<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 12, 2000
The Liposome Company, Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 000-14887 222370691
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
</TABLE>
One Research Way
Princeton, New Jersey 08540
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 452-7060
<PAGE>
Item 5. Other Events.
Attached as Exhibits 99.1 and 99.2 are two press releases issued by The
Liposome Company, Inc. on April 14, 2000. Attached as Exhibit 99.3 is the proxy
statement/prospectus contained in the Registration Statement on Form F-4 filed
by Elan Corporation, plc on April 12, 2000, relating to the issuance of Elan
securities in the proposed merger of a subsidiary of Elan with Liposome.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
99.1 Press release, dated April 14, 2000, issued by Liposome.
99.2 Press release, dated April 14, 2000, issued by Liposome.
99.3 Proxy statement/prospectus.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE LIPOSOME COMPANY, INC.
By: /s/ Lawrence R. Hoffman
------------------------
Name: Lawrence R. Hoffman
Title: Vice President, Finance and Chief
Financial Officer
Date: April 14, 2000
<PAGE>
Exhibit Index
-------------
Exhibit Description
- ------- -----------
99.1 Press release, dated April 14, 2000, issued by Liposome.
99.2 Press release, dated April 14, 2000, issued by Liposome.
99.3 Proxy statement/prospectus.
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
---------------------
Contact:
The Liposome Company, Inc.
--------------------------
Lawrence R. Hoffman
Vice President, Finance & CFO
(609) 452-7060
Douglas S. Farrell
Director, Investor Relations
(609) 951-4307
EUROPEAN CPMP RECOMMENDS APPROVAL OF MYOCET(TM)
(FORMERLY KNOWN AS EVACET(TM)) TO TREAT METASTATIC BREAST CANCER
Princeton, NJ, -- April 14, 2000 -- The Liposome Company, Inc. (Nasdaq:LIPO)
today announced that the Committee for Proprietary Medicinal Products (CPMP)
reached a positive opinion on the approval of Myocet(TM) (liposome encapsulated
doxorubicin citrate complex) in combination with cyclophosphamide in the 15
member States of the European Union* for the treatment of women with metastatic
breast cancer. The CPMP is the scientific committee of the European Agency for
the Evaluation of Medicinal Products (EMEA). This favorable CPMP opinion now
has to be endorsed by the European Commission before MYOCET(TM), formerly know
as EVACET(TM), receives final marketing authorization in this indication.
"The clinical trial data we presented clearly led to the Committee's favorable
opinion for the use of MYOCET(TM) in the European Union for the first line
treatment of metastatic breast cancer," said Charles A. Baker, Chairman and
Chief Executive Officer of The Liposome Company, Inc. "The approval of
MYOCET(TM) in the European Union will represent a significant step forward for
those women who suffer from metastatic breast cancer and their families,"
continued Mr. Baker.
Doxorubicin is an anthracycline glycoside that has applications as an
antineoplastic agent. It was first marketed in the 1960's and is commonly used
with other cancer drugs to treat patients with advanced stage or metastatic
breast cancer. Doxorubicin can cause debilitating side effects such as severe
nausea and vomiting, ulcers of the lining of the esophagus and intestines, bone
marrow suppression, and most importantly, irreversible damage to the heart,
sometimes resulting in congestive heart failure. MYOCET(TM) is a liposomal
formulation of doxorubicin that enhances
<PAGE>
delivery of the drug to tumor cells, thereby reducing side effects while
maintaining equivalent anti-tumor efficacy.
The MYOCET(TM) dossier remains under active consideration in Canada and a
regulatory decision regarding marketing approval is expected in the latter part
of this year.
The Liposome Company, Inc. is a biopharmaceutical company developing,
manufacturing and marketing therapeutic products to treat cancer and related
diseases. ALBELCET(R) is marketed in the U.S. and 25 other countries for the
treatment of severe, systemic fungal infections in patients who are refractory
to or intolerant of conventional therapy and is the leading lipid-based
formulation of amphotericin B in the United States. The Company's product
pipeline includes MYOCET(TM), TLC ELL-12 and bromotaxane for the treatment of
various cancers and programs focused on the development of new cancer therapies
and vehicles for the delivery of gene therapy.
On March 6, 2000, the Company announced that it had entered into a definitive
merger agreement with Elan Corporation, plc ("Elan") (NYSE: ELN). Elan is a
leading worldwide specialty pharmaceutical company focused on the discovery,
development and marketing of therapeutic products and services in neurology and
pain management and on the development and commercialization of products using
its extensive range of proprietary drug delivery technologies. Elan currently
supports many notable biotechnology research efforts; the most significant of
which is specifically dedicated to developing pathology-based approaches to the
diagnosis and treatment of Alzheimer's disease. Elan is headquartered in
Dublin, Ireland, with its principal research and development, manufacturing and
marketing facilities located in Ireland, the United States and Israel. Elan's
ordinary shares are listed on the London and Dublin Stock Exchanges and its
American Depositary Shares trade on the New York Stock Exchange.
*Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden and the United Kingdom.
Except for historical information, this press release contains
forward-looking statements that involve risks and uncertainties, including,
but not limited to, statements regarding future sales growth prospects for
ALBELCET(R), the ability of ALBELCET(R) to maintain its position as the
leading lipid-based formulation of amphotericin B in the U.S., the
likelihood that MYOCET(TM), TLC ELL-12 or any
<PAGE>
other product in the research pipeline can demonstrate safety and efficacy
in clinical trials, receive regulatory approval in the U.S. or abroad, or
be successfully developed, manufactured and marketed. While these
statements reflect the Company's best current judgment, they are subject to
risks and uncertainties that could cause actual results to vary, including
the risk factors identified in the Company's 1999 10-K filing and from time
to time in the Company's other filings with the Securities and Exchange
Commission. The Company disclaims any intent or obligation to update these
forward looking statements.
This release and other company information is available at http://www.lipo.com
<PAGE>
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
---------------------
Contact:
The Liposome Company, Inc.
--------------------------
Lawrence R. Hoffman
Vice President, Finance & CFO
(609) 452-7060
Douglas S. Farrell
Director, Investor Relations
(609) 951-4307
LIPOSOME SETS SPECIAL STOCKHOLDERS MEETING FOR
MAY 12, 2000 TO APPROVE PROPOSED MERGER WITH ELAN
- Registration Statement Declared Effective -
Princeton, NJ, -- April 14, 2000 -- The Liposome Company, Inc. (Nasdaq:LIPO)
today announced that a special meeting date for Liposome stockholders to vote on
the proposed merger with Elan Corporation, plc ("Elan") (NYSE: ELN) has been
set for Friday, May 12, 2000. Liposome stockholders will meet at 10:00 A.M.,
Eastern Daylight Time, at the Holiday Inn, 1053 Route 1, Princeton, New Jersey,
08540. The registration statement relating to the Elan shares and the
contingent value rights to be issued to Liposome stockholders pursuant to the
merger agreement between Liposome and Elan has been declared effective by the
Securities and Exchange Commission.
A proxy statement/prospectus, which describes the proposed merger, merger
agreement, related Elan stock issuance and the issuance of contingent value
rights, is expected to be mailed on or about April 14, 2000, to Liposome
stockholders of record on March 29, 2000. Consummation of the transaction
remains subject to Liposome stockholder and regulatory approvals and
satisfaction or waiver of customary closing conditions. Upon completion of the
merger, Liposome stockholders would receive 0.3850 of an Elan ADS plus one
contingent value right for each share of Liposome common stock that they own.
The Liposome Company, Inc. is a biopharmaceutical company developing,
manufacturing and marketing therapeutic products to treat cancer and related
diseases. ABELCET(R) is marketed in the U.S. and 25 other countries for the
treatment of severe, systemic fungal infections in patients who are refractory
to or intolerant of conventional therapy and is the leading lipid-based
formulation of amphotericin B in the United States. The Company's product
pipeline includes
<PAGE>
MYOCET(TM) (formerly known as EVACET(TM)), TLC ELL-12 and bromotaxane for the
treatment of various cancers and programs focused on the development of new
cancer therapies and vehicles for the delivery of gene therapy.
On March 6, 2000, the Company announced that it had entered into a definitive
merger agreement with Elan. Elan is a leading worldwide specialty
pharmaceutical company focused on the discovery, development and marketing of
therapeutic products and services in neurology and pain management and on the
development and commercialization of products using its extensive range of
proprietary drug delivery technologies. Elan currently supports many notable
biotechnology research efforts; the most significant of which is specifically
dedicated to developing pathology-based approaches to the diagnosis and
treatment of Alzheimer's disease. Elan is headquartered in Dublin, Ireland,
with its principal research and development, manufacturing and marketing
facilities located in Ireland, the United States and Israel. Elan's ordinary
shares are listed on the London and Dublin Stock Exchanges and its American
Depositary Shares trade on the New York Stock Exchange.
Except for historical information, this press release contains
forward-looking statements that involve risks and uncertainties, including,
but not limited to, statements regarding future sales growth prospects for
ABELCET(R), the ability of ABELCET(R) to maintain its position as the
leading lipid-based formulation of amphotericin B in the U.S., the
likelihood that MYOCET(TM), TLC ELL-12 or any other product in the research
pipeline can demonstrate safety and efficacy in clinical trials, receive
regulatory approval in the U.S. or abroad, or be successfully developed,
manufactured and marketed. While these statements reflect the Company's
best current judgment, they are subject to risks and uncertainties that
could cause actual results to vary, including the risk factors identified
in the Company's 1999 10-K filing and from time to time in the Company's
other filings with the Securities and Exchange Commission. The Company
disclaims any intent or obligation to update these forward looking
statements.
This release and other company information is available at http://www.lipo.com
<PAGE>
EXHIBIT 99.3
[LOGO OF THE LIPOSOME COMPANY, INC.]
THE LIPOSOME COMPANY, INC.
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08540-6619
April 13, 2000
Dear Stockholder:
We are pleased to inform you that Liposome has signed a merger agreement
with Elan Corporation, plc. As a result of the proposed merger, each of your
Liposome shares will be converted into 0.385 of an Elan ADS and one contingent
value right, and Liposome will become a wholly-owned subsidiary of Elan. The
contingent value rights represent the right to receive cash payments of up to a
total of $98 million, based partly on the approval of Evacet(TM) for sale in
the European Union, and partly on Evacet(TM) reaching certain sales milestones
outside the United States. Based on the number of Liposome shares, warrants and
options outstanding on March 29, 2000, the maximum payment on the contingent
value rights would be $2.16 per Liposome share.
Elan ADSs are listed on the NYSE under the symbol "ELN", and the closing
price was $41.25 per Elan ADS on April 11, 2000. Application will be made to
list the contingent value rights on the Nasdaq National Market.
Liposome has scheduled a special meeting of its stockholders to be held on
May 12, 2000, to consider and vote on the merger agreement. We cannot complete
the merger without the approval of the holders of a majority of the outstanding
shares of Liposome common stock.
After careful consideration, your board of directors has unanimously
approved the merger agreement and determined that the merger is fair to and in
the best interest of Liposome and its stockholders. The board of directors
unanimously recommends that you vote "FOR" the merger agreement.
In arriving at its determination and recommendation, the board of directors
took into account the factors described in the attached prospectus-proxy
statement, including the opinion of Warburg Dillon Read LLC, to the effect that
the merger consideration is fair from a financial point of view to Liposome
stockholders.
Your vote is very important. Please promptly complete, date, sign and return
the enclosed proxy card in the prepaid envelope enclosed to ensure that your
shares will be represented at the special meeting. If you do not vote at all,
it will, in effect, count as a vote against the merger.
You should consider the matters discussed under "Risk Factors--Risks
Relating to the Merger" on page 20 of the attached prospectus-proxy statement
before voting. Please review carefully the entire prospectus-proxy statement.
<PAGE>
We look forward to the successful combination of Liposome and Elan and to
your continued support as a stockholder of Elan.
On behalf of the board of directors of Liposome, we urge you to vote "FOR"
approval of the merger and the related merger agreement.
/s/ Charles A. Baker
Charles A. Baker
Chairman, President and
Chief Executive Officer
----------------
Your vote is important.
Please complete, sign, date and return your proxy.
----------------
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the merger described in this prospectus-
proxy statement or the Elan ADSs or contingent value rights to be issued in
connection with the merger, or determined if the prospectus-proxy statement is
accurate or adequate. Any representation to the contrary is a criminal offense.
This prospectus-proxy statement is dated April 13, 2000, and is first being
mailed to stockholders on or about April 14, 2000.
<PAGE>
THE LIPOSOME COMPANY, INC.
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08540-6619
----------------
Notice of Special Meeting of Stockholders
To Be Held May 12, 2000
----------------
To the Stockholders of The Liposome Company, Inc.:
We will hold a special meeting of the stockholders of Liposome on May 12,
2000, at 10:00 a.m., local time, at The Holiday Inn, 1053 Route 1, Princeton,
New Jersey 08540, for the following purpose:
To consider and vote upon a proposal to adopt the merger agreement among
Elan Corporation, plc, a wholly-owned subsidiary of Elan and Liposome. In the
merger, Liposome will become a wholly-owned subsidiary of Elan, and outstanding
shares of Liposome common stock will be converted into the right to receive
Elan ADSs and contingent value rights as set forth in the merger agreement.
We will transact no other business at the special meeting except such
business as may properly be brought before the special meeting or any
adjournment of it by the Liposome board of directors.
Only stockholders who owned shares of Liposome common stock at the close of
business on March 29, 2000, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements of it.
We cannot complete the merger unless the merger agreement is adopted by the
affirmative vote of holders of a majority of our outstanding common shares.
Liposome stockholders will have appraisal rights under Delaware law in
connection with the merger, as described on page 35 and Annex E of the
accompanying prospectus-proxy statement.
For more information about the merger, please review the accompanying
prospectus-proxy statement and the merger agreement attached as Annex A.
The enclosed proxy is solicited by the board of directors of Liposome.
Whether or not you plan to attend the special meeting, please complete, sign
and date the enclosed proxy and return it promptly in the enclosed prepaid
envelope.
Please do not send any stock certificates at this time.
By Order of the Board of Directors
/s/ Michael McGrane
Michael McGrane
Secretary
Princeton, New Jersey
April 13, 2000
<PAGE>
PROSPECTUS-PROXY STATEMENT
----------------
Elan Corporation, plc
PROSPECTUS
----------------
[Elan Logo]
The Liposome Company, Inc.
[Elan Logo]
PROXY STATEMENT
For a Special Meeting of Stockholders
To Be Held May 12, 2000
The boards of directors of The Liposome Company, Inc. and Elan Corporation,
plc have agreed to the merger of a wholly-owned subsidiary of Elan Corporation,
plc into Liposome. Liposome will become a wholly-owned subsidiary of Elan
provided that the conditions to the merger are met, including the approval of
Liposome's stockholders, and the merger is consummated. This document gives you
detailed information about the proposed merger.
We urge you to read and carefully consider all the information contained in
this prospectus-proxy statement.
Please see "Where You Can Find More Information" on page 67 for additional
information about Elan and Liposome on file with the Commission and elsewhere.
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL
SECURITIES LAWS......................................................... 2
SUMMARY.................................................................. 3
The Merger............................................................. 3
The Companies.......................................................... 3
The Merger Agreement..................................................... 4
What Liposome Stockholders Will Receive in the Merger.................. 4
Conditions to the Completion of the Merger............................. 4
Termination of the Merger Agreement.................................... 4
Termination Fees....................................................... 5
The Special Meeting...................................................... 5
Time and Place......................................................... 5
Record Date; Shares Entitled to Vote................................... 6
Required Vote.......................................................... 6
Voting by Liposome Directors and Executive Officers; Voting Agreement.. 6
Contingent Value Rights.................................................. 6
Payments on the Contingent Value Rights................................ 6
Termination............................................................ 7
Listing of the Contingent Value Rights................................. 7
Recommendation of the Liposome Board of Directors........................ 7
Opinion of Financial Advisor to Liposome................................. 7
Interests of Certain Persons in the Merger............................... 7
Accounting Treatment..................................................... 7
Material U.S. Federal Income and Irish Tax Consequences.................. 8
Appraisal Rights......................................................... 8
Governmental and Regulatory Matters...................................... 8
Comparative Rights of Stockholders....................................... 8
Summary Historical Consolidated Financial Data of Elan................... 9
Summary Historical Consolidated Financial Data of Liposome............... 10
Unaudited Pro Forma Combined Financial Data.............................. 11
Unaudited Pro Forma Combined Balance Sheet............................. 12
Unaudited Pro Forma Combined Statement of Income (for the year ended
December 31, 1998).................................................... 14
Unaudited Pro Forma Combined Statement of Income (for the nine months
ended
September 30, 1999) .................................................. 15
Comparative Per Share Data............................................... 16
Comparative Market Price and Dividend Information........................ 17
Comparative Market Price Information................................... 17
Comparative Dividend Information....................................... 17
Cautionary Note Concerning Forward-Looking Statements.................... 18
RISK FACTORS............................................................. 20
Risks Relating to the Merger............................................. 20
Risk Factors Relating to Elan............................................ 22
Risk Factors Relating to Liposome........................................ 22
THE SPECIAL MEETING...................................................... 23
Time and Place........................................................... 23
Matters to Be Considered at the Special Meeting.......................... 23
Record Date; Voting Rights; Quorum....................................... 23
</TABLE>
i
<PAGE>
<TABLE>
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Page
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<S> <C>
Votes Required........................................................... 23
Voting by Liposome Directors and Executive Officers...................... 23
Voting of Proxies........................................................ 23
Solicitation of Proxies.................................................. 24
Revocability of Proxies.................................................. 24
Surrender of Certificates................................................ 24
THE MERGER............................................................... 25
Background of the Merger................................................. 25
Liposome's Reasons for the Merger; Recommendation of the Liposome Board
of Directors............................................................ 26
Elan's Reasons for the Merger............................................ 27
Interests of Executive Officers and Directors of Liposome in the Merger;
Conflicts of Interest................................................... 27
Opinion of Financial Advisor to Liposome................................. 28
Resales of Elan ADSs and Contingent Value Rights......................... 34
Listing of Elan ADSs, Elan Ordinary Shares and the Contingent Value
Rights; Delisting and Deregistration of Liposome Shares................. 35
Appraisal Rights......................................................... 35
Governmental and Regulatory Matters...................................... 37
Accounting Treatment..................................................... 37
THE MERGER AGREEMENT..................................................... 38
What Liposome Stockholders Will Receive in the Merger.................... 38
Form of the Merger....................................................... 38
Effective Time of the Merger............................................. 38
Liposome Stock Options................................................... 38
Representations and Warranties........................................... 39
No Solicitation.......................................................... 39
Conduct of the Business Pending the Merger............................... 39
Indemnification.......................................................... 39
Employee Benefits........................................................ 39
Conditions to the Completion of the Merger............................... 40
Termination of the Merger Agreement...................................... 40
Termination Fees......................................................... 41
CONTINGENT VALUE RIGHTS.................................................. 42
Payments on the Contingent Value Rights.................................. 42
Termination.............................................................. 42
Listing of the Contingent Value Rights................................... 43
THE VOTING AGREEMENT..................................................... 44
Voting of Shares; Proxy.................................................. 44
Certain Representations and Warranties................................... 44
Covenants of the Stockholder............................................. 44
MATERIAL U.S. FEDERAL INCOME AND IRISH TAX CONSEQUENCES.................. 45
General.................................................................. 45
Material U.S. Federal Income Tax Consequences............................ 45
Material Irish Tax Consequences.......................................... 48
RESTRICTIONS ON FINANCIAL TRANSFERS AND UNITED NATIONS SANCTIONS......... 50
COMPARISON OF RIGHTS OF LIPOSOME STOCKHOLDERS AND ELAN STOCKHOLDERS...... 51
</TABLE>
ii
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<TABLE>
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Page
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<C> <S> <C>
Authorized Capital Stock.................................................. 51
Stockholder Voting Rights................................................. 51
Special Meetings of Stockholders; Consent to Actions of Stockholders in
Lieu of Meeting.......................................................... 52
Rights of Inspection...................................................... 53
Amendment of Articles of Incorporation and By-laws and Governing
Instruments.............................................................. 53
Business Combinations and Reorganizations................................. 53
Dissenters' Appraisal Rights.............................................. 55
Disclosure of Interests................................................... 55
Dividends................................................................. 56
Classification of the Board of Directors.................................. 56
Removal of Directors...................................................... 57
Vacancies on the Board of Directors....................................... 57
Stockholders' Suits....................................................... 57
Indemnification; Liability of Directors................................... 58
Pre-emptive Rights........................................................ 58
Rights of Purchase and Redemption......................................... 59
DESCRIPTION OF ELAN CAPITAL STOCK......................................... 60
Ordinary Shares........................................................... 60
Executive Shares and "B' Executive Shares................................. 62
DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS............................... 63
Deposit and Withdrawal of Shares.......................................... 63
Dividends, Other Distributions and Rights................................. 63
Record Dates.............................................................. 64
Voting of the Underlying Elan Ordinary Shares............................. 64
Amendment and Termination of the Deposit Agreement........................ 64
Charges of Depositary..................................................... 65
General................................................................... 65
CURRENCY TRANSLATION...................................................... 67
LEGAL MATTERS............................................................. 67
EXPERTS................................................................... 67
WHERE YOU CAN FIND MORE INFORMATION....................................... 67
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 68
Elan Commission Filings................................................... 68
Liposome Commission Filings............................................... 68
Annex A -- Agreement and Plan of Merger, dated as of March 6, 2000, by
and among Elan Corporation, plc, Lithium Acquisition Corp. and
The Liposome Company, Inc. .................................... A-1
Annex B -- Form of Contingent Value Rights Agreement..................... B-1
Annex C -- Voting Agreement, dated as of March 6, 2000 by and among Elan
Corporation, plc and Kenneth B. Dart........................... C-1
Annex D -- Opinion of Warburg Dillon Read LLC............................ D-1
Annex E -- Section 262 of Delaware General Corporation Law............... E-1
</TABLE>
iii
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES
UNDER UNITED STATES FEDERAL SECURITIES LAWS
Elan is a public limited company incorporated in Ireland. Certain directors,
officers and controlling persons of Elan, as well as certain of the experts
named in this prospectus-proxy statement, reside outside the United States of
America, and all or a substantial portion of their assets and the assets of
Elan are located outside the U.S. As a result, it may be difficult for
investors to effect service of process within the U.S. upon those persons
(other than Elan) or to enforce against them judgments of courts of the U.S.
predicated upon civil liabilities under the U.S. federal securities laws. Elan
has been advised by its Irish counsel that there is doubt as to the
enforceability against such persons in Ireland, whether in original actions or
in actions for enforcement of judgments of U.S. courts, of liabilities
predicated solely upon the U.S. federal securities laws.
Elan has irrevocably appointed CT Corporation System, New York, New York, as
its agent to receive service of process in actions against it arising out of or
in connection with the U.S. federal securities laws in any federal court or
state court in New York, New York, relating to the transactions covered by this
prospectus-proxy statement.
2
<PAGE>
SUMMARY
The following is a summary of certain information contained in this
prospectus-proxy statement and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the terms of the merger, you should carefully read this entire
document, as well as those additional documents to which we refer you. See
"Where You Can Find More Information."
The Merger
We are asking you to vote for a proposal that Elan and Liposome merge, that
Liposome become a wholly-owned subsidiary of Elan, and that Liposome
stockholders become stockholders of Elan. If the merger is completed, you will
receive 0.385 of an Elan ADS and one contingent value right for each share of
Liposome common stock you own. The merger agreement, which is the legal
document governing the merger, is attached as Annex A to this prospectus-proxy
statement. The form of contingent value rights agreement, which is the legal
document that will govern the terms of the contingent value rights, is attached
as Annex B to this prospectus-proxy statement.
The Companies
Elan Corporation, plc
Lincoln House
Lincoln Place
Dublin 2, Ireland
Telephone: +353-1-709-4000
Elan is a worldwide pharmaceutical and biotechnology company headquartered
in Dublin, Ireland. Elan is a world leader in drug delivery and in the
discovery, development and marketing of products and services in neurology and
pain management. Elan's principal research and development, manufacturing and
marketing facilities are located in Ireland, the United States and Israel.
Traditionally, Elan has focused on the development and commercialization of
products for pharmaceutical industry clients utilizing proprietary drug
delivery systems. Elan continues to focus on drug delivery systems, but has
also embarked on a new strategy to expand its therapeutic focus through the
development and commercialization of new pharmaceutical products for selected
target markets, including the areas of neurology and pain management.
Elan currently conducts its operations through two primary business units:
Elan Pharmaceuticals and Elan Pharmaceutical Technologies.
Elan Pharmaceuticals. Elan Pharmaceuticals engages in the discovery,
development and marketing of therapeutic products for neurological disorders
and pain management, and diagnostic services for neurological disorders. Its
principal research and development activities focus on Alzheimer's disease,
pain management, epilepsy, multiple sclerosis and stroke.
Elan Pharmaceutical Technologies. Elan Pharmaceutical Technologies engages
in the development, licensing and marketing of drug delivery products based on
Elan's proprietary drug delivery systems.
Following the consummation of the merger, Elan expects that Liposome will
operate as a separate business unit within Elan.
3
<PAGE>
The Liposome Company, Inc.
One Research Way
Princeton Forrestal Center
Princeton, NJ 08540-6619
Telephone: (609) 452-7060
Liposome is a biopharmaceutical company engaged in the discovery,
development, manufacturing and marketing of proprietary lipid- and liposome-
based pharmaceuticals, primarily for the treatment of cancer and other related
life-threatening illness. Organized in 1981, Liposome's marketed product and
products in development are based on its knowledge and understanding of lipids,
the substances that compromise the membrane of all living cells. The products
developed by Liposome with this technology include drug delivery vehicles and
novel pharmaceuticals utilizing modulated cell signaling and bioactive lipids.
The Merger Agreement
The merger agreement is attached as Annex A to this prospectus-proxy
statement. Liposome and Elan encourage you to read this agreement carefully.
See "The Merger Agreement."
What Liposome Stockholders Will Receive in the Merger
In the merger, holders of Liposome common stock will receive, for each share
they own, 0.385 of an Elan ADS and one contingent value right.
Conditions to the Completion of the Merger
The obligations of Elan and Liposome to effect the merger are subject to a
number of conditions, including the following:
. adoption of the merger agreement by Liposome stockholders;
. the receipt of regulatory approvals, the absence of legal restraints and
the receipt of third party consents;
. the accuracy of the representations made by the other party in the
merger agreement and the performance of the covenants made by the other
party in the merger agreement;
. receipt of an opinion of counsel to the effect that the merger will
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986 (see "Material U.S. Federal Income and
Irish Tax Consequences"); and
. the absence of a material adverse change in the other party.
Elan's obligations are also conditioned on:
. receipt of specified environmental approvals; and
. holders of less than 10% of the Liposome shares exercising dissenters'
rights.
Termination of the Merger Agreement
1. Elan and Liposome can jointly agree to terminate the merger agreement.
2. Elan or Liposome can terminate the merger agreement if:
. the merger has not been completed by September 30, 2000;
4
<PAGE>
. Liposome stockholders do not adopt the merger agreement at the
special meeting;
. a court order prohibiting the merger becomes final and nonappealable;
or
. the other party breaches any of its representations, warranties,
covenants or agreements under the merger agreement that results in a
failure of specified conditions to the merger and has not cured the
breach within 30 days after receipt of notice of such breach.
3. Liposome can terminate the merger agreement:
. in response to an unsolicited proposal to acquire Liposome on terms
that the Liposome board of directors determine to be more favorable
to Liposome than the merger, but only if it has given Elan five days'
notice of the terms of the other proposal and has paid the required
termination fee; or
. if the average price of Elan ADSs in the ten consecutive trading days
ending two trading days before the special meeting falls below $31.74
and falls more than 20% compared to the S&P Pharmaceuticals Index,
unless Elan notifies Liposome that it is increasing the exchange
ratio so that Liposome would not have the right to terminate under
these criteria.
4. Elan can terminate the merger agreement if Liposome withdraws, modifies
or changes its approval or recommendation of the merger, recommends an
alternative transaction or discloses non-public information to or
negotiates with a third party with respect to any proposal to acquire
Liposome.
Termination Fees
Liposome must pay Elan a termination fee of $22 million if:
. (a) a third party makes a takeover proposal, (b) the merger agreement is
terminated because the stockholders of Liposome do not approve the
merger or because the merger has not been closed by September 30, 2000,
and (c) within 12 months of the termination, Liposome enters into an
acquisition agreement or consummates a takeover proposal;
. (a) a third party makes a takeover proposal, and (b) Elan terminates the
merger agreement due to a change in Liposome's recommendation of the
merger or because Liposome recommends another transaction, as described
in paragraph 4 above; or
. Liposome terminates the merger agreement in response to an unsolicited
superior proposal, as described in paragraph 3 above.
Liposome must reimburse Elan for its expenses in connection with the merger,
up to $3 million, if the foregoing fee is not payable and:
. Liposome stockholders do not adopt the merger agreement at the special
meeting; or
. the merger agreement is terminated due to Liposome's breach.
The Special Meeting
Time and Place
The special meeting of Liposome stockholders will be held at The Holiday
Inn, 1053 Route 1, Princeton, New Jersey 08540, at 10:00 a.m., local time, on
May 12, 2000. At the special meeting, we will ask Liposome stockholders to
adopt the merger agreement.
5
<PAGE>
Record Date; Shares Entitled to Vote
Only Liposome stockholders of record at the close of business on March 29,
2000, are entitled to notice of, and to vote at, the special meeting. On the
record date, there were 39,812,406 shares of Liposome common stock outstanding
and entitled to vote, which were held by approximately 906 holders of record.
Each holder of record of Liposome common stock on the record date is entitled
to cast one vote per share of Liposome common stock, exercisable in person or
by proxy, on each matter submitted at the special meeting. See "The Special
Meeting--Record Date; Voting Rights; Quorum."
Required Vote
The merger between Liposome and Elan requires the affirmative vote of the
holders of a majority of the shares of Liposome common stock outstanding and
entitled to vote, or 19,906,204 shares. An abstention or a failure to vote with
respect to the merger between Liposome and Elan will have the effect of a vote
against the merger. Brokers who hold shares of Liposome common stock as
nominees will not have discretionary authority to vote those shares in the
absence of instructions from the beneficial owners. Any votes which are not
cast by a nominee-broker will also have the effect of a vote cast against the
merger between Liposome and Elan.
Voting by Liposome Directors and Executive Officers; Voting Agreement
At the close of business on the record date, directors and executive
officers of Liposome owned and were entitled to vote 931,957 shares of Liposome
common stock, which represented approximately 2.3% of the shares of Liposome
common stock outstanding on that date.
As a condition to Elan's willingness to enter into the merger agreement, a
principal holder of Liposome common stock entered into a voting agreement with
Elan, dated as of March 6, 2000. Pursuant to the voting agreement, the
principal stockholder agreed, without receiving or being promised any
additional consideration, to vote all shares of Liposome common stock owned by
him in favor of the merger. The voting agreement covers an aggregate of
8,945,846 shares of Liposome common stock, representing approximately 22.5% of
the Liposome common stock outstanding as of March 29, 2000. See "The Special
Meeting--Record Date; Voting Rights; Quorum," "--Voting by Liposome Directors
and Executive Officers" and "The Voting Agreement."
Contingent Value Rights
In the merger, stockholders of Liposome will receive, for each share they
own, 0.385 of an Elan ADS and one contingent value right. The contingent value
rights will be governed by the contingent value rights agreement, the form of
which is attached to this prospectus-proxy statement as Annex B. Liposome and
Elan encourage you to read this agreement carefully.
Payments on the Contingent Value Rights. The holders of contingent value
rights will be entitled to receive cash milestone payments of as much as $98.0
million and as little as zero, depending on whether and when Evacet(TM) is
approved for marketing in the European Union and on the success of Elan in
selling or licensing Evacet(TM). If Elan obtains approval for marketing
Evacet(TM) in the European Union and receives pricing licenses in Germany and
the United Kingdom on or prior to March 31, 2001, holders of contingent value
rights will be entitled to a total payment of up to $54.0 million. If Elan
achieves quarterly sales of Evacet(TM) in the European Union and Canada of more
than $10.5 million on or before the quarter ending December 31, 2002, holders
of contingent value rights will be entitled to a total payment of up to $44.0
million. Other payments could be made if Elan licenses or sells the rights to
Evacet(TM).
Based on the number of Liposome shares, warrants and options outstanding on
March 29, 2000, the maximum payment on the contingent value rights would be
$1.19 per Liposome share in the case of the approval milestone payment, and
$0.97 per Liposome share in the case of the revenue milestone payment.
6
<PAGE>
Payments on the contingent value rights are subject to the satisfaction of a
number of conditions within specified time frames. If none of the conditions
are met, holders of contingent value rights will receive no payments. See "Risk
Factors--Risks Relating to the Merger."
Termination. The contingent value rights will terminate, whether or not the
holders have received any payments, if the EU determines not to consider or
approve Evacet(TM) for marketing authorization, or if any regulatory body
issues adverse findings with respect to Evacet that cause Elan to withdraw it
from the market.
Listing of the Contingent Value Rights. Elan will use its reasonable best
efforts to obtain and maintain, at Elan's expense, approval for quotation of
the contingent value rights on the Nasdaq National Market or for listing on the
American Stock Exchange.
Recommendation of the Liposome Board of Directors
On March 4, 2000, the board of directors of Liposome met to consider the
merger agreement with Elan. Warburg Dillon Read LLC gave its oral opinion that
the consideration to be received by Liposome stockholders in the merger was
fair, from a financial point of view, to the Liposome stockholders. The board
of directors of Liposome unanimously approved the merger agreement and the
merger and determined that the terms of the merger agreement are fair to and in
the best interests of Liposome and the Liposome stockholders. The Liposome
board unanimously recommends that you vote "FOR" the approval and adoption of
the merger agreement. To review the background of and reasons for the merger,
as well as risks relating to the merger, see "The Merger--Liposome's Reasons
for the Merger; Recommendation of the Liposome Board of Directors," "--Elan's
Reasons for the Merger" and "Risk Factors--Risks Relating to the Merger."
Opinion of Financial Advisor to Liposome
Warburg Dillon Read LLC, the financial advisor to Liposome, delivered to the
Liposome board of directors its written opinion, dated March 6, 2000, to the
effect that, as of the date of such opinion, the consideration to be received
in the merger is fair, from a financial point of view, to the Liposome
stockholders. The full text of the opinion of Warburg Dillon Read, which sets
forth the assumptions made, procedures followed, matters considered and
limitations on the review undertaken, is attached as Annex D to this
prospectus-proxy statement. Stockholders of Liposome are urged to carefully
read this opinion in its entirety. Warburg Dillon Read's opinion is directed to
Liposome's board of directors, and it does not constitute a recommendation to
any stockholder with respect to any matter. Liposome has agreed to pay Warburg
Dillon Read a customary fee for its services in connection with the merger, a
substantial portion of which is conditioned upon the consummation of the
merger. See "The Merger--Opinion of Financial Advisor to Liposome."
Interests of Certain Persons in the Merger
In considering the recommendation of the Liposome board of directors with
respect to the merger agreement, you should be aware that certain officers and
directors of Liposome have interests in the merger that are different from and
in addition to your interests generally and which may present them with certain
conflicts of interest. In addition, certain directors and officers of Liposome
are expected to become officers of the surviving corporation following the
merger. For further information see "The Merger--Interests of Executive
Officers and Directors of Liposome in the Merger; Conflicts of Interest."
Accounting Treatment
The merger will be accounted for by Elan under the "purchase" method of
accounting in accordance with U.S. generally accepted accounting principles.
See "The Merger--Accounting Treatment."
7
<PAGE>
Material U.S. Federal Income and Irish Tax Consequences
The consummation of the merger is conditioned upon, among other things,
receipt by Elan of an opinion of its tax counsel, Cahill Gordon & Reindel, and
receipt by Liposome of an opinion of its tax counsel, Dewey Ballantine LLP, in
each case, that the merger will generally be tax-free to Liposome stockholders
(other than with respect to the contingent value rights and cash in lieu of
fractional shares).
You should read carefully the discussion in "Material U.S. Federal Income
and Irish Tax Consequences" and other sections of this prospectus-proxy
statement. You are urged to consult your own tax advisor as to the specific tax
consequences to you of the merger and the ownership and disposition of Elan
ADSs and contingent value rights.
Appraisal Rights
If you do not vote for the merger, you will have the right under Delaware
law to dissent from the merger and request an appraisal of the value of your
Liposome common stock. In order to preserve this right, you must follow the
procedure described in Annex E. See "The Merger--Appraisal Rights."
Governmental and Regulatory Matters
The merger is subject to U.S. antitrust laws which provide that certain
transactions may not be consummated until required information has been
furnished to the U.S. Antitrust Division of the Department of Justice and the
U.S. Federal Trade Commission and certain waiting periods have expired or been
terminated. Elan and Liposome completed the filing of the required information
and material with the Justice Department and the FTC on March 20, 2000. On
March 28, 2000, early termination of the applicable waiting period under the
U.S. antitrust laws was received without the FTC or Department of Justice
taking any action. No additional filings or waiting periods are applicable with
respect to the merger under U.S. antitrust laws.
The merger is also subject to the Irish Mergers Act, which provides that
certain transactions may not be consummated until a notification has been made
to the Minister for Enterprise, Trade and Employment and the Minister has
issued a clearance for the proposed transaction or the prescribed statutory
period following notification has expired. Elan and Liposome gave notification
of the merger to the Minister on March 16, 2000, and requested that the
Minister issue a clearance. On April 4, 2000, the Minister issued a clearance
for the proposed transaction.
The obligation of Elan to complete the merger is subject to receipt of
certain environmental approvals from the State of New Jersey and delivery of
environmental disclosure documents by Liposome to the State of Indiana. Elan
and Liposome initiated the application process with the State of New Jersey on
March 10, 2000, and Liposome is preparing the Indiana disclosure materials in
consultation with Elan for filing immediately after the merger.
See "The Merger--Governmental and Regulatory Matters."
Comparative Rights of Stockholders
For a comparison of Delaware law and Irish law and of the certificate of
incorporation and the by-laws of Liposome and the memorandum and articles of
association of Elan governing the rights of Liposome stockholders and Elan
stockholders, respectively, see "Comparison of Rights of Liposome Stockholders
and Elan Stockholders."
8
<PAGE>
Summary Historical Consolidated Financial Data of Elan
(Dollars in thousands, except per share data)
The summary historical consolidated financial data set forth below as of and
for each of the years in the two-year period ended March 31, 1996, the nine
months ended December 31, 1996, and the two-year period ended December 31,
1998, have been derived from consolidated financial statements of Elan and its
subsidiaries, audited by KPMG, Chartered Accountants. The summary historical
consolidated financial data as of and for the nine months ended September 30,
1998 and 1999 have been derived from the unaudited consolidated financial
statements of Elan and its subsidiaries. In the opinion of Elan's management,
such unaudited consolidated financial data reflect all adjustments necessary to
present fairly the information set forth therein. Consolidated balance sheets
as of December 31, 1997 and 1998 and the consolidated statements of income,
comprehensive income, cash flows and shareholders' equity for the nine months
ended December 31, 1996 and the years ended December 31, 1997 and 1998, and the
notes thereto, as well as the unaudited consolidated balance sheet as of
September 30, 1999 and the unaudited consolidated statements of income and cash
flows for the nine months ended September 30, 1998 and 1999 are incorporated by
reference in this prospectus-proxy statement. See "Where You Can Find More
Information" and "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
Nine Months
Year ended ended Year ended Nine months ended
March 31, December 31, December 31, September 30,
----------------- ------------ -------------------- ------------------------
1995 1996 1996 1997 1998 1998 1999
-------- -------- ------------ -------- ----------- ----------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Product sales.......... $ 87,694 $105,625 $ 117,973 $215,486 $ 342,078 $ 210,671 $378,851
License fees........... 34,818 51,989 34,574 64,049 207,473 160,735 198,859
Royalties.............. 27,719 33,948 37,363 46,857 31,660 23,045 20,524
Research revenues...... 32,470 36,680 45,649 57,789 95,523 67,336 126,147
-------- -------- --------- -------- ----------- ----------- --------
Total revenues.......... 182,701 228,242 235,559 384,181 676,734 461,787 724,381
-------- -------- --------- -------- ----------- ----------- --------
Operating income
(loss)................. 60,076 78,668 (582,763)(1) 131,075 (1,184,324)(2) (1,125,707)(3) 227,324
Income (loss) before
provision for income
taxes.................. 64,715 91,473 (571,794)(1) 171,325 (1,166,739)(2) (1,112,402)(3) 251,614
Net income (loss)....... 64,050 90,925 (572,568)(1) 170,139 (1,170,613)(2) (1,114,536)(3) 245,601
======== ======== ========= ======== =========== =========== ========
Basic earnings (loss)
per share.............. $0.51 $0.67 ($3.21)(1) $0.86 ($4.91)(2) ($4.89)(3) $0.92
Diluted earnings (loss)
per share.............. $0.45 $0.60 ($3.21)(1) $0.77 ($4.91)(2) ($4.89)(3) $0.87
Weighted average number
of
ordinary shares
Basic.................. 126,181 137,241 178,330 198,704 238,304 227,812 266,349
Diluted................ 142,157 167,246 178,330 226,160 238,304 227,812 282,836
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31, September 30,
----------------- ------------------------------ ---------------------
1995 1996 1996 1997 1998 1998 1999
-------- -------- -------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital......... $247,735 $477,985 $252,774 $ 675,722 $1,080,106 $ 364,594 $1,114,250
Total assets............ 490,932 703,195 765,900 1,214,477 2,480,751 1,648,275 2,706,609
Long-term obligations... 159,512 162,416 138,265 325,000 1,262,239 325,000 1,227,745
Total shareholders'
equity................. 299,422 508,583 511,195 824,100 983,934 1,014,801 1,249,920
</TABLE>
(1) After other charges of $659,865,000 relating to the acquisition of in-
process research and development, costs of fundamental restructuring and a
provision for loss on sale of a business.
(2) After other charges of $1,423,718,000 relating to the acquisition of in-
process research and development, rationalization and integration costs, a
loss on a sale of a business and a contribution to Axogen Limited.
(3) After other charges of $1,294,965,000 relating to the acquisition of in-
process research and development, rationalization and integration costs and
a loss on a sale of a business.
9
<PAGE>
Summary Historical Consolidated Financial Data of Liposome
(Dollars in thousands, except per share data)
The summary historical consolidated financial data set forth below as of and
for each of the years ended December 31, 1995, December 29, 1996, December 28,
1997, January 3, 1999 and January 2, 2000 have been derived from consolidated
financial statements of Liposome and its subsidiaries audited by
PricewaterhouseCoopers LLP, independent accountants. The consolidated balance
sheets as of January 3, 1999 and January 2, 2000 and the consolidated
statements of operations and cash flows for the years ended December 28, 1997,
January 3, 1999 and January 2, 2000, and the notes thereto are incorporated by
reference in this prospectus-proxy statement. See "Where You Can Find More
Information" and "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------------------
December 31, December 29, December 28, January 3, January 2,
1995 1996 1997 1999 2000
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Product sales, net..... $ 6,164 $ 52,840 $ 58,452 $ 73,495 $ 86,203
Collaborative
agreements and
grants................ 6,589 3,228 2,331 -- --
Interest, investment
and other income...... 2,964 3,864 4,313 4,373 6,267
--------- --------- --------- --------- ---------
Total revenues.......... 15,717 59,932 65,096 77,868 92,470
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales.......... $ 2,304 $ 16,559 $ 22,029 $ 20,805 $ 20,284
Research and
development........... 30,149 29,371 28,894 26,441 25,517
Selling, general and
administrative........ 18,631 31,541 39,914 34,535 32,277
--------- --------- --------- --------- ---------
Total costs and
expenses............... 51,084 77,471 90,837 81,781 78,078
--------- --------- --------- --------- ---------
(Loss) income from
operations............. (35,367) (17,539) (25,741) (3,913) 14,392
Interest expense........ (294) (339) (705) (773) (551)
--------- --------- --------- --------- ---------
Net (loss) income....... $ (35,661) $ (17,878) $ (26,446) $ (4,686) $ 13,841
Taxation................ -- -- -- -- (790)
Preferred stock
dividends.............. (5,348) (1,235) -- -- --
--------- --------- --------- --------- ---------
Net (loss) income
applicable to common
stock.................. $ (41,009) $ (19,113) $ (26,446) $ (4,686) $ 13,051
========= ========= ========= ========= =========
Basic and diluted net
(loss) earnings per
share.................. $(1.50) $(0.57) $(0.71) $(0.12) $0.34(1)
Shares used in computing
basic and diluted net
(loss) earnings per
share.................. 27,293 33,292 37,083 38,172 38,825(1)
<CAPTION>
December 31, December 29, December 28, January 3, January 2,
1995 1996 1997 1999 2000
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents
and short-term
investments............ $ 72,333 $ 47,180 $ 45,525 $ 54,343 $ 76,863
Working capital......... 64,422 46,781 41,566 41,401 67,329
Total assets............ 105,926 94,555 91,500 90,574 110,758
Long-term obligations... 4,104 7,555 6,879 5,089 2,383
Accumulated deficit..... (144,520) (162,398) (188,844) (193,530) (180,479)
Total shareholders'
equity................. 89,832 74,861 73,662 71,741 90,729
</TABLE>
(1) Diluted shares outstanding as of January 2, 2000 were 40,284, and diluted
net earnings per share were $0.32.
10
<PAGE>
Unaudited Pro Forma Combined Financial Data
The following unaudited pro forma combined financial data are based on the
historical financial statements of Elan and Liposome and have been prepared to
illustrate the effects of the merger. The pro forma combined balance sheet as
of September 30, 1999 gives effect to the merger as if it had occurred on that
date. The pro forma combined statements of income for the year ended December
31, 1998 and for the nine months ended September 30, 1999 give effect to the
merger as if it had occurred on January 1, 1998.
The pro forma combined financial data have been prepared in accordance with
U.S. generally accepted accounting principles using the purchase method of
accounting. The pro forma combined financial data do not contain any adjustment
to reflect any restatement of the net assets of Liposome to conform with Elan's
accounting policies or the costs, benefits or synergies resulting from the
integration of Elan and Liposome following the merger. The pro forma combined
financial data are for illustrative purposes only and are not necessarily
indicative of any future results of operations or the results that might have
occurred if the merger had been consummated on the indicated dates. You should
read the following information together with the historical financial
statements of Elan and Liposome and the related notes.
The merger will be accounted for using the purchase method of accounting.
The aggregate purchase cost of the merger will be allocated to tangible and
intangible assets and liabilities acquired based upon the estimated fair
values. Any allocation relating to in-process research and development will be
written off at the time of the merger. The allocation of the purchase price
reflected in the pro forma combined financial data is preliminary. The final
allocation of the purchase price is contingent upon appraisals of the acquired
assets.
The calculation of the number of Elan ADSs to be issued for Liposome common
stock is based on the exchange ratio of 0.385 of an Elan ADS for each Liposome
share.
11
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
Historical
-----------------------
Elan Liposome
September 30, October Combined Pro Forma
1999 3, 1999 Adjustment(1) September 30, 1999
------------- --------- ------------- ------------------
(unaudited)
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash
equivalents........... $ 810,996 $ 17,983 -- $ 828,979
Marketable investment
securities............ 172,242 44,403 -- 216,645
Accounts receivable
(net)................. 150,540 4,183 -- 154,723
Inventories............ 129,355 7,185 -- 136,540
Prepayments............ 80,061 1,344 -- 81,405
----------- --------- --------- -----------
Total current assets... $ 1,343,194 $ 75,098 -- $ 1,418,292
=========== ========= ========= ===========
Marketable investment
securities............ 33,329 -- -- 33,329
Investments............ 335,879 5,522 -- 341,401
Property, plant and
equipment (net)....... 209,914 20,786 -- 230,700
Intangible assets
(net)................. 784,293 306 448,099 1,232,698
----------- --------- --------- -----------
Total assets............ $ 2,706,609 $ 101,712 $ 448,099 $ 3,256,420
=========== ========= ========= ===========
Liabilities and
shareholders' equity:
Current liabilities:
Accounts payable....... 45,304 3,983 -- 49,287
Accrued and other
liabilities........... 183,640 10,265 -- 193,905
----------- --------- --------- -----------
Total current
liabilities......... $ 228,944 $ 14,248 -- $ 243,192
=========== ========= ========= ===========
Other liabilities:
Long-term
obligations........... 17,842 2,816 -- 20,658
4.75% Exchangeable
notes................. 325,000 -- -- 325,000
3.25% Zero coupon
subordinated
exchangeable notes.... 884,903 -- -- 884,903
----------- --------- --------- -----------
$ 1,227,745 $ 2,816 -- $ 1,230,561
=========== ========= ========= ===========
Shareholders' equity:
Share capital.......... 16,252 392 (392) 17,018
766
Additional paid-in
capital............... 2,492,796 270,626 (270,626) 3,136,802
644,006
Other shareholders'
equity................ (76,838) (1,113) 1,113 (76,838)
Retained earnings...... (1,182,290) (185,257) 185,257 (1,294,315)
(112,025)
----------- --------- --------- -----------
Total shareholders'
equity.............. $ 1,249,920 $ 84,648 $ 448,099 $ 1,782,667
=========== ========= ========= ===========
Total liabilities and
shareholders' equity... $ 2,706,609 $ 101,712 $ 448,099 $ 3,256,420
=========== ========= ========= ===========
</TABLE>
12
<PAGE>
(1) The merger is expected to result in the issuance of 15,327,776 Elan
ordinary shares, resulting in an increase in share capital and additional
paid-in capital of $766,000 and $607,555,000, respectively. In addition,
Liposome had granted options and warrants which are exercisable for
5,461,389 shares of Liposome common stock at March 29, 2000. Under the
merger agreement the holders of the options and warrants of Liposome will
receive similar rights in Elan, adjusting the number of Liposome shares
into which such instruments are exercisable and the exercise price thereof
for the exercise ratio of 0.385. The amount by which the quoted market
value of the Elan ADSs exceeds the exercise proceeds to be received from
the exercise of options and warrants is included in additional paid-in
capital and in the purchase price. This amounts to $36,451,000. The Elan
ADS price assumed for the purpose of this calculation is $39.6875, the
closing price of Elan ADSs at March 3, 2000. The total resulting purchase
price approximates $644,772,000. The preliminary allocation of the purchase
price is as follows:
<TABLE>
<S> <C>
Increase in fair value of intangible assets.............. $448,099,000(a)
In-process research and development...................... 112,025,000(b)
Net assets of Liposome per balance sheet as of October 3,
1999.................................................... 84,648,000
------------
$644,772,000
============
</TABLE>
(a) Reflects an increase in the carrying value of intangible assets to
their estimated fair value, based on a preliminary assessment.
(b) Reflects a charge against earnings, representing the acquisition of
in-process research and development activities estimated at
$112,025,000, based on a preliminary assessment. This charge is
excluded from the unaudited pro forma combined statements of income
as it is a non-recurring charge that is directly attributable to the
merger.
(2) The unaudited pro forma combined balance sheet as of September 30, 1999
does not include the pro forma effect of the acquisitions by Elan of Axogen
Limited and Neuralab Limited as they do not meet the definition of
significant business combinations.
(3) The unaudited pro forma combined balance sheet as of September 30, 1999
does not include the effect of any potential contingent value right
payments by Elan arising from the approval or marketing of Evacet(TM).
13
<PAGE>
Unaudited Pro Forma Combined Statement of Income
for the year ended December 31, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
----------------------- Combined
Elan Liposome Pro Forma
Year ended Year ended Year ended
December January December
31, 1998 3, 1999 Adjustment(1) 31, 1998
----------- ---------- ------------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product sales............. $ 342,078 $73,495 -- $ 415,573
License fees.............. 207,473 -- -- 207,473
Royalties................. 31,660 -- -- 31,660
Research revenues......... 95,523 -- -- 95,523
----------- ------- -------- -----------
Total revenues............ $ 676,734 $73,495 -- $ 750,229
----------- ------- -------- -----------
Costs and expenses:
Cost of goods sold........ 137,935 20,805 22,405 181,145
Selling, general and
administrative........... 155,869 34,535 -- 190,404
Research and development.. 143,536 26,441 -- 169,977
Other charges:
Acquisition of in-process
research and development
(2)(3)................... 1,311,149 -- -- 1,311,149
Rationalization and
integration.............. 41,747 -- -- 41,747
Loss on sale of business.. 3,322 -- -- 3,322
Contribution to Axogen
Limited.................. 67,500 -- -- 67,500
----------- ------- -------- -----------
Total operating expenses.. $ 1,861,058 $81,781 $ 22,405 $ 1,965,244
----------- ------- -------- -----------
Operating (loss)........... (1,184,324) (8,286) (22,405) (1,215,015)
Interest and other costs.. (28,872) (773) -- (29,645)
Interest and other
income................... 46,457 4,373 -- 50,830
----------- ------- -------- -----------
(Loss) before provision for
income taxes.............. (1,166,739) (4,686) (22,405) (1,193,830)
Taxation................... (3,874) -- -- (3,874)
----------- ------- -------- -----------
Net (loss)................. $(1,170,613) $(4,686) $(22,405) $(1,197,704)
=========== ======= ======== ===========
Basic (loss) per share..... ($4.91) ($4.72)
Diluted (loss) per share... ($4.91) ($4.72)
Weighted average number of
ordinary shares
Basic..................... 238,304 253,632
Diluted................... 238,304 253,632
</TABLE>
(1) The adjustment of $22,405,000 represents increased amortisation following
the revaluation of Liposome intangible assets at their estimated fair
value. The intangible assets will be amortised on a straight line basis
over their expected useful lives, estimated at 20 years based on a
preliminary assessment.
(2) As a result of the merger, Elan will incur a non-recurring charge against
earnings representing the acquisition of in-process research and
development estimated at $112,025,000, based on a preliminary assessment.
The charge is excluded from the unaudited pro forma combined statement of
income as it is directly attributable to the merger.
(3) Other charges for the year ended December 31, 1998 arose principally from
the acquired in-process research and development expenses on the
acquisitions of Neurex Corporation ($787 million), GWC Healthcare, Inc.
($20 million), Sano Corporation ($405 million) and NanoSystems LLC ($89
million).
(4) The unaudited pro forma combined statement of income for the year ended
December 31, 1998 does not include the pro forma effect of the acquisitions
by Elan of Axogen Limited and Neuralab Limited as they do not meet the
definition of significant business combinations.
14
<PAGE>
Unaudited Pro Forma Combined Statement of Income
for the nine months ended September 30, 1999
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
------------------------- Combined
Elan Liposome Pro Forma
Nine months Nine months Nine months
ended ended ended
September 30, October 3, September
1999 1999 Adjustment(1) 30, 1999
------------- ----------- ------------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product sales............. $378,851 $63,060 -- $441,911
License fees.............. 198,859 -- -- 198,859
Royalties................. 20,524 -- -- 20,524
Research revenues......... 126,147 -- -- 126,147
-------- ------- -------- --------
Total revenues............ $724,381 $63,060 -- $787,441
-------- ------- -------- --------
Costs and expenses:
Cost of goods sold........ 146,265 14,855 16,804 177,924
Selling, general and
administrative........... 181,241 23,894 -- 205,135
Research and development.. 169,551 20,084 -- 189,635
-------- ------- -------- --------
Total operating expenses.. $497,057 $58,833 $ 16,804 $572,694
-------- ------- -------- --------
Operating income (loss).... 227,324 4,227 (16,804) 214,747
Interest and other
income................... 75,128 4,788 -- 79,916
Interest and other costs.. (51,083) (442) -- (51,525)
Share of income from
investments accounted for
under the equity method.. 268 -- -- 268
Minority interest......... (23) -- -- (23)
-------- ------- -------- --------
Income (loss) before
provision for income
taxes..................... 251,614 8,573 (16,804) 243,383
Taxation................... (6,013) (300) -- (6,313)
-------- ------- -------- --------
Net income (loss).......... $245,601 $ 8,273 $(16,804) $237,070
======== ======= ======== ========
Basic earnings per share... $ 0.92 $ 0.84
Diluted earnings per
share..................... $ 0.87 $ 0.79
Weighted average number of
ordinary shares
Basic..................... 266,349 281,677
Diluted................... 282,836 299,222
</TABLE>
(1) The adjustment of $16,804,000 represents increased amortisation following
the revaluation of Liposome intangible assets at their estimated fair
value. The intangible assets will be amortised on a straight line basis
over their expected useful lives, estimated at 20 years based on a
preliminary assessment.
(2) As a result of the merger, Elan will incur a non-recurring charge against
earnings representing the acquisition of in-process research and
development estimated at $112,025,000, based on a preliminary assessment.
The charge is excluded from the unaudited pro forma combined statement of
income as it is directly attributable to the merger.
(3) The unaudited pro forma combined statement of income for the nine months
ended September 30, 1999 does not include the pro forma effect of the
acquisitions by Elan of Axogen Limited and Neuralab Limited as they do not
meet the definition of significant business combinations.
15
<PAGE>
Comparative Per Share Data
The following table sets forth certain historical per share data for the
nine months ended September 30, 1999 (for Elan) and October 3, 1999 (for
Liposome) and for the year ended December 31, 1998 (for Elan) and January 3,
1999 (for Liposome) and unaudited pro forma and Liposome equivalent pro forma
combined per share data to reflect the consummation of the merger based upon
the historical financial results of Elan and Liposome and the conversion of
each share of Liposome common stock into 0.385 of an Elan ADS and one
contingent value right. Neither Elan nor Liposome have paid dividends. The pro
forma data are not necessarily indicative of actual or future operating results
or of the financial position that would have occurred had the merger closed at
the date or at the beginning of the periods indicated, or that will occur upon
consummation of the merger. The data presented below should be read in
conjunction with the unaudited pro forma combined financial information set
forth under "Unaudited Pro Forma Combined Financial Data" and the separate
historical consolidated financial statements of Elan and Liposome, which are
incorporated in this prospectus-proxy statement by reference. See "Unaudited
Pro Forma Combined Financial Data."
<TABLE>
<CAPTION>
Historical Liposome
---------------- Pro Forma Equivalent
Elan Liposome Combined(1) Pro Forma(1)(2)
------ -------- ----------- ---------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998
(Elan) and
January 3, 1999 (Liposome)
Diluted (loss) per ordinary,
common and equivalent share..... $(4.91) $(0.12) $(4.72) $(1.82)
Book value per ordinary, common
and equivalent share............ $ 4.13 $ 1.88 $ 5.93 $ 2.28
Nine months ended September 30,
1999 (Elan) and
October 3, 1999 (Liposome)
Diluted earnings per ordinary,
common and
equivalent share................ $ 0.87 $ 0.21 $ 0.79 $ 0.30
Book value per ordinary, common
and equivalent share............ $ 4.69 $ 2.19 $ 6.33 $ 2.44
</TABLE>
- --------
(1) Excludes the effect of any potential payments on the contingent value
rights by Elan arising from the approval or marketing of Evacet(TM).
(2) The equivalent pro forma per share amounts with respect to Liposome common
stock were calculated by multiplying pro forma income per share and pro
forma book value per share by the exchange ratio of 0.385.
16
<PAGE>
Comparative Market Price and Dividend Information
Comparative Market Price Information
Elan ADSs are listed and traded on the New York Stock Exchange, the
principal trading market for Elan's securities, under the symbol "ELN".
Liposome common stock is quoted on the Nasdaq National Market under the symbol
"LIPO". The following table sets forth the high and low per share sale prices
for the Elan ADSs on the NYSE and shares of Liposome common stock on the Nasdaq
National Market, as reported in published financial sources, for the periods
indicated.
<TABLE>
<CAPTION>
Liposome Common
Elan ADSs Stock
----------------- -----------------
High Low High Low
-------- -------- -------- -------- ---
<S> <C> <C> <C> <C> <C>
2000
2nd Quarter (through April 11).......... $49.0000 $38.7500 $18.3750 $14.8750
1st Quarter............................. 48.2500 26.0000 18.1250 10.8750
1999
4th Quarter............................. 33.8125 21.2500 14.0000 6.3438
3rd Quarter............................. 35.3750 26.6250 28.5000 6.7500
2nd Quarter............................. 38.4063 24.8125 19.2500 10.0000
1st Quarter............................. 43.6250 33.2813 16.0625 10.7500
1998
4th Quarter............................. 35.8750 29.6250 16.8750 5.1250
3rd Quarter............................. 37.9688 28.2500 6.2500 3.3750
2nd Quarter............................. 33.7813 29.0625 8.6250 4.6875
1st Quarter............................. 34.5000 24.0625 6.4375 4.6875
</TABLE>
Elan's ordinary shares are also traded in Dublin on the Irish Stock Exchange
and in London on the London Stock Exchange. The volume of trading in the
ordinary shares on such markets is, however, very limited.
The following table sets forth the high, low and closing per share sale
price for the Elan ADSs on the NYSE and shares of Liposome common stock on the
Nasdaq National Market as of March 3, 2000, the last full day of trading before
the issuance of a press release by Elan and Liposome announcing the proposed
merger, and as of April 11, 2000, the last full day of trading for which
information was available before the printing of this prospectus-proxy
statement.
<TABLE>
<CAPTION>
Elan ADSs Liposome Common Stock
-------------------------- --------------------------
High Low Closing High Low Closing
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
March 3, 2000............. $41.6875 $39.0000 $39.6875 $15.2500 $14.1875 $14.3750
April 11, 2000............ 41.5000 38.7500 41.2500 15.7500 14.8750 15.4688
</TABLE>
We cannot assure you of the market price of Elan ADSs or shares of Liposome
common stock at, or the Elan ADSs and the contingent value rights after, the
completion of the merger. We urge you to obtain current market quotations for
the Elan ADSs and the shares of Liposome common stock.
Comparative Dividend Information
Elan has not paid cash dividends on its ordinary shares in the past. Elan's
dividend policy will be reviewed periodically depending on its earnings,
capital requirements and financial condition of Elan and other relevant
factors. Elan does not anticipate that it will pay any cash dividends on its
ordinary shares in the foreseeable future. Dividends may be paid on Elan's
Executive Shares or "B' Executive Shares at a time when
17
<PAGE>
no dividends are being paid on the ordinary shares. For additional information
relating to the Executive Shares and "B' Executive Shares, see "Description of
Elan Capital Stock" and Note 16 to the Consolidated Financial Statements
included in Elan's 1998 annual report on Form 20-F, as amended by Form 20-F/A1,
incorporated in this prospectus-proxy statement by reference.
Liposome has never paid dividends on Liposome common stock and does not
anticipate that it will pay dividends in the foreseeable future.
Cautionary Note Concerning Forward-Looking Statements
In this prospectus-proxy statement, Elan and Liposome have made forward-
looking statements that are subject to risk and uncertainties. Forward-looking
statements include statements concerning possible or assumed future results of
operations included:
. under "The Merger--Elan's Reasons for the Merger" and "The Merger--
Liposome's Reasons for the Merger";
. in statements about the benefits that Elan or Liposome may achieve as a
result of the merger, or about other effects of the merger or the future
development of Elan;
. in statements before, after or including the words "may," "will,"
"could," "should," "believe," "expect," "future," "anticipate,"
"intend," "plan," "estimate," or "continue" or similar expressions; and
. in other statements about matters that are not historical facts.
Various risks and uncertainties may cause actual results to differ
materially from the results that these statements express or imply. For
instance, important factors that could cause Elan's or Liposome's actual
results to differ materially include:
. costs or difficulties in integrating Elan and Liposome are greater than
expected or involve the loss of key personnel resulting in an inability
of Elan to capitalize on Liposome's research, development and marketing
capabilities to the degree contemplated by Elan and Liposome;
. the failure to successfully develop, commercialize and launch new
products in a timely manner;
. competition to Elan's or Liposome's products from products supplied by
other companies causing decreased sales or slower growth of Elan or
Liposome products, and competitive pressures and pricing in the health
care industry generally;
. risks associated with technology and product development and risks
associated with Elan's continued ability to license technologies or
products;
. the difficulty of predicting regulatory approvals or other regulatory
actions;
. fluctuations in operating results;
. availability of raw materials;
. risks relating to clinical development and medical acceptance of new
pharmaceutical products;
. changes in the health care marketplace and decisions by government
health administration authorities or private health coverage insurers as
to the level of reimbursement for Elan's and Liposome's products;
. reliance on key strategic alliances; and
. patent and intellectual property matters and manufacturing issues.
18
<PAGE>
Additional factors relating specifically to Liposome that could cause Elan's
or Liposome's actual results to differ materially include:
(a) the commercialization of Abelcet(R) is still ongoing, and the future
rate of sales of Abelcet(R) is uncertain;
(b) Liposome's other products are in development and have not yet
received regulatory approval for sale, and it is difficult to predict if
and when such approvals will be received and, if approved, whether the
products can be successfully developed, manufactured and marketed;
(c) risks associated with international sales, such as currency exchange
rates, currency controls, tariffs, duties, taxes, export license
requirements and foreign regulations may adversely affect Liposome's
foreign operations; and
(d) Liposome has incurred annual losses since its inception except
calendar 1999, and there can be no assurance of profitability in any future
annual period.
Please do not place undue reliance on these forward-looking statements,
which speak only as of the date of this prospectus-proxy statement.
19
<PAGE>
RISK FACTORS
In addition to the other information regarding Elan, Liposome and the merger
contained in this prospectus-proxy statement, Liposome stockholders should
consider the following factors before making any decisions regarding the
approval and adoption of the merger agreement.
Risks Relating to the Merger
Risks Relating to Payments on Contingent Value Rights--There can be no
assurance that you will ever receive any payments on the contingent value
rights. There are a number of factors relating to distributions of milestone
payments on the contingent value rights that may adversely affect your ability
to realize value on the contingent value rights. It is possible that the
contingent value rights will terminate without any payments being made.
Based on the number of Liposome shares, warrants and options outstanding on
March 29, 2000, the maximum total payment on the contingent value rights would
be $2.16 per Liposome share. The actual amount payable per contingent value
right will depend on the number of Liposome shares, warrants and options
outstanding at the closing of the merger, which may be different from the
number that was outstanding on March 29, 2000. If the number is larger, the
amount payable per contingent value right will be smaller. See "Contingent
Value Rights."
Termination of Contingent Value Rights. The contingent value rights will
terminate if the European Union determines not to consider or approve
Evacet(TM) for marketing authorization. Liposome withdrew its new drug
application for Evacet(TM) in the U.S. after the FDA declined to recommend its
approval, and there can be no assurance that Evacet(TM) will be approved in the
EU. Elan is under no obligation to appeal any determination by the EU not to
consider or approve Evacet(TM).
The contingent value rights will also terminate if any regulatory body
issues adverse findings with respect to Evacet(TM) that cause Elan to withdraw
it from the market. These termination events could occur prior to the payment
of any amounts on the contingent value rights.
Risks Relating to EU Approval and Pricing Licenses. The approval milestone
payment of up to $54.0 million depends on the approval of Evacet(TM) for
marketing in the EU and the issuance of pricing licenses in Germany and the
United Kingdom on or before March 31, 2001. The standard process required
before a pharmaceutical product may be marketed in the EU is complex and
subject to many uncertainties. Separate applications for a pricing license must
be made in each EU country, which are also subject to uncertainties and delays.
In order to meet the requirements under the contingent value rights agreement
for distribution of the approval milestone payment, the EU marketing approval
and the pricing licenses must be for at least five years and meet other
specific requirements, and they must not be subject to any material limitations
or require Elan to provide any further material data. Although Liposome has
informed Elan that it believes the EU will approve Evacet(TM) for marketing in
the third quarter of 2000, no assurance can be given that the EU approval and
the German and UK pricing licenses will be received on or before March 31,
2001, or at all, or that the EU approval and the German and UK pricing licenses
will meet all the requirements of the contingent value rights agreement. If all
these conditions are not met, the approval milestone payment will not be made.
Elan has agreed to use its reasonable efforts consistent with pharmaceutical
industry practice to achieve the approval milestone. However, all
determinations relating to approval applications will be in the sole discretion
of Elan. Elan also has the right not to proceed with the application for EU
approval or the German or UK pricing licenses if it determines that the cost of
pursuing those applications would exceed a threshold amount. Furthermore, the
amount of the approval payment will be reduced by costs to Elan of obtaining
pricing licenses in Germany and the United Kingdom and certain costs relating
to the EU application.
Risks Relating to Revenue Milestone Payment. The revenue milestone payment
of $44.0 million depends on the ability of Elan to achieve certain quarterly
sales of Evacet(TM) in the EU and Canada on or before the
20
<PAGE>
quarter ending December 31, 2002. As a result, the revenue milestone payment
also depends on the approval of Evacet(TM) for marketing in the EU and the
issuance of pricing licenses by countries in the EU, as well as necessary
Canadian approval. No assurance can be given that any such approvals will be
obtained. Elan has agreed to use its reasonable efforts consistent with
pharmaceutical industry practice to achieve the revenue milestone. However, all
determinations relating to approval applications will be in the sole discretion
of Elan. If EU marketing approval or pricing licenses in the EU countries are
not received, or necessary approval in Canada is not received, the quarterly
sales targets set forth in the contingent value rights agreement are less
likely to be met, and the revenue milestone payment is less likely to be made.
Furthermore, even if Evacet(TM) is approved for marketing in the EU and Canada,
there can be no assurance that the quarterly sales target will be met on or
before the quarter ending December 31, 2002. If the quarterly sales target
required in the contingent value rights agreement is not achieved by that time,
the revenue milestone payment will not be made.
Risks Relating to Sales and Licensing Milestone Payments. Milestone payments
on the contingent value rights may also be made if Elan is successful in
licensing Evacet(TM) for marketing in France, Germany, Italy, Spain or the UK,
or if Elan sells all or substantially all of the rights to Evacet(TM) in the EU
and Canada. Although these payments do not directly depend on prior approval of
Evacet(TM) for marketing in the EU or Canada, any failure to receive the
necessary approvals or pricing licenses would make it less likely that those
milestone payments would be made. Application has been made in the EU and
Canada for approval to market Evacet(TM). Approvals for marketing and pricing
licenses are subject to many uncertainties, however, and no assurance can be
given that any such approvals or pricing licenses will be obtained. All
determinations relating to approval applications will be in the sole discretion
of Elan. Furthermore, there can be no assurance that Elan will be successful in
licensing or selling the rights to Evacet(TM).
Inability to Calculate Value of Contingent Value Rights--The value of the
contingent value rights depends on the satisfaction of several conditions. The
contingent value rights received in connection with the merger could result in
total milestone payments to Liposome stockholders of as much as $98.0 million
and or as little as zero. The distributions to Liposome stockholders of the
milestone payments are subject to the satisfaction of certain conditions, and
no assurance can be given that those conditions will be satisfied. As a result,
you will be unable to determine the value, if any, of the contingent value
rights at the time you execute a proxy or at the time of the special meeting.
See "Contingent Value Rights."
The contingent value rights will constitute a new issue of securities with
no prior market. Although application has been made for the contingent value
rights to be approved for quotation on the Nasdaq National Market, there can be
no assurance that a significant public market will develop or be sustained. If
a trading market develops for these securities, future trading prices could be
volatile and will depend on many factors. The price at which the contingent
value rights will trade is uncertain and will not correlate with the market
price of Elan ADSs.
If Elan does not successfully integrate the operations of Liposome, the
merger into Elan may not benefit us or our stockholders. The combination of
Elan and Liposome involves the integration of a separate company that has
previously operated independently. If the integration into Elan is not
completed successfully or takes longer than planned, the anticipated benefits
of the merger may be lost or delayed. In integrating the operations of
Liposome, Elan may encounter difficulties or experience the loss of key
employees, customers or suppliers.
Persons affiliated with Liposome have interests that may conflict with the
interests of Liposome stockholders in the merger. Some members of Liposome's
management and board of directors have interests in the merger that are
different from or in addition to your interests as a Liposome stockholder. As a
result, these individuals may have interests different from your own.
Specifically:
. the chief executive officer of Liposome will be entitled under his
employment agreement to receive, if his employment is terminated after
the merger in circumstances described in his employment agreement,
payments equal to 12 months of his base salary without restriction and
up to an additional 12 months of his base salary, plus additional
payments;
21
<PAGE>
. eight other officers of Liposome will be entitled under their severance
agreements to receive, if their employment is terminated after the
merger in circumstances described in their severance agreements,
severance payments equal to 12 months of their base salary, plus
additional payments; and
. Elan has agreed to indemnify each of Liposome's current or former
directors and officers against losses and claims arising in connection
with their actions as a director or officer prior to the merger and to
provide liability insurance for up to six years.
We have described the interests of these persons in more detail under the
heading "The Merger--Interests of Executive Officers and Directors of Liposome
in the Merger; Conflicts of Interests."
Risk Factors Relating to Elan
For a discussion of risk factors relating to Elan, see Elan's annual report
for the year ended December 31, 1998, on Form 20-F, as amended by Form 20-F/A1,
which is incorporated by reference in this prospectus-proxy statement.
Risk Factors Relating to Liposome
For a discussion of risk factors relating to Liposome, see "Business" in
Liposome's annual report for the year ended January 2, 2000, on Form 10-K,
which is incorporated by reference in this prospectus-proxy statement.
22
<PAGE>
THE SPECIAL MEETING
Time and Place
This prospectus-proxy statement is being furnished to Liposome stockholders
in connection with the solicitation of proxies by the board of directors of
Liposome for use at the special meeting of Liposome stockholders scheduled to
be held at The Holiday Inn, 1053 Route 1, Princeton, New Jersey 08540, at
10:00 a.m., local time on May 12, 2000. This prospectus-proxy statement, the
attached Notice of Stockholders' Meeting and the enclosed form of proxy are
first being mailed to Liposome stockholders on or about April 14, 2000.
Matters to Be Considered at the Special Meeting
At the special meeting, you will be asked to consider and vote on a proposal
to adopt the merger agreement and to approve the merger. You will also consider
any other matters that may properly come before the special meeting or any
adjournment or postponement of the special meeting.
After careful consideration, the board of directors of Liposome has
unanimously determined that the terms of the merger agreement and the
transactions contemplated thereby are fair to and in the best interests of
Liposome and the Liposome stockholders. The Liposome board of directors has
unanimously approved the merger agreement and unanimously recommends that
holders of Liposome common stock vote for the approval and adoption of the
merger agreement at the special meeting.
Record Date; Voting Rights; Quorum
Only holders of record of Liposome common stock at the close of business on
March 29, 2000, the record date, are entitled to notice of and to vote at the
special meeting. On the record date, 39,812,406 shares of Liposome common stock
were outstanding and entitled to vote and held by approximately 906 holders of
record. A quorum will be present at the special meeting if a majority of the
shares of Liposome common stock outstanding and entitled to vote on the record
date, or 19,906,204 shares, are represented at the special meeting in person or
by proxy. In the event that a quorum is not present at the special meeting, it
is expected that the meeting will be adjourned or postponed to solicit
additional proxies. Holders of record of Liposome common stock on the record
date are entitled to one vote per share at the special meeting on the proposal
to adopt the merger agreement and approve the merger.
Votes Required
The adoption of the merger agreement requires the affirmative vote of a
majority of the outstanding shares of Liposome common stock.
Voting by Liposome Directors and Executive Officers
At the close of business on the record date, directors and executive
officers of Liposome owned and were entitled to vote 931,957 shares of Liposome
common stock, which represented approximately 2.3% of the shares of Liposome
common stock outstanding on that date.
Voting of Proxies
All shares represented by properly executed proxies received in time for the
special meeting will be voted at the special meeting in the manner specified by
the holders. Properly executed proxies that do not contain voting instructions
will be voted "FOR" adoption of the merger agreement.
Shares of Liposome common stock represented at the special meeting but not
voting, including shares of Liposome common stock for which proxies have been
received but for which holders of shares have abstained
23
<PAGE>
and shares held in street name by brokers who have not received voting
instructions from their beneficial owners, will be treated as present at the
special meeting for purposes of determining the presence or absence of a quorum
for the transaction of all business.
Only shares affirmatively voted for adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as votes in favor of the merger. If a Liposome stockholder
abstains from voting or does not vote, either in person or by proxy, it will
have the same effect as a vote against the merger. Brokers who hold shares of
Liposome common stock in street name for customers who are the beneficial
owners of such shares may not give a proxy to vote those customers' shares in
the absence of specific instructions from those customers. These non-voted
shares are referred to as broker non-votes and will have the same effect as
votes against the merger.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
Liposome does not expect that any matter other than the proposal to adopt
the merger agreement and approve the merger will be brought before the special
meeting. If, however, the Liposome board of directors properly presents other
matters, the persons named as proxies will vote in accordance with their
judgment.
Solicitation of Proxies
Liposome will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Liposome and its subsidiaries may solicit proxies from
stockholders by telephone or other electronic means or in person. Liposome will
cause brokerage houses and other custodians, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of stock held of record
by such persons. Liposome will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in doing so.
Corporate Investor Communications, Inc. will assist in the solicitation of
proxies by Liposome. Liposome will pay Corporate Investor Communications a fee
of approximately $5,000, plus reimbursement of certain out-of-pocket expenses,
and will indemnify Corporate Investor Communications against any losses arising
out of its proxy soliciting services on behalf of Liposome.
Revocability of Proxies
Any proxy you give may be revoked by filing with the Secretary of Liposome
before the vote at the special meeting a later-dated proxy relating to the same
shares of Liposome common stock or a written notice of revocation bearing a
later date than the date of the proxy. You may do this by telegram or
facsimile. You may also revoke your proxy by attending the special meeting and
voting in person. Holders of Liposome common stock who hold their shares
through a bank, brokerage firm or other nominee account may revoke or change
their earlier votes by instructing the nominee or obtaining and voting a proxy
issued by the nominee. Holders of Liposome common stock who have questions
about a proxy should contact Liposome's proxy solicitor, Corporate Investor
Communications, at 101 Commerce Road, Carlstadt, NJ 07072-2586, or by telephone
at 1-877-977-6191.
Surrender of Certificates
Stockholders should not send stock certificates with their proxies. A
transmittal form with instructions for the surrender of Liposome common stock
certificates will be mailed to Liposome stockholders shortly after completion
of the merger.
24
<PAGE>
THE MERGER
Background of the Merger
In 1997, Liposome had one commercialized product, Abelcet(R), and was
conducting clinical trials for two other products, Evacet(TM) and Ventus(TM).
In June 1997, Liposome received the results of the clinical trial of Ventus(TM)
and determined not to perform any further clinical development of the drug.
Liposome issued a press release announcing this result.
Following this setback, Liposome determined to explore entering into a
strategic alliance with a significant partner in order to support and leverage
Liposome's marketing, manufacturing, and research and development efforts.
In December 1997, Liposome retained a financial advisor to identify either a
pharmaceutical company that would agree to make a minority investment in
Liposome, or a biotechnology company that was of equal size with a product in
late-stage development for the purposes of considering a merger. During 1998
and through the third quarter of 1999 this effort led to preliminary contacts
with six companies.
In September 1999, Liposome suffered a second product development setback
when the FDA Oncologic Drugs Advisory Committee declined to recommend approval
of Evacet(TM). In October 1999, Liposome withdrew its New Drug Application for
Evacet(TM) with the intention of resubmitting it soon with a reanalysis of the
existing data.
As a result of the Evacet(TM) developments, the Liposome board met on
October 20, 1999, with its then financial advisor and with Warburg Dillon Read
LLC. The board concluded that Liposome should explore strategic alternatives,
including a possible merger or sale of Liposome. The board directed Warburg
Dillon Read to contact third parties who may be interested in a transaction
with Liposome.
Warburg Dillon Read contacted 28 companies in the biopharmaceuticals,
specialty pharmaceuticals and large pharmaceutical businesses. As a result of
those contacts, proposed confidentiality agreements were sent to 20 companies,
six of which signed confidentiality agreements. These six companies were
provided a confidential information memorandum and were asked to submit
indications of interest.
At a special meeting of the Liposome board of directors on December 20,
1999, Warburg Dillon Read described to the board indications of interest that
were received. On December 29, 1999, one of the companies submitted a revised
proposal, which was conditioned on, among other things, the transaction being
accounted for as a pooling of interests. When it was determined that Liposome
was not eligible for pooling of interests accounting treatment in a transaction
with that company, the company withdrew its proposal.
On February 1, 2000, Liposome met with the FDA regarding the resubmission of
the Evacet(TM) New Drug Application and concluded that additional clinical data
would be required to obtain marketing approval of Evacet(TM) in the U.S.
Shortly thereafter, Liposome issued a press release announcing the result of
this meeting.
On February 9, 2000, Liposome announced financial results for its fourth
quarter and announced that it had retained Warburg Dillon Read to advise it on
strategic alternatives, including the possible acquisition of Liposome.
Liposome and Warburg Dillon Read contacted the parties which submitted
indications of interest. As a result, Elan proposed a transaction in which
Liposome stockholders would receive Elan ADSs with a value of $15 per Liposome
share as of the date of signing a merger agreement.
On February 16, 2000, the Liposome board of directors met to consider the
proposals received and determined to pursue the Elan proposal. The board
established a Negotiating Committee consisting of Mr. Baker, Dr. Collins, Mr.
Feiner and Mr. Stewart. The Negotiating Committee, together with Warburg Dillon
Read and Dewey Ballantine LLP, Liposome's legal advisor, negotiated the terms
of a merger agreement and related documents with Elan and its financial and
legal advisors.
25
<PAGE>
On Saturday, March 4, 2000, the board of directors of Liposome met to
consider the merger agreement with Elan. Warburg Dillon Read gave its oral
opinion to the effect that the consideration to be received by Liposome
stockholders in the merger was fair to the stockholders from a financial point
of view. The board of directors unanimously approved the execution of the
merger agreement. The merger agreement was executed on March 6, 2000, as was a
voting agreement between Elan and the holder of approximately 22.5% of
Lipsome's shares. The form of contingent value rights agreement was also agreed
to. Elan and Liposome issued a press release announcing the merger agreement
before the U.S. markets opened on Monday, March 6, 2000.
Liposome's Reasons for the Merger; Recommendation of the Liposome Board of
Directors
In reaching its conclusion to approve the merger agreement and recommend
that stockholders vote for the merger agreement, the Liposome board of
directors considered a number of factors, including the following material
factors:
. Information regarding the financial condition, results of operations,
business and prospects of Liposome and Elan, both on a stand-alone and
combined basis.
. That Liposome stockholders would receive an ownership interest in the
combined company, allowing them to share in the growth and prospects of
the combined company.
. The judgment and advice of Liposome's senior management, including its
favorable recommendation of the merger.
. The opinion of Warburg Dillon Read to the effect that, as of its date
and based on and subject to various assumptions, matters considered and
limitations described in the opinion, the consideration provided for in
the merger was fair, from a financial point of view, to the holders of
Liposome common stock. Warburg Dillon Read's written opinion is attached
as Annex D and should be read in its entirety.
. Liposome's process of exploring strategic alternatives, including
contacting third parties and issuing a press release in which it
announced that it was exploring strategic alternatives, and that the
Elan proposal was the alternative which the board believed was the most
favorable to Liposome's stockholders. See "--Background of the Merger."
. The terms of the merger agreement, the contingent value rights agreement
and the voting agreement, including the terms of the contingent value
rights and provisions relating to Liposome's ability to consider third
party proposals. See "The Merger Agreement."
. That the merger is generally expected to be tax-free to Liposome
stockholders (other than with respect to the contingent value rights and
cash in lieu of fractional shares) for federal income tax purposes. See
"Material U.S. Federal Income and Irish Tax Consequences."
. Current industry, economic and market conditions.
. The risk that the expected benefits of the merger may not be realized.
See "Risk Factors."
. The interests of Liposome's management in the merger. See "-- Interests
of Executive Officers and Directors of Liposome in the Merger; Conflicts
of Interest."
In view of the variety of factors considered in connection with the
evaluation of the proposed merger and the terms of the merger agreement, the
Liposome board of directors did not deem it practicable to and did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its conclusion. Individual directors may have given different weights
to different factors.
26
<PAGE>
Elan's Reasons for the Merger
Elan believes that the businesses of both Elan and Liposome will be enhanced
through their combination by allowing them to be better positioned to
capitalize on the market opportunities created by the continued consolidation
of the pharmaceutical industry. Elan believes that the merger can significantly
enhance the value of the combined companies through expanded distribution and
marketing capabilities and increased opportunities for product acquisitions and
research partnerships. Liposome enables Elan to enter the oncology market and
will be a platform from which Elan can build a presence in the oncology area.
Liposome will complement Elan's existing drug delivery business and may be of
benefit to Elan in the marketing of Ziconotide, upon approval, in the treatment
of severe chronic cancer pain.
Interests of Executive Officers and Directors of Liposome in the Merger;
Conflicts of Interest
In considering the merger, you should be aware of the interests which
certain officers and directors of Liposome have in the merger that are
different from your and their interests as stockholders.
The officers of Liposome and the members of the Liposome board of directors
may have interests in the merger that are different from, or in addition to,
the interests of stockholders generally. Several officers, including one who is
also a director, have employment agreements and they as well as the nonemployee
directors are, or may become, entitled to specific benefits under Liposome's
benefit plans as a result of the merger. All such additional interests are
described below, to the extent material. Except as described below these
persons have, to the knowledge of Elan and Liposome, no material interest in
the merger apart from the interests of stockholders generally.
Employment Agreement. Liposome has entered into an employment agreement with
Charles A. Baker which provides, among other things, that if Mr. Baker's
employment is terminated within six months of a change in control of Liposome
(as defined in the employment agreement, which definition includes the merger)
either (i) by Liposome for any reason other than "for cause" (as defined in the
employment agreement to cover specified serious misconduct), or (ii) by Mr.
Baker for any reason, Mr. Baker will be entitled to 12 months of continued
payment of base salary without restriction and up to an additional 12 months of
continued payment of base salary (until such time as Mr. Baker obtains another
full-time position). In addition, Mr. Baker will continue to be covered under
the medical and life insurance plans of Liposome for the period he continues to
receive his base salary in accordance with the foregoing, and all options to
purchase stock of Liposome held by Mr. Baker at the time of such termination
shall remain exercisable to the end of their original term.
Severance Agreements. Liposome has entered into severance agreements with
Donald D. Yarson, George G. Renton, Michael McGrane, Andrew S. Janoff, Lily
Lee, Lawrence R. Hoffman, Ralph del Campo and James A. Boyle, all of whom are
officers of Liposome. The severance agreements provide that if their employment
is terminated during the period beginning 90 days prior to a change in control
of Liposome (as defined in the agreements, which definition includes the
merger) and ending 18 months following such change in control either (i) by
Liposome for any reason other than "for cause" (as defined in the agreements to
cover specified serious misconduct), or (ii) by an officer for "good reason"
(as defined in the severance agreement to cover certain constructive
termination events), the officer will be entitled to the following: (i) an
amount equal to 12 months of his or her then-current base salary, (ii) an
amount equal to his or her average annual bonus earned during the prior 3 years
or during such shorter period as the officer has received an annual bonus,
(iii) a pro rata portion of his or her expected bonus for the year in which the
termination occurs, (iv) continuation of all welfare benefit coverage for 12
months, (v) reasonable company-paid outplacement assistance, and (vi) the
immediate vesting of any stock options, restricted stock or other equity
incentives held by the officer at the time of termination. In addition, each
officer will be entitled to receive a parachute tax gross-up payment to make
them whole for any excise tax they may incur should any payments due them
following a change in control be deemed excess parachute payments.
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<PAGE>
Option Plans. Under the merger agreement, all awards of stock options on the
date of the merger under any option plans maintained by Liposome will be
converted into similar options with respect to Elan ADRs and contingent value
rights. In addition, in accordance with the terms of the option agreements to
Liposome's 1996 Equity Incentive Plan and the 1986 Employee Stock Option Plan,
all outstanding options shall become fully vested and exercisable upon the
merger.
In addition, with respect to any nonemployee directors of Liposome who are
removed from the board of directors of Liposome following the completion of the
merger, such directors may exercise any stock options they hold at such time
for a period of six months following such removal, including any options that
were not yet vested.
Indemnification; Directors and Officers Insurance. Elan has agreed that all
rights to indemnification for acts or omissions occurring prior to the
completion of the merger in favor of Liposome's current or former directors or
officers, as determined at the time of the completion of the merger, shall
continue for a period of six years. For six years after the completion of the
merger, Elan will maintain Liposome's liability insurance in respect of acts or
omissions occurring to the completion of the merger, for all Liposome's current
and former officers and directors, provided the annual premium does not exceed
200% of the last annual premium paid by Liposome prior to the signing of the
merger agreement. However, Elan may substitute its own policies (or separate
policy of the same insurer) which provide no less favorable coverage. In the
event the existing insurance coverage expires, is terminated or is cancelled by
the insurer or if the annual premium exceeds 200% of the last annual premium
paid by Liposome, Elan shall obtain such comparable insurance as can be
obtained for the remainder of the six-year period at an annualized premium not
in excess of 200% of the last annual premium paid by Liposome.
Opinion of Financial Advisor to Liposome
On March 4, 2000, the date of the Liposome's board of directors' meeting,
Warburg Dillon Read delivered an oral opinion to Liposome's board of directors
to the effect that, as of that date and based on and subject to various
assumptions, matters considered and limitations described in its opinion, the
consideration to be received in the merger by the holders of Liposome common
stock was fair, from a financial point of view, to such holders.
On March 6, 2000, Warburg Dillon Read delivered its written opinion to
Liposome's board of directors to the same effect. The full text of Warburg
Dillon Read's opinion describes, among other things, the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken by Warburg Dillon Read. This opinion is attached as Annex D and is
incorporated in this document by reference. Warburg Dillon Read's opinion is
directed only to the fairness, from a financial point of view, of the
consideration to be received in the merger by the holders of Liposome common
stock. The opinion does not constitute a recommendation to any holder of
Liposome common stock as to how to vote with respect to matters relating to the
proposed merger. Holders of Liposome common stock are encouraged to read this
opinion carefully in its entirety. The summary of Warburg Dillon Read's opinion
described below is qualified in its entirety by reference to the full text of
its opinion.
In arriving at its opinion, Warburg Dillon Read, among other things:
. reviewed publicly available business and historical financial
information relating to Liposome and Elan;
. reviewed internal financial information and other data relating to the
businesses and financial prospects of Liposome and Elan, including
estimates and financial forecasts prepared by the management of Liposome
and estimates and financial forecasts prepared by the management of
Elan, that were provided to Warburg Dillon Read by Liposome and Elan and
are not publicly available;
. conducted discussions with members of the senior management of Liposome
and Elan;
28
<PAGE>
. reviewed publicly available financial and stock market data with respect
to other companies in lines of business that Warburg Dillon Read
believed to be generally comparable to those of Liposome and Elan;
. compared the financial terms of the merger with publicly available
financial terms of other transactions that Warburg Dillon Read believed
to be generally relevant;
. reviewed the merger agreement; and
. conducted other financial studies, analyses and investigations, and
considered other information, as Warburg Dillon Read deemed necessary or
appropriate.
In connection with its review, with Liposome's consent, Warburg Dillon Read
did not assume any responsibility for independent verification of any of the
information that Warburg Dillon Read was provided or reviewed for the purpose
of its opinion and relied on that information being complete and accurate in
all material respects. In addition, at Liposome's direction, Warburg Dillon
Read did not make an independent evaluation or appraisal of any of the assets
or liabilities, contingent or otherwise, of Liposome or Elan, and was not
furnished with any evaluation or appraisal. With respect to the financial
forecasts and estimates that it reviewed, Warburg Dillon Read assumed, at
Liposome's direction, that they were reasonably prepared on a basis reflecting
the best currently available estimates and judgements of the respective
managements of Liposome and Elan as to the future financial performance of
Liposome and Elan. Warburg Dillon Read's opinion is necessarily based on
economic, monetary, market and other conditions existing, and information
available to Warburg Dillon Read on the date of its opinion.
Warburg Dillon Read's opinion did not address Liposome's underlying business
decision to effect the transaction or constitute a recommendation to
stockholders of Liposome as to how stockholders should vote with respect to the
merger. At Liposome's direction, Warburg Dillon Read was not asked to, and did
not, offer any opinion as to the material terms of, or the obligations under,
the merger agreement or the form of the merger. Warburg Dillon Read expressed
no opinion as to the value of Elan ADSs when issued in the merger or the price
at which Elan ADSs will trade or otherwise be transferable after the merger. In
rendering its opinion, Warburg Dillon Read assumed, with Liposome's consent,
that each of Liposome, Elan and Elan's wholly-owned subsidiary would comply
with all material terms of the merger agreement and that the merger would be
validly consummated in accordance with its terms.
In connection with rendering its opinion to Liposome's board of directors,
Warburg Dillon Read performed a variety of financial analyses which are
summarized below. The following summary is not a complete description of all of
the analyses performed and factors considered by Warburg Dillon Read in
connection with its opinion. The preparation of a fairness opinion is a complex
process involving subjective judgements and is not necessarily susceptible to
partial analysis or summary description. With respect to the analysis of
selected publicly traded companies and the analysis of selected transactions
summarized below, no company or transaction used as a comparison is either
identical or directly comparable to Liposome, Elan or the merger. These
analyses necessarily involve complex considerations and judgements concerning
financial and operating characteristics and other factors that could affect the
public trading or transaction values of the companies or transactions
concerned.
Warburg Dillon Read believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying Warburg Dillon
Read's analyses and opinion. None of the analyses performed by Warburg Dillon
Read was assigned a greater significance by Warburg Dillon Read than any other.
Warburg Dillon Read arrived at its ultimate opinion based on the results of all
the analyses undertaken by it and assessed as a whole. Warburg Dillon Read did
not draw conclusions from or with regard to any one factor or method of
analysis.
29
<PAGE>
The type and amount of consideration payable in the transaction was
determined through negotiation between Liposome and Elan. Although Warburg
Dillon Read provided financial advice to Liposome during the course of
negotiations, the decision to enter into the merger agreement was solely that
of Liposome's board of directors. Warburg Dillon Read's opinion and financial
analyses were only one of many factors considered by Liposome's board of
directors in their evaluation of the merger and should not be viewed as
determinative of the views of Liposome's board of directors or management with
respect to the transaction or the consideration payable in the merger.
The following is a brief summary of the material analyses performed by
Warburg Dillon Read and reviewed with Liposome's board of directors in
connection with its oral opinion delivered March 4, 2000. The financial
analyses summarized below include information presented in tabular format. In
order to fully understand Warburg Dillon Read's financial analyses, the tables
must be read together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses. Considering the
data set forth below without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of Warburg Dillon Read's
financial analyses.
The estimates of future performance of Liposome and Elan provided by the
respective managements of Liposome and Elan in or underlying Warburg Dillon
Read's analyses were not prepared for inclusion in this proxy statement-
prospectus and are not necessarily indicative of future results or values,
which may be significantly more or less favorable than those estimates. In
performing its analyses, Warburg Dillon Read considered industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Liposome and Elan. Estimates of the financial value of
companies do not purport to be appraisals or necessarily reflect the prices at
which companies actually may be sold.
Transaction Terms.
The consideration to be received in the merger by the holders of Liposome
common stock is (1) 0.385 of an Elan ADS per share of Liposome common stock,
and (2) one contingent value right per share of Liposome common stock.
30
<PAGE>
Analysis of Selected Comparable Companies.
Warburg Dillon Read compared selected financial information and operating
statistics for Liposome with corresponding financial information and operating
statistics of the following 15 selected publicly held companies in the
biotechnology and specialty pharmaceutical industries:
--Alkermes, Inc.
--Alza Corporation
--Andrx Corporation
--Anesta Corp.
--Biovail Corporation International
--Celgene Corporation
--CIMA Labs Inc.
--Dura Pharmaceuticals, Inc.
--Elan Corporation, plc
--Enzon, Inc.
--Gilead Sciences, Inc.
--ICOS Corporation
--IDEC Pharmaceuticals Corporation
--Noven Pharmaceuticals, Inc.
--Penwest Pharmaceuticals Corp.
Warburg Dillon Read reviewed enterprise values, calculated as equity value,
plus debt, less cash, as multiples of latest 12 months revenues, earnings
before interest, taxes, depreciation and amortization, commonly known as
EBITDA, and earnings before interest and taxes, commonly known as EBIT. Warburg
Dillon Read reviewed share prices as multiples of estimated fiscal years 1999,
2000 and 2001 earnings per share, commonly known as EPS. Warburg Dillon Read
also reviewed ratios of estimated fiscal year 2001 price-to-earnings ratios
divided by estimated compound annual EPS growth rates for a five-year period
("PEG").
All multiples were based on closing stock prices on March 3, 2000. Estimated
financial data for the selected companies were based on publicly available
research analysts' estimates; financial projections for Liposome were based on
Liposome management estimates. This analysis indicated the following implied
enterprise value and equity value multiples and PEG ratios for the selected
companies and Liposome (at market value), as compared to the implied multiples
for Liposome based solely on the ADS consideration payable in the transaction
and the closing price of Elan ADSs, on March 3, 2000.
<TABLE>
<CAPTION>
Multiples for
Implied Multiples for Implied Multiples Liposome Implied
Selected Companies for Liposome at by the ADS
(Median) Market Consideration
--------------------- ----------------- ----------------
<S> <C> <C> <C>
Enterprise Values:
Latest 12 months
revenues............... 7.7x 5.7x 6.2x
Latest 12 months
EBITDA................. 22.5x 29.5x 31.7x
Latest 12 months EBIT... 25.3x 38.5x 41.3x
Equity Values:
Estimated fiscal year
1999 EPS............... 29.3x 46.3x 49.3x
Estimated fiscal year
2000 EPS............... 26.3x 27.6x 29.3x
Estimated fiscal year
2001 EPS............... 29.1x 17.7x 18.8x
Estimated fiscal year
2001 PEG............... 92% 59% 63%
</TABLE>
31
<PAGE>
Warburg Dillon Read also compared selected financial information and
operating statistics for Elan with corresponding financial information and
operating statistics of the following 16 selected publicly held companies in
the biotechnology and specialty pharmaceutical industries:
--Allergan, Inc.
--Alza Corporation
--Andrx Corporation
--Biovail Corporation International
--Dura Pharmaceuticals Inc.
--Forest Laboratories, Inc.
--ICN Pharmaceuticals, Inc.
--IVAX Corporation
--Jones Pharma Incorporated
--King Pharmaceuticals, Inc.
--KV Pharmaceutical Company
--Medicis Pharmaceutical Corp.
--Mylan Laboratories Inc.
--Shire Pharmaceuticals Group plc
--Teva Pharmaceutical Industry Limited
--Watson Pharmaceuticals, Inc.
Warburg Dillon Read reviewed enterprise values as multiples of latest 12 months
revenues, EBITDA and EBIT, and share prices as multiples of estimated fiscal
years 1999, 2000 and 2001 EPS. Warburg Dillon Read also reviewed PEG ratios
based on 2001 earnings. All multiples were based on closing stock prices on
March 3, 2000. Estimated financial data for the selected companies were based
on publicly available research analysts' estimates and estimated financial data
for Elan were based on Wall Street consensus estimates as provided by IBES (an
investor service that monitors earnings estimates for publicly traded
companies). This analysis indicated the following implied enterprise value and
equity value multiples and PEG ratios for the selected companies and Elan:
<TABLE>
<CAPTION>
Implied Multiples for
Selected Companies Implied Multiples
(Median) for Elan
--------------------- -----------------
<S> <C> <C>
Enterprise Values:
Latest 12 months revenues........ 6.2x 11.2x
Latest 12 months EBITDA.......... 20.9x 31.0x
Latest 12 months EBIT............ 26.0x 36.7x
Equity Values:
Estimated fiscal year 1999 EPS... 40.8x 32.0x
Estimated fiscal year 2000 EPS... 34.2x 26.3x
Estimated fiscal year 2001 EPS... 27.9x 21.5x
Estimated fiscal year 2001 PEG... 99% 98%
</TABLE>
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<PAGE>
Analysis of Selected Precedent Transactions
Warburg Dillon Read reviewed the purchase prices and implied transaction
multiples in the following 17 selected transactions in the biotechnology and
specialty pharmaceutical industries announced since November 1997:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
King Pharmaceuticals, Inc. Medco Research, Inc.
Baxter International Inc. North American Vaccine Inc.
Millennium Pharmaceuticals, Inc. LeukoSite, Inc.
E.I. du Pont de Nemours and Company CombiChem, Inc.
MedImmune, Inc. U.S. Bioscience, Inc.
Schering AG Diatide, Inc.
Shire Pharmaceuticals Group plc Roberts Pharmaceutical Corporation
Biovail Corporation International Fuisz Technologies Ltd.
Johnson & Johnson Inc. Centocor, Inc.
Pharmacia & Upjohn, Inc. SUGEN, Inc.
Celltech Group plc Chiroscience Group plc
Gilead Sciences, Inc. NeXstar Pharmaceuticals, Inc.
Warner-Lambert Company Agouron Pharmaceuticals, Inc.
Watson Pharmaceuticals, Inc. TheraTech, Inc.
Alza Corporation SEQUUS Pharmaceuticals, Inc.
Cardinal Health, Inc. R.P. Scherer Corporation
Arris Pharmaceutical Corporation Sequana Therapeutics, Inc.
</TABLE>
Warburg Dillon Read reviewed enterprise values in the selected transactions as
multiples of latest 12 months sales, EBITDA and EBIT. Warburg Dillon Read also
reviewed equity values as multiples of fiscal year 1999, fiscal year 2000 and
fiscal year 2001 EPS. All multiples were based on publicly available
information at the time of announcement of the relevant transaction. This
analysis indicated the following implied enterprise value and equity value
multiples for the selected transactions, as compared to the implied multiples
for Liposome based solely on the ADS consideration payable in the transaction
and the closing price of Elan ADSs on March 3, 2000.
<TABLE>
<CAPTION>
Implied Multiples of
Selected Transactions:
-----------------------
Low Median High
----- ------ ------
<S> <C> <C> <C> <C>
Enterprise Values:
Latest 12 months sales............................. 3.4x 9.4x 39.4x
Latest 12 months EBITDA............................ 18.2x 26.7x 90.1x
Latest 12 months EBIT.............................. 22.1x 40.0x 139.1x
Equity Values:
Fiscal year 1999 EPS............................... 33.0x 48.8x 167.1x
Fiscal year 2000 EPS............................... 25.0x 37.3x 87.1x
Fiscal year 2001 EPS............................... 20.8x 34.9x 112.5x
</TABLE>
<TABLE>
<CAPTION>
Multiples for Liposome
Implied by the
ADS Consideration
----------------------
<S> <C> <C> <C> <C>
Enterprise Values:
Latest 12 months sales............................ 6.2x
Latest 12 months EBITDA........................... 31.7x
Latest 12 months EBIT............................. 41.3x
Equity Values:
Fiscal year 1999 EPS.............................. 49.3x
Fiscal year 2000 EPS.............................. 29.3x
Fiscal year 2001 EPS.............................. 18.8x
</TABLE>
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<PAGE>
Discounted Cash Flow Analysis.
Warburg Dillon Read performed a discounted cash flow analysis with respect
to Liposome to estimate the present value of the unlevered, after-tax free cash
flows that Liposome could generate based on Liposome management estimates. The
range of estimated terminal values for Liposome was calculated by applying
terminal value multiples of 20.0x to 30.0x to Liposome's projected fiscal year
2004 unlevered net income using discount rates of 20.00% to 25.00%. This
analysis yielded the following implied per share equity reference range for
Liposome, as compared to the equity value implied for Liposome based on the ADS
consideration payable in the transaction and the closing price of Elan ADSs on
March 3, 2000.
<TABLE>
<CAPTION>
Implied per Share Equity Per Share Equity Value Implied for Liposome
Reference Range for Liposome based on ADS Consideration
---------------------------- -------------------------------------------
<S> <C>
$10.03-$15.26 $15.28
</TABLE>
Pro Forma Merger Analysis.
Warburg Dillon Read analyzed the potential pro forma effects resulting from
the merger, including the impact of the merger on Elan's projected EPS for
fiscal years 2000 through 2002, based on estimates of Liposome management and
Wall Street consensus estimates for Elan.
Excluding the effects of any potential synergies and assuming no contingent
value right payments, the results of the pro forma merger analysis suggested
that the merger could be dilutive to Elan's estimated EPS in fiscal years 2000
to 2002 after the effects of goodwill amortization. Excluding the effects of
goodwill amortization, the merger could be dilutive to Elan's estimated EPS in
fiscal year 2000 and accretive to Elan's estimated EPS in fiscal years 2001 and
2002.
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
Miscellaneous.
Liposome has agreed to pay Warburg Dillon Read for its services upon
completion of the merger an aggregate financial advisory fee estimated to be
$5.8 million based on Liposome's stock price when the merger agreement was
signed, subject to adjustment based on Liposome's stock price at closing. In
addition, Liposome has agreed to reimburse Warburg Dillon Read for its
reasonable expenses, including reasonable fees and disbursements of its
counsel, and to indemnify Warburg Dillon Read and related parties against
liabilities, including liabilities under federal securities laws, relating to,
or arising out of, its engagement.
Liposome selected Warburg Dillon Read as financial advisor in connection
with the merger because Warburg Dillon Read is an internationally recognized
investment banking firm with substantial experience in similar transactions.
Warburg Dillon Read is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, leveraged
buyouts, negotiated underwritings, competitive bids, secondary distributions of
listed and unlisted securities and private placements.
In the ordinary course of business, Warburg Dillon Read, its successors and
affiliates may actively trade the securities of Liposome and Elan for their own
accounts and the accounts of their customers and, accordingly, may at any time
hold a long or short position in these securities.
Resales of Elan ADSs and Contingent Value Rights
The Elan ADSs and contingent value rights you will receive pursuant to the
merger agreement will have been registered under the Securities Act, allowing
them to be freely traded without restriction by persons who will not be
"affiliates" of Elan after the merger or who were not "affiliates" of Liposome
on the date of the special meeting. All directors and certain officers and
stockholders of Liposome may be deemed to have been "affiliates" of Liposome
within the meaning of Rules 144 or 145 under the Securities Act. Any such
person may resell the Elan ADSs and contingent value rights received by him or
her in the merger only if such Elan
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<PAGE>
ADSs and contingent value rights are registered for such resale under the
Securities Act or an exemption from registration under the Securities Act is
available. Such persons may be permitted to effect resales under Rule 145 under
the Securities Act (or Rule 144 in the case of persons who become "affiliates"
of Elan) or as otherwise permitted under the Securities Act. Persons who may be
deemed affiliates of Elan generally include individuals or entities that
control, are controlled by or are under common control with, Elan, and may
include certain officers and directors of such party as well as principal
stockholders of such party. It is recommended that such persons obtain the
advice of securities counsel prior to effecting any resales.
Liposome has agreed that it will use its reasonable best efforts to cause
each person who may be deemed an affiliate of Liposome to execute a written
agreement providing, among other things, that such person will not sell, assign
or transfer any Elan ADSs or contingent value rights received in the merger in
violation of the Securities Act or the rules and regulations thereunder.
Listing of Elan ADSs, Elan Ordinary Shares and the Contingent Value Rights;
Delisting and Deregistration of Liposome Shares
It is a condition to the consummation of the merger that the Elan ADSs to be
issued in the merger be authorized for listing on the New York Stock Exchange
upon official notice of issuance and the Elan ordinary shares be admitted
(subject to allotment) to the Official Lists of the Irish Stock Exchange and
the London Stock Exchange. In addition, the contingent value rights agreement
will provide that Elan will use its reasonable best efforts to obtain approval
for quotation of the contingent value rights on the Nasdaq National Market or
for listing on the American Stock Exchange.
Upon consummation of the merger, the Liposome common stock will no longer be
quoted on the Nasdaq National Market and will be deregistered under the
Exchange Act.
Appraisal Rights
You are entitled to appraisal rights under Section 262 of the Delaware
General Corporation Law. This means that, instead of accepting the
consideration to be issued in the merger for your shares of Liposome common
stock, you may demand the fair value of your Liposome shares as determined by a
Delaware court. However, to do so, you must comply with the conditions
established by Section 262, which are complex.
The following discussion is only a summary of those conditions. If you are
considering exercising appraisal rights, you should also read the copy of
Section 262, which is attached as Annex E to this prospectus-proxy statement.
If you fail to comply with the conditions described below or in Section 262,
you may lose your appraisal rights.
Here are some of the requirements for preserving and exercising appraisal
rights:
. You must own the shares of Liposome common stock for which you demand
appraisal on the date you deliver the demand for appraisal described
below.
. You must continue to own those shares through the closing of the
acquisition of Liposome by Elan.
. Before the vote is taken at the special meeting, you must deliver a
properly executed written demand for appraisal of your shares to
Liposome. The demand will be sufficient if you sign it and it reasonably
informs Liposome of your identity and your intent to demand an appraisal
of your shares. Any written demands should be sent to:
The Liposome Company, Inc.
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08540-6619
Attention: Secretary
. You must NOT have voted in favor of the proposed merger, either in
person, by proxy or by written consent. You can meet this requirement
either by not voting or by voting against the merger.
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Important: You must separately comply with each of the last two requirements
listed above. Under Delaware law, not voting in favor of the proposed
transaction or voting against it is not considered a written demand for
appraisal of your shares.
. You must file a petition for appraisal of your shares in the Delaware
Court of Chancery, as more fully described below, within 120 days after
the closing of the merger.
. Within 20 days after you file your petition with the Delaware Court of
Chancery, you must send a copy of it to Liposome. Send it to the same
address to which your written demand is sent (see the third bullet point
in this section).
. You must satisfy the other conditions described more fully below and in
Annex E.
Availability of Information About Other Dissenting Stockholders. Within 120
days after the closing of the proposed merger, if you have complied with the
conditions for appraisal of your shares, you may request in writing, and
Liposome will send you, a statement of the number of Liposome's shares not
voted in favor of the transaction, the number of shares for which Liposome has
received a written demand for appraisal and the number of stockholders who own
those shares. Liposome is required to mail this statement to you within 10 days
after receiving your request or within 10 days after the special meeting,
whichever is later. You should send any such request to the same address to
which your written demand is sent (see the third bullet point in this section).
What You Would Receive by Exercising Appraisal Rights. If you intend to
demand an appraisal of your Liposome shares, keep in mind that the fair value
of your shares as determined under Delaware law could be more than, the same as
or less than the value of the cash and Elan ADSs and contingent value rights
you would receive if you did not demand an appraisal of your shares. Section
262 requires the fair value of your Liposome common shares to be determined
exclusive of any element of value arising from the accomplishment or
expectation of the merger. A discussion of the other factors considered by the
Delaware Court of Chancery in appraising your shares is beyond the scope of
this summary.
Expenses of the Appraisal Proceeding. The cost of the appraisal proceeding
may be determined by the court and allocated among the parties to the
proceeding as the court deems equitable. Also, on application by a dissenting
stockholder, the court may order that all or a portion of the expenses incurred
in the appraisal proceeding by all dissenting stockholders be charged pro rata
against the value of all shares of stock entitled to appraisal.
Termination of Rights as a Stockholder. If you properly demand appraisal of
your shares, you will lose your right to vote those shares on any matter or to
receive payment of dividends or other distributions on such shares.
Withdrawal of a Demand for Appraisal. You may withdraw a demand for
appraisal, and accept the consideration received by other stockholders of
Liposome, at any time within 60 days after the closing of the merger. After
this 60-day period has passed, you may not withdraw your demand for appraisal
unless Liposome consents to the withdrawal. If you take all the other actions
required to exercise your appraisal rights but fail to file a petition in the
Delaware Court of Chancery within 120 days after the transaction closes, you
will lose your appraisal rights. However, you will then be entitled to receive
consideration equivalent in value to that received by the other stockholders of
Liposome receive in the transaction.
The failure to take any step required to preserve or exercise appraisal
rights may result in the loss of those rights. In view of the complexity of
exercising appraisal rights under Delaware law, stockholders who are
considering exercising such rights should consult with their legal advisors.
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Governmental and Regulatory Matters
U.S. Antitrust. Under the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended (the "HSR Act"), and the rules promulgated thereunder, certain
acquisition transactions, including the merger, may not be consummated until
certain information has been furnished to the Justice Department and the
Federal Trade Commission (the "FTC") and certain waiting period requirements
thereunder have been satisfied. Elan and Liposome completed the filing of the
required information and material with the Justice Department and the FTC with
respect to the merger agreement on March 20, 2000. On March 28, 2000, early
termination of the applicable waiting period under the HSR Act was received
without the FTC or Justice Department taking any action. No additional filings
or waiting periods are applicable with respect to the merger pursuant to the
HSR Act and the rules promulgated thereunder.
At any time before or after the effective time, the Justice Department or
the FTC or a private person or entity could seek under the antitrust laws,
among other things, to enjoin the merger or to cause Elan to divest itself, in
whole or in part, of Liposome or of other businesses conducted by Elan. There
can be no assurance that a challenge to the merger will not be made or that, if
such a challenge is made, Elan and Liposome will prevail. The obligations of
Elan and Liposome to consummate the merger are subject to the condition that
there be no preliminary or permanent injunction or other order by any court or
governmental or regulatory authority of competent jurisdiction prohibiting
consummation of the merger.
Irish Antitrust. Certain transactions, including the merger, may not be
consummated until, pursuant to the Irish Mergers Act, a notification has been
made to the Minister for Enterprise, Trade and Employment, such further
information (if any) as may be required has been furnished and either the
Minister has issued a clearance for the proposed transaction or a prescribed
period following notification has expired without the Minister having
prohibited the proposed transaction. The prescribed period consists of the
three months following the date of notification or, where the Minister requests
further information, the date of receipt of such information. Elan and Liposome
gave notification of the merger to the Minister on March 16, 2000, and
requested that the Minister issue a clearance. On April 4, 2000, the Minister
issued a clearance for the proposed transaction.
Environmental Regulation. The obligation of Elan to complete the merger is
subject to either the receipt from the New Jersey Department of Environmental
Protection of a declaration of non-applicability of the New Jersey Industrial
Site Recovery Act ("ISRA"), or compliance with ISRA. Elan and Liposome
initiated the application process with New Jersey on March 10, 2000. The
obligation of Elan to complete the merger is also subject to the approval by
Elan of Liposome's environmental disclosure document required to be provided to
Elan by the Indiana Responsible Property Transfer Law. Liposome intends to
provide the document to Elan prior to the merger and to file and record it with
the appropriate governmental authority immediately following the merger.
Elan and Liposome are not aware of any material governmental or regulatory
approvals required to be obtained in order to consummate the merger, other than
compliance with the HSR Act, the Irish Mergers Act, the state environmental
regulations described above and applicable federal and state securities and
corporate laws.
Accounting Treatment
The merger will be accounted for by Elan under the "purchase" method of
accounting in accordance with U.S. GAAP. Therefore, the aggregate consideration
paid by Elan in connection with the merger will be allocated to Liposome's
assets and liabilities based on their estimated fair values, with any excess
being treated as goodwill. Any allocation relating to in-process research and
development will be written off at the time of the merger. The assets and
liabilities and results of operations of Liposome will be consolidated into the
assets and liabilities and results of operations of Elan subsequent to the
effective time.
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THE MERGER AGREEMENT
The following description of the material provisions of the merger agreement
is only a summary and does not purport to be complete. This description is
qualified in its entirety by reference to the merger agreement, a copy of which
is attached as Annex A and is incorporated in this prospectus-proxy statement
by reference. We urge you to carefully read the merger agreement in its
entirety.
What Liposome Stockholders Will Receive in the Merger
In the merger, holders of Liposome common stock will receive, for each share
they own, 0.385 of an Elan ADS and one contingent value right.
If the average price of Elan ADSs in the ten consecutive trading days ending
two trading days before the special meeting falls below $31.74 and falls more
than 20% compared to the S&P Pharmaceuticals Index (ticker symbol "SPPRMC"),
Liposome may terminate the merger agreement unless Elan notifies Liposome that
it is increasing the exchange ratio by an amount such that Liposome would not
have the right to terminate under these criteria.
See "Contingent Value Rights" for a description of the contingent value
rights.
Liposome stockholders who properly exercise appraisal rights will not be
entitled to receive Elan ADSs or contingent value rights in the merger unless
they withdraw or lose their appraisal rights. See "The Merger--Appraisal
Rights."
Form of the Merger
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, a wholly-
owned subsidiary of Elan will merge with and into Liposome. Liposome will
survive the merger as a wholly-owned subsidiary of Elan. Alternatively, if
necessary so that tax counsel could deliver the opinions described under
"Material U.S. Federal Income and Irish Tax Consequences", Liposome would merge
with and into Elan's wholly-owned subsidiary, and the subsidiary would survive
the merger as a wholly-owned subsidiary of Elan.
Effective Time of the Merger
The merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware or such later time as is
agreed upon by Liposome and Elan and specified in the certificate of merger.
The filing of the certificate of merger will occur as soon as practicable, but
no later than one business day after satisfaction or waiver of the conditions
to the completion of the merger described in the merger agreement unless
another date is agreed to by Liposome and Elan.
Liposome Stock Options
The merger agreement provides that, as of the closing of the merger, each
outstanding Liposome stock option, whether or not exercisable and whether or
not vested, shall be converted into an option to purchase Elan ADSs and
contingent value rights. Each option so converted shall be exercisable upon the
same terms and conditions as under the applicable Liposome stock option. Each
option shall be exercisable for (1) that number of Elan ADSs (rounded to the
nearest whole share) equal to the number of Liposome shares subject to the
option multiplied by the exchange ratio of 0.385, and (2) that number of
contingent value rights equal to the number of Liposome shares subject to the
option. The total exercise price of the option shall not change, but the option
price per Elan ADS and contingent value rights shall be an amount equal to the
option price per Liposome share subject to the option immediately prior to the
closing, divided by the exchange ratio of 0.385 (the option price, as so
determined, being rounded to the nearest whole cent). If any cash payments are
made
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with respect to the contingent value rights prior to the exercise of an option,
the exercise price of the option shall be reduced by the amount of cash which
would have been payable to the option holder had such holder exercised the
option immediately prior to the record date for such payment. In any event, the
merger agreement provides that the status of any incentive stock options will
be preserved, unless the optionholder elects otherwise.
Representations and Warranties
The merger agreement contains customary representations and warranties.
No Solicitation
The merger agreement provides that Liposome shall not, and shall use its
reasonable best efforts to ensure that its representatives do not, solicit,
encourage or facilitate a third party acquisition proposal, negotiate a third
party acquisition proposal or provide non-public information to a third party
making an acquisition proposal. Liposome may, however, furnish information to
and negotiate with a third party prior to the vote of Liposome's stockholders
on the merger at the special meeting if Liposome's board of directors
determines that the proposal is superior to the merger, enters into a customary
confidentiality agreement with the third party and gives Elan three business
days' notice of its decision to take such actions.
The Liposome board is required to recommend that stockholders vote to
approve the merger unless this recommendation would be inconsistent with the
fiduciary duties of the board.
Conduct of the Business Pending the Merger
The merger agreement requires each party to operate its business in the
ordinary course pending the closing of the merger.
Indemnification
For six years following the merger, Elan agrees to indemnify present and
former directors and officers of Liposome and its subsidiaries against claims
arising out of matters prior to the merger, to the fullest extent permitted by
law, including by advancing expenses.
Elan also agreed to maintain, for six years following the merger, Liposome's
directors' and officers' liability insurance policy to the extent that it
provides coverage for events occurring prior to the merger. Elan would not be
required to spend more than 200% of the current annual premium in any year.
Employee Benefits
For one year following the merger, Elan will provide Liposome employees and
officers with benefits which are not substantially less favorable on an overall
basis than the benefits currently provided to the Liposome employees, and
thereafter will provide employees with benefits comparable to those provided to
similarly-situated employees of Elan. Following the merger, Elan shall grant
Liposome employees with credit for service with Liposome prior to the merger,
except to the extent that this would result in duplication of accrual. Elan
also agreed that, with respect to medical or dental benefit plans, (i) Elan
shall waive any pre-existing condition exclusion and actively-at-work
requirements (to the extent such exclusion or requirement would not have
applied under the applicable Liposome employee plan) and (ii) that any covered
expenses incurred on or before the merger by a Liposome employee or covered
dependents shall be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions after the merger
to the same extent as such expenses will be taken into account if incurred by
similarly situated employees of Elan.
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Conditions to the Completion of the Merger
The obligations of Elan and Liposome to effect the merger are subject to a
number of conditions, including the following:
. adoption of the merger agreement by Liposome stockholders;
. the receipt of regulatory approvals, the absence of legal restraints and
the receipt of third party consents;
. the accuracy of the representations made by the other party in the
merger agreement and the performance of the covenants made by the other
party in the merger agreement;
. receipt of an opinion of counsel to the effect that the merger will
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986. See "Material U.S. Federal Income and
Irish Tax Consequences"; and
. the absence of a material adverse change in the other party.
Elan's obligations are also conditioned on:
. receipt of specified environmental approvals; and
. holders of less than 10% of the Liposome shares exercising dissenters
rights.
Termination of the Merger Agreement
1. Elan and Liposome can jointly agree to terminate the merger agreement.
2. Elan or Liposome can terminate the merger agreement if:
. the merger has not been completed by September 30, 2000;
. Liposome stockholders do not adopt the merger agreement at the
special meeting;
. a court order prohibiting the merger becomes final and
nonappealable; or
. the other party breaches any of its representations, warranties,
covenants or agreements under the merger agreement that results in a
failure of specified conditions to the merger and has not cured the
breach within 30 days after receipt of notice of such breach.
3. Liposome can terminate the merger agreement:
. in response to an unsolicited proposal to acquire Liposome on terms
that the Liposome board of directors determines to be more favorable
to Liposome than the merger, but only if it has given Elan five
days' notice of the terms of the other proposal and has paid the
required termination fee; or
. if the average price of Elan ADSs in the 10 consecutive trading days
ending two trading days before the special meeting falls below
$31.74 and falls more than 20% compared to the S&P Pharmaceuticals
Index, unless Elan notifies Liposome that it is increasing the
exchange ratio so that Liposome would not have the right to
terminate under these criteria.
4. Elan can terminate the merger agreement if Liposome withdraws, modifies
or changes its approval or recommendation of the merger, recommends an
alternative transaction or discloses non-public information to or
negotiates with a third party with respect to any proposal to acquire
Liposome.
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Termination Fees
Liposome must pay Elan a termination fee of $22 million if:
. (a) a third party makes a takeover proposal, (b) the merger agreement is
terminated because the stockholders of Liposome do not approve the
merger or because the merger has not been closed by September 30, 2000
and (c) within 12 months of the termination, Liposome enters into an
acquisition agreement or consummates a takeover proposal;
. (a) a third party makes a takeover proposal and (b) Elan terminates the
merger agreement due to a change in Liposome's recommendation of the
merger or because Liposome recommends another transaction, as described
in paragraph 4 above; or
. Liposome terminates the merger agreement in response to an unsolicited
superior proposal, as described in paragraph 3 above.
Liposome must reimburse Elan for its expenses in connection with the merger,
up to $3 million, if the foregoing fee is not payable and:
. Liposome stockholders do not adopt the merger agreement at the special
meeting; or
. the merger agreement is terminated due to Liposome's breach.
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CONTINGENT VALUE RIGHTS
The following description of the contingent value rights agreement is only a
summary and does not purport to be complete. This description is qualified in
its entirety by reference to the form of contingent value rights agreement, a
copy of which is attached as Annex B and is incorporated in this prospectus-
proxy statement by reference. We urge you to carefully read the form of
contingent value rights agreement in its entirety.
In the merger, holders of Liposome common stock will receive, for each share
they own, 0.385 of an Elan ADS and one contingent value right. The contingent
value rights will be governed by the contingent value rights agreement. See
"The Merger Agreement" for a description of the merger agreement.
Based on the number of Liposome shares, warrants and options outstanding on
March 29, 2000, the maximum payment on the contingent value rights would be
$2.16 per Liposome share. The actual amount payable per contingent value right
will depend on the number of Liposome shares, warrants and options outstanding
at the closing of the merger, which may be different from the number
outstanding on March 29, 2000. If the number of shares is larger, the amount
payable per contingent value right will be smaller.
Payments on the Contingent Value Rights
The holders of contingent value rights will be entitled to receive milestone
payments from Elan of as much as $98.0 million or as little as zero. Unless the
contingent value rights have already been terminated as described below,
holders will be entitled to cash payments in the following circumstances:
(1) on and after the date that is on or before March 31, 2001, that Elan
has received approval to market Evacet(TM) in the EU and has received
pricing licenses in Germany and the United Kingdom, a total payment of
$54.0 million, less all costs of Elan and its subsidiaries incurred in
order to comply with any request by the EU on or prior to the date of the
EU approval that it be provided with additional information prior to the
issuance of EU approval, and in obtaining the required pricing licenses;
(2) on and after the date that Elan has revenue from sales of Evacet(TM)
of at least $10.5 million in the EU and Canada in any quarter ended not
later than December 31, 2002, a total payment of $44.0 million, less the
amount of all license payments described below;
(3) on and after any date that Elan licenses Evacet(TM) marketing rights
in specified EU countries, a payment equal to 50% of any up-front or
deferred fees (to the extent not based on revenue or other contingencies)
actually received by Elan in connection with such license; and
(4) on and after the date that Elan sells all or substantially all of
its rights to Evacet(TM) in the EU and Canada, a payment equal to (i) if
the approval milestone has occurred, 50% of all amounts greater than $54.0
million actually received by Elan, or (ii) if the approval milestone has
not occurred, 50% of all amounts received by Elan, in each case up to a
maximum total amount payable to the holders of $44.0 million.
Payments on the contingent value rights are subject to the satisfaction of a
number of conditions within specified time frames. If none of the conditions is
met, holders of contingent value rights will receive no payments. See "Risk
Factors--Risks Relating to the Merger."
Termination
The contingent value rights agreement will terminate on the earliest to
occur of the following events:
(1) a determination by the Committee for Proprietary Medicinal Products
or by the European Agency for the Evaluation of Medicinal Products not to
consider, recommend for approval or approve Evacet for a
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marketing authorization in the EU, which Elan in its sole discretion
determines not to appeal, or the occurrence of any other event which would
make the EU approval incapable of being granted;
(2) issuance by the European Commission, the EMEA, the CPMP or any other
multinational or national regulatory body of any adverse findings resulting
from ongoing pharmacovigilance or other regulatory monitoring of Evacet
that, individually or in the aggregate, in the reasonable judgment of Elan
consistent with pharmaceutical industry practice, would materially and
adversely affect the marketing, sale or licensing of Evacet such that Elan
withdraws Evacet from the market; or
(3) March 31, 2003.
These termination events could occur prior to the payment of any amounts on
the contingent value rights. See "Risk Factors--Risks Relating to the Merger."
Listing of the Contingent Value Rights
Elan will use its reasonable best efforts to obtain and maintain, at Elan's
expense, approval of the contingent value rights for quotation on the Nasdaq
National Market or for listing on the American Stock Exchange.
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THE VOTING AGREEMENT
As a condition to the willingness of Elan to enter into the merger
agreement, Mr. Kenneth B. Dart, a principal Liposome stockholder (the
"Stockholder"), entered into the voting agreement with Elan. The following
description of the material provisions of the voting agreement is only a
summary and does not purport to be complete. This description is qualified in
its entirety by reference to the voting agreement, a copy of which is attached
hereto as Annex C and is incorporated in this prospectus-proxy statement by
reference. We urge you to carefully read the voting agreement in its entirety.
Voting of Shares; Proxy
Pursuant to the voting agreement, the Stockholder agreed with Elan to cause
the shares of Liposome common stock owned by him to be voted at any meeting of
Liposome stockholders or in any consent in lieu of such a meeting in favor of
the merger agreement and the transactions contemplated thereby, so long as the
merger agreement has not been amended to adversely affect the Stockholder in
any material respect without his consent. The Stockholder's obligation to vote
his shares of Liposome common stock in favor of the merger will terminate on
the earliest of:
. the closing of the merger;
. the termination of the merger agreement in accordance with its terms;
and
. the termination of the voting agreement by the written agreement of the
parties.
Certain Representations and Warranties
The voting agreement contains customary representations and warranties of
the Stockholder and Elan.
Covenants of the Stockholder
The Stockholder has agreed pursuant to the voting agreement that he:
. will not dispose of or encumber his shares of Liposome common stock;
. will not solicit or initiate any inquiries or the making of any proposal
with respect to any acquisition transaction; and
. will immediately cease and cause to be terminated all existing
discussions or negotiations conducted prior to the date of the voting
agreement with respect to the foregoing.
The voting agreement covers an aggregate of 8,945,846 Liposome Shares,
representing approximately 22.5% of the Liposome Shares outstanding as of March
29, 2000.
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MATERIAL U.S. FEDERAL INCOME AND IRISH TAX CONSEQUENCES
General
The following discussion of the material U.S. federal income tax and Irish
tax consequences of the merger and of the ownership of Elan ADSs and contingent
value rights is included for general information purposes only and does not
purport to be a complete description of all potential tax consequences
affecting the decision whether to vote to approve the merger. The discussion
and the opinions described below apply only to U.S. Holders who hold shares of
Liposome common stock as "capital assets". The following discussion does not
address the effect of applicable state, local or foreign (other than Irish) tax
laws.
A "U.S. Holder" means a holder of shares of Liposome common stock who is (i)
a citizen or resident of the U.S., (ii) a corporation or other entity taxable
as a corporation created in or organized under the laws of the U.S. or any
political subdivision thereof, (iii) an estate the income of which is subject
to U.S. federal income tax regardless of its source or (iv) in general, a trust
if a U.S. court can exercise primary supervision over the administration of
such trust, and one or more U.S. persons have the authority to control all of
the substantial decisions of such trust. A "non-U.S. Holder" means a holder of
shares of Liposome common stock who is not a "U.S. Holder."
U.S. Holders of Elan ADSs are treated as owners of the ordinary shares
underlying such ADSs for purposes of (i) the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) the U.S.-Ireland double taxation conventions
relating to income and gains (the "Income Tax Convention"), and (iii) the
following discussion relating to material U.S. federal income tax consequences.
Material U.S. Federal Income Tax Consequences
This summary of material U.S. federal income tax consequences and the
opinions of counsel described below are based on the Code, Treasury
regulations, administrative rulings and practice and judicial precedent, in
effect at the date of this prospectus-proxy statement, all of which are subject
to change. Any such change, which may or may not be retroactive, could alter
the tax consequences discussed herein. No rulings have been or are expected to
be sought from the Internal Revenue Service concerning the tax consequences of
the merger, and the opinions of counsel described below and this tax discussion
as to the material U.S. federal income tax consequences of the merger will not
be binding on the Internal Revenue Service or any court. This discussion and
the opinions of counsel described below rely on assumptions, including
assumptions regarding the absence of changes in existing facts and the
completion of the merger in accordance with this prospectus-proxy statement and
the merger agreement. This discussion and the opinions of counsel described
below are also based on certain representations made by Elan and Liposome. If
any of these representations is inaccurate, the tax consequences of the merger
could differ from those described herein.
The discussion and the opinions of counsel described below do not address
any potential tax effects to non-U.S. Holders nor do they address all potential
tax effects that may be relevant to U.S. Holders subject to special U.S.
federal income tax treatment, including:
. persons who own (actually or constructively) 5% or more of either the
total voting power or total value of all capital stock of Elan
immediately before or immediately after the merger;
. persons subject to the alternative minimum tax;
. persons who hold shares of Liposome common stock through partnerships or
other pass-through entities;
. persons who hold their shares as part of a hedge, straddle or conversion
transaction;
. persons whose functional currency is not the U.S. dollar;
. insurance companies,
. financial institutions;
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. dealers in securities;
. traders that mark the market;
. tax-exempt organizations;
. retirement plans; and
. persons who acquired their shares of Liposome common stock pursuant to
the exercise of employee stock options or otherwise as compensation.
The opinions of counsel described below and this tax discussion do not
purport to contain a complete analysis or discussion of all potential tax
effects relevant to the merger or the ownership of Elan ADSs and contingent
value rights. Thus, Liposome stockholders are urged to consult their own tax
advisors as to the specific tax consequences to them of the merger and the
ownership of Elan ADSs and contingent value rights, including tax return
reporting requirements, the applicability and effect of federal, state, local,
foreign and other applicable tax laws and the effect of any proposed changes in
the tax laws. Stockholders that are not U.S. Holders and who hold or have held,
actually or constructively, 5% of the outstanding capital stock of Liposome,
should consult their tax advisor regarding, among other things, the
consequences of the merger under the Foreign Investment In Real Property Tax
Act, including any reporting requirements that may apply. Liposome stockholders
that are U.S. Holders and who own, actually or constructively, 5% or more of
the total voting power or total value of all capital stock of Elan immediately
after the merger should consult their tax advisor regarding, among other
things, the advisability of entering into a gain recognition agreement as
provided in Treasury Regulation Section 1.367(a)-3(c).
General U.S. Federal Income Tax Consequences of the Merger. The obligation
of each of Elan and Liposome to consummate the merger is conditioned on its
receipt of an opinion from its counsel, Cahill Gordon & Reindel and Dewey
Ballantine LLP, respectively, to the effect that the merger will be treated for
U.S. federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code; and that no gain or loss will be recognized by a
Liposome stockholder on the conversion of shares of Liposome common stock into
Elan ADSs and contingent value rights pursuant to the merger (except with
respect to the contingent value rights and any cash received in lieu of a
fractional share); provided that (i) Liposome complies with the reporting
requirements contained in Treasury Regulation Section 1.367(a)-3(c)(6)
(requiring Liposome to file with its tax return for the year in which the
merger occurs a statement that, among other things, describes the merger,
provides information concerning the amount of Elan ADSs received by Liposome
stockholders in the merger, and contains certain statements regarding the
nature of Elan's business and the ownership of Elan stock), and (ii) the
Liposome stockholder owns (including beneficial, indirect and constructive
ownership) less than 5% of the total voting power and total value of Elan's
outstanding stock immediately after the merger. The opinions of Cahill Gordon &
Reindel and Dewey Ballantine LLP will be based on certain facts,
representations and assumptions that counsel reasonably deem relevant
(including certain representations regarding the ownership of Elan Stock).
Assuming the accuracy of the opinions of counsel described above, and subject
to the discussion below regarding the contingent value rights, the following
additional U.S. federal income tax consequences would arise:
(i) The tax basis of the Elan ADSs received by a Liposome stockholder in
the merger will be equal to the tax basis of the shares of Liposome common
stock exchanged therefor, reduced by any amount of basis allocable to
fractional Elan ADSs for which cash is received, and the fair market value
of the contingent value rights, and increased by the amount of any gain
recognized by the Liposome stockholder as a result of the merger;
(ii) The holding period of the Elan ADSs received by a Liposome
stockholder in the merger will include the holding period of the shares of
Liposome common stock exchanged therefor; and
(iii) The receipt of cash in lieu of a fractional Elan ADS by a Liposome
stockholder pursuant to the merger generally will result in taxable capital
gain or loss to such stockholder based on the difference between the amount
of cash received by such stockholder and such stockholder's basis in such
fractional Elan ADS.
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Contingent Value Rights. The receipt of contingent value rights by a
Liposome stockholder pursuant to the merger will result in taxable gain (but
not loss) to such stockholder equal to the excess, if any, of (x) the fair
market value of the Elan ADSs received or treated as received and the
contingent value rights received by such stockholder over (y) such
stockholder's basis in the Liposome shares exchanged therefor, but not in
excess of the fair market value of those contingent value rights. Any such gain
will be treated as capital gain, unless the exchange has the effect of a
distribution of a dividend with respect to the Liposome stockholder, in which
case the amount of gain recognized that is not in excess of the stockholder's
ratable share of accumulated earnings and profits will be treated as a
dividend. The exchange will not have the effect of the distribution of a
dividend if one of the tests of Section 302(b) of the Code is met. Under one of
the Section 302(b) tests, as interpreted by the relevant judicial and
administrative authorities, in the present case the distribution generally will
be considered not to have the effect of a dividend if the Elan ADSs owned by a
Liposome stockholder after the merger represent a minimal interest in Elan and
the stockholder does not otherwise exercise any control over the affairs of
Elan. Under this test, most stockholders of Liposome likely will have their
gain treated as a capital gain.
A Liposome stockholder's initial tax basis in the contingent value rights
received in the merger will be equal to the fair market value of the contingent
value rights at the time they are issued to the stockholder. The stockholder's
holding period for the contingent value rights will begin on the day following
the merger.
Amounts received by a Liposome stockholder in respect of the contingent
value rights generally will result in taxable income, gain or loss (the
character and timing of which, as well as the method for recovering the
stockholder's tax basis, are uncertain, although if payments are made by Elan
with respect to the contingent value rights more than one year after their
issuance, a portion of those payments generally will be treated as interest).
It is not anticipated that the contingent value rights will be treated as
indebtedness for U.S. federal income tax purposes because payment in respect of
the contingent value rights is wholly contingent and the contingent value
rights do not provide for fixed principal or interest. If, however, the
contingent value rights were considered to be indebtedness, they would be
treated as contingent payment debt instruments and a portion of any cash
payments received with respect to the contingent value rights generally would
be treated as interest income. Such interest income could be taxable to
stockholders in advance of the actual cash payment. In addition, if the
contingent value rights were considered to be indebtedness, gain recognized
from the sale, exchange or retirement of the contingent value rights generally
would be treated as interest income (rather than as capital gain) and all or a
portion of any loss recognized may be treated as an ordinary loss (rather than
a capital loss).
The U.S. federal income tax treatment of the contingent value rights is
unclear and each Liposome stockholder is urged to consult his or her own tax
advisor concerning the taxation of the contingent value rights, including with
respect to their receipt, ownership and disposition of the contingent value
rights.
Taxation of Dividends. Dividends paid by Elan, if any, generally will not
qualify for the dividends-received deduction otherwise generally available to
corporate shareholders. Because more than 50% of Elan's stock may be owned by
U.S. persons, a portion of any dividends received by a U.S. holder of Elan ADSs
may be treated as U.S. source dividend income for purposes of calculating such
holder's U.S. foreign tax credit.
U.S. Backup Withholding and Information Reporting. A holder of Elan ADSs
may, under certain circumstances, be subject to certain information reporting
requirements and backup withholding tax at the rate of 31% with respect to
dividends paid on the Elan ADSs, or the proceeds of sale of the Elan ADSs,
unless such holder (i) is a corporation or comes within certain other exempt
categories, and when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number ("T.I.N."), certifies that such holder
is not subject to backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A holder of Elan ADSs who does
not provide a correct T.I.N. may be subject to penalties imposed by the U.S.
Internal Revenue Service. Any amount withheld under the backup withholding
rules generally will be creditable against the holder's U.S. federal income tax
liability.
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Material Irish Tax Consequences
The following discussion is intended only as a general guide to the position
under Irish tax law and will not apply to certain classes of investors, such as
dealers or Liposome stockholders resident or ordinary resident or domiciled in
Ireland or doing business in Ireland. If you are in any doubt as to your tax
position, you should consult with your tax advisor.
Irish Taxation of Elan. Elan is a public limited company incorporated, and
resident for tax purposes, in Ireland. Under current Irish legislation, Elan is
regarded as resident for tax purposes in Ireland because it is centrally
managed and controlled in Ireland.
The Taxes Consolidation Act of 1997 provides that a company which is
resident in Ireland and which is not resident elsewhere shall be entitled to
have any income from a qualifying patent disregarded for taxation purposes. The
legislation does not provide a termination date for this relief. A qualifying
patent means a patent in relation to which the research, planning, processing,
experimenting, testing, devising, designing, developing or similar activities
leading to the invention which is the subject of the patent, were carried out
in Ireland. Income from a qualifying patent means any royalty or other sum paid
in respect of the use of the invention to which the qualifying patent relates,
including any sum paid for the grant of a license to exercise rights under such
patent, where that royalty or other sum is paid, for the purpose of activities
which would be regarded under Irish law as the manufacture of goods, or by a
person who is not connected with Elan. Accordingly, Elan's income from such
qualifying patents is disregarded for taxation purposes in Ireland. Any Irish
manufacturing income of Elan and its subsidiaries is taxable at the rate of 10%
in Ireland until December 31, 2010. Any income of Elan which does not qualify
for the patent exemption or the 10% rate of tax will be taxable if income from
trading activities at 24% (which is reducing annually to 12.5% from January 1,
2003), and if income from investments at 25%.
Irish Taxation of Capital Gains. A person who is neither resident nor
ordinarily resident in Ireland and who does not carry on a trade in Ireland
through a branch or agency will not be subject to Irish capital gains tax on
the disposal of Elan ADSs, Elan ordinary shares or the contingent value rights,
provided the Elan ADSs, Elan ordinary shares or the contingent value rights, as
the case may be, are either quoted on a stock exchange or do not derive the
greater part of their value from Irish land or mineral rights.
Taxation of U.S. Holders on Merger Consideration. U.S. Holders who are
neither resident nor ordinarily resident in Ireland nor carrying on a trade in
Ireland through a branch or agency will not be subject to Irish tax on income
or gains arising from the receipt of consideration payable under the terms of
the merger or any contingent payments received pursuant to the contingent value
rights and no withholding tax will apply to any such payment.
Irish Taxation of Dividends. Unless exempted, all dividends paid by Elan are
subject to Irish withholding tax ("DWT") at the rate of 22%. An individual
shareholder resident in a country with which Ireland has a double tax treaty or
in a member state of the European Union (together a "Relevant Territory") will
be exempt from DWT provided he or she makes the requisite declaration.
Corporate shareholders that are not resident in Ireland and are ultimately
controlled by residents of a Relevant Territory, and corporate shareholders the
principal class of shares of which, or of a 75% parent, are traded on a stock
exchange in a Relevant Territory will be exempt from DWT provided the
appropriate declaration is made. Corporate shareholders residing in a Relevant
Territory not controlled by Irish residents and corporate shareholders wholly-
owned by two or more companies the shares of each of which are traded on a
stock exchange in a Relevant Territory will also be exempt from DWT provided
the appropriate declaration is made. Holders of Elan ADSs will automatically be
exempt from DWT if their address on the register of depository shares
maintained by the depository is in the U.S. Where such a withholding is made it
will satisfy the liability to Irish tax of the shareholder except in certain
circumstances where an individual shareholder may have an additional liability.
A charge to Irish social security taxes and other levies can arise for
individuals. However, under the Social Welfare agreement between Ireland and
the U.S., an individual who is liable for U.S. Social Security contributions
can normally claim an exemption from these taxes and levies.
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Irish Stamp Duty. Under current Irish legislation, no stamp duty will be
payable upon the acquisition of Elan ADSs by persons acquiring such Elan ADSs
upon consummation of the merger, or upon any subsequent transfer of the Elan
ADSs. A transfer of Elan ordinary shares whether on sale, in contemplation of a
sale or by way of gift, will attract duty at the rate of 1% on the
consideration given, or where the purchase price is inadequate or
unascertainable, on the market value of the shares. Transfers of Elan ordinary
shares which are not liable to duty at the rate of 1% may attract a fixed duty
of 10 Irish pounds unless the transfer is by way of security in which event
there is a potential maximum charge of 500 Irish pounds.
No Irish stamp duty will be payable on any document transferring or agreeing
to transfer contingent value rights on the basis that the contingent value
rights are issued under the seal of Elan outside Ireland, the contingent value
rights register is at all times maintained outside Ireland, the contingent
value rights are primarily enforceable outside Ireland, and neither the
contingent value rights certificate nor the contingent value rights agreement
will be located in Ireland at the date of transfer of, or agreement to
transfer, the contingent value rights.
Irish Capital Acquisitions Tax. A gift or inheritance of Elan ADSs or Elan
ordinary shares will be within the charge to Irish capital acquisitions tax.
Capital acquisitions tax is charged at a rate of 20% above a tax-free
threshold. The tax-free threshold is determined by the amount of the current
benefit and of previous benefits within the charge to capital acquisitions tax
received since December 2, 1998 and the relationship between the donor and the
successor or donee. Gifts and inheritances between spouses are not subject to
capital acquisitions tax. There is also a probate tax which is charged at 2% on
the value of the estate of deceased persons which exceed a specified threshold.
To the extent that they pass under a will or on intestacy, Elan ADSs and Elan
ordinary shares would be within the charge to this tax.
In a case where Elan ADSs or Elan ordinary shares are subject to both Irish
capital acquisitions tax with respect to an inheritance and U.S. federal estate
tax, the Estate Tax Convention generally provides for Irish capital
acquisitions tax paid on inheritances in Ireland to be credited against tax
payable in the U.S. and for tax paid in the United States to be credited
against tax payable in Ireland, based on priority rules set forth in the Estate
Tax Convention. The Estate Tax Convention does not apply to Irish capital
acquisitions tax paid on gifts.
The foregoing summary of material U.S. and Irish tax consequences is based
on the Income Tax Convention, Estate Tax Convention, U.S. law, Irish law, and
regulations, administrative rulings and practices of the U.S. and Ireland, all
as they exist as of the date of this prospectus-proxy statement. This summary
does not discuss all aspects that may be relevant to Liposome stockholders in
light of their particular circumstances. Liposome stockholders are urged to
consult their own tax advisors with respect to their own particular
circumstances and with respect to the specific tax consequences of the merger
to them and of ownership of Elan ADSs and contingent value rights by them,
including the applicability and effect of state, local and foreign tax laws,
estate tax laws and proposed changes in applicable laws.
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RESTRICTIONS ON FINANCIAL TRANSFERS
AND UNITED NATIONS SANCTIONS
Irish exchange control regulations ceased to apply from and after December
31, 1992. Except as indicated below, there are no restrictions on non-residents
of Ireland dealing in domestic securities, which include shares or depositary
receipts of Irish companies such as Elan. Except as indicated below, dividends
and redemption proceeds are freely transferable to non-resident holders of
shares or depositary receipts of Irish companies such as Elan. The Financial
Transfers Act, 1992 gives power to the Minister for Finance of Ireland to
restrict financial transfers between Ireland and other countries. Financial
transfers are broadly defined and include all transfers which would be
movements of capital or payments within the meaning of the treaties governing
the member states of the European Union. The acquisition or disposal of
American depositary receipts representing shares issued by an Irish
incorporated company and associated payments may fall within this definition.
In addition, dividends or payments on redemption or purchase of shares and
payments upon liquidation of an Irish incorporated company would fall within
this definition. At present, there are orders in force by the Minister for
Finance of Ireland under the Financial Transfers Act, 1992, including orders
applicable to Angola, the Federal Republic of Yugoslavia, the Republic of
Serbia and Iraq.
Additionally, any transfer of, or payment in respect of an American
depositary share involving the government of any country which is currently the
subject of United Nations sanctions or any person or body controlled by any
country which is currently the subject of United Nations sanctions, or by any
person acting on behalf of the foregoing, may be subject to restrictions under
United Nations sanctions as implemented into Irish law.
Elan does not anticipate that orders under the Financial Transfers Act, 1992
or United Nations sanctions implemented into Irish law will have a material
effect on its business.
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COMPARISON OF RIGHTS OF LIPOSOME STOCKHOLDERS
AND ELAN STOCKHOLDERS
As a result of the merger, Liposome stockholders will receive Elan ADSs,
which represent ordinary shares of Elan, a public limited company incorporated
under the laws of Ireland. Liposome stockholders will also receive contingent
value rights of Elan. The following is a summary of material differences
between the rights of Liposome stockholders and the rights of stockholders of
Elan arising from the differences between the corporate laws of Delaware and
Ireland. For information as to where the governing instruments of Liposome and
Elan may be obtained, see "Where You Can Find More Information."
Pursuant to Section 14 of the Exchange Act and the rules promulgated
thereunder (the "Proxy Rules"), Liposome is required to comply with certain
notice and disclosure requirements relating to the solicitation of proxies in
respect of stockholder meetings. As a foreign private issuer, Elan is not
subject to the Proxy Rules. However, Elan is subject to the rules of the Irish
Stock Exchange and the London Stock Exchange regulating notices of stockholder
meetings and solicitation of proxies. Under the applicable requirements, notice
of a stockholder meeting is normally accompanied by a stockholder circular
(and, in the case of an annual general meeting, by an annual report and
accounts) containing an explanation of the purpose of the meeting and the
recommendations of the board of directors of Elan with respect to actions to be
taken. All such communications are sent by the Depositary to holders of Elan
ADSs promptly upon receipt thereof. As a foreign private issuer with securities
listed on the New York Stock Exchange and registered under Section 12 of the
Exchange Act, Elan is also required under the Exchange Act to publicly file
with the Commission and the New York Stock Exchange annual reports and other
information. As an issuer with securities listed on the Nasdaq National Market
and registered under Section 12 of the Exchange Act, Liposome is also required
under the Exchange Act to publicly file with the Commission and the Nasdaq
National Market an annual report and other information.
Although there are certain similarities between the Delaware General
Corporation Law and Irish law as well as between the Liposome certificate of
incorporation and Liposome by-laws and the Elan memorandum and articles of
association, a significant number of differences do exist. The following is a
summary of certain material differences between the current rights of Liposome
stockholders and Elan stockholders under the DGCL and Irish law, respectively,
and under the Liposome certificate of incorporation and by-laws and the Elan
memorandum and articles of association.
The following summary does not purport to be a complete description of the
rights of stockholders of Elan and stockholders of Liposome under, and is
qualified in its entirety by reference to, the relevant Irish laws, the DGCL,
the Elan memorandum and articles of association and the Liposome certificate of
incorporation and by-laws.
Authorized Capital Stock
The authorized capital stock of Liposome currently consists of 122,400,000
shares of capital stock, consisting of (i) 120,000,000 shares of Liposome
common stock and (ii) 2,400,000 shares of Liposome preferred stock.
The authorized capital stock of Elan currently consists of 600,000,000
Ordinary Shares, par value 5 Euro cents per share, 1,000 Executive Shares, par
value Euro 1.25 per share and 25,000 "B' Executive Shares, par value 5 Euro
cents per share.
Stockholder Voting Rights
Under the DGCL each stockholder is entitled to one vote per share unless the
certificate of incorporation provides otherwise. In addition, the certificate
of incorporation may provide for cumulative voting at all
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elections of directors of the corporation. The certificate of incorporation of
Liposome does not contain such a provision. A stockholder may vote at any
meeting of the stockholders, either in person or by proxy.
Under Irish law, the voting rights of stockholders are governed by the Irish
Companies Acts and by a company's articles of association. Holders of Elan
ordinary shares are entitled to one vote per share, either in person or by
proxy whenever a formal vote is called for by a poll. On non-contentious
matters brought before a general or special meeting of stockholders, a vote
shall be taken by a show of hands in which every stockholder present in person
and every proxy shall have one vote; provided, however, that no individual
shall have more than one vote. Cumulative voting is essentially unknown under
Irish law. Elan's articles of association specify that three members present in
person or by proxy being holders of not less than one third of the issued Elan
ordinary shares shall be a quorum.
Special Meetings of Stockholders; Consent to Actions of Stockholders in Lieu of
Meeting
Special Meetings. Under the DGCL, a special meeting of stockholders may be
called only by the board of directors or by such person or persons as may be
authorized by the certificate of incorporation or by-laws. The certificate of
incorporation of Liposome provides that a special meeting of stockholders may
be called by the chairman of the board of directors or by the holders of 20
percent or more of the outstanding shares of Liposome entitled to vote. Under
the DGCL, the vote of stockholders required to pass a resolution is the
affirmative vote of a majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter unless a higher
or lower vote is required by the DGCL or a company's certificate of
incorporation. The certificate of incorporation of Liposome does not contain
such a provision. Under the DGCL, matters requiring approval by a majority of
the outstanding shares entitled to vote include approval of merger, sale, lease
or exchange of all or substantially all of the company's property or assets,
and amendment to the company's certificate of incorporation.
Under Irish law, an extraordinary general meeting of stockholders may be
called up by the board of directors or by stockholders holding not less than
one-tenth of the paid-up capital of the company carrying voting rights at
general meetings. An extraordinary general meeting, if convened for the passing
of a special resolution, requires 21 days' notice (a special resolution, to be
passed, requires the approval of at least 75% of the votes cast at the
meeting), and, if convened for the passing only of an ordinary resolution,
requires 14 days' notice (an ordinary resolution, to be passed requires the
approval of a majority of the votes cast). An annual general meeting requires
21 days' notice regardless of the type of resolution to be proposed. "Special
resolutions" generally involve proposals to change the name of the company, to
alter its capital structure in certain respects, to change or amend the rights
of stockholders, to permit the company to issue new shares for cash without
applying the stockholders' preemptive rights, to amend the company's objects
(purpose clause) and articles of association and to carry out certain other
matters where the company's articles of association or the Companies Acts
prescribe that a "special resolution" is required. All other proposals relating
to the ordinary course of the company's business such as the election of
directors would be the subject of an "ordinary resolution."
Consent of Stockholders In Lieu of Meeting. Under the DGCL, unless otherwise
provided in the certificate of incorporation, any action required or permitted
to be taken at any meeting of stockholders may instead be taken without a
meeting, without prior notice or a vote if a written consent to the action is
signed by holders of outstanding shares of stock having at least the number of
votes that would be required to authorize such action at a meeting of
stockholders entitled to vote thereon were present and voting. The certificate
of incorporation of Liposome does not prohibit action by written consent of the
stockholders.
Under Irish law, a company's articles of association may provide that a
resolution in writing executed by or on behalf of each stockholder who would
have been entitled to vote upon it if it had been proposed at a general meeting
will be as effective as if it had been passed at a general meeting properly
convened and held. Elan's articles of association do not contain any such
provision.
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Rights of Inspection
The DGCL allows any stockholder to inspect during business hours the
stockholder list and the corporation's other books and records for a purpose
reasonably related to such person's interest as a stockholder.
Except when closed in accordance with the provisions of the Irish Companies
Acts, the register and index of names of members of an Irish company may be
inspected during business hours by its members, without charge and by other
persons upon payment of a charge, and copies may be obtained on payment of a
charge. The members of an Irish company may, without charge, also inspect the
minutes of meetings of the members during business hours and obtain copies upon
payment of a charge. The published annual accounts of an Irish company are
required to be laid before the members in general meeting and a member is
entitled to a copy of such accounts. The members of Elan, including the holders
of Elan ADSs, have no rights to inspect the accounting records of Elan or
minutes of meetings of directors. Under the Irish Companies Acts, certain
registers required to be kept by the company are open to public inspection, and
service contracts of directors of the company (which have at least three years
unexpired or require at least three years' notice to terminate without
compensation) must be available for inspection during business hours. Under the
listing rules of the Irish Stock Exchange, service contracts of directors of a
listed company (which have less than 12 months unexpired or require at least 12
months notice to terminate without compensation) must be available for
inspection under certain circumstances.
Amendment of Articles of Incorporation and By-laws and Governing Instruments
Under the DGCL, any amendment, alteration or repeal of any article of the
certificate of incorporation requires the affirmative vote of a majority of the
outstanding stock entitled to vote thereon and of a majority of the outstanding
stock of each class entitled to vote thereon as a class. If the certificate of
incorporation requires a greater vote or if the articles being amended, altered
or repealed require a greater vote for action by the board of directors of the
stockholders, such greater vote is also required to alter, amend or repeal such
article. The certificate of incorporation of Liposome does not require a
greater vote than the DGCL prescribes. Even if not otherwise entitled to vote
upon a proposed amendment, the holders of the outstanding shares of any class,
or series of any class, are entitled under the DGCL to vote as a class upon
such proposed amendment if it would alter the number of authorized shares or
par value of the shares of such class, or series, or adversely affect the
powers, preferences or special rights of the shares of such class, or series.
Under the DGCL, the by-laws of a corporation generally may be amended or
repealed by the affirmative vote of the holders of a majority of the issued and
outstanding stock of the corporation entitled to vote thereon as a class. As
permitted by the DGCL, the certificate of incorporation of Liposome provides
that the by-laws of Liposome may be altered, amended or repealed by the board
of directors of Liposome.
Under Irish Law, the stockholders have the authority to alter most
provisions of a company's memorandum of association and all provisions of its
articles of association by a Special Resolution subject, in the case of certain
amendments to the memorandum of association, to the right of dissenting
stockholders to apply to the courts to cancel the amendments. Under Irish law,
the board of directors is not authorized to change the memorandum of
association or the articles of association. Amendments affecting the rights of
the holders of any class of shares may, depending on the rights attached to
such class and the nature of the amendments, also require approval of the class
affected at a separate class meeting, although an amendment so approved will be
subject to confirmation by the court if the holders of at least 10% of the
shares of that class apply to the court for the cancellation of the amendment.
Business Combinations and Reorganizations
Under the DGCL, the vote of a majority of the outstanding shares of capital
stock entitled to vote thereon generally is necessary to approve a merger or
other reorganization. However, subject to certain conditions
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detailed in the DGCL, no vote of the stockholders of a surviving corporation to
a merger is needed unless required by the certificate of incorporation if:
. the agreement of merger does not amend in any respect the certificate of
incorporation of such surviving corporation,
. each share of stock of such constituent corporation outstanding
immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation
after the effective date of the merger, and
. either no shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into such stock are to be
issued or delivered under the plan of merger, or the authorized unissued
shares of the treasury shares of common stock of the surviving
corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities
or obligations to be issued or delivered under such plan do not exceed
20% of the shares of common stock of such constituent corporation
outstanding immediately prior to the effective date of the merger.
Finally, the DGCL permits a corporation to include in its certificate of
incorporation a provision requiring for any corporate action the vote of a
larger portion of the stock or of any class or series thereof than would
otherwise be required under the DGCL. The certificate of incorporation of
Liposome does not contain such a provision.
Takeovers of certain Irish public companies, including Elan, are regulated
by the Takeover Rules, which are similar to the City Code in the U.K. except
that unlike the latter they are statutory based (the "Takeover Rules"), which
prescribe rules administered by the Irish Takeover Panel, which oversees the
conduct of such takeovers. One of the provisions of the Takeover Rules is to
the effect that (i) when any person acquires, whether by a series of
transactions over a period of time or not, shares which (taken together with
shares held or acquired by persons acting in concert with him) carry 30% or
more of the voting rights of a public company; or (ii) when any person,
together with persons acting in concert with him, holds not less than 30% but
not more than 50% of the voting rights and such person, or any person acting in
concert with him, acquires in any period of twelve months additional shares
carrying more than 1% of the voting rights, such person must generally make an
offer for all of the equity shares of the company (whether voting or non-
voting) for cash, or accompanied by a cash alternative, at not less than the
highest price paid for the relevant shares during the twelve months preceding
the date of the offer.
The Irish Companies Acts provide for schemes of arrangement, which are
arrangements or compromises between a company and any class of its
stockholders, or any class of its creditors, and are used for certain types of
reconstructions, amalgamations, capital reorganizations or takeovers. They
require the approval at a specially convened meeting of a majority of the
stockholders in number representing 75% in value of the relevant class of
shares present and voting, either in person or by proxy, and the sanction of
the court. Once so approved and sanctioned, all stockholders of the relevant
class are bound by the terms of the scheme; a dissenting stockholder would have
no dissenters' rights. The Irish Companies Acts also provide that where a take-
over offer is made for the shares of a certain class of a company incorporated
in Ireland and, within four months of the date of the offer the offeror has, by
virtue of acceptances of the offer, acquired or contracted to acquire not less
than 80% in value of the shares to which the offer relates, the offeror may
before the expiration of six months after the date of the offer by notice
compulsorily require stockholders of the relevant class who do not accept the
offer to transfer their shares on the terms of the offer. A dissenting
stockholder may apply to the court within one month of the date on which such
notice was given objecting to the compulsory transfer or its terms. The court
is unlikely, in the absence of fraud or oppression, to exercise its discretion
to order that the compulsory transfer not take effect, but it may vary the
terms of the transfer as it thinks fit.
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Dissenters' Appraisal Rights
Under the DGCL, stockholders who follow prescribed statutory procedures are
entitled, in the event of certain mergers or consolidations, to surrender their
shares to the corporation in exchange for the judicially determined "fair
value" of such shares. A stockholder, however, is not entitled to such
appraisal rights if the shares of stock held by the stockholder are listed on a
national securities exchange or held of record by more than 2,000 stockholders,
unless the agreement of merger or consolidation converts such shares of stock
into anything except shares of stock of the surviving corporation, shares of
stock of any other corporation that at the effective date of the merger will be
either listed on a national securities exchange or held of record by more than
2,000 stockholders, cash in lieu of fractional shares of such stock or any
combination of such shares and cash in lieu of fractional shares.
Although Irish law does not generally provide for appraisal rights, if a
stockholder applies to a court as described under "Business Combinations and
Reorganizations" above, the court may specify such terms for the acquisition as
it considers appropriate.
Disclosure of Interests
Section 67 of the Irish Companies Act, 1990 provides that a person,
including a company or other legal entity, who acquires an interest or becomes
aware that he has acquired an interest of 5% or more of any class of shares
comprised in a public company's "relevant share capital" (which, for these
purposes, means that company's issued share capital carrying rights to vote in
all circumstances at general meetings of the company) is obliged to notify that
company in writing of his interest within five business days (that is,
excluding Saturdays, Sundays and public holidays in Ireland) after becoming so
interested or so aware. Thereafter, any changes in such interest of at least 1%
calculated as required by the Companies Act, 1990 or which reduce such interest
below 5% must be notified to the company. In addition, a person is obliged to
notify the Irish Stock Exchange if his or her interest in the shares of any
company listed on that exchange reaches, exceeds or falls below 10%, 25%, 50%
or 75% of the relevant class of shares. The Elan ordinary shares are "relevant
share capital" for this purpose. Failure by any person to notify punctually and
properly is an offense, and as a consequence of such failure (except where it
relates to his ceasing to be interested in shares) no right or interest in
respect of the relevant shares will be enforceable by him, directly or
indirectly, by action or legal proceeding. Application may be made to the Irish
courts to remove this restriction, but this would not be successful unless the
court was satisfied that the failure to notify was not due to any deliberate
act of omission on the part of the applicant.
In addition, Section 81 of the Irish Companies Act, 1990 provides that a
public company may by notice in writing (a "Section 81 Notice") require a
person whom the company knows or has reasonable cause to believe to be, or to
have been at any time during the three years immediately preceding the date on
which the notice is issued, interested in shares comprised in the company's
"relevant share capital" to confirm that fact or, as the case may be, to
indicate whether or not that is the case, and where he holds or has during the
relevant time held an interest in such shares, to give such further information
as may be required relating to his interest and any other interest in the
shares of which he is aware. The disclosure must be made within such reasonable
period as may be specified in the relevant notice (which may, depending on the
circumstances, be as short as one or two days).
For the purpose of the above obligations, the interest of a person in shares
means, subject to certain exceptions, any kind of interest in shares including
interests in any shares (i) in which his spouse, or his child or stepchild
under the age of 18 is interested, (ii) in which a corporate body is interested
and either (a) that corporate body is or its directors are accustomed to act in
accordance with that person's directions or instructions or (b) that person
controls one-third or more of the voting power of that corporate body or (iii)
in which another party is interested and the person and that other party are
parties to a "concert party" agreement under section 73 of the Companies Act,
1990 (being an agreement which provides for one or more parties to it to
acquire interest in shares of the company, which imposes obligations or
restrictions on any one or more of
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the parties as to the use, retention or disposal of such interests acquired
pursuant to such agreement and pursuant to which any interest in the company's
shares is in fact acquired by any of the parties). The holding of an Elan
American Depositary Receipt ("Elan ADR") evidencing an Elan ADS would generally
constitute an interest in the underlying Elan ordinary shares.
Where a Section 81 Notice is served by a company on a person who is or was
interested in shares of the company and that person fails to give the company
any information required by the notice within the time specified in the notice,
the company may apply to the court for an order directing that any transfer of
those shares will be void, no voting rights in respect of such shares may be
exercised, no further shares shall be issued in respect of such shares or
otherwise to such person and, other than in a liquidation, no payments,
including dividends, shall be made in respect of such shares. Such restrictions
may also void any agreement to transfer such shares. In addition, it is a
criminal offense in Ireland to fail to comply with a Section 81 Notice.
Dividends
The DGCL permits the payment of dividends on common stock, subject to any
restrictions contained in the certificate of incorporation, without
stockholders' consent out of a corporation's surplus (the excess of net assets
over capital) or out of net profits for the current and preceding fiscal years.
If the net assets are diminished to an amount less than the aggregate amount of
capital represented by the outstanding stock having a preference on the
distribution of assets, then no distribution paid out of net profits shall be
made until the deficiency in the amount of capital represented by the preferred
shares shall have been repaired. The certificate of incorporation and by-laws
of Liposome do not restrict the payment of dividends on the Liposome common
stock.
Under the DGCL, a corporation may purchase shares of any class of its
capital stock or redeem shares of any class or series of preferred stock unless
its capital is impaired or would become impaired as a result of such purchase
of redemption. However, a purchase or redemption of preferred stock may be made
out of the corporation's capital if such shares will be retired upon their
acquisition and the capital of the corporation thereby reduced. The certificate
of incorporation of Liposome does not restrict this right.
Under Irish law, a company may pay dividends on its ordinary shares, subject
to the prior rights of holders of its preferred shares, only out of its
distributable profits (accumulated, realized profits less accumulated, realized
losses) and not out of share capital, which includes share premiums (paid-in
surplus). Amounts credited to the share premium account (representing the
excess of the consideration for the issue of outstanding shares over the
aggregate par value of such shares) may not be paid out as cash dividends but
may be used, among other things, to pay up unissued shares which may then be
distributed to stockholders in proportion to their holdings. In addition, a
public company such as Elan may make a distribution at any time only if, at
that time and immediately after such distribution, the amount of its net assets
is not less than the aggregate of its called-up (i.e., issued and paid-up)
share capital and undistributable reserves.
Under the articles of association of Elan, subject to applicable law, the
stockholders may by ordinary resolution declare dividends in accordance with
the respective rights of the members, but no dividend may exceed the amount
recommended by the Elan board of directors. In addition, subject to applicable
law, if the profits of Elan available for distribution appear to justify such
payments, the Elan board of directors may from time to time pay interim
dividends.
Classification of the Board of Directors
Under the DGCL, the certificate of incorporation of a Delaware corporation
may provide for the classification of the board of directors with respect to
the time for which directors severally hold office. The certificate of
incorporation of Liposome does not provide for such classifications.
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Irish law permits a company to provide for the classification of the board
of directors with respect to the time for which directors severally hold
office. The articles of association of Elan do not provide for such
classification of the Elan board of directors. The articles of association of
Elan require that, at every annual meeting, one-third (or the nearest number to
one-third) of the directors (other than the chairman) will retire from office
(provided that if the number of directors subject to retirement by rotation is
two, one of them will retire and if the number of such directors is one, he or
she will retire) and that all vacant directorships may be filled at the
meeting. The directors to retire in each year are the directors who have been
longest in office since their last election or appointment. Although this tri-
annual rotation of directors is similar to a classified board, it is different
in that any director who is one of the one-third of directors who have been
longest in office since their last election or appointment at the time of the
annual meeting will retire from office regardless of the actual year of such
director's last appointment. A retiring director is eligible for re-election.
Removal of Directors
Under the DGCL, the entire board of directors or any individual director may
be removed from office, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors. If the
stockholders are entitled to cumulative voting in the election of directors,
unless the entire board is removed, no individual director may be removed
without cause if the number of votes cast against the resolution for his
removal would be sufficient if cumulatively voted to elect one or more
directors to the board. If the board of directors is classified, a director may
be removed by a vote of stockholders only for cause, unless the certificate of
incorporation provides otherwise. The certificate of incorporation of Liposome
does not provide for cumulative voting or for the classification of directors.
Under the Irish Companies Acts, stockholders have the right, irrespective of
the provisions of the articles of association, to remove a director by ordinary
resolution, provided that notice of the intention to propose it has been given
to the company not less than 28 days before the relevant meeting.
Vacancies on the Board of Directors
As permitted under the DGCL, the by-laws of Liposome provide that the board
of directors may increase or decrease the number of directors. The certificate
of incorporation and the by-laws of Liposome are silent as to whether directors
may fill vacancies on the board until a new board member is duly elected at an
annual or special meeting of the stockholders.
Under Irish law, stockholders of an Irish public company may, by ordinary
resolution, appoint a person to be a director either to fill a vacancy or as an
additional director. The board of directors also has the power to appoint a
person to be a director to fill a vacancy or as an additional director,
provided that such appointment will only last until the next following annual
general meeting of the company, at which the director concerned may be elected.
Stockholders' Suits
Under the DGCL, a stockholder may institute a lawsuit on behalf of the
corporation. An individual stockholder also may commence a lawsuit on behalf of
himself and other similarly situated stockholders where the requirements for
maintaining a class action under Delaware law have been met. Neither the
certificate or by-laws of Liposome prescribe any procedure for the exercise of
these stockholder rights.
Irish law permits an action by a stockholder is his own right (or in a
representative capacity on behalf of himself and other affected consenting
stockholders of the same class if their rights are identical) where he alleges
that his personal rights have been infringed. Additionally, under Irish law,
any stockholder of a company who claims that the affairs of the company are
being conducted, or that the powers of the directors of the company are being
exercised, in a manner oppressive to him or any of the stockholders (including
himself) or in disregard of his or their interests as stockholders, may apply
to court for an appropriate order.
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As a general principle of Irish law, a stockholder generally has no right to
sue in the name of the company; the company itself is the proper plaintiff for
the purposes of maintaining proceedings in respect of wrongs done to the
company. There are, however, certain exceptions to this principle available
under equitable principles on a case-by-case basis. For example, the
controlling stockholders cannot perpetrate a fraud on the minority stockholders
or commit an act that is illegal or ultra vires. Additionally, if a company
purports to act on the strength of a decision by a simple majority of votes
where such a decision requires more than a simple majority, an individual
stockholder is entitled to bring suit. In certain circumstances, if controlling
stockholders fail to institute proceedings in the name of the company when such
proceedings are properly called for, one or more of the aggrieved minority
stockholders may apply to the court to bring what has come to be known as a
derivative action, namely an action that derives from the injury to the company
rather than the injury to individual stockholders.
Indemnification; Liability of Directors
The DGCL provides that a corporation may, and in certain circumstances,
must, indemnify its directors, officers, employees or agents for expenses,
judgments or settlements actually and reasonably incurred by them in connection
with suits and other legal actions or proceedings if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and had no reasonable cause to believe their
conduct was unlawful. The DGCL also permits a corporation to adopt procedures
for advancing expenses to directors, officers and others without the need for a
case-by-case determination of eligibility, so long as, in the case of officers
and directors, they undertake to repay the amount advanced if it is ultimately
determined that the officer or director was not entitled to be indemnified. The
certificate of incorporation of Liposome provides for indemnification of
directors from personal liability arising out of certain breaches of fiduciary
duties which were in good faith, and did not include any intentional misconduct
or a knowing violation of law.
Irish law does not permit a company to indemnify a director or an officer of
the company or any person employed by the company as auditor against any
liability of such person by virtue of any rule of law in respect of his
negligence, default, breach of duty or breach of trust in relation to the
company except any liability incurred by such person in defending any legal
proceedings (whether civil or criminal) in which judgment is given in his favor
or in which he is acquitted or in certain proceedings brought by him in which,
although he is liable, a court finds that he acted honestly and reasonably and
that having regard to all the circumstances he ought fairly to be excused and
relief is granted by the court. The articles of association of Elan contain
such an indemnity in respect of such persons (other than any person employed as
auditor).
Pre-emptive Rights
Under the DGCL, stockholders of a Delaware corporation do not have pre-
emptive rights unless the certificate of incorporation provides otherwise. The
certificate of incorporation of Liposome does not provide for pre-emptive
rights.
Under Irish law, equity shares (shares other than shares which with respect
to dividends and capital carry a right to participate only up to a specified
amount in a distribution) and rights to subscribe for, or to convert any
security into, equity shares must, before being issued or granted for cash, be
offered to the existing equity stockholders in proportion to the respective
nominal values of their holdings, unless the articles of association or a
special resolution passed at a general meeting of stockholders provide
otherwise. By a resolution passed by Elan's stockholders on May 14, 1999, the
Elan board of directors is authorized, during the period expiring August 13,
2000, to allot equity shares up to the amount of Elan's present authorized but
unissued share capital otherwise than pro rata to its existing stockholders.
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Rights of Purchase and Redemption
Under the DGCL, a corporation may purchase shares of any class of its
capital stock or redeem shares of any class or series of preferred stock unless
its capital is impaired or would become impaired as a result of such purchase
or redemption. However, a purchase or redemption of preferred stock may be made
out of the corporation's capital if such shares will be retired upon their
acquisition and the capital of the corporation thereby reduced. The certificate
of incorporation of Liposome does not restrict this right.
Under Irish law, a company may issue redeemable shares if authorized by its
articles of association and subject to the conditions stated therein. A public
company, such as Elan, may purchase its own shares, including any redeemable
shares, if authorized by its articles of association and provided that such
purchase is, in the case of an on-market purchase, within the scope of an
authority given by ordinary resolution of the stockholders specifying the
maximum number and permissible price range of shares to which it relates and
is, in other cases, made pursuant to a contract authorized in advance by
special resolution of the stockholders.
Under Irish law, shares may be redeemed or purchased only if fully paid and
only out of distributable profits unless the shares are to be canceled on
redemption or purchase, when they can also be redeemed or, as the case may be,
purchased out of the proceeds of a new issue of shares made for the purpose of
the redemption or purchase. Any amount, in excess of the par value thereof,
payable on redemption or purchase of shares may be paid out of profits and, if
the shares are to be canceled, may be paid out of the proceeds of a new issue
of shares up to an amount equal to the lesser of the aggregate of premiums
received by the company on the issue of the shares to be redeemed or purchased
and the amount of the company's share premium account at the time of the
redemption or purchase (including amounts transferred to that account in
respect of premiums on the new issue). The share premium account must be
reduced by the amount of any such payment.
Elan's articles of association permit it to issue redeemable shares and to
purchase its own shares. No redeemable shares have been issued. In 1999, Elan
purchased 621,500 Elan ordinary shares and is currently holding these shares as
treasury shares. Elan annually seeks the authority of its stockholders to make
on-market purchases of its shares and to re-issue off-market any treasury
shares resulting from any such on-market purchases.
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DESCRIPTION OF ELAN CAPITAL STOCK
Elan's authorized capital stock consists of 600,000,000 Elan Ordinary
Shares, par value 5 Euro cents, 1,000 executive shares, par value Euro 1.25,
and 25,000 "B' Executive Shares, par value 5 Euro cents.
Ordinary Shares
General. All of the 269,128,803 Elan ordinary shares issued as of December
31, 1999, were fully paid, duly authorized and validly issued. Holders of Elan
ordinary shares are entitled to receive dividends as may be recommended by the
board of directors of Elan and approved by the stockholders and/or interim
dividends as the board of directors of Elan may decide. On liquidation or a
winding up of Elan, the assets available for distribution among the holders of
Elan ADSs and Elan ordinary shares not otherwise represented by Elan ADSs shall
be distributed equally to all holders of Elan ordinary shares and ADSs. Elan
ordinary shares have no conversion or redemption rights.
Voting Rights. Subject to any special rights or restrictions as to voting
attached to any class of shares, under Irish law holders of ordinary shares are
entitled to one vote per share, either in person or by proxy, whenever a formal
vote is called for by a poll. On non-contentious matters brought before a
general or special meeting of stockholders, a vote shall be taken by a show of
hands, in which every stockholder present in person or by proxy will have one
vote; provided, however, that no individual will have more than one vote.
Elan's articles of association provide that three or more stockholders present
in person or by proxy holding not less than one-third of the issued ordinary
shares constitute a quorum at a meeting of stockholders. A majority of votes
cast is required for ordinary resolutions; however, a 75% vote is required for
adoption of a special resolution, such as a proposed amendment to Elan's
memorandum and articles of association or authorizing a voluntary liquidation
of Elan. Variation of the rights relating to a class of shares requires the
approval of a special resolution by the class in question. Stockholders do not
have cumulative voting rights for the election of directors, which means that
the holders of a majority of the shares can elect all of the directors. There
are no special rights or restrictions as to voting attached to Elan ordinary
shares.
Stockholder Meetings. Under Irish law, a company's annual general meeting of
stockholders must take place in Ireland and any business transacted at a
meeting held in breach of this requirement will be void, unless all
stockholders entitled to attend and vote at such meeting consent in writing to
the meeting being held elsewhere or alternatively a resolution providing that
the meeting be held elsewhere has been passed at the preceding annual meeting
of stockholders, and the articles of association do not require that the annual
meeting be held in Ireland. Elan's articles of association permit annual
meetings to be held outside Ireland if the above procedures are followed.
Under Irish law, extraordinary general stockholders' meetings may be
convened by the board of directors or at the request of stockholders holding
not less than one-tenth of the paid-up capital of the company as at the
relevant date. An annual meeting must be held each year and not more than 15
months shall elapse between the date of one annual meeting and that of the
next. The Minister for Enterprise, Trade and Employment of Ireland may, on the
application of any stockholder, call or direct the calling of a general meeting
if default is made in holding such meeting. Irish law requires at least 14
days' written notice of a meeting, except that an annual meeting or a meeting
for passing a special resolution requires at least 21 days' written notice.
Issuance of Shares. Irish company law restricts the power of the board of
directors to allot shares and to grant share subscription rights and rights to
convert securities of a company into shares unless the stockholders pass a
resolution conferring such powers of the board of directors for periods of up
to five years. By an ordinary resolution passed by Elan's stockholders on May
14, 1999, the Elan board of directors is authorized to enter into agreements,
during the period expiring May 13, 2004, to allot shares up to the amount of
Elan's present authorized but unissued share capital. In addition, Elan may not
pay, directly or indirectly, a commission in excess of 10% of the price at
which shares are issued to any person subscribing for or procuring
subscriptions for ordinary shares.
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Pre-emptive Rights. Irish law provides that equity shares (and rights to
subscribe for or convert securities into equity shares) must, before being
issued or granted for cash, be offered, pro rata, to the existing holders of
equity shares. The stockholders may by special resolution eliminate this
requirement for periods of up to five years. Elan's stockholders have passed a
special resolution eliminating the requirement for these preemptive rights for
agreements entered into prior to the period expiring August 13, 2000, or the
date of the next annual general meeting of Elan, whichever is the earlier to
occur.
Derivative Action Suits. As a general principle of Irish law, only a company
itself can be the proper plaintiff for the purposes of maintaining proceedings
in respect of wrongs done to the company. Neither an individual stockholder nor
any group of stockholders has any right of action in such circumstances. There
are, however, certain exceptions to this principle available under equitable
principles on a case-by-case basis. For example, the controlling stockholders
cannot perpetrate a fraud on the minority stockholders or commit an act which
is illegal or ultra vires. Additionally, if a company purports to act on the
strength of a decision by a simple majority where certain decisions call for
more than a simple majority, an individual stockholder is entitled to bring
suit. In cases where the controlling stockholders will not institute
proceedings in the name of the company in those instances where they are
properly called for, one or more of the aggrieved minority stockholders may
bring what has come to be known as a derivative action, namely an action that
derives from the injury to the company rather than the injury to individual
stockholders. A minority stockholder is also able to initiate proceedings in
the name of the company in certain other limited circumstances.
Class Action Suits. In contrast to a derivative action, which lies where it
is alleged that a wrong has been done to the company, Irish law permits an
action by a stockholder in his own right where he alleges that his personal
rights have been infringed. If such a stockholder has rights which are
identical to those enjoyed by other members or by all members of the same class
of stockholders, it is possible for the stockholder to commence a suit in a
representative capacity on behalf of himself and the other persons affected.
Additionally, under Irish company law any member of a company who claims
that the affairs of the company are being conducted, or that the powers of the
directors of the company are being exercised, in a manner oppressive to him or
any of the members (including himself) or in disregard of his or their
interests as members, may apply to the courts for an appropriate order.
Interlocking and Interested Directors. Irish company law provides that it
shall be the duty of a director of a company who is in any way, whether
directly or indirectly, interested in a contract or proposed contract with the
company to declare the nature of his interest at a meeting of the directors of
the company. Regulation 70(d) of Elan's articles of association provides, among
other things, that a director may not generally vote in respect of any contract
or arrangement or any other proposal whatsoever in which he has any material
interest otherwise than by virtue of his interests in shares or other
securities of or otherwise in or through Elan. Such regulation also provides
that if any question shall arise at any meeting as to the materiality of a
director's interest or as to the entitlement of any director to vote and such
question is not resolved by his voluntarily agreeing to abstain from voting,
such question shall be referred to the members of the board of directors whose
votes are not in question. Additionally, it is provided by such regulation that
the stockholders of Elan may, by ordinary resolution, ratify any transaction
not duly authorized by reason of a contravention of the regulation. The above
principles could apply where a director of Elan is or was a director and/or
stockholder of or otherwise connected with another company with which Elan had
entered into contracts.
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Executive Shares and "B' Executive Shares
There are presently issued 1,000 Executive Shares, all fully paid, which are
held by one person. There are presently issued 21,375 "B' Executive Shares, all
fully paid, which are held by one person. The Executive Shares do not confer on
the holder thereof the right to receive notice of or to attend and vote at any
meeting of Elan under any circumstances except with respect to matters relating
to such holder as a class. A "B' Executive Share confers on the holder thereof
the same voting rights as are enjoyed by a holder of Elan ordinary shares.
Neither the Executive Shares nor the "B' Executive Shares have the right to any
profits of Elan, except as Elan may from time to time decide to distribute as a
dividend on such shares. These shares were established by Elan as a means of
enabling its key employees to participate in profits of Elan. In the event of
the winding up of Elan, Executive Shares shall have a priority over Elan
ordinary shares, and the "B' Executive Shares shall rank equally with the Elan
ordinary shares, with respect to return of capital, but neither the Executive
Shares nor the "B' Executive Shares shall be entitled to participate further in
any way in the profits or assets of Elan. Elan does not currently intend to
issue any additional Executive Shares or "B' Executive Shares.
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DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS
Elan ADRs evidencing Elan ADSs (each of which represents one Elan ordinary
share) are issuable under the amended and restated deposit agreement dated as
of May 17, 1996, by and among Elan, The Bank of New York, as depositary and the
owners and holders of ADRs. Each Elan ADS represents one ordinary share, or
evidence of a right to receive an ordinary share, deposited in accordance with
the deposit agreement with The Bank of Ireland, Dublin, Ireland, as agent of
the depositary, or any successor to such agent. An Elan ADR may represent any
number of Elan ADSs.
The following statement includes a summary of certain provisions of the
deposit agreement. Such summary does not purport to be complete and is
qualified in its entirety by reference to the deposit agreement. Copies of the
deposit agreement are available for inspection at the corporate trust office of
the depositary at 101 Barclay Street, New York, New York 10286, at the office
of the depositary's agent and at the designated office of the custodian in
Dublin, Ireland.
Deposit and Withdrawal of Shares
The depositary has agreed that upon the deposit with the custodian in
Dublin, or upon delivery to the depositary at its corporate trust office for
forwarding to the custodian at the risk of the depositor, of Elan ordinary
shares or evidence of rights to receive such ordinary shares and, subject to
the terms of the deposit agreement, it will execute and deliver through its
corporate trust office to the person or persons specified by the depositor an
Elan ADR or ADRs registered in the name of such person or persons for the
number of Elan ADSs issuable in respect of such deposit.
Upon surrender of Elan ADRs at the corporate trust office of the depositary,
and upon payment of the charges provided in the deposit agreement, Elan ADR
holders are entitled to delivery at the corporate trust office of the
depositary or at the office of the custodian in Dublin of the Elan ordinary
shares and any other property at the time represented by the surrendered Elan
ADRs, except that the depositary may make delivery of such other property at
its corporate trust office. The forwarding of share certificates and other
documents of title for such delivery at the corporate trust office of the
depositary in New York City will be at the request, risk and expense of the
Elan ADR holder.
Dividends, Other Distributions and Rights
The depositary is required to distribute all cash dividends and other cash
distributions which it receives on the underlying Elan ordinary shares to the
holders of Elan ADRs in proportion to the number of Elan ADSs representing such
Elan ordinary shares held by each of them. The amount distributed will be
reduced by any amounts required to be withheld by Elan or the depositary on
account of taxes.
If a distribution by Elan consists of a stock dividend or a free
distribution of Elan ordinary shares, the depositary may, with Elan's approval,
and shall if Elan so requests, distribute to the holders of outstanding Elan
ADRs, in proportion to their holdings, additional Elan ADRs for an aggregate
number of Elan ADSs representing the number of Elan ordinary shares received as
such dividend or free distribution. If additional Elan ADRs are not so
distributed, each Elan ADS will then also represent the additional Elan
ordinary shares distributed as a stock dividend or free distribution on the
underlying ordinary shares.
If Elan offers, or causes to be offered, to the holders of Elan ordinary
shares any right to subscribe for additional Elan ordinary shares or any rights
of any other nature, the depositary will, if requested by Elan, either
. make the rights available to holders of Elan ADRs by means of warrants
or otherwise, if lawful and feasible, or
. if making the rights available is not lawful or not feasible, or if the
rights represented by such warrants or other instruments are not
exercised and appear to be about to lapse, the depositary in its
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discretion may sell the rights or the warrants or other instruments at
public or private sale, at a place or places and upon such terms as the
depositary may deem proper, and allocate the proceeds of those sales for
the accounts of the holders of Elan ADRs otherwise entitled thereto upon
an averaged or other practicable basis without regard to any
distinctions among ADR holders because of exchange restrictions, or the
date of delivery of any Elan ADR or ADRs, or otherwise.
The depositary will not make available to holders of Elan ADRs any right to
subscribe for or to purchase any securities unless a registration statement is
in effect or unless the offering and sale of the securities to ADR holders is
exempt from registration under the provisions of the Securities Act.
Should a distribution of rights not be possible, the depositary intends to
endeavor to dispose of the rights for the benefit of the holders of Elan ADRs,
as stated above. Any disposal of rights may substantially reduce the equity of
the holders of Elan ADRs.
In the event that the depositary determines that any distribution in
property, including Elan ordinary shares or rights to subscribe for Elan
ordinary shares, is subject to any tax which the depositary is obligated to
withhold, the depositary may dispose of all or a portion of such property in
amounts and in a manner as the depositary deems necessary and practicable to
pay the taxes, by public or private sale, and the depositary shall distribute
the net proceeds of the sale or the balance of any such property, after
deduction of such taxes, to the Elan ADR holders entitled thereto.
Record Dates
Whenever any cash dividend or other cash distribution becomes payable or
any distribution other than cash is made, or whenever rights are issued with
respect to the Elan ordinary shares, or whenever the depositary receives
notice of any meeting of holders of securities represented by Elan ADRs, the
depositary will fix a record date for the determination of the holders of Elan
ADRs who are entitled to receive the dividend, distribution or rights, or the
net proceeds of the sale of the dividend, or to give instructions for the
exercise of voting rights at any such meeting, subject to the provisions of
the deposit agreement.
Voting of the Underlying Elan Ordinary Shares
Upon receipt of a notice of any meeting of holders of Elan ordinary shares
or securities represented by the Elan ADRs, the depositary, as soon as
practicable, will mail the information contained in the notice of meeting to
the record holders of Elan ADRs.
The record holders of Elan ADRs at the close of business on the date
specified by the depositary are entitled under the deposit agreement, subject
to any applicable provisions of law and Elan's articles of association, to
instruct the depositary as to the exercise of the voting rights, if any,
pertaining to the Elan ordinary shares or other securities represented by the
Elan ADSs. The depositary has agreed it will endeavor, insofar as practicable,
to vote the Elan ordinary shares or other securities so represented in
accordance with such instructions. The depositary has agreed not to vote the
Elan ordinary shares or other securities so represented unless it has received
such instructions from the record holders of Elan ADRs.
Amendment and Termination of the Deposit Agreement
The Elan ADRs and the deposit agreement may at any time be amended by
agreement between Elan and the depositary. Any amendment which imposes or
increases any fees or charges, other than the fees of the depositary for the
execution and delivery or cancellation of Elan ADRs and taxes or other
governmental charges, or which otherwise prejudices any substantial existing
right of Elan ADR holders, will not take effect as to outstanding Elan ADRs
until the expiration of three months after notice of the amendment has been
given to the record holders of outstanding Elan ADRs. Every holder of an Elan
ADR at the time the amendment so becomes effective will be deemed, by
continuing to hold the Elan ADR, to consent to the amendment and to be
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bound by the deposit agreement as so amended. In no event may any amendment
impair the right of any Elan ADR holder to surrender his Elan ADR and receive
in exchange the underlying ordinary shares and any other property represented
thereby.
Whenever so directed by Elan, the depositary has agreed to terminate the
deposit agreement by mailing notice of the termination to the record holders of
all Elan ADRs then outstanding at least 30 days prior to the date fixed in the
notice of termination. The depositary may likewise terminate the deposit
agreement at any time 60 days after the depositary shall have delivered to Elan
a notice of its election to resign and a successor depositary shall not have
been appointed and accepted its appointment within that 60 days. The deposit
agreement provides that Elan will use its best efforts to appoint a successor
depositary. If any Elan ADRs remain outstanding after the day of termination,
the depositary will then discontinue the registration of transfer of Elan ADRs,
will suspend the distribution of dividends to the ADR holders and will not give
any further notices or perform any further acts under the deposit agreement,
except that the depositary shall continue to collect dividends or other
distributions pertaining to the underlying Elan ordinary shares, shall sell
rights as provided in the deposit agreement, and shall continue to deliver
securities together with any dividends or other distribution received with
respect thereto and the net proceeds of the sale of any rights or other
property, in exchange for surrendered Elan ADRs. At any time after the
expiration of two years from the date of termination, the depositary has the
right under the deposit agreement to sell the underlying Elan ordinary shares
and any other property and hold the net proceeds for the pro rata benefit of
the holders of Elan ADRs which have not been surrendered.
Charges of Depositary
The depositary charges a fee to the party to whom Elan ADRs are delivered
against deposits and the party surrendering Elan ADRs for delivery of Elan
ordinary shares or other underlying securities represented by the Elan ADRs
issued or surrendered. Elan pays all other charges of the depositary, including
charges for issuance of Elan ADRs payable as a dividend or distribution or in
connection with a rights offering to stockholders, except for taxes and other
governmental charges, any applicable transfer or registration fees on the
deposit or withdrawal of Elan ordinary shares, and certain cable, telex,
facsimile and delivery charges, any of which are payable by persons depositing
or withdrawing Elan ordinary shares, and such expenses as are incidental to the
conversion of foreign currency into dollars.
General
Elan will, through the depositary, distribute to holders of Elan ADRs annual
reports including its financial statements. Neither the depositary nor Elan
will be liable to the holders of Elan ADRs if prevented or delayed by law or
any circumstances beyond their control in performing their obligations under
the deposit agreement. The obligations of Elan and the depositary under the
deposit agreement are expressly limited to performing in good faith their
respective duties specified therein.
The Elan ADRs are transferable on the books of the depositary; provided,
however, that the depositary may close the transfer books, at any time or from
time to time, when deemed expedient by it in connection with the performance of
its duties. As a condition precedent to the execution and delivery,
registration of transfer, split-up, combination or surrender of any Elan ADR or
withdrawal of Elan ordinary shares, the depositary or the custodian may require
payment of a sum sufficient to reimburse it for any tax or other governmental
charge and any stock transfer or registration fee with respect thereto and
payment of any applicable fees payable by the holders of Elan ADRs. The
depositary may refuse to execute and deliver Elan ADRs, register the transfer
of any Elan ADR or make any distribution of, or related to, Elan ordinary
shares until it has received such proof of citizenship or residence, exchange
control approval or other information as it may deem necessary or proper. The
execution and delivery, transfers and surrenders of Elan ADRs generally may be
suspended, during any period when the transfer books of the depositary are
closed, if such suspension action is deemed necessary or advisable by the
depositary or Elan at any time or from time to time. Holders of
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Elan ADRs are entitled to withdraw their deposited Elan ordinary shares at any
time, subject only to the following:
. temporary delays caused by closing the transfer books of the depositary
or Elan, as the case may be, or the deposit of shares in connection with
voting at a stockholders' meeting, or the payment of dividends;
. the payment of fees, taxes and similar charges; and
. compliance with any United States or foreign laws or governmental
regulations relating to the Elan ADRs or the withdrawal of deposited
securities. The holders of Elan ADSs may inspect the books for the
registration and transfer of Elan ADRs at all reasonable times, provided
that such inspection shall not be for the purpose of communicating with
holders of Elan ADSs in the interest of a business or object other than
the business of Elan or a matter related to the deposit agreement or the
Elan ADSs.
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CURRENCY TRANSLATION
Elan publishes its consolidated financial statements in United States
dollars. Monetary assets and liabilities denominated in currencies other than
U.S. dollars are translated into U.S. dollars at exchange rates prevailing at
the balance sheet date. Profits and losses are dealt with in the income
statement, and where material they are separately disclosed.
LEGAL MATTERS
Certain legal matters relating to the Elan ADSs and the contingent value
rights will be passed upon by Cahill Gordon & Reindel, New York, New York, U.S.
counsel for Elan. Certain Irish legal matters, including the validity of the
ordinary shares of Elan and the contingent value rights, will be passed upon by
A&L Goodbody Solicitors, Dublin, Ireland, Irish counsel to Elan. Dewey
Ballantine LLP, counsel to Liposome, and Cahill Gordon & Reindel will deliver
opinions to their respective clients concerning certain U.S. federal income tax
consequences of the merger.
EXPERTS
The financial statements of Liposome incorporated in this prospectus-proxy
statement by reference to Liposome's Annual Report on Form 10-K for the year
ended January 2, 2000, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in auditing and accounting.
The consolidated financial statements of Elan as of and for each of the two
years in the period ended December 31, 1998, incorporated herein by reference
have been audited and reported on by KPMG, Chartered Accountants. Such
consolidated financial statements have been incorporated herein by reference in
reliance upon the report of KPMG, incorporated herein by reference, and upon
the authority of that firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Elan files annual and special reports and other information, and Liposome
files annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any reports, statements
or other information filed by Elan or Liposome at the Commission's public
reference rooms in Washington, D.C., at 450 Fifth Street, Mail Stop 1-2, N.W.,
Washington, D.C. 20549, in New York, New York at 7 World Trade Center, Suite
1300, New York, New York 10048 and in Chicago, Illinois at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Copies of such material can also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, Mail Stop 1-2 N.W.,
Washington, D.C. 20549, at prescribed rates. Filings of Elan and Liposome with
the Commission are also available to the public from commercial document
retrieval services. The website maintained by the Commission is
http://www.sec.gov.
In addition, reports and other information regarding Elan may be inspected
and copies made at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005, where the Elan ADSs are listed. Reports and other
information regarding Liposome may be inspected and copies made at the offices
of The Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006,
where shares of Liposome common stock are quoted.
Elan also furnishes to registered holders of its ordinary shares, and to the
depositary under the deposit agreement for mailing to the record holders of
Elan ADSs all notices of stockholders' meetings and other
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reports and communications that are made generally available to stockholders.
The depositary arranges for the mailing of such notices, reports and
communications to holders of record of Elan ADSs. As a foreign private issuer,
Elan is exempt from the rules under the Exchange Act prescribing the furnishing
and content of proxy statements.
Elan has filed with the Commission a registration statement on Form F-4 to
register the Elan ADSs and contingent value rights to be issued to Liposome
stockholders in the merger. This prospectus-proxy statement is a part of that
registration statement and constitutes a prospectus of Elan in addition to
being a proxy statement of Liposome for the special meeting of its
stockholders. As allowed by Commission rules, this prospectus-proxy statement
does not contain all the information you can find in the registration statement
and the exhibits to the registration statement. Statements contained in this
prospectus-proxy statement concerning any documents are not necessarily
complete, and in each instance reference is made to the copies of such
documents filed as exhibits to the registration statement. Each such statement
is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Commission allows Liposome and Elan to "incorporate by reference"
information into its prospectus-proxy statement, which means that Liposome and
Elan can disclose important information to you by referring you to another
document filed separately with the Commission. The information incorporated by
reference is deemed to be part of this prospectus-proxy statement, except for
any information superseded by information in this prospectus-proxy statement.
This prospectus-proxy statement incorporates by reference the documents set
forth below that Elan and Liposome have previously filed with the Commission.
These documents contain important information about Elan and Liposome and their
finances.
Elan Commission Filings
(File No. 1-13896) Period
- -----------------------------
Annual Report on Form 20-F
as amended by Form 20-F/A1...
Year ended December 31, 1998.
Current Reports on Form 6- January 7, 1999, January 14, 1999, February 9,
K............................ 1999, February 17, 1999 (two reports), March 5,
1999, March 10, 1999, March 26, 1999, April 6,
1999, April 16, 1999, April 21, 1999, April 28,
1999 (two reports), May 7, 1999, May 14, 1999,
May 28, 1999, June 10, 1999, June 23, 1999,
June 25, 1999, July 16, 1999, August 2, 1999
(three reports), September 3, 1999 (two
reports), September 15, 1999, October 28, 1999,
November 22, 1999, December 2, 1999 (two
reports), December 16, 1999, December 23, 1999,
January 6, 2000, February 11, 2000, March 8,
2000 (three reports), March 23, 2000 and April
12, 2000.
Description of Elan ordinary
shares and Elan ADSs
contained in Elan's Filed with the Commission on June 4, 1999, as
registration statement on amended.
Form 8-A.....................
Liposome Commission Filings
(File No. 14887) Period
- -----------------------------
Annual Report on Form 10-K... Year Ended January 2, 2000.
In addition, all filings on Form 20-F filed by Elan and pursuant to the
Exchange Act, and, to the extent so designated therein, any reports on Form 6-K
by Elan, and all filings by Liposome after the initial filing of the
Registration Statement of which this prospectus-proxy statement forms a part,
after the date of this prospectus-
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proxy statement and prior to the date of the special meeting shall be deemed
incorporated by reference in this prospectus-proxy statement and to be a part
hereof from the date any such document is filed. Any statements contained in a
document incorporated or deemed to be incorporated by reference herein (or in
any other subsequently filed document which also is incorporated by reference
herein) constitute a part hereof except as so modified or superseded. All
information appearing in this prospectus-proxy statement is qualified in its
entirety by the information and consolidated financial statements (including
notes thereto) appearing in the documents incorporated herein by reference,
except to the extent set forth in the immediately preceding sentence.
If you are a stockholder of Elan or Liposome, Elan and Liposome may have
sent you some of the documents incorporated by reference, but you can obtain
any of them through Elan, Liposome or the Commission. Documents incorporated by
reference are available from Elan or Liposome without charge, excluding all
exhibits unless such exhibits have been specifically incorporated by reference
in this prospectus-proxy statement. Stockholders may obtain documents
incorporated by reference in this prospectus-proxy statement by requesting them
in writing or by telephone from the appropriate party at the following
addresses:
Elan Documents:
Elan Corporation, plc
Attention: William F. Daniel
Lincoln House
Lincoln Place
Dublin 2, Ireland
+353-1-709-4000
Liposome Documents:
The Liposome Company, Inc.
Attention: Secretary
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08540-6619
(609) 452-7060
If you would like to request documents from Elan or Liposome, please do so
by May 5, 2000 to receive them before the special meeting.
This prospectus-proxy statement does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the solicitation of a
proxy, in any jurisdiction to or from any person to whom it is not lawful to
make any such offer or solicitation in such jurisdiction. Neither the delivery
of this prospectus-proxy statement nor any distribution of securities made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of Liposome or Elan since the date hereof or that
the information herein is correct as of any time subsequent to its date.
You should rely on the information contained or incorporated by reference in
this prospectus-proxy statement. Neither Elan nor Liposome has authorized
anyone to provide you with information that is different from what is contained
in this prospectus-proxy statement. All information contained or incorporated
by reference in this prospectus-proxy statement with respect to Liposome has
been provided by Liposome, and all information contained (or incorporated by
reference) in this prospectus-proxy statement with respect to Elan has been
provided by Elan. Neither Elan nor Liposome warrants the accuracy of
information relating to the other party. This prospectus-proxy statement is
dated April 13, 2000. You should not assume that the information contained in
this prospectus-proxy statement is accurate as of any date other than such
date, and neither the mailing of this prospectus-proxy statement nor the
issuance of Elan ADSs and contingent value rights in the merger shall create
any implication to the contrary.
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ANNEX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
ELAN CORPORATION, PLC
LITHIUM ACQUISITION CORP.
and
THE LIPOSOME COMPANY, INC.
Dated as of March 6, 2000
A-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE 1 The Merger................................................... A-4
1.1. The Merger................................................... A-4
1.2. The Closing.................................................. A-4
1.3. Effective Time............................................... A-5
1.4. The Charter and Bylaws....................................... A-5
1.5. Directors of the Surviving Corporation....................... A-5
1.6. Officers of the Surviving Corporation........................ A-5
ARTICLE 2 Conversion and Exchange of Securities........................ A-5
2.1. Merger Sub Stock............................................. A-5
2.2. Company Stock................................................ A-5
2.3. Exchange of Certificates Representing Company Common Stock... A-7
2.4. Adjustment of Exchange Ratio................................. A-9
2.5. Dissenters Rights............................................ A-9
ARTICLE 3 Representations and Warranties of the Company................ A-10
Existence; Good Standing; Corporate Authority; Compliance
3.1. with Law..................................................... A-10
3.2. Authorization, Validity and Effect of Agreements............. A-10
3.3. Capitalization............................................... A-10
3.4. Subsidiaries................................................. A-11
3.5. No Violation................................................. A-11
3.6. SEC Documents................................................ A-12
3.7. Litigation................................................... A-12
3.8. No Violation of Law.......................................... A-12
3.9. Absence of Certain Changes................................... A-13
3.10. Taxes and Tax Returns........................................ A-13
3.11. Employee Benefit Plans....................................... A-14
3.12. Intellectual Property........................................ A-15
3.13. Parent Stock Ownership....................................... A-16
3.14. Tax Reorganization........................................... A-16
3.15. State Takeover Statutes...................................... A-16
3.16. No Brokers................................................... A-16
3.17. Opinion of Financial Advisor................................. A-16
3.18. Rights Agreement............................................. A-16
3.19. Environmental Matters........................................ A-17
ARTICLE 4 Representations and Warranties of Parent and Merger Sub...... A-18
Existence; Good Standing; Corporate Authority; Compliance
4.1. with Law..................................................... A-18
4.2. Authorization, Validity and Effect of Agreements............. A-19
4.3. Capitalization............................................... A-19
4.4. Subsidiaries................................................. A-20
4.5. No Violation................................................. A-20
4.6. SEC Documents................................................ A-20
4.7. Litigation................................................... A-21
4.8. No Violation of Law.......................................... A-21
4.9. Absence of Certain Changes................................... A-21
4.10. Taxes and Tax Returns........................................ A-21
4.11. Employee Benefit Plans....................................... A-22
4.12. Intellectual Property........................................ A-23
4.13. Company Stock Ownership...................................... A-23
4.14. Tax Reorganization........................................... A-23
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C> <C>
ARTICLE 5 Covenants................................................ A-24
5.1. Alternative Proposals.................................... A-24
5.2. Interim Operations....................................... A-25
5.3. Meetings of Stockholders................................. A-28
5.4. Reasonable Efforts; Further Assurances................... A-28
5.5. Inspection of Records.................................... A-29
5.6. Publicity................................................ A-29
5.7. Registration Statement................................... A-29
5.8. Listing Application...................................... A-30
5.9. Affiliate Letters........................................ A-30
5.10. Expenses................................................. A-30
5.11. Directors' and Officers' Indemnification and Insurance... A-30
5.12. Conveyance Taxes......................................... A-31
5.13. Benefit Arrangements..................................... A-31
5.14. Takeover Statutes, Etc................................... A-32
5.15. Tax-Free Merger.......................................... A-32
5.16. CVR Agreement............................................ A-33
ARTICLE 6 Conditions............................................... A-33
Conditions to Each Party's Obligation to Effect the
6.1. Merger................................................... A-33
Conditions to Obligation of the Company to Effect the
6.2. Merger................................................... A-33
Conditions to Obligation of Parent and Merger Sub to
6.3. Effect the Merger........................................ A-34
ARTICLE 7 Termination.............................................. A-35
7.1. Termination by Mutual Consent............................ A-35
7.2. Termination by Either Parent or the Company.............. A-35
7.3. Termination by the Company............................... A-35
7.4. Termination by Parent.................................... A-36
7.5. Effect of Termination and Abandonment.................... A-36
7.6. Extension; Waiver........................................ A-37
ARTICLE 8 General Provisions....................................... A-37
Nonsurvival of Representations and Warranties; Survival
8.1. of Tax Covenants......................................... A-37
8.2. Notices.................................................. A-37
8.3. Assignment; Binding Effect............................... A-38
8.4. Entire Agreement......................................... A-38
8.5. Amendment................................................ A-38
8.6. Governing Law; Submission to Jurisdiction................ A-39
8.7. Counterparts............................................. A-39
8.8. Headings................................................. A-39
8.9. Interpretation........................................... A-39
8.10. Waivers.................................................. A-39
8.11. Incorporation of Exhibits................................ A-39
8.12. Severability............................................. A-40
8.13. Enforcement of Agreement................................. A-40
8.14. Definitions.............................................. A-40
EXHIBIT A Form of Contingent Value Rights Agreement
EXHIBIT B Company Affiliate Letter
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
</TABLE>
A-3
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 6, 2000,
among Elan Corporation, plc, a public limited company organized under the laws
of Ireland ("Parent"), Lithium Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and The Liposome Company,
Inc., a Delaware corporation (the "Company").
RECITALS
A. Parent and the Company each have determined that a business combination
between Parent and the Company is in the best interests of their respective
companies and stockholders, and accordingly have agreed to effect the merger
provided for herein upon the terms and subject to the conditions set forth
herein.
B. The respective Boards of Directors of Parent, Merger Sub and the Company,
and Parent, acting as the sole stockholder of Merger Sub, have approved the
merger of Merger Sub with and into the Company (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement.
C. It is intended that, for federal income tax purposes, the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Code
(as defined in Section 3.10) with respect to which gain recognition is not
required under Section 367(a) of the Code and that this Agreement shall be, and
hereby is, adopted as a plan of reorganization for purposes of Section 368 of
the Code.
D. Merger Sub is a wholly-owned subsidiary of Parent and has been formed
solely to facilitate the Merger and has conducted and will conduct no business
or activity other than in connection with the Merger.
E. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to the willingness of Parent and Merger Sub to enter
into this Agreement, a holder of shares of the outstanding Company Common Stock
has entered into a Stockholder Agreement, dated as of the date hereof (the
"Stockholder Agreement"), pursuant to which such holder has agreed, among other
things, to vote in favor of the Merger. The Stockholder Agreement terminates
upon the termination of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
The Merger
1.1. The Merger
Subject to the terms and conditions of this Agreement, at the Effective Time
(as defined in Section 1.3), Merger Sub shall be merged with and into the
Company in accordance with this Agreement, and the separate corporate existence
of Merger Sub shall thereupon cease and the Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and will be a wholly- owned subsidiary of Parent, provided,
however, that in the event that either tax counsel determines that it is unable
to issue its opinion as described in Section 6.2(b) or 6.3(b), as the case may
be, the parties shall restructure the transaction such that the Company shall
be merged with and into Merger Sub, with Merger Sub being the Surviving
Corporation, if that restructuring would enable such tax counsel to render its
opinion. The Merger shall have the effects specified in the Delaware General
Corporation Law ("DGCL").
1.2. The Closing
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") shall take place (a) at the offices of Dewey Ballantine
LLP, 1301 Avenue of the Americas, New York, New York as
A-4
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promptly as practicable, but no later than one business day, following the
satisfaction or waiver of the conditions set forth in Article 6 (other than
conditions which by their nature are to be satisfied at Closing, but subject to
those conditions) or (b) at such other time, date or place as Parent and the
Company may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
1.3. Effective Time
If all the conditions set forth in Article 6 shall have been fulfilled or
waived in accordance herewith and this Agreement shall not have been terminated
as provided in Article 7, the parties hereto shall cause a Certificate of
Merger meeting the requirements of Section 251 of the DGCL (the "Certificate of
Merger") to be properly executed and filed in accordance with such Section on
the Closing Date. The Merger shall become effective at the time of filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL or at such later time which the parties hereto
shall have agreed upon and designated in such filings as the effective time of
the Merger (the "Effective Time").
1.4. The Charter and Bylaws
(a) The Certificate of Incorporation of the Company as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until duly amended as provided therein or by applicable
law.
(b) The Bylaws of Merger Sub in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation, until thereafter amended as provided
therein or by applicable law.
1.5. Directors of the Surviving Corporation
The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation as of the Effective Time and until
their successors are duly appointed or elected in accordance with applicable
law.
1.6. Officers of the Surviving Corporation
The officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation as of the Effective Time and until
their successors are duly appointed or elected in accordance with applicable
law.
ARTICLE 2
Conversion and Exchange of Securities
2.1. Merger Sub Stock
At the Effective Time, each share of common stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and non-assessable share of common stock of
the Surviving Corporation.
2.2. Company Stock
(a) (x) Subject to Section 2.3(e), at the Effective Time, each outstanding
share of common stock, par value $.01 per share (the "Company Common Stock"),
of the Company shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into (1) a number of American
Depositary Shares ("Parent ADSs"), evidenced by American Depositary Receipts
("ADRs"), each Parent ADS representing one Ordinary Share ("Parent Ordinary
Shares"), par value 5 Euro cents, of Parent equal to the Exchange Ratio and (2)
one Contingent Value Right (a "CVR") to be issued pursuant to the Contingent
Value
A-5
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Rights Agreement (the "CVR Agreement") in the form of Exhibit A hereto to be
entered into between Parent and a bank or financial institution mutually
acceptable to Parent and the Company (the "CVR Agent"). The consideration
referred to in (subparagraphs (1) and (2) of this Section 2.2(a)(x) is
hereinafter referred to as the "Merger Consideration").
(y) The "Exchange Ratio" shall equal 0.3850. The Exchange Ratio shall be
rounded to the nearest 1/10,000th of an ADS. "Parent Average Price" shall be
the average of the closing prices of the Parent ADSs on the New York Stock
Exchange ("NYSE") for the 10 consecutive trading days ending on the second
trading day prior to the date of Company Stockholders Meeting (as defined
herein) (such date being the "Determination Date"), as reported by The Wall
Street Journal (or, if not reported thereby, any other authoritative source).
(z) If the Parent Average Price (as defined herein) shall be less than
$31.74 and if the Parent Price Decline (as defined herein) shall be more than
twenty percentage points greater than the Index Decline (as defined herein),
the Company may, at any time prior to the Effective Time, deliver a notice (the
"Top-Up Request") to Parent requesting that the Exchange Ratio be increased to
the Topped-Up Exchange Ratio (rounded to the nearest 1/10,000th of an ADS).
Parent may, in its sole discretion, agree to increase the Exchange Ratio to the
Topped-Up Exchange Ratio. No later than 10:00 a.m., New York City time on the
third trading day following Parent's receipt of the Top-Up Request (the "Parent
Response Time"), Parent shall deliver notice to the Company of its
determination with respect thereto. If Parent agrees to increase the Exchange
Ratio, the Exchange Ratio shall equal the Topped-Up Exchange Ratio. If the
Company does not receive such notice by the Parent Response Time, the Company
may at, at any time prior to the Effective Time, deliver a notice to Parent to
the effect that the Company is terminating this Agreement pursuant to
Section 2.2(a)(z). Notwithstanding anything herein to the contrary, unless
Parent agrees to so increase the Exchange Ratio, the Company shall not be
obligated to effect the Merger following the delivery of a Top-Up Request until
10:00 a.m. on the third trading day following the Parent Response Time.
(aa) Parent Price Decline shall mean the percentage determined by dividing
(a) $39 11/16 minus the Parent Average Price by (b) $39 11/16. Index Decline
shall mean the percentage determined by dividing (c) the closing price of the
S&P Pharmaceuticals Index (ticker symbol SPPRMC) on March 3, 2000 minus the
average closing prices for the 10 consecutive trading days ending on the
Determination Date of such Index by (d) the closing price of such Index on
March 3, 2000, each as reported by the Wall Street Journal (or, if not reported
there, any other authoritative source); provided, however, if such average is
greater than the closing price of such Index on March 3, 2000, the percentage
shall be 0%.
(bb) If there has been an Index Decline, the Topped-Up Exchange Ratio shall
be the lowest exchange ratio that would not have given the Company the right to
send a Top-Up Request; otherwise the Topped-Up Exchange Ratio shall be $12.21
divided by the Parent Average Price.
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall cease to exist, and each holder of shares of Company
Common Stock shall thereafter cease to have any rights with respect to such
shares of Company Common Stock, except the right to receive, without interest,
the consideration contemplated by Section 2.2(a) and cash in accordance with
Sections 2.3(c) and 2.3(e) upon the surrender of a certificate (a
"Certificate") representing such shares of Company Common Stock.
(c) Each share of Company Common Stock held in the Company's treasury at the
Effective Time, and each share of Company Common Stock that is owned by Parent
or any Parent Subsidiary (as defined in Section 4.1) at the Effective Time,
shall, by virtue of the Merger, cease to be outstanding and shall be canceled
and retired and shall cease to exist without payment of any consideration
therefor.
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(d) As of the Effective Time, each outstanding option to purchase capital
stock of the Company (the "Company Options"), whether or not exercisable and
whether or not vested, under any plan or arrangement of the Company providing
for the grant of options to purchase shares of Company Common Stock
(collectively, the "Company Stock Option Plans"), shall be converted into an
option to purchase Parent ADSs and CVRs. Each Company Option so converted shall
be exercisable upon the same terms and conditions as under the applicable
Company Stock Option Plan and the applicable option agreement issued thereunder
(including continuing any Company policy or procedure regarding cashless
exercises), except that (A) each such Company Option shall be exercisable for
(x) that whole number of Parent ADSs (rounded to the nearest whole share) equal
to the number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio and
(y) that number of CVR's equal to the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time, and (B)
the option price per Parent ADS and CVRs shall be an amount equal to the option
price per share of Company Common Stock subject to such Company Option in
effect immediately prior to the Effective Time divided by the Exchange Ratio
(the option price, as so determined, being rounded to the nearest whole cent).
If any cash payments are made with respect to the CVRs prior to the exercise of
a Company Option, the exercise price of the option shall be reduced by the
amount of cash which would have been payable to the option holder had such
holder exercised the option immediately prior to the record date for such
payment. Notwithstanding the foregoing, the foregoing conversions with respect
to any Company Options that are incentive stock options as defined in Section
422 of the Code shall be effected in a manner consistent with Section 424(a) of
the Code, except as otherwise elected by the option holder.
(e) Parent shall (i) on or prior to the Effective Time, reserve for issuance
the number of Parent ADSs and CVRs that will become subject to options to
purchase Parent ADSs and CVRs ("Parent Options") pursuant to Section 2.2(d),
(ii) from and after the Effective Time, upon exercise of the Parent Options in
accordance with the terms thereof, make available for issuance all Parent ADSs
and CVRs covered thereby, (iii) at the Effective Time, assume the Company Stock
Plans, with the result that all obligations of the Company under the Company
Stock Plans, including with respect to Company Options outstanding at the
Effective Time, shall be obligations of Parent following the Effective Time and
(iv) as promptly as practicable after the Effective Time, issue to each holder
of an outstanding Company Option a document evidencing the foregoing assumption
by Parent.
(f) The parties shall take all actions necessary to ensure that the Company
Options converted by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent permitted
under Section 422 of the Code and to the extent the Company Options qualified
as incentive stock options prior to the Effective Time, except as otherwise
elected by the option holder.
(g) Parent shall, on the Closing Date, file a registration statement on Form
S-8 under the Securities Act of 1933 (the "Securities Act"), covering the
Parent ADSs and CVRs issuable upon the exercise of Parent Options created upon
the assumption by Parent of Company Options under Section 2.2(d), and will
maintain the effectiveness of such registration, and the current status of the
prospectus contained therein, until the exercise or expiration of such Parent
Options.
2.3. Exchange of Certificates Representing Company Common Stock
(a) As of the Effective Time, Parent shall deposit, or shall cause to be
deposited, with a banking or other financial institution mutually acceptable to
Parent and the Company (the "Exchange Agent"), for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this Article
2, certificates representing a number of Parent Ordinary Shares and CVRs
sufficient to permit the Exchange Agent to issue the number of Parent ADSs and
CVRs to be issued in connection with the Merger and cash in an amount equal to
Parent's good faith estimate of the cash required to be paid to holders of
shares of Company Common Stock in lieu of fractional shares expected to be
payable in connection with the Merger (such cash and certificates for Parent
ADSs and CVRs, together with any dividends or distributions with respect
thereto (relating to record
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dates for such dividends or distributions after the Effective Time), being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 2.2 and paid pursuant to this Section 2.3 in exchange for outstanding
shares of Company Common Stock.
(b) Promptly after the Effective Time, Parent shall cause the Exchange Agent
to mail to each holder of record of shares of Company Common Stock (i) a letter
of transmittal specifying that delivery shall be effected, and risk of loss and
title to such shares of Company Common Stock shall pass, only upon delivery of
the Certificates representing such shares to the Exchange Agent and which
letter shall be in such form and have such other provisions as Parent may
reasonably specify and (ii) instructions for use in effecting the surrender of
Certificates in exchange for the consideration contemplated by Section 2.2 and
this Section 2.3, including cash in lieu of fractional shares. Upon surrender
of a Certificate for cancellation to the Exchange Agent together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of the shares represented by such Certificate
shall be entitled to receive in exchange therefor (x) a certificate
representing that number of whole Parent ADSs, (y) a CVR certificate issued
pursuant to the CVR Agreement evidencing CVRs (a "CVR Certificate") and (z) a
check representing the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, that such holder has the right to
receive in respect of the Certificate surrendered pursuant to the provisions of
this Article 2, after giving effect to any required withholding tax, and the
shares represented by the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the cash payable to holders of
shares of Company Common Stock. In the event of a transfer of ownership of
Company Common Stock that is not registered in the transfer records of the
Company, a certificate representing the proper number of Parent ADSs, CVR
Certificates, together with a check for the cash to be paid pursuant to Section
2.3(b)(y) may be issued to such a transferee if the Certificate representing
such Company Common Stock is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the Effective Time on Parent ADSs and CVRs
shall be paid with respect to any shares of Company Common Stock represented by
a Certificate until such Certificate is surrendered for exchange as provided
herein. Following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole Parent ADSs and CVRs issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole Parent ADSs and
CVRs and not paid, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole Parent ADSs and CVRs, less the amount of any withholding
taxes which may be required thereon.
(d) At or after the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for certificates for Parent ADSs and CVRs and cash
deliverable in respect thereof pursuant to this Agreement in accordance with
the procedures set forth in this Article 2. Certificates surrendered for
exchange by any Affiliate (as defined in Section 5.9 hereof), shall not be
exchanged until Parent has received a written agreement from such person as
provided in Section 5.9.
(e) No fractional Parent ADSs shall be issued pursuant hereto. In lieu of
the issuance of any fractional Parent ADS, cash adjustments will be paid to
holders in respect of any fractional Parent ADS that would otherwise be
issuable, and the amount of such cash adjustment shall be equal to the product
obtained by multiplying such stockholder's fractional Parent ADS that would
otherwise be issuable by the closing price per Parent ADS on the Closing Date
as reported by The Wall Street Journal (or, if not reported thereby, any other
authoritative source).
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(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any Parent ADSs and CVRs) that remains unclaimed by the
former stockholders of the Company one year after the Effective Time shall be
delivered to Parent. Any former stockholders of the Company who have not
theretofore complied with this Article 2 shall thereafter look only to Parent,
and Parent shall comply with such requests, made in accordance with the terms
of this Agreement, for payment of their Parent ADSs and CVRs, cash and unpaid
dividends and distributions on Parent ADSs and CVRs deliverable in respect of
each share of Company Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
(g) None of Parent, the Company, the Surviving Corporation, the Exchange
Agent or any other person shall be liable (except to the extent provided by
applicable law) to any former holder of shares of Company Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and the posting by such person of a
bond in such amount as the Surviving Corporation may reasonably request as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Parent ADSs and CVRs and cash deliverable in respect
thereof pursuant to this Agreement.
2.4. Adjustment of Exchange Ratio
In the event that, subsequent to the date of this Agreement but prior to the
Effective Time, the outstanding Parent ADSs or Company Common Stock,
respectively, shall have been changed into a different number of shares or a
different class as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, combination, exchange,
recapitalization or other similar transaction (or a record date shall have been
set for such purpose), amounts payable hereunder shall be appropriately
adjusted.
2.5. Dissenters Rights
Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger or consented thereto
in writing and who has delivered a written demand for appraisal of such shares
in accordance with Section 262 of the DGCL, if such Section 262 provides for
appraisal rights for such shares in the Merger ("Dissenting Shares"), shall not
be converted into the right to receive the Merger Consideration, as provided in
Section 2.1(b) hereof, unless and until such holder fails to perfect or
effectively withdraws or otherwise loses his right to appraisal and payment
under Section 262 of the DGCL. If, after the Effective Time, any such holder
fails to perfect or effectively withdraws or loses his right to appraisal, such
Dissenting Shares shall thereupon be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration to
which such holder is entitled, without interest or dividends thereon.
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ARTICLE 3
Representations and Warranties of the Company
Except as set forth in the corresponding section or subsection of the
disclosure schedule delivered at or prior to the execution hereof to Parent
(the "Company Disclosure Schedule") or in the Company Reports (as defined in
Section 3.6) filed on or prior to the date hereof, the Company represents and
warrants to Parent as of the date of this Agreement as follows (it being
understood that disclosure of an item is not to be construed as an admission of
any fact):
3.1. Existence; Good Standing; Corporate Authority; Compliance with Law
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware. The Company is duly licensed or qualified
to do business as a foreign corporation and is in good standing under the laws
of any other state of the United States in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary, except where the failure to be so qualified
or to be in good standing, individually and in the aggregate, is not reasonably
likely to result in a Company Material Adverse Effect (as defined in Section
8.14 hereof). The Company has all requisite corporate power and authority to
own, operate and lease its properties and carry on its business as now
conducted or as reasonably contemplated in the future. The Company has no
Subsidiaries (as defined in Section 8.14) other than those Subsidiaries set
forth in Section 3.1 of the Company Disclosure Schedule (the "Company
Subsidiaries"). Each of the Company Subsidiaries is a corporation duly
organized, validly existing and in good standing, under the laws of the
jurisdictions in which such companies are incorporated. Neither the Company nor
any of the Company Subsidiaries is in violation of any order of any court,
governmental authority or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation to which the Company or any of the Company
Subsidiaries or any of their respective properties or assets is subject, other
than any violations that are not reasonably likely to result in a Company
Material Adverse Effect. The Company and each of the Company Subsidiaries have
obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or governmental regulations in connection
with their business as now conducted, except where the failure to obtain any
such item or to take any such action, individually and in the aggregate, is not
reasonably likely to result in a Company Material Adverse Effect.
3.2. Authorization, Validity and Effect of Agreements
The Company has the requisite corporate power and authority to execute and
deliver this Agreement and all other agreements and documents contemplated
hereby and to perform its obligations hereunder. Subject only to the approval
of this Agreement and the Merger by the holders of a majority of the
outstanding shares of Company Common Stock, the consummation by the Company of
the transactions contemplated hereby has been unanimously approved by the Board
of Directors of the Company (the "Company Board") and duly authorized by all
requisite corporate action. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
3.3. Capitalization
The authorized capital stock of the Company consists of 120,000,000 shares
of Company Common Stock and 2,400,000 shares of preferred stock of the Company
(the "Company Preferred Stock"). As of March 2, 2000, there were 39,478,293
shares of Company Common Stock and no shares of Company Preferred Stock issued
and outstanding. Since such date, no shares of capital stock of Company have
been issued, except shares of Company Common Stock issued pursuant to the
exercise of options outstanding under the Company Stock Option Plans. The
Company is party to a Shareholder Rights Agreement, dated as of July 11, 1996
(the "Company Rights Agreement"), with American Stock Transfer, as Rights
Agent. As of March 2, 2000, options to acquire 4,836,411 shares of Company
Common Stock were outstanding pursuant to the terms of the Company Stock Option
Plans and 100,000 shares of Series B Participating Preferred Stock were
reserved for
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issuance in connection with the Rights issued pursuant to the Company Rights
Agreement. The Company has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) on any
matter with respect to such securities. All issued and outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, and were issued in compliance with
all applicable federal and state securities laws, rules and regulations. Other
than as set forth above, there are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments that obligate the Company or any of the
Company Subsidiaries to issue, transfer or sell any shares of capital stock of
the Company or any of the Company Subsidiaries.
3.4. Subsidiaries
The Company owns directly or indirectly each of the outstanding shares of
capital stock of each of the Company Subsidiaries. Each of the outstanding
shares of capital stock of each of the Company Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances.
3.5. No Violation
Neither the execution and delivery by the Company of this Agreement nor the
consummation by the Company of the transactions contemplated hereby in
accordance with the terms hereof, will: (i) conflict with or result in a breach
of any provisions of the Certificate of Incorporation or the Bylaws of the
Company; (ii) result in a breach or violation of, or a default under, any
existing Company Employee Plans, or any grant or award made under any of the
foregoing or violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of the Company or any of the Company Subsidiaries
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument, binding commitment or obligation to which the
Company or any of the Company Subsidiaries is a party, or by which the Company
or any of the Company Subsidiaries or any of their respective properties is
bound or affected, except for any of the foregoing matters in this clause (ii),
individually and in the aggregate, which are not reasonably likely to (a)
result in a Company Material Adverse Effect or (b) impair in any material
respect the ability of the Company to perform its obligations under this
Agreement, or (c) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement; or (iii) other than (a) filings by
the Company required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act"), (b) the filing with the Securities and Exchange
Commission (the "SEC") of a proxy statement relating to the approval by the
Company's stockholders of this Agreement and such reports under the Securities
Exchange Act of 1934 (the "Exchange Act"), as may be required in connection
with this Agreement and the transactions contemplated by this Agreement, (c)
any filings with and written authorization of the transaction by the New Jersey
Department of Environmental Protection that may be required pursuant to the New
Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. or under Indiana
law, as described in Section 6.3(d) hereof, (d) the filing of the Certificate
of Merger with the Delaware Secretary of State, (e) the filings and
notifications required by the rules of the Nasdaq National Market, (f) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the corporation, takeover or blue sky laws of
various states, and (g) such authorizations, orders, consents, licenses,
confirmations, clearances, permissions and approvals as may be required in any
foreign jurisdiction for the purposes of applicable anti-trust, competition,
takeover or similar legislation require, by or with respect to the Company or
any of the Company Subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
Merger, any consent, approval or authorization of, or declaration, filing or
registration with, any domestic or foreign governmental or regulatory authority
("Governmental Entity"), other than consents, approvals,
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authorizations, declarations or filings or registration which, if not obtained
or made, individually and in the aggregate, are not reasonably likely to result
in a Company Material Adverse Effect.
3.6. SEC Documents
(a) As of their respective dates, or, if amended, as of the date of the last
such amendment, each registration statement, report, proxy statement or
information statement (as defined in Regulation 14C under the Exchange Act) of
the Company prepared by the Company since January 1, 1998, in the form
(including exhibits and any amendments thereto) filed with the SEC,
(collectively, the "Company Reports") (i) complied as to form in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act, and the rules and regulations thereunder applicable to such Company
Reports and (ii) at the time they were filed did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into the
Company Reports (including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of the Company and
each of the Company Subsidiaries as of its date, and each of the consolidated
statements of operations, stockholders' equity and cash flows included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presents in all material respects the financial position,
results of operations and cash flows, as the case may be, of the Company and
each of the Company Subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments which
are not reasonably likely to be material in amount or effect, and the absence
of footnotes), in each case in accordance with U.S. generally accepted
accounted principles ("GAAP") consistently applied during the periods involved,
except as may be noted therein.
(b) Except as and to the extent set forth on the balance sheet of the
Company as of September 30, 1999, including the notes thereto (the "Company
Balance Sheet"), the Company has no material liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) except for
liabilities and obligations (i) disclosed in any Company Report and Mailings
(as defined hereafter) filed since September 30, 1999 and prior to the date of
this Agreement, (ii) incurred since September 30, 1999 in the ordinary course
of business, (iii) incurred pursuant to this Agreement or (iv) liabilities or
obligations which individually and in the aggregate, would not have a Company
Material Adverse Effect.
(c) The Company will deliver to Parent as soon as they become available true
and complete copies of any report, registration statement or statement mailed
by it to its securityholders generally (the "Mailings") subsequent to the date
hereof and prior to the Effective Time. As of their respective dates, such
Mailings (excluding any information therein provided by Parent or Merger Sub,
as to which the Company makes no representation) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply in all
material respects with all applicable requirements of law.
3.7. Litigation
There are no actions, suits or proceedings pending against the Company or
any of the Company Subsidiaries or, to the knowledge of the Company, threatened
against the Company or any of the Company Subsidiaries that, individually and
in the aggregate, are reasonably likely to have a Company Material Adverse
Effect.
3.8. No Violation of Law
(a) The Company and each of the Company Subsidiaries is not in violation of
any statute, law, ordinance, regulation, rule or order of any foreign, federal,
state or local government or any other governmental department or agency, or
any judgment, decree or order of any court, applicable to its business or
operations, except where any such violations or failures to comply would not,
individually and in the aggregate, have a
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Company Material Adverse Effect. The Company and each of the Company
Subsidiaries has all permits, licenses and franchises from governmental
agencies required to conduct its business as now being conducted, except for
such permits, licenses and franchises the absence of which would not,
individually and in the aggregate, have a Company Material Adverse Effect.
(b) To the best of the Company's knowledge, as to each product subject to
FDA's jurisdiction under the Federal Food, Drug and Cosmetic Act ("FDCA") and
the jurisdiction of the Drug Enforcement Agency under the Comprehensive Drug
Abuse Prevention and Control Act of 1970 ("CSA") which is manufactured, tested,
distributed, held, and/or marketed by the Company, such product is being
manufactured, held and distributed in substantial compliance with all
applicable requirements under the FDCA and the CSA including, but not limited
to, those relating to investigational use, premarket clearance, good
manufacturing practices, labeling, advertising, record keeping, filing of
reports, and security.
(c) The Company will promptly provide Parent with copies of any document
that is issued, prepared, or otherwise becomes available from the date of this
Agreement until the Effective Time which bears on the regulatory status under
the FDCA or the CSA of the Company and each of the Company Subsidiaries, or any
product of the Company and each of the Company Subsidiaries, including, but not
limited to, any deficiency letter, warning letter, non-approvable letter/order,
and withdrawal letter/order, except for documents reflecting such matters
which, individually and in the aggregate, would not have a Material Adverse
Effect.
3.9. Absence of Certain Changes
Since September 30, 1999, other than as set forth in the Company Reports,
the Company has conducted its business only in the ordinary course of such
business, and there has not been (i) any Company Material Adverse Effect or any
event which is reasonably likely to result in a Company Material Adverse
Effect; or (ii) any material change in its accounting principles, practices or
methods, except as required under GAAP or applicable law.
3.10. Taxes and Tax Returns
(a) As used in this Agreement:
"Code" means the Internal Revenue Code of 1986, as amended. All
citations to provisions of the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments thereto and any
substitute or successor provisions thereto.
"Taxes" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, including, without limitation,
taxes based upon or measured by gross receipts, income, profits, sales, use
and occupation, and value added, ad valorem, transfer, gains, franchise,
withholding, payroll, employment, excise, unemployment, premium, social
security, occupation, stamp, and property taxes, together with all
interest, penalties and additions to tax imposed with respect to such
amounts.
"Tax Return" means any report, return, declaration or other form or
document filed or required to be filed with a taxing authority in
connection with any Taxes.
(b) All material Tax Returns required to be filed by or with respect to the
Company and each of the Company Subsidiaries have been timely filed and all
such Tax Returns are true, correct and complete in all material respects. The
Company and each of the Company Subsidiaries have (i) timely paid or caused to
be timely paid, or made adequate provisions in accordance with GAAP, all Taxes
due, whether or not shown (or required to be shown) on a Tax Return (other than
Taxes that are being contested in good faith and for which adequate reserves
have been made) and (ii) provided a sufficient reserve (without regard to
deferred Tax assets and liabilities) for the payment of all Taxes not yet due
and payable on the financial statements included in the Company Reports.
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(c) The Company and each of the Company Subsidiaries have complied in all
material respects with the provisions of the Code relating to the withholding
and payment of Taxes, including, without limitation, the withholding and
reporting requirements under Code sections 1441 through 1464, 3401 through
3406, and 6041 through 6049, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental authorities all
amounts required to be withheld and paid over except where the failure to
withhold and pay over, individually and in the aggregate, are not reasonably
likely to have a Material Adverse Effect.
(d) To the Company's knowledge, none of the Tax Returns of the Company or
any of the Company Subsidiaries is currently being examined by the Internal
Revenue Service ("IRS") or relevant state, local or foreign taxing authorities
and there are no administrative or court proceedings relating to any Taxes in
progress or, to the Company's knowledge, pending.
(e) Except for liens for Taxes that are not yet due and payable, there are
no liens for any Tax upon any asset of the Company or any of the Company
Subsidiaries.
(f) Neither the Company nor any of the Company Subsidiaries is, or has been,
a party to any agreement (other than this Agreement) relating to allocating or
sharing the payment of, or liability for, Taxes.
(g) Neither the Company nor any of the Company Subsidiaries is a party to
any contract, agreement, plan or arrangement that, individually or in the
aggregate, or when taken together with any payment that may be made under this
Agreement or any agreements contemplated hereby, would give rise to the payment
of any "excess parachute payment" within the meaning of Section 280G of the
Code.
(h) True and complete copies of all federal, state, local and foreign Tax
Returns of the Company and each of the Company Subsidiaries have been made
available to Parent prior to the date hereof to the extent reasonably requested
by Parent.
(i) No extension of time with respect to any date on which a Tax Return was
or is to be filed by the Company or any of the Company Subsidiaries is in
force, and no waiver or agreement by the Company or any of the Company
Subsidiaries is in force for the extension of time for the assessment or
payment of any Taxes.
(j) Neither the Company nor any of the Company Subsidiaries has been a
member of an (i) affiliated group (within the meaning of Section 1504 of the
Code) or (ii) affiliated, combined, consolidated, unitary, or similar group for
state, local or foreign Tax purposes, other than the group of which the Company
is the common parent.
3.11. Employee Benefit Plans
(a) Schedule 3.11 of the Company Disclosure Schedule contains a list of each
material plan, program, arrangement and contract which is maintained by the
Company or any Company Subsidiaries or under which the Company or any of the
Company Subsidiaries is obligated to make contributions and which provides
benefits or compensation to or on behalf of employees or former employees,
including but not limited to executive arrangements and "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). All such material plans, programs,
arrangements, practices or contracts are referred to herein as "Company
Employee Plans." The Company has made available to Parent the plan documents or
other writing constituting each Company Employee Plan that has been reduced to
writing and, if applicable, the trust, insurance contract or other funding
arrangement, the ERISA summary plan description and the most recent Forms 5500
and actuarial report for each such Plan. The Company has made available to
Parent accurate copies of the most recent favorable determination letters for
all Company Employee Plans qualified under Section 401(a) of the Code.
(b) With respect to each Company Employee Plan that is subject to Title IV
or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the
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meaning of Section 412 of the Code or Section 302 of ERISA, whether or not
waived; (ii) no reportable events within the meaning of Section 4043(c) of
ERISA with respect to which the 30-day notice period have not been waived have
occurred which, individually and in the aggregate, are reasonably likely to
result in a Company Material Adverse Effect, (iii) all premiums required to be
paid to the Pension Benefit Guaranty Corporation have been timely paid in full;
and (iv) all contributions to the Company Employee Plans required to be made by
the Company or any Company Subsidiary have been timely made in all material
respects. There does not now exist, nor do any circumstances exist as are
reasonably likely to result in, any Company Controlled Group Liability (as
defined below) that is reasonably likely to be a liability of the Company or
any Company Subsidiary following the Effective Time. "Company Controlled Group
Liability" means any and all liabilities under (i) Title IV of ERISA, (ii)
Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code and (iv) the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code, other than, in each case, such liabilities that arise solely
out of, or relate solely to, the Company Employee Plans. There are no
investigations by any governmental agency (including the Pension Benefit
Guaranty Corporation), termination proceedings or other claims (except claims
for benefits payable in the normal operation of the Company Employee Plans),
suits or proceedings against or involving any Company Employee Plans or
asserting any rights to or claims for benefits under any Company Employee Plan
that are reasonably likely to have a Company Material Adverse Effect.
(c) Neither the Company nor any Company Subsidiary is, or has been, a
participant in a multiemployer plan (within the meaning of ERISA Section
3(37)). Neither the Company nor any of the Company Subsidiaries is obligated to
provide post-employment or retirement medical benefits or any other unfunded
welfare benefits to or on behalf of any Person who is no longer an employee of
Company or any of the Company Subsidiaries, except for health continuation
coverage as required by Section 4980B of the Code or Part 6 of Title I of
ERISA.
(d) Each Company Employee Plan has at all times been maintained, by its
terms and in operation, in accordance with all applicable laws, and each of
those Company Employee Plans which are intended to be qualified under Section
401(a) of the Code has at all times been maintained, by its terms and in
operation, in accordance with Section 401(a) of the Code, in each case except
where a failure to be so maintained, individually and in the aggregate, are not
reasonably likely to have a Company Material Adverse Effect.
(e) No prohibited transaction has occurred with respect to any Company
Employee Plan maintained by the Company or any of the Company Subsidiaries that
would result, directly or indirectly, in the imposition of an excise tax or
other liability under the Code or ERISA, except for such a tax or other
liability that, individually and in the aggregate, are not reasonably likely to
have a Company Material Adverse Effect.
(f) No employee of the Company or any of the Company Subsidiaries will be
entitled to any additional payment or benefits or acceleration of the time of
payment or vesting of any benefit under any Company Employee Plan or other
agreement or arrangement as a result of the transactions contemplated by this
Agreement.
3.12. Intellectual Property
Each of the Company and its Subsidiaries owns, or is validly licensed or
otherwise has the right to use all patents, patent applications, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, copyrights and other proprietary intellectual property rights and
computer programs (collectively, "Intellectual Property Rights") which if the
Company or its Subsidiaries did not own or validly license or otherwise have
the right to use would, individually and in the aggregate, have a Material
Adverse Effect on the Company. Section 3.12 of the Company Disclosure Schedule
sets forth, as of the date hereof, a list of all material granted patents,
pending patent applications, trademarks and applications therefor owned by or
licensed to the Company or any of its Subsidiaries. No claims are pending or,
to the knowledge of the Company, threatened that the Company or any of its
Subsidiaries is infringing the rights of any Person with regard to any
Intellectual Property Right which, individually and in the aggregate, have or
would have a
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Material Adverse Effect on the Company. To the knowledge of the Company, no
person is infringing the rights of the Company or any of its Subsidiaries with
respect to any Intellectual Property Right which would have a Material Adverse
Effect on the Company. As of the date hereof, the Company has no knowledge that
the business of the Company and its Subsidiaries as presently conducted or as
presently contemplated does or will infringe (i) any granted patent or existing
trademark or (ii) any patent granted from a pending patent application. No
claims are pending or, to the knowledge of the Company, are threatened
challenging the ownership of or license to the Intellectual Property Rights
owned by or licensed to the Company and its Subsidiaries which would,
individually and in the aggregate, have a Material Adverse Effect on the
Company.
3.13. Parent Stock Ownership
Neither the Company nor any of the Company Subsidiaries beneficially owns
any Parent ADSs or other securities convertible into or exercisable for Parent
ADSs.
3.14. Tax Reorganization
Neither the Company nor any of the Company Subsidiaries has taken or agreed
to take any action or knows of any fact or circumstance that is reasonably
likely to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code with respect to which gain recognition is
not required under Section 367(a) of the Code.
3.15. State Takeover Statutes
The Company Board has approved this Agreement, the Stockholder Agreement and
the Merger, and such approval is sufficient to render inapplicable to this
Agreement, the Stockholder Agreement and the Merger, the provisions of Section
203 of the DGCL to the extent, if any, such Section is applicable to this
Agreement, the Stockholder Agreement and the Merger. To the Company's
knowledge, no other state antitakeover statute or similar statute or regulation
is applicable to the Merger or the other transactions contemplated hereby.
3.16. No Brokers
The Company has not entered into any contract, arrangement or understanding
with any person or firm which may result in the obligation of the Company or
Parent to pay any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, except that the Company
has retained Warburg Dillon Read LLC ("WDR") as its financial advisors. A copy
of WDR's engagement letter has been previously delivered to Parent.
3.17. Opinion of Financial Advisor
The Board of Directors of the Company has received the opinion of WDR to the
effect that, as of the date hereof, the consideration to be received in the
Merger is fair to the holders of Company Common Stock from a financial point of
view.
3.18. Rights Agreement
The Company has taken all actions necessary to irrevocably (i) render the
Company Rights Agreement inapplicable to this Agreement, the Stockholder
Agreement, the Merger and the other transactions contemplated hereby and
thereby and (ii) ensure that the Rights will not become separable,
distributable, unredeemable or exercisable as a result of the approval,
execution and delivery of this Agreement and the Stockholder Agreement or the
consummation of the Merger and the other transactions contemplated hereby and
thereby. A correct and complete copy of the Company Rights Agreement, as
amended to date, has been furnished to Parent.
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3.19. Environmental Matters
(a) The Company and its Subsidiaries possess all Environmental Permits under
applicable Environmental Laws to conduct its current business, and is in
compliance with the terms and conditions of such Environmental Permits, except
where such failures to possess or comply, individually and in the aggregate,
would not have a Company Material Adverse Effect, nor has the Company reason to
believe that any Environmental Permits possessed by the Company and its
Subsidiaries will be revoked, suspended, or will not be renewed.
(b) To the best of the Company's knowledge, the execution and delivery of
this Agreement and the consummation by the Company of the Merger and other
transactions contemplated hereby and the exercise by the Parent and the Merger
Sub or rights to own and operate the businesses of the Company substantially as
presently conducted will not affect the validity of any Environmental Permits
held by the Company and its Subsidiaries.
(c) The Company and its Subsidiaries are in compliance, and within the
period of all applicable statutes of limitation, has complied, with all
applicable Environmental Laws including, without limitation, the transport,
storage, treatment and disposal of Hazardous Materials, except where the
failure to comply, individually and in the aggregate, would not have a Company
Material Adverse Effect; and has not received notice of any liability under any
Environmental Law.
(d) (i) There is no civil, criminal, or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, notice or demand letter, or
request for information pending or, to the knowledge of the Company threatened,
under any Environmental Law against the Company or any of its Subsidiaries, and
(ii) to the knowledge of the Company, there is no civil, criminal or
administrative action, suit, demand , claim, hearing, notice of violation,
investigation, notice or demand letter, or request for information pending or
threatened against any person or entity, including but not limited to any
Contractor (as hereinafter defined), in connection with which liability could
reasonably be imputed or attributed by law or contract to the Company or any of
its Subsidiaries.
(e) To the best of the Company's knowledge, no property or facility
presently or formerly owned, operated, or leased by the Company or any of its
Subsidiaries, or by any of their respective predecessors in interest, is listed
or proposed for listing on the National Priorities List or the Comprehensive
Environmental Response, Compensation and Liability Information System, both
promulgated under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), or on any comparable list
established under any Environmental Law, nor has the Company nor any of its
Subsidiaries received any notification of potential or actual liability or any
request for information under CERCLA or any comparable Environmental Law.
(f) To the best of the Company's knowledge, (i) there has been no disposal,
spill, discharge, or release of any Hazardous Material by the Company or any of
its Subsidiaries or of their respective predecessors in interest, on, at, or
under any property presently or formerly owned, leased, or operated by the
Company or any of its Subsidiaries, any of their predecessors in interest, or
by any Contractor, and (ii) there are no Hazardous Materials located in, at,
on, or under any such facility or property, or at any other location, in each
case that could reasonably be expected to result in liability under or costs
pursuant to any Environmental Laws to the Company or any of its Subsidiaries in
excess of $100,000, either individually or in the aggregate.
(g) To the best of the Company's knowledge, there has not been any
underground storage tank or other underground storage receptacle or related
piping, or any surface impoundment or other disposal area containing Hazardous
Materials located on any facility or property owned, leased or operated by the
Company or any of its Subsidiaries, or any of their respective predecessors in
interest, during the period of such ownership, lease or operation.
(h) To the best of the Company's knowledge, no lien has been recorded
against any properties, assets or facilities owned, leased or operated by the
Company or any of its Subsidiaries under any Environmental Law.
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(i) To the best of the Company's knowledge, the Company has made available
to Parent, Merger Sub and their authorized representatives all records and
files, including, but not limited to, all assessments, reports, studies,
audits, analyses, tests and data in possession of the Company or any of its
Subsidiaries concerning the existence of Hazardous Materials at facilities or
properties currently or formerly owned, operated, or leased by the Company, any
of its Subsidiaries or any former subsidiary or any of their respective
predecessors in interest, or concerning compliance by the Company or any of its
Subsidiaries with, or liability under, any Environmental Law.
(j) For purposes of this Agreement:
(i) "Contractor" shall mean any person or entity, including but not
limited to partners, licensors, and licensees, with which the Company
formerly or presently has any agreement or arrangement under which such
person or entity has or had physical possession of, and was or is obligated
to develop, test, process, manufacture, produce or package any component
ingredients owned by the Company.
(ii) "Environmental Law" shall mean CERCLA, the Resource Conservation
and Recovery Act of 1976, as amended, and any other applicable federal,
state, local, or foreign statute, rule, regulation, order, judgment,
directive, decree or common law as now or previously in effect relating to,
pollution or the protection of the outdoor or indoor environment, including
without limitation ambient air, groundwater, surface water, subsurface
strata, land and natural resources such as wetlands, flora and fauna,
employee health or safety, the experimental use of animals, or the disposal
of animal carcasses, including without limitation those relating to the
release or threatened release or discharge of any Hazardous Material into
the environment, the generation, handling, treatment, storage, transport or
disposal of any Hazardous Material.
(iii) "Environmental Permit" shall mean any permit, license, approval,
consent, or other authorization by a federal, state, local, or foreign
government or regulatory entity issued pursuant to any Environmental Law.
(iv) "Hazardous Material" shall mean any pollutant, contaminant, or
hazardous, toxic, medical, biohazardous, infectious or dangerous waste, or
any other chemical, substance, constituent or material, including, without
limitation, any asbestos, any petroleum, oil (including crude oil or any
fraction thereof), any radioactive substance, any animal carcass, any
toxin, chemical, virus, infectious disease or disease-causing agent, that
is subject to regulation or can give rise to liability under any
Environmental Law.
ARTICLE 4
Representations and Warranties of Parent and Merger Sub
Except as set forth in the corresponding section or subsection of the
disclosure schedule delivered at or prior to the execution hereof to the
Company (the "Parent Disclosure Schedule") or in the Parent Reports (as defined
in Section 4.6) filed on or prior to the date hereof, Parent and Merger Sub
represent and warrant to the Company as of the date of this Agreement as
follows (it being understood that disclosure of an item is not to be construed
as an admission of any fact):
4.1. Existence; Good Standing; Corporate Authority; Compliance with Law
Each of Parent and Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Parent is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing,
individually and in the aggregate, is not reasonably likely to result in a
Parent Material Adverse Effect (as defined in Section 8.14 hereof). Parent has
all requisite corporate power and authority to own, operate and lease its
properties and carry
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on its business as now conducted or as reasonably contemplated in the future.
Each of the Subsidiaries of Parent (the "Parent Subsidiaries") is a corporation
duly organized, validly existing and in good standing, under the laws of the
respective jurisdictions in which they are incorporated. None of Parent, any of
the Parent Subsidiaries or Merger Sub is in violation of any order of any
court, governmental authority or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which Parent, the Parent
Subsidiaries or Merger Sub or any of their respective properties or assets is
subject, other than any violations which are not reasonably likely to result in
a Parent Material Adverse Effect. Parent, any of the Parent Subsidiaries and
Merger Sub have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental regulations
in connection with their business as now conducted, except where the failure to
obtain any such item or to take any such action, individually and in the
aggregate, is not reasonably likely to result in a Parent Material Adverse
Effect.
4.2. Authorization, Validity and Effect of Agreements
Each of Parent and Merger Sub, respectively, has the requisite corporate
power and authority to execute and deliver this Agreement and all other
agreements and documents contemplated hereby (including the CVR Agreement), and
perform its obligations hereunder and thereunder. The consummation by Parent
and Merger Sub, as applicable, of the transactions contemplated hereby have
been unanimously approved by the Board of Directors of Parent and Merger Sub,
as applicable, and duly authorized by all requisite corporate action. This
Agreement constitutes, and the CVR Agreement when executed will constitute, the
valid and legally binding obligation of Parent and Merger Sub, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
4.3. Capitalization
The authorized capital stock of Parent consists of 600,000,000 Parent
Ordinary Shares, 1,000 executive shares, par value Euro 1.25 each ("Parent
Executive Shares"), and 25,000 'B' executive shares, par value 5 Euro cents
each ("Parent 'B' Executive Shares"). As of December 31, 1999, there were
269,128,803 Parent Ordinary Shares issued and outstanding, no Parent Ordinary
Shares held in Parent's treasury, 1,000 Parent Executive Shares outstanding and
21,375 Parent 'B' Executive Shares outstanding. As of such date there were (i)
35,112,331 Parent Ordinary Shares reserved for issuance upon the exercise of
outstanding options ("Outstanding Options"), (ii) 14,753,520 Parent Ordinary
Shares reserved for issuance upon the exercise of outstanding warrants (the
"Warrants"), (iii) 4,574,635 Parent Ordinary Shares reserved for issuance upon
the exchange of the Exchangeable Notes due 2005 issued by Athena Neurosciences,
Inc., a wholly-owned subsidiary of Parent ("Athena Notes"), guaranteed by
Parent, and (iv) 22,598,758 Parent Ordinary Shares reserved for issuance upon
the exchange of the Liquid Yield Option Notes Due 2018 issued by Elan Finance
Corporation Ltd., a wholly-owned subsidiary of Parent ("LYONS"), guaranteed by
Parent. Except for the Outstanding Options, the Warrants, the Athena Notes and
the LYONS, there were not as of December 31, 1999 any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating Parent to issue, transfer or sell any share of its
capital stock or any other securities convertible into or evidencing the right
to subscribe for any such shares. All issued and outstanding Parent Ordinary
Shares are duly authorized, validly issued and fully paid, and nonassessable.
The issuance of the Parent ADSs, each representing one Parent Ordinary Share,
pursuant to the Merger will be duly authorized, validly issued, fully paid and
nonassessable, and free of preemptive rights. The issuance of CVRs pursuant to
the Merger has been duly authorized and the CVRs will be valid and binding
obligations of Parent, enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
All of the issued and outstanding shares of capital stock of Merger Sub are
owned by Parent. Merger Sub has not engaged in any activities other than in
connection with its formation and the transactions contemplated by this
Agreement.
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4.4. Subsidiaries
Parent owns directly or indirectly each of the outstanding shares of each of
the Parent Subsidiaries. Each of the outstanding shares of capital stock of
each of the Parent Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable, and is owned, directly or indirectly, by Parent free and
clear of all liens, pledges, security interests, claims or other encumbrances.
4.5. No Violation
Neither the execution and delivery by Parent and Merger Sub of this
Agreement or the CVR Agreement nor the consummation by Parent and Merger Sub of
the transactions contemplated hereby and thereby in accordance with the terms
hereof or thereof, will: (i) conflict with or result in a breach of any
provisions of the respective Certificate of Incorporation or Bylaws of Parent
or Merger Sub; (ii) result in a breach or violation of, a default under, or the
triggering of any payment or other material obligations pursuant to, or
accelerate vesting under, any of the Parent Stock Option Plans, or any grant or
award under any of the foregoing, or violate, conflict with, result in a breach
of any provision of, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, result in the
termination or in a right of termination or cancellation of, accelerate the
performance required by, result in the triggering of any payment or other
material obligations pursuant to, result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties of Parent,
any of the Parent Subsidiaries or Merger Sub under, or result in being declared
void, voidable, or without further binding effect, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust or any
material license, franchise, permit, lease, contract, agreement or other
instrument, binding commitment or obligation to which Parent, any of the Parent
Subsidiaries or Merger Sub is a party, or by which Parent, any of the Parent
Subsidiaries or Merger Sub or any of their respective properties is bound or
affected, except for any of the foregoing matters which is not reasonably
likely to (a) result in a Parent Material Adverse Effect, (b) impair in any
material respects the ability of Parent to perform its obligations under this
Agreement, or (c) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement; or (iii) other than (a) filings by
Parent required under the HSR Act, (b) the filing with the SEC of a
Registration Statement on Form F-4, (c) the filing of the Certificate of Merger
with the Delaware Secretary of State, (d) filings required by the Mergers,
Take-overs and Monopolies (Control) Act, 1978 (as amended) of Ireland (the
"Irish Mergers Act"), (e) the listing on the NYSE of the Parent ADSs to be
issued in connection with the Merger, (f) the listing on the respective
official lists of the Irish Stock Exchange and the London Stock Exchange of
Parent Ordinary Shares to be represented by Parent ADSs constituting the Merger
Consideration, (g) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the
corporation, takeover or blue sky laws of various states, and (h) such
authorizations, orders, consents, licenses, confirmations, clearances,
permissions and approvals as may be required in any foreign jurisdiction for
the purposes of applicable anti-trust, competition, takeover or similar
legislation, require, by or with respect to Parent, any of the Parent
Subsidiaries or Merger Sub in connection with the execution and delivery of
this Agreement by Parent and Merger Sub or the CVR Agreement by Parent or the
consummation by Merger Sub of the Merger, any consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, other than consents, approvals,
authorizations, declarations or filings or registrations which, if not obtained
or made, are not reasonably likely to result in a Parent Material Adverse
Effect or materially impair Parent's ability to perform its obligations under
the CVR Agreement.
4.6. SEC Documents
(a) As of their respective dates, or, if amended, as of the date of the last
such amendment, each registration statement, report, proxy statement or
information statement (as defined in Regulation 14C under the Exchange Act) of
Parent prepared by Parent since January 1, 1998, in the form (including
exhibits and any amendments thereto) filed with the SEC, (collectively, the
"Parent Reports") (i) complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations thereunder applicable to such Parent Reports and (ii) at the
time they were filed did not contain any
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untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each of
the consolidated balance sheets included in or incorporated by reference into
the Parent Reports (including the related notes and schedules) fairly presents
in all material respects the consolidated financial position of Parent and each
of the Parent Subsidiaries as of its date, and each of the consolidated
statements of operations, stockholders' equity and cash flows included in or
incorporated by reference into the Parent Reports (including any related notes
and schedules) fairly presents in all material respects the financial position,
results of operations and cash flows, as the case may be, of Parent and each of
the Parent Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to normal year-end audit adjustments which are not
reasonably likely to be material in amount or effect, and the absence of
footnotes), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(b) Except as and to the extent set forth on the balance sheet of Parent as
of September 30, 1999, including the notes thereto (the "Parent Balance
Sheet"), Parent has no material liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in accordance
with GAAP, except for liabilities and obligations (i) disclosed in any Parent
Report and Parent Mailing (as defined hereafter) filed since September 30, 1999
and prior to the date of this Agreement, (ii) incurred since September 30, 1999
in the ordinary course of business, (iii) incurred pursuant to this Agreement
or (iv) liabilities or obligations which individually and in the aggregate,
would not have a Parent Material Adverse Effect.
(c) Parent will deliver to the Company as soon as they become available true
and complete copies of any report, registration statement or statement mailed
by it to its securityholders generally (the "Parent Mailings") subsequent to
the date hereof and prior to the Effective Time. As of their respective dates,
such Parent Mailings (excluding any information therein provided by the
Company, as to which Parent makes no representation) will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading and will comply in
all material respects with all applicable requirements of law.
4.7. Litigation
There are no actions, suits or proceedings pending against Parent, any of
the Parent Subsidiaries or Merger Sub or, to the knowledge of Parent,
threatened against Parent, any of the Parent Subsidiaries or Merger Sub, that,
individually or in the aggregate, are reasonably likely to have a Parent
Material Adverse Effect.
4.8. No Violation of Law
The business and operations of Parent and the Parent Subsidiaries have been
conducted in compliance with all other applicable laws, ordinances, regulations
and orders of all governmental entities and other regulatory bodies, except
where such noncompliance, individually or in the aggregate, is not reasonably
likely to have a Parent Material Adverse Effect.
4.9. Absence of Certain Changes
Since September 30, 1999, other than as set forth in the Parent Reports,
Parent has conducted its business only in the ordinary course of such business,
and there has not been (i) any Parent Material Adverse Effect or any event
which is reasonably likely to result in a Parent Material Adverse Effect; or
(ii) any material change in its accounting principles, practices or methods,
except as required under GAAP or applicable law.
4.10. Taxes and Tax Returns
(a) All material Tax Returns required to be filed by or with respect to
Parent and each of Parent Subsidiaries have been timely filed and all such Tax
Returns are true, correct and complete in all material
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respects. The Parent and each of Parent Subsidiaries have (i) timely paid or
caused to be timely paid, or made adequate provisions in accordance with GAAP,
all Taxes due, whether or not shown (or required to be shown) on a Tax Return
(other than Taxes that are being contested in good faith and for which adequate
reserves have been made) and (ii) provided a sufficient reserve (without regard
to deferred Tax assets and liabilities) for the payment of all Taxes not yet
due and payable on the financial statements included in Parent Reports.
(b) The Parent and each of Parent Subsidiaries have complied in all material
respects with the provisions of the Code relating to the withholding and
payment of Taxes, including, without limitation, the withholding and reporting
requirements under Code sections 1441 through 1464, 3401 through 3406, and 6041
through 6049, as well as similar provisions under any other laws, and have,
within the time and in the manner prescribed by law, withheld from employee
wages and paid over to the proper governmental authorities all amounts required
to be withheld and paid over except where the failure to withhold and pay over,
individually and in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
(c) Except for liens for Taxes that are not yet due and payable, there are
no liens for any material Tax upon any asset of Parent or any of Parent
Subsidiaries.
(d) As of December 31, 1999, Parent was not a passive foreign investment
company as defined in Section 1297(a) of the Code and, to the best of the
Parent's knowledge, there is no reasonable basis to believe that it may become
one in the foreseeable future.
4.11. Employee Benefit Plans
(a) All material plans, programs, arrangements and contracts which are
maintained by Parent or any Parent Subsidiaries or under which Parent or any of
Parent Subsidiaries is obligated to make contributions and which provides
benefits or compensation to or on behalf of employees or former employees,
including but not limited to executive arrangements and "employee benefit
plans" as defined in Section 3(3) of ERISA, are referred to herein as "Parent
Employee Plans." Parent has made available to the Company the plan documents or
other writing constituting each Parent Employee Plan that has been reduced to
writing and, if applicable, the trust, insurance contract or other funding
arrangement, the ERISA summary plan description and the most recent Forms 5500
and actuarial report for each such Plan. Parent has made available to the
Company accurate copies of the most recent favorable determination letters for
all Parent Employee Plans qualified under Section 401(a) of the Code.
(b) With respect to each Parent Employee Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived; (ii) no reportable
events within the meaning of Section 4043(c) of ERISA with respect to which the
30-day notice period have not been waived have occurred which is reasonably
likely to result in a Parent Material Adverse Effect, (iii) all premiums
required to be paid to the Pension Benefit Guaranty Corporation have been
timely paid in full, and (iv) all contributions to the Parent Employee Plans
required to be made by Parent or any Parent Subsidiary have been timely made in
all material respects. There does not now exist, nor do any circumstances exist
as are reasonably likely to result in, any Parent Controlled Group Liability
(as defined below) that is reasonably likely to be a liability of Parent or any
Parent Subsidiary following the Effective Time. "Parent Controlled Group
Liability" means any and all liabilities under (i) Title IV of ERISA, (ii)
Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code and (iv) the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code, other than, in each case, such liabilities that arise solely
out of, or relate solely to, Parent Employee Plans. There are no investigations
by any governmental agency (including the Pension Benefit Guaranty
Corporation), termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Parent Employee Plans), suits
or proceedings against or involving any Parent Employee Plans or asserting any
rights to or claims for benefits under any Parent Employee Plan that are
reasonably likely to have a Parent Material Adverse Effect.
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(c) Neither Parent nor any Parent Subsidiary is, or has been, a participant
in a multiemployer plan (within the meaning of ERISA Section 3(37)). Neither
Parent nor any of Parent Subsidiaries is obligated to provide post-employment
or retirement medical benefits or any other unfunded welfare benefits to or on
behalf of any Person who is no longer an employee of Parent or any of Parent
Subsidiaries, except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA.
(d) Each Parent Employee Plan has at all times been maintained, by its terms
and in operation, in accordance with all applicable laws, and each of those
Parent Employee Plans which are intended to be qualified under Section 401(a)
of the Code has at all times been maintained, by its terms and in operation, in
accordance with Section 401(a) of the Code, in each case except where a failure
to be so maintained is not reasonably likely to have a Parent Material Adverse
Effect.
(e) No prohibited transaction has occurred with respect to any Parent
Employee Plan maintained by Parent or any of Parent Subsidiaries that would
result, directly or indirectly, in the imposition of an excise tax or other
liability under the Code or ERISA, except for such a tax or other liability
that is not reasonably likely to have a Parent Material Adverse Effect.
(f) No employee of Parent or any of the Parent Subsidiaries will be entitled
to any additional payment or benefits or acceleration of the time of payment or
vesting of any benefit under any Parent Employee Plan or other agreement or
arrangement as a result of the transactions contemplated by this Agreement.
4.12. Intellectual Property
Each of Parent and its Subsidiaries owns, or is validly licensed or
otherwise has the right to use all Intellectual Property Rights which if Parent
or its Subsidiaries did not own or validly license or otherwise have the right
to use would, individually and in the aggregate, have a Parent Material Adverse
Effect. No claims are pending or, to the knowledge of Parent, threatened that
Parent or any of its Subsidiaries is infringing the rights of any Person with
regard to any Intellectual Property Right which have or would, individually and
in the aggregate, have a Parent Material Adverse Effect. To the knowledge of
Parent, no person is infringing the rights of Parent or any of its Subsidiaries
with respect to any Intellectual Property Right which would have a Parent
Material Adverse Effect. As of the date hereof, Parent has no knowledge that
the business of Parent and its Subsidiaries as presently conducted or as
presently contemplated does or will infringe (i) any granted patent or existing
trademark or (ii) any patent granted from a pending patent application. No
claims are pending or, to the knowledge of Parent, are threatened challenging
the ownership of or license to the Intellectual Property Rights owned by or
licensed to Parent and its Subsidiaries which would, individually and in the
aggregate, have a Parent Material Adverse Effect.
4.13. Company Stock Ownership
Neither Parent nor any of the Parent Subsidiaries beneficially owns any
shares of Company Common Stock or other securities convertible into or
exercisable for Company Common Stock.
4.14. Tax Reorganization
Neither Parent nor any of the Parent Subsidiaries has taken or agreed to
take any action or knows of any fact or circumstance that is reasonably likely
to prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code with respect to which gain recognition is not
required under Section 367(a) of the Code.
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ARTICLE 5
Covenants
5.1. Alternative Proposals
(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties other than Parent or
Merger Sub conducted heretofore with respect to a Transaction and, pursuant to
the confidentiality agreements with such parties, the Company shall direct such
parties to return to the Company all confidential information provided by or on
behalf of the Company to such parties, shall direct such parties to destroy any
documents or other materials they created containing confidential information
provided by or on behalf of the Company, and shall use its reasonable best
efforts to see that such information is returned or destroyed. Neither the
Company nor any of its Subsidiaries shall, and the Company shall use its
reasonable best efforts to cause its and its Subsidiaries respective officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors and other representatives ("Representatives") not to, (i) directly or
indirectly, initiate, solicit or encourage, or take any action to facilitate
the making of, any Takeover Proposal (as defined below), or (ii) directly or
indirectly, engage in negotiations or discussions with, or provide any
confidential information or data to, any person relating to any Takeover
Proposal; provided, however, that at any time prior to the date of the
Stockholders' meeting contemplated by Section 5.3 (the "Applicable Period"),
the Company may, in response to a Superior Proposal (as defined below) which
was not solicited by it or any Representative of the Company and which did not
otherwise result from a breach of this Section 5.1(a), and subject to providing
written notice of its decision to take such action to the Parent (the "Notice")
and compliance with Section 5.1(c), but only after the third business day
following delivery of the Notice to Parent (x) furnish information with respect
to the Company and/or its Subsidiaries to any person making a Superior Proposal
pursuant to a customary confidentiality agreement (as determined by the Company
after consultation with its outside counsel) and (y) participate in discussions
or negotiations regarding such Superior Proposal.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (x) unless such Board or committee shall have determined in good faith
that such action is required by its fiduciary duties under applicable law,
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
the Parent, such Board's or committee's approval or recommendation of the
Merger or this Agreement, (y) approve any letter of intent, agreement in
principle, acquisition agreement or similar agreement (other than a
confidentiality agreement in connection with a Superior Proposal which is
entered into by the Company in accordance with Section 5.1(a) relating to any
Takeover Proposal (each, an "Acquisition Agreement"), or (z) approve or
recommend, or propose to approve or recommend, any Takeover Proposal.
Notwithstanding the foregoing, in response to a Superior Proposal which was not
solicited by the Company, and which did not otherwise result from a breach of
Section 5.1(a), the Board of Directors of the Company may (subject to this
sentence) terminate this Agreement and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Acquisition
Agreement with respect to any Superior Proposal, but only at a time that is
during the Applicable Period and is after the fifth business day following the
Company's delivery of written notice advising the Parent that the Board of
Directors of the Company has resolved to accept a Superior Proposal (subject to
such termination), specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal.
(c) The Company promptly shall advise the Parent orally and in writing of
any Takeover Proposal or any inquiry with respect to any Takeover Proposal, the
identity of the person making any such Takeover Proposal or inquiry and the
material terms and conditions of any such Takeover Proposal or inquiry. The
Company shall keep the Parent reasonably informed of the status and material
terms and conditions of any such Takeover Proposal or inquiry.
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(d) Nothing contained in this Agreement shall prohibit the Company or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act
provided that the Company and its Board of Directors complies with Section
5.1(b) hereof.
For purposes of this Agreement, a "Takeover Proposal" means any proposal or
offer from any person relating to (i) any direct or indirect acquisition or
purchase of a business that constitutes 15% or more of the net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole, or 15%
or more of the common stock or voting power (or of securities or rights
convertible into or exercisable for such common stock or voting power) of the
Company, (ii) any tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more of the common stock or
voting power (or of securities or rights convertible into or exercisable for
such common stock or voting power) of the Company, or (iii) any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of its Subsidiaries that
constitutes 15% or more of the net revenues, net income or assets of the
Company and its Subsidiaries taken as a whole, in each case other than the
transactions contemplated by this Agreement or transactions permitted under
Section 5.2. Each of the transactions referred to in clauses (i)-(iii) of the
foregoing definition of Takeover Proposal, other than the transactions
contemplated by this Agreement and transactions permitted under Section 5.2 is
referred to herein as an "Acquisition Transaction."
For purposes of this Agreement, a "Superior Proposal" with respect to the
Company means any proposal (x) made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities,
more than 50% of the combined voting power of the shares of Company Common
Stock then outstanding or at least 50% of the assets of the Company and its
Subsidiaries, taken together, (y) which is otherwise on terms which the Board
of Directors of the Company determines in its good faith judgment (after
consultation with a financial advisor and based on such other matters as the
Board of Directors of the Company deems relevant) to be more favorable to the
Company's stockholders than the Merger and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the Board
of Directors of the Company, is reasonably capable of being obtained by such
third party and (z) which such Board, after considering such matters as such
Board deems relevant (including the advice of outside counsel), determines in
good faith that the Company furnishing information to the third party,
participating in discussions or negotiations with respect to the Superior
Proposal or withdrawing or modifying its recommendation with respect to the
Merger or recommending a Takeover Proposal, or terminating this Agreement, is
required for the Board of Directors of the Company to comply with its fiduciary
duties to the Company and its stockholders under applicable law.
5.2. Interim Operations
(a) Prior to the Effective Time, except as set forth in Section 5.2 of the
Company Disclosure Schedule or as expressly provided for in this Agreement,
unless Parent has consented in writing thereto (such consent not to be
unreasonably withheld or delayed), the Company:
(i) shall, and shall cause each of the Company Subsidiaries to, conduct
its operations in the ordinary course consistent with the manner as
heretofore conducted;
(ii) shall use commercially reasonable efforts, and shall cause each of
the Company Subsidiaries to use commercially reasonable efforts, to
preserve intact their business organizations and goodwill, keep available
the services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
(iii) shall not, and shall cause each of the Company Subsidiaries not
to, amend their respective Certificates of Incorporation or Bylaws or
comparable governing instruments;
(iv) shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or
inaccurate in any material respect such that the condition set forth in
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Section 6.3(a)(ii) would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement;
(v) shall not, and shall not permit any of the Company Subsidiaries to,
(A) acquire or agree to acquire by merging or consolidating with, or by
acquiring any capital stock of or purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof, or (B) acquire or agree to acquire assets other than in
the ordinary course of business or (C) release or relinquish or agree to
release or relinquish any material contract rights;
(vi) shall not, and shall not permit any of the Company Subsidiaries to,
effect any stock split or otherwise change its capitalization or issue any
shares of its capital stock or securities convertible into or exchangeable
or exercisable for shares of its capital stock, except upon exercise of
options outstanding as of the date hereof to purchase shares of Company
Common Stock under the Company Stock Option Plans;
(vii) shall not, and shall not permit any of the Company Subsidiaries
to, grant, confer or award any options, warrants, conversion rights or
other rights, not existing on the date hereof, to acquire any shares of its
capital stock or other securities of the Company or any of the Company
Subsidiaries or amend or otherwise modify any outstanding options or
warrants;
(viii) shall not, and shall not permit any of the Company Subsidiaries
to, set aside, make or pay any dividend or other distribution, payable in
cash, stock, property or otherwise, with respect to any of its capital
stock, or to redeem, purchase or otherwise acquire, directly or indirectly,
any of its capital stock;
(ix) shall not, and shall not permit any of the Company Subsidiaries to,
take or fail to take any actions which would be reasonably likely to
prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code with respect to which gain recognition is not
required under Section 367(a) of the Code;
(x) shall not, and shall not permit any of the Company Subsidiaries to,
amend in any material respect, except as required by applicable law or in
response to changes in applicable law, the terms of any Company Employee
Plans, including, without limitation, any employment, severance or similar
agreements or arrangements in existence on the date hereof, or adopt any
new employee benefit plans, programs or arrangements or any employment,
severance or similar agreements or arrangements, or grant any award
thereunder (except in the case of awards not involving the acquisition of
securities, in the ordinary course of business consistent with past
practice), or grant any salary increases to any employee of the Company or
any of the Company Subsidiaries except in the ordinary course of business
consistent with past practice except that (A) the Company may hire, and
enter into compensation arrangements with, employees in the ordinary course
of business consistent with past practice and (B) this subsection (x) shall
not preclude the Company from making payments required under Company
Employee Plans in effect on the date hereof;
(xi) shall not, and shall not permit any of the Company Subsidiaries to,
except in the ordinary course of business consistent with past practice,
(x) incur, create, assume or otherwise become liable for borrowed money or
assume, guarantee, endorse or otherwise become responsible or liable for
the obligations of any other individual, corporation or other entity or (y)
make any loans or advances to any other person;
(xii) shall not, and shall not permit any of the Company Subsidiaries
to, (x) make, revoke or change any material election with respect to Taxes
unless required by applicable law or (y) settle or compromise any material
Tax liability;
(xiii) shall not, and shall not permit any of the Company Subsidiaries
to, authorize capital expenditures which are, in the aggregate, in excess
of $1 million for the Company and the Company Subsidiaries taken as a
whole;
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(xiv) shall not, and shall not permit any of the Company Subsidiaries
to, except for the payment of reasonable professional fees relating to the
Merger or otherwise and reasonable fees to financial advisors (which
financial advisory fees have heretofore been disclosed or are otherwise
acceptable, to Parent), pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) in an amount in excess of $1 million in the aggregate, other
than the payments, discharges or satisfactions, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the Company's most recent audited balance sheet as of a
date prior to the date hereof or subsequently incurred in the ordinary
course of business and consistent with past practice or collect, or
accelerate the collection of, any amounts owed (including accounts
receivable) other than collection in the ordinary course;
(xv) shall not, and shall not permit any of the Company Subsidiaries to,
except in the ordinary course of business or as otherwise expressly
contemplated hereby, grant or acquire any material licenses to use any
Intellectual Property Rights or unpatented inventions set forth in the
Company Disclosure Schedule; provided that the Company shall not grant any
material licenses to use any material Intellectual Property Rights or
unpatented inventions so set forth without the prior written consent of
Parent, which consent shall not be unreasonably withheld;
(xvi) shall not, and shall not permit of the Company Subsidiaries to,
allow any insurance policy naming it as a beneficiary or a loss payee to be
cancelled, terminated or materially altered, except in the ordinary course
of business and consistent with past practice and following written notice
to Parent (provided that an insurer refusing to renew a policy shall not be
deemed a breach of this covenant);
(xvii) shall not, and shall not permit any of the Company Subsidiaries
to, enter into any hedging, option, derivative or other similar
transaction;
(xviii) shall notify Parent a reasonable time in advance of, and shall
permit a representative of Parent to review or participate in, any
communications, meetings, or correspondence between the Company or any
Company Subsidiary and the FDA, the European Agency for the Evaluation of
Medical Products or similar regulatory agency and in any of the Company's
internal planning meetings that cover substantive issues relating to
Evacet(TM), except, in each case, as may be inconsistent with applicable
law or regulation; and
(xix) shall not, and shall not permit any of the Company Subsidiaries
to, agree, in writing or otherwise, to take any of the foregoing actions.
(b) Prior to the Effective Time, except as set forth in Section 5.2 of the
Parent Disclosure Schedule or as expressly provided in this Agreement, unless
the Company has consented in writing thereto (such consent not to be
unreasonably withheld or delayed), Parent:
(i) shall, and shall cause each of the Parent Subsidiaries to, conduct
its operations in the ordinary course consistent with the manner as
heretofore conducted;
(ii) shall use commercially reasonable efforts, and shall cause each of
Parent Subsidiaries to use commercially reasonable efforts, to preserve
intact their business organizations and goodwill, keep available the
services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
(iii) shall not, and shall cause each of Parent Subsidiaries not to,
amend their respective Certificates of Incorporation or Bylaws or
comparable governing instruments;
(iv) shall give prompt notice to the Company of any representation or
warranty made by it contained in this Agreement becoming untrue or
inaccurate in any material respect such that the condition set forth in
Section 6.2(a)(ii) would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement;
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(v) shall not, and shall not permit any of Parent Subsidiaries to, take
or fail to take any actions which would be reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code with respect to which gain recognition is not required
under Section 367(a) of the Code; and
(vi) shall not, and shall not permit any of Parent Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions.
5.3. Meetings of Stockholders
The Company will, as soon as reasonably practicable following the date of
this Agreement, take all action necessary to establish a record date for, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders Meeting") as promptly as practicable for the purpose of
obtaining the approval of its stockholders of this Agreement and the Merger.
The Company Board shall recommend such approval and shall use its reasonable
best efforts to solicit such approval, including, without limitation, timely
mailing the Proxy Statement/Prospectus (as defined in Section 5.7); provided,
however, that such recommendation or solicitation shall not be required and the
Company Board may withdraw or modify such recommendation or solicitation, if
previously made, if and to the extent that the Company Board determines after
the date hereof, in its good faith judgment, after consulting with counsel,
that such actions may be required by its fiduciary duties. The Company shall
take all lawful action necessary or advisable to hold the Company Stockholders
Meeting and collect the votes of its stockholders, including, without
limitation, timely mailing to its stockholders the Proxy Statement/Prospectus
as promptly as practicable after the Form F-4 (as defined in Section 6.7) shall
be declared effective. Whether or not the Board of Directors of the Company, or
any committee thereof, shall have (a) withdrawn or modified in a manner adverse
to the Parent such Board's or Committee's approval or recommendation of the
Merger and this Agreement or otherwise determined that the Merger and/or
Agreement are no longer advisable, or (b) approved, recommended and determined
advisable a Superior Proposal, the Merger and the Agreement shall be submitted
to the stockholders of the Company for the purpose of acting thereupon at the
Company Stockholders Meeting.
5.4. Reasonable Efforts; Further Assurances
Subject to the terms and conditions herein provided, each of the parties
hereto will promptly file and prosecute diligently the applications and related
documents required to be filed by such party with the applicable regulatory
authorities in order to effect the transactions contemplated hereby, including
filings under the HSR Act and other Regulatory Laws requesting early
termination of the applicable waiting period. The parties shall make the
filings contemplated by the HSR Act and the Irish Mergers Act within ten
business days of the date hereof. Each party hereto agrees to use all
commercially reasonable efforts to, and shall take, or cause to be taken, all
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 this Agreement as promptly as
practicable. 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 corporation which is a party to this Agreement
shall take all such necessary action. Each of the parties hereto agrees to
defend vigorously against any actions, suits or proceedings in which such party
is named as defendant which seeks to enjoin, restrain or prohibit the
transactions contemplated hereby or seeks damages with respect to such
transactions. For purposes of this Agreement, "Regulatory Law" means the
Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other federal, state and foreign, if
any, statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening of the competition, in each case applicable to the
transactions contemplated by this Agreement.
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5.5. Inspection of Records
From the date hereof to the Effective Time, the Company and Parent shall (i)
allow all designated officers, attorneys, accountants and other representatives
of their respective companies reasonable access at all reasonable times to the
offices, records and files, correspondence, audits and properties, as well as
to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of the other
party and their Subsidiaries, (ii) furnish to such other party and such other
party's counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request and (iii) instruct employees, counsel and
financial advisors to cooperate with such party in such party's investigation
of the business of the other party and its Subsidiaries. Except as required by
law, Parent and the Company will hold, and will cause their respective
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any and all information received from
the Company or from Parent, as the case may be, directly or indirectly, in
confidence, in accordance with the Confidentiality Agreement dated as of
November 22, 1999 between Parent and the Company (as it may be amended from
time to time, the "Confidentiality Agreement").
5.6. Publicity
The initial press release relating to this Agreement shall be a joint press
release in the form heretofore agreed to by the parties and thereafter the
Company and Parent shall, subject to their respective legal obligations
(including requirements of stock exchanges and other similar regulatory
bodies), consult with each other, and use reasonable efforts to agree upon the
text of any press release, before issuing any such press release or otherwise
making public statements with respect to the transactions contemplated hereby
and in making any filing with any federal or state governmental or regulatory
agency or with any national securities exchange with respect thereto.
5.7. Registration Statement
Parent and the Company shall cooperate and promptly prepare and Parent shall
file with the SEC as soon as practicable a Registration Statement on Form F-4
(the "Form F-4") under the Securities Act, with respect to the Parent ADSs and
CVRs issuable in the Merger, which Registration Statement shall contain the
proxy statement with respect to the meeting of the stockholders of the Company
in connection with the Merger (the "Proxy Statement/Prospectus"). The parties
shall cause the Form F-4 to be filed or confidentially submitted within 20 days
of the date hereof. The respective parties will cause the Proxy
Statement/Prospectus and the Form F-4 to comply in all material respects with
the applicable provisions of the Securities Act, the Exchange Act and the rules
and regulations thereunder. Parent shall use reasonable efforts, and the
Company will cooperate with Parent, to have the Form F-4 declared effective by
the SEC as promptly as practicable. Parent shall take all action required to
obtain, prior to the effective date of the Form F-4, all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement. The information supplied by the
Company for inclusion or incorporation by reference in the Proxy
Statement/Prospectus and the Form F-4, shall not (i) at the time the Form F-4
is declared effective, (ii) at the time the Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to holders of Parent
and Company Common Stock, (iii) at the time of the Company Stockholders Meeting
and (iv) at the Effective Time, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
are made, not misleading. The information supplied by Parent for inclusion or
incorporation by reference in the Proxy Statement/Prospectus and the Form F-4,
shall not (i) at the time the Form F-4 is declared effective, (ii) at the time
the Proxy Statement/Prospectus (or any amendment thereof or supplement thereto)
is first mailed to holders of Parent and Company Common Stock, (iii) at the
time of the Company Stockholders Meeting and (iv) at the Effective Time,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they are made, not misleading. No
amendment or supplement to the Proxy Statement/Prospectus will be made by the
Company without the approval of Parent and no amendment of the
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Form F-4 will be made by Parent without the approval of the Company (such
consent not to be unreasonable withheld or delayed). Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form
F-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the Parent
ADSs issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form F-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
5.8. Listing Application
Parent shall promptly prepare and submit to the NYSE a listing application
covering the Parent ADSs issuable in the Merger and upon exercise of the Parent
Options, and shall use all reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such Parent ADSs, subject to official notice
of issuance. Parent shall promptly prepare and submit to the Irish Stock
Exchange and the London Stock Exchange a listing application covering the
Parent Ordinary Shares to be represented by Parent ADSs issuable in the Merger
and upon exercise of the Parent Options, and shall use all reasonable efforts
to obtain, prior to the Effective Time, approval for the listing of such
shares, subject to official notice of issuance.
5.9. Affiliate Letters
No later than 30 days prior to the date of the Company Stockholders Meeting,
the Company shall deliver to Parent a letter identifying all Persons who are at
the time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to deliver or
cause to be delivered to Parent, prior to the Closing Date, from each such
person an Affiliate Letter in the form attached hereto as Exhibit B.
5.10. Expenses
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses except as expressly provided
herein and except that (a) the filing fee in connection with the filing of the
Form F-4 or Proxy Statement/Prospectus with the SEC, (b) the filing fees in
respect of filings made pursuant to the HSR Act and other Regulatory Laws, (c)
all filing fees in connection with any filings, permits or approvals made or
obtained under applicable state securities and "blue sky" laws, (d) all
printing, mailing and related expenses incurred in connection with the printing
and mailing of the Proxy Statement/Prospectus and (e) all other expenses not
directly attributable to any one of the parties, shall be paid one-half by
Parent and one-half by the Company.
5.11. Directors' and Officers' Indemnification and Insurance
(a) From and after the Effective Time for a period of six years, Parent
agrees that it will indemnify and hold harmless each present and former
director and officer of the Company or any Company Subsidiary (when acting in
such capacity), determined as of the Effective Time (each, an "Indemnified
Party" and, collectively, the "Indemnified Parties"), against any costs or
expenses (including attorneys' fees and expenses), judgments, fines, losses,
amounts paid in settlement claims, damages or liabilities incurred in
connection with any claim, action, suit, proceeding or investigation, actual or
threatened, whether civil, criminal, administrative or investigative, in whole
or in part based on or arising in whole or in part out of matters existing or
occurring at or prior to the Effective Time, to the fullest extent that the
Company would have been permitted under Delaware law and its Certificate of
Incorporation, as amended, or Amended and Restated Bylaws in effect on the date
hereof to indemnify such Indemnified Party. Parent shall also advance expenses
as incurred to the fullest extent permitted under applicable law provided the
Indemnified Party to whom expenses are advanced provides (i) a written
affirmation of his or her good faith belief that the standard of conduct
necessary for indemnification has been met, and (ii) an undertaking to repay
such advances if it is ultimately determined that such Indemnified Party is not
entitled to indemnification).
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(b) Parent shall cause to be maintained, for a period of not less than six
years from the Effective Time, the Company's current directors' and officers'
liability insurance policy to the extent that it provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") for all present and
former directors and officers of the Company or any Company Subsidiary, so long
as the annual premium therefor would not be in excess of 200% of the last
annual premium paid for the D&O Insurance prior to the date of this Agreement
(200% of such premium, the "Maximum Premium"); provided that Parent may, in
lieu of maintaining such existing D&O Insurance as provided above, cause no
less favorable coverage to be provided under any policy maintained for the
benefit of the directors and officers of Parent or a separate policy provided
by the same insurer. If the existing D&O Insurance expires, is terminated or
canceled by the insurer or if the annual premium would exceed the Maximum
Premium during such period, Parent shall obtain, in lieu of such D&O Insurance,
such comparable directors' and officers' liability insurance as can be obtained
for the remainder of such period for an annualized premium not in excess of the
Maximum Premium and on terms and conditions no less advantageous to the
directors and officers of the Company and its subsidiaries than the existing
D&O Insurance.
(c) The provisions of this Section are in addition to the rights that an
Indemnified Party may have under the Certificate of Incorporation, as amended,
Amended and Restated Bylaws or agreements of or with the Company or any of the
Company Subsidiaries or under applicable law. Parent agrees to pay all costs
and expenses (including fees and expenses of counsel) that may be incurred by
any Indemnified Party in successfully enforcing the indemnity or other
obligations under this Section. The provisions of this Section shall survive
the Merger and are intended to be for the benefit of, and shall be enforceable
by, each of the Indemnified Parties, their heirs and their representatives.
5.12. Conveyance Taxes
The Company and Parent shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications or other documents
regarding any real property transfer or gains, sales, use, transfer, value
added, stock transfer and stamp Taxes, any transfer, recording and other fees
or any similar Taxes ("Conveyance Taxes") which become payable in connection
with the transactions contemplated by this Agreement that are required or
permitted to be filed on or before the Effective Time. The Company shall pay
all such Conveyance Taxes that become payable in connection with the
transactions contemplated by this Agreement.
5.13. Benefit Arrangements
For a period of one year following the Effective Time, Parent will provide
or cause to be provided benefits to the Company employees and officers who are
employed by Parent or any Parent Subsidiary (including the Company or any
Company Subsidiary) immediately after the Effective Time ("Company Employees"),
not substantially less favorable on an overall basis to the benefits currently
provided to the Company Employees, and thereafter will provide Company
Employees with benefits comparable to those provided to similarly-situated
employees of Parent. From and after the Effective Time, Parent shall grant all
Company Employees for purposes of all such benefit rights, credit for all
service with the Company prior to the Effective Time (to the same extent that
such service would be taken into account if it had been service with the
Parent) except to the extent that this would result in duplication of accrual.
Parent and the Company agree that where applicable with respect to any medical
or dental benefit plan of Parent, (i) Parent shall waive, with respect to any
Company Employee, any pre-existing condition exclusion and actively-at-work
requirements (to the extent such exclusion or requirement would not have
applied under the applicable Company Employee Plan) and (ii) that any covered
expenses incurred on or before the Effective Time by a Company Employee or a
Company Employee's covered dependents shall be taken into account for purposes
of satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time to the same extent as such expenses will be
taken into account if incurred by similarly situated employees of Parent.
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5.14. Takeover Statutes, Etc.
(a) If any "fair price," "moratorium," "control share acquisition" or other
similar anti-takeover statute or regulation is or may become applicable to the
transactions contemplated hereby, the Company and its Board of Directors shall
grant such approvals and take all such actions as are legally permissible so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
(b) The Company shall not waive, amend or otherwise make inapplicable to any
third party (i) the terms of any confidentiality agreement the Company may have
with any such third party, (ii) the Company Rights Agreement, or (iii) Section
203 of the DGCL or any other anti-takeover statute or regulation which is or
may become applicable to any transaction with the Company contemplated by such
third party.
5.15. Tax-Free Merger
(a) Each of the parties will use its best efforts to cause the Merger to
qualify as a "reorganization" under Section 368(a) of the Code. None of Parent,
Merger Sub, the Company or any of their respective Subsidiaries over which they
exercise control, shall take any action, or fail to take any action, that would
reasonably be expected to cause (i) the Merger not to qualify as a
"reorganization" under Section 368(a) of the Code with respect to which gain
recognition is not required under Section 367(a) of the Code or (ii) gain or
loss to be recognized by any stockholder of the Company on the conversion of
Company Common Stock into Parent ADSs and CVRs pursuant to the Merger, except
with respect to the CVRs and cash received in lieu of a fractional share.
(b) To avoid the application of Section 367(a)(1) of the Code, Parent
covenants that, after the Closing, Parent will ensure that the Company complies
with the reporting requirements in Treasury Regulation Section 1.367(a)-
3(c)(6).
(c) Parent shall provide to the Company stockholders who receive Parent ADSs
in the Merger any information concerning Parent necessary to comply with the
requirements of Section 6038B of the Code and Treasury Regulation Section
1.6038B-1 (or any successor Regulation).
(d) At or prior to the filing of the Form F-4 Registration Statement, the
Company and Parent shall execute and deliver to Dewey Ballantine LLP, special
tax counsel to the Company, and Cahill Gordon & Reindel, special tax counsel to
Parent, tax representation letters in form and substance satisfactory to such
counsel. Parent, Merger Sub and the Company shall each confirm to Dewey
Ballantine LLP and Cahill Gordon & Reindel the accuracy and completeness as of
the Effective Time of the tax representation letters delivered pursuant to the
immediately preceding sentence. Following delivery of the tax representation
letters contemplated pursuant to the first sentence of this Section 5.15(d),
each of Parent and the Company shall use its best efforts to cause Dewey
Ballantine LLP to deliver to the Company, and Cahill Gordon & Reindel to
deliver to Parent, a tax opinion (i) to the effect that the Merger will qualify
as a reorganization as described in Section 368(a) of the Code and that no gain
or loss will be recognized by a stockholder of the Company on the conversion of
Company Common Stock into Parent ADSs and CVRs pursuant to the Merger, except
with respect to the CVRs and any cash received in lieu of a fractional share;
provided, however, that (a) the Company complies with the reporting
requirements contained in Treasury Regulation Section 1.367(a)-3(c)(6), and (b)
the Company stockholder owns (including beneficial, indirect and constructive
ownership) less than five percent of the total voting power and total value of
Parent's outstanding stock immediately after the Merger, and (ii) with respect
to such other federal income tax matters as the SEC requires in connection with
the F-4 Registration Statement and the Proxy Statement/Prospectus, such
opinions to be substantially identical in substance. In rendering such
opinions, each of such counsel shall be entitled to rely on the tax
representation letters referred to in this Section 5.15(d).
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5.16. CVR Agreement
Parent shall, at or prior to the Effective Time, duly execute and deliver
the CVR Agreement and shall cause the Rights Agent to duly execute and deliver
the CVR Agreement and the CVR Agreement shall be a valid and binding agreement
of Parent, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
ARTICLE 6
Conditions
6.1. Conditions to Each Party's Obligation to Effect the Merger
The respective obligation of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the Merger shall have been approved by the
holders of the issued and outstanding shares of capital stock of the
Company in accordance with the DGCL and Company's Certificate of
Incorporation.
(b) The waiting period applicable to, or approvals of, the Merger under
the HSR Act, the Irish Mergers Act and all other material Regulatory Laws,
shall have expired or been terminated.
(c) No judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court
or governmental regulatory or administrative agency or commission of
competent jurisdiction which restrains, enjoins or otherwise prohibits the
Merger shall be in effect. In the event any such order, decree, ruling or
other action shall have been issued, each party agrees to use commercially
reasonable best efforts to have any such order, decree, ruling or other
action reversed and any such restraint or injunction lifted.
(d) The Form F-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form
F-4 shall have been issued, no action, suit, proceeding, or investigation
by the SEC to suspend the effectiveness thereof shall have been initiated
and be continuing.
(e) The Parent ADSs to be issued to the Company stockholders in
connection with the Merger shall have been approved for listing on the
NYSE, subject only to official notice of issuance. The Parent Ordinary
Shares to be represented by Parent ADSs issuable in the Merger shall have
been approved for listing on the Irish Stock Exchange and the London Stock
Exchange, subject to official notice of issuance.
(f) All required third party consents, the absence of which would have a
Material Adverse Effect on Parent or the Company, as the case may be, shall
have been obtained.
6.2. Conditions to Obligation of the Company to Effect the Merger
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) (i) Parent and Merger Sub shall have performed in all material
respects all obligations contained in this Agreement required to be
performed by them on or prior to the Closing Date, (ii) the representations
and warranties of Parent and Merger Sub contained in this Agreement shall
be true and correct (without regard to any materiality qualifiers therein)
as of the Closing Date (except for changes contemplated by this Agreement
and except that those representations and warranties which address matters
only as of a particular date shall have been true and correct as of such
date), except where the failure to be true and correct would not, in the
aggregate, have a Parent Material Adverse Effect, and (iii)
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the Company shall have received certificates of the President or a Vice
President of Parent and Merger Sub dated the Closing Date, certifying to
such effect with respect to Parent and Merger Sub, respectively.
(b) The Company shall have received an opinion of Dewey Ballantine LLP,
special tax counsel to the Company, dated as of the Closing Date, to the
effect that the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code and that no gain or loss will be recognized
by a stockholder of the Company on the conversion of Company Common Stock
into Parent ADSs and CVRs pursuant to the Merger, except with respect to
the CVRs and cash received in lieu of a fractional share, provided that (i)
the Company complies with the reporting requirements contained in Treasury
Regulation Section 1.367(a)-3(c)(6) and (ii) the Company stockholder owns
(including beneficial, indirect and constructive ownership) less than five
percent of the total voting power and total value of Parent's outstanding
stock immediately after the Merger. The issuance of such opinion shall be
conditioned upon the receipt by such special tax counsel of customary
representation letters from each of Parent, Merger Sub, and the Company, in
each case in form and substance satisfactory to such special tax counsel.
Each such representation letter shall be dated on the date of such opinion
and shall not have been withdrawn or modified in any respect.
(c) Since September 30, 1999, other than as set forth in the Parent
Reports or Section 4.9 of the Parent Disclosure Schedule, through the
Effective Time, there shall not have occurred a Parent Material Adverse
Effect (or, if a Parent Material Adverse Effect shall have occurred, it
shall have been cured).
6.3. Conditions to Obligation of Parent and Merger Sub to Effect the Merger
The obligations of Parent and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) (i) The Company shall have performed in all material respects all
obligations contained in this Agreement required to be performed on or
prior to the Closing Date, (ii) the representations and warranties of the
Company contained in this Agreement shall be true and correct (without
regard to any materiality qualifiers therein) as of the Closing Date
(except for changes contemplated by this Agreement and except that those
representations and warranties which address matters only as of a
particular date shall have been true and correct as of such date), except
where the failure to be true and correct would not, in the aggregate, have
a Company Material Adverse Effect, and (iii) Parent shall have received a
certificate of the President or a Vice President of the Company, dated the
Closing Date, certifying to such effect with respect to the Company.
(b) Parent shall have received an opinion of Cahill Gordon & Reindel,
special tax counsel to Parent, dated as of the Closing Date, to the effect
that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code and that no gain or loss will be recognized by a
stockholder of the Company on the conversion of Company Common Stock into
Parent ADSs and CVRs pursuant to the Merger, except with respect to the
CVRs and any cash received in lieu of a fractional share, provided that (i)
the Company complies with the reporting requirements contained in Treasury
Regulation Section 1.367(a)-3(c)(6) and (ii) the Company stockholder owns
(including beneficial, indirect and constructive ownership) less than five
percent of the total voting power and total value of Parent's outstanding
stock immediately after the Merger. The issuance of such opinion shall be
conditioned upon the receipt by such special tax counsel of customary
representation letters from each of Parent, Merger Sub, and the Company, in
each case in form and substance satisfactory to such special tax counsel.
Each such representation letter shall be dated on the date of such opinion
and shall not have been withdrawn or modified in any respect.
(c) Since September 30, 1999, other than as set forth in the Company
Reports or Section 3.9 of the Company Disclosure Schedule, through the
Effective Time, there shall not have occurred a Company Material Adverse
Effect (or, if a Company Material Adverse Effect shall have occurred, it
shall have been cured).
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(d) The Company shall have obtained from the New Jersey Department of
Environmental Protection either (i) a declaration of non-applicability of
the New Jersey Industrial Site Recovery Act ("ISRA") to the Merger or any
other transactions contemplated thereby, or (ii) approval of a negative
declaration or other action required to comply with ISRA, in each case
which is reasonably acceptable to Parent. The Company shall also have
provided any environmental disclosure document required by the Indiana
Responsible Property Transfer Law, Ind. Code Section 13-25-3-1 et seq., in
a form reasonably acceptable to Parent.
(e) Less than 10% of the outstanding shares of Company Common Stock
shall be Dissenting Shares.
ARTICLE 7
Termination
7.1. Termination by Mutual Consent
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, before or after the approval of this
Agreement by the stockholders of the Company, by the mutual written consent of
Parent, Merger Sub and the Company.
7.2. Termination by Either Parent or the Company
This Agreement may be terminated and the Merger may be abandoned by action
of the Board of Directors of either Parent or the Company if
(a) the Merger shall not have been consummated by September 30, 2000,
provided, that the terminating party shall not have breached in any
material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure to consummate the Merger
by such date.
(b) the approval of the Company's stockholders required by Section
6.1(a) shall not have been obtained at a meeting called and duly held for
the purpose of obtaining such approval, including any postponement or
adjournment thereof, or
(c) a United States federal, state, local or foreign court of competent
jurisdiction or United States federal or state, local or foreign
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable; provided, that the party
seeking to terminate this Agreement pursuant to clause (d) shall have used
all reasonable best efforts to remove such injunction, order or decree, in
accordance with Section 5.4.
7.3. Termination by the Company
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, by action of the Company Board,
(a) in accordance with Section 5.1(b), provided, however, in order for
the termination of this Agreement pursuant to this clause of this Section
7.3 to be deemed effective, the Company shall have complied with all
provisions contained in Sections 5.1(a), (b) and (c), including the notice
provisions therein, and with applicable requirements of Section 7.5
including the payment of the Company Termination Fee (as defined
hereafter),
(b) if there has been a breach by Parent or Merger Sub of any
representation or warranty contained in this Agreement that would cause the
condition set forth in Section 6.2(a)(ii) to not be satisfied, which breach
is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by the Company to Parent,
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(c) if there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Parent which breach
would cause the condition set forth in Section 6.2(a)(i) to not be
satisfied, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by the Company to
Parent, or
(d) in accordance with Section 2.2(a)(z) unless Parent shall have agreed
to increase the Exchange Ratio to the Topped-Up Exchange Ratio as
contemplated by such Section.
7.4. Termination by Parent
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, by action of the Board of Directors of Parent, if
(a) the Board of Directors of the Company or any committee of the Board
of Directors of the Company, whether or not permitted pursuant to the terms
hereof, (w) shall withdraw or modify in any manner adverse to Parent its
approval or recommendation of this Agreement or the Merger, (x) shall
recommend or shall approve an Acquisition Transaction, or shall state that
it is not recommending against or that it is unable to make a
recommendation regarding an Acquisition Transaction, (y) shall furnish or
disclose non-public information to or negotiate, discuss or explore with a
third party with respect to any Acquisition Transaction or (z) shall
resolve to take any of the actions specified in clauses (w), (x) or (y)
above, or
(b) there has been a breach by the Company of any representation or
warranty contained in this Agreement that would cause the condition set
forth in Section 6.3(a)(ii) to not be satisfied, which breach is not
curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Parent to the Company, or
(c) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of the Company, which
breach would cause the condition set forth in Section 6.3(a)(i) to not be
satisfied, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by Parent to the
Company.
7.5. Effect of Termination and Abandonment
(a) In the event that
(w) any Person shall have made a Takeover Proposal to the Company or to
its stockholders after the date hereof and thereafter this Agreement is
terminated (1) by either party pursuant to Section 7.2(b) or Section 7.2(a)
and (2) within 12 months after the termination of this Agreement any
Acquisition Transaction involving the Company shall have been consummated
or any Acquisition Agreement with respect to an Acquisition Transaction
involving the Company shall have been entered into,
(x) any Person shall have made a Takeover Proposal to the Company or its
stockholders after the date hereof and thereafter this Agreement is
terminated by Parent pursuant to Section 7.4(a), or
(y) this Agreement is terminated by the Company pursuant to Section
7.3(a)
then, in any such case, the Company shall in no event later than (i) the date
an Acquisition Agreement is entered into with respect to an Acquisition
Transaction involving the Company, or if no such agreement is entered into,
upon the date of consummation of such Acquisition Transaction involving the
Company, in the case of a termination described in clauses (w), (ii) two days
after such termination, in the case of a termination described in clause (x),
or (iii) concurrently with such termination, in the case of a termination
described in clause (y), pay Parent a fee of $22 million (the "Company
Termination Fee"), which amount shall be payable by wire transfer of same day
funds to a bank account designated by Parent. The Company Termination Fee shall
be reduced by any amount paid or payable under Section 7.5(b).
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(b) In the event that this Agreement is terminated by either party pursuant
to Section 7.2(b) or by Parent pursuant to Section 7.4(b) or Section 7.4(c) and
no fee is payable under Section 7.5(a), after such termination, the Company
shall reimburse Parent, promptly after being requested to do so by Parent, for
all reasonable out-of-pocket documented costs and expenses incurred by Parent
in connection with this Agreement and the transactions contemplated hereby,
including, without limitation, reasonable fees and expenses of accountants,
attorneys and financial advisors and reasonable fees and expenses, up to an
aggregate of $3 million.
(c) The Company acknowledges that the agreements contained in this Section
7.5 are an integral part of the transactions contemplated in this Agreement and
that, without these agreements, the Parent would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the amount due from it
pursuant to this Section 7.5 and in order to obtain such payment the Parent
commences a suit which results in a judgment for the fees and expenses set
forth in this Section 7.5, the Company shall pay to the Parent its costs and
expenses (including reasonable attorneys' fees) in connection with such suit.
(d) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article 7, all obligations of the parties hereto shall
terminate, except the obligations of the parties set forth in this Section 7.5
and Section 5.10 and except for the Confidentiality Agreement, provided that
nothing in this Section 7.5(d) shall relieve any party from liability for
willful breach, including, without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity.
7.6. Extension; Waiver
At any time prior to the Effective Time, any party hereto, by action taken
by its Board of Directors, may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE 8
General Provisions
8.1. Nonsurvival of Representations and Warranties; Survival of Tax
Covenants
All representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall not survive the Effective Time. All
covenants shall survive in accordance with their terms. Notwithstanding any
other provisions of this Agreement, the covenants contained in Section 5.15
shall survive indefinitely.
8.2. Notices
Any notice required to be given hereunder shall be sufficient if in writing,
and sent by facsimile transmission, by courier or other national overnight
express mail service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows.
if to Parent or Merger Sub
Elan Corporation, plc
Lincoln House
Lincoln Place
Dublin 2, Ireland
Telecopy: 011-353-1-662-4963
Attention: Thomas G. Lynch
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with copies to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Telecopy: (212) 269-5420
Attention: William M. Hartnett
If to the Company:
The Liposome Company, Inc.
One Research Way
Princeton, NJ 08540
Telecopy: (609) 734-0882
Attention: Charles A. Baker
copy to: General Counsel
with copies to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Telecopy: (212) 259-6333
Attention: Bernard E. Kury
Richard D. Pritz
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date of
receipt.
8.3. Assignment; Binding Effect
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
except that Merger Sub may assign its rights hereunder to any Subsidiary of
Parent, but no such assignment shall relieve Merger Sub of any of its
obligations hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, except for the provisions of Article 2 (Conversion
and Exchange of Securities) and Section 5.11 (Directors' and Officers'
Indemnification and Insurance), nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. Parent shall cause Merger Sub to comply with its obligations
hereunder.
8.4. Entire Agreement
This Agreement, the Exhibits hereto, the Company Disclosure Schedule, the
Parent Disclosure Schedule, the Confidentiality Agreement and any documents
delivered by the parties in connection herewith or therewith constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.5. Amendment
This Agreement may be amended by the parties hereto, by action taken by
their respective Boards of Directors, at any time before or after approval of
matters presented in connection with the Merger by the
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stockholders of the Company; provided, however, after such stockholder
approval, no amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6. Governing Law; Submission to Jurisdiction
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to its rules of conflict of laws.
The parties hereto agree that any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of, this Agreement
may be brought in the United States District Court for the Southern District of
New York or any other New York State court sitting in New York County, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such suit, action or proceeding and
irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing,
each party agrees that service of process on such party in the manner provided
for notices in Section 8.2 shall be deemed effective service of process on such
party.
8.7. Counterparts
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
8.8. Headings
Headings of the Articles and Sections of this Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
8.9. Interpretation
In this Agreement, unless the context otherwise requires, words describing
the singular number shall include the plural and vice versa, and words denoting
each gender shall include the other gender and words denoting natural persons
shall include corporations and partnerships and vice versa.
8.10. Waivers
Except as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11. Incorporation of Exhibits
The Company Disclosure Schedule, the Parent Disclosure Schedule and all
Exhibits attached hereto and referred to herein are hereby incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
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8.12. Severability
Any term or provision of this Agreement which is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
8.13. Enforcement of Agreement
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they are entitled
at law or in equity.
8.14. Definitions
(a) As used in this Agreement, the word "Subsidiary" when used with respect
to any party means any corporation or other organization, whether incorporated
or unincorporated, of which such party directly or indirectly owns or controls
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization, or any organization of which such party is a general partner.
(b) As used in this Agreement, "Company Material Adverse Effect" means a
change in or effect on the Company or its Subsidiaries that is, or would
reasonably be expected in the future to be, materially adverse to the business,
results of operation or financial condition of the Company and the Company
Subsidiaries taken as a whole; provided, however, that there shall not be taken
into account (i) any adverse change or effect that is caused by or that arises
out of conditions affecting the economy or securities markets generally or (ii)
any adverse change or effect that is caused by or that arises out of conditions
generally affecting the biotech or specialty pharmaceuticals industry.
(c) As used in this Agreement, "Parent Material Adverse Effect" means a
change in or effect on Parent or its Subsidiaries that is, or would reasonably
be expected in the future to be, materially adverse to the business, results of
operation or financial condition of Parent and the Parent Subsidiaries, taken
as a whole; provided, however, that that there shall not be taken into account
(i) any adverse change or effect that is caused by or that arises out of
conditions affecting the economy or securities markets generally or (ii) any
adverse change or effect that is caused by or that arises out of conditions
generally affecting the pharmaceutical industry.
(d) As used in this Agreement the "Company's knowledge," or words of similar
import means the actual knowledge, without independent investigation, of any of
the directors or executive officers of the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
Elan Corporation, PLC
/s/ Thomas G. Lynch
By: _________________________________
Name: Thomas G. Lynch
Title: Executive Vice President
and Chief Financial Officer
Lithium Acquisition Corp.
/s/ Thomas G. Lynch
By: _________________________________
Name: Thomas G. Lynch
Title: President
The Liposome Company, Inc.
/s/ Charles A. Baker
By: _________________________________
Name: Charles A. Baker
Title: Chief Executive Officer
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ANNEX B
FORM OF CONTINGENT VALUE RIGHTS AGREEMENT
CONTINGENT VALUE RIGHTS AGREEMENT, dated [ ], 2000, between ELAN
CORPORATION, PLC, a public limited company organized under the laws of Ireland
("Elan"), and [ ], as Rights Agent (the "Rights Agent"), in favor of each
person (a "Holder") who from time to time holds one or more Contingent Value
Rights (the "CVRs") to receive cash payments in the amounts and subject to the
terms and conditions set forth herein. A registration statement on Form F-4
(No. 333- ) (the "Registration Statement") with respect to, among other
securities, the CVRs, has been prepared and filed by Elan with the Securities
and Exchange Commission (the "Commission") and has become effective in
accordance with the Securities Act of 1933 (the "Act"). This Agreement is
entered into in connection with the Agreement and Plan of Merger (the "Merger
Agreement") dated as of March [ ], 2000, by and among Elan, Lithium
Acquisition Corp. and The Liposome Company, Inc. ("Liposome"), which sets forth
the initial allocation of one CVR to each outstanding share of Company Common
Stock (as defined in the Merger Agreement) and each share of Company Common
Stock subject to issuance under the Company Options (as defined in the Merger
Agreement).
Section 1. Appointment of Rights Agent. Elan hereby appoints the Rights
Agent to act as agent for the Holders in accordance with the instructions set
forth herein, and the Rights Agent hereby accepts such appointment, upon the
terms and conditions hereinafter set forth.
Section 2. Certain Definitions. For purposes of this Agreement,
"Deposit Account" means a trust deposit account established by the Rights
Agent for the purpose of holding the Milestone Payments prior to payment by the
Rights Agent to the Holders in accordance with the terms hereof.
"EU Approval" means final approval of a marketing authorization in the
European Union of Evacet((TM)) by the European Commission, the European Agency
for the Evaluation of Medicinal Products or any successor agency (the "EMEA")
and the Committee for Proprietary Medicinal Products, so long as such approval:
(i) is for a period of at least five years from the date of such
approval;
(ii) is for the treatment of metastatic breast cancer together with
cyclophosphamide;
(iii) does not contain any condition, limitation or qualification that,
individually or in the aggregate, in the reasonable judgment of Elan
consistent with pharmaceutical industry practice, would materially and
adversely affect the marketing, sale or licensing of Evacet((TM));
(iv) does not impose any material limitation on use or contain any
labeling or marketing requirement that, individually or in the aggregate,
in the reasonable judgment of Elan consistent with pharmaceutical industry
practice, would materially and adversely affect the marketing, sale or
licensing of Evacet((TM)); and
(v) does not require any further Development Data (as defined in Section
5.1), the results of which, in the reasonable judgment of Elan consistent
with pharmaceutical industry practice, could reasonably likely result in
Evacet((TM)) not continuing to be approved for marketing in the European
Union (or, if any further Development Data has been requested, all such
requests shall have been satisfied).
"EU Countries" means Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden
and the United Kingdom.
"GAAP" means generally accepted accounting principles as in effect in
Ireland from time to time.
"In-Market Sales" means sales by Elan or any of its affiliates, licensees or
other transferees of Evacet((TM)) in the EU Countries and Canada to
unaffiliated third parties measured in accordance with GAAP, excluding in any
event the transfer pricing of Evacet((TM)) by Elan to any of its affiliates or
licensees.
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"Majority Holders" means, at any time, the Holders of at least a majority
of the then outstanding CVRs.
"Milestone Date" means any of the Approval Milestone Date, the Revenue
Milestone Date and the Sale Milestone Date and any License Milestone Date.
"Milestone Payment" means any of the Approval Payment, the Revenue Payment
and the Sale Payment and any License Payment.
"Net Sales" means the sum determined by deducting the following amounts
from the aggregate gross In-Market Sales billed with respect to Evacet((TM))
by Elan or any of its affiliates or licensees:
(i) trade, quantity or cash discounts, broker's or agent's commissions,
if any, allowed or paid; and
(ii) credits or allowances, if any, given or made on account of price
adjustments, returns, bad debts, promotional discounts, rebates and any and
all federal, state or local government rebates whether now in existence or
subsequently enacted.
"Required Pricing Licenses" means customary licenses from or agreements
with each Specified EU Country with respect to the pricing, labelling and
marketing of and reimbursement levels (consistent with customary
pharmaceutical margins) applicable to Evacet((TM)) in such country, each for a
period of at least five years from the date of such approval and otherwise
satisfactory to Elan in its reasonable judgment consistent with pharmaceutical
industry practice.
"Specified EU Countries" means the following member states of the European
Union: Germany and the United Kingdom.
Section 3. Form of CVR Certificate.
3.1 The CVRs shall be evidenced by certificates (the "CVR Certificates"),
including the form of assignment to be printed on the reverse thereof,
substantially in the form attached hereto as Exhibit A. The CVR Certificates
may have such letters, numbers or other marks of identification or designation
and such legends, summaries or endorsements printed, lithographed or engraved
thereon as Elan may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with applicable
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of the National Association of Securities Dealers, Inc, or the
Nasdaq National Market or such stock exchange on which the CVRs may from time
to time be listed, as the case may be.
3.2 The CVR Certificates shall be executed on behalf of Elan by the manual
or facsimile signature of the present or any future President or Vice
President of Elan, under its corporate seal, affixed or in facsimile, attested
by the manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of Elan. CVR Certificates shall be dated as of the date of
the initial issuance thereof or the date of any subsequent transfer, exchange
or assignment, as the case may be.
Section 4. Registration and Countersignature.
4.1 The Rights Agent shall maintain books for the registration and
registration of transfer of the CVR Certificates. The CVR Certificates shall
be countersigned by the Rights Agent and shall not be valid for any purpose
unless so countersigned. The CVR Certificates shall be so countersigned and
delivered by the Rights Agent, regardless of whether the persons whose manual
or facsimile signatures appear thereon as proper officers of Elan shall have
ceased to be such officers at the time of such countersignature or delivery.
4.2 Prior to due presentment for registration of transfer of the CVR
Certificates, Elan and the Rights Agent may deem and treat the registered
Holder thereof as the absolute owner of the CVR Certificates (notwithstanding
any notation of ownership or other writing thereon made by anyone other than
Elan or the Rights Agent), for the purpose of any Milestone Payment and for
all other purposes, and neither Elan nor the Rights Agent shall be affected by
any notice to the contrary.
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Section 5. Payment of CVRs.
5.1 Unless this Agreement and the CVRs shall have been earlier terminated as
provided herein, the Holders shall be entitled to the following payments, to be
paid by the Rights Agent in accordance with the procedures set forth in Section
6.
(a) On and after the date (the "Approval Milestone Date") of receipt on or
before March 31, 2001 (the "Approval Milestone") by Elan or one of its
subsidiaries of the latest to occur of the following:
(i) official notification by the applicable authority of EU Approval;
and
(ii) official notification by the applicable authorities of the
issuances of the Required Pricing Licenses,
the Holders will be entitled to a total payment (the "Approval Payment") of
US$54.0 million, less all costs of Elan and its subsidiaries incurred (i) in
order to comply with any request by the European Commission, the EMEA or other
governing agency on or prior to the date of the EU Approval that it be provided
with additional studies, tests, research, procedures or other data
("Development Data") prior to the issuance of the EU Approval, and (ii) in
obtaining the Required Pricing Licenses. Notwithstanding the foregoing, if the
Approval Milestone has not occurred on or before March 31, 2001 solely because
of the operation of clause (v) of the definition of "EU Approval", then the
Approval Milestone shall occur on the date on or before December 31, 2001, on
which such condition is satisfied. Elan shall retain the right to make a
determination not to proceed with the EU application or with any application
for the Required Pricing Licenses with respect to Evacet((TM)) based on the
reasonable judgment of Elan consistent with pharmaceutical industry practice
(based in part upon information received from relevant government authorities)
that the cost of pursuing such applications, including the cost of providing
any additional Development Data, would exceed US$7.5 million.
In addition, if (i) the Approval Milestone is not achieved solely because of
clause (iii), (iv) or (v) of the definition of the definition of "EU Approval",
and (ii) the Revenue Milestone (as defined below) is achieved, then the
Approval Milestone Payment shall also be due and payable on the Revenue
Milestone Date.
(b) Elan shall provide to the Rights Agent, as soon as is reasonably
practicable after the end of each fiscal quarter of Elan prior to the fiscal
quarter ended December 31, 2002, a certificate signed by an officer of Elan
setting forth the Net Sales for such fiscal quarter. On and after the date (the
"Revenue Milestone Date") on which Elan certifies to the Rights Agent that Net
Sales in any fiscal quarter of Elan ended not later than December 31, 2002,
were US$10.5 million or more (calculated on a basis customarily used by Elan in
preparing its financial statements for sales other than those denominated in US
dollars) (the "Revenue Milestone"), and so long as the Sale Milestone has not
occurred, the Holders will be entitled to a total payment of US$44.0 million,
less the amount of all License Payments (the "Revenue Payment").
(c) If at any time (a "License Milestone Date") prior to the Revenue
Milestone Date and prior to the date after which the Revenue Milestone Date is
incapable of being achieved, Elan licenses its right to market Evacet((TM)) in
any of France, Germany, Italy, Spain or the United Kingdom, the Holders will be
entitled to a payment (a "License Payment") equal to 50% of any up-front or
deferred fees (to the extent not based on revenue or other contingencies)
actually received by Elan in connection with such license.
(d) If at any time (the "Sale Milestone Date") prior to any License
Milestone Date and the Revenue Milestone Date and prior to the date after which
the Revenue Milestone Date is incapable of being achieved, Elan sells for up-
front cash, in a single transaction or series of related transactions, all or
substantially all of its rights to Evacet((TM)) in the EU Countries and Canada
(whether achieved by a sale of assets or a sale of all or substantially all of
the marketing rights in such countries) (the "Sale Milestone"), the Holders
will be entitled to a payment (the "Sale Payment") equal to (i) if the Approval
Milestone has occurred, 50% of all amounts greater than US$54.0 million
actually received by Elan, or (ii) if the Approval Milestone has not occurred,
50% of all amounts actually received by Elan, in each case up to a maximum
amount payable to the Holders of US$44.0 million.
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(e) The Holders of not less than 20% of the CVRs then outstanding may direct
the Rights Agent on behalf of the Holders to submit any determination made by
Elan pursuant to clause (iii), (iv) or (v) of the definition of "EU Approval"
or pursuant to clause (ii) of Section 18 to arbitration in accordance with
Section 25.
(f) The Holders of not less than 20% of the CVRs then outstanding may direct
the Rights Agent on behalf of the Holders to challenge the accuracy of any Net
Sales certificate provided by Elan pursuant to paragraph (b) of this Section
5.1, with all costs and expenses (including the reasonable fees and expenses of
counsel) of Elan, the Rights Agent and the Holders to be paid by the losing
party (i.e., Elan or the Rights Agent on behalf of the Holders) in any such
proceeding.
5.2 On or as soon as is reasonably practicable after a Milestone Date, but
in no event later than ten business days after such Milestone Date, Elan shall
deliver a notice to the Rights Agent setting forth the amount of the applicable
Milestone Payment or Milestone Payments payable pursuant to this Agreement, and
shall also deliver funds equal to such amount to the Rights Agent in accordance
with Section 6. In no event shall the total Milestone Payments exceed US$98.0
million. If the Revenue Milestone Date has not occurred for any fiscal quarter
ended on or prior to December 31, 2002, Elan shall deliver a certificate signed
by an officer of Elan to the Rights Agent to that effect. All amounts to be
paid to the Holders shall be in cash from Elan not derived from Liposome or any
of Liposome's subsidiaries. No Holder has any interest in Evacet((TM)), and the
Holders' sole right to receive property hereunder is the right to receive cash
from Elan in accordance with the terms hereof.
Section 6. Establishment of Deposit Account; Distribution of Milestone
Payments.
(a) On or as soon as is reasonably practicable after a Milestone Date, but
in any event no later than ten business days after a Milestone Date (such date,
the "Payment Due Date"), Elan shall deliver the applicable Milestone Payment or
Milestone Payments in cash to the Deposit Agent against the Deposit Agent's
written acknowledgment and receipt thereof in the form attached hereto as
Exhibit B. If Elan does not deliver any Milestone Payment to the Deposit Agent
on or prior to the Payment Due Date, such Milestone Payment will bear interest
at the LIBO Rate for the period that most closely approximates the number of
days after the Payment Date such Milestone Payment was delivered, and the
interest will be added to the related Milestone Payment and distributed to the
Holders in the same manner. The Deposit Agent will deposit the applicable
Milestone Payment amount into the Deposit Account and hold it until it is paid
to the Holders pursuant to the terms of this Agreement.
(b) As soon as practicable after receipt of a notice by Elan described in
Section 5.2 hereof, the Rights Agent shall cause to be delivered to each Holder
of record as of the date that is 15 days after the applicable Milestone Date
(the "Record Date") cash in an amount equal to the pro rata share of the
applicable Milestone Payment to which such Holder is entitled under this
Agreement. The amount to which any Holder is entitled shall be calculated by
dividing the total Milestone Payment by [the number of fully diluted shares at
closing], multiplied by the number of CVRs held by such Holder. The sole source
of funds for each Milestone Payment shall be the Deposit Account, and the
Rights Agent shall have no liability in respect of any deficiency thereof
(subject to Section 15).
(c) The Rights Agent will advise Elan of the number of CVRs outstanding as
of the Record Date. Following distribution of any Milestone Payment to the
Holders, the Rights Agent shall return to Elan as soon as is practicable the
portion of such Milestone Payment remaining, together with a notice that the
balance in the Deposit Account has been reduced to zero.
Section 7. Application to European Union; Application for Required Pricing
Licenses.
(a) Unless this Agreement and the CVRs shall have earlier terminated as
provided herein, and subject to the provisions of Section 5 hereof, from and
after the Effective Time (as defined in the Merger Agreement), Elan shall use
its reasonable efforts consistent with pharmaceutical industry practice to
achieve the Approval Milestone and the Revenue Milestone. In the event of any
sale, license or other transfer of any rights to
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Evacet((TM)) in the EU Countries and Canada, Elan agrees to use its reasonable
best efforts to obtain the applicable agreement an undertaking by the buyer,
licensee or other transferee with respect to the Approval Milestone and/or the
Revenue Milestone, as applicable, similar to that set forth in the preceding
sentence. All determinations relating to such applications and all actions
taken in connection with seeking such approvals shall be in the sole discretion
of Elan. The failure to obtain any of such approvals, either at all or on or
before a certain date, shall not be deemed a breach by Elan of the provisions
hereof.
(b) Elan agrees not to sell, in a single transaction or series of related
transactions, all of its rights to Evacet((TM)) in the EU Countries and Canada
(whether achieved by a sale of assets or a sale of all or substantially all of
the marketing rights in such countries) at any time prior to the Approval
Milestone Date and prior to the date after which the Approval Milestone Date is
incapable of being achieved.
Section 8. Payment of Taxes. Elan will pay all documentary stamp taxes
attributable to the original issuance of the CVRs; provided, however, that Elan
shall not be required to pay any tax which may be payable in respect of any
transfer and delivery of CVR Certificates.
Section 9. Mutilated or Missing Certificates. In case any CVR Certificate
shall be mutilated, lost, stolen or destroyed, Elan may in its sole discretion
issue, and the Rights Agent may countersign and deliver in exchange and
substitution for and upon cancellation of the mutilated CVR Certificate, or in
lieu of a substitution for the lost, stolen or destroyed CVR Certificate, a new
CVR Certificate of like tenor and evidencing the number of CVRs evidenced by
the CVR Certificate so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence satisfactory to the Rights Agent of such mutilation, loss,
theft or destruction of such CVR Certificate and indemnity, if requested, also
satisfactory to it. Applicants for such substitute CVR Certificate shall also
comply with such other reasonable regulations and pay such other reasonable
charges as Elan or the Rights Agent may prescribe. Any such new CVR Certificate
shall constitute an original contractual obligation of Elan, whether or not the
allegedly mutilated, lost, stolen or destroyed CVR Certificate shall be at any
time enforceable by anyone.
Section 10. Transfer and Registration of CVRs; Listing on Securities
Exchange.
10.1 The CVRs and any interest therein may be sold, assigned, pledged,
encumbered or in any other manner transferred or disposed of, in whole or in
part, only in accordance with Section 11 hereof and in compliance with
applicable United States federal and state securities laws and the terms and
conditions hereof.
10.2 The CVRs have been registered pursuant to the Registration Statement
under the Act. Elan covenants and agrees:
(a) to prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective through the final Milestone Date or until such time as
the CVRs terminate in accordance with the terms hereof and to use its
reasonable best efforts to keep such Registration Statement effective
during such period;
(b) to use its reasonable best efforts to register or qualify the CVRs
under the securities or Blue Sky laws of each jurisdiction in which such
registration or qualification is necessary; and
(c) to pay all expenses incurred by it in complying with this Section
10.2, including, without limitation, (i) all registration and filing fees,
(ii) all printing expenses, (iii) all fees and disbursements of counsel and
independent public accountants for Elan, (iv) all Blue Sky fees and
expenses (including fees and expenses of counsel in connection with any
Blue Sky surveys), and (v) the entire expense of any special audits
incident to or required by any such registration.
10.3 Elan will use its reasonable best efforts to obtain approval for
quotation of the CVRs on the Nasdaq National Market or for listing on the
American Stock Exchange and will use its reasonable best efforts to maintain
such approval for so long as any CVRs remain outstanding. Any such quotation
will be at Elan's expense.
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Section 11. Exchange, Transfer or Assignment of CVRs.
11.1 CVRs may be exchanged or transferred, at the option of the Holder, upon
surrender of CVR Certificates to the Rights Agent for other CVR Certificates of
different denominations, entitling the Holder or Holders thereof to receive in
the aggregate the same total Milestone Payments. Subject to the preceding
sentence, a CVR Certificate may be divided or combined with other CVR
Certificates that carry the same rights upon presentation thereof at the office
of the Rights Agent, together with written notice specifying the names and
denominations in which new CVR Certificates are to be issued and signed by the
holder thereof.
11.2 CVRs may be assigned or transferred, at the option of the Holder, upon
surrender of CVR Certificates to the Rights Agent, accompanied (if so required
by Elan or the Rights Agent) by a written instrument or instruments of transfer
in form satisfactory to Elan and the Rights Agent, duly executed by the
registered holder or by a duly authorized representative or attorney, such
signature to be guaranteed by a commercial bank or trust company having an
office in the United States, by a broker or dealer that is a member of the
National Association of Securities Dealers, Inc. or by a member of a national
securities exchange. Upon any such registration of transfer, a new CVR
Certificate shall be issued to the transferee and the surrendered CVR
Certificate shall be canceled by the Rights Agent. CVR Certificates so canceled
shall be delivered by the Rights Agent to Elan from time to time or otherwise
disposed of by the Rights Agent in a manner satisfactory to Elan.
11.3 Any transfer, exchange or assignment of CVRs shall be without charge
(other than the cost of any transfer tax) to the holder and any new CVR
Certificates issued pursuant to this Section 11 shall be dated the date of such
transfer, exchange or assignment.
Section 12. Rights of CVR Certificate Holder. The Holder of any CVR
Certificate or CVR, shall not, by virtue thereof, be entitled to any rights of
a stockholder of Elan, either at law or in equity, and the rights of the
Holders are limited to those expressed in this Agreement.
Section 13. Availability of Information. Elan will comply with all
applicable periodic public information reporting requirements of the Commission
to which it may from time to time be subject. Elan will provide to the Rights
Agent all information in connection with this Agreement and the CVRs that the
Rights Agent may reasonably request.
Section 14. Merger, Consolidation or Change or Name of Rights Agent. Any
corporation into which the Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Rights Agent, shall be the successor to the
Rights Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, so long as such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 16 hereof. If at the time such successor to the
Rights Agent shall succeed to the agency created by this Agreement, and if at
that time any of the Certificates shall have been countersigned but not
delivered, any such successor to the Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Certificates
so countersigned; and in case at that time any of the CVR Certificate shall not
have been countersigned, any successor to the Rights Agent may countersign such
CVR either in the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such CVR Certificates shall have
the full force and effect provided in the CVR Certificate and in this
Agreement.
If at any time the name of the Rights Agent shall be changed and at such
time any of the CVR Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver CVR Certificates so countersigned; and in case at that time any of
the CVR Certificates shall not have been countersigned, the Rights Agent may
countersign such CVR Certificates either in its prior name or in its changed
name; and in all such cases such CVR Certificates shall have the full force and
effect provided in the CVR Certificates and in this Agreement.
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Section 15. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which Elan and the Holders, by their acceptance hereof,
shall be bound:
(a) The statements contained herein and in the CVR Certificates shall be
taken as statements of Elan, and the Rights Agent assumes no responsibility
for the correctness of any of the same except such as describe the Rights
Agent or actions taken or to be taken by it. The Rights Agent assumes no
responsibility with respect to the delivery of CVRs and the Milestone
Payments except as herein otherwise provided.
(b) The Rights Agent shall not be responsible for any failure of Elan to
comply with any of the covenants contained in this Agreement or in the CVR
Certificates to be complied with by Elan.
(c) The Rights Agent may consult at any time with counsel satisfactory
to it (who may be counsel for Elan), and the Rights Agent shall incur no
liability or responsibility to Elan or to any Holder in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel, provided that
the Rights Agent shall have exercised reasonable care in the selection and
continued employment of such counsel.
(d) The Rights Agent shall incur no liability or responsibility to Elan
or to any Holder for any action taken in reliance on any notice,
resolution, waiver, consent, order, certificate or other paper, document or
instrument believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(e) Elan agrees (i) to pay to the Rights Agent reasonable compensation
for all services rendered by the Rights Agent in the execution of this
Agreement, and (ii) to reimburse the Rights Agent for all taxes and
governmental charges, reasonable expenses and other charges of any kind and
nature incurred by the Rights Agent in the execution of this Agreement
(other than taxes measured by the Rights Agent's net income). Elan shall
reimburse the Rights Agent for the reasonable costs of any counsel engaged
by the Rights Agent for the purposes contemplated by Section 15(c),
provided that (x) such engagement is reasonably necessary in the discharge
of the Rights Agent's functions hereunder and relates to matters outside
the ordinary course, and (y) the Rights Agent first consults with Elan a
reasonable amount of time prior to incurring any such liability. The Rights
Agent shall be paid any compensation or reimbursement owed to it directly
and shall not disburse from the Deposit Account any such amounts.
(f) The Majority Holders may direct the Rights Agent to act on behalf of
the Holders in enforcing any of their rights hereunder and pursuant to the
CVRs. The Rights Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve material expense unless the Holders shall furnish the Rights Agent
with reasonable security and indemnity for any costs and expenses which may
be incurred, including without limitation any legal costs and expenses for
which the Holders may be found liable pursuant to Section 5.1(c). All
rights of action under this Agreement or under any of the CVR Certificates
may be enforced by the Rights Agent without the possession of any of the
CVR Certificates or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the
Rights Agent shall be brought in its name as Rights Agent, and any recovery
of judgment shall be for the ratable benefit of the registered Holders, as
their respective rights or interests may appear.
(g) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the CVRs or other
securities of Elan or maintain interest in any transaction in which Elan
may be interested, or contract with or lend money to or otherwise act as
fully and freely as though it were not the Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in
any capacity for Elan or for any other legal entity.
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(h) The Rights Agent shall act hereunder solely as agent, and its duties
shall be determined solely by the provisions hereof. The Rights Agent shall
not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own gross negligence or bad
faith.
Section 16. Change of Rights Agent.
(a) The Rights Agent may resign and be discharged from its duties under this
Agreement by giving to Elan notice in writing, and to the Holders notice in
writing and sent by the first-class mail, postage prepaid, to each registered
Holder at the address appearing in the register maintained by the Rights Agent
with respect to the CVRs, specifying a date when such resignation shall take
effect, which notice shall be sent at least 30 days prior to the date so
specified. If the Rights Agent shall resign or otherwise become incapable of
acting, Elan shall appoint a successor to the Rights Agent. If Elan shall fail
to make such appointment within a period of 30 days after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent, then any registered Holder (who shall, with such notice, submit
his CVR for inspection by Elan) may apply to any court of competent
jurisdiction for the appointment of a successor to the Rights Agent. After
appointment the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the former Rights Agent shall
deliver and transfer to the successor Rights Agent any funds in the Deposit
Account and copies of all books, records, plans and other documents in the
former Rights Agent's possession relating to such funds or this Agreement and
execute and deliver any further assurance, conveyance, act or deed necessary
for the purpose. Failure to give any notice provided for in this paragraph (a)
or paragraph (b) below of this Section 16 or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
(b) The Majority Holders shall have the right to cause the Rights Agent to
be relieved of its duties hereunder and to select a successor Rights Agent,
upon the expiration of 30 days following delivery of written notice of
substitution to the Rights Agent. Upon selection of such successor Rights
Agent, such successor Rights Agent and Elan shall enter into an agreement
substantially identical to this Agreement and, thereafter, the former Rights
Agent shall be relieved of its duties and obligations to perform hereunder,
except that the former Rights Agent shall transfer to the successor Rights
Agent upon request therefor any funds in the Deposit Account and copies of all
books, records, plans and other documents in the former Rights Agent's
possession relating to such funds or this Agreement and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose.
Section 17. Successors. All covenants and provisions of this Agreement by or
for the benefit of Elan, the Rights Agent or the Holders shall bind and inure
to the benefit of their respective successors, assigns, heirs and personal
representatives.
Section 18. Termination. This Agreement shall terminate on the earliest to
occur of the following events (each, a "Termination Event"):
(i) a determination by the Committee for Proprietary Medicinal Products
(or any successor body) or by the EMEA not to consider, recommend for
approval or approve Evacet((TM)) for a marketing authorization in the
European Community, unless Elan in its sole discretion determines not to
appeal, which determination shall be conclusive and not subject to
challenge by the Rights Agent or any Holder, or the occurrence of any other
event which would make the EU Approval incapable of being granted;
(ii) issuance by the European Commission, the EMEA, the CPMP or any
other multinational or national regulatory body of any adverse findings
resulting from ongoing pharmacovigilance or other regulatory monitoring of
Evacet((TM)) that, individually or in the aggregate, in the reasonable
judgment of Elan consistent with pharmaceutical industry practice, would
materially and adversely affect the marketing, sale or licensing of
Evacet((TM)) such that Elan withdraws Evacet((TM)) from the market; or
(iii) March 31, 2003.
B-8
<PAGE>
Section 19. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute one and the
same agreement.
Section 20. Headings. The headings of sections of this Agreement have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 21. Amendments. This Agreement may be amended by the written consent
of Elan and the affirmative vote or the written consent of holders holding not
less than two-thirds in interest of the then outstanding CVRs; provided,
however, that no such modification or amendment to this Agreement may, without
the consent of each Holder affected thereby, change in a manner adverse to the
Holders, (a) any provision contained herein with respect to termination of this
Agreement or the CVRs, (b) the amount of CVR Consideration to be issued
according to the terms of this Agreement to the Holders of the CVRs, or (c) the
provisions of this Section 21.
Notwithstanding the foregoing, Elan and the Rights Agent may from time to
time supplement or amend this Agreement, without the approval of any Holder, in
order to cure any ambiguity or to correct or supplement any provision contained
in this Agreement which may be defective or inconsistent with any other
provision in this Agreement, or to make any other provisions in regard to
matters or questions arising under this Agreement which Elan and the Rights
Agent may deem necessary or desirable and which shall not be inconsistent with
the provisions of the CVRs and which shall not adversely affect the interests
of the Holders.
Section 22. Notices. Any notice required to be given hereunder shall be
sufficient if in writing and sent by facsimile transmission, by courier or
other national overnight express mail service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and first-
class postage prepaid), addressed as follows:
if to Elan:
Elan Corporation, plc
Lincoln House
Lincoln Place
Dublin 2, Ireland
Telecopy: 011-353-1-662-4963
Attention: Thomas G. Lynch
if to the Rights Agent:
[ ]
[ ]
[ ]
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date of
receipt.
Section 23. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation, other than Elan, the Rights
Agent and the registered Holders, any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of Elan, the Rights Agent and the registered Holders.
Section 24. Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without regard to its rules of conflict of laws.
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<PAGE>
The parties hereto agree that any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of, this Agreement
may be brought in the United States District Court for the Southern District of
New York or any other New York State court sitting in New York County, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such suit, action or proceeding and
irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing,
each party agrees that service of process on such party in the manner provided
for notices in Section 22 shall be deemed effective service of process on such
party.
Section 25. Binding Arbitration.
(a) The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA") in effect
at the time of the arbitration, except as they may be modified herein or by
mutual agreement of Elan and the Rights Agent acting on behalf of the Holders.
The arbitration shall be conducted in the County of New York, State of New
York, and administered by the AAA's New York office. Notwithstanding any other
language contained in this Section 25, the arbitration and this Section 25
shall be governed by the Federal Arbitration Act, 9 U.S.C. (S)(S) 1 et seq.
(the "Federal Arbitration Act"). All reasonable costs and expenses (including
the reasonable fees and expenses of counsel) of Elan, the Rights Agent and the
Holders shall be paid by the losing party (i.e., Elan or the Rights Agent on
behalf of the Holders) in any such arbitration. The parties expressly waive all
rights whatsoever to file an appeal against or otherwise to challenge any
decision by the arbitrators hereunder.
(b) The arbitration shall be conducted before a Commercial Arbitration
Tribunal (the "Tribunal") consisting of three (3) neutral arbitrators selected
from the AAA's National Panel of Commercial Arbitrators in accordance with the
AAA's Commercial Arbitration Rules, except that no arbitrator shall be
appointed to the Tribunal unless, prior to such appointment, his or her name
has appeared on a list of potential arbitrators disseminated to the parties by
the AAA.
(c) Notwithstanding the AAA's Commercial Arbitration Rules, the Tribunal
shall provide the parties with not less than thirty (30) days' written notice
of the commencement of the arbitration hearing. Any adjourned hearing sessions
shall be held as soon as practicable on dates agreed to by the Tribunal and the
parties; if the parties are unable to agree upon subsequent hearing dates, the
Tribunal shall, upon not less than thirty (30) days' written notice to the
parties, select such dates. The parties hereby agree to use their best efforts
to conduct the arbitration expeditiously.
(d) The parties agree that irreparable damage would occur in the event of a
breach of the terms of this Agreement. Accordingly, it is agreed that, without
limiting the rights of the parties to seek any other relief, the parties shall
be entitled to seek injunctive or similar equitable relief from the Tribunal,
which Tribunal is expressly authorized by this clause to grant such injunctive
or similar equitable relief. The parties may seek injunctive or similar
equitable relief (and any other relief) in connection with this Agreement only
from the Tribunal.
(e) In addition to the authority conferred on the Tribunal by the rules
specified above, the Tribunal shall have the authority to order reasonable
discovery, including the deposition of party witnesses and production of
documents. The arbitral award shall be in writing, state the reasons for the
award, and be final and binding on the parties. All statutes of limitations
that would otherwise be applicable shall apply to any arbitration proceeding.
Any attorney-client privilege and other protection against disclosure of
confidential information, including without limitation any protection afforded
the work-product of any attorney, that could otherwise be claimed by any party
shall be available to and may be claimed by any such party in any arbitration
proceeding. No party waives any attorney-client privilege or any other
protection against disclosure of confidential
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<PAGE>
information by reason of anything contained in or done pursuant to or in
connection with this Agreement. Each party agrees to keep all arbitration
proceedings strictly confidential, except for disclosure of information to the
parties' legal counsel, financial advisors or auditors or those required by
applicable law. The Tribunal shall determine the matters in dispute in
accordance with law specified in Section 24.
(f) The obligation to arbitrate any dispute arising pursuant to Section
5.1(c) shall be binding upon the successors and assigns of all of the parties.
B-11
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
Elan Corporation, plc
By:
Name:
Title:
[ ], as Rights Agent
By:
Name:
Title:
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<PAGE>
ANNEX C
VOTING AGREEMENT
VOTING AGREEMENT, dated as of March 6, 2000 (this "Agreement"), among Elan
Corporation, plc, a public limited company organized under the laws of Ireland
("Parent"), and the individuals whose names and addresses are set forth on the
signature pages hereto (collectively, the "Stockholders", and each,
individually, a "Stockholder").
WHEREAS, as of the date hereof, the Stockholders own (both beneficially and
of record) the number of shares of Common Stock, par value $0.01 per share, of
the Company ("Company Common Stock") set forth opposite their respective names
on the signature pages hereto; and
WHEREAS, each of the Stockholders has agreed to enter into this Agreement
governing the voting and disposition of the shares of Company Common Stock now
or hereafter beneficially owned by such Stockholder (the "Shares") to induce
Parent to enter into the Merger Agreement (as hereinafter defined).
WHEREAS, Parent and its wholly-owned subsidiary, Lithium Acquisition Corp.,
a Delaware corporation (the "Subsidiary"), is entering into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), with The
Liposome Company, Inc., a Delaware corporation (the "Company"), which Merger
Agreement provides, among other things, that the Subsidiary will merge with the
Company pursuant to the merger contemplated by the Merger Agreement (the
"Merger"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1. Voting of Shares. Each Stockholder shall, until the Termination Date (as
hereinafter defined), cause the Shares owned by such Stockholder to be voted,
at the Special Meeting (as defined in the Merger Agreement) or any other
meeting of the stockholders of the Company, however called, and in any action
by written consent of the stockholders of the Company, in favor of the Merger
Agreement and the transactions contemplated thereby (as defined in the Merger
Agreement); provided that the Merger Agreement shall not have been amended to
adversely affect the Stockholders in any material respect, without the consent
of the Stockholders. For the purposes of this Agreement, "Termination Date"
shall mean the earlier of the date (i) of the Effective Time (as defined in the
Merger Agreement), (ii) the termination of the Merger Agreement in accordance
with its terms, and (iii) of the termination of this Agreement by the written
agreement of the parties hereto or pursuant to the terms of Section 7 of this
Agreement.
2. No Disposition or Encumbrance of Shares. Each Stockholder hereby
covenants and agrees that, the Stockholder shall not sell, transfer, tender,
assign, hypothecate or otherwise dispose of, or create or permit to exist any
security interest, lien, claim, pledge, option, right of first refusal,
agreement, limitation on the Stockholder's voting rights.
3. No Solicitation of Transactions. Each Stockholder shall not, directly or
indirectly, through any agent or representative or otherwise, (i) solicit or
initiate any inquiries or the making of any proposal with respect to any
Acquisition Transaction. Each Stockholder immediately shall cease and cause to
be terminated all existing discussions or negotiations of the Stockholder and
its agents or other representatives with any Person conducted heretofore with
respect to any of the foregoing. The provisions of this Section 4 shall not
apply to or restrict any action that may be taken by any Stockholder in his
capacity as a director of the Company.
4. Representations and Warranties of the Stockholders. Each Stockholder
hereby severally represents and warrants to Parent with respect to itself and
its ownership of the Shares as follows:
a. Authority Relative to this Agreement. The Stockholder has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby have been duly and validly
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<PAGE>
authorized by all necessary action on the part of the Stockholder. This
Agreement has been duly and validly executed and delivered by the
Stockholder and, assuming the due authorization, execution and delivery by
Parent, constitutes a legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its
terms, except that such enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally.
b. No Conflict. The execution and delivery of this Agreement by the
Stockholder does not, and the performance of this Agreement by the
Stockholder will not, (i) require any consent, approval, authorization or
permit of, or filing with or notification to any governmental or regulatory
authority, domestic or foreign, (ii) if applicable, conflict with or
violate the Certificate of Incorporation or By-laws of the Stockholder,
(iii) conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to the Stockholder or by which any property or asset
of the Stockholder is bound or (iv) result in the creation of a lien or
other encumbrance of any nature whatsoever on any of the Shares pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Stockholder is a party or by which the Stockholder is or the Shares are
bound.
c. Title to the Shares. The Shares owned by the Stockholder are all the
securities of the Company owned, either of record or beneficially, by the
Stockholder.
d. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on
behalf of the Stockholder.
5. Representations and Warranties of Parent. Parent hereby represents and
warrants to the Stockholders that Parent has all necessary power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement by Parent have been
duly authorized by all necessary action on the part of Parent. This Agreement
has been duly and validly executed and delivered by Parent and, assuming the
due authorization, execution and delivery by the Stockholders, constitutes a
legal, valid and binding obligation of Parent enforceable in accordance with
its terms, except that such enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally.
6. Termination of Agreement. Parent reserves the right in its sole
discretion at any time hereafter to terminate this Agreement.
7. Miscellaneous.
a. Entire Agreement. This Agreement constitutes the entire agreement between
Parent and the Stockholders with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between Parent and the Stockholders with respect to the subject matter hereof.
b. Assignment. This Agreement shall not be assigned by operation of law or
otherwise, without the prior written consent of the parties.
c. Obligations of Successors; Parties in Interest. This Agreement shall be
binding upon, inure solely to the benefit of, and be enforceable by, the
successors and permitted assigns of the parties hereto. Nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
d. Amendment; Waiver. This Agreement may not be amended or changed except by
an instrument in writing signed by the parties hereto. Any party hereto may (i)
extend the time for the performance of any obligation or other act of the 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. 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.
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<PAGE>
e. Severability. The validity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
f. 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 cable, telecopy,
telegram or telex 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 9(i):
if to Parent:
ELAN CORPORATION, PLC
Lincoln House
Lincoln Place
Dublin 2, Ireland
Attention: Thomas G. Lynch
Telecopy: 011-353-1-662-4963
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: William M. Hartnett, Esq.
Telecopy: (212) 269-5420
if to any Stockholder:
at the respective addresses of such Stockholder set forth on the
signature pages to this Agreement.
g. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE DELAWARE PRINCIPLES OF CONFLICTS OF
LAW) AS TO ALL MATTERS, INCLUDING, BUT NOT LIMITED TO, MATTERS OF VALIDITY,
CONSTRUCTION, EFFECT, PERFORMANCE AND REMEDIES.
h. 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.
i. 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
rights, benefits or remedies or any nature whatsoever under or by reason of
this Agreement.
j. Counterparts. This Agreement may be executed in one or more counterparts,
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.
k. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT IT MIGHT HAVE TO
A JURY TRIAL OF ANY DISPUTE ARISING IN CONNECTION WITH THIS AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, Parent and the Stockholders have duly executed this
Agreement, as of the date first written above.
PARENT:
Elan Corporation, PLC
/s/ Thomas G. Lynch
By: _________________________________
Name: Thomas G. Lynch
Title: Executive Vice President and
Chief Financial Officer
STOCKHOLDERS: NUMBER OF SHARES OWNED:
/s/ Kenneth B. Dart 8,945,846
_____________________________________ _____________________________________
Name: Kenneth B. Dart
Address: Ross Financial Corporation
P.O. Box 31363-SMB
Grand Cayman, Cayman Islands, BWI
C-4
<PAGE>
ANNEX D
March 6, 2000
The Board of Directors
The Liposome Company, Inc.
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08540-6619
Dear Members of the Board of Directors:
We understand that The Liposome Company, Inc. ("Liposome") is considering a
transaction whereby a wholly owned subsidiary ("Merger Sub") of Elan
Corporation plc ("Elan") will merge with and into Liposome (the "Merger").
Pursuant to the Merger, each outstanding share of common stock, par value $.01
per share (the "Liposome Common Stock") (except as otherwise set forth in the
Merger Agreement), will be converted into (1) 0.3850 American Depositary Shares
("ADSs") of Elan, evidenced by American Depositary Receipts, each American
Depositary Share representing one Ordinary Share, par value 5 Euro cents, and
(2) one Contingent Value Right (a "CVR") (collectively, the "Merger
Consideration"). The CVRs, in aggregate, represent the right to receive cash
payments of: (i) $54.0 million upon approval of EVACET in the EU and pricing
approvals in the UK and Germany by March 31, 2001; and (ii) $44.0 million upon
achievement of EVACET sales of $42.0 million based on an annualized trailing
quarter by December 31, 2002. The terms and conditions of the Merger, including
the terms of the CVRs, are more fully set forth in the Agreement and Plan of
Merger, dated March 6, 2000, among Elan, Merger Sub and Liposome (the "Merger
Agreement"), including its exhibits.
You have requested our opinion as to the fairness, from a financial point of
view, of the Merger Consideration to the holders of Liposome Common Stock.
Warburg Dillon Read LLC ("WDR") has acted as financial advisor to Liposome
in connection with the Merger and will receive a fee for its services, a
significant portion of which is contingent upon the consummation of the Merger
and a portion of which is payable upon the delivery of this opinion. In
addition, WDR acted as financial advisor and agent to Elan in connection with
the private placement of $350.0 million of senior notes in June 1999. In the
ordinary course of business, WDR, its successors and affiliates may trade
securities of Liposome and Elan for their own accounts and the accounts of
their customers and, accordingly, may at any time hold a long or short position
in such securities.
Our opinion does not address Liposome's underlying business decision to
effect the Merger or constitute a recommendation to any stockholder of Liposome
as to how such stockholder should vote with respect to the Merger. At your
direction, we have not been asked to, nor do we, offer any opinion as to the
material terms of the Merger Agreement and the obligations thereunder, or the
form of the Merger. We express no opinion as to what the value of Elan ADSs
will be when issued pursuant to the Merger or the price at which Elan ADSs will
trade or otherwise be transferable subsequent to the Merger. In rendering this
opinion, we have assumed, with your consent, that each of Liposome, Elan, and
Merger Sub will comply with all material terms of the Merger Agreement, as
applicable, and that the Merger will be validly consummated in accordance with
its terms. In connection with our engagement, at your direction, we solicited
third party indications of interest with respect to the acquisition of
Liposome.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to Liposome and Elan; (ii) reviewed certain internal financial
information and other data relating to the businesses and financial prospects
of Liposome and Elan, including
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<PAGE>
estimates and financial forecasts prepared by the management of Liposome and
estimates and financial forecasts prepared by the management of Elan, that were
provided to us by Liposome and Elan and not publicly available; (iii) conducted
discussions with members of the senior managements of Liposome and Elan; (iv)
reviewed publicly available financial and stock market data with respect to
certain other companies in lines of business we believe to be generally
comparable to those of Liposome and Elan; (v) compared the financial terms of
the Merger with the publicly available financial terms of certain other
transactions which we believe to be generally relevant; (vi) reviewed the
Merger Agreement; and (vii) conducted such other financial studies, analyses,
and investigations, and considered such other information as we deemed
necessary or appropriate.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the information provided
to or reviewed by us for the purpose of this opinion and have, with your
consent, relied on its being complete and accurate in all material respects. In
addition, at your direction, we have not made any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of
Liposome or Elan, nor have we been furnished with any such evaluation or
appraisal. With respect to the financial forecasts and estimates referred to
above, we have assumed, at your direction, that they have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the managements of Liposome and Elan as to the future performance
of Liposome and Elan. Our opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made available
to us, as of the date of this letter.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to the holders of Liposome Common Stock.
Very truly yours,
WARBURG DILLON READ LLC
/s/ John Chambers /s/ Eric Roberts
By: _________________________________ By: _________________________________
Name:John Chambers Name:Eric Roberts
Title:Managing Director Title:Managing Director
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ANNEX E
SECTION 262 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
SECTION 262 Appraisal Rights. (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S) 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (e) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" means a receipt or
other instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S) 251 (other than a merger effected pursuant to (S)
251(g) of this title, (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or (S) 264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S)
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting
shall notify each of its stockholders who was such on the record date for
such meeting with CIA respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
(S) 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient, if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the
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facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
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stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair market value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertified stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation may be a corporation of this State or
of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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