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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9/A
AMENDMENT NO. 1
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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FUISZ TECHNOLOGIES LTD.
(Name of Subject Company)
FUISZ TECHNOLOGIES LTD.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
359536109
(CUSIP Number of Class of Securities)
STEPHEN H. WILLARD, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FUISZ TECHNOLOGIES LTD.
14555 AVION PARKWAY
CHANTILLY, VA 20151
(703) 995-2400
(Name, Address and Telephone Number of Person Authorizing to Receive Notices
and Communications on Behalf of the Person Filing this Statement)
COPY TO:
RONALD O. MUELLER, ESQ.
GIBSON, DUNN & CRUTCHER LLP
1050 CONNECTICUT AVE., N.W., SUITE 900
WASHINGTON, D.C. 20036
(202) 955-8500
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject entity is Fuisz Technologies Ltd., a Delaware
corporation ("Company"), which has its principal executive offices at 14555
Avion Parkway, Chantilly, VA 20151. The class of equity securities to which this
statement relates is Company's Common Stock, par value $.01 per share (the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Statement") relates to the offer by ABCI Acquisition Sub. Corporation, a newly
organized Delaware corporation (the "Purchaser") and a wholly owned subsidiary
of Biovail Corporation International, an Ontario, Canada corporation ("Parent"),
to purchase up to 6,585,225 of the outstanding Shares at a price of $7.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated July 30, 1999 (the "Offer to Purchase")
and in the related Letter of Transmittal (the "Letter of Transmittal", together
with the Offer to Purchase, the "Offer"). The Offer is disclosed in the Schedule
14D-1, dated July 30, 1999 (the "Schedule 14D-1") filed with the Securities and
Exchange Commission (the "Commission") by Parent and Purchaser. This Statement
is being filed on behalf of the Company. The item numbers and responses thereto
below are in accordance with the requirements of Schedule 14D-9 of the
Securities Exchange Act of 1934, as amended. Biovail's principal executive
offices are located at 2488 Dunwin Drive, Mississauga, Ontario, Canada L5L 1J9
and ABCI's principal executive offices are located at 2488 Dunwin Drive,
Mississauga, Ontario, Canada L5L 1J9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 25, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by the Purchaser and further provides that, after the
purchase of Shares pursuant to the Offer and subject to the satisfaction or
waiver of certain conditions set forth therein, the Purchaser will be merged
with and into Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent. The surviving corporation of the Merger is
referred to herein as the "Surviving Corporation." In connection with the
Merger, all remaining outstanding Shares will be exchanged for shares of common
stock of Parent, at a ratio of one Share for 0.1194 shares of common stock of
Parent, subject to certain adjustments discussed below in Item 3-- Identity and
Background--The Merger Agreement.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
statement, is set forth in Item 1 of this Statement. All information contained
in this Statement or incorporated herein by reference concerning Purchaser or
Parent, or actions or events with respect to either of them, was provided by
Purchaser or Parent, respectively, and Company takes no responsibility for such
information. Information contained in this Statement with respect to Company and
its advisors has been provided by the Company.
(b) Except as described herein and in the exhibits hereto, to the knowledge
of the Company, as of the date hereof there are no material contracts,
agreements, arrangements or understandings, or any potential or actual conflicts
of interest between the Company or its affiliates and (1) the Company, its
executive officers, directors or affiliates or (2) the Purchaser, its executive
officers, directors or affiliates.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendations of the Board of Directors of the Company
(the "Company Board"), the stockholders should be aware that certain members of
the Company Board and certain of the Company's officers have interests in the
Merger and the Offer which are described herein and which may present them with
certain conflicts of interest. Each of the members of the Company Board were
aware of these potential conflicts and considered them along with the other
factors described in Item 4(b)(2) below.
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EMPLOYMENT AND COMPENSATION ARRANGEMENTS
The employment agreements of Mr. Myers, Mr. Willard and Mr. Cherukuri
provide for the acceleration of their compensation otherwise payable through the
term of their agreements and the vesting of all unvested stock options in the
event of a "change of control," which is defined to include the direct or
indirect beneficial ownership of 30% or more of the Shares by any person.
Pursuant to the Company's 1991 Stock Option Plan, all outstanding stock
options become exercisable in full upon a consolidation, merger or sale of all
or substantially all of the assets of the Company in which Shares are exchanged
for securities, cash or other property of another corporation.
Mr. Scrivens has executed a Consulting Agreement with the Company entitling
him to receive the compensation and benefits provided under his previous
employment agreement with the Company for the term of the Consulting Agreement,
which has been extended from its original expiration date of October 19, 2000 by
such number of whole months, rounded up, that Mr. Scrivens serves as Acting
Chief Financial Officer of the Company. This obligation shall be a binding
obligation on the successors and assigns of the Company, including any entity
which may be merged with the Company.
FUISZ DRUGSTORE.COM
On December 31, 1998, the Company entered into a stock purchase agreement
(the "Stock Purchase Agreement") to sell all of the issued and outstanding share
capital of FuiszDrugstore.com Ltd. ("FuiszDrugstore"), then a wholly-owned
subsidiary of the Company, to Privateer Ltd., ("Privateer"), a corporation owned
by Richard C. Fuisz, M.D. ("Dr. Fuisz"), Chairman of the Board of the Company.
At the closing, which took place in February 1999, the Company delivered the
shares, which were transferred to RxDrugstore.com Limited ("RxDrugstore.com")
and received consideration of $100,000 in cash and 200,000 shares of common
stock of RxDrugstore.com (which represents 5% of the issued and outstanding
shares of common stock of RxDrugstore.com). Prior to the closing, FuiszDrugstore
was engaged in sales of drugstore products over the Internet.
In connection with the Stock Purchase Agreement, in February 1999, the
Company and Privateer concluded a 20 year license agreement (the "License
Agreement"), which grants Privateer the non-exclusive right to sell Licensed
Products (as that term is defined in the License Agreement) through the
Internet. The license covers all existing products of the Company as well as
certain additional products developed by the Company over the next four years.
In consideration for the license, the Company received a non-interest bearing
promissory note for $2.4 million, payable by Privateer in four annual
installments commencing on December 31, 1999.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an exhibit to the Schedule 14D-1 filed by Purchaser and Parent with the
Commission in connection with the Offer. The Offer is described in the Offer to
Purchase, under the caption, "The Tender Offer", as referenced below. The
following summary is qualified in its entirety by reference to the Merger
Agreement.
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the Offer Conditions (which are set forth below in "Certain Conditions
of the Offer"), the Purchaser will purchase such number of Shares of the Company
as will cause Parent and its affiliates to beneficially own up to 49% of the
outstanding Company Common Stock, but, except as otherwise provided in the
Merger Agreement, not less than 40% of the outstanding Company Common Stock of
the Shares validly tendered pursuant to the Offer. The Merger Agreement provides
that the Purchaser may modify and extend the terms of the Offer as described in
the Offer to Purchase. Subject to the terms and conditions of the Offer, the
Purchaser shall accept for payment and shall pay, as soon as practicable after
the expiration date of the Offer for Shares validly tendered and not withdrawn
(subject to proration, if applicable).
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Subject to compliance with applicable law, promptly upon the payment by the
Purchaser or Parent, as the case may be, for Shares pursuant to the Offer, and
from time to time thereafter, Parent shall be entitled to designate such number
of directors, proportionate to the number of Shares beneficially owned by Parent
or its affiliates; provided, however, that prior to the Effective Time (as
defined), the members of the Board which are officers, directors or designees of
the Parent shall at all times be less than 50% of the total number of Board
members.
Promptly upon the payment by the Purchaser or Parent, as the case may be,
for Shares pursuant to the Offer, Parent shall be entitled to designate one
officer of the Company (reasonably acceptable to the Company) as described in
the Merger Agreement. Such officer shall report to and serve at the pleasure of
the Board of Directors of the Company; PROVIDED, that such officer shall not be
terminated without the approval of at least two-thirds of the members of the
Board of Directors (including Purchaser Insiders as defined in the Merger
Agreement).
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the Delaware General Corporation Law
(the "DGCL"), at the effective time of the Merger (the "Effective Time"), the
Merger will be effected as soon as practicable following the satisfaction or
waiver of certain conditions to the Merger (as described below under "Conditions
to the Merger") or on such other date as the parties hereto may agree. At the
Effective Time, the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall cease.
If the Merger is consummated, the Certificate of Incorporation and By-Laws
of Purchaser, each as in effect immediately prior to the Effective Time, shall
be the Certificate of Incorporation and By-Laws of the Surviving Corporation,
until amended in accordance with the provisions thereof, the Merger Agreement
and applicable law.
CONSIDERATION TO BE PAID IN THE MERGER. In the Merger, each Share (other
than Shares held by Parent, the Purchaser, any direct or indirect wholly-owned
subsidiary of Parent, in the treasury of the Company or by any direct or
indirect wholly-owned subsidiary of the Company) issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive a fraction of a common share of Parent Common Stock, based on an
exchange ratio determined as follows: (i) if the average of the daily closing
prices per share of Parent Common Stock on the NYSE Composite Transactions
Reporting System, as reported in the Wall Street Journal for the fifteen trading
days ending on the date immediately prior to the second full NYSE trading day
immediately preceding the Closing Date the (the "Average Trading Price") is less
than $45.000, the Exchange Ratio shall equal .1556; (ii) if the Average Trading
Price is greater than or equal to $45.000, but less than or equal to $58.625,
the Exchange Ratio shall equal a fraction (rounded to the nearest
ten-thousandth) determined by dividing $7.00 by the Average Trading Price; (iii)
if the Average Trading Price is greater than $58.625 but less than or equal to
$62.810, the Exchange Ratio shall equal .1194 and (iv) if the Average Trading
Price is greater than $62.810, the Exchange Ratio shall equal a fraction
(rounded to the nearest ten-thousandth) determined by dividing $7.50 by the
Average Trading Price (the "Merger Consideration").
The Merger Agreement provides that each share of Company Common Stock held
by Parent, the Purchaser, any direct or indirect wholly-owned subsidiary of
Parent, in the treasury of the Company or by any direct or indirect wholly-owned
subsidiary of the Company, if any, immediately prior to the Effective Time shall
be canceled and retired and shall cease to exist with no payment being made with
respect thereto.
In addition, the Merger Agreement provides that each share of common stock,
par value $0.01 per share, of Purchaser issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become the number of
validly issued, fully paid and nonassessable shares of common stock, par value
$.01 per share, of the Surviving Corporation equal to the number of shares of
Common Stock outstanding on a fully diluted basis immediately prior to the
Effective Time.
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RECOMMENDATION. The Merger Agreement states that the Company's Board of
Directors has (i) determined that the Offer and the Merger are fair to and in
the best interests of the Company and its stockholders, (ii) approved the Offer
and the Merger in accordance with Section 203 of the DGCL and (iii) recommended
that the Company's stockholders accept the Offer, tender all of their Shares in
response to the Offer and adopt and approve the Merger Agreement and the Merger.
The Board may withdraw, modify or amend its recommendation if it determines
reasonably and in good faith that it is necessary under applicable law to do so
in the exercise of the directors' fiduciary duties, after consultation with
outside counsel.
SURVIVING CORPORATION'S DIRECTORS AND OFFICERS. Subject to applicable law,
the directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal. The officers of the Company at the Effective Time shall
be the initial officers of the Surviving Corporation and will hold office from
the Effective Time until their respective successors are duly elected or
appointed.
STOCK OPTIONS AND AWARDS. The Merger Agreement provides that, the Board of
Directors of the Company and the Board Compensation Committee have adopted such
resolutions, and shall take such other actions as may be necessary, so that each
outstanding option granted under the Company's 1991 Stock Option Plan, 1994
Director Stock Option Plan and 1994 Stock Incentive Plan (collectively, the
"Option Plans"), whether or not then exercisable or vested, shall, if not
exercised within five business days, be terminated immediately prior to the
Effective Time.
APPROVAL REQUIRED; STOCKHOLDERS MEETING. Under the DGCL, the affirmative
vote of holders of a majority of the outstanding Shares (including any Shares
owned by the Purchaser) is required to approve the Merger. The Board of
Directors of the Company has approved the Offer, the Merger and the Merger
Agreement; consequently, the only additional corporate action of the Company
that is necessary to effect the Merger is approval by the Company's
Stockholders. See also "--Conditions to the Merger" and "Certain Conditions of
the Offer" for a discussion of other conditions that must be satisfied prior to
the consummation of the Offer and the Merger.
Pursuant to the Merger Agreement, the Company will duly call a special
meeting of its Stockholders (the "Company Stockholders Meeting") as soon as
practicable following the acceptance for payment of and payment for Shares by
the Purchaser pursuant to the Offer for the purpose of voting upon the Merger
Agreement, whether or not the Board of Directors determines at any time
subsequent to the July 25, 1999 meeting of the Company's Board of Directors that
this Agreement is no longer advisable and recommends that Stockholders reject
it. The Merger Agreement provides that in connection with the Company
Stockholders Meeting, the Company shall prepare and file with the Commission a
preliminary proxy statement (the "Company Proxy Statement") relating to the
Merger and the Merger Agreement and that Parent shall file a registration
statement in which the Company Proxy Statement shall be included (the
"Registration Statement") and together with the Company Proxy Statement, the
"Proxy Statement/ Prospectus" with respect to the issuance of Parent Common
Stock in the Merger. Each of Parent and the Company shall use all commercially
reasonable best efforts to have such Proxy Statement/Prospectus and any
supplement or amendment thereto cleared by the Commission and the Registration
Statement declared effective by the Commission. The Proxy Statement/Prospectus
will be mailed to the Stockholders of the Company prior to the Company
Stockholders Meeting. The Company has agreed, subject to its fiduciary duties
under applicable law, as advised by outside counsel, to include in the proxy
statement the recommendation of the Board of Directors that Stockholders of the
Company vote in favor of the approval of the Merger and the adoption of the
Merger Agreement; provided, however, that notwithstanding any withdrawal,
modification or amendment of the recommendation of the Board of Directors of the
Company made at the Company Board Meeting, the Company agrees that the Merger
Agreement shall be submitted to the Stockholders for approval and adoption at
the Special Meeting whether or not the Board of
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Directors determines at any time subsequent to the Company Board Meeting that
the Merger Agreement is no longer advisable and recommends that Stockholders
reject it. Parent agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, the Purchaser or any of its other subsidiaries or
affiliates in favor of the approval of the Merger and the adoption of the Merger
Agreement.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE STOCKHOLDERS OF THE COMPANY. ANY SUCH SOLICITATION WHICH THE COMPANY, PARENT
OR THE PURCHASER MIGHT MAKE WOULD BE MADE ONLY PURSUANT TO SEPARATE PROXY OR
SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE
EXCHANGE ACT, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
NO APPRAISAL RIGHTS. In accordance with Section 262(b) of the DGCL, no
holder of shares of Company Common Stock shall be entitled to appraisal rights.
INTERIM OPERATIONS. Except as required by the Merger Agreement or with the
prior written consent of Parent, during the period from the date of the Merger
Agreement to the Effective Time, the Company has agreed to conduct its
operations only in the ordinary course of business consistent with past
practice. In addition, subject to certain exceptions, the Company will not,
prior to the Effective Time, without the prior written consent of Parent: amend
its organizational documents; modify existing compensation arrangements except
in the ordinary course of business consistent with past practice; acquire or
dispose of any assets; incur, assume or pre-pay any debt; modify, amend or
terminate any material contracts; change its accounting methods; adopt a plan of
liquidation or take certain other actions.
NO SOLICITATION. The Merger Agreement provides that neither the Company nor
any of the Subsidiaries (as defined in the Merger Agreement) has any agreement,
arrangement or understanding regarding an Acquisition Transaction (as defined
below) with any party expressing an interest in an Acquisition Transaction that,
directly or indirectly, would be violated, or require any payments, by reason of
the execution, delivery and/or consummation of the Merger Agreement. The Company
shall, and shall cause the Subsidiaries and its and their officers, directors,
employees, investment bankers, attorneys and other agents and representatives
to, immediately cease any existing discussions or negotiations with any person
other than Parent or the Purchaser (a "Third Party") heretofore conducted with
respect to any Acquisition Transaction. The Company shall not, and the Company
shall cause the Subsidiaries and its and their respective officers, directors,
employees, investment bankers, attorneys and other agents and representatives
not to, directly or indirectly, (x) solicit, initiate, continue, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any inquiries, proposals or offers from any Third Party with respect to, or that
could reasonably be expected to lead to, (i) any acquisition or purchase of 25%
or more of the assets or business of the Company and its Subsidiaries, taken as
a whole or a 25% or more voting equity interest in (including by way of a tender
offer), or (ii) any amalgamation, merger, consolidation or business combination
with, or any recapitalization or restructuring, or any similar transaction
involving, the Company (the foregoing clauses (i) and (ii) being referred to
collectively as an "Acquisition Transaction"), or (y) negotiate, explore or
discuss in any way with any Third Party with respect to any Acquisition
Transaction or enter into, approve or recommend any agreement, arrangement or
understanding requiring the Company to abandon, terminate or fail to consummate
the Offer and/or the Merger or any other transaction contemplated under the
Merger Agreement. Notwithstanding anything to the contrary in the foregoing, the
Company may, prior to the Company Special Meeting, in response to an unsolicited
written proposal with respect to an Acquisition Transaction involving the
acquisition of all or substantially all of the Shares (or all or substantially
all of the assets of the Company and the Subsidiaries) from a Third Party (i)
furnish or disclose non-public information to such Third Party, (ii) negotiate,
discuss or otherwise communicate with such Third Party and (iii) in the case of
an unsolicited tender offer for Shares, withdraw or modify (or resolve to
withdraw or modify) in a manner adverse to Parent the approval or recommendation
of the Merger Agreement and the transactions contemplated thereby or recommend
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(or resolve to recommend) such Acquisition Transaction with a Third Party to
Stockholders, (including disclosing to the Company's stockholders such position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act) in
each case only if the Board of Directors of the Company determines reasonably
and in good faith: (1) after consultation with and based (as to legal matters)
upon advice of outside counsel that it is required to do so in the exercise of
its fiduciary obligations, (2) (after consultation with its financial advisor)
that such proposed Acquisition Transaction or tender offer is more favorable to
the Stockholders from a financial point of view than the transaction
contemplated under the Merger Agreement (including any adjustment to the terms
and conditions proposed by Parent and the Purchaser in response to such proposed
Acquisition Transaction (a proposal with respect to such Acquisition Transaction
meeting the requirements of clauses (1) and (2) is referred to herein as a
"Superior Proposal"). Prior to furnishing or disclosing any non-public
information to such Third Party, the Company shall receive from such Third Party
an executed confidentiality agreement with terms no less favorable in the
aggregate to the Company than those contained in the Confidentiality Agreement
between the Company and Parent (the "Confidentiality Agreement"), but which
confidentiality agreement shall not provide for any exclusive right to negotiate
with the Company or any payments by the Company. The Company shall give Parent
one day's written notice prior to entering into any such Confidentiality
Agreement. The Company shall provide to Parent copies of all such non-public
information delivered to such Third Party concurrently with such delivery.
Notwithstanding the foregoing, the Board of Directors of the Company shall not,
and the Company shall not, withdraw or modify (or resolve to withdraw or modify)
in a manner adverse to Parent the approval or recommendation of the Merger
Agreement or any of the transactions contemplated thereby, or recommend (or
resolve to recommend) an Acquisition Transaction with a Third Party to the
Stockholders or enter into a definitive agreement with respect to a Superior
Proposal unless (x) the Company has given Parent five business days' notice of
the intention of the Board of Directors to withdraw or modify (or resolve to
withdraw or modify) in a manner adverse to Parent the approval or recommendation
of the Merger Agreement or any of the transactions contemplated under the Merger
Agreement, or recommend (or resolve to recommend) an Acquisition Transaction
with a Third Party to the Stockholders or the intention of the Company to enter
into such definitive agreement, as the case may be, (y) if Parent makes a
counter-proposal within such three business day period, the Board of Directors
of the Company shall have determined, in light of any such counter-proposal,
that the Third Party Acquisition Transaction proposal is still a Superior
Proposal, and (z) the Company concurrently terminates the Merger Agreement in
accordance with the terms thereof and pays any required Termination Fee (as
defined in the Merger Agreement) described under "Termination by Company-clause
(b)."
The Company shall promptly (but in any event within one day of the Company
becoming aware of same) advise Parent of the receipt by the Company, any of the
Subsidiaries or any of its or their bankers, attorneys or other agents or
representatives of any inquiries or proposals relating to an Acquisition
Transaction and any actions taken pursuant to the preceding paragraph. The
Company shall promptly (but in any event within one day of the Company becoming
aware of same) provide Parent with a copy of any such inquiry or proposal in
writing and a written statement with respect to any such inquiries or proposals
not in writing, which statement shall include the identity of the parties making
such inquiries or proposal and all the material terms thereof. The Company
shall, from time to time, promptly (but in any event within one day of the
Company becoming aware of same) inform Parent of the status and content of and
developments with respect to any discussions regarding any Acquisition
Transaction with a Third Party. The Company shall, from time to time, promptly
(but in any event within one day of the Company becoming aware of same) inform
Parent in writing of: (i) the calling of meetings of the Board of Directors of
the Company to take action with respect to such Acquisition Transaction, (ii)
the execution of any letters of intent, memoranda of understanding or similar
non-binding agreements with respect to such Acquisition Transaction, (iii) the
waiver of any standstill agreement to which the Company is or becomes a party,
(iv) the determination by the Board of Directors of the Company to recommend to
the Stockholders that they approve or accept a Superior Proposal or withdraw or
modify in a manner adverse to the Parent its approval or recommendation of the
Merger Agreement or the transactions contemplated under the
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Merger Agreement, (v) the determination by the Company to publicly disclose
receipt of a Superior Proposal and (vi) the waiver by the Company of any
confidentiality agreement with a person proposing a Superior Proposal.
DIRECTORS' AND OFFICERS' INSURANCE; INDEMNIFICATION. The Merger Agreement
provides that Parent agrees that all rights to indemnification now existing in
favor of any director or officer of the Company or its Subsidiaries as provided
in such person's certificate of incorporation or by laws, in an agreement
between any such person and the Company, or otherwise in effect on the date of
the Merger Agreement shall survive the Merger and shall continue in full force
and effect after the Effective Time. Parent also agreed to maintain directors'
and officers' liability insurance similar to that maintained by the Company for
at least six years.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the respective
obligations of the Company, Parent and Purchaser to consummate the Merger are
subject to the satisfaction or waiver of the following conditions prior to the
Closing (as defined in the Merger Agreement):
(a) STOCKHOLDER APPROVAL. The Stockholders shall have duly approved and
adopted the Merger Agreement and the transactions contemplated by the Merger
Agreement, to the extent required under applicable law.
(b) INJUNCTIONS; ILLEGALITY. The consummation of the Merger shall not be
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity (as
defined in the Merger Agreement) and there shall not have been any statute, rule
or regulation enacted, promulgated or deemed applicable to the Merger by any
Governmental Entity which prevents the consummation of the Merger.
CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER. The Merger Agreement
provides that the obligation of Parent and Purchaser to effect the Merger and to
perform their other obligations to be performed at or subsequent to the Closing
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived by Parent or
Purchaser:
(a) PERFORMANCE. The Company shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
the Merger Agreement to be performed or complied with by it on or prior to the
Closing Date, except for those failures to so perform or comply which are not
willful and those failures, whether or not willful, that, individually or in the
aggregate, would not either impair the Company's ability to consummate the
Merger and the other transactions contemplated thereby or have a Material
Adverse Effect on the Company.
(b) PURCHASE OF SHARES. The Purchaser shall have accepted for payment and
paid for Shares pursuant to the Offer in accordance with the terms of the Merger
Agreement, unless Purchaser's failure to accept for payment and pay for Shares
results from Purchaser's breach of any provision of the Merger Agreement.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The Merger Agreement provides
that the obligations of the Company under the Merger Agreement to effect the
Merger shall be subject to the fulfillment on or before the Closing Date of each
of the following additional conditions, any one or more of which may be waived
by the Company:
(a) PERFORMANCE. Parent and Purchaser shall have performed and complied in
all material respects with all agreements, obligations and conditions required
by the Merger Agreement to be performed or complied with by them on or prior to
the Closing Date (as defined in the Merger Agreement) except for those failures
to so perform or comply that, individually or in the aggregate, would not either
impair the ability of Parent or Purchaser to consummate the Merger and the other
transactions contemplated under the Merger Agreement or have a Material Adverse
Effect (as defined below) on Parent.
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(b) PURCHASE OF SHARES. The Purchaser shall have accepted for payment and
paid for Shares pursuant to the Offer in accordance with the terms of the Merger
Agreement, unless Purchaser's failure to accept for payment and pay for Shares
results from the Company's breach of any provision of the Merger Agreement.
For purposes of the Merger Agreement the term "Material Adverse Effect"
means, as to either company, any change in, or effect on, the business, results
of operations, assets, financial condition or prospects of that company or any
of its subsidiaries that is or would reasonably be expected to be materially
adverse to that company and its subsidiaries taken as a whole.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, each party has
made customary representations and warranties with respect to, among other
things, its organization, capitalization, financial statements, public filings,
conduct of business, compliance with laws, litigation, non-contravention,
consents and approvals, opinions of financial advisors, brokers, undisclosed
liabilities and the absence of certain changes with respect to the Company since
March 31, 1999.
TERMINATION; FEES. The Merger Agreement may be terminated and the Offer and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval by the Stockholders of the Company:
(a) by the written agreement of Parent and the Company duly authorized by
their respective Boards of Directors;
(b) by either Parent or the Company if, without fault of such terminating
party, the Merger shall not have been consummated on or before March 31, 2000,
which date may be extended by mutual consent of the parties hereto;
(c) by either Parent or the Company, if any court of competent jurisdiction
or other governmental body shall have issued an order (other than a temporary
restraining order), decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger, and such order, decree, ruling or
other action shall have become final and nonappealable; or
(d) by either Parent or the Company, if the approval of a majority of the
outstanding shares of Company Common Stock cast at the Special Meeting (as
defined in the Merger Agreement) or any adjournment thereof is not obtained.
TERMINATION BY PARENT. The Merger Agreement may be terminated and the
Merger may be abandoned by action of the Board of Directors of Parent, at any
time prior to the Effective Time, before or after the approval by the
stockholders of the Company, if:
(a) the Company shall have willfully failed to perform in all material
respects its covenants or agreements contained in the Merger Agreement which
would have a Material Adverse Effect on the Company or materially adversely
affect (or materially delay) the ability of Purchaser to consummate the Offer or
of Parent, Purchaser or the Company to consummate the Merger, and the Company
has not cured such breach within ten business days after notice by Parent or
Purchaser thereof;
(b) there exists a breach or breaches of any representation or warranty of
the Company contained in the Merger Agreement such that the Offer condition set
forth in clause (b)(i) of "Certain Conditions of the Offer" would not be
satisfied; PROVIDED, HOWEVER, that if such breach or breaches are capable of
being cured prior to the consummation of the Offer (as required to be extended),
only if such breaches shall not have been cured within 10 days of delivery to
the Company of written notice of such breach or breaches;
(c) the Board of Directors of the Company (i) fails to recommend the
approval of the Merger Agreement and the Merger to the Company's stockholders,
(ii) withdraws or amends or modifies in a manner adverse to Parent its
recommendation or approval in respect of the Merger Agreement or the Merger (it
being understood that taking no position on a tender offer for the Company as
contemplated by
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Rules 14d-9 and 14e-2 shall not be deemed a withdrawal, amendment or
modification) or (iii) makes any recommendation with respect to an Acquisition
Transaction, or the Board of Directors of the Company shall have resolved to
take any of the foregoing actions referred to in this clause and publicly
discloses such resolution;
(d) due to an occurrence or circumstance which would result in a failure to
satisfy any of the conditions set forth in "Certain Conditions of the Offer",
Purchaser shall have (i) terminated the Offer in accordance with the provisions
of "Certain Conditions of the Offer", or (ii) failed to pay for Shares pursuant
to the Offer within 120 days following the date hereof, unless such failure to
pay for Shares is a result of the failure of Parent or Purchaser to perform any
of its covenants and agreements contained in the Merger Agreement.
TERMINATION BY THE COMPANY. The Merger Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the stockholders of the Company, by action of the Board of the
Directors of the Company, if:
(a) Parent or Purchaser shall have failed to perform in all material
respects its covenants or agreements contained in the Merger Agreement which
would have a Material Adverse Effect on Parent or materially adversely affect
(or materially delay) the ability of Purchaser to consummate the Offer or of
Parent, Purchaser or the Company to consummate the Merger, and Parent or the
Purchaser has not cured such breach within ten business days after notice by the
Company thereof;
(b) the representations or warranties of the Parent and Purchaser contained
in the Merger Agreement at the date hereof and as of the consummation of the
Offer with the same effect as if made at and as of the consummation of the Offer
(except as to any such representation or warranty which speaks as of a specific
date) shall not be true and correct in any respect that is reasonably likely to
have a Material Adverse Effect on Parent (or if such representations and
warranties are qualified by reference to materiality or a Material Adverse
Effect on Parent, shall not be true and correct); provided, however, that if
such breach or breaches are capable of being cured prior to the consummation of
the Offer (as required to be extended), only if such breaches shall not be cured
within 10 days of delivery to Parent of written notice of such breach or
breaches;
(c) (A)(x) the Company proposes entering into a definitive agreement with
respect to a Superior Proposal or (y) the Board of Directors of the Company
recommends a Third Party Acquisition Transaction which is an unsolicited all
cash tender offer for any and all Shares and which constitutes a Superior
Proposal, (B) the Company gives Parent the three business days' notice as
required pursuant to the last sentence of the first paragraph of "No
Solicitation", (C) if a counter-proposal was made by Parent within such three
business day period, the Board of Directors of the Company has determined, in
light of the counter-proposal, that the Third Party Acquisition Transaction (or
proposal therefor) is still a Superior Proposal as required by the last sentence
of the first paragraph of "No Solicitation" and (D) the Company has paid to
Parent by wire transfer or immediately available funds to an account specified
by Parent a fee of $5.5 million immediately prior to such termination; or
(d) (i) Purchaser fails to commence the Offer as required, (ii) Purchaser
fails to pay for Shares pursuant to the Offer within 120 days following the date
of the Merger Agreement, unless such failure to pay for Shares is the result of
the failure of the Company to perform any of its covenants and agreements
contained in the Merger Agreement or (iii) Purchaser terminates the Offer in
accordance with the provisions of Annex I of the Merger Agreement.
In the event of termination of the Merger Agreement and abandonment of the
Merger pursuant to the termination provisions, no party thereto (or any of its
directors or officers) shall have any liability or further obligation to any
other party to the Merger Agreement, except as provided in this Section--
"Termination by the Company" and except that nothing in the Merger Agreement
shall relieve any party from liability for any breach of the Merger Agreement.
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In the event of a termination of the Merger Agreement by Parent pursuant to
the provision described in clause (c) of "Termination by Parent", the Company
shall, within two business days of such termination pay Parent, by wire transfer
or immediately available funds to an account specified by Parent, a fee of $5.5
million.
In the event of a termination of the Merger Agreement (i) pursuant to the
provision described in clause (c) of "Termination; Fees" based on the Company's
actions or omission or the provision described in clause (d) of "Termination;
Fees" or (ii) by Parent pursuant to the provisions described in clauses (a) or
(b) of "Termination by Parent" and in the case of either clause (i) or clause
(ii), prior to such termination any person shall have made a proposal with
respect to an Acquisition Transaction with the Company or its stockholders, and,
if prior to or within twelve months after such termination the Company or any
subsidiary of the Company enters into a definitive agreement with a third party
with respect to, or consummates, an Acquisition Transaction, then the Company,
as a condition to and prior to the earlier of entering into any such definitive
agreement and consummating an Acquisition Transaction, shall pay Parent by wire
transfer or immediately available funds to an account specified by Parent, a fee
of $5.5 million.
Parent and Purchaser acknowledge that whenever a fee is payable by the
Company to Parent pursuant to the termination provisions, payment by the Company
of such fee in accordance with the terms of the applicable paragraph shall be
deemed a release of the Company from all liability under the Merger Agreement.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions of
the Offer, in addition to (and not in limitation of) the Purchaser's right to
extend and amend the Offer at any time in its sole discretion (subject to the
terms of the Merger Agreement), the Purchaser shall not be required to accept
for payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act, pay for, and may delay the
acceptance for payment of or, subject to the regulations referred to above, the
payment for, any tendered Shares, and may terminate or amend the Offer, if (i)
there are not validly tendered and not withdrawn prior to the expiration date
for the Offer (the "Expiration Date") that number of Common Shares which,
together with Shares beneficially owned by Parent or its affiliates, represent
at least 40% of the outstanding Common Shares on the date of purchase (the
"Minimum Condition") PROVIDED; that Purchaser shall only be required to accept
for payment and to purchase that number of Common Shares which, together with
Shares beneficially owned by Parent or its affiliates, represents not more than
49% of the outstanding Common Shares on the date of purchase, (ii) any
applicable waiting periods under the HSR Act or any applicable foreign antitrust
statute shall not have expired or (iii) at any time on or after July 25, 1999
and before the expiration of the Offer, any of the following events shall occur:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger by any
domestic or foreign court or other Governmental Entity which, directly or
indirectly, (i) prohibits, or makes illegal, the acceptance for payment,
payment for or purchase of Shares or the consummation of the Offer, the
Merger or the other transactions contemplated by the Merger Agreement,
(ii) renders Purchaser unable to accept for payment, pay for or purchase
some or all of the Shares, (iii) imposes material limitations on the
ability of Parent effectively to exercise full rights of ownership of the
Shares, including the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders, or (iv)
otherwise has a Material Adverse Effect on the Company;
(b) (i) the representations and warranties of the Company contained in the
Merger Agreement at the date of the Merger Agreement and as of the
consummation of the Offer with the same effect as if made at and as of
the consummation of the Offer (except as to any such representation or
warranty which speaks as of a specific date) shall not be true and
correct in any respect that is
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reasonably likely to have a Material Adverse Effect on the Company (or if
such representations and warranties are qualified by reference to
materiality or a Material Adverse Effect on the Company, shall not be
true and correct), (ii) the Company shall have failed to perform in all
material respects its covenants or agreements contained in the Merger
Agreement which would have a Material Adverse Effect on the Company or
materially adversely affect (or materially delay) the ability of
Purchaser to consummate the Offer or of Parent, Purchaser or the Company
to consummate the Merger, and the Company has not cured such breach
within ten business days after notice by Parent or Purchaser thereof; or
(c) it shall have been publicly disclosed that (i) any person or "group" (as
defined in Section 13(d)(3) of the Exchange Act) shall have acquired or
entered into a definitive agreement or agreement in principle to acquire
beneficial ownership of more than 25% of the Shares or any other class of
capital stock of the Company, through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted any option,
right or warrant, conditional or otherwise, to acquire beneficial
ownership of more than 25% of the Shares and (ii) such person or group
shall not have tendered such Shares pursuant to the Offer;
(d) (i) the Company Board shall have withdrawn, or modified or changed in a
manner adverse to Parent (including by amendment of the Schedule 14D-9),
its recommendation of the Offer, the Merger Agreement or the Merger, or
recommended another proposal or offer, or the Company Board, shall have
resolved to do any of the foregoing or (ii) the Company enters into any
agreement to consummate any Acquisition Proposal with a Third Party;
(e) the Merger Agreement shall have terminated in accordance with its terms;
(f) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange, the Toronto Stock Exchange or the NASDAQ Stock
Market which lasts twenty four hours, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in Canada or
the United States (whether or not mandatory) or (iii) any limitation
(whether or not mandatory) by any United States or Canadian governmental
authority on the extension of credit generally by banks or other
financial institutions;
which in the good faith judgment of Parent, in any such case, and regardless of
the circumstances (including any action or inaction by Parent) giving rise to
such condition makes it inadvisable to proceed with the Offer or the acceptance
for payment of or payment for the Shares.
The foregoing conditions (other than the Minimum Condition) are for the sole
benefit of Parent and Purchaser and may be waived by Parent and Purchaser, in
whole or in part at any time and from time to time, in the sole discretion of
Parent and Purchaser. The failure by Parent and Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
THE OPTION AGREEMENT
On July 13, 1999, Parent entered into an option agreement with Dr. Fuisz
(the "Option Agreement"). Under the Option Agreement, Dr. Fuisz granted to
Parent an option (the "Option") to acquire 3,209,829 Shares (the "Option
Shares") through 5:00 p.m. July 23, 1999 for an aggregate cash purchase price of
$22,468,803 (the "Purchase Price"). Contemporaneous with entering into the
Option Agreement, Dr. Fuisz made arrangements for the Option Shares to be placed
into escrow, pursuant to the Escrow Agreement, dated as of July 13, 1999, by and
among Dr. Fuisz, Parent and the U.S. Trust Company, National Association (the
"Escrow Agreement"). On July 23, 1999, Parent and Dr. Fuisz agreed to extend the
option period until 11:59 p.m. Prior to such time, Parent placed the Purchase
Price in escrow and exercised the Option. The Purchase Price and the Option
Shares will be released from escrow upon the
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expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. If the Option Shares and the Purchase Price are not
distributed as provided in the preceding sentence by October 31, 1999, the
Option Shares will be returned to Dr. Fuisz and the Purchase Price will be
returned to Parent.
The Board of Directors of the Company, at a meeting duly called and held on
July 6, 1999 approved the Option Agreement in accordance with Section 203 of the
DGCL for the limited purpose of ensuring that the provisions of Section 203 of
the DGCL will not apply to the Option Agreement.
THE SALISBURY AND WESTBURY LETTERS
Pursuant to a letter of commitment from Salisbury Ltd. ("Salisbury"), dated
as of July 23, 1999, (the "Salisbury Letter"), Parent has committed to purchase
100,000 shares of Common Stock (the "Salisbury Shares") from Salisbury for an
aggregate cash purchase price of $700,000. Pursuant to a letter of commitment
from Westbury Ltd. ("Westbury"), dated as of July 23, 1999, (the "Westbury
Letter"), Parent has committed to purchase 900,000 shares of Common Stock (the
"Westbury Shares") from Westbury for an aggregate cash purchase price of
$6,300,000. Both the Salisbury Shares and the Westbury Shares will be purchased
by Parent following expiration or termination of the Offer. Parent has indicated
that it does not intend to consummate the Westbury and Salisbury transactions
until after the termination or the expiration of the Offer.
THE CONSULTING AGREEMENT
On July 13, 1999, Parent and Dr. Fuisz entered into an agreement providing
that a Consulting Agreement between Parent and Dr. Fuisz will become effective
if Parent, having exercised the Option, acquires more than 50% of the Company.
The Consulting Agreement provides for Dr. Fuisz to provide business, strategic,
marketing, business planning, special projects and other consulting services to
Parent. The Consulting Agreement imposes certain restrictions on Dr. Fuisz with
respect to competitive activities and Parent's employees, customers and
suppliers. If the Consulting Agreement becomes effective, Dr. Fuisz is entitled
to receive a fee of $2,000,000 on the first anniversary of the effective date,
provided that if Parent has acquired an interest of 80% or more in the Company
prior to July 13, 2010 Dr. Fuisz will be entitled to receive a fee of $500,000
per calendar quarter until he has received aggregate fees under the Consulting
Agreement of $6,000,000.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
At a meeting held on July 25, 1999, the Company Board, by unanimous vote of
all directors except for Mr. Tierney, who was not available, (a) determined that
each of the Offer, the Merger, and the Merger Agreement is fair to and in the
best interests of the Stockholders of the Company, (b) approved the Offer and
the Merger, (c) approved and adopted the Merger Agreement, the execution of such
agreements and the transactions contemplated by such agreements and (d)
recommended that such Stockholders accept the Offer and tender their Shares
pursuant thereto.
THEREFORE, THE FUISZ TECHNOLOGIES, INC. BOARD RECOMMENDS THAT THE
STOCKHOLDERS TENDER ALL OF THEIR SHARES PURSUANT TO THE OFFER.
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A copy of a letter to all stockholders of the Company communicating the
recommendations of the members of the Company Board is filed as Exhibit 18
hereto and is incorporated by reference in its entirety.
(b) BACKGROUND OF THE OFFER; REASONS FOR RECOMMENDATION.
(1) BACKGROUND
From time to time since before the Company's initial public offering, the
Company has received indications of interest or overtures from other companies
regarding a possible business combination.
One of the companies with which the Company has had discussions is Elan
Corporation, plc ("Elan"), which first expressed an interest in acquiring the
Company in July 1994. In the summer of 1995, Elan conducted a due diligence
review of the Company. Management of Elan and the Company reached a preliminary
agreement on a possible business combination subject to approval by the
companies' respective Boards of Directors. Elan's Board did not authorize a
transaction with the Company at that time.
In 1998, the Company and Elan again discussed possible strategic
relationships. In September 1998, Dr. Fuisz proposed to Mr. Geaney, the Chairman
and Chief Executive Officer of Elan, that Elan make an initial investment in the
Company's stock, as a first step in a strategic alliance. After further
discussions, the parties began to explore a transaction in which Dr. Fuisz would
offer to sell to Elan a block of his Shares that would amount to just under 20%
of the Company's outstanding stock.
On November 11, 1998, Dr. Fuisz and Mr. McVey of the Company and Messrs.
Geaney and Lynch of Elan met in New York City. At this meeting, the parties
discussed a transaction in which, among other things, Dr. Fuisz would sell
approximately 4.2 million Shares of the Company to Elan in exchange for 960,000
registered Elan shares that would be immediately transferrable. The discussions
contemplated a "gross up" provision that would provide price protection to Dr.
Fuisz in the event that Elan acquired a majority of the outstanding Shares after
purchasing Dr. Fuisz's Shares, and a provision under which Mr. Geaney would
become a Director of the Company. Following further discussions between the
parties over the next two months, in January 1999, the Company was informed that
Elan had determined not to execute an agreement documenting the transactions. In
February 1999, Dr. Fuisz and the Company filed a lawsuit against Elan as a
result of Elan's alleged failure to perform under a written agreement with the
Company and an oral agreement with Dr. Fuisz. The lawsuit was settled March 30,
1999.
Beginning in early 1999, senior executives of the Company began contacting a
number of pharmaceutical companies regarding the possibility of a strategic
business relationship. Company executives had extensive conversations with a
number of potential business partners. From these contacts, one large
pharmaceutical, health and medical product manufacturer and distributor
expressed an interest in further evaluating the possibility of a relationship
with the Company. Conversations between the Company and this company continued
during the Spring of 1999 and included an extensive due diligence review of the
Company's Chantilly, Virginia plant and offices. After further discussions, in
April 1999 the pharmaceutical company informed the Company that its preference
would be to monitor the Company's progress over the following year, but not to
pursue any transaction or relationship until that time.
In early June 1999, Dr. Fuisz and other senior executives of the Company and
the Chairman of Parent began discussions regarding a potential transaction
involving the two companies. In late June 1999, the Chairman of Parent proposed
acquiring Dr. Fuisz's shares through an option arrangement.
In mid-June, officers of the Company engaged in extensive negotiations with
Elan regarding a potential supply agreement. On account of an understanding that
Dr. Fuisz had with Elan that he would offer Elan a right of first negotiation
regarding any sale of his Shares, in late June and early July the Company
informed Elan that it was discussing a sale transaction involving the Company
and Dr. Fuisz's Shares.
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At a Company Board meeting on June 30, 1999, Dr. Fuisz briefed the Board on
the Company's discussions with various parties. After further discussion, the
Company Board determined to appoint a special committee of the Board (the
"Special Committee") to evaluate and respond to any transactions.
On July 2, 1999, representatives of the Parent and of Dr. Fuisz discussed
the terms of an option and escrow agreement covering Dr. Fuisz's Shares, but the
parties did not reach an agreement or understanding at that time.
Separately, on July 6, Parent stated that it was interested in conducting
due diligence on the Company but that it would not commence that process unless
it held an option to purchase Dr. Fuisz's Shares. In addition, Parent and
Company discussed entering into a confidentiality agreement, however, Parent
would not enter into such agreement without an exclusive ten day due diligence
period. On July 6, 1999, the Special Committee met telephonically and passed a
resolution approving Dr. Fuisz's grant to Parent of an option to purchase his
Shares, and the exercise of such an option, for the limited purpose of ensuring
that the provisions of Section 203 of the DGCL would not apply to the grant and
exercise of the option to purchase his Shares.
On July 6, 1999, Elan delivered a letter indicating that it would be
interested in acquiring all of the Shares that it did not own through a merger
for consideration of between $7.25 and $8.00 per Share and in entering into a
consulting agreement with Dr. Fuisz. Elan indicated that any such transaction
would be subject to various closing conditions, including approval by Elan's
Board, which had not as of that time been obtained; the negotiation, execution
and delivery of a definitive merger agreement; the absence of any material
adverse change in the Company's business, condition (financial and otherwise)
and prospects; and Elan's satisfactory completion of due diligence. The letter
stated that Elan would be able to complete its due diligence within
approximately two weeks, that the Company should agree not to solicit other
offers during that time, and that Elan anticipated closing the acquisition
within 50 days after completing its due diligence.
On July 8, 1999, Elan delivered another letter to the Company which
superseded its letter of July 6. The July 8 Elan letter substantially repeated
Elan's July 6, 1999 proposal, except that Elan stated that it would be able to
conclude its due diligence by July 13 and that it expected to be able to
consummate the transaction within 60 days of completing its due diligence
review. On July 8, the Special Committee met telephonically to consider Parent's
request for an exclusive period to conduct due diligence. At that meeting, the
Special Committee was informed that Elan had stated that it could complete its
due diligence and present an offer for the Company by noon on Saturday, July 10.
The Special Committee expressed concern, in light of the Company's past dealings
with Elan, as to the level of Elan's interest, and that the terms of Elan's July
8 letter represented no improvement over its July 6 letter, other than with
respect to the due diligence review period. In light of Elan's commitment to
present a proposal by July 10 at noon, the Special Committee determined to allow
Elan to continue to conduct due diligence, to enter into discussions with Parent
regarding its interest in conducting due diligence, and to decline to grant
Parent an exclusive due diligence review period. In response to that decision,
Parent indicated that it had no interest in conducting due diligence under those
circumstances.
On July 10, the Special Committee convened a telephonic meeting in
anticipation of considering a proposal from Elan. At that meeting, Elan
presented a letter indicating its interest in pursuing an acquisition of the
Company through a merger at $7.50 per Share, but indicated that it would need
until July 14 to complete its due diligence. The letter did not otherwise
significantly change the conditions to Elan's proposal, including the fact that
any transaction remained subject to approval by Elan's Board of Directors. The
Special Committee was also informed that Parent had contacted the Company to
indicate that it continued to be interested in conducting due diligence at the
Company on a limited exclusive basis. In light of the fact that Elan had not
obtained its Board's approval to pursue a transaction with the Company, the
period of time that Elan previously had been granted to conduct due diligence on
the Company, the extent of Elan's existing knowledge of and familiarity with the
Company and Elan's request
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for additional time to conduct due diligence and out of concern that continuing
discussions with Elan would prevent the Company from considering any other
proposals, the Special Committee determined to deny Elan's request for
additional time to conduct due diligence and to authorize negotiations toward a
provision allowing Parent to conduct due diligence for a limited period of time
on an exclusive basis, subject to the Special Committee's ability to satisfy its
fiduciary duties if a competing party expressed interest in a transaction.
On July 12 and 13, Gibson, Dunn & Crutcher LLP ("Gibson, Dunn & Crutcher"),
as counsel to the Special Committee, negotiated with counsel to Parent a
confidentiality agreement containing an agreement by the Company not to solicit
or respond to other proposals for a period of ten calendar days, subject to the
Company's ability to respond to an unsolicited proposal if required to satisfy
its fiduciary duties. At the same time, Parent negotiated the terms of the
Option Agreement and the proposed Consulting Agreement with the Falk Law Firm,
counsel to Dr. Fuisz. On July 13, Parent executed the Option Agreement with Dr.
Fuisz and the confidentiality agreement with the Company and immediately
commenced a due diligence examination of the Company.
On July 15, Elan delivered a letter to the Company indicating that it
continued to be interested in exploring a transaction with the Company.
On July 19, Parent indicated to the Special Committee's advisors that any
proposal that it would make to acquire the Company likely would involve
consideration in the form of both cash and Parent stock. Accordingly, legal
advisors to the Special Committee determined that it should authorize financial
and legal advisors to promptly conduct due diligence on Parent, with the
objective of being able to evaluate a cash and stock proposal from Parent, by
July 23, the date that the Stock Option expired. On July 21, 1999, the Company
retained Warburg Dillon Read LLC ("Warburg Dillon Read") to act as financial
advisor to the Special Committee in connection with the proposed transaction.
On July 22, Parent presented a draft merger agreement, which the Company
understood from discussions with Parent, contemplated a cash tender offer at
$7.00 per share for that number of shares that would result in Parent holding
49% of the Company's outstanding Shares, to be followed by a merger for stock at
an exchange ratio to be negotiated. That evening, legal and financial advisors
to the Special Committee and to Parent met to negotiate the terms of the draft
merger agreement.
On July 23, legal and financial advisors to the Company provided Parent
further comments on the draft merger agreement. On that afternoon, Dr. Fuisz
extended the term of the Stock Option until 11:59 p.m. that evening. That
afternoon, the Special Committee held a telephonic meeting to be briefed by its
legal and financial advisors regarding the terms of the draft merger agreement
and to discuss certain provisions that might be negotiated further. The Special
Committee authorized its legal and financial advisors to seek to negotiate,
among other things, an exchange ratio in the merger that would provide greater
protection against downside movement in Parent's stock price and some potential
to participate in any upside movement in Parent's stock price, and a
significantly lower break-up fee. In response to these negotiations, Parent
agreed to the exchange ratio and the break-up fee reflected in the Merger
Agreement, but refused to increase the cash purchase price for Shares in the
tender offer. The Special Committee held another telephonic meeting at which its
legal and financial advisors reported on the status of negotiations, and at
which the Special Committee authorized further negotiations. At 11:55 p.m.,
Parent exercised the Stock Option.
The parties continued to negotiate the Merger Agreement into the morning and
during the day on July 24. In the evening of July 24, the Special Committee
again met by telephone so that its legal and financial advisors could brief the
Committee on the status of negotiations. At the conclusion of that meeting, the
Special Committee recommended that the Merger Agreement be presented to the full
Board of Directors for consideration, and the Company Secretary called a meeting
of the Board of Directors for 11:00 a.m. on July 25. The Special Committee also
authorized its advisors to continue negotiating certain
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provisions of the Merger Agreement, including limiting the conditions to the
Merger and the circumstances under which the break-up fee would be payable.
During the morning of July 25, 1999, the Company's Board of Directors met
via teleconference, in which all members were present except for Mr. Tierney,
who was in Ireland and indicated that he could not be available. At the meeting,
Gibson, Dunn & Crutcher reviewed the status of negotiations that had been
occurring over the Merger Agreement. Gibson, Dunn & Crutcher also provided a
summary of the principal terms of the Merger Agreement, and reported on the due
diligence examination of Parent that it had conducted. Warburg Dillon Read then
reviewed with the Board the financial analyses it had performed in connection
with its evaluation, from a financial point of view, of the consideration
payable in the proposed transaction. Although the Board expressed its support
for the terms of the Merger Agreement, in response to further discussion, the
Board instructed its advisors to approach Parent regarding the Share conversion
formula and to seek revision or clarification of certain other terms. In
response to these discussions, Parent agreed to revise certain terms of the
Merger Agreement.
The Company's Board of Directors reconvened its meeting later that day and,
received a report from Gibson, Dunn & Crutcher with respect to the additional
modifications to the Merger Agreement and Warburg Dillon Read's opinion as to
fairness, from a financial point of view, of the consideration to be received in
the Offer and Merger, taken together, by holders of the Company's Shares (other
than Parent and its affiliates). The Board (i) determined that the Offer and the
Merger are fair to and in the best interests of the Company and its
stockholders, (ii) approved the Offer and the Merger in accordance with Section
203 of the DGCL and (iii) recommended that the Company's stockholders accept the
Offer, tender all of their Shares in response to the Offer and adopt and approve
the Merger Agreement and the Merger.
That evening, the Merger Agreement was executed by the parties and on July
26, 1999, a joint press release was issued prior to the opening of the U.S.
stock markets.
(2) REASONS FOR THE RECOMMENDATION OF THE BOARD; FAIRNESS OF THE OFFER.
In reaching its determination referred to in Item 4(a) above, the Company
Board considered the following factors, each of which in the view of the Company
Board, supported such determinations:
(i) The amount, timing and form of consideration to be received by the
Company's stockholders in the Offer and the Merger pursuant to the Merger
Agreement, including the fact that stockholders would receive a cash payment
with no financing condition.
(ii) The possibility that the consideration the Company's stockholders might
obtain in a future transaction or through continued ownership of Company Shares
if the Company were to remain independent would likely be less advantageous than
the consideration they would receive pursuant to the Offer and the Merger,
because of:
(a) The present financial condition and needs, and the business and
strategic objectives of the Company, as well as the risks involved in
achieving those objectives;
(b) The need for the Company to attract and retain management and skilled
scientific personnel if it were to remain independent; and
(c) The need for the Company to restructure its operations and the
current financial market conditions and historical market prices,
volatility and trading information with respect to the Shares.
(iii) The historical market prices and trading activity of the Shares over
the weeks preceding the date of the public announcement of the Merger Agreement
(the "Announcement"): the Offer Price of $7.00 per share represents a 113%
premium over the closing price of the Shares thirty days prior to the
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Announcement, a 67% premium over the average closing price for the thirty days
prior to the Announcement and a 38.3% premium over the closing price one week
prior to the Announcement;
(iv) The fact that, under the Merger Agreement, stockholders may receive in
the Merger the benefit of any appreciation in Parent's stock price over its
trading price immediately prior to the date the Merger Agreement was signed, up
to the level where the Parent stock to be received may be worth $7.50 per share;
(v) The fact that, under the Merger Agreement, the Company may still receive
offers from other interested bidders, if any, and may communicate with any such
bidders if required to satisfy its fiduciary obligations to the Company's
stockholders; and if the Company determines any such other bidder has made a
superior offer, it may after giving notice to Purchaser and an opportunity to
match or exceed the alternative offer, elect to terminate the Merger Agreement
and pay the break-up fee provided for in the Merger Agreement;
(vi) The likelihood of the proposed acquisition being consummated, in light
of Purchaser's prior purchase of a significant number of Shares and the limited
conditions to Purchaser's obligation to consummate the Merger once the Offer has
been consummated;
(vii) The effect of the condition in the Merger Agreement that, without the
consent of the Company, no change in the Offer may be made by Parent or
Purchaser which (i) decreases the $7.00 per Share payable in the Offer, (ii)
waive the Minimum Condition, (iii) change the form of consideration payable in
the Offer, (iv) reduces the maximum number of Shares to be purchased in the
Offer, (v) change the conditions to the Offer or (vi) impose additional
conditions to the Offer or amend any other term of the Offer in any manner
adverse to the holders of Shares; and
(viii) The written opinion of Warburg Dillon Read to the Special Committee and
the Company Board, dated July 25, 1999, to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
per Share consideration to be received by the holders of Shares (other than
Parent and its affiliates) in the Offer and the Merger, taken together, was
fair, from a financial point of view, to such holders. The full text of the
written opinion of Warburg Dillon Read, dated July 25, 1999, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex A to this document and is incorporated herein
by reference. Warburg Dillon Read's opinion is directed to the Special Committee
and the Company Board, addresses only the fairness of the per Share
consideration to be received by the holders of Shares (other than Parent and its
affiliates) in the Offer and the Merger, taken together, from a financial point
of view, and does not constitute a recommendation to any stockholder as to
whether or not such stockholder should tender Shares in the Offer or as to how
such stockholder should vote with respect to the proposed Merger. HOLDERS OF
SHARES ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS ENTIRETY.
CONSIDERATIONS OF THE COMPANY BOARD
The foregoing discussion of the information and factors considered by the
Company Board is not meant to be exhaustive but includes the material factors
considered by the Board in reaching its conclusions and recommendations. The
members of the Company Board evaluated the various factors listed above in light
of their knowledge of the business, financial condition and prospects of the
Company and after discussions with the Company's management and legal and
financial advisors. In light of the number and variety of factors that the
Company Board considered in connection with its evaluation of the Merger, the
Merger Agreement and the transactions contemplated thereby (including the
Offer), the Company Board did not find it practicable to assign relative weights
to the foregoing factors, and accordingly, the Company Board did not do so. In
addition, individual members of the Company Board may have given different
weights to different factors.
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The Company Board determined that the Offer was the result of a process that
was fair to the stockholders of the Company because, among other things, (a) the
Special Committee conducted numerous meetings, during which the Special
Committee evaluated and analyzed the proposed transaction, determined the
negotiating strategy and reached informed conclusions based, in part, on the
advice of independent financial and legal advisors, (b) the Special Committee
deliberated with respect both to the transactions with Parent and alternative
strategies potentially available for maximizing stockholder value and (c) the
$7.00 per Share price and the other terms and conditions of the Merger Agreement
and the Offer resulted from active arm's-length bargaining between the Company
and its representatives, on the one hand, and Parent and its representatives on
the other.
IN LIGHT OF ALL THE FACTORS SET FORTH ABOVE, THE COMPANY BOARD HAS
DETERMINED THAT THE OFFER, MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE OFFER, THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained Warburg Dillon Read to act as financial advisor to
the Special Committee in connection with the Offer and the Merger. Pursuant to
the terms of this engagement, the Company has agreed to pay Warburg Dillon Read
for its services upon completion of the Offer and the Merger an aggregate
financial advisory fee equal to 1% of the total consideration, including
liabilities assumed, payable in the Offer and the Merger, subject to a minimum
fee of $2,750,000. The Company also has agreed to reimburse Warburg Dillon Read
for reasonable travel and other out-of-pocket expenses, including the fees and
expenses of legal counsel, and to indemnify Warburg Dillon Read and related
parties against certain liabilities, including liabilities under the federal
securities laws, relating to or arising out of their engagement. In the ordinary
course of business, Warburg Dillon Read and its successors and affiliates may
actively trade or hold the securities of the Company and Parent for their own
accounts or for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
The Company also retained Wasserstein Perella & Co., Inc. ("Wasserstein
Perella") to render financial advice and assistance to the Company in connection
with a possible merger, sale or other strategic combination involving the
Company and Parent. However, Wasserstein Perella was not requested to provide
the Company an opinion as to the fairness, from a financial point of view, of
the consideration payable in the Offer and the Merger, and will not receive any
compensation in connection with the Merger Agreement, the Offer or the Merger.
Neither the Company nor any person acting on its behalf has or currently
intends to employ, retain or compensate any person to make solicitations or
recommendations to the stockholders of the Company on its behalf with respect to
the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected by
Company or, to the best of Company's knowledge, by any of its executive
officers, directors, affiliates or subsidiaries, except (i) Dr. Fuisz has
exercised 105,000 options on July 13, 1999, (ii) Dr. Fuisz sold Parent 3,209,829
Shares on July 23, 1999 for an aggregate cash purchase price of $22,468,803,
(iii) Salisbury Ltd. has committed to sell 100,000 Shares to Parent for an
aggregate cash purchase price of $700,000; and (iv) Westbury Ltd. has committed
to sell 900,000 Shares to Parent for an aggregate cash purchase price of
$6,300,000.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director and affiliate of the Company presently intends to tender to Purchaser,
pursuant to the Offer, all Shares of which he is the record or beneficial owner.
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth herein and in the portions of the Offer to Purchase
incorporated herein by reference, the Company is not engaged in any negotiation
in response to the Offer which relates to or would result in: (1) an
extraordinary transaction, such as a merger or reorganization involving the
Company or any subsidiary thereof; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary thereof; (3) a tender
offer for or other acquisition of securities by or of the Company; or (4) any
material change in the present capitalization or dividend policy of the Company.
(b) Except as set forth herein and in the portions of the Offer to Purchase
incorporated therein by reference, there is no transaction, board resolution,
agreement in principle, or signed contract in response to the Offer which
relates to or would result in one or more of the matters referred to in Item
7(a)(1), (2), (3) or (4).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The information contained in all of the Exhibits referred to in Item 9 below
is incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit 1 Offer to Purchase, dated July 30, 1999 (incorporated by reference to Exhibit (a)(1) to the Schedule
14D-1.
Exhibit 2 Letter of Transmittal (incorporated by reference Exhibit (a)(2) to the Schedule 14D-1).
Exhibit 3 Employment Letter, dated October 24, 1995, between Company and Mr. Myers (incorporated by reference
to Exhibit 10.12 to Form 10-K/A, dated April 15, 1999 ("Form 10-K/A")).
Exhibit 3A Employment Letters, dated August 3, 1998 and January 13, 1999 between Company and Mr. Myers.#
Exhibit 4 Employment Letters, dated September 18, 1997 and July 1, 1998 between Company and Mr. Willard.#
Exhibit 5 Employment Letters, dated October 27, 1992 and August 3, 1998 between Company and Mr. Cherukuri.#
Exhibit 6 Company's 1991 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 and 10.1A
to Form 10-K/A).
Exhibit 7 Consulting Agreement, dated as of January 28, 1999 ("January 28 Consulting Agreement"), as amended
June 25, 1999, between Company and Mr. Scrivens. Appendix A to the January 28 Consulting Agreement
is incorporated by reference to Exhibit 10.10 to Form 10-K/A.#
Exhibit 8 The Stock Purchase Agreement, dated December 31, 1998, between Privateer Ltd. and the Company.#
Exhibit 9 License Agreement, dated December 31, 1998, between Privateer Ltd. and the Company.#
Exhibit 10 Amended & Restated Agreement and Plan of Merger, dated as of July 25, 1999, among ABCI Acquisition
Sub. Corporation, Biovail Corporation International and Fuisz Technologies, Ltd. (incorporated by
reference to Exhibit (c)(1) to the Schedule 14D-1).
</TABLE>
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<TABLE>
<CAPTION>
Exhibit 11 Option Agreement, dated as of July 13, 1999, among ABCI Acquisition Sub. Corporation, Biovail
Corporation International and Dr. Richard Fuisz (incorporated by reference to Exhibit 1 to Schedule
13D, filed July 13, 1999 ("Schedule 13D")).
<S> <C>
Exhibit 12 Escrow Agreement, dated as of July 13, 1999, by and between Richard C. Fuisz, M.D., Biovail
Corporation International and U.S. Trust Company, National Association Fuisz (incorporated by
reference to Exhibit 2 to Schedule 13D).
Exhibit 13 Letter of Commitment, dated as of July 23, 1999, between Salisbury Ltd. and Biovail Corporation
International (incorporated by reference to Exhibit 1 to the Amendment No. 1 to Schedule 13D, filed
July 26, 1999 ("Schedule 13D/A")).
Exhibit 14 Letter of Commitment, dated as of July 23, 1999, between Westbury Ltd. and Biovail Corporation
International (incorporated by reference to Exhibit 2 to Schedule 13D/A).
Exhibit 15 Letter of Acceptance, dated as of July 25, 1999, between Biovail Corporation International and
Salisbury Ltd. (incorporated by reference to Exhibit 3 to Schedule 13D/A).
Exhibit 16 Letter of Acceptance, dated as of July 25, 1999, between Biovail Corporation International and
Westbury Ltd. (incorporated by reference to Exhibit 4 to Schedule 13D/A).
Exhibit 17 Letter Agreement between Bioval and Dr. Fuisz, dated July 13, 1999 regarding the Consulting
Agreement (incorporated by reference to Exhibit (c)(8) of Schedule 14D-1).
Exhibit 18 Letter to Stockholders of Fuisz Technologies, Ltd., dated July 30, 1999.*#
Exhibit 19 Press Release issued July 25, 1999 (incorporated by reference to Exhibit (a)(6) to the Schedule
14D-1).
ANNEX A Opinion of Warburg Dillon Read LLC.*#
</TABLE>
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* Included in materials mailed to stockholders.
# Filed with original Schedule 14D-9, dated July 30, 1999
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SIGNATURE
After due inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
<TABLE>
<S> <C> <C>
Dated: July 30, 1999 FUISZ TECHNOLOGIES, LTD.
By: Fuisz Technologies, Ltd.
/s/ Dr. Richard Fuisz
By: Dr. Richard Fuisz
Its: Chairman of the Board
</TABLE>
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