<PAGE>
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- -------------------------------------------------------------------------------
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X]FILED BY THE REGISTRANT [_]FILED BY A PARTY OTHER THAN THE REGISTRANT
CHECK THE APPROPRIATE BOX:
[_]Preliminary Proxy Statement
[_]Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEUREX CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[_]No fee required.
[X]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction
applies: 26,291,827
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
$30.9825(1)
(4) Proposed maximum aggregate value of transaction: $814,586,530
(5) Total fee paid: $162,918
[X]Fee paid previously with preliminary materials.
[X]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: $162,918
(2) Form, Schedule or Registration Statement No.: Registration
Statement on Form F-4, Registration No. 333-9056
(3) Filing Party: Elan Corporation,
plc
(4) Date Filed: July 1, 1998
- --------
Notes:
(1) Based upon the average of the high and low sale prices of American
Depositary Shares of Elan Corporation, plc on The New York Stock Exchange
on June 2, 1998 multiplied by the exchange ratio of 0.51.
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- -------------------------------------------------------------------------------
<PAGE>
NEUREX CORPORATION
3760 HAVEN AVENUE
MENLO PARK, CALIFORNIA 94025
July 1, 1998
Dear Neurex Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Neurex Corporation ("Neurex") to be held at the administrative offices of
Neurex, 190 Independence Drive, Menlo Park, California, on August 11, 1998, at
10:00 a.m., local time.
At the Annual Meeting you will be asked to vote on a proposal to approve and
adopt an Agreement and Plan of Merger, dated as of April 29, 1998 (the "Merger
Agreement"), providing for the merger (the "Merger") of Neurex with a wholly-
owned subsidiary of Elan Corporation, plc ("Elan"). Upon consummation of the
Merger, (a) Neurex will become a wholly-owned subsidiary of Elan and (b)
Neurex stockholders (other than Elan) will be entitled to receive 0.51 of an
American Depositary Share of Elan (an "Elan ADS," each Elan ADS representing
one ordinary share, par value 4 Irish pence, of Elan, evidenced by one
American Depositary Receipt of Elan) for each share of Neurex common stock,
par value $.01 (a "Neurex Share"), held by them (the "Exchange Ratio").
The Board of Directors of Neurex has carefully considered the terms and
conditions of the proposed Merger, including a written opinion, dated as of
April 28, 1998, from its financial advisor, Morgan Stanley & Co. Incorporated
("Morgan Stanley"), to the effect that, as of such date, the Exchange Ratio is
fair, from a financial point of view, to the stockholders of Neurex. A copy of
Morgan Stanley's written opinion, which sets forth a description of the
assumptions made, matters considered and limits of its review, is attached to
the accompanying Prospectus-Proxy Statement as Annex B. Neurex stockholders
are urged to read carefully the opinion in its entirety.
NEUREX'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN
THE BEST INTERESTS OF, NEUREX AND THE NEUREX STOCKHOLDERS. ACCORDINGLY, THE
BOARD OF DIRECTORS OF NEUREX RECOMMENDS THAT NEUREX STOCKHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT
The approval and adoption of the Merger Agreement requires the affirmative
vote of the holders of a majority of the Neurex Shares outstanding and
entitled to vote thereon. In view of the importance of the actions to be taken
at this Annual Meeting of Neurex stockholders, we urge you to review carefully
the accompanying Notice of Annual Meeting of Stockholders and the Prospectus-
Proxy Statement, including the Annexes thereto, which include information on
the Merger, the Merger Agreement, Elan and Neurex. Whether or not you expect
to attend the Annual Meeting, please complete, sign and date the enclosed
proxy and return it as promptly as possible. If you attend the Annual Meeting
in person, you may, if you wish, vote personally even if you have previously
returned your proxy.
PLEASE DO NOT SEND YOUR SHARE CERTIFICATES WITH THE ENCLOSED PROXY CARD AT
THIS TIME. Promptly after the Merger is consummated, you will be sent a letter
of transmittal which will include instructions as to the procedures to be used
in exchanging your certificates representing Neurex Shares for certificates
evidencing Elan ADSs.
In the Notice of Annual Meeting of Stockholders that follows, we have also
described other matters being submitted for your vote, all of which the Board
of Directors of Neurex recommends Neurex stockholders vote FOR.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
/s/ Paul Goddard, Ph. D.
Paul Goddard, Ph. D.
President and Chief Executive
Officer
<PAGE>
NEUREX CORPORATION
3760 HAVEN AVENUE
MENLO PARK, CALIFORNIA 94025
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 11, 1998
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Neurex Corporation, a Delaware corporation ("Neurex"), will be
held at the administrative offices of Neurex, 190 Independence Drive, Menlo
Park, California, on August 11, 1998, at 10:00 a.m., local time, for the
following purposes:
(1) To consider and vote on a proposal (the "Merger Proposal") to
approve and adopt an Agreement and Plan of Merger, dated as of April
29, 1998 (the "Merger Agreement"), by and among Elan Corporation, plc
("Elan"), Ganesh Acquisition Corp. ("Subco") and Neurex, pursuant to
which, among other things, (a) Subco will be merged with and into
Neurex with the result that Neurex will become a wholly-owned
subsidiary of Elan (the "Merger") and (b) each share (other than shares
held by Elan) of Neurex common stock, par value $.01 (a "Neurex
Share"), outstanding will be converted into the right to receive 0.51
of an American Depositary Share of Elan (an "Elan ADS"). Each Elan ADS
represents one ordinary share, par value 4 Irish pence, of Elan, and is
evidenced by one American Depositary Receipt of Elan.
(2) To consider and vote on a proposal to approve Neurex's 1998
Employee, Consultant and Director Stock Option Plan (the "1998 Stock
Option Plan") and to authorize 1,000,000 Neurex Shares for issuance
thereunder.
(3) To consider and vote on the election of nine directors to
Neurex's Board of Directors for terms expiring at the Neurex 1999
Annual Meeting.
(4) To consider and vote on the ratification of the selection of
Ernst & Young LLP as auditors of Neurex's financial statements for the
year ending December 31, 1998.
(5) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The proposals presented for vote are not conditioned on one another.
The Board of Directors of Neurex has fixed the close of business on June 29,
1998 as the record date for the determination of the Neurex stockholders
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
or postponements thereof. Approval of the Merger Proposal requires the
affirmative vote of a majority of the Neurex Shares outstanding and entitled
to vote thereon. The proposals set forth in paragraphs (2) and (4) above
require the affirmative vote of a majority of the Neurex Shares present in
person or represented by proxy at the Annual Meeting and entitled to vote
thereon. A plurality of the Neurex Shares present in person or represented by
proxy at the Annual Meeting will be required to elect each director to the
Board of Directors of Neurex pursuant to the proposal set forth in paragraph
(3) above. Under Delaware law, Neurex stockholders will not be entitled to
appraisal rights in connection with the Merger.
Information regarding the Merger, the Merger Agreement, Neurex, Elan and the
proposals set forth in paragraphs (2), (3) and (4) above is contained in the
accompanying Prospectus-Proxy Statement and the Annexes thereto, which are
incorporated by reference herein and form a part of this Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
IT IS IMPORTANT THAT YOUR INTERESTS BE REPRESENTED AT THE MEETING.
<PAGE>
THE BOARD OF DIRECTORS OF NEUREX HAS UNANIMOUSLY DETERMINED THAT THE TERMS
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO,
AND IN THE BEST INTERESTS OF, NEUREX AND THE NEUREX STOCKHOLDERS. ACCORDINGLY,
THE BOARD OF DIRECTORS OF NEUREX RECOMMENDS THAT NEUREX STOCKHOLDERS VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE BOARD OF DIRECTORS OF
NEUREX ALSO RECOMMENDS THAT NEUREX STOCKHOLDERS VOTE FOR THE APPROVAL OF EACH
OF THE REMAINING PROPOSALS.
By Order of the Board of Directors
/s/ Thomas L. Barton,
Thomas L. Barton,
Secretary
Menlo Park, California
July 1, 1998
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
<PAGE>
PROSPECTUS-PROXY STATEMENT
---------------
LOGO ELAN CORPORATION, PLC
PROSPECTUS
NEUREX CORPORATION LOGO
---------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 11, 1998
This Prospectus-Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Neurex Corporation, a
Delaware corporation ("Neurex"), for use at the Annual Meeting of Stockholders
of Neurex (the "Annual Meeting") scheduled to be held on August 11, 1998, at
10:00 a.m., local time, at the administrative offices of Neurex, 190
Independence Drive, Menlo Park, California, and at any adjournments or
postponements thereof.
At the Annual Meeting, the Neurex stockholders of record as of the close of
business on June 29, 1998 will be asked to consider and vote on a proposal to
approve and adopt an Agreement and Plan of Merger, dated as of April 29, 1998
(the "Merger Agreement"), by and among Elan Corporation, plc, a public limited
company incorporated under the laws of Ireland ("Elan"), Ganesh Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Elan ("Subco"),
and Neurex (the "Merger Proposal"). A copy of the Merger Agreement is attached
as Annex A to this Prospectus-Proxy Statement. Pursuant to the Merger
Agreement, upon the terms and conditions thereof, Subco will be merged with
and into Neurex (the "Merger"). Neurex, as the surviving corporation in the
Merger (the "Surviving Corporation"), will become a wholly-owned subsidiary of
Elan, and each share of common stock, par value $.01, of Neurex (a "Neurex
Share") then outstanding (other than shares owned by Elan) will be converted
into the right to receive 0.51 of an American Depositary Share of Elan (an
"Elan ADS"). Each Elan ADS represents one ordinary share, par value 4 Irish
pence, of Elan (an "Ordinary Share"), and is evidenced by one American
Depositary Receipt of Elan (an "Elan ADR"). No fractional Elan ADSs will be
issued in the Merger; Neurex stockholders will receive cash in lieu thereof.
See "The Merger Agreement--Conversion of Neurex Shares" and "--No Fractional
Elan ADSs."
At the Annual Meeting, Neurex stockholders will also be asked (i) to
consider and vote on a proposal to approve Neurex's 1998 Employee, Consultant
and Director Stock Option Plan (the "1998 Stock Option Plan") and to authorize
1,000,000 Neurex Shares for issuance thereunder; (ii) to consider and vote on
the election of nine directors to Neurex's Board of Directors (the "Neurex
Board") for terms expiring at the Neurex 1999 Annual Meeting; (iii) to
consider and vote on the ratification of the selection of Ernst & Young LLP as
auditors of Neurex's financial statements for the year ending December 31,
1998; and (iv) to transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
This Prospectus-Proxy Statement also constitutes the prospectus of Elan
filed with the Securities and Exchange Commission (the "Commission") as part
of a Registration Statement on Form F-4 (the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
Elan ADSs (and the Ordinary Shares represented thereby) to be issued to
stockholders of Neurex upon the consummation of the Merger. All information
concerning Elan contained or incorporated by reference in this Prospectus-
Proxy Statement has been furnished by Elan and all information concerning
Neurex prior to the Merger contained or incorporated by reference in this
Prospectus-Proxy Statement has been furnished by Neurex.
Neurex stockholders are urged to read and carefully consider the information
contained in this Prospectus-Proxy Statement. This Prospectus-Proxy Statement,
the letter to Neurex stockholders, the Notice of Annual Meeting of
Stockholders and the related form of proxy are first being mailed or delivered
to stockholders of Neurex on or about July 2, 1998. Any stockholder of Neurex
who has given his, her or its proxy may revoke it at any time prior to its
use. See "The Annual Meeting--Record Date; Voting Rights; Voting at the
Meeting" and "--Voting of Proxies."
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 OF THIS PROSPECTUS-PROXY STATEMENT
FOR A DISCUSSION OF CERTAIN MATTERS NEUREX STOCKHOLDERS SHOULD CONSIDER BEFORE
VOTING FOR OR AGAINST THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
---------------
THE ELAN ADSS (AND THE ORDINARY SHARES REPRESENTED THEREBY) TO BE ISSUED IN
THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS-PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus-Proxy Statement is July 1, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES
LAWS..................................................................... v
AVAILABLE INFORMATION..................................................... v
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... vi
FORWARD LOOKING STATEMENTS................................................ vii
SUMMARY................................................................... 1
General................................................................... 1
The Companies............................................................. 1
The Annual Meeting........................................................ 3
Date, Time, Place and Purpose........................................... 3
Record Date; Shares Entitled to Vote.................................... 3
Required Vote; Voting Agreement......................................... 3
Revocability of Proxies................................................. 3
The Merger and the Merger Agreement....................................... 4
Merger Terms............................................................ 4
Reasons for the Merger.................................................. 4
Recommendation of the Neurex Board of Directors......................... 4
Opinion of Neurex's Financial Advisor................................... 5
Interests of Certain Persons in the Merger.............................. 5
Anticipated Accounting Treatment........................................ 5
Certain U.S. Federal Income Tax Consequences............................ 5
Absence of Appraisal Rights............................................. 5
Conditions to the Merger................................................ 5
Effective Time of the Merger............................................ 6
Termination of the Merger Agreement..................................... 6
Governmental and Regulatory Matters..................................... 7
Comparative Rights of Stockholders...................................... 7
Summary Historical Consolidated Financial Data of Elan.................... 8
Summary Historical Consolidated Financial Data of Neurex.................. 9
Summary Unaudited Pro Forma Combined Financial Data....................... 11
Unaudited Pro Forma Combined Balance Sheet.............................. 12
Unaudited Pro Forma Combined Statement of Income (year ended December
31, 1997).............................................................. 13
Unaudited Pro Forma Combined Statement of Income (three months ended
March 31, 1998)........................................................ 14
Comparative Per Share Data................................................ 15
Comparative Market Price and Dividend Information......................... 15
Comparative Market Price Information.................................... 15
Comparative Dividend Information........................................ 16
RISK FACTORS.............................................................. 17
Risk Factors Relating to Elan........................................... 17
Risk Factors Relating to Neurex......................................... 19
THE ANNUAL MEETING........................................................ 19
General................................................................. 19
Matters to be Considered at the Annual Meeting.......................... 19
Record Date; Voting Rights; Voting at the Meeting....................... 19
</TABLE>
i
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<TABLE>
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<S> <C>
Adjournment of the Annual Meeting....................................... 20
Voting of Proxies....................................................... 20
Solicitation of Proxies................................................. 21
THE MERGER................................................................ 21
Background of the Merger................................................ 21
Neurex's Reasons for the Merger; Recommendation of the Neurex Board of
Directors.............................................................. 23
Elan's Reasons for the Merger........................................... 23
Opinion of Financial Advisor to Neurex.................................. 24
Interests of Certain Persons in the Merger.............................. 27
Resales of Elan ADSs.................................................... 28
Delisting and Deregistration of Neurex Shares; Listing of Elan ADSs..... 29
Absence of Appraisal Rights............................................. 29
Covenant not to Sell Elan ADSs.......................................... 29
Governmental Regulation................................................. 29
Anticipated Accounting Treatment........................................ 30
THE MERGER AGREEMENT...................................................... 30
General; Effective Time and Effects of the Merger....................... 30
Conversion of Neurex Shares............................................. 30
No Fractional Elan ADSs................................................. 31
Exchange of Share Certificates.......................................... 31
Treatment of Neurex Stock Options....................................... 32
Stock Purchase Plan..................................................... 32
Employee Benefits....................................................... 32
Certain Representations and Warranties.................................. 33
Conduct of Business of Neurex........................................... 33
No Solicitation......................................................... 35
Conditions.............................................................. 36
Termination............................................................. 37
Fees and Expenses....................................................... 38
Indemnification; Insurance.............................................. 39
Amendment............................................................... 39
Waivers; Consents....................................................... 39
THE VOTING AGREEMENT...................................................... 40
Voting of Shares; Proxy................................................. 40
Certain Representations and Warranties.................................. 40
Certain Covenants....................................................... 40
CERTAIN TAX CONSEQUENCES.................................................. 41
General................................................................. 41
U.S. Federal Income Tax Consequences of the Merger...................... 41
Irish Tax Consequences after the Merger................................. 42
IRISH EXCHANGE CONTROL REGULATIONS AND UNITED NATIONS SANCTIONS........... 43
HISTORICAL CONSOLIDATED FINANCIAL DATA OF ELAN............................ 45
HISTORICAL CONSOLIDATED FINANCIAL DATA OF NEUREX.......................... 46
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA............................... 47
Unaudited Pro Forma Combined Balance Sheet.............................. 48
Notes to Unaudited Pro Forma Combined Balance Sheet..................... 49
Unaudited Pro Forma Combined Statement of Income (year ended December
31, 1997).............................................................. 50
Unaudited Pro Forma Combined Statement of Income (three months ended
March 31, 1998)........................................................ 51
</TABLE>
ii
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<TABLE>
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<S> <C>
COMPARATIVE PER SHARE DATA................................................. 52
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION.......................... 52
Comparative Market Price Information..................................... 52
Comparative Dividend Information......................................... 53
DESCRIPTION OF ELAN SHARE CAPITAL.......................................... 53
Ordinary Shares.......................................................... 53
Executive Shares and "B' Executive Shares................................ 55
DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS................................ 55
Deposit and Withdrawal of Shares......................................... 56
Dividends, Other Distributions and Rights................................ 56
Record Dates............................................................. 57
Voting of the Underlying Ordinary Shares................................. 57
Amendment and Termination of the Deposit Agreement....................... 57
Charges of Depositary.................................................... 58
General.................................................................. 58
COMPARATIVE RIGHTS OF NEUREX STOCKHOLDERS AND ELAN SHAREHOLDERS............ 58
Authorized Capital Stock................................................. 59
Stockholder Voting Rights................................................ 59
Special Meetings of Stockholders......................................... 59
Consent of Stockholders in Lieu of Meeting............................... 60
Rights of Inspection..................................................... 60
Amendment of Governing Instruments....................................... 60
Certain Provisions Relating to Share Acquisition......................... 61
Rights of Appraisal...................................................... 61
Disclosure of Interests.................................................. 62
Sources and Payment of Dividends......................................... 63
Classification of the Board of Directors................................. 63
Removal of Directors..................................................... 63
Vacancies on the Board of Directors...................................... 64
Stockholders' Suits...................................................... 64
Indemnification; Liability of Directors.................................. 64
Preemptive Rights........................................................ 65
Rights of Purchase and Redemption........................................ 65
ADDITIONAL ITEMS REQUIRING THE VOTE OF NEUREX STOCKHOLDERS................. 66
ELECTION OF DIRECTORS...................................................... 66
Nominees................................................................. 66
Board Committees and Meetings............................................ 68
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS.......................... 69
APPROVAL OF ADOPTION OF 1998 STOCK OPTION PLAN............................. 69
Description of Proposed 1998 Stock Option Plan........................... 69
Administration........................................................... 69
Term of Options.......................................................... 70
Eligibility; Limitations................................................. 70
Exercise of Options...................................................... 70
Adjustment Provisions.................................................... 70
Amendment and Term....................................................... 71
Federal Income Tax Consequences.......................................... 71
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............................ 72
</TABLE>
iii
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<TABLE>
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF NEUREX.......... 73
Compliance with Section 16(a) of the Securities Exchange Act of 1934.... 74
CERTAIN TRANSACTIONS...................................................... 75
EMPLOYEE BENEFIT PLANS.................................................... 76
401(k).................................................................. 76
1992 Employee Stock Purchase Plan....................................... 76
1997 Employee Stock Purchase Plan....................................... 77
1988 Stock Option Plan.................................................. 78
Stock Options Granted as of February 28, 1998........................... 79
EXECUTIVE COMPENSATION.................................................... 80
Employment Agreements................................................... 82
Remuneration of Non-Employee Directors of Neurex........................ 83
REPORT OF THE COMPENSATION COMMITTEE OF THE NEUREX BOARD WITH RESPECT TO
EXECUTIVE COMPENSATION................................................... 83
Report on Repriced Options.............................................. 84
The Compensation Committee.............................................. 84
NEUREX CORPORATION STOCK PERFORMANCE GRAPH................................ 85
LEGAL MATTERS............................................................. 86
EXPERTS................................................................... 86
Annex A--Agreement and Plan of Merger..................................... A-1
Annex B--Opinion of Morgan Stanley & Co. Incorporated..................... B-1
Annex C--Voting Agreement................................................. C-1
Annex D--1998 Stock Option Plan........................................... D-1
</TABLE>
iv
<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 herein, reside outside the United States of America (the "U.S.") 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 such 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, A&L Goodbody, 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 or out of violations of
such laws in any federal court or state court in New York, New York, relating
to the transactions covered by this Prospectus-Proxy Statement.
AVAILABLE INFORMATION
Elan and Neurex are subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
applicable to foreign private issuers and domestic issuers, respectively, and
in accordance therewith file reports and other information with the
Commission. The reports and other information filed by Elan and Neurex with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission located at 7 World
Trade Center, Room 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, reports and other information regarding Elan may be
inspected and copied at the offices of the New York Stock Exchange ("NYSE"),
20 Broad Street, New York, New York 10005, on which exchange the Elan ADSs are
listed. Reports and other information regarding Neurex may be inspected and
copied at the offices of The Nasdaq National Market ("Nasdaq"), 1735 K Street,
N.W., Washington, D.C. 20006, on which market Neurex Shares are traded. Elan
and Neurex public filings are also available from commercial document
retrieval services. The web site maintained by the Commission is at
http://www.sec.gov.
In addition to the foregoing, Elan furnishes to registered holders of
Ordinary Shares, and to The Bank of New York, as depositary (the "Depositary")
under the Amended and Restated Deposit Agreement, dated as of May 17, 1996,
among Elan, the Depositary and the holders from time to time of the Elan ADRs
(the "Deposit Agreement"), for mailing to the record holders of Elan ADRs, all
notices of shareholders' meetings and other reports and communications that
are made generally available to its shareholders. The Depositary arranges for
the mailing of such notices, reports and communications to such 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.
This Prospectus-Proxy Statement does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The Registration
Statement and any amendments thereto, including exhibits filed as a part
thereof, are available for inspection and copying as set forth above.
v
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Elan (Commission File No. 1-
13896) with the Commission pursuant to the Exchange Act are incorporated
herein by this reference:
(i) Elan's Annual Report on Form 20-F for the fiscal period ended
December 31, 1997 ("Elan's 1997 Annual Report");
(ii) Elan's Reports on Form 6-K dated January 16, 1998, January 16,
1998, January 28, 1998, February 9, 1998, February 26, 1998, March 4,
1998, March 26, 1998, April 9, 1998, April 24, 1998, May 5, 1998, June
3, 1998, June 22, 1998 and June 30, 1998; and
(iii) the descriptions of Elan's Ordinary Shares and Elan ADSs
contained in Elan's Registration Statements on Form 8-A filed with the
Commission on October 30, 1990, including any amendment or reports
filed for purposes of updating such descriptions.
In addition, all Annual Reports on Form 20-F and, to the extent designated
therein, any Reports on Form 6-K, in each case, filed by Elan pursuant to
Section 13(a), 13(c) or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the date of the Annual Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the date any
such document is filed.
The following documents previously filed by Neurex (Commission File No. 0-
19560) with the Commission pursuant to the Exchange Act are incorporated
herein by this reference:
(i) Neurex's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 ("Neurex's 1997 Annual Report");
(ii) Neurex's Current Report on Form 8-K dated April 30, 1998; and
(iii) Neurex's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 filed with the Commission on May 14, 1998.
In addition, all documents filed by Neurex pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
date of the Annual Meeting shall be deemed to be incorporated by reference
herein 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 shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to 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 statement.
Copies of documents incorporated by reference with respect to Elan or Neurex
that are not presented herein or delivered herewith (not including exhibits to
such documents unless such exhibits are specifically incorporated by reference
in such documents or herein) are available without charge to any person to
whom this Prospectus-Proxy Statement is delivered upon written or oral request
to the following:
ELAN DOCUMENTS NEUREX DOCUMENTS
Elan Corporation, plc Neurex Corporation
Lincoln House 3760 Haven Avenue
Lincoln Place Menlo Park, California 94025
Dublin 2, Ireland Attn: Brian Burns
Attn: William F. Daniel (650) 853-1500
353-1-709-4000
In order to ensure timely delivery, any request for documents should be made
by August 4, 1998.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROSPECTUS-PROXY
STATEMENT OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED
BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ELAN, NEUREX OR ANY OTHER
PERSON. 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, BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS-PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE ASSETS, PROPERTIES
OR AFFAIRS OF ELAN OR NEUREX SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THE DATE OF THE DOCUMENT THAT INCLUDES THE
INFORMATION INCORPORATED BY REFERENCE.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS-PROXY STATEMENT CONTAINS OR INCORPORATES BY REFERENCE
CERTAIN FORWARD LOOKING STATEMENTS WITH RESPECT TO THE BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF ELAN AND NEUREX AND STATEMENTS RELATING
TO THE PROSPECTS OF ELAN FOLLOWING THE MERGER. SEE "THE MERGER--NEUREX'S
REASONS FOR THE MERGER; RECOMMENDATION OF THE NEUREX BOARD OF DIRECTORS" AND
"--ELAN'S REASONS FOR THE MERGER" AND THOSE PRECEDED BY, FOLLOWED BY OR THAT
INCLUDE THE WORDS "BELIEVES," "EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS.
THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES.
FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING: (1) THE FAILURE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE NEW
PRODUCTS IN A TIMELY MANNER, (2) COSTS OR DIFFICULTIES IN INTEGRATING ELAN AND
NEUREX ARE GREATER THAN EXPECTED OR INVOLVE THE LOSS OF KEY PERSONNEL
RESULTING IN AN INABILITY OF ELAN TO CAPITALIZE ON NEUREX'S RESEARCH,
DEVELOPMENT AND MARKETING CAPABILITIES TO THE DEGREE CONTEMPLATED BY ELAN AND
NEUREX AND (3) COMPETITIVE PRESSURES IN THE HEALTH CARE INDUSTRY. FURTHER
INFORMATION ON THESE AND OTHER RISKS WHICH COULD ADVERSELY AFFECT ELAN AFTER
THE MERGER IS INCLUDED HEREIN AND IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN INCLUDING ELAN'S 1997 ANNUAL REPORT AND NEUREX'S 1997 ANNUAL REPORT.
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SUMMARY
The following is a summary of certain information contained in this
Prospectus-Proxy Statement. This summary does not contain a complete statement
of all material information relating to the Merger and the Merger Agreement and
is qualified in all respects by reference to the more detailed information and
financial statements contained elsewhere or incorporated by reference in this
Prospectus-Proxy Statement and in the Annexes hereto including, but not limited
to, the Merger Agreement set forth in Annex A. Neurex stockholders are urged to
read and consider carefully all of the information contained or incorporated by
reference in this Prospectus-Proxy Statement and in the Annexes hereto.
GENERAL
This Prospectus-Proxy Statement relates to the proposed Merger of Subco with
and into Neurex, pursuant to the Merger Agreement, a copy of which is attached
as Annex A hereto and is incorporated herein by reference. In the Merger,
Neurex stockholders will receive, for each Neurex Share, 0.51 of an Elan ADS
(with each Elan ADS representing one Ordinary Share, evidenced by one Elan ADR)
(the "Exchange Ratio").
THE COMPANIES
ELAN CORPORATION, PLC
Lincoln House
Lincoln Place
Dublin 2, Ireland
Telephone: 353-1-709-4000
Elan, headquartered in Dublin, Ireland, is a leading worldwide specialty
pharmaceutical company with its principal research and manufacturing facilities
located in Ireland, the U.S. and Israel. Elan is a world leader in the
development of drug delivery systems and, through its pharmaceutical division,
has expanded capabilities in the discovery, development and marketing of
therapeutic products and diagnostic services for patients with neurological
disorders.
Elan currently conducts its business through its three operating divisions,
Elan Pharmaceutical Technologies ("EPT"), Elan Pharmaceuticals and Elan
Pharmaceutical Operations ("EPO").
Elan Pharmaceutical Technologies. EPT develops, markets and licenses to clients
drug delivery products based on Elan's drug delivery systems. EPT's drug
delivery technologies are designed to improve and control the absorption and
utilization by the human body of active pharmaceutical compounds, allowing
these compounds to be administered less frequently, with reduced side effects
and/or in reduced dosages. These new dosage forms may also provide Elan's
client pharmaceutical companies with the opportunity to improve the commercial
prospects for existing drugs. One of EPT's principal objectives is to be the
"Preferred Industry Partner" to certain leading pharmaceutical and
biotechnology companies with respect to the development of drug delivery
technologies applicable to a full range of pharmaceutical products.
EPT markets its products in the major pharmaceutical markets of the world
directly through joint ventures and through licensing arrangements with third
parties. Currently, the principal products developed by EPT are: (i) a once-
daily formulation of naproxen sodium used in the treatment of osteoarthritis
and rheumatoid arthritis, marketed as Naprelan(R) in the U.S. by American Home
Products Corporation ("AHP"); (ii) a once-daily formulation of diltiazem used
in the treatment of hypertension and angina, marketed in the U.S. and Canada as
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Cardizem(R) CD by Hoescht Marion Roussel, Inc., as Herbesser HP in Japan by
Tanabe Seiyaku Co., Ltd., and by other licensees in certain other countries;
and (iii) a once-daily formulation of verapamil used in the treatment of
hypertension, marketed in the U.S. and Canada as Verelan(R) by AHP and other
licensees in certain other countries.
Elan Pharmaceuticals. Elan Pharmaceuticals, principally through Elan's
wholly-owned subsidiary, Athena Neurosciences, Inc. ("Athena"), discovers,
develops and markets therapeutic products and diagnostic services for patients
with neurological disorders. Its research and development activities focus on
Alzheimer's disease and other neurological diseases, including multiple
sclerosis and Parkinson's disease.
Elan Pharmaceuticals markets its products and services in the U.S. through
its own sales and marketing group, including a national sales force of
approximately 280 representatives, which currently markets: (i) Permax(R) for
the adjunctive treatment of Parkinson's disease; (ii) Zanaflex(R) for the
treatment of muscle spasticity; (iii) Diastat(R) for use as adjunctive
treatment for certain types of epileptic seizures; (iv) Mysoline(R), an
anticonvulsant; (v) Skelaxin(R) for the relief of acute painful musculoskeletal
conditions; (vi) diagnostic testing services; and (vii) pharmacy products and
services offered by the Athena(R) Rx Home Pharmacy.
Elan Pharmaceuticals markets Elan's specialty pharmaceutical products outside
of the U.S. in a number of countries (including the United Kingdom, Ireland,
Sweden, Spain, the Philippines, China and Taiwan) through affiliated companies,
joint ventures, licensees and distributors.
Following the consummation of the Merger, Elan expects that Neurex will
operate as a business unit of Elan Pharmaceuticals.
Elan Pharmaceutical Operations. EPO manufactures and supplies products for
EPT and Elan Pharmaceuticals and their respective customers, clients and
licensees.
NEUREX CORPORATION
3760 Haven Avenue
Menlo Park, CA 94025
Telephone: (650) 853-1500
Neurex has developed and is developing biopharmaceutical products principally
for pain management and the treatment of cardiorenal and neurological diseases.
Neurex's two lead products are CORLOPAM(R) (fenoldopam mesylate) and ziconotide
(SNX-111). CORLOPAM was approved for U.S. commercialization in September 1997
and commercially launched in January 1998. Ziconotide for use in the treatment
of chronic pain has completed pivotal clinical trials. Both CORLOPAM and
ziconotide have potential in multiple indications. In addition, Neurex conducts
an active research and licensing program to expand its product portfolio.
Neurex's strategy is (i) to develop and directly market its products for acute
care treatment in hospital settings, such as emergency rooms, intensive care
units and pain clinics, in the U.S. and (ii) to enter into collaborative
relationships to develop and market its chronic treatment products in the U.S.,
and all of its products outside the U.S.
Neurex focuses its research efforts primarily on the discovery of new
therapeutics which modulate the function of the central and peripheral nervous
systems by regulating nerve cell communication. Neurex also conducts research
in (i) programmed cell death (apoptosis) and its link to neurodegenerative
diseases; (ii) the role of potassium channels in demyelinating diseases such as
multiple sclerosis; and (iii) vesicle exocytosis, the controlled process by
which neurotransmitters are released from the nerve terminal and its role in
psychiatric disorders. Neurex has also expanded its interests in the treatment
of pain by focusing on a number of programs including the use of sodium
channels.
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THE ANNUAL MEETING
DATE, TIME, PLACE AND PURPOSE
The Annual Meeting will be held at the administrative offices of Neurex, 190
Independence Drive, Menlo Park, California, on August 11, 1998, at 10:00 a.m.,
local time, for the following purposes: (1) to consider and vote on the Merger
Proposal; (2) to consider and vote on a proposal to approve the 1998 Stock
Option Plan and to authorize 1,000,000 Neurex Shares for issuance thereunder;
(3) to consider and vote on the election of nine directors to the Neurex Board
for terms expiring at the Neurex 1999 Annual Meeting; (4) to consider and vote
on the ratification of the selection of Ernst & Young LLP as auditors of
Neurex's financial statements for the year ending December 31, 1998; and (5) to
transact such other business as may properly come before the Annual Meeting.
See "Additional Items Requiring the Vote of Neurex Stockholders."
RECORD DATE; SHARES ENTITLED TO VOTE
Only Neurex stockholders of record at the close of business on June 29, 1998
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. On the Record Date, there were 23,289,991 Neurex Shares outstanding
and entitled to vote which were held by approximately 258 holders of record.
Each holder of record of Neurex Shares on the Record Date is entitled to cast
one vote per Neurex Share, exercisable in person or by a properly executed
proxy, on each matter submitted at the Annual Meeting. See "The Annual
Meeting--Record Date; Voting Rights; Voting at the Meeting."
REQUIRED VOTE; VOTING AGREEMENT
The Merger Proposal requires the affirmative vote of the holders of a
majority of the Neurex Shares outstanding and entitled to vote thereon. An
abstention or a failure to vote with respect to the Merger Proposal will have
the effect of a vote against the Merger Proposal. Brokers who hold Neurex
Shares as nominees will not have discretionary authority to vote such Neurex
Shares in the absence of instructions from the beneficial owners thereof. Any
votes which are not cast by a nominee-broker will also have the effect of a
vote cast against the Merger Proposal.
As a condition to the willingness of Elan to enter into the Merger Agreement,
each of the executive officers and directors of Neurex entered into a Voting
Agreement with Elan, dated as of April 29, 1998 (the "Voting Agreement").
Pursuant to the Voting Agreement, each such person agreed, without any
additional consideration being paid to such person, to vote all Neurex Shares
owned or thereafter acquired by such person in favor of the Merger and
appointed Elan as his or her attorney and proxy to vote such Neurex Shares at
any meeting of stockholders of Neurex in connection with the Merger. The Voting
Agreement covers an aggregate of 1,480,474 Neurex Shares, representing
approximately 6.4% of the Neurex Shares outstanding as of June 29, 1998. See
"The Annual Meeting--Record Date; Voting Rights; Voting at the Meeting" and
"The Voting Agreement."
A plurality of the Neurex Shares present in person or represented by proxy at
the Annual Meeting will be required to elect each director to the Neurex Board.
Approval of the remaining proposals requires the affirmative vote of a majority
of the Neurex Shares present in person or represented by proxy at the Annual
Meeting and entitled to vote thereon. See "Additional Items Requiring the Vote
of Neurex Stockholders."
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by (i) filing
(including by telegram or facsimile) with the Secretary of Neurex, before the
taking of the vote at the Annual Meeting, a later-dated proxy relating to the
same shares or a written notice of revocation bearing a later date than the
date of the proxy or (ii) attending the Annual Meeting and voting in person.
Neurex stockholders who require assistance in changing or revoking a proxy
should contact Neurex's Proxy Solicitor, ChaseMellon Shareholder Services
L.L.P., at 235 Montgomery Street, 23rd Floor, San Francisco, California 94104,
or by telephone at (415) 743-1423. See "The Annual Meeting--Voting of Proxies."
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THE MERGER AND THE MERGER AGREEMENT
MERGER TERMS
The Merger Agreement provides that, subject to the requisite approval of
Neurex's stockholders and the satisfaction or, where permissible, waiver of
certain other conditions, at the Effective Time (as defined below) of the
Merger, Subco will be merged with and into Neurex, the separate corporate
existence of Subco will cease and Neurex, as the Surviving Corporation, will
become a wholly-owned subsidiary of Elan. Upon consummation of the Merger, each
Neurex Share issued and outstanding immediately prior to the Effective Time of
the Merger will be converted into the right to receive 0.51 of an Elan ADS. No
fractional Elan ADSs will be received by Neurex stockholders in the Merger. In
lieu of any such fractional Elan ADSs, each holder of Neurex Shares who
otherwise would be entitled to receive a fractional Elan ADS pursuant to the
Merger will be paid an amount in cash, without interest, equal to such fraction
multiplied by the Market Value. "Market Value" shall mean, with respect to Elan
ADSs issued, the mean between the high and low prices of the Elan ADSs as
reported on the NYSE Composite Tape on the NYSE trading day immediately prior
to the Effective Time. The fractional share interests of each Neurex
stockholder will be aggregated and no Neurex stockholder will receive cash in
an amount equal to or greater than the value of one full Elan ADS. See "The
Merger Agreement--Conversion of Neurex Shares" and "--No Fractional Elan ADSs."
With respect to the treatment of options of Neurex, see "The Merger Agreement--
Treatment of Neurex Stock Options."
REASONS FOR THE MERGER
Neurex. Neurex believes that the Merger will result in a combined
biopharmaceutical and drug development entity with substantially greater
resources and a more diversified product base, development pipeline,
manufacturing capability and international presence than Neurex. Following the
Merger, Elan will be able to provide Neurex with the capital and resources
necessary in order for Neurex to both continue its research into acute care
pain management and other neurological disorders and have more flexibility in
addressing the scientific and business aspects of its programs. Neurex believes
that Elan's strengths in the testing, registration, manufacture and technology
for delivery of pharmaceutical products will complement Neurex's own strengths
in basic research, sales and marketing and distribution, allowing Neurex to
more efficiently bring products to market. The Merger will allow continued
expansion by the combined companies into other territories and other
therapeutic areas. See "The Merger--Neurex's Reasons for the Merger;
Recommendation of the Neurex Board of Directors."
Elan. Elan believes that the business of both Elan and Neurex will be
enhanced by their combination by being better positioned to capitalize on the
market opportunities created by the continued consolidation of the
pharmaceutical industry. Following the Merger, Elan will have expanded its
global pharmaceutical operations by the addition of a new therapeutic area,
acute care, and the expansion of product opportunities for pain management. The
Merger supplements Elan's existing research, development, sales and marketing
capabilities, continuing Elan's desire to build and increase those resources
which are deemed essential to Elan's success in its 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. See "The
Merger--Elan's Reasons for the Merger."
RECOMMENDATION OF THE NEUREX BOARD OF DIRECTORS
On April 28, 1998, the Neurex Board unanimously approved the Merger Agreement
and the Merger as being in the best interests of Neurex and the Neurex
stockholders. The Neurex Board unanimously recommends that Neurex stockholders
vote FOR the approval and adoption of the Merger Agreement. The Neurex Board
also recommends that Neurex stockholders vote FOR the approval of each of the
remaining proposals described under "Additional Items Requiring the Vote of
Neurex Stockholders." See "The Merger--Neurex's Reasons for the Merger;
Recommendation of the Neurex Board of Directors."
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OPINION OF NEUREX'S FINANCIAL ADVISOR
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), the financial advisor
to Neurex, delivered to the Neurex Board its written opinion, dated April 28,
1998, to the effect that, as of the date of such opinion, the Exchange Ratio is
fair, from a financial point of view, to the Neurex stockholders. The full text
of the opinion of Morgan Stanley, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken, is attached as Annex B to this Prospectus-Proxy Statement.
STOCKHOLDERS OF NEUREX ARE URGED TO CAREFULLY READ SUCH OPINION IN ITS
ENTIRETY. Neurex has agreed to pay Morgan Stanley 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 Neurex."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Neurex Board with respect to the
Merger Agreement, Neurex stockholders should be aware that certain officers and
directors of Neurex have interests in the Merger that are different from and in
addition to the interests of Neurex stockholders generally. For further
information, see "The Merger--Interests of Certain Persons in the Merger."
ANTICIPATED ACCOUNTING TREATMENT
The Merger will be accounted for by Elan under the "purchase" method of
accounting in accordance with U.S. generally accepted accounting principals
("U.S. GAAP"). See "The Merger--Anticipated Accounting Treatment."
CERTAIN U.S. FEDERAL INCOME 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 Neurex of an opinion of its tax counsel, Skadden, Arps, Slate,
Meagher & Flom LLP, in each case, that, among other things, the Merger will,
subject to certain limitations, qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
All Neurex stockholders should read carefully the discussion in "Certain Tax
Consequences" and other sections of this Prospectus-Proxy Statement. Neurex
stockholders are urged to consult their own tax advisors as to the specific tax
consequences to them of the Merger.
ABSENCE OF APPRAISAL RIGHTS
Under the General Corporation Law of the State of Delaware (the "DGCL"), the
stockholders of Neurex are not entitled to appraisal rights in connection with
the Merger. See "The Merger Agreement--Absence of Appraisal Rights."
CONDITIONS TO THE MERGER
The obligations of Elan, Subco and Neurex to effect the Merger are subject to
the satisfaction or, where permissible, waiver of certain conditions set forth
in the Merger Agreement including, without limitation, the following: (i) the
effectiveness of the Registration Statement under the Securities Act; (ii) the
approval and adoption of the Merger Agreement by the requisite vote of the
stockholders of Neurex; (iii) the approval for listing on the NYSE of the Elan
ADSs to be issued in connection with the Merger and the admission to the
Official Lists of the Irish Stock Exchange Limited (the "Irish Stock Exchange")
and the London Stock Exchange Limited (the "London Stock Exchange") of the
Ordinary Shares represented thereby; (iv) there not having been
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entered and in effect any injunction or order that prohibits the Merger; (v)
any waiting period applicable to the Merger under the HSR Act (as defined
below) shall have expired or been terminated; (vi) no action shall have been
taken under the Mergers, Take-overs and Monopolies (Control) Act, 1978 (as
amended) of Ireland (the
"Irish Mergers Act") that prohibits the Merger and the relevant period under
the Irish Mergers Act shall have expired; and (vii) Neurex and Elan shall have
received the opinions of their respective tax counsel, in each case, that the
Merger will, subject to certain limitations, qualify as a reorganization within
the meaning of Section 368(a) of the Code.
The obligation of Elan and Subco to effect the Merger is subject to the
satisfaction or waiver of certain additional conditions set forth in the Merger
Agreement including, without limitation, the following: (i) the accuracy of the
representations and warranties of Neurex and the performance in all material
respects of the agreements and obligations of Neurex under the Merger Agreement
and the receipt of certificates of officers of Neurex to such effect; (ii) the
absence since December 31, 1997 of (x) any material adverse change in the
general affairs, management, business, operations, assets, condition (financial
or otherwise) or prospects of Neurex and its subsidiary, taken as a whole
(excluding any such material adverse change relating solely to ziconotide), or
(y) any Ziconotide Event (as defined below); (iii) all consents, approvals,
filings and registrations required on the part of Neurex for the consummation
of the Merger shall have been obtained or accomplished; (iv) the meeting
between Neurex and the U.S. Food and Drug Administration (the "FDA") regarding,
among other things, the filing of a New Drug Application (an "NDA") relating to
ziconotide shall have occurred, the FDA shall have responded to such meeting,
Elan shall have been provided with all documents, materials and other
information prepared by the FDA or Neurex in connection therewith and Elan
shall have been provided the opportunity to attend such meeting; and (v) Elan
shall have received agreements from each of Neurex's executive officers
restricting each such person's ability to dispose of Elan ADSs held by such
person for a period of one year following the Effective Time.
The obligation of Neurex to effect the Merger is subject to the satisfaction
or waiver of certain additional conditions set forth in the Merger Agreement
including, without limitation, the following: (i) the accuracy of the
representations and warranties of Elan and Subco and the performance in all
material respects of the agreements and obligations of Elan and Subco under the
Merger Agreement and the receipt of certificates of officers of Elan and Subco
to such effect; (ii) the absence since December 31, 1997 of any material
adverse change in the general affairs, management, business, operations,
assets, condition (financial or otherwise) or prospects of Elan and its
subsidiaries, taken as a whole; and (iii) all consents and approvals of, and
filings and registrations required on the part of Elan and Subco for the
consummation of the Merger shall have been obtained or accomplished. See "The
Merger Agreement--Conditions."
EFFECTIVE TIME OF THE MERGER
If the Merger Agreement is approved and adopted by the requisite vote of
Neurex stockholders and the other conditions to the Merger are satisfied or,
where permissible, waived, the Merger will be consummated and become effective
upon the filing of a certificate of merger with the Secretary of State of the
State of Delaware (the time of such filing being the "Effective Time") in
accordance with the DGCL. See "The Merger Agreement--General; Effective Time
and Effects of the Merger."
TERMINATION OF THE MERGER AGREEMENT
Neurex and Elan can agree in writing at any time to terminate the Merger
Agreement without completing the Merger. In addition, either Elan or Neurex may
terminate the Merger Agreement under certain circumstances including, but not
limited to, the following: (i) if, without fault of the terminating party, the
Merger is not consummated on or before November 30, 1998; (ii) if any court of
competent jurisdiction or other governmental body takes any action permanently
restraining, enjoining or otherwise prohibiting the Merger; (iii) if the Merger
Agreement is not approved and adopted by the requisite vote of the Neurex
stockholders; or (iv) if the other party fails to comply in all material
respects with the covenants or agreements contained in the Merger
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Agreement or there exists any breach or breaches of any representation or
warranty of the other party contained in the Merger Agreement and, in either
case, if such failure or breach, as the case may be, is capable of being cured
prior to the Effective Time, such failure or breach, as the case may be, is not
cured within 20 days of notice thereof.
Elan may terminate the Merger Agreement under certain additional
circumstances including, but not limited to, the following: (i) if the Neurex
Board fails to recommend or withdraws or modifies in a manner adverse to Elan
its recommendation or approval of the Merger Agreement or the Merger or makes
any recommendation with respect to a competing transaction (including making no
recommendation or stating an inability to make a recommendation) other than a
recommendation to reject such competing transaction or (ii) if, subject to
certain time limitations, Neurex or its representatives disclose non-public
information to, or negotiate or discuss a competing transaction with a third
party.
Neurex may terminate the Merger Agreement five days after it notifies Elan of
a more favorable third-party competing transaction meeting the requirements of
the Merger Agreement that Neurex determines, based on the advice of legal
counsel and Neurex's financial advisor, is reasonably likely to be consummated
and that failing to take such action would be reasonably likely to constitute a
breach of the Neurex Board's fiduciary duties to Neurex stockholders. See "The
Merger Agreement--Termination."
GOVERNMENTAL AND REGULATORY MATTERS
The Merger is subject to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations thereunder,
which provide that certain transactions may not be consummated until required
information and material have been furnished to the U.S. Antitrust Division of
the Department of Justice (the "Justice Department") and the U.S. Federal Trade
Commission (the "FTC") and certain waiting periods have expired or been
terminated. Elan and Neurex completed the filing of the required information
and material with the Justice Department and the FTC on May 19, 1998. On June
18, 1998, the applicable waiting period under the HSR Act expired. No
additional filings or waiting periods are applicable with respect to the Merger
pursuant to the HSR Act and the rules promulgated thereunder. 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 (the "Enterprise Minister"), such further
information (if any) as may be required has been furnished and either the
Enterprise Minister has issued a clearance for the proposed transaction or the
prescribed statutory period following notification has expired without the
Enterprise Minister having prohibited the proposed transaction. Elan and Neurex
gave notification of the Merger to the Enterprise Minister on May 13, 1998 and
requested that the Enterprise Minister issue a clearance in respect thereof. On
June 12, 1998, Elan and Neurex received the required clearance from the
Enterprise Minister. See "The Merger--Governmental Regulation."
COMPARATIVE RIGHTS OF STOCKHOLDERS
For a comparison of Delaware and Irish laws and of the Amended and Restated
Certificate of Incorporation (the "Neurex Certificate") and Amended and
Restated By-laws (the "Neurex By-laws") of Neurex and the Memorandum and
Articles of Association of Elan ("Elan's Articles") governing the rights of
Neurex stockholders and Elan shareholders, respectively, see "Comparative
Rights of Neurex Stockholders and Elan Shareholders."
7
<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 three-year period ended March 31, 1996, the nine
months ended December 31, 1996 and the year ended December 31, 1997 have been
derived from the audited consolidated financial statements of Elan and its
subsidiaries. Such consolidated financial statements have been audited by KPMG,
Chartered Accountants. The summary historical consolidated financial data as of
and for the three months ended March 31, 1997 and 1998 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. Results for the three months ended March 31, 1998 should not be
regarded as indicative of the results that may be expected for the full year.
See "Available Information" and "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
NINE MONTHS YEAR THREE MONTHS ENDED
YEAR ENDED MARCH 31, ENDED ENDED MARCH 31,
------------------------------ DECEMBER 31, DECEMBER 31, -------------------
1994 1995 1996 1996 1997 1997 1998
-------- -------- -------- ------------ ------------ -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Product sales.......... $ 84,942 $ 87,694 $105,625 $ 117,973 $ 215,486 $ 52,606 $ 62,617
Royalties and fees..... 48,261 62,537 85,937 71,937 115,881 26,696 51,229
Research revenues...... 21,231 32,470 36,680 45,649 57,789 9,745 20,820
-------- -------- -------- --------- ---------- -------- ----------
Total revenues......... 154,434 182,701 228,242 235,559 389,156 89,047 134,666
-------- -------- -------- --------- ---------- -------- ----------
Operating income (loss). (80,877)(1) 60,076 78,668 (582,763)(2) 136,050 31,542 (434,630)(3)
Income (loss) before
taxation............... (71,463)(1) 64,715 91,473 (571,794)(2) 176,300 37,547 (423,732)(3)
Net income (loss)....... $(72,613)(1) $ 64,050 $ 90,925 $(572,568)(2) $ 175,114 $ 37,154 $ (424,129)(3)
======== ======== ======== ========= ========== ======== ==========
Basic earnings per
ordinary share(4)...... $ (1.18)(1) $ 1.02 $ 1.33 $ (6.42)(2) $ 1.76 $ 0.38 $ (3.97)(3)
Diluted earnings per
ordinary share(4)...... $ -- (5) $ 0.90 $ 1.20 $ -- (5) $ 1.58 $ 0.35 $ -- (5)
Weighted average number
of ordinary shares for
the purposes of
calculating-- Basic
earnings per share..... 61,660 63,090 68,621 89,165 99,352 97,090 106,906
Diluted earnings per
share................. -- (5) 71,079 83,623 -- (5) 113,080 109,986 -- (5)
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
------------------------------ ---------------------------- -------------------
1994 1995 1996 1996 1997 1997 1998
-------- -------- -------- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $238,654 $247,735 $477,985 $ 252,774 $ 675,722 $272,152 $ 618,655
Total assets............ 396,006 490,932 703,195 765,900 1,219,452 769,040 1,275,493
Long-term obligations... 150,844 159,512 162,416 138,265 325,000 101,012 325,000
Total shareholders'
equity................. 215,525 299,422 508,583 511,195 829,075 570,461 819,963
</TABLE>
- --------
(1) Reflects one-time charge of $122,844,000 arising from the acquisition of
in-process research and development and a cash contribution to a research
affiliate.
(2) Reflects one-time charge of $659,865,000 relating to the acquisition of in-
process research and development, costs of restructuring and provision for
loss on sale of business.
(3) Reflects one-time charge of $478,609,000 relating to the acquisition of in-
process research and development and costs of restructuring.
(4) During the year ended December 31, 1997, Elan adopted SFAS No.128 "Earnings
Per Share" ("SFAS 128") which required a change in the method used to
compute earnings per share. Under this new standard, primary and fully
diluted earnings per share were replaced with "basic" and "diluted"
earnings per share. Basic earnings per share is based upon dividing the net
income available to shareholders by the weighted average number of Ordinary
Shares outstanding during the period. Diluted earnings per share is based
upon dividing the net income available to shareholders by the weighted
average number of Ordinary Shares outstanding during the period and
adjusted for the effect of all dilutive potential Ordinary Shares that were
outstanding during the period. Both the earnings per share figures and the
weighted average number of Ordinary Shares figures for all periods
presented have been stated or, where appropriate, restated in accordance
with SFAS 128.
(5) No diluted earnings per share figure or number of shares for the purposes
of calculating diluted earnings per share have been shown for the year
ended March 31, 1994, the nine months ended December 31, 1996 and the three
months ended March 31, 1998 because, as Elan had a net loss for these
periods, the calculation would be anti-dilutive.
8
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF NEUREX
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary historical consolidated financial data set forth below with
respect to Neurex's consolidated statements of operations for the year ended
September 30, 1995, for the three months ended December 31, 1995 and for each
of the two years in the period ended December 31, 1997, and with respect to the
consolidated balance sheets at December 31, 1996 and 1997, are derived from,
and should be read in conjunction with, the consolidated financial statements
of Neurex, including the notes thereto, contained in Neurex's 1997 Annual
Report, which is incorporated by reference in this Prospectus-Proxy Statement.
Such consolidated financial statements have been audited by Ernst & Young LLP,
independent auditors. Consolidated statement of operations data for each of the
two years in the period ended September 30, 1994, and consolidated balance
sheet data at September 30, 1993, 1994 and 1995, have been derived from
consolidated financial statements audited by Ernst & Young LLP that are not
incorporated by reference herein. The statement of operations data for the
three months ended March 31, 1997 and 1998 and the balance sheet data at March
31, 1997 and 1998 are derived from unaudited consolidated financial statements.
Such unaudited consolidated financial statements, in the opinion of management,
reflect all adjustments, consisting solely of normal recurring adjustments,
which Neurex considers necessary to present fairly such information for those
periods. Results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the full fiscal year. See
"Available Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED THREE MONTHS
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
------------------------------- ------------ ------------------ -----------------
1993 1994(1) 1995 1995 1996 1997 1997 1998
------- --------- -------- ------------ -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Product sales, net..... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 2,100
Collaborative agree-
ments and grants:
Related parties........ -- 1,000 897 158 1,884 2,309 427 292
Other.................. 1,679 1,132 1,765 -- 1,692 83 11 --
------- --------- -------- ------- -------- -------- ------- --------
Total revenues......... 1,679 2,132 2,662 158 3,576 2,392 438 2,392
------- --------- -------- ------- -------- -------- ------- --------
Costs and expenses:
Cost of sales.......... -- -- -- -- -- -- -- 234
Research and develop-
ment.................. 6,233 8,477 10,607 2,781 19,663 28,474 7,608 8,826
Acquired in-process
research and
development(2)........ -- 10,153 -- -- -- -- -- --
Selling, general & ad-
ministrative.......... 2,083 1,933 2,079 595 3,923 9,686 1,509 4,637
------- --------- -------- ------- -------- -------- ------- --------
Total costs and ex-
penses................. 8,316 20,563 12,686 3,376 23,586 38,160 9,117 13,697
------- --------- -------- ------- -------- -------- ------- --------
Loss from operations.... (6,637) (18,431) (10,024) (3,218) (20,010) (35,768) (8,679) (11,305)
Interest income (ex-
pense), net............ (580) 463 35 192 3,534 3,888 1,037 748
------- --------- -------- ------- -------- -------- ------- --------
Net loss................ $(7,217) $(17,968) $ (9,989) $(3,026) $(16,476) $(31,880) $(7,642) $(10,557)
======= ========= ======== ======= ======== ======== ======= ========
Basic and diluted net
loss per share(3)...... $ (5.92) $ (1.70)(4) $ (0.80) $ (0.17) $ (0.80) $ (1.44) $ (0.35) $ (0.47)
======= ========= ======== ======= ======== ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 1,218 10,548 12,499 17,423 20,680 22,147 22,078 22,337
======= ========= ======== ======= ======== ======== ======= ========
</TABLE>
- --------
(1) The operating results of Creagen, Inc. ("Creagen") have been included in
Neurex's consolidated results from the date of acquisition, July 15, 1994.
(2) The acquired in-process research and development charges resulted from the
acquisition of Creagen in July 1994 ($8.8 million) and the CORLOPAM
licensing fee in April 1994 ($1.4 million).
(3) All net loss per share amounts for all periods have been presented and,
where appropriate, restated to conform to the requirements of SFAS 128.
(4) Net loss per share in the year ended September 30, 1994, includes a $0.96
per share charge for acquired in-process research and development and
licensing fees resulting from the acquisition of Creagen and the CORLOPAM
licensing fee; net loss per share without these charges would have been
$0.77 per share.
9
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, MARCH 31,
----------------------- --------------- ---------------
1993 1994(1) 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash, cash equivalents
and short-term
investments(2)......... $18,555 $11,385 $12,753 $87,243 $57,418 $81,153 $46,443
Working capital......... 16,418 7,580 9,369 79,975 45,921 72,039 35,752
Total assets............ 19,774 13,500 17,617 89,571 60,664 83,747 51,856
Long-term obligations... 18 174 8,161 1,964 114 1,969 69
Total stockholders'
equity(3).............. 17,517 9,022 3,289 79,958 48,776 72,413 38,646
</TABLE>
- --------
(1) The operating results of Creagen have been included in Neurex's
consolidated results from the date of acquisition, July 15, 1994.
(2) In 1998, Neurex presented investments with maturities greater than one
year, but liquid and available for sale, as short-term investments. The
amounts above reflect the reclassification to short-term investments of
$9,874,000 and $5,616,000 originally presented as long-term investments at
December 31, 1996 and 1997, respectively.
(3) No dividends have been declared or paid on Neurex Shares.
10
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following summary unaudited pro forma combined financial data are based
on the historical financial statements of Elan and Neurex and have been
prepared to illustrate the effects of the Merger. The pro forma combined
financial data should be read in conjunction with the historical financial
statements of Elan and Neurex incorporated herein by reference and the
unaudited pro forma combined financial data and accompanying notes set forth
under "Unaudited Pro Forma Combined Financial Data." The pro forma combined
statements of income for the year ended December 31, 1997 and for the three
months ended March 31, 1998 give effect to the Merger and the consummation by
Elan of the acquisition (the "Carnrick Acquisition") of GWC Health, Inc.
("Carnrick") and the acquisition (the "Sano Acquisition") of Sano Corporation
("Sano"), in each case, as if such event had occurred on January 1, 1997. The
pro forma combined balance sheet at March 31, 1998 has been prepared as if the
Merger and the Carnrick Acquisition had occurred on that date. The balance
sheet of Elan at March 31, 1998 includes the assets and liabilities of Sano at
that date, as the Sano Acquisition closed on February 27, 1998. The pro forma
combined financial data have been prepared in accordance with U.S. GAAP using
the purchase method of accounting. The pro forma combined financial data are
presented 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, the Carnrick Acquisition or the Sano Acquisition had been consummated
on the indicated dates. See "Unaudited Pro Forma Combined Financial Data."
11
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-------------------------------------------------------------------
HISTORICAL
------------------------------- NEUREX CARNRICK COMBINED
ELAN NEUREX CARNRICK ADJUSTMENT ADJUSTMENT PRO FORMA
---------- --------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash
equivalents.......... $ 183,614 $ 3,324 $ 1,969 $ -- $(132,000) $ 56,907
Marketable investment
securities........... 409,058 43,119 5,295 -- -- 457,472
Accounts receivable
and
prepayments........... 113,984 2,450 5,843 -- -- 122,277
Inventories........... 42,529 -- 19,884 -- -- 62,413
---------- --------- ------- --------- --------- -----------
Total current
assets............. 749,185 48,893 32,991 -- (132,000) 699,069
---------- --------- ------- --------- --------- -----------
Fixed assets:
Property, plant and
equipment (net)...... 139,673 2,808 6,981 -- -- 149,462
Other assets:
Investments........... 129,822 -- 1,800 -- -- 131,622
Intangible assets
(net)................ 256,813 -- 712 39,952 106,429 403,906
Other assets.......... -- 155 1,450 -- -- 1,605
---------- --------- ------- --------- --------- -----------
386,635 155 3,962 39,952 106,429 537,133
---------- --------- ------- --------- --------- -----------
Total assets........ 1,275,493 51,856 43,934 39,952 (25,571) 1,385,664
========== ========= ======= ========= ========= ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable and
accrued liabilities.. 130,530 12,982 6,177 -- 6,000 155,689
Current portion of
debt................. -- 159 460 -- -- 619
---------- --------- ------- --------- --------- -----------
Total current
liabilities........ 130,530 13,141 6,637 -- 6,000 156,308
---------- --------- ------- --------- --------- -----------
Long-term debt.......... 325,000 69 1,033 -- 12,000 338,102
Other liabilities....... -- -- 4,518 -- -- 4,518
---------- --------- ------- --------- --------- -----------
325,000 69 5,551 -- 12,000 342,620
---------- --------- ------- --------- --------- -----------
Share capital........... 7,178 224 1,236 (224) (1,236) 7,838
660
Additional paid-in
capital................ 1,517,905 156,700 17 (156,700) (17) 2,354,925
837,020
Equity adjustments from
foreign currency
translation............ (34,840) -- 60 -- (60) (34,840)
Unrealized net gain
(loss) on available for
sale securities........ 6,152 (29) 1,445 29 (1,445) 6,152
Retained earnings
(losses)............... (676,432) (118,249) 28,988 118,249 (28,988) (1,447,339)
(759,082) (11,825)
---------- --------- ------- --------- --------- -----------
Shareholders' equity.. 819,963 38,646 31,746 39,952 (43,571) 886,736
---------- --------- ------- --------- --------- -----------
Total liabilities
and shareholders'
equity............. $1,275,493 $ 51,856 $43,934 $ 39,952 $ (25,571) $ 1,385,664
========== ========= ======= ========= ========= ===========
</TABLE>
12
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------
HISTORICAL
-------------------------------------- COMBINED
ELAN SANO NEUREX CARNRICK ADJUSTMENT(1) PRO FORMA(2)
-------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales......... $215,486 $ 159 $ -- $51,183 $ -- $266,828
Research revenues..... 57,789 2,232 2,392 -- -- 62,413
Royalties and fees.... 115,881 -- -- -- -- 115,881
-------- -------- -------- ------- -------- --------
Total revenues........ 389,156 2,391 2,392 51,183 -- 445,122
-------- -------- -------- ------- -------- --------
Costs and expenses:
Cost of goods sold.... 106,182 132 -- 15,412 9,759 131,485
Selling, general and
administrative....... 71,764 3,654 9,686 22,822 -- 107,926
Research and
development.......... 75,160 16,968 28,474 1,214 -- 121,816
-------- -------- -------- ------- -------- --------
Total operating
expenses............. 253,106 20,754 38,160 39,448 9,759 361,227
-------- -------- -------- ------- -------- --------
Operating income (loss). 136,050 (18,363) (35,768) 11,735 (9,759) 83,895
Interest and other
costs................ (5,843) (167) -- -- (9,000) (15,010)
Interest and other
income............... 53,291 2,578 3,888 29 -- 59,786
Share of losses of
associates........... (7,458) -- -- -- -- (7,458)
Minority interest..... 260 -- -- -- -- 260
-------- -------- -------- ------- -------- --------
Income (loss) before
tax.................... 176,300 (15,952) (31,880) 11,764 (18,759) 121,473
Taxation.............. (1,186) -- -- (4,694) -- (5,880)
-------- -------- -------- ------- -------- --------
Net income (loss) after
tax.................... $175,114 $(15,952) $(31,880) $ 7,070 $(18,759) $115,593
======== ======== ======== ======= ======== ========
Earnings per ordinary
share
Basic................. $ 1.76 $ 0.98
Diluted............... $ 1.58 $ 0.89
Weighted average number
of ordinary shares
Basic................. 99,352 117,590
Diluted............... 113,080 133,216
</TABLE>
- --------
(1) The adjustment of $9,759,000 represents increased amortization following
the revaluation of the assets of Neurex, Carnrick and Sano at their
estimated fair value. Intangible assets will be amortized on a straight
line basis over their expected useful lives, estimated at 15 years. The
adjustment of $9,000,000 comprises the aggregate effect of the foregone
interest and the interest expense on the cash consideration and promissory
note, respectively, relating to the Carnrick Acquisition. For purposes of
the pro forma combined statement of income, it is assumed that such cash
consideration was paid and such promissory note was issued on January 1,
1997.
(2) As a result of the Merger, the Carnrick Acquisition and the Sano
Acquisition, Elan will incur an aggregate one-time charge against earnings
representing the acquisition of in-process research and development and
costs of restructuring estimated at $1,249,516,000. This charge is excluded
from the pro forma combined statement of income as it is a non-recurring
item.
13
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
----------------------------------------------------------------
HISTORICAL
------------------------------------ COMBINED
ELAN(1) SANO(2) NEUREX CARNRICK ADJUSTMENT(3) PRO FORMA(4)
------- ------- -------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales......... $62,617 $ 31 $ 2,100 $ 6,220 $ -- $ 70,968
Research revenues..... 20,820 318 292 -- -- 21,430
Royalties and fees.... 51,229 -- -- -- -- 51,229
------- ------- -------- ------- ------- --------
Total revenues........ 134,666 349 2,392 6,220 -- 143,627
------- ------- -------- ------- ------- --------
Cost and expenses:
Cost of goods sold.... 29,073 435 234 2,445 2,440 34,627
Selling, general and
administrative....... 27,797 7,231 4,637 6,036 -- 45,701
Research and
development.......... 33,817 2,590 8,826 632 -- 45,865
------- ------- -------- ------- ------- --------
Total operating
expenses............. 90,687 10,256 13,697 9,113 2,440 126,193
------- ------- -------- ------- ------- --------
Operating income (loss). 43,979 (9,907) (11,305) (2,893) (2,440) 17,434
Interest and other
costs................ (289) (33) -- -- (2,369) (2,691)
Interest and other
income............... 11,187 282 748 52 -- 12,269
------- ------- -------- ------- ------- --------
Income (loss) before
tax.................... 54,877 (9,658) (10,557) (2,841) (4,809) 27,012
Taxation.............. (397) -- -- 1,115 -- 718
------- ------- -------- ------- ------- --------
Net income (loss) after
tax.................... $54,480 $(9,658) $(10,557) $(1,726) $(4,809) $ 27,730
======= ======= ======== ======= ======= ========
Earnings per ordinary
share
Basic................. $ 0.51 $ 0.23
Diluted............... $ 0.46 $ 0.20
Weighted average number
of ordinary shares
Basic................. 106,906 123,024
Diluted............... 119,628 137,644
</TABLE>
- --------
(1) As a result of the Sano Acquisition, in the three months ended March 31,
1998, Elan incurred a one-time charge against earnings representing the
acquisition of in-process research and development and costs of
restructuring of approximately $478,609,000. This charge is excluded from
the pro forma combined statement of income as it is a non-recurring item.
(2) These are the results of Sano for the two months ended February 28, 1998.
The results of Sano for the month of March 1998 are included in the results
of Elan for the three months ended March 31, 1998.
(3) The adjustment of $2,440,000 represents the increased amortization
following the revaluation of the assets of Neurex, Carnrick and Sano at
their estimated fair value. Intangible assets will be amortized on a
straight line basis over their expected useful lives, estimated at 15
years. The adjustment of $2,369,000 comprises the aggregate effect of the
foregone interest and the interest expense on the cash consideration and
promissory note, respectively, relating to the Carnrick Acquisition. For
purposes of the pro forma combined statement of income, it is assumed that
such cash consideration was paid and such promissory note was issued on
January 1, 1997.
(4) As a result of the Merger and the Carnrick Acquisition, Elan will incur a
further one-time charge against earnings representing the acquisition of
in-process research and development and costs of restructuring estimated at
$770,907,000. This charge is excluded from the pro forma combined statement
of income as it is a non-recurring item.
14
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data for Elan and
Neurex and unaudited pro forma and equivalent pro forma combined per share data
to reflect the consummation of the Merger based upon the historical financial
results of Elan and Neurex and the conversion of each Neurex Share into 0.51 of
an Elan ADS. The pro forma data are not necessarily indicative of actual or
future operating results or of the financial position that would have occurred
or will occur upon consummation of the Merger. The data presented below should
be read in conjunction with the unaudited pro forma combined financial data set
forth under "Unaudited Pro Forma Combined Financial Data" and the separate
historical consolidated financial statements of Elan and Neurex which are
incorporated herein by reference. See "Unaudited Pro Forma Combined Financial
Data."
<TABLE>
<CAPTION>
HISTORICAL NEUREX
------------ PRO FORMA EQUIVALENT
YEAR ENDED DECEMBER 31, 1997 ELAN NEUREX COMBINED PRO FORMA (1)
- ---------------------------- ----- ------ --------- -------------
<S> <C> <C> <C> <C>
Diluted earnings per ordinary, common and
equivalent share........................ $1.58 $(1.44) $0.89 $0.46
Dividends................................ -- -- -- --
Book value per ordinary, common and
equivalent share........................ 7.96 2.19 7.65 3.90
<CAPTION>
HISTORICAL NEUREX
------------ PRO FORMA EQUIVALENT
THREE MONTHS ENDED MARCH 31, 1998 ELAN NEUREX COMBINED PRO FORMA (1)
- --------------------------------- ----- ------ --------- -------------
<S> <C> <C> <C> <C>
Diluted earnings per ordinary, common and
equivalent share........................ $0.46 $(0.47) $0.20 $0.10
Dividends................................ -- -- -- --
Book value per ordinary, common and
equivalent share........................ 7.34 1.73 7.17 3.66
</TABLE>
- --------
(1) The equivalent pro forma per share amounts were calculated by multiplying
pro forma income per share, pro forma dividends per share and pro forma
book value per share by the Exchange Ratio of 0.51.
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
COMPARATIVE MARKET PRICE INFORMATION
Elan ADSs are listed and traded on the NYSE, the principal trading market for
Elan's securities, under the symbol "ELN." Neurex Shares are listed and traded
on the Nasdaq under the symbol "NXCO." The following table sets forth the high
and low per share sale prices for the Elan ADSs and Neurex Shares on the NYSE
Composite Tape and the Nasdaq, respectively, as reported in published financial
sources, for the periods indicated.
<TABLE>
<CAPTION>
ELAN ADSS (1) NEUREX SHARES
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
CALENDAR 1998
2nd Quarter (through June 30, 1998)........... $68.38 $57.00 $31.25 $19.50
1st Quarter................................... 69.00 48.13 24.44 13.25
CALENDAR 1997
4th Quarter................................... 56.88 44.38 18.63 12.63
3rd Quarter................................... 51.19 42.75 16.19 10.75
2nd Quarter................................... 45.38 30.00 17.75 9.88
1st Quarter................................... 38.75 32.75 18.25 11.63
CALENDAR 1996
4th Quarter................................... 33.25 23.00 19.25 11.75
3rd Quarter................................... 32.63 24.75 22.50 12.50
2nd Quarter................................... 33.88 28.19 25.75 16.00
1st Quarter................................... 32.31 24.19 23.00 7.25
</TABLE>
- --------
(1) The prices for Elan ADSs have been adjusted to give effect to a two-for-one
stock split effected on August 22, 1996.
15
<PAGE>
Elan's Ordinary Shares are also traded in Dublin on the Official List of the
Irish Stock Exchange and in London on the Official List of the London Stock
Exchange. The volume of trading in the Ordinary Shares on such markets is,
however, very limited.
On April 28, 1998, the last full day of trading before the issuance of a
press release by Elan and Neurex announcing the proposed Merger, the high sale
price, low sale price and closing price per Elan ADS was $65.38, $62.25 and
$62.38, respectively, and the high sale price, low sale price and closing price
per Neurex Share was $20.50, $19.50 and $19.75, respectively. On June 30, 1998,
the last full day of trading prior to the date of this Prospectus-Proxy
Statement, the high sale price, low sale price and closing price per Elan ADS
was $64.25, $64.06 and $64.31, respectively, and the high sale price, low sale
price and closing price per Neurex Share was $30.50, $30.38 and $30.38,
respectively.
COMPARATIVE DIVIDEND INFORMATION
Elan has not paid cash dividends on its Ordinary Shares in the past. The
declaration of any cash dividends will be at the recommendation of Elan's Board
of Directors (the "Elan Board"). The recommendations of the Elan Board will
depend upon the earnings, capital requirements and financial condition of Elan
and other relevant factors. Although Elan does not anticipate that it will pay
any cash dividends on its Ordinary Shares in the foreseeable future, Elan
expects that the Elan Board will review Elan's dividend policy on a regular
basis. Dividends may be paid on Elan's Executive Shares (as defined below) or
"B" Executive Shares (as defined below) at a time when 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 Share
Capital" and Note 14 to the Consolidated Financial Statements included in
Elan's 1997 Annual Report incorporated herein by reference.
Neurex has never paid dividends on Neurex Shares and does not anticipate that
it will pay such dividends in the foreseeable future.
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RISK FACTORS
In addition to the other information regarding Elan, Neurex and the Merger
contained in this Prospectus-Proxy Statement, Neurex stockholders should
consider the following factors in evaluating whether to vote FOR or AGAINST
the approval and adoption of the Merger Agreement.
RISK FACTORS RELATING TO ELAN
Dependence on Key Products. Revenues from the sale and/or manufacture of
Permax(R) (pergolide mesylate) and Naprelan(R) (naproxen sodium) for the U.S.
market accounted for approximately 14% and 8%, respectively, of Elan's total
revenues for the year ended December 31, 1997 and approximately 10% and 8%,
respectively, for the three months ended March 31, 1998. The patent covering
Elan's naproxen sodium formulation for once-daily administration expires June
10, 2014. The patent covering the active ingredient in Permax expires February
8, 2000. Continued growth in Elan's revenues will depend on continued market
demand for such products, as well as the successful introduction and marketing
of new products. There can be no assurance that the demand for Elan's products
will remain at current levels or that Elan will continue to be successful in
developing or marketing new products.
Integration of Acquisitions. Elan consummated the acquisition of Athena, the
Sano Acquisition and the Carnrick Acquisition in July 1996, February 1998 and
May 1998, respectively. Prior to these acquisitions, each of Athena, Sano and
Carnrick were operated independently as separate and distinct businesses.
Elan's success will depend, in part, on its ability to integrate these
businesses and, upon consummation of the Merger, to integrate Neurex. There
can be no assurance that Elan will be able to effectively manage or integrate
these businesses, or that it will be successful in implementing appropriate
operational, financial and management systems and controls to achieve the
benefits expected to result from the acquisitions. Elan's efforts to integrate
these businesses could be affected by a number of factors beyond Elan's
control, such as regulatory developments, general economic conditions,
increased competition and the loss of certain customers resulting from the
acquisitions. In addition, the consolidation of each of these businesses will
require substantial attention from Elan's management. Any diversion of
management attention and any difficulties encountered in the transition and
integration process could have a material adverse effect on Elan and its
operations.
Competition. The pharmaceutical industry is characterized by intense
competition and rapid technological change. In recent years, a large number of
pharmaceutical companies have become increasingly interested in the
development and commercialization of products incorporating advanced or novel
drug delivery systems and in the research, development and marketing of
neurological therapeutic products. Elan's products could be rendered obsolete
or made uneconomical by (i) the development of new pharmaceuticals to treat
the diseases or conditions addressed by Elan's products and (ii) technological
advances affecting the cost of production of, or marketing or pricing actions
by, one or more of Elan's competitors. Elan believes that competition among
branded prescription pharmaceuticals, including those incorporating its drug
delivery systems, and generics will be based on, among other things, the
degree of patent protection, product efficacy, safety, reliability,
availability and price.
No Assurance of Continued Successful Licensing and Marketing. Elan's
revenues are derived from sales of products which may be marketed through
agreements with third parties, by way of license agreements or otherwise.
There can be no assurance that such third party arrangements can continue to
be successfully negotiated or that any such arrangements will be on
commercially reasonable terms. Even if acceptable and timely arrangements are
available, there can be no assurance that products developed by Elan will be
accepted in the marketplace or that, if initially accepted, sales of such
products will not thereafter decline. Additionally, since Elan's clients or
marketing partners for its drug delivery systems in many cases make material
marketing and other commercialization decisions, a significant number of the
variables that may affect Elan's revenues and net income are not exclusively
within Elan's control.
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Government Regulation. The design, development, testing, manufacturing and
marketing of pharmaceutical products and devices are subject to regulation by
governmental authorities, including the FDA, and comparable regulatory
authorities in other countries. The approval process is generally lengthy,
expensive and subject to unanticipated delays. Currently, Elan is actively
pursuing marketing approval for a number of its products from regulatory
authorities, including the FDA. Continued growth in Elan's revenues and
profits will depend, in part, on the successful introduction and marketing of
some or all of such products. There can be no assurance as to when or whether
such approvals from regulatory authorities will be received.
All facilities and manufacturing techniques used for the manufacturing of
products and devices for clinical use or for sale in the U.S. must be operated
in conformity with current Good Manufacturing Practices ("GMP") regulations,
the FDA regulations governing the production of pharmaceutical products.
Elan's facilities are subject to scheduled periodic regulatory inspections to
ensure compliance with GMP regulations. In 1995, Elan received two warning
letters from the FDA which referenced previous inspections of Elan's Athlone,
Ireland and Gainesville, Georgia manufacturing facilities, identifying certain
conditions which the FDA considered to be deviations from GMP regulations.
Elan implemented a number of corrective actions and, following reinspection of
its facilities, believed that such facilities were in substantial compliance
with GMP regulations. In 1997, Elan received another warning letter from the
FDA dated November 7, 1997, referencing the FDA's September 1997 inspection of
Elan's Gainesville, Georgia facility. The FDA identified certain conditions
which it considered to be deviations from GMP regulations. As a result of
discussions with the FDA following the September 1997 inspection, Elan
implemented corrective actions. The FDA has conducted a re-inspection of this
facility and made no observations concerning any GMP deviations. Therefore,
Elan believes that it is in substantial compliance with GMP regulations. Any
future determination by the FDA that Elan is not in substantial compliance
with such regulations could have a material adverse effect on Elan.
Uncertainty of Third Party Reimbursement; Pricing Pressure. Elan's ability
to earn sufficient returns on its products may depend, in part, on the
availability of reimbursement from third party payors, such as government
health administration authorities, private health insurers and other
organizations. Third party payors are increasingly challenging the price and
cost-effectiveness of medical products and services. There can be no assurance
that adequate third party reimbursement will be available to enable Elan to
achieve or maintain price levels sufficient to realize an appropriate return
on its investment in product development.
In addition, global efforts to contain health care costs, particularly among
managed care organizations, continue to exert downward pressure on product
pricing. Further, a number of regulatory and legislative proposals aimed at
changing the health care industry in the U.S. and other countries have been
proposed. There can be no assurance that private sector reform or governmental
health care reform measures, if adopted, will not have a negative impact upon
Elan and its operations.
Proprietary Technology; Unpredictability of Patent Protection. Elan's
success, competitive position and amount of sales and royalty income will
depend, in part, on its ability to obtain patents in various jurisdictions on
its current and future technologies and products, to defend its patents and
protect its trade secrets and to operate without infringing on the proprietary
rights of others. Elan has filed, and expects to continue to file, patent
applications seeking to protect its technologies and products. There can be no
assurance, however, that Elan's existing patent applications will mature into
issued patents or, if issued, that they will be enforceable. In addition,
there can be no assurance that Elan's patents will not be challenged by third
parties and, if challenged, will be held valid, or that any technologies or
products developed by Elan will not infringe upon patents held by third
parties. The expense involved in litigation regarding patent protection or a
challenge thereto can be significant and cannot be estimated by Elan. In
addition, if Elan relies on unpatented proprietary technology, there can be no
assurance that others will not independently develop or obtain similar
products or technologies.
In September 1997, AHP, Elan's exclusive U.S. licensee of its verapamil
patent, with Elan named as co-plaintiff, filed a lawsuit against each of
Biovail Corporation International ("Biovail") and Mylan Pharmaceuticals, Inc.
("Mylan") for patent infringement. Biovail has filed counterclaims alleging
non-
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infringement and certain antitrust and unfair competition violations and Mylan
has filed a counterclaim for patent invalidity. Both of these lawsuits are
currently in the discovery stages of litigation. Should one or both of these
parties prevail in these proceedings, Elan expects that revenues from the
manufacture and sale of Verelan(R) would decline.
RISK FACTORS RELATING TO NEUREX
For a discussion of risk factors relating to Neurex, see "Business--Risk
Factors" in Neurex's 1997 Annual Report which is incorporated by reference in
this Prospectus-Proxy Statement.
THE ANNUAL MEETING
GENERAL
This Prospectus-Proxy Statement is being furnished to Neurex stockholders in
connection with the solicitation of proxies by the Neurex Board for use at the
Annual Meeting scheduled to be held at the administrative offices of Neurex,
190 Independence Drive, Menlo Park, California, on August 11, 1998, at 10:00
a.m., local time, and at any adjournment or postponement thereof. This
Prospectus-Proxy Statement, the Letter to Neurex stockholders, the Notice of
Annual Meeting of Stockholders and the related form of proxy are first being
mailed to Neurex stockholders on or about July 2, 1998.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the Annual Meeting, Neurex stockholders will be asked to consider and
vote on the Merger Proposal.
AFTER CAREFUL CONSIDERATION, THE NEUREX BOARD HAS UNANIMOUSLY DETERMINED
THAT THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, NEUREX AND THE NEUREX
STOCKHOLDERS. THE NEUREX BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND UNANIMOUSLY RECOMMENDS THAT NEUREX STOCKHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AT THE ANNUAL MEETING.
At the Annual Meeting, Neurex stockholders will also be asked to consider
and vote on:
(1) a proposal to approve the 1998 Stock Option Plan and to authorize
1,000,000 Neurex Shares for issuance thereunder;
(2) the election of nine directors to the Neurex Board for terms expiring
at the Neurex 1999 Annual Meeting;
(3) the ratification of the selection of Ernst & Young LLP as auditors of
Neurex's financial statements for the year ending December 31, 1998; and
(4) such other business as may properly come before the Annual Meeting or
any adjournments or postponements thereof.
THE NEUREX BOARD ALSO RECOMMENDS THAT NEUREX STOCKHOLDERS VOTE FOR THE
APPROVAL OF PROPOSALS (1) AND (3) ABOVE AND THE ELECTION OF EACH OF THE NINE
NOMINATED DIRECTORS.
RECORD DATE; VOTING RIGHTS; VOTING AT THE MEETING
The Neurex Board has fixed June 29, 1998 as the Record Date for
determination of Neurex stockholders entitled to notice of, and to vote at,
the Annual Meeting. Each holder of record of Neurex Shares on the Record Date
is entitled to cast one vote per share, exercisable in person or by a properly
executed proxy, on each matter submitted at the Annual Meeting. On the Record
Date, there were 23,289,991 Neurex Shares outstanding and entitled to vote
which were held by approximately 258 holders of record.
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The presence, in person or by a properly executed proxy, of a majority of
the Neurex Shares outstanding and entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. The Merger Proposal
requires the affirmative vote of the holders of a majority of the Neurex
Shares outstanding and entitled to vote thereon. Pursuant to the Voting
Agreement, each of the executive officers and directors of Neurex agreed,
without any additional consideration being paid to such person, to vote all of
the Neurex Shares owned or thereafter acquired by such person in favor of the
Merger and appointed Elan as his or her attorney and proxy to vote such Neurex
Shares at any meeting of stockholders of Neurex in connection with the Merger.
The Voting Agreement covers an aggregate of 1,480,474 Neurex Shares,
representing approximately 6.4% of the Neurex Shares outstanding as of June
29, 1998. See "The Voting Agreement."
A plurality of the Neurex Shares present in person or represented by proxy
at the Annual Meeting will be required to elect each director to the Neurex
Board. Approval of the remaining proposals requires the affirmative vote of a
majority of the Neurex Shares present in person or represented by proxy at the
Annual Meeting and entitled to vote thereon. See "Additional Items Requiring
the Vote of Neurex Stockholders."
An abstention or a failure to vote with respect to the Merger Proposal and
any "broker non-vote" (as defined below) will have the effect of a vote cast
against the Merger Proposal.
ADJOURNMENT OF THE ANNUAL MEETING
In the event that there are insufficient votes to approve the Merger
Proposal at the time of the Annual Meeting, such proposal will not be approved
unless the Annual Meeting is adjourned in order to permit further solicitation
of proxies from Neurex stockholders. Proxies that are being solicited by the
Neurex Board grant the discretionary authority to vote for any such
adjournment. If it is necessary to adjourn the Neurex Annual Meeting, and such
adjournment is for a period of less than 30 days, no notice of the time and
place of the adjourned meeting is required to be given to Neurex stockholders
other than an announcement of such time and place at the Annual Meeting. A
majority of the voting power represented and voting at the Annual Meeting is
required to approve any such adjournment whether or not a quorum is present at
the Annual Meeting.
VOTING OF PROXIES
All Neurex stockholders who are entitled to vote and are represented at the
Annual Meeting by properly executed proxies received prior to or at such
meeting and not revoked will be voted at such meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted FOR approval of the Merger Proposal and FOR each of the
other proposals stated in the Notice of Annual Meeting of Stockholders of
Neurex and described under "Additional Items Requiring the Vote of Neurex
Stockholders" (the "Additional Proposals"). A properly executed proxy marked
"WITHHELD," although counted for purposes of determining whether there is a
quorum and for purposes of determining the aggregate voting power and number
of Neurex Shares represented and entitled to vote at the Annual Meeting, will
not be voted. Accordingly, since the affirmative vote of a majority of the
Neurex Shares present in person or represented by proxy at the Annual Meeting
is required for approval of the Additional Proposals and the affirmative vote
of a majority of the Neurex Shares outstanding and entitled to vote thereon is
required for approval of the Merger Proposal, a proxy marked "WITHHELD" will
have the effect of a vote against each of these proposals. Neurex Shares
represented by "broker non-votes" (i.e., shares held by brokers or nominees
which are represented at a meeting but with respect to which the broker is not
empowered to vote) will be counted for purposes of determining whether there
is a quorum at the Annual Meeting. Under rules applicable to brokers, a broker
is precluded from exercising voting discretion with respect to the approval of
either the Additional Proposals or the Merger Proposal and thus, absent
specific instructions from the beneficial owner of such Neurex Shares, is not
empowered to vote such Neurex Shares with respect to the approval of such
proposals. Since the affirmative vote of a majority of the Neurex Shares
present in person or represented by proxy at the Annual Meeting is required
for approval of the Additional Proposals (provided that the number of votes
cast represents more than
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50% of the outstanding Neurex Shares), and for the election of each director
nominated by the Neurex Board, a "broker non-vote" or the failure to be
present in person or by proxy at the Annual Meeting will have no effect upon
the outcome of the vote with respect to the Additional Proposals, provided
that the total number of votes cast on such proposals represents more than 50%
of the outstanding Neurex Shares. However, since the affirmative vote of a
majority of the Neurex Shares is required to approve the Merger Proposal, a
"broker non-vote" or the failure to vote in person or by proxy will have the
effect of a vote against the Merger Proposal.
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn such meeting to another time or place, the persons named in the
enclosed form of proxy, and acting thereunder, will have discretion to vote on
such matters in accordance with their best judgment (unless authorization to
use such discretion is withheld). Neurex is not aware of any matters expected
to be presented at the Annual Meeting other than as described in its Notice of
Annual Meeting of Stockholders.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
(including by telegram or facsimile) with the Secretary of Neurex, before the
taking of the vote at the Annual Meeting, a written notice of revocation
bearing a later date than the date of the proxy or by giving notice of
revocation in open meeting; (ii) duly executing a later-dated proxy relating
to the same shares and delivering (including by telegram or facsimile) it to
the Secretary of Neurex before the taking of the vote at the relevant meeting;
or (iii) attending the Annual Meeting and voting in person. In order to vote
in person at the Annual Meeting, Neurex stockholders must attend the meeting
and cast their votes in accordance with the voting procedures established for
such meeting. Attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy. Any written notice of revocation or
subsequent proxy must be sent to: Neurex Corporation, 3760 Haven Avenue, Menlo
Park, California 94025 (facsimile (650) 853-1538), Attention: Secretary.
Neurex stockholders who require assistance in changing or revoking a proxy
should contact Neurex's Proxy Solicitor, ChaseMellon Shareholder Services
L.L.P., at 235 Montgomery Street, 23rd Floor, San Francisco, California 94104,
or by telephone at (415) 743-1423.
SOLICITATION OF PROXIES
Proxies are being solicited by and on behalf of the Neurex Board. Elan and
Neurex will share equally all expenses related to printing, filing and mailing
the Prospectus-Proxy Statement and all Commission and other regulatory filing
fees incurred in connection with the Prospectus-Proxy Statement. See "The
Merger Agreement--Fees and Expenses." In addition to solicitation by mail,
proxies may be solicited by directors, officers and employees of Neurex in
person or by telephone, telegram or other means of communication. These
persons will receive no additional compensation for solicitation of proxies,
but may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Neurex has retained ChaseMellon Shareholder Services L.L.P.
at an estimated cost of $6,500, plus reimbursement of reasonable expenses, to
assist in its solicitation of proxies from brokers, nominees, institutions and
individuals. Arrangements will also be made by Neurex with custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of Neurex Shares held of record by such custodians, nominees
and fiduciaries, and Neurex will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred in
connection therewith.
THE MERGER
BACKGROUND OF THE MERGER
On January 13, 1998, following a presentation at a biotechnology conference
by Neurex's Chief Executive Officer, Paul Goddard, Ph.D., members of Elan's
management expressed an interest in Neurex's business prospects. On January
22, 1998, a Confidentiality Agreement was agreed upon by Elan and Neurex and
executed shortly thereafter.
On February 5, 1998, Dr. Goddard met with John Groom, President and Chief
Operating Officer of Elan, to discuss the feasibility of a business
combination of Neurex and Elan. Subsequently, Dr. Goddard provided to Elan
certain confidential information regarding Neurex's business prospects.
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On March 2 and 3, 1998, Dr. Goddard met with members of Elan's executive
management. At those meetings, the initial concept of a possible business
combination of Elan and Neurex was raised by Elan. Dr. Goddard agreed to
discuss the concept with the Neurex Board.
On March 6, 1998, Dr. Goddard and Neurex's Chief Financial Officer, John
Varian, held a conference call with two members of the Neurex Board, John
Chappell and Ray Egan, to obtain their initial thoughts on such a transaction.
It was agreed that the remainder of the Neurex Board and executive management
team would be consulted.
On March 10, 1998, the remainder of the Neurex Board and executive
management team were informed of Elan's inquiry. At this meeting, the Neurex
Board authorized Neurex's management to continue discussing various forms of
strategic collaborations or other arrangements that might be mutually
beneficial. The Neurex Board instructed Neurex's executive management team to
meet with their counterparts from Elan.
On March 19 and 20, 1998, members of Neurex's executive management team met
with certain members of Elan's executive management team, the Elan Board and
Elan's advisors. Following that meeting, a senior representative of Neurex and
a senior representative of Elan agreed that interest in pursuing further
discussions existed among the individuals who had attended the meeting.
On March 21, 1998, the Neurex Board was informed of the result of the
meeting and determined that Neurex was interested in continuing to explore the
possibility of expanding their relationship with Elan, including, among other
things, a possible business combination of the two companies, and that
priority should be placed on the performance of due diligence by both Neurex
and Elan. The Neurex Board also specifically directed Neurex's management to
retain investment bankers to represent Neurex in potential discussions. Morgan
Stanley was retained to represent Neurex and, throughout the remainder of
March and into April, representatives of Elan and Neurex conducted a due
diligence review of each other's business and operations.
In connection with the performance of Neurex's due diligence review, on
March 30 and 31, 1998, certain members of the Neurex Board met with certain
members of the Elan Board and Elan's management to hear a presentation of
Elan's current and prospective business operations. Also attending these
meetings were the financial advisors for Neurex and Elan.
In mid-April 1998, representatives of Elan, Neurex and their respective
financial advisors met to discuss valuation issues. At such time, the parties
were unable to agree on the valuation of Neurex. Representatives of each of
Elan and Neurex and their respective legal and financial advisors continued
their due diligence review of each other's businesses.
On April 21, 1998, the Neurex Board received and reviewed a term sheet
prepared by Elan outlining certain principal terms of a possible business
combination. After extended discussion, the Neurex Board formally and
unanimously rejected the proposed terms. In addition, the Neurex Board took
the following actions: (i) directed Morgan Stanley, Neurex's financial
advisor, to further discuss with Elan the proposed terms and (ii) established
a special committee of the Neurex Board comprised solely of outside directors
to conduct further negotiations with Elan.
On April 27, 1998, the Neurex Board received revised terms from Elan, which
it discussed in detail. Certain unacceptable items were identified and
conveyed to Elan and its advisors. During the remainder of April 27, 1998 and
April 28, 1998, negotiations continued on the remaining items.
After the close of business on April 28, 1998, the final terms of the Merger
Agreement were negotiated, including the Exchange Ratio, the amount and nature
of termination fees and other key financial provisions. At that meeting, the
Neurex Board received presentations from Neurex's financial and legal
advisors, and the written opinion of Morgan Stanley to the effect that, as of
such date, the Exchange Ratio was fair, from a financial point
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of view, to Neurex stockholders. The outside directors of the Neurex Board
determined that the terms of the Merger Agreement were fair to, and in the
best interests of, Neurex and Neurex stockholders, and accordingly the Neurex
Board unanimously approved the Merger Agreement and resolved to recommend that
the Neurex stockholders vote for the approval and adoption of the Merger
Agreement. See "--Neurex's Reasons for the Merger; Recommendation of the
Neurex Board of Directors." On April 29, 1998, Neurex and Elan executed the
Merger Agreement and the parties issued a joint press release announcing the
Merger.
NEUREX'S REASONS FOR THE MERGER; RECOMMENDATION OF THE NEUREX BOARD OF
DIRECTORS
The Neurex Board has approved and adopted the Merger Agreement, believes
that the Merger is fair to and in the best interests of Neurex and its
stockholders and unanimously recommends the approval and adoption of the
Merger Agreement by the stockholders of Neurex at the Annual Meeting. In the
course of reaching its decision to approve the Merger Agreement and the
transactions contemplated thereby, the Neurex Board considered a number of
factors, including, among others, the following: (i) the Neurex Board's view
that the Merger will result in a combined biopharmaceutical and drug
development entity with substantially greater resources and a more diversified
product base, development pipeline, manufacturing capability and international
presence; (ii) the Neurex Board's view that Elan will be able to provide
Neurex with the capital and resources necessary in order for Neurex to both
continue its research into acute care pain management and other neurological
disorders and have more flexibility in addressing scientific and business
aspects of these programs; (iii) the terms and conditions of the Merger,
including the premium to be paid by Elan and the anticipated U.S. federal
income tax-free nature of the transaction to Neurex stockholders; (iv) the
presentation and written opinion of Morgan Stanley to the effect that the
Exchange Ratio was fair, from a financial point of view, to the Neurex
stockholders (other than Elan and its affiliates); (v) information regarding
historical market prices and other information with respect to the Neurex
Shares and the Elan ADSs, and the financial performance and condition, assets,
liabilities, business operations, and prospects of each of Neurex and Elan and
their projected future values and prospects as separate entities and on a
combined basis; (vi) the Neurex Board's view that Elan's strengths in the
testing, registration, manufacture and technology for delivery of
pharmaceutical products will complement Neurex's own strengths in basic
research, sales and marketing and distribution, allowing Neurex to more
efficiently bring products to market; (vii) the Neurex Board's view that the
Merger will allow continued expansion by the combined companies into other
territories and other areas of neurology, with the acquisition of additional
products developed by third parties on favorable terms being a viable method
of enhancing near-term revenues; (viii) the compatibility of management of the
two companies; (ix) the status of Neurex's current research collaborations and
other commercial relationships; and (x) the Neurex Board's assessment of
Neurex's strategic alternatives to the Merger, including remaining an
independent company, licensing or otherwise transferring its rights to future
discoveries and merging or consolidating with a party other than Elan.
The foregoing discussion of the factors considered by the Neurex Board is
not intended to be exhaustive. In view of the wide variety of factors
considered in connection with its evaluation of the Merger, the Neurex Board
did not find it practicable to, and did not, quantify or otherwise attempt to
assign relative weights to the specific factors considered in reaching its
determinations.
ELAN'S REASONS FOR THE MERGER
Elan believes that the businesses of both Elan and Neurex will be enhanced
through their combination by being better positioned to capitalize on the
market opportunities created by the continued consolidation of the
pharmaceutical industry. Following the Merger, Elan will have expanded its
global pharmaceutical operations by the addition of a new therapeutic area,
acute care, and the expansion of product opportunities for pain management.
The Merger supplements Elan's existing research, development, sales and
marketing capabilities, continuing Elan's objective to build and increase
those resources which are deemed essential to Elan's success in its 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.
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OPINION OF FINANCIAL ADVISOR TO NEUREX
Morgan Stanley was engaged by Neurex to provide financial advisory services
in connection with the Merger. Morgan Stanley was selected by the Neurex Board
to act as its financial advisor based on Morgan Stanley's qualifications,
expertise and reputation and its knowledge of the business and affairs of
Neurex. At the meeting of the Neurex Board on April 28, 1998, Morgan Stanley
rendered its oral opinion, subsequently confirmed in writing, that, as of such
date and based upon and subject to the various considerations set forth in the
opinion, the Exchange Ratio pursuant to the Merger Agreement was fair from a
financial point of view to the Neurex stockholders.
THE FULL TEXT OF THE MORGAN STANLEY OPINION DATED APRIL 28, 1998, WHICH SETS
FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY MORGAN
STANLEY IN RENDERING ITS OPINION, IS ATTACHED TO THIS PROSPECTUS-PROXY
STATEMENT AS ANNEX B. NEUREX STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY. THE MORGAN STANLEY OPINION IS DIRECTED
TO THE NEUREX BOARD AND ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO
PURSUANT TO THE MERGER AGREEMENT FROM A FINANCIAL POINT OF VIEW AS OF THE DATE
OF THE OPINION, AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER, NOR DOES
IT CONSTITUTE A RECOMMENDATION TO ANY NEUREX STOCKHOLDERS AS TO HOW TO VOTE AT
THE ANNUAL MEETING. THE SUMMARY OF THE MORGAN STANLEY OPINION SET FORTH IN
THIS PROSPECTUS-PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION.
In rendering its opinion, Morgan Stanley, among other things: (i) reviewed
certain publicly available financial statements and other information of Elan
and Neurex; (ii) reviewed certain internal financial statements and other
financial and operating data concerning Elan and Neurex prepared by the
managements of Elan and Neurex, respectively; (iii) analyzed certain financial
projections prepared by the managements of Elan and Neurex; (iv) discussed the
past and current operations and financial condition and the prospects of Elan,
including information relating to certain strategic, financial and operational
benefits anticipated from the Merger, with senior executives of Elan; (v)
discussed the past and current operations and financial condition and the
prospects of Neurex, including information relating to certain strategic,
financial and operational benefits anticipated from the Merger, with senior
executives of Neurex; (vi) reviewed the pro forma impact of the Merger on the
earnings per share of Elan; (vii) reviewed the reported prices and trading
activity for the Elan ADSs and Neurex Shares; (viii) compared the financial
performance of Elan and Neurex and the prices and trading activity of the Elan
ADSs and Neurex Shares with that of certain other publicly traded companies
and their securities; (ix) reviewed the financial terms, to the extent
publicly available, of certain comparable merger and acquisition transactions;
(x) reviewed and discussed with the senior managements of Elan and Neurex the
strategic rationale for the Merger and certain alternatives to the Merger;
(xi) participated in discussions and negotiations among representatives of
Elan and Neurex and their financial and legal advisors; (xii) reviewed the
Merger Agreement and certain related agreements; and (xiii) considered such
other factors as Morgan Stanley deemed appropriate.
Morgan Stanley assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the
purposes of its opinion. With respect to the internal financial statements,
financial projections and/or other financial and operating data and
discussions relating to the strategic, financial and operational benefits
anticipated from the Merger provided by Elan and Neurex, Morgan Stanley
assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial
performance and prospects of Elan and Neurex, respectively. Morgan Stanley
relied upon the assessment by the managements of Elan and Neurex of their
ability to retain key employees of both Elan and Neurex. Morgan Stanley also
relied upon, without independent verification, the assessment by the
managements of Elan and Neurex of the strategic and other benefits expected to
result from the Merger. Morgan Stanley also relied upon, without independent
verification, the assessment by the managements of Elan and Neurex of Elan's
and Neurex's technologies and products, the timing and risks associated with
the integration of Neurex with Elan, and the validity of, and timing and risks
associated with, Elan's and Neurex's existing and future technologies and
products, including the timing or likelihood of any results of clinical trials
or of any necessary regulatory approvals. Morgan Stanley did not make any
independent valuation or appraisal of the assets, liabilities or
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intellectual property of Elan or Neurex, respectively, nor was Morgan Stanley
furnished with any such appraisals. Morgan Stanley assumed that the Merger
will be accounted in accordance with U.S. GAAP, will be treated as a tax-free
reorganization and/or exchange pursuant to the Code and will be consummated in
accordance with the terms set forth in the Merger Agreement. Morgan Stanley's
opinion was necessarily based on economic, market and other conditions as in
effect on, and the information made available to it as of, the date of the
opinion.
The following is a brief summary of the analysis performed by Morgan Stanley
in connection with its oral opinion and the preparation of its opinion letter
dated April 28, 1998.
Comparative Stock Price Performance. As part of its analysis, Morgan Stanley
reviewed the recent stock price performance of Elan and Neurex and compared
such performance with that of a group of biotechnology companies. The group
included Agouron Pharmaceuticals, Inc., Amgen, Inc., Biogen, Inc., Centocor,
Inc., Chiron Corporation, Genzyme Corporation, IDEC Pharmaceuticals
Corporation, Immunex Corporation and MedImmune, Inc. (collectively, the
"Biotech Index"). Morgan Stanley observed that over the period from April 28,
1997 to April 28, 1998, the market price of Neurex Shares increased 79.6%,
compared with an increase of 87.6% for Elan ADSs, an increase of 71.3% for the
Biotech Index and an increase of 36.7% for the S&P 500.
Peer Group Comparison. Morgan Stanley compared certain financial information
of Neurex with publicly available information of a group of biotechnology
companies including Agouron Pharmaceuticals, Inc., Amgen, Inc., Biogen, Inc.,
Centocor, Inc., Chiron Corporation, Genzyme Corporation, IDEC Pharmaceuticals
Corporation and MedImmune, Inc. (collectively, the "Biotechnology Companies").
Such analysis showed that as of April 28, 1998, Neurex's aggregate value was
90.4 times its last twelve months of revenue, compared to a median of 6.3
times for the Biotechnology Companies. Since Neurex was not projected to have
earnings in calendar year 1998 based on median estimates from securities
research analysts, there was not an observable multiple of equity market value
to calendar year 1998 earnings. The median multiple of equity market value to
1998 calendar year earnings for Biotechnology Companies was 27.3 times.
Neurex's equity market value was 46.5 times calendar year 1999 earnings based
on median estimates from securities research analysts, compared to a median of
24.3 times for the Biotechnology Companies.
Morgan Stanley also compared certain financial information of Elan with
publicly available information of a group of drug delivery companies including
ALZA Corporation, Biovail Corporation International, Dura Pharmaceuticals,
Inc. and R.P. Scherer Corporation (collectively, the "Drug Delivery
Companies") and with that of a group of pharmaceutical companies including
Abbott Laboratories, AHP, Amgen, Inc., Bristol-Myers Squibb Co., Eli Lilly and
Company, Johnson & Johnson, Merck & Co., Inc., Monsanto Company, Pfizer, Inc.,
Pharmacia & Upjohn, Inc., Schering-Plough Corporation and Warner-Lambert
Company (collectively, the "Pharmaceutical Companies"). In particular, such
analysis showed that as of April 28, 1998, Elan's market value traded at a
multiple of 30.1 times calendar year 1998 earnings based on median estimates
of securities research analysts, compared to a median of 28.7 times for Drug
Delivery Companies and 27.7 times for Pharmaceutical Companies. Elan's market
value traded at a multiple of 24.0 times calendar year 1999 estimated earnings
based on median estimates of securities research analysts, compared to a
median of 23.1 times for Drug Delivery Companies and 24.2 for Pharmaceutical
Companies. The analysis also showed that as of April 24, 1998, Elan's calendar
year 1999 price to earnings ratio, based on median estimates of securities
research analysts, divided by the estimated long term growth rate, based on
median estimates of securities research analysts, was 1.0, compared to 1.0 for
Drug Delivery Companies and 1.8 for Pharmaceutical Companies.
Analysis of Selected Precedent Transactions. As part of its analysis, Morgan
Stanley reviewed 14 biotechnology transactions including 9 in which stock was
used as consideration: Somatogen, Inc./Baxter International, Inc., Sano/Elan,
Sequana Therapeutics, Inc./Arris Pharmaceutical Corporation, PerSeptive
Biosystems Inc./Perkins-Elmer Corp., Somatix Therapy Corp./Cell Genesys Inc.,
Athena/Elan, Univax Biologics Inc./North American Biologicals, Glycomed
Inc./Ligand Pharmaceuticals Inc. and Vestar Inc./Nexagen (collectively, the
"Biotechnology Stock Transactions"). Morgan Stanley compared certain
statistics for the Biotechnology Stock Transactions to the relevant financial
statistics for Neurex based on the value of Neurex implied by the Exchange
Ratio and the closing price for Neurex Shares as of April 28, 1998. The
analysis showed
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in Biotechnology Stock Transactions technology value (defined as equity value
less cash plus debt) ranging from 0.6 times to 1.8 times the preceding 30-day
average equity value, technology value ranging from 0.9 times to 15.8 times
cash, implied offer price premia/(discounts) ranging from (13.5%) to 68.6%
over 30-day average price prior to transaction announcement, exchange ratio
premia/(discounts) ranging from (7.9%) to 52.4% over the exchange ratio one
day prior to transaction announcement and target exchange ratio
premia/(discounts) ranging from (10.4%) to 65.0% over 30-day average exchange
ratio prior to transaction announcement. These compared in the case of the
consideration to be received by Neurex stockholders to a multiple of
technology value of 1.5 times for the preceding 30-day average equity value,
technology value multiple of 16.2 times cash, implied offer price premium of
46.6% over 30-day average price prior to transaction announcement, Exchange
Ratio premium of 61.1% over the exchange ratio one day prior to transaction
announcement and Exchange Ratio premium of 50.0% over 30-day average exchange
ratio prior to transaction announcement.
Exchange Ratio Analysis. Morgan Stanley reviewed the ratios of the closing
prices of Neurex Shares divided by the corresponding prices of Elan ADSs over
various periods during the twelve month period ending April 28, 1998 and
computed the premia represented by the Exchange Ratio over the averages of
these daily ratios over various periods. The averages of these ratios of the
closing prices of Elan and Neurex were 0.339 for the previous 10 calendar
days, 0.349 for the previous 20 calendar days, 0.340 for the previous 30
calendar days, 0.336 for the previous 60 calendar days, 0.325 for the previous
90 calendar days and 0.317 for the latest twelve-month period ending April 28,
1998. The Exchange Ratio represented premia of 51%, 46%, 50%, 52%, 57% and
61%, respectively, over the aforementioned average exchange ratios of the Elan
and Neurex stock prices. The Exchange Ratio represented a 61% premium over the
exchange ratio based on closing prices of Elan ADSs and Neurex Shares on April
28, 1998.
Discounted Equity Value. Morgan Stanley performed an analysis of the present
value per share of the implied value of Neurex on a stand-alone basis based on
Neurex's future trading price. Morgan Stanley reviewed various valuation
benchmarks for 10 emerging biotechnology companies with valuations based on
earnings per share estimates in the calendar year 2000 and beyond (Advanced
Tissue Sciences, Inc., Agouron Pharmaceuticals, Inc., AxyS Pharmaceuticals,
Inc., Centocor, Inc., Cygnus, Inc., IDEC Pharmaceuticals Corporation,
MedImmune, Inc., Pharmacyclics, Inc., Protein Design Labs, Inc. and
Transkaryotic Therapies, Inc.). Morgan Stanley observed that, based on a range
of earnings per share estimates for the calendar years 2000 and 2001,
illustrative multiples of earnings per share ranging from 20.0 times to 30.0
times and illustrative discount rates ranging from 30.0% to 40.0%, the present
value per Neurex Share on a stand-alone basis ranged from $16.82 to $64.58.
Morgan Stanley compared the results of the stand-alone analysis to an analysis
of the present value per share of the implied value of Neurex based on Elan's
future trading price assuming consummation of the Merger and based on a range
of earnings per share estimates for both companies for calendar years 2000 and
2001 prior to any synergies resulting from the Merger, multiples of earnings
per share ranging from 24.1 times to 30.0 times and a discount rate of 15.0%.
Based on this analysis, Morgan Stanley estimated a present value per
equivalent Neurex Share ranging from $35.05 to $56.16.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
analysis or factor considered by it. Furthermore, selecting any portion of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its opinion. In addition, Morgan Stanley may have given
various analyses and factors more or less weight than other analyses and
factors, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of Elan or Neurex.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, the timing and likelihood of clinical trials
or of any necessary regulatory approvals, general business and economic
conditions and other matters, many of which are beyond the control of Elan or
Neurex. Any estimates contained herein are not necessarily indicative of
future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses performed were
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prepared solely as part of Morgan Stanley's analysis of the fairness of the
Exchange Ratio pursuant to the Merger Agreement from a financial point of view
to the Neurex stockholders and were conducted in connection with the delivery
of the Morgan Stanley opinion. The analyses do not purport to be appraisals or
to reflect the prices at which Elan or Neurex might actually be sold. The
Exchange Ratio pursuant to the Merger Agreement was determined through arm's-
length negotiations between Elan and Neurex and was approved by the Neurex
Board.
The Neurex Board retained Morgan Stanley based upon Morgan Stanley's
qualifications, experience and expertise. Morgan Stanley is an internationally
recognized investment banking and advisory firm. Morgan Stanley, as part of
its investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for
corporate, estate and other purposes. In the ordinary course of Morgan
Stanley's trading and brokerage activities, Morgan Stanley or its affiliates
may at any time hold long or short positions, may trade or otherwise effect
transactions, for its own account or for the account of customers in the
equity securities of Elan or Neurex.
Pursuant to an engagement letter dated April 3, 1998, Morgan Stanley
provided financial advisory services and a financial opinion in connection
with the Merger, and Neurex agreed to pay Morgan Stanley fixed fees of $1.0
million and an additional $4.1 million to be paid if the Merger is
consummated. Neurex has also agreed to indemnify Morgan Stanley and its
affiliates, their respective directors, officers, agents and employees and
each person, if any, controlling Morgan Stanley or any of its affiliates
against certain liabilities and expenses, including certain liabilities under
the federal securities laws, related to Morgan Stanley's engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Neurex Board with respect to the
Merger Agreement, Neurex stockholders should be aware that certain officers
and directors of Neurex have interests in the Merger that are different from
and in addition to the interests of Neurex stockholders generally. The Neurex
Board was aware of these interests and took these interests into account in
approving the Merger Agreement and the transactions contemplated thereby.
Neurex Options. Pursuant to the Merger Agreement, as of the Effective Time,
Elan will assume all of the obligations of Neurex under each of the Neurex
Plans (as defined below), with the effect that each option to purchase Neurex
Shares (a "Neurex Option") that is outstanding under the 1998 Stock Option
Plan, a copy of which is attached as Annex D hereto, and the Neurex 1988
Employee and Consultant Stock Option Plan (the "1988 Stock Option Plan" and,
together with the 1998 Stock Option Plan, the "Neurex Plans") immediately
prior to the Effective Time, whether or not then vested, will be assumed by
Elan and will constitute an option to acquire, on the same terms and
conditions (except as set forth in the Merger Agreement) as were applicable
under such Neurex Plan, the number of Elan ADSs (rounded down to the nearest
whole share) equal to the number of Neurex Shares subject to such Neurex
Option multiplied by the Exchange Ratio, at a price per share (rounded up to
the nearest whole cent) equal to the aggregate exercise price for the Neurex
Shares subject to such Neurex Option divided by the Exchange Ratio (an "Elan
Exchange Option"). See "The Merger Agreement--Treatment of Neurex Stock
Options." Pursuant to a resolution approved by the Neurex Board in December
1995 (the "December 1995 Resolution"), in the event of any merger,
reorganization or consolidation of Neurex with or into any other entity, or
the sale of all or substantially all of Neurex's assets (i) 50% of all
unvested Neurex Options held by each executive officer of Neurex immediately
prior to the effective time of such event shall immediately vest and (ii) the
vesting period for the remaining unvested Neurex Options held by such
executive officer shall be reduced by 50%. In addition, in the event that any
former Neurex employee (including an executive officer) is terminated by Elan
without cause within one year of the Effective Time, the unvested portion of
any Neurex Option held by such employee shall immediately vest. Pursuant to
stock option agreements under which Neurex directors were granted Neurex
Options, the unvested portion of each Neurex Option held by any Neurex
director will, at such director's option, either immediately vest at the
Effective Time or continue to vest after the Effective Time pursuant to the
vesting schedule set forth in such director's relevant stock option agreement.
As of the Record Date, approximately 1,683,233 Neurex Shares were issuable to
executive officers and
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directors of Neurex upon the exercise of outstanding Neurex Options, including
approximately 1,347,370 Neurex Options which will vest upon the consummation
of the Merger (assuming the vesting of all Neurex Options held by Neurex
directors). Such options, given the Exchange Ratio of 0.51 Elan ADSs per
Neurex Share, will be converted into Elan Exchange Options to purchase an
aggregate of approximately 858,449 Elan ADSs.
As soon as practicable after the Effective Time, Elan will grant options to
purchase Elan ADSs under Elan's stock option plans to Neurex employees,
including Neurex executive officers.
Neurex and Elan Management. Following the Effective Time, the Neurex Board
will consist of Donal J. Geaney, John Groom and Thomas G. Lynch. Immediately
following the Effective Time, Paul Goddard, Ph.D., will be appointed (i)
President of the Elan Pharmaceuticals division of Elan and (ii) to the
Executive Committee of the Elan Board.
Employment Arrangements. In connection with the Merger, Dr. Goddard may
enter into an employment agreement with Elan. The terms of such employment
agreement have not been finalized as of the date of this Prospectus-Proxy
Statement.
Severance Agreements with Officers. Each of the officers of Neurex is
expected to enter into a severance agreement (a "Severance Agreement") with
Neurex. Each Severance Agreement will provide, subject to certain
restrictions, for the payment of benefits to those persons who are officers of
Neurex immediately preceding the Effective Time and who are terminated from
the employ of Neurex within one year of the Effective Time due to (i)
involuntary termination without Cause (as defined in the Severance
Agreements), (ii) resignation after a material reduction in compensation or
benefits or (iii) resignation in response to a proposed relocation in excess
of fifty miles from Neurex's Menlo Park, California address. The benefits to
be paid under each Severance Agreement will consist of a lump sum payment
equal to (i) in the case of Dr. Goddard, two years' Compensation
("Compensation" being defined in the Severance Agreements to include base
salary plus the product of base salary multiplied by the average bonus
percentage paid to that officer over the two years preceding the Effective
Time) and (ii) in the case of officers other than Dr. Goddard, 12 months'
Compensation plus one month's Compensation for each full year of service with
Neurex in excess of one year, but in no event more than 18 months'
Compensation. In addition, the Surviving Corporation will continue, for each
officer so terminated, medical, dental and life insurance benefits for not
more than 12 months after the Effective Time. Finally, the Severance
Agreements will provide for out-placement services at a cost not to exceed
$15,000 per person.
Indemnification; Insurance. Elan has agreed to indemnify present and former
directors and officers of Neurex and to continue in effect for a period of six
years following the Merger a directors' and officers' liability insurance
policy substantially equivalent to that which Neurex currently maintains for
directors and officers. See "The Merger Agreement--Indemnification;
Insurance."
RESALES OF ELAN ADSS
The Elan ADSs to be received by Neurex stockholders pursuant to the Merger
Agreement have been registered under the Securities Act, thereby allowing such
Elan ADSs to be freely traded without restriction by persons who will not be
"affiliates" of Elan after the Merger or who were not "affiliates" of Neurex
on the date of the Annual Meeting. All directors and certain officers and
stockholders of Neurex may be deemed to have been "affiliates" of Neurex
within the meaning of Rules 144 or 145 under the Securities Act. Any such
person may resell the Elan ADSs received by him or her in the Merger only if
such Elan ADSs are registered for such resale under the Securities Act or an
exemption from such registrations 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 or 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.
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Neurex has agreed that it will use all commercially reasonable efforts to
cause each person who may be deemed an affiliate of Neurex to execute a
written agreement (an "Affiliate Agreement") providing, among other things,
that such person will not sell, assign or transfer any Elan ADSs received in
the Merger in violation of the Securities Act or the rules and regulations
thereunder.
DELISTING AND DEREGISTRATION OF NEUREX SHARES; LISTING OF ELAN ADSS
Upon consummation of the Merger, the Neurex Shares will be delisted from the
Nasdaq and will be deregistered under the Exchange Act.
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 NYSE upon official
notice of issuance and the Ordinary Shares be admitted (subject to allotment)
to the Official Lists of the Irish Stock Exchange and the London Stock
Exchange.
ABSENCE OF APPRAISAL RIGHTS
In accordance with Section 262(b) of the DGCL, no holder of Neurex Shares
shall be entitled to appraisal rights.
COVENANT NOT TO SELL ELAN ADSS
In connection with the Merger, each of Neurex's officers will agree that,
except with Elan's prior written consent, such officer will not and will not
offer or agree to, directly or indirectly, (i) sell, transfer, tender, assign,
hypothecate or otherwise dispose of, or create or permit to exist any security
interest, lien, claim, pledge, right of first refusal, limitation on voting
rights, charge or encumbrance of any nature whatsoever with respect to, Elan
ADSs, (ii) sell any option or contract to purchase or purchase any option or
contract to sell Elan ADSs or (iii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of Elan ADSs, in the case of each of clauses (i),
(ii) and (iii), whether such transaction is to be settled in Elan ADSs or any
other securities and whether such Elan ADSs are acquired as a result of the
Merger, upon the exercise of options or otherwise, for a period of one year
from the Effective Time; provided that up to 25% of the sum of Elan ADSs
acquired and Elan ADSs underlying Elan Exchange Options may be immediately or
from time to time sold in accordance with applicable laws. The foregoing
transfer restrictions applicable to each Neurex officer will (i) cease upon
involuntary termination or death of such officer and (ii) will not apply to
transfers to any trust of which such officer's direct family members are
beneficiaries.
GOVERNMENTAL REGULATION
Antitrust. Certain acquisition transactions, including the Merger, may not
be consummated until certain information has been furnished to the Justice
Department and the FTC pursuant to the HSR Act, and certain waiting period
requirements thereunder have been satisfied. Elan and Neurex completed the
filing of the required information and material with the Justice Department
and the FTC with respect to the Merger Agreement on May 19, 1998. On June 18,
1998, the applicable waiting period under the HSR Act expired. 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 Neurex 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 Neurex will prevail. The obligations of
Elan and Neurex 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.
Certain transactions, including the Merger, may not be consummated until,
pursuant to the Irish Mergers Act, a notification has been made to the
Enterprise Minister, such further information (if any) as may be required has
been furnished and either the Enterprise Minister has issued a clearance for
the proposed transaction or a
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prescribed period following notification has expired without the Enterprise
Minister having prohibited the proposed transaction. The prescribed period
consists of the three months following the date of notification or, where the
Enterprise Minister requests further information, the date of receipt of such
information. Elan and Neurex gave notification of the Merger to the Enterprise
Minister on May 13, 1998 and requested that the Enterprise Minister issue a
clearance in respect thereof. On June 12, 1998, Elan and Neurex received the
required clearance from the Enterprise Minister.
ANTICIPATED 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
Neurex'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 Neurex will be
consolidated into the assets and liabilities and results of operations of Elan
subsequent to the Effective Time.
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 hereto as Annex A and is incorporated herein by reference.
GENERAL; EFFECTIVE TIME AND EFFECTS OF THE MERGER
The Merger Agreement provides that, subject to the approval of the Merger
Agreement by the stockholders of Neurex (under the DGCL, a majority of the
outstanding Neurex Shares must vote in favor of the Merger Agreement) and the
satisfaction or waiver of other conditions to the Merger, Subco will be merged
with and into Neurex, with Neurex continuing as the Surviving Corporation and
as a wholly-owned subsidiary of Elan.
If the Merger Agreement is approved by the stockholders of Neurex, and the
other conditions to the Merger are satisfied or, where permissible, waived,
the Effective Time will occur at the time of filing of a certificate of
merger, in the form required by and executed in accordance with the DGCL, with
the Secretary of State of the State of Delaware. At the Effective Time, the
Neurex Certificate and Neurex By-laws, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation and by-laws of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law. The directors of Subco immediately prior to the
Effective Time will be the initial directors of the Surviving Corporation, and
the officers of Neurex immediately prior to the Effective Time will be the
initial officers of the Surviving Corporation, in each case until their
successors are duly elected or appointed and qualify in the manner provided in
the certificate of incorporation and by-laws of the Surviving Corporation, or
as otherwise provided by law.
CONVERSION OF NEUREX SHARES
The Merger Agreement provides that, as of the Effective Time, by virtue of
the Merger and without any action on the part of any Neurex stockholder, (i)
each Neurex Share issued and outstanding immediately prior to the Effective
Time (except for shares, if any, owned by Neurex as treasury stock or owned by
any subsidiary of Neurex or owned by Elan or any of its subsidiaries) shall be
converted into the right to receive 0.51 of an Elan ADS, which Exchange Ratio
shall be adjusted for any stock split, readjustment, stock dividend, exchange
of shares, reclassification, recapitalization or otherwise in Elan ADSs,
Ordinary Shares, or Neurex Shares; (ii) each share of common stock of Subco
issued and outstanding immediately prior to the Effective Time shall be
converted into such number of newly issued shares of common stock of the
Surviving Corporation as shall equal the sum of the number of Neurex Shares
outstanding immediately prior to the Effective Time; and (iii) each Neurex
Share shall be canceled and retired and shall cease to exist and each holder
of a certificate evidencing
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Neurex Shares shall thereafter cease to have any rights with respect to the
number of Neurex Shares evidenced by such certificate, except the right to
receive the number of Elan ADSs into which the Neurex Shares evidenced by such
certificate have been converted. See "--Exchange of Share Certificates."
NO FRACTIONAL ELAN ADSS
No fractional Elan ADSs will be issued in the Merger. In lieu of any such
fractional Elan ADSs, each holder of Neurex Shares who otherwise would be
entitled to receive a fractional Elan ADS pursuant to the Merger will be paid
an amount in cash equal to such fraction multiplied by the Market Value.
"Market Value" shall mean, with respect to Elan ADSs issued, the mean between
the high and low prices of the Elan ADSs as reported on the NYSE Composite
Tape on the NYSE trading day immediately prior to the Effective Time. The
fractional share interests of each Neurex stockholder will be aggregated, and
no Neurex stockholder will receive cash in an amount equal to or greater than
the value of one full Elan ADS.
EXCHANGE OF SHARE CERTIFICATES
At the Effective Time, Elan will make available to The Bank of New York, as
exchange agent (the "Exchange Agent"), for the benefit of the holders of
Neurex Shares, for exchange, certificates evidencing a sufficient number of
Ordinary Shares as would permit the Exchange Agent to issue such number of
Elan ADSs issuable to holders of Neurex Shares.
As promptly as practicable after the Effective Time, the Exchange Agent will
mail to each record holder of a certificate or certificates, which immediately
prior to the Effective Time represented outstanding Neurex Shares (the
"Certificates"), (i) a letter of transmittal (which specifies that delivery
will be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for Elan ADRs evidencing Elan ADSs.
Upon surrender to the Exchange Agent of a Certificate for cancellation,
together with a letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate will be entitled to receive in exchange therefor the appropriate
number of Elan ADRs evidencing Elan ADSs.
No dividends or other distributions declared or made after the Effective
Time with respect to Elan ADSs (or underlying Ordinary Shares) with a record
date after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the Elan ADSs, and no cash payment in lieu of any
fractional shares will be paid to any such holder until the holder of such
Certificate surrenders such Certificate. Subject to the effect of escheat, tax
or other applicable laws, following surrender of any such Certificate, there
will be paid to the holder of the certificates representing whole shares of
Elan ADSs issued in exchange therefor, without interest, (i) the amount of any
cash payable with respect to a fractional Elan ADS to which such holder is
entitled and the amount of dividends or other distributions with a record date
after the Effective Time and theretofore paid with respect to such whole Elan
ADSs 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 occurring after surrender, payable with respect
to such whole Elan ADSs.
At the Effective Time, the stock transfer books of Neurex will be closed and
there will be no further registration of transfers of Neurex Shares thereafter
on the records of Neurex. From and after the Effective Time, holders of
Certificates will cease to have any rights with respect to Neurex Shares,
except as otherwise provided in the Merger Agreement or by law.
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TREATMENT OF NEUREX STOCK OPTIONS
As of the Effective Time, by virtue of the Merger and without any action on
the part of the participants therein, Elan shall assume all of the obligations
of Neurex under each of the Neurex Plans, with the effect that each Neurex
Option that is outstanding under the Neurex Plans immediately prior to the
Effective Time, whether or not then vested, shall be assumed by Elan and shall
constitute an Elan Exchange Option. Such Elan Exchange Option shall be
exercisable upon the same terms and conditions as under the applicable Neurex
Plan, except that (i) each Elan Exchange Option shall be exercisable for that
number of Elan ADSs equal to the number of Neurex Shares subject to such
Neurex Option multiplied by the Exchange Ratio and (ii) the option price per
share of Elan ADSs shall be an amount equal to the option price per Neurex
Share subject to such Neurex Option in effect immediately prior to the
Effective Time divided by the Exchange Ratio.
Pursuant to the December 1995 Resolution, in the event of any merger,
reorganization or consolidation of Neurex with or into any other entity or the
sale of all or substantially all of Neurex's assets (i) 50% of all unvested
Neurex Options held by each executive officer of Neurex immediately prior to
the effective time of such event shall immediately vest and (ii) the vesting
period for the remaining unvested Neurex Options held by such executive
officer shall be reduced by 50%.
Pursuant to the Merger Agreement, at the Effective Time, Neurex expects to
accelerate the vesting schedule of each Neurex Option held by any other
employee of Neurex which was outstanding on the date of the Merger Agreement
in a manner consistent with the December 1995 Resolution. In addition, in the
event that any former Neurex employee (including an executive officer) is
terminated by Elan without cause within one year of the Effective Time, the
unvested portion of any Neurex Option held by such employee shall immediately
vest. Pursuant to stock option agreements under which Neurex directors were
granted Neurex Options, the unvested portion of each Neurex Option held by any
Neurex director will, at such director's option, either immediately vest at
the Effective Time or continue to vest after the Effective Time pursuant to
the vesting schedule set forth in such director's relevant stock option
agreement.
As of the Record Date, approximately 2,977,684 Neurex Shares were issuable
upon the exercise of outstanding Neurex Options, including approximately
2,153,211 Neurex Options which will vest upon the consummation of the Merger
(assuming the vesting of all Neurex Options held by Neurex directors). Such
Neurex Options, given the Exchange Ratio of 0.51 Elan ADSs per Neurex Share,
will be converted at the Effective Time into Elan Exchange Options to purchase
an aggregate of approximately 1,518,618 Elan ADSs.
Elan has agreed to file with the Commission at the Effective Time a
Registration Statement on Form S-8 or other appropriate form under the
Securities Act to register the Elan ADSs issuable upon exercise of the Elan
Exchange Options and to use its reasonable efforts to cause such registration
statement to remain effective until the exercise or expiration of all such
options.
As soon as practicable after the Effective Time, Elan will grant options to
purchase Elan ADSs under Elan's stock option plans to Neurex employees,
including executive officers.
STOCK PURCHASE PLANS
Neurex has agreed that, on or before the Effective Time, it will terminate
its 1992 Employee Stock Purchase Plan (the "1992 Neurex Purchase Plan") and
(ii) its 1997 Employee Stock Purchase Plan (the "1997 Neurex Purchase Plan"
and, together with the 1992 Neurex Purchase Plan, the "Neurex Purchase
Plans"). Any unused cash balances shall be refunded to participants (as
defined in the Neurex Purchase Plans) in cash, without interest.
EMPLOYEE BENEFITS
For a period of 12 months following the Effective Time, Elan has agreed,
with certain limited exceptions, that employees of Neurex immediately prior to
the Effective Time will receive benefits that are no less favorable, in the
aggregate, than the benefits received by such employees immediately prior to
the Effective Time; provided, however, that Elan and its subsidiaries will not
be required to continue any employment relationship with any employee for any
specified period of time.
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CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties of
Neurex relating to, among other things, the following: (i) due organization,
valid existence and good standing of Neurex and its subsidiary and the absence
of any violation of any of the provisions of their respective certificates of
incorporation (or other applicable charter document) or by-laws; (ii) the
authorization, execution, delivery and enforceability of the Merger Agreement
and the transactions contemplated thereby; (iii) the absence of any required
permit, authorization, consent or approval of any public body, except as
provided in the Merger Agreement; (iv) the absence of any conflict between the
execution and performance of the Merger Agreement and Neurex's organizational
documents, applicable law and certain contracts; (v) the receipt of an opinion
of Morgan Stanley as to the fairness of the Exchange Ratio to Neurex's
stockholders; (vi) the approval and adoption of the Merger Agreement by the
Neurex Board and the recommendation by the Neurex Board to Neurex stockholders
of the Merger, the Merger Agreement and the other transactions contemplated
thereby; (vii) the receipt of approvals and the taking of steps to exempt the
Merger from the provisions of state antitakeover statutes; (viii) the absence
of any brokerage, finder's or similar fee in connection with the Merger
(except for fees to be paid to Morgan Stanley); (ix) the accuracy and
completeness of information contained in this Prospectus-Proxy Statement
(except for information provided by Elan); (x) Neurex's capital structure;
(xi) the accuracy and completeness of Neurex's recent reports filed with the
Commission and the financial statements contained therein; (xii) the absence
of undisclosed liabilities; (xiii) the absence of certain changes or events
including, but not limited to, any event or events that would, or would
reasonably be likely to, jeopardize the final approval by the FDA for sale in
the U.S. of ziconotide for the treatment of pain by September 30, 2000 (a
"Ziconotide Event"); (xiv) the absence of material pending or threatened
litigation against Neurex; (xv) the existence of Neurex's insurance coverage;
(xvi) the enforceability of material contracts and the absence of material
breaches, violations or defaults thereunder; (xvii) Neurex's labor relations
and employment agreements; (xviii) compliance with laws, ordinances,
regulations, rules and orders including, but not limited to, those related to
products subject to the FDA's jurisdiction; (xix) the right to use
intellectual property and the lack of any infringement claims against Neurex;
(xx) certain tax matters and the payment of taxes; (xxi) the absence of
changes to, and the qualification, operation and liability under, certain
employee benefit plans; (xxii) certain environmental matters; and (xxiii) the
absence of actions that would prevent the Merger from constituting a
transaction qualifying under Section 368(a) of the Code.
The Merger Agreement contains certain representations and warranties of Elan
and Subco relating to, among other things, the following: (i) due
organization, valid existence and good standing of Elan and Subco and the
absence of any violation of any of the provisions of their respective charter
documents; (ii) the authorization, execution, delivery and enforceability of
the Merger Agreement and the transactions contemplated thereby; (iii) the
absence of any required permit, authorization, consent or approval of any
public body, except as provided in the Merger Agreement; (iv) the absence of
any conflict between the execution and performance of the Merger Agreement and
Elan's and Subco's organizational documents, applicable law and certain
contracts; (v) the approval of the Merger, the Merger Agreement and the other
transactions contemplated thereby by the Elan Board; (vi) the absence of any
brokerage, finder's or similar fee in connection with the Merger (except for
fees to be paid to Goldman Sachs International); (vii) the accuracy and
completeness of information supplied by Elan or Subco and contained in this
Prospectus-Proxy Statement; (viii) the accuracy and completeness of Elan's
recent reports filed with the Commission and the financial statements
contained therein; (ix) the absence of undisclosed liabilities; (x) the
absence of certain changes or events; (xi) Elan's capital structure; (xii) the
absence of material pending or threatened litigation against Elan or its
subsidiaries; (xiii) certain tax matters; and (xiv) the absence of actions
that would prevent the Merger from constituting a transaction qualifying under
Section 368(a) of the Code.
CONDUCT OF BUSINESS OF NEUREX
Neurex has agreed, pursuant to the Merger Agreement, that, prior to the
Effective Time, the operations of Neurex and its subsidiary will be conducted
in the ordinary and usual course of business and consistent in all material
respects with past practices. The Merger Agreement further provides that
Neurex and its subsidiary will each use commercially reasonable efforts to
preserve intact their business organizations, to keep available the
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services of their officers and employees and to preserve their current
relationships with suppliers, distributors, customers and others having
significant business relationships with them and will take no action which
would adversely affect their ability to consummate the Merger or the other
transactions contemplated thereby. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in the Merger Agreement,
prior to the Effective Time, neither Neurex nor its subsidiary will, without
the prior written consent of Elan: (i) amend its charter documents or by-laws;
(ii) authorize for issuance, issue, sell, deliver, grant any options,
warrants, calls, subscriptions or other rights for, or otherwise agree or
commit to issue, sell or deliver any shares of any class of capital stock of
Neurex or its subsidiary or any securities convertible into or exchangeable or
exercisable for shares of any class of capital stock of Neurex or its
subsidiary, other than, in the case of Neurex, (a) pursuant to and in
accordance with and subject to the limitations set forth in the Neurex
Purchase Plans, Neurex Options or Neurex warrants and convertible or
exchangeable notes, in each case, outstanding on the date of the Merger
Agreement and (b) additional Neurex Options to purchase up to 50,000 Neurex
Shares pursuant to and in accordance with and subject to the limitations set
forth in Neurex Plans; provided, however, that Neurex shall be permitted to
take such action as may be necessary to accelerate the vesting and
exercisability schedule of the unvested and unexercisable portion of each
Neurex Option that is outstanding immediately prior to date of the Merger
Agreement in a manner that is consistent with the December 1995 Resolution;
(iii) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock or
purchase, redeem or otherwise acquire any shares of its own capital stock or
that of any subsidiary; (iv) (a) (1) create or incur indebtedness for borrowed
money, (2) assume, guarantee, endorse or otherwise as an accommodation become
liable or responsible for the obligations of any other individual, firm or
corporation or (3) make any loans, advances or capital contributions to or
investments in any other individual, firm or corporation, except, in the case
of each of the foregoing clauses (1), (2) and (3), in the ordinary course of
business and consistent with past practice but in no event in an amount in
excess of $500,000 in the aggregate; (b) enter into or amend any material
contract, agreement, commitment, arrangement or transaction material to Neurex
and its subsidiary taken as a whole; or (c) incur any liabilities except for
liabilities that, individually or in the aggregate, would not have a Material
Adverse Effect (as defined in the Merger Agreement); (v) (a) increase in any
manner the compensation of any of its directors, officers or, except in the
ordinary course of business and consistent with past practice, its employees;
(b) pay or agree to pay any pension, retirement allowance or other employee
benefit, or enter into any contract, agreement or understanding with any of
its past or present employees relating to any such pension, retirement
allowance or other employee benefit, except, in each case, as required under
agreements, plans or arrangements existing as of December 31, 1997; (c) grant
any severance or termination pay to, or enter into any employment, consulting
or severance agreement with, any person; (d) except in the ordinary course of
business and consistent with past practice, or as may be required to comply
with applicable law, become obligated under any new pension plan, welfare
plan, multiemployer plan, employee benefit plan, benefit arrangement, or
similar plan or arrangement that was not in existence on or prior to December
31, 1997, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other benefit plan, contract, agreement or understanding,
or amend any such plans, contracts, agreements or understandings in existence
prior to December 31, 1997; and (e) initiate, approve or allow to begin any
new Purchase Period (as defined in the 1997 Neurex Purchase Plan) under the
1997 Neurex Purchase Plan or new Offer Period (as defined in the 1992 Neurex
Purchase Plan) under the 1992 Neurex Purchase Plan; (vi) except as otherwise
expressly contemplated by the Merger Agreement, sell, transfer, lease,
license, pledge, mortgage or otherwise dispose of, or encumber, or agree to
sell, transfer, lease, license, pledge, mortgage or otherwise dispose of or
encumber, any material properties, real, personal or mixed; (vii) except in
the ordinary course of business or as otherwise expressly contemplated by the
Merger Agreement, grant any material licenses to use any Intellectual Property
Rights (as defined in the Merger Agreement) or certain unpatented inventions
or acquire any material licenses to use Intellectual Property Rights having a
cost in excess of $500,000 in the aggregate; (viii) except as otherwise
expressly contemplated by the Merger Agreement, enter into any other
agreements, commitments or contracts, except agreements, commitments or
contracts for the purchase, sale or lease of goods or services in the ordinary
course of business and consistent in all material respects with past practice
and having a term of no more than one year; (ix) authorize, recommend, propose
or announce an intention to authorize, recommend or propose, or enter into any
agreement in principle or an agreement with any
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other person with respect to, any plan of liquidation or dissolution, any
acquisition of a material amount of assets or securities, any disposition of a
material amount of assets or securities or any material change in its
capitalization, or any entry into a material contract or any amendment or
modification of any material contract or any release or relinquishment of any
material contract rights not in the ordinary course of business and consistent
with past practice, except as expressly contemplated by the Merger Agreement;
(x) except as previously approved by the Neurex Board prior to the date of the
Merger Agreement and as identified to Elan prior to the date of the Merger
Agreement, authorize, commit to make or make capital expenditures in excess of
$500,000 in the aggregate; provided, however, that Neurex may make capital
expenditures of up to $1.0 million in the aggregate in connection with its
facility located at 190 Independence Drive, Menlo Park, California; (xi)
permit any insurance policy naming it as a beneficiary or a loss payee to be
canceled, terminated or materially altered, except in the ordinary course of
business and consistent with past practice and following written notice to
Elan; (xii) maintain its books and records in a manner not in the ordinary
course of business and consistent with past practice; (xiii) enter into any
hedging, option, derivative or other similar transaction; (xiv) institute any
change in its accounting methods, principles or practices or revalue any of
its respective assets, including, without limitation, writing down the value
of inventory or writing off notes or accounts receivables; (xv) settle or
compromise any material federal, state, local or foreign Tax (as defined in
the Merger Agreement) liability, make any new material Tax election, revoke or
modify any existing Tax election, or request or consent to a change in any
method of Tax accounting; (xvi) except for payment of professional fees
relating to the Merger, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
liabilities (including accounts payable) 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 the collection
in the ordinary course of business; (xvii) take, cause or permit to be taken
any action, whether before or after the Effective Time, that could reasonably
be expected to prevent the Merger from constituting a "reorganization" within
the meaning of Section 368(a) of the Code or prevent an exchange of Neurex
Shares for Elan ADSs pursuant to the Merger from qualifying as an exchange
described in Section 354 of the Code (except with respect to any cash received
in lieu of a fractional share) to which Section 367(a)(1) of the Code does not
apply; (xviii) amend, modify, terminate, waive or permit to lapse other than
by the passage of time any material right of first refusal, preferential
right, right of first offer or any other material right of Neurex or its
subsidiary; (xix) take any action that would or is reasonably likely to result
in any of the covenants, agreements or conditions applicable to Neurex as set
forth in the Merger Agreement not being satisfied as of the Closing Date (as
defined in the Merger Agreement); and (xx) agree to do any of the foregoing.
NO SOLICITATION
Pursuant to the terms of the Merger Agreement, Neurex has agreed that, prior
to the Effective Time, it shall not, and shall not authorize or permit its
subsidiary or any of its or its subsidiary's directors, officers, employees,
agents or representatives to, directly or indirectly, solicit, initiate,
facilitate or encourage (including by way of furnishing or disclosing non-
public information) any inquiries or the making of any proposal with respect
to any merger, consolidation or other business combination involving Neurex or
its subsidiary or any acquisition of any kind of material portion of the
assets or capital stock of Neurex and its subsidiary taken as a whole (an
"Acquisition Transaction") or negotiate, explore or otherwise communicate in
any way with any third party with respect to any Acquisition Transaction or
enter into any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by the Merger Agreement; provided, however, that Neurex may, in
response to an unsolicited, bona fide, written proposal from a third party
regarding a Superior Proposal (as defined below) furnish information to,
engage in discussions and negotiate with such third party, but only if the
Neurex Board determines in good faith by a majority vote that taking such
action is reasonably likely to lead to an Acquisition Transaction that is more
favorable to the Neurex stockholders than the Merger and that failing to take
such action would be reasonably likely to constitute a breach of the Neurex
Board's fiduciary duties, having received prior to such determination (i) the
written advice of outside legal counsel of Neurex that failing to take such
action would be reasonably likely to constitute a breach of the Neurex Board's
fiduciary duties and (ii) the written advice of Morgan Stanley or another
financial advisor
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of nationally recognized reputation that the Superior Proposal would be
reasonably likely to provide greater value to Neurex and the Neurex
stockholders than the Merger. As used herein, "Superior Proposal" means a bona
fide, written and unsolicited offer made by any financially responsible third
party (other than Elan) with respect to an Acquisition Transaction for which
any required financing is committed in writing by reputable financing sources.
CONDITIONS
In addition to the requisite approval of the Merger Agreement by the
stockholders of Neurex, the respective obligations of Elan, Subco and Neurex
to consummate the Merger are subject to the satisfaction of certain conditions
including, without limitation, the following: (i) (a) the Registration
Statement shall have become effective under the Securities Act, and no stop
order shall have been issued with respect thereto and (b) all necessary state
securities and blue sky authorizations shall have been received; (ii) the Elan
ADSs issuable in the Merger shall have been authorized for listing on the NYSE
upon official notice of issuance and the Ordinary Shares shall have been
admitted (subject to allotment) to the Official Lists of the Irish Stock
Exchange and the London Stock Exchange; (iii) no writ, order, decree or
injunction of a court of competent jurisdiction or governmental entity shall
have been entered and remain in effect which prohibits the consummation of the
Merger or limits the exercise by Elan and the Surviving Corporation of full
rights to own and operate the business of Neurex and its subsidiary; (iv) any
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated and no action shall have been taken
under the Irish Mergers Act prohibiting the Merger and the relevant period
under the Irish Mergers Act for objection shall have expired; (v) all material
authorizations, orders, consents, licenses, confirmations, clearances,
permissions and approvals that may be required in any foreign jurisdiction for
the purposes of applicable antitrust, competition, takeover or similar
legislation in connection with the consummation of the Merger and the other
transactions contemplated hereby shall have been received and shall remain in
full force and effect; (vi) the receipt by Elan of an opinion of Cahill Gordon
& Reindel and the receipt by Neurex of an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, each to the effect that, subject to certain limitations,
(a) the Merger will be treated as a reorganization under Section 368(a) of the
Code, and (b) except for cash received in lieu of fractional Elan ADSs, no
gain or loss will be recognized by a Neurex stockholder as a result of the
Merger with respect to the Neurex Shares converted into Elan ADSs.
The obligations of Neurex to effect the Merger are further subject to the
satisfaction or, where permissible, waiver of the following conditions: (i)
the representations and warranties of Elan and Subco that are qualified by
reference to a Parent Material Adverse Effect (as defined in the Merger
Agreement) or materiality are true and correct in all respects and the
representations and warranties of Elan and Subco that are not so qualified
shall be true and correct in all material respects, in each case, as of the
date of the Merger Agreement and, except to the extent they speak as of an
earlier date, as of the Effective Time as if made at and as of the Effective
Time; (ii) subject to certain limitations, Elan and Subco shall have performed
in all material respects their agreements, obligations and conditions under
the Merger Agreement; (iii) Neurex shall have received certificates of certain
officers of Elan and Subco evidencing compliance with the conditions set forth
in the Merger Agreement; (iv) there shall not have occurred since December 31,
1997 any material adverse change in the general affairs, management, business,
operations, assets, condition (financial or otherwise) or prospects of Elan
and its subsidiaries taken as a whole; and (v) all necessary consents and
approvals of, and notifications and disclosures to, and filings and
registration with, any U.S. or any other governmental authority or any other
third party required on the part of Elan and Subco for the consummation of the
Merger and the other transactions contemplated by the Merger Agreement shall
have been obtained or accomplished.
The obligations of Elan and Subco to effect the Merger are further subject
to the satisfaction or, where permissible, waiver of the following conditions:
(i) the representations and warranties of Neurex that are qualified by
reference to a Material Adverse Effect (as defined in the Merger Agreement) or
materiality are true and correct in all respects and the representations and
warranties of Neurex that are not so qualified shall be true and correct in
all respects, in each case, as of the date of the Merger Agreement and, except
to the extent they speak as of an earlier date, as of the Effective Time as if
made at and as of the Effective Time; (ii) subject to certain limitations,
Neurex shall have performed in all material respects its agreements,
obligations and conditions under the Merger
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Agreement; (iii) Elan and Subco shall have received certificates of certain
officers of Neurex evidencing compliance with the conditions set forth in the
Merger Agreement; (iv) (a) there shall not have occurred since December 31,
1997 any material adverse change in the general affairs, management, business,
operations, assets, conditions (financial or otherwise) or prospects of Neurex
and its subsidiary taken as a whole (including the loss of a significant
portion of the employees of Neurex), excluding any such material adverse
change relating solely to ziconotide or (b) any Ziconotide Event; (v) all the
consents, approvals, notifications, disclosures, filings and registrations
required by the Merger Agreement shall have been obtained; (vi) (a) the
meeting between Neurex and the FDA regarding, among other things, the filing
by Neurex with the FDA of an NDA relating to ziconotide shall have occurred,
(b) the FDA shall have granted such meeting and acknowledged receipt of
supporting materials for such meeting, (c) the FDA shall have responded during
or after the meeting either verbally or in writing, (d) Neurex shall have
provided to Elan copies of all documents, materials and other information
prepared by the FDA or Neurex in connection therewith and (e) Elan shall have
been provided the opportunity to attend and observe such meeting; and (vii)
Elan shall have received agreements executed by each of the executive officers
of Neurex restricting each such executive officer's ability to dispose of Elan
ADSs held by such executive officer for a period of one year following the
Effective Time.
TERMINATION
The Merger Agreement may be terminated (i) by the written agreement of Elan
and Neurex; (ii) by either party if, without fault of the terminating party,
the Merger shall not have been consummated on or before November 30, 1998,
which date may be extended by mutual consent of Elan and Neurex; (iii) by
either party if any court of competent jurisdiction or other governmental body
shall have issued a final and nonappealable order (other than a temporary
restraining order), decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger; (iv) by either party if the
requisite stockholder approval of Neurex is not obtained at the Annual Meeting
or any adjournment thereof; (v) by either party if the other party fails to
comply in any material respect with any of the covenants or agreements
contained in the Merger Agreement or breaches any representation or warranty
contained in the Merger Agreement; provided that if such failure to comply or
breach is capable of being cured prior to the Effective Time, such other party
shall not have cured such failure or breach within 20 days of receiving notice
thereof; (vi) by Elan if the Neurex Board fails to recommend the approval of
the Merger Agreement and the Merger to Neurex stockholders, withdraws, amends
or modifies its recommendation of the Merger Agreement or the Merger in a
manner adverse to Elan, or makes any recommendation in respect of an
Acquisition Transaction (including making no recommendation or stating an
inability to make a recommendation), other than a recommendation to reject
such Acquisition Transaction, or the Neurex Board shall have resolved to take
any of the foregoing actions and publicly disclosed such resolution; (vii) by
Elan if Neurex or its representatives shall furnish or disclose non-public
information or negotiate, discuss, explore or otherwise communicate in any way
with a third party with respect to any Acquisition Transaction, or the Neurex
Board shall have resolved to do any of the foregoing and publicly disclosed
such resolution; provided, however, that in such event Elan shall have no
right to terminate until the earlier of (a) June 29, 1998 and (b) the 30th
calendar day after Neurex or its representatives first furnishes or discloses
nonpublic information to, or negotiates, discusses, explores or otherwise
communicates with any third party with respect to an Acquisition Transaction
(such earlier date being referred to as the "Trigger Date") and only if Neurex
has not terminated all such activities prior to the Trigger Date; provided,
further, that if, at any time after the Trigger Date, a Ziconotide Event shall
have occurred and be continuing and each of the conditions set forth in the
Merger Agreement shall have been satisfied or waived by the party or parties
entitled to the benefit of such conditions, other than any condition which
shall not have been satisfied solely as a result of such Ziconotide Event (the
"Satisfaction Date"), then Elan shall have no right to terminate the Merger
Agreement during the period from the 14th calendar day following the
Satisfaction Date to the 44th calendar day following the Satisfaction Date and
only if Neurex and its representatives have not terminated all such activities
prior to such 44th day; and (viii) by Neurex if it shall have received a
Superior Proposal and the Neurex Board reasonably determines in good faith by
a majority vote that such Superior Proposal is more favorable to Neurex
stockholders than the Merger and is reasonably likely to be consummated and
that failing to take such action would be reasonably likely to constitute a
breach of the Board's fiduciary duties to the Neurex stockholders, having
received prior to such determination (a) the written advice of outside legal
counsel of Neurex that failing to take
37
<PAGE>
such action would be reasonably likely to constitute a breach of the fiduciary
duties of the Neurex Board and (b) the written advice of Morgan Stanley or
another financial advisor of nationally recognized reputation that the
Superior Proposal would be reasonably likely to provide greater value to
Neurex and its stockholders than the Merger and Neurex shall have given Elan
five days prior notice of its determination to terminate the Merger Agreement.
FEES AND EXPENSES
Pursuant to the Merger Agreement, each of Elan and Subco, on the one hand,
and Neurex, on the other hand, will bear their respective expenses incurred in
connection with the Merger Agreement, the Merger and the other transactions
contemplated thereby, except that expenses incurred in printing, mailing and
filing (including, without limitation, Commission filing fees and stock
exchange listing application fees) this Prospectus-Proxy Statement will be
shared equally by Elan and Neurex.
If the Merger Agreement is terminated by one of the parties upon the failure
of the other party to comply in any material respect with any of the covenants
or agreements contained in the Merger Agreement or the breach by such other
party of any representation or warranty contained in the Merger Agreement and,
if such failure to comply or breach is capable of being cured prior to the
Effective Time, such other party shall not have cured such failure or breach
within 20 days of receiving notice thereof, then within two business days of
such termination, the party whose failure or breach resulted in such
termination must pay to the non-breaching party up to $3 million to reimburse
it for its documented fees and expenses (including the fees and expenses of
counsel, accountants, consultants and advisors) incurred in connection with
the Merger Agreement and the transactions contemplated thereby.
If the Merger Agreement is terminated by Elan (a) upon the breach by Neurex
of any representation or warranty contained in the Merger Agreement and Elan
and Neurex mutually agree in writing that such termination was valid and in
accordance with the Merger Agreement and resulted solely from a Ziconotide
Event or (b) because the Merger shall not have been consummated by November
30, 1998 and Elan and Neurex mutually agree in writing that (i) such
termination was valid and in accordance with the Merger Agreement and (ii) at
the time of such termination a Ziconotide Event shall have occurred and be
continuing and each of the conditions to the obligations of Elan, Subco and
Neurex shall have been satisfied or waived by the party or parties entitled to
the benefit of such conditions (other than any condition which shall not have
been satisfied solely as a result of such Ziconotide Event) then, at Neurex's
option exercised at the time of such termination, Elan shall, within 30 days
of such termination, purchase 2,000,000 Neurex Shares at a purchase price in
cash equal to $20 per share (subject to appropriate adjustments in the event
of any split, combination or reclassification of Neurex Shares at any time
subsequent to the date of the Merger Agreement). Elan shall be entitled to
customary registration rights relating to such Neurex Shares including, but
not limited to, one demand registration at Elan's expense.
If the Merger Agreement is terminated (i) by Elan, if the Neurex Board fails
to recommend the approval of the Merger Agreement and the Merger to the Neurex
stockholders, withdraws, amends or modifies in a manner adverse to Elan its
recommendation or approval of the Merger Agreement or the Merger or makes any
recommendation with respect to an Acquisition Transaction (including making no
recommendation or stating an inability to make a recommendation) other than a
recommendation to reject such Acquisition Transaction, or the Neurex Board
shall have resolved to take such action and publicly discloses such
resolution; (ii) by Elan, if, subject to certain time limitations, Neurex or
its representatives shall furnish or disclose non-public information to, or
negotiate, discuss, explore or otherwise communicate in any way with, a third
party with respect to an Acquisition Transaction, or the Neurex Board shall
have resolved to take any such action and publicly discloses such resolution;
or (iii) by Neurex, if Neurex has received a Superior Proposal and the Neurex
Board, having received the written advice of outside legal counsel and of
Morgan Stanley or another financial advisor of nationally recognized
reputation, reasonably determines in good faith that such Superior Proposal is
more favorable to Neurex stockholders than the Merger and is reasonably likely
to be consummated and that failing to take such action would be reasonably
likely to constitute a breach of the Neurex Board's fiduciary duties to
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<PAGE>
Neurex stockholders then, in the case of each of clauses (i), (ii) and (iii),
within two business days of such termination, Neurex must pay to Elan (a) up
to $3 million to reimburse Elan for its documented fees and expenses
(including the fees and expenses of counsel, accountants, consultants and
advisors) incurred in connection with the Merger Agreement and the
transactions contemplated thereby and (b) a $24 million fee as liquidated
damages.
INDEMNIFICATION; INSURANCE
Elan has agreed to cause the Surviving Corporation to maintain and perform
in the same manner Neurex's existing indemnification provisions with respect
to present and former directors and officers of Neurex for all losses, claims,
damages, expenses or liabilities arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time, to
the extent permitted or required under applicable law and the Neurex
Certificate and Neurex By-laws in effect as of the date of the Merger
Agreement.
For a period of six years after the Effective Time, Elan has agreed to cause
the Surviving Corporation to maintain in effect the current policies of
directors' and officers' liability insurance maintained by Neurex (provided
that the Surviving Corporation may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from facts or events which
occurred at or before the Effective Time; provided, however, that the
Surviving Corporation will not be obligated to make annual premium payments
for such insurance to the extent such premiums exceed 150% of the annual
premiums paid as of the date of the Merger Agreement by Neurex for such
insurance.
AMENDMENT
Subject to applicable law, the Merger Agreement may be amended, modified or
supplemented only by written agreement of Elan, Subco and Neurex at any time
prior to the Effective Time with respect to any of the terms contained
therein; provided, however, that, after the Merger Agreement is adopted by the
Neurex stockholders, no such amendment or modification shall change the amount
or form of the consideration to be paid pursuant to the Merger Agreement.
WAIVERS; CONSENTS
Any failure of Elan or Subco, on the one hand, or Neurex, on the other hand,
to comply with any obligation, covenant, agreement or condition in the Merger
Agreement may be waived by Elan, Subco and Neurex, respectively, only by a
written instrument signed by the party granting such waiver, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever the Merger Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing pursuant to the terms of the Merger Agreement.
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<PAGE>
THE VOTING AGREEMENT
As a condition to the willingness of Elan to enter into the Merger
Agreement, all executive officers and directors of Neurex entered into the
Voting Agreement. The following summary of the Voting Agreement is qualified
in its entirety by reference to the Voting Agreement, a copy of which is
attached as Annex C hereto and is incorporated herein by reference.
VOTING OF SHARES; PROXY
Pursuant to the Voting Agreement, each of Messrs. David L. Anderson, Thomas
L. Barton, Gerard N. Burrow, John F. Chappell, Sandra K. Cooper, Raymond C.
Egan, John W. Glynn, Jr., Paul Goddard, Howard E. Greene, Jr., Robert R.
Luther, John W. Varian, Paul L. Wood and Philip J. Young (together, the
"Stockholders") has agreed until the Termination Date (as defined below), to
cause the Neurex Shares owned by such Stockholder to be voted at any meeting
of the stockholders of Neurex or in any consent in lieu of such a meeting in
favor of the Merger Agreement and the transactions contemplated thereby,
subject to such Stockholder's obligation to faithfully discharge his or her
duty as a director, if applicable, of Neurex, 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 the Voting Agreement, "Termination Date" means the earliest of (i)
the termination of the Merger Agreement in accordance with its terms; (ii) the
Effective Time; (iii) the termination of the Voting Agreement by the mutual
written agreement of the parties hereto; or (iv) the termination of the Voting
Agreement by Elan.
Pursuant to the Voting Agreement, each Stockholder has irrevocably appointed
Elan, subject to such Stockholder's obligation to faithfully discharge his or
her duty as a director, if applicable, of Neurex, until the Termination Date,
as his or her attorney and proxy with full power of substitution, to vote in
such manner as Elan or its substitute shall, in Elan's sole discretion, deem
proper and otherwise act (by written consent or otherwise) with respect to the
Neurex Shares owned by such Stockholder (and all other securities issued to
such Stockholder in respect of such Neurex Shares) which each Stockholder is
entitled to vote at any meeting of stockholders of Neurex, however called, or
in respect of any consent in lieu of any such meeting or otherwise in
connection with the Merger Agreement and the transactions contemplated
thereby.
CERTAIN REPRESENTATIONS AND WARRANTIES
Representations and Warranties of the Stockholders. The Voting Agreement
contains certain representations and warranties of the Stockholders with
respect to: (i) authority to enter into and perform their obligations under
the Voting Agreement; (ii) the enforceability and legality of the Voting
Agreement; (iii) the lack of conflicts with laws and other agreements to which
a Stockholder is a party; (iv) the required consent, approval, authorization
or permission of, or filing with or notification to, governmental authorities;
(v) title to the Neurex Shares; and (vi) the absence of any brokers' and
finders' fees.
Representations and Warranties of Elan. The Voting Agreement contains
certain representations and warranties of Elan with respect to corporate
authority to enter into the contemplated transactions and the enforceability
and legality of the Voting Agreement.
CERTAIN COVENANTS
Covenants of the Stockholders. Each Stockholder has agreed pursuant to the
Voting Agreement that such Stockholder will not (i) dispose of or encumber the
Neurex Shares held by such Stockholder; (ii) except with respect to activities
as a director of Neurex, will not solicit or encourage other proposals or
negotiate or communicate in any way with any third party with respect to any
other Acquisition Transaction; and (iii) will immediately cease and cause to
be terminated all existing discussions or negotiations conducted prior to the
date of the Voting Agreement.
The Voting Agreement covers an aggregate of 1,480,474 Neurex Shares,
representing approximately 6.4% of the Neurex Shares outstanding as of June
29, 1998.
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CERTAIN TAX CONSEQUENCES
GENERAL
The following discussion of certain U.S. federal income tax consequences of
the Merger and certain U.S. federal income tax and Irish tax consequences of
ownership of Elan ADSs 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 applies only to U.S. Holders (as defined below) who hold Neurex
Shares as "capital assets" within the meaning of Section 1221 of the Code and
does not address all potential tax effects that may be relevant to Neurex
stockholders subject to special federal income tax treatment, including
foreign persons, persons who own (actually or constructively) 5% or more of
either the total voting power or total value of all capital stock of Elan
before or immediately after the Merger, persons who are residents of Ireland
or engaged in a trade or business in Ireland through a permanent
establishment, insurance companies, tax-exempt organizations, retirement plans
and persons who acquired their Neurex Shares pursuant to the exercise of
employee stock options or otherwise as compensation. 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 Neurex Shares who is (i) a citizen or
resident of the U.S., (ii) a corporation or partnership 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) 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.
U.S. Holders of Elan ADSs are treated as owners of the Ordinary Shares
underlying such ADSs for purposes of the Code and for purposes of the U.S.-
related double taxation conventions relating to income and gains (the "Income
Tax Convention") and to estate taxes (the "Estate Tax Convention").
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
This summary is 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. This discussion is also based on certain representations
made by Elan, Neurex and certain Neurex stockholders. If any of these
representations is inaccurate, the tax consequences of the Merger could differ
from those described herein.
General Consequences of the Merger. The obligation of each of Elan and
Neurex to consummate the Merger is conditioned on its receipt of an opinion
from its counsel, Cahill Gordon & Reindel and Skadden, Arps, Slate, Meagher &
Flom LLP, respectively, based on such facts, representations and assumptions
as counsel may reasonably deem relevant (including certain representations
regarding the ownership of Elan stock), to the effect (i) that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code; (ii) that each of Elan, Subco and
Neurex will be a party to the reorganization within the meaning of Section
368(b) of the Code; and (iii) that no gain or loss will be recognized by a
stockholder of Neurex on the conversion of Neurex Shares into Elan ADSs
pursuant to the Merger (except with respect to any cash received in lieu of a
fractional share); provided that (a) Neurex complies with the reporting
requirements contained in Treasury Regulation Section 1.367(a)-3(c)(6) and (b)
if the Neurex stockholder owns (directly or indirectly and taking into account
certain attribution rules) either 5% or more of the total voting power or 5%
or more of the total value of Elan's outstanding capital stock immediately
after the Merger (recognizing that in certain circumstances options to acquire
Elan ADSs may be treated as Elan stock), such stockholder will, in a timely
manner, enter into a five-year gain recognition agreement in accordance with
the requirements of Temporary Treasury Regulation Section (S)1.367(a)-8. Based
on those conclusions, the following additional federal income tax consequences
would arise:
(i) the tax basis of the Elan ADSs received by any such Neurex
stockholder in the Merger will be equal to the tax basis of the Neurex
Shares exchanged therefor, reduced by any amount of basis allocable to
fractional share interests for which cash is received;
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(ii) the holding period of the Elan ADSs received by such Neurex
stockholder in the Merger will include the holding period of the Neurex
Shares exchanged therefor; and
(iii) the receipt of cash in lieu of a fractional Elan ADS by any such
Neurex stockholder pursuant to the Merger 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 share.
Taxation of Dividends. Dividends paid by Elan, if any, will not qualify for
the dividends-received deduction otherwise generally available to corporate
shareholders. Because more than 50% of Elan's stock is 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 these rules will be
creditable against the holder's U.S. federal income tax liability.
IRISH TAX CONSEQUENCES AFTER THE MERGER
The following 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. 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, a
company is regarded as resident for tax purposes in Ireland if it is centrally
managed and controlled in Ireland.
The Tax 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 at the Irish corporation tax rate of 32%.
Irish Taxation of Capital Gains and Dividends. 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 or Ordinary Shares, provided the Elan
ADSs or the Ordinary Shares, as the case may be, are quoted on a stock
exchange.
Dividends paid by Elan are not subject to Irish withholding tax. No Irish
income tax will be payable on dividends paid by an Irish resident company,
such as Elan, to shareholders who are not resident or ordinarily resident in
Ireland. A charge to Irish social security taxes and other levies can arise
for individuals. However,
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under the social welfare agreement between Ireland and the United States, an
individual who is liable for U.S. social security contributions can normally
claim exemption from these taxes and levies.
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. Any transfer of the underlying Ordinary Shares, however (which may
include a transfer from the Depositary to an Elan ADR holder but does not
include a transfer where the beneficial interest does not pass or a transfer
which is not a sale), would require the person acquiring such Ordinary Shares
to pay Irish stamp duty (presently 1%). The stamp duty is calculated based
upon the purchase price or market value, if higher, of such Ordinary Shares.
If the transfer is by way of gift (or other non-arm's length transaction), the
stamp duty is calculated based upon the market value of the Ordinary Shares
transferred.
Irish Capital Acquisitions Tax. A gift or inheritance of Elan ADSs or
Ordinary Shares will be within the charge to Irish capital acquisition tax.
Capital acquisitions tax is charged on a sliding scale of rates ranging
between 15% and 40% above a tax free threshold. This tax free threshold is
determined by the amount of the current benefit and of previous benefits
within the charge to capital acquisitions tax 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 Ordinary Shares would be within the charge to this
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 U.S. to be credited against tax payable in
Ireland, based on priority rules set forth in the Estate Tax Convention, in a
case where Elan ADSs or Ordinary Shares are subject to both Irish capital
acquisitions tax with respect to inheritance and U.S. federal estate tax. The
Estate Tax Convention does not apply to capital acquisitions tax paid on
gifts.
THE FOREGOING SUMMARY OF 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 NEUREX STOCKHOLDERS IN
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. IN PARTICULAR, IT DOES NOT ADDRESS
THE CONSEQUENCES TO NEUREX STOCKHOLDERS RESIDENT OR ORDINARILY RESIDENT OR
DOMICILED IN IRELAND OR DOING BUSINESS IN IRELAND. NEUREX STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THEIR OWN PARTICULAR
CIRCUMSTANCES AND WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER
TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN
TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE LAWS.
IRISH EXCHANGE CONTROL REGULATIONS 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 also continue to be freely
transferable to non-resident holders of such securities. The Financial
Transfers Act, 1992 gives power to the Minister for Finance of Ireland to make
provision for the restriction of 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
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addition, dividends or payments on redemption or purchase of shares and
payments on a liquidation of an Irish incorporated company would fall within
this definition. At present, the Financial Transfers Act, 1992 prohibits
financial transfers only to, or by the order of, or on behalf of, residents of
Libya and Iraq without the prior permission of the Central Bank of Ireland.
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, any person or body controlled by any of the
foregoing, or by any person acting on behalf of the foregoing, may be subject
to restrictions pursuant to such sanctions as implemented into Irish law.
Angola is currently the subject of such sanctions.
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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HISTORICAL CONSOLIDATED FINANCIAL DATA OF ELAN
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected historical consolidated financial data set forth below as of
and for each of the years in the three-year period ended March 31, 1996, the
nine months ended December 31, 1996 and the year ended December 31, 1997 have
been derived from the audited consolidated financial statements of Elan and
its subsidiaries. Such consolidated financial statements have been audited by
KPMG, Chartered Accountants. The summary historical consolidated financial
data as of and for the three months ended March 31, 1997 and 1998 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. Results for the three months ended March 31,
1998 should not be regarded as indicative of the results that may be expected
for the full year. See "Available Information" and "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS YEAR THREE MONTHS ENDED
YEAR ENDED MARCH 31, ENDED ENDED MARCH 31,
------------------------------ DECEMBER 31, DECEMBER 31, -------------------
1994 1995 1996 1996 1997 1997 1998
-------- -------- -------- ------------ ------------ -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Product sales.......... $ 84,942 $ 87,694 $105,625 $ 117,973 $ 215,486 $ 52,606 $ 62,617
Royalties and fees..... 48,261 62,537 85,937 71,937 115,881 26,696 51,229
Research revenues...... 21,231 32,470 36,680 45,649 57,789 9,745 20,820
-------- -------- -------- --------- ---------- -------- ----------
Total revenues......... 154,434 182,701 228,242 235,559 389,156 89,047 134,666
-------- -------- -------- --------- ---------- -------- ----------
Operating income (loss). (80,877)(1) 60,076 78,668 (582,763)(2) 136,050 31,542 (434,630)(3)
Income (loss) before
taxation............... (71,463)(1) 64,715 91,473 (571,794)(2) 176,300 37,547 (423,732)(3)
Net income (loss)....... $(72,613)(1) $ 64,050 $ 90,925 $(572,568)(2) $ 175,114 $ 37,154 $ (424,129)(3)
======== ======== ======== ========= ========== ======== ==========
Basic earnings per
ordinary share(4)...... $ (1.18)(1) $ 1.02 $ 1.33 $ (6.42)(2) $ 1.76 $ 0.38 $ (3.97)(3)
Diluted earnings per
ordinary share(4)...... $ -- (5) $ 0.90 $ 1.20 $ -- (5) $ 1.58 $ 0.35 $ -- (5)
Weighted average number
of ordinary shares for
the purposes of
calculating-- Basic
earnings per share..... 61,660 63,090 68,621 89,165 99,352 97,090 106,906
Diluted earnings per
share................. -- (5) 71,079 83,623 -- (5) 113,080 109,986 -- (5)
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
------------------------------ ---------------------------- -------------------
1994 1995 1996 1996 1997 1997 1998
-------- -------- -------- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $238,654 $247,735 $477,985 $ 252,774 $ 675,722 $272,152 $ 618,655
Total assets............ 396,006 490,932 703,195 765,900 1,219,452 769,040 1,275,493
Long-term obligations... 150,844 159,512 162,416 138,265 325,000 101,012 325,000
Total shareholders'
equity................. 215,525 299,422 508,583 511,195 829,075 570,461 819,963
</TABLE>
- --------
(1) Reflects one-time charge of $122,844,000 arising from the acquisition of
in-process research and development and a cash contribution to a research
affiliate.
(2) Reflects one-time charge of $659,865,000 relating to the acquisition of
in-process research and development, costs of restructuring and provision
for loss on sale of business.
(3) Reflects one-time charge of $478,609,000 relating to the acquisition of
in-process research and development and costs of restructuring.
(4) During the year ended December 31, 1997, Elan adopted SFAS 128 which
required a change in the method used to compute earnings per share. Under
this new standard, primary and fully diluted earnings per share were
replaced with "basic" and "diluted" earnings per share. Basic earnings per
share is based upon dividing the net income available to shareholders by
the weighted average number of Ordinary Shares outstanding during the
period. Diluted earnings per share is based upon dividing the net income
available to shareholders by the weighted average number of Ordinary
Shares outstanding during the period and adjusted for the effect of all
dilutive potential Ordinary Shares that were outstanding during the
period. Both the earnings per share figures and the weighted average
number of Ordinary Shares figures for all periods presented have been
stated or, where appropriate, restated in accordance with SFAS 128.
(5) No diluted earnings per share figure or number of shares for the purposes
of calculating diluted earnings per share have been shown for the year
ended March 31, 1994, the nine months ended December 31, 1996 and the
three months ended March 31, 1998 because, as Elan had a net loss for
these periods, the calculation would be anti-dilutive.
45
<PAGE>
HISTORICAL CONSOLIDATED FINANCIAL DATA OF NEUREX
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data set forth below with respect to
Neurex's consolidated statements of operations for the year ended September
30, 1995, for the three month period ended December 31, 1995 and for each of
the two years in the period ended December 31, 1997, and with respect to the
consolidated balance sheets at December 31, 1996 and 1997, are derived from,
and should be read in conjunction with, the consolidated financial statements
of Neurex, including the notes thereto, contained in Neurex's 1997 Annual
Report, which is incorporated by reference in this Prospectus-Proxy Statement.
Such consolidated financial statements have been audited by Ernst & Young LLP,
independent auditors. Consolidated statement of operations data for each of
the two years in the period ended September 30, 1994, and consolidated balance
sheet data at September 30, 1993, 1994 and 1995, have been derived from
consolidated financial statements audited by Ernst & Young LLP that are not
incorporated by reference herein. The statement of operations data for the
three months ended March 31, 1997 and 1998 and the balance sheet data at March
31, 1997 and 1998 are derived from unaudited consolidated financial
statements. Such unaudited consolidated financial statements, in the opinion
of management, reflect all adjustments, consisting solely of normal recurring
adjustments, which Neurex considers necessary to present fairly such
information for those periods. Results for the three months ended March 31,
1998 are not necessarily indicative of the results that may be expected for
the full fiscal year. See "Available Information" and "Incorporation of
Certain Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED THREE MONTHS
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
------------------------------- ------------ ------------------ -----------------
1993 1994(1) 1995 1995 1996 1997 1997 1998
------- --------- -------- ------------ -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Product sales, net..... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 2,100
Collaborative
agreements and grants:
Related parties........ -- 1,000 897 158 1,884 2,309 427 292
Other.................. 1,679 1,132 1,765 -- 1,692 83 11 --
------- --------- -------- ------- -------- -------- ------- --------
Total revenues......... 1,679 2,132 2,662 158 3,576 2,392 438 2,392
------- --------- -------- ------- -------- -------- ------- --------
Costs and expenses:
Cost of sales.......... -- -- -- -- -- -- -- 234
Research and develop-
ment.................. 6,233 8,477 10,607 2,781 19,663 28,474 7,608 8,826
Acquired in-process
research and
development(2)........ -- 10,153 -- -- -- -- -- --
Selling, general & ad-
ministrative.......... 2,083 1,933 2,079 595 3,923 9,686 1,509 4,637
------- --------- -------- ------- -------- -------- ------- --------
Total costs and ex-
penses................. 8,316 20,563 12,686 3,376 23,586 38,160 9,117 13,697
------- --------- -------- ------- -------- -------- ------- --------
Loss from operations.... (6,637) (18,431) (10,024) (3,218) (20,010) (35,768) (8,679) (11,305)
Interest income (ex-
pense), net............ (580) 463 35 192 3,534 3,888 1,037 748
------- --------- -------- ------- -------- -------- ------- --------
Net loss................ $(7,217) $(17,968) $ (9,989) $(3,026) $(16,476) $(31,880) $(7,642) $(10,557)
======= ========= ======== ======= ======== ======== ======= ========
Basic and diluted net
loss per share(3)...... $ (5.92) $ (1.70)(4) $ (0.80) $ (0.17) $ (0.80) $ (1.44) $ (0.35) $ (0.47)
======= ========= ======== ======= ======== ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 1,218 10,548 12,499 17,423 20,680 22,147 22,078 22,337
======= ========= ======== ======= ======== ======== ======= ========
</TABLE>
- -------
(1) The operating results of Creagen have been included in Neurex's
consolidated results from the date of acquisition, July 15, 1994.
(2) The acquired in-process research and development charges resulted from the
acquisition of Creagen in July 1994 ($8.8 million) and the CORLOPAM
licensing fee in April 1994 ($1.4 million).
(3) All net loss per share amounts for all periods have been presented and,
where appropriate, restated to conform to the requirements of SFAS 128.
(4) Net loss per share in the year ended September 30, 1994, includes a $0.96
per share charge for acquired in-process research and development and
licensing fees resulting from the acquisition of Creagen and the CORLOPAM
licensing fee; net loss per share without these charges would have been
$0.77 per share.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, MARCH 31,
----------------------- --------------- ---------------
1993 1994(1) 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash, cash equivalents
and short-term
investments(2)......... $18,555 $11,385 $12,753 $87,243 $57,418 $81,153 $46,443
Working capital......... 16,418 7,580 9,369 79,975 45,921 72,039 35,752
Total assets............ 19,774 13,500 17,617 89,571 60,664 83,747 51,856
Long-term obligations... 18 174 8,161 1,964 114 1,969 69
Total stockholders'
equity(3).............. 17,517 9,022 3,289 79,958 48,776 72,413 38,646
</TABLE>
- -------
(1) The operating results of Creagen have been included in Neurex's
consolidated results from the date of acquisition, July 15, 1994.
(2) In 1998, Neurex presented investments with maturities greater than one
year, but liquid and available for sale, as short-term investments. The
amounts above reflect the reclassification to short-term investments of
$9,874,000 and $5,616,000 originally presented as long-term investments at
December 31, 1996 and 1997, respectively.
(3) No dividends have been declared or paid on Neurex shares.
46
<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 Neurex and have been prepared to
illustrate the effects of the Merger. The pro forma combined financial data
and accompanying notes should be read in conjunction with the historical
financial statements of Elan and Neurex incorporated herein by reference. The
pro forma combined statements of income for the year ended December 31, 1997
and for the three months ended March 31, 1998 give effect to the Merger and
the consummation by Elan of the Carnrick Acquisition and the Sano Acquisition,
in each case, as if such event had occurred on January 1, 1997. The pro forma
combined balance sheet at March 31, 1998 has been prepared as if the Merger
and the Carnrick Acquisition had occurred on that date. The pro forma combined
financial data have been prepared in accordance with U.S. GAAP using the
purchase method of accounting. The balance sheet of Elan at March 31, 1998
includes the assets and liabilities of Sano at that date, as the Sano
Acquisition closed on February 27, 1998. The pro forma combined financial data
do not contain any adjustment to reflect any restatement of the net assets of
Neurex to conform with Elan's accounting policies or any costs, benefits or
synergies that may result from the integration of Elan and Neurex following
the Merger. The pro forma combined financial data are presented 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,
the Carnrick Acquisition and the Sano Acquisition had been consummated on the
indicated dates.
The Merger will be accounted for using the purchase method of accounting.
The aggregate purchase price of the Merger will be allocated to the tangible
and intangible assets and liabilities acquired based upon their 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 aggregate
purchase price reflected in the pro forma combined financial data is
preliminary. The final allocation of the purchase price is contingent upon
final appraisals of the acquired assets.
The calculation of the number of Elan ADSs to be issued for Neurex is based
on the Exchange Ratio of 0.51 Elan ADSs for each Neurex Share.
47
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-------------------------------------------------------------------
HISTORICAL
------------------------------- NEUREX CARNRICK COMBINED
ELAN NEUREX CARNRICK ADJUSTMENT ADJUSTMENT PRO FORMA
---------- --------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash
equivalents........... $ 183,614 $ 3,324 $ 1,969 $ -- $(132,000) $ 56,907
Marketable investment
securities............ 409,058 43,119 5,295 -- -- 457,472
Accounts receivable and
prepayments........... 113,984 2,450 5,843 -- -- 122,277
Inventories............ 42,529 -- 19,884 -- -- 62,413
---------- --------- ------- --------- --------- -----------
Total current assets. 749,185 48,893 32,991 -- (132,000) 699,069
---------- --------- ------- --------- --------- -----------
Fixed assets:
Property, plant and
equipment (net)....... 139,673 2,808 6,981 -- -- 149,462
Other assets:
Investments............ 129,822 -- 1,800 -- -- 131,622
Intangible assets
(net)................. 256,813 -- 712 39,952 106,429 403,906
Other assets........... -- 155 1,450 -- -- 1,605
---------- --------- ------- --------- --------- -----------
386,635 155 3,962 39,952 106,429 537,133
---------- --------- ------- --------- --------- -----------
Total assets......... 1,275,493 51,856 43,934 39,952 (25,571) 1,385,664
========== ========= ======= ========= ========= ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable and
accrued liabilities... 130,530 12,982 6,177 -- 6,000 155,689
Current portion of
debt.................. -- 159 460 -- -- 619
---------- --------- ------- --------- --------- -----------
Total current
liabilities......... 130,530 13,141 6,637 -- 6,000 156,308
---------- --------- ------- --------- --------- -----------
Long-term debt.......... 325,000 69 1,033 -- 12,000 338,102
Other liabilities....... -- -- 4,518 -- -- 4,518
---------- --------- ------- --------- --------- -----------
325,000 69 5,551 -- 12,000 342,620
---------- --------- ------- --------- --------- -----------
Share capital........... 7,178 224 1,236 (224) (1,236) 7,838
660
Additional paid-in
capital................ 1,517,905 156,700 17 (156,700) (17) 2,354,925
837,020
Equity adjustments from
foreign currency
translation............ (34,840) -- 60 -- (60) (34,840)
Unrealized net gain
(loss) on available for
sale securities........ 6,152 (29) 1,445 29 (1,445) 6,152
Retained earnings
(losses)............... (676,432) (118,249) 28,988 118,249 (28,988) (1,447,339)
(759,082) (11,825)
---------- --------- ------- --------- --------- -----------
Shareholders' equity... 819,963 38,646 31,746 39,952 (43,571) 886,736
---------- --------- ------- --------- --------- -----------
Total liabilities and
shareholders'
equity.............. $1,275,493 $ 51,856 $43,934 $ 39,952 $ (25,571) $ 1,385,664
========== ========= ======= ========= ========= ===========
</TABLE>
48
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) The Merger is expected to result in the issuance of 11,877,895 Elan
Ordinary Shares, resulting in an increase in share capital and additional
paid-in capital of $660,000 and $769,978,000, respectively. In addition,
Neurex has options exercisable for 2,977,684 Neurex Shares. Under the
Merger Agreement, the holders of the options of Neurex will receive
similar rights in Elan, adjusting the number of Neurex Shares into which
such options are exercisable and the exercise price therefor for the
Exchange Ratio of 0.51. The amount by which the quoted market value of the
Elan ADSs exceeds the proceeds to be received upon the exercise of such
options is included in additional paid-in capital and in the purchase
price. The price per share of Elan ADSs used for the purpose of this
calculation is the closing price of Elan ADSs at June 29, 1998 of $64.88.
Neurex also has rights exercisable for 1,700 Neurex Shares, the effect of
which is included in additional paid-in capital and in the purchase price.
The total resulting purchase price approximates $837,680,000. The
preliminary allocation of the purchase price is as follows:
<TABLE>
<S> <C>
Increase in fair value of intangible assets................ $ 39,952,000(a)
In-process research and development........................ 759,082,000(b)
Net assets of Neurex per balance sheet at March 31, 1998... 38,646,000
------------
$837,680,000
============
</TABLE>
--------
(a) Reflects an increase in the carrying value of intangible assets to
their estimated fair value based on the preliminary allocation of
the purchase price.
(b) Reflects a one-time charge against earnings, representing the
acquisition of in-process research and development estimated at
$759,082,000 based on the preliminary allocation of the purchase
price. This charge is excluded from the unaudited pro forma
combined statements of income as it is a non-recurring item.
(2) The Carnrick Acquisition will result in the payment of $132,000,000 in
cash and the issuance of an $18,000,000 promissory note to the
stockholders of Carnrick. The preliminary allocation of the total purchase
price of $150,000,000 is as follows:
<TABLE>
<S> <C>
Increase in fair value of intangible assets............... $106,429,000(a)
In-process research and development....................... 11,825,000(b)
Net assets of Carnrick per balance sheet at March 31,
1998..................................................... 31,746,000
------------
$150,000,000
============
</TABLE>
--------
(a) Reflects an increase in the carrying value of intangible assets to
their estimated fair value based on the preliminary allocation of
the purchase price.
(b) Reflects a one-time charge against earnings, representing the
acquisition of in-process research and development estimated at
$11,825,000 based on the preliminary allocation of the purchase
price. This charge is excluded from the unaudited pro forma
combined statements of income as it is a non-recurring item.
49
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------
HISTORICAL
-------------------------------------- COMBINED
ELAN SANO NEUREX CARNRICK ADJUSTMENT(1) PRO FORMA(2)
-------- -------- -------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales.......... $215,486 $ 159 $ -- $51,183 $ -- $266,828
Research revenues...... 57,789 2,232 2,392 -- -- 62,413
Royalties and fees..... 115,881 -- -- -- -- 115,881
-------- -------- -------- ------- -------- --------
Total revenues......... 389,156 2,391 2,392 51,183 -- 445,122
-------- -------- -------- ------- -------- --------
Costs and expenses:
Cost of goods sold..... 106,182 132 -- 15,412 9,759 131,485
Selling, general and
administrative........ 71,764 3,654 9,686 22,822 -- 107,926
Research and
development........... 75,160 16,968 28,474 1,214 -- 121,816
-------- -------- -------- ------- -------- --------
Total operating
expenses.............. 253,106 20,754 38,160 39,448 9,759 361,227
-------- -------- -------- ------- -------- --------
Operating income (loss). 136,050 (18,363) (35,768) 11,735 (9,759) 83,895
Interest and other
costs................. (5,843) (167) -- -- (9,000) (15,010)
Interest and other
income................ 53,291 2,578 3,888 29 -- 59,786
Share of losses of
associates............ (7,458) -- -- -- -- (7,458)
Minority interest...... 260 -- -- -- -- 260
-------- -------- -------- ------- -------- --------
Income (loss) before
tax.................... 176,300 (15,952) (31,880) 11,764 (18,759) 121,473
Taxation............... (1,186) -- -- (4,694) -- (5,880)
-------- -------- -------- ------- -------- --------
Net income (loss) after
tax.................... $175,114 $(15,952) $(31,880) $ 7,070 $(18,759) $115,593
======== ======== ======== ======= ======== ========
Earnings per ordinary
share
Basic.................. $ 1.76 $ 0.98
Diluted................ $ 1.58 $ 0.89
Weighted average number
of ordinary shares
Basic.................. 99,352 117,590
Diluted................ 113,080 133,216
</TABLE>
- --------
(1) The adjustment of $9,759,000 represents increased amortization following
the revaluation of the assets of Neurex, Carnrick and Sano at their
estimated fair value. Intangible assets will be amortized on a straight
line basis over their expected useful lives, estimated at 15 years. The
adjustment of $9,000,000 comprises the aggregate effect of the foregone
interest and the interest expense on the cash consideration and promissory
note, respectively, relating to the Carnrick Acquisition. For the purposes
of the pro forma combined statement of income, it is assumed that such
cash consideration was paid and such promissory note was issued on January
1, 1997.
(2) As a result of the Merger, the Carnrick Acquisition and the Sano
Acquisition, Elan will incur an aggregate one-time charge against earnings
representing the acquisition of in-process research and development and
costs of restructuring estimated at $1,249,516,000. This charge is
excluded from the pro forma combined statement of income as it is a non-
recurring item.
50
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------------------------------
HISTORICAL
------------------------------------- COMBINED
ELAN(1) SANO(2) NEUREX CARNRICK ADJUSTMENT(3) PRO FORMA(4)
-------- ------- -------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales.......... $ 62,617 $ 31 $ 2,100 $ 6,220 $ -- $ 70,968
Research revenues...... 20,820 318 292 -- -- 21,430
Royalties and fees..... 51,229 -- -- -- -- 51,229
-------- ------- -------- ------- ------- --------
Total revenues......... 134,666 349 2,392 6,220 -- 143,627
-------- ------- -------- ------- ------- --------
Cost and expenses:
Cost of goods sold..... 29,073 435 234 2,445 2,440 34,627
Selling, general and
administrative........ 27,797 7,231 4,637 6,036 -- 45,701
Research and
development........... 33,817 2,590 8,826 632 -- 45,865
-------- ------- -------- ------- ------- --------
Total operating
expenses.............. 90,687 10,256 13,697 9,113 2,440 126,193
-------- ------- -------- ------- ------- --------
Operating income (loss). 43,979 (9,907) (11,305) (2,893) (2,440) 17,434
Interest and other
costs................. (289) (33) -- -- (2,369) (2,691)
Interest and other
income................ 11,187 282 748 52 -- 12,269
-------- ------- -------- ------- ------- --------
Income (loss) before
tax.................... 54,877 (9,658) (10,557) (2,841) (4,809) 27,012
Taxation............... (397) -- -- 1,115 -- 718
-------- ------- -------- ------- ------- --------
Net income (loss) after
tax.................... $ 54,480 $(9,658) $(10,557) $(1,726) $(4,809) $ 27,730
======== ======= ======== ======= ======= ========
Earnings per ordinary
share
Basic.................. $ 0.51 $ 0.23
Diluted................ $ 0.46 $ 0.20
Weighted average number
of ordinary shares
Basic.................. 106,906 123,024
Diluted................ 119,628 137,644
</TABLE>
- --------
(1) As a result of the Sano Acquisition, in the three months ended March 31,
1998, Elan incurred a one-time charge against earnings representing the
acquisition of in-process research and development and costs of
restructuring of approximately $478,609,000. This charge is excluded from
the pro forma combined statement of income as it is a non-recurring item.
(2) These are the results of Sano for the two months ended February 28, 1998.
The results of Sano for the month of March 1998 are included in the
results of Elan for the three months ended March 31, 1998.
(3) The adjustment of $2,440,000 represents the increased amortization
following the revaluation of the assets of Neurex, Carnrick and Sano at
their estimated fair value. Intangible assets will be amortized on a
straight line basis over their expected useful lives, estimated at 15
years. The adjustment of $2,369,000 comprises the aggregate effect of the
foregone interest and the interest expense on the cash consideration and
promissory note, respectively, relating to the Carnrick Acquisition. For
purposes of the pro forma combined statement of income, it is assumed that
such cash consideration was paid and such promissory note was issued on
January 1, 1997.
(4) As a result of the Merger and the Carnrick Acquisition, Elan will incur a
further one-time charge against earnings representing the acquisition of
in-process research and development and costs of restructuring estimated
at $770,907,000. This charge is excluded from the pro forma combined
statement of income as it is a non-recurring item.
51
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data for Elan
and Neurex and unaudited pro forma and equivalent pro forma combined per share
data to reflect the consummation of the Merger based upon the historical
financial results of Elan and Neurex and the conversion of each Neurex Share
into 0.51 of an Elan ADS. The pro forma data are not necessarily indicative of
actual or future operating results or of the financial position that would
have occurred or will occur upon consummation of the Merger. The data
presented below should be read in conjunction with the unaudited pro forma
combined financial data set forth under "Unaudited Pro Forma Combined
Financial Data" and the separate historical consolidated financial statements
of Elan and Neurex which are incorporated herein by reference. See "Unaudited
Pro Forma Combined Financial Data."
<TABLE>
<CAPTION>
HISTORICAL NEUREX
------------ PRO FORMA EQUIVALENT
YEAR ENDED DECEMBER 31, 1997 ELAN NEUREX COMBINED PRO FORMA(1)
- ---------------------------- ----- ------ --------- ------------
<S> <C> <C> <C> <C>
Diluted earnings per ordinary, common and
equivalent share......................... $1.58 $(1.44) $0.89 $0.46
Dividends................................. -- -- -- --
Book value per ordinary, common and equiv-
alent share.............................. 7.96 2.19 7.65 3.90
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL NEUREX
------------ PRO FORMA EQUIVALENT
THREE MONTHS ENDED MARCH 31, 1998 ELAN NEUREX COMBINED PRO FORMA(1)
- --------------------------------- ----- ------ --------- ------------
<S> <C> <C> <C> <C>
Diluted earnings per ordinary, common and
equivalent share......................... $0.46 $(0.47) $0.20 $0.10
Dividends................................. -- -- -- --
Book value per ordinary, common and
equivalent share......................... 7.34 1.73 7.17 3.66
</TABLE>
- --------
(1) The equivalent pro forma per share amounts were calculated by multiplying
pro forma income per share, pro forma dividends per share and pro forma
book value per share by the Exchange Ratio of 0.51.
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
COMPARATIVE MARKET PRICE INFORMATION
Elan ADSs are listed and traded on the NYSE, the principal trading market
for Elan's securities, under the symbol "ELN." Neurex Shares are listed and
traded on the Nasdaq under the symbol "NXCO." The following table sets forth
the high and low per share sale prices for the Elan ADSs and Neurex Shares on
the NYSE Composite Tape and the Nasdaq, respectively, as reported on published
financial sources, for the periods indicated.
<TABLE>
<CAPTION>
ELAN ADSS(1) NEUREX SHARES
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
CALENDAR 1998
2nd Quarter (through June 30, 1998)............ $68.38 $57.00 $31.25 $19.50
1st Quarter.................................... 69.00 48.13 24.44 13.25
CALENDAR 1997
4th Quarter.................................... 56.88 44.38 18.63 12.63
3rd Quarter.................................... 51.19 42.75 16.19 10.75
2nd Quarter.................................... 45.38 30.00 17.75 9.88
1st Quarter.................................... 38.75 32.75 18.25 11.63
CALENDAR 1996
4th Quarter.................................... 33.25 23.00 19.25 11.75
3rd Quarter.................................... 32.63 24.75 22.50 12.50
2nd Quarter.................................... 33.88 28.19 25.75 16.00
1st Quarter.................................... 32.31 24.19 23.00 7.25
</TABLE>
- --------
(1) The prices for Elan ADSs have been adjusted to give effect to a two-for-
one stock split effected on August 22, 1996.
52
<PAGE>
The Ordinary Shares are also traded in Dublin on the Official List of the
Irish Stock Exchange and in London on the Official List of the London Stock
Exchange. The volume of trading in Ordinary Shares on such markets is,
however, very limited.
On April 28, 1998, the last full day of trading before the issuance of a
press release by Elan and Neurex announcing the proposed Merger, the high sale
price, low sale price and closing price per Elan ADS was $65.38, $62.25 and
$62.38, respectively, and the high sale price, low sale price and closing
price per Neurex Share was $20.50, $19.50 and $19.75, respectively. On June
30, 1998, the last full day of trading prior to the date of this Prospectus-
Proxy Statement, the high sale price, low sale price and closing price per
Elan ADS was $64.25, $64.06 and $64.31, respectively, and the high sale price,
low sale price and closing price per Neurex Share was $30.50, $30.38 and
$30.38, respectively.
COMPARATIVE DIVIDEND INFORMATION
Elan has not paid cash dividends on its Ordinary Shares in the past. The
declaration of any cash dividends will be at the recommendation of the Elan
Board. The recommendations of the Elan Board will depend upon the earnings,
capital requirements and financial condition of Elan and other relevant
factors. Although Elan does not anticipate that it will pay any cash dividends
on its Ordinary Shares in the foreseeable future, Elan expects that the Elan
Board will review Elan's dividend policy on a regular basis. Dividends may be
paid on Elan's Executive Shares (as defined below) or "B" Executive Shares (as
defined below) at a time when 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 Share Capital" and Note 14 to the
Consolidated Financial Statements included in Elan's 1997 Annual Report
incorporated herein by reference.
Neurex has never paid dividends on Neurex Shares and does not anticipate
that it will pay such dividends for the foreseeable future.
DESCRIPTION OF ELAN SHARE CAPITAL
Elan's authorized share capital consists of 300,000,000 Ordinary Shares,
1,000 Executive Shares, par value one Irish pound per share (the "Executive
Shares"), and 25,000 "B' Executive Shares, par value 4 Irish pence per share
(the "B" Executive Shares").
ORDINARY SHARES
General. All of the 112,600,805 Ordinary Shares issued as of June 29, 1998
were fully paid (except for 42,553 Ordinary Shares), duly authorized and
validly issued. Holders of Ordinary Shares are entitled to receive such
dividends as may be recommended by the Elan Board and approved by the
shareholders and/or such interim dividends as the Elan Board may decide. On
liquidation or a winding up of Elan, the assets available for distribution
among the holders of Elan ADSs and Ordinary Shares not otherwise represented
by Elan ADSs shall be distributed pro rata. 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, 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 shareholder present in person or by proxy will have one vote;
provided, however, that no individual will have more than one vote. Elan's
Articles provide that three or more shareholders present in person or by proxy
holding not less than one-third of the issued Ordinary Shares constitute a
quorum at a meeting of shareholders. 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
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amendment to Elan's Articles 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. Shareholders 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 Ordinary Shares.
Shareholder Meetings. Under Irish law, a company's annual general meeting of
shareholders ("annual meeting") must take place in Ireland and any business
transacted at a meeting held in breach of this requirement will be void,
unless all shareholders 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 shareholders, and the articles of association do not require
that the annual meeting be held in Ireland. Elan's Articles permit annual
meetings to be held outside Ireland if the above procedures are followed.
Under Irish law, extraordinary general shareholders' meetings may be
convened by the board of directors or at the request of shareholders 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 Enterprise Minister may, on the application of any shareholder, 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 shareholders pass a
resolution conferring such powers on the board of directors for periods of up
to five years. By an ordinary resolution passed by Elan's shareholders on
April 24, 1998, the Elan Board is authorized to enter into agreements, during
the period expiring April 23, 2003, 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.
Preemptive 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 shareholders may by special resolution eliminate this
requirement for periods of up to five years. Elan's shareholders passed a
special resolution on April 24, 1998 eliminating the requirement for these
preemptive rights for agreements entered into prior to the period expiring
July 23, 1999 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 shareholder
nor any group of shareholders 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
shareholders cannot perpetrate a fraud on the minority shareholders 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 shareholder is entitled to
bring suit. In cases where the controlling shareholders 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 shareholders 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
shareholders. A minority shareholder 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 shareholder in his own right where he alleges that his
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personal rights have been infringed. If such a shareholder has rights which
are identical to those enjoyed by other members or by all members of the same
class of shareholders, it is possible for the shareholder 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 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 Elan Board whose votes
are not in question. Additionally, it is provided by such regulation that the
shareholders 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.
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 an
Ordinary Share. 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 Ordinary Shares, and the "B' Executive Shares shall rank pari
passu with the 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 or "B' Executive Shares.
DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS
Elan ADRs evidencing Elan ADSs (each of which represents one Ordinary Share)
are issuable pursuant to the Deposit Agreement by and among Elan, the
Depositary, and the owners and holders of ADRs. Each Elan ADS represents one
Ordinary Share (or evidence of a right to receive such 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 (the
"Custodian"). 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.
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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 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 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 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 Ordinary Shares to the
holders of Elan ADRs in proportion to the number of Elan ADSs representing
such 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 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 Ordinary Shares received as such
dividend or free distribution. If additional Elan ADRs are not so distributed,
each Elan ADS shall thenceforth also represent the additional Ordinary Shares
distributed with respect to the Ordinary Shares represented thereby.
If Elan offers, or causes to be offered, to the holders of Ordinary Shares
any right to subscribe for additional Ordinary Shares or any rights of any
other nature, the Depositary will, if requested by Elan, either (i) make such
rights available to holders of Elan ADRs by means of warrants or otherwise, if
lawful and feasible, or (ii) if making such 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 discretion may sell such rights or warrants or other instruments at
public or private sale, at such place or places and upon such terms as the
Depositary may deem proper, and allocate the proceeds of such 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
such 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 such securities to such holders is exempt from registration under the
provisions of the Securities Act.
Should such 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 Ordinary Shares or rights to subscribe therefor) 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 such amounts
and in such manner as the Depositary deems necessary and practicable to pay
such taxes, by public or private sale, and the Depositary shall distribute the
net proceeds of any such sale or the balance of any such property, after
deduction of such taxes, to the Elan ADR holders entitled thereto.
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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 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 such dividend, distribution or rights, or the net
proceeds of the sale thereof, 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 ORDINARY SHARES
Upon receipt of a notice of any meeting of holders of Ordinary Shares or
securities represented by the Elan ADRs, the Depositary, as soon as
practicable thereafter, will mail the information contained in such 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, to instruct the
Depositary as to the exercise of the voting rights, if any, pertaining to the
Ordinary Shares or other securities represented by the Elan ADSs. The
Depositary has agreed it will endeavor, insofar as practicable, to vote the
Ordinary Shares or other securities so represented in accordance with such
instructions. The Depositary has agreed not to vote the 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. Federal securities regulations
require that holders of the Elan ADRs be given 30 days advance notice of
changes in the fee schedule in the Deposit Agreement. 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
such amendment has been given to the record holders of outstanding Elan ADRs.
Every holder of an Elan ADR at the time such amendment so becomes effective
will be deemed, by continuing to hold such Elan ADR, to consent to such
amendment and to be 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 therefor 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 such termination to the record holders
of all Elan ADRs then outstanding at least 30 days prior to the date fixed in
such notice of such 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 so resign and a successor
Depositary shall not have been appointed and accepted its appointment within
such 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 thereafter will discontinue the
registration of transfer of Elan ADRs, will suspend the distribution of
dividends to the holders thereof 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 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 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
theretofore been surrendered.
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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 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 shareholders, except for taxes and other
governmental charges, any applicable transfer or registration fees on the
deposit or withdrawal of Ordinary Shares, and certain cable, telex, facsimile
and delivery charges, any of which are payable by persons depositing or
withdrawing 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 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, 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 Elan ADRs are
entitled to withdraw their deposited Ordinary Shares at any time, subject only
to (i) 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; (ii) the
payment of fees, taxes and similar charges; and (iii) compliance with any U.S.
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 matter other than
the business of Elan or a matter related to the Deposit Agreement or the Elan
ADSs.
COMPARATIVE RIGHTS OF NEUREX STOCKHOLDERS AND ELAN SHAREHOLDERS
As a result of the Merger, Neurex stockholders will receive Elan ADSs
representing Ordinary Shares of Elan, a public limited company incorporated
under the laws of Ireland. The following is a summary of certain material
differences between the current rights of Elan shareholders and Neurex
stockholders under Irish law and the DGCL, respectively, and under the Neurex
Certificate and Neurex By-laws and Elan's Articles. The following summary does
not purport to be a complete description of the rights of shareholders of Elan
and stockholders of Neurex under, and is qualified in its entirety by
reference to, relevant Irish law, the DGCL, the Neurex Certificate and Neurex
By-laws and Elan's Articles. For information as to where the governing
instruments of Neurex and Elan may be obtained, see "Available Information."
Pursuant to Section 14 of the Exchange Act and the rules promulgated
thereunder (the "Proxy Rules"), Neurex 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.
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However, Elan is subject to the rules of the Irish Stock Exchange and the
London Stock Exchange regulating notices of shareholder meetings and
solicitation of proxies. Under the applicable requirements, notice of a
shareholder meeting is normally accompanied by a shareholder 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 Elan Board 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 NYSE 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 NYSE annual reports and other information. As an issuer with
securities listed on the Nasdaq and registered under Section 12 of the
Exchange Act, Neurex is also required under the Exchange Act to publicly file
with the Commission and the Nasdaq an annual report and other information.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Neurex currently consists of 45,000,000
shares of common stock, $.01 par value per share, and 15,000,000 shares of
preferred stock, $.01 par value per share.
The authorized share capital of Elan currently consists of 300,000,000
Ordinary Shares, 1,000 Executive Shares and 25,000 "B' Executive Shares.
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
elections of directors of the corporation. Under the Neurex Certificate and
the Neurex By-laws, holders of Neurex Shares are entitled to one vote per
share on all matters, and cumulative voting is not permitted. A quorum
consists of a majority of the shares entitled to vote, unless otherwise
required by law.
Under Irish law, the voting rights of shareholders are governed by the Irish
Companies Acts and by a company's articles of association. 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 shareholders, a vote shall be
taken by a show of hands in which every shareholder 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 specify that three members present in person or by proxy
being holders of not less than one third of the issued Ordinary Shares shall
be a quorum.
SPECIAL MEETINGS OF STOCKHOLDERS
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 Neurex By-laws provide that a
special meeting of stockholders may be called by the Neurex Board or the Chief
Executive Officer of Neurex.
Under Irish law, an extraordinary general meeting of shareholders may be
called by the board of directors or by shareholders 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
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proposals to change the name of the company, to alter its capital structure in
certain respects, to change or amend the rights of shareholders, to permit the
company to issue new shares for cash without applying the shareholders'
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 Irish 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 Neurex Certificate prohibits 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 shareholder 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 do not contain any such provision.
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. 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.
AMENDMENT OF 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 the articles being
amended, altered or repealed require a greater vote for action by the board of
directors or the stockholders, such greater vote is required to alter, amend
or repeal such article. The Neurex Certificate 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 Neurex Certificate provides that the Neurex By-
laws may be altered, amended or repealed by the Neurex Board.
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Under Irish Law, the shareholders have the authority to alter most
provisions of a company's memorandum 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 shareholders to
apply to the courts to cancel the amendments. Under Irish law, the board of
directors is not authorized to change the memorandum 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.
CERTAIN PROVISIONS RELATING TO SHARE ACQUISITION
The DGCL generally prevents a corporation from entering into certain
business combinations with an interested stockholder (defined as any person or
entity that is the beneficial owner of at least 15% of a corporation's voting
stock or an affiliate or associate of the corporation who was the owner of 15%
or more of the corporation's voting stock at any time in the preceding three
years) or its affiliates, unless (i) the corporation's board of directors
approved the business combination or transaction prior to the time the
stockholder became an interested stockholder, (ii) the interested stockholder
acquired 85% of the corporation's voting stock in the same transaction in
which it exceeded 15% or (iii) the business combination is approved by the
board of directors and by a vote of two-thirds of the outstanding voting stock
not owned by the interested stockholder.
Takeovers of certain Irish public companies, including Elan, are regulated
by the Takeover Rules, which are similar to the City Code in the United
Kingdom except that, unlike the City Code 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
shareholders (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
shareholders 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 shareholders of the relevant
class are bound by the terms of the scheme; a dissenting shareholder 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 shareholders of the relevant class who do
not accept the offer to transfer their shares on the terms of the offer. A
dissenting shareholder 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.
RIGHTS OF APPRAISAL
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
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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. Neurex stockholders are not entitled to appraisal
rights. See "The Merger--Absence of Appraisal Rights."
Although Irish law does not generally provide for appraisal rights, if a
shareholder applies to a court as described under "Certain Provisions Relating
to Share Acquisition" above, the court may specify such terms for the
acquisition as it considers appropriate.
DISCLOSURE OF INTERESTS
Section 67 of the 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 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 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 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 ADR evidencing an Elan ADS
would generally constitute an interest in the underlying Ordinary Shares.
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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.
SOURCES AND PAYMENT OF 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 Neurex Certificate and Neurex
By-laws do not restrict the payment of dividends on the Neurex Shares.
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 shareholders 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 Elan's Articles, subject to applicable law, the shareholders 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. In addition, subject to applicable law, if the profits of Elan
available for distribution appear to justify such payments, the Elan Board 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 Neurex Certificate
does not provide for such classification of the Neurex Board.
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. Elan's Articles do not provide for such classification of the Elan
Board. Elan's Articles 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
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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 Neurex Board is not
classified and therefore directors may be removed without cause.
Under the Irish Companies Acts, shareholders 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 Neurex By-laws provide that the board of
directors may increase or decrease the number of directors and fill any
vacancy on the board, including vacancies resulting from an increase in the
number of directors.
Under Irish law, shareholders of an Irish public company may, by ordinary
resolution, appoint a person as a director either to fill a vacancy or as an
additional director. The board of directors also has the power to appoint a
person as 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
Neurex Certificate nor the Neurex By-laws prescribe any procedure for the
exercise of these stockholder rights.
Irish law permits an action by a shareholder is his own right (or in a
representative capacity on behalf of himself and other affected consenting
shareholders of the same class if their rights are identical) where he alleges
that his personal rights have been infringed. Additionally, under Irish law,
any shareholder 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 shareholders (including
himself) or in disregard of his or their interests as shareholders, may apply
to court for an appropriate order.
As a general principle of Irish law, a shareholder 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 shareholders cannot perpetrate a fraud on the minority
shareholders 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 shareholder is entitled to bring suit. In certain circumstances, if
controlling shareholders fail to institute proceedings in the name of the
company when such proceedings are properly called for, one or more of the
aggrieved minority shareholders 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 shareholders.
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
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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 amounts
advanced if it is ultimately determined that the officer or director was not
entitled to be indemnified. The Neurex Certificate and the Neurex By-laws
provide for indemnification of officers and directors to the fullest extent
permitted by, and the Neurex By-laws contain provisions for advancing expenses
in the manner provided for in, the DGCL.
The DGCL permits a Delaware corporation to include in its certificate of
incorporation a provision that would eliminate a director's monetary liability
for certain breaches of his fiduciary duty in a lawsuit by or on behalf of the
corporation or in an action by stockholders of the corporation. The Neurex
Certificate eliminates a director's or officer's monetary liability in a
lawsuit by or on behalf of the corporation or in an action by stockholders of
the corporation to the full extent permitted by the DGCL.
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. Elan's Articles contain such an
indemnity in respect of such persons (other than any person employed as
auditor).
Irish law does not permit a company to exempt any director or other officer
of the company or any person employed by the company as auditor from any
liability which by virtue of any rule of law would otherwise attach to him in
respect of any negligence, default, breach of duty or breach of trust of which
he may be guilty in relation to the company.
PREEMPTIVE RIGHTS
Unless the certificate of incorporation expressly provides otherwise,
stockholders of a Delaware corporation do not have preemptive rights. The
Neurex Certificate does not provide for preemptive 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 shareholders 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 shareholders provide
otherwise. By a resolution passed by Elan's shareholders on April 24, 1998,
the Elan Board is authorized, during the period expiring July 23, 1999, or the
date of the next annual general meeting of Elan, whichever occurs earliest, to
allot equity shares up to the amount of Elan's present authorized but unissued
share capital otherwise than pro rata to its existing shareholders.
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
Neurex Certificate 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
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of an on-market purchase, within the scope of an authority given by ordinary
resolution of the shareholders 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
shareholders.
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 permit it to issue redeemable shares and to purchase its own
shares. No redeemable shares have been issued, and no purchase of any of its
shares has been made, by Elan. Elan annually seeks the authority of its
shareholders to make on-market purchases of its shares and to re-issue off-
market any treasury shares resulting from any such on-market purchases.
ADDITIONAL ITEMS REQUIRING THE VOTE OF NEUREX STOCKHOLDERS
In addition to the Merger Proposal, Neurex stockholders will consider and
vote on the following matters:
(1) the election of nine directors to the Neurex Board for terms expiring
at the 1999 Neurex Annual Meeting;
(2) the ratification of the selection of Ernst & Young LLP as auditors of
Neurex's financial statements for the year ending December 31, 1998;
(3) the approval of Neurex's 1998 Stock Option Plan and the authorization
of 1,000,000 Neurex Shares for issuance thereunder; and
(4) such other business as may properly come before the Annual Meeting.
ELECTION OF DIRECTORS
NOMINEES
Nine directors of Neurex are to be elected at the Annual Meeting, each to
hold office until the next Annual Meeting and until his successor is elected
and qualified. If the Merger is consummated, each Neurex director shall
resign. The Neurex Board has nominated for election as directors the nine
persons indicated in the following table. Proxy holders may not vote for a
greater number of persons than the number of nominees named below. In the
election of directors, the proxy holders intend, unless directed otherwise, to
vote for the election of the nominees named below, all of whom are now members
of the Neurex Board. In the event that cumulative voting is employed in the
election of directors, the proxy holders intend, unless directed otherwise, to
distribute the votes represented by each proxy among the nominees named herein
so as to elect all or as many of them as possible. Neurex's By-laws currently
fix the number of directors on the Neurex Board at ten. There exists one
vacancy on the Neurex Board resulting from the March 17, 1998 resignation of
Roberto Crea as an officer and director and as a result there are only nine
(9) nominees. It is not anticipated that any of the nominees will decline or
be unable to serve as a director. If, however, that should occur, the proxy
holders will vote the proxies in their discretion for any nominee designated
by the present Board of Directors to fill the vacancy. In any event, proxies
will not be voted for more than nine (9) persons.
THE NEUREX BOARD RECOMMENDS A VOTE
IN FAVOR OF EACH NAMED NOMINEE.
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The following table gives certain information as to each person nominated
for election as a director:
AS OF APRIL 15, 1997
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Paul Goddard, Ph.D. .................................... 48 1991
Robert R. Luther, M.D. ................................. 49 1996
Thomas L. Barton........................................ 55 1983
David L. Anderson....................................... 54 1987
Gerard N. Burrow, M.D. ................................. 65 1996
John F. Chappell........................................ 61 1992
Raymond C. Egan......................................... 55 1996
John W. Glynn, Jr. ..................................... 57 1989
Howard E. Greene, Jr. .................................. 55 1986
</TABLE>
Paul Goddard has served as Neurex's Chief Executive Officer since March
1991. Since May 1991, he has been a member of the Neurex Board and was elected
Chairman in November 1991. Prior to joining Neurex, Dr. Goddard was employed
by SmithKline Beecham Corporation ("SmithKline Beecham") and its predecessors.
From 1984 to 1991, he served as Senior Vice President and Director, Japan-
Pacific region of SmithKline Beecham. From 1976 to 1984, he was employed by
SmithKline Beckman Corporation, a predecessor of SmithKline Beecham, most
recently as Vice President, Strategic Marketing. Dr. Goddard received a B.S.
in Biochemistry from the University of London and a Ph.D. from St. Mary's
Hospital, Paddington, England, in Aetiology and Epidemiology of Colon Cancer.
He also serves as a member of the Board of Directors of Molecular Devices
Corporation, Onyx Pharmaceuticals, Inc., and Ribi ImmunoChem Research, Inc.
Robert R. Luther is the Executive Vice President of Development and has
served as a member of the Neurex Board since 1996. He has been an officer of
Neurex since March 1992. From 1980 through February 1992, Dr. Luther was
employed by Abbott Laboratories, in various positions, most recently as
Division Director, Pharmaceutical Research and Development. He received his
B.S. and M.D. degrees from Northwestern University and he is a fellow of the
American College of Clinical Pharmacology.
Thomas L. Barton, a founder of Neurex, has served as its General Counsel and
Secretary and as a member of the Neurex Board since 1983. Mr. Barton was a
partner in the law firm of Holtzmann, Wise & Shepard LLP from 1982 until July
1995. Since that time he has been a partner in the law firm of Wise & Shepard
LLP. Mr. Barton received his undergraduate degree from Yale University, his
MBA from Stanford Business School and his J.D. from Northwestern University.
David L. Anderson has served as a director of Neurex since November 1987. He
serves as the Managing Director of the general partner of Sutter Hill
Ventures, a California Limited Partnership ("Sutter Hill"), a venture capital
investment firm, since 1974. He is also a member of the Board of Directors of
Dionex Corporation, BroadVision, Inc., Molecular Devices Corporation and Cytel
Corporation ("Cytel").
Gerard N. Burrow has served as a director of Neurex since August 1996. Dr.
Burrow is Special Advisor for Health Affairs to the President of Yale
University. From 1992 to 1997, he served as the Dean of the Yale School of
Medicine. He also served as Vice Chancellor for Health Services and Dean of
the School of Medicine at the University of California, San Diego. He is a
member of the Board of Directors of Johnson & Johnson.
John F. Chappell has served as a director of Neurex since January 1992. Mr.
Chappell is the President of Plexus Ventures, Inc. ("Plexus"), an investment
firm which he founded in December 1990. Prior to founding Plexus, Mr. Chappell
was employed for 28 years by SmithKline Beecham and its predecessors. From
July 1989 to July 1990, he served as the Chairman and a director of SmithKline
Beecham. He was the President of SmithKline & French Laboratories from
September 1988 to July 1989 and was the President of SmithKline &
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French International from February 1985 to September 1988. He is currently
serving as a director of Ribi ImmunoChem Research, Inc. and Tanox Biosystems,
Inc. He also has served as a director of the Pharmaceutical Manufacturers'
Association and of the Industrial Biotechnology Association.
Raymond C. Egan has served as director of Neurex since August 1996. Mr. Egan
is the President and founder of Princeton Healthcare Consultants, a health
care consulting company founded in 1995. Prior to founding his company, Mr.
Egan was with Bristol-Myers Squibb Co. where he held a number of executive and
marketing positions.
John W. Glynn, Jr. has served as a director of Neurex since November 1989.
He has been a general partner of Glynn Ventures, a venture capital
partnership, and Glynn Capital Management, an investment management firm, both
founded by Mr. Glynn, since 1983. Mr. Glynn is also a member of the Board of
Directors of The Pacific Bank.
Howard E. Greene, Jr., has served as a director of Neurex since November
1986. He has been Chairman of the Board of Directors of Amylin
Pharmaceuticals, Inc. ("Amylin"), a biotechnology company, since 1987.Mr.
Greene has also been a general partner of the general partner of Biovest
Partners, a California Limited Partnership, a venture capital investment firm,
since October 1986. Mr. Greene is a director of Allergan, Inc., the Chairman
of the Board of Directors of Cytel and Amylin and a trustee of the Scripps
Clinic and Research Foundation.
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1997, there were six meetings of the
Neurex Board. Each member of the Neurex Board attended 75% or more of the
aggregate of the meetings of the Neurex Board and the meetings of all
Committees of the Neurex Board on which he served.
The Audit Committee was established on September 28, 1993. The members of
the Audit Committee are John Glynn, David Anderson and Thomas Barton, none of
whom are employees of Neurex. The functions of the Audit Committee are to
define the scope of the audit, review the auditor's reports and comments, and
monitor the internal auditing procedures of Neurex. The Audit Committee met
three times during Neurex's year ended December 31, 1997.
The Compensation Committee was established on September 28, 1993. The
members of the Compensation Committee are David Anderson and John Glynn,
neither of whom is employed by Neurex. The Compensation Committee makes
recommendations with respect to the compensation of senior officers and the
granting of stock options and stock awards. The Compensation Committee met
three times during Neurex's year ended December 31, 1997.
The Nominating Committee was established on November 18, 1993. The members
of the Nominating Committee are David Anderson and Howard E. Greene, Jr.,
neither of whom is employed by Neurex. The Nominating Committee makes
recommendations as to the size of the Neurex Board and the selection,
nomination and recruitment of directors. It does not solicit independent
nominations from stockholders or any other third parties and will not consider
nominations put forward by stockholders. The Nominating Committee did not meet
during the year ended December 31, 1997.
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RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Neurex Board has selected Ernst & Young LLP as Neurex's independent
auditors for the year ending December 31, 1998, and has further directed that
management submit the selection of the auditors for ratification by the
stockholders at the Annual Meeting. Ernst & Young LLP was first appointed
independent auditors of Neurex in October 1991. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as Neurex's
independent auditors is not required by Neurex's By-laws or otherwise.
However, the Neurex Board is submitting the selection of Ernst & Young LLP to
the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection the Neurex Board will reconsider
whether to retain that firm. Even if the selection is ratified, the Neurex
Board in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Neurex Board determines
that such a change would be in the best interests of Neurex and its
stockholders.
THE NEUREX BOARD RECOMMENDS A VOTE
IN FAVOR OF THE RATIFICATION OF SELECTION OF THE INDEPENDENT AUDITORS.
----------------
APPROVAL OF ADOPTION OF 1998 STOCK OPTION PLAN
Stockholders are being asked to approve the adoption of the 1998 Stock
Option Plan and the reservation for issuance of 1,000,000 Neurex Shares
thereunder. Neurex previously granted options under the 1988 Stock Option
Plan; however, by its terms, the 1988 Stock Option Plan terminated on April
20, 1998. In February 1998, in order to continue to attract and retain
personnel who possess a high degree of competence, experience and motivation,
the Neurex Board adopted the 1998 Stock Option Plan and reserved 1,000,000
Neurex Shares for issuance thereunder.
In the opinion of the Neurex Board, adoption of the 1998 Stock Option Plan
would provide the necessary flexibility to attract, motivate and reward
employees and directors of and consultants to, Neurex in a manner that would
improve Neurex's financial performance. As of February 28, 1998, Neurex had
141 current employees and 7 outside directors, all of whom were eligible to
participate in the 1998 Stock Option Plan. The affirmative vote of the holders
of a majority of Neurex Shares voting at the Annual Meeting is necessary to
approve the 1998 Stock Option Plan.
DESCRIPTION OF PROPOSED 1998 STOCK OPTION PLAN
In February 1998, the Neurex Board adopted the 1998 Stock Option Plan,
subject to stockholder approval. Under the 1998 Stock Option Plan, there are
1,000,000 Neurex Shares reserved for issuance upon exercise of options granted
to key employees and directors of, and consultants to, Neurex. The 1998 Stock
Option Plan provides for the grant of both incentive stock options, intended
to qualify as such under Section 422 of the Code, and nonstatutory stock
options. The 1998 Stock Option Plan will terminate on February 3, 2008, unless
sooner terminated by the Neurex Board. The following description of the 1998
Stock Option Plan is qualified in its entirety by reference to the 1998 Stock
Option Plan attached hereto as Annex D. Capitalized terms used in this section
and not otherwise defined herein shall have the meanings ascribed to them in
the 1998 Stock Option Plan.
ADMINISTRATION
The administration of the 1998 Stock Option Plan may be delegated by the
Neurex Board to the Compensation Committee subject to certain restrictions.
Subject to these restrictions and the limitations set forth
69
<PAGE>
in the 1998 Stock Option Plan, the Compensation Committee has the authority to
select the persons to whom grants are to be made, to designate the number of
shares to be covered by each option, to establish vesting schedules, to
determine whether an option is to be an incentive stock option or a
nonstatutory stock option and to specify other terms of the options.
TERM OF OPTIONS
The maximum term of options granted under the 1998 Stock Option Plan is ten
(10) years in the case of incentive stock options and ten (10) years and one
(1) week in the case of a nonstatutory stock option; provided that in the case
of an incentive option granted to a 10% stockholder, the term of the option
may be no more than five (5) years from the date of grant. No option may be
exercised after the expiration of its term. Options granted under the 1998
Stock Option Plan generally are nontransferable and expire three months after
the termination of an optionee's employment, directorship, or consultancy
relationship with Neurex. In general, if an optionee is permanently disabled
or dies during his or her employment by, or service to, Neurex, such person's
options will expire within such period as the Administrator prescribes in the
stock option agreement; generally, such period is one (1) year. If options
granted under the 1998 Stock Option Plan expire or otherwise terminate without
being exercised, the Neurex Shares not purchased pursuant to such options
again becomes available for issuance under the 1998 Stock Option Plan.
ELIGIBILITY; LIMITATIONS
Nonstatutory stock options may be granted under the 1998 Stock Option Plan
to employees, directors and consultants of Neurex. Incentive stock options may
be granted only to employees. If the aggregate fair market value of all shares
of Neurex common stock subject to an optionee's incentive stock option which
are exercisable for the first time during any calendar year exceeds $100,000,
the excess options will be treated as nonstatutory stock options.
EXERCISE OF OPTIONS
The Administrator determines when options become exercisable, and may in its
discretion, accelerate the vesting of any outstanding option. Stock option
grants to employees and consultants vest and become exercisable over four
years. Stock option grants to non-employee directors vest monthly over a three
year period.
The exercise price of nonstatutory stock options granted under the 1998
Stock Option Plan must equal at least 85% of the fair market value of the
Neurex Shares on the date of grant and the exercise price of incentive stock
options must equal at least 100% of the fair market value of the Neurex Shares
on the date of grant. The exercise price of options granted to any person who,
at the time of grant, owns stock possessing more than 10% of the total
combined voting power of all classes of stock must be at least 100% of the
fair market value of Neurex Shares on the date of grant in the case of a
nonstatutory stock option and 110% of the fair market value of the Neurex
Shares on the date of grant in the case of an incentive stock option. The
exercise price of a nonstatutory stock option may be determined by the
Administrator; provided, however, that the exercise price of a nonstatutory
stock option intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code may not be less than 100% of the
fair market value of the Neurex Shares on the date of grant.
ADJUSTMENT PROVISIONS
In the event any change is made to the Neurex Shares issuable under the 1998
Stock Option Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or other change affecting the outstanding Neurex
Shares as a class without receipt of consideration, then appropriate
adjustments shall be made by the Neurex Board to (i) the aggregate number
and/or class of shares issuable under the 1998 Stock Option Plan, and (ii) the
number and/or class of shares and the exercise price per share of the stock
subject to each outstanding option in order to preclude the dilution or
enlargement of benefits hereunder.
70
<PAGE>
In the event that Neurex is not the surviving entity in any merger,
reorganization or consolidation (collectively, a "Reorganization") the options
shall terminate unless they are assumed by the surviving corporation in the
Reorganization. As a matter of policy, in the event of a Reorganization,
options granted to outside directors, at their discretion, will either
immediately vest or will continue normal vesting after the Reorganization and,
subject to the discretion of the Neurex Board, 50% of unvested options granted
to executive officers become immediately exercisable and the remaining 50%
will have their vesting period reduced by 50%.
AMENDMENT AND TERM
The Neurex Board may amend or modify the 1998 Stock Option Plan at any time
provided that no such amendment or modification may adversely affect
outstanding options without the consent of the holders thereof. In addition,
in order to obtain the benefits provided by Section 422 of the Code and Rule
16b-3 under the Exchange Act, the Neurex Board will determine at the time of
making each amendment whether or not it is necessary to submit the amendment
to the stockholders for approval. The 1998 Stock Option Plan became effective
when adopted by the Neurex Board in February 1998 and continues until
terminated by the Neurex Board; however, no option granted under the 1998
Stock Option Plan shall become exercisable, and no shares shall be issued,
unless and until the 1998 Stock Option Plan has been approved by Neurex's
stockholders. In no event will the 1998 Stock Option Plan terminate later than
February 3, 2008.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options under the 1998 Stock Option Plan are intended to be
eligible for the favorable federal income tax treatment accorded "incentive
stock options" under the Code. There are generally no federal income tax
consequences to the optionee or Neurex by reason of the grant or exercise of
an incentive stock option. If an optionee holds stock acquired through
exercise of an incentive stock option for more than two years from the date on
which the option is granted and more than one year from the date on which the
shares are transferred to the optionee upon exercise of an option, any gain or
loss on a disposition of such stock will be long term capital gain or loss.
Generally, if the optionee disposes of the stock before the expiration of
either of these holding periods, at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss upon the disqualifying disposition
will be a capital gain or loss which will be long term or short term depending
on whether the stock was held for more than one year. Slightly different rules
may apply to optionees who acquire stock subject to certain repurchase options
or who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the company will be entitled, subject to certain
requirements, to a corresponding business expense deduction in the tax year in
which the disqualifying disposition occurs.
Nonstatutory stock options granted under the 1998 Stock Option Plan
generally have the following federal income tax consequences:
There are no tax consequences to the optionee or Neurex by reason of the
grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, Neurex is
required to withhold from regular wages or supplemental wage payments an
amount based on the ordinary income recognized. Subject to certain
requirements, Neurex will be entitled to a business expense deduction equal to
the taxable ordinary income realized by the optionee. Upon disposition of the
stock, the optionee will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon exercise of the
option. Such gain or loss will be long or short term depending on whether the
stock was held for more than one year. Slightly different rules apply to
optionees who acquire stock subject to certain repurchase options or who are
subject to Section 16(b) of the Exchange Act.
THE NEUREX BOARD RECOMMENDS A VOTE IN
FAVOR OF THE ADOPTION OF NEUREX'S 1998 STOCK OPTION PLAN AND THE
AUTHORIZATION OF 1,000,000 NEUREX SHARES FOR ISSUANCE THEREUNDER.
71
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of June 26, 1998, certain information
with respect to each person known by Neurex to be a beneficial owner, as
defined in Rule 13d-3 ("Rule 13d-3") promulgated by the Commission under the
Exchange Act, of more than 5% of the outstanding Neurex Shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK(1)
------------------- ------------------ ---------------
<S> <C> <C>
Equitable Companies Incorporated............. 1,912,720 8.2%
1290 Avenue of the Americas
New York, NY 10104(2)
Medtronic, Inc. ............................. 1,406,711 6.0%
7000 Central Avenue N.E.
Minneapolis, MN 55432(3)
Elan Corporation, plc........................ 1,480,474 6.4%
Lincoln House
Lincoln Place
Dublin 2, Ireland(4)
Travelers Group Inc. ........................ 1,354,065 5.8%
388 Greenwich Street
New York, NY 10013(5)
Larry N. Feinberg............................ 1,224,729 5.3%
712 Fifth Avenue
45th Floor
New York, NY 10019
</TABLE>
- --------
(1) Percentage of beneficial ownership is calculated assuming 23,289,991
Neurex Shares were outstanding on June 26, 1998. Beneficial ownership is
determined in accordance with the Rules of the Commission and generally
includes voting or investment power with respect to securities. Neurex
Shares subject to options and warrants currently exercisable or
exercisable within 60 days after June 26, 1998, are deemed outstanding for
computing percentage of the person holding such options but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnote, the persons named in the table have sole voting and
investment power with respect to all Neurex Shares shown as beneficially
owned by them.
(2) Pursuant to a Schedule 13G dated and filed with the Commission on February
13, 1998, these shares are held indirectly by Equitable Companies
Incorporated ("Equitable"), Mutuelles AXA, and AXA-UAP; and directly by
various entities controlled by Equitable, including AXA Sun Life &
Provincial Holdings (UK) ("AXA Sun Life"), Alliance Capital Management
L.P. ("Alliance") and Donaldson, Lufkin, and Jenrette Securities
Corporation ("Donaldson"), all of whom own such shares in their capacities
as investment advisors, investment companies, or investment managers. AXA
Sun Life reports sole investment power and voting power for 386,550
shares. Alliance reports sole investment power and sole voting power for
1,525,770 and 20,370 shares, respectively. According to the Schedule 13G,
shared investment power is held with respect to 400 shares and shared
voting power is held with respect to 1,503,800 shares.
(3) Includes 1,179,085 shares owned by Medtronic Asset Management, Inc., a
wholly-owned subsidiary of Medtronic, Inc. Also includes 669,646 Neurex
Shares held by the Medtronic Foundation.
(4) Includes 1,480,474 Neurex Shares over which Elan has sole voting power
pursuant to the Voting Agreement.
(5) Pursuant to a Schedule 13G dated and filed with the Commission on February
6, 1998, Travelers Group Inc., and Salomon Smith Barney Holdings Inc.,
each reports shared investment and voting power. Salomon Smith Barney
Holdings Inc. is a wholly-owned subsidiary of Travelers Group Inc.
72
<PAGE>
SECURITY OWNERSHIP OF
DIRECTORS AND EXECUTIVE OFFICERS OF NEUREX
The following table sets forth certain information concerning the ownership
of each director and each executive officer, including their beneficial
ownership as defined in Rule 13d-3, of Neurex Shares and beneficial ownership
of Neurex Shares by all officers and directors as a group. All such ownership
is as of June 26, 1998. Included in share ownership are shares that may be
acquired upon the exercise of options that are currently exercisable or become
exercisable on or before September 25, 1998 ("Exercisable Options").
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME POSITION(S) OWNED OWNED(12)
---- ----------- ------------ ------------
<S> <C> <C> <C>
David L. Anderson(1).... Director 265,725 1.1%
Thomas L. Barton(2)..... Director, General Counsel and Secretary 137,332 *
Gerard N. Burrow,
M.D.(3)................ Director 19,471 *
John F. Chappell(4)..... Director 117,429 *
Sandy K. Cooper......... V.P., Human Resources -- *
Raymond C. Egan(5)...... Director 21,033 *
John W. Glynn, Jr.(6)... Director 49,269 *
Paul Goddard, Ph.D.(7).. Director, Chairman, President & CEO 570,381 2.4%
Howard E. Greene,
Jr.(6)................. Director 52,686 *
Robert R. Luther,
M.D.(8)................ Director, Executive V.P. of Development 230,681 1.0%
Dawn McGuire(9)......... V.P. Clinical/Medical Affairs 21,664 *
John W. Varian(10)...... V.P. Finance & CFO 31,249 *
Paul L. Wood, Ph.D. .... V.P. Research/Pre-Clinical Development -- *
Philip J. Young(11)..... V.P. Sales and Marketing 57,290 *
All Directors and
executive officers
as a group (14
persons)............... 1,574,390 6.8%
</TABLE>
- --------
* Less than one percent
(1) Includes 48,134 shares held of record by Sutter Hill Ventures and 37,609
shares held by Anvest LP. Mr. Anderson is the Managing Director of the
general partner of Sutter Hill and a general partner of Anvest LP. Mr.
Anderson disclaims beneficial ownership of the shares held by the two
partnerships, except as to his proportionate interest therein. Does not
include 164,221 shares held by Sutter Hill in which Mr. Anderson has no
beneficial or pecuniary interest and over which he exercises no
investment or voting power. Includes 11,332 shares that may be acquired
upon the exercise of Exercisable Options.
(2) Includes 11,332 shares that may be acquired upon the exercise of
Exercisable Options.
(3) Includes 19,471 shares that may be acquired upon the exercise of
Exercisable Options.
(4) Includes 18,165 shares that may be acquired upon the exercise of
Exercisable Options, 38,600 shares held by Plexus, and 18,053 shares that
may be acquired upon the exercise of Exercisable Options held by Plexus,
of which Mr. Chappell is the sole shareholder.
(5) Includes 21,033 shares that may be acquired upon the exercise of
Exercisable Options.
(6) Includes 18,165 shares that may be acquired upon the exercise of
Exercisable Options.
(7) Includes 562,061 shares that may be acquired upon the exercise of
Exercisable Options.
(8) Includes 186,327 shares that may be acquired upon the exercise of
Exercisable Options.
(9) Includes 21,664 shares that may be acquired upon the exercise of
Exercisable Options.
(10) Includes 31,249 shares that may be acquired upon the exercise of
Exercisable Options.
(11) Includes 57,290 shares that may be acquired upon the exercise of
Exercisable Options.
(12) Percentage of beneficial ownership is calculated assuming 23,289,991
Neurex Shares were outstanding on June 26, 1998.
73
<PAGE>
Roberto Crea resigned from Neurex as a director and Vice President of
Research and Technology Development on March 17, 1998, positions he had held
since July 1994. Prior to joining Neurex, he was the Chairman and Chief
Executive Officer of Creagen, Inc., from its founding in 1991 until its
acquisition by Neurex in July 1994. Prior to Creagen, Dr. Crea was a founder
and director of Creative BioMolecules, Inc. From 1978 to 1982, Dr. Crea was
with Genentech, Inc. as Director of DNA Chemistry. He received a Ph.D. in
Chemistry from the University of Pavia, Italy.
Sandy K. Cooper has been Neurex's Vice President of Human Resources since
April 1998. Prior to joining Neurex, Ms. Cooper served as Senior Director of
Human Resources for Nellcor Puritan Bennett, an international medical device
company, from 1993 to 1998. Ms. Cooper also served as Director of Human
Resources for Ceco Corporation from 1991 to 1993. Ms. Cooper obtained a B.S.
from Missouri Southern State College and a Masters in Business Administration
from Webster University.
John W. Varian has been Neurex's Vice President and Chief Financial Officer
since June 1997. Prior to joining Neurex, Mr. Varian served as Vice President,
Finance and Chief Financial Officer of Anergen, Inc., a biotechnology company,
from 1991 to 1997. Mr. Varian also served as a Senior Manager with Ernst &
Young LLP. Mr. Varian is a certified public accountant and received his
Bachelors Degree in Business Administration from Western Michigan University.
Paul L. Wood has been Neurex's Vice President of Research/Preclinical
Development since March 9, 1998. Prior to joining Neurex, Dr. Wood served as
Vice President of Preclinical Development for CoCensys, Inc., a biotechnology
company, from August 1993 until March 1998. Dr. Wood is a pharmacologist who
obtained his B.S. in biology/biochemistry from Trent University and his Ph.D.
in pharmacology from Queen's University.
Philip J. Young has been Neurex's Vice President of Sales and Marketing
since November 1996. Prior to joining Neurex, Mr. Young was employed by
Pharmacia, Inc., Peptide Hormones Division, in various positions, most
recently as Director of Sales and Marketing. Mr. Young also served as Director
of Marketing at Gilead Sciences, Inc., from May 1994 until November 1995. Mr.
Young received his B.S. in Sociology from James Madison University.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires Neurex's directors and executive
officers, and persons who own more than ten percent of a registered class of
Neurex's equity securities, to file with the Commission initial reports of
ownership and reports of changes in ownership of Neurex Shares and other
equity securities of Neurex. Officers, directors and greater than ten percent
stockholders are required by Commission regulation to furnish Neurex with
copies of all Section 16(a) forms they file.
To Neurex's knowledge, based solely on a review of the copies of such
reports furnished to Neurex and written representations that no other reports
were required, during the calendar year ended December 31, 1997, all Section
16(a) filing requirements applicable to its officers, directors and greater
than ten percent beneficial owners were complied with except that Mr. Young
filed his initial report on Form 3 late. The April Form 4 report for Mr.
Chappell was filed on time, but was later amended to include information
regarding one transaction. The Form 4 report for Mr. Barton was filed on time,
but was later amended to include information regarding one transaction.
74
<PAGE>
CERTAIN TRANSACTIONS
On November 13, 1995, Warner-Lambert Company purchased $1,500,000 of Neurex
Shares at $4.50 per share and on March 29, 1996, Warner-Lambert purchased
$1,500,000 of Neurex Shares at $19.93 per share. In connection with a former
agreement, Warner-Lambert also paid Neurex $1,500,000 on October 1, 1995,
$500,000 on January 1, 1996, $250,000 on April 1, 1996, and $250,000 on July
1, 1996, in lieu of milestone payments, subject to repayment by Neurex by
offsetting such amounts against future royalties, if any.
A note receivable from Roberto Crea, a former director and Senior Vice
President of Research and Technology Development, totaling $123,000 at
December 31, 1996, bearing interest at 8.75% per annum was paid in full
(including accrued interest of $7,000) on the maturity date of August 8, 1997.
The note had been secured by 100,000 Neurex Shares held in escrow and a deed
of trust on Dr. Crea's home in San Mateo, California.
Promissory note receivables in the amounts of $35,000 and $75,000 from
Philip Young, Vice President of Sales and Marketing, were issued during 1997
bearing interest at 5.81% per annum, and secured by certain securities and
real property located in San Mateo, California. The first note totaling
$75,000 will be forgiven as compensation expense to the officer at a rate of
33% per year as long as the officer is employed by Neurex. The second note
totaling $35,000 is due in full on February 28, 2000, or immediately if the
officer's employment is terminated for any reason whatsoever.
On January 1, 1995, Neurex entered into a Consultant Agreement with Plexus,
a Pennsylvania corporation wholly-owned by John Chappell, a director of
Neurex. This agreement was terminated by Neurex upon the successful contract
negotiations with Beaufour Ipsen of France for CORLOPAM, for which Plexus
assisted. Plexus remains entitled to certain success fees payable in cash and
stock, based upon the total value of certain future transactions with Beaufour
Ipsen.
On July 18, 1996, Neurex entered into a Business Development Agreement with
Plexus to assist Neurex in the development, registration and commercialization
of Neurex products in certain Asian countries. Under the terms of the
agreement, Plexus received options to purchase 25,000 Neurex Shares and will
receive monthly retainer fees and is entitled to certain success fees based
upon the total value of any transactions entered into by Neurex with the
assistance of Plexus. The original term of the agreement was 12 months, but it
may be terminated earlier by Neurex upon 60 days notice. In July 1997, the
parties extended the agreement for an additional 12 month term. The fees paid
by Neurex to Plexus did not exceed 5% of the gross revenues in the last fiscal
years.
Thomas L. Barton, a director, Secretary and General Counsel of Neurex, was a
member of the law firm of Holtzmann, Wise & Shepard, which provided legal
services to Neurex from Neurex's inception through July 1995. Mr. Barton is
currently a member of the law firm of Wise & Shepard LLP, which provides legal
services to Neurex. The fees paid by Neurex did not exceed five percent of the
gross revenues of either Holtzmann, Wise & Shepard or Wise & Shepard LLP in
1995 and 1997. In 1996 Wise & Shepard LLP was paid $374,000 by Neurex.
Neurex believes that the foregoing transactions were in its best interests.
All of the foregoing transactions were approved by a majority of the
independent and disinterested members of the Neurex Board, were on terms no
less favorable to Neurex than could be obtained from unaffiliated third
parties and were in conjunction with bona fide business purposes of Neurex. As
a matter of policy, all future transactions between Neurex and any of its
officers, directors or principal stockholders will be approved by a majority
of the independent and disinterested members of the Neurex Board, will be on
terms no less favorable to Neurex than could be obtained from unaffiliated
third parties and will be in connection with bona fide business purposes of
Neurex.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of Neurex as to which indemnification is being sought
nor is Neurex aware of any pending or threatened litigation that may result in
claims for indemnification by any director, officer, employee or other agents.
75
<PAGE>
EMPLOYEE BENEFIT PLANS
The following is a brief summary of plans in effect during the calendar year
ended December 31, 1997, under which officers, directors, employees and
consultants of Neurex received benefits. The closing price of Neurex Shares
reported on the Nasdaq on the Record Date was $30.50 per share.
401(K)
In July of 1988, Neurex adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan"), which generally covers all of Neurex's
full-time employees who have attained age 21. Pursuant to the 401(k) Plan,
employees may elect to defer up to 10% of their current compensation (subject
to certain statutorily prescribed limits, including an annual limit of $9,500
in 1997). These deferred amounts are contributed to the 401(k) Plan. The
401(k) Plan permits, but does not require, additional matching and Neurex
contributions on behalf of participants. Since the 401(k) Plan's inception,
Neurex has not elected to contribute to each participant's contribution. The
401(k) Plan is intended to qualify under Sections 401(k) and 401(a) of the
Code. Contributions to such a qualified plan are deductible to Neurex when
made and neither the contributions nor the income earned on those
contributions is taxable to participants until withdrawn. All 401(k) Plan
contributions are credited to separate accounts maintained in trust by two
individual trustees. Contributions are invested, at the participant's
direction, in one or more of the investment funds available under the 401(k)
Plan. All account balances are adjusted at least annually to reflect the
investment earnings and losses of the trust fund. Each participant is fully
vested in his or her salary deferral accounts under the 401(k) Plan.
Distributions may be made from a participant's account pursuant to the 401(k)
Plan's hardship withdrawal provisions as well as upon a participant's
termination of employment, disability or attainment of age 59 1/2.
Distributions will be in the form of a lump sum, installment payments or an
annuity, in the participant's discretion. Federal tax laws limit the amount
that may be added to a participant's accounts for any one year under a
qualified plan such as the 401(k) Plan to the lesser of (i) $30,000 or (ii)
25% of the participant's compensation (net of salary deferral contributions)
for the year.
1992 EMPLOYEE STOCK PURCHASE PLAN
In December 1992, Neurex adopted the 1992 Neurex Purchase Plan, which was
intended to qualify under Section 423 of the Code. Any employee who worked
more than twenty (20) hours per week, worked for Neurex for at least two (2)
years, and owned less than 5% of the outstanding shares of the capital stock
of Neurex was eligible to participate in the 1992 Neurex Purchase Plan. To
purchase shares under the 1992 Purchase Plan, participating employees could
elect to pay cash or to have periodic payroll deductions. Each offering period
ran 24 to 27 months and was divided into four consecutive purchase periods of
six months, allowing eligible employees to join the 1992 Neurex Purchase Plan
and participating employees to purchase shares. The price at which stock was
purchased under the 1992 Neurex Purchase Plan was equal to 85% of the fair
market value of Neurex Shares on the first day of the applicable offering
period or the last day of the applicable purchase period, whichever was lower.
A total of 153,846 Neurex Shares were reserved for issuance under the 1992
Neurex Purchase Plan. As of December 31, 1997, a total of 117,802 Neurex
Shares had been issued to employees and 36,044 shares remained available for
future issuance under the 1992 Neurex Purchase Plan. As of February 28, 1998,
participants in the 1992 Neurex Purchase Plan had the right to purchase 4,714
Neurex Shares. The 1992 Neurex Purchase Plan terminated on May 1, 1998.
The following table sets forth as to the executive officers named in the
table under "Executive Compensation" who purchased shares pursuant to the 1992
Neurex Purchase Plan, all current executive officers as a group and all other
employees as a group (i) the number of Neurex Shares purchased under the 1992
Neurex
76
<PAGE>
Purchase Plan during the period from its inception until December 31, 1997;
(ii) the aggregate purchase price thereof and (iii) the fair value of stock
purchased through December 31, 1997, under the 1992 Neurex Purchase Plan:
1992 NEUREX EMPLOYEE STOCK PURCHASE PLAN EXERCISES
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE FAIR VALUE OF
NAME YEAR SHARES PURCHASE PRICE STOCK PURCHASED
---- ---- --------- -------------- ---------------
<S> <C> <C> <C> <C>
Paul Goddard, Ph.D. .......... 1997 1,400 $ 13,090 $ 15,400
1996 6,920 24,999 160,890
Robert R. Luther, M.D. ....... 1997 1,400 13,090 15,400
1996 6,920 24,999 160,890
Bradford M. Wait.............. 1997 -- -- --
1996 6,920 24,999 160,890
All current executive officers
as a group (5)............... 1997 2,800 26,180 30,800
1996 20,760 74,996 482,670
All current employees (who are
not also executive officers)
as a group (136)............. 1997 20,749 198,655 234,451
1996 58,555 234,817 1,363,647
</TABLE>
1997 EMPLOYEE STOCK PURCHASE PLAN
In May 1997, the shareholders of Neurex adopted the 1997 Neurex Purchase
Plan, which is intended to qualify under Section 423 of the Code. A total of
400,000 Neurex Shares are reserved for issuance under the 1997 Neurex Purchase
Plan. Under the 1997 Neurex Purchase Plan, participating employees elect to
withhold a specified percentage of each salary payment over certain offering
periods (the "Offering Period"). The Neurex Board has set the length of the
Offering Periods at six (6) months. The first day of each Offering Period is
the "Offering Date" for the Offering Period and the last day of each Offering
Period is the "Purchase Date" for the Offering Period. The Neurex Board will
have the authority to change the duration of future Offering Periods if the
change is announced prior to the Offering Date of the first Offering Period to
be affected.
Any employee who works more than twenty (20) hours per week, has worked for
Neurex for at least six (6) months prior to an Offering Period, and who owns
less than 5% of the outstanding shares of capital stock of Neurex may
participate in the 1997 Neurex Purchase Plan. Participants will participate in
the 1997 Neurex Purchase Plan during each pay period through payroll
deductions. A Participant will make contributions to the 1997 Neurex Purchase
Plan at a rate equal to not less than 1%, up to a maximum of 10% (or such
lower limit as set by the Committee) of his or her base earnings of each pay
period from Neurex. Notwithstanding the level of payroll deductions, no
Participant will be permitted to purchase shares under the 1997 Neurex
Purchase Plan at a rate which, when aggregated with any other purchases under
other Neurex stock purchase plans, (i) exceeds 10% of such employee's gross
compensation; or (ii) exceeds $25,000 of fair market value of common stock
(determined as of the first trading day in an Offering Period) in any year.
Enrollment in the 1997 Neurex Purchase Plan with respect to an Offering
Period will constitute a grant, as of the Offering Date, of an option to
purchase shares at a purchase price equal to 85% of the lesser of (i) the fair
market value of the shares on the Offering Date or (ii) the fair market value
of the shares on the Purchase Date. The fair market value of a Neurex Share
will be the last reported sale price of Neurex Shares on the Nasdaq on the
Offering Date or Purchase Date. The number of whole shares a Participant will
be able to purchase in any Offering Period will be determined by dividing the
total payroll amount withheld from the Participant during the Offering Period
by the purchase price per share determined as described above. The 1997 Neurex
Purchase Plan will terminate on July 1, 1998.
77
<PAGE>
The following table sets forth as to the executive officers named in the
table under "Executive Compensation" who purchased shares pursuant to the 1997
Neurex Purchase Plan, all current executive officers as a group and all other
employees as a group (i) the number of Neurex Shares purchased under the 1997
Neurex Purchase Plan during the period from its inception until December 31,
1997; (ii) the aggregate purchase price thereof and (iii) the fair value of
stock purchased through December 31, 1997, under the 1997 Neurex Purchase
Plan:
1997 NEUREX EMPLOYEE STOCK PURCHASE PLAN EXERCISES
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE FAIR VALUE OF
NAME SHARES PURCHASE PRICE STOCK PURCHASED
- ---- --------- -------------- ---------------
<S> <C> <C> <C>
Paul Goddard, Ph.D. .................. -- -- --
Robert R. Luther, M.D. ............... 1,053 $ 12,083 $ 14,216
Roberto Crea, Ph.D. .................. 822 9,432 11,097
All current executive officers as a
group (5)............................ 1,875 21,516 25,313
All current employees (who are not
also executive officers)
as a group (136)..................... 9,462 108,576 127,737
</TABLE>
1988 STOCK OPTION PLAN
In April 1988, the Neurex Board adopted and the stockholders of Neurex
approved the 1988 Stock Option Plan. A total of 4,311,111 Neurex Shares has
been reserved for issuance under the 1988 Stock Option Plan. The 1988 Stock
Option Plan expires by its own terms on April 20, 1998. As of December 31,
1997, options to purchase 3,161,422 shares were outstanding at a weighted
average exercise price of $9.1265 per share and 168,301 options had been
exercised. As of February 28, 1998, Neurex had 141 current employees and 7
outside directors, all of whom were eligible to participate in the 1988 Stock
Option Plan.
The 1988 Stock Option Plan provides for the grant to employees of "incentive
stock options" within the meaning of section 422 of the Code and nonstatutory
stock options to employees, consultant and directors of Neurex. The 1988 Stock
Option Plan permits Neurex to grant nonstatutory stock options to purchase
Neurex Shares to non-employee directors ("Outside Directors") of Neurex. At
the present time, as a matter of policy, Outside Directors newly elected or
appointed to the Neurex Board after March 30, 1995 are granted options to
purchase 12,000 Neurex Shares upon election and all Outside Directors are
granted options to purchase an additional 8,000 Neurex Shares on March 30th of
each year for so long as they serve as directors of Neurex. The exercise price
of all options granted to Outside Directors is the closing price of Neurex
Shares on the grant date and such grants shall vest monthly over a three (3)
year period.
The administration of the 1988 Stock Option Plan has been delegated by the
Neurex Board to the Compensation Committee. Subject to the limitations set
forth in the 1988 Stock Option Plan, the Compensation Committee has the
authority to select the persons to whom grants are to be made, to designate
the number of shares to be covered by each option, to establish vesting
schedules, to determine whether an option is to be an incentive stock option
or a nonstatutory stock option and to specify other terms of the options.
Options granted to employees typically vest at the rate of 1/4th of the shares
after one (1) year and an additional 1/48th of the shares per month for three
(3) years thereafter.
The exercise price of nonstatutory stock options granted under the 1988
Stock Option Plan must equal at least 85% of the fair market value of the
Neurex Shares on the date of grant, and the exercise price of incentive stock
options must equal at least 100% of the fair market value of the Neurex Shares
on the date of grant. The exercise price of options granted to any person who,
at the time of grant, owns stock possessing more than 10% of the total
combined voting power of all classes of stock must be at least 100% of the
fair market value of the Neurex Shares on the date of grant in the case of a
nonstatutory stock option and 110% in the case of an incentive stock option,
and, in the case of an incentive stock option granted to such persons, the
term of these options cannot exceed five years. The maximum term of options
granted under the 1988 Stock Option Plan is ten years and one week. Options
granted under the 1988 Stock Option Plan generally are nontransferable and
expire three months
78
<PAGE>
after the termination of an optionee's employment or directorship relationship
with Neurex. In general, if an optionee is permanently disabled or dies during
his or her employment by, or service to, Neurex, such person's options may be
exercised up to one year following such disability or death.
As of February 28, 1998, options (net of canceled or expired options)
covering an aggregate of 3,701,890 Neurex Shares had been granted under the
1988 Stock Option Plan since its inception and 609,221 Neurex Shares were
available for future grants under the 1988 Stock Option Plan. The following
table presents, as of February 28, 1998, the total number of options that have
been granted under the 1988 Stock Option Plan to (i) each executive officer of
Neurex, (ii) all executive officers as a group, (iii) all directors (who are
not also officers) as a group, and (iv) all employees (who are not also
officers or directors) as a group. Please see "Executive Compensation" for
information with respect to grant of options to the executive officers.
STOCK OPTIONS GRANTED AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
NAME AND POSITION NO. OF SHARES
- ----------------- -------------
<S> <C>
Paul Goddard, Ph.D., Chairman, President and Chief Executive
Officer......................................................... 816,241
Robert R. Luther, M.D., Executive Vice President of Development.. 358,206
Roberto Crea, Ph.D., Senior Vice President of Research and
Technology Development.......................................... 170,000
John W. Varian, Vice President of Finance and Administration and
Chief Financial Officer......................................... 115,000
Philip J. Young, Vice President of Sales and Marketing........... 175,000
All current executive officers as a group (5).................... 1,634,447
All current directors (who are not also executive officers) as a
group (7)....................................................... 196,095
All current employees (who are not also executive officers or
directors) as a group (136)..................................... 1,871,348
</TABLE>
79
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth the total compensation paid by Neurex to its
Chief Executive Officer and its executive officers who had the highest
combination of salary and bonuses for services rendered in all capacities for
the calendar years ended December 31, 1997, and 1996; the three months ended
December 31, 1995 (1995.25); and the fiscal year ended September 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------ ------------ ALL OTHER
OPTIONS / COMPENSATION
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) SARS(#) ($)
- --------------------------- ------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul Goddard, Ph.D...... 1997 $323,771 $100,000(4) 100,000 $ --
Chairman, President and
Chief Executive 1996 298,639 125,000 -- --
Officer 1995.25 72,750 -- -- --
1995 277,814 56,000(5) 502,565(6) --
Robert R. Luther, M.D... 1997 238,238 44,262(4) 30,000 --
Executive V.P. of
Development 1996 225,775 66,000 -- --
1995.25 55,000 -- 242,735(7) --
1995 212,060 34,000(5) 150,000 11,000(10)
Roberto Crea, Ph.D...... 1997 198,000 -- -- --
S.V.P. of Research &
Technology 1996 197,040 20,000 -- --
Development 1995.25 48,000 -- -- --
1995 188,500 15,000(5) 170,000(8) --
Bradford M. Wait........ 1997 171,628 17,267(4) 15,000 --
V.P. of Finance and
Administration & 1996 129,632 33,000 -- --
Chief Financial Officer 1995.25 32,000 -- -- --
1995 124,638 15,000(5) 42,693(9) --
John W. Varian(2)....... 1997 75,795 15,159(4) 115,000 --
V.P. & Chief Financial
Officer
Philip J. Young(3)...... 1997 203,750 59,270(4) 50,000 124,184(11)
V.P. of Sales and
Marketing 1996 33,333 -- 125,000 7,117(11)
</TABLE>
- --------
(1) In 1996, Neurex changed its year end from a fiscal year ending September
30 to a calendar year ending December 31. The period 1995.25 reflects the
stub period October 1, 1995, through December 31, 1995.
(2) Mr. Varian joined Neurex on June 17, 1997. Accordingly, the Summary
Compensation information includes only that compensation earned by Mr.
Varian from July 1, 1997, through December 31, 1997. Mr. Varian's
compensation in 1997 was at an annual rate of $160,000.
(3) Mr. Young joined Neurex on November 1, 1996. Accordingly, the Summary
Compensation information includes only that compensation earned by Mr.
Young from November 1, 1996, through December 31, 1997.
(4) Includes amounts earned in 1997 and paid in 1998.
(5) Includes amounts earned in 1994 and paid in 1995.
(6) Includes repriced options to purchase 402,565 Neurex Shares.
(7) Includes repriced options to purchase 192,735 Neurex Shares.
(8) Includes repriced options to purchase 150,000 Neurex Shares.
(9) Includes repriced options to purchase 27,693 Neurex Shares.
(10) Represents cost of living allowance for $11,000 as part of his employment
agreement.
(11) Represents relocation expense of $7,117 in 1996 and $124,184 in 1997
associated with his employment arrangement with Neurex.
80
<PAGE>
OPTION GRANTS TO NEUREX OFFICERS IN 1997 CALENDAR YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED ANNUAL
SECURITIES OPTIONS EXERCISE RATES OF STOCK PRICE
UNDERLYING GRANTED TO OR BASE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE OPTION TERM(4)
GRANTED IN CALENDAR ($/PER EXP. -------------------------
NAME (#)(1) YEAR(2) SHARE) DATE(3) 0%($) 5%($) 10%($)
---- ---------- ----------- -------- -------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul Goddard............ 100,000 8.5% $14.75 12/11/07 0 $927,620 $2,350,770
Robert R. Luther........ 30,000 2.5 14.75 12/11/07 0 278,286 705,231
John W. Varian.......... 100,000 8.5 15.25 06/17/07 0 959,064 2,430,457
15,000 1.3 14.75 12/11/07 0 139,143 352,616
Philip J. Young......... 50,000 4.2 14.75 12/11/07 0 463,810 1,175,385
Bradford M. Wait........ 15,000 1.3 14.75 12/11/07 0 139,143 352,616
</TABLE>
- --------
(1) Twenty-five percent of the shares vest one year following the date of
option grant and the remainder vest in equal monthly amounts over the next
three years.
(2) Total options granted were 1,173,768.
(3) To the extent that any incentive stock options are deemed to be non-
qualified options, the non-qualified options shall have a term of 10 years
and 2 days, subject to earlier termination in certain events.
(4) The 5% and 10% assumed rates of appreciation (over the deemed fair market
value at the grant date) are mandated by the Rules of the Commission and
do not represent Neurex's estimate or projection of the future price of
Neurex Shares.
AGGREGATED OPTION EXERCISES IN CALENDAR YEAR AND
CALENDAR YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
OPTIONS EXERCISED UNDERLYING IN-THE-MONEY
------------------ OPTIONS OPTIONS($)
NUMBER OF VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
NAME SHARES REALIZED UNEXERCISABLE(U) UNEXERCISABLE(U)(1)
---- --------- -------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Paul Goddard...... 1997 -- -- 467,830 (E) $5,763,560 (E)
288,411 (U) 2,147,616 (U)
Robert R. Luther.. 1997 30,000 $430,925 140,814 (E) 1,650,870 (E)
121,178 (U) 1,036,721 (U)
Roberto Crea...... 1997 -- -- 107,707 (E) 1,281,499 (E)
62,293 (U) 731,001 (U)
Bradford M. Wait.. 1997 -- -- 65,625 (E) 770,574 (E)
15,000 (U) -- (U)
John W. Varian.... 1997 -- -- -- (E) -- (E)
115,000 (U) -- (U)
Philip J. Young... 1997 -- -- 33,852 (E) -- (E)
141,148 (U) -- (U)
</TABLE>
- --------
(1) Calculated on the basis of the closing price of $13.875 on December 31,
1997, less the exercise price.
81
<PAGE>
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE EXERCISE ORIGINAL OPTION
UNDERLYING OF STOCK PRICE AT TERM REMAINING
OPTIONS/SARS AT TIME OF TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
---- ------- ------------ ------------ ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Paul Goddard............ 5/12/95 102,565 $1.625 $5.580 $1.625 6 years 7 months
300,000 1.625 4.000 1.625 7 years 9 months
Robert R. Luther........ 5/12/95 42,735 1.625 5.580 1.625 6 years 7 months
150,000 1.625 4.000 1.625 7 years 9 months
Roberto Crea............ 5/12/95 150,000 1.625 3.500 1.625 8 years 4 months
Bradford M. Wait........ 5/12/95 7,693 1.625 5.580 1.625 6 years 7 months
20,000 1.625 4.000 1.625 8 years 1 month
</TABLE>
EMPLOYMENT AGREEMENTS
In January 1991, Neurex entered into an employment agreement with Dr.
Goddard pursuant to which he presently receives a salary at the rate of
$331,300 per year. Pursuant to his original employment agreement, Dr. Goddard
received an option to purchase 213,676 Neurex Shares at an exercise price of
$0.585 per Neurex Share which vested over five years. The agreement provides
that Dr. Goddard's employment may be terminated by either party upon 90 days
notice. In March 1992, the Neurex Board amended Dr. Goddard's agreement to
reflect, at the discretion of the Neurex Board, a bonus of up to 20% of his
salary based upon performance. In October 1995, the Neurex Board amended Dr.
Goddard's agreement to remove the 20% limitation on any bonus awarded to Dr.
Goddard. Dr. Goddard has signed a confidentiality agreement with Neurex.
In February 1992, Neurex entered into an employment agreement with Dr.
Luther pursuant to which he presently receives a salary at the rate of
$241,750 per year, plus the right to receive an annual bonus of up to 20% of
salary based upon performance. Pursuant to this agreement, Dr. Luther received
an option to purchase 85,471 shares of Neurex Shares under the 1988 Stock
Option Plan at an exercise price of $6.44 per share which vests over five
years. The exercise price of this option was based upon a proposed sale of
Neurex Shares; when the contemplated sale was postponed, the options were
repriced at $1.17 per share. In October 1995, the Neurex Board amended Dr.
Luther's agreement to remove the 20% limitation on any bonus awarded to Dr.
Luther. Dr. Luther has signed a confidentiality agreement with Neurex.
In January 1992, Neurex entered into an employment agreement with Mr. Wait.
In accordance with his employment agreement, Mr. Wait resigned from Neurex in
January 1998. Mr. Wait has signed a confidentiality agreement with Neurex.
In June 1994, Neurex entered into an employment agreement with Dr. Crea. Dr.
Crea resigned as an officer and director of Neurex, effective March 17, 1998.
Dr. Crea has signed a confidentiality agreement with Neurex.
In December 1995, the Neurex Board approved a resolution providing that in
the event of any merger, reorganization, or consolidation of Neurex with or
into any other entity, or the sale of all or substantially all of Neurex's
assets (collectively, a "Change of Control"), (i) 50% of all unvested stock
options held by each executive officer immediately prior to the effective time
of such Change of Control shall immediately vest, and (ii) each remaining
vesting period for the remaining 50% of the unvested options held by each
executive officer shall be reduced by half; provided, however, that the Neurex
Board may, in its sole discretion, declare this resolution null and void with
respect to all executive officers, but not less than all, in any Change of
Control if the effect of the resolution would not be in the best interests of
Neurex.
82
<PAGE>
REMUNERATION OF NON-EMPLOYEE DIRECTORS OF NEUREX
Outside Directors of Neurex are not compensated for their services as
directors, other than grants of stock options of Neurex Shares. At the present
time, newly elected Outside Directors receive the option to purchase 12,000
Neurex Shares upon election and options to purchase an additional 8,000 Neurex
Shares on March 30th of each year thereafter. All such options are granted at
the closing price of Neurex Shares on the date of grant and vest monthly over
a three (3) year period. At the discretion of each director, vesting is either
accelerated or is continued and options remain exercisable, if resignation is
caused by a Change of Control of Neurex where Neurex is not the surviving
entity.
REPORT OF THE COMPENSATION COMMITTEE OF THE NEUREX BOARD
WITH RESPECT TO EXECUTIVE COMPENSATION
The Compensation Committee of the Neurex Board (the "Committee") was
established on September 28, 1993. The functions of the Committee are to make
recommendations to the Neurex Board concerning salaries and incentive
compensation for Neurex's executive officers. The Committee is composed of two
Outside Directors, neither of whom has any interlocking relationships as
defined by the Commission.
Neurex's executive compensation program has been designed to (i) attract and
retain executives capable of leading Neurex to meet its business objectives
and to motivate them to enhance long-term stockholder value through
compensation that is comparable to the levels offered by other companies in
the biotechnology industry; (ii) motivate key executive officers to achieve
strategic business initiatives and reward them for their achievement; and
(iii) align the interests of executives with the long-term interests of
Neurex's stockholders through award opportunities resulting in the ownership
of Neurex Shares. Annual compensation for Neurex's executive officers may
consist of three elements: a cash salary, a cash incentive bonus and stock
option grants. All salary increases reflected consideration of competitive
data provided by an independent consulting firm, as well as the Committee's
assessment of the performance of each executive. Stock option grants provide
an incentive which focuses the executive's attention on managing Neurex from
the perspective of an owner with an equity stake in the business. These stock
options will generally provide value to the recipient only when the price of
Neurex Shares increases above the option grant price.
The Committee considered a variety of factors, both personal and corporate,
in evaluating Neurex's executive officers and making compensation decisions.
These include the compensation paid by comparable companies to individuals in
comparable positions, the individual contributions of each officer to Neurex,
the progress of Neurex towards its long-term objectives, including, progress
on product development, regulatory approval and strategic collaborations with
other companies, and the executive's progress in achieving the individual
goals set for that particular executive. As Neurex progresses, executives'
performance goals are expected to change.
The Committee based the 1997 compensation of the Chief Executive Officer and
Neurex's other executive officers on the policies described above. The base
salaries of the Chief Executive Officer and Neurex's other executive officers
generally increased in 1997 commensurate with their increased responsibilities
and the growth in scope of Neurex's operations. The 1997 cash bonuses paid to
the executive officers, including the Chief Executive Officer, were based on
the achievement of individual productivity and performance goals consistent
with Neurex's annual business goals during the year. In December 1997, new
stock option grants were made to the executive officers, including the Chief
Executive Officer. These stock option grants were made by the Committee as
part of the program of making periodic stock option grants to executive
officers, with the number of stock options granted to each officer during 1997
determined on the basis of such officer's contribution toward achieving
Neurex's strategic and product development goals, as described above.
During 1998, it is anticipated that the Committee will conduct annual
performance reviews comparing actual Neurex progress against detailed annual
plans. Elements of such plans, including progress on product development and
regulatory approval, expense control, and organizational development may be
considered.
83
<PAGE>
REPORT ON REPRICED OPTIONS
On May 12, 1995, the Committee determined that it was in the best interest
of Neurex and Neurex's stockholders to offer all employees, including
executive officers, and non-employee directors, the opportunity to cancel and
replace any existing options to purchase Neurex Shares with new grants, on a
one-for-one basis, subject to a new four year vesting period and all other
terms and conditions of the 1988 Stock Option Plan. Employees holding options
to purchase a total of 1,059,274 Neurex Shares elected to reprice and revest
and such options were canceled and replaced pursuant to such program (the
"Repriced Options"). The Repriced Options were repriced to the closing bid
price of Neurex Shares on the Nasdaq on May 12, 1995, which was $1.625.
The Committee gathered information on recent option repricings in the
biotechnology industry in determining whether, and on what terms, to make the
repricing offer. The Committee, after such review, determined that the
repricing offer was appropriate to incentivize and retain Neurex's existing
employees and executive officers. As of May 12, 1995, approximately 68% of
Neurex's outstanding options had an exercise price 100% or more above the
current market price of Neurex Shares, and Neurex's stock price had been below
$3.00 for more than four months. Due in part to a downturn in the market for
biotechnology stocks in general, there was little indication that Neurex's
stock price would improve significantly in the near future. In addition,
recent announcements relating to the clinical status of both ziconotide and
CORLOPAM, which Neurex considered to be positive, had little or no effect on
the stock price. In the Committee's opinion, outstanding options with exercise
prices substantially above the current market value of the stock provided
little incentive for employees, including executive officers, to remain with
Neurex and thus jeopardized the interests of Neurex and its stockholders.
Option values are a particularly important factor in employee retention in
that, as is typical in the biotechnology industry, if a company is successful,
a significant portion of the compensation paid to such company's employees and
executive officers is comprised of the value of their stock options, and the
Committee felt that over the long-term, this price differential could result
in damage to the morale and motivation of Neurex's employees.
THE COMPENSATION COMMITTEE
The Committee consists of David Anderson and John Glynn.
84
<PAGE>
NEUREX CORPORATION
STOCK PERFORMANCE GRAPH(1)
The following graph compares the total stockholder return of the CRSP Total
Return Index for the Nasdaq (U.S. Companies), and the CRSP Total Return Index
for the Nasdaq Pharmaceutical Companies, and Neurex, since September 22, 1993.
The graph assumes that $100.00 was invested on September 22, 1993, the effective
date of Neurex initial public offering of Neurex Shares.
NEUREX CORPORATION
STOCK PERFORMANCE GRAPH(1)
The following graph compares the total stockholder return of the CRSP Total
Return Index for the NASDAQ stock market (U.S. Companies), and the CRSP Total
Return Index for the NASDAQ Pharmaceutical Companies, and Neurex since
September 22, 1993. The graph assumes that $100.00 was invested on September 22,
1993, the effective date of Neurex initial public offering of Common
Stock.
<TABLE>
<CAPTION>
NASDAQ
Measurement Period NASDAQ (U.S. (Pharmaceutical
(Fiscal Year Covered) Neurex Companies) Companies)
<S> <C> <C> <C>
9/22/93 100.00 100.00 100.00
12/31/93 80.00 101.13 88.79
3/31/94 80.00 96.88 101.72
6/30/94 77.60 92.35 124.71
9/30/94 72.60 100.00 115.07
12/31/94 45.00 98.86 93.86
3/31/95 35.00 107.77 101.33
6/30/95 40.00 123.28 117.85
9/30/95 132.60 138.13 147.26
12/31/95 182.60 139.81 171.71
3/31/96 370.00 146.33 178.66
6/30/96 437.60 158.28 173.54
9/30/96 382.60 163.91 177.51
12/31/96 340.00 171.97 172.21
3/31/97 237.50 162.65 163.55
6/30/97 282.50 192.46 176.55
9/30/97 295.00 225.02 198.07
12/31/97 277.50 211.02 177.96
</TABLE>
- --------
(1) These indices are calculated on a dividend reinvested basis. Neurex
emphasizes that the performance of Neurex Shares over the period shown is
not necessarily indicative of the future performance of Neurex Shares.
85
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the Elan ADSs will be passed upon by
Cahill Gordon & Reindel (a partnership including a professional corporation)
New York, New York, U.S. counsel for Elan. Certain Irish legal matters,
including the validity of the Ordinary Shares will be passed upon by A&L
Goodbody Solicitors, Dublin, Ireland, Irish counsel for Elan incorporated
herein by reference. Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Neurex, and Cahill Gordon & Reindel will deliver opinions to their respective
clients concerning the federal income tax consequences of the Merger.
EXPERTS
The consolidated financial statements of Neurex at December 31, 1996 and
1997, for the year ended September 30, 1995, for the three month period ended
December 31, 1995 and for each of the two years in the period ended December
31, 1997, incorporated herein by reference, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated
by reference herein. Such financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of Elan as of and for each of the
years in the three-year period ended March 31, 1996, the nine months ended
December 31, 1996 and the year ended December 31, 1997 incorporated herein by
reference, have been audited and reported upon 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 such firm as experts in auditing and
accounting.
86
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ELAN CORPORATION, PLC,
GANESH ACQUISITION CORP.
AND
NEUREX CORPORATION
DATED AS OF APRIL 29, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I ----
THE MERGER
<C> <S> <C>
Section 1.01. The Merger................................................. 1
Section 1.02. Effective Time............................................. 1
Certificate of Incorporation and By-Laws of Surviving
Section 1.03. Corporation................................................ 1
Section 1.04. Directors and Officers of Surviving Corporation............ 2
Section 1.05. Stockholders' Meeting...................................... 2
Section 1.06. Filing of Certificate of Merger............................ 2
Section 1.07. Further Assurances......................................... 2
</TABLE>
ARTICLE II
CONVERSION OF SHARES
<TABLE>
<C> <S> <C>
Section 2.01. Shares...................................................... 3
Section 2.02. Subco Common Stock.......................................... 3
Section 2.03. Exchange of Certificates.................................... 3
Section 2.04. Effect on Company Options and Warrants...................... 5
Section 2.05. Fractional Shares........................................... 5
Section 2.06. No Appraisal Rights......................................... 5
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBCO
<TABLE>
<C> <S> <C>
Section 3.01. Organization, Etc. ......................................... 6
Section 3.02. Board Recommendation........................................ 6
Section 3.03. Authority Relative to This Agreement........................ 6
Section 3.04. No Violations, Etc. ........................................ 6
Section 3.05. Finders or Brokers.......................................... 7
Section 3.06. Registration Statement; Company Proxy Statement............. 7
Section 3.07. SEC Filings................................................. 7
Section 3.08. Financial Statements........................................ 8
Section 3.09. Absence of Undisclosed Liabilities.......................... 8
Section 3.10. Absence of Changes or Events................................ 8
Section 3.11. Capitalization.............................................. 8
Section 3.12. Litigation.................................................. 9
Section 3.13. Tax Treatment; Officer's Certificate as to Tax Matters...... 9
Section 3.14. Taxes....................................................... 9
</TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<C> <S> <C>
Section 4.01. Organization, Etc. ......................................... 9
Section 4.02. Authority Relative to This Agreement........................ 9
Section 4.03. No Violations, Etc. ........................................ 10
Section 4.04. Fairness Opinion............................................ 10
Section 4.05. Board Recommendation........................................ 10
Section 4.06. State Antitakeover Statutes................................. 10
Section 4.07. Affiliates.................................................. 11
</TABLE>
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<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 4.08. Finders or Brokers.......................................... 11
Section 4.09. Registration Statement; Company Proxy Statement............. 11
Section 4.10. Capitalization.............................................. 11
Section 4.11. SEC Filings................................................. 11
Section 4.12. Financial Statements........................................ 12
Section 4.13. Absence of Undisclosed Liabilities.......................... 12
Section 4.14. Absence of Changes or Events................................ 12
Section 4.15. Capital Stock of Subsidiary................................. 13
Section 4.16. Litigation.................................................. 13
Section 4.17. Insurance................................................... 14
Section 4.18. Contracts and Commitments................................... 14
Section 4.19. Labor Matters; Employment and Labor Contracts............... 14
Section 4.20. Compliance with Laws........................................ 14
Section 4.21. Intellectual Property Rights................................ 15
Section 4.22. Taxes....................................................... 15
Section 4.23. Employee Benefit Plans; ERISA............................... 16
Section 4.24. Environmental Matters....................................... 18
Section 4.25. Tax Treatment; Officer's Certificate as to Tax Matters...... 20
</TABLE>
ARTICLE V
COVENANTS
<TABLE>
<C> <S> <C>
Section 5.01. Conduct of Business of the Company.......................... 20
Section 5.02. No Solicitation............................................. 22
Section 5.03. Access to Information....................................... 23
Section 5.04. Registration Statement and Company Proxy Statement.......... 23
Section 5.05. Commercially Reasonable Efforts; Other Actions.............. 24
Section 5.06. Public Announcements........................................ 24
Section 5.07. Notification of Certain Matters............................. 24
Section 5.08. Indemnification............................................. 24
Section 5.09. Expenses.................................................... 24
Section 5.10. Affiliates.................................................. 25
Section 5.11. Stock Exchange Listings..................................... 25
Section 5.12. Resignation of Directors.................................... 25
Section 5.13. Stock Purchase Plans........................................ 25
Section 5.14. Governance.................................................. 25
Section 5.15. Employee Benefits........................................... 25
</TABLE>
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF PARENT, SUBCO AND THE COMPANY
<TABLE>
<C> <S> <C>
Section 6.01. Registration Statement...................................... 25
Section 6.02. Stockholder Approval........................................ 25
Section 6.03. Listing..................................................... 26
Section 6.04. Certain Proceedings......................................... 26
Section 6.05. Tax Matters................................................. 26
</TABLE>
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUBCO
<TABLE>
<C> <S> <C>
Section 7.01. Representations and Warranties True......................... 26
Section 7.02. Performance................................................. 26
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 7.03. Certificates................................................ 27
Section 7.04. Material Adverse Change..................................... 27
Section 7.05. Consents, Approvals and Notifications....................... 27
Section 7.06. FDA Matters................................................. 27
Section 7.07. Additional Agreements....................................... 27
</TABLE>
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
<TABLE>
<C> <S> <C>
Section 8.01. Representations and Warranties True......................... 27
Section 8.02. Performance................................................. 27
Section 8.03. Certificates................................................ 27
Section 8.04. Material Adverse Change..................................... 28
Section 8.05. Consents, Approvals and Notifications....................... 28
</TABLE>
ARTICLE IX
CLOSING
<TABLE>
<C> <S> <C>
Section 9.01. Time and Place.............................................. 28
Section 9.02. Filings at the Closing...................................... 28
</TABLE>
ARTICLE X
TERMINATION AND ABANDONMENT
<TABLE>
<C> <S> <C>
Section 10.01. Termination................................................ 28
Section 10.02. Termination by Parent...................................... 28
Section 10.03. Termination by the Company................................. 29
Section 10.04. Procedure for Termination.................................. 30
Section 10.05. Effect of Termination and Abandonment...................... 30
</TABLE>
ARTICLE XI
DEFINITIONS
<TABLE>
<C> <S> <C>
Section 11.01. Terms Defined in This Agreement............................ 31
</TABLE>
ARTICLE XII
MISCELLANEOUS
<TABLE>
<C> <S> <C>
Section 12.01. Amendment and Modification................................. 33
Section 12.02. Waiver of Compliance; Consents............................. 33
Section 12.03. Survivability; Investigations.............................. 33
Section 12.04. Notices.................................................... 33
Section 12.05. Assignment; Third Party Beneficiaries...................... 34
Section 12.06. Governing Law.............................................. 34
Section 12.07. Counterparts............................................... 34
Section 12.08. Severability............................................... 34
Section 12.09. Interpretation............................................. 34
Section 12.10. Entire Agreement........................................... 34
</TABLE>
<TABLE>
<S> <C> <C>
Signatures.............................................................. S-1
</TABLE>
EXHIBITS
Exhibit A Form of Company Affiliate Letter
Exhibit B Form of Covenant not to Sell American Depository Shares
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 29, 1998 (the "Agreement"),
by and among ELAN CORPORATION, PLC, a public limited company organized under
the laws of Ireland ("Parent"), GANESH ACQUISITION CORP., a Delaware
corporation ("Subco"), which is a newly-formed direct wholly-owned Subsidiary
of Parent, and NEUREX CORPORATION, a Delaware corporation (the "Company").
Subco and the Company are hereinafter sometimes collectively referred to as
the "Constituent Corporations."
RECITALS
WHEREAS, Parent and the Company believe it is in the long-term strategic
interests of their respective stockholders to combine their businesses;
WHEREAS, the combination will be effected by the merger of Subco with and
into the Company pursuant to which stockholders of the Company will receive
Parent ADSs (as defined in Section 2.01) and the Company will become a wholly-
owned subsidiary of Parent, all upon the terms and subject to the conditions
of this Agreement;
WHEREAS, Parent, Subco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
merger of Subco and the Company; and
WHEREAS, such combination is intended to qualify for Federal income tax
purposes as a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. (a) In accordance with the provisions of this
Agreement and the General Corporation Law of the State of Delaware (the
"Delaware Act"), at the Effective Time (as defined in Section 1.02), Subco
shall be merged (the "Merger") with and into the Company, and the Company
shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Delaware. At the election of Parent, any direct wholly-
owned consolidated subsidiary of Parent incorporated under the laws of the
United States may be substituted for Subco as a Constituent Corporation in the
Merger. The name of the Surviving Corporation shall be "Neurex Corporation."
At the Effective Time the separate existence of Subco shall cease.
(b) The Merger shall have the effects on Subco and the Company as
constituent corporations of the Merger as provided under the Delaware Act.
Section 1.02. Effective Time. The Merger shall become effective at the time
of filing of, or at such later time specified in, a certificate of merger, in
the form required by and executed in accordance with the Delaware Act, with
the Secretary of State of the State of Delaware in accordance with the
Delaware Act (the "Certificate of Merger"). The date and time when the Merger
shall become effective is herein referred to as the "Effective Time."
Section 1.03. Certificate of Incorporation and By-Laws of Surviving
Corporation. The Amended and Restated Certificate of Incorporation and Amended
and Restated By-Laws of the Company, as in effect
1
<PAGE>
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation until thereafter
amended as provided by law.
Section 1.04. Directors and Officers of Surviving Corporation. The directors
of Subco immediately prior to the Effective Time will be the initial directors
of the Surviving Corporation, and the officers of the Company immediately
prior to the Effective Time will be the initial officers of the Surviving
Corporation, in each case until their successors are elected and qualified.
Section 1.05. Stockholders' Meeting. The Company shall take all action
necessary in accordance with applicable law and its Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws to call and
convene a special meeting of its stockholders (a "Special Meeting") as soon as
practicable to consider and vote upon the approval of this Agreement. The
Company, through its Board of Directors, (i) shall recommend to its
stockholders approval of this Agreement, which recommendation shall be
contained in the proxy statement of the Company (the "Company Proxy
Statement") and (ii) shall use all commercially reasonable efforts to solicit
from its stockholders proxies in favor of approval and adoption of this
Agreement; provided, however, that the Board of Directors of the Company may,
in response to an unsolicited bona fide, written proposal from a corporation,
partnership, person, or other entity or group (a "Third Party") regarding a
Superior Proposal (as defined in Section 5.02), withdraw, modify or change its
recommendation to the stockholders, but only if the Board of Directors
determines in good faith by a majority vote that withdrawing, modifying or
changing its recommendation is reasonably likely to lead to an Acquisition
Transaction (as defined in Section 5.02) that is more favorable to the
stockholders of the Company than the Merger and that failing to take such
action would be reasonably likely to constitute a breach of the Board's
fiduciary duties, having received prior to such determination (x) the written
advice of outside legal counsel of the Company that failing to take such
action would be reasonably likely to constitute a breach of the fiduciary
duties of such Board of Directors and (y) the written advice of Morgan Stanley
& Co. Incorporated, or another financial advisor of nationally recognized
reputation, that the Superior Proposal would be reasonably likely to provide
greater value to the Company and its stockholders than the Merger.
Section 1.06. Filing of Certificate of Merger. At the Closing (as defined
in Section 9.01), Parent, Subco and the Company shall cause a Certificate of
Merger to be executed and filed with the Secretary of State of the State of
Delaware, as provided in the Delaware Act, and shall take any and all other
lawful actions and do any and all other lawful things to cause the Merger to
become effective.
Section 1.07. Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary
or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, obligation, title or interest in, to or under
any of the rights, properties or assets of either of the Constituent
Corporations acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of the
Constituent Corporations or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
each of the Constituent Corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and
all right, obligation, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out
this Agreement.
2
<PAGE>
ARTICLE II
CONVERSION OF SHARES
Section 2.01. Shares. (a) Each share of common stock, par value $.01 per
share, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (except for shares, if any, owned by
the Company as treasury stock or owned by the Subsidiary (as defined in
Section 4.01) or owned by Parent or the Parent Subsidiaries (as defined in
Section 3.01) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive 0.5100 of
an American Depositary Share ("Parent ADSs"), evidenced by American Depositary
Receipts ("ADRs") (the "Exchange Ratio"), each Parent ADS representing one
Ordinary Share ("Parent Ordinary Shares"), par value 4 Irish pence, of Parent.
The Parent ADSs to be delivered in exchange for shares of Company Common
Stock pursuant to this Section 2.01(a) are hereinafter sometimes called the
"Closing Consideration." In the event of any change in Parent ADSs or Parent
Ordinary Shares or Company Common Stock by reason of any stock split,
readjustment, stock dividend, exchange of shares, reclassification,
recapitalization or otherwise, the Exchange Ratio shall be correspondingly
adjusted.
(b) At the Effective Time all shares of Company Common Stock, by virtue of
the Merger and without any action on the part of the holders thereof, shall no
longer be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a Certificate (as defined in Section 2.03) shall
thereafter cease to have any rights with respect to the number of shares of
Company Common Stock evidenced by such Certificate, except the right to
receive the Closing Consideration for such shares of Company Common Stock
specified in the foregoing clause (a) upon the surrender of such Certificate
in accordance with Section 2.03.
Section 2.02. Subco Common Stock. All shares of common stock, par value $.01
per share, of Subco 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 such number of newly issued shares of common
stock of the Surviving Corporation as shall equal the sum of the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time and the number of shares of Company Common Stock underlying options,
warrants, calls, subscriptions or other rights or other agreements or
commitments of the Company assumed by Parent.
Section 2.03. Exchange of Certificates. (a) Exchange Agent. From and after
the Effective Time, (i) Parent shall make available to a bank or trust company
designated by Parent who shall be the depositary under Parent's ADR program
(the "Exchange Agent"), for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Article II through the
Exchange Agent, certificates evidencing a sufficient number of Parent Ordinary
Shares as would permit the Exchange Agent to issue such number of Parent ADSs
issuable to holders of Company Common Stock pursuant to Section 2.01 (such
certificates for Parent ADSs, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange Fund").
As promptly as practicable after the Effective Time, Parent shall cause the
Exchange Agent to deliver the Parent ADSs contemplated to be issued pursuant
to Section 2.01 out of the Exchange Fund in accordance with the procedures
specified in this Section 2.03. Except as contemplated by Section 2.03(f)
hereof, the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
(i) a letter of transmittal (which shall be in customary form and shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration.
3
<PAGE>
(c) Exchange of Certificates. Upon surrender to the Exchange Agent of a
Certificate for cancellation, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably required pursuant to such instructions,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Parent
ADSs, if any, to which such holder is entitled pursuant to this Article II
(including any cash in lieu of any fractional Parent ADSs to which such holder
is entitled pursuant to Section 2.05 and any dividends or other distributions
to which such holder is entitled pursuant to Section 2.03(d) (together, the
"Additional Payments")), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, the
applicable Closing Consideration and Additional Payments, if any, may be
issued to a transferee if the Certificate representing such shares of Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.03, each Certificate shall be deemed at all
times after the Effective Time to represent only the right to receive upon
such surrender the applicable Closing Consideration with respect to the shares
of Company Common Stock formerly represented thereby and Additional Payments,
if any.
(d) Distributions with Respect to Unsurrendered Certificates. No dividends
or other distributions declared or made after the Effective Time with respect
to Parent ADSs (or underlying Parent Ordinary Shares) with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the Parent ADSs the holder thereof entitled to
receive upon surrender thereof, and no cash payment in lieu of any fractional
shares shall be paid to any such holder pursuant to Section 2.05, until the
holder of such Certificate shall surrender such Certificate. Subject to the
effect of escheat, tax or other applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Parent ADSs issued in exchange therefor, without
interest, (i) promptly, the amount of any cash payable with respect to a
fractional Parent ADS to which such holder is entitled pursuant to Section
2.05 and the amount of dividends or other distributions with a record date
after the Effective Time and theretofore paid with respect to such whole
shares of Parent ADSs, 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 occurring after surrender, payable
with respect to such whole Parent ADSs. After the Effective Time, each
outstanding Certificate which therefore represented shares of Company Common
Stock shall, until surrendered for exchange in accordance with this Section
2.03, be deemed for all purposes to evidence ownership of the number of shares
of Parent ADSs into which the shares of Company Common Stock (which, prior to
the Effective Time, were represented thereby) shall have been so converted.
(e) No Further Rights in Company Common Stock. At the Effective Time all
outstanding shares of Company Common Stock, by virtue of the Merger and
without any action on the part of the holders thereof, shall no longer be
outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such 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 Closing Consideration for
such shares of Company Common Stock. All Parent ADSs issued upon conversion of
the shares of Company Common Stock in accordance with the terms hereof
(including any cash paid pursuant to Section 2.03(d) or 2.05) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the applicable Merger
Consideration and any Additional Payments to which they are entitled. Any
portion of the Exchange Fund remaining unclaimed by holders of shares of
Company Common Stock as of a date which is immediately prior to such time as
such amounts would otherwise escheat to or become property of any government
entity shall, to the extent permitted by applicable law, become the property
of Parent free and clear of any claims or interest of any person previously
entitled thereto.
4
<PAGE>
(g) No Liability. None of the Exchange Agent, Parent or the Surviving
Corporation shall be liable to any holder of Certificates for any Parent ADSs
(or dividends or distributions with respect thereto), or cash delivered to a
public official pursuant to any abandoned property, escheat or similar law.
(h) Lost Certificates. If 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, if required by the
Surviving Corporation or Parent, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation or Parent may direct, 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 applicable Closing Consideration and Additional
Payments, if any.
Section 2.04. Effect on Company Options and Warrants. (a) As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, Parent shall assume all of the obligations of the Company
under its 1988 Employee and Consultant Stock Option Plan and its 1998
Employee, Consultant and Director Stock Option Plan in the form adopted by the
Board of Directors of the Company in February 1998 (together, the "Company
Option Plans"), with the effect that each option to purchase shares of Company
Common Stock that is outstanding under the Company Option Plans immediately
prior to the Effective Time, whether or not then vested, shall be assumed by
Parent in such a manner that each such option shall be exercisable upon the
same terms and conditions as under the applicable Company Option Plan, except
that (i) each such option shall be exercisable for that number of Parent ADSs
(rounded down to the nearest whole share) equal to the number of shares of
Company Common Stock subject to such option multiplied by the Exchange Ratio
and (ii) the option price per share of Parent ADSs shall be an amount equal to
the option price per share of Company Common Stock subject to such option in
effect immediately prior to the Effective Time divided by the Exchange Ratio
(rounded up to the nearest whole cent) (the "Parent Exchange Options").
(b) Parent agrees to file with the Securities and Exchange Commission (the
"SEC") at the Effective Time a Registration Statement on Form S-8 or other
appropriate form under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act"), to register
Parent ADSs issuable upon exercise of the Parent Exchange Options and use its
reasonable efforts to cause such Registration Statement to remain effective
until the exercise or expiration of such options.
(c) As of the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof, Parent shall assume all of the obligations
of the Company under (i) the Warrant "A", dated as of August 3, 1995, to
purchase 169,646 shares of Company Common Stock (the "A Warrant") and (ii) the
Warrant "B", dated as of October 16, 1995, to purchase 500,000 shares of
Company Common Stock (the "B Warrant" and, together with the A Warrant, the
"Company Warrants"), in each case, with the effect that each Company Warrant
will be exercisable for Parent ADSs upon the terms and subject to the
conditions set forth in the A Warrant and the B Warrant, as the case may be.
Section 2.05. Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock who, upon surrender
of Certificates, would be entitled to receive a fractional Parent ADS shall
not be entitled to receive dividends on or vote such fractional share and
shall receive, in lieu of such fractional share, cash in an amount equal to
such fraction multiplied by the Market Value (as defined below). "Market
Value" shall mean, with respect to Parent ADSs issued, the mean between the
high and low prices of the Parent ADSs as reported on the New York Stock
Exchange, Inc. ("NYSE") composite tape on the NYSE trading day immediately
prior to the Effective Time. The fractional share interests of each Company
stockholder will be aggregated, and no Company stockholder will receive cash
in an amount equal to or greater than the value of one full share of Parent
ADSs. All references in this Agreement to Parent ADSs to be issued as Closing
Consideration shall be deemed to include any cash in lieu of fractional shares
payable pursuant to this Section 2.05.
Section 2.06. No Appraisal Rights. In accordance with Section 262(b) of the
Delaware Act, no holder of shares of Company Common Stock shall be entitled to
appraisal rights.
5
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBCO
Except as disclosed in a separate disclosure schedule referring to the
Sections contained in this Agreement, which has been delivered by Parent to
the Company prior to the execution of this Agreement (the "Parent Disclosure
Statement") each of Parent and Subco jointly and severally represents and
warrants to the Company as follows:
Section 3.01. Organization, Etc. Each of Parent and its subsidiaries
(collectively, the "Parent Subsidiaries") is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Each of Parent and the Parent Subsidiaries is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned, leased or operated or the nature
of its activities makes such qualification necessary, except for failures to
be so qualified or in good standing that would not, individually or in the
aggregate, have a material adverse effect on the general affairs, management,
business, operations, assets, condition (financial or otherwise), results of
operations or prospects of Parent and the Parent Subsidiaries taken as a whole
("Parent Material Adverse Effect"). Neither Parent nor Subco is in violation
of any provision of its charter documents. Parent has heretofore furnished to
the Company accurate and complete copies of the charter documents and bylaws,
as currently in effect, of each of Parent and Subco. Subco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Parent owns directly all of the outstanding capital stock
of Subco.
Section 3.02. Board Recommendation. The Board of Directors of Parent has, by
a unanimous vote at a meeting of such Board duly held on April 24, 1998,
approved and adopted this Agreement, the Merger and the other transactions
contemplated hereby and determined that the Merger is fair to the holders of
Parent Ordinary Shares.
Section 3.03. Authority Relative to This Agreement. Each of Parent and Subco
has full corporate power and authority to execute and deliver this Agreement
and to consummate the Merger and the other transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of each of Parent and Subco and
by Parent as the sole stockholder of Subco and no other corporate proceedings
on the part of Parent or Subco are necessary to authorize this Agreement or to
consummate the Merger or the other transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of Parent
and Subco and, assuming the due authorization, execution and delivery hereof
by the Company, constitutes a valid and binding agreement of each of Parent
and Subco, enforceable against each of them in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
Section 3.04. No Violations, Etc. (a) Assuming that all filings, permits,
authorizations, consents and approvals have been duly made or obtained as
contemplated by this Section 3.04, the execution and delivery of this
Agreement and the consummation by Parent and Subco of the Merger and the other
transactions contemplated hereby will not (i) violate any provision of the
charter, by-laws or other organizational documents of either Parent or Subco,
(ii) violate any statute, rule, regulation, order or decree of any public body
or authority by which Parent, Subco or any of their respective properties is
bound, or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, any license,
franchise, permit, indenture, agreement or other instrument to which Parent or
Subco is a party, or by which Parent, Subco or any of their respective
properties is bound, excluding from the foregoing clauses (ii) and (iii),
violations, breaches and defaults that, individually or in the aggregate,
would not prevent or materially delay the ability of Parent or
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Subco to consummate the Merger or the other transactions contemplated hereby
or have a Parent Material Adverse Effect on the general affairs, management,
business, operations, assets, condition (financial or otherwise), results of
operations or prospects of the Parent Subsidiaries.
(b) No filing or registration with, or authorization, consent or approval
of, or notification to, any governmental entity is required by Parent or Subco
in connection with the execution and delivery of this Agreement or the
consummation by Parent and Subco of the Merger and the other transactions
contemplated hereby, except (i) in connection with the applicable requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) in connection with the applicable requirements of the
Mergers, Take-overs and Monopolies (Control) Act, 1978 (as amended) of Ireland
(the "Irish Mergers Act"), (iii) in connection with the provisions of the
Securities Act, (iv) the filing of appropriate merger documents as required by
the Delaware Act, (v) the listing on the NYSE of the Parent ADSs to be issued
in connection with the Merger, (vi) the agreement of the Irish Stock Exchange
and the London Stock Exchange (subject to allotment) to admit to their
respective Official Lists the Parent Ordinary Shares to be represented by
Parent ADSs constituting the Closing Consideration, (vii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under the corporation, takeover or blue sky laws of various
states, (viii) 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 and (ix) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made, individually or in the aggregate, would not prevent or materially delay
the ability of Parent or Subco to consummate the Merger and the other
transactions contemplated hereby or have a Parent Material Adverse Effect.
Section 3.05. Finders or Brokers. Except for Goldman Sachs International,
neither Parent nor any Parent Subsidiary has employed any investment banker,
broker, finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or any commission the
receipt of which is conditioned upon consummation of the Merger.
Section 3.06. Registration Statement; Company Proxy Statement. None of the
information provided by either Parent or Subco for inclusion or incorporation
by reference in (i) the registration statement registering under the
Securities Act the Parent ADSs to be issued at the Effective Time (such
registration statement, as amended by any amendments thereto, being referred
to herein as the "Registration Statement") or (ii) the Company Proxy Statement
shall, in the case of the Registration Statement, at (i) the time the
Registration Statement becomes effective and (ii) the Effective Time, and, in
the case of the Company Proxy Statement, on the date the Company Proxy
Statement is first mailed to stockholders, at the time of the Special Meeting
and 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 in
order to make the statements therein not misleading. If, at any time prior to
the Effective Time, any event with respect to Parent or Subco shall occur that
is required to be described in the Registration Statement or Company Proxy
Statement, such event shall be so described, and an amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of the Company. The Registration Statement and Company Proxy
Statement will (with respect to Parent and Subco) comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), as the case may be.
Section 3.07. SEC Filings. (a) Parent has filed with the SEC its Annual
Report on Form 20-F for the year ended December 31, 1996 and its reports on
Form 6-K dated April 28, 1997, August 21, 1997, October 31, 1997 and February
9, 1998 (collectively, the "Parent SEC Reports"), each of which complied as to
form when filed in all material respects with the applicable provisions of the
Exchange Act. As of their respective dates, the Parent SEC Reports (including
all exhibits and schedules thereto and documents incorporated by reference
therein) 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 therein, in light of the circumstances under which they were made,
not misleading.
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(b) Parent will deliver to the Company as soon as they become available true
and complete copies of any Annual Report on Form 20-F and any report on Form
6-K relating to Parent's results for a fiscal quarter filed by it with the
SEC, in each case subsequent to the date hereof and prior to the Effective
Time. The audited consolidated financial statements and unaudited consolidated
interim financial statements of the Parent and the Parent Subsidiaries to be
included or incorporated by reference in such reports will be prepared in
accordance with generally accepted accounting principles in the United States
("U.S. GAAP") applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and will fairly present in
all material respects the consolidated financial position of the Parent and
the Parent Subsidiaries as of the dates thereof and the consolidated results
of operations and consolidated cash flows for the periods then ended (subject,
in the case of any unaudited interim financial statements, to normal year-end
adjustments and to the extent they may not include footnotes or may be
condensed or summary statements).
Section 3.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Parent
and the Parent Subsidiaries included or incorporated by reference in the
Parent SEC Reports have been prepared in accordance U.S. GAAP, in each case
applied on a consistent basis throughout the periods indicated (except as may
be indicated in the notes thereto), and fairly present in all material
respects the consolidated financial position of Parent and the Parent
Subsidiaries as of the date thereof and the consolidated results of operations
and consolidated cash flows for the periods then ended (subject, in the case
of any unaudited interim financial statements, to normal year-end adjustments
and to the extent they may not include footnotes or may be condensed or
summary statements) and such audited consolidated financial statements have
been certified as such (without exception) by Parent's independent
accountants.
Section 3.09. Absence of Undisclosed Liabilities At December 31, 1996,
neither Parent nor any of the Parent Subsidiaries has any liabilities or
obligations of any nature, whether absolute, accrued, unmatured, contingent or
otherwise, or any unsatisfied judgments or any unusual or extraordinary
commitments, except the liabilities recorded on the Consolidated Balance Sheet
as at December 31, 1996 of Parent and the Parent Subsidiaries contained in its
audited financial statements for the year ended December 31, 1996 and/or
reflected in the notes thereto, and except for liabilities or obligations that
would not, individually or in the aggregate, have a Parent Material Adverse
Effect.
Section 3.10. Absence of Changes or Events. Since December 31, 1996, except
as set forth in the Parent SEC Reports and in the periodic reports and
documents required under the Exchange Act to have been filed by Parent with
the SEC since December 31, 1996 and prior to the date of this Agreement,
including all exhibits filed therewith, there has not been any event or events
having, or reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect.
Section 3.11. Capitalization. The authorized capital stock of Parent
consists of 150,000,000 Parent Ordinary Shares, 1,000 executive shares, par
value 1 Irish pound per share ("Parent Executive Shares") and 25,000 "B'
executive shares, par value 4 Irish pence per share ("Parent "B' Executive
Shares"). As of March 31, 1998, there were 111,741,005 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) 12,829,083 Parent Ordinary
Shares reserved for issuance upon the exercise of outstanding options under
the stock option plans of Parent (the "Parent Plans"), (ii) 4,574,887 Parent
Ordinary Shares reserved for issuance upon the exchange of the Exchangeable
Notes due 2005 (the "Exchangeable Notes") issued by Athena Neurosciences,
Inc., a wholly-owned subsidiary of Parent, and guaranteed by Parent, and (iii)
13,913,288 Parent Ordinary Shares reserved for issuance upon the exercise of
the outstanding warrants (the "Parent Warrants"). Except for the Exchangeable
Notes, the Parent Warrants and the options granted under the Parent Plans,
there were not as of such date any existing options, warrants, calls,
subscriptions, or other rights or other agreements or commitments obligating
Parent to issue, transfer or sell any shares 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, and all Parent
ADSs to be issued at the
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Effective Time shall be, when issued, duly authorized and validly issued,
fully paid, non-assessable and free of preemptive rights with respect thereto.
The Parent ADSs to be issued at the Effective Time will, when issued, be
registered under the Securities Act and the Exchange Act and registered or
exempt from registration under applicable Blue Sky laws.
Section 3.12. Litigation. There is no (i) claim, action, suit or proceeding
pending or, to the best knowledge of Parent, threatened against Parent or any
of the Parent Subsidiaries before any court or governmental or regulatory
authority or body or arbitration tribunal or (ii) outstanding judgment, order,
writ, injunction or decree, or application, request or motion therefor, of any
court, governmental agency or arbitration tribunal in a proceeding to which
Parent, any Parent Subsidiary or any of their respective assets was or is a
party except, in the case of clauses (i) and (ii) above, such as would not,
individually or in the aggregate, either impair Parent's ability to consummate
the Merger or the other transactions contemplated hereby or have a Parent
Material Adverse Effect.
Section 3.13. Tax Treatment; Officer's Certificate as to Tax
Matters. Neither Parent nor, to Parent's knowledge, any of its affiliates has
taken, agreed to take, or will take any action that would prevent the Merger
from constituting a transaction qualifying under Section 368(a) of the Code.
Section 3.14. Taxes. As of December 31, 1997, Parent was not a passive
foreign investment company, as defined in Section 1297(a) of the Code, and, to
the best of Parent's knowledge, there is no reasonable basis to believe that
it may become one in the foreseeable future.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a separate disclosure schedule referring to the
Sections contained in this Agreement, which has been delivered by the Company
to Parent prior to the execution of this Agreement (the "Company Disclosure
Statement"), the Company represents and warrants to Parent and Subco as
follows:
Section 4.01. Organization, Etc. Each of the Company and Neurex
International Company Limited, a corporation organized under the laws of
Liechtenstein (the "Subsidiary"), is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Each of the Company and its Subsidiary is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or operated or the nature
of its activities makes such qualification necessary, except for failures to
be so qualified or in good standing that would not, individually or in the
aggregate, have a material adverse effect on the general affairs, management,
business, operations, assets, condition (financial or otherwise), results of
operations or prospects of the Company and its Subsidiary taken as a whole (a
"Material Adverse Effect"). Neither the Company nor its Subsidiary is in
violation of any of the provisions of its Amended and Restated Certificate of
Incorporation (or other applicable charter document) or by-laws. The Company
has heretofore furnished to Parent accurate and complete copies of the Amended
and Restated Certificate of Incorporation (or other applicable charter
document) and by-laws, as currently in effect, of each of the Company and its
Subsidiary.
Section 4.02. Authority Relative to This Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the Merger and the other transactions contemplated
hereby (other than, with respect to the Merger, the approval of a majority of
the outstanding shares of Company Common Stock at the
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Special Meeting or any adjournment thereof as required by the Delaware Act).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery hereof by Parent
and Subco, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
Section 4.03. No Violations, Etc. Except for the filings of the Certificate
of Merger and the Company Proxy Statement under and as contemplated by the
Exchange Act and the filings required under and in compliance with the HSR
Act, no filing with, notification to and no permit, authorization, consent or
approval of, any public body is necessary on the part of the Company for the
consummation by the Company of the Merger, the other transactions contemplated
hereby or the exercise by Parent and the Surviving Corporation of full rights
to own and operate the business of the Company and its Subsidiary. Neither the
execution and delivery of this Agreement nor the consummation of the Merger or
the other transactions contemplated hereby nor compliance by the Company with
any of the provisions hereof nor, to the Knowledge of the Company, the
exercise by Parent and the Surviving Corporation of full rights to own and
operate the business of the Company and its Subsidiary will (i) subject to
obtaining the approval of a majority of the outstanding shares of Company
Common Stock at the Special Meeting or any adjournment thereof as required by
the Delaware Act, conflict with or result in any breach of any provision of
the Amended and Restated Certificate of Incorporation (or other comparable
charter documents) or by-laws of the Company or its Subsidiary, (ii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Company, its Subsidiary or any of their respective properties or assets or
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation, acceleration, redemption or repurchase) under, any
of the terms, conditions or provisions of any (x) note, bond, mortgage,
indenture or deed of trust or (y) license, lease, agreement or other
instrument or obligation to which the Company or its Subsidiary is a party or
by which either of them or any of their properties or assets may be bound,
excluding from the foregoing clauses (ii) and (iii), violations, breaches or
defaults that, individually or in the aggregate, would not either prevent or
materially delay the Company's ability to consummate the Merger or the other
transactions contemplated hereby or have a Material Adverse Effect.
Section 4.04. Fairness Opinion. The Company has received the opinion of
Morgan Stanley & Co. Incorporated to the effect that as of the date hereof the
Exchange Ratio is fair to the Company's stockholders from a financial point of
view.
Section 4.05. Board Recommendation. The Board of Directors of the Company
has, by a unanimous vote at a meeting of such Board duly held on April 28,
1998, approved and adopted this Agreement, the Merger and the other
transactions contemplated hereby, and determined that this Agreement, the
Merger and the other transactions contemplated hereby, taken together, are
fair to and in the best interest of the stockholders of the Company, and
resolved to recommend that the holders of shares of Company Common Stock
approve and adopt this Agreement, the Merger and the other transactions
contemplated hereby.
Section 4.06. State Antitakeover Statutes. The Company has granted all
approvals and taken all other steps necessary to exempt the Merger and the
other transactions contemplated hereby from the requirements and provisions of
(S)203 of the Delaware Act and any other state antitakeover statute or
regulation such that none of the provisions of such (S)203 or any other
"business combination," "moratorium," "control share," or other state
antitakeover statute or regulation (x) prohibits or restricts the Company's
ability to perform its obligations under this Agreement or its ability to
consummate the Merger and the other transactions contemplated hereby, (y)
would have the effect of invalidating or voiding this Agreement or any
provision hereof or (z) would subject Parent or Subco to any material
impediment or condition in connection with the exercise of any of their
respective rights under this Agreement or their ownership and operation of the
business of the Company and its Subsidiary.
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Section 4.07. Affiliates. Set forth in Section 4.07 of the Company
Disclosure Statement is a list identifying all persons who may be deemed to be
"affiliates" of the Company for purposes of Rule 145 under the Securities Act
("Affiliates") and, promptly after the execution of this Agreement, the
Company will use its best efforts to deliver to Parent the written agreement
of each such person, substantially in the form of Exhibit A hereto.
Section 4.08. Finders or Brokers. Except for Morgan Stanley & Co.
Incorporated, whose fees have been disclosed to Parent, neither the Company
nor its Subsidiary has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to a fee or any commission the receipt of which is conditioned
upon consummation of the Merger.
Section 4.09. Registration Statement; Company Proxy Statement. Except for
information concerning Parent that has been provided by Parent for inclusion
or incorporation by reference in the Company Proxy Statement, such
information, at the date the Company Proxy Statement is first mailed to
stockholders, at the time of the Special Meeting and at the Effective Time,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If, at any time prior to the Effective
Time, any event with respect to the Company or its Subsidiary shall occur that
is required to be described in the Company Proxy Statement, such event shall
be so described, and an amendment or supplement shall be promptly filed with
the SEC and, as required by law, disseminated to the stockholders of the
Company. The Company Proxy Statement will comply as to form in all material
respects with the applicable provisions of the Securities Act and Exchange
Act, as the case may be.
Section 4.10. Capitalization. The authorized capital stock of the Company
consists of 45,000,000 shares of Company Common Stock and 15,000,000 shares of
Convertible Preferred Stock, par value $.01 per share (the "Company Preferred
Stock"). No shares of Company Preferred Stock are outstanding. As of December
31, 1997, there were 22,239,267 shares of Company Common Stock outstanding and
no treasury shares. Set forth in Section 4.10 of the Company Disclosure
Statement is a list identifying and describing the number of shares of Company
Common Stock to be received upon exercise or conversion, and the exercise or
conversion price, of each option, warrant and convertible or exchangeable note
outstanding on the date hereof (the "Company Common Stock Equivalents") and
the date of grant or issuance, as the case may be, of each such option,
warrant or convertible or exchangeable note. Except for the Company Common
Stock Equivalents, there are no existing options, warrants, calls,
subscriptions or other rights, or other agreements or commitments, obligating
the Company or its Subsidiary to issue, transfer or sell any shares of capital
stock of the Company or its Subsidiary or any other securities convertible
into or evidencing the right to subscribe for any such shares. There are no
outstanding stock appreciation rights with respect to the capital stock of the
Company or its Subsidiary. All issued and outstanding shares of Company Common
Stock are duly authorized and validly issued, fully paid, non-assessable and
free of preemptive rights with respect thereto.
Section 4.11. SEC Filings. (a) The Company has filed with the SEC all
required forms, reports, registration statements and documents required to be
filed by it with the SEC since December 31, 1997 (collectively, the "Company
SEC Reports"), all of which complied as to form when filed in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act, as the case may be. As of their respective dates, the Company SEC Reports
(including all exhibits and schedules thereto and documents incorporated by
reference therein) 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 therein, in light of the circumstances under which they
were made, not misleading.
(b) 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 or filed by it with the SEC, in each
case subsequent to the date hereof and prior to the Effective Time. As of
their respective dates, such reports and statements (excluding any information
therein provided by Parent or Subco, 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
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which they are made, not misleading and will comply in all material respects
with all applicable requirements of law. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company and its Subsidiary to be included or incorporated by reference in such
reports and statements will be prepared in accordance with U.S. GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and will fairly present in all material
respects the consolidated financial position of the Company and its Subsidiary
as of the dates thereof and the consolidated results of operations and
consolidated cash flows for the periods then ended (subject, in the case of
any unaudited interim financial statements, to normal year-end adjustments and
to the extent they may not include footnotes or may be condensed or summary
statements).
Section 4.12. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company and its Subsidiary included or incorporated by reference in any of the
Company SEC Reports have been prepared in accordance with U.S. GAAP applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto), and fairly present in all material respects the
consolidated financial position of the Company and its Subsidiary as of the
dates thereof and the consolidated results of operations and consolidated cash
flows for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year-end adjustments and to the extent
they may not include footnotes or may be condensed or summary statements) and
such audited financial statements are accompanied by an unqualified opinion
thereon by the Company's independent auditors.
Section 4.13. Absence of Undisclosed Liabilities. At December 31, 1997,
neither the Company nor its Subsidiary has any liabilities or obligations of
any nature, whether absolute, accrued, unmatured, contingent or otherwise, or
any unsatisfied judgments or any unusual or extraordinary commitments, except
the liabilities recorded on the Consolidated Balance Sheet as of December 31,
1997 of the Company and its Subsidiary (the "1997 Balance Sheet") and/or
reflected in the notes thereto, and except for liabilities or obligations that
would not, individually or in the aggregate, have a Material Adverse Effect.
Section 4.14. Absence of Changes or Events. Since December 31, 1997, the
Company and its Subsidiary have not, directly or indirectly:
(a) purchased, otherwise acquired, or agreed to purchase or otherwise
acquire, any shares of capital stock of the Company or its Subsidiary, or
declared, set aside or paid any dividend or otherwise made a distribution
(whether in cash, stock or property or any combination thereof) in respect
of their capital stock;
(b) authorized for issuance, issued, sold, delivered, granted or issued
any options, warrants, calls, subscriptions or other rights for, or
otherwise agreed or committed to issue, sell or deliver, any shares of any
class of capital stock of the Company or its Subsidiary or any securities
convertible into or exchangeable or exercisable for shares of any class of
capital stock of the Company or its Subsidiary, other than pursuant to and
in accordance with and subject to the limitations set forth in (i) the
Company Option Plans, (ii) the Company Purchase Plans (as defined below in
Section 5.12) or (iii) the Company Common Stock Equivalents;
(c)(i) except in the ordinary course of business and consistent with past
practice, created or incurred any material indebtedness for borrowed money,
(ii) assumed, guaranteed, endorsed or otherwise as an accommodation become
liable or responsible for the obligations of any other individual, firm or
corporation any of which obligations would be material to the Company and
its Subsidiary taken as a whole, (iii) made any material loans, advances or
capital contributions to or material investments in any other individual,
firm or corporation, (iv) entered into any commitment or transaction
material to the Company and its Subsidiary taken as a whole, (v) amended or
supplemented any material contract, agreement, commitment or other
instrument in existence on or prior to December 31, 1997 or (vi) incurred
any liabilities, except for liabilities that, individually or in the
aggregate, would not have a Material Adverse Effect;
(d) instituted any change in their accounting methods, principles or
practices;
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(e) revalued any of their respective assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivables, except for amounts previously reserved as reflected
in the 1997 Balance Sheet;
(f) suffered any damage, destruction or loss, whether covered by
insurance or not, except for such as would not, individually or in the
aggregate, have a Material Adverse Effect;
(g) suffered any event or events (i) having, or reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect,
excluding any such event or events relating solely to Ziconotide and (ii)
that would, or would reasonably be likely to, jeopardize the final approval
by the FDA for sale in the United States of Ziconotide for the treatment of
pain by September 30, 2000 (a "Ziconotide Event");
(h)(i) increased in any manner the compensation of any of their
respective directors or officers or, except in the ordinary course of
business and consistent with past practice, their respective employees;
(ii) paid or agreed to pay any pension, retirement allowance or other
employee benefit, or entered into any contract, agreement or understanding
with any of their respective past or present employees relating to any such
pension, retirement allowance or other employee benefit, except, in each
case, as required under agreements, plans or arrangements existing at
December 31, 1997; (iii) granted any severance or termination pay to, or
entered into any employment consulting or severance agreement with, any
person; (iv) entered into any contract, agreement or understanding with any
of the Company's or its Subsidiary's past or present employees; (v) except
in the ordinary course of business and consistent with past practice, or as
may be required to comply with applicable law, become obligated under any
new pension plan, welfare plan, multiemployer plan, employee benefit plan,
benefit arrangement, or similar plan or arrangement that was not in
existence on or prior to December 31, 1997, including any bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, retirement or other benefit plan,
contract, agreement or understanding, or amended any such plans, contracts,
agreements or understandings in existence at or prior to December 31, 1997;
or (vi) sold, transferred, leased, licensed, pledged, mortgaged, or
otherwise disposed of, or encumbered, or agreed to sell, transfer, lease,
license, pledge, mortgage or otherwise dispose of or encumber, any material
properties, real, personal or mixed; and
(i) agreed to (i) do any of the things described in the preceding
clauses (a) through (h) other than as expressly contemplated or provided
for in this Agreement or (ii) take, whether in writing or otherwise, any
action that, if taken prior to the date of this Agreement, would have made
any representation or warranty in this Article IV untrue or incorrect.
Section 4.15. Capital Stock of Subsidiary. The Company is directly or
indirectly the record and beneficial owner (including all such qualifying
shares) of all of the outstanding shares of capital stock of its Subsidiary.
There are no proxies with respect to such shares, and there are not any
existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating the Company or its Subsidiary to issue,
transfer or sell any shares of capital stock of the Subsidiary or any other
securities convertible into or evidencing the right to subscribe for any such
shares. All of such shares so owned by the Company are duly authorized and
validly issued, fully paid, nonassessable and free of preemptive rights with
respect thereto and are owned by the Company free and clear of any claim, lien
or encumbrance of any kind with respect thereto. The Company does not,
directly or indirectly, own any interest in any corporation, partnership,
joint venture or other business association or entity.
Section 4.16. Litigation. There is no (i) claim, action, suit or proceeding
pending or, the Knowledge of the Company, threatened against the Company or
its Subsidiary before any court or governmental or regulatory authority or
body or arbitration tribunal or (ii) outstanding judgment, order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
in a proceeding to which the Company, its Subsidiary or any of their
respective assets was or is a party except, in the case of clauses (i) and
(ii) above, such as would not, individually or in the aggregate, prevent or
materially delay the Company's ability to consummate the Merger or the other
transactions contemplated hereby or have a Material Adverse Effect.
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Section 4.17. Insurance. The Company has heretofore furnished to Parent a
list identifying and describing all insurance policies in force on the date
hereof covering the businesses, properties and assets of the Company and its
Subsidiary, the premiums and coverages of such policies and all claims against
such policies. All such policies are currently in effect and true and complete
copies of all such policies have been made available to Parent. The Company
has not received notice of the cancellation of any of such insurance in effect
on the date of this Agreement.
Section 4.18. Contracts and Commitments. (a) Neither the Company nor its
Subsidiary is a party to any existing contract, obligation or commitment of
any type in any of the following categories:
(i) any contract that materially limits or restricts where either of the
Company or its Subsidiary may conduct its business or the type or line of
business that the Company or its Subsidiary may engage in;
(ii) any material contract containing any agreement with respect to a
change of control of the Company or its Subsidiary; and
(iii) any hedging, option, derivative or other similar transaction.
(b) Each material contract to which the Company or its Subsidiary is a party
or by which either of them or any of their properties or assets is bound is
valid and binding upon the Company and/or its Subsidiary, as the case may be
(and, to the Company's Knowledge, on all other parties thereto), in accordance
with its terms and is in full force and effect; there is no material breach or
violation of or default by the Company or its Subsidiary (or, to the Company's
Knowledge, by the other parties thereto) under any such material contract,
whether or not such breach, violation or default has been waived; and no event
has occurred with respect to the Company or its Subsidiary which, with notice
or lapse of time or both, would constitute a material breach, violation or
default, or give rise to the right of termination, cancellation, foreclosure,
imposition of a lien, prepayment or acceleration under any such material
contract.
Section 4.19. Labor Matters; Employment and Labor Contracts. (a) Neither the
Company nor its Subsidiary is a party to any union contract or other
collective bargaining agreement. Each of the Company and its Subsidiary is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, except for
those failures to comply that, individually or in the aggregate, would not
have a Material Adverse Effect. There is no labor strike, slowdown or stoppage
pending (or any labor strike or stoppage threatened) against or affecting the
Company or its Subsidiary. No petition for certification has been filed and is
pending before the National Labor Relations Board with respect to any
employees of the Company or its Subsidiary who are not currently organized.
(b) Neither the Company nor its Subsidiary is a party to any employment,
management services, consultation or other contract or agreement with any past
or present officer, director or employee or, to the best of the Company's
Knowledge, any entity affiliated with any past or present officer, director or
employee, which contract or agreement is required to be described under Item
404 of Regulation S-K of the SEC.
Section 4.20. Compliance with Laws. Neither the Company nor its Subsidiary
has violated or failed to comply with 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 or in the aggregate,
have a Material Adverse Effect. Each of the Company and its Subsidiary have
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 or in the
aggregate, have a Material Adverse Effect.
(a) To 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 ("DEA") under the Comprehensive
Drug Abuse Prevention and Control Act of 1970 ("CSA") that is manufactured,
tested,
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distributed, held, and/or marketed by the Company or its Subsidiary, 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.
(b) The Company will promptly provide Parent with copies of any document
that is issued, prepared (by the Company or otherwise), or otherwise becomes
available from the date of this Agreement until the Effective Time that bears
on the regulatory status under the FDCA or the CSA of the Company, its
Subsidiary or any product of the Company or its Subsidiary, including, but not
limited to, any deficiency letter, warning letter, non-approvable
letter/order, and withdrawal letter/order.
(c) The Company will, within five days after signing of this Agreement,
provide Parent copies of or make available for Parent's review any and all
documents in its or its Subsidiary's possession relevant to assessing the
Company's or its Subsidiary's compliance with the FDCA or the CSA and
implementing regulations, including, but not limited to, copies of (i) all
483s issued during the last three years; (ii) all audit reports performed
during the last three years, whether performed by the Company, its Subsidiary,
or an outside consultant; (iii) any document (prepared by the Company or
otherwise) concerning any oral or written communication received from the FDA,
the DEA, or the Department of Justice during the last three years; (iv) any
administrative or judicial order, ruling or agreement issued or entered into
during the last three years in which the Company, its Subsidiary, or their
respective predecessor companies were a named party or were identified as an
interested person; or (v) any recall notice or order.
Section 4.21. Intellectual Property Rights. To the best of the Company's
Knowledge, the Company and its Subsidiary own or have the right to use all
Intellectual Property Rights (as defined below in this Section 4.21) necessary
to the conduct of their respective businesses. The Company has heretofore
furnished to Parent a worldwide list of all patents, trade names, trademarks
and service marks, and applications for the foregoing owned or possessed by
the Company or its Subsidiary and true and complete copies of all such
materials have been made available to Parent. No material rights or licenses
to use Intellectual Property Rights (or covenants not to sue in respect
thereof) have been granted or acquired by the Company or its Subsidiary. The
Company has received no notice of any claims or assertions made by others that
the Company has infringed any material Intellectual Property Rights of others
by the sale of products or any other activity in the preceding five year
period and there has been no such material infringement by the Company during
this period. The Company has received no Knowledge of any infringement of
Intellectual Property Rights of the Company by others. All issued patents,
registered trademarks, and service marks owned by the Company or its
Subsidiary are recorded on the public record in the name of the Company or its
Subsidiary.
"Intellectual Property Rights" shall mean and include rights to use patents,
trademarks, service marks, trade names, trade secrets, know-how, copyrights,
and any and all currently pending applications for any thereof.
Section 4.22. Taxes. Except for those matters that individually or in the
aggregate would not have a Material Adverse Effect, (i) the Company and its
Subsidiary have prepared and timely filed or will timely file with the
appropriate governmental agencies all franchise, income and all other Tax (as
defined below in this Section 4.22) returns, information statements and
reports and any other filings (Tax returns, information statements and reports
and any other filings are hereinafter collectively referred to as "Tax
Returns") required to be filed for any period (or portion thereof) ending on
or before the Effective Time, taking into account any extension of time to
file granted to or obtained on behalf of the Company and/or its Subsidiary
(copies of which for the past three fiscal years have been provided or made
available to Parent); (ii) all Taxes of the Company and its Subsidiary in
respect of any taxable period (or portion thereof) ending prior to or at the
Effective Time have been paid in full to the proper authorities or fully
accrued on the publicly available financial statements of the Company or its
Subsidiary, other than such Taxes as are being contested in good faith by
appropriate proceedings and are adequately reserved for in accordance with
U.S. GAAP; (iii) all deficiencies resulting from Tax examinations of federal,
state, local and foreign income, sales and franchise and all other Tax Returns
filed by the Company and its Subsidiary have either been paid or fully
settled, and no issue previously raised by any
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taxing authority could reasonably be expected to result in a proposed
deficiency for any prior, parallel or subsequent period (including periods
subsequent to the Effective Time); (iv) to the best Knowledge of the Company,
no deficiency has been asserted or assessed against the Company or its
Subsidiary and is pending, and no examination of the Company or its Subsidiary
is pending or threatened for any material amount of Tax by any taxing
authority; (v) no extension of the period for assessment or collection of any
Tax is currently in effect and no extension of time within which to file any
Tax Return has been requested, which Tax Return has not since been filed; (vi)
no Tax liens have been filed with respect to any Taxes of the Company or its
Subsidiaries, except for property taxes that have accrued but are not yet due
or payable; (vii) there are no Tax sharing agreements or arrangements under
which the Company or its Subsidiary will have any obligation or liability on
or after the Effective Time; (viii) neither the Company nor its Subsidiary is,
or has been at any time during the five-year period prior to the Effective
Time, a "United States real property holding corporation," as defined for
purposes of Section 897(c)(ii) of the Code; (ix) to the best Knowledge of the
Company, there are no transfer pricing agreements made by the Company or its
Subsidiary with any taxation authority; (x) neither the Company nor its
Subsidiary has made an election under Section 341(f) of the Code; and (xi)
neither the Company nor its Subsidiary is obligated to make any payments or
provide any other benefits, or is a party to any agreement that on account of
the transactions contemplated in this Agreement, would obligate it, or
reasonably be expected to obligate it, to make any payments or provide any
other benefits that would constitute parachute payments within the meaning of
Section 280G of the Code.
"Tax" or "Taxes" means (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, alternative minimum, gross receipts, capital,
sales, use, ad valorem, value added, transfer, franchise, profits, inventory,
capital stock, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation, property and estimated
taxes, customs duties, fees, assessments and charges of any kind whatsoever,
(ii) all interest, penalties, fines, additions to tax or other additional
amounts imposed by any taxing authority in connection with any item described
in clause (i) and (iii) all transferee, successor, joint and several or
contractual liability (including, without limitation, liability pursuant to
United States Treasury Regulation ("Treas. Reg.") (S) 1.1502-6 (or any
comparable state, local or foreign provisions)) in respect of any items
described in clause (i) or (ii) above.
Section 4.23. Employee Benefit Plans; ERISA. (a) There are no "employee
pension benefit plans" as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") ("Pension Benefit Plans"),
"welfare benefit plans" as defined in Section 3(1) of ERISA ("Welfare Plans"),
or stock bonus, stock option, restricted stock, stock appreciation right,
stock purchase, bonus, incentive, deferred compensation, severance, or
vacation plans, or any other employee benefit plan, program, policy or
arrangement, covering employees (or former employees), maintained or
contributed to by the Company or its Subsidiary or any of their ERISA
Affiliates (as hereinafter defined), or to which the Company or its Subsidiary
or any of their ERISA Affiliates contributes or is obligated to make payments
thereunder or otherwise may have any liability (collectively, the "Employee
Benefit Plans"). For purposes of this Agreement, "ERISA Affiliate" shall mean
any person (as defined in Section 3(9) of ERISA) that is or has been a member
of any group of persons described in Section 414(b), (c), (m) or (o) of the
Code including the Company or its Subsidiary.
(b) The Company and its Subsidiary, and each of the Pension Benefit Plans
and Welfare Plans, are in compliance with the applicable provisions of ERISA,
the Code and other applicable laws, except where the failure to comply would
not, individually or in the aggregate, have a Material Adverse Effect.
(c) All contributions to, and payments from, the Pension Benefit Plans that
are required to have been made in accordance with the Pension Benefit Plans
have been timely made, except where the failure to make such contributions or
payments on a timely basis would not, individually or in the aggregate, either
impair the Company's ability to consummate the Merger and the other
transactions contemplated hereby or have a Material Adverse Effect.
(d) Any Pension Benefit Plans intended to qualify under Section 401 of the
Code have been determined by the Internal Revenue Service ("IRS") to be so
qualified and no event has occurred and no condition exists with
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respect to the form or operation of such Pension Benefit Plans that would
cause the loss of such qualification or exemption or the imposition of any
material liability, penalty or tax under ERISA or the Code.
(e) There are (i) no investigations pending by any governmental entity
(including the Pension Benefit Guaranty Corporation) involving the Pension
Benefit Plans or Welfare Plans and (ii) no pending or threatened claims (other
than routine claims for benefits), suits or proceedings against any Pension
Benefit or Welfare Plan, against the assets of any of the trusts under any
Pension Benefit or Welfare Plan or against any fiduciary of any Pension
Benefit or Welfare Plan with respect to the operation of such plan or
asserting any rights or claims to benefits under any Pension Benefit Plan or
against the assets of any trust under such plan, except for those that would
not, individually or in the aggregate, give rise to any liability that would
have a Material Adverse Effect, nor, to the best of the Company's Knowledge,
are there any facts that would give rise to any liability, except for those
that would not, individually or in the aggregate, either impair the Company's
ability to consummate the Merger and the other transactions contemplated
hereby or have a Material Adverse Effect in the event of any such
investigation, claim, suit or proceeding.
(f) None of the Company, its Subsidiary or any employee of the foregoing,
nor any trustee, administrator, other fiduciary or, to the Knowledge of the
Company, any other "party in interest" or "disqualified person" with respect
to the Pension Benefit Plans or Welfare Plans, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section
406 of ERISA) that could result in a tax or penalty on the Company or its
Subsidiary under Section 4975 of the Code or Section 502(i) of ERISA, except
any such event that would not, individually or in the aggregate, either impair
the Company's ability to consummate the Merger and the other transactions
contemplated hereby or have a Material Adverse Effect.
(g) None of the Company, its Subsidiary or any of their ERISA Affiliates
maintains or contributes to, nor have they ever maintained or contributed to,
any pension plan subject to Title IV of ERISA or Sections 412 of the Code or
302 of ERISA.
(h) None of the Company, its Subsidiary or any ERISA Affiliate has incurred
any material liability under Title IV of ERISA.
(i) None of the Company, its Subsidiary or any ERISA Affiliate has incurred
any material liability (including any contingent liability under Section 4204
of ERISA) with respect to any multiemployer plan, within the meaning of
Section 3(37) of ERISA.
(j) With respect to each of the Employee Benefit Plans, true, correct and
complete copies of the following documents have been made available to Parent:
(i) the plan document and any related trust agreement, including amendments
thereto, (ii) any current summary plan descriptions and other material
communications to participants relating to the Employee Benefit Plans, (iii)
the most recent Forms 5500, if applicable, and (iv) the most recent IRS
determination letter, if applicable.
(k) None of the Welfare Plans maintained by the Company or its Subsidiary
provide for continuing benefits or coverage for any participant or any
beneficiary of a participant following termination of employment, except as
may be required under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"). The Company and its Subsidiary (to the extent that
the Subsidiary maintains a "group health plan" within the meaning of Section
5000(b)(1) of the Code) have complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of
Title I of ERISA and the regulations thereunder, except where the failure to
comply would not, individually or in the aggregate, either impair the
Company's ability to consummate the Merger and the other transactions
contemplated hereby or have a Material Adverse Effect.
(l) No liability under any Pension Benefit or Welfare Plan has been funded
nor has any such obligation been satisfied with the purchase of a contract
from an insurance company as to which the Company or its Subsidiary has
received notice that such insurance company is in rehabilitation or a
comparable proceeding.
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(m) The consummation of the transactions contemplated by this Agreement will
not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable to or in respect of any employee of the Company or its Subsidiary;
provided, however, that the vesting and exercisability schedule of the
unvested and unexercisable portion of each option to purchase Company Common
Stock that is outstanding immediately prior to the date of this Agreement will
accelerate in a manner that is consistent with the acceleration schedule
adopted by the Board of Directors of the Company by resolution dated December
21, 1995.
(n) The Company has heretofore furnished to Parent each Foreign Plan (as
hereinafter defined) to the extent the benefits provided thereunder are not
mandated by the laws of the applicable foreign jurisdiction. The Company and
its Subsidiary and each of the Foreign Plans are in compliance with applicable
laws and all required contributions have been made to the Foreign Plans,
except where the failure to comply or make contributions would not,
individually or in the aggregate, either impair the Company's ability to
consummate the Merger and the other transactions contemplated hereby or have a
Material Adverse Effect. Each of the Foreign Plans that is a funded defined
benefit plan has a fair market value of plan assets that is greater than the
plan's liabilities, as determined in accordance with applicable laws. For
purposes hereof, the term "Foreign Plan" shall mean any plan, program, policy,
arrangement or agreement maintained or contributed to by, or entered into
with, the Company or its Subsidiary with respect to employees (or former
employees) employed outside the United States.
Section 4.24. Environmental Matters. (a) Except to the extent otherwise
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, respecting material environmental liabilities and risks,
(i) to the Knowledge of the Company, the Company possesses all Environmental
Permits required under applicable Environmental Laws to conduct its current
business, and is, and within the last three years has been, in compliance with
the terms and conditions of such Environmental Permits, except where the
failure to so possess or comply would not reasonably be expected to have a
Material Adverse Effect; to the Company's Knowledge, no Environmental Permits
possessed by the Company will be revoked, suspended, or will not be renewed;
(ii) except as would not have a Material Adverse Effect, to the Knowledge of
the Company, the execution and delivery of this Agreement and the consummation
by the Company of the Merger and other transactions contemplated hereby will
not affect the validity or require the transfer of any Environmental Permits
held by the Company, and will not require any notification, disclosure,
registration, reporting, filing, investigation, or remediation under any
Environmental Law;
(iii) to the Knowledge of the Company, the Company is in compliance, and
within the last three years has complied, with all applicable Environmental
Laws, except where the failure to so comply would not reasonably be expected
to have a Material Adverse Effect;
(iv) except as would not reasonably be expected to have a Material Adverse
Effect, (a) the Company has not received written notice of a civil, criminal,
or administrative action, suit, demand, claim, hearing, adjudicatory
proceeding, notice of violation, investigation, notice or demand letter, or
request for information pending or threatened under any Environmental Law
against the Company, and (b) the Company has not received written notice of
actual or potential liability or of violations of or by the Company under any
Environmental Law, including, but not limited to, resulting from the
activities of any Contractor for or on behalf of the Company, or liability
assumed by the Company pursuant to any contract entered into by the Company;
(v) to the Knowledge of the Company, no property or facility presently or
formerly owned, operated or leased by the Company is listed or proposed for
listing on the National Priorities List promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
or on any state "superfund" list established under any Environmental Law;
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(vi) except as would not reasonably be expected to have a Material Adverse
Effect, to the Knowledge of the Company, there has been no disposal, spill,
discharge or release of any Hazardous Material generated, used, owned, stored
or controlled by the Company on, at, or under any property presently or
formerly owned, leased or operated by the Company, and there are no Hazardous
Materials located in, at, on, or under any such facility or property, or at
any other location at which hazardous material generated, used, owned, stored,
or controlled by the Company has been disposed of, in any case that could
reasonably be expected to require investigation, removal, remedial or
corrective action by the Company or that would reasonably likely result in
liability of, or costs to, the Company under any Environmental Law;
(vii) to the Knowledge of the Company, except as would not reasonably be
expected to have a Material Adverse Effect, there has not been any underground
or above-ground storage tank or other underground storage receptacle or
related piping used by the Company, or any impoundment or other disposal area
containing Hazardous Materials, except as in compliance with applicable
Environmental Law, located on any facility or property owned, leased or
operated and used by the Company during the period of such ownership, lease or
operation, and no asbestos or polychlorinated biphenyls have been used or
disposed of, or have been located at, on, or under any such facility or
property during the period of such ownership, lease or operation except in
compliance with applicable Environmental Law;
(viii) to the Knowledge of the Company, no lien has been recorded against
any properties, assets or facilities owned, leased or operated by the Company
or under any Environmental Law; and
(ix) as to such Form 10-K report referenced above in this Section 4.24(a),
the Company has no Knowledge of any facts or circumstances which would lead to
the realization of risks or liabilities listed as qualifications or exceptions
to such Form 10-K report.
(b) To the Knowledge of the Company, the Company has provided or made
available to Parent, Subco, and their authorized representatives all records
and files not subject to the attorney-client or attorney work product
privileges, including, but not limited to, all assessments, reports, studies,
audits, analyses, tests and data currently in the possession of the Company
concerning the existence of Hazardous Materials at facilities or properties
currently or formerly owned, operated, or leased by the Company or concerning
compliance by the Company with, or liability under, any Environmental Law.
This Section shall not create any obligation to create any records or files or
to conduct any tests, assessments or analyses that currently do not exist or
are not in the possession of the Company.
(c) For purposes of this Agreement:
(i) "Contractor" shall mean any person or entity, including, but not
limited to, suppliers, vendors, or service providers with which the Company
formerly or presently has any written contract or other formal agreement to
provide maintenance, facilities, building operations or cleaning services,
or other ministerial services unrelated to product development or
manufacturing.
(ii) "Environmental Law" shall mean CERCLA, the Resource Conservation and
Recovery Act of 1976, as amended, and any other applicable federal, state
or local statute, rule, regulation, order, judgment, directive, decree or,
as decided as of the date of this Agreement, common law applicable to the
Company, and regulating or imposing liability or enforceable standards of
conduct concerning air emissions, waste water discharges, 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, or otherwise concerning pollution or
the protection of the outdoor or indoor environment, public health, or the
disposal of biological material or biohazardous waste.
(iii) "Environmental Permit" shall mean any permit, license, approval,
consent, or other authorization by a federal, state, or local government or
regulatory entity pursuant to any Environmental Law.
(iv) "Hazardous Material" shall mean any pollutant, contaminant or
hazardous or toxic substances or wastes, or medical, biohazardous,
biological or infectious waste or material, regulated or governed as such
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in or by any Environmental Law, including, without limitation, any
asbestos, any petroleum, oil (including crude oil or any fraction thereof),
any radioactive substance, any polychlorinated biphenyls, and any other
substance that is adjudicated to impose liability under any Environmental
Law.
Section 4.25. Tax Treatment; Officer's Certificate as to Tax Matters. The
Company has not taken, agreed to take, or will take any action that would
prevent the Merger from constituting a transaction qualifying under Section
368(a) of the Code. The Company is not aware of any agreement, plan or other
circumstance that would prevent the Merger from qualifying under Section
368(a) of the Code or that would prevent an exchange of Company Common Stock
for Parent ADSs pursuant to the Merger from qualifying as an exchange
described in Section 354 of the Code (except with respect to any cash received
in lieu of a fractional share) to which Section 367(a)(1) of the Code does not
apply, and to the Company's Knowledge, the Merger and each such exchange will
so qualify. As of the date hereof, the Company knows of no reason why it will
be unable to deliver to Skadden, Arps, Slate, Meagher & Flom LLP and to Cahill
Gordon & Reindel at the Closing representation letters with respect to the
Company in form and substance sufficient to enable such counsel to render the
opinions required by Section 6.05 of this Agreement.
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business of the Company. Except as contemplated by
this Agreement or as expressly agreed to in writing by Parent, during the
period from the date of this Agreement to the Effective Time, the Company and
its Subsidiary will each conduct its operations according to its ordinary and
usual course of business consistent in all material respects with past
practice, and will use commercially reasonable efforts to preserve intact its
business organization, to keep available the services of its officers and
employees and to preserve the current relationships with suppliers,
distributors, customers and others having significant business relationships
with it and will take no action that would adversely affect its ability to
consummate the Merger or the other transactions contemplated hereby. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Effective Time, neither the Company
nor its Subsidiary will, without the prior written consent of Parent:
(a) amend its Amended and Restated Certificate of Incorporation (or other
applicable charter document) or by-laws;
(b) authorize for issuance, issue, sell, deliver, grant any options,
warrants, calls, subscriptions or other rights for, or otherwise agree or
commit to issue, sell or deliver any shares of any class of capital stock
of the Company or its Subsidiary or any securities convertible into or
exchangeable or exercisable for shares of any class of capital stock of the
Company or its Subsidiary, other than, in the case of the Company,
(i) pursuant to and in accordance with and subject to the limitations set
forth in (x) the Company Purchase Plans or (y) the Company Common Stock
Equivalents and (ii) options to purchase up to 50,000 shares of Company
Common Stock pursuant to and in accordance with and subject to the
limitations set forth in the Company Option Plans; provided, however, that
the Company shall be permitted to take such action as may be necessary to
accelerate the vesting and exercisability schedule of the unvested and
unexercisable portion of each option to purchase Company Common Stock that
is outstanding immediately prior to date of this Agreement in a manner that
is consistent with the acceleration schedule adopted by the Board of
Directors of the Company by resolution dated December 21, 1995;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock or that of any subsidiary;
(d)(i)(x) create or incur indebtedness for borrowed money, (y) assume,
guarantee, endorse or otherwise as an accommodation become liable or
responsible for the obligations of any other individual, firm or
corporation or (z) make any loans, advances or capital contributions to or
investments in any other
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individual, firm or corporation, except, in the case of each of clause (x),
(y) and (z), in the ordinary course of business and consistent with past
practice but in no event in an amount in excess of $500,000 in the
aggregate; (ii) enter into or amend any material contract, agreement,
commitment arrangement or transaction material to the Company and its
Subsidiary taken as a whole; or (iii) incur any liabilities except for
liabilities that, individually or in the aggregate, would not have a
Material Adverse Effect;
(e)(i) increase in any manner the compensation of any of its directors,
officers or, except in the ordinary course of business and consistent with
past practice, its employees; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit, or enter into any contract,
agreement or understanding with any of its past or present employees
relating to any such pension, retirement allowance or other employee
benefit, except, in each case, as required under agreements, plans or
arrangements existing as of December 31, 1997; (iii) grant any severance or
termination pay to, or enter into any employment, consulting or severance
agreement with, any person; (iv) except in the ordinary course of business
and consistent with past practice, or as may be required to comply with
applicable law, become obligated under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit arrangement, or similar
plan or arrangement that was not in existence on or prior to December 31,
1997, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay, retirement or other benefit plan, contract, agreement or
understanding, or amend any such plans, contracts, agreements or
understandings in existence prior to December 31, 1997; and (v) initiate,
approve or allow to begin any new Purchase Period (as defined in the 1997
Company Purchase Plan) under the 1997 Company Purchase Plan or new Offer
Period (as defined in the 1992 Company Purchase Plan) under the 1992
Company Purchase Plan.
(f) except as otherwise expressly contemplated hereby, sell, transfer,
lease, license, pledge, mortgage or otherwise dispose of, or encumber, or
agree to sell, transfer, lease, license, pledge, mortgage or otherwise
dispose of or encumber, any material properties, real, personal or mixed;
(g) except in the ordinary course of business or as otherwise expressly
contemplated hereby, grant any material licenses to use any Intellectual
Property Rights or unpatented inventions set forth in Section 4.21 of the
Disclosure Statement or acquire any material licenses to use Intellectual
Property Rights having a cost in excess of $500,000 in the aggregate;
provided that the Company and its Subsidiary 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;
(h) except as otherwise expressly contemplated hereby, enter into any
other agreements, commitments or contracts, except agreements, commitments
or contracts for the purchase, sale or lease of goods or services in the
ordinary course of business and consistent in all material respects with
past practice and having a term of no more than one year;
(i) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an
agreement with any other person with respect to, any plan of liquidation or
dissolution, any acquisition of a material amount of assets or securities,
any disposition of a material amount of assets or securities or any
material change in its capitalization, or any entry into a material
contract or any amendment or modification of any material contract or any
release or relinquishment of any material contract rights not in the
ordinary course of business and consistent with past practice, except as
expressly contemplated by this Agreement;
(j) except as previously approved by the Board of Directors of the
Company prior to the date hereof and as identified to Parent prior to the
date hereof, authorize, commit to make or make capital expenditures in
excess of $500,000 in the aggregate; provided, however, that the Company
may make capital expenditures of up to $1.0 million in the aggregate in
connection with its facility located at 1980 Independence Avenue, Menlo
Park, California;
(k) permit any insurance policy naming it as a beneficiary or a loss
payee to be canceled, terminated or materially altered, except in the
ordinary course of business and consistent with past practice and following
written notice to Parent;
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(l) maintain its books and records in a manner not in the ordinary course
of business and consistent with past practice;
(m) enter into any hedging, option, derivative or other similar
transaction;
(n) institute any change in its accounting methods, principles or
practices or revalue any of its respective assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivables;
(o) settle or compromise any material federal, state, local or foreign
Tax liability, make any new material Tax election, revoke or modify any
existing Tax election, or request or consent to a change in any method of
Tax accounting;
(p) except for payment of professional fees relating to the Merger, pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of liabilities (including
accounts payable) 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 the collection in the
ordinary course of business;
(q) take, cause or permit to be taken any action, whether before or after
the Effective Time, that could reasonably be expected to prevent the Merger
from constituting a "reorganization" within the meaning of Section 368(a)
of the Code or prevent an exchange of Company Common Stock for Parent ADSs
pursuant to the Merger from qualifying as an exchange described in Section
354 of the Code (except with respect to any cash received in lieu of a
fractional share) to which Section 367(a)(1) of the Code does not apply;
(r) amend, modify, terminate, waive or permit to lapse other than by the
passage of time any material right of first refusal, preferential right,
right of first offer or any other material right of the Company or its
Subsidiary;
(s) take any action that would or is reasonably likely to result in any
of the covenants and agreements set forth in Article I and V of this
Agreement or any of the conditions set forth in Article VI of this
Agreement not being satisfied as of the Closing Date; and
(t) agree to do any of the foregoing.
Section 5.02. No Solicitation. (a) The Company agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit its Subsidiary
or any of its or its Subsidiary's directors, officers, employees, agents or
representatives to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public
information) any inquiries or the making of any proposal with respect to any
merger, consolidation or other business combination involving the Company or
its Subsidiary or any acquisition of any kind of a material portion of the
assets or capital stock of the Company and its Subsidiary taken as a whole (an
"Acquisition Transaction") or negotiate, explore or otherwise communicate in
any way with any third party with respect to any Acquisition Transaction or
enter into any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement; provided, however, that the Company may, in
response to an unsolicited bona fide, written proposal from a Third Party
regarding a Superior Proposal (as defined below in this Section 5.02(a))
furnish information to, engage in discussions and negotiate with such Third
Party, but only if the Board of Directors of the Company determines in good
faith by a majority vote that taking such action is reasonably likely to lead
to an Acquisition Transaction that is more favorable to the stockholders of
the Company than the Merger and that failing to take such action would be
reasonably likely to constitute a breach of the Board's fiduciary duties,
having received prior to such determination (i) the written advice of outside
legal counsel of the Company that failing to take such action would be
reasonably likely to constitute a breach of the fiduciary duties of the Board
of Directors and (ii) the written advice of Morgan Stanley & Co. Incorporated
or another financial advisor of nationally recognized reputation that the
Superior Proposal would be reasonably likely to provide greater value to the
Company and its stockholders than the Merger. As used herein, "Superior
Proposal" means a bona fide, written and unsolicited
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offer made by any financially responsible Third Party (other than Parent) with
respect to an Acquisition Transaction for which any required financing is
committed in writing by reputable financing sources.
(b) The Company shall promptly notify Parent of (i) receipt of any proposal
relating to an Acquisition Transaction or any request for nonpublic
information relating to the Company in connection with an Acquisition
Transaction or for access to the properties, books or records of the Company
or its Subsidiary by any person or entity that informs the Board of Directors
of the Company that it is considering making, or has made, a proposal relating
to an Acquisition Transaction or (ii) any action, failure to act,
determination or resolution by the Company or its Board of Directors referred
to in Section 1.05, 5.02(a), 10.02(c), 10.02(d) or 10.03(c). Such notice to
Parent shall be made orally and in writing and shall include a copy of any
writing submitted by such person or entity and shall identify the offeror and
indicate in reasonable detail the terms and conditions of such proposal,
inquiry or contract.
(c) During the period from the date of this Agreement through the Effective
Time, the Company shall not terminate, amend, modify or waive any provision of
any confidentiality or standstill agreement to which it or its Subsidiary is a
party. During such period, the Company shall enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreement,
including, but not limited to, by obtaining injunctions to prevent any
breaches of any such agreement and to enforce specifically the terms and
provisions thereof in any court of the United States of America or of any
state having jurisdiction.
Section 5.03. Access to Information. (a) From the date of this Agreement
until the Effective Time, each party will give the other party and their
authorized representatives (including counsel, environmental and other
consultants, accountants, auditors and agents) full access during normal
business hours to all facilities, personnel and operations and to all books
and records of it and its subsidiaries, will permit and cooperate with such
other party and their authorized representatives to conduct inspections as
they may reasonably require (including, without limitation, any air, water,
soil or other environmental testing and monitoring deemed necessary by them)
and will cause its officers and those of its subsidiaries to furnish such
other party with such financial and operating data and other information with
respect to its business and properties as such other party may from time to
time reasonably request; provided, however, that the performance by either
party of any such environmental testing or monitoring shall be subject to the
prior receipt by the other party of reasonably satisfactory indemnity relating
thereto.
(b) Each of Parent and Subco will hold and will cause their respective
authorized representatives, including consultants and advisors, to hold in
strict confidence pursuant to the Confidentiality Agreement, dated as of
January 22, 1998, between Parent and the Company (the "Confidentiality
Agreement"), all documents and information (whether oral or written)
concerning the Company and its Subsidiary furnished to Parent or Subco in
connection with the transactions contemplated by this Agreement. The Company
will hold and will cause its authorized representatives, including consultants
and advisors, to hold in strict confidence pursuant to the Confidentiality
Agreement, all documents and information (whether oral or written) concerning
Parent and the Parent Subsidiaries furnished to the Company in connection with
the transactions contemplated by this Agreement. Notwithstanding any provision
of Article X hereof, nothing herein shall relieve any party of liabilities for
any and all damages to the other party by reason of any breach of this Section
5.03(c).
Section 5.04. Registration Statement and Company Proxy Statement. The
Company, with the assistance of Parent (only with respect to information to be
provided by Parent) shall prepare and file with the SEC as soon as is
reasonably practicable after the date hereof the Company Proxy Statement and
Parent, with the assistance of the Company (only with respect to information
to be provided by the Company), shall file the Registration Statement in which
the Company Proxy Statement shall be included. Parent and the Company shall
use all commercially reasonable efforts to have the Registration Statement
declared effective by the SEC and the Company Proxy Statement cleared by the
staff of the SEC as promptly as practicable. Parent shall take any action
required to be taken under applicable state blue sky or securities laws in
connection with the Parent ADSs to be issued as Closing Consideration. Parent
and the Company shall promptly furnish to each other all information, and take
such other actions (including, without limitation, using all commercially
reasonable efforts to provide
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any required consents of their respective independent accountants or auditors,
as the case may be), as may reasonably be requested in connection with any
action by any of them in connection with the preceding sentences of this
Section 5.04.
Section 5.05. Commercially Reasonable Efforts; Other Actions. Subject to the
terms and conditions herein provided, Parent, Subco and the Company shall use
all commercially reasonable efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) the filing of Notification and Report Forms under the HSR Act
with the Federal Trade Commission (the "FTC") and the Antitrust Division of
the Department of Justice (the "Antitrust Division") and using all
commercially reasonable efforts to respond as promptly as practicable to any
inquiries received from the FTC or the Antitrust Division for additional
information or documentation, (ii) the obtaining of all necessary consents,
approvals or waivers and (iii) the lifting of any legal bar to the Merger.
Parent shall cause Subco to perform all of its obligations under this
Agreement and shall not take any action that would cause the Company to fail
to perform its obligations hereunder.
Section 5.06. Public Announcements. Before issuing any press release or
otherwise making any public statement with respect to the Merger or any of the
other transactions contemplated hereby, Parent, Subco and the Company will
consult with each other as to its form and substance and shall not issue any
such press release or make any such public statement prior to obtaining the
consent of each of the other parties to this Agreement (which consent will not
be unreasonably withheld or delayed), except as may be required by law.
Section 5.07. Notification of Certain Matters. The Company shall give prompt
notice to Parent of any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would become a
default, received by the Company or its Subsidiary subsequent to the date of
this Agreement and prior to the Effective Time, under any contract material to
the general affairs, management, business, operations, assets, condition
(financial or otherwise) or prospects of the Company and its Subsidiary taken
as a whole, to which the Company or its Subsidiary is a party or is subject.
The Company shall keep Parent and Subco informed of all non-routine actions
the Company intends to take in connection with any Environmental Law and all
actions shall be on terms and conditions reasonably satisfactory to Parent and
Subco. Each of the Company and Parent shall give prompt notice to the other
party of (a) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the Merger or other transactions contemplated hereby, (b) any change or
prospective change that is likely to have, respectively, a Material Adverse
Effect or Parent Material Adverse Effect or (c) the occurrence or existence of
any event that would, or could with the passage of time or otherwise, make any
representation or warranty contained herein untrue.
Section 5.08. Indemnification. (a) Parent shall cause the Surviving
Corporation to maintain and perform in the same manner the Company's existing
indemnification provisions with respect to present and former directors and
officers of the Company for all losses, claims, damages, expenses or
liabilities arising out of actions or omissions or alleged actions or
omissions occurring at or prior to the Effective Time, to the extent permitted
or required under applicable law, and the Company's Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws in effect at the
date hereof (to the extent consistent with applicable law).
(b) For a period of six years after the Effective Time, Parent shall cause
the Surviving Corporation to maintain in effect the current policies of
directors' and officers' liability insurance maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions that
are no less advantageous) with respect to claims arising from facts or events
that occurred at or before the Effective Time; provided, however, that the
Surviving Corporation shall not be obligated to make annual premium payments
for such insurance to the extent such premiums exceed 150% of the annual
premiums paid as of the date hereof by the Company for such insurance.
Section 5.09. Expenses. Except as set forth in Section 10.05, Parent and
Subco, on the one hand, and the Company, on the other hand, shall bear their
respective expenses incurred in connection with this Agreement,
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the Merger, and the transactions contemplated hereby, including, without
limitation, the preparation, execution and performance of this Agreement and
the transactions contemplated hereby and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, counsel and accountants,
except that expenses incurred in printing, mailing and filing (including,
without limitation, SEC filing fees and stock exchange listing application
fees) the Company Proxy Statement shall be shared equally by the Company and
Parent.
Section 5.10. Affiliates. The Company shall advise Parent in writing of any
person who becomes an Affiliate after the date hereof and prior to the
Effective Time and shall use all commercially reasonable efforts to cause each
such person to deliver to Parent, no later than the date such person becomes
an Affiliate, a written agreement substantially in the form of Exhibit A
hereto.
Section 5.11. Stock Exchange Listings. Parent shall use all commercially
reasonable efforts to list on (i) the NYSE, upon official notice of issuance,
the Parent ADSs to be issued in connection with the Merger and (ii) the Irish
Stock Exchange and the London Stock Exchange (subject to allotment) the Parent
Ordinary Shares to be represented by Parent ADSs constituting the Closing
Consideration.
Section 5.12. Resignation of Directors. Prior to the Effective Time, the
Company shall take all commercially reasonable efforts to deliver to Parent at
no cost the resignations of such directors of the Subsidiary as Parent shall
specify, effective at the Effective Time. In connection with any such
resignation, the directors shall simultaneously reconvey their directors'
qualifying shares, if any, to the Subsidiary or such other persons as Parent
shall specify at no additional expense to Parent, Subco or the Subsidiary
other than customary expenses directly relating to the transfer and issuance
of directors' qualifying shares, if any.
Section 5.13. Stock Purchase Plans. The Company shall, on or before the
Effective Time, terminate (i) effective as of May 1, 1998 its 1992 Employee
Stock Purchase Plan (the "1992 Company Purchase Plan") and (ii) effective as
of July 1, 1998 its 1997 Employee Stock Purchase Plan (the "1997 Company
Purchase Plan" and, together with the 1992 Company Purchase Plan, the "Company
Purchase Plans"). Any unused cash balances shall be refunded to participants
(as defined in the Purchase Plans) in cash, without interest.
Section 5.14. Governance. Immediately after the Effective Time, Parent shall
appoint Paul Goddard, Ph.D. (i) the President of Pharmaceutical Operations of
Parent and (ii) to the Executive Committee of Parent.
Section 5.15. Employee Benefits. For a period of 12 months following the
Effective Time, employees of the Company immediately prior to the Effective
Time shall be entitled to receive benefits that are no less favorable, in the
aggregate, than the benefits received by such employees immediately prior to
the Effective Time; provided, however, that Parent and the Parent Subsidiaries
shall not be required to continue any employment relationship with any
employee for any specified period of time.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF PARENT, SUBCO AND THE COMPANY
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing (as defined in Section
9.01) of each of the following conditions:
Section 6.01. Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and remain in effect. All necessary state
securities and blue sky authorizations shall have been received.
Section 6.02. Stockholder Approval. The approval of a majority of the
outstanding shares of Company Common Stock cast at the Special Meeting or any
adjournment thereof shall have been obtained.
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Section 6.03. Listing. The Parent ADSs issuable in connection with the
Merger shall have been authorized for listing on the NYSE, subject to official
notice of issuance, and the Parent Ordinary Shares to be represented by Parent
ADSs constituting the Closing Consideration shall have been admitted (subject
to allotment) to the Official Lists of the Irish Stock Exchange and the London
Stock Exchange.
Section 6.04. Certain Proceedings. (a) No writ, order, decree or injunction
of a court of competent jurisdiction or governmental entity shall have been
entered and remain in effect against Parent, Subco or the Company that
prohibits the consummation of the Merger or limits the exercise by Parent and
the Surviving Corporation of full rights to own and operate the business of
the Company and its Subsidiary, and any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and no action shall have been taken under the Irish Mergers Act
prohibiting the Merger and the relevant period under the Irish Mergers Act for
objection shall have expired.
(b) All material authorizations, orders, consents, licenses, confirmations,
clearances, permissions and approvals that may be required in any foreign
jurisdiction for the purposes of applicable anti-trust, competition, takeover
or similar legislation in connection with the consummation of the Merger and
the other transactions contemplated hereby shall have been received and shall
remain in full force and effect.
Section 6.05. Tax Matters. Parent shall have received an opinion of Cahill
Gordon & Reindel, counsel to Parent and Subco, and the Company shall have
received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
the Company, each such opinion dated as of the Closing Date, and each such
opinion substantially to the effect that (i) the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code; (ii) each of
Parent, Subco and the Company will be a party to such reorganization within
the meaning of Section 368(b) of the Code; and (iii) except for cash received
in lieu of fractional Parent ADSs, no gain or loss will be recognized by a
stockholder of the Company as a result of the Merger with respect to the
shares of Company Common Stock converted into Parent ADSs; provided that (x)
the Company complies with the reporting requirements contained in Treas. Reg.
(S)1.367(a)-3(c)(6) and (y) with respect to any particular stockholder of the
Company, such stockholder owns (directly or indirectly and taking into account
certain attribution rules) less than five percent of the total voting power
and less than five percent of the total value of parent's outstanding capital
stock immediately after the Merger (a "less-than-5% holder") or alternatively,
such stockholder is not a less-than-5% holder but will still qualify for non
recognition treatment provided that such stockholder enters into the
applicable gain recognition agreement, as defined in Treasury Regulation
section 1.367(a)-3(c)(ii). In rendering such opinions, such counsel may
receive and rely upon representations of fact contained in certificates as
specified in Section 3.13 and 4.25.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUBCO
The obligation of Parent and Subco 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
Subco:
Section 7.01. Representations and Warranties True. The representations and
warranties of the Company that are qualified by reference to a Material
Adverse Effect or materiality shall be true and correct in all respects and
the representations and warranties of the Company that are not so qualified
shall be true and correct in all material respects, in each case as of the
date of this Agreement and, except to the extent such representations and
warranties speak as of an earlier date, as of the Effective Time as though
made at and as of the Effective Time, except for changes expressly permitted
or contemplated by this Agreement.
Section 7.02. Performance. The Company shall have performed and complied in
all material respects with all agreements, obligations and conditions required
by this 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 that,
individually or in the
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aggregate, would not either prevent or materially delay the Company's ability
to consummate the Merger and the other transactions contemplated hereby or
have a Material Adverse Effect.
Section 7.03. Certificates. The Company shall furnish such certificates of
its officers to evidence compliance with the conditions set forth in Sections
7.01 and 7.02 as may be reasonably requested by Parent or Subco.
Section 7.04. Material Adverse Change. There shall not have occurred since
December 31, 1997 (i) any material adverse change in the general affairs,
management, business, operations, assets, condition (financial or otherwise)
or prospects of the Company and its Subsidiary taken as a whole (including the
loss of a significant portion of the employees of the Company), excluding any
such material adverse change relating solely to Ziconotide or (ii) any
Ziconotide Event.
Section 7.05. Consents, Approvals and Notifications. All the consents and
approvals, and notifications and disclosures, and filings and registrations
described in Section 4.03 of this Agreement shall have been obtained.
Section 7.06. FDA Matters. The meeting between the Company and the FDA
regarding, among other things, the filing by the Company with the FDA of a New
Drug Application relating to Ziconotide shall have occurred; the FDA shall
have granted such meeting and acknowledged receipt of supporting materials for
such meeting; the FDA shall have responded during or after the meeting either
verbally or in writing; the Company shall have provided to Parent copies of
all documents, materials and other information prepared by the FDA or the
Company in connection therewith; and Parent shall have been provided the
opportunity to attend and observe such meeting.
Section 7.07. Additional Agreements. Parent shall have received agreements
substantially in the form of Exhibit B hereto executed by each of the
executive officers of the Company restricting each such executive officer's
ability to dispose of Parent ADSs held by such executive officer for a period
of one year following the Effective Time.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this 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:
Section 8.01. Representations and Warranties True. The representations and
warranties of Parent and Subco that are qualified by reference to a Parent
Material Adverse Effect or materiality shall be true and correct in all
respects and the representations and warranties of Parent and Subco that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and, except to the extent such
representations and warranties speak as of an earlier date, as of the
Effective Time as though made at and as of the Effective Time, except for
changes expressly permitted or contemplated by this Agreement.
Section 8.02. Performance. Parent and Subco shall have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by them
on or prior to the Closing Date except for those failures to so perform or
comply that, individually or in the aggregate, would not either prevent or
materially delay the ability of Parent or Subco to consummate the Merger and
the other transactions contemplated hereby or have a Parent Material Adverse
Effect.
Section 8.03. Certificates. Parent and Subco shall furnish such certificates
of their respective officers to evidence compliance with the conditions set
forth in Sections 8.01 and 8.02 as may be reasonably requested by the Company.
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Section 8.04. Material Adverse Change. There shall not have occurred since
December 31, 1997 any material adverse change in the general affairs,
management, business, operations, assets, condition (financial or otherwise)
or prospects of Parent and its Parent Subsidiaries taken as a whole.
Section 8.05. Consents, Approvals and Notifications. All necessary consents
and approvals of, and notifications and disclosures to, and filings and
registration with, any United States or any other governmental authority or
any other third party required on the part of Parent and Subco for the
consummation of the Merger and the other transactions contemplated hereby
shall have been obtained or accomplished.
ARTICLE IX
CLOSING
Section 9.01. Time and Place. Subject to the provisions of Articles VI, VII,
VIII and X, the closing of the Merger (the "Closing") shall take place at the
offices of Cahill Gordon & Reindel, as soon as practicable but in no event
later than 9:30 A.M., local time, on the first business day after the date on
which each of the conditions set forth in Articles VI, VII and VIII have been
satisfied or waived by the party or parties entitled to the benefit of such
conditions; or at such other place, at such other time, or on such other date
as Parent, Subco and the Company may mutually agree. The date on which the
Closing actually occurs is herein referred to as the "Closing Date."
Section 9.02. Filings at the Closing. Subject to the provisions of Articles
VI, VII, VIII and X, the Company, Parent and Subco shall cause to be executed
and filed at the Closing the Certificate of Merger and shall cause the
Certificate of Merger to be recorded in accordance with the applicable
provisions of the Delaware Act and shall take any and all other lawful actions
and do any and all other lawful things necessary to cause the Merger to become
effective.
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.01. Termination. This Agreement may be terminated and the Merger
may be abandoned 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 November 30,
1998, 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 Meetings or
any adjournment thereof is not obtained.
Section 10.02. Termination by Parent. This 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 failed to comply in any material respect with
any of the covenants or agreements contained in Articles I and V of this
Agreement to be complied with or performed by the
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Company at or prior to such date of termination; provided, however, that,
if such failure to comply is capable of being cured prior to the Effective
Time, such failure shall not have been cured within 20 days of the delivery
to the Company of written notice of such failure;
(b) there exists a breach or breaches of any representation or warranty
of the Company contained in this Agreement such that the Closing condition
set forth in Section 7.01 would not be satisfied; provided, however, that
if such breach or breaches are capable of being cured prior to the
Effective Time, such breaches shall not have been cured within 20 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 this 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 this Agreement or the Merger or
(iii) makes any recommendation with respect to an Acquisition Transaction
(including making no recommendation or stating an inability to make a
recommendation), other than a recommendation to reject such 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; or
(d) the Company or its representatives shall furnish or disclose non-
public information to, or negotiate, discuss, explore or otherwise
communicate in any way with, a Third Party 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; provided, however, that in such event
Parent shall have no right to terminate pursuant to this clause (d) until
the earlier of (i) June 29, 1998 and (ii) the 30th calendar day after the
date on which the Company or any of its representatives first takes any of
the foregoing actions referred to in this clause (d) (the "Trigger Date")
and, in each case, only if the Company and its representatives have not
terminated all such activities prior to the Trigger Date; provided,
further, that if, at any time after the Trigger Date, a Ziconotide Event
shall have occurred and be continuing and each of the conditions set forth
in Articles VI, VII and VIII shall have been satisfied or waived by the
party or parties entitled to the benefit of such conditions, other than any
condition which shall not have been satisfied solely as a result of such
Ziconotide Event (the "Satisfaction Date"), then Parent shall have no right
to terminate pursuant to this clause (d) during the period from the 14th
calendar day following the Satisfaction Date to the 44th calendar day
following the Satisfaction Date and only if the Company and its
representatives have not terminated all such activities prior to such 44th
day.
Section 10.03. Termination by the Company. This 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 Subco shall have failed to comply in any material respect
with any of the covenants or agreements contained in Articles I and V of
this Agreement to be complied with or performed by Parent or Subco at or
prior to such date of termination; provided, however, that, if such failure
to comply is capable of being cured prior to the Effective Time, such
failure to comply shall not have been cured within 20 days of the delivery
to Parent of written notice of such failure;
(b) there exists a breach or breaches of any representation or warranty
of Parent or Subco contained in this Agreement such that the Closing
condition set forth in Section 8.01 would not be satisfied; provided,
however, that if such breach or breaches are capable of being cured prior
to the Effective Time, such breaches shall not be cured within 20 days of
delivery to Parent of written notice of such breach or breaches; or
(c) if (i) the Company shall have received a Superior Proposal, (ii) the
Board of Directors of the Company reasonably determines in good faith by a
majority vote that such Superior Proposal is more favorable to the
stockholders of the Company than the Merger and is reasonably likely to be
consummated and that failing to take such action would be reasonably likely
to constitute a breach of the Board's fiduciary duties to the stockholders
of the Company, having received prior to such determination (x) the written
29
<PAGE>
advice of outside legal counsel of the Company that failing to take such
action would be reasonably likely to constitute a breach of the fiduciary
duties of the Board of Directors and (y) the written advice of Morgan
Stanley & Co. Incorporated or another financial advisor of nationally
recognized reputation that the Superior Proposal would be reasonably likely
to provide greater value to the Company and its stockholders than the
Merger and (iii) the Company shall have given Parent five days prior notice
of its determination to terminate this Agreement.
Section 10.04 Procedure for Termination. In the event of termination and
abandonment of the Merger by Parent or the Company pursuant to this Article X,
written notice thereof shall forthwith be given to the other.
Section 10.05. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article X, no party hereto (or any of its directors or officers) shall have
any liability or further obligation to any other party to this Agreement,
except as provided in this Section 10.05 and except that nothing herein shall
relieve any party from liability for any breach of this Agreement.
(b) In the event of a termination of this Agreement by the Company pursuant
to Section 10.03(a) or (b), then Parent shall within two business days of such
termination pay the Company by wire transfer or immediately available funds to
an account specified by the Company up to $3.0 million to reimburse the
Company for its documented fees and expenses (including the fees and expenses
of counsel, accountants, consultants and advisors) incurred in connection with
this Agreement and the transactions contemplated hereby. In the event of a
termination of this Agreement by Parent pursuant to Section 10.02(a) or (b),
then 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 up to $3.0 million to reimburse Parent for its documented fees and
expenses (including the fees and expenses of counsel, accountants, consultants
and advisors) incurred in connection with this Agreement and the transactions
contemplated hereby. In the event of a termination of this Agreement by Parent
pursuant to Section 10.02(b) and Parent and the Company mutually agree in
writing that such termination was valid and in accordance with this Agreement
and resulted solely from a Ziconotide Event then, at the Company's option
exercised at the time of such termination, Parent shall, within 30 days of
such termination, purchase 2,000,000 shares of Company Common Stock at a
purchase price in cash equal to $20 per share (subject to appropriate
adjustments in the event of any split, combination or reclassification of the
Company Common Stock at any time subsequent to the date of this Agreement).
Parent shall be entitled to customary registration rights relating to such
Company Common Stock including, but not limited to, one demand registration at
Parent's expense.
(c) In the event of a termination of this Agreement (i) by Parent pursuant
to Section 10.02(c) or (d) or (ii) by the Company pursuant to Section
10.03(c), then, in any such case, 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) up to $3.0 million to reimburse Parent
for its documented fees and expenses (including the fees and expenses of
counsel, accountants, consultants and advisors) incurred in connection with
this Agreement and the transactions contemplated hereby and (b) a fee of $24.0
million as liquidated damages.
(d) In the event of a termination of this Agreement by Parent pursuant to
Section 10.01(b) and if Parent and the Company mutually agree in writing that
(i) such termination was valid and in accordance with this Agreement and (ii)
at the time of such termination a Ziconotide Event shall have occurred and be
continuing and each of the conditions set forth in Articles VI, VII and VIII
shall have been satisfied or waived by the party or parties entitled to the
benefit of such conditions, other than any condition which shall not have been
satisfied solely as a result of such Ziconotide Event, then, at the Company's
option exercised at the time of such termination, Parent shall, within 30 days
of such termination, purchase 2,000,000 shares of Company Common Stock at a
purchase price in cash equal $20 per share (subject to appropriate adjustments
in the event of any split, combination or reclassification of the Company
Common Stock at any time subsequent to the date of this Agreement). Parent
shall be entitled to customary registration rights relating to such Company
Common Stock including, but not limited to, one demand registration at
Parent's expense.
30
<PAGE>
ARTICLE XI
DEFINITIONS
Section 11.01. Terms Defined in This Agreement. The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.
<TABLE>
<S> <C>
1997 Balance Sheet......................................... 4.13
1992 Company Purchase Plan................................. 5.13
1997 Company Purchase Plan................................. 5.13
A Warrant.................................................. 2.04
Acquisition Transaction.................................... 5.02
ADRs....................................................... 2.01
Additional Payments........................................ 2.03
Affiliates................................................. 4.07
Agreement.................................................. First Paragraph
Antitrust Division......................................... 5.05
Average Market Value....................................... 6.06
B Warrant.................................................. 2.04
CERCLA..................................................... 4.24
Certificate of Merger...................................... 1.02
Certificates............................................... 2.03
Closing.................................................... 9.01
Closing Consideration...................................... 2.01
Closing Date............................................... 9.01
COBRA...................................................... 4.23
Code....................................................... RECITALS
Company.................................................... First Paragraph
Company Common Stock....................................... 2.01
Company Common Stock Equivalents........................... 4.10
Company Disclosure Statement............................... Article IV
Company Option Plans....................................... 2.04
Company Preferred Stock.................................... 4.10
Company Proxy Statement.................................... 1.05
Company Purchase Plans..................................... 5.13
Company SEC Reports........................................ 4.11
Company Warrants........................................... 2.04
Confidentiality Agreement.................................. 5.03
Constituent Corporations................................... First Paragraph
Contractor................................................. 4.24
CSA........................................................ 4.20
Delaware Act............................................... 1.01
DEA........................................................ 4.20
Effective Time............................................. 1.02
Employee Benefit Plans..................................... 4.23
Environmental Law.......................................... 4.24
Environmental Permit....................................... 4.24
ERISA...................................................... 4.23
ERISA Affiliate............................................ 4.23
Exchange Act............................................... 3.06
Exchange Agent............................................. 2.03
Exchange Fund.............................................. 2.03
Exchange Ratio............................................. 2.01
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
Exchangeable Notes......................................... 3.11
FDCA....................................................... 4.20
Foreign Plan............................................... 4.23
FTC........................................................ 5.05
Hazardous Material......................................... 4.24
HSR Act.................................................... 3.04
Intellectual Property Rights............................... 4.21
Irish Mergers Act.......................................... 3.04
IRS........................................................ 4.23
Less-than-5%-holder........................................ 6.05
Market Value............................................... 2.05
Material Adverse Effect.................................... 4.01
Merger..................................................... 1.01
NYSE....................................................... 2.05
Parent..................................................... First Paragraph
Parent ADSs................................................ 2.01
Parent "B' Executive Shares................................ 3.11
Parent Disclosure Statement................................ Article III
Parent Exchange Options.................................... 2.04
Parent Executive Shares.................................... 3.11
Parent Material Adverse Effect............................. 3.01
Parent Ordinary Shares..................................... 2.01
Parent Plans............................................... 3.11
Parent SEC Reports......................................... 3.07
Parent Subsidiaries........................................ 3.01
Parent Warrants............................................ 3.11
Pension Benefit Plans...................................... 4.23
Registration Statement..................................... 3.06
SEC........................................................ 2.04
Securities Act............................................. 2.04
Special Meeting............................................ 1.05
Subco...................................................... First Paragraph
Subsidiary................................................. 4.01
Superior Proposal.......................................... 5.02
Surviving Corporation...................................... 1.01
Tax........................................................ 4.22
Tax Returns................................................ 4.22
Taxes...................................................... 4.22
Third Party................................................ 1.05
Treas. Reg................................................. 4.22
Trigger Date............................................... 10.02
U.S. GAAP.................................................. 3.07
Welfare Plans.............................................. 4.23
Ziconotide Event........................................... 4.14
</TABLE>
32
<PAGE>
ARTICLE XII
MISCELLANEOUS
Section 12.01. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement
of Parent, Subco and the Company at any time prior to the Effective Time with
respect to any of the terms contained herein; provided, however, that after
this Agreement is adopted by the stockholders of the Company, no such
amendment or modification shall change the amount or form of the Closing
Consideration.
Section 12.02. Waiver of Compliance; Consents. Any failure of Parent or
Subco, on the one hand, or the Company, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by the
Company or Parent or Subco, respectively, only by a written instrument signed
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 12.02.
Section 12.03. Survivability; Investigations. The respective representations
and warranties of Parent, Subco and the Company contained herein or in any
certificates or other documents delivered prior to or at the Closing shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto and shall not survive the Closing.
Section 12.04. Notices. All notices and other communications hereunder shall
be in writing and shall be delivered personally, by next-day courier or mailed
by registered or certified mail (return receipt requested), first class
postage prepaid, or telecopied with written confirmation of receipt, to the
parties at the addresses specified below (or at such other address for a party
as shall be specified by like notice; provided that notices of a change of
address shall be effective only upon receipt thereof). Any such notice shall
be effective upon receipt, if personally delivered or telecopied, one day
after delivery to a courier for next-day delivery, or three days after
mailing, if deposited in the U.S. mail, first class postage prepaid.
(a) if to the Company, to
Neurex Corporation
3760 Haven Avenue
Menlo Park, California 94025
Telecopy: (650) 853-1538
Attention: Paul Goddard, Ph.D.
with a copy to
Wise & Shepard LLP
3030 Hansen Way
Palo Alto, California 94304
Telecopy: (650) 856-1344
Attention: Thomas Barton, Esq.
and with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Telecopy: (213) 687-5600
Attention: Brian J. McCarthy, Esq.
33
<PAGE>
(b) if to Parent or Subco, to
Elan Corporation, plc
Lincoln House
Lincoln Place
Dublin 2, Ireland
Telecopy: 011-353-1-662-4963
Attention: Thomas G. Lynch
with a copy to
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: (212) 269-5420
Attention: William M. Hartnett, Esq.
Section 12.05. Assignment; Third Party Beneficiaries. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns
(including, without limitation, any wholly-owned Subsidiary of Parent
incorporated under the laws of the United States and substituted for Subco as
provided in Section 1.01), but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. This Agreement
is not intended to confer any rights or remedies hereunder upon any other
person except the parties hereto and, with respect to Section 5.08, the
officers, directors and employees of the Company.
Section 12.06. Governing Law. This Agreement shall be governed by 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.
Section 12.07. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.08. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall
only apply as to such party in the specific jurisdiction where such judgment
shall be made.
Section 12.09. Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof; (ii) the term "subsidiary" of any specified
corporation shall mean any corporation of which a majority of the outstanding
securities having ordinary voting power to elect a majority of the board of
directors is directly or indirectly owned by such specified corporation or any
other person of which a majority of the equity interests therein is, directly
or indirectly, owned by such specified corporation; and (iii) the term
"Knowledge" means, solely with respect to the Company, the actual knowledge of
the officers, directors or senior managers of the Company, after reasonable
inquiry.
Section 12.10. Entire Agreement. This Agreement, including the exhibits
hereto and the documents and instruments referred to herein (including the
Disclosure Statement), embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
representations, promises, warranties, covenants, or undertakings, other than
those expressly set forth or referred to herein and therein.
34
<PAGE>
IN WITNESS WHEREOF, Parent, Subco and the Company have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
ELAN CORPORATION, PLC
/s/ John Groom
By: _________________________________
Name: John Groom
Title:President and Chief
Operating Officer
GANESH ACQUISITION CORP.
/s/ Thomas Lynch
By: _________________________________
Name: Thomas Lynch
Title:Executive Vice President and
Chief Financial Officer
NEUREX CORPORATION
/s/ Paul Goddard
By: _________________________________
Name: Paul Goddard
Title:Chief Executive Officer
S-1
<PAGE>
EXHIBIT A
FORM OF COMPANY AFFILIATE LETTER
Neurex Corporation
3760 Haven Avenue
Menlo Park, California 94025
Gentlemen:
The undersigned, a holder of shares of common stock, par value $.01 per
share ("Company Common Stock"), of Neurex Corporation, a Delaware corporation
(the "Company"), is entitled to receive, in connection with the merger (the
"Merger") between the Company and a direct wholly owned subsidiary of Elan
Corporation, plc ("Parent"), American Depositary Shares ("ADSs"), each ADS
representing one Ordinary Share, par value 4 Irish Pence ("Parent ADSs"), of
Parent. The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Act"), although
nothing contained herein should be construed as an admission of such fact.
If, in fact, the undersigned is an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Parent ADSs received by
the undersigned upon conversion of any shares of Company Common Stock pursuant
to the Merger may be restricted unless such transaction is registered under
the Act or an exemption from such registration is available. The undersigned
understands that such exemptions are limited and the undersigned has obtained
advice and counsel as to the nature and conditions of such exemptions,
including information with respect to the applicability to the sale of such
securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign or transfer any of the Parent ADSs received
by the undersigned upon conversion of shares of Company Common Stock pursuant
to the Merger except (i) pursuant to an effective registration statement under
the Act, (ii) in conformity with the limitations specified by Rules 144 and
145(d), (iii) in a transaction which, in the opinion of counsel reasonably
satisfactory to Parent is not required to be registered under the Act or (iv)
in a transaction that, as described in a "no-action" or interpretive letter
from the Staff of the Securities and Exchange Commission (the "SEC"), is not
required to be registered under the Act.
In the event of a sale or other disposition by the undersigned of Parent
ADSs pursuant to Rule 145(d)(1), the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any Parent ADSs disposed of by the
undersigned, but that upon receipt of such evidence of compliance the transfer
agent shall effectuate the transfer of the Parent ADSs sold as indicated in
the letter.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Parent ADSs received by the undersigned in
the Merger or held by a transferee thereof, which legends will be removed by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to Parent from independent counsel
reasonably satisfactory to Parent to the effect that such legends are no
longer required for the purposes of the Act or the third paragraph of this
letter.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Parent
ADSs and (ii) the receipt by Parent of this letter is an inducement and a
condition to Parent's obligations to consummate the Merger.
Very truly yours,
A-1
<PAGE>
ANNEX I
TO EXHIBIT A
[Name]
[Date]
On the undersigned sold Ordinary Shares,
represented by American Depositary Shares ("ADSs"), par value 4 Irish Pence
(the "Parent ADSs"), of Elan Corporation, plc (the "Parent"). The Parent ADSs
were received by the undersigned in connection with the merger of a direct
wholly owned subsidiary of Parent with and into Neurex Corporation.
Based upon the most recent report or statement filed by the Parent with the
Securities and Exchange Commission, the Parent ADSs sold by the undersigned
were within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Parent ADSs were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Parent ADSs, and that the undersigned has
not made any payment in connection with the offer or sale of the Parent ADSs
to any person other than to the broker who executed the order in respect of
such sale.
Very truly yours,
I-1
<PAGE>
EXHIBIT B
COVENANT NOT TO SELL AMERICAN DEPOSITARY SHARES
ELAN CORPORATION, PLC
Lincoln House
Lincoln Place
Dublin 2, Ireland
Ladies and Gentlemen:
In connection with the consummation of that certain Agreement and Plan of
Merger (the "Agreement") among Neurex Corporation, Elan Corporation, plc
("Parent") and Ganesh Acquisition Corp., dated as of April 29, 1998, the
undersigned hereby covenants and agrees with you that, except with your prior
written consent and except as otherwise provided below, the undersigned will
not and will not offer or agree to, directly or indirectly, (i) sell,
transfer, tender, assign, hypothecate or otherwise dispose of, or create or
permit to exist any security interest, lien, claim, pledge, right of first
refusal, limitation on voting rights, charge or encumbrance of any nature
whatsoever with respect to, Parent ADSs, (ii) sell any option or contract to
purchase or purchase any option or contract to sell Parent ADSs or (iii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of Parent ADSs, in the
case of each of clauses (i), (ii) and (iii), whether such transaction is to be
settled in Parent ADSs or any other securities and whether such Parent ADSs
are acquired as Merger Consideration, upon the exercise of options or
otherwise, for a period of one year from the Effective Time; provided that, up
to 25.0% of the sum of Parent ADSs acquired as Merger Consideration and Parent
ADSs underlying Parent Exchange Options may be immediately or from time to
time sold in accordance with applicable laws as set forth in the attached
affiliate letter. The transfer restrictions set forth above shall (i) cease
upon the involuntary termination or death of the undersigned and (ii) shall
not apply to transfers to any trust of which the undersigned's direct family
members are the beneficiaries.
Dated: [ ], 1998
-------------------------------------
Name:
<PAGE>
MORGAN STANLEY ANNEX B
MORGAN STANLEY & CO.
INCORPORATED
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 576-2000
April 28, 1998
Board of Directors
Neurex Corporation
3760 Haven Avenue
Menlo Park, California 94025-1012
Members of the Board:
We understand that Elan Corporation, plc ("Elan"), Neurex Corporation ("Neurex")
and Ganesh Acquisition Corp. ("Merger Sub"), a wholly-owned subsidiary of Elan,
have entered into an Agreement and Plan of Merger and Reorganization, dated as
of April 28, 1998 (the "Merger Agreement"), which provides, among other things,
for the merger (the "Merger") of Merger Sub with and into Neurex. Pursuant to
the Merger, Neurex will become a wholly-owned subsidiary of Elan and each issued
and outstanding share of common stock, par value $0.01 per share (the "Neurex
Common Stock"), of Neurex, other than shares held in treasury or held by Elan or
any subsidiary of Elan or Neurex, shall be converted into the right to receive
0.510 shares (the "Exchange Ratio") of American Depository Shares ("Elan ADSs"),
evidenced by American Depository Receipts ("Elan ADRs"), each Elan ADS
representing one Ordinary Share, par value 4 Irish pence per share, of Elan (the
"Elan Common Stock"). The terms and conditions of the Merger are more fully set
forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to the holders of shares
of Neurex. Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Elan and Neurex, respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning Elan and Neurex prepared by the managements of
Elan and Neurex;
(iii) reviewed certain financial projections prepared by the managements of
Elan and Neurex;
(iv) discussed the past and current operations and financial condition and the
prospects of Elan, including information relating to certain strategic,
financial and operational benefits anticipated from the Merger, with
senior executives of Elan;
<PAGE>
MORGAN STANLEY
Neurex Corporation
April 28, 1998
Page 2
(v) discussed the past and current operations and financial condition and the
prospects of Neurex, including information relating to certain strategic,
financial and operational benefits anticipated from the Merger, with
senior executives of Neurex;
(vi) reviewed the pro forma impact of the Merger on the earnings per share of
Elan;
(vii) reviewed the reported prices and trading activity for the Elan ADSs and
the Neurex Common Stock;
(viii) compared the financial performance of Elan and Neurex and the prices and
trading activity of the Elan ADSs and the Neurex Common Stock with that
of certain other publicly-traded companies and their securities;
(ix) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(x) reviewed and discussed with the senior managements of Elan and Neurex the
strategic rationale for the Merger and certain alternatives to the
Merger;
(xi) participated in discussions and negotiations among representatives of
Elan and Neurex and their financial and legal advisors;
(xii) reviewed the Merger Agreement and certain related agreements; and
(xiii) considered such other factors as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the internal financial statements, financial
projections and/or other financial and operating data and discussions relating
to the strategic, financial and operational benefits anticipated from the Merger
provided by Elan and Neurex, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance and prospects of Elan and Neurex,
respectively. We have relied upon the assessment by the managements of Elan and
Neurex of their ability to retain key employees of both Elan and Neurex. We have
also relied upon, without independent verification, the assessment by the
managements of Elan and Neurex of the strategic and other benefits expected to
result from the Merger. We have also relied upon, without independent
verification, the assessment by the managements of Elan and Neurex of Elan's and
Neurex's technologies and products, the timing and risks associated with the
integration of Neurex with Elan, and the validity of, and timing and risks
associated with, Elan's and Neurex's existing and future technologies and
products, including the timing or likelihood of any results of clinical trials
or of any necessary regulatory approvals. We have not made any independent
valuation or appraisal of
<PAGE>
MORGAN STANLEY
Neurex Corporation
April 28, 1998
Page 3
the assets, liabilities or intellectual property of Elan or Neurex,
respectively, nor have we been furnished with any such appraisals. We have
assumed that the Merger will be accounted in accordance with U.S. Generally
Accepted Accounting Principles, will be treated as a tax-free reorganization
and/or exchange pursuant to the Internal Revenue Code of 1986, as amended, and
will be consummated in accordance with the terms set forth in the Merger
Agreement. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have acted as financial advisor to the Board of Directors of Neurex in
connection with this transaction and will receive a fee for our services.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to an acquisition, business
combination or other extraordinary transaction involving Neurex.
It is understood that this letter is for the information of the Board of
Directors of Neurex and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in any
filing made by Neurex with respect to the Merger with the Securities and
Exchange Commission. In addition, this opinion does not in any manner address
the prices at which the Elan ADSs will actually trade at any time and we express
no recommendation or opinion as to how the holders of Neurex Common Stock should
vote at the shareholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the holders of shares of Neurex Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Charles R. Cory
-----------------------------
Charles R. Cory
Managing Director
<PAGE>
ANNEX C
VOTING AGREEMENT
VOTING AGREEMENT, dated as of April 29, 1998 (this "Agreement"), among Elan
Corporation, plc, a public limited company organized under the laws of Ireland
("Purchaser"), and the individuals whose names and addresses are set forth on
the signature pages hereto (collectively, the "Stockholders", and each,
individually, a "Stockholder").
WHEREAS, Purchaser and its wholly-owned subsidiary, Ganesh Acquisition
Corp., a Delaware corporation (the "Subsidiary"), have entered into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), with Neurex Corporation, a Delaware corporation (the "Company"),
which Merger Agreement provides, among other things, that the Subsidiary will
merge with and into the Company pursuant to the merger contemplated by the
Merger Agreement (the "Merger"); and
WHEREAS, as of the date hereof, the Stockholders own (both beneficially and
of record) the number of shares of Common Stock, par value $.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").
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, subject to such
Stockholder's obligation to faithfully discharge his duty as a director of the
Company; 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 earliest of (i) the termination of the Merger Agreement in
accordance with its terms, (ii) the Effective Time (as defined in the Merger
Agreement), (iii) 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. Irrevocable Proxy. Each Stockholder hereby irrevocably appoints
Purchaser, subject to his obligation to faithfully discharge his duty as a
director of the Company, until the Termination Date, as such Stockholder's
attorney and proxy, with full power of substitution, to vote in such manner as
Purchaser or its substitute shall, in its sole discretion, deem proper and
otherwise act (by written consent or otherwise) with respect to the Shares
(and all other securities issued to the Stockholder in respect of the Shares)
which each Stockholder is entitled to vote at the Special Meeting or any other
meeting of stockholders of the Company, however called, and in any action by
written consent of the stockholders of the Company, in accordance with the
provisions of Section 1 of this Agreement. This proxy and power of attorney is
irrevocable and coupled with an interest in favor of Purchaser. Each
Stockholder hereby revokes all other proxies and powers of attorney with
respect to the Shares (and all other securities issued to the Stockholder in
respect of the Shares) which it may have heretofore appointed or granted, and
no subsequent proxy or power of attorney shall be given or written consent
executed (and if given or executed, shall not be effective) by the Stockholder
with respect thereto.
3. No Disposition or Encumbrance of Shares. Each Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement, the
Stockholder shall not, and shall not offer or agree to, 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, charge or
other encumbrance of any nature whatsoever with respect to the Shares.
C-1
<PAGE>
4. No Solicitation of Transactions. Except with respect to activities as a
director of the Company, each Stockholder shall not, directly or indirectly,
through any agent or representative or otherwise, (i) solicit, initiate,
facilitate or encourage (including by way of furnishing or disclosing non-
public information) any inquiries or the making of any proposal with respect
to any merger, consolidation or other business combination involving the
Company or the acquisition of any kind of a material portion of the assets or
capital stock of the Company (an "Acquisition Transaction") or negotiate,
explore or otherwise communicate in any way with any third party with respect
to any Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to perform as
contemplated by this Agreement. 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. Each Stockholder shall
immediately notify Purchaser if any proposal or offer, or any inquiry or
contact with any Person with respect to an Acquisition Transaction, is made
and shall, in any such notice to Purchaser, indicate in reasonable detail the
identity of the Person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. 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.
5. Representations and Warranties of the Stockholders. Each Stockholder
hereby severally represents and warrants with respect to itself and its
ownership of the Shares to Purchaser 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 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 Purchaser, 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 (other than pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the Securities Exchange
Act of 1934, as amended), 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. The Stockholder owns all such Shares free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Stockholder's voting rights, charges and other
encumbrances of any nature whatsoever which would prohibit the granting of the
proxy contained herein, and, except as provided in this Agreement, the
Stockholder has not appointed or granted any proxy, which appointment or grant
is still effective, with respect to the Shares.
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.
C-2
<PAGE>
6. Representations and Warranties of Purchaser. Purchaser hereby represents
and warrants to the Stockholders that Purchaser 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
Purchaser have been duly authorized by all necessary action on the part of
Purchaser. This Agreement has been duly and validly executed and delivered by
Purchaser and, assuming the due authorization, execution and delivery by the
Stockholders, constitutes a legal, valid and binding obligation of Purchaser
enforceable in accordance with its terms, except that such enforceability may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally.
7. Termination of Agreement. Purchaser reserves the right in its sole
discretion at any time hereafter to terminate this Agreement and all
irrevocable proxies granted to it hereunder.
8. Miscellaneous.
a. Expenses. Except as otherwise provided herein or in the Merger Agreement,
all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
b. Further Assurances. From time to time at the other party's reasonable
request, Purchaser and the Stockholders will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
c. Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy to which they may be entitled at law or in equity.
d. Entire Agreement. This Agreement constitutes the entire agreement between
Purchaser and the Stockholders with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between Purchaser and the Stockholders with respect to the subject matter
hereof.
e. Assignment. This Agreement shall not be assigned by operation of law or
otherwise, without the prior written consent of the parties.
f. 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.
g. 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.
h. 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.
C-3
<PAGE>
i. 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 8(i):
if to Purchaser:
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.
j. 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.
k. 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.
l. 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.
m. 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.
n. 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.
C-4
<PAGE>
IN WITNESS WHEREOF, Purchaser and the Stockholders have duly executed this
Agreement, as of the date first written above.
PURCHASER:
ELAN CORPORATION, PLC
By: /s/ Thomas G. Lynch
___________________________________
Name: Thomas G. Lynch
Title: Executive Vice President
and
Chief Financial Officer
<TABLE>
<CAPTION>
NUMBER OF
STOCKHOLDERS: SHARES OWNED:
------------- -------------
<S> <C>
/s/ David L. Anderson 264,392
--------------------------------------------
Name: David L. Anderson
Address:
/s/ Thomas L. Barton 135,999
--------------------------------------------
Name: Thomas L. Barton
Address:
/s/ Gerard N. Burrow 16,832
--------------------------------------------
Name: Gerard N. Burrow, M.D.
Address:
/s/ John F. Chappell 113,680
--------------------------------------------
Name: John F. Chappell
Address:
/s/ Sandra K. Cooper None
--------------------------------------------
Name: Sandra K. Cooper
Address:
/s/ Raymond C. Egan 19,207
--------------------------------------------
Name: Raymond C. Egan
Address:
/s/ John W. Glynn, Jr. 47,603
--------------------------------------------
Name: John W. Glynn, Jr.
Address:
/s/ Paul Goddard 538,971
--------------------------------------------
Name: Paul Goddard, Ph.D
Address:
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
STOCKHOLDERS: SHARES OWNED:
------------- -------------
<S> <C>
/s/ Howard E. Greene, Jr. 51,020
---------------------------------------------
Name: Howard E. Greene, Jr.
Address:
/s/ Robert R. Luther 215,690
---------------------------------------------
Name: Robert R. Luther, M.D.
Address:
/s/ John W. Varian 24,999
---------------------------------------------
Name: John W. Varian
Address:
/s/ Paul L. Wood None
---------------------------------------------
Name: Paul L. Wood, Ph.D
Address:
/s/ Philip J. Young 52,081
---------------------------------------------
Name: Philip J. Young
Address:
</TABLE>
C-6
<PAGE>
ANNEX D
NEUREX CORPORATION
1998 EMPLOYEE, CONSULTANT AND DIRECTOR STOCK OPTION PLAN
(AS ADOPTED EFFECTIVE FEBRUARY 3, 1998)
1. Purposes of this Plan. The purposes of this 1998 Employee, Consultant and
Director Stock Option Plan (this "Plan") of Neurex Corporation, a Delaware
corporation (the "Company"), are as follows:
(a) To furnish incentives to individuals chosen to receive options
because they are considered capable of responding by improving operations
and increasing profits;
(b) To encourage selected employees and consultants to accept or continue
employment with, or consulting to, the Company or its affiliates;
(c) To encourage non-employee directors to accept membership on, or to
continue serve as members of, the Company's Board of Directors; and
(d) To increase the interest of selected employees and consultants and of
non-employee directors in the Company's welfare through their participation
in the growth in value of the Company's Common Stock ("Common Stock").
To accomplish the foregoing objectives, this Plan provides a means whereby
employees, consultants, and directors may receive options to purchase Common
Stock. Options granted under this Plan will be either nonstatutory stock
options (subject to federal income taxation upon exercise) or incentive stock
options (generally not subject to immediate federal income taxation upon
exercise) pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "IRC").
2. Eligible Persons. Every individual who at the date of grant is an
employee of the Company or of any parent or subsidiary of the Company (as
defined in Section 5.1(c) below) is eligible to receive incentive stock
options and nonstatutory stock options to purchase Common Stock under this
Plan. The term "employee" includes an officer or director who is an employee
of the Company or a parent or subsidiary of it, as well as a non-officer, non-
director employee of the Company or a parent or subsidiary of it. Every
individual who at the date of grant is a consultant to, or a non-employee
director of, the Company or of any parent or subsidiary of the Company is
eligible to receive nonstatutory stock options to purchase Common Stock under
this Plan, but shall not be eligible to receive incentive stock options. The
term "consultant" includes individuals employed by, or otherwise affiliated
with, a person providing consulting services to the Company or any parent or
subsidiary of the Company.
3. Common Stock Subject to Plan.
(a) There shall be reserved for issue upon the exercise of options
granted under this Plan One Million (1,000,000) shares of Common Stock,
subject to adjustment as provided in Section 7 hereof. If an option granted
under this Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject thereto shall again
be available for the purposes of this Plan.
(b) Notwithstanding any other provisions of this Plan, the aggregate
number of shares of Common Stock subject to outstanding options granted
under this Plan, plus the aggregate number of shares issued upon the
exercise of all options granted under this Plan, shall never be permitted
to exceed the number of shares specified in the first sentence of Section
3(a) above.
4. Administration. The Plan shall be administered by the Board of Directors
of the Company (the "Board"). The Board may appoint one or more Committees
each consisting of not less than two members of the Board to administer the
Plan on behalf of the Board (in either case the "Administrator"), subject to
such terms and conditions as the Board may prescribe. Once appointed, such
Committees shall continue to serve until otherwise directed by the Board. Any
grants of options to persons who are subject to Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act") shall be made (i) by the entire
Board, (ii) by a Committee of two or more directors, each of whom is a Non-
Employee Director and an Outside Director, or (iii) as otherwise permitted by
both Rule 16b-3, Section 162(m) of the Code and other applicable regulations.
The term "Non-
<PAGE>
Employee Director" shall have the same meaning as defined or interpreted for
purposes of Rule 16b-3 (including amendments and successor provisions) as
promulgated by the Securities and Exchange Commission pursuant to its
authority under the Exchange Act. The term "Outside Director" shall have the
same meaning as defined or interpreted for purposes of Section 162(m) of the
IRC. The Board may from time to time increase the size of the Committee(s) and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, or fill vacancies however
caused.
The Administrator may delegate nondiscretionary administrative duties to
such employees of the Company as it deems proper. Subject to the terms and
conditions of this Plan, and except as otherwise set forth herein, the
Administrator shall have the sole authority, in its discretion:
(a) to determine to which of the eligible individuals, and the time or
times at which, options to purchase Common Stock of the Company shall be
granted;
(b) to determine the number of shares of Common Stock to be subject to
options granted to each eligible individual;
(c) to determine the price to be paid for the shares of Common Stock upon
the exercise of each option;
(d) to determine the term and the exercise schedule of each option;
(e) to determine the terms and conditions of each stock option agreement
(which need not be identical) entered into between the Company and any
eligible individual to whom the Administrator has granted an option;
(f) to interpret this Plan;
(g) to accelerate the exercise date or schedule with respect to any
option granted under this Plan or, with the consent of the holder thereof,
to modify or amend any such option; and
(h) to make all determinations deemed necessary or advisable for the
administration of this Plan.
5. Terms of Options. Each option granted under this Plan shall be evidenced
by a stock option agreement between the individual to whom the option is
granted (the "optionee") and the Company. Each such agreement shall designate
the option thereby granted as an incentive stock option, or a nonstatutory
stock option or in part an incentive stock option, and in part a nonstatutory
stock option. Each such agreement shall be subject to the terms and conditions
set forth in Section 5.1, and to such other terms and conditions not
inconsistent therewith as the Administrator may deem appropriate in each case.
In addition, incentive stock options shall be subject to the terms and
conditions set forth in Section 5.2.
5.1 Terms and Conditions to Which All Options Are Subject. All options
granted under this Plan shall be subject to the following terms and
conditions:
(a) Term of Options. The period or periods within which an option may be
exercised shall be determined by the Administrator at the time the option
is granted, and such period or periods may be amended subsequently only by
written mutual agreement of the Company (at the direction of the
Administrator) and the optionee. In no event shall such period extend
beyond ten (10) years from the date the option is granted in the case of an
incentive stock option or ten (10) years and one (1) week from the date the
option is granted in the case of a nonstatutory stock option.
(b) Exercise Price. The price to be paid for each share of Common Stock
upon the exercise of an option shall be determined by the Administrator at
the time the option is granted, but shall in no event be less than eighty-
five percent (85%) in the case of a nonstatutory stock option, and one
hundred percent (100%) in the case of an incentive stock option, of the
fair market value of a share of Common Stock on the date the option is
granted. For all purposes of this Plan, the fair market value of the Common
Stock on any particular date shall be the closing price on the trading day
next preceding that date on the principal securities exchange on which the
Company's Common Stock is listed, or, if such Common Stock is not then
listed on any securities exchange, then the fair market value of the Common
Stock on such date shall be the closing price as reported by the National
Association of Securities Dealers, Inc. Automated Quotation
2
<PAGE>
System ("NASDAQ") on the trading day next preceding such date. In the event
that the Company's Common Stock is neither listed on a securities exchange
nor quoted by NASDAQ, then the Administrator shall determine the fair
market value of the Company's Common Stock on such date.
Notwithstanding the above provisions of this Section 5.1(b), the exercise
price of all options granted to the Company's non-employee directors will be
100% of the fair market value of the Common Stock determined as above.
(c) More than Ten Percent Shareholders. No option shall be granted to any
individual who, at the time such option would be granted, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of outstanding capital stock of the Company, or of any parent
corporation or subsidiary corporation of the Company, unless the exercise
price (as provided in Section 5.1(b) hereof) is, in the case of a nonstatutory
stock option, not less than one hundred percent (100%) and in the case of an
incentive stock option, not less than one hundred ten percent (110%) of the
fair market value of the Common Stock on the date the option is granted, and
in the case of an incentive stock option the period within which the option
may be exercised (as provided in Section 5.1(a) hereof) does not exceed five
(5) years from the date the option is granted. For purposes of this Section
5.1(c) in determining stock ownership, an optionee shall be considered as
owning the voting capital stock owned, directly or indirectly, by or for his
brothers and sisters, spouse, ancestors and lineal descendants. Voting capital
stock owned, directly or indirectly, by or for a corporation, partnership,
estate or trust shall be considered as being owned proportionately by or for
its shareholders, partners or beneficiaries, as applicable. An optionee shall
not be considered as owning the shares of Common Stock issuable upon exercise
of any option which such optionee holds. Additionally, for purposes of this
Section 5.1(c), outstanding capital stock shall include all capital stock
actually issued and outstanding immediately after the grant of the option to
the optionee. Outstanding capital stock shall not include capital stock
authorized for issue under outstanding options held by the optionee or by any
other person. As used in this Plan, the terms "parent corporation" and
"subsidiary corporation" shall have the meanings set forth in IRC Sections
424(e) and (f), respectively.
(d) Method of Payment for Common Stock. The exercise price for each share
of Common Stock purchased under an option shall be paid in full in cash at
the time of purchase.
(e) Nontransferability. All options shall be nontransferable, except by
will or the laws of descent and distribution, and shall be exercisable
during the lifetime of the optionee only by the optionee.
(f) Withholding and Employment Taxes. At the time of exercise of an
option, the optionee shall remit to the Company in cash the amount of any
and all applicable federal and state withholding and employment taxes.
(g) Death. Upon the death of an employee, any option which such employee
holds may be exercised, within such period after the date of death as the
Administrator shall prescribe in the stock option agreement, by the
employee's representative or by the person entitled thereto under the
employee's will or the laws of intestate succession.
(h) Disability. Upon the permanent and total disability of an employee
(as defined in IRC Section 22(e)(3)), any stock option which the employee
holds may be exercised by the employee within such period after the date of
termination of employment resulting from such disability (not to exceed
twelve (12) months in the case of an incentive stock option) as the
Administrator shall prescribe in the stock option agreement. The option
shall terminate upon the expiration of such prescribed period, unless the
employee dies prior thereto, in which event the provisions of Section
5.1(g) hereof shall apply.
(i) Retirement. Upon the voluntary retirement of an employee at or after
reaching sixty-five (65) years of age, any stock option which such employee
holds may be exercised by such employee with respect to all or any portion
of the balance of the Common Stock subject thereto within such period after
the date of retirement (not to exceed three (3) months in the case of an
incentive stock option) as the Administrator shall prescribe in the stock
option agreement. The option shall terminate upon the expiration of such
prescribed period, unless the employee dies prior thereto, in which event
the provisions of Section 5.1(g) hereof shall apply.
3
<PAGE>
(j) Transfer to Related Corporation. If an employee leaves the employ of
the Company to become an employee of any parent or subsidiary corporation
of the Company, or if the employee leaves the employ of any such parent or
subsidiary corporation to become an employee of the Company or of another
parent or subsidiary corporation, such employee shall be deemed to continue
as an employee of the Company for all purposes of this Plan.
(k) Other Severance. If an employee leaves the employ of the Company for
any reason other than as set forth in subsections (g) through (i), above,
any stock option which such employee holds may be exercised by such
employee with respect to all or any portion of the balance of the Common
Stock subject thereto within such period after the date of severance (not
to exceed three (3) months in the case of an incentive stock option) as the
Administrator shall prescribe in the stock option agreement.
(l) Other Provisions. Each option granted under this Plan may contain
such other terms, provisions and conditions not inconsistent with this Plan
as may be determined by the Administrator. However, options granted after
the date the Common Stock of the Company is first quoted on the National
Association of Securities Dealers Automated Quotation System or listed on
an established stock exchange shall not contain any provisions giving the
Company a right of first refusal to purchase the Common Stock underlying
the options.
5.2 Additional Terms and Conditions to Which Incentive Stock Options Are
Subject. Options granted under this Plan which are designated as incentive
stock options shall be subject to the following additional terms and
conditions:
(a) Annual Limitation. To the extent the aggregate fair market value
(determined as of the date an incentive stock option is granted) of the
stock with respect to which incentive stock options granted become
exercisable for the first time by an employee during any one (1) calendar
year (under this Plan and under all other plans of the Company and of any
parent or subsidiary corporation) exceed One Hundred Thousand Dollars
($100,000), such options shall be treated as options which are not
incentive stock options.
(b) Disqualifying Dispositions. If Common Stock acquired by exercise of
an incentive stock option granted pursuant to this Plan is disposed of
within two (2) years from the date of grant of the option or within one (1)
year after the transfer of the Common Stock to the optionee, the holder of
the Common Stock immediately prior to the disposition shall promptly notify
the Company in writing of the date and terms of the disposition and shall
provide such other information regarding the disposition as the Company may
reasonably require.
6. Stock Issuance and Rights as Shareholder. Notwithstanding any other
provisions of this Plan, no optionee shall have any of the rights of a
shareholder (including the right to vote and receive dividends) of the
Company, by reason of the provisions of this Plan or any action taken
hereunder, until the date such optionee shall both have paid the exercise
price for the Common Stock and shall have been issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) the stock certificate evidencing such shares.
7. Adjustments Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the Company's shareholders, the
number of shares of Common Stock covered by this Plan as provided in
Section 3, the number of shares covered by each outstanding option granted
hereunder and the exercise price thereof shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of such shares or the payment
of a stock dividend (but only on the Common Stock) or any other increase or
decrease in the number of such outstanding shares of Common Stock effected
without the receipt of consideration by the Company; provided, however,
that the conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration."
4
<PAGE>
(b) Subject to any required action by the Company's shareholders, if the
Company shall be the surviving corporation in any merger or consolidation,
each outstanding option shall pertain and apply to the securities to which
a holder of the number of shares subject to the option would have been
entitled. A dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving corporation shall
cause each outstanding option to terminate, unless the surviving
corporation in the case of a merger or consolidation assumes outstanding
options or replaces them with substitute options having substantially
similar terms and conditions; provided, however, that if an outstanding
option is to terminate upon any such event, the Administrator, on such
terms and conditions as it deems appropriate, may provide, either by the
terms of a stock option agreement or by a resolution adopted prior to the
occurrence of any such event, that, for some period of time prior to such
event, such option shall be exercisable as to all or any portion of the
shares covered by the portion of the option that previously has not lapsed,
terminated, or been exercised, notwithstanding any standard exercise
schedule otherwise provided for in the stock option agreement.
(c) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
(d) Except as hereinabove expressly provided in this Section 7, no
optionee shall have any rights by reason of any subdivision or
consolidation of shares of the capital stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of
shares of any class or by reason of any dissolution, liquidation, merger or
consolidation or spin-off of assets or stock of another corporation, and
any issue by the Company of shares of stock of any class or of securities
convertible into shares of stock of any class shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to any option granted hereunder.
(e) The grant of an option pursuant to this Plan shall not affect in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
8. Manner of Exercise. An optionee wishing to exercise an option shall give
written notice to the Company at its principal executive office, to the
attention of the Secretary of the Company, accompanied by payment of the
exercise price as provided in Section 5.1(b). The date the Company receives
written notice of an exercise hereunder accompanied by payment of the exercise
price will be considered as the date such option was exercised.
Promptly after receipt of written notice of exercise of an option, the
Company shall, without charge for stock issue or transfer taxes, deliver to
the optionee or such other person a certificate or certificates for the
requisite number of shares of stock pursuant to the terms of the option
agreement.
9. Employment, Consulting or Director Relationship. Nothing in this Plan or
any option granted hereunder shall interfere with or limit in any way the
right of the Company or of its parent or subsidiaries to terminate any
optionee's employment, consultancy, or directorship at any time, nor confer
upon any optionee any right to continue as an employee of, consultant to, or
director of, the Company or any of its parent or subsidiaries.
10. Securities Law Requirements.
(a) The Administrator may require an individual as a condition of the
grant and of the exercise of an option, to represent and establish to the
satisfaction of the Administrator that all shares of Common Stock to be
acquired upon the exercise of such option will be acquired for investment
and not for resale. The Administrator shall cause such legends to be placed
on certificates evidencing shares of Common Stock issued upon exercise of
an option as, in the opinion of the Company's counsel, may be required by
federal and applicable state securities laws.
5
<PAGE>
(b) No shares of Common Stock shall be issued upon the exercise of any
option unless and until counsel for the Company determines that: (i) the
Company and the optionee have satisfied all applicable requirements under
the Securities Act of 1933, as amended, and the Exchange Act; (ii) any
applicable requirement of any stock exchange or quotation system on which
the Company's Common Stock is listed or quoted has been satisfied; and
(iii) all other applicable provisions of state and federal law have been
satisfied.
11. Amendment. The Board may terminate this Plan or amend this Plan from
time to time in such respects as the Board may deem advisable, except that,
without the approval of the Company's shareholders in compliance with the
requirements of applicable law, no such revision or amendment shall:
(a) increase the number of shares of Common Stock reserved under Section
3 hereof for issue under this Plan, except as provided in Section 7 hereof;
(b) change the class of persons eligible to participate in this Plan
under Section 2 hereof;
(c) extend the term of this Plan under Section 12 hereof; or
(d) amend this Section 11 to defeat its purpose.
12. Termination. This Plan shall terminate automatically on May 7, 2008, and
may be terminated at any earlier date by the Board. No option shall be granted
hereunder after termination of this Plan, but such termination shall not
affect the validity of any option then outstanding.
13. Time of Granting Options. The date of grant of an option hereunder
shall, for all purposes, be the date on which the Administrator makes the
determination granting such option.
14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of this Plan.
15. Effective Date. This Plan shall become effective upon adoption by the
Board of Directors of the Company, and shall be effective on said date,
provided this Plan is approved within twelve (12) months of said date by the
shareholders of the Company in accordance with the Certificate of
Incorporation and Bylaws of the Company and the requirements of the IRC and
the Delaware General Corporation Law. Options may be granted hereunder, but
may not be exercised, prior to the date of such shareholder approval.
6
<PAGE>
REVOCABLE PROXY
NEUREX CORPORATION
3760 HAVEN AVENUE
MENLO PARK, CA 94025
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 11, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NEUREX
CORPORATION
The undersigned stockholder of Neurex Corporation (the "Company") hereby
constitutes and appoints PAUL GODDARD and THOMAS L. BARTON the proxy of the
undersigned, with full power of substitution and revocation, to attend the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
at 190 Independence Drive, which is located at Menlo Park, California, on
August 11, 1998, at 10:00 a.m., local time, and at any adjournments thereof,
and to vote all of the shares of common stock of the Company which the
undersigned may be entitled to vote upon the following matters:
(Continued and to be signed on reverse side)
FOLD AND DETACH HERE
<PAGE>
PLEASE MARK
[X] YOUR VOTE AS
INDICATED IN
THIS EXAMPLE
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF THIS PROXY IS SUBMITTED, BUT NO DIRECTIONS ARE MADE, THIS PROXY WILL
BE VOTED "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND ALL
REMAINING PROPOSALS.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1. APPROVAL AND ADOPTION OF THE FOR AGAINST WITHHELD 3. RATIFICATION OF FOR AGAINST WITHHELD
AGREEMENT AND PLAN OF MERGER, [ ] [ ] [ ] SELECTION OF [ ] [ ] [ ]
DATED AS OF APRIL 29, 1998 INDEPENDENT AUDITORS.
(THE "MERGER AGREEMENT"), BY
AND AMONG ELAN CORPORATION, PLC,
GANESH ACQUISITION CORP. AND THE
COMPANY.
4. ADOPTION OF THE FOR AGAINST WITHHELD
FOR WITHHOLD COMPANY'S 1998 [ ] [ ] [ ]
ALL AUTHORITY FOR EMPLOYEE, CONSULTANT
2. ELECTION OF DIRECTORS: NOMINEES ALL NOMINEES AND DIRECTOR STOCK
(INSTRUCTION: TO [ ] [ ] OPTION PLAN AND THE
WITHHOLD AUTHORITY TO AUTHORIZATION OF
VOTE FOR THE ELECTION OF ONE OR MORE 1,000,000 SHARES
PERSONS NOMINATED BY THE BOARD OF COMMON STOCK FOR ISSUANCE
OF DIRECTORS, MARK "FOR ALL THEREUNDER.
NOMINEES' ABOVE AND CROSS
OUT THE NAME(S) OF PERSONS WITH
RESPECT TO WHOM AUTHORITY IS 5. OTHER MATTERS: [ ] [ ] [ ]
WITHHELD.) DISCRETIONARY
AUTHORITY IS HEREBY
Nominees: Paul Goddard Raymond C. Egan GRANTED WITH RESPECT
Thomas L. Barton John W. Glynn, Jr. TO SUCH OTHER
David L. Anderson Howard E. Greene, Jr. BUSINESS AS MAY
Gerard N. Burrow Robert R. Luther PROPERLY COME
John F. Chappell BEFORE THE MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT
THEREOF.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE APPROVAL AND ADOPTION OF THE The undersigned hereby acknowledges
MERGER AGREEMENT. THE COMPANY'S BOARD OF receipt of the Notice of Annual Meeting
DIRECTORS ALSO RECOMMENDS A VOTE of Stockholders and the Prospectus-
FOR THE APPROVAL AND ADOPTION OF ALL Proxy Statement, each dated July 1, 1998,
REMAINING PROPOSALS. furnished herewith.
Dated: ____________________________________, 1998
Signature: ______________________________________
SIGNATURE(S) (IF HELD JOINTLY):
Title or Authority: _____________________________
</TABLE>
IMPORTANT: PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON. WHEN SIGNING AS
ATTORNEY, AGENT, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR CORPORATE
OFFICER, PLEASE GIVE YOUR FULL TITLE AS SUCH. EACH JOINT OWNER SHOULD SIGN THE
PROXY. IF EXECUTED BY A PARTNERSHIP, THIS PROXY SHOULD BE SIGNED BY AN
AUTHORIZED PARTNER.
Please mark, sign, date and return this proxy card promptly, using the enclosed
envelope.
FOLD AND DETACH HERE
