Exhibit 1.2
BIOVAIL CORPORATION
2488 Dunwin Drive
Mississauga, Ontario L5L 1J9
September 25, 2000
Messrs. George Vesely, David Roffey,
Thomas Higgins, and Joseph Shier
c/o Maple Partners Financial Group Inc.
Maritime Life Tower
Toronto-Dominion Centre, Suite 3500
P.O. Box 328
Toronto, Ontario
M5K 1K7
Dear Sirs:
Re: Proposed Transaction
We are currently in discussions with you regarding your proposed
participation in a transaction to effect the acquisition of the common shares of
Intelligent Polymers Limited ("IPL") through the exercise of an option attaching
to the Special shares of IPL (the "Transaction").
We wish to confirm the following terms that apply to your review of and
participation in the Transaction.
1. In consideration of your review and involvement in the negotiation of the
Transaction for purposes of your proposed participation therein, to be
carried out commencing today and continuing through September 25, 2000, we
will pay on September 25, 2000 to you, or as you direct, US $250,000.
2. In the event that you commit to participation in the Transaction by
providing us, not later than 5:00 p.m. (Toronto time) on September 25,
2000, with a signed term sheet consistent with the draft term sheet
attached hereto or otherwise on terms acceptable to us, such participation
to be conditional upon the execution of definitive documentation as
provided in paragraph 4, we will pay to you, or as you direct, either:
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(a) in the event that we complete the Transaction with your participation,
an additional US$1,525,000 payable at the time of the advance by you
of the funds to effect the acquisition of the common shares of IPL;
and
(i) if, prior to January 1, 2001, the voting common shares in
Acquireco are redeemed by Acquireco or transferred under the
option granted by the Equity Investor, an additional US$225,000
minus the amount received on such redemption or transfer in
excess of the initial issue price of the voting common shares,
payable at the time of such redemption or transfer, or
(ii) in all other cases, an additional US$225,000, payable on January
1, 2001, or
(b) on September 29, 2000, an additional US $250,000 in the event that on
or prior to September 28, 2000 we do not complete the Transaction with
your participation.
3. In addition to any amounts payable to you under paragraph 1 or 2, we agree
to reimburse you for any reasonable legal expenses incurred by you in
connection with the Transaction and your consideration thereof.
4. You and we acknowledge that the execution and delivery of this letter will
not constitute any commitment by you or us to your participation in the
Transaction or the payment of any amount other than as expressly set forth
herein. You and we further acknowledge that the term sheet referred to
above is subject to the negotiation and settlement of definitive
documentation.
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If the foregoing correctly reflects your understanding, please indicate
your agreement by signing and returning a copy of this letter. Notwithstanding
the date first written above, this agreement shall be treated as bearing an
effective date of September 22, 2000, being the date of the commencement of our
discussions with you.
Yours very truely,
/s/ Brian Crombie
------------------------------
Brian Crombie
Senior Vice President and
Chief Financial Officer
Agreed and accepted by:
/s/ George Vesely /s/ David Roffey
------------------------- ------------------------------
George Vesely David Roffey
/s/ Thomas Higgins /s/ Joseph Shier
------------------------- ------------------------------
Thomas Higgins Joseph Shier
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TERM SHEET
ACQUIRECO IPL Acquireco 2000 Ltd., a special
purpose corporation to be incorporated
in the British Virgin Islands. Acquireco
shall not be a resident of Canada for
purposes of the Income Tax Act (Canada).
The directors of Acquireco shall be
appointed by Holdco and Holdco shall
have the right to nominate and appoint
the directors of IPL
BIOVAIL Biovail Laboratories Inc.
EQUITY HOLDER IPL Holdco 2000 Ltd., an Ontario
business corporation, the shares of
which shall be held by Andrew Gaspar,
funding for which shall be provided by
David Roffey, George Vesely, Thomas
Higgins and Joseph Shier and/or any of
their personal holding companies (the
"Investor Group").
EQUITY COMMITMENT The Equity Commitment shall be 3% (net
of any fees) of the total cost to
Acquireco to exercise the option
attaching to the Special shares of
Intelligent Polymers Limited ("IPL") to
acquire all but not less than all of the
common shares of IPL, to a maximum of US
$6,500,000.
BIOVAIL The Biovail Commitment shall be 97% of
COMMITMENT the total cost to Acquireco to exercise
the option attaching to the IPL Special
shares to acquire all but not less than
all of the common shares of IPL.
SPECIAL SHARES Special shares of IFL that under the
bye-laws of IPL provide an irrevocable
option to the holders of the Special
shares to acquire all but not less than
all of the issued and outstanding common
shares of IPL at a price of U.S. $39.06
(provided the option is exercised prior
to October 1, 2000).
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CLOSING DATE A date on or before September 28,
2000 (the "First Closing Date") on which
Acquireco shall acquire the Special
shares and still be able to fund the
exercise of the option to acquire all
but not less than all of the common
shares of IPL and complete the closing
of such purchase on or before September
29, 2000 (the "Second Closing Date").
EQUITY INVESTMENT On the First Closing Date, the Equity
Holder shall purchase voting common
shares of Acquireco for an aggregate
subscription price equal to the amount
of the Equity Commitment (at a price of
U.S. $1.00 per share). The voting common
shares of Acquireco shall be voting in
all circumstances except that the
holders of the non-voting common shares
shall have the sole right to vote to
cause the voting common shares to be
redeemed. The voting common shares shall
be entitled to such dividends as the
directors may determine. Acquireco,
shall have the right to redeem at any
time up to October 1, 2001 the voting
common shares of Acquireco for a price
of US. $1.00 per share plus 15% per
annum from the First Closing Date if
redeemed prior to January 1, 2WI, and
U.S. $1.00 per share plus 35% per annum
compounded daily from January 1, 2001 to
the date of redemption if redeemed at
any time on or after January 1, 2001
(the "redemption price").
Upon a liquidation or winding-up of
Acquireco, the holders of the voting
common shares shall be entitled to
receive an amount equal to the
redemption price in preference and
priority to the non-voting common shares
and after payment of any amounts owing
in respect of the Class A shares.
The holders of the voting common shares
shall, at any time after February 1,
2001, be entitled to cause Acquireco to
sell all of its property (including
causing IPL to sell all of its
property), to such persons and on such
terms as the holders of the voting
common shares may determine, after
providing at least 15 days' prior
written notice to all shareholders of
its intention to do so.
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BIOVAIL INVESTMENT On the First Closing Date, Biovail shall
purchase Class A shares of Acquireco for
an aggregate subscription price equal to
the amount of the Biovail Commitment (at
a price of U.S. $1.00 per share). The
Class A shares shall be entitled to
receive cumulative dividends in the
amount of 8% per annum. The Class A
shares shall not be entitled to vote,
shall not be redeemable at the option of
Acquireco and, upon a liquidation or
winding up of Acquireco, shall be
entitled to receive an amount equal to
U.S. $1.00 per share plus accrued but
unpaid dividends in preference and
priority to the voting common shares and
non-voting common shares.
At any time after the date on which
there are no voting common shares
outstanding the holders of Class A
shares shall be entitled to require
Acquireco to redeem the whole or any
part of their Class A shares.
So long as there are any voting common
shares outstanding, the holders of Class
A shares shall agree (in a voting trust
agreement/unanimous shareholder
agreement) that the holders of voting
common shares shall be entitled to cast
all of the votes attaching to the Class
A shares in connection with any vote
required for a liquidation, dissolution
or bankruptcy of Acquireco or IPL or in
respect of any sale of all or
substantially all of the property and
assets of Acquireco or IPL.
OPTION The Equity Holder shall grant an option
to Biovail to permit it to purchase all
of the voting common shares of Acquireco
held by the Equity Holder such option to
terminate on October 1, 2002. The option
exercise price for this option shall be
equal to the redemption price. The
option shall be exercisable at any time
after the First Closing Date upon giving
reasonable notice.
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PURCHASE OF On the First Closing Date, Acquireco
SPECIAL SHARES shall acquire the Special shares of IPL
from Biovail in return for the issuance
to Biovail by Acquireco of 12,000
non-voting common shares of Acquireco.
The non-voting common shares shall not
be entitled to vote (except to cause the
redemption of the voting common shares),
shall be entitled to non-cumulative
dividends in the amount of 8% per annum
and shall be entitled to receive upon
liquidation all of the remaining
property of Acquireco after payment of
any amounts owing in respect of the
Class A shares and voting common shares,
provided, however, that if there are no
voting common shares outstanding, the
non-voting common shares shall be
entitled to vote, shall be entitled to
dividends in the discretion of the
directors and shall be entitled to
receive (after payment of any amounts
owing in respect of the Class A shares)
all of the remaining property of
Acquireco.
So long as them are any voting common
shares outstanding, the holders of
non-voting common shares shall agree (in
a voting trust agreement unanimous
shareholder agreement) that the holders
of voting common shares shall be
entitled to cast all of the votes
attaching to the non-voting shares in
connection with any vote required for a
liquidation, dissolution or bankruptcy
of Acquireco or IPL or in respect of any
sale of all or substantially all of the
assets of Acquireco or IPL.
Biovail agrees to take all steps within
its power necessary to enable Acquireco
to exercise the option attaching to the
IPL Special Shares to acquire all but
not less than all of the common shares
of IPL on or before the Second Closing
Date.
Biovail shall agree that in the event
that Acquireco does not exercise on or
before the Second Closing Date for any
reason the purchase option to acquire
all but not less than all of the common
shares of IPL, Acquireco shall
immediately repay the amount of the
Equity Commitment to the Equity Holder,
failing which repayment Biovail shall
immediately pay such amount to the
Equity Holder.
All of Biovail's obligations shall be
guaranteed by Biovail Corporation.
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CONSENT PROVISIONS Except as expressly provided herein,
until February 1, 2001, no resolution or
act of Acquireco to authorize or permit
any of the following will be effective
without the prior written approval of
the holders of the Class A shares and
the non-voting common shares: (i) the
allotment or issue of shares or other
securities or the creation of any right
to such allotment or issue; (ii) the
reduction of Acquireco's share capital;
(iii) borrowings by Acquireco over an
aggregate of $50,000 outstanding at any
one time; (iv) the sale or other
disposition of, or the creation of any
lien or liens on, the whole or a
material part of Acquireco's undertaking
or assets; (v) the declaration or
payment of dividends or the making of
any other distribution by Acquireco to
its shareholders; (vi) the amalgamation
of Acquireco; and (vii) any amendment of
Biovail's option to acquire voting
common shares of Acquireco.
Except as expressly provided herein,
until February 1, 2001, no resolution or
act of IPL to authorize or permit any of
the following will be effective without
the prior written approval of the
holders of the Class A Shares and the
non-voting common shares: (i) the
allotment or issue of shares or other
securities or the creation of any right
to such allotment or issue; (ii) the
reduction of IPL's share capital; (iii)
borrowings by IPL over an aggregate of
$1 million outstanding at any one time,
(iv) the sale or other disposition of,
or the creation of any lien or liens on.
the whole or a material part of IPL's
undertaking or assets; (v) the
declaration or payment of dividends or
the making of any other distribution by
IPL to its shareholders; and (vi) the
amalgamation of IPL.
The holders of the voting common shares
shall agree (in a voting trust
agreement/unanimous shareholder
agreement) that until February 1, 2001
they will vote their shares in a manner
consistent with the business plan of
IPL, as of the date of signing of this
term sheet, as presented to the Equity
Holder by Biovail Corporation, provided
that the holders of the voting common
shares shall not, in any event, be
required to do anything which they
reasonably determine would be
prejudicial to them.
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DOCUMENTATION This term sheet represents an outline of
the basis on which the Equity Holder is
prepared to provide the Equity
Commitment. It is not exhaustive as to
the terms and conditions which will
govern the Equity Commitment and
negotiation required to finalize the
terms and conditions of the transaction.
The transaction will be effected upon
completion of documentation (referred to
herein as "definitive documentation"),
including a definitive agreement which
will contain the terms and conditions
set out herein, in addition to
conditions precedent, representations
and warranties (including as to (a) the
ownership by IPL of drugs and/or related
intellectual property and license rights
to the reasonable satisfaction of the
Equity Holder, and (b) the fairness of
the financial information presentation
provided to the Equity Holder by Biovail
Corporation), covenants, events of
default, rights of set-off, and
indemnity provisions, and other
conditions, terms and provisions,
customary for transactions of this kind
or as the Equity Holder may reasonably
require. The definitive documentation
shall be governed by the laws of
Ontario.
CONDITONS Without limiting the other terms of this
PRECEDENT term sheet, the Equity Holder's
obligation to make the Equity Investment
will be subject to fulfillment of the
following conditions on or prior to the
First Closing Date:
(a) The acquisition of the Special
shares by Acquireco being completed
pursuant to an agreement
satisfactory to the Equity Holder,
with all conditions of the agreement
being satisfied or waived on a basis
satisfactory to the Equity Holder,
and there having been no material
adverse change in the financial
condition, business or prospects of
Biovail Corporation or IPL;
(b) The Equity Holder being satisfied as
to the results of legal and
financial due diligence concerning
Biovail Corporation and the
transaction (provided that nothing
herein shall be deemed to impose an
obligation on the Equity Holder to
perform any specific due diligence);
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(c) The Equity Holder having received
acknowledgments from third parties
relating to the transaction as
reasonably required by the Equity
Holder;
(d) All costs, fees and expenses owing
to the Equity Holder having been
paid by Biovail;
(e) Biovail having received all
necessary shareholder, creditor,
regulatory and other consents that
may be required in connection with
the transaction;
(f) No material adverse change or
proposed change in tax law or any
other applicable law and an absence
of litigation challenging the
transaction; and
(g) The delivery by Biovail Corporation
to the Equity Holder of an
irrevocable and perpetual indemnity,
in form reasonably satisfactory to
the Equity Holder, indemnifying the
Equity Holder, Maple Partners
Financial Group Inc., each member of
the Investor Group and Acquireco and
their respective shareholders,
directors, officers and employees
(each an "Indemnified Party") from
any and all claims by Biovail
Corporation, its affiliates or any
third parties arising from or in
connection with the participation by
any of the Indemnified Parties in
the Transaction, including without
limitation (a) any statement made in
or omitted from any publicly filed
document in connection with the
Transaction, with the exception of
any statement made or omitted solely
with respect to the Indemnified
Parties, or (b) the purchase,
holding or disposition of the shares
of Acquireco, or (c) any taxes
associated with the foregoing other
than taxes related to any amount
received upon a redemption or
purchase in excess of the original
subscription price or by way of a
fee or similar payment.
Without limiting the other terms of this
term sheet, Biovail's obligation to
proceed with this transaction is subject
to, among other conditions, receipt of
the approval of its principal banker of
an additional funding of IPL and the
conversion of IPL's banking arrangements
to a term basis.
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TRANSACTION The costs of the transaction will be
COSTS borne by the party incurring them except
that Biovail will reimburse the Equity
Holder for its reasonable legal
expenses.
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REPORTING Biovail shall provide the Equity Holder
REQUIREMENTS with such other information as the
Equity Holder may reasonably request
from time to time.
/s/ George Vesely /s/ David Roffey
------------------------- ------------------------------
George Vesely David Roffey
/s/ Thomas Higgins /s/ Joseph Shier
------------------------- ------------------------------
Thomas Higgins Joseph Shier
Agreed and accepted by:
BIOVAIL CORPORATION
per /s/ Brian Crombie
----------------------
Brian Crombie
Senior Vice President and
Chief Financial Officer
