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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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IMCLONE SYSTEMS INCORPORATED
(Name of Subject Company)
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IMCLONE SYSTEMS INCORPORATED
(Name of Person Filing Statement)
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Common Stock, par value $.001 per share
(Title of Class of Securities)
45245W109
(CUSIP Number of Class of Securities)
John B. Landes, Esq.
Senior Vice President, Legal & General Counsel
ImClone Systems Incorporated
180 Varick Street
New York, NY 10014
212-645-1405
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person Filing Statement)
With a Copy to:
Phillip R. Mills, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
212-450-4000
|_| Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (together with the Exhibits and Annexes hereto, this
"Schedule") relates is ImClone Systems Incorporated, a Delaware corporation (the
"Company"). The address of the principal executive offices of the Company is 180
Varick Street, New York, NY, 10014, and the telephone number of the principal
executive offices of the Company is 212-645-1405.
This Schedule relates to the Company's common stock, par value $.001 per
share (the "Shares"). As of September 27, 2001, there were 72,344,087 Shares
outstanding.
Item 2. Identity and Background of Filing Person.
The filing person is the subject company. The Company's name, business
address and business telephone number are set forth in Item 1 above.
This Schedule relates to the tender offer by Bristol-Myers Squibb Biologics
Company, a Delaware corporation ("Purchaser") and a wholly owned subsidiary of
Bristol-Myers Squibb Company, a Delaware corporation ("Parent"), to purchase up
to 14,392,003 Shares for $70.00 per Share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase, dated September 28, 2001 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), copies of which are
filed as Exhibits (a)(1) and (a)(2) herewith, respectively, and certain sections
of which are incorporated by reference herein as described below. The Offer is
described in a Tender Offer Statement on Schedule TO, dated September 28, 2001
(the "Schedule TO"), which was filed with the Securities and Exchange Commission
(the "SEC") on September 28, 2001 by Purchaser and Parent.
The Schedule TO states that the principal executive offices of Purchaser
are located at Route 206 and ProvinceLine Road, Princeton, New Jersey 08540,
telephone 609-252-4000 and those of Parent are located at 345 Park Avenue, New
York, NY 10154, telephone 212-546-4000.
The Offer is being made pursuant to the Acquisition Agreement, dated as of
September 19, 2001 (the "Acquisition Agreement"), among the Company, Parent and
Purchaser. A copy of the Acquisition Agreement is filed as Exhibit (d)(1) to
this Schedule and is incorporated herein by reference. In connection with the
Acquisition Agreement, the Company, Parent and Purchaser entered into a
Stockholder Agreement, dated as of September 19, 2001 (the "Stockholder
Agreement"), pursuant to which the Company, Parent and Purchaser have agreed to
various arrangements regarding the respective rights and obligations of the
Company, Parent and Purchaser with respect to, among other things, the ownership
of Shares by Parent and Purchaser. A copy of the Stockholder Agreement is filed
as Exhibit (d)(2) to this Schedule and is incorporated herein by reference.
Concurrently with execution of the Acquisition Agreement and the Stockholder
Agreement, the Company, Parent and E.R. Squibb & Sons, L.L.C., a Delaware
limited liability company and a wholly owned subsidiary of Parent ("E.R.
Squibb"), entered into a Development, Promotion, Distribution and Supply
Agreement (the "Commercial Agreement"), pursuant to which, among other things,
Parent, E.R. Squibb and the Company will (a) co-develop and co-promote the
biologic pharmaceutical product IMC-C225 in the United States and Canada, and
(b) co-develop and co-promote the biologic pharmaceutical product IMC-C225
(together with Merck KgaA) in Japan. A copy of the Commercial Agreement is filed
as Exhibit (d)(3) to this Schedule and is incorporated herein by reference.
Item 3. Past Contracts, Transactions, Negotiations and Agreements.
Except as described or referred to in this Item 3, to the knowledge of the
Company after reasonable inquiry, there exists on the date hereof no material
agreement, arrangement or understanding or any actual or potential conflict of
interest between the Company or its affiliates, on the one hand, and (1) the
Company's executive officers, directors or affiliates, or (2) Parent, Purchaser
or their respective executive officers, directors or affiliates, on the other
hand.
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Acquisition Agreement
The following is a summary of the material terms of the Acquisition
Agreement. The summary is qualified in its entirety by reference to the
Acquisition Agreement, a copy of which has been filed with the SEC as an exhibit
to this Schedule. The Acquisition Agreement may be inspected at, and copies may
be obtained from, the same places and in the manner set forth in Section 8 of
the Offer to Purchase. The Acquisition Agreement should be read in its entirety
for a more complete description of the matters summarized below. Defined terms
used in the following summary and not defined in this Schedule have the
respective meanings assigned to those terms in the Acquisition Agreement.
The Offer. The Acquisition Agreement provides that Purchaser will commence
the Offer as promptly as practicable, but no later than October 3, 2001. Upon
the terms and subject to satisfaction or waiver of the conditions to the Offer
set forth below, promptly after the expiration of the Offer, Purchaser will
accept for payment, and pay for, all Shares (including (i) all Shares issuable
in respect of exercisable, in-the-money options to acquire Shares which have
been "conditionally exercised" by present and former employees and directors of
the Company for purposes of participating in the Offer, and (ii) all Shares
issued prior to the expiration of the Offer upon the conversion of any
convertible securities or upon the exercise of any options or warrants) validly
tendered and not withdrawn pursuant to the Offer, but not in excess of
14,392,003 Shares (the "Maximum Number"). If the number of Shares that are
validly tendered and not withdrawn exceeds the Maximum Number, Purchaser will
accept for purchase tendered Shares in an amount equal to the Maximum Number, on
a pro rata basis from each stockholder who has validly tendered Shares pursuant
to the Offer.
Purchaser may waive any of the conditions to the Offer and modify the terms
of the Offer, except that, without the consent of the Company, Purchaser may not
(i) increase or reduce the Maximum Number, (ii) reduce the price per Share to be
paid pursuant to the Offer, (iii) add to or modify any conditions to the Offer,
(iv) change the form of consideration payable in the Offer or (v) otherwise
amend the Offer in any manner adverse to the holders of Shares.
The initial expiration date of the Offer shall be October 26, 2001. If any
of the conditions to the Offer are not satisfied or waived on the expiration
date of the Offer, Purchaser will extend the Offer until such conditions are
satisfied or waived. Each extension of the Offer shall be for a period of not
more than ten business days. Purchaser may not, without the Company's consent,
extend the Offer beyond the Termination Date (as defined below). Purchaser will
also extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC or the staff thereof applicable to the
Offer or any period required by applicable law.
Conditions to the Offer. Subject to the terms of the Acquisition Agreement,
Purchaser is not required to accept for payment any Shares and may terminate the
Offer in any of the following cases if in Parent's good faith reasonable
judgment it is inadvisable to proceed with the Offer:
(1) the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") has not expired
or been terminated prior to the expiration date of the Offer, or
(2) at any time on or after September 19, 2001 and prior to the acceptance
for payment of Shares by Purchaser, any of the following conditions
exists:
(a) there shall have been any action taken, or any statute, rule,
regulation, injunction, judgment, order or decree enacted,
enforced, entered, promulgated, issued or deemed applicable to
Parent, Purchaser, the Company or the Offer, by any court,
government or governmental authority or agency in the United
States or any state thereof, other than the application of the
waiting period provisions of the HSR Act to the Offer, that
prohibits the consummation of the Offer or imposes material
limitations on the ability of Parent or Purchaser to acquire or
hold, or exercise full rights of ownership of, any
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Shares validly tendered and not withdrawn in the Offer, including
the right to vote such Shares on all matters properly presented
to the stockholders of the Company;
(b) the Company shall have breached or failed to perform in any
material respect any of its obligations under the Acquisition
Agreement required to be performed on or prior to such time;
(c) the Company shall have taken any Prohibited Action (as defined
below under "Stockholder Agreement") without the consent of
Parent after September 19, 2001;
(d) any of the representations and warranties of the Company
contained in the Acquisition Agreement or the Commercial
Agreement shall fail to be true and correct as of the date made
(or if expressly made as of an earlier date, as of such date),
other than for such failures to be true and correct that would
not have, individually or in the aggregate, a Material Adverse
Effect (as defined below) on the Company (except for certain
representations and warranties regarding the Company's
capitalization, which must be true and correct in all material
respects);
(e) the Acquisition Agreement shall have been terminated in
accordance with its terms; or
(f) there shall have occurred (i) any general suspension of trading
in securities on the Nasdaq National Market quotation system or
(ii) a declaration of a banking moratorium by federal or New York
authorities or (iii) any suspension of payments in respect of
banks in the United States that regularly participate in the
market in loans to large corporations, in each case which would
prevent the acceptance for payment or the payment for Shares
accepted for payment in the Offer.
Additional Share Issuance. If the number of Shares that Purchaser accepts
for payment in the Offer is less than the Maximum Number, the Company will issue
and sell to Purchaser, and Purchaser will purchase from the Company for cash, a
number of Shares equal to the difference between the Maximum Number and the
number of Shares accepted for payment by Purchaser in the Offer at a price per
Share of $70, net to the Company in cash (the "Additional Share Issuance"). The
Company's, Parent's and Purchaser's obligations to effect the Additional Share
Issuance are subject to the following conditions:
o The applicable waiting period under the HSR Act shall have expired or
been terminated;
o There shall not have been any action taken, or any statute, rule,
regulation, injunction, judgment, order or decree enacted, entered,
enforced, promulgated, issued or deemed applicable to Parent,
Purchaser, the Company or the Additional Share Issuance, by any court,
government or governmental authority or agency in the United States or
any state thereof, other than the application of the waiting period
provisions of the HSR Act to the Additional Share Issuance, that
prohibits the consummation of the Additional Share Issuance or imposes
material limitations on the ability of Parent or Purchaser to acquire
or hold, or exercise full rights of ownership of, any Shares issued
pursuant to the Additional Share Issuance, including the right to vote
such Shares on all matters properly presented to the stockholders of
the Company;
o Purchaser shall have accepted for payment all Shares, subject to the
Maximum Number, validly tendered and not withdrawn in the Offer; and
o The Shares to be issued shall have been authorized for quotation on
the Nasdaq National Market upon official notice of issuance.
Board Recommendation. The Board of Directors of the Company (the "Board")
has approved of and consented to the Offer and has resolved to recommend that
the Company's stockholders accept the Offer and tender their Shares in the
Offer. Such recommendation may be modified or withdrawn by the Board in the
exercise of its fiduciary duties.
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Representations and Warranties. The Acquisition Agreement contains
representations and warranties by the Company with respect to the following:
o the corporate existence and powers of the Company;
o the corporate power and authority of the Company to enter into the
Acquisition Agreement and the Stockholder Agreement and to consummate
the transactions contemplated by those agreements;
o required governmental authorizations;
o the absence of conflicts, breaches or defaults triggered by the
Acquisition Agreement or the Stockholder Agreement;
o the capitalization of the Company;
o the accuracy of documents filed by the Company with the SEC;
o the Company's financial statements;
o the absence of undisclosed material liabilities;
o compliance with laws;
o the absence of material undisclosed litigation of the Company;
o the absence of certain material changes affecting the Company's
business;
o intellectual property;
o actions taken to exempt the transactions contemplated by the
Acquisition Agreement from certain antitakeover laws; and
o the authorization and absence of restrictions on any Shares issuable
to Purchaser by the Company under the Acquisition Agreement.
The Acquisition Agreement contains representations and warranties by Parent
with respect to the following:
o the corporate existence and powers of Parent and Purchaser;
o the corporate power and authority of Parent and Purchaser to enter
into the Acquisition Agreement and the Stockholder Agreement and to
consummate the transactions contemplated by those agreements;
o required governmental authorizations;
o the absence of conflicts, breaches or defaults triggered by the
Acquisition Agreement or the Stockholder Agreement;
o the availability of financing to consummate the transactions
contemplated by the Acquisition Agreement;
o no resale or distribution of Shares issuable to Purchaser by the
Company under the Acquisition Agreement; and
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o no prior ownership of Shares by Parent and its affiliates.
Certain representations and warranties of Parent and the Company are
qualified by "Material Adverse Effect," which is defined in the Acquisition
Agreement with respect to the Company as a material adverse effect on the
condition (financial or otherwise), business, assets (including the Company's
manufacturing facilities) or results of operations or prospects (including
prospects for the commercialization of IMC-C225) of the Company, except any such
effect resulting from or arising in connection with (i) the Acquisition
Agreement or the transactions contemplated thereby or the announcement thereof,
(ii) changes, circumstances or conditions (including changes in applicable laws,
rules and regulations) affecting the biotechnology industry in general, or (iii)
changes in general economic conditions or financial markets. With respect to
Parent, "Material Adverse Effect" means a material impairment of the ability of
Parent or Purchaser to perform its obligations under or consummate the
transactions contemplated by the Acquisition Agreement, the Stockholder
Agreement or, in the case of Parent only, the Commercial Agreement, in
accordance with the terms thereof.
Covenants of the Company. The Company may not take any Prohibited Action
during the term of the Acquisition Agreement without the consent of Parent.
In addition, the Acquisition Agreement provides that, during the term of
the Acquisition Agreement, the Company will not, nor will it authorize or permit
any subsidiary or any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of the Company or any
subsidiary of the Company to, directly or indirectly, solicit, initiate or
encourage the submission of any public offer or proposal by a third party to
acquire beneficial ownership of more than 35% of the outstanding Shares.
Covenants of Parent and the Company. The Acquisition Agreement also
contains agreements between the Company and Parent to take certain actions,
including: (i) using reasonable best efforts to do all things necessary, proper
or advisable to consummate the transactions contemplated by the Acquisition
Agreement, (ii) cooperating with one another in the preparation of the documents
relating to the Offer and the making of necessary filings, (iii) consulting one
another in the making of public announcements and (iv) providing notice to the
other party of certain events.
Termination. The Acquisition Agreement may be terminated at any time:
o by mutual written agreement of the Company and Parent;
o by either the Company or Parent, if the Offer has not been consummated
on or before the Termination Date; provided that the Acquisition
Agreement may not be terminated by any party pursuant to this
provision if, at the time of termination, either:
(a) any of the events referred to in clause (2)(a) under "Conditions
to the Offer" above exist (other than (i) such events that exist
as a result of action by the U.S. Federal Trade Commission or the
Antitrust Division of the U.S. Department of Justice brought
under antitrust laws (an "Antitrust Injunction"), or (ii) such
events that relate to or arose in the context of a bona fide
public offer or proposal by a third party to acquire beneficial
ownership of more than 35% of the outstanding Shares (a "Third
Party Change of Control Injunction")); or
(b) any of the events referred to in clause (2)(f) under "Conditions
to the Offer" above (the "Market Failure Condition") exist.
The right to terminate the Acquisition Agreement pursuant to this
provision is not available to any party whose failure to perform any
of its obligations under the Acquisition Agreement results in the
failure of the Offer to be consummated;
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o by the Company, if Purchaser shall have failed to commence the Offer
in the time required by the Acquisition Agreement;
o by Parent, if (i) any of the representations or warranties of the
Company contained in the Acquisition Agreement or the Commercial
Agreement, disregarding all qualifications and exceptions contained
therein relating to materiality or Material Adverse Effect, shall fail
to be true and correct as of the date made, other than such failures
that would not have, individually or in the aggregate, a Material
Adverse Effect on the Company (except for certain representations
regarding the Company's capitalization, which shall be true and
correct in all material respects), (ii) the Company shall have
breached or failed to perform in any material respect any of its
obligations under the Acquisition Agreement, or (iii) the Company
shall have taken a Prohibited Action without the consent of Parent
after September 19, 2001, and in the cases of breaches of
representations, warranties and covenants, such breaches cannot be
cured or have not been cured within 30 days after notice;
o by the Company, if (i) any of the representations or warranties of
Parent contained in the Acquisition Agreement or the Commercial
Agreement, disregarding all qualifications and exceptions contained
therein relating to materiality or Material Adverse Effect, shall fail
to be true and correct as of the date made (or if expressly made as of
an earlier date, as of such date), other than for such failures that
would not have, individually or in the aggregate, a Material Adverse
Effect on Parent, and (ii) either Parent or Purchaser has breached any
obligation under the Acquisition Agreement, the Stockholder Agreement
or, in the case of Parent only, the Commercial Agreement required to
be performed on or prior to such time and, in the cases of breaches of
representations, warranties and covenants, such breaches cannot be
cured or have not been cured within 30 days after notice; or
o by either the Company or Parent, if:
(a) under the terms of the Acquisition Agreement, the Company, Parent
and Purchaser are obligated to effect the Additional Share
Issuance, and the Additional Share Issuance is not consummated
within 30 days after the date on which Purchaser has accepted for
purchase Shares tendered in the Offer;
(b) under the terms of the Acquisition Agreement, the Company, Parent
and Purchaser are obligated to effect the Market Failure Share
Issuance (as defined below), and the Market Failure Share
Issuance is not consummated within 30 days after the termination
of the Offer by either party due to the failure of the Market
Failure Condition; or
(c) under the terms of the Acquisition Agreement, the Company, Parent
and Purchaser are obligated to effect the Open Market Top-Up
Share Issuance (as defined below), and the Open Market Top-Up
Share Issuance is not consummated within 30 days after the final
day of the Open Market Purchase Period (as defined below).
"Termination Date" means the earlier of (A) April 1, 2002; provided that if
on or before April 1, 2002, Purchaser has not accepted for payment Shares
validly tendered and not withdrawn in the Offer and, at April 1, 2002 (i) the
applicable waiting period under the HSR Act shall not have expired or been
terminated or there exists an Antitrust Injunction, then such date may be
extended by either party from time to time to any date on or prior to September
30, 2002 by notice in writing to the other party, (ii) there exists a Third
Party Change of Control Injunction, then such date shall be extended to the
earlier to occur of (a) September 30, 2002, and (b) such date prior to September
30, 2002 as the Company shall determine in its sole discretion by notice in
writing to Parent at any time prior to September 30, 2002, or (iii) there exists
a failure of the Market Failure Condition, then such date may be extended by
either party from time to time to any date on or prior to September 30, 2002 by
notice in writing to the other party; and (B) the date upon which any of the
events referred to in clause (2)(a) under "Conditions to the Offer" above shall
have become final and nonappealable.
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Market Failure Share Issuance. If at the Termination Date (as may be
extended pursuant to the terms of the Acquisition Agreement) Purchaser has not
accepted for payment Shares tendered in the Offer and all conditions to the
Offer have been satisfied except for the Market Failure Condition, either party
may elect to terminate the Offer. Upon any such election, the Company will issue
and sell to Purchaser, and Purchaser will purchase from the Company for cash, a
number of Shares equal to the Maximum Number, at a price per Share of $70, net
to the Company in cash (the "Market Failure Share Issuance").
The obligations of the Company, Parent and Purchaser to complete the Market
Failure Share Issuance will be subject to the following conditions: (i) the
expiration or termination of the waiting period under the HSR Act, (ii) no
injunction or other governmental action prohibits the consummation of the Market
Failure Share Issuance or imposes material limitations on Parent's or
Purchaser's ownership or voting rights with respect to the Shares to be issued,
(iii) the Shares to be issued have been authorized for listing on the Nasdaq
National Market, and (iv) the Offer has been terminated as described in the
preceding paragraph.
Open Market Purchase. If at the Termination Date (as may be extended
pursuant to the terms of the Acquisition Agreement) Purchaser has not accepted
for payment Shares tendered in the Offer and there exists on that date a failure
of the condition specified in clause (2)(a) under "Conditions to the Offer"
above that is not an Antitrust Injunction or a Third Party Change of Control
Injunction, either party may elect to terminate the Offer. Upon any such
election, Purchaser shall, to the fullest extent permitted by law and not
prohibited by the terms of any injunction or other governmental action, during
the twelve-month period commencing on the date immediately following the date on
which the Offer is terminated (the "Open Market Purchase Period"), from time to
time purchase in transactions through the Nasdaq National Market or otherwise, a
number of Shares in the aggregate equal to the Maximum Number (the "Open Market
Purchase"); provided, that Purchaser's obligation to purchase Shares in the Open
Market Purchase shall terminate at the time Purchaser has paid $1,000,000,000 in
the aggregate to purchase Shares in the Open Market Purchase.
If Parent and Purchaser have complied with their obligations with respect
to the Open Market Purchase, and immediately following the Open Market Purchase
Period, Parent and its affiliates do not own at least 5% of the then-outstanding
Shares, subject to the conditions set forth below, Purchaser will purchase from
the Company for cash, a number of Shares equal to the difference between the
number of Shares representing 5% of the Shares outstanding immediately following
the Open Market Purchase Period and the number of Shares owned by Parent and its
affiliates immediately following the Open Market Purchase Period, at a price per
Share equal to the average closing price of the Shares on the Nasdaq National
Market for the 30 Nasdaq trading days ending on and including the last business
day of the Open Market Purchase Period, net to the Company in cash (the "Open
Market Top-Up Share Issuance").
Within two business days following the end of the Open Market Purchase
Period, Parent will pay to the Company an amount equal to (A) the excess, if
any, of (1) $70.00, over (2) the average purchase price paid by Purchaser for
all Shares acquired in the Open Market Purchase, multiplied by (B) the number of
Shares purchased by Purchaser in the Open Market Purchase.
The respective obligations of the Company, Parent and Purchaser to complete
the Open Market Top-Up Share Issuance will be subject to the following
conditions: (i) the expiration or termination of the waiting period under the
HSR Act, (ii) no injunction or other governmental action prohibits the
consummation of the Open Market Top-Up Share Issuance or imposes material
limitations on Parent's or Purchaser's ownership or voting rights with respect
to the Shares to be issued, (iii) the Shares to be issued have been authorized
for listing on the Nasdaq National Market and (iv) the Offer has been terminated
as described above.
Effect of Termination. If the Acquisition Agreement is terminated then none
of the Company, Parent, nor Purchaser will have any liability to the other
party, except for damages incurred as a result of breaches of representations,
warranties and covenants contained in the Acquisition Agreement.
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Stockholder Agreement
The following is a summary of the material terms of the Stockholder
Agreement. The summary is qualified in its entirety by reference to the
Stockholder Agreement, a copy of which has been filed with the SEC as an exhibit
to this Schedule. The Stockholder Agreement may be inspected at, and copies may
be obtained from, the same places and in the manner set forth in Section 8 of
the Offer to Purchase. The Stockholder Agreement should be read in its entirety
for a more complete description of the matters summarized below. Defined terms
used in the following summary and not defined in this Schedule have the
respective meanings assigned to those terms in the Stockholder Agreement.
References in this description of the Stockholder Agreement to Parent's
ownership interest in the Company mean the ownership interest of Parent and all
of Parent's affiliates.
Composition of the Board of Directors. Prior to completion of the
acquisition of Shares pursuant to the Acquisition Agreement, the Board will be
increased from ten to twelve members. After completion of the acquisition,
Parent will have the right to have the Company nominate a number of directors to
the Board (each a "Parent Director") based upon Parent's ownership interest in
the Company. Any individual designated by Parent to serve as a Parent Director
will be a senior officer or director of Parent. Parent will have the right to
have the Company nominate:
o two Parent Directors if Parent's ownership interest is 12.5% or
greater;
o one Parent Director if Parent's ownership interest is 5% or greater
but less than 12.5%; and
o no Parent Directors if Parent's ownership interest is less than 5%.
If the size of the Board is increased to a number greater than twelve, the
number of Parent Directors will be increased, subject to rounding, such that the
number of Parent Directors is proportionate to the lesser of Parent's
then-current ownership interest in the Company and 19.9%. Parent will have no
right to have the Company nominate any Parent Directors if (i) the Company has
terminated the Commercial Agreement due to a material breach by Parent or (ii)
Parent's ownership interest in the Company remains below 5% for 45 consecutive
days.
Voting of Shares. During the period in which Parent has the right to have
the Company nominate at least one Parent Director, Parent and its affiliates
will vote all of their Shares in the same proportion as the votes cast by all of
the Company's other stockholders with respect to the election or removal of
non-Parent Directors.
Committees of the Board of Directors. During the period in which Parent has
the right to have the Company nominate at least one Parent Director, subject to
certain exceptions, one member of each committee of the Board will be a Parent
Director.
Approval Required for Certain Actions. Until September 19, 2006 or, if
earlier, the occurrence of any of (i) a reduction in Parent's ownership interest
in the Company to below 5% for 45 consecutive days, (ii) a transfer or other
disposition of Shares by Parent or any of its affiliates such that Parent and
its affiliates own or have control over less than 75% of the maximum number of
Shares owned by Parent and its affiliates at any time after September 19, 2001,
(iii) an acquisition by a third party of more than 35% of the outstanding
Shares, (iv) a termination of the Commercial Agreement by Parent due to
significant regulatory or safety concerns regarding IMC-C225, or (v) a
termination of the Commercial Agreement by the Company due to a material breach
by Parent, the Company will not do any of the following (each a "Prohibited
Action") without the consent of the Parent Directors:
o issue additional Shares or securities convertible into Shares in
excess of 21,473,002 Shares in the aggregate, subject to appropriate
adjustment for any stock split, reverse stock split or other similar
transactions (certain issuances of Shares or securities convertible
into Shares, including Shares issued in connection with acquisitions
and Shares issued in respect of convertible securities outstanding as
of September 19, 2001, are not counted for purposes of this
limitation);
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o incur additional indebtedness if the total of (i) the principal amount
of indebtedness incurred since September 19, 2001 and
then-outstanding, and (ii) the net proceeds from the issuance of any
redeemable preferred stock then-outstanding, would exceed the amount
of indebtedness for borrowed money of the Company outstanding as of
September 19, 2001 by more than $500 million;
o acquire any business if the aggregate consideration for such
acquisition, when taken together with the aggregate consideration for
all other acquisitions consummated during the previous twelve months,
is in excess of 25% of the aggregate value of the Company at the time
the Company enters into the binding agreement relating to such
acquisition;
o dispose of all or any substantial portion of the non-cash assets of
the Company;
o enter into non-competition agreements which would be binding on
Parent, its affiliates or any Parent Director;
o take certain actions that would have a discriminatory effect on Parent
or any of its affiliates as a stockholder of the Company; or
o issue capital stock with more than one vote per share.
Limitation on Additional Purchases of Shares and Other Actions. Subject to
the exceptions set forth below, until September 19, 2006 or, if earlier, the
occurrence of any of (i) an acquisition by a third party of more than 35% of the
outstanding Shares, (ii) the first anniversary of a reduction in Parent's
ownership interest in the Company to below 5% for 45 consecutive days, or (iii)
the Company taking a Prohibited Action without the consent of the Parent
Directors, neither Parent nor any of its affiliates will acquire beneficial
ownership of any Shares or take any of the following actions:
o encourage any proposal for a business combination with, or an
acquisition of Shares of, the Company;
o participate in the solicitation of proxies from holders of Shares;
o form or participate in any "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934) with respect to the
Shares;
o enter into any voting arrangement with respect to the Shares; or
o seek any amendment or waiver to these restrictions.
The following are exceptions to the standstill restrictions described
above:
o Purchaser may acquire Shares pursuant to the Acquisition Agreement;
o Purchaser may acquire beneficial ownership of Shares either in the
open market or from the Company pursuant to the option described
below, so long as, after giving effect to any such acquisition of
Shares, Parent's ownership interest would not exceed 19.9%;
o Parent may make a non-public proposal to the Board to acquire Shares
if the Company provides material non-public information to a third
party in connection with, or begins active negotiation of, an
acquisition by a third party of more than 35% of the outstanding
Shares. If a third party has publicly proposed an acquisition of more
than 35% of the outstanding Shares and the Company has provided
material non-public information to such third party, or has begun
active negotiation of such transaction, Parent will have the right to
make a public or non-public proposal to the Board to acquire
additional Shares, but may only acquire beneficial ownership of any
additional Shares in a transaction for the acquisition of (i) 100%
10
of the outstanding Shares, or (ii) the same percentage of the
outstanding Shares which the third party has proposed to acquire. If
the Company accepts Parent's proposal, Parent may acquire additional
Shares in accordance with the terms of such proposal. If the Company
rejects Parent's proposal and enters into an agreement with respect to
an acquisition by a third party of more than 35% of the outstanding
Shares, Parent may make public its proposal to the Board to acquire
additional Shares, but may only acquire beneficial ownership of any
additional Shares in a transaction for the acquisition of (i) 100% of
the outstanding Shares, or (ii) the same percentage of the outstanding
Shares which the third party has agreed to acquire. Parent's right to
make a proposal as described in this paragraph is subject to the
condition that the Parent Directors recuse themselves from all
consideration of an acquisition by a third party of more than 35% of
the outstanding Shares;
o Parent may acquire Shares if such acquisition has been approved by a
majority of the non-Parent Directors; and
o Parent may make non-public requests to the Board to amend or
waive any of the standstill restrictions described above, but if the
Company agrees to such request and Parent subsequently makes a
proposal for a business combination with the Company or an acquisition
of additional Shares, such proposal by Parent will provide for an
acquisition of all outstanding Shares and equity interests of the
Company at a premium of at least 25% to the prevailing market price of
the Shares.
Certain of the exceptions to the standstill provisions described above will
terminate upon the occurrence of: (i) a reduction in Parent's ownership interest
in the Company to below 5% for 45 consecutive days, (ii) a transfer or other
disposition of Shares by Parent or any of its affiliates such that Parent and
its affiliates own or have control over less than 75% of the maximum number of
Shares owned by Parent and its affiliates at any time after September 19, 2001,
(iii) a termination of the Commercial Agreement by Parent due to significant
regulatory or safety concerns regarding IMC-C225, or (iv) a termination of the
Commercial Agreement by the Company due to a material breach by Parent.
Option to Purchase Shares in the Event of Dilution. Purchaser will have the
right to purchase additional Shares from the Company, pursuant to an option
granted to Parent by the Company, in the event that Parent's ownership interest
is diluted (other than by any transfer or other disposition by Parent or any of
its affiliates). Parent can exercise this right:
o once per year;
o if the Company issues Shares in excess of 10% of the then-outstanding
Shares in one day; and
o if Parent's ownership interest is reduced to below 5% or 12.5%.
The per share price for Shares purchased pursuant to the option shall be
equal to the average closing price of the Shares on the Nasdaq National Market
for the 30 Nasdaq trading days ending on and including the date on which Parent
notifies the Company that it has elected to exercise the option.
Purchaser's right to purchase additional Shares from the Company pursuant
to this option will terminate on September 19, 2006 or, if earlier, upon the
occurrence of (i) an acquisition by a third party of more than 35% of the
outstanding Shares, or (ii) the first anniversary of a reduction in Parent's
ownership interest in the Company to below 5% for 45 consecutive days.
Transfers of Shares. Until September 19, 2004, neither Parent nor any of
its affiliates may transfer any Shares or enter into any arrangement that
transfers any of the economic consequences associated with the ownership of
Shares. After September 19, 2004, neither Parent nor any of its affiliates may
transfer any Shares or enter into any arrangement that transfers any of the
economic consequences associated with the ownership of Shares, except (i)
pursuant to the registration rights described below, (ii) pursuant to Rule 144
under the Securities Act of 1933, as
11
amended (the "Securities Act") or (iii) for hedging transactions permitted by
clause (iii) of the following sentence. Any transfer made pursuant to the
preceding sentence is subject to the following limitations: (i) the transferee
may not acquire beneficial ownership of more than 5% of the then-outstanding
Shares; (ii) no more than 10% of the total outstanding Shares may be sold in any
one registered underwritten public offering; and (iii) neither Parent nor any of
its affiliates may transfer Shares (except for registered firm commitment
underwritten public offerings pursuant to the registration rights described
below) or enter into hedging transactions in any twelve-month period that would,
individually or in the aggregate, have the effect of reducing the economic
exposure of Parent and its affiliates by the equivalent of more than 10% of the
maximum number of Shares owned by Parent and its affiliates at any time after
September 19, 2001.
Notwithstanding the foregoing, Purchaser may transfer all but not less than
all of the Shares owned by it to Parent, E.R. Squibb or another wholly owned
subsidiary of Parent.
The transfer of Shares by Parent or any of its affiliates (other than
pursuant to the preceding paragraph) will not result in the transfer of any
rights of Parent or any of its affiliates under the Stockholder Agreement.
Registration Rights. The Company has granted Parent customary registration
rights with respect to Shares owned by Parent or any of its affiliates. After
September 19, 2004, Parent may make up to three requests to have the Company
register Shares under the Securities Act. The Company will not be obligated to
effect more than one request in any twelve-month period. In addition, the
Company has granted Parent the right to have Shares owned by Parent or any of
its affiliates registered in certain circumstances where the Company files a
registration statement with respect to newly-issued Shares or Shares that a
third party is seeking to have registered. All registration fees and expenses
will be (i) divided equally between the Company and Parent with respect to the
first and second registrations requested by Parent, and (ii) borne by Parent
with respect to a third registration.
Commercial Agreement
The following is a summary of the material terms of the Commercial
Agreement. The summary is qualified in its entirety by reference to the
Commercial Agreement, a copy of which has been filed with the SEC as an exhibit
to this Schedule. The Commercial Agreement may be inspected at, and copies may
be obtained from, the same places and in the manner set forth in Section 8 of
the Offer to Purchase. The Commercial Agreement should be read in its entirety
for a more complete description of the matters summarized below. Defined terms
used in the following summary and not defined in this Schedule have the
respective meanings assigned to those terms in the Commercial Agreement.
Rights Granted to E.R. Squibb. Pursuant to the Commercial Agreement, the
Company has granted to E.R. Squibb (i) the exclusive right to distribute, and
the co-exclusive right to develop and promote (together with the Company) any
prescription pharmaceutical product using the compound IMC-C225 (the "Product")
in the United States and Canada (collectively, "North America"), (ii) the
co-exclusive right to develop, distribute and promote (together with the Company
and Merck KGaA and its affiliates) the Product in Japan, and (iii) the
non-exclusive right to use the Company's registered trademarks for the Product
in North America and Japan (collectively, the "Territory") in connection with
the foregoing. In addition, the Company has agreed not to grant any right or
license to any third party or otherwise permit any third party to develop
IMC-C225 for animal health or any other application outside the human health
field without the prior consent of E.R. Squibb (which consent may not be
unreasonably withheld).
Rights Granted to the Company. Pursuant to the Commercial Agreement, E.R.
Squibb has granted to the Company and its affiliates a license, without the
right to grant sublicenses (other than to Merck KGaA and its affiliates for use
in Japan and to any third party for use outside the Territory), to use solely
for the purpose of developing, using, manufacturing, promoting, distributing and
selling IMC-C225 or the Product, any process, know- how or other invention
developed solely by E.R. Squibb or Parent which has general utility in
connection with other products or compounds in addition to IMC-C225 or the
Product ("E.R. Squibb Inventions").
12
Up-Front and Milestone Payments. The Commercial Agreement provides for
up-front and milestone payments by E.R. Squibb to the Company of $1.0 billion in
the aggregate, with $200 million payable upon signing of the Commercial
Agreement, $300 million payable upon acceptance by the United States Food and
Drug Administration (the "FDA") of the initial regulatory filing for the Product
and $500 million payable upon receipt of marketing approval from the FDA. All
such payments are non-refundable, except that the two milestone payments of $300
million and $500 million are refundable in the event that the Company terminates
the Commercial Agreement pursuant to the Antitrust Termination Right (as defined
below).
Distribution Fees. The Commercial Agreement provides that E.R. Squibb shall
pay the Company distribution fees based on a percentage of annual sales of the
Product (less customary deductions, such as for returns, customary discounts,
chargeback payments and rebates, shipping costs and sales taxes) ("Net Sales")
by E.R. Squibb in North America. The base distribution fee rate is 39% of Net
Sales in North America. Pursuant to the Commercial Agreement, this rate will
increase in the event that Net Sales exceed certain agreed levels.
In the event that a third party acquires more than a 35% ownership interest
in the Company at any time prior to (or announces such acquisition prior to and
consummates any time after) the earliest to occur of (i) September 19, 2006,
(ii) the date which is 45 days after any date on which Parent's ownership
interest in the Company is less than 5%, or (iii) a transfer or other
disposition of Shares by Parent or any of its affiliates such that Parent and
its affiliates own or have control over less than 75% of the maximum number of
Shares owned by Parent and its affiliates at any time after September 19, 2001,
the distribution fee payable by E.R. Squibb for North America shall be adjusted
to a flat rate of 39% of all future Net Sales.
The Commercial Agreement also provides that the distribution fees for the
sale of the Product in Japan by E.R. Squibb or the Company shall be equal to 50%
of operating profit or loss with respect to such sales for any calendar month.
In the event of an operating profit, E.R. Squibb shall pay the Company the
amount of such distribution fee, and in the event of an operating loss, the
Company shall credit E.R. Squibb the amount of such distribution fee.
Development of the Product. The Commercial Agreement provides that the
Company is primarily responsible for conducting the clinical studies and other
regulatory and manufacturing matters necessary to support, prepare and file the
initial regulatory filing for the Product until such filing with the FDA is
completed. As soon as practicable after filing, the Company will transition such
clinical and other studies ongoing with respect to the Product which the parties
have agreed will be transferred from the Company's sole control to the control
of both parties. The clinical development plans agreed to by the parties
pursuant to the Commercial Agreement set forth the activities to be undertaken
by the parties for the purpose of obtaining marketing approvals, providing
market support and developing new indications and formulations of the Product.
After the transition of the clinical and other studies, each party will be
primarily responsible for performing the studies designated to it in the
clinical development plans. In North America, the Company and E.R. Squibb will
each be responsible for 50% of the cost of studies not required by the FDA or
other applicable regulatory agency, and E.R. Squibb will be responsible for 100%
of the cost of studies required by the FDA or other applicable regulatory
agency. E.R. Squibb and the Company will each be responsible for 50% of the cost
of all studies in Japan (whether required or not required by the applicable
regulatory agency). Except as otherwise agreed upon by the parties, the Company
will own all registrations for the Product. However, E.R. Squibb will be
primarily responsible for the regulatory activities in the Territory after the
Product has been registered in each country in the Territory.
Distribution and Promotion of the Product. Pursuant to the Commercial
Agreement, E.R. Squibb has agreed to use all commercially reasonable efforts to
launch, promote and sell the Product in the Territory with the objective of
maximizing the sales potential of the Product and promoting the therapeutic
profile and benefits of the Product in the most commercially beneficial manner.
In connection with its responsibilities for distribution, marketing and sales of
the Product in the Territory, E.R. Squibb will perform all relevant functions,
including but not limited to the provision of all sales force personnel,
marketing (including all advertising and promotional expenditures), warehousing
and physical distribution of the Product. However, the Company has the right, at
its election and sole expense, to co-promote with E.R. Squibb the Product in the
Territory. If the Company exercises this co-promotion option, it is entitled (at
its sole expense) to have its sales force and medical liaison personnel
participate in the
13
promotion of the Product consistent with the marketing plan agreed by the
parties, provided that E.R. Squibb will retain the exclusive rights to sell and
distribute the Product. Except to the extent the Company exercises the co-
promotion option, E.R. Squibb will be responsible for 100% of the distribution,
sales and marketing costs in North America, and E.R. Squibb and the Company will
each be responsible for 50% of the distribution, sales, marketing costs and
other related costs and expenses in Japan.
Manufacture and Supply. The Commercial Agreement provides that the Company
will be responsible for the manufacture and supply of all requirements of
IMC-C225 in bulk form ("API") for clinical and commercial use in the Territory,
and that E.R. Squibb will purchase all of its requirements of API for commercial
use from the Company. The Company will supply API for clinical use at the
Company's fully burdened manufacturing cost, and will supply API for commercial
use at the Company's fully burdened manufacturing cost plus a mark-up of 10%.
The parties intend to negotiate the Company's use of the process development at
one of Parent's facilities for the support of a non-commercial supply of API.
Upon the expiration, termination or assignment of any existing agreements
between the Company and third party manufacturers, E.R. Squibb will be
responsible for processing API into the finished form of the Product.
Management. The parties have agreed to form the following committees for
purposes of managing their relationship and their respective rights and
obligations under the Commercial Agreement:
o a joint executive committee (the "JEC"), which will consist of certain
senior officers of each party. The JEC will be co-chaired by a
representative of each of the Company and Parent. The JEC will be
responsible for, among other things, managing and overseeing the
development and commercialization of IMC-C225 and the Product pursuant
to the terms of the Commercial Agreement, approving the annual budgets
and multi-year expense forecasts, and resolving disputes,
disagreements and deadlocks arising in the other committees;
o a product development committee (the "PDC"), which will consist of
members of senior management of each party with expertise in
pharmaceutical drug development and/or marketing. The PDC will be
chaired by a representative of the Company. The PDC will be
responsible for, among other things, managing and overseeing the
development and implementation of the clinical development plans,
comparing actual versus budgeted clinical development and regulatory
expenses, and reviewing the progress of the registrational studies;
o a joint commercialization committee (the "JCC"), which will consist of
members of senior management of each party with clinical experience
and expertise in marketing and sales. The JCC will be chaired by a
representative of Parent. The JCC will be responsible for, among other
things, overseeing the preparation and implementation of the marketing
plans, coordinating the sales efforts of E.R. Squibb and the Company,
and reviewing and approving the marketing and promotional plans for
the Product in the Territory; and
o a joint manufacturing committee (the "JMC"), which will consist of
members of senior management of each party with expertise in
manufacturing. The JMC will be chaired by a representative of the
Company (except where a determination is made that a long term
inability to supply API exists, in which case the JMC will be
co-chaired by representatives of E.R. Squibb and the Company). The JMC
will be responsible for, among other things, overseeing and
coordinating the manufacturing and supply of API and the Product, and
formulating and directing the manufacturing strategy for the Product.
Any matter which is the subject of a deadlock (i.e., no consensus decision)
in the PDC, the JCC or the JMC will be referred to the JEC for resolution.
Subject to certain exceptions, deadlocks in the JEC will be resolved as follows:
(i) if the matter was also the subject of a deadlock in the PDC, by the
co-chairperson of the JEC designated by the Company, (ii) if the matter was also
the subject of a deadlock in the JCC, by the co-chairperson of the JEC
designated by Parent, or (iii) if the matter was also the subject of a deadlock
in the JMC, by the co-chairperson of the JEC designated by the Company. All
other deadlocks in the JEC will be resolved by arbitration.
14
Right of First Offer. If at any time prior to the earlier to occur of
September 19, 2006 and the first anniversary of the date which is 45 days after
any date on which Parent's ownership interest in the Company is less than 5%,
the Company decides to enter into a partnering arrangement with a third party
with respect to the Company's 2C6 anti- VEGF receptor monoclonal antibody (or
any humanized or chimeric version thereof or any substitute therefor) ("2C6"),
the Company must notify E.R. Squibb. If E.R. Squibb notifies the Company that it
is interested in such an arrangement, the Company will provide its proposed
terms to E.R. Squibb and the parties will negotiate in good faith for 90 days to
attempt to agree on the terms and conditions of such an arrangement. If the
parties do not reach agreement during this period, E.R. Squibb must propose the
terms of an arrangement which it is willing to enter into, and if the Company
rejects such terms it may enter into an agreement with a third party with
respect to such a partnering arrangement (provided that the terms of any such
agreement may not be more favorable to the third party than the terms proposed
by E.R. Squibb).
Right of First Negotiation. If, at any time during the Restricted Period
(as defined below), the Company is interested in establishing a partnering
relationship with a third party involving certain compounds or products not
related to IMC-C225, the Product or 2C6, the Company must notify E.R. Squibb and
E.R. Squibb will have 90 days to enter into a non-binding heads of agreement
with the Company with respect to such a partnering relationship. In the event
that E.R. Squibb and the Company do not enter into a non-binding heads of
agreement, the Company is free to negotiate with third parties without further
obligation to E.R. Squibb. The "Restricted Period" means the period from
September 19, 2001 until the earliest to occur of (i) September 19, 2006, (ii) a
reduction in Parent's ownership interest in the Company to below 5% for 45
consecutive days, (iii) a transfer or other disposition of Shares by Parent or
any of its affiliates such that Parent and its affiliates own or have control
over less than 75% of the maximum number of Shares owned by Parent and its
affiliates at any time after September 19, 2001, (iv) an acquisition by a third
party of more than 35% of the outstanding Shares, (v) a termination of the
Commercial Agreement by Parent due to significant regulatory or safety concerns
regarding IMC-C225, or (vi) a termination of the Commercial Agreement by the
Company due to a material breach by Parent.
Restriction on Competing Products. During the period from the date of the
Commercial Agreement until September 19, 2008, the parties have agreed not to,
directly or indirectly, develop or commercialize a competing product (defined as
a product which has as its only mechanism of action an antagonism of the EGF
receptor) in any country in the Territory. In the event that any party proposes
to commercialize a competing product or purchases or otherwise takes control of
a third party which has developed or commercialized a competing product, then
such party must either divest the competing product within 12 months or offer
the other party the right to participate in the commercialization and
development of the competing product on a 50/50 basis (provided that if the
parties cannot reach agreement with respect to such an arrangement, the
competing product must be divested within 12 months).
Ownership. The Commercial Agreement provides that the Company will own all
data and information concerning IMC-C225 and the Product and (except for the
E.R. Squibb Inventions) all processes, know-how and other inventions relating to
the Product and developed by either party or jointly by the parties. E.R. Squibb
will, however, have the right to use all such data and information, and all such
processes, know-how or other inventions, in order to fulfill its obligations
under the Commercial Agreement.
Product Recalls. If E.R. Squibb is required by any regulatory authority to
recall the Product in any country in the Territory (or if the JCC determines
such a recall to be appropriate), then the Company and E.R. Squibb shall bear
the costs and expenses associated with such a recall (i) in North America, in
the proportion of 39% for the Company and 61% for E.R. Squibb and (ii) in Japan,
in the proportion for which each party is entitled to receive operating profit
or loss (unless the predominant cause for such a recall is the fault of either
party, in which case all such costs and expenses shall be borne by such party).
Mandatory Transfer. Each of Parent and E.R. Squibb has agreed under the
Commercial Agreement that in the event it sells or otherwise transfers all or
substantially all of its pharmaceutical business or pharmaceutical oncology
business, it must also transfer to the transferee its rights and obligations
under the Commercial Agreement.
15
Indemnification. Pursuant to the Commercial Agreement, each party has
agreed to indemnify the other for (i) its negligence, recklessness or wrongful
intentional acts or omissions, (ii) its failure to perform certain of its
obligations under the Commercial Agreement, and (iii) any breach of its
representations and warranties under the Commercial Agreement.
Termination. Unless earlier terminated pursuant to the termination rights
discussed below, the Commercial Agreement expires with regard to the Product in
each country in the Territory on the later of September 19, 2018 and the date on
which the sale of the Product ceases to be covered by a validly issued or
pending patent in such country. The Commercial Agreement may be also be
terminated prior to such expiration as follows:
o by either party, in the event that the other party materially breaches
any of its material obligations under the Commercial Agreement and has
not cured such breach within 60 days;
o by E.R. Squibb, if the JEC determines that there exists a significant
concern regarding a regulatory or patient safety issue that would
seriously impact the long-term viability of the Product;
o by the Company, if (i) the Offer is not consummated on or before the
Termination Date and either (A) the waiting period under the HSR Act
has not expired or been terminated at such time or (B) there exists at
such time any injunction, judgment, order or decree as a result of any
action by the United States Federal Trade Commission or the Antitrust
Division of the United States Department of Justice prohibiting the
consummation of the Offer or imposing material limitations on the
ability of Parent or Purchaser to acquire or hold, or exercise full
rights of ownership of, any Shares validly tendered and not withdrawn
in the Offer (the "Antitrust Termination Right"), or (ii) all of the
conditions to the Offer are satisfied but Purchaser fails to purchase
the Shares tendered in the Offer; or
o by either party, in the event that the JEC does not approve additional
clinical studies that are required by the FDA in connection with the
submission of the initial regulatory filing with the FDA within 90
days of receiving the formal recommendation of the PDC concerning such
additional clinical studies.
Letter Agreements
In connection with the Acquisition Agreement, each of Samuel D. Waksal,
Ph.D., President and Chief Executive Officer of the Company, and Harlan W.
Waksal, M.D., Executive Vice President and Chief Operating Officer of the
Company, entered into letter agreements with Parent (the "Tender Letter
Agreements"). Under the Tender Letter Agreements, each of Samuel D. Waksal,
Ph.D. and Harlan W. Waksal, M.D. agreed:
o to tender in the Offer and not withdraw a substantial portion of the
Shares beneficially owned by him, except where such tender would
create liability under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or where the Board changes its
recommendation with respect to the Offer;
o in the event that the Board changes its recommendation with respect to
the Offer or a third party makes a bona fide public offer or proposal
to acquire beneficial ownership of more than 35% of the outstanding
Shares, to tender in the Offer and not withdraw at least 100,000 of
the Shares beneficially owned by him; and
o not to sell or otherwise transfer or dispose of Shares beneficially
owned by him, except in the Offer or with the prior written consent of
Parent if such sale, transfer or other disposition would prevent him
from performing his obligations thereunder.
The Tender Letter Agreements terminate upon the earliest to occur of (i)
acceptance for payment of Shares in the Offer, (ii) termination of the
Acquisition Agreement pursuant to its terms, and (iii) termination of the Offer.
16
The above summary is qualified in its entirety by reference to the Tender
Letter Agreements, copies of which have been filed with the SEC as exhibits to
this Schedule. The Tender Letter Agreements may be inspected at, and copies may
be obtained from, the same places and in the manner set forth in Section 8 of
the Offer to Purchase. The Tender Letter Agreements should be read in their
entirety for a more complete description of the matters summarized above.
Confidentiality Agreement
On May 19, 2001, the Company and Parent entered into a confidentiality
agreement (the "Confidentiality Agreement"). Under the terms of the
Confidentiality Agreement, the Company and Parent agreed to furnish to the other
party on a confidential basis certain information concerning their respective
businesses in connection with the evaluation of a possible transaction between
Parent and the Company. The Confidentiality Agreement also contains customary
standstill provisions.
The above summary is qualified in its entirety by reference to the
Confidentiality Agreement, a copy of which have been filed with the SEC as an
exhibit to this Schedule. The Confidentiality Agreement may be inspected at, and
copies may be obtained from, the same places and in the manner set forth in
Section 8 of the Offer to Purchase. The Confidentiality Agreement should be read
in its entirety for a more complete description of the matters summarized above.
Employment Agreements
On September 19, 2001, the Company entered into employment agreements (each
an "Employment Agreement", and collectively, the "Employment Agreements") with
each of Samuel D. Waksal, Ph.D., Harlan W. Waksal, M.D., Daniel S. Lynch, S.
Joseph Tarnowski, Ph.D. and John B. Landes (each, an "Executive").
Term. Each Employment Agreement has a three-year term, effective as of
September 19, 2001. The term of employment for each of Samuel D. Waksal, Ph.D.
and Harlan W. Waksal, M.D. will be automatically extended for one additional day
each day during the term of employment unless either the Company or the
Executive otherwise gives notice.
Base Salary and Annual Bonus Opportunity. Pursuant to their respective
Employment Agreements, Samuel D. Waksal, Ph.D. will receive a base salary of no
less than $500,000 and an annual bonus equal to an amount not less than the
difference between $1,000,000 and the amount of his base salary; Harlan W.
Waksal, M.D. will receive a base salary of no less than $455,000 and an annual
bonus equal to an amount not less than the difference between $1,000,000 and the
amount of his base salary; Daniel S. Lynch will receive a base salary of no less
than $360,000 and an annual bonus of not less than $360,000; S. Joseph
Tarnowski, Ph.D. will receive a base salary of no less than $225,000 and an
annual bonus of not less than $100,000; and John B. Landes will receive a base
salary of no less than $225,000 and an annual bonus of not less than $100,000.
Benefits. Each Executive will be provided with customary benefits and
perquisites. Each of Samuel D. Waksal, Ph.D., Harlan W. Waksal, M.D., and S.
Joseph Tarnowski will be provided with life insurance policies purchased by the
Company.
Stock Options. The Employment Agreements provide Samuel D. Waksal, Ph.D.,
Harlan W. Waksal, M.D. and Daniel S. Lynch with a one-time grant of options to
purchase 1,250,000, 1,000,000 and 200,000 Shares, respectively. The options
granted to Daniel S. Lynch shall vest as to one-third of the Shares underlying
the option grant on each anniversary of the date of grant. The options granted
to Samuel D. Waksal, Ph.D. and Harlan W. Waksal, M.D. shall vest in full on the
third anniversary of the date of grant, provided that the vesting of the options
shall be accelerated if the price of the Shares reaches certain targets for a
specified period of time prior to the third anniversary of the Employment
Agreements. Upon a change in control of the Company, the options granted to each
of Samuel D. Waksal, Ph.D., Harlan W. Waksal, M.D. and Daniel S. Lynch shall
become fully vested.
17
Termination of Employment. If the Company terminates the employment of any
Executive without "cause" or if any Executive terminates employment for "good
reason", the Executive will be entitled to certain payments and benefits,
including immediate vesting of all stock options and other equity awards and a
lump sum payment equal to three times the sum of base salary and bonus.
In addition, if any payments received by an Executive would be subject to
an excise tax imposed by Section 4999 of the Internal Revenue Code, the
Executive will receive a gross-up payment to fully offset the effect of any such
excise tax. If as a result of reducing the amount of payments owed to the
Executive by an amount that is less than 10% of the portion of the payments that
would be treated as "parachute payments", such payments would not be subject to
an excise tax, then the payments shall be so reduced.
Non-Competition and Non-Solicitation. For the period beginning with the
termination of an Executive's employment by the Company without "cause" or by
the Executive for "good reason" and ending one year later, the Executive will
not (i) be employed by or perform activities on behalf of or have an ownership
interest of more than 1% in any entity that is directly or indirectly engaged in
any biopharmaceutical business in the which the Company and its subsidiaries
have significant involvement, or (ii) directly or indirectly induce any employee
of the Company to terminate his or her employment or become employed by another
biopharmaceutical company.
The above summary is qualified in its entirety by reference to the
Employment Agreements, copies of which have been filed with the SEC as exhibits
to this Schedule. The Employment Agreements may be inspected at, and copies may
be obtained from, the same places and in the manner set forth in Section 8 of
the Offer to Purchase. The Employment Agreements should be read in their
entirety for a more complete description of the matters summarized above.
Other Matters
Certain directors and executive officers of the Company beneficially own
securities of Parent. To the knowledge of the Company after reasonable inquiry,
Mr. William R. Miller, a director of the Company, beneficially owns 292,982
shares of Parent common stock, Mr. David M. Kies, a director of the Company,
beneficially owns 1,600 shares of Parent common stock, and Mr. Daniel S. Lynch,
Chief Financial Officer and Senior Vice President - Finance of the Company,
beneficially owns 13,915 shares of Parent common stock.
Mr. Miller served as Vice Chairman of the Board of Directors of Parent from
1985 until 1991. Mr. Miller retired from Parent in 1991 with fully-vested
pension and other retirement benefits from Parent and has not been employed by
Parent since that time. Mr. Miller abstained from voting on the approval by the
Board of the Acquisition Agreement, the Stockholder Agreement and the Commercial
Agreement.
Each of Dr. Arnold J. Levine and Dr. John Mendelsohn, directors of the
Company, are affiliated with academic institutions that have from time to time
received research funding from Parent.
Item 4. The Solicitation or Recommendation.
Recommendation of the Board of Directors. The Board at a meeting duly
called and held on September 19, 2001, by a unanimous vote of those directors
present and voting, (i) approved each of the Acquisition Agreement, the
Stockholder Agreement and the Commercial Agreement and the transactions
contemplated thereby, (ii) approved of and consented to the Offer, and (iii)
recommended that the stockholders of the Company accept the Offer and tender
their Shares pursuant to the Offer.
As described in the Offer to Purchase, Purchaser will accept for payment
and pay for Shares tendered in the Offer upon the conditional exercise of
exercisable options to purchase Shares having exercise prices below $70.00 per
Share held by present or former employees and directors of the Company ("Option
Shares"), subject to the terms and conditions of the Offer (including proration
with respect to such Shares in the event that more than 14,392,003 Shares are
validly tendered and not withdrawn at the expiration of the Offer). As of
September 27, 2001, there were outstanding approximately 3.2 million exercisable
options to purchase Shares having exercise prices of less than $70.00 per Share
held by present or former employees and directors of the Company. Neither the
Company nor the
18
Board makes any recommendation as to whether holders of such options should
exercise or refrain from exercising (conditionally or otherwise) such options in
order to tender Shares (including Option Shares) in the Offer, since that
decision requires an analysis of each individual option holder's specific
circumstances. Each holder of such options is urged to consult his or her own
tax, financial and legal advisors regarding the U.S. federal, state, local and
foreign tax consequences of conditionally exercising his or her options in light
of his or her own particular circumstances. Each holder of such options is urged
to consider (in conjunction with his or her tax, financial and legal advisors)
the financial implications of exercising options significantly in advance of the
expiration of the option term.
Background of the Tender Offer. In the summer of 2000, the Company
contacted a select group of large pharmaceutical companies, including Parent, to
explore a possible strategic transaction involving the Company. Representatives
of certain companies contacted by the Company, including Parent, conducted due
diligence on the Company and met with representatives of the Company. The
Company subsequently determined not to further pursue a strategic transaction
involving the Company at that time.
In mid-April 2001, Mr. Brian Markison, Senior Vice President of Parent,
contacted Dr. Samuel Waksal, President and Chief Executive Officer of the
Company, through Lehman Brothers Inc., Parent's financial advisors, to determine
whether the Company would be interested in pursuing a strategic transaction with
Parent, potentially involving a significant equity investment in the Company by
Parent. Through Morgan Stanley & Co. Incorporated ("Morgan Stanley"), the
Company's financial advisor, Dr. Samuel Waksal conveyed concern to Mr. Markison
that Parent had conducted due diligence in the summer of 2000 and not pursued a
transaction but agreed to meet with Mr. Markison to discuss Parent's interest in
the Company.
On May 3, 2001, Dr. Samuel Waksal met with Mr. Peter Ringrose, Chief
Scientific Officer of Parent, and Mr. Markison to discuss Parent's interest in
the Company. Mr. Markison assured Dr. Samuel Waksal that Parent was interested
in pursuing a strategic transaction to completion. Dr. Samuel Waksal provided
guidance regarding potential structures for a strategic transaction that would
be acceptable to the Company, including his preference that the Company remain a
publicly traded entity. Over the course of the discussions, Mr. Markison and Dr.
Samuel Waksal agreed to explore a possible transaction whereby Parent would
acquire a majority interest (between 51% and 80%) in the Company for Parent
common stock valued at $65.00 per Share in a transaction which would be tax-free
to the Company's stockholders, together with a separate agreement providing for
a commercial collaboration with respect to IMC-C225.
During the balance of the month of May, meetings and telephonic discussions
took place between Mr. Daniel Lynch, Chief Financial Officer of the Company, and
other representatives of the Company, and Mr. Markison and other representatives
of Parent, during which time the parties outlined elements of each company's
responsibilities in a potential commercial collaboration. On May 19, 2001,
Parent and the Company entered into the Confidentiality Agreement, and
thereafter employees of Parent conducted preliminary due diligence on the
Company.
On May 24, 2001, at a regularly scheduled meeting of the Company's Board of
Directors, Dr. Samuel Waksal reviewed with the Board the discussions with Parent
regarding a potential strategic transaction.
On May 29, 2001, Mr. Richard J. Lane, President of Parent's pharmaceutical
business, and Dr. Samuel Waksal met in New York and further discussed the
potential strategic transaction between the companies.
On June 1, 2001, a telephonic meeting of the Company's Board of Directors
was held at which Dr. Samuel Waksal and Mr. Lynch, in conjunction with
representatives of Morgan Stanley and Davis Polk & Wardwell, the Company's legal
advisor, reviewed with the Board a proposal that the Company was developing for
an acquisition of a majority interest in the Company by Parent.
On June 1, 2001, after the meeting of the Company's Board of Directors, Mr.
Lane and Dr. Samuel Waksal met again to discuss the terms of a possible
transaction, including an outline of a transaction structure and governance
19
proposal prepared by Davis Polk & Wardwell regarding the acquisition by Parent
of a majority stake in the Company.
On June 5, 2001, Cravath, Swaine & Moore, Parent's legal advisors,
delivered a due diligence request list to the Company on behalf of Parent. On
June 7, 2001, representatives of the Company and Parent met to discuss Parent's
proposed due diligence review of the Company. Shortly thereafter, employees of
Parent and representatives of Parent's legal and financial advisors commenced
their due diligence review on the Company in the areas of clinical development,
legal matters, information technology, marketing and sales, tax, finance,
manufacturing, intellectual property and regulatory affairs.
On June 7, 2001, Mr. Markison advised Mr. Lynch that Parent's management
wished to pursue other strategic alternatives to acquiring a majority interest
in the Company, including the acquisition of a minority interest in the Company.
On June 11, 2001 and June 18, 2001, at telephonic meetings of the Company's
Board of Directors, Dr. Samuel Waksal briefed the Board on the current status of
discussions with Parent.
In late June, Dr. Samuel Waksal was contacted by Mr. Peter Dolan, Chief
Executive Officer of Parent, and Mr. Lane, who confirmed to Dr. Samuel Waksal
that Parent was not interested in a transaction where Parent acquired a majority
interest in the Company and the Company remained a publicly-traded entity. Mr.
Dolan and Mr. Lane reaffirmed Parent's interest in the Company and Parent's
intent to consider other strategic structures that met the economic and business
objectives of both companies. Dr. Samuel Waksal stated that he was willing to
consider alternative proposals, but emphasized that he was not interested in a
commercial transaction that did not also include a significant equity investment
in the Company by Parent. Dr. Samuel Waksal also advised Parent that he felt the
Company's existing stockholders would benefit most if Parent acquired an equity
interest through a tender offer to the Company's existing stockholders.
On June 26, 2001, representatives of the Company and Parent met, together
with each party's legal and financial advisors, at the offices of the Company.
At this meeting, Parent distributed to the Company and its advisors an outline
of a proposed commercial transaction for the co-development, co-promotion and
distribution of IMC-C225 and an equity structure which proposed an acquisition
of a 19.9% interest in the Company and included standstill, governance and other
terms. Dr. Samuel Waksal and others asked questions regarding some of the
proposed terms, and the parties agreed to meet again later that week. On June
28, 2001, the Company, Parent, and their respective financial and legal advisors
met to further discuss terms of the equity and commercial transactions. At this
meeting, the Company distributed to Parent and its advisors a revised outline of
a proposed equity and commercial transaction structure.
During the end of June and the first two weeks of July, the Company, Parent
and their respective legal and financial advisors met several times to discuss
terms and conditions of a 19.9% equity investment acquired through a tender
offer to the Company's stockholders and a commercial transaction relating to
IMC-C225. Outlines of proposed terms and conditions were exchanged several times
during this period. Also during this time, representatives of Parent and the
Company and their respective financial advisors discussed the price at which
Parent would offer to purchase the Shares.
On July 11, 2001, at a telephonic meeting of the Company's Board of
Directors, Dr. Samuel Waksal reported on the current status of discussions with
Parent. On July 18, 2001, a telephonic meeting of the Company's Board of
Directors was held at which Dr. Samuel Waksal and representatives of Morgan
Stanley and Davis Polk & Wardwell further advised the Board on the current
status of discussions with Parent.
On July 19 and July 20, telephonic discussions were held between the
Company and Parent to discuss outstanding issues relating to the effectiveness
of the commercial arrangements, the terms and conditions of Parent's tender
offer for the Shares, the terms of the standstill provisions to be included in
the Stockholder Agreement, Parent's ability to acquire additional shares of the
Company and certain other terms of the governance and
20
commercial agreements. On July 20, the Company and Parent agreed, on a
preliminary basis, to a tender offer price of $70.00 per Share. On July 23,
2001, the Company and Parent and their respective advisors met at the offices of
the Company's legal advisors and discussed outstanding issues relating to the
terms of the transactions. Also during this time, a meeting was held at the
offices of Kenyon & Kenyon, the Company's outside intellectual property counsel,
at which the parties reviewed open issues relating to the Company's patents and
other intellectual property. On July 25, 2001, the parties agreed to non-binding
indicative term sheets relating to Parent's equity investment in the Company and
the commercial transaction relating to IMC-C225.
On July 30, 2001, the Company and Parent exchanged initial drafts of the
Acquisition Agreement, the Stockholder Agreement and the Commercial Agreement.
During the month of August, representatives of the Company and Parent met
several times, together with their respective legal and financial advisors, to
negotiate the terms of these definitive agreements.
On August 6, 2001, a meeting of the Company's Board of Directors was held,
at which representatives of the Company's financial and legal advisors were
present, to fully review the proposed transaction with Parent. The Company's
financial and legal advisors made oral presentations regarding the transactions
contemplated by the draft Acquisition Agreement, Stockholder Agreement and
Commercial Agreement to the Company's Board of Directors.
On August 7, 2001, following negotiations that day between representatives
of the Company and Parent, Mr. Lane, Mr. Markison, Dr. Samuel Waksal, Mr. Lynch
and Dr. Harlan Waksal, Chief Operating Officer of the Company, met in New York
to discuss the progress of the negotiations. On August 15, 2001, Mr. Dolan, Mr.
Lane, Dr. Samuel Waksal, Dr. Harlan Waksal, Mr. Lynch and Dr. Andrew G. Bodnar,
Vice President of Medical and External Affairs of Parent, met in New York to
again discuss the progress of negotiations, as well as the commercial
collaboration relating to IMC-C225.
During the first two weeks of September, the parties and their respective
legal advisors continued to negotiate terms of the Acquisition Agreement, the
Stockholder Agreement and the Commercial Agreement. On September 11, 2001, the
Boards of Directors of Parent and the Company each were scheduled to meet to
consider the transaction. These meetings were cancelled due to the terrorist
attacks in New York. During the week of September 10 through September 16, the
parties' respective legal advisors had several telephonic discussions to
finalize the terms of the agreements. On September 17, 2001, a rescheduled
telephonic meeting of the Board of Directors of Parent was held, at which
Parent's Board of Directors unanimously approved the Acquisition Agreement, the
Stockholder Agreement and the Commercial Agreement.
A rescheduled telephonic meeting of the Company's Board of Directors was
held on September 19, 2001, at which representatives of the Company's financial
and legal advisors were present. At this meeting, the Company's Board of
Directors, by a unanimous vote of those directors present and voting, (i)
approved each of the Acquisition Agreement, the Stockholder Agreement and the
Commercial Agreement and the transactions contemplated thereby, (ii) approved of
and consented to the Offer, and (iii) recommended that the stockholders of the
Company accept the Offer and tender their Shares pursuant to the Offer.
On September 19, 2001, the Company and Parent issued separate press
releases announcing the execution of the Acquisition Agreement, the Stockholder
Agreement and the Commercial Agreement.
During the Offer, the Company expects to have ongoing contacts with Parent
and its advisors.
Reasons for the Recommendation. In making the determination and
recommendation described above with regard to the Offer, the Board considered a
number of factors including, without limitation, the following:
(1) the Board's familiarity with, and information provided by the
Company's management as to, the (i) business, (ii) financial
condition, (iii) results of operations, (iv) current business
strategy and (v) future prospects of the Company including,
without limitation, the results to date from the clinical testing
of IMC-C225; the anticipated timing for and risks in obtaining
regulatory approval to market
21
IMC-C225 in the U.S., Canada and Japan; the competitive position
of IMC-C225 if regulatory approval is obtained; the Company's
funding requirements for IMC-C225 and its other products; the
prospects for the other products the Company has in development;
and the resources required to develop a sales and marketing
infrastructure for the Company's products;
(2) the benefits expected to be derived from the transactions
contemplated by the Commercial Agreement including, without
limitation:
(a) the Board's belief that, to the extent marketing approval is
obtained for IMC-C225, marketing in the U.S., Canada and
Japan through the organization of Parent, which has the
world's leading oncology sales force, will provide a
stronger platform for launching IMC-C225 in a highly
competitive market and give rise to increased total end-user
sales of IMC-C225;
(b) under the terms of the Commercial Agreement, E.R. Squibb
will assume a substantial portion of the economic risk
associated with the development and marketing of IMC-C225 in
the U.S., Canada and Japan;
(c) the significant capital infusion from E.R. Squibb resulting
from the $200 million paid upon signing of the Commercial
Agreement and an additional $800 million to be paid upon the
achievement of certain milestones relating to regulatory
approval for IMC-C225 in the U.S., all of which is
non-refundable (except upon the termination of the
Commercial Agreement in certain circumstances), (i)
eliminates the need for the Company to raise a substantial
amount of new capital to complete the manufacturing and
commercial build-out for the commercialization of IMC-C225
on a stand-alone basis, (ii) mitigates the risk to the
Company in the commercialization of IMC-C225 and (iii)
mitigates the risk of not obtaining adequate capital for
pursuit of the Company's other strategic objectives; and
(d) enhancing and accelerating the Company's expectation of
receiving revenues from the commercialization of IMC-C225 in
Japan to the extent product marketing approval for IMC- C225
is obtained in Japan;
(3) the anticipated impact on the Company's results of operations, to
the extent that regulatory approval is obtained for the marketing
of IMC-C225 in the U.S., Canada and Japan, including the fact
that the distribution fees payable by E.R. Squibb are expected to
allow the Company to achieve similar total Company revenues to
those that are expected by the Company without the Commercial
Agreement. In addition, the Commercial Agreement is expected to
reduce the Company's operating expenses for the commercialization
of IMC-C225, thereby accelerating the Company's expected
profitability and improving the Company's profit margins if
IMC-C225 is approved for marketing in the U.S.;
(4) the Board's belief, based upon, among other things, discussions
with other industry participants about a range of alternatives
for maximizing value for the Company's stockholders from IMC-C225
and the Company's other products, that the Offer and the
transactions contemplated by the Commercial Agreement and the
Stockholder Agreement present the greatest value for stockholders
at this time;
(5) the implications of the Commercial Agreement, the Offer, the
Acquisition Agreement and the Stockholder Agreement on the
prospects for a change of control of the Company over the
foreseeable future including, without limitation, the anticipated
financial impact of such a change in control during the next five
years as a result of which the distribution fees payable to the
Company under the Commercial Agreement for sales in the U.S. and
Canada would be reduced to a flat 39% on all future revenues;
(6) the Board's belief that having Parent acquire a strategic
minority investment in the Company pursuant to the Offer and the
Acquisition Agreement will align Parent's interests with those of
the
22
Company and its stockholders, while at the same time the
interests of the Company's public stockholders are protected
through the Stockholder Agreement, which includes provisions (i)
implementing certain restrictions on Purchaser's and Parent's
purchase and sale of Shares and (ii) delineating the composition
of the Board;
(7) the fact that the Offer is a partial tender offer which allows
the Company's stockholders to monetize a portion of their
stockholding at a substantial premium to the trading price of the
stock prior to the transaction with Parent and Purchaser while
maintaining a substantial equity position in the Company and
which lets each stockholder decide whether, and to what extent,
to tender Shares in the Offer, subject to the proration
requirements if more than the maximum number of Shares to be
purchased in the Offer are validly tendered and not withdrawn;
(8) the fact that the Offer and the balance of the transaction with
Parent and Purchaser will allow the Company to continue to be run
independently as a publicly traded company;
(9) although the Commercial Agreement becomes effective immediately
upon signing of the Acquisition Agreement and is not subject to
the outcome of the Offer, the number and nature of the conditions
to Purchaser's obligation to accept for payment and pay for
Shares validly tendered and not withdrawn in the Offer are
limited and do not depend on any minimum number of Shares being
tendered and Purchaser is required to accept Shares on a pro rata
basis if more than the maximum number of Shares are tendered;
(10) the presentations to the Board by Morgan Stanley and the oral
opinion (which was subsequently confirmed in writing) of Morgan
Stanley to the effect that, based on and subject to the
conditions in its opinion, as of September 19, 2001, the $70.00
consideration per Share to be received in the Offer by the
holders of Shares was fair, from a financial point of view, to
such holders. The full text of Morgan Stanley's opinion is
attached as Annex A to this Schedule 14D-9 and contains the
assumptions made and qualifications upon that opinion.
Stockholders are urged to read the opinion in its entirety;
(11) that the price being paid by Purchaser for the Shares represents
(i) a 40% premium over the closing price for the Shares of $50.01
on the Nasdaq National Market on September 18, 2001 (the last
trading day immediately prior to announcement of the
transaction), (ii) a 49.1% premium over the average closing price
from May 3, 2001 to September 18, 2001, (iii) a 1.3% premium over
the 52- week high immediately preceding announcement of the
transaction, (iv) a 39.3% premium over the 1- month average
closing price immediately preceding announcement of the
transaction, (v) a 48% premium over the 2-month average closing
price immediately preceding announcement of the transaction, (vi)
a 48.5% premium over the 3-month average closing price
immediately preceding announcement of the transaction, (vii) a
59.9% premium over the 6-month average closing price immediately
preceding announcement of the transaction and (viii) a 58.3%
premium over the 12- month average closing price immediately
preceding announcement of the transaction; and
(12) while the terms of the Commercial Agreement are, in the view of
the Board, attractive to the Company, there continue to be a
number of risks which could adversely affect the achievement of
the Company's business plan, including (a) those risks that
relate to IMC-C225, including (i) the contingencies to the
payment of $800 million of milestones under the Commercial
Agreement; (ii) the fact that regulatory approval for the
marketing of IMC-C225 has not yet been obtained in the U.S. or
any other country; (iii) the highly competitive market for
oncology products; (iv) the fact that there remains a high degree
of risk of adverse developments in the use of IMC-C225 both
before and after marketing approval is obtained and (v) that E.R.
Squibb may terminate the Commercial Agreement in certain
circumstances where there is found to be a significant concern
regarding a regulatory or patient safety issue that would
seriously impact the long-term viability of the Product, as
specified therein; and (b) those risks that relate to the Company
as a whole, including (i) that competitive
23
products may prove to be more effective than the Company's
products, (ii) that the Company currently has limited
manufacturing capacity and will need to enter into arrangements
with third party manufacturers, and (iii) that the acceptance of
the Company's products in the marketplace is uncertain.
The foregoing discussion of the information and factors considered by the
Board includes all material factors considered by the Board but is not intended
to be exhaustive. In view of the variety of factors considered in its evaluation
and in its determination to recommend the Offer, the Board did not quantify or
otherwise assign any relative or specific weights to the foregoing factors and
individual directors may have given differing weights to different factors.
Rather, the decision to recommend that the Company's stockholders accept the
Offer and tender their Shares pursuant to the Offer was made after consideration
of all the factors taken as a whole. Throughout its deliberations, the Board
received the advice of its legal and financial advisors.
Intent to Tender. After reasonable inquiry and to the best knowledge of the
Company, each director or executive officer of the Company that holds Shares of
record or beneficially owns Shares currently intends to tender Shares as set
forth in the following paragraph, except to the extent such tender would violate
applicable securities laws or require disgorgement of any profits arising from
such tender under Section 16 of the Exchange Act.
Samuel D. Waksal, Ph.D., President and Chief Executive Officer and a
director of the Company, currently intends to tender 2,400,000 Shares of the
3,812,841 Shares that he holds of record or beneficially owns; Harlan W. Waksal,
M.D., Executive Vice President and Chief Operating Officer and a director of the
Company, currently intends to tender 3,618,560 of the 3,618,560 Shares that he
holds of record or beneficially owns; Robert F. Goldhammer, Chairman of the
Board of Directors of the Company, currently intends to tender 1,765,902 of the
1,825,902 Shares that he holds of record or beneficially owns; Richard Barth, a
director of the Company, currently intends to tender 25,000 of the 130,000
Shares that he holds of record or beneficially owns; Vincent T. DeVita, Jr.,
M.D., a director of the Company, currently intends to tender 600 of the 206,684
Shares that he holds of record or beneficially owns; David M. Kies, a director
of the Company, currently intends to tender 208,200 of the 400,015 Shares that
he holds of record or beneficially owns; Paul B. Kopperl, a director of the
Company, currently intends to tender 120,000 of the 191,420 Shares that he holds
of record or beneficially owns; Arnold J. Levine, Ph.D., a director of the
Company, currently intends to tender 6,200 of the 64,974 Shares that he holds of
record or beneficially owns; John Mendelsohn, M.D., a director of the Company,
currently intends to tender 420,952 of the 420,952 Shares that he holds of
record or beneficially owns; and William R. Miller, a director of the Company,
currently intends to tender 20,000 of the 138,094 Shares that he holds of record
or beneficially owns.
Item 5. Person/Assets, Retained, Employed, Compensated or Used.
The Board has retained Morgan Stanley to act as financial advisor to the
Company in connection with the evaluation of the Offer, the Commercial Agreement
and other matters arising in connection therewith. Pursuant to an engagement
letter dated January 20, 2000, as amended as of August 1, 2001, between Morgan
Stanley and the Company, Morgan Stanley provided financial advisory services in
connection with the Offer and the Commercial Agreement, and the Company agreed
to pay Morgan Stanley a customary fee at the time of the closing of the
transaction. The Company has also agreed to reimburse Morgan Stanley for its
expenses incurred in performing its services. In addition, the Company has
agreed to indemnify Morgan Stanley and its affiliates, its 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 or arising out of
Morgan Stanley's engagement and any related transactions.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, competitive biddings,
private placements and valuations for corporate and other purposes. Morgan
Stanley is also continuously engaged in the valuation of businesses and
securities in connection with negotiated underwritings and secondary
distributions of listed and unlisted securities.
24
In the ordinary course of business, Morgan Stanley and its affiliates may
from time to time trade in the securities or indebtedness of the Company and/or
Parent for its own account, the accounts of investment funds and other clients
under the management of Morgan Stanley and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities or
indebtedness. In the past, Morgan Stanley and its affiliates have provided
financial advisory and financing services for both the Company and Parent and
have received fees for the rendering of those services.
Except as described above, neither the Company, nor any person acting on
its behalf, has employed, retained or compensated any person to make
solicitations or recommendations to stockholders on its behalf concerning the
Offer, except that such solicitations or recommendations may be made by
directors, officers or employees of the Company, for which no additional
compensation will be paid.
Item 6. Interest in Securities of the Subject Company.
Except as described in the following paragraph, no transactions in Shares
have been effected during the past 60 days by the Company or, to the knowledge
of the Company, any director, executive officer or affiliate of the Company.
The following executive officers or directors of the Company purchased or
sold Shares in the last 60 days:
On July 30, 2001, Mr. David M. Kies, a director of the Company, acquired
20,000 Shares through the exercise of 20,000 options to acquire Shares at an
exercise price of $3.00 per share. On August 2, 2001, Mr. Kies acquired 30,000
Shares through the exercise of 30,000 options to acquire Shares at an exercise
price of $6.625 per Share.
On August 3, 2001, Arnold J. Levine, Ph.D., a director of the Company,
acquired 16,000 Shares through the exercise of 16,000 options to acquire Shares
at an exercise price of $5.4375 per Share.
On August 15, 2001, Samuel D. Waksal, Ph.D., President and Chief Executive
Officer and a director of the Company, gifted 3,480 Shares to the Center for
Jewish History.
On September 17, 2001, Mr. Richard Barth, a director of the Company,
acquired 2,500 Shares through the exercise of 2,500 options to acquire Shares at
an exercise price of $3.00 per Share. On September 17, 2001, Mr. Barth sold the
2,500 Shares that he acquired on September 17, 2001 at $51.05 per Share in an
open market transaction in accordance with the terms of a Rule 10b5-1 trading
plan entered into in March 2001.
Item 7. Purposes of the Transaction and Plans or Proposals.
For the reasons discussed in Item 4 above, by a unanimous vote of those
directors present and voting at its September 19, 2001 meeting, the Board has
approved of and consented to the Offer and recommends that the stockholders of
the Company accept the Offer and tender their Shares pursuant to the Offer.
Except as disclosed herein, the Company is not now engaged in any negotiations
in response to the Offer that relate to, or would result in, one or more of the
following or a combination thereof: (i) a tender offer for or other acquisition
of securities of the Company by the Company, any of its subsidiaries or any
other person; (ii) an extraordinary transaction, such as a merger, liquidation
or reorganization, involving the Company or any of its subsidiaries; (iii) a
purchase, sale or transfer of a material amount of assets by the Company or any
of its subsidiaries; or (iv) any material change in the present capitalization,
indebtedness or dividend rate or policy of the Company.
Except as disclosed herein, there are no transactions, resolutions of the
Board, agreements in principle or signed contracts in response to the Offer that
relate to or would result in one or more of the events referred to in the
previous paragraph.
25
Item 8. Additional Information.
Section 203 of the Delaware General Corporation Law. Section 203 of the
Delaware General Corporation Law (the "DGCL") purports to regulate certain
business combinations of a corporation organized under Delaware law, such as the
Company, with a stockholder beneficially owning 15% or more of the outstanding
voting stock, or is an affiliate or associate, of such corporation (an
"Interested Stockholder"). Section 203 prevents an Interested Stockholder from
engaging in a "business combination" (defined to include a merger or
consolidation and certain other transactions) with a Delaware corporation for a
period of three years following the time when such stockholder became an
Interested Stockholder unless (i) prior to such time the corporation's board of
directors approved either the business combination or the transaction which
resulted in such stockholder becoming an Interested Stockholder, (ii) upon
consummation of the transaction which resulted in such stockholder becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
corporation's voting stock outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock plans and persons who are
directors and also officers of the corporation) or (iii) on or subsequent to
such time the business combination is approved by the corporation's board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the Interested Stockholder. Because the
Board has approved the Acquisition Agreement and the Stockholder Agreement and
the transactions contemplated thereby, including the Offer, the Company does not
believe that any acquisition of Shares pursuant to the Acquisition Agreement or
as expressly permitted by the Stockholder Agreement by Purchaser, Parent or any
affiliate of Parent would trigger the restrictions of Section 203.
Appraisal Rights. Stockholders do not have appraisal rights as a result of
the Offer.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The purchase of Shares pursuant to the Offer is subject to such
requirements.
Under the provisions of the HSR Act, the purchase of Shares may not be
consummated until the expiration of a 15-calendar day waiting period following
the filing by Purchaser of a Notification and Report Form with respect to the
Offer. This information was furnished to the Antitrust Division and the FTC by
Purchaser on September 26, 2001. The Company is also required to file a
Notification and Report Form within ten days of Purchaser's filing. The Company
filed this form with the Antitrust Division and the FTC on September 28, 2001.
The Antitrust Division or the FTC may extend the waiting period by requesting
additional information or documentary material relevant to the Offer from
Purchaser. If such a request is made, the waiting period will be extended until
11:59 P.M., New York City time, on the tenth day after Purchaser's substantial
compliance with such request. Thereafter, such waiting period can be extended
only by court order or consent.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's acquisition of Shares
pursuant to the Offer. At any time before or after the consummation of any such
transactions, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of Purchaser's,
Parent's or the Company's substantial assets. Private parties (including
individual states) may also bring legal actions under the antitrust laws.
Although the Company believes that Purchaser's acquisition of Shares
pursuant to the Offer would not violate the antitrust laws, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such challenge is made, what the outcome will be.
Forward-Looking Statements. This Schedule, including the exhibits referred
to herein, contains certain statements by or relating to the Company and the
transactions with Parent, Purchaser and E.R. Squibb that are neither reported
financial results nor other historical information. These statements are
forward-looking statements
26
and include statements of market estimates, growth and expansion plans and
opportunities, potential revenue and cost synergies, the benefits of new
technologies and the anticipated benefits of the Commercial Agreement. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in the
forward-looking statements. Many of these risks and uncertainties relate to
factors that are beyond the Company's ability to control or estimate precisely,
including, without limitation, risks and uncertainties in obtaining and
maintaining regulatory approval, market acceptance of and continuing demand for
the Company's products, the impact of competitive products and pricing.
Stockholders are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Schedule. The Company does
not undertake any obligation to publicly release any revisions to these
froward-looking statements to reflect events or circumstances after the date of
this Schedule.
Item 9. Exhibits.
The following Exhibits are filed herewith:
Exhibit Description
------- -----------
(a)(1) Offer to Purchase, dated September 28, 2001 (incorporated by
reference to Exhibit (a)(1)(A) to the Schedule TO of
Purchaser and Parent filed with the SEC on September 28,
2001).
(a)(2) Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(1)(C) to the Schedule TO of Purchaser and Parent
filed with the SEC on September 28, 2001).
(a)(3) Form of Notice of Conditional Exercise (incorporated by
reference to Exhibit (a)(1)(K) to the Schedule TO of
Purchaser and Parent filed with the SEC on September 28,
2001).
(a)(4) Instructions for Conditional Exercise (incorporated by
reference to Exhibit (a)(1)(L) to the Schedule TO of
Purchaser and Parent filed with the SEC on September 28,
2001).
(a)(5) Memorandum to Eligible Option Holders (incorporated by
reference to Exhibit (a)(1)(M) to the Schedule TO of
Purchaser and Parent filed with the SEC on September 28,
2001).
(a)(6) Opinion of Morgan Stanley & Co. Incorporated dated September
19, 2001 (included as Annex A to this Schedule).*
(a)(7) Letter to Stockholders of the Company, dated September 28,
2001.*
(b) Not applicable.
(c) Not applicable.
(d)(1) Acquisition Agreement, dated as of September 19, 2001, among
the Company, Parent and Purchaser.
(d)(2) Stockholder Agreement, dated as of September 19, 2001, among
Parent, Purchaser and the Company.
(d)(3) Development, Promotion, Distribution and Supply Agreement,
dated as of September 19, 2001, among the Company, Parent and
E.R. Squibb.**
(d)(4) Letter Agreement, dated September 19, 2001, between Samuel D.
Waksal, Ph.D. and Parent.
27
(d)(5) Letter Agreement, dated September 19, 2001, between Harlan W.
Waksal, M.D. and Parent.
(d)(6) Employment Agreement, dated as of September 19, 2001, between
the Company and Samuel D. Waksal, Ph.D.
(d)(7) Employment Agreement, dated as of September 19, 2001, between
the Company and Harlan W. Waksal, M.D.
(d)(8) Employment Agreement, dated as of September 19, 2001, between
the Company and Daniel S. Lynch
(d)(9) Employment Agreement, dated as of September 19, 2001, between
the Company and John B. Landes
(d)(10) Employment Agreement, dated as of September 19, 2001, between
the Company and S. Joseph Tarnowski, Ph.D.
(d)(11) Confidentiality Agreement, dated as of May 19, 2001, between
Parent and the Company.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Not applicable.
* Included in material sent to stockholders.
** Certain portions of this agreement have been omitted pursuant to an
application for confidential treatment filed with the SEC by Parent, Purchaser
and the Company pursuant to Rule 24b-2 under the Exchange Act.
28
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: September 28, 2001
IMCLONE SYSTEMS INCORPORATED
By: /s/ John B. Landes
-------------------------------------
Name: John B. Landes
Title: Senior Vice President, Legal
& General Counsel
29
Annex A
[Morgan Stanley Letterhead]
September 19, 2001
Board of Directors
ImClone Systems Incorporated
180 Varick Street
New York, New York 10014
Members of the Board:
We understand that ImClone Systems Incorporated ("ImClone"), Bristol-Myers
Squibb Company ("Bristol"), and Acquisition Sub, a wholly-owned subsidiary of
Bristol, propose to enter into a Development, Promotion, Distribution and Supply
Agreement (the "Commercial Agreement"), an Acquisition Agreement (the
"Acquisition Agreement") and a Stockholder Agreement (collectively with the
Commercial Agreement and the Acquisition Agreement, the "Agreements"), each
substantially in the form of the drafts of such agreements dated as of September
19, 2001 provided to Morgan Stanley.
The Acquisition Agreement provides, among other things, for the commencement by
Acquisition Sub of a tender offer (the "Tender Offer") for 14,392,003 of the
outstanding shares of common stock, par value $.001 per share (the "Common
Stock"), of ImClone for $70.00 per share net to the seller in cash (the
"Consideration"). We also note that the Agreements provide, among other things,
for, (i) the payment by Bristol to ImClone of milestones in the aggregate amount
of $1,000,000,000, $200,000,000 of which is payable at signing and the remainder
of which is based upon the achievement of certain regulatory objectives by
ImClone, (ii) the granting to Bristol by ImClone of (a) a co-exclusive right to
develop and promote and an exclusive right to distribute ImClone's biologic
pharmaceutical product known as IMC-C225 ("IMC-C225") in North America in return
for specified royalties, and (b) a co-exclusive right to develop, promote and
distribute IMC-C225 in Japan in return for profit participation rights, (iii)
the payment by Bristol of certain expenses related to the further development
and commercialization of IMC-C225, and (iv) the addition of two Bristol
representatives to the ImClone Board and the establishment of certain governance
arrangements with respect to ImClone for the benefit of Bristol. For purposes of
this letter, all transactions described above shall be defined collectively as
the "Transactions." The terms and conditions of the Transactions are more fully
set forth in the Agreements.
You have asked for our opinion as to whether the Consideration to be received by
the holders of shares of Common Stock pursuant to the Acquisition Agreement is
fair to such holders from a financial point of view.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of ImClone and Bristol;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning ImClone prepared by the management of
ImClone;
(iii) reviewed the past and current operations and financial condition and
the prospects of ImClone with senior executives of ImClone;
(iv) reviewed certain financial projections with respect to IMC-C225 and
related matters prepared by the managements of ImClone and Bristol,
respectively;
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(v) reviewed certain financial projections with respect to the entire
business of ImClone, including but not limited to IMC-C225, prepared
by the management of ImClone;
(vi) reviewed the pro-forma impact of the Transactions on ImClone's
projected revenues, costs, income and earnings per share;
(vii) reviewed information relating to certain strategic, financial and
operational benefits anticipated from the Transactions, prepared by
the managements of ImClone and Bristol, respectively;
(viii)reviewed the reported prices and trading activity for the Common
Stock;
(ix) compared the financial performance of ImClone and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition, partial acquisition and product
licensing transactions;
(xi) participated in discussions and negotiations among representatives of
ImClone, its legal advisors, Bristol and its financial and legal
advisors;
(xii) reviewed drafts provided to us of the Agreements and other related
documentation; and
(xiii)performed such other analyses as we have deemed appropriate and
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 financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the Transactions, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
future financial performance of ImClone and of IMC-C225. In addition, we have
assumed that the Transactions will be consummated in accordance with the terms
set forth in the Agreements. We have further assumed that in connection with the
Transactions, ImClone and Bristol will receive all regulatory approvals
necessary for completion of the Tender Offer, without any restrictions that
would have an adverse effect on the consummation of or benefits expected from
the Transactions. We have not made any independent valuation or appraisal of the
assets or liabilities of ImClone, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to a strategic transaction with
ImClone.
We have acted as financial advisor to the Board of Directors of ImClone in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for ImClone and Bristol and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of ImClone only and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety,
if required, in any filing made by ImClone in respect of the Transactions with
the Securities and Exchange Commission and distributed to stockholders of
ImClone. In addition, Morgan Stanley expresses no opinion or recommendation as
to whether shareholders of ImClone should tender their shares of Common Stock
into the Tender Offer.
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Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Consideration to be received by the holders of shares of Common
Stock pursuant to the Acquisition Agreement is fair to such holders from a
financial point of view.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Peter N. Crnkovich
----------------------------
Peter N. Crnkovich
Managing Director
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