prec14a
PRELIMINARY CONSENT STATEMENT SUBJECT TO COMPLETION, DATED
APRIL [], 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Consent Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant þ
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Soliciting Material Pursuant to Section 240.14a-12 |
CEPHALON, INC.
(Name of Registrant as Specified in Its Charter)
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
(Name of Person(s) Filing Consent Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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CEPHALON,
INC.
CONSENT
STATEMENT
OF
VALEANT
PHARMACEUTICALS INTERNATIONAL, INC.
This Consent Statement and the enclosed WHITE consent card are
being furnished by Valeant Pharmaceuticals International, Inc.,
a Canadian corporation (Valeant or we),
in connection with our solicitation of written consents from
you, the holders of shares of common stock, par value $0.01 per
share (the Common Stock), of Cephalon, Inc., a
Delaware corporation (the Company). Stockholder
action by written consent is a process that allows a
companys stockholders to act by submitting written
consents to any proposed stockholder actions in lieu of voting
in person or by proxy at an annual or special meeting of
stockholders. We are soliciting written consents from the
holders of shares of Common Stock to take the following actions
(each, as more fully described in this Consent Statement, a
Proposal and together, the Proposals),
in the following order, without a stockholders meeting, as
authorized by Delaware law:
1. That any changes to the amended and restated bylaws
of the Company filed with the Securities and Exchange Commission
on March 16, 2011, be repealed (the Bylaw Restoration
Proposal);
2. That each member of the board of directors of the
Company (such board, as constituted from time to time, the
Company Board) as of the time this Proposal becomes
effective, and each person, if any, nominated, appointed or
elected by the Company Board prior to the effectiveness of this
Proposal to become a member of the Company Board at any future
time or upon any event, be removed (the Removal
Proposal); and
3. To elect each of the following seven
(7) individuals (each, a Nominee and
collectively, the Nominees) to serve as a director
of the Company: Santo J. Costa, Richard H. Koppes, Lawrence N.
Kugelman, Anders Lönner, John H. McArthur, Thomas G.
Plaskett and Blair H. Sheppard (the Election
Proposal).
This Consent Statement and the enclosed WHITE consent card are
first being sent or given to the stockholders of the Company on
or about April [ ], 2011.
On March 29, 2011, Valeant publicly announced that it had
made an all-cash offer to the Company Board to acquire the
Company at $73 per share of Common Stock. Valeant noted that it
made the offer public as a result of the failure of the Company
Board to engage in meaningful discussions in a timely manner
concerning an acquisition of the Company by Valeant. Valeant
also announced its intention to commence a consent solicitation
process during the week of April 4, 2011 in an effort to
remove impediments related to a potential tender offer for the
Common Stock, which tender offer would only commence, subject to
receipt of sufficient support from the Companys
stockholders (the Proposed Offer).
THIS CONSENT STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF
SHARES, NOR AN OFFER WITH RESPECT THERETO, AND DOES NOT CONVEY
RECORD OR BENEFICIAL OWNERSHIP OF SHARES TO VALEANT. NO
TENDER OFFER FOR SHARES OF THE COMPANY HAS COMMENCED AT
THIS TIME. ANY TENDER OFFER WILL BE MADE ONLY BY MEANS OF AN
OFFER TO PURCHASE AND A RELATED LETTER OF TRANSMITTAL.
We are seeking your support for the removal of the Company Board
as of the time the Removal Proposal becomes effective and the
election of our Nominees because we believe that the Company
Board is not acting, and will not act, in your best interests.
Specifically, despite the fact that the $73 per share price in
the Proposed Offer represents a premium of approximately 29%
over the Companys
30-day
trading average prior to the announcement of the Proposed Offer
and is higher than any price at which the Companys shares
traded in the two years prior to the public announcement of the
Proposed Offer, the Company Board has declined to engage in
meaningful discussions with us in a timely manner.
WE BELIEVE THAT THE COMPANYS STOCKHOLDERS THE
OWNERS OF THE COMPANY ARE ENTITLED TO MAKE A
DECISION ON WHETHER OR NOT THE COMPANY SHOULD BE SOLD.
We are sending you this Consent Statement and accompanying WHITE
consent card to enable you, the owners of the Company, to put in
place a board that we believe will, subject to their fiduciary
duties, dismantle the impediments to the consummation of the
Proposed Offer the poison pill that the Company has
in place, and the need for the Company Board to approve the
Proposed Offer under Section 203 of the Delaware General
Corporation Law (the DGCL) so that there are no
supermajority requirements applicable to the consummation of the
Proposed Offer or the approval of a subsequent merger, which
merger would be on the same terms as the Proposed Offer, as
discussed in more detail below.
We believe the Nominees will, if elected and subject to their
fiduciary duties, act to remove the poison pill and to approve
the Proposed Offer under Section 203 of the DGCL, thereby
enabling the Companys stockholders, rather than the
incumbent Company Board, to determine whether the Proposed Offer
is acceptable. In consenting to the removal of the existing
Company Board and to the election of the Nominees, you are
sending a message to the Nominees that you want them to allow
the Proposed Offer to be consummated without these impediments.
If the Nominees are elected, we plan to propose to them that a
merger agreement be entered into pursuant to which our Proposed
Offer would proceed, and pursuant to which (i) we would
also commit to complete a second-step merger at the same price
per share in the Proposed Offer, and (ii) the Company would
grant us a customary
top-up
option. This
top-up
option common in merger agreements that
contemplate initial tender offers would, if
necessary, allow us to move from majority ownership as a result
of the Proposed Offer to 90% ownership so that we can complete a
short-form merger under Delaware law very promptly and thereby
pay non-tendering stockholders their merger consideration
substantially more quickly than might otherwise be the case.
Furthermore, we believe that the Nominees will, if elected,
permit us to conduct a due diligence investigation, which could
potentially result in a modest increase to any ultimate offer
price, should the results of such exercise demonstrate
additional value to Valeant.
We have not asked for any commitment from the Nominees to agree
to such a merger agreement, and they would have to consider it
in the exercise of their fiduciary duties. Pursuant to the
Nomination Agreements between Valeant and each of the Nominees
(a form of which is included as Annex C to this Consent
Statement), each Nominee has agreed, if elected, to serve as a
director of the Company, and in that capacity to act in the best
interests of the Company and its stockholders and to exercise
his independent judgment in accordance with his fiduciary duties
in all matters that come before the Company Board.
On April 6, 2011, pursuant to the Companys bylaws, we
provided written notice to the secretary of the Company
requesting that the Company Board fix a record date for
determining stockholders entitled to give their written consent
to the Proposals described herein, and on [ ],
2011, the Company announced that the Company Board had fixed
[ ], 2011 (the Record Date) as the
record date for the determination of the Companys
stockholders who are entitled to execute, withhold or revoke
consents relating to this consent solicitation.
The effectiveness of each of the Proposals requires the
affirmative consent of the holders of record, as of the close of
business on the Record Date, of a majority of the shares of
Common Stock then outstanding. Each Proposal will be effective
when we deliver to the Company such requisite number of
consents, subject to Section 2.08 of the Fourth Amended and
Restated Bylaws of the Company, which provides for a ministerial
review of consents by nationally recognized independent
inspectors of election. Neither the Bylaw Restoration Proposal
nor the Removal Proposal is subject to, or is conditioned upon,
the effectiveness of the other Proposals. The Election Proposal
is conditioned upon the effectiveness of the Removal Proposal.
If the then existing members of (or appointees to) the Company
Board are not removed in the Removal Proposal, and there are no
vacancies to fill, the Nominees cannot be elected pursuant to
the Election Proposal.
In addition, none of the Proposals will be effective unless the
delivery of the written consents complies with
Section 228(c) of the DGCL. For the Proposals to be
effective, properly completed and unrevoked written consents to
the Proposals from the holders of record as of the close of
business on the Record Date of a majority of the shares of
Common Stock then outstanding must be delivered to the Company,
under Delaware law and the Companys Bylaws, within
60 days of the earliest dated written consent delivered to
the Company. However, we have set [ ], 2011
as the deadline for submission of written consents, but we
reserve the right to extend such deadline. Effectively, this
means that you have until [ ], 2011 to consent
to the Proposals. WE URGE YOU TO ACT PROMPTLY TO ENSURE THAT
YOUR CONSENT WILL COUNT. We reserve the right to submit
consents
ii
to the Company at any time within 60 days of the earliest
dated written consent delivered to the Company. See
CONSENT PROCEDURES for additional information
regarding such procedures.
This solicitation is being made by Valeant and certain other
participants and not by or on behalf of the Company or the
existing Company Board.
Except as otherwise expressly set forth in this Consent
Statement, the information concerning the Company contained in
this Consent Statement has been taken from or based upon
publicly available documents and records on file with the SEC
and other public sources and is qualified in its entirety by
reference thereto. Valeant cannot take responsibility for the
accuracy or completeness of the information contained in such
documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are
unknown to Valeant. Valeant has relied upon the accuracy of the
information included in such publicly available documents and
records and other public sources and has not made any
independent attempt to verify the accuracy of such information.
YOUR CONSENT IS IMPORTANT.
Valeant urges you to consent to the Bylaw Restoration
Proposal, the Removal Proposal and the Election Proposal by
following the instructions on the WHITE consent card.
We urge you not to revoke your consent by signing any
consent revocation card sent to you by the Company or otherwise,
and to revoke any consent revocation you may have already
submitted to the Company. To revoke an earlier revocation
and change your vote, simply consent to the Proposals by
following the instructions on the WHITE consent card.
According to the Companys proxy statement for its 2011
annual meeting, there were 75,751,151 shares of Common
Stock outstanding as of March 14, 2011. The stockholders of
the Company are entitled to one vote per share of Common Stock.
IMPORTANT
PLEASE
READ THIS CAREFULLY
If your shares of Common Stock are registered in your own name,
please submit your consent to us today by following the
instructions on the WHITE consent card.
If your shares of Common Stock are held in the name of a
brokerage firm, bank, dealer, trust company or other nominee,
only it can execute a consent representing your shares of Common
Stock and only upon receipt of your specific instructions.
Accordingly, you should follow the instructions included in the
materials that you have received or contact the person
responsible for your account and give instructions to consent to
the Proposals on your behalf. Valeant recommends that you then
confirm in writing your instructions to the person responsible
for your account and provide a copy of those instructions to
Valeant, care of Georgeson Inc., which is assisting in this
solicitation, at the address and telephone numbers set forth
below, so that Valeant will be aware of all instructions given
and can attempt to ensure that those instructions are followed.
Execution and delivery of a consent by a record holder of shares
of Common Stock will be presumed to be a consent with respect to
all shares held by such record holder unless the consent
specifies otherwise.
Valeant recommends that you NOT return any Revocation of
Consent card sent to you by the Company.
Only holders of record of shares of Common Stock as of the close
of business on the Record Date will be entitled to consent to
the Proposals. If you are a stockholder of record as of the
close of business on the Record Date, you will retain your right
to consent even if you sell your shares of Common Stock after
the Record Date.
IF YOU TAKE NO ACTION, YOU WILL IN EFFECT BE REJECTING THE
PROPOSALS. ABSTENTIONS, FAILURES TO CONSENT AND BROKER NON-VOTES
WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT WHICH IS THE
SAME AS A NO VOTE.
iii
If you have any questions about executing or delivering your
WHITE consent card or require assistance, please contact:
199 Water Street,
26th Floor
New York, NY
10038-3560
Banks and Brokers Call
(212) 440-9800
All Others Call Toll-Free
(800) 509-0917
iv
Table of
Contents
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B-1
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C-1
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D-1
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ANNEX E FORM OF CONSENT CARD
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E-1
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FORWARD-LOOKING
STATEMENTS
Valeant urges you to read this entire Consent Statement
carefully. This Consent Statement may contain forward-looking
statements, including, but not limited to, statements regarding
our Proposed Offer, financing related to our Proposed Offer,
opportunities and our plans should we acquire the Company, the
effect of a proposed transaction on financial results and
certain financial projections. Forward-looking statements may be
identified by the use of the words anticipates,
expects, intends, plans,
should, could, would,
may, will, believes,
estimates, potential, or
continue and variations or similar expressions.
These statements are based upon the current expectations and
beliefs of management of Valeant and are subject to certain
risks and uncertainties that could cause actual results to
differ materially from those described in the forward-looking
statements. These risks and uncertainties include, but are not
limited to, risks and uncertainties discussed in Valeants
most recent annual or quarterly report filed with the Securities
and Exchange Commission (SEC) and risks and
uncertainties relating to the Proposed Offer, as detailed from
time to time in Valeants filings with the SEC and the
Canadian Securities Administrators, which factors are
incorporated herein by reference. Readers are cautioned not to
place undue reliance on any of these forward-looking statements.
Valeant undertakes no obligation to update any of these
forward-looking statements to reflect events or circumstances
after the date of this Consent Statement or to reflect actual
outcomes.
QUESTIONS
AND ANSWERS ABOUT THIS WRITTEN CONSENT SOLICITATION
Who is
making the solicitation?
The solicitation is being made by Valeant and certain other
participants.
Valeant is a Canadian corporation with its principal executive
offices located at 7150 Mississauga Road, Mississauga, Ontario,
Canada, L5N 8M5.
For additional information concerning Valeant, please see the
section titled OTHER INFORMATION Participants
in the Solicitation and Solicitation of Written Consents.
For information regarding directors, officers and employees of
Valeant who may assist in the solicitation of written consents,
please see the section titled OTHER
INFORMATION Participants in the Solicitation and
Solicitation of Written Consents and Annex B of this
Consent Statement.
Who is
paying for the solicitation?
Valeant will pay all costs of the solicitation and will not seek
reimbursement of those costs from the Company.
To what
are we asking you to consent?
Valeant is asking you to consent to three corporate actions:
(1) the Bylaw Restoration Proposal, (2) the Removal
Proposal and (3) the Election Proposal.
Valeant is asking you to consent to the Removal Proposal and the
Election Proposal to remove those persons who are the directors
of the Company Board immediately prior to the effectiveness of
the Removal Proposal, together with any persons chosen by the
Company Board prior to the effectiveness of the Removal Proposal
to become members of the Company Board at any future time or
upon any event, and to replace them with the Nominees. The
Companys 2011 annual meeting of stockholders at which
directors are elected is presently scheduled for May 10,
2011. Depending on the timing of the effectiveness of the
Removal Proposal, either (i) the current Company Board, and
any additional directors who may have been added in the interim
by the Company Board, will be removed, and the 2011 annual
meeting is likely to be postponed pending the outcome of the
Proposed Offer, or (ii) the directors elected at the 2011
annual meeting will be removed, together with any persons chosen
by the Company Board prior to the effectiveness of the Removal
Proposal to become members of the Company Board at any future
time or upon any event, and in each case the directors so
removed would be replaced with the Nominees. In addition, in
order to ensure that your consent to elect the Nominees will not
be modified or diminished
1
by actions taken by the incumbent Company Board prior to the
election of such Nominees, Valeant is asking you to consent to
the Bylaw Restoration Proposal.
Please see the sections titled PROPOSAL 1
THE BYLAW RESTORATION PROPOSAL,
PROPOSAL 2 THE REMOVAL PROPOSAL and
PROPOSAL 3 THE ELECTION PROPOSAL
for the full text of, and a more complete description of, the
Proposals.
Who are
the Nominees that Valeant is proposing to elect to the Company
Board?
Valeant is asking you to elect each of Santo J. Costa, Richard
H. Koppes, Lawrence N. Kugelman, Anders Lönner, John H.
McArthur, Thomas G. Plaskett and Blair H. Sheppard to serve as a
director of the Company. Except as otherwise disclosed in this
Consent Statement, the Nominees are independent persons not
affiliated with Valeant or the Company. They are highly
qualified, experienced and well-respected members of the
business community who are committed to act in the best
interests of the Company and its stockholders.
We believe the Nominees will, if elected, and subject to their
fiduciary duties, remove the impediments to the stockholders
being able to accept the Proposed Offer, by eliminating the
poison pill and by approving the Proposed Offer under
Section 203 of the DGCL so that there are no supermajority
requirements applicable to the acceptance of the Proposed Offer
or the approval of the contemplated subsequent merger which
would be on the same terms as the Proposed Offer. In consenting
to the removal of the existing Company Board and the election of
the Nominees, you are sending a message to the Nominees that you
want them to allow the Proposed Offer to be consummated without
these impediments.
If the Nominees are elected, we plan to propose to them that a
merger agreement be entered into pursuant to which our Proposed
Offer would proceed, and pursuant to which (i) we would
also commit to complete a second-step merger at the same price
per share in the Proposed Offer, and (ii) the Company would
grant us a customary
top-up
option. This
top-up
option common in merger agreements that
contemplate initial tender offers would, if
necessary, allow us to move from majority ownership as a result
of the Proposed Offer to 90% ownership so that we can complete a
short-form merger under Delaware law very promptly and thereby
pay non-tendering stockholders their merger consideration
substantially more quickly than might otherwise be the case.
Furthermore, we believe that the Nominees will, if elected,
permit us to conduct a due diligence investigation, which could
potentially result in a modest increase to any ultimate offer
price, should the results of such exercise demonstrate
additional value to Valeant.
Pursuant to the Nomination Agreements between Valeant and each
of the Nominees (a form of which is included as Annex C to
this Consent Statement), each Nominee has agreed, if elected, to
serve as a director of the Company, and in that capacity to act
in the best interests of the Company and its stockholders and to
exercise his independent judgment in accordance with his
fiduciary duties in all matters that come before the Company
Board. For information regarding the Nominees, please see the
section titled THE NOMINEES and Annex A of this
Consent Statement.
Why are
we soliciting your consent?
Despite the substantial premium to the market price of the
Common Stock prior to the announcement of the Proposed Offer
offered by Valeant in the letters sent to the Company Board and
the certainty of value associated with Valeants all-cash
offer, the Company Board has refused to engage in meaningful
discussions in a timely manner concerning an acquisition of the
Company by Valeant.
Furthermore, as recently as March 21 and March 28, 2011,
the Company has publicly announced commitments to spend
approximately $388 million of its cash on what we believe
to be risky investments, namely its proposed transactions to
acquire Gemin X Pharmaceuticals, Inc. and ChemGenex
Pharmaceuticals Limited. Any Company stockholder who shares our
negative view of these investments should act quickly in order
to replace the incumbent Company Board if the incumbent Company
Board continues to reject our offer.
We are sending you this Consent Statement and accompanying WHITE
consent card to enable you to elect a board of directors that we
believe will, subject to their fiduciary duties, dismantle the
impediments which presently prevent you from being able to
accept the Proposed Offer. These impediments are the poison pill
that the Company
2
has in place and the need for the Company Board to approve the
Proposed Offer under Section 203 of the DGCL so that there
are no supermajority requirements applicable to the acceptance
of the Proposed Offer or the approval of the contemplated
subsequent merger. We believe the Nominees will, if elected, and
subject to their fiduciary duties, act to remove the poison pill
and to approve the Proposed Offer under Section 203 of the
DGCL, thereby enabling the Companys stockholders, rather
than the incumbent Company Board, to determine whether the
Proposed Offer is acceptable.
In addition, we are also soliciting your consent in favor of the
adoption of the Bylaw Restoration Proposal to prevent the
incumbent Company Board from tying the hands of the newly
elected directors through any changes to the amended and
restated bylaws of the Company filed with the SEC on
March 16, 2011.
Your consent for the Bylaw Restoration Proposal, the Removal
Proposal
and/or the
Election Proposal does not obligate you to accept the Proposed
Offer or otherwise consent to any transaction between the
Company and Valeant.
How does
the poison pill affect Valeants ability to consummate the
Proposed Offer?
Preferred share purchase rights (the Rights) have
been issued to all stockholders of the Company under the Second
Amended and Restated Rights Agreement, dated October 27,
2003, between the Company and StockTrans, Inc., which is an
agreement of the type commonly referred to as a poison pill.
Because poison pills would cause punitive economic and voting
dilution to an acquirer who buys shares in excess of the
triggering threshold, which is 20% in this instance, all tender
offers are conditioned on the removal or invalidation of a
poison pill when one is in place. We believe the Nominees will,
if elected, and subject to their fiduciary duties, act to remove
the poison pill and also act to approve the Proposed Offer under
Section 203 of the DGCL, so that there are no supermajority
requirements applicable to the acceptance of the Proposed Offer,
thereby enabling the Companys stockholders, rather than
the incumbent Company Board, to determine whether the Proposed
Offer is acceptable.
For more information on the poison pill, please see the section
titled THE NOMINEES below.
Who can
consent to the Proposals?
If you are a record owner of shares of Common Stock as of the
close of business on [ ], 2011, the Record
Date, you have the right to consent to the Proposals.
You also have the right to consent to the Proposals with respect
to any shares of Common Stock of which you are the beneficial
owner as of the Record Date, but which are registered in the
name of a bank, broker firm, dealer, trust company or other
nominee. Please see the section titled VOTING
SECURITIES for details regarding how to instruct your
bank, broker firm, dealer, trust company or other nominee to
consent to the Proposals.
When is
the deadline for submitting consents?
For the Proposals to be effective, properly completed and
unrevoked written consents to the Proposals from the holders of
record as of the close of business on the Record Date of a
majority of the shares of Common Stock then outstanding must be
delivered to the Company, under Delaware law and the
Companys Bylaws, within 60 days of the earliest dated
written consent delivered to the Company. However, we have
set [ ], 2011 as the deadline for submission of
written consents, but we reserve the right to extend such
deadline. Effectively, this means that you have until
[ ], 2011 to consent to the Proposals. WE URGE
YOU TO ACT PROMPTLY TO ENSURE THAT YOUR CONSENT WILL COUNT.
We reserve the right to submit consents to the Company
consents at any time within 60 days of the earliest dated
written consent delivered to the Company. See CONSENT
PROCEDURES for additional information regarding such
procedures.
How many
consents must be granted in favor of each of the
Proposals?
Each of the Bylaw Restoration Proposal, the Removal Proposal and
the election of each Nominee will be adopted and become
effective when properly completed, unrevoked consents are signed
by the holders of a majority of the shares of Common Stock
outstanding as of the close of business on the Record Date,
provided that such consents are delivered to the Company within
60 days of the earliest dated written consent delivered to
the
3
Company, although we have set an earlier deadline of
[ ], 2011, which we reserve the right to
extend. According to the Companys proxy statement filed on
March 25, 2011 with respect to its 2011 annual meeting, as
of March 14, 2011 there were 75,751,151 shares of
Common Stock outstanding.
Assuming that the number of outstanding shares of Common Stock
on the Record Date is 75,751,151, the consent of stockholders
holding at least 37,875,576 shares of Common Stock would be
necessary to effect each of the Bylaw Restoration Proposal, the
Removal Proposal and the election of each Nominee to the Company
Board.
IF YOU TAKE NO ACTION, YOU WILL IN EFFECT BE REJECTING THE
PROPOSALS. ABSTENTIONS, FAILURES TO CONSENT AND BROKER NON-VOTES
WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT WHICH IS THE
SAME AS A NO VOTE. Broker non-votes
occur when a bank, broker firm, dealer, trust company or other
nominee holder has not received instructions with respect to a
particular matter, including the Proposals, and therefore does
not have discretionary power to vote on that matter.
What
should you do to consent?
If your shares of Common Stock are registered in your own name,
please submit your consent to us by telephone or via the
Internet, or by signing, dating and returning the enclosed WHITE
consent card in the postage-paid envelope provided. Submitting
your consent by telephone or Internet authorizes your consent in
the same manner as if you had signed, dated and returned a
consent card.
If your shares of Common Stock are held in the name of a
brokerage firm, bank, dealer, trust company or other nominee,
only it can execute a consent representing your shares of Common
Stock and only upon receipt of your specific instructions.
Accordingly, you should follow the instructions included in the
materials that you have received or contact the person
responsible for your account and give instructions to consent to
the Proposals on your behalf. Valeant recommends that you then
confirm in writing your instructions to the person responsible
for your account and provide a copy of those instructions to
Valeant, care of Georgeson Inc., which is assisting in this
solicitation, at the address and telephone numbers set forth
herein, so that Valeant will be aware of all instructions given
and can attempt to ensure that those instructions are followed.
Execution and delivery of a consent by a record holder of shares
of Common Stock will be presumed to be a consent with respect to
all shares held by such record holder unless the consent
specifies otherwise.
Valeant recommends that you NOT return any Revocation of
Consent card sent to you by the Company.
Whom
should you call if you have questions about the
solicitation?
If you have any questions regarding this Consent Statement,
please call our consent solicitor, Georgeson Inc. toll-free at
(800) 509-0917.
Banks and brokers may call
(212) 440-9800.
IMPORTANT
Valeant urges you to express your consent on the WHITE consent
card or as otherwise specified above under the section titled
QUESTIONS AND ANSWERS ABOUT THIS WRITTEN CONSENT
SOLICITATION What should you do to consent?
TODAY with respect to:
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the Removal Proposal and the Election Proposal to remove and
replace the incumbent Company Board (including pending
directors) with the Nominees; and
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the Bylaw Restoration Proposal to ensure that the incumbent
Company Board does not limit the effect of your consent to the
removal of the incumbent Board and the replacement thereof
through the election of the Nominees.
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A consent to remove all members of the Company Board and any
other person or persons chosen for the Company Board by the
incumbent members of the Company Board and to elect the Nominees
will enable you as the owners of the
Company to put in place a board that we believe
will, subject to their fiduciary duties, dismantle those
impediments which presently prevent the Proposed Offer from
being consummated.
4
PROPOSAL 1
THE BYLAW RESTORATION PROPOSAL
Valeant is asking you to consent to the adoption of the Bylaw
Restoration Proposal to prevent the incumbent Company Board from
tying the hands of the newly elected directors through changes
to the amended and restated bylaws of the Company filed with the
SEC on March 16, 2011 (the
March 16th Bylaws).
The following is the text of the Bylaw Restoration Proposal:
RESOLVED, that any changes to the amended and restated
bylaws of Cephalon, Inc. filed with the Securities and Exchange
Commission on March 16, 2011, be and are hereby
repealed.
Valeant believes that any change to the Companys bylaws
adopted after March 16, 2011 could serve to limit the
ability of the Nominees to pursue the best interests of the
Company and its stockholders. If the incumbent Company Board
does not effect any change to the March 16th Bylaws,
the Bylaw Restoration Proposal will have no effect. However, if
the incumbent Company Board does effect a change to the
March 16th Bylaws, which, under the charter of the
Company, the incumbent Company Board is empowered to do without
stockholder approval, the Bylaw Restoration Proposal, if
adopted, will restore the Companys bylaws to the
March 16th Bylaws, without considering the nature of
any changes the incumbent Company Board may have effected. As a
result, the Bylaw Restoration Proposal could have the effect of
repealing bylaw amendments which one or more stockholders of the
Company may consider to be beneficial to them or to the Company.
However, the Bylaw Restoration Proposal will not preclude the
newly elected Company Board from reconsidering any repealed
bylaw changes following the consent solicitation. Valeant is not
currently aware of any specific bylaw provisions that would be
repealed by the adoption of the Bylaw Restoration Proposal.
VALEANT
URGES YOU TO CONSENT TO THE BYLAW RESTORATION PROPOSAL.
PROPOSAL 2
THE REMOVAL PROPOSAL
Valeant is asking you to consent to the Removal Proposal to
remove all members of the Company Board and any other person or
persons nominated, appointed or elected by the Company Board to
become a member of the Company Board at any future time or upon
any event (which, for the avoidance of doubt, excludes Nominees
elected pursuant to this consent solicitation and their
successors). The following is the text of the Removal Proposal:
RESOLVED, that each member of the board of directors of
Cephalon, Inc. as of the time this resolution becomes effective,
and each person, if any, theretofore nominated, appointed or
elected by the board of directors of Cephalon, Inc. prior to the
effectiveness of this resolution to become a member of the board
of directors of Cephalon, Inc. at any future time or upon any
event, be and hereby is removed.
The Company is scheduled to hold its 2011 annual meeting of
stockholders on May 10, 2011. According to the
Companys proxy statement with respect to the 2011 annual
meeting, the nine nominees for election are all presently
directors of the Company. They are: J. Kevin Buchi, William P.
Egan, Martyn D. Greenacre, Charles J. Homcy, Vaughn M. Kailian,
Kevin E. Moley, Charles A. Sanders, Gail R. Wilensky and Dennis
L. Winger. Under Delaware law, directors not serving on a
classified board may be removed from office by the stockholders
without cause. The Companys board is not classified, and
accordingly, all nine of the Companys current directors
may be removed without cause by the holders of a majority of the
shares entitled to vote or consent as of the applicable record
date. Since the members of the current board are the same
persons who would be elected at the 2011 annual meeting, the
same individuals would be removed whether the Removal Proposal
became effective before or after the election of directors at
the 2011 annual meeting. In addition, should the Company Board
propose the election of any additional individuals, to be
effective at a future time or upon any event, the Removal
Proposal would also remove those persons.
5
VALEANT
URGES YOU TO CONSENT TO THE REMOVAL PROPOSAL.
PROPOSAL 3
THE ELECTION PROPOSAL
Valeant is asking you to consent to elect, without a
stockholders meeting, each of the following individuals to
serve as a director of the Company:
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Name
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Age
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Santo J. Costa
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65
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Richard H. Koppes
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64
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Lawrence N. Kugelman
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68
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Anders Lönner
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66
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John H. McArthur
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77
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Thomas G. Plaskett
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67
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Blair H. Sheppard
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58
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The following is the text of the Election Proposal:
To elect each of the following seven
(7) individuals to serve as a director of Cephalon, Inc.:
Santo J. Costa, Richard H. Koppes, Lawrence N. Kugelman, Anders
Lönner, John H. McArthur, Thomas G. Plaskett and Blair H.
Sheppard.
Although Valeant has no reason to believe that any of the
Nominees will be unable or unwilling to serve as directors, if
any of the Nominees is not available for election, then the
remaining Nominees that are elected intend, upon becoming
directors, to act to fill any vacancy resulting from such unable
or unwilling Nominee not being elected. Each of the Nominees has
agreed to be named in this Consent Statement and to serve as a
director of the Company, if elected. If elected, each Nominee
will hold office until his or her successor is elected and
qualified at the next annual meeting of stockholders of the
Company or until his or her earlier death, resignation,
retirement, disqualification or removal. If the Election
Proposal is effective before the 2011 annual meeting of
stockholders, it is contemplated that the 2011 annual meeting
would likely be postponed in order for the newly elected Company
Board to dismantle the impediments to the consummation of the
Proposed Offer as described herein and the stockholders to be
able to respond to the Proposed Offer.
For information on the Nominees, please see the section titled
THE NOMINEES and Annex A of this Consent
Statement.
VALEANT
URGES YOU TO CONSENT TO THE ELECTION OF ALL NOMINEES.
NUMBER OF
CONSENTS REQUIRED FOR THE PROPOSALS
Each of the Bylaw Restoration Proposal, the Removal Proposal and
the election of each Nominee will be adopted and become
effective when properly completed, unrevoked consents are signed
by the holders of a majority of the outstanding shares of Common
Stock as of the close of business on the Record Date, provided
that such consents are delivered to the Company within
60 days of the earliest dated written consent delivered to
the Company, although we have set an earlier deadline of
[ ], 2011 for delivery of consents, which
deadline we reserve the right to extend. According to
Companys proxy statement filed on March 25, 2011 with
respect to the 2011 annual meeting, as of March 14, 2011
there were 75,751,151 shares of Common Stock outstanding.
Assuming that the number of outstanding shares of Common Stock
is 75,751,151, the consent of stockholders holding at least
37,875,576 shares of Common Stock would be necessary to
effect each of the Bylaw Restoration Proposal, the Removal
Proposal and the election of each Nominee to the Company Board.
IF YOU TAKE NO ACTION, YOU WILL IN EFFECT BE REJECTING THE
PROPOSALS. ABSTENTIONS, FAILURES TO CONSENT AND BROKER NON-VOTES
WILL HAVE THE SAME EFFECT AS WITHHOLDING CONSENT. Broker
non-votes occur when a bank, broker firm, dealer, trust
company or other nominee holder has not received instructions
with respect to a particular matter, including the Proposals,
and therefore does not have discretionary power to vote on that
matter. As a result, you should follow the instructions included
in the materials that you have
6
received or contact the person responsible for your account and
give instructions to consent to the Proposals on your behalf.
Valeant recommends that you then confirm in writing your
instructions to the person responsible for your account and
provide a copy of those instructions to Valeant, care of
Georgeson Inc., which is assisting in this solicitation, at the
address and telephone numbers set forth herein, so that Valeant
will be aware of all instructions given and can attempt to
ensure that those instructions are followed. Execution and
delivery of a consent by a record holder of shares of Common
Stock will be presumed to be a consent with respect to all
shares held by such record holder unless the consent specifies
otherwise.
Neither the Bylaw Restoration Proposal nor the Removal Proposal
is subject to, or is conditioned upon, the effectiveness of the
other Proposals. The Election Proposal is conditioned upon the
effectiveness of the Removal Proposal. If none of the existing
members of the Company Board are removed in the Removal
Proposal, the Nominees cannot be elected pursuant to the
Election Proposal.
THE
NOMINEES
Pursuant to the Nomination Agreements between Valeant and each
of the Nominees (a form of which is included as Annex C to
this Consent Statement), each Nominee has agreed, if elected, to
serve as a director of the Company, and in that capacity to act
in the best interests of the Company and its stockholders and to
exercise his independent judgment in accordance with his
fiduciary duties in all matters that come before the Company
Board. We believe the Nominees will, if elected, and subject to
their fiduciary duties, remove the poison pill and approve the
Proposed Offer under Section 203 of the DGCL, and in
removing the existing Company Board and electing the Nominees,
you are sending a message to the Nominees that you want them to
allow the Proposed Offer to be accepted without those
impediments.
If the Nominees are elected, we plan to propose to them that a
merger agreement be entered into pursuant to which our Proposed
Offer would proceed, and pursuant to which (i) we would
also commit to complete a second-step merger at the same price
per share in the Proposed Offer, and (ii) the Company would
grant us a customary
top-up
option. This
top-up
option common in merger agreements that
contemplate initial tender offers would, if
necessary, allow us to move from majority ownership as a result
of the Proposed Offer to 90% ownership so that we can complete a
short-form merger under Delaware law very promptly and thereby
pay non-tendering stockholders their merger consideration
substantially more quickly than might otherwise be the case.
Furthermore, we believe that the Nominees will, if elected,
permit us to conduct a due diligence investigation, which could
potentially result in a modest increase to any ultimate offer
price, should the results of such exercise demonstrate
additional value to Valeant. We have not asked for any
commitment from the Nominees to agree to such a merger
agreement, and they would have to consider it in the exercise of
their fiduciary duties.
Section 203 of the DGCL. In general,
Section 203 of the DGCL prevents an interested
stockholder (generally, a stockholder owning 15% or more
of a corporations outstanding voting stock or an affiliate
or associate thereof) from engaging in a business
combination with a Delaware corporation, which would
include the second-step merger contemplated on the same terms as
the Proposed Offer, for a period of three years following the
time on which such stockholder became an interested stockholder
unless (i) prior to such time the corporations 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 corporations 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) at or subsequent
to such time the business combination is approved by the
corporations 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
662/3%
of the outstanding voting stock not owned by the interested
stockholder. Accordingly, under (i) above, if the Nominees
are elected and the newly constituted Company Board approves the
Proposed Offer, there will be no delay in, or supermajority
voting requirements applicable to, the contemplated second step
merger, which would be on the same terms as the Proposed Offer.
Poison Pill. With the poison pill currently in
place, if Valeant were to purchase more than 20% of the shares
of Common Stock outstanding, each Right would enable the holders
to purchase multiple shares of Common Stock
7
at half of market value or receive one free share of Common
Stock in exchange for a Right. Any Rights Valeant purchased
(either attached to or separated from shares of Common Stock
purchased in the Proposed Offer) would be voided under the
poison pill, resulting in substantial potential economic and
ownership dilution. Accordingly, as is customary in offers to
purchase, if the Proposed Offer were commenced prior to the
elimination of the poison pill, its consummation would be
conditioned upon the Rights no longer being in existence or
being rendered inapplicable to the Proposed Offer.
Any description of the Rights contained herein is based upon
publicly available documents and does not purport to be complete
and is qualified in its entirety by reference to the Rights
Agreement and the Agreement of Appointment and Joinder and
Amendment No. 1 to the Rights Agreement, dated
February 9, 2007 which are filed as Exhibit 1 to the
Companys Form 8A/12G filed with the SEC on
October 27, 2003 and as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed with the SEC on February 13, 2007.
Information regarding the Nominees. Valeant
believes the Nominees are independent in accordance with the
definition of independent used by the Company for
determining if a majority of the Company Board is independent in
compliance with the requirements of NASDAQ. In addition, Valeant
believes the Nominees are independent in accordance
with the applicable definition of independent used
by the Company for determining if a member of the corporate
governance committee, the compensation committee and the audit
committee of the Company Board is independent in compliance with
NASDAQs listing standards and the requirements of the
Sarbanes-Oxley Act of 2002.
Each of the Nominees has furnished the following information
regarding his or her principal occupations and certain other
matters. Except as otherwise stated herein, none of the
corporations or other organizations in which any Nominee carried
on his or her principal occupations or employment during the
past five years is a subsidiary or other affiliate of the
Company.
Mr. Santo J. Costa. Mr. Costa
is Chairman of the Board of Labopharm Inc. and is currently Of
Counsel with Smith, Anderson, Blount, Dorsett, Mitchell and
Jernigan, L.L.P., of Raleigh, North Carolina, specializing in
corporate law for healthcare companies. Mr. Costa currently
serves as a director of Cytokinetiks Inc. and Biovest Corp. I.
From June 2001 to August 2007 he was Of Counsel with the law
firm Williams, Mullen, Maupin, Taylor. Previously,
Mr. Costa held the role of Vice Chairman and before that,
President and Chief Operating Officer of Quintiles Transnational
Corporation. Prior to joining Quintiles, Mr. Costa held the
positions of General Counsel and Senior Vice-President
Administration with Glaxo Inc., U.S. Area Counsel with
Merrell Dow Pharmaceuticals and Food & Drug Counsel
with Norwich Eaton Pharmaceuticals. Mr. Costa is an Adjunct
Professor in the clinical research program at the Campbell
University School of Pharmacy.
Mr. Richard H.
Koppes. Mr. Koppes was appointed to the
Board of Directors of NutraCea in April 2011. Mr. Koppes
served on the Board of Directors of Valeant from 2002 until its
merger with Biovail Corporation (upon consummation of the
merger, Biovail Corporation changed its name to Valeant) in
September 2010. He is currently a Corporate Governance Fellow at
Stanford University School of Law, running the Stanford
Institutional Investor Forum and Stanfords Fiduciary
College. From 1996 to 2009, he was Of Counsel to the law firm of
Jones Day LLP. From May 1986 through July 1996, Mr. Koppes
held several positions with the California Public
Employees Retirement System, including General Counsel,
Interim Chief Executive Officer and Deputy Executive Officer. He
also founded the National Association of Public Pension
Attorneys and serves as its Administrator. He was also on the
Board of the Society of Corporate Secretaries and Governance
Professionals, and is currently serving on the Boards of
Directors of the Investor Research Responsibility Center
Institute and the National Association of Corporate Directors.
Mr. Koppes is a former Director of Apria Healthcare Group
Inc.
Mr. Lawrence N.
Kugelman. Mr. Kugelman currently serves
on the Board of Directors of Coventry Health Care, Inc.
(Chairman of Audit Committee) and is a former Director of
LabOne, Inc. Mr. Kugelman served on the Boards of Directors
of Valeant from 2002 until its merger with Biovail Corporation
(upon consummation of the merger, Biovail Corporation changed
its name to Valeant) in September 2010, and of AccentCare, Inc.
from 2003 to 2010. He is a healthcare consultant and private
investor. From December 1995 through October 1996,
Mr. Kugelman was President, Chief Executive Officer and
Director of Coventry Health Care, Inc., a managed care
organization. From 1980 through 1992, he served as a Chief
Executive Officer of several HMOs and managed healthcare
organizations in the United States.
8
Mr. Anders
Lönner. Mr. Lönner served on
the Board of Directors of Valeant from 2009 until its merger
with Biovail Corporation (upon consummation of the merger,
Biovail Corporation changed its name to Valeant) in September
2010. Since 1999, he has been the Group President and Chief
Executive Officer of Meda AB. Prior to joining Meda AB,
Mr. Lönner has served as the Vice President Nordic
region of Astra, Chief Executive Officer of Karo Bio AB and
Chairman of the Pharmaceutical Industry Association in Sweden.
He has a masters degree in business administration from
the University of Lund.
Dr. John H.
McArthur. Dr. McArthur was Dean of the
Faculty of Harvard Business School from 1980 through 1995. Since
then, he has held the positions of Professor of Business
Administration Emeritus and Dean Emeritus. He was a member of
the Schools faculty from 1962, where he taught courses in
corporate finance and related fields in several Harvard Business
School programs while also engaging in research and course
development in Europe and North America. From 1995 to 2005 he
served as Senior Advisor to the President of The World Bank. He
is currently Chair of the Asia Pacific Foundation of Canada.
Dr. McArthur earned the Bachelor of Commerce degree in
Forestry from the University of British Columbia in 1957. At the
Harvard Business School, he completed the MBA degree in 1959 and
earned a doctorate there in business administration in 1963.
Dr. McArthur has held numerous corporate directorships,
committee memberships, and consulting posts in business,
government, education and health care organizations around the
world.
Mr. Thomas G.
Plaskett. Mr. Plaskett has served as
Chairman of Fox Run Capital Associates (a private consulting
firm) since 1999, and is a corporate director and a business
consultant. He is a Director of Alcon, Inc., where he is Chair
of the Audit Committee, and Signet Jewelers Limited.
Mr. Plaskett is also currently a Director at RadioShack
Corporation and is a member of its Audit and Compliance
Committee and the Corporate Governance Committee. He was
Chairman of the Board of Platinum Research Organization, Inc.
from 2006 to 2008.
Dr. Blair H.
Sheppard. Dr. Sheppard has served as the
Dean of Fuqua School of Business at Duke University since July
2007. Dr. Sheppard is also the Chair of the Board of
Directors of Duke Corporate Education, a company that he founded
in 2000 and at which he previously served as the Chief Executive
Officer. Prior to Duke Corporate Education, Dr. Sheppard
was the Senior Associate Dean of Fuqua School of Business, where
he played a leading role in the creation of two innovative
management education programs.
Compensation
of the Companys Directors
Valeant has agreed to pay each Nominee $50,000 for agreeing to
serve as a Nominee. If elected to the Company Board, the
Nominees will not receive any form of compensation or
indemnification from Valeant for their service as directors of
the Company. They will, however, receive whatever compensation
for directors the Company Board has established unless and until
the Company Board determines to change such compensation. The
following discussion summarizes the Companys compensation
of directors based solely on the Companys proxy statement
on Schedule 14A filed with the SEC on March 25, 2011.
2010
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
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Change
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in Pension
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Value and
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Fees
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Nonqualified
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Earned or
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Non-Equity
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Deferred
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Paid in
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Cash
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name
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($)(1)
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($)
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($)(2)
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($)
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($)
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($)
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($)
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William P. Egan
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$
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129,000
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$
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335,400
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$
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464,400
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Martyn D. Greenacre
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$
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126,000
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$
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335,400
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$
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446,400
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Charles J. Homcy, M.D.
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Vaughn M. Kailian
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$
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122,000
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$
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335,400
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$
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457,400
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Kevin E. Moley
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$
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109,000
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$
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335,400
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$
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444,400
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Charles A. Sanders, M.D.
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$
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89,000
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$
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335,400
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$
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424,400
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Gail R. Wilensky, Ph.D.
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$
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105,000
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$
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335,400
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$
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440,400
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Dennis L. Winger
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$
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124,000
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$
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335,400
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$
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459,400
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9
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(1) |
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Consists of the amounts described below under Cash
Compensation. With respect to Mr. Egan, includes
$20,000 paid for service as Presiding Director of the Company
Board. With respect to Mr. Greenacre, includes $17,000 paid
for service as a committee chairperson of the Corporate
Governance and Nominating Committee. With respect to
Dr. Sanders, includes $17,000 paid for service as a
committee chairperson of the Stock Option and Compensation
Committee. With respect to Mr. Winger, includes $30,000
paid for service as the committee chairperson of the Audit
Committee. During 2010, Dr. Sanders took an unpaid medical
leave from his duties. His fees earned in cash are therefore
lower than that of the other non-employee directors.
Dr. Homcy was not a member of the Company Board in 2010. |
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(2) |
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On May 20, 2010, each of the non-employee directors
received a grant of stock options to purchase 15,000 shares
of Common Stock at an exercise price of $59.18 per share, which
were immediately exercisable. The fair value of each option
award granted to the non-employee directors in 2010 was
$335,400, as calculated under applicable accounting guidance,
excluding the effect of certain forfeiture assumptions. See
Note 16 to the Consolidated Financial Statements included
in the Cephalon Annual Report on
Form 10-K
for the year ended December 31, 2010 for a discussion of
the assumptions used in the calculation. The total number of
stock option awards outstanding that were granted to
non-employee directors as of December 31, 2010 was 630,000. |
Compensation
for Service as a Non-Employee Director
The Company compensates its non-employee directors through a mix
of cash compensation and stock option grants. The components of
the non-employee directors compensation are as follows:
|
|
|
|
|
|
|
Cash Compensation:
|
|
|
|
|
|
|
Board Service Annual Retainer
|
|
$
|
55,000
|
|
|
|
Per Board Meeting Fees
|
|
|
|
|
|
|
Attendance in person
|
|
$
|
5,000/mtg.
|
|
|
|
Attendance by telephone
|
|
$
|
2,000/mtg.
|
|
|
|
Committee Service Fees
|
|
|
|
|
|
|
Audit Committee Chair Annual Retainer
|
|
$
|
30,000
|
|
|
|
Stock Option and Compensation Committee
Chair Annual Retainer
|
|
$
|
17,000
|
|
|
|
Corporate Governance and Nominating
Committee Chair Annual Retainer
|
|
$
|
17,000
|
|
|
|
Committee Member Annual Retainer
|
|
$
|
15,000
|
|
|
|
Presiding Director Annual Retainer
|
|
$
|
20,000
|
|
Stock Option Compensation:
|
|
|
|
|
|
|
Initial Grant (upon first election or appointment to the Company
Board)
|
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|
5,000 shares
|
|
|
|
Annual Grant (upon the date of the Annual Meeting)
|
|
|
5,000 shares
|
|
Under the Companys 2011 Equity Compensation Plan
(previously known as the Companys 2004 Equity Compensation
Plan), the initial grant of 15,000 stock options to a
non-employee director is made at the time of the earlier to
occur of such directors appointment as a director by the
Company Board or first election to the Company Board by
stockholders. This initial award generally vests over a
four-year period, with 25% becoming exercisable on each
anniversary of the grant date. Upon the date of re-election to
the Company Board at the 2011 annual meeting, a non-employee
director will receive an annual grant of 15,000 stock options
that are fully exercisable on the date of grant. The Company
Board also may grant options to non-employee directors in
addition to the automatic grants described above. Stock options
granted to non-employee directors have a ten-year term and are
granted with an exercise price equal to the fair market value of
our Common Stock on the date of grant.
In May 2010, all non-employee directors each received an annual
grant of stock options to purchase 15,000 shares of Common
Stock at an exercise price of $59.18 per share, which were
immediately exercisable.
The Company also reimburses directors for travel expenses
incurred in connection with attending Company Board, committee
and stockholder meetings and for other Company business-related
expenses. The Company does not provide retirement benefits or
other perquisites to non-employee directors under any current
program.
10
Other than as described herein, Valeant is not aware of any
arrangements pursuant to which non-employee directors of the
Company were to be compensated for services as directors during
the Companys last fiscal year.
Except as otherwise set forth herein, since January 1,
2010, none of the Nominees nor any of their
associates (as defined in
Rule 14a-1(a)
promulgated by the SEC under the Securities Exchange Act of
1934, as amended (the Exchange Act)) has received
any cash compensation, cash bonuses, deferred compensation,
compensation pursuant to plans or other compensation from, or in
respect of services rendered on behalf of, the Company, or is
subject to any arrangement described in Item 402 of
Regulation S-K
(Regulation S-K)
under the Securities Act of 1933, as amended.
Arrangements
between Valeant and the Nominees
Pursuant to a nomination agreement with each of the Nominees
(each, a Nomination Agreement), Valeant has agreed
to pay each Nominee a fee of $50,000 for serving as a nominee
and to reimburse each Nominee for his or her reasonable expenses
incurred in the performance of his or her responsibilities as a
nominee and to pay the reasonable legal fees and expenses of a
single independent legal counsel selected collectively by and
acting for the Nominees as nominees. Valeant has also agreed,
subject to certain conditions set forth in the Nomination
Agreement, to indemnify, defend and hold harmless each Nominee
from and against any and all losses, claims, damages,
liabilities, judgments, costs and expenses (including reasonable
fees and disbursements of counsel and costs of investigation) to
which such Nominee may become subject or which such Nominee may
incur in connection with being made, or threatened with being
made, a party or witness (or in any other capacity) to any
proceeding at law or in equity or before any governmental agency
or board or any other body whatsoever (whether arbitral, civil,
criminal, trial, appeal, administrative, formal, informal,
investigative or other), arising out of or based upon his or her
being a nominee for election to the Company Board. Pursuant to
the Nomination Agreement, each Nominee also has agreed, if
elected, to serve as a director and to act in the best interests
of the Company and its stockholders and to exercise his or her
independent judgment in accordance with his or her fiduciary
duties in all matters that come before the Company Board. Other
than the Nomination Agreement, there is no arrangement or
understanding between any Nominee and any other person or
persons, including Valeant, pursuant to which any Nominee was
selected as a nominee for election to the Company Board,
although it is expected that the Nominees, if elected and
subject to their fiduciary duties, will remove the
Companys poison pill and approve the Proposed Offer under
Section 203 of the DGCL. Furthermore, we believe that the
Nominees will, if elected, permit us to conduct a due diligence
investigation, which could potentially result in a modest
increase to any ultimate offer price, should the results of such
exercise demonstrate additional value to Valeant. Although we
plan, as discussed above, to propose entering into a merger
agreement including a
top-up
option, we have received no commitment from the Nominees with
respect to a merger agreement, and any decision would be subject
to the exercise of their fiduciary duties. A
form Nomination Agreement is included in Annex C of
this Consent Statement.
Additional
Information Concerning the Nominees
The Nominees have furnished additional miscellaneous information
required by the SEC rules and applicable law, which information
is located in Annex A of this Consent Statement.
VALEANT IS
ASKING YOU TO CONSENT TO THE ELECTION OF ALL NOMINEES.
The Nominees are highly qualified, experienced and
well-respected members of the business community. The only
commitment that each of the Nominees has given to Valeant, and
the only commitment that Valeant has sought from the Nominees,
is that he or she will, if elected, serve as a director, act in
the best interests of the Company and its stockholders and
exercise his or her independent judgment in accordance with his
or her fiduciary duties in all matters that come before the
Company Board. Support of the Proposals by holders of at least a
majority of the then outstanding Common Stock will send a strong
signal to the Nominees that the Companys stockholders want
them to remove the impediments to accepting the Proposed Offer
should the newly elected directors deem it appropriate in the
exercise of their fiduciary duties to do so. We do not believe
the election of the Nominees to the Company Board will preclude
their consideration of any competing bids or proposals for the
acquisition of the Company.
11
VOTING
SECURITIES
According to the Companys public filings, the shares of
Common Stock constitute the only class of outstanding voting
securities of the Company, and as of March 14, 2011 there
were 75,751,151 shares of Common Stock outstanding. Each
share of Common Stock is entitled to one vote, and only record
holders of Common Stock are entitled to execute consents. The
Companys stockholders do not have cumulative voting rights.
PROCEDURAL
INSTRUCTIONS
The Bylaw Restoration Proposal. You may
consent to the Bylaw Restoration Proposal by marking the box
CONSENT on the enclosed WHITE consent card. You may
also withhold your consent to the Bylaw Restoration Proposal by
marking the proper box on the consent card. You may abstain from
consenting to the Bylaw Restoration Proposal by marking the
proper box on the consent card. If the WHITE consent card is
signed and dated, but no direction is given with respect to the
Bylaw Restoration Proposal, you will be deemed to consent to the
Bylaw Restoration Proposal.
VALEANT
URGES YOU TO CONSENT TO THE BYLAW RESTORATION
PROPOSAL.
The Removal Proposal. You may consent to the
Removal Proposal by marking the box CONSENT on the
enclosed WHITE consent card. You may also withhold your consent
for the Removal Proposal by marking the proper box on the
enclosed WHITE consent card. You may abstain from consenting to
the Removal Proposal by marking the proper box on the consent
card. If the WHITE consent card is signed and dated, but no
direction is given with respect to the Removal Proposal, you
will be deemed to consent to the Removal Proposal.
VALEANT
URGES YOU TO CONSENT TO THE REMOVAL PROPOSAL.
Election of Nominees. You may consent to the
election of all the Nominees by marking the CONSENT
box on the enclosed WHITE consent card. You may also withhold
your consent for the entire slate of Nominees by marking the
proper box on the enclosed WHITE consent card. You may also
withhold your consent from any one or more of the Nominees by
marking the box CONSENT and writing the name of any
Nominee you wish to withhold your consent from in the space
provided on the WHITE consent card. You may abstain from the
election of the Nominees by marking the proper box on the
consent card. If the WHITE consent card is signed and dated, but
no direction is given with respect to the election of Nominees,
you will be deemed to consent to the election of all Nominees.
VALEANT
URGES YOU TO CONSENT TO THE ELECTION PROPOSAL.
Although Valeant has no reason to believe that any of the
Nominees will be unable or unwilling to serve as directors, if
any of the Nominees is not available for election, then the
remaining Nominees that are elected intend, upon becoming
directors, to act to fill any vacancy resulting from such unable
or unwilling Nominee not being elected.
Revocation of Written Consents. An executed
consent card may be revoked at any time by marking, dating,
signing and delivering a written revocation before the time that
the action authorized by the executed consent becomes effective.
Revocations may only be made by the record holder that granted
such consent. A revocation may be in any written form validly
signed by the record holder as long as it clearly states that
the consent previously given is revoked or no longer effective.
The delivery of a subsequently dated consent card that is
properly completed will constitute a revocation of any earlier
consent. The revocation may be delivered either to Valeant, in
care of Georgeson Inc., 199 Water Street
26th
Floor, New York, NY 10038, or to the principal executive offices
of the Company. Although a revocation is effective if delivered
to the Company, Valeant requests that either the original or
photostatic copies of all revocations of consents be mailed or
delivered to Valeant in care of Georgeson Inc., 199 Water
Street
26th
Floor, New York, NY 10038, so that Valeant will be aware of all
revocations and can more accurately determine if and when
sufficient unrevoked consents to the actions described in this
Consent Statement have been received.
12
YOUR CONSENT IS IMPORTANT.
Your CONSENT to the Bylaw Restoration Proposal, the Removal
Proposal and the Election Proposal will send a strong signal to
the Nominees that the Companys stockholders want them to
remove the impediments to accepting the Proposed Offer should
the newly elected directors deem it appropriate in the exercise
of their fiduciary duties to do so.
CONSENT
PROCEDURES
Section 228 of the DGCL provides that, absent a contrary
provision in a Delaware corporations certificate of
incorporation, any action that is required or permitted to be
taken at a meeting of the corporations stockholders may be
taken without a meeting, without prior notice and without a
vote, if consents in writing, setting forth the action so taken,
are signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, and such
consents are properly delivered to the corporation by delivery
to its registered office in Delaware, its principal place of
business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of
stockholders are recorded. The Companys Restated
Certificate of Incorporation, as amended, does not contain any
such contrary provision.
On April 6, 2011, pursuant to the Companys bylaws,
Valeant provided written notice to the secretary of the Company
requesting that the Company Board fix a record date for
determining stockholders entitled to give their written consent
to the Proposals, and on [ ], 2011, the Company
notified Valeant that the Board had fixed [ ],
2011 as the record date for the determination of the
Companys stockholders who are entitled to execute,
withhold or revoke consents relating to this consent
solicitation.
For the Proposals to be effective, properly completed and
unrevoked written consents to the Proposals from the holders of
record as of the close of business on the Record Date of a
majority of the shares of Common Stock then outstanding must be
delivered to the Company, under Delaware law and the
Companys Bylaws, within 60 days of the earliest dated
written consent delivered to the Company. However, we have
set [ ], 2011 as the deadline for submission of
written consents, but we reserve the right to extend such
deadline. Effectively, this means that you have until
[ ], 2011 to consent to the Proposals. WE URGE
YOU TO ACT PROMPTLY TO ENSURE THAT YOUR CONSENT WILL COUNT.
We reserve the right to submit consents to the Company at
any time within 60 days of the earliest dated written
consent delivered to the Company. See CONSENT
PROCEDURES for additional information regarding such
procedures.
If the Proposals become effective as a result of this consent
solicitation by less than unanimous written consent, prompt
notice of the adoption of the Proposals will be given under
Section 228(e) of the DGCL to stockholders who have not
executed written consents. All stockholders will be notified as
promptly as possible by press release of the results of the
solicitation.
APPRAISAL
RIGHTS
The Companys stockholders are not entitled to appraisal
rights under Delaware law in connection with the Proposals or
this Consent Statement.
OTHER
INFORMATION
Participants
in the Solicitation and Solicitation of Written
Consents
Valeant is a Canadian corporation with its principal executive
offices located at 7150 Mississauga Road, Mississauga, Ontario,
Canada, L5N 8M5. The telephone number of Valeants
principal executive offices is
(905) 286-3000.
Valeant is a multinational, specialty pharmaceutical company
that develops, manufactures and markets a broad range of
pharmaceutical products. Valeants specialty pharmaceutical
and
over-the-counter
(OTC) products are marketed under brand names and
are sold in the United States, Canada, Australia and New
Zealand, where Valeant focuses most of its efforts on products
in the dermatology and neurology therapeutic
13
classes. Valeant also has branded generic and OTC operations in
Europe and Latin America which focus on pharmaceutical products
that are bioequivalent to original products and are marketed
under company brand names. More information about Valeant can be
found at www.valeant.com.
Except as otherwise disclosed in this Consent Statement, since
January 1, 2010, there has not been and there is no
currently proposed transaction or series of transactions in
which the Company was or is to be a participant and the amount
involved exceeds $120,000, and in which Valeant or any associate
of Valeant had or will have any direct or indirect material
interest.
Except as set forth in this Consent Statement, no associate of
Valeant owns beneficially, either directly or indirectly, any
securities of the Company.
Except as otherwise disclosed in this Consent Statement, Valeant
does not have a substantial interest, either direct or indirect,
by security holdings or otherwise, in the matters to be acted
upon pursuant to this Consent Statement.
Except as set forth in this Consent Statement, Valeant:
(i) does not own any class of securities of the Company of
record that it does not own beneficially; (ii) does not own
beneficially, either directly or indirectly, any class of
securities of the Company or of any subsidiary of the Company;
(iii) has not purchased or sold any securities of the
Company within the past two years; and (iv) is not or was
not within the past year, a party to any contract, arrangement
or understanding with any person with respect to any securities
of the Company, including, but not limited to, joint ventures,
loan or option arrangements, puts or calls, guarantees against
loss or guarantees of profit, division of losses or profits, or
the giving or withholding of written consents.
As of the date of this Consent Statement, Vax Holdings, Inc., a
newly formed and wholly-owned subsidiary of Valeant, owns of
record and beneficially 100 shares of Common Stock which it
purchased on March 25, 2011. Valeant beneficially owns an
additional 1,034,908 shares of Common Stock and 203
unexpired option contracts each representing 100 shares of
Common Stock. Annex B sets forth all transactions in
securities of the Company by Valeant in the past two years.
Solicitation of consent by or on behalf of Valeant and other
participants in this solicitation may be conducted by mail,
facsimile, courier services, telephone, telegraph, the Internet,
e-mail,
newspapers, advertisements and other publications of general
distribution and in person. Valeant may, from time to time,
request that certain of its senior management employees assist
with the solicitation as part of his or her duties in the normal
course of his or her employment without any additional
compensation for the solicitation. Information regarding
directors, officers and employees of Valeant who may assist in
the solicitation is included in Annex B of this Consent
Statement.
Valeant has retained Georgeson Inc. for information agent for
the Proposed Offer and consent solicitation services for an
initial retainer of $25,000. Under its engagement letter,
Georgeson Inc. will also receive $75,000 for its services as
information agent in the Proposed Offer and $150,000 for its
services as consent solicitor. In addition, if Georgeson Inc. is
requested to make calls to or receive calls from individual
retail investors, Valeant will pay Georgeson Inc. $5.00 per such
call. Valeant has agreed to pay, advance funds for or reimburse
Georgeson Inc. for its reasonable expenses and fees and, subject
to certain terms and conditions, to indemnify Georgeson Inc.
against all claims liabilities, losses, damages and expenses
arising out or relating to the rendering of such services by
Georgeson Inc. or related services requested by Valeant. It is
anticipated that approximately [ ] people
will be employed by Georgeson Inc. in connection with the
solicitation of written consents for the Proposals.
Valeant may reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable
out-of-pocket
expenses incurred in connection with forwarding, at
Valeants request, all materials related to the consent
solicitation to the beneficial owners of shares of Common Stock
they hold of record.
Valeant will pay all costs of the solicitation of consent and
will not seek reimbursement of those costs from the Company.
Valeant estimates the total amount to be spent in furtherance of
or in connection with the solicitation of security holders of
the Company to be approximately
$[ ] million. Valeants aggregate
expenditures to date in furtherance of or in connection with the
solicitation of security holders of the Company are less than
$[ ].
14
Neither Valeant nor any associate of Valeant has any arrangement
or understanding with any person with respect to any future
employment by the Company or its affiliates, or with respect to
any future transactions to which the Company or its affiliates
will or may be a party.
Deadline
for Submitting Stockholder Proposals and Director Nominations
for the Next Annual Meeting
According to the Companys definitive proxy statement on
Schedule 14A filed with the SEC on March 25, 2011 in
relation to the 2011 annual meeting, proposals intended to be
presented at the 2012 annual meeting of stockholders must be
received by the Company at its principal executive offices no
later than November 24, 2011 for inclusion in the
Companys proxy statement and form of proxy relating to the
2012 annual meeting. Stockholders of record who do not submit
proposals for inclusion in the proxy statement but who intend to
submit a proposal at the 2012 annual meeting of stockholders,
and stockholders of record who intend to submit nominations for
directors at the meeting, must provide written notice. Such
notice should be addressed to the Secretary of the Company and
received at the Companys principal executive offices not
earlier than January 11, 2012 and not later than
February 10, 2012, and must satisfy certain other
requirements specified in the Companys bylaws.
Security
Ownership of Certain Beneficial Owners and Management of the
Company
Information regarding security ownership of certain beneficial
owners and management of the Company is included in Annex D
of this Consent Statement.
15
ANNEX A
MISCELLANEOUS
INFORMATION CONCERNING THE NOMINEES
The business address of each Nominee is as follows:
Santo J. Costa
2500 Wachovia Capital Center
P.O. Box 2611
Raleigh, North Carolina 27602
Richard H. Koppes
7248 South Land Park Drive, #102
Sacramento, California 95831
Lawrence N. Kugelman
24 Venezia,
Newport Coast, California 92657
Anders Lönner
Meda AB
Pipers Väg 2, 170 73
Solna, Stockholm, Sweden
John H. McArthur
Soldiers Field, Cumnock House
Boston, Massachusetts 02163
Thomas G. Plaskett
3911 Fox Glen Drive
Irving, Texas 75062
Blair H. Sheppard
Duke University
100 Fuqua Drive
Durham, North Carolina 27708
None of the Nominees holds a position or office with the
Company, and none of the Nominees has ever served on the Company
Board.
Except as set forth below, to Valeants knowledge, none of
the Nominees: (i) owns any class of securities of the
Company of record that he or she does not own beneficially;
(ii) owns beneficially, either directly or indirectly, any
class of securities of the Company or of any subsidiary of the
Company; (iii) has purchased or sold any securities of the
Company within the past two years; or (iv) is or was within
the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of
the Company, including, but not limited to, joint ventures, loan
or option arrangements, puts or calls, guarantees against loss
or guarantees of profit, division of losses or profits, or the
giving or withholding of proxies.
Except as otherwise set forth in the Consent Statement, no
associate of any Nominee owns beneficially, either directly or
indirectly, any securities of the Company.
None of the Nominees or any associates of the Nominees has any
arrangement or understanding with any person with respect to any
future employment by the Company or its affiliates
(as defined in
Rule 12b-2
promulgated by the SEC under the Exchange Act), or with respect
to any future transactions to which the Company or its
affiliates will or may be a party.
Except inasmuch as the Nomination Agreement provides that a
Nominee agrees to stand for election to the Company Board if
nominated by Valeant and to serve as a director if elected, and
each Nominee has acknowledged that he or she will, if elected,
act in the best interests of the Company and its stockholders
and will exercise his or her
A-1
independent judgment in accordance with his or her fiduciary
duties in all matters that come before the Company Board, other
than as described herein, none of the Nominees has a substantial
interest, either direct or indirect, by security holdings or
otherwise, in the matters to be acted upon pursuant to the
Consent Statement.
Other than as described in the Consent Statement, there are no
blood, marriage or adoption relationships (other than
relationships more remote than first cousin) between any of the
Nominees, or between any of the Nominees and any director or
executive officer of the Company or, to the knowledge of Valeant
as of the date of this Consent Statement, any nominee to become
a director or executive officer of the Company.
There are no material proceedings to which any of the Nominees
or any of their associates is a party adverse to the Company or
any of its subsidiaries, or proceedings in which such Nominees
or any of their associates have a material interest adverse to
the Company or any of its subsidiaries.
Other than as described herein, since January 1, 2010,
there has not been and there is no currently proposed
transaction or series of transactions, in which the Company was
or is to be a participant and the amount involved exceeds
$120,000, and in which any Nominee or any associate of any
Nominee or any immediate family member of any Nominee or any
such associate had or will have any direct or indirect material
interest.
Other than as described herein, none of the Nominees has been
involved in any legal proceedings during the past five years
described in Item 401(f) of
Regulation S-K
that is required to be disclosed as material for purposes of an
evaluation of the ability or integrity of the Nominee.
None of the Nominees has failed to file with the SEC on a timely
basis any report on Form 3, Form 4 or Form 5 or
any amendment thereto required to be filed by such Nominee under
Section 16 of the Exchange Act with respect to the Company.
A-2
ANNEX B
PERSONS
WHO MAY BE PARTICIPANTS IN THE SOLICITATION OF WRITTEN
CONSENTS
Set forth below are the names, principal business addresses and
principal occupations or employment of the directors, officers,
employees and other representatives of Valeant who may assist in
Valeants solicitation of written consents in connection
with the Consent Statement, and the name, principal business and
address of any corporation or other organization in which their
employment is carried on. Information with respect to the
Nominees is included in the section titled THE
NOMINEES and Annex A of the Consent Statement. To the
extent any of these individuals assists Valeant in its
solicitation of written consents, these persons may be deemed
participants under SEC rules.
Directors,
Officers and Employees of Valeant
The name and principal occupations or employment of each
director, officer and employee of Valeant who may be deemed a
participant are set forth below. For each person,
the principal business address is care of Valeant, 7150
Mississauga Road, Mississauga, Ontario, Canada, L5N 8M5. Unless
otherwise indicated, each occupation set forth opposite an
individuals name refers to employment with Valeant.
|
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|
|
|
|
|
Present Position with Valeant or
|
|
Address of Principal Employer
|
Name
|
|
Other Principal Occupation or Employment
|
|
(Only if Other Than Valeant)
|
|
J. Michael Pearson
|
|
Chairman and Chief Executive Officer
|
|
|
Laurie W. Little
|
|
Vice President Investor Relations
|
|
|
Interests
of Participants and Other Potential Participants
To Valeants knowledge, with respect to the individuals
listed above under Directors, Officers and Employees of
Valeant in this Annex B, no such person:
(i) owns any class of securities of the Company of record
that it does not own beneficially; (ii) owns beneficially,
either directly or indirectly, any class of securities of the
Company or of any subsidiary of the Company; (iii) has
purchased or sold any securities of the Company within the past
two years; or (iv) is, or was within the past year, a party
to any contract, arrangement or understanding with any person
with respect to any securities of the Company, including, but
not limited to, joint ventures, loan or option arrangements,
puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of
written consents.
Except as otherwise set forth in the Consent Statement, no
associate of any individual listed above under Directors,
Officers and Employees of Valeant in this Annex B
owns beneficially, either directly or indirectly, any securities
of the Company.
No individual listed above under Directors, Officers and
Employees of Valeant in this Annex B nor any
associate of any such individual has any arrangement or
understanding with any person with respect to any future
employment by the Company or its affiliates, or with respect to
any future transactions to which the Company or its affiliates
will or may be a party.
No individual listed above under Directors, Officers and
Employees of Valeant in this Annex B has a
substantial interest, direct or indirect, by security holdings
or otherwise, in the matters to be acted upon pursuant to the
Consent Statement.
Except as otherwise set forth in the Consent Statement, since
January 1, 2010, there has not been and there is no
currently proposed transaction or series of transactions in
which the Company was or is to be a participant and the amount
involved exceeds $120,000, and in which any individual listed
above under Directors, Officers and Employees of
Valeant in this Annex B or any associate of any such
individual or any immediate family member of any such individual
or any such associate had or will have any direct or indirect
material interest.
B-1
ANNEX C
FORM OF
NOMINATION AGREEMENT
Dear [Nominee]:
This letter agreement, dated [ ], 2011 (this
Agreement), is with reference to your agreement to
become a nominee (a Nominee) of Valeant
Pharmaceuticals International, Inc., a company incorporated
under the laws of Canada (Valeant), for election as
an independent director of Cephalon, Inc., a Delaware
corporation (Cephalon). Valeant desires to solicit
written consents of stockholders in lieu of a special meeting
(the Consent Solicitation), among other things, to
remove all members of the Board of Directors of Cephalon (the
Board) and any other person or persons (other than
the persons elected pursuant to the Consent Solicitation)
elected or appointed to the Board to fill any vacancy or
newly-created directorship, and to replace such removed
directors with the Nominees proposed by Valeant for election as
directors of Cephalon.
A. Responsibilities of Nominee.
(a) You agree (i) to be named as a Nominee in any and
all solicitation materials prepared by Valeant in connection
with the Consent Solicitation, (ii) to provide true and
complete information concerning your background, experience,
abilities and integrity as may be requested from time to time by
Valeant (including, without limitation, all information required
under the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder to be disclosed in
a consent solicitation statement or other materials prepared by
Valeant in connection with the Consent Solicitation
(collectively, the Consent Solicitation Statement)),
and not to omit information that may be material to an
understanding of your background, experience, abilities and
integrity, (iii) that your agreement to be a Nominee, and
the information referred to in clause (ii) of this
paragraph (a) may be disclosed by Valeant, in its Consent
Solicitation materials or otherwise, and (iv) if elected,
to serve as a director of Cephalon, and in that capacity to act
in the best interests of Cephalon and its stockholders and to
exercise your independent judgment in accordance with your
fiduciary duties in all matters that come before the Board. You
represent that the information supplied to Valeant in your
completed questionnaire, in your response to any
follow-up
questions from Valeant and any related supplement provided by
you (together, the Questionnaire) relating to your
being a Nominee is true and complete and does not omit
information that may be material to an understanding of your
background, experience, abilities and integrity. You agree that
you will promptly provide Valeant with (x) any updates to
the information you have previously supplied to Valeant in order
to satisfy your obligation under paragraph (a)(ii) of this
Section A and your representations in the Questionnaire,
and (y) such additional information as may reasonably be
requested by Valeant in connection with your nomination for
election to the Board.
(b) The parties acknowledge and agree that you are not an
employee or an agent or otherwise a representative of Valeant,
and that you are independent of, and not controlled by or acting
at the direction of, Valeant and that, if elected, you will be
acting as a director of Cephalon, on behalf of Cephalon and all
of the stockholders of Cephalon and will in no way be controlled
by or acting at the direction of Valeant. You shall have no
authority to act as an agent of Valeant and you shall not
represent the contrary to any person.
B. Responsibilities of
Valeant. Notwithstanding anything in this
Agreement to the contrary, Valeant is not obligated to nominate
you to the Board or to commence or complete the Consent
Solicitation.
C. Compensation. In consideration of your
agreement to become a Nominee and to be named in the Consent
Solicitation Statement, promptly following the date hereof,
Valeant shall pay to you a one-time payment in the amount of
fifty thousand US dollars ($50,000).
D. Expenses. Valeant agrees that for the
period starting from the date of this Agreement and ending at
the earlier of (x) your election to the Board (or if the
election or qualification of members to the Board is contested
on any grounds, such later date that such contest is resolved)
and (y) the date you have been notified by Valeant that it
will not commence the Consent Solicitation or has abandoned the
Consent Solicitation or will not nominate you to the Board or
that the requisite number of votes for your election to the
Board has not been obtained, Valeant will (i) promptly
reimburse you for all reasonable expenses (including first class
air travel) incurred in the performance
C-1
of your responsibilities as a Nominee, and (ii) directly
pay for the reasonable legal fees and expenses incurred by one
independent legal counsel selected collectively by and acting on
behalf of all Nominees proposed by Valeant for election as
independent directors of Cephalon (the Independent
Counsel).
E. Indemnification.
(a) As a material inducement to you to become a Nominee,
Valeant hereby agrees to indemnify, defend and hold harmless you
from and against any and all losses, claims, damages,
liabilities, judgments, costs, and expenses (including
reasonable fees and disbursements of counsel and costs of
investigation) (collectively, Losses) to which you
may become subject or which you may incur in connection with
being made, or threatened with being made, a party or witness
(or in any other capacity) to any proceeding at law or in equity
or before any governmental agency or board or any other body
whatsoever (whether arbitral, civil, criminal, trial, appeal,
administrative, formal, informal, investigative or other),
arising out of or based upon your being a Nominee, except to the
extent such Loss arises or results from your willful misconduct
or any untrue statement or omission made by you or made by
Valeant in reliance upon and in conformity with information
furnished by you in writing expressly for use in any document
made available to the public; it being understood that you are
furnishing the Questionnaire expressly for use in the Consent
Solicitation Statement and other filings to be made publicly
available in connection with the Consent Solicitation.
(b) In the event of the commencement or threatened
commencement of any action in respect of which you may seek
indemnification from Valeant hereunder, you will give prompt
written notice thereof to Valeant; provided that the failure to
so provide prompt notice shall not relieve Valeant of its
indemnification obligations hereunder except to the extent that
Valeant is materially prejudiced as a result thereof. Valeant
shall timely pay all fees and disbursements of the Independent
Counsel in respect of such action; however, you shall have the
right to retain separate counsel, provided, that you shall be
responsible for the fees of such counsel and costs of such
participation unless either (i) you and Valeant mutually
agree to the retention of such counsel, or
(ii) representation of you and other Nominees by the same
counsel would be inappropriate due to actual or potential
differing interests between you and them. Valeant shall in no
event be liable for any settlement by you of any such action
effected without the prior written consent of Valeant, which
consent shall not be unreasonably withheld.
(c) Valeant shall not settle, without your prior written
consent (which you may withhold in your sole discretion), any
action in any manner that would impose any penalty, obligation
or limitation on you (other than monetary damages for which
Valeant agrees to be wholly responsible) or that would contain
any language that could reasonably be viewed as an
acknowledgement of wrongdoing on your part or otherwise as
detrimental to your reputation.
(d) Your rights to indemnification under this Agreement
shall include the right to be advanced any and all expenses
incurred in connection with any indemnifiable claim as such
expenses are incurred.
(e) Notwithstanding anything to the contrary, if Valeant
has made payments to you pursuant to the indemnification and
expense reimbursement provisions hereof and you subsequently are
reimbursed by a third party therefor, you will remit such
subsequent reimbursement to Valeant.
F. General. Notices and other
communications under this Agreement shall be in writing and
delivered by a nationally-recognized overnight courier with
tracking capability, if mailed to you, then to the address set
forth above under your name, and, if mailed to Valeant, then to
the address indicated above in the letterhead. The failure of a
party to insist upon strict adherence to any term contained
herein shall not be deemed to be a waiver of such partys
rights thereafter to insist upon strict adherence to that term
or to any other term contained herein. In the event that any one
or more provisions of this Agreement are deemed to be invalid,
illegal or unenforceable by a court of competent jurisdiction,
then such provision(s) shall be deemed severed to the least
extent possible without affecting the validity, legality and
enforceability of the remainder of this Agreement. This
Agreement (i) shall be governed by and construed in
accordance with the laws of the State of Delaware, without
regard to its conflict of laws principles; (ii) contains
the entire understanding of the parties with respect to the
subject matter contained herein and may not be modified or
amended except by mutual written consent; (iii) shall inure
to the benefit of and be binding upon the parties and their
respective heirs, representatives, successors, and assigns; and
(iv) may be executed in counterparts and delivered by
facsimile signatures.
C-2
G. Most Favored Nation. In the event
that, in connection with the Consent Solicitation, Valeant
enters into any nomination agreement with any other individual
with respect to such individual being a Nominee proposed by
Valeant for election as a director of Cephalon, and such
nomination agreement contains any term that is more favorable to
such individual than this Agreement is to you, this Agreement
shall be deemed to be amended automatically to incorporate such
more favorable term. Valeant agrees to notify you of any such
amendment.
If you are in agreement with the foregoing, please so indicate
by signing and returning one copy of this Agreement.
Very truly yours,
Valeant Pharmaceuticals International, Inc.
Name:
Title:
Accepted and agreed to:
Name:
C-3
ANNEX D
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF THE COMPANY
The information set forth in this Annex D is based solely
upon the Companys publicly available proxy statement on
Schedule 14A filed with the SEC on March 25, 2011.
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of
Common Stock as of February 28, 2011 (except as noted) by
(i) the named executive officers and the Companys
directors, excluding Drs. Baldino and Homcy; (ii) each
person or group that is known to Valeant to be the owners of
more than five percent of the outstanding shares of the Common
Stock; and (iii) all executive officers and directors as a
group. As of February 28, 2011, there were
75,747,836 shares of Common Stock outstanding. Except as
otherwise noted, the business address of each person shown below
is 41 Moores Road, Frazer, PA 19355.
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Amount and Nature
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|
|
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of Beneficial
|
|
Percentage
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Name
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Ownership(1)(2)
|
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of Class(3)
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J. Kevin Buchi
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|
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353,058
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*
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Wilco Groenhuysen
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|
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17,292
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|
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*
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Alain Aragues
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50,275
|
|
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*
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Gerald J. Pappert
|
|
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70,193
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|
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*
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Lesley Russell Cooper, MB.CH.B, MRCP
|
|
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221,274
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|
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*
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William P. Egan
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126,661
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|
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*
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Martyn D. Greenacre
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|
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105,200
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*
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Vaughn M. Kailian
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70,000
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*
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Kevin E. Moley
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61,000
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*
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Charles A. Sanders, M.D.
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111,000
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*
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Gail R. Wilensky, Ph.D.
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90,000
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*
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Dennis L. Winger
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90,000
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*
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Wellington Management Company, LLP(4)
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9,170,782
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12.11%
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75 State Street
Boston, MA 02109
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|
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BlackRock, Inc.(5)
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8,729,500
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11.53%
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55 East 52nd Street
New York, NY 10055
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|
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T. Rowe Price Associates, Inc.(6)
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5,556,081
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7.34%
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100 E. Pratt Street
Baltimore, MD 21202
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|
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Vanguard Specialized Funds Vanguard Healthcare
Fund(7)
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5,811,230
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7.67%
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100 Vanguard Blvd.
Malvern, PA 19355
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FMR LLC(8)
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7,033,457
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9.26%
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82 Devonshire Street
Boston, MA 02109
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The Vanguard Group, Inc.(9)
|
|
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4,320,968
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5.71%
|
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
|
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All executive officers and directors as a group (16 persons)
|
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2,116,732
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2.73%
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D-1
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(1) |
|
Beneficial ownership is determined in accordance with the rules
of the SEC and means voting or investment power with respect to
securities. Except as indicated below, the individuals or groups
named in this table have sole voting and investment power with
respect to all shares of common stock indicated above. |
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(2) |
|
Includes shares that may be acquired upon the exercise of
outstanding options that were exercisable within 60 days of
February 28, 2011 as follows: Mr. Buchi
322,500 shares; Mr. Groenhuysen 15,425 shares;
Mr. Aragues 47,900 shares; Mr. Pappert
62,500 shares; Dr. Russell Cooper 146,800 shares;
Mr. Egan 105,000 shares; Mr. Greenacre
105,000 shares; Mr. Kailian 70,000 shares;
Mr. Moley 60,000 shares; Dr. Sanders
110,000 shares; Dr. Wilensky 90,000 shares;
Mr. Winger 90,000 shares; and all executive officers
and directors as a group (16 persons) 1,950,475 shares. |
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(3) |
|
Shares of Common Stock issuable upon the exercise of stock
options that are exercisable within 60 days of
February 28, 2011 and shares of Common Stock issuable upon
the conversion of the Companys convertible subordinated
notes are deemed to be outstanding and beneficially owned by the
person or group holding such option or notes, as the case may
be, for purposes of computing such persons percentage
ownership as of February 28, 2011 but are not deemed
outstanding for the purpose of computing the percentage
ownership of any other person or group as of February 28,
2011. |
|
(4) |
|
Information is as of December 31, 2010 and is based upon a
Schedule 13G, as amended and filed by Wellington Management
Company, LLP (WMC) with the SEC on February 14,
2011. WMC is an investment adviser with respect to
9,170,782 shares that are held of record by clients of WMC.
Vanguard Specialized Fund Vanguard Health Care Fund
is a client of WMC holding more than five percent of the
Companys securities. WMC has shared voting power with
respect to 2,902,802 shares and shared dispositive power
with respect to 9,170,782 shares. |
|
(5) |
|
Information is as of January 31, 2011 and is based upon a
Schedule 13G, as amended and filed by BlackRock, Inc.
(BlackRock) with the SEC on February 10, 2011.
BlackRock is a Delaware corporation and a parent holding company
or control person in accordance with Rule 13d-1(b)(1)(ii)(G) of
the Securities Exchange Act of 1934. BlackRock has sole voting
power and sole dispositive power with respect to
8,729,500 shares. |
|
(6) |
|
Information is as of December 31, 2010 and is based upon a
Schedule 13G, as amended and filed with the SEC by T. Rowe
Price Associates, Inc. (T. Rowe Price) on
February 10, 2011. These securities are owned by various
individual and institutional investors, for which T. Rowe Price
Associates, Inc. serves as investment adviser, registered under
Section 203 of the Investment Advisers Act of 1940, with
power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, T. Rowe Price is deemed to be a
beneficial owner of such securities; however, T. Rowe Price
expressly disclaims that it is, in fact, the beneficial owner of
such securities. T. Rowe Price has sole voting power to vote
1,259,932 shares and sole dispositive power over
5,556,081 shares. |
|
(7) |
|
Information is as of December 31, 2010 and is based upon a
Schedule 13G, as amended and filed with the SEC by Vanguard
Specialized Funds Vanguard Healthcare Fund
(Vanguard SF-VHF), on February 10, 2011.
Vanguard SF-VHF is an Investment Company registered under
Section 8 of the Investment Company Act of 1940, and is the
beneficial owner and has sole voting power with respect to
5,811,230 shares. |
|
(8) |
|
Information is as of December 31, 2010 and is based upon a
Schedule 13G, as amended and filed by FMR LLC
(FMR) and others with the SEC on February 14,
2011 that states the following: |
|
|
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Fidelity Management & Research Company
(Fidelity), a wholly owned subsidiary of FMR and an
investment adviser, is the beneficial owner of
6,553,799 shares of the Common Stock outstanding of the
Company as a result of acting as investment adviser to various
investment companies. The number of shares of Common Stock owned
by the investment companies at December 31, 2010 included
24,625 shares of Common Stock resulting from the assumed
conversion of $1,150,000 principal amount of the Companys
2% convertible notes due June 1, 2015 (21.4133 shares
of Common Stock for each $1,000 principal amount of debenture).
|
|
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|
Edward C. Johnson, 3d, Chairman of FMR, and FMR,
through its control of Fidelity and its funds (the
Funds) each has sole dispositive power of the
6,553,799 shares of the Common Stock outstanding of the
Company owned by the Funds. Neither FMR nor Edward C. Johnson,
3d, has the sole power to vote or direct the voting of the
shares owned directly by the Funds, which power resides with the
Funds Boards of Trustees.
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D-2
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Fidelity carries out the voting of the shares under written
guidelines established by the Funds Boards of Trustees. |
|
|
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Members of the family of Edward C. Johnson 3d,
Chairman of FMR LLC, are the predominant owners, directly or
through trusts, of Series B voting common shares of FMR
LLC, representing 49% of the voting power of FMR LLC. The
Johnson family group and all other Series B shareholders
have entered into a shareholders voting agreement under
which all Series B voting common shares will be voted in
accordance with the majority vote of Series B voting common
shares. Accordingly, through their ownership of voting common
shares and the execution of the shareholders voting
agreement, members of the Johnson family may be deemed, under
the Investment Company Act of 1940, to form a controlling group
with respect to FMR LLC.
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|
Strategic Advisers, Inc., a wholly-owned subsidiary
of FMR and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940,
provides investment advisory services to individuals. As such,
FMRs beneficial ownership includes 3,913 shares of
the Common Stock outstanding of the Company, beneficially owned
through Strategic Advisers, Inc.
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|
|
|
Pyramis Global Advisors, LLC (PGA LLC),
an indirect wholly-owned subsidiary of FMR and an investment
adviser registered under Section 203 of the Investment
Advisors Act of 1940, is the beneficial owner of
220,174 shares of the Common Stock outstanding of the
Company, as a result of its serving as investment advisor to
institutional accounts,
non-U.S.
mutual funds, or investment companies registered under
Section 8 of the Investment Company Act of 1940 owning such
shares. The number of shares of common stock of the Company
owned by institutional account(s) at December 31, 2010
included 177,794 shares of the Common Stock outstanding of
the Company resulting from the assumed conversion of $8,303,000
principal amount of the Companys 2% convertible notes due
June 1, 2015 (21.4133 shares of Common Stock for each
$1,000 principal amount of debenture).
|
|
|
|
Edward C. Johnson, 3d and FMR, through its control
of PGA LLC, each has sole dispositive power over
220,174 shares and sole power to vote or to direct the
voting of 220,174 shares of the Common Stock owned by the
institutional accounts or funds advised by PGA LLC as reported
above.
|
|
|
|
Pyramis Global Advisors Trust Company
(PGATC), an indirect wholly-owned subsidiary of FMR
LLC and a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, is the beneficial owner of
170,681 of the Common Stock outstanding of the Company, as a
result of its serving as investment manager of institutional
accounts owning such shares. The number of shares of common
stock of the Company owned by institutional account(s) at
December 31, 2010 included 20,129 shares of Common
Stock resulting from the assumed conversion of $940,000
principal amount of the Companys 2% convertible notes due
June 01, 2015 (21.4133 shares of common stock for each
$1,000 principal amount of debenture).
|
|
|
|
Edward C. Johnson, 3d and FMR, through its control
of PGATC, each has sole dispositive power over
170,681 shares and sole power to vote or to direct the
voting of 170,681 shares of the Common Stock outstanding of
the Company owned by the institutional accounts managed by PGATC
as reported above.
|
|
|
|
FIL Limited (FIL) and various
foreign-based subsidiaries provide investment advisory and
management services to a number of
non-U.S.
investment companies and certain institutional investors. FIL,
which is a qualified institution under section
240.13d-1(b)(1)(ii), is the beneficial owner of
84,890 shares of the Common Stock outstanding of the
Company.
|
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|
|
|
Partnerships controlled predominantly by members of the family
of Edward C. Johnson 3d, Chairman of FMR LLC and FIL, or trusts
for their benefit, own shares of FIL voting stock with the right
to cast approximately 39% of the total votes which may be cast
by all holders of FIL voting stock. FMR LLC and FIL are separate
and independent corporate entities, and their Boards of
Directors are generally composed of different individuals. |
|
|
|
FMR LLC and FIL are of the view that they are not acting as a
group for purposes of Section 13(d) under the
Securities Exchange Act of 1934 and that they are not otherwise
required to attribute to each other the beneficial
ownership of securities beneficially owned by
the other corporation within the meaning of Rule 13d-3
promulgated under the 1934 Act. Therefore, they are of the
view that the shares held by the other corporation need not be
aggregated for purposes of Section 13(d). However, FMR LLC is
making this filing on a voluntary basis as if all of the shares
are beneficially owned by FMR LLC and FIL on a joint basis. |
D-3
|
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|
FIL has sole dispositive power over 84,890 shares owned by
the International Funds. FIL has sole power to vote or direct
the voting of 82,440 shares and no power to vote or direct
the voting of 2,450 shares of Common Stock held by the
International Funds as reported above. |
|
|
|
(9) |
|
Information is as of December 31, 2010 and is based upon a
Schedule 13G, as amended and filed with the SEC by The
Vanguard Group, Inc. (Vanguard) on February 10,
2011. Vanguard has sole voting power over 94,053 shares and
sole dispositive power over 4,226,915 shares and, through
its wholly-owned subsidiary, Vanguard Fiduciary
Trust Company (VFTC), is the beneficial owner
of 94,053 shares as a result of its serving as investment
manager of collective trust accounts. VFTC directs the voting of
these shares. The aggregate amount of beneficially owned shares
by Vanguard is 4,320,968 shares of the Common Stock
outstanding of the Company. |
D-4
ANNEX E
PRELIMINARY COPY
SUBJECT TO COMPLETION
DATED [], 2011
PLEASE CONSENT TODAY!
SEE REVERSE SIDE
FOR THREE EASY WAYS TO CONSENT!
TO CONSENT BY MAIL, PLEASE DETACH CONSENT CARD HERE, AND SIGN, DATE AND RETURN IN THE ENVELOPE PROVIDED
THIS WRITTEN CONSENT IS SOLICITED ON BEHALF OF VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
This written consent is solicited on behalf of Valeant Pharmaceuticals International, Inc.
(Valeant) and certain other participants, and not on behalf of the Board of Directors of
Cephalon, Inc., a Delaware corporation (the Company). Unless otherwise indicated below, the
undersigned, a stockholder of record of shares of Common Stock, par value $0.01 per share (the
Common Stock), of the Company, as of [], 2011, the record date established for determining
stockholders entitled to consent to the following actions (the Proposals), hereby consents,
pursuant to Section 228 of the Delaware General Corporation Law, with respect to all shares of
Common Stock held by the undersigned, to the adoption of the below-described Proposals without a
meeting of the stockholders of the Company.
This written consent revokes all prior written consents given by the undersigned with respect
to the matters covered hereby.
Your consent is important. Please CONSENT immediately.
Please sign, date and return your written consent form in the enclosed postage-paid envelope.
[continued and to be signed on the reverse side]
E-1
YOUR CONSENT IS IMPORTANT
PLEASE REVIEW THE CONSENT STATEMENT AND CONSENT TODAY IN ONE OF THREE WAYS:
1. Consent by Telephone Please call toll-free in the U.S. or Canada at 1-877-456-7915 on a
touch-tone telephone. If outside the U.S. or Canada, call 1-781-575-4687. Please follow the simple
instructions. You will be required to provide the unique control number printed below.
OR
2. Consent by Internet Please access http://proxy.georgeson.com/, and follow the simple
instructions. Please note you must type an s after http. You will be required to provide the
unique control number printed below.
You may consent by telephone or Internet 24 hours a day, 7 days a week. Your telephone or
Internet consent authorizes your consent in the same manner as if you had signed, dated and
returned a consent card.
OR
3. Consent by Mail If you do not wish to consent by telephone or over the Internet, please
sign, date and return the consent card in the envelope provided, or mail to: Valeant, c/o Georgeson
Inc. 199 Water Street 26th Floor, New York, NY 10038.
TO CONSENT BY MAIL, PLEASE DETACH CONSENT CARD HERE, AND SIGN, DATE AND RETURN IN THE ENVELOPE PROVIDED
WHITE
VALEANT RECOMMENDS THAT YOU CONSENT TO PROPOSALS 1, 2 AND 3 BELOW.
Proposal 1 (Bylaw Restoration Proposal): RESOLVED, that any changes to the amended and
restated bylaws of Cephalon, Inc. filed with the Securities and Exchange Commission on March 16,
2011, be and are hereby repealed:
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CONSENT o
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DOES NOT CONSENT o
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ABSTAIN o |
Proposal 2 (Removal Proposal): RESOLVED, that each member of the board of directors of
Cephalon, Inc. as of the time this resolution becomes effective, and each person, if any,
theretofore nominated, appointed or elected by the board of directors of Cephalon, Inc. prior to
the effectiveness of this resolution to become a member of the board of directors of Cephalon, Inc.
at any future time or upon any event, be and hereby is removed:
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CONSENT o
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DOES NOT CONSENT o
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ABSTAIN o |
Proposal 3 (Election Proposal): To elect each of the following seven (7) individuals to
serve as a director of Cephalon, Inc.: Santo J. Costa, Richard H. Koppes, Lawrence N. Kugelman,
Anders Lönner, John H. McArthur, Thomas G. Plaskett and Blair H. Sheppard:
E-2
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CONSENT o
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DOES NOT CONSENT o
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ABSTAIN o |
To withhold authority to consent to the election of one or more of the Nominees, check
the CONSENT box above and write the candidate(s) name(s) for whom you wish to withhold your
consent in the space below.
Neither Proposal 1 nor Proposal 2 is subject to, or is conditioned upon, the effectiveness of
any other Proposal. Proposal 3 is conditioned upon the effectiveness of Proposal 2; if the existing
members of the Company Board are not removed in Proposal 2, and there are no vacancies to fill, the
Nominees cannot be elected pursuant to Proposal 3.
IN THE ABSENCE OF DOES NOT CONSENT OR ABSTAIN BEING INDICATED ABOVE, THE UNDERSIGNED
HEREBY CONSENTS TO EACH PROPOSAL LISTED ABOVE.
IN ORDER FOR YOUR CONSENT TO BE VALID, IT MUST BE DATED.
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Date: |
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Signature of Stockholder |
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Signature (if held jointly) |
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Name and Title of Representative (if applicable) |
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IMPORTANT NOTE TO STOCKHOLDERS: |
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Please sign exactly as name appears
hereon. If the shares are held by
joint tenants, both should sign. When
signing as executor, administrator,
trustee, guardian, or other
representative, please give full
title. If a corporation, please sign
in full corporate name by an
authorized officer. If a
partnership, please sign in
partnership name by an authorized
person. |
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E-3