PREM14A 1 d819924dprem14a.htm PREM14A PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

 

Filed by the Registrant  ☒                                Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

Achillion Pharmaceuticals, Inc.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.

  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)   

Title of each class of securities to which transaction applies:

 

Common Stock, par value $0.001 per share.

  (2)   

Aggregate number of securities to which transaction applies:

 

As of the close of business on November 3, 2019, there were 140,046,647 shares of Common Stock outstanding and 13,734,379 shares of Common Stock subject to outstanding employee stock options with an exercise price less than $8.30 per share.

 

  (3)   

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

In accordance with Exchange Act Rule 0-11(c), the filing fee of $159,892.47 was determined by multiplying 0.0001298 by the aggregate merger consideration of $1,231,837,217.63. The aggregate merger consideration was calculated by multiplying the 140,046,647 shares of Common Stock outstanding by the per share merger consideration of $8.30, which consists of $6.30 in upfront per share consideration and one (1) contingent value right that Achillion Pharmaceuticals, Inc. estimates could result in additional cash payments of up to $2.00 per share, and adding the foregoing product to $69,450,047.53, the product obtained by multiplying the 13,734,379 shares of Common Stock subject to outstanding employee stock options with an exercise price less than $8.30 per share by $5.06, the per share merger consideration of $8.30 less the $3.24 weighted average exercise price per share of such outstanding employee stock options (in each case, as of the close of business of November 3, 2019).

  (4)   

Proposed maximum aggregate value of transaction:

 

$1,231,837,217.63

  (5)   

Total fee paid:

 

$159,892.47

  Fee paid previously with preliminary materials.

  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 

(1)

  

Amount Previously Paid:

 

 

 

(2)

  

Form, Schedule or Registration Statement No.:

 

 

 

(3)

  

Filing Party:

 

 

 

(4)

  

Date Filed:

 

 

 

 

 


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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION

Achillion Pharmaceuticals, Inc.

1777 Sentry Parkway West, VEVA Building #14 Suite 200

Blue Bell, Pennsylvania 19422

To be held on [●], 20[●]

To the stockholders of Achillion Pharmaceuticals, Inc.:

You are cordially invited to attend a special meeting of stockholders (the “Special Meeting”) of Achillion Pharmaceuticals, Inc., a Delaware corporation (“Achillion”, “we”, “us”, or “our”), to be held on [●], 20[●], at 9:00 a.m., Eastern time, at [●].

At the Special Meeting, you will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), dated October 15, 2019, among Achillion, Alexion Pharmaceuticals, Inc., a Delaware corporation (“Alexion”), and Beagle Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Alexion (“Merger Sub”), including the form of CVR Agreement to be entered into at or prior to the effective time of the Merger by Alexion and a rights agent mutually acceptable to Alexion and Achillion (the “CVR Agreement”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Achillion, and Achillion will continue as the surviving corporation and as a wholly owned subsidiary of Alexion (the “Merger”). At the Special Meeting, you will also be asked to consider and vote on a non-binding, advisory proposal to approve compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

If the Merger is completed, for each share of common stock that you own, you will be entitled to receive (i) $6.30 in cash (the “Cash Merger Consideration”) and (ii) one contractual contingent value right pursuant to the CVR Agreement (a “CVR”), in each case without interest (collectively, the “Merger Consideration”).

The Board of Directors of Achillion (the “Board of Directors”), after considering the factors more fully described in the enclosed proxy statement, has unanimously (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, Achillion and its stockholders; (2) declared that it is advisable for Achillion to enter into the Merger Agreement; and (3) approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. The Board of Directors unanimously recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement. The proxy statement also describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. We encourage you to read the proxy statement and its annexes, including the Merger Agreement, carefully and in their entirety, as they contain important information.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other


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nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of Achillion common stock.

If you have any questions or need assistance voting your shares, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders May Call:

Toll-Free at (888) 750-5834 (from the U.S. and Canada)

or +1 (412) 232-3651 (from other locations)

Banks & Brokers May Call Collect: (212) 750-5833

On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of this matter.

 

Sincerely,
LOGO

Martha E. Manning, Esq.

Corporate Secretary

The accompanying proxy statement is dated [●], 20[●] and, together with the enclosed form of proxy card, is first being mailed on or about [●], 20[●].


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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION

Achillion Pharmaceuticals, Inc.

1777 Sentry Parkway West, VEVA Building #14 Suite 200

Blue Bell, Pennsylvania 19422

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [], 20[]

Notice is hereby given that a special meeting of stockholders (the “Special Meeting”) of Achillion Pharmaceuticals, Inc., a Delaware corporation (“Achillion”, “we”, “us”, or “our”), will be held on [●], 20[●], at 9:00 a.m., Eastern time, at [●] for the following purposes:

 

  1.

To consider and vote on the proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), dated October 15, 2019, among Achillion, Alexion Pharmaceuticals, Inc., a Delaware corporation (“Alexion”), and Beagle Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Alexion (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Achillion, and Achillion will continue as the surviving corporation and as a wholly owned subsidiary of Alexion (the “Merger”);

 

  2.

To consider and vote on any proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting;

 

  3.

To consider and vote on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger; and

 

  4.

To transact any other business that may properly come before the Special Meeting or any adjournment, postponement or other delay of the Special Meeting.

Only stockholders of record as of the close of business on [●], 20[●] are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.

The Board of Directors unanimously recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

 

By the Order of the Board of Directors,
LOGO

Martha E. Manning, Esq.

Corporate Secretary

Dated: [●], 20[●]


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YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

If you are a stockholder of record, voting by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.

If you fail to (1) return your proxy card; (2) grant your proxy electronically over the Internet or by telephone; or (3) attend the Special Meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the other two proposals.

We encourage you to read the accompanying proxy statement and its annexes carefully and in their entirety. If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders May Call:

Toll-Free at (888) 750-5834 (from the U.S. and Canada)

or +1 (412) 232-3651 (from other locations)

Banks & Brokers May Call Collect: (212) 750-5833


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TABLE OF CONTENTS

 

     Page  

SUMMARY

     1  

Parties Involved in the Merger

     1  

The Merger

     2  

Form of Contingent Value Rights Agreement

     2  

Treatment of Equity Awards

     3  

Financing of the Merger

     4  

Conditions to the Closing of the Merger

     4  

Regulatory Approvals Required for the Merger

     6  

Recommendation of the Board of Directors

     6  

Opinion of Achillion’s Financial Advisor

     6  

Interests of Achillion’s Directors and Executive Officers in the Merger

     7  

Appraisal Rights

     8  

U.S. Federal Income Tax Considerations of the Merger

     9  

Alternative Proposals

     9  

Adverse Recommendation Change

     10  

Termination of the Merger Agreement

     10  

Termination Fees

     11  

Effect on Achillion if the Merger is Not Completed

     11  

The Special Meeting

     12  

QUESTIONS AND ANSWERS

     14  

FORWARD-LOOKING STATEMENTS

     23  

THE SPECIAL MEETING

     26  

Date, Time and Place

     26  

Purpose of the Special Meeting

     26  

Record Date; Shares Entitled to Vote; Quorum

     26  

Vote Required; Abstentions and Broker Non-Votes

     26  

Shares Held by Achillion’s Directors and Executive Officers

     27  

Voting of Proxies

     27  

Revocability of Proxies

     28  

Board of Directors’ Recommendation

     28  

Solicitation of Proxies

     28  

Anticipated Date of Completion of the Merger

     28  

Appraisal Rights

     29  

Other Matters

     29  

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on [●], 20[●]

     29  

Householding of Special Meeting Materials

     29  

Questions and Additional Information

     30  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     31  

PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

     32  

PROPOSAL 3: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED

     33  

EXECUTIVE COMPENSATION ARRANGEMENTS

     33  

THE MERGER

     34  

Parties Involved in the Merger

     34  

Effect of the Merger

     34  

Effect on Achillion if the Merger is Not Completed

     35  

Merger Consideration

     35  

Background of the Merger

     35  

Recommendation of the Board of Directors and Reasons for the Merger

     43  

 

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Opinion of Achillion’s Financial Advisor

     47  

Certain Financial Projections

     54  

Interests of Achillion’s Directors and Executive Officers in the Merger

     57  

Financing of the Merger

     62  

Closing and Effective Time

     62  

Appraisal Rights

     62  

Accounting Treatment

     67  

Certain U.S. Federal Income Tax Considerations of the Merger

     67  

Regulatory Approvals Required for the Merger

     72  

THE MERGER AGREEMENT

     73  

Explanatory Note Regarding the Merger Agreement

     73  

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

     74  

Closing and Effective Time

     74  

Merger Consideration and Treatment of Equity Securities

     74  

Exchange and Payment Procedures

     76  

Representations and Warranties

     76  

Conduct of Business Pending the Merger

     79  

No Solicitation; Alternative Proposals

     81  

Stockholder Meeting

     84  

Access to Information

     84  

Notice of Certain Events

     85  

Employee Benefit Plan Matters

     85  

State Takeover Laws

     86  

CVR Agreement

     86  

Director and Officer Liability

     86  

Reasonable Best Efforts

     87  

Conditions to the Closing of the Merger

     88  

Termination of the Merger Agreement

     89  

Miscellaneous

     92  

FORM OF CONTINGENT VALUE RIGHTS AGREEMENT

     93  

Explanatory Note Regarding the Form of Contingent Value Rights Agreement

     93  

Contingent Value Rights

     93  

Evidence of CVR; Registration

     94  

Payment Procedures

     94  

Enforcement of Rights of Holders

     96  

Rights Agent

     96  

Covenants by Alexion

     96  

Amendments

     98  

Termination

     99  

MARKET PRICES AND DIVIDEND DATA

     100  

FUTURE STOCKHOLDER PROPOSALS

     103  

WHERE YOU CAN FIND MORE INFORMATION

     103  

MISCELLANEOUS

     104  

ANNEXES

  

ANNEX A — AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B — FORM OF CONTINGENT VALUE RIGHTS AGREEMENT

     B-1  

ANNEX C — OPINION OF CENTERVIEW PARTNERS LLC

     C-1  

ANNEX D — SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

     D-1  

 

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION

SUMMARY

This summary highlights selected information from this proxy statement related to the merger of Beagle Merger Sub, Inc. with and into Achillion Pharmaceuticals, Inc., which we refer to as the “Merger”, and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read this entire proxy statement, the annexes to this proxy statement and the documents that we refer to in this proxy statement. You may obtain additional information without charge by following the instructions under the caption “Where You Can Find More Information.” The Merger Agreement is attached as Annex A to this proxy statement. We encourage you to read the Merger Agreement, which is the legal document that governs the Merger, carefully and in its entirety.

Except as otherwise specifically noted in this proxy statement, “Achillion”, “we”, “our”, “us” and similar words refer to Achillion Pharmaceuticals, Inc., including, in certain cases, our subsidiaries. Throughout this proxy statement, we refer to Alexion Pharmaceuticals, Inc. as “Alexion” and Beagle Merger Sub, Inc. as “Merger Sub”. In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated October 15, 2019, among Achillion, Alexion and Merger Sub, as it may be amended from time to time, as the “Merger Agreement” and the form of CVR Agreement attached to the Merger Agreement to be entered into at or prior to the effective time of the Merger by Alexion and a rights agent mutually acceptable to Alexion and Achillion as the “CVR Agreement”.

Parties Involved in the Merger

Achillion Pharmaceuticals, Inc.

Achillion is a clinical-stage biopharmaceutical company focused on advancing its oral factor D inhibitors into late-stage development and commercialization. Each of the product candidates in Achillion’s factor D portfolio was discovered in its laboratories and is wholly owned by Achillion. Achillion is focusing its product development activities on complement-mediated diseases where there are no approved therapies or significant unmet medical needs persist despite existing therapies.

Achillion’s common stock is listed on The Nasdaq Global Select Market (“NASDAQ”) under the symbol “ACHN”.

Alexion Pharmaceuticals, Inc.

Alexion is a global biopharmaceutical company focused on serving patients and families affected by rare diseases through the innovation, development and commercialization of life-changing therapies. It is a global leader in complement inhibition and has developed and commercialized two approved complement inhibitors to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS), as well as the first approved complement inhibitor to treat anti-acetylcholine receptor (AChR) antibody-positive generalized myasthenia gravis (gMG) and anti-AQP4 antibody-positive neuromyelitis optica spectrum disorder (NMOSD). In addition, Alexion has two highly innovative enzyme replacement therapies and the first and only approved therapies for patients with life-threatening and ultra-rare metabolic disorders, hypophosphatasia (HPP) and lysosomal acid lipase deficiency (LAL-D). In addition to its marketed therapies, Alexion has a diverse pipeline resulting from internal innovation and business development with strategic focus in hematology and nephrology, neurology, metabolics and neonatal Fc receptor (FcRn).

Alexion’s common stock is listed on NASDAQ under the symbol “ALXN”.



 

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Beagle Merger Sub, Inc.

Merger Sub is a wholly-owned subsidiary of Alexion and was formed on October 15, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.

The Merger

Upon the terms and subject to the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into Achillion, and Achillion will continue as the surviving corporation and as a wholly owned subsidiary of Alexion (the “Surviving Corporation”). As a result of the Merger, Achillion will cease to be a publicly traded company, all outstanding shares of Achillion common stock will be canceled and converted into the right to receive (i) $6.30 in cash (the “Cash Merger Consideration”) and (ii) one contractual contingent value right pursuant to the CVR Agreement (a “CVR”), in each case without interest (collectively, the “Merger Consideration”) (except for any shares owned by Alexion or Merger Sub or stockholders who are entitled to and who properly exercise appraisal rights under the Delaware General Corporation Law (the “DGCL”)), and you will not own any shares of the capital stock of the Surviving Corporation.

After the Merger is completed, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by the DGCL, as described below under the caption “The Merger — Appraisal Rights”).

Form of Contingent Value Rights Agreement

The Merger Agreement requires that, at or prior to the closing of the Merger, Alexion and a rights agent mutually acceptable to Alexion and Achillion will enter into the CVR Agreement, substantially in the form attached as Exhibit B to the Merger Agreement and attached to this proxy statement as Annex B, subject to such changes thereto as permitted under the Merger Agreement and the CVR Agreement. The CVR Agreement will govern the terms of the CVRs, and is further described below under the caption “— The Form of Contingent Value Rights Agreement”.

While no guarantee can be given that any proceeds will be received, each CVR represents the right to receive the following contingent cash payments:

 

   

$1.00 upon the earlier of (i) first dosing of the first patient with a pharmaceutical product containing ACH-5228 in the first Phase III clinical trial, (ii) the Conversion Date (defined in the CVR Agreement as the date when the first action specified in the protocol for the corresponding Adaptive Trial (as defined in the CVR Agreement) is taken following the decision to modify such Adaptive Trial to proceed as a Phase III clinical trial) for the first Converted Trial (as defined in the CVR Agreement) of any pharmaceutical product containing ACH-5228, and (iii) the first submission of a new drug application to market and sell any pharmaceutical product containing ACH-5228 in the United States (the “Clinical Trial Milestone”), in each case, prior to the fourth (4th) anniversary of the time at which the Merger will become effective (the “Effective Time”) (the “Clinical Trial Milestone Period”); and

 

   

$1.00 upon Alexion’s first receipt of approval by the FDA of a new drug application which approval grants Alexion the right to market and sell a pharmaceutical product containing ACH-4471 (danicopan) in the United States (the “Regulatory Approval Milestone”) prior to the date that is fifty-four (54) months after the Effective Time (the “Regulatory Approval Milestone Period”).



 

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Such payments will be made on or prior to the date that is fifteen (15) business days following the achievement of the Clinical Trial Milestone or the Regulatory Approval Milestone, as applicable (the “Milestone Payment Date”).

The CVRs will not be evidenced by a certificate or other instruments. The rights agent will keep a register for the purpose of registering CVRs pursuant to the terms of the CVR Agreement. The CVRs will not have any voting or dividend rights, and interest; and will not represent any equity or ownership interest in Alexion, Achillion, the Surviving Corporation or any of their affiliates. The CVRs may not be transferred except under certain limited circumstances.

If a milestone occurs during the applicable milestone period, then Alexion will, among other things, deliver to the rights agent on the applicable Milestone Payment Date a wire transfer of dollars in immediately available funds, in the aggregate amount equal to the number of CVRs then outstanding multiplied by $1.00. In the case of the aggregate amount payable to all holders of compensatory options to purchase shares (“Company Stock Options”) that have a per share exercise price that is less than the Cash Merger Consideration (“In the Money Options”), Alexion may elect to pay such amount directly to the Surviving Corporation. After receipt of the wire transfer, the rights agent will promptly (and in any event, within five (5) business days) pay the CVR holders of record by wire or check as required under the CVR Agreement.

During each milestone period, Alexion will use Commercially Reasonable Efforts (as defined in the section below captioned “Form of Contingent Value Rights Agreement — Covenants by Alexion”) to achieve the milestones. However, Alexion will have no obligation to develop any pharmaceutical product containing ACH-5228 in any indication other than paroxysmal nocturnal hemoglobinuria. Alexion is permitted to sell, spin-off, split-off and license intellectual property and assets related to ACH-5228 and ACH-4471 (danicopan) under certain circumstances if the acquiror expressly assumes Alexion’s obligations under the CVR Agreement, as further described in the section below captioned “Form of Contingent Value Rights Agreement — Covenants by Alexion.”

Any actions seeking the enforcement of the rights of holders under the CVR Agreement may only be brought either by the rights agent or the holders of at least the majority of the outstanding CVRs as set forth in the register kept by the rights agent.

Treatment of Equity Awards

The Merger Agreement provides that Achillion’s equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment at the Effective Time:

In the Money Options

At the Effective Time, each In the Money Option that is outstanding immediately prior to the Effective Time will be cancelled and converted into the right to receive both (i) a cash payment equal to (A) the excess of (x) the Cash Merger Consideration over (y) the exercise price payable per share under such Company Stock Option, multiplied by (B) the total number of shares subject to such In the Money Option immediately prior to the Effective Time (without regard to vesting) and (ii) one (1) CVR for each share subject to such In the Money Option immediately prior to the Effective Time (without regard to vesting), on the terms and conditions described below under the caption “The Merger Agreement — Treatment of Equity Awards.”

Out of the Money Options

At the Effective Time, each Company Stock Option other than an In the Money Option (an “Out of the Money Option”) will be cancelled and, except as described below, converted into the right to receive a cash payment



 

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with respect to each share subject to the Out of the Money Option upon each date on which the milestone payment pursuant the CVR Agreement becomes due and payable (each, a “Valuation Point”) which occurs after the Effective Time, equal to (i) the amount by which, as of the Valuation Point, the sum of (x) the Cash Merger Consideration, (y) the amount per share in cash previously paid in respect of any earlier Valuation Points (if any) and (z) the amount per share in cash to be paid at such Valuation Point under the CVR Agreement (collectively, the “Per Share Value Paid”) exceeds the exercise price payable per share under such Out of the Money Option, less (ii) the amount of all payments previously received with respect to such Out of the Money Option, on the terms and conditions described below under the caption “The Merger Agreement — Treatment of Equity Awards.”

Achillion and Alexion have agreed that Achillion may grant equity awards after October 15, 2019 in the ordinary course of business consistent with past practice, subject to certain agreed upon limitations. All such awards granted after October 15, 2019 will be subject to the same treatment upon closing as applies to the corresponding type of equity awards as set forth in the Merger Agreement, provided, however, that such awards will not provide for accelerated vesting and payout upon the closing.

Treatment of ESPP

Achillion will take such action as may be necessary under the Achillion 2006 Employee Stock Purchase Plan (the “ESPP”) to terminate all offerings under the ESPP as of the last day of Achillion’s last payroll period ending at least ten (10) days prior to the Effective Time and the ESPP will terminate on or following such date.

Financing of the Merger

The Merger is not conditioned upon the receipt of financing by Alexion. Alexion has represented to Achillion that it will have sufficient cash, available lines of credit or other sources of immediately available funds to enable Alexion to pay the aggregate Cash Merger Consideration and to perform its obligations with respect to the transactions contemplated by the Merger Agreement.

Conditions to the Closing of the Merger

The obligation of each party to consummate the Merger is subject to the satisfaction, at or prior to the closing, of the following conditions:

 

   

the adoption of the Merger Agreement by the requisite affirmative vote of Achillion’s stockholders;

 

   

the absence of any order or other action issued by a governmental authority having jurisdiction over any party to the Merger Agreement that is in effect restraining, enjoining or otherwise prohibiting the consummation of the Merger and the absence of any applicable law that makes consummation of the Merger illegal or otherwise prohibited; and

 

   

the expiration or termination of the waiting period (and any extension thereof) applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).

The obligation of Alexion and Merger Sub to consummate the Merger is subject to the satisfaction, at or prior to closing, of the following conditions:

 

   

the representations and warranties in the Merger Agreement relating to Achillion’s capitalization being true in all respects when made and as of immediately prior to the Effective Time as if made at and as of such time; provided that this condition will be deemed to be satisfied unless the failure of such representations and warranties to be so true would increase the aggregate Cash Merger Consideration by more than $1,000,000;



 

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the representations and warranties relating to (i) Achillion’s corporate existence and power, (ii) Achillion’s corporate authority to enter into the Merger Agreement, (iii) compliance with Achillion’s certificate of incorporation and bylaws, (iv) the absence of any finder’s fee except with respect to Centerview Partners LLC (“Centerview”) and (v) Centerview’s fairness opinion, to the extent not qualified as to materiality or Company Material Adverse Effect (as defined in the section below captioned “The Merger Agreement — Representations and Warranties”), being true in all material respects, and to the extent so qualified being true in all respects as so qualified, when made and as of immediately prior to the Effective Time as if made at and as of such time (other than any such representation or warranty that is made only as of a specified date, which need only to be true in all material respects as of such specified date);

 

   

the representations and warranties other than those in the above bullets, disregarding any materiality or Company Material Adverse Effect qualifications contained therein, being true when made and as of immediately prior to the Effective Time as if made at and as of such time (other than any such representations and warranties that are made only as of a specified date, which need only to be true as of such specified date); provided that such representations and warranties will be deemed true at any time unless the individual or aggregate impact of the failure to be so true would have or reasonably be expected to have a Company Material Adverse Effect; and Alexion having received a certificate signed on behalf of Achillion by a senior executive officer of Achillion to such effect;

 

   

Achillion having performed in all material respects its obligations under the agreement, and Alexion having received a certificate signed on behalf of Achillion by a senior executive officer of Achillion to such effect;

 

   

the absence of any instituted, pending or threatened proceeding initiated by any governmental authority, or instituted, pending or threatened any proceeding initiated by any other third party that has a reasonable likelihood of success, (i) challenging the consummation of the Merger or seeking to obtain material damages in connection therewith, (ii) seeking to restrain or prohibit Alexion’s ownership or operation of all or any material portion of the business, assets or products of Achillion or of Alexion and its subsidiaries, taken as a whole, or to compel Alexion or any of its affiliates to dispose of, license or hold separate all or any material portion of the business, assets or products of Achillion or of Alexion and its subsidiaries, taken as a whole, (iii) seeking to impose or confirm material limitations on the ability of Alexion or any of its affiliates effectively to acquire, hold or exercise full rights of ownership of Achillion common stock or any shares of common stock of the Surviving Corporation, or (iv) seeking to require divestiture by Alexion, Merger Sub or any of Alexion’s other affiliates of any equity interests;

 

   

the absence of any order in effect that is reasonably likely to result, directly or indirectly, in any of the effects referred to in the immediately preceding clauses (i) through (iv); and

 

   

the absence of any fact, event, change, development or set of circumstances that has had or would reasonably be expected to have a Company Material Adverse Effect.

The obligation of Achillion to consummate the Merger is subject to the satisfaction, at or prior to closing, of the following conditions:

 

   

the representations and warranties of Alexion and Merger Sub set forth in the Merger Agreement being true and correct, except where the failure of any such representation or warranty to be so true and correct would not constitute a Parent Material Adverse Effect (as defined in the section below captioned “The Merger Agreement — Representations and Warranties”), as of immediately prior to the Effective Time (except for any such representations and warranties made as of a particular date, which representations and warranties must be true and correct only as of that date), and Achillion having received a certificate signed on behalf of Alexion by a senior executive officer of Alexion to such effect;



 

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Alexion and Merger Sub having performed in all material respects their respective obligations under the Merger Agreement, and Achillion having received a certificate signed on behalf of Alexion by a senior executive officer of Alexion to such effect; and

 

   

the CVR Agreement being in full force and effect.

Regulatory Approvals Required for the Merger

Achillion and Alexion have agreed to use their reasonable best efforts to obtain all necessary regulatory approvals required to consummate the Merger and to fully carry out the purposes of the Merger Agreement. These approvals include the expiration or termination of the waiting period under the HSR Act.

Recommendation of the Board of Directors

Achillion’s Board of Directors (the “Board of Directors”), after considering various factors described under the caption “The Merger — Recommendation of the Board of Directors and Reasons for the Merger,” has unanimously: (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, Achillion and its stockholders; (2) declared that it is advisable for Achillion to enter into the Merger Agreement; and (3) approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. The Board of Directors unanimously recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

Opinion of Achillion’s Financial Advisor

Achillion retained Centerview as financial advisor to the Board of Directors in connection with the proposed Merger and the other transactions contemplated by the Merger Agreement, which are collectively referred to as the “Transaction” throughout this section and the section entitled “The Merger — Opinion of Achillion’s Financial Advisor,” beginning on page [●] of this proxy statement. In connection with this engagement, the Board of Directors requested that Centerview evaluate the fairness, from a financial point of view, to the holders of shares of Achillion common stock (other than (i) shares held by Achillion as treasury stock or owned by Alexion, Merger Sub or any subsidiary of Alexion (other than Merger Sub) and (ii) shares held by a holder who has not voted in favor of adoption of the Merger Agreement or consented thereto in writing and who has properly exercised appraisal rights of such shares in accordance with Section 262 of the DGCL (the shares referred to in clauses (i) and (ii), together with any shares held by any affiliate of Achillion or Alexion, are collectively referred to as “Excluded Shares” throughout this section and the section entitled “The Merger — Opinion of Achillion’s Financial Advisor,” beginning on page [●] of this proxy statement)) of the Merger Consideration proposed to be paid to such holders pursuant to the Merger Agreement and the CVR Agreement. On October 15, 2019, Centerview rendered to the Board of Directors its oral opinion and subsequently confirmed by delivery of a written opinion dated October 15, 2019 that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Merger Consideration proposed to be paid to the holders of shares of Achillion common stock (other than Excluded Shares) pursuant to the Merger Agreement and the CVR Agreement was fair, from a financial point of view, to such holders.

The full text of Centerview’s written opinion, dated October 15, 2019, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by



 

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Centerview in preparing its opinion, is attached as Annex C and is incorporated herein by reference. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Board of Directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of the Board of Director’s consideration of the Transaction and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to the holders of shares of Achillion common stock (other than Excluded Shares) of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Centerview’s opinion did not address any other term or aspect of the Merger Agreement or the Transaction and does not constitute a recommendation to any stockholder of Achillion or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.

The full text of Centerview’s written opinion should be read carefully and in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

For a description of the opinion that the Board of Directors received from Centerview, see the section entitled “The Merger — Opinion of Achillion’s Financial Advisor,” beginning on page [●] of this proxy statement.

Interests of Achillion’s Directors and Executive Officers in the Merger

Achillion’s directors and executive officers may have interests in the merger that may be different from or in addition to those of Achillion stockholders generally. The Board of Directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in evaluating the Merger Agreement, in approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted by the stockholders at the Special Meeting. As described in more detail below, these interests potentially include:

 

   

the accelerated vesting (upon the Effective Time assuming for this purpose that the Merger is completed on October 31, 2019 and if applicable, the executive officer has met certain conditions) of unvested stock options and the payment of vested stock options with an aggregate estimated value equal to $24,558,861, based on a cash payment equal to $6.30 per share of Achillion common stock under each stock option less the applicable stock option exercise price and $14,783,512 in respect of corresponding CVRs and “phantom” CVRs (as described on page [●]), calculated based on $2.00, which is the maximum amount payable under each CVR (or phantom CVR);

 

   

the payment of certain severance payments and benefits that the executive officers of Achillion may become entitled to receive under their respective employment agreements with Achillion, assuming that the merger is completed on and a qualifying termination of employment occurs on October 31, 2019, with an aggregate estimated value of $4,143,503;

 

   

payment of the 2019 annual bonuses at the greater of actual or target level of performance to the executive officers, if the Effective Time does not occur prior to the payment of Achillion’s 2019 annual bonuses during the first calendar quarter of 2020, with an aggregate estimated value of $1,070,153 assuming target level of performance;

 

   

the potential for continued employment of Achillion’s officers by Alexion following the Effective Time;

 

   

the passive beneficial ownership interest in Alexion by a member of the Board of Directors (with an aggregate value of approximately $13,100 as of the date of entry into the Merger Agreement), which following identification and discussion, and prior to the entry into the Merger Agreement, the Board of Directors determined did not constitute a material conflict of interest with respect to the proposed transaction with Alexion; and



 

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continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.

If the proposal to adopt the Merger Agreement is approved, the shares of common stock held by our directors and executive officers as of the Effective Time will be treated in the same manner as outstanding shares of common stock held by all other stockholders. For more information, see the section of this proxy statement captioned “The Merger — Interests of Achillion’s Directors and Executive Officers in the Merger,” beginning on page [●] of this proxy statement.

Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL (“Section 262”).

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex D and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Only a holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of common stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of our common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Under Section 262, holders of shares of common stock who (i) do not vote in favor of the adoption of the Merger Agreement; (ii) continuously are the record holders of such shares through the Effective Time; and (iii) otherwise follow the procedures set forth in Section 262 will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court, so long as they comply with the procedures established by Section 262. Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights. Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the Merger Consideration.

To exercise your appraisal rights, you must (i) deliver a written demand for appraisal to Achillion before the vote is taken on the proposal to adopt the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; and (iii) continue to hold your shares of common stock of record through the Effective Time. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex D to this proxy statement. If you hold your shares of common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee.



 

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U.S. Federal Income Tax Considerations of the Merger

The receipt of cash and CVRs in exchange for such shares of Achillion common stock in the Merger generally will be a taxable transaction for U.S. federal income tax purposes. The amount of gain or loss a holder recognizes, and the timing and character of such gain or loss, depend on the U.S. federal income tax treatment of the receipt of, and payments with respect to, CVRs, with respect to which there is uncertainty.

For more information, see the section of this proxy statement captioned “The Merger — U.S. Federal Income Tax Considerations of the Merger,” beginning on page [●] of this proxy statement.

Stockholders should consult their own tax advisors concerning the U.S. federal income tax considerations relating to the Merger and the receipt of, and payments with respect to, CVRs in light of their particular circumstances and any considerations arising under the laws of any state, local or foreign taxing jurisdiction.

Alternative Proposals

Under the Merger Agreement, Achillion has agreed that it will not, and will not authorize or permit any of its directors, officers, employees, financial advisors, attorneys, accountants, consultants, agents and other authorized representatives, acting in such capacity (whom we collectively refer to as “representatives”) to, and to instruct each such representative not to, directly or indirectly, among other things:

 

   

solicit, initiate or knowingly take any action to facilitate or encourage the submission of any Acquisition Proposal (as defined in the section below captioned “The Merger Agreement — No Solicitation; Alternative Proposals”) or the making of any inquiry, offer or proposal that could reasonably be expected to lead to any Acquisition Proposal (other than informing persons of the provisions set forth in the Merger Agreement);

 

   

conduct or engage in any discussions or negotiations with, disclose any non-public information relating to Achillion to, afford access to the business, properties, assets, books or records of Achillion to or otherwise cooperate in any way, or knowingly assist, participate in, facilitate or encourage any effort by, any third party that is seeking to make, or has made, any Acquisition Proposal;

 

   

amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of Achillion;

 

   

approve any transaction under, or any third party becoming an “interested stockholder” under, Section 203 of the DGCL; or

 

   

enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any Acquisition Proposal or enter into any agreement or agreement in principle requiring Achillion to abandon, terminate or fail to consummate the transactions contemplated by the Merger Agreement or breach its obligations thereunder.

Notwithstanding these restrictions, under certain circumstances, prior to the adoption of the Merger Agreement by Achillion stockholders, the Board of Directors may engage in negotiations or discussions with any third party that has made in writing after October 15, 2019 (and not withdrawn) a bona fide unsolicited Acquisition Proposal that did not result from or arise out of a breach of the Merger Agreement and that the Board of Directors believes in good faith, after consultation with its outside legal counsel and financial advisor of nationally recognized reputation, constitutes or would reasonably be expected to result in a Superior Proposal (as defined in the section below captioned “The Merger Agreement — No Solicitation; Alternative Proposals”) and thereafter furnish to



 

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such third party non-public information relating to Achillion pursuant to an executed confidentiality agreement with terms no less favorable to Achillion than those contained in the confidentiality agreement with Alexion and containing additional provisions that expressly permit Achillion to comply with the terms of the Merger Agreement, but in each case only if the Board of Directors determines in good faith, after consultation with its outside legal counsel and a financial advisor of nationally recognized reputation, that the failure to take such action would be inconsistent with its fiduciary duties under applicable law.

For more information, see the section of this proxy statement captioned “The Merger Agreement — Alternative Proposals,” beginning on page [●] of this proxy statement.

Adverse Recommendation Change

The Board of Directors has unanimously recommended that you vote for the adoption of the Merger Agreement. The Merger Agreement provides that the Board of Directors may not change its recommendation, or take other actions constituting an Adverse Recommendation Change (as defined in the section below captioned “The Merger Agreement — The Board of Directors’ Recommendation; Adverse Recommendation Change”), except in certain specified circumstances.

For more information, see the section of this proxy statement captioned “The Merger Agreement — The Board of Directors’ Recommendation; Adverse Recommendation Change,” beginning on page [●] of this proxy statement.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the adoption of the Merger Agreement by stockholders, in the following ways:

 

   

By mutual written agreement of Achillion and Alexion;

 

   

By either Achillion or Alexion:

 

   

subject to certain exceptions, if the Merger has not been consummated on or before April 15, 2020, which date we refer to as the “End Date”;

 

   

subject to certain exceptions, if any governmental authority of competent jurisdiction has issued an order, decree, injunction or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger and such order, decree, ruling or other action shall have become final and nonappealable, or if there shall be adopted any applicable law that makes consummation of the Merger illegal or otherwise prohibited; or

 

   

if Achillion’s stockholders fail to approve the proposal to approve and adopt the Merger Agreement at the Special Meeting, or any adjournment or postponement thereof;

 

   

By Alexion:

 

   

if an Adverse Recommendation Change has occurred;

 

   

if Achillion has entered into a definitive agreement relating to any Acquisition Proposal;

 

   

if Achillion or any of its representatives have willfully and materially breached any of its obligations related to Acquisition Proposals and Superior Proposals; or

 

   

if there has been any material breach of any convent or agreement on the part of Achillion set forth in the Merger Agreement or a breach of any representation or warranty of Achillion, in either case which would result in the failure of a closing condition, provided that if such breach is



 

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capable of being cured by Achillion through the exercise of commercially reasonable efforts prior to the End Date and within thirty (30) calendar days, then Alexion may not be permitted to terminate the Merger Agreement as a result of such breach until the expiration of a thirty (30) calendar day period after delivery of written notice from Alexion to Achillion of such breach (except that Alexion may not terminate the Merger Agreement pursuant to this provision if either Alexion or Merger Sub is then in material breach of the Merger Agreement);

 

   

By Achillion:

 

   

if prior to the approval and adoption of the Merger Agreement by Achillion stockholders, the Board of Directors authorizes Achillion, in compliance with the terms of the Merger Agreement, to enter into a binding definitive agreement in respect of a Superior Proposal with a third party and Achillion pays a termination fee to Alexion in the amount of $20,000,000 in accordance with the terms of the Merger Agreement; or

 

   

if there has been any material breach of any convent or agreement on the part of Alexion or Merger Sub set forth in the Merger Agreement or a material breach of any representation or warranty of Alexion, provided that if such breach is capable of being cured by Alexion or Merger Sub through the exercise of commercially reasonable efforts prior to the End Date and within thirty (30) calendar days, then Achillion may not be permitted to terminate the Merger Agreement as a result of such breach until the expiration of a thirty (30) calendar day period after delivery of written notice from Achillion to Alexion of such breach (except that Achillion may not terminate the Merger Agreement pursuant to this provision if Achillion is then in material breach of the Merger Agreement).

Termination Fees

Except in specified circumstances, Achillion, Alexion and Merger Sub are each responsible for all of their respective costs and expenses incurred in connection with the Merger Agreement.

Achillion may be required to pay to Alexion a termination fee of $20,000,000 if the Merger Agreement is terminated under specified circumstances.

Alexion may be required to pay to Achillion a reverse termination fee between $30,000,000 and $60,000,000 if the Merger Agreement is terminated under different specified circumstances.

For more information on these termination fees, see the section of this proxy statement captioned “The Merger Agreement — Termination Fees,” beginning on page [●] of this proxy statement.

Effect on Achillion if the Merger is Not Completed

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of common stock. Instead, Achillion will remain an independent public company, our common stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act, and we will continue to file periodic reports with the SEC. Under specified circumstances, Achillion will be required to pay Alexion a termination fee upon the termination of the Merger Agreement; under different specified circumstances, Alexion will be required to pay Achillion a reverse termination fee upon the termination of the Merger Agreement.

For more details see the section of this proxy statement captioned “The Merger Agreement — Termination Fees,” beginning on page [●] of this proxy statement.



 

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The Special Meeting

Date, Time and Place

A special meeting of stockholders of Achillion (the “Special Meeting”) will be held on [●], 20[●], at 9:00 a.m., Eastern time, at [●].

Record Date; Shares Entitled to Vote

You are entitled to vote at the Special Meeting if you owned shares of common stock at the close of business on [●], 20[●] (the “Record Date”). You will have one vote at the Special Meeting for each share of common stock that you owned at the close of business on the Record Date.

Purpose

At the Special Meeting, we will ask stockholders to vote on proposals to (1) adopt the Merger Agreement; (2) adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

Quorum

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Achillion’s common stock as of the Record Date is necessary to constitute a quorum at the Special Meeting. As there were [●] shares eligible to vote on the Record Date, we will need more than [●] shares present in person or by proxy at the Special Meeting for a quorum to exist.

For purposes of determining whether a quorum exists, (i) shares held by stockholders entitled to vote who are present at the Special Meeting in person or by proxy, (ii) abstentions and (iii) broker non-votes are counted as present or represented at the meeting. Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes.

Required Vote

The affirmative vote of the holders of a majority of the outstanding shares of Achillion common stock is required to adopt the Merger Agreement. Approval of the proposal to adjourn the Special Meeting requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. Approval, by non-binding, advisory vote, of compensation that will or may become payable to Achillion’s executive officers in connection with the Merger requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.

Share Ownership of Our Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [●] shares of common stock, representing approximately [●]% of the shares of common stock outstanding on the Record Date.

Voting and Proxies

Any stockholder of record entitled to vote may submit a proxy by returning a signed proxy card by mail in the accompanying prepaid reply envelope or granting a proxy electronically over the Internet or by telephone, or may vote in person by appearing at the Special Meeting.



 

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If you are a beneficial owner and hold your shares of common stock in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee on how you wish to vote your shares of common stock using the instructions provided by your bank, broker or other nominee. Under applicable stock exchange rules, banks, brokers or other nominees have the discretion to vote on routine matters. The proposals to be considered at the Special Meeting are non-routine matters, and banks, brokers and other nominees cannot vote on these proposals without your instructions. Therefore, it is important that you cast your vote or instruct your bank, broker or nominee on how you wish to vote your shares.

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by (1) signing another proxy card with a later date and returning it prior to the Special Meeting; (2) submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy; (3) delivering a written notice of revocation to our Corporate Secretary; or (4) attending the Special Meeting and voting in person by ballot.

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.



 

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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement. You may obtain additional information without charge by following the instructions under the caption “Where You Can Find More Information.”

 

  Q:

Why am I receiving these materials?

 

  A:

The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Achillion common stock in connection with the solicitation of proxies to be voted at the Special Meeting.

 

  Q:

What am I being asked to vote on at the Special Meeting?

 

  A:

You are being asked to vote on the following proposals:

 

  1)

To adopt the Merger Agreement pursuant to which Merger Sub will merge with and into Achillion, and Achillion will become a wholly owned subsidiary of Alexion;

 

  2)

To approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and

 

  3)

To approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

  Q:

When and where is the Special Meeting?

 

  A:

The Special Meeting will take place on [●], 20[●] at 9:00 a.m., Eastern time, at [●].

 

  Q:

Who is entitled to vote at the Special Meeting?

 

  A:

Stockholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting (and at any adjournment or postponement thereof). Each holder of shares of Achillion common stock is entitled to cast one vote on each matter properly brought before the Special Meeting for each share of common stock owned as of the Record Date.

 

  Q:

May I attend the Special Meeting and vote in person?

 

  A:

Yes. All stockholders as of the Record Date may attend the Special Meeting and vote in person. Seating will be limited. Stockholders will need to present proof of ownership of shares of Achillion common stock, such as a bank or brokerage account statement, and a form of personal identification to be admitted to the Special Meeting. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Special Meeting.

Even if you plan to attend the Special Meeting in person, to ensure that your shares will be represented at the Special Meeting we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy previously submitted.

 

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If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you hold your shares in “street name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

  Q:

What is the proposed Merger and what effects will it have on Achillion?

 

  A:

The proposed Merger is the acquisition of Achillion by Alexion. If the proposal to adopt the Merger Agreement is approved by stockholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into Achillion, with Achillion continuing as the Surviving Corporation. As a result of the Merger, Achillion will become a wholly owned subsidiary of Alexion, and our common stock will no longer be publicly traded and will be delisted from NASDAQ. In addition, our common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC.

 

  Q:

What will I receive if the Merger is completed?

 

  A:

Upon completion of the Merger, you will be entitled to receive (i) $6.30 in cash and (ii) one contractual CVR pursuant to the CVR Agreement, in each case, without interest and less applicable withholding taxes, for each share of Achillion common stock you own as of immediately prior to the Effective Time, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 1,000 shares of common stock, you will receive $6,300.00 in cash and 1,000 contractual CVRs pursuant to the CVR Agreement in exchange for your shares of common stock, less any applicable withholding taxes. You will not be entitled to receive shares in the Surviving Corporation or in Alexion.

 

  Q:

What is a CVR and how does it work?

 

  A:

While no guarantee can be given that any proceeds will be received, each CVR will represent the right to receive contingent cash payments from Alexion upon the achievement of certain milestones set forth in the CVR Agreement, as further described in the section captioned “The Contingent Value Rights Agreement,” beginning on page [●] of this proxy statement.

 

  Q:

Is it possible that I will receive more than one payment under the CVR?

 

  A:

Yes. Each CVR represents the right to receive:

 

   

$1.00 upon the earlier of (i) first dosing of the first patient with a pharmaceutical product containing ACH-5228 in the first Phase III clinical trial, (ii) the Conversion Date (defined in the CVR Agreement as the date when the first action specified in the protocol for the corresponding Adaptive Trial (as defined in the CVR Agreement) is taken following the decision to modify such Adaptive Trial to proceed as a Phase III clinical trial) for the first Converted Trial (as defined in the CVR Agreement) of any pharmaceutical product containing ACH-5228, and (iii) the first submission of a new drug application to market and sell any pharmaceutical product containing ACH-5228 in the United States (the “Clinical Trial Milestone”), in each case, prior to the fourth anniversary of the consummation of the Merger (the “Clinical Trial Milestone Period”); and

 

   

$1.00 upon Alexion’s first receipt of approval by the FDA of a new drug application which approval grants Alexion the right to market and sell a pharmaceutical product containing ACH-4471 (danicopan) in the United States (the “Regulatory Approval Milestone”) prior to the date that is fifty-four months after the date of the consummation of the Merger (the “Regulatory Approval Milestone Period”).

 

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Such payments, if any, will be made on or prior to the date that is fifteen (15) business days following the achievement of the Clinical Trial Milestone or the Regulatory Approval Milestone, as applicable.

 

  Q:

Is it possible that I will not receive any payment under the CVR?

 

  A:

Yes. There can be no assurance that the Clinical Trial Milestone will be achieved during the Clinical Trial Milestone Period or that the Regulatory Approval Milestone will be achieved during the Regulatory Approval Milestone Period, and that the resulting payments will be required of Alexion.

 

  Q:

Can I transfer my CVR?

 

  A:

The CVRs are not transferable except under certain limited circumstances, will not be evidenced by a certificate or other instrument and will not be registered or listed for trading. The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in Alexion, Merger Sub, Achillion or any of their affiliates.

 

  Q:

How does the Cash Merger Consideration compare to the market price of the common stock?

 

  A:

The Cash Merger Consideration ($6.30 per share) constitutes a premium of approximately 71% to the unaffected ten (10)-day average stock price of Achillion’ s common stock prior to October 15, 2019, the last trading day prior to the date on which Achillion publicly announced the Merger Agreement.

 

  Q:

What do I need to do now?

 

  A:

We encourage you to read this proxy statement, the annexes to this proxy statement and the documents that we refer to in this proxy statement carefully and consider how the Merger affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the Internet or telephone, so that your shares can be voted at the Special Meeting, unless you wish to seek appraisal. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares. Please do not send your stock certificates with your proxy card.

 

  Q:

Should I send in my stock certificates now?

 

  A:

No. After the Merger is completed, you will receive a letter of transmittal containing instructions for how to send your Achillion stock certificates to the paying agent in order to receive the appropriate Cash Merger Consideration for the shares of common stock represented by your stock certificates. You should use the letter of transmittal to exchange your stock certificates for the Cash Merger Consideration to which you are entitled. Please do not send your stock certificates with your proxy card.

 

  Q:

What happens if I sell or otherwise transfer my shares of common stock after the Record Date but before the Special Meeting?

 

  A:

The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Achillion common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Achillion in writing of such special arrangements, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone.

 

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  Q:

How does the Board of Directors recommend that I vote?

 

  A:

The Board of Directors, after considering the various factors described under the caption “The Merger — Recommendation of the Board of Directors and Reasons for the Merger,” has unanimously (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, Achillion and its stockholders; (2) declared that it is advisable for Achillion to enter into the Merger Agreement; and (3) approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

The Board of Directors unanimously recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

  Q:

What happens if the Merger is not completed?

 

  A:

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of Achillion common stock. Instead, Achillion will remain an independent public company, our common stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act, and we will continue to file periodic reports with the SEC.

Achillion may be required to pay Alexion a termination fee of $20,000,000 upon the termination of the Merger Agreement under specified circumstances, and Alexion may be required to pay to Achillion a reverse termination fee between $30,000,000 and $60,000,000 if the Merger Agreement is terminated under different specified circumstances, in each case as described in the section captioned “The Merger Agreement — Termination Fees,” beginning on page [●] of this proxy statement.

 

  Q:

What vote is required to adopt the Merger Agreement?

 

  A:

The affirmative vote of the holders of a majority of the outstanding shares of Achillion common stock is required to adopt the Merger Agreement.

If a quorum is present at the Special Meeting, the failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy electronically over the Internet or by telephone; or (3) vote in person by ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

 

  Q:

What vote is required to approve any proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting and to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger?

 

  A:

Approval of the proposal to adjourn the Special Meeting requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. Approval, by non-binding, advisory vote, of compensation that will or may become payable by Achillion to its named executive officers in

 

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  connection with the Merger requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.

The failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy electronically over the Internet or by telephone; or (3) vote in person by ballot at the Special Meeting will not have any effect on the adjournment proposal or the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your shares will not have any effect on the adjournment proposal and the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal and the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

  Q:

Why am I being asked to cast a non-binding, advisory vote regarding compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger?

 

  A:

SEC rules require Achillion to seek a non-binding, advisory vote regarding compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

  Q:

What is the compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger for purposes of this advisory vote?

 

  A:

The compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger is certain compensation that is tied to or based on the Merger and payable to certain of Achillion’s named executive officers. For further detail, see the section captioned “Proposal 3: Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements.”

 

  Q:

What will happen if stockholders do not approve the compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger at the Special Meeting?

 

  A:

Approval of the compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger is not a condition to completion of the Merger. The vote with respect to the compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger is an advisory vote and will not be binding on Achillion or Alexion. If the Merger Agreement is adopted by the stockholders and the Merger is completed, the compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger will or may be paid to Achillion’s named executive officers even if stockholders fail to approve such compensation.

 

  Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

  A:

If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Achillion.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of common stock held in “street name.” In that case, this proxy statement has been

 

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forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

  Q:

How may I vote?

 

  A:

Voting of Shares Registered in Your Name. If you are a record holder, meaning your shares are registered in your name, you may vote over the Internet, by mail or in person at the Special Meeting pursuant to the following instructions:

 

   

Over the Internet: Go to the website of our tabulator, Broadridge Financial Solutions, Inc., at www.proxyvote.com. Use the 16-digit control number to access your proxy card and vote your shares. You must specify how you want your shares voted or your Internet vote cannot be completed, and you will receive an error message. Your shares will be voted according to your instructions. You must submit your Internet proxy before 11:59 p.m. Eastern time on [●], 20[●] for your proxy to be valid and your vote to count.

 

   

By Mail: Complete and sign your enclosed proxy card and mail it in the enclosed postage prepaid envelope to Broadridge Financial Solutions, Inc. Your shares will be voted according to your instructions. If you do not specify how you want your shares voted, they will be voted as recommended by the Board of Directors. Broadridge Financial Solutions, Inc. must receive your proxy card no later than [●], 20[●] for your proxy to be valid and your vote to count.

 

   

In Person at the Special Meeting: If you attend the Special Meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which we will provide to you at the Special Meeting.

Voting of Shares Held in Street Name. If your shares are held in “street name,” meaning they are held for your account by a broker or other nominee, you will receive instructions from your broker or other nominee regarding how to vote your shares over the Internet or by mail. You should follow those instructions. If you wish to vote your shares in person at the Special Meeting, contact your broker or other nominee who holds your shares to obtain a brokers’ proxy card and bring it with you to the Special Meeting. You will not be able to vote in person at the Special Meeting unless you have a proxy from your broker issued in your name giving you the right to vote your shares.

 

  Q:

If my broker holds my shares in “street name,” will my broker vote my shares for me?

 

  A:

No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote of your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger Agreement, but will have no effect on the adjournment proposal or the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

  Q:

May I change my vote after I have mailed my signed proxy card?

 

  A:

Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

   

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

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submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to the Corporate Secretary; or

 

   

attending the Special Meeting and voting in person by ballot.

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

 

  Q:

What is a proxy?

 

  A:

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of common stock is called a “proxy card.” Our Board of Directors has designated Joseph Truitt, our President and Chief Executive Officer, and Martha E. Manning, Esq., our Executive Vice President, General Counsel and Corporate Secretary, and each of them, with full power of substitution, as the proxy holders for the Special Meeting.

 

  Q:

If a stockholder gives a proxy, how are the shares voted?

 

  A:

Regardless of the method you choose to vote, the proxy holders will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

  Q:

Who will count the votes?

 

  A:

Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes.

 

  Q:

What should I do if I receive more than one set of voting materials?

 

  A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card.

Please sign, date and return (or grant your proxy electronically over the Internet or by telephone) each proxy card and voting instruction card that you receive.

 

  Q:

Where can I find the voting results of the Special Meeting?

 

  A:

If available, Achillion may announce preliminary voting results at the conclusion of the Special Meeting. Achillion intends to publish final voting results in a Current Report on Form 8-K to be filed

 

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  with the SEC following the Special Meeting. All reports that Achillion files with the SEC are publicly available when filed. See the section of this proxy statement captioned “Where You Can Find More Information.”

 

  Q:

Will I be subject to U.S. federal income tax in connection with the Merger?

 

  A:

The exchange of Achillion common stock for cash and CVRs pursuant to the Merger will generally be a taxable transaction for U.S. federal income tax purposes. The amount of gain or loss a holder recognizes, and the timing and character of such gain or loss, depend on the U.S. federal income tax treatment of the receipt of, and payments with respect to, CVRs, with respect to which there is uncertainty.

You should consult your own tax advisor to determine the U.S. federal income tax considerations relating to the Merger and the receipt of, and payments with respect to, CVRs applicable to you in light of your own particular circumstances and any considerations arising under the laws of any state, local or foreign taxing jurisdiction. A more complete description of certain U.S. federal income tax considerations of the Merger is provided under the caption “The Merger — U.S. Federal Income Tax Considerations of the Merger.”

 

  Q:

What will the holders of Achillion stock options receive in the Merger?

 

  A:

At the Effective Time, each In the Money Option that is outstanding immediately prior to the Effective Time will be cancelled and converted into the right to receive both (i) a cash payment equal to (A) the excess of (x) the Cash Merger Consideration over (y) the exercise price payable per share under such Company Stock Option, multiplied by (B) the total number of shares subject to such In the Money Option immediately prior to the Effective Time (without regard to vesting) and (ii) one (1) CVR for each share subject to such In the Money Option immediately prior to the Effective Time (without regard to vesting), on the terms and conditions described below under the caption “The Merger Agreement — Treatment of Equity Awards.”

At the Effective Time, each Out of the Money Option will be cancelled and, except as described below, converted into the right to receive a cash payment with respect to each share subject to the Out of the Money Option upon each Valuation Point which occurs after the Effective Time, equal to (i) the amount by which, as of the Valuation Point, the sum of (x) the Cash Merger Consideration, (y) the amount per share in cash previously paid in respect of any earlier Valuation Points (if any) and (z) the amount per share in cash to be paid at such Valuation Point under the CVR Agreement exceeds the exercise price payable per share under such Out of the Money Option, less (ii) the amount of all payments previously received with respect to such Out of the Money Option, on the terms and conditions described below under the caption “The Merger Agreement — Treatment of Equity Awards.”

 

  Q:

When do you expect the Merger to be completed?

 

  A:

We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the first half of 2020. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control.

 

  Q:

Am I entitled to appraisal rights under the DGCL?

 

  A:

If the Merger is completed, Achillion stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262. This means that stockholders are entitled to

 

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  have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court, so long as they comply with the procedures established by Section 262. Due to the complexity of the appraisal process, Achillion stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights. The DGCL requirements for exercising appraisal rights are described in additional detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex D to this proxy statement.

 

  Q:

Do any of Achillion’s directors or officers have interests in the Merger that may differ from those of Achillion stockholders generally?

 

  A:

Yes. In considering the recommendation of the Board of Directors with respect to the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of Achillion stockholders generally. In (i) evaluating and negotiating the Merger Agreement; (ii) approving the Merger Agreement and the Merger; and (iii) recommending that the Merger Agreement be adopted by stockholders, the Board of Directors was aware of and considered these interests to the extent that they existed at the time, among other matters. For more information, see the section of this proxy statement captioned “The Merger — Interests of Achillion’s Directors and Executive Officers of Achillion in the Merger,” beginning on page [●] of this proxy statement.

 

  Q:

Who can help answer my questions?

 

  A:

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Achillion common stock, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders May Call:

Toll-Free at (888) 750-5834 (from the U.S. and Canada)

or +1 (412) 232-3651 (from other locations)

Banks & Brokers May Call Collect: (212) 750-5833

 

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FORWARD-LOOKING STATEMENTS

This proxy statement, the documents to which we refer you in this proxy statement and information included in oral statements or other written statements made or to be made by us or on our behalf contain forward-looking information related to Alexion, Achillion and the proposed acquisition of Achillion by Alexion that involves substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements include, among other things:

 

   

statements about the potential benefits of the proposed acquisition;

 

   

Alexion’s and Achillion’s plans, objectives, expectations and intentions;

 

   

the financial condition, results of operations and business of Alexion and Achillion;

 

   

Achillion’s product pipeline and portfolio assets;

 

   

the potential CVR payments, including the ability to achieve certain milestones that trigger the CVR payments;

 

   

the anticipated timing of closing of the Merger; and

 

   

the Management Projections included in the section of this proxy statement captioned “The Merger —Certain Financial Projections,” beginning on page [●] of this proxy statement.

Risks and uncertainties include, among other things:

 

   

risks related to the fact that the proposed acquisition may not be completed due to Achillion’s or Alexion’s failure to satisfy or waive the conditions to closing the proposed acquisition (including the failure to obtain necessary regulatory approvals) in the anticipated timeframe or at all, including uncertainties as to whether Achillion’s stockholders will approve the Merger and the possibility that the acquisition does not close;

 

   

the fact that under the terms of the Merger Agreement, Achillion is unable to solicit other alternative proposals during the pendency of the Merger;

 

   

risks related to obtaining the requisite consents to the acquisition, including, without limitation, the timing (including possible delays) and receipt of regulatory approval under the HSR Act (including any conditions, limitations or restrictions placed on approval and the risk that one or more governmental entities may deny approval);

 

   

disruption from the transaction making it more difficult to maintain business and operational relationships, including potential negative effects on our ability to retain or recruit key employees;

 

   

that the Merger Agreement may be terminated in circumstances that require us to pay Alexion a termination fee of $20,000,000, and other significant transaction costs or unexpected expenses;

 

   

unknown liabilities, including the risk of litigation and/or regulatory actions related to the proposed acquisition;

 

   

other business effects, including the effects of industry, market, economic, political or regulatory conditions;

 

   

changes in tax and other laws, regulations, rates and policies, including government-mandated price decreases of Alexion’s products, in particular as those changes relate to Alexion’s development of the products included in the CVR Agreement;

 

   

the uncertainty that the milestones for the CVR payment may not be achieved in the prescribed timeframe or at all;

 

   

the fact that, if the Merger is completed, stockholders will forgo the opportunity to realize the potential long-term value of the successful execution of Achillion’s current strategy as an independent company;

 

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the uncertainties inherent in research and development, including the ability to meet anticipated clinical endpoints, commencement and/or completion dates for clinical trials, regulatory submission dates, regulatory approval dates and/or launch dates, as well as the possibility of unfavorable new clinical data and further analyses of existing clinical data;

 

   

the potential benefits of, and indications for, Achillion’s compounds that inhibit factor D, including ACH-4471 (danicopan) and ACH-5228;

 

   

the status of enrollment in Achillion’s ongoing clinical trials;

 

   

Achillion’s expectations regarding the advancement of, and timeline for reporting results from, clinical trials of its product candidates (including ACH-4471 (danicopan) and ACH-5228) as well as its ability to advance additional compounds; the possibility that results of clinical trials are not predictive of safety and efficacy results of products in broader patient populations;

 

   

the possibility that clinical trials of product candidates could be delayed or terminated prior to completion for a number of reasons;

 

   

the possibility that interim results from a clinical trial are not predictive of the final results of that trial and the possibility that results of early clinical trials or preclinical studies will not be indicative of the results of later clinical trials;

 

   

Achillion’s expectations regarding the timing of regulatory interactions and filings;

 

   

the risk that clinical trial data are subject to differing interpretations and assessments by regulatory authorities;

 

   

whether regulatory authorities will be satisfied with the design of and results from Alexion’s and Achillion’s clinical studies;

 

   

the possibility that Achillion fails to satisfactorily address matters raised by the regulatory agencies;

 

   

whether and when drug applications may be filed in any jurisdictions for any potential indication for any of Alexion’s or Achillion’s pipeline assets;

 

   

whether and when any such applications may be approved by regulatory authorities, which will depend on myriad factors, including making a determination as to whether the product’s benefits outweigh its known risks and determination of the product’s efficacy and, if approved, whether any such products will be commercially successful;

 

   

decisions by regulatory authorities impacting labeling, manufacturing processes, safety and/or other matters that could affect the availability or commercial potential of any such products; and

 

   

competitive developments.

A further description of risks and uncertainties relating to Achillion can be found in Achillion’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and in its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and available at www.sec.gov and www.achillion.com.

These forward-looking statements are based on numerous assumptions and assessments made by Alexion and Achillion in light of their respective experiences and perceptions of historical trends, current conditions, business strategies, operating environment, future developments and other factors they believe are appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this document could cause actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in the forward-looking statements in this

 

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document are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this document are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this document.

The information contained in this document is as of [●], 20[●]. Achillion assumes no obligation to update forward-looking statements contained in this document as the result of new information or future events or developments.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.

Date, Time and Place

We will hold the Special Meeting on [●], 20[●], at 9:00 a.m., Eastern time, at [●]

Purpose of the Special Meeting

At the Special Meeting, we will ask stockholders to vote on proposals to (i) adopt the Merger Agreement, (ii) adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting and (iii) approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

Record Date; Shares Entitled to Vote; Quorum

Only stockholders of record as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. A list of stockholders entitled to vote at the Special Meeting will be available at our principal executive offices, located at 1777 Sentry Parkway West, VEVA Building #14 Suite 200, Blue Bell, Pennsylvania 19422, during regular business hours for a period of no less than ten (10) days before the Special Meeting and at the place of the Special Meeting during the meeting.

As of the Record Date, there were [●] shares of common stock outstanding and entitled to vote at the Special Meeting.

The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

The affirmative vote of the holders of a majority of the outstanding shares of Achillion common stock is required to adopt the Merger Agreement. Adoption of the Merger Agreement by stockholders is a condition to the closing of the transactions contemplated by the Merger Agreement.

Approval of the proposal to adjourn the Special Meeting requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. Approval, by non-binding, advisory vote, of compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.

If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the Merger Agreement. For stockholders who attend the meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the stockholder voted “AGAINST” any proposal to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting and “AGAINST” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

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Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement, but will have no effect on (i) any proposal to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting or (ii) the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger. A “broker non-vote” generally occurs when a bank, broker or other nominee holding shares on your behalf does not vote on a proposal because the bank, broker or other nominee has not received your voting instructions and lacks discretionary power to vote the shares. “Broker non-votes,” if any, will be counted for the purpose of determining whether a quorum is present.

Shares Held by Achillion’s Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [●] shares of common stock, representing approximately [●]% of the shares of common stock outstanding on the Record Date.

Voting of Proxies

If your shares are registered in your name with our transfer agent, you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may grant a proxy electronically over the Internet or by telephone by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

If you plan to attend the Special Meeting and wish to vote in person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any previously submitted proxy.

Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted (1) “FOR” adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will not have any effect on the adjournment proposal or the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

 

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Revocability of Proxies

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

   

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

   

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to our Corporate Secretary; or

 

   

attending the Special Meeting and voting in person by ballot.

If you have submitted a proxy, your appearance at the Special Meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, postponed or delayed.

Board of Directors’ Recommendation

The Board of Directors, after considering various factors described under the caption “The Merger — Recommendation of the Board of Directors and Reasons for the Merger,” has unanimously (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, Achillion and its stockholders; (2) declared that it is advisable for Achillion to enter into the Merger Agreement; and (3) approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. The Board of Directors unanimously recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

Solicitation of Proxies

The expense of soliciting proxies will be borne by Achillion. We have retained Innisfree M&A Incorporated, a proxy solicitation firm (the “Proxy Solicitor”), to solicit proxies in connection with the Special Meeting at a cost of approximately $25,000 plus expenses. We will also indemnify the Proxy Solicitor against losses arising out of its provisions of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of Completion of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be consummated in the first half of 2020.

 

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Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262. This means that stockholders are entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court, so long as they comply with the procedures established by Section 262. Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the Merger Consideration.

To exercise your appraisal rights, you must (i) deliver a written demand for appraisal to Achillion before the vote is taken on the adoption of the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; and (iii) continue to hold your shares of common stock of record through the Effective Time. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as Annex D to this proxy statement. If you hold your shares of common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, broker or nominee.

Other Matters

At this time, we know of no other matters to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of common stock will be voted in accordance with the discretion of the appointed proxy holders.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on [], 20[]

This proxy statement is also available to our stockholders electronically via the Internet at www.proxyvote.com.

Householding of Special Meeting Materials

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for notices of special meetings (“Notices”) and, if applicable, our proxy materials and annual report, with respect to two or more stockholders sharing the same address by delivering a single Notice and, if applicable, a single set of our proxy materials and annual report, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially eliminates some duplicative mailings to stockholders and reduces our mailing costs.

For the Special Meeting, a number of brokers with account holders who are stockholders of Achillion will be “householding” our proxy materials. A single Notice and copy of our proxy materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent.

 

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If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice and, if applicable, a separate copy of our proxy materials and annual report, please notify your broker, or direct your request via mail to Achillion Pharmaceuticals, Inc., Attention: Martha E. Manning, Esq., Corporate Secretary, 1777 Sentry Parkway West, VEVA Building #14 Suite 200, Blue Bell, Pennsylvania 19422 or via telephone to (215) 709-3040. Upon written or oral request, we will promptly deliver to you a separate Notice and proxy materials. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker.

Questions and Additional Information

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders May Call:

Toll-Free at (888) 750-5834 (from the U.S. and Canada)

or +1 (412) 232-3651 (from other locations)

Banks & Brokers May Call Collect: (212) 750-5833

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

We are asking you to approve and adopt the Merger Agreement and the Merger contemplated by the Merger Agreement.

For a summary of and detailed information regarding this proposal, see the information about the Merger Agreement and the Merger throughout this proxy statement, including the information set forth in the sections captioned “The Merger” beginning on page [●] of this proxy statement and “The Merger Agreement” beginning on page [●] of this proxy statement. A copy of the Merger Agreement is attached to this proxy statement as Annex A. You are urged to read the Merger Agreement carefully in its entirety.

Under applicable law, we cannot complete the Merger without the affirmative vote of a majority of the outstanding shares of Achillion common stock voting in favor of the proposal to approve and adopt the Merger Agreement and the Merger. If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote against the proposal to adopt the Merger Agreement.

The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

We are asking you to approve a proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If stockholders approve the adjournment proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including proxies from stockholders that have previously returned properly executed proxies voting against adoption of the Merger Agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would be defeated, we could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the Merger Agreement. Additionally, we may seek to adjourn the Special Meeting if a quorum is not present or otherwise at the discretion of the chair of the Special Meeting.

The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 3: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED

EXECUTIVE COMPENSATION ARRANGEMENTS

Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that we provide stockholders with the opportunity to vote to approve, on an advisory, non-binding basis, the payment of certain compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger, as disclosed in the section captioned “The Merger — Interests of Achillion’s Directors and Executive Officers in the Merger,” beginning on page [●] of this proxy statement.

We are asking stockholders to indicate their approval of the various compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger. These payments are set forth in the section captioned “The Merger — Interests of Achillion’s Directors and Executive Officers in the Merger,” beginning on page [●] of this proxy statement, and the accompanying footnotes. In general, the various plans and arrangements pursuant to which these compensation payments may be made have previously formed part of Achillion’s overall compensation program for our named executive officers and previously have been disclosed to stockholders as part of the Compensation Discussion and Analysis and related sections of our annual proxy statements. These historical arrangements were adopted and approved by the Compensation Committee of the Board of Directors, which is composed solely of independent directors, and are believed to be reasonable and in line with marketplace norms.

Accordingly, we are seeking approval of the following resolution at the Special Meeting:

“RESOLVED, that the stockholders of Achillion Pharmaceuticals, Inc. approve, on a nonbinding, advisory basis, the compensation that will or may become payable by Achillion to its named executive officers that is based on or otherwise relates to the Merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section captioned “The Merger — Interests of Achillion’s Directors and Executive Officers in the Merger.”

Stockholders should note that this proposal is not a condition to completion of the Merger, and as an advisory vote, the result will not be binding on Achillion, the Board of Directors, Alexion or the named executive officers. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the Merger is consummated our named executive officers will be eligible to receive the compensation that is based on or otherwise relates to the Merger in accordance with the terms and conditions applicable to the underlying plans and agreements and the Merger Agreement.

The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

Parties Involved in the Merger

Achillion Pharmaceuticals, Inc.

1777 Sentry Parkway West, VEVA Building #14 Suite 200

Blue Bell, Pennsylvania 19422

Achillion is a clinical-stage biopharmaceutical company focused on advancing its oral factor D inhibitors into late-stage development and commercialization. Each of the product candidates in Achillion’s factor D portfolio was discovered in its laboratories and is wholly owned by Achillion. Achillion is focusing its product development activities on complement-mediated diseases where there are no approved therapies or significant unmet medical needs persist despite existing therapies.

Achillion’s common stock is listed on NASDAQ under the symbol “ACHN”.

Alexion Pharmaceuticals, Inc.

121 Seaport Boulevard

Boston, Massachusetts 02210

Alexion is a global biopharmaceutical company focused on serving patients and families affected by rare diseases through the innovation, development and commercialization of life-changing therapies. It is a global leader in complement inhibition and has developed and commercialized two approved complement inhibitors to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS), as well as the first approved complement inhibitor to treat anti-acetylcholine receptor (AChR) antibody-positive generalized myasthenia gravis (gMG) and anti-AQP4 antibody-positive neuromyelitis optica spectrum disorder (NMOSD). In addition, Alexion has two highly innovative enzyme replacement therapies and the first and only approved therapies for patients with life-threatening and ultra-rare metabolic disorders, hypophosphatasia (HPP) and lysosomal acid lipase deficiency (LAL-D). In addition to its marketed therapies, Alexion has a diverse pipeline resulting from internal innovation and business development with strategic focus in hematology and nephrology, neurology, metabolics and neonatal Fc receptor (FcRn).

Alexion’s common stock is listed on NASDAQ under the symbol “ALXN”.

Beagle Merger Sub, Inc.

c/o Alexion Pharmaceuticals, Inc.

121 Seaport Boulevard

Boston, Massachusetts 02210

Merger Sub is a wholly-owned subsidiary of Alexion and was formed on October 15, 2019, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.

Effect of the Merger

Upon the terms and subject to the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into Achillion, and Achillion will continue as the Surviving Corporation and as a wholly owned subsidiary of Alexion. As a result of the Merger, our common stock will no longer be publicly traded and

 

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will be delisted from NASDAQ. In addition, our common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as we, Alexion and Merger Sub may agree and specify in the certificate of merger).

Effect on Achillion if the Merger is Not Completed

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of common stock. Instead, Achillion will remain an independent public company, our common stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act and we will continue to file periodic reports with the SEC. In addition, if the Merger is not completed, we expect that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which Achillion operates and risks related to adverse economic conditions.

Furthermore, if the Merger is not completed, and depending on the circumstances that caused the Merger not to be completed, the price of our common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it trades as of the date of this proxy statement.

Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of common stock. If the Merger is not completed, the Board of Directors will continue to evaluate and review Achillion’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate. If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board of Directors will be offered or that Achillion’s business, prospects or results of operation will not be adversely impacted.

Upon termination of the Merger Agreement under specified circumstances, Achillion will be required to pay Alexion a termination fee of $20,000,000. Alexion will be required to pay to Achillion a reverse termination fee between $30,000,000 and $60,000,000 if the Merger Agreement is terminated under different specified circumstances. For more information please see the section captioned “The Merger Agreement — Termination Fees,” beginning on page [●] of this proxy statement.

Merger Consideration

In the Merger, each outstanding share of Achillion common stock will be canceled and converted into the right to receive the Merger Consideration (except for any shares owned by Alexion or Merger Sub or stockholders who are entitled to and who properly exercise appraisal rights under the DGCL).

After the Merger is completed, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by the DGCL, as described below under the caption “— Appraisal Rights,” beginning on page [●] of this proxy statement.)

Background of the Merger

Achillion periodically confers with other biotechnology and pharmaceutical companies regarding a variety of potential partnerships, licensing arrangements, joint ventures, collaborations and other strategic transactions. In

 

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connection with this process and based on emerging clinical data, commencing in September 2018, at the direction of the Board of Directors, Achillion management began actively exploring potential partnerships regarding the development of ACH-5228 and ACH-4471, Achillion’s leading product candidates. From October 2018 through 2019, Achillion met with over thirty (30) potential counterparties, including Alexion, and considered a broad spectrum of potential strategic transactions, ranging from geographically-defined, molecule-specific and therapeutically-defined partnerships to broader collaborations regarding multiple product candidates, geographies and indications.

In connection with the exploration of Achillion’s strategic options, Achillion had discussions with twenty-one (21) counterparties under confidentiality agreements (each, a “CDA”), including with Alexion. Achillion entered into its CDA with Alexion, effective October 11, 2018, and Alexion thereafter began preliminary due diligence. Only two (2) of the CDAs contained standstill provisions, including one with Alexion, and of these, neither contained a “don’t ask, don’t waive” restriction.

Among the other counterparties with whom Achillion entered into CDAs, one (1) company submitted a term sheet regarding a partnership outside the United States, which the Board of Directors determined did not properly reflect the value of Achillion’s product candidates. Achillion and such company subsequently agreed to terminate the discussion regarding a partnership. Another party, Company A, expressed strong interest in pursuing a strategic transaction with Achillion, and representatives of Achillion had periodic discussions regarding such interest with Company A through September 2019. The eighteen (18) other counterparties with whom Achillion entered into CDAs did not pursue any strategic transaction or propose any terms for such a transaction after conducting preliminary due diligence investigation on Achillion.

On February 10, 2019, Aradhana Sarin, Chief Strategy and Business Officer of Alexion, sent a letter to Anthony Gibney, Chief Business Officer of Achillion, making a non-binding offer to acquire all of the outstanding common stock of Achillion for upfront cash consideration of $3.00 per share (the “February 10 Proposal”).

On February 11, 2019, the Board of Directors held a meeting, which included members of senior management and representatives of Centerview. The Board of Directors discussed the February 10 Proposal and determined that the proposal did not properly reflect the full value of Achillion. Following the meeting, at the direction of the Board of Directors, Achillion management communicated to Alexion that the Board of Directors had rejected the February 10 Proposal.

On February 12, 2019, Achillion engaged Skadden, Arps, Slate, Meagher and Flom LLP (“Skadden”) as legal counsel in connection with any strategic transaction that it might pursue.

On February 18, 2019, Dr. Sarin delivered a letter to Mr. Gibney, making a revised non-binding offer to acquire all of the outstanding common stock of Achillion for an aggregate price of $5.00 per share, which consisted of upfront cash consideration of $3.75 per share plus one non-transferable contingent value right with a nominal value of up to $1.25 per share in cash, which would become payable following completion of a successful Phase III or other pivotal clinical trial of ACH-5228 in any indication (the “February 18 Proposal”). The February 18 Proposal also requested a 45-day exclusivity period.

On February 20, 2019, the Board of Directors held a meeting, which included members of senior management and representatives of Centerview and Skadden. The Board of Directors discussed the February 18 Proposal, the improvements in value as compared to the February 10 Proposal, including the addition of contingent consideration, and the potential for achieving the milestone underlying the contingent consideration. The Board of Directors again considered Achillion’s prospects and risks as a stand-alone company, including with respect to Achillion’s future capital requirements, and determined that the February 18 Proposal still did not reflect the full value of Achillion. Following the meeting, at the direction of the Board of Directors, Achillion management communicated to Alexion that the Board of Directors had rejected the February 18 Proposal.

 

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Following the Company’s rejection of the February 18 Proposal, Achillion and Alexion resumed discussions with respect to a potential global partnership regarding ACH-5228 and ACH-4471, and the parties negotiated the terms for such a partnership for the next month.

In late March, Achillion and Alexion agreed to postpone further discussions regarding the global partnership until after results for Achillion’s Phase I Multiple Ascending Dose study for ACH-5228 (the “MAD Study”) became available.

On May 24, 2019, Dr. Sarin called Mr. Gibney and tentatively indicated that Alexion was considering making a revised proposal to acquire Achillion with upfront cash consideration of $5.00 per share. Consistent with his previous discussions with the Board of Directors regarding the value of Achillion, Mr. Gibney informed Dr. Sarin that such a proposal was unlikely to be accepted by the Board of Directors. The Board of Directors was later made aware of the communication. Alexion made no formal offer pursuant to such terms.

On May 30, 2019, Achillion entered into a CDA with Company A.

On June 3, 2019, Joseph Truitt, Chief Executive Officer of Achillion, and Mr. Gibney met with Ludwig Hantson, Ph.D., Chief Executive Officer of Alexion, and Dr. Sarin and provided Alexion with updated information regarding Achillion’s clinical programs, including with respect to the ongoing MAD Study.

On June 4, 2019, representatives of Achillion met with representatives of Company A and provided Company A with updated information regarding Achillion’s clinical programs, including with respect to the ongoing MAD Study.

On June 5, 2019, Company A informed Achillion that it was considering potentially acquiring Achillion. The Board of Directors was made aware of the communication, but no proposal for an acquisition transaction was actually received from Company A, written or otherwise.

On June 19, 2019, representatives of Achillion met with representatives of Alexion and discussed Achillion’s clinical programs, including with respect to the ongoing MAD Study. Later that day, after the meeting between representatives of Achillion and Alexion, Dr. Sarin met with Mr. Gibney, indicated that Alexion was considering making an improved proposal to acquire Achillion and asked for Mr. Gibney’s perspectives. Consistent with his discussion with the Board of Directors on February 20, 2019, Mr. Gibney discussed with Dr. Sarin the potential proposal from Alexion.

On June 21, 2019, Dr. Hantson called Mr. Truitt and indicated that Alexion intended to make an improved proposal to acquire Achillion.

On June 21, 2019, Dr. Sarin delivered a letter to Mr. Truitt, making a non-binding offer to acquire all of the outstanding common stock of Achillion for upfront cash consideration of $5.50 per share plus one non-transferable contingent value right with a nominal value of up to $2.50 per share in cash, including $1.50 per share payable upon the start of a Phase III clinical trial for ACH-5228 (defined as dosing of the first patient in a pivotal study) and $1.00 per share upon the approval by the FDA of the combination of ACH-4471 with Soliris or Ultomiris for the treatment of patients with paroxysmal nocturnal hemoglobinuria (“PNH”) (the “June 21 Proposal”). The June 21 Proposal also included a request that Achillion enter into an exclusivity agreement through an expected August 19 announcement date.

On June 27, 2019, the Board of Directors held a meeting, which included members of senior management, and representatives of Centerview and Skadden. During the meeting, members of senior management discussed with the Board of Directors the implied valuation of the June 21 Proposal and the discussions with Alexion leading to such proposal, and Centerview shared preliminary illustrative financial analyses of Achillion. The Board of Directors, together with senior management and representatives of Centerview and Skadden, discussed various

 

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strategic alternatives for Achillion, including other transactions such as a sale to Company A, or potential partnerships, the potential benefits of a broader outreach to other potential counterparties regarding an acquisition of Achillion and the accompanying risk of a public disclosure of information with respect to any proposed transaction. Following discussion of the advantages and disadvantages of a broader outreach, the Board of Directors authorized Centerview and Achillion management to initiate contact with six (6) additional potential counterparties (based in part on the knowledge that the Board of Directors had gathered as a result of the management’s broad partnership outreach process throughout 2018 and 2019) in order to gauge interest in a strategic transaction, including a potential acquisition of Achillion, and to inform Alexion that the June 21 Proposal was not sufficient but that access to further due diligence and discussions among legal advisors would be granted.

Following this meeting, Centerview contacted four (4) other potential counterparties: Company A, Company B, Company C and Company D. Company A and Company B were receptive to the outreach and scheduled management presentations, while Company C and Company D declined to participate. Achillion management also contacted two (2) additional counterparties: Company E and Company F. Company E and Company F declined to pursue any kind of strategic transaction with Achillion.

On July 8, 2019, representatives of Achillion met representatives of Company A in person for a management presentation and the parties discussed potential strategic transactions between the two parties, including the potential acquisition of Achillion by Company A.

On July 11, 2019, a representative of Company A contacted Mr. Gibney and another representative of Achillion, and reaffirmed Company A’s interest in a potential acquisition of Achillion.

On July 13, 2019, Dr. Sarin called Mr. Gibney and discussed the potential improvement of Alexion’s offer to acquire Achillion.

On July 15, 2019, Skadden received a draft merger agreement (the “Merger Agreement”) from Foley Hoag LLP (“Foley”), counsel to Alexion in connection with the potential acquisition.

On July 17, 2019, representatives of Achillion had a teleconference with representatives of Company B for a management presentation and the parties discussed potential strategic transactions between the two parties, including the potential acquisition of Achillion by Company B.

On July 19, 2019, the Strategy Committee of the Board of Directors (the “Strategy Committee”), a standing committee charged with evaluating strategic opportunities, held a meeting, which included senior management and representatives of Centerview and Skadden. During the meeting, the Strategy Committee discussed with management and Centerview the status of discussions regarding the potential sale of Achillion, including the continued engagement with Alexion, Centerview’s outreach to the four (4) other potential counterparties and management’s outreach to Company E and Company F, which resulted in expressions of interest in acquiring Achillion from Company A and Company B, Achillion’s interactions with additional third-parties, including Company E and Company F, and management’s subsequent engagement with Company A and Company B.

On July 22, 2019, Achillion publicly announced the results of the MAD Study.

On July 23, 2019, Skadden received a draft form of the CVR Agreement from Foley.

On July 26, 2019, the Board of Directors held a meeting, which included members of senior management and representatives of Centerview and Skadden. During the meeting, the Board discussed recent developments in ACH-5228, including the announcement of the MAD Study, and the increase in the stock price of Achillion following such announcement. The Board of Directors also discussed with management and Centerview the status of the discussions regarding the potential sale of Achillion, including the level of engagement with

 

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Alexion, Company A and Company B. In addition, the Board of Directors approved the entry into an amended and restated engagement letter with Centerview to serve as financial advisor to Achillion in connection with a possible strategic transaction, which amended and restated the terms of an engagement letter that Achillion and Centerview had entered into on January 22, 2015.

On July 29, 2019, Mr. Truitt and Mr. Gibney met in person with Dr. Hantson, Dr. Sarin, John Orloff, M.D., Executive Vice President, Head of Research and Development of Alexion, and Paul Clancy, Executive Vice President, Chief Financial Officer of Alexion, and discussed the potential acquisition of Achillion by Alexion and certain due diligence matters.

On July 30, 2019, Company B informed Centerview that it would not pursue any strategic transaction with Achillion, including an acquisition transaction.

On August 8, 2019, representatives of Achillion discussed due diligence materials with representatives of Alexion. Following the meeting, representatives of Alexion informed Achillion that Alexion needed to review the diligence materials further, and that Alexion could not complete its evaluation of the potential transaction within its previously-communicated timeline of mid-August, 2019.

On August 14, 2019, Alexion informed Achillion that Alexion wished to postpone pursuing the potential transaction until after Achillion’s upcoming pre-IND meeting with the FDA regarding the development of ACH-5228 (the “Pre-IND Meeting”).

On September 5, 2019, Company A informed Achillion that it was no longer interested in pursuing an acquisition of Achillion. Instead, it was interested in pursuing a global partnership with Achillion with respect to ACH-5228 and third-generation oral factor D inhibitors.

On September 11, 2019, Achillion met with the FDA to discuss the development of ACH-5228.

On September 12, 2019, the Achillion Strategy Committee held a meeting, which included senior management and representatives of Centerview and Skadden. During the meeting, Achillion management reported on the recent meeting with the FDA and, together with Centerview, discussed with the Strategy Committee members providing information regarding the Pre-IND Meeting to Alexion and Company A, with a view towards assessing their respective interests in continuing to pursue a potential strategic transaction. The Board of Directors discussed the engagement levels of each of Alexion and Company A in pursuing a strategic transaction with Achillion, noting that Company A had solely expressed interest in pursuing a partnership with Achillion as opposed to making an offer to acquire Achillion. The Strategy Committee expressed its support for management to continue to engage with both Alexion and Company A.

On September 13, 2019, Mr. Gibney called Dr. Sarin and provided her with updates regarding the Pre-IND Meeting. On the same day, representatives of Achillion spoke to a representative of Company A and provided him with updates regarding Achillion’s meeting with the FDA.

On September 17, 2019, representatives of Achillion provided representatives of Alexion with additional information regarding the Pre-IND Meeting.

On September 21, 2019, Dr. Sarin delivered a letter to Mr. Truitt, proposing a revised non-binding offer to acquire all of the outstanding common stock of Achillion for an aggregate price of $8.65 per share, which consisted of upfront cash consideration of $6.15 per share plus one contingent value right with a nominal value of up to $2.50 per share in cash, including $1.50 per share payable upon the start of a Phase III clinical trial for ACH-5228 and $1.00 per share upon the approval by the FDA of the combination of ACH-4471 with Soliris or Ultomiris for the treatment of patients with PNH (the “September 21 Proposal”). Compared with the June 21 Proposal, the upfront cash consideration increased from $5.50 per share to $6.15 per share, with the value and the underlying milestones of the contingent value right unchanged. The September 21 Proposal also included a request that Achillion enter into an exclusivity agreement through an expected October 23 announcement date.

 

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On September 22, 2019, the Board of Directors held a meeting, which included members of senior management and representatives of Centerview and Skadden. During the meeting, the Board of Directors, together with management and representatives of Centerview and Skadden, discussed various strategic considerations, including the September 21 Proposal, the history of negotiation with Alexion, Achillion’s other strategic options, including a potential partnership transaction with Company A regarding ACH-5228 and third-generation oral factor D inhibitors and Achillion’s prospects and risks as a stand-alone company (including with respect to Achillion’s future capital requirements). Achillion management updated the Board of Directors on upcoming meetings with the FDA and expected timing for data readouts. At the meeting, Centerview also discussed with the Board of Directors strategies for obtaining an improved offer from Alexion, including potentially making a counteroffer. Additionally, Mr. Gibney updated the board on the status of discussions with Company A, noting that it continued to focus on a partnership with respect to ACH-5228 and third-generation oral factor D inhibitors as opposed to an acquisition, and that it would not be in a position to provide a term sheet with respect to the structure and value associated with such partnership until mid-October at the earliest. Following the discussion, the Board of Directors authorized Mr. Gibney to contact Dr. Sarin to gauge Alexion’s reaction to a potential counteroffer and instructed him to communicate to Dr. Sarin that the Board of Directors had rejected the request for exclusivity. The Board of Directors also held an executive session, which did not include representatives of Centerview and Skadden or management, and continued to discuss the advantages and disadvantages of a potential transaction with Alexion, a potential partnership with Company A, Achillion’s prospects and risks as a stand-alone company, including with respect to Achillion’s future capital requirements, and strategies for obtaining an improved offer.

On September 23, 2019, the Board of Directors held a meeting to continue the discussions that had occurred during its September 22 meeting and receive responses to various questions posed to management. During the meeting, Mr. Truitt further discussed with the Board of Directors various strategic alternatives for Achillion, including the September 21 Proposal, a potential partnership transaction with Company A regarding ACH-5228 and third-generation oral factor D inhibitors and Achillion’s prospects and risks as a stand-alone company, including with respect to Achillion’s future capital requirements. The Board of Directors directed Mr. Truitt to continue engaging Alexion and Company A regarding a potential strategic transaction.

On September 23, 2019, following the direction of the Board of Directors, Mr. Gibney called Dr. Sarin and informed her that Alexion would likely need to improve its offer of upfront cash consideration, that the Board of Directors had rejected Alexion’s request for exclusivity, and that she would be provided with a further response following Achillion’s regularly-scheduled Board Meeting on September 26 and 27.

Also on September 23, 2019, representatives of Achillion informed Company A that Achillion had received a revised acquisition proposal and requested that Company A accelerate the evaluation of a potential partnership and reconsider whether it would acquire Achillion.

On September 25, 2019, Company A informed Achillion and Centerview that it was only interested in entering into a global partnership with Achillion regarding ACH-5228 and third-generation oral factor D inhibitors, not the acquisition of Achillion, and that it could not accelerate the timing of its evaluation of the potential partnership.

On September 26 and 27, 2019, the Board of Directors held a regularly-scheduled two-day in-person meeting in New York, New York, where the Board of Directors discussed the potential entry into a strategic transaction with Alexion or Company A, and various matters in the ordinary course of Achillion’s business. Skadden attended the meeting session regarding a potential transaction via teleconference while Centerview attended in person. The Board of Directors discussed the most recent developments with respect to Achillion’s product candidates and the expected timeline for certain developments. Mr. Gibney reported on his latest discussions with Dr. Sarin, his guidance to her to improve the Alexion offer, and her response. Management discussed with the Board of Directors financial projections prepared by management and the underlying assumptions and methodologies and representatives of Centerview discussed with the Board of Directors the preliminary illustrative financial analyses of Centerview based on these projections. Centerview also reviewed with the Board of Directors the

 

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status of discussion regarding a potential strategic transaction, including the fact that Alexion had submitted four (4) written proposals, and that the other potential counter party, Company A, was only interested in a partnership transaction, had not yet proposed the terms for such partnership, and had not provided any assurance as to when they would provide such terms. The Board of Directors then discussed management’s financial projections, Centerview’s preliminary illustrative financial analyses, Achillion’s strategic alternatives, including Achillion’s prospects and risks as a stand-alone company, including with respect to Achillion’s future capital requirements, the timing and regulatory considerations of a potential transaction, and the terms of the draft Merger Agreement, including the right the Board of Directors would have with respect to consideration of a Superior Proposal (as defined in the Merger Agreement) that may be made after the announcement of any transaction. Centerview then discussed with the Board of Directors strategies for obtaining an improved offer from Alexion, including potentially making a counteroffer and the parameters for such counteroffer. Following discussion, the Board of Directors authorized Centerview and Mr. Gibney to formally deliver a counteroffer to Alexion with an emphasis on improving the upfront cash consideration.

Later on September 26, 2019, following discussion with the Board of Directors, Mr. Gibney provided a counteroffer to Dr. Sarin with upfront cash consideration of $6.75 per share, with the value and the underlying milestones for the contingent value right unchanged from the September 21 Proposal. On the same day, Achillion authorized Skadden to negotiate the transaction documents with Foley. Skadden sent a revised draft of the Merger Agreement to Foley.

On September 27, 2019, Skadden sent a revised draft of the CVR Agreement to Foley. Skadden and Foley continued to negotiate the Merger Agreement, the CVR Agreement and various transaction agreements up until the execution of the definitive agreement by Achillion and Alexion.

On September 30, 2019, Dr. Sarin called Mr. Gibney with a revised non-binding proposal, which was characterized as Alexion’s “best and final” offer, to acquire all of the outstanding common stock of Achillion for an for an aggregate price of up to $8.30 per share, which consisted of upfront cash consideration of $6.30 per share plus one (1) CVR with a nominal value of up to $2.00 per share in cash, including $1.00 per share payable following the start of a Phase III clinical trial for ACH-5228 and $1.00 per share payable upon the approval by the FDA of ACH-4471 (the “September 30 Proposal”). Dr. Sarin noted that the revised offer incorporated a thorough review of the Merger Agreement and CVR Agreement drafts mark-ups, a more definitive evaluation of transaction and closing costs and further due diligence. Compared with the September 21 Proposal, the upfront cash consideration increased from $6.15 per share to $6.30 per share and the nominal value of the CVR payable upon satisfaction of the milestones decreased in the aggregate from $2.50 per share to $2.00 per share. The September 30 Proposal also included a reverse termination fee of 4.5% of the upfront net cash consideration, payable to Achillion in the event the transaction does not receive antitrust clearance in the United States. The September 30 Proposal also included a request for exclusivity.

On October 1, 2019, the Board of Directors held a meeting, which included members of senior management and representatives of Centerview and Skadden. Representatives of Skadden reviewed with the board their fiduciary duties as well as certain antitrust considerations, including the impact on the timeline for closing and strategies for addressing these considerations. Management discussed with the Board of Directors the financial projections prepared by management and the underlying assumptions and methodologies, and representatives of Centerview discussed with the Board of Directors preliminary illustrative financial analyses of Centerview based on these projections. Based on its financial analyses, Centerview discussed with the Board of Directors the comparison between the September 21 Proposal and the September 30 Proposal, including the fact that the September 30 Proposal offered greater upfront cash consideration while, based on certain assumptions provided by Achillion’s management regarding the probability that the milestones underlying the CVR would be realized and the timing thereof, representing a lower net present value due to the decrease in the nominal value of the CVR. The Board of Directors then discussed various strategic considerations, including Achillion’s prospects and risks as a stand-alone company, including with respect to Achillion’s future capital requirements, the milestones underlying the CVR, the probability that either milestone would be realized and the timing thereof, the advantages and

 

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disadvantages of increased upfront cash consideration and the decreased nominal value of the CVR, the fact that Company A had not engaged further with Achillion regarding a potential partnership, the fact that the other potential counterparties had declined to pursue a strategic transaction with Achillion, and the strategies for mitigating the risks that Achillion could face in the event that the transaction did not close, including the fact that Alexion had agreed to pay a reverse termination fee to Achillion at a level that could potentially be further improved. The Board of Directors also held an executive session, which included Skadden but not representatives of Centerview or members of management, and continued to discuss the advantages and disadvantages of the potential acquisition by Alexion. With respect to the September 30 Proposal, the Board of Directors discussed the greater upfront cash payment (despite the potentially lower net present value as calculated by Centerview based on certain assumptions provided by Achillion’s management regarding the probability that the milestones underlying the CVR would be realized and the timing thereof) and the risks associated with each of the milestones in the various proposals. Following the discussion, the Board of Directors concluded that the September 30 Proposal offered more certain value to Achillion stockholders than the September 21 Proposal and that the parties were reasonably likely to reach definitive agreement on the terms of the September 30 Proposal, which reflected Alexion’s review of the proposed terms of the Merger Agreement and CVR Agreement, as well as further due diligence and other considerations. Following discussion, the Board of Directors unanimously agreed that Achillion should pursue the transaction with Alexion on the terms of the September 30 Proposal. The Board of Directors also directed management to continue to resolve the outstanding issues in the transaction documents and to negotiate the reverse termination fee with a view towards mitigating Achillion’s risks if the transaction did not close.

During the period from October 1, 2019 through the execution of the definitive agreement on October 15, 2019, Skadden continued to exchange drafts of transaction documents with Foley, while management and Skadden continued to resolve the outstanding issues in such documents in a manner consistent with the prior discussions with the Board of Directors. Following negotiations, Alexion agreed to pay to Achillion an increased reverse termination fee between $30,000,000 and $60,000,000 if the Merger Agreement is terminated under different specified circumstances. For more information on these termination fees, see the section of this proxy statement captioned “The Merger Agreement — Termination Fees,” beginning on page [●] of this proxy statement.

During the same period, the representatives of Achillion responded to various due diligence questions and requests for information from Alexion.

On October 14, 2019, Mr. Truitt discussed with Dr. Hantson matters related to the proposed acquisition of Achillion by Alexion.

On October 15, 2019, the Board of Directors held a meeting, attended by members of senior management and representatives of Centerview and Skadden. Representatives of Skadden reviewed with the Board of Directors the resolution of the remaining open legal issues and the final material terms of the Merger Agreement and the CVR Agreement for the proposed transaction. Management discussed with the Board of Directors the financial projections and the underlying assumptions and methodologies, including changes in such projections since the Board last reviewed the projections on September 26, 2019, as the result of further analysis by management of the potential market for Achillion’s product candidates. For more information on these projections, see the section of this proxy statement captioned “The Merger — Certain Financial Projections,” beginning on page [●] of this proxy statement. Representatives of Centerview reviewed with the Board of Directors Centerview’s financial analysis of the Merger Consideration, and rendered to the Board of Directors an oral opinion, which was subsequently confirmed by delivery of a written opinion dated such date that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken in preparing its opinion, the Merger Consideration to be paid to the holders of shares of Achillion common stock (other than as specified in such opinion) pursuant to the Merger Agreement and the CVR Agreement was fair, from a financial point of view, to such holders. For a detailed discussion of Centerview’s opinion, please see the section entitled “The Merger — Opinion of Achillion’s Financial Advisor,” beginning on page [●] of this proxy statement.

 

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After further discussion, including a discussion regarding the various factors described under the caption “The Merger — Recommendation of the Board of Directors and Reasons for the Merger,” the Board of Directors unanimously: (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, Achillion and its stockholders; (2) declared that it is advisable for Achillion to enter into the Merger Agreement; and (3) approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

On October 15, 2019, Achillion, Alexion and Merger Subsidiary executed and delivered the Merger Agreement.

On October 16, 2019, Achillion and Alexion issued a joint press release announcing the execution of the Merger Agreement prior to the opening of trading on NASDAQ.

Recommendation of the Board of Directors and Reasons for the Merger

Recommendation of the Board of Directors

The Board of Directors has unanimously (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, Achillion and its stockholders; (2) declared that it is advisable for Achillion to enter into the Merger Agreement; and (3) approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

The Board of Directors unanimously recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by Achillion to its named executive officers in connection with the Merger.

Reasons for the Merger

In evaluating the Merger Agreement and the transactions contemplated thereby, the Board of Directors consulted with outside legal counsel, its financial advisor and Achillion’s senior management. In recommending that Achillion’s stockholders vote in favor of adoption of the Merger Agreement, the Board of Directors considered numerous positive factors relating to the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, including the following material factors (which factors are not necessarily presented in order of relative importance):

 

   

The relationship of the Cash Merger Consideration ($6.30 per share) to the unaffected trading price of Achillion’s common stock, which constitutes a premium of approximately 71% to the unaffected ten (10)-day average stock price of Achillion’s common stock prior to October 15, 2019, the last trading day prior to the date on which Achillion publicly announced the Merger Agreement.

 

   

The fact that the Cash Merger Consideration (representing a substantial portion of the overall Merger Consideration) will provide certainty of value and liquidity to Achillion’s stockholders, while eliminating the effects of long-term business and execution risk to Achillion’s stockholders.

 

   

The fact that, via extensive negotiations over an eight month process, Achillion was able to increase the value of Alexion’s offers several times, from an original proposal of $3.00 per share in cash to the Merger Consideration (including the Cash Merger Consideration of $6.30 per share and up to $2.00 per share if the milestones under the CVR Agreement are met), which Achillion, after consultation with its financial advisor, believed was the maximum price at which Alexion would transact.

 

   

The fact that the Merger Consideration includes a CVR and that the provisions of the CVR Agreement provide Achillion stockholders an opportunity to realize additional value of up to $2.00 per share, to

 

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the extent that the milestones set forth in the CVR Agreement are achieved within the time periods described therein. The Board of Directors considered the estimated probability of success and estimated timing for achieving each of the milestones set forth in the CVR Agreement. The Board of Directors also considered the extensive experience and resources of Alexion in developing, and obtaining FDA and other approvals for commercializing, clinical stage biopharmaceutical product candidates and its global commercial capabilities, particularly as such development, experience and resources relate to the potential achievement of the milestones set forth in the CVR Agreement.

 

   

The fact that Achillion actively sought proposals from several other parties that it believed were logical potential buyers, in part based on levels of interest it had previously received in connection with its broad partnership outreach process throughout 2018 and 2019, which resulted in significant engagement with three potential buyers (including Company A and Company B), as more fully described above under the heading “— Background of the Merger”.

 

   

The risk that prolonging the sale process further could have resulted in the loss of a favorable opportunity to successfully consummate a transaction on favorable terms.

 

   

The perceived risks and benefits of a variety of possible alternatives to the Merger, including the execution of senior management’s stand-alone plan, potential strategic collaborations, partnerships, combination studies and licensing and other arrangements with Alexion or other third parties, and the potential for growth through possible future acquisitions by Achillion, and the risks associated with these alternatives. In particular, the Board of Directors considered the risks and costs associated with designing and conducting clinical trials and seeking and obtaining future regulatory approvals for its product portfolio, building a commercial infrastructure, hiring or leasing a sales force, launching and marketing its various products currently in development, and other execution risks associated with transforming a relatively small biotechnology company focused on product development into a profitable pharmaceutical company. The Board of Directors considered that entering into potential strategic collaborations, partnerships, combination studies and licensing and other arrangements to mitigate such execution risks would likely require Achillion to share a significant portion of potential future profits related to its product portfolio with such counterparties.

 

   

The fact that although Achillion believes that its existing cash, cash equivalents and marketable securities will be sufficient to meet its current projected operating requirements for at least the next twelve (12) months, Achillion has incurred significant losses since inception, expects to incur significant and accumulating losses for at least the next several years, and will require substantial additional capital in order to complete the remaining clinical development for its product candidates and potentially commercialize these product candidates, as well as fund its other ongoing operations. The Board of Directors also took into consideration that, while Achillion may seek additional funding through future debt and equity financing or additional collaborations or strategic partnerships, any such fundraising could be highly dilutive to Achillion’s existing stockholders, might be available only on unfavorable terms, or might not be available at all.

 

   

The significant risks and considerable costs associated with a successful launch and commercialization by Achillion of its various products in late stage clinical development due, in part, to Achillion’s lack of any global sales or marketing infrastructure or capabilities. The Board of Directors also considered the fact that successful commercialization would be subject to uncertainty associated with market demand, pricing, governmental reimbursement and other factors beyond the control of Achillion.

 

   

The competitive risks to Achillion’s business from existing and new entrants to the complement-mediated disease space as well as the biopharmaceutical industry generally, including competitive risks that may affect Achillion’s ability to realize the benefits of its product portfolio. To the knowledge of Achillion, in addition to the two products (Soliris and Ultomiris) by Alexion approved for the treatment of the various complement-mediated diseases, several other companies, including Apellis Pharmaceuticals, Inc., Novartis AG, Roche Holding AG, Ra Pharmaceuticals, Inc., BioCryst Pharmaceuticals, Inc., Regeneron Pharmaceuticals, Inc. and ChemoCentryx, Inc. have also made

 

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substantial progress in this space where Achillion is focusing certain of its product development activities. The Board of Directors considered the risks inherent in the development of products for complement-mediated diseases, the risks related to designing, conducting and compiling data from clinical trials, the risks related to seeking approval for marketing from the FDA and other regulatory authorities, and other factors affecting the revenues and profitability of biotechnology products in this competitive landscape.

 

   

The current state of the economy and the stage of the pharmaceutical industry cycle, as well as the uncertainty surrounding these forecasted economic conditions both in the near term and the long term.

 

   

The terms and conditions of the Merger Agreement and related transaction documents, including:

 

   

Alexion’s commitments in the Merger Agreement to use its reasonable best efforts to consummate the Merger (subject to the terms and conditions of the Merger Agreement);

 

   

The fact that Alexion’s obligation to complete the Merger is not conditioned upon receipt of financing;

 

   

Achillion’s ability, under certain circumstances pursuant to the Merger Agreement, to seek specific performance to prevent breaches of the Merger Agreement and to enforce specifically the terms of the Merger Agreement;

 

   

The fact that in the event of a failure of the Merger to be consummated under certain circumstances, Alexion will pay Achillion a reverse termination fee between $30,000,000 and $60,000,000 if the Merger Agreement is terminated, without the need for Achillion to establish any damages;

 

   

Achillion’s ability, in certain circumstances, to engage in negotiations or discussions with any third party that has made in writing after October 15, 2019 (and not withdrawn) a bona fide unsolicited Acquisition Proposal that did not result from or arise out of a breach of the Merger Agreement and that the Board of Directors believes in good faith, after consultation with its outside legal counsel and financial advisor of nationally recognized reputation, constitutes or would reasonably be expected to result in a Superior Proposal;

 

   

The Board of Director’s ability to change its recommendation in response to a Superior Proposal or, in certain circumstances, terminate the Merger Agreement in favor of a Superior Proposal, subject to Alexion’s ability to propose adjustments to the terms and conditions of the Merger Agreement and subject to paying Alexion a termination fee of $20,000,000;

 

   

The Board of Director’s ability to change its recommendation in response to an intervening event not related to an Acquisition Proposal not known or reasonably foreseeable by the Board of Directors as of or prior to October 15, 2019, subject to Alexion’s ability to propose adjustments to the terms and conditions of the Merger Agreement that may convince the Board of Directors not to change its recommendation, and subject to Alexion’s right to terminate the Merger Agreement following such change in recommendation and to collect a termination fee of $20,000,000;

 

   

The fact that the termination fee payable by Achillion is equal to approximately 2.2% of the aggregate Cash Merger Consideration, which amount the Board of Directors believed was reasonable in light of, among other matters, the benefits of the Merger to Achillion’s stockholders, the relatively small size of such termination fee when compared to termination fees in similar transactions and the likelihood that a fee of such size would not be a meaningful deterrent to alternative Acquisition Proposals;

 

   

The fact that the Merger is subject to the approval of the holders of a majority of the outstanding shares of Achillion’s common stock;

 

   

The availability of statutory appraisal rights under the DGCL in connection with the Merger; and

 

   

The fact that the Merger Agreement has customary terms and was the product of extensive arms-length negotiations by Achillion and Achillion’s professional advisors.

 

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The opinion of Centerview rendered to the Board of Directors on October 15, 2019, which was subsequently confirmed by delivery of a written opinion dated such date that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Merger Consideration to be paid to the holders of shares of Achillion common stock (other than as specified in such opinion) pursuant to the Merger Agreement and the CVR Agreement was fair, from a financial point of view, to such holders, as more fully described below in the section entitled “The Merger — Opinion of Achillion’s Financial Advisor,” beginning on page [●] of this proxy statement.

 

   

The fact that resolutions approving the Merger Agreement were unanimously approved by the Board of Directors, which is comprised of a majority of independent directors who are neither affiliated with Alexion nor employees of Achillion or any of its subsidiaries, and which retained and received advice from Achillion’s outside legal counsel and financial advisor in evaluating, negotiating and recommending the terms of the Merger Agreement.

In the course of reaching the determinations and decisions and making the recommendation described above, the Board of Directors, in consultation with Achillion’s senior management, outside legal counsel and financial advisor, considered the risks and potentially negative factors relating to the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, including the following material factors (which factors are not necessarily presented in order of relative importance):

 

   

The fact that Achillion’s September 21 Proposal had a potentially greater net present value (as calculated by Centerview) than the Merger Consideration due to the decrease in the nominal value of the CVR, but which the Board of Directors, after due consideration, concluded offered less certainty in value to Achillion stockholders than the Merger Consideration based on, among other things, the lower upfront cash consideration and the risks associated with each of the proposed CVR milestones, as more fully described above under the heading “— Background of the Merger”.

 

   

The fact that the milestones necessary to trigger payments under the CVR Agreement may not be achieved within the required time period and, if they are not achieved within such time period, no payments would be made pursuant to the CVRs, as well as the fact that the CVRs are not freely transferable and, accordingly, will not be registered with the SEC or listed on any securities exchange.

 

   

The fact that Achillion’s public stockholders will have no ongoing equity interest in the Surviving Corporation following the Merger, meaning that the stockholders will cease to participate in Achillion’s potential future earnings or growth and benefit from any potential increases in the value of Achillion’s common stock.

 

   

The risks associated with the need to make antitrust filings, and obtain antitrust consents and approvals, in the United States.

 

   

The possibility that the consummation of the Merger may be delayed or not occur at all (due to antitrust reasons or otherwise), and the adverse impact such event would have on Achillion and its business.

 

   

The restrictions on the conduct of Achillion’s business during the period between execution of the Merger Agreement and the consummation of the Merger, which may delay or prevent Achillion from undertaking business opportunities that may arise during such time which, absent the Merger Agreement, Achillion might otherwise have pursued.

 

   

The possible disruption to Achillion’s business that may result from announcement of the Merger and the resulting distraction of management’s attention from day-to-day operations of the business.

 

   

The potential negative effect of the pendency of the Merger Agreement on Achillion’s business, including uncertainty about the effect of the proposed Merger on Achillion’s employees, customers and other parties, which may impair Achillion’s ability to attract, retain and motivate key personnel, and could cause customers, suppliers and others to seek to change existing business relationships with Achillion.

 

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The fact that under the terms of the Merger Agreement, Achillion is unable to solicit other Acquisition Proposals during the pendency of the Merger Agreement.

 

   

The fact that if the Merger is not consummated, Achillion will be required to pay its own expenses associated with the Merger Agreement, and the fact that the resulting public announcement of termination of the Merger Agreement could affect the trading price of Achillion’s common stock.

 

   

The fact that the reverse termination fee will not be available in all instances in which the Merger Agreement is terminated (in which case Achillion would be able to pursue damages under the Merger Agreement only for fraud), and that under certain circumstances Achillion may be obligated to pay a termination fee of $20,000,000 to Alexion.

 

   

The fact that the merger would generally be a taxable transaction to Achillion’s stockholders for U.S. federal income tax purposes.

 

   

The fact that some of Achillion’s directors and executive officers may be deemed to have interests in the Merger that are different from, or in addition to, the interests of Achillion’s stockholders generally, as more fully described below under the caption “— Interests of Achillion’s Directors and Executive Officers in the Merger.”

The Board of Directors believed that, overall, the potential benefits of the Merger to Achillion’s stockholders outweighed the risks and uncertainties of the Merger.

The foregoing discussion of factors considered by the Board of Directors contains the material factors considered by the Board of Directors, but is not in any way intended to be exhaustive. In light of the variety of factors considered in connection with its evaluation of the Merger, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Each member of the Board of Directors applied his or her own business judgment to the process and may have given different weight to different factors. The Board of Directors did not undertake to make any specific determination as to whether any factor or any particular aspect of a factor supported or did not support its ultimate determination. The Board of Directors based its recommendation on the totality of the information presented.

Opinion of Achillion’s Financial Advisor

On October 15, 2019, Centerview rendered to the Board of Directors its oral opinion, subsequently confirmed in a written opinion dated such date, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Merger Consideration to be paid to the holders of shares of Achillion common stock (other than Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

The full text of Centerview’s written opinion, dated October 15, 2019, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex C and is incorporated herein by reference. The summary of the written opinion of Centerview set forth below is qualified in its entirety to the full text of Centerview’s written opinion attached as Annex C. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Board of Directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerview’s opinion only addressed the fairness, from a financial point of view, as of the date thereof, to the holders of shares of Achillion common stock (other than Excluded Shares) of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Centerview’s opinion did not address any other term or aspect of the Merger Agreement or the Transaction and does not constitute a recommendation to any stockholder of Achillion or any other person as to how such stockholder or other

 

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person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.

The full text of Centerview’s written opinion should be read carefully and in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:

 

   

an execution copy of the Merger Agreement, dated as of October 15, 2019, and a form of the CVR Agreement annexed thereto, referred to in this summary of Centerview’s opinion as the “Execution Copies”;

 

   

Annual Reports on Form 10-K of Achillion for the years ended December 31, 2018, December 31, 2017 and December 31, 2016;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Achillion;

 

   

certain publicly available research analyst reports for Achillion;

 

   

certain other communications from Achillion to its stockholders; and

 

   

certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities, probabilities of success and prospects of Achillion, including certain financial forecasts, analyses and projections relating to Achillion prepared by management of Achillion and furnished to Centerview by Achillion for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Management Projections,” and which are collectively referred to in this summary of Centerview’s opinion as the “Internal Data.”

Centerview also participated in discussions with members of the senior management and representatives of Achillion regarding their assessment of the Internal Data. In addition, Centerview reviewed publicly available financial and stock market data for Achillion and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly available, of certain other transactions that Centerview deemed relevant, and conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.

Centerview assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of its opinion and, with Achillion’s consent, Centerview relied upon such information as being complete and accurate. In that regard, Centerview assumed, at Achillion’s direction, that the Internal Data (including, without limitation, the Management Projections) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Achillion as to the matters covered thereby and Centerview relied, at Achillion’s direction, on the Internal Data for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the Internal Data or the assumptions on which it was based. In addition, at Achillion’s direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of Achillion, nor was Centerview furnished with any such evaluation or appraisal, and was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of Achillion. Centerview assumed, at Achillion’s direction, that the final executed Merger Agreement and CVR Agreement would not differ in any respect material to Centerview’s analysis or opinion from the Execution Copies reviewed by Centerview. Centerview also assumed, at Achillion’s direction, that the Transaction will be consummated on the terms set forth in the Merger Agreement and in accordance with all applicable laws and other relevant documents

 

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or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or Centerview’s opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Transaction, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to Centerview’s analysis or Centerview’s opinion. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of Achillion, or the ability of Achillion to pay its obligations when they come due, or as to the impact of the Transaction on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.

Centerview’s opinion expressed no view as to, and did not address, Achillion’s underlying business decision to proceed with or effect the Transaction, or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to Achillion or in which Achillion might engage. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, as of the date of Centerview’s written opinion, to the holders of the shares of Achillion common stock (other than Excluded Shares) of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement and the CVR Agreement. For purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement, the CVR Agreement or the Transaction, including, without limitation, the structure or form of the Transaction, the form or terms of the CVR with respect to transferability, illiquidity or otherwise, or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or any other term or aspect of the Transaction to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, creditors or other constituencies of Achillion or any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of Achillion or any party, or class of such persons in connection with the Transaction, whether relative to the Merger Consideration to be paid to the holders of the shares of Achillion common stock (other than Excluded Shares) pursuant to the Merger Agreement or otherwise. Centerview’s opinion was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of, the date of Centerview’s written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview’s written opinion. Centerview’s opinion does not constitute a recommendation to any stockholder of Achillion or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter. Centerview’s financial advisory services and its written opinion were provided for the information and assistance of the Board of Directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction. The issuance of Centerview’s opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.

Summary of Centerview’s Financial Analysis

The following is a summary of the material financial analyses prepared and reviewed with the Board of Directors in connection with Centerview’s opinion, dated October 15, 2019. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Centerview may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Centerview’s view of the actual value of Achillion. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not

 

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constitute a complete description of the financial analyses performed by Centerview. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Centerview’s financial analyses and its opinion. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Achillion or any other parties to the Transaction. None of Achillion, Alexion, Merger Sub or Centerview or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of Achillion do not purport to be appraisals or reflect the prices at which Achillion may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 15, 2019 (the last trading day before the public announcement of the Transaction), and is not necessarily indicative of current market conditions. The implied per share equity value ranges described below were based on Achillion’s fully diluted shares outstanding calculated on a treasury stock method basis (taking into account outstanding in-the-money options) based on information provided by Achillion.

Analysis of Consideration

Centerview conducted an analysis of the Merger Consideration to be paid to the holders of shares of Achillion common stock (other than Excluded Shares) pursuant to the Merger Agreement and the CVR Agreement. Such consideration is equal, on a per share basis, to $6.30 upfront in cash together, and not separately, with one (1) CVR, which could result in an additional one-time payment of $1.00 in cash upon achievement of the clinical trial milestone and an additional one-time payment of $1.00 in cash upon achievement of the regulatory approval milestone, each as more fully described below in the section entitled “The Form of Contingent Value Rights Agreement,” beginning on page [●] of this proxy statement. For analytical purposes, assuming that CVR holders receive a $1.00 per CVR payment upon the achievement of the clinical trial milestone and a $1.00 per CVR payment upon the achievement of the regulatory approval milestone, based solely on the assessments of Achillion’s management as to the probability of success and the estimated timing of achievement of the milestones, and discounting the two probability-adjusted payments under the CVR back to the valuation date using the midpoint of a range of discount rates from 11% to 13% based on Centerview’s analysis of Achillion’s weighted average cost of capital, Centerview calculated an illustrative net present value for one (1) CVR of $1.14.

Solely for purposes of the financial analyses summarized below, the term “illustrative assumed per share merger consideration” refers to an aggregate assumed implied per share value of the merger consideration of $7.44 per share, equal, on a per share basis, to $6.30 upfront plus the estimated net present value of the CVR of $1.14 per CVR, based on the midpoint of the range of discount rates, as set forth above. However, there is no guarantee that the conditions triggering the CVR payment will be satisfied, and if triggered, when such conditions will be satisfied.

Selected Public Company Analysis

Centerview reviewed and compared certain financial information for Achillion to corresponding financial information for the following publicly traded biopharmaceutical companies that Centerview deemed comparable, based on its experience and professional judgment, to Achillion. Although none of the selected companies is directly comparable to Achillion, the companies listed below were chosen by Centerview, among other reasons, because they are publicly traded biopharmaceutical companies with certain operational, business and/or financial characteristics that, for purposes of Centerview’s analysis, may be considered similar to those of Achillion.

 

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However, because none of the selected companies is exactly the same as Achillion, Centerview believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected public company analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the operational, business and/or financial characteristics of Achillion and the selected companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis.

Using publicly available information obtained from SEC filings and other data sources as of October 15, 2019, Centerview calculated, for each selected company, the company’s enterprise value (calculated as the equity value (determined using the treasury stock method and taking into account outstanding in-the-money options, warrants, restricted stock units and other convertible securities) plus the book value of debt and certain liabilities less cash and cash equivalents), which is referred to, with respect to the selected companies, as “Enterprise Value.”

The selected companies are summarized below (dollars in millions):

 

Selected Companies

   Enterprise
Value
($)
 

Abeona Therapeutics Inc.

     71  

Apellis Pharmaceuticals, Inc.

     1,581  

AVROBIO, Inc.

     232  

ChemoCentryx, Inc.

     251  

Crinetics Pharmaceuticals, Inc.

     278  

Homology Medicines, Inc.

     338  

Krystal Biotech, Inc.

     471  

MeiraGTx Holdings plc

     268  

Rocket Pharmaceuticals, Inc.

     502  

Median

     278  

Based on its analysis and other considerations that Centerview deemed relevant in its professional judgment and experience, Centerview selected a reference range of Enterprise Values of $250 million to $450 million. In selecting this range of Enterprise Values, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics of Achillion and the selected companies that could affect their public trading values in order to provide a context in which to consider the results of the quantitative analysis. Applying this range of Enterprise Value and adding to it Achillion’s estimated net cash of $190 million as of December 31, 2019, as set forth in the Internal Data, resulted in an implied per share equity value range for the shares of approximately $3.11 to $4.43. Centerview then compared this range to the illustrative assumed per share merger consideration.

Selected Precedent Transactions Analysis

Centerview reviewed and compared certain information relating to the following selected biopharmaceutical transactions that Centerview, based on its experience and professional judgment, deemed relevant to consider in relation to Achillion and the Transaction. These transactions were selected, among other reasons, because their participants, size or other factors, for purposes of Centerview’s analysis, may be considered similar to the Transaction. Centerview used its experience, expertise and knowledge of these industries to select transactions that involved companies with certain operational, business and/or financial characteristics that, for purposes of this analysis, may be considered similar to those of Achillion.

However, because none of the selected transactions used in this analysis is identical or directly comparable to the Transaction, Centerview believed that it was inappropriate to rely solely on the quantitative results of the selected transaction analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the operational, business and/or financial characteristics

 

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of Achillion and each target company as well as the Transaction and the selected transactions that could affect the transaction values of each in order to provide a context in which to consider the results of the quantitative analysis.

Using publicly available information obtained from SEC filings and other data sources as of October 15, 2019, Centerview calculated, for each selected transaction, the transaction value (calculated as the offer value (determined using the treasury stock method and taking into account outstanding in-the-money options, warrants, restricted stock units and other convertible securities), plus the book value of debt and certain liabilities less cash and cash equivalents) implied for each target company based on the consideration payable in the applicable selected transaction, in each case excluding any contingent payments, which is referred to, with respect to the selected transactions, as “Transaction Value.”

The selected transactions considered in this analysis are summarized below (dollars in millions):

 

Date Announced

   Target      Acquiror      Transaction
Value

($)
 

10/10/19

     Ra Pharmaceuticals, Inc.        UCB S.A.        2,191  

05/08/19

     Therachon AG        Pfizer Inc.        340  

03/04/19

     Nightstar Therapeutics Limited        Biogen Inc.        719  

02/25/19

     Clementia Pharmaceuticals Inc.        Ipsen S.A.        933  

09/26/18

     Syntimmune, Inc.        Alexion Pharmaceuticals, Inc.        400  

04/11/18

     Wilson Therapeutics AB        Alexion Pharmaceuticals, Inc.        804  

05/23/17

     True North Therapeutics, Inc.        Bioverativ Inc.        400  

11/24/14

     Prosensa Holding N.V.        BioMarin Pharmaceutical Inc.        612  

12/28/11

     Enobia Pharma Inc.        Alexion Pharmaceuticals, Inc.        610  

Median

           612  

Based on its analysis and other considerations that Centerview deemed relevant in its professional judgment and experience, Centerview selected a reference range of Transaction Values of $400 million to $925 million. In selecting this range of Transaction Values, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics of Achillion and the target companies included in the selected transactions and other factors that could affect each transaction or other values in order to provide a context in which to consider the results of the quantitative analysis. Applying this range of Transaction Values and adding to it Achillion’s estimated net cash of $190 million as of December 31, 2019, as set forth in the Internal Data, resulted in an implied per share equity value range for the shares of approximately $4.10 to $7.54. Centerview then compared this range to the illustrative assumed per share merger consideration.

Discounted Cash Flow Analysis

Centerview performed a discounted cash flow analysis of Achillion based on the Management Projections, which reflect different assumptions and future financing needs of Achillion. For a detailed discussion of the Management Projections, please see the section entitled “The Merger — Certain Financial Projections,” beginning on page [●] of this proxy statement. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset or set of assets by calculating the “present value” of estimated future cash flows of the asset or set of assets. “Present value” refers to the current value of future cash flows and is obtained by discounting those future cash flows by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

In performing this analysis, Centerview calculated the estimated present value of the unlevered free cash flows of Achillion reflected in the Management Projections for the years from 2020 through 2038, based on a cash tax rate of 25% after utilization of federal net operating losses and credits (as set forth in the Management Projections), and an implied terminal value of Achillion, assuming that Achillion’s unlevered free cash flows would decline in perpetuity after December 31, 2038, at a rate of free cash flow decline year- over-year of 80.0%.

 

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The unlevered free cash flows were then discounted to present values using a range of discount rates from 11.0% to 13.0% using a mid-year convention. This range of discount rates was based on Centerview’s analysis of Achillion’s weighted average cost of capital. In performing its discounted cash flow analysis, Centerview adjusted for (i) net present value of tax savings from usage of federal net operating losses of $541 million as of December 31, 2018 plus $70 million in estimated 2019 losses, as set forth in the Management Projections, (ii) estimated net cash of $190 million as of December 31, 2019. See the section entitled “The Merger — Certain Financial Projections,” beginning on page [●] of this proxy statement. Centerview divided the results of each of the foregoing calculations by Achillion’s fully diluted shares outstanding (using the treasury stock method and taking into account outstanding in-the-money options) as of October 14, 2019 based on the Internal Data and adjusted for the cash to be received and shares to be issued in an assumed $150 million equity financing at a 10% discount to an illustrative 2020 price of $4.00 per share.

This analysis resulted in the implied per share equity value range for shares of Achillion’s common stock of $4.41 to $5.15.

Centerview then compared this range to the illustrative assumed per share merger consideration.

Other Factors

Centerview noted for the Board of Directors certain additional factors solely for informational purposes, including, among other things, the following:

 

   

historical closing trading prices of the shares during the 52-week period ended October 15, 2019 (the last trading day before the public announcement of the Transaction), which reflected low and high stock closing prices for Achillion during such period of approximately $1.31 to $4.82 per share;

 

   

stock price targets for the shares in publicly available Wall Street research analyst reports, which indicated low and high stock price targets for Achillion ranging from $5.00 to $11.00 per share; and

 

   

an analysis of premiums paid in the selected transactions involving publicly traded biopharmaceutical companies, as set forth above in “— Opinion of Achillion’s Financial Advisor — Summary of Centerview’s Financial Analysis — Selected Precedent Transaction Analysis,” for which premium data were available. The premiums in this analysis were calculated by comparing the per share acquisition price in each transaction to the closing price of the target company’s common stock for the date one day prior to the date on which the trading price of the target’s common stock was perceived to be affected by a potential transaction. Based on the analysis above and other considerations that Centerview deemed relevant in its professional judgment, Centerview applied a range of 50% to 70% to Achillion’s closing stock price on October 15, 2019 (the last trading day before the public announcement of the Transaction), of $3.65, which resulted in an implied price range of approximately $5.48 to $6.21 per share.

General

The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.

Centerview’s financial analyses and opinion were only one of many factors taken into consideration by the Board of Directors in its evaluation of the Transaction. Consequently, the analyses described above should not be viewed as determinative of the views of the Board of Directors or Achillion management with respect to the

 

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Merger Consideration or as to whether the Board of Directors would have been willing to determine that a different consideration was fair. For a background of the negotiations related to the Transaction, please see the section entitled “The Merger — Background of the Merger,” beginning on page [●] of this proxy statement, including a description of the September 30 Proposal. The consideration for the Transaction was determined through arm’s-length negotiations between Achillion and Alexion and was approved by the Board of Directors. Centerview provided advice to Achillion during these negotiations. Centerview did not, however recommend any specific amount of consideration to Achillion or the Board of Directors or that any specific amount of consideration constituted the only appropriate consideration for the Transaction.

Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two (2) years prior to the date of its written opinion, except for Centerview’s current engagement, Centerview had not been engaged to provide financial advisory or other services to Achillion, and Centerview did not receive compensation from Achillion during such period. In the two (2) years prior to the date of its written opinion, Centerview was not engaged to provide financial advisory or other services to Alexion or Merger Sub, and Centerview did not receive compensation from Alexion or Merger Sub during such period. Centerview may provide financial advisory and other services to or with respect to Achillion or Alexion or their respective affiliates in the future, for which Centerview may receive compensation. Certain (i) of Centerview’s and its affiliates’ directors, officers, members and employees, or family members of such persons, (ii) of Centerview’s affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, Achillion, Alexion, or any of their respective affiliates, or any other party that may be involved in the Transaction.

The Board of Directors selected Centerview as its financial advisor in connection with the Transaction based on Centerview’s reputation and experience. Centerview is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Transaction.

In connection with Centerview’s services as the financial advisor to the Board of Directors, Achillion has agreed to pay Centerview an aggregate fee of $16.5 million, which is payable contingent upon consummation of the Transaction. In addition, Achillion has agreed to reimburse certain of Centerview’s expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerview’s engagement.

Certain Financial Projections

Achillion, which does not yet have any marketed products, does not make public long-term projections as to future revenues, earnings or other results due to the uncertainty of the underlying assumptions and estimates. In its normal operating cadence, Achillion has traditionally provided forecast ranges for year and cash spend and cash balance. However, in connection with the Board of Director’s evaluation of the Merger and other strategic alternatives, Achillion management prepared certain long-range, risk-adjusted financial projections for the years 2020 through 2038 as a stand-alone company (the “Management Projections”).

The Management Projections were also provided to Centerview, Achillion’s financial advisor, and were relied upon by Centerview in connection with the rendering of Centerview’s fairness opinion to the Board of Directors and in performing the related financial analyses as described below under “— Opinion of Achillion’s Financial Advisor” and were the only financial projections with respect to Achillion used by Centerview in performing such financial analyses. The Management Projections were not provided to Alexion.

Achillion is electing to summarize the Management Projections in this proxy statement to provide holders of shares access to certain non-public, unaudited prospective financial information that was prepared for the Board of Directors for purposes of considering and evaluating Alexion’s proposal. Achillion makes and has made no representation to Alexion or Merger Sub in the Merger Agreement or otherwise, concerning any projected financial information.

 

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Cautionary Note About the Management Projections

The Management Projections, while necessarily presented with numerical specificity, were based on numerous variables and assumptions that were inherently uncertain and many of which were beyond Achillion’s control. The Management Projections reflect numerous estimates and assumptions made by Achillion’s management, based on information available at the time the Management Projections were developed, including with respect to industry performance and competition, regulatory conditions and general business, economic, market and financial conditions. In addition, the forecasts were based on certain internal assumptions about the probability of success and regulatory approval, launch timing, pricing, labeling, addressable markets, market growth, market share, competition, partnering, costs and other relevant factors relating to commercialization and profitability of Achillion’s product candidates, ACH-4471 (danicopan) and ACH-5228. In preparing the forecasts, Achillion management weighed the opportunity to enter previously undisclosed new indications beyond PNH and C3G against the operational complexity and capital formation required of clinical expansion and determined that the Company could manage expanding into one additional indication for ACH-4471 (danicopan) and one indication for ACH-5228. Achillion management selected an ophthalmology indication and a nephrology indication for ACH-4471 (danicopan) and ACH-5228, respectively. The probability of success attributed to all indications and partnerships in the forecasts are based on management assumptions, as well as typical success rates for programs based on similar stages of clinical development and other considerations.

Furthermore, Achillion made certain assumptions concerning future capital raises (including that it would be required to raise approximately $150 million in equity financing) and also determined that it would partner certain of its compounds on a territory and indication-specific basis. For valuation purposes, the upfront and milestone cash payments assumed from such partnerships are based on market norms for such transactions and are reflected as revenues in the period received. The U.S. generally accepted accounting principles (“GAAP”) accounting for such payments from third-parties would depend on the actual structure of the transaction which could include such payments being recognized as revenue over long periods of time.

As a result, there can be no assurance that the Management Projections accurately reflect future trends or accurately estimate the future market for Achillion’s product candidates. There can be no assurance of the approval, or timing of such approval, of Achillion’s product candidates, and it is possible that other therapeutic scenarios will be preferable. The Management Projections also reflect assumptions as to certain business decisions that are subject to change. Important factors that may affect actual results and result in the Management Projections not being achieved include, but are not limited to, the timing of regulatory approvals and introductions of new products, market acceptance of new products, success of clinical testing, availability of third-party reimbursement, impact of competitive products and pricing, the effect of regulatory actions, the effect of global economic conditions, the cost and effect of changes in tax and other legislations and other risk factors described in Achillion’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. In addition, the Management Projections may be affected by Achillion’s ability to achieve strategic goals, objectives and targets over the applicable periods. Further, the Management Projections cover multiple years and, by their nature, become subject to greater uncertainty with each successive year. Accordingly, there can be no assurance that the Management Projections will be realized, and actual results may vary materially from those shown.

In light of the foregoing factors and the uncertainties inherent in the Management Projections, stockholders are cautioned not to place undue, if any, reliance on the Management Projections. The Management Projections were not prepared with a view toward public disclosure. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that Achillion or any of its affiliates, advisors or representatives considered or consider the Management Projections to be predictive of actual future events, and the Management Projections should not be relied upon as such or construed as financial guidance. Neither Achillion nor any of its affiliates assumes any responsibility for the accuracy of this information. Neither Achillion nor any of its respective affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from the Management Projections, and none of them

 

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undertakes any obligation to update or otherwise revise or reconcile the Management Projections to reflect circumstances existing after the date the Management Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Management Projections are shown to be in error. Achillion does not intend to make publicly available any update or other revision to the Management Projections, except as otherwise required by law. Neither Achillion nor any of its respective affiliates, advisors, officers, directors or representatives has made or makes any representation or warranty to any holders of shares or other person regarding the ultimate performance of Achillion compared to the information contained in the Management Projections, the likelihood that the Management Projections will be achieved, the results of Achillion’s clinical trials, the effectiveness or marketability of Achillion’s product candidates or the overall future performance of Achillion. The Management Projections were prepared based on Achillion’s continued operation as a stand-alone company and do not take into account the effect of any business or strategic decision or action that has been or will be taken as a result of the execution of the Merger Agreement. The Management Projections are subjective in many respects and are thus subject to interpretation. Please refer to the section of this proxy statement captioned “Forward-Looking Statements,” beginning on page [●] of this proxy statement.

The Management Projections were not prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Achillion may not be comparable to similarly titled amounts used by other companies. In addition, the Management Projections were not prepared with the assistance of, or reviewed, compiled or examined by, independent accountants. The Management Projections are not being included in this proxy statement to influence any stockholder’s decision whether to vote in favor of the Merger, but instead are being included because the Management Projections were provided to the Board of Directors and to Centerview to evaluate the transactions contemplated by the Merger Agreement. The Management Projections may differ from publicly available analyst estimates, and the Management Projections do not take into account any events or circumstances after the date they were prepared, including the announcement of the Merger.

The following table provides a summary of the risk-adjusted Management Projections on a non-GAAP basis:

 

$MM

  2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

Total Partner Payments(1)

    10       —         133       —         —         10       15       —         —         —         —         —         —         —         —         —         —         —         —    

Total Revenues(2)

    10       —         133       24       46       106       175       229       282       338       389       417       432       440       448       454       378       343       173  

Total Gross Profit(3)

    10       —         133       23       45       103       169       221       273       328       377       405       420       428       435       441       366       331       167  

Operating Income(4)

    (60     (131     27       (51     (14     45       109       157       211       263       311       336       349       355       361       365       289       252       127  

Unlevered Free Cash Flow(5)

    (60     (131     21       (52     (15     32       80       116       157       196       232       252       262       266       270       273       218       190       102  

 

(1)

Total Partner Payments, as presented herein, reflects assumed upfront and/or milestone payments on a probability-adjusted basis.

(2)

Total Revenues, as presented herein, reflects Total Partner Payments, plus net product revenues, plus net royalty revenues.

(3)

Total Gross Profit, as presented herein, reflects Total Revenues, less costs of goods sold.

(4)

Operating Income, as presented herein, reflects Total Gross Profit, less research and development expenses, less sales and marketing expenses and less general and administrative expenses.

(5)

Unlevered Free Cash Flow, as presented herein, reflects Operating Income, less tax expense if profitable, plus depreciation and amortization, less capital expenditures, and less change in net working capital. Unlevered free cash flow is a non-GAAP financial measure.

ACHILLION DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE MANAGEMENT PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE MANAGEMENT FORECASTS ARE NO LONGER APPROPRIATE.

 

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Interests of Achillion’s Directors and Executive Officers in the Merger

When considering the recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. The Board of Directors was aware of and considered these interests to the extent that they existed at the time, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders.

Treatment of Equity-Based Awards

The Merger Agreement provides that Achillion’s Company Stock Options that are held by each director and each executive officer and that are outstanding immediately prior to the Effective Time will be subject to the following treatment at the Effective Time:

In the Money Options. Each In the Money Option that is (i) a Company Stock Option that is then outstanding, unexercised and vested (or which, pursuant to its terms or the terms of a contract in effect on October 15, 2019, shall become vested upon the consummation of the Merger), (ii) an unvested Company Stock Option held by an executive officer who has, at or prior to the Effective Time, delivered to Achillion and not revoked a non-competition agreement in the form attached to the Merger Agreement as Exhibit D, and (iii) a Company Stock Option that is then outstanding and unexercised, whether or not vested, that is held by a director, which, in each case, has a per share exercise price that is less than the Cash Merger Consideration, will be cancelled and converted into the right to receive both (i) a cash payment equal to (A) the excess of (x) the Cash Merger Consideration over (y) the exercise price payable per share under such In the Money Option, multiplied by (B) the total number of shares subject to such Company Stock Option immediately prior to the Effective Time (without regard to vesting) and (ii) one (1) CVR for each share subject to such In the Money Option immediately prior to the Effective Time (without regard to vesting).

Out of the Money Options. At the Effective Time, each Out of the Money Option that is (i) a Company Stock Option other than an In the Money Option that is then outstanding, unexercised and vested (or which, pursuant to its terms or the terms of a contract in effect on October 15, 2019, shall become vested upon the consummation of the Merger), (ii) an unvested Company Stock Option that is not an In the Money Option that is held by an executive officer who has, at or prior to the Effective Time, delivered to Achillion and not revoked a non-competition agreement, and (iii) a Company Stock Option other than an In the Money Option that is then outstanding and unexercised, whether or not vested, that is held by a director, will be cancelled and, except as described below, converted into the right to receive a cash payment, if any, from Alexion with respect to each share subject to the Out of the Money Option upon each Valuation Point which occurs after the Effective Time, equal to (i) the amount by which, as of the Valuation Point, the sum of the Per Share Value Paid exceeds the exercise price payable per share under such Out of the Money Option, less (ii) the amount of all payments previously received with respect to such Out of the Money Option. Any Out of the Money Options with an exercise price payable per share equal to or greater than $8.30 and any other Company Stock Options that are not vested as of the effective time and which do not vest pursuant to their respective terms or the terms of a contract in effect on October 15, 2019 that are held by an executive officer who has not, at or prior to the Effective Time, delivered to Achillion and not revoked a non-competition agreement will be cancelled at the Effective Time without any consideration payable therefor.

The following table sets forth, for each of our executive officers and the non-employee members of Achillion’s Board of Directors, (i) the number of vested and unvested In the Money Options held as of October 31, 2019, and (ii) the estimated cash consideration payable (on a pre-tax basis) in respect thereof, calculated by multiplying the excess of $6.30 over the exercise price of such In the Money Options by the total number of shares subject to such In the Money Options, assuming that the Effective Time occurs on October 31, 2019. Each share subject to an In the Money Option will also entitle the holder to receive one (1) CVR, with the total number of CVRs each

 

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individual is entitled to receive with respect to his or her Company Stock Options reflected in the table below. Each applicable Out of the Money Option will be eligible for a cash payment (deducting the applicable exercise price) as if the holder received one (1) notional (or “phantom”) CVR for each share subject to any applicable Out of the Money Option. For purposes of this table, the cash value that is assigned to each CVR is $2.00 (or a portion thereof in the case of CVR-related payments in respect of Out of the Money Options), which is the maximum (and only) amount payable under a CVR.

 

Name(1)

  Number of
Shares
Subject to
Vested In
the Money
Options

(#)
    Cash
Consideration
for Vested In
the Money
Options

($)
    Number of
Shares
Subject to
Unvested
In the
Money
Options

(#)
    Cash
Consideration
for Unvested
In the Money
Options

($)
    Number of
CVRs
Issued in
Respect of
In the
Money
Options

(#)
    Maximum
Cash
Payment
for CVRs
Issued in
Respect of
In the
Money
Options

($)
    Number of
Phantom
CVRs in
Respect of
Out of the
Money
Options

(#)
    Maximum
Cash
Payment
for
Phantom
CVRs in
Respect of
Out of the
Money
Options

($)
 

Non-Employee Directors

               

Nicole Vitullo

    154,625       501,936       22,375       81,404       177,000       354,000       50,000       37,000  

Jason S. Fisherman, M.D.

    174,625       562,336       22,375       81,404       197,000       394,000       50,000       37,000  

Kurt Graves

    239,625       366,236       22,375       81,404       262,000       524,000       30,000       22,800  

Michael D. Kishbauch

    110,875       364,186       22,375       81,404       133,250       266,500       30,000       22,800  

David Scheer

    174,625       562,336       22,375       81,404       197,000       394,000       50,000       37,000  

Robert L. Van Nostrand

    174,625       562,336       22,375       81,404       197,000       394,000       50,000       37,000  

Frank Verwiel, M.D.

    79,625       259,936       22,375       81,404       102,000       204,000       30,000       22,800  

Executive Officers

               

Joseph Truitt(2)

    799,578       2,326,516       1,851,188       6,631,565       2,650,766       5,301,532       242,000       168,980  

Brian Di Donato

    50,000       187,000       650,000       2,566,000       700,000       1,400,000       —         —    

Paul Firuta

    100,000       298,000       500,000       1,718,000       600,000       1,200,000       —         —    

Anthony Gibney

    125,000       471,250       575,000       2,237,750       700,000       1,400,000       —         —    

Martha Manning(2)

    173,437       477,383       326,563       1,167,267       500,000       1,000,000       110,000       166,100  

Dr. Steven Zelenkofske

    125,000       476,250       575,000       2,252,750       700,000       1,400,000       —         —    

 

(1)

Dr. Deshpande and Ms. Fenton, who were named executive officers in Achillion’s most recent Definitive Proxy Statement filed on April 15, 2019, are no longer employed at Achillion as of the date of this proxy statement and will not receive any compensation based on or otherwise related to the transactions contemplated by the Merger Agreement.

(2)

Notwithstanding the terms of the Merger Agreement, pursuant to Mr. Truitt’s and Ms. Manning’s employment agreements, Mr. Truitt and Ms. Manning are each entitled to, upon a change in control, immediate vesting and exercisability of 50% of the original number of shares subject to unvested option grants and unvested grants of restricted stock and restricted stock units (if any are outstanding) for such person.

Potential Severance Payments Upon a Qualifying Termination Following the Effective Time

Achillion previously has entered into employment agreements with each of its executive officers. Each employment agreement provides that upon a termination by Achillion without “cause,” a termination due to non-renewal by Achillion or a resignation by the executive officer for “good reason” (each as defined in the applicable employment agreement) within twelve (12) months following a change in control, the executive officer will be entitled to receive:

 

   

continued payment of the executive officer’s then-current base salary for a period of twelve (12) months (eighteen (18) months in the case of Mr. Truitt);

 

   

the target bonus for the fiscal year of termination (150% of the target bonus in the case of Mr. Truitt); and

 

   

continuation of medical and dental benefit coverage equal to the share of the premium for such coverage currently paid by Achillion until the end of the 12th month after the executive’s employment

 

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ends or the date the covered individual’s COBRA continuation coverage expires, except in the case of Mr. Truitt for whom the amount represents 18 months of coverage.

The Merger Agreement permits Achillion to amend the executive employment agreements so that severance may all be paid in a lump sum, instead of continued payment of base salary, to the extent permitted under Section 409A of the Code. The estimated value of severance payments and benefits for Messrs. Truitt, Firuta and Gibney and Dr. Zelenkofske is set forth below in the table entitled “Golden Parachute Compensation.” Based on the same assumptions set forth in the section below “Merger-Related Compensation” and applied in the table entitled “Golden Parachute Compensation,” Mr. Di Donato’s and Ms. Manning’s estimated cash severance payments would be $504,000 and $481,808, respectively, and the payment of COBRA premiums would be $7,690 and $20,899, respectively.

The closing of the Merger will constitute a change in control for purposes of the executive officers’ employment agreements. If the payments and benefits provided to the executive officer constitute “parachute payments” subject to the excise tax imposed by Section 4999 of the Code, then any such payments and benefits will be reduced to less than the amount that would incur such excise tax, if the net after-tax amount payable to the executive officer is 110% greater than the net after-tax amount payable without the reduction. Pursuant to the Merger Agreement, Achillion may implement tax reimbursements in respect of any excise and related taxes imposed on any employee, including any executive officer, under Section 4999 of the Code up to an aggregate limit of $1.5 million. The estimated value of the excise tax reimbursement payment for Messrs. Truitt, Firuta and Gibney and Dr. Zelenkofske is set forth in the section below “Merger-Related Compensation” and applied in the table entitled “Golden Parachute Compensation.” Based on the same assumptions set forth in the section below “Merger-Related Compensation” and applied in the table entitled “Golden Parachute Compensation,” the estimated excise tax reimbursement payment for Mr. Di Donato and Ms. Manning would be $300,711 and $0, respectively (for purposes of this calculation, Achillion has assigned an estimated value to Mr. Di Donato’s non-competition covenant). The actual amount of the excise tax reimbursement for each executive officer, if any, would not be determinable until after the consummation of the transaction.

2019 Annual Bonus

Achillion may pay annual bonuses to its executive officers and other eligible employees in respect of 2019 at the level determined by the Board of Directors. In the event that the Closing occurs prior to Achillion paying the 2019 annual bonuses during the first calendar quarter of 2020, Alexion will pay to each executive officer and other eligible employees a cash bonus in respect of 2019 in an amount equal to the cash bonus payable under the applicable Achillion annual cash incentive plan or program based on the greater of target or actual level of achievement of the applicable performance criteria.

As of the date of the filing of this proxy statement, the achievement of the applicable performance criteria in respect of the 2019 annual bonus has not yet been determined. The value of the 2019 annual bonus assuming target level of performance for Messrs. Truitt, Firuta and Gibney and Dr. Zelenkofske is set forth below in the table entitled “Golden Parachute Compensation.” Based on the same assumptions set forth in the section below “Merger-Related Compensation” and applied in the table entitled “Golden Parachute Compensation,” Mr. Di Donato’s and Ms. Manning’s 2019 annual bonus assuming target level of performance would be $144,000 and $124,913, respectively.

Merger-Related Compensation

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation that is based on or otherwise related to the Merger for each of our executive officers who are designated as “named executive officers” in the Definitive Proxy Statement filed on April 15, 2019. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the Merger-related compensation that will, or may be, payable to our named executive

 

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officers. The amounts set forth in the table below are based on multiple assumptions that may or may not actually prove correct, including assumptions described in this proxy statement and in the footnotes to the table below. As a result, the actual amounts, if any, to be received by a named executive officer in connection with the Merger may differ materially from the amounts set forth below.

The table below sets forth, for purposes of this golden parachute disclosure, the amount of payments and benefits that each of Achillion’s named executive officers would receive, assuming that (i) the Effective Time occurs on October 31, 2019 (which is the assumed date solely for purposes of this golden parachute compensation disclosure); (ii) each of Achillion’s named executive officers experiences a qualifying termination of employment (i.e., a termination of employment without “cause” or for “good reason” as such terms are defined in the applicable employment agreement) at the Effective Time; (iii) the unvested Stock Options outstanding as of October 31, 2019 will be cancelled in exchange for a cash payment equal to $6.30 per share (less the applicable Stock Option exercise price) and a corresponding CVR cash payment (or corresponding phantom CVR cash payment in respect of Out of the Money Options) equal to $2.00 (or a portion thereof in the case of CVR-related payments in respect of Out of the Money Options), which is the maximum amount payable under each CVR (or phantom CVR); (iv) no named executive officer receives any additional equity grants or other awards on or prior to the Effective Time; and (v) no named executive officer enters into any new agreement with Achillion or is otherwise legally entitled to, prior to the Effective Time, additional compensation or benefits. Each of the potential payments and benefits described below is also discussed with additional detail in the section entitled “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page [●] of this proxy statement. The amounts in respect of the “golden parachute” compensation set forth in the table below are subject to a non-binding advisory vote of Achillion’s shareholders, as described in the section of this proxy statement titled “Proposal 3 — Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements” beginning on page [●].

Golden Parachute Compensation

 

Name(1)

   Cash
($)(2)
     Equity
($)(3)
     Pension /
NQDC

($)
     Perquisites /
Benefits

($)(4)
     Tax
Reimbursement
($)(5)
     Total
($)
 

Joseph Truitt

     1,658,300        12,102,077        —          31,349        679,294        14,471,020  

Paul Firuta

     756,000        2,918,000        —          20,899        478,245        4,173,144  

Anthony Gibney

     648,000        3,637,750        —          20,899        —          4,306,649  

Dr. Steven Zelenkofske

     774,000        3,652,750        —          20,899        —          4,447,649  

 

(1)

In accordance with relevant SEC rules, this table represents compensation that may be paid to Achillion’s named executive officers. Dr. Deshpande and Ms. Fenton were named executive officers in Achillion’s most recent Definitive Proxy Statement filed on April 15, 2019. However, this table does not include Dr. Deshpande and Ms. Fenton because these individuals are no longer employed at Achillion as of the date of this proxy statement and will not receive any compensation based on or otherwise related to the transactions contemplated by the Merger Agreement.

(2)

The amounts in this column represent the cash severance payments that would be payable to each named executive officer upon a qualifying termination on October 31, 2019 under their respective employment agreements and the payment of the 2019 annual bonus assuming target level of performance pursuant to the terms of the Merger Agreement. The cash severance payments consist of a lump sum payment equal to (a) twelve (12) months of each executive’s base salary (eighteen (18) months for Mr. Truitt) at the time of termination plus (b) the target bonus for the fiscal year of termination (150% of the target bonus for Mr. Truitt). The cash severance payment amounts in this column are considered “double-trigger,” i.e., such amounts will only be vested upon a qualifying termination of employment following the Effective Time.

 

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  The 2019 annual bonus payments are considered “single-trigger,” i.e., such amounts will be vested upon the Effective Time. The following table provides the individual components represented in the column:

 

Name

   Cash Severance
Payment

($)
     2019 Target
Annual Bonus

($)
 

Joseph Truitt

     1,341,060        317,240  

Paul Firuta

     588,000        168,000  

Anthony Gibney

     504,000        144,000  

Dr. Steven Zelenkofske

     602,000        172,000  

 

(3)

The amounts in this column represent the estimated pre-tax amounts payable to each named executive officer in cancellation of unvested Stock Options (assuming the named executive officer executes and does not revoke a noncompetition agreement) and the maximum amount payable under corresponding CVRs held by such named executive officer at the Effective Time. The value of Stock Options is calculated by multiplying the excess of $6.30 over the applicable per share exercise price of the Stock Option by the number of shares of Achillion common stock subject to the Stock Option. The value of the corresponding CVR (or a portion thereof in the case of CVR-related payments in respect of Out of the Money Options) is calculated based on $2.00, which is the maximum amount payable under each CVR (or phantom CVR). The amounts in this column are considered “single-trigger.” The following table provides the individual equity award components represented in the column:

 

Name

   Unvested In the
Money Options

($)
     Corresponding
CVRs

($)
     Phantom CVRs
In Respect of
Out of the
Money Options

($)
 

Joseph Truitt

     6,631,565        5,301,532        168,980  

Paul Firuta

     1,718,000        1,200,000        —    

Anthony Gibney

     2,237,750        1,400,000        —    

Dr. Steven Zelenkofske

     2,252,750        1,400,000        —    

 

(4)

The amounts in this column represent payment for the continuation of medical and dental benefit coverage equal to the share of the premium for such coverage currently paid by Achillion until the end of the 12th month after the executive’s employment ends or the date the covered individual’s COBRA continuation coverage expires, except in the case of Mr. Truitt for whom the amount represents 18 months of coverage. For purposes of this table, the value of the continuation of benefits is based on premium amounts as of October 31, 2019.

(5)

The amounts in this column represent the estimated excise tax reimbursement each named executive officer could be entitled to receive upon the assumed Effective Time of October 31, 2019, if each named executive officer experiences a qualifying termination of employment at the Effective Time so that on a net after-tax basis the executive would be in the same economic position as if no such excise tax had been applied to the executive officer. Notwithstanding the foregoing, the named executive officers will be eligible for such reimbursement only if the aggregate reimbursement for all employees of Achillion, including the named executive officers, will not exceed $1.5 million. For purposes of this calculation, Achillion has assigned an estimated value to Mr. Truitt’s non-competition covenant. In addition to the assumptions described immediately prior to the tables above, the amounts in this column are calculated based on a 20% excise tax rate. The actual amount of the excise tax reimbursement for each named executive officer, if any, will not be determinable until after the consummation of the transaction.

Passive Ownership Interest in Alexion

One of the members of the Board of Directors may be deemed to hold a passive beneficial ownership interest in Alexion with an aggregate value of approximately $13,100 as of the date of entry into the Merger Agreement.

 

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Following identification and discussion, and prior to the entry into the Merger Agreement, the Board of Directors determined such beneficial ownership did not constitute a material conflict of interest with respect to the proposed transaction with Alexion.

Indemnification Arrangements

For six (6) years after the Effective Time, Alexion will, or will cause the Surviving Corporation to, maintain officers’ and directors’ liability insurance and fiduciary liability insurance in respect of acts or omissions occurring prior to the Effective Time covering each such person currently covered by Achillion’s officers’ and directors’ liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on October 15, 2019, subject to limitations.

From and after the Effective Time through the sixth anniversary of the Effective Time, Alexion will cause the Surviving Corporation to fulfill and honor in all respects the obligations of Achillion pursuant to: (i) each indemnification agreement in effect between Achillion and any person who is now, or has been at any time prior to October 15, 2019, or who becomes prior to the Effective Time, a director or officer of Achillion; and (ii) any indemnification provision and any exculpation provision and advancement of expenses provision set forth in the certificate of incorporation or by-laws of Achillion as in effect on October 15, 2019.

Executive Officers Following the Merger

As of the date of this proxy statement, none of our executive officers has entered into any new agreement or arrangement with Alexion or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, Alexion or any of its affiliates. Prior to or following the Effective Time (but in any case following the time Alexion agreed upon the Per Share Merger Consideration), it is anticipated that certain of our executive officers may be identified by Alexion and thereafter engage in negotiations regarding compensation, benefits and the right to participate in the equity incentive programs of Alexion and may enter into definitive agreements with regarding employment or the right to participate in the equity incentive programs of Alexion or one or more of its affiliates on a going-forward basis following completion of the Merger. The Merger is not conditioned upon any Achillion executive officer agreeing to remain with the Surviving Corporation or any of its affiliates.

Financing of the Merger

The Merger is not conditioned upon the receipt of financing by Alexion. Alexion has represented to Achillion that it will have sufficient cash, available lines of credit or other sources of immediately available funds to enable Alexion to pay the aggregate Cash Merger Consideration and to perform its obligations with respect to the transactions contemplated by the Merger Agreement.

Closing and Effective Time

The closing of the transactions contemplated by the Merger Agreement will take place as soon as practicable (and, in any event, within two business days) after the satisfaction or waiver in accordance with the Merger Agreement of all of the conditions to closing of the transactions contemplated by the Merger Agreement (as described under the caption “The Merger Agreement — Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions.

Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262.

 

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The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex D and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Only a holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of common stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of our common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Under Section 262, holders of shares of common stock who (i) do not vote in favor of the adoption of the Merger Agreement; (ii) continuously are the record holders of such shares through the Effective Time; and (iii) otherwise follow the procedures set forth in Section 262 will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than twenty (20) days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Achillion’s notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex D. In connection with the Merger, any holder of shares of common stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so should review Annex D carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner will result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Merger Consideration. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, Achillion believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.

Stockholders wishing to exercise the right to seek an appraisal of their shares of common stock must do ALL of the following:

 

   

the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;

 

   

the stockholder must deliver to Achillion a written demand for appraisal before the vote on the Merger Agreement at the Special Meeting;

 

   

the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and

 

   

the stockholder or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within one hundred twenty (120) days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote its shares.

 

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Filing Written Demand

Any holder of shares of common stock wishing to exercise appraisal rights must deliver to Achillion, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to the stockholders, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting of Achillion’s stockholders will constitute a waiver of appraisal rights.

Only a holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of common stock should be executed by or on behalf of the holder of record and must reasonably inform Achillion of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

Achillion Pharmaceuticals, Inc.

Attention: Martha E. Manning, Esq., Corporate Secretary

1777 Sentry Parkway West, VEVA Building #14 Suite 200

Blue Bell, Pennsylvania 19422

Any holder of shares of common stock may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to Achillion a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than sixty (60) days after

 

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the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just.

Notice by the Surviving Corporation

If the Merger is completed, within ten (10) days after the Effective Time, the Surviving Corporation will notify each holder of shares of common stock who has made a written demand for appraisal pursuant to Section 262 and who has not voted in favor of the adoption of the Merger Agreement that the Merger has become effective and the effective date thereof.

Filing a Petition for Appraisal

Within one hundred twenty (120) days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of common stock who has complied with Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and holders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of common stock. Accordingly, any holders of shares of common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of common stock within the time and in the manner prescribed in Section 262. The failure of a holder of common stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.

Within one hundred twenty (120) days after the Effective Time, any holder of shares of common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which Achillion has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within ten (10) days after receipt of the written request for such a statement or within ten (10) days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statements. As noted above, however, the demand for appraisal can only be made by a stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within twenty (20) days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded appraisal of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings.

Determination of Fair Value

After determining the holders of common stock entitled to appraisal, the Delaware Court of Chancery will appraise the “fair value” of the shares of common stock, exclusive of any element of value arising from the

 

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accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and does not in any manner address, fair value under Section 262. Although Achillion believes that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Neither Achillion nor Alexion anticipates offering more than the Merger Consideration to any stockholder exercising appraisal rights, and each of Achillion and Alexion reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of common stock is less than the Merger Consideration. If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised.

If any stockholder who demands appraisal of his, her or its shares of common stock under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s right to appraisal, the stockholder’s shares of common stock will be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within one hundred twenty (120) days after the Effective Time or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Merger Consideration in accordance with Section 262.

From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of

 

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the Merger, either within sixty (60) days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder who commenced the proceeding or joined that proceeding as a named party without the approval of the court.

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Accounting Treatment

The Merger is anticipated to be accounted for as an acquisition of a business, pending final assessment upon closing of the Merger. Alexion anticipates it will record assets acquired and liabilities assumed from Achillion primarily at their respective fair values at the date of completion of the Merger. Any excess of the Merger Consideration is anticipated to be recorded to goodwill.

The financial condition and results of operations of Alexion after completion of the Merger will reflect Achillion’s balances and results after completion of the Merger but will not be restated retroactively to reflect the historical financial condition or results of operations at Achillion.

Certain U.S. Federal Income Tax Considerations of the Merger

The following discussion is a summary of certain U.S. federal income tax considerations relating to the Merger that are relevant to U.S. Holders and Non-U.S. Holders (each as defined below) of shares of common stock whose shares are exchanged for cash and CVRs pursuant to the Merger. This discussion is for general information only and is not tax advice. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the “IRS”), and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect.

This discussion is limited to holders who hold their shares of common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not describe any of the tax considerations arising under the laws of any state, local or foreign tax jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation (e.g., estate or gift taxation) or the alternative minimum tax or the Medicare net investment income surtax that may be relevant or applicable to a particular holder in connection with the Merger and the receipt of, and payments with respect to, CVRs. For purposes of this discussion, a “holder” means either a U.S. Holder or a Non-U.S. Holder (each as defined below) or both, as the context may require.

This discussion does not address all of the tax considerations that may be relevant to holders in light of their particular circumstances. For example, this discussion does not address:

 

   

holders who may be subject to special treatment under U.S. federal income tax laws, such as banks or other financial institutions; tax-exempt organizations (including private foundations); S corporations or any other entities or arrangements treated as partnerships or other pass-through entities for U.S. federal income tax purposes and holders who hold shares through such S corporations, partnerships or other pass-through entities; insurance companies; retirement plans; mutual funds; dealers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; controlled foreign corporations; passive foreign investment companies; entities subject to the U.S. anti-inversion rules; or certain former citizens or long-term residents of the United States;

 

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holders holding the shares as part of a hedging, constructive sale or conversion, straddle or other integrated transaction;

 

   

holders that own or have owned within the past five years (or are deemed to own or have owned within the past five years) five percent (5%) or more of the outstanding shares;

 

   

holders that received their shares of common stock in a compensatory transaction;

 

   

holders who own an equity interest, actually or constructively, in Alexion or the Surviving Corporation following the Merger;

 

   

U.S. Holders whose “functional currency” is not the U.S. dollar;

 

   

holders who hold their common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States; or

 

   

holders that do not vote in favor of the Merger and who properly demand appraisal of their shares under Section 262 of the DGCL.

If a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of common stock, then the U.S. federal income tax considerations applicable to a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding shares of common stock and partners therein should consult their tax advisors regarding the U.S. federal income tax considerations applicable to them relating to the Merger and the receipt of, and payments with respect to, CVRs.

No ruling has been or will be obtained from the IRS regarding the U.S. federal income tax considerations of the Merger described below. No assurance can be given that the IRS will agree with the views expressed in this discussion, or that a court will not sustain any challenge by the IRS in the event of litigation.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE MERGER AND THE RECEIPT OF, AND PAYMENTS WITH RESPECT TO, CVRS IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSIDERATIONS ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.

U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of common stock that is for U.S. federal income tax purposes:

 

   

a citizen or individual resident of the United States;

 

   

a corporation, or other entity classified as a corporation, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust (1) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions; or (2) that has in effect a valid election under applicable Treasury Regulations to be treated as a U.S. person.

Receipt of Cash and CVRs

The receipt of cash and CVRs by a U.S. Holder in exchange for shares of common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. The amount of gain or loss a U.S. Holder

 

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recognizes, and the timing and potential character of a portion of such gain or loss, depends on the U.S. federal income tax treatment of the CVRs, with respect to which there is a significant amount of uncertainty. The installment method of reporting any gain attributable to the receipt of a CVR generally will not be available with respect to the disposition of shares of Achillion common stock of pursuant to the Merger because such shares are traded on an established securities market.

There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of the CVRs in connection with the Merger. The receipt of the CVRs as part of the Merger consideration might be treated as a “closed transaction” or as an “open transaction” for U.S. federal income tax purposes, each discussed below.

Pursuant to Treasury Regulations addressing contingent payment obligations analogous to the CVRs, if the fair market value of the CVRs is “reasonably ascertainable,” a U.S. Holder should treat the transaction as a “closed transaction” and treat the fair market value of the CVRs as part of the consideration received in the Merger for purposes of determining gain or loss. On the other hand, if the fair market value of the CVRs cannot be reasonably ascertained, a U.S. Holder should treat the transaction as an open transaction for purposes of determining gain or loss. These Treasury Regulations state that only in “rare and extraordinary” cases would the value of contingent payment obligations not be reasonably ascertainable. The following sections discuss the U.S. federal income tax considerations relating to the receipt of cash and CVRs in exchange for shares of common stock in the event it is treated as an open transaction and, alternatively, in the event it is treated as a closed transaction. There is no authority directly addressing whether contingent payment rights with characteristics similar to the rights under a CVR should be treated as “open transactions” or “closed transactions,” and such question is inherently factual in nature. Accordingly, U.S. Holders are urged to consult their own tax advisors regarding this issue. The CVRs also may be treated as debt instruments for U.S. federal income tax purposes. However, as such treatment is unlikely, the discussion below does not address the tax considerations relating to such a characterization. We urge you to consult your own tax advisor with respect to the proper characterization of the receipt of, and payments made with respect to, a CVR.

Treatment as Open Transaction

If the transaction is treated as an “open transaction” for U.S. federal income tax purposes, the fair market value of the CVRs would not be treated as additional consideration for shares of common stock at the time the CVRs are received in the Merger, and the U.S. Holder would have no tax basis in the CVRs. Instead, the U.S. Holder would take payments under the CVRs into account when made or deemed made in accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes. A portion of such payments would be treated as interest income under Section 483 of the Code (as discussed below) and the balance, in general, as additional consideration for the disposition of shares of common stock. Payments of cash pursuant to the Merger, plus the portion of payments on the CVRs not treated as imputed interest under Section 483 of the Code, will generally first be applied to reduce a U.S. Holder’s adjusted tax basis in the shares of common stock. A U.S. Holder will then recognize capital gain to the extent of any cash received pursuant to the Merger or the portion of CVR payments not so treated as imputed interest received after the U.S. Holder’s adjusted tax basis has been reduced to zero. A U.S. Holder will recognize capital loss to the extent of any remaining basis after the basis reduction described in the previous sentence, although it is possible that such holder may not be able to recognize such loss until the resolution of all contingencies under the CVRs or possibly until such holder’s abandonment of the holder’s CVRs. Gain or loss recognized in the transaction must be determined separately for each identifiable block of shares of common stock (i.e., shares of common stock acquired at the same cost in a single transaction). Any such capital gain or loss will be long-term if the shares of common stock were held for more than one year prior to such disposition. The deductibility of capital losses is subject to certain limitations.

A CVR payment may be treated as a payment under a contract for the sale or exchange of shares of common stock to which Section 483 of the Code applies if at least one payment is due more than one year after the consummation of the Merger. If Section 483 of the Code applies, a portion of any CVR payment that is due more than six months after the consummation of the Merger will be treated as interest and subject to U.S. federal

 

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income tax as ordinary income. The portion of any payment made with respect to a CVR treated as imputed interest under Section 483 of the Code will be determined at the time such payment is made and generally should equal the excess of (1) the amount of the CVR payment over (2) the present value of such amount as of the Effective Time, calculated using the applicable federal rate as the discount rate. The applicable federal rate is published monthly by the IRS. The relevant applicable federal rate will be the lower of the lowest applicable federal rate in effect during the three month period ending with the month that includes the date on which the Merger Agreement was signed or the lowest applicable federal rate in effect during the three month period ending with the month that includes the date of the consummation of the Merger. The maturity range of the relevant applicable federal rate will correspond to the period from the date of the consummation of the Merger to the date the amount is received or deemed received. A U.S. Holder must include in its taxable income interest imputed pursuant to Section 483 of the Code using such holder’s regular method of accounting for U.S. federal income tax purposes.

Treatment as Closed Transaction

If the receipt of the CVRs is treated as, or determined to be, part of a closed transaction for U.S. federal income tax purposes, then a U.S. Holder of shares of common stock generally would recognize capital gain or loss, if any, in the same manner as if the transaction were an open transaction, except that a U.S. Holder would take into account the “reasonably ascertainable” fair market value of the CVR determined on the date of the consummation of the Merger as an additional amount realized for purposes of calculating gain or loss with respect to the exchange of shares of common stock pursuant to the Merger. It is possible that the trading value of Achillion’s common stock would be considered along with other factors in determining whether the value of the CVR is reasonably ascertainable. A U.S. Holder’s initial tax basis in a CVR received in the Merger would equal the fair market value of such CVR as determined for U.S. federal income tax purposes. The holding period for a CVR would begin on the day following the date of the Effective Time. There is no authority directly addressing the U.S. federal income tax treatment of receiving payments on the CVRs and, therefore, the amount, timing and character of any gain, income or loss with respect to the CVRs would be uncertain. For example, payments with respect to the CVRs could be treated as payments with respect to a sale or exchange of a capital asset or as giving rise to ordinary income. In addition, it is unclear how a U.S. Holder of the CVRs would recover its adjusted tax basis with respect to payments thereon. It is also possible that, were a payment to be treated as being with respect to the sale of a capital asset, a portion of such payment would constitute imputed interest under Section 483 of the Code (as described above under “Treatment as Open Transaction”). Additionally, a U.S. Holder may recognize loss to the extent of any remaining basis after the expiration of any right to cash payments under such U.S. Holder’s CVR.

Non-U.S. Holders

For purposes of this discussion, the term “Non-U.S. Holder” means a beneficial owner of shares of common stock that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

In general, any gain realized by a Non-U.S. Holder pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case the Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder (as described above under “U.S. Holders”), except that, if the Non-U.S. Holder is a corporation, an additional branch profits tax may apply at a rate of 30% (or a lower rate under an applicable income tax treaty); or

 

   

such Non-U.S. Holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year in which the gain is realized, and certain other specified conditions are met, in which case such gain (net of certain U.S. source losses) will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable income tax treaty).

 

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Generally, if payments are made to a Non-U.S. Holder with respect to a CVR, such Non-U.S. Holder may be subject to withholding at a rate of 30% (or a lower rate under an applicable income tax treaty) of the portion of any such payments treated as interest income under Section 483 of the Code (as described above under “Treatment as Open Transaction”), unless such Non-U.S. Holder establishes its entitlement to exemption from or a lower rate of withholding under an applicable income tax treaty by providing the appropriate documentation (generally, IRS Form W-8BEN or W-8BEN-E) to the applicable withholding agents.

Non-U.S. Holders should consult their own tax advisors to determine the U.S. federal, state, local and other tax considerations that may be relevant to them in light of their particular circumstances.

Foreign Account Tax Compliance Act (FATCA)

Withholding at a rate of 30% generally will be required in certain circumstances on interest (including payments treated as interest income under Section 483 of the Code) in respect of CVRs held by or through certain non-U.S. financial institutions (including investment funds), unless such institution (i) enters into, and complies with, an agreement with the IRS to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments or (ii) if required under an intergovernmental agreement between the U.S. and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. authorities. An intergovernmental agreement between the U.S. and an applicable foreign country may modify these requirements. Accordingly, the entity through which the CVR is held will affect the determination of whether such withholding is required. Similarly, in certain circumstances, interest (including payments treated as interest income under Section 483 of the Code) in respect of the CVRs held by a holder that is a non-financial non-U.S. entity that does not qualify under certain exemptions generally will be subject to withholding at a rate of 30%, unless such entity either (i) certifies to the payor that such entity does not have any “substantial United States owners” or (ii) provides certain information regarding the entity’s “substantial United States owners,” which the payor will then in turn be required to provide to the U.S. Department of the Treasury. Holders should consult their tax advisors regarding the possible implications of these rules on their receipt of, and payments with respect to, CVRs.

Information Reporting and Backup Withholding

Information reporting and backup withholding generally will apply to payments to a holder pursuant to the Merger, unless such holder is an entity that is exempt from information reporting and, when required, properly demonstrates its eligibility for exemption. In addition, payments with respect to a CVR may be subject to information reporting and backup withholding. Any payment to a U.S. Holder that is subject to information reporting generally will also be subject to backup withholding, currently at a rate of 24%, unless such U.S. Holder (i) provides the appropriate documentation (generally, IRS Form W-9) to the applicable withholding agent certifying that, among other things, its taxpayer identification number is correct, or otherwise establishes an exemption and (ii) with respect to payments on the CVRs, provides the rights agent with the certification documentation in clause (i) of this sentence or otherwise establishes an exemption from backup withholding.

The information reporting and backup withholding rules that apply to payments to a holder pursuant to the Merger generally will not apply to payments to a Non-U.S. Holder if such Non-U.S. Holder certifies under penalties of perjury that it is not a U.S. person (generally by providing an IRS Form W-8BEN or W-8BEN-E or other applicable IRS Form W-8) or otherwise establishes an exemption. Non-U.S. Holders should consult their own tax advisors to determine which IRS Form W-8 is appropriate.

Certain stockholders (including corporations) generally are not subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is properly and timely furnished by such U.S. Holder to the IRS.

 

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Tax information provided to a U.S. Holder and the IRS on IRS Form 1099-B for the year of the Merger may reflect only the cash amounts paid to the U.S. Holder on the Merger and not the fair market value of the U.S. Holder’s interest in payments made (or to be made) on the CVRs. Accordingly, a U.S. Holder that treats the Merger as a “closed transaction” for U.S. federal income tax purposes may receive an IRS Form 1099-B reporting an amount received that is less than the amount such U.S. Holder will realize in the year of the Merger. In addition, any IRS Form 1099-B a U.S. Holder receives with respect to payments on the CVRs may reflect the entire amount of the CVR payments paid to the U.S. Holder (except imputed interest) and therefore may not take into account the fact that the U.S. Holder already included the value of the such payments in such U.S. Holder’s amount realized in the year of the Merger. As a result, U.S. Holders reporting under this method should not rely on the amounts reported to them on IRS Forms 1099-B with respect to the Merger. U.S. Holders are urged to consult their tax advisors regarding how to accurately report their income under this method.

THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE DISCUSSION OF THE POTENTIAL TAX CONSIDERATIONS OF THE OFFER OR THE MERGER OR THE RECEIPT OF, AND PAYMENTS WITH RESPECT TO, CVRS. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. INCOME, ESTATE AND OTHER TAX CONSIDERATIONS RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES. NOTHING IN THIS SUMMARY IS INTENDED TO BE, OR SHOULD BE CONSTRUED AS, TAX ADVICE.

Regulatory Approvals Required for the Merger

Achillion and Alexion have agreed to use their reasonable best efforts to obtain all necessary regulatory approvals required to consummate the Merger and to fully carry out the purposes of the Merger Agreement. These approvals include the expiration or termination of the waiting period under the HSR Act.

HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder, the Merger cannot be completed until Achillion and Alexion file a notification and report form with the United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “DOJ”) under the HSR Act and the waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of the waiting period following the parties’ filing of their respective HSR Act notification forms (typically a thirty (30) day period) or the early termination of that waiting period. Achillion and Alexion have agreed to make the necessary filings with the FTC and the Antitrust Division of the DOJ on November 12, 2019.

Assuming the filings are made on November 12, 2019, the waiting period under the HSR Act is scheduled to expire at 11:59 p.m. (Eastern time in the United States) on December 12, 2019. However, before that time, the DOJ or the FTC can choose to shorten the waiting period by granting early termination or may extend the waiting period by requesting additional information or documentary material from the parties. If such request were made, the waiting period would be extended until 11:59 p.m. (Eastern time in the U.S.) on the 30th day after certification of substantial compliance by the parties with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act rules. The DOJ or the FTC may also request that the parties agree not to consummate the merger for some period of time after the expiration or termination of the relevant HSR Act waiting period.

At any time before or after consummation of the Merger, notwithstanding the termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, and

 

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notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

Other Regulatory Approvals

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained, and there may be a substantial period of time between the approval by stockholders and the completion of the Merger.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

THE MERGER AGREEMENT

Explanatory Note Regarding the Merger Agreement

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement. Capitalized terms used in this section but not defined in this proxy statement have the meaning ascribed to them in the Merger Agreement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by Achillion, Alexion and Merger Sub in connection with negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and in some cases were qualified by confidential matters disclosed to Alexion and Merger Sub by Achillion in connection with the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk among Achillion, Alexion and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Achillion, Alexion or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after October 15, 2019. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Achillion, Alexion and

 

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Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Achillion, Alexion, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Achillion and our business.

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

The Merger Agreement provides that, at the Effective Time, (1) Merger Sub will be merged with and into Achillion in accordance with Delaware law, with Achillion continuing as a wholly owned subsidiary of Alexion; and (2) the separate corporate existence of Merger Sub will thereupon cease.

Effective as of, and immediately following, the Effective Time, the board of directors of the Surviving Corporation will consist of the directors of Merger Sub, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until the earlier of their death, resignation or removal or until their successors are duly elected and qualified, as the case may be. From and after the Effective Time, the officers of Merger Sub at the Effective Time will be the officers of the Surviving Corporation, until the earlier of their death, resignation or removal or until their successors have been duly elected or appointed and qualified, as the case may be. At the Effective Time, the certificate of incorporation of Achillion as the Surviving Corporation will be amended to be identical to the certificate set forth in Exhibit A to the Merger Agreement until changed or amended in accordance with applicable law and the applicable provisions of such certificate, and the bylaws of the Surviving Corporation, without any further action on the part of Achillion or Merger Sub, will be the bylaws of Merger Sub (except references to Merger Sub’s name will be replaced by references to “Achillion Pharmaceuticals, Inc.”).

Closing and Effective Time

The closing of the Merger will take place at 10:00 a.m., Boston time, as soon as practicable (and, in any event, within two (2) business days) after satisfaction or, to the extent permitted under the Merger Agreement, waiver of all conditions to the Merger (described below under the caption “Conditions to the Closing of the Merger”) (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions), unless the Merger Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by Alexion, Merger Sub and Achillion. As soon as practicable after the closing, Achillion will file with the Delaware Secretary of State a certificate of merger in connection with the Merger in such form as is required by, and executed and acknowledged in accordance with, Delaware law. The Merger will become effective on the date and time that the certificate of merger is filed with the Delaware Secretary of State (or at such later time as may be agreed by the parties that is specified in the certificate of merger).

Merger Consideration and Treatment of Equity Securities

Conversion of Shares

At the Effective Time, each share of Achillion common stock outstanding immediately prior to the Effective Time, other than shares held by Achillion as treasury stock, shares owned by Alexion or any subsidiary of Alexion and dissenting shares, will be converted into the right to receive (i) the Cash Merger Consideration and (ii) one (1) CVR, in each case, without interest thereon.

At the Effective Time, each share of Achillion common stock held by Achillion as treasury stock or owned by Alexion or Merger Sub immediately prior to the Effective Time will be canceled, and no payment will be made in exchange for such cancellation.

 

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At the Effective Time, shares of Achillion common stock held by any subsidiary of Alexion (other than Merger Sub) immediately prior to the Effective Time will be converted into an equal number of shares of common stock, par value $0.001 per share, of the Surviving Corporation so that each subsidiary owns the same percentage of the Surviving Corporation immediately following the Effective Time as it owned in Achillion immediately prior to the Effective Time.

At the Effective Time, each share of common stock of Merger Sub outstanding immediately prior to the Effective Time will be converted into and become one share of common stock, par value $0.001 per share, of the Surviving Corporation and (ii) each share of preferred stock of Merger Sub outstanding immediately prior to the Effective Time will be converted into and become one share of preferred stock, par value $0.001 per share, of the Surviving Corporation, in each case with the same rights, powers and privileges as the shares so converted and, together with the shares held by any subsidiary of Alexion other than Merger Sub, shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

Treatment of Equity Awards

The Merger Agreement provides that Achillion’s equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment at the Effective Time:

 

   

In the Money Options. Each (i) In the Money Option that is then outstanding, unexercised and vested (or which, pursuant to its terms or the terms of a contract in effect on October 15, 2019, shall become vested upon the consummation of the Merger), (ii) unvested In the Money Option that is held by a holder of Company Stock Option (A) who is employed by Achillion as of immediately prior to the Effective Time at the level of Executive Director or higher or (B) is identified by Alexion within thirty (30) days after October 15, 2019 (each, a “Specified Holder”) who has, at or prior to the Effective Time, delivered to Achillion and not revoked a non-competition agreement in the form attached to the Merger Agreement as Exhibit D, (iii) unvested In the Money Option, that is held by an officer or employee of Achillion other than a Specified Holder who has, at or prior to the Effective Time, delivered to Achillion and not revoked a general release in the form attached to the Merger Agreement as Exhibit C, and (iv) In the Money Option that is then outstanding and unexercised, whether or not vested, that is held by an individual who is not an officer or employee of Achillion will be cancelled and converted into the right to receive both (i) a cash payment equal to (A) the excess of (x) the Cash Merger Consideration over (y) the exercise price payable per share under such In the Money Option, multiplied by (B) the total number of shares subject to such In the Money Option immediately prior to the Effective Time (without regard to vesting) and (ii) one (1) CVR for each share subject to such In the Money Option immediately prior to the Effective Time (without regard to vesting).

 

   

Out of the Money Options. At the Effective Time, each (i) Out of the Money Option that is then outstanding, unexercised and vested (or which, pursuant to its terms or the terms of a contract in effect on October 15, 2019, shall become vested upon the consummation of the Merger), (ii) unvested Out of the Money Option that is held by a Specified Holder who has, at or prior to the Effective Time, delivered to Achillion and not revoked a non-competition agreement, (iii) unvested Out of the Money Option that is held by an officer or employee of Achillion other than a Specified Holder who has, at or prior to the Effective Time, delivered to Achillion and not revoked a general release, (iv) Out of the Money Option that is then outstanding and unexercised, whether or not vested, that is held by an individual who is not an officer or employee of Achillion will be cancelled and, except as described below, converted into the right to receive a cash payment, if any, from Alexion with respect to each share subject to the Out of the Money Option upon each Valuation Point which occurs after the Effective Time, equal to (i) the amount by which the Per Share Value Paid exceeds the exercise price payable per share under such Out of the Money Option, less (ii) the amount of all payments previously received with respect to such Out of the Money Option. Any Out of the Money Options with an exercise price payable per share equal to or greater than $8.30 and any other Company Stock Options that are not vested as of the effective time and which do not vest pursuant to their respective terms or

 

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the terms of a contract in effect on October 15, 2019 that are held by (1) a Specified Holder who has not, at or prior to the Effective Time, delivered to Achillion and not revoked a non-competition agreement or (2) an officer or employee of Achillion who is not a Specified Holder who has not, at or prior to the Effective Time, delivered to Achillion and not revoked a general release will be cancelled at the Effective Time without any consideration payable therefor.

Achillion and Alexion have agreed that Achillion may grant equity awards after October 15, 2019 in the ordinary course of business consistent with past practice, subject to certain agreed upon limitations. All such awards granted after October 15, 2019 will be subject to the same treatment upon closing as applies to the corresponding type of equity awards as set forth in the Merger Agreement, provided, however, that such awards will not provide for accelerated vesting and payout upon the closing.

Treatment of ESPP

Achillion will take such action as may be necessary under the ESPP to terminate all offerings under the ESPP as of the last day of Achillion’s last payroll period ending at least ten (10) days prior to the Effective Time and the ESPP will terminate on or following such date.

Exchange and Payment Procedures

As of the Effective Time, Alexion will deposit with an exchange agent the aggregate Cash Merger Consideration to be paid in respect of the certificates representing shares of Achillion common stock and the uncertificated shares of Achillion common stock.

Promptly after the Effective Time, Alexion will send, or will cause the exchange agent to send, to each record holder of shares of Achillion common stock at the Effective Time a letter of transmittal which will specify that the delivery of Merger Consideration will be effected upon proper delivery of the certificates (or affidavits of loss in lieu thereof in accordance with the Merger Agreement or transfer of the uncertificated shares to the exchange agent) for use in such exchange.

Upon surrender of a certificate (or affidavit of loss in lieu thereof) to the exchange agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such certificate will be entitled to receive in exchange therefor the Merger Consideration in respect of the Achillion common stock represented by such certificate, and the certificate so surrendered will be cancelled. No interest will be paid or accrued on any amount payable upon due surrender of the certificates.

Each holder of record of one or more uncertificated shares whose shares were converted into the right to receive the Merger Consideration will, upon receipt by the exchange agent of an “agent’s message” in customary form (or such other evidence, if any, as the exchange agent may reasonably request), be entitled to receive, and Alexion will cause the exchange agent to pay and deliver, the Merger Consideration as promptly as reasonably practicable after the Effective Time.

Representations and Warranties

The Merger Agreement contains representations and warranties of Achillion, Alexion and Merger Sub.

Achillion

In the Merger Agreement, Achillion has made customary representations and warranties to Alexion and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and authority and qualification to conduct business with respect to Achillion;

 

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Achillion’s corporate power and authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

   

required consents and regulatory filings in connection with the Merger Agreement;

 

   

the absence of conflicts with laws, Achillion’s organizational documents and Achillion’s material contracts;

 

   

the capital structure of Achillion;

 

   

the absence of subsidiaries and other equity and partnership interests;

 

   

the accuracy of Achillion’s SEC filings, including those required to be made in connection with the Merger, and compliance with the Sarbanes-Oxley Act;

 

   

the accuracy of Achillion’s financial statements and internal controls and disclosure controls and procedures;

 

   

the accuracy of the information supplied by or on behalf of Achillion for inclusion in this proxy statement;

 

   

the absence of any fact, event, change, development or set of circumstances that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

 

   

the conduct of the business of Achillion in the ordinary course of business in all material respects from December 31, 2018 through October 15, 2019;

 

   

the absence of undisclosed liabilities that have had, or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

 

   

litigation and investigation matters;

 

   

Achillion’s compliance with applicable laws;

 

   

material contracts;

 

   

tax matters;

 

   

employee benefit plans;

 

   

labor and employment matters;

 

   

insurance policies;

 

   

environmental matters;

 

   

intellectual property;

 

   

regulatory matters;

 

   

real property matters;

 

   

interested party transactions;

 

   

Achillion’s compliance with the U.S. Foreign Corrupt Practices Act and other applicable anti-corruption laws;

 

   

finders’ fees;

 

   

receipt of Centerview’s fairness opinion; and

 

   

antitakeover statutes.

Some of the representations and warranties in the Merger Agreement made by Achillion are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company

 

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Material Adverse Effect” means (A) any effect, change, event or occurrence that would or would reasonably be expected to be materially adverse to the business, financial condition or results of operations of Achillion, or (B) any effect, change, event or occurrence that would or would reasonably be expected to, individually or in the aggregate, materially impair, prevent or delay Achillion’s ability to consummate the Merger and the other transactions contemplated by the Merger Agreement in a timely manner on the terms set forth therein, excluding in the case of clause (A) above, any such material adverse effect resulting from or arising out of:

 

   

the announcement, pendency or performance of the Merger (including any loss of or adverse change in the relationship of Achillion with its employees, customers, partners or suppliers related thereto);

 

   

any change in the market price or trading volume of Achillion common stock or change in Achillion’s credit ratings (it being understood that any cause of any such change may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

 

   

general market, economic or political conditions (including acts of terrorism, war, national or international calamity, natural disaster or any similar event) that do not disproportionately affect Achillion’s, as compared to other companies participating in the same industry as Achillion;

 

   

general conditions in the industry in which Achillion operates that do not disproportionately affect Achillion as compared to other companies participating in the same industry as Achillion;

 

   

any changes (after the date hereof) in U.S. generally accepted accounting principles or applicable law;

 

   

any failure to take any action in compliance with the interim operating covenants set forth in Merger Agreement, or the taking of any specific action at the written direction of Alexion or expressly required by the Merger Agreement;

 

   

any proceeding made or brought by any holder of shares of Achillion common stock (on the holder’s own behalf or on behalf of Achillion) arising out of or related to the Merger Agreement or any of the transactions contemplated thereby (including the Merger); or

 

   

any failure by Achillion to meet internal or analysts’ estimates or projections (it being understood that any cause of any such failure may be taken into consideration when determining whether a Company Material Adverse Effect has occurred).

Alexion and Merger Sub

In the Merger Agreement, Alexion has made customary representations and warranties to Achillion that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and authority and qualification to conduct business with respect to Alexion and Merger Sub;

 

   

Alexion’s and Merger Sub’s corporate power and authority to enter into and perform the Merger Agreement and the CVR Agreement and the enforceability of the Merger Agreement and the CVR Agreement;

 

   

required consents and regulatory filings in connection with the Merger Agreement and the CVR Agreement;

 

   

the absence of conflicts with laws, Alexion and Merger Sub’s organizational documents and Alexion and Merger Sub’s contracts;

 

   

the accuracy of the information supplied by Alexion for inclusion in this proxy statement;

 

   

litigation and investigation matters;

 

   

availability of funds to enable Alexion to perform its obligations contemplated by the Merger Agreement; and

 

   

Alexion’s and its affiliates’ lack of any ownership interest in Achillion.

 

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Some of the representations and warranties in the Merger Agreement made by Alexion and Merger Sub are qualified as to a “Parent Material Adverse Effect.” For purposes of the Merger Agreement, “Parent Material Adverse Effect” means any effect, change, event or occurrence that would or would reasonably be expected to, individually or in the aggregate, materially impair, prevent or delay Alexion or Merger Sub’s ability to consummate the Merger and the other transactions contemplated by the Merger Agreement in a timely manner on the terms set forth therein.

Conduct of Business Pending the Merger

The Merger Agreement provides that from October 15, 2019 until the Effective Time, except for matters (i) expressly permitted or contemplated by the Merger Agreement or as set forth in the confidential disclosure schedule to the Merger Agreement, (ii) as required under any Achillion employee benefit plan, (iii) as required by applicable law or (iv) with the prior written consent of Alexion (which consent will not be unreasonably withheld, conditioned or delayed), Achillion will conduct its business in the ordinary course, consistent with past practice, and use its commercially reasonable efforts to (i) preserve intact its business organization and material assets, (ii) maintain in effect all of its material regulatory authorizations, (iii) keep available the services of its directors, officers and employees and (iv) maintain satisfactory relationships with customers, lenders, suppliers, licensors, licensees, distributors and others having business relationships with Achillion.

In addition, except for matters expressly permitted or contemplated by the Merger Agreement or as set forth in the confidential disclosure schedule or except as required by applicable law, Achillion will not do any of the following without the prior written consent of Alexion:

 

   

amend its certificate of incorporation or bylaws (whether by merger, consolidation or otherwise);

 

   

declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock, property or otherwise) in respect of, or enter into any agreement with respect to the voting of, any capital stock of Achillion, except for distributions under the ESPP in the ordinary course and for distributions resulting from the vesting or exercise of compensatory awards, split, combine or reclassify any capital stock of Achillion, except as otherwise provided below, issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for, shares of capital stock of Achillion, purchase, redeem or otherwise acquire any Achillion securities, except for acquisitions of Achillion common stock by Achillion in satisfaction by holders of compensatory awards of the applicable exercise price and/or withholding taxes, or take any action that would result in any material amendment, modification or change of any material term of any indebtedness of Achillion;

 

   

issue, deliver, sell, grant, pledge, transfer, subject to any lien or otherwise encumber or dispose of any Achillion securities, other than the issuance of shares of Achillion common stock upon the exercise of Company Stock Options that are outstanding on October 15, 2019, in each case in accordance with the applicable equity award’s terms as in effect on October 15, 2019, or the issuance of shares of Achillion common stock under the ESPP and in accordance with the terms of the Merger Agreement, or amend any term of any Achillion security (whether by merger, consolidation or otherwise);

 

   

adopt a plan or agreement of, or resolutions providing for or authorizing, complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

 

   

make any capital expenditures or incur any obligations or liabilities in respect thereof in excess of $250,000 in the aggregate in any fiscal quarter;

 

   

acquire any business, assets or capital stock of any person or division thereof, whether in whole or in part (and whether by purchase of stock, purchase of assets, merger, consolidation, or otherwise), or any other material assets (other than assets acquired in the ordinary course of business consistent with past practice);

 

   

sell, lease, license, pledge, transfer, subject to any lien or otherwise dispose of any intellectual property that is owned by, purported to be owned by, or exclusively licensed to Achillion, or has been used, is

 

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used or is held for use in the business of Achillion as previously conducted, currently conducted or as currently proposed to be conducted (“Achillion IP”), material assets or material properties except as permitted by Merger Agreement, pursuant to existing contracts or commitments, or permitted liens incurred in the ordinary course of business consistent with past practice;

 

   

(i) hire any new employee to whom a written offer of employment has not previously been made and accepted prior to October 15, 2019 or, after the date of the Merger Agreement, extend any new offers of employment with Achillion to any individual with an annual base salary, wage rate or fees greater than $200,000, (ii) grant to any current or former director, officer, employee or consultant of Achillion any increase in compensation, bonus or benefits other than pursuant to arrangements in effect on October 15, 2019, (iii) grant to any current or former director, officer, employee or consultant of Achillion any severance or termination pay or benefits or any increase in severance, change of control or termination pay or benefits other than pursuant to arrangements in effect on October 15, 2019, (iv) establish, adopt, enter into or amend any employee benefit plan (other than offer letters that contemplate “at will” employment without severance benefits) or collective bargaining agreement, in each case except as required by applicable law, (v) take any action to amend or waive any performance or vesting criteria or accelerate any rights or benefits or take any action to fund or in any other way secure the payment of compensation or benefits under any employee benefit plan except to the extent required pursuant to the terms thereof or applicable law or (vi) make any person a beneficiary of any retention or severance plan, agreement or other arrangement under which such person is not, as of October 15, 2019, a beneficiary that would be entitled to vesting, acceleration or any other right as a consequence of consummation of the transactions contemplated by the Merger Agreement and/or termination of employment;

 

   

write-down any of its material assets, including any capitalized inventory or Achillion IP, or make any change in any method of financial accounting principles, method or practices, in each case except for any such change required by U.S. generally accepted accounting principles or applicable law, including Regulation S-X under the Exchange Act (in each case following consultation with Achillion’s independent auditor);

 

   

repurchase, prepay or incur any indebtedness, including by way of a guarantee or an issuance or sale of debt securities, or issue or sell options, warrants, calls or other rights to acquire any debt securities of Achillion, enter into any “keep well” or other contract to maintain any financial statement or similar condition of another person or enter into any arrangement having the economic effect of any of the foregoing (other than in connection with the financing of ordinary course trade payables consistent with past practice or accounts payable in the ordinary course of business consistent with past practice), or make any loans, advances or capital contributions to, or investments in, any other person (other than accounts receivable and extensions of credit in the ordinary course of business, and advances in expenses to employees, in each case in the ordinary course of business consistent with past practice);

 

   

participate in any scheduled meetings or teleconferences with, or correspond in writing, communicate or consult with the FDA or any similar governmental authority without providing Alexion (whenever feasible and to the extent permitted under applicable law) with prior written notice and, within 24 hours from the time such written notice is delivered, the opportunity to consult with Achillion with respect to such correspondence, communication or consultation;

 

   

enter into any agreement that would constitute a Material Contract (as the term is defined in the Merger Agreement) if it were in existence on October 15, 2019, terminate, amend, restate or supplement any Material Contract or waive, release or assign any rights or claims under any Material Contract, except, that for the purposes of this covenant, all applicable thresholds will be changed from “$250,000” to “$400,000”;

 

   

except as required by applicable law or U.S. generally accepted accounting principles, (i) make, change or revoke any material tax election, (ii) change any annual tax accounting period, (iii) adopt or change any method of tax accounting, (iv) amend any tax returns with respect to a material amount of taxes,

 

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(v) enter into any closing agreement regarding any material tax liability or assessment, (vi) enter into any tax sharing, tax allocation or tax indemnification agreement or other similar agreement (other than written contracts not primarily relating to taxes and entered into in the ordinary course of business consistent with past practice, and that are not material in the aggregate), (vii) settle any material tax claim, audit or assessment, (viii) consent to any extension or waiver of the limitation period applicable to any material tax claim, audit or assessment, (ix) surrender any right to claim a material tax refund (including any such refund to the extent it is used to offset or otherwise reduce tax liability) or (x) request any ruling from any governmental authority or taxing authority with respect to tax matters;

 

   

institute, pay, discharge, compromise, settle or satisfy (or agree to do any of the preceding with respect to) any claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), in excess of $250,000 in any individual case, other than (x) as required by their terms as in effect on October 15, 2019, (y) claims, liabilities or obligations reserved against on December 31, 2018 (for amounts not in excess of such reserves), or (z) incurred since the date of such financial statements in the ordinary course of business consistent with past practice; provided that, in the case of each of (x), (y) or (z), the payment, discharge, settlement or satisfaction of such claim, liability or obligation does not include any material obligation (other than the payment of money) to be performed by Achillion following the closing date, waive, relinquish, release, grant, transfer or assign any right with a value of more than $250,000 in any individual case except in the ordinary course of business consistent with past practice, or waive any material benefits of, or agree to modify in any adverse respect, or fail to enforce, or consent to any matter with respect to which its consent is required under, any confidentiality, standstill or similar contract to which Achillion is a party;

 

   

with respect to Achillion IP, (i) sell, assign, license, sublicense, encumber, impair, abandon, fail to diligently protect or maintain, transfer or otherwise dispose of any right, title or interest of Achillion in any Achillion IP, (ii) extend, amend, waive, cancel or modify any rights in or to Achillion IP, (iii) fail to diligently prosecute the patents owned or controlled by Achillion or (iv) divulge, furnish to or make accessible any trade secrets or other confidential intellectual property within Achillion IP to any third party who is not subject to an enforceable written agreement to maintain the confidentiality thereof; or

 

   

authorize, commit or agree to take any of the foregoing actions.

No Solicitation; Alternative Proposals

Under the Merger Agreement, Achillion has agreed not to, and not to authorize or permit any of its representatives to, directly or indirectly:

 

   

solicit, initiate or knowingly take any action to facilitate or encourage the submission of any Acquisition Proposal or the making of any inquiry, offer or proposal that could reasonably be expected to lead to any Acquisition Proposal (other than informing persons of the provisions set forth in the Merger Agreement);

 

   

conduct or engage in any discussions or negotiations with, disclose any non-public information relating to Achillion to, afford access to the business, properties, assets, books or records of Achillion to or otherwise cooperate in any way, or knowingly assist, participate in, facilitate or encourage any effort by, any third party that is seeking to make, or has made, any Acquisition Proposal;

 

   

amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of Achillion;

 

   

approve any transaction under, or any third party becoming an “interested stockholder” under, Section 203 of the DGCL; or

 

   

enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any Acquisition Proposal or enter into any agreement or agreement in principle requiring Achillion

 

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to abandon, terminate or fail to consummate the transactions contemplated hereby or breach its obligations hereunder, or resolve, propose or agree to do any of the foregoing.

Existing Discussions or Negotiations

Under the terms of the Merger Agreement, Achillion will and will cause its representatives to cease immediately and cause to be terminated, and will not authorize or knowingly permit any of its representatives to continue, any and all existing activities, discussions or negotiations, if any, with any third party conducted prior to October 15, 2019 with respect to any Acquisition Proposal and will use its reasonable best efforts to cause any such third party (or its agents or advisors) in possession of non-public information in respect of Achillion that was furnished by or on behalf of Achillion to return or destroy (and confirm destruction of) all such information.

Receipt of Acquisition Proposals

Notwithstanding the provisions of the Merger Agreement described above, prior to the adoption of the Merger Agreement by the stockholders, the Board of Directors may take the following actions:

 

   

engage in negotiations or discussions with any third party that has made in writing after October 15, 2019 (and not withdrawn) a bona fide unsolicited Acquisition Proposal that did not result from or arise out of the prohibited conduct described in the above section captioned “No Solicitation; Alternative Proposals,” and that the Board of Directors believes in good faith, after consultation with its outside legal counsel and financial advisor of nationally recognized reputation, constitutes or would reasonably be expected to result in a Superior Proposal; and

 

   

thereafter furnish to such third party non-public information relating to Achillion pursuant to an executed confidentiality agreement with terms no less favorable to Achillion than those contained in the Non-disclosure Agreement dated October 11, 2018 between Alexion and Achillion (the “Confidentiality Agreement”) and containing additional provisions that expressly permit Achillion to comply with the non-solicitation provisions in the Merger Agreement (a copy of which confidentiality agreement will be promptly and in any event within twenty-four (24) hours of execution by Achillion provided for informational purposes only to Alexion).

The Board of Directors will not take any of the actions referred immediately above unless Achillion has notified Alexion in writing at least one (1) business day in advance that it intends to take such action. Achillion shall notify Alexion promptly (but in no event later than twenty-four (24) hours) after Achillion obtains knowledge of the receipt by Achillion (or any of its representatives) of any Acquisition Proposal, any inquiry, offer or proposal that would reasonably be expected to lead to an Acquisition Proposal, and shall identify the third party making such Acquisition Proposal, inquiry, offer or proposal and the terms and conditions thereof.

For purposes of this proxy statement and the Merger Agreement:

 

   

“Acquisition Proposal” means any offer, proposal, inquiry or indication of interest from any third party relating to any transaction or series of related transactions involving (i) any acquisition or purchase by any person, directly or indirectly, of 15% or more of any class of outstanding voting or equity securities of Achillion, or any tender offer (including a self-tender) or exchange offer that, if consummated, would result in any person beneficially owning 15% or more of any class of outstanding voting or equity securities of Achillion, (ii) any merger, amalgamation, consolidation, share exchange, business combination, joint venture or other similar transaction involving Achillion, the business of which constitutes 15% or more of the net revenues, net income or assets of Achillion, (iii) any sale, exchange, transfer, license (other than licenses in the ordinary course of business), or other disposition of 15% or more of the consolidated assets of Achillion (measured by the lesser of book or fair market value thereof) or (iv) any liquidation, dissolution, recapitalization, extraordinary dividend or other significant corporate reorganization of Achillion, the business of which accounts for 15% or more of the consolidated net revenues, net income or assets of Achillion.

 

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“Superior Proposal” means any bona fide, unsolicited, written Acquisition Proposal which did not result from or arise out of a breach of the Merger Agreement, made by a third party, which the Board of Directors determines in good faith, after considering the advice of its outside legal counsel and a financial advisor of nationally recognized reputation, and after taking into account all of the terms and conditions of such Acquisition Proposal (including any termination or break-up fees, expense reimbursement provisions and conditions to consummation) and after taking into account all financial, legal, regulatory, and other aspects of such Acquisition Proposal (including the financing terms and the ability of such third party to finance such Acquisition Proposal), is more favorable to Achillion’s stockholders (other than Alexion and its affiliates) from a financial point of view than as provided hereunder (including any changes to the terms of the Merger Agreement proposed by Alexion in response to such Superior Proposal pursuant to and in accordance with the Merger Agreement or otherwise); provided that for purposes of the definition of “Superior Proposal,” the references to “15%” in the definition of Acquisition Proposal are deemed to be references to “50%.”

Changes in Board Recommendation

The Board of Directors has unanimously recommended that Achillion stockholders vote “FOR” the proposal to adopt the Merger Agreement (the “Board Recommendation”). The Merger Agreement provides that the Board of Directors may not:

 

   

fail to make, withdraw, amend or modify, or publicly propose to withhold, withdraw, amend or modify, in a manner adverse to Alexion or Merger Sub, the Board Recommendation;

 

   

approve, endorse, adopt or recommend, or publicly propose to approve, endorse, adopt or recommend, any Acquisition Proposal or Superior Proposal;

 

   

fail to recommend against acceptance of any tender offer or exchange offer for Achillion common stock within ten (10) business days after Alexion so requests in writing;

 

   

make any public statement inconsistent with the Board Recommendation; or

 

   

resolve or agree to take any of the foregoing actions (any of the foregoing, an “Adverse Recommendation Change”).

Notwithstanding the foregoing, the Board of Directors may make an Adverse Recommendation Change and terminate the Merger Agreement following receipt of a Superior Proposal if it determines in good faith, after consultation with its outside legal counsel and a financial advisor of nationally recognized reputation, that the failure to take such action would be inconsistent with its fiduciary duties under applicable law. The Board of Directors may not make an Adverse Recommendation Change based on a Superior Proposal unless:

 

   

Achillion promptly notifies Alexion, in writing at least four (4) business days before making an Adverse Recommendation Change (the “Notice Period”), of its intention to take such action with respect to a Superior Proposal;

 

   

Achillion attaches to such notice the most current version of the proposed agreement or a reasonably detailed summary of all material terms of any such Superior Proposal and the identity of the third party making the Superior Proposal;

 

   

Achillion negotiates in good faith with Alexion during the Notice Period to adjust the terms and conditions of the Merger Agreement, and, in the event that there is any material revision to the terms of a Superior Proposal, the Notice Period is extended to ensure that at least two (2) business days remains in the Notice Period after Achillion notifies Alexion of the material revision; and

 

   

the Board of Directors determines in good faith, after giving effect to the proposals made by Alexion during such period, if any, after consultation with its outside legal counsel and a financial advisor of nationally recognized reputation, that such Acquisition Proposal remains a Superior Proposal and the failure to make the Adverse Recommendation Change or terminate the Merger Agreement would be inconsistent with the fiduciary duties of the Board of Directors under applicable law.

 

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Further, the Board of Directors may, in response to a material fact, event, change, development or set of circumstances that was not known to the Board of Directors nor reasonably foreseeable by the Board of Directors as of or prior to October 15, 2019 (an “Intervening Event”) make an Adverse Recommendation Change if the Board of Directors determines in good faith, after consultation with its outside legal counsel and a financial advisor of nationally recognized reputation, that the failure to effect an Adverse Recommendation Change would be inconsistent with fiduciary duties. Achillion may not make an Adverse Recommendation Change based on an Intervening Event unless:

 

   

Achillion has provided to Alexion at least four (4) business days’ prior written notice advising Alexion that the Board of Directors intends to take such action and specifying the facts underlying the Board of Directors’ determination that an Intervening Event has occurred, and the reasons for the Adverse Recommendation Change, in reasonable detail; and

 

   

Achillion negotiates in good faith with Alexion during such Notice Period to amend the Merger Agreement in such a manner that obviates the need for an Adverse Recommendation Change as a result of the Intervening Event, if Alexion, in its discretion, proposes to make such adjustments. In the event that there are any material changes to the Intervening Event, the Notice Period will be extended, if applicable, to ensure that at least two (2) business days remains in the Notice Period subsequent to the time Achillion notifies Alexion of any such material revision.

The Merger Agreement does not prevent the Board of Directors from complying with Rule 14d-9 and Rule 14e-2(a) under the Exchange Act with regard to an Acquisition Proposal; however, any disclosure (other than a “stop, look and listen” communication or similar communication of the type contemplated by Section 14d-9(f) under the Exchange Act) will be deemed to be an Adverse Recommendation Change unless the Board of Directors expressly publicly reaffirms its Board Recommendation in such communication or within two (2) business days after requested to do so by Alexion.

Stockholder Meeting

Under the Merger Agreement, Achillion will establish a record date for, duly call, give notice of, convene and hold the Special Meeting as promptly as practicable after (i) the date on which the SEC confirms that it has no further comments on this proxy statement; or (ii) if the SEC has failed to affirmatively notify Achillion within ten (10) calendar days after the initial filing of this proxy statement, the eleventh (11th) day after such filing, for the purpose of (A) voting on the matters requiring stockholder approval; and (B) in accordance with Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, seeking advisory approval of a proposal to Achillion’s stockholders for a non-binding, advisory vote to approve certain compensation that may become payable to Achillion’s executive officers in connection with the completion of the Merger. Unless the Board of Directors has effected an Adverse Recommendation Change in accordance with the section above, the Board of Directors will make the Board Recommendation and use its reasonable best efforts to obtain the affirmative vote of the holders of a majority of the outstanding shares of Achillion common stock voting to approve and adopt the Merger Agreement and the Merger (the “Stockholder Approval”).

If unable to obtain a quorum of its stockholders, Achillion may adjourn or postpone the date of the Special Meeting for up to ten (10) business days, and Achillion will use its reasonable best efforts during such period to obtain a quorum as soon as practicable. Achillion may delay, adjourn or postpone the Special Meeting to the extent it reasonably determines that such delay, adjournment or postponement is required by law or to comply with any order or request made by the SEC with respect to this proxy statement or otherwise.

Access to Information

From October 15, 2019 until the Effective Time, Achillion will give to Alexion and its representatives reasonable access to the offices, properties, books, records, contracts, governmental authorizations, documents, directors, officers and employees of Achillion during normal business hours, furnish to Alexion and its representatives such

 

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financial, tax and operating data and other information as such persons may reasonably request, and instruct its representatives to cooperate with Alexion and its representatives in its investigation. Achillion may restrict the foregoing access to the extent that any applicable law requires Achillion to restrict or prohibit access to any such properties or information or such disclosure would, based on the advice of such party’s counsel, result in a waiver of attorney-client privilege, work-product doctrine or any other privilege applicable to such information. Any investigation will be conducted in such manner as not to interfere unreasonably with the conduct of the business of Achillion.

Notice of Certain Events

In connection with the continuing operation of the business of Achillion between October 15, 2019 and the Effective Time, subject to applicable law, the executive officers of Achillion, including but not limited to the Chief Executive Officer, will consult in good faith on a regular basis with Alexion to report material (individually or in the aggregate) operational developments, the status of relationships with customers, resellers, partners, suppliers, licensors, licensees, distributors and others having material business relationships with Achillion, the status of ongoing operations and other matters reasonably requested by Alexion pursuant to procedures reasonably requested by Alexion. No such consultation will affect the representations, warranties, covenants, agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under the Merger Agreement.

Achillion will promptly notify Alexion of:

 

   

any notice or other communication from any person alleging that the consent of such person is or may be required in connection with the transactions contemplated by the Merger Agreement;

 

   

any notice or other communication from any governmental authority in connection with the transactions contemplated by the Merger Agreement;

 

   

any proceeding commenced or, to the knowledge of Achillion, threatened against, relating to or involving or otherwise affecting Achillion that, if pending on October 15, 2019, would have been required to have been disclosed pursuant to the Merger Agreement or that relate to the consummation of the transactions contemplated by the Merger Agreement; and

 

   

any inaccuracy of any representation or warranty or breach of covenant or agreement contained in the Merger Agreement at any time during the term thereof that could reasonably be expected to cause the conditions to the obligations of Alexion and Merger Sub to consummate the Merger to not to be satisfied.

Employee Benefit Plan Matters

For a period of one (1) year following the Effective Time, Alexion will provide, or cause to be provided, to those employees of Achillion who are employed by Achillion as of immediately prior to the Effective Time and who continue to be actively employed by the Surviving Corporation (or any affiliate thereof) during such one (1) year period (the “Continuing Employees”) (i) base salary and base wages no less favorable than those provided to such Continuing Employees immediately prior to the execution of the Merger Agreement, (ii) short-term incentive compensation opportunities (excluding any equity-based compensation) no less favorable in the aggregate than those provided to such Continuing Employees immediately prior to the execution of the Merger Agreement and (iii) benefits (including severance benefits) no less favorable in the aggregate than those provided to such Continuing Employees immediately prior to the execution of the Merger Agreement.

Following the closing date, Alexion will use commercially reasonable efforts to cause the service of each Continuing Employee with Achillion and its ERISA affiliates prior to the closing date to be recognized for purposes of eligibility to participate, levels of benefits and vesting under parent benefit plans, excluding equity plans, in which any Continuing Employee is or becomes eligible to participate, subject to limitations.

 

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From and after the closing date, with respect to parent benefit plans, excluding equity plans, that are “employee welfare benefit plans” as defined in Section 3(1) of ERISA in which any Continuing Employee is eligible to participate, Alexion will use reasonable efforts to cause each such plan to waive all limitations as to pre-existing conditions, waiting periods, required physical examinations and exclusions with respect to participation and coverage requirements to the same extent they would not have applied or would have been waived under the corresponding Achillion benefit plan in which such Continuing Employee was a participant immediately prior to commencement of participation in the Alexion plan, with respect to long-term disability and life insurance benefits and coverage, solely to the extent permitted under the terms and conditions of Alexion’s applicable insurance contracts in effect as of the closing date. Alexion will provide each Continuing Employee and their eligible dependents with credit for any co-payments and deductibles paid in the calendar year that, and prior to the date that, such Continuing Employee commences participation in such Alexion plan in satisfying any applicable co-payment or deductible requirements under such plan for the applicable calendar year, to the extent that such expenses were recognized for such purposes under the comparable Achillion plan.

In the event that the closing occurs prior to Achillion paying annual cash incentives in respect of 2019, Alexion will pay to each Continuing Employee a cash bonus in respect of 2019 in an amount equal to the cash bonus amount payable under the applicable Achillion annual cash incentive plan or program based on the greater of target or actual level of achievement of the applicable performance criteria.

Effective as of the day immediately preceding the Effective Time, unless otherwise directed in writing by Alexion at least ten (10) business days prior to the Effective Time, Achillion take all actions necessary to effect the termination of the Achillion Pharmaceuticals, Inc. 401(k) Retirement Savings Plan and will provide Alexion evidence that the Achillion Pharmaceuticals, Inc. 401(k) Retirement Savings Plan has been terminated pursuant to an action by the Board of Directors. In the event that Alexion requests that the Achillion Pharmaceuticals, Inc. 401(k) Retirement Savings Plan be terminated, Alexion will offer participation in Alexion’s tax-qualified defined contribution plan not later than 120 days following the Effective Date to the Continuing Employees.

State Takeover Laws

If any “control share acquisition,” “fair price,” “moratorium” or other anti-takeover applicable law becomes or is deemed to be applicable to Achillion, Alexion, Merger Sub, the Merger or any other transaction contemplated by the Merger Agreement or the CVR Agreement, then each of Achillion, Alexion, Merger Sub, and their respective board of directors will grant such approvals and take such actions as are necessary so that the transactions may be consummated as promptly as practicable on the terms contemplated thereby.

CVR Agreement

At or prior to the Effective Time, Alexion will authorize and duly adopt, execute and deliver, and will ensure that a duly qualified rights agent executes and delivers, the CVR Agreement, subject to any reasonable revisions to the CVR Agreement that are requested by such rights agent (provided that such revisions are not, individually or in the aggregate, detrimental or adverse, taken as a whole, to any holder of a CVR). Alexion and Achillion will cooperate, including by making changes to the form of CVR Agreement, as necessary to ensure that the CVRs are not subject to registration under the Securities Act, the Exchange Act or any applicable state securities or “blue sky” laws.

Director and Officer Liability

For six (6) years after the Effective Time, Alexion will, or will cause the Surviving Corporation to, maintain officers’ and directors’ liability insurance and fiduciary liability insurance in respect of acts or omissions occurring prior to the Effective Time covering each such person currently covered by Achillion’s officers’ and directors’ liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on October 15, 2019, subject to limitations.

 

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From and after the Effective Time through the sixth anniversary of the Effective Time, Alexion will cause the Surviving Corporation to fulfill and honor in all respects the obligations of Achillion pursuant to: (i) each indemnification agreement in effect between Achillion and any person who is now, or has been at any time prior to October 15, 2019, or who becomes prior to the Effective Time, a director or officer of Achillion; and (ii) any indemnification provision and any exculpation provision and advancement of expenses provision set forth in the certificate of incorporation or by-laws of Achillion as in effect on October 15, 2019.

Reasonable Best Efforts

Achillion and Alexion will use their reasonable best efforts to take all actions necessary, proper or advisable under applicable law to consummate the transactions contemplated by the Merger Agreement, including obtaining all necessary actions or nonactions, waivers, consents and approvals from governmental authorities and making all necessary registrations and filings and taking all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental authorities, the delivery of required notices to, and the obtaining of required consents or waivers from, third parties and the execution and delivery of any additional instruments necessary to consummate the Merger and to fully carry out the purposes of the Merger Agreement.

Alexion and Achillion will provide as promptly as practicable to governmental antitrust authorities information and documents as necessary, proper or advisable to permit consummation of the transactions contemplated by the Merger Agreement, including preparing and filing any notification and report form and related material required under the HSR Act and any additional consents and filings under any antitrust laws as promptly as practicable following October 15, 2019 (but in no event more than ten (10) business days from October 15, 2019 except by mutual consent confirmed in writing) and thereafter to respond as promptly as practicable to any request for additional information or documentary material and any additional consents and filings under any antitrust laws. Alexion and Achillion have agreed to make the necessary filings with the FTC and the Antitrust Division of the DOJ on November 12, 2019.

Alexion will not be obligated to litigate any proceeding brought by any governmental authority or appeal any order challenging the consummation of the transactions contemplated by the Merger Agreement, or seeking to obtain from Alexion any damages in connection therewith, or seeking to prohibit or limit in any respect, or place any conditions on, the ownership or operation by Achillion, Alexion or any of their respective affiliates of their business, assets or any product or to require any such person to dispose of, license or enter into a consent decree or hold separate all or any portion of their business, assets or any product, in each case as a result of or in connection with any of the transactions contemplated by the Merger Agreement. Achillion will give Alexion the opportunity to participate in the defense of any proceeding against Achillion and/or its directors relating to the transactions contemplated by the Merger Agreement and will obtain the prior written consent of Alexion prior to settling or satisfying any such proceeding.

In connection with the receipt of any necessary governmental approvals or clearances (including under any antitrust law), nothing in the Merger Agreement will require Alexion or any of its subsidiaries to, nor will Achillion without the prior written consent of Alexion agree or proffer to, divest, hold separate, or enter into any license or similar agreement with respect to, or agree to restrict the ownership or operation of, or agree to conduct or operate in a specified manner, any portion of the business or assets of Alexion, any of its subsidiaries, or Achillion.

Subject to applicable law relating to the exchange of information, Achillion and Alexion and their respective counsel will have the right to review in advance, and to the extent practicable each will consult the other on, any filing made with, or written materials to be submitted to, any governmental authority in connection with the transactions contemplated by the Merger Agreement, promptly inform each other of any communication with any governmental antitrust authority and promptly furnish each other with copies of all communications between them or their subsidiaries or affiliates, on the one hand, and any governmental authority or its respective staff, on

 

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the other hand. Achillion and Alexion will, to the extent practicable, provide the other party and its counsel with advance notice of and the opportunity to participate in any discussion with any governmental authority in connection with the transactions contemplated by the Merger Agreement and to participate in the preparation for such discussion. Neither Alexion nor Achillion will, without prior written consent of the other: (i) withdraw its filing under the HSR Act or any other applicable foreign competition laws or (ii) commit to or agree with any governmental authority to stay, toll or extend any waiting period under the HSR Act or applicable foreign competition laws.

Conditions to the Closing of the Merger

The obligation of each party to consummate the Merger is subject to the satisfaction, at or prior to the closing of the Merger, of the following conditions:

 

   

the adoption of the Merger Agreement by the requisite affirmative vote of the stockholders;

 

   

the absence of any order or other action issued by a governmental authority having jurisdiction over any party to the Merger Agreement that is in effect restraining, enjoining or otherwise prohibiting the consummation of the Merger and the absence of any applicable law that makes consummation of the Merger illegal or otherwise prohibited; and

 

   

the expiration or termination of the waiting period (and any extension thereof) applicable to the Merger under the HSR Act.

The obligation of Alexion and Merger Sub to consummate the Merger is subject to the satisfaction, at or prior to the closing of the Merger, of the following conditions:

 

   

the representations and warranties in the Merger Agreement relating to Achillion’s capitalization being true in all respects when made and as of immediately prior to the Effective Time as if made at and as of such time; provided that this condition will be deemed to be satisfied unless the failure of such representations and warranties to be so true would increase the aggregate Cash Merger Consideration by more than $1,000,000;

 

   

the representations and warranties relating to (i) Achillion’s corporate existence and power, (ii) Achillion’s corporate authority to enter into the Merger Agreement, (iii) compliance with Achillion’s certificate of incorporation and bylaws, (iv) the absence of any finder’s fee except with respect to Centerview and (v) Centerview’s fairness opinion, to the extent not qualified as to materiality or Company Material Adverse Effect, being true in all material respects, and to the extent so qualified being true in all respects as so qualified, when made and as of immediately prior to the Effective Time as if made at and as of such time (other than any such representation or warranty that is made only as of a specified date, which need only to be true in all material respects as of such specified date);

 

   

the representations and warranties other than those in the above bullets, disregarding any materiality or Company Material Adverse Effect qualifications contained therein, being true when made and as of immediately prior to the Effective Time as if made at and as of such time (other than any such representations and warranties that are made only as of a specified date, which need only to be true as of such specified date); provided that such representations and warranties will be deemed true at any time unless the individual or aggregate impact of the failure to be so true would have or reasonably be expected to have a Company Material Adverse Effect; and Alexion having received a certificate signed on behalf of Achillion by a senior executive officer of Achillion to such effect;

 

   

Achillion having performed in all material respects its obligations under the agreement, and Alexion having received a certificate signed on behalf of Achillion by a senior executive officer of Achillion to such effect;

 

   

the absence of any instituted, pending or threatened proceeding initiated by any governmental authority, or instituted, pending or threatened any proceeding initiated by any other third party that has

 

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a reasonable likelihood of success, (i) challenging the consummation of the Merger or seeking to obtain material damages in connection therewith, (ii) seeking to restrain or prohibit Alexion’s ownership or operation of all or any material portion of the business, assets or products of Achillion or of Alexion and its subsidiaries, taken as a whole, or to compel Alexion or any of its affiliates to dispose of, license or hold separate all or any material portion of the business, assets or products of Achillion or of Alexion and its subsidiaries, taken as a whole, (iii) seeking to impose or confirm material limitations on the ability of Alexion or any of its affiliates effectively to acquire, hold or exercise full rights of ownership of Achillion common stock or any shares of common stock of the Surviving Corporation, or (iv) seeking to require divestiture by Alexion, Merger Sub or any of Alexion’s other affiliates of any equity interests;

 

   

the absence of any order in effect that is reasonably likely to result, directly or indirectly, in any of the effects referred to in the immediately preceding clauses (i) through (iv); and

 

   

the absence of any fact, event, change, development or set of circumstances that has had or would reasonably be expected to have a Company Material Adverse Effect.

The obligation of Achillion to consummate the Merger is subject to the satisfaction, at or prior to closing, of the following conditions:

 

   

the representations and warranties of Alexion and Merger Sub set forth in the Merger Agreement being true and correct, except where the failure of any such representation or warranty to be so true and correct would not constitute a Parent Material Adverse Effect, as of immediately prior to the Effective Time (except for any such representations and warranties made as of a particular date, which representations and warranties must be true and correct only as of that date), and Achillion having received a certificate signed on behalf of Alexion by a senior executive officer of Alexion to such effect;

 

   

Alexion and Merger Sub having performed in all material respects their respective obligations under the Merger Agreement, and Achillion having received a certificate signed on behalf of Alexion by a senior executive officer of Alexion such effect; and

 

   

the CVR Agreement being in full force and effect.

Termination of the Merger Agreement

Termination

The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the closing (notwithstanding any approval of the Merger Agreement by the stockholders of Achillion):

 

   

by mutual written agreement of Achillion and Alexion;

 

   

by either Achillion or Alexion, if:

 

   

the Merger has not been consummated on or before April 15, 2020 (subject to possible extension as provided below, the “End Date”); provided that if the conditions to the completion of the Merger with respect to the HSR Act or other foreign competition laws have not been satisfied by the End Date (as it may be extended as described below), but all other conditions set forth in the Merger Agreement would be satisfied if the closing date were to occur on such date, then Alexion will be entitled to extend the End Date by a three (3)-month period by written notice to Achillion. In no event will the End Date be extended to a date that is later than January 15, 2021. The right to terminate the Merger Agreement on this basis will not be available to any party whose material breach of any provision of the Merger Agreement results in the failure of the Merger to be consummated by the End Date;

 

   

any governmental authority of competent jurisdiction has issued an order, decree, injunction or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the

 

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consummation of the Merger and such order, decree, ruling or other action has become final and nonappealable, or if there has been adopted any applicable law that makes consummation of the Merger illegal or otherwise prohibited. The right to terminate the Merger Agreement on this basis will not be available to any party whose material breach of the Merger Agreement has caused or resulted in the issuance of such final and nonappealable order, decree, injunction, ruling or other action; or

 

   

stockholder approval has not been obtained by reason of the failure to obtain the required vote upon a final vote taken at the Special Meeting (or any adjournment or postponement thereof);

 

   

by Alexion:

 

   

if an Adverse Recommendation Change has occurred;

 

   

if Achillion has entered into a definitive agreement (other than a confidentiality agreement) relating to any Acquisition Proposal;

 

   

if Achillion or any of its representatives have willfully and materially breached any of its obligations related to solicitation of Acquisition Proposals; or

 

   

in the event of a material breach of any covenant, agreement, representation or warranty contained in the Merger Agreement on the part of Achillion such that the closing conditions would not be satisfied as of the time of such breach; provided however, that in the event that any such breach is curable by Achillion through the exercise of commercially reasonable efforts prior to the End Date and within thirty (30) calendar days, then Alexion will not be permitted to terminate the Merger Agreement on this basis until the earlier to occur of the expiration of a thirty (30) calendar day period after delivery of written notice from Alexion to Achillion of such breach; provided that Alexion may not terminate the Merger Agreement on this basis if Alexion or Merger Sub is then in material breach of any representation, warranty, covenant or obligations under the Merger Agreement; or

 

   

by Achillion:

 

   

if prior to the Stockholder Approval, the Board of Directors authorizes Achillion, in compliance with the terms of the Merger Agreement, to enter into a binding definitive agreement in respect of a Superior Proposal with a third party; provided that Achillion has paid the termination fee due pursuant to the Merger Agreement in accordance with the terms specified therein; provided, further that, in the event of such termination, Achillion substantially concurrently enters into such binding definitive agreement; or

 

   

in the event of a material breach of any covenant, agreement, representation or warranty contained in the Merger Agreement on the part of Alexion and Merger Sub; provided that, in the event that any such breach is curable by Alexion or Merger Sub through the exercise of commercially reasonable efforts prior to the End Date and within thirty (30) days, then Achillion will not be permitted to terminate the Merger Agreement on this basis until the earlier to occur of the expiration of a thirty (30) calendar day period after delivery of written notice from Achillion to Alexion of such breach; provided, further, that Achillion may not terminate the Merger Agreement on this basis if Achillion is then in material breach of any representation, warranty, covenant or obligation under the Merger Agreement.

The party desiring to terminate the Merger Agreement (other than by mutual written agreement of the parties) must give written notice of such termination to each other party.

Effect of Termination

If the Merger Agreement is terminated as described above, it will become void and of no effect without liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to

 

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each other party to the Merger Agreement; provided that no such termination will relieve any party to the Merger Agreement of any liability for damages resulting from any willful or intentional breach of the Merger Agreement. The provisions of Merger Agreement relating to the Confidentiality Agreement, the effect of termination, expenses, assignment, governing law, jurisdiction and waiver of jury trial and the Confidentiality Agreement will survive any termination of the Merger Agreement.

Termination Fee

Achillion will pay Alexion a termination fee in an amount of $20,000,000 if the Merger Agreement is terminated in the following circumstances:

 

   

if the Merger Agreement is terminated by Alexion because the Board of Directors effected an Adverse Recommendation Change or Achillion entered into a definitive agreement (other than a confidentiality agreement) relating to an Acquisition Proposal;

 

   

if the Merger Agreement is terminated by Achillion because the Board of Directors authorized Achillion to enter into a binding definitive agreement in respect of a Superior Proposal;

 

   

if the Merger Agreement is terminated due to failure to close on or before the End Date or failure to obtain the Stockholder Approval, and prior to such termination or the Special Meeting, an Acquisition Proposal has been publicly announced and not publicly withdrawn, and within twelve (12) months following the date of such termination, Achillion has entered into a definitive agreement with respect to, recommended to its stockholders or consummated a transaction contemplated by such Acquisition Proposal; or

 

   

if Achillion or any of its representatives willfully and materially breach any of its obligations with respect to non-solicitation, and within twelve (12) months following the date of such termination, Achillion has entered into a definitive agreement with respect to, recommended to its stockholders or consummated, a transaction contemplated by any Acquisition Proposal;

In the event that the Merger Agreement is terminated whereby the termination fee is payable by Achillion to Alexion pursuant to the scenarios above, the termination fee will be the sole and exclusive remedy of Alexion, Merger Sub or any of their respective affiliates against Achillion and any of its respective former, current or future officers, directors, partners, stockholders, managers, members or affiliates (collectively, the “Company Related Parties”) for any loss suffered as a result of the failure of the Merger to be consummated or for a breach or failure to perform; and upon payment of such amount(s), none of Company Related Parties will have any further liability or obligation relating to or arising out of the Merger Agreement or the transactions contemplated thereby, other than with respect to claims for, arising out of or in connection with willful and material breach of the Merger Agreement.

Reverse Termination Fee

If the Merger Agreement is terminated by Alexion or Achillion because the Merger has not been consummated on or before the End Date or because a governmental authority has issued a final order prohibiting consummation of the Merger, provided that in either case, at the time of such termination, approval under the HSR Act or any applicable foreign competition laws has not been obtained, and the failure to obtain such approval did not result from any material breach by Achillion of any covenant or obligation set forth in the Merger Agreement, then, in either such event, Alexion will pay to Achillion a reverse termination fee in an amount equal to:

 

   

$30,000,000 if the Merger Agreement is terminated prior to April 15, 2020;

 

   

$40,000,000 if Alexion has extended the end date and the Merger Agreement is terminated after April 15, 2020 but on or prior to the July 15, 2020;

 

   

$50,000,000 if Alexion has extended the end date twice and the Merger Agreement is terminated after July 15, 2020 but on or prior to October 15, 2020; or

 

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$60,000,000 if Alexion has extended the end date three (3) times and the Merger Agreement is terminated after October 15, 2020.

The payment by Alexion of the reverse termination fee will be the sole and exclusive remedy of Achillion in the event of termination of the Merger Agreement under circumstances requiring the payment of the reverse termination fee, other than with respect to claims for, arising out of or in connection with willful and material breach of the Merger Agreement.

Miscellaneous

Expenses

Except as otherwise provided in the Merger Agreement, all costs and expenses incurred in connection with the Merger Agreement will be paid by the party incurring such cost or expense. Alexion will pay all filing fees payable pursuant to the HSR Act or any foreign competition laws; provided, that if the Merger Agreement is terminated (other than by Achillion on the basis of a material breach by Alexion), Achillion will promptly thereafter reimburse Alexion for one-half of all such filing fees paid by Alexion.

Amendments and Waivers

Any provision of the Merger Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is duly executed and delivered, in the case of an amendment, by each party to the Merger Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective; provided that, without the further approval of Achillion’s stockholders, no such amendment or waiver will be made or given after the Stockholder Approval that requires the approval of the stockholders of Achillion under Delaware law unless the required further approval is obtained.

Governing Law

The Merger Agreement is governed by Delaware law.

Specific Performance

Under the Merger Agreement, the parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the parties do not perform their obligations under the provisions of the Merger Agreement in accordance with its specified terms or otherwise breach such provisions. In the event of any breach or threatened breach by Alexion or Merger Sub, on the one hand, or Achillion, on the other hand, of any covenant or obligation of such party contained in the Merger Agreement, the other party will be entitled to, and the other party will not oppose (on the basis that the other party has an adequate remedy at law), in addition to any monetary remedy or damages and without proof of damages or otherwise: a decree or order of specific performance to enforce the observance and performance of such covenant or obligation; and an injunction or other equitable relief restraining such breach or threatened breach. The parties also agree that the right of specific performance is an integral part of the Merger and the other transactions contemplated by the Merger Agreement and without that right, neither Achillion nor Alexion would have entered into the Merger Agreement. The parties agree that any party seeking an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement will not be required to provide any bond or other security in connection with any such order or injunction.

 

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FORM OF CONTINGENT VALUE RIGHTS AGREEMENT

Explanatory Note Regarding the Form of Contingent Value Rights Agreement

The following summary describes the material provisions of the CVR Agreement. Achillion and Alexion have agreed in the Merger Agreement that Alexion will enter into the CVR Agreement with a rights agent at or prior to the closing of the Merger, subject to such changes thereto as permitted under the Merger Agreement and the CVR Agreement.

The descriptions of the CVR Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the CVR Agreement, a copy of which is attached to this proxy statement as Annex B and incorporated into this proxy statement by reference. We encourage you to read the CVR Agreement carefully and in its entirety because this summary may not contain all the information about the CVR Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the CVR Agreement and not by this summary or any other information contained in this proxy statement.

Contingent Value Rights

Each CVR represents the right of its holders to receive contingent cash payments pursuant to the CVR Agreement. The initial holders will be the (i) holders of shares (other than dissenting share)s immediately prior to the Effective Time and (ii) holders of Company Stock Options immediately prior to the Effective Time whose Company Stock Options are converted into the right to receive the Cash Merger Consideration pursuant to Section 2.06 of the Merger Agreement (as described under the caption “— The Merger Agreement, Treatment of Equity Awards”).

The CVRs will not have any voting or dividend rights, and interest will not accrue on any amounts payable on the CVRs to any holder. The CVRs will not represent any equity or ownership interest in Alexion, Achillion, the Surviving Corporation or any of their respective affiliates.

Milestone Payments

While no guarantee can be given that any proceeds will be received, each CVR represents the right to receive the following contingent cash payments:

 

   

$1.00 upon the earlier of (i) first dosing of the first patient with a pharmaceutical product containing ACH-5228 in the first Phase III clinical trial, (ii) the Conversion Date (defined in the CVR Agreement as the date when the first action specified in the protocol for the corresponding Adaptive Trial (as defined in the CVR Agreement) is taken following the decision to modify such Adaptive Trial to proceed as a Phase III clinical trial) for the first Converted Trial (as defined in the CVR Agreement) of any pharmaceutical product containing ACH-5228, and (iii) the first submission of a new drug application to market and sell any pharmaceutical product containing ACH-5228 in the United States (the “Clinical Trial Milestone”), in each case, prior to the fourth (4th) anniversary of the Effective Time (the “Clinical Trial Milestone Period”); and

 

   

$1.00 upon Alexion’s first receipt of approval by the FDA of a new drug application which approval grants Alexion the right to market and sell a pharmaceutical product containing ACH-4471 (danicopan) in the United States (the “Regulatory Approval Milestone”) prior to the date that is fifty-four (54) months after Effective Time (the “Regulatory Approval Milestone Period”). Such payments will be made on or prior to the date that is fifteen (15) business days following the achievement of the Clinical Trial Milestone or the Regulatory Approval Milestone, as applicable (the “Milestone Payment Date”).

 

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Non-Transferability

The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of other than under the following specified circumstances (each, a “Permitted Transfer”):

 

   

upon death of a holder by will or intestacy;

 

   

by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee,

 

   

pursuant to a court order;

 

   

by operation of law (including by consolidation or merger) or without consideration in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; or

 

   

in the case of CVRs payable to a nominee, from a nominee to a beneficial owner (and, if applicable, through an intermediary) or from such nominee to another nominee for the same beneficial owner, in each case to the extent allowable by The Depository Trust Company (“DTC”).

Every request to transfer CVRs must be in writing in accordance with the CVR Agreement.

Evidence of CVR; Registration

The CVRs will not be evidenced by a certificate or other instruments. The rights agent will keep a register (the “CVR Register”) for the purpose of registering CVRs and Permitted Transfers. The CVR Register will initially show one (1) position for Cede & Co. representing all Shares held by DTC on behalf of street name holders held by such holders as of immediately prior to the Effective Time. In the case of holders of In the Money Options, the CVRs will be registered in the names and addresses of such holder of In the Money Options and in a denomination equal to the number of shares subject to the outstanding number of shares underlying the outstanding In the Money Options held by such holder of In the Money Options immediately prior to the Effective Time, and, in each case, as set forth in a schedule delivered by Achillion to Alexion. Except as otherwise provided in the CVR Agreement, once registered on the CVR Register, such holders of In the Money Options will be deemed CVR holders and entitled to all rights, and privileges and subject to all obligations under the CVR Agreement. All duly transferred CVRs registered in the CVR Register will be the valid obligations of Alexion and will entitle the transferee to the same benefits and rights under the CVR Agreement as those held immediately prior to the transfer by the transferor. No transfer of a CVR will be valid until registered in the CVR Register in accordance with the CVR Agreement.

A holder may make a written request to the rights agent to change such holder’s address of record in the CVR Register. The written request must be duly executed by the holder. Upon receipt of such written notice, the rights agent will, subject to its reasonable determination that the written notice is in proper form, promptly record the change of address in the CVR Register.

Payment Procedures

If the Clinical Trial Milestone occurs during the Clinical Trial Milestone Period, or if the Regulatory Approval Milestone occurs within the Regulatory Approval Milestone Period, then, in each case, on the applicable Milestone Payment Date, Alexion will deliver to the rights agent (i) a “Milestone Achievement Certificate” certifying the date of the satisfaction of the milestone and that the holders are entitled to receive $1.00 per CVR and (ii) a wire transfer of dollars in immediately available funds to an account designated by the rights agent, in the aggregate amount equal to the number of CVRs (as reflected in the CVR Register) then outstanding multiplied by $1.00 (the “Aggregate Clinical Trial Milestone Payment” or the “Aggregate Regulatory Approval Milestone Payment”), as applicable. In the case of the aggregate amount payable to all holders of In the Money Options, Alexion may elect to pay such amount directly to the Surviving Corporation. After receipt of the wire

 

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transfer, the rights agent will promptly (and in any event, within five (5) business days) pay the CVR holders of record:

 

   

by one (1) lump sum wire payment to DTC for any holder who is a former street name holder of shares;

 

   

by one (1) lump sum wire payment to the Surviving Corporation for all holders of In the Money Options (unless Alexion has paid such amount itself to the Surviving Corporation); and

 

   

for all other holders, by check mailed, first-class postage prepaid, to the address of each holder set forth in the CVR Register or by other method of delivery as specified by the applicable holder in writing to the rights agent (such amounts together, an amount in cash equal to Aggregate Clinical Trial Milestone Payment or Aggregate Regulatory Approval Milestone Payment, as applicable).

The rights agent will hold the Aggregate Clinical Trial Milestone Payment or Aggregate Regulatory Approval Milestone Payment, as applicable, in a non-interest bearing account until such payment is made. Each of Alexion and the rights agent may require payment, from any holder of CVR and any transferee of such holder, of a sum sufficient to cover any stamp or other tax or other charge of any nature whatsoever that is imposed by a governmental authority or taxing authority in connection with any such registration of transfer. Each of Alexion and the rights agent will have no duty or obligation to take any action under any section of the CVR Agreement that requires the payment by a holder or a transferee of a CVR of applicable taxes or charges unless and until each of Alexion and the rights agent is satisfied that all such taxes or charges have been paid by such holder or such transferee.

Tax Withholding

Except in respect of the CVRs corresponding to In the Money Options (which such CVRs will be subject to the tax withholding provisions set forth in the Merger Agreement), Alexion and the rights agent will be entitled to deduct and withhold from either of the milestone payments, if payable, such amounts as may be required to be deducted and withheld with respect to the applicable milestone payment or CVR under the Internal Revenue Code, and the rules and regulations thereunder, or any other applicable provision of state, local or foreign law relating to taxes, as may be reasonably determined by Alexion or the rights agent. Prior to making any such deduction or withholding, other than ordinary course payroll withholding and reporting, if applicable, Alexion or the rights agent, as applicable, will solicit IRS Form W-9 or IRS Form W-8, or any other appropriate forms or information from each holder in order to avoid or reduce such deduction and withholding, and the milestone payment may be reasonably delayed in order to gather such forms or information. Any amounts so deducted and withheld will be timely remitted over to the relevant governmental authorities. To the extent such amounts are so deducted and withheld and timely remitted to the relevant governmental authorities, such amounts will be treated for all purposes under the CVR Agreement as having been paid to the person to whom such amounts would otherwise have been paid. As required by applicable law, Alexion or the rights agent, as applicable, will deliver to the person to whom such amounts would otherwise have been paid an original IRS Form 1099 or other reasonably acceptable evidence of such withholding.

Undistributed Payments; Imputed Interest

Any portion of any milestone payment that remains undistributed to the holders twelve (12) months after the date of the applicable Milestone Achievement Certificate will be delivered by the rights agent to Alexion, upon demand, and any holder will thereafter look only to Alexion for payment of such milestone payment, without interest, but such holder will have no greater rights against Alexion than those accorded to general unsecured creditors of Alexion under applicable law.

Neither Alexion nor the rights agent will be liable to any person in respect of any milestone payment delivered to a public official in compliance with any applicable state, federal or other abandoned property, escheat or similar law. Alexion will indemnify and hold harmless the rights agent with respect to any liability, penalty, cost or expense the rights agent may incur or be subject to in connection with transferring such property to Alexion.

 

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Except to the extent any portion of the milestone payment is required to be treated as imputed interest and except as otherwise required pursuant to applicable law, the parties to the CVR Agreement intend to treat the milestone payments payable with respect to shares for all tax purposes as consideration for the shares, pursuant to the Merger Agreement. Alexion will, and will cause the Surviving Corporation to, report imputed interest on the CVRs as required by applicable law.

Enforcement of Rights of Holders

Any actions seeking the enforcement of the rights of holders under the CVR Agreement may only be brought either by the rights agent or the holders of at least the majority of the outstanding CVRs as set forth in the CVR Register (the “Majority Holders”).

Rights Agent

The rights agent will be one that is mutually agreeable to Achillion and Alexion. Alexion will (i) pay the rights agent compensation for its services, (ii) reimburse it for all reasonable and documented expenses, and (iii) indemnify it against claims arising out of or in connection with its duties under the form of CVR agreement, except to the extent resulting from the rights agent’s gross negligence, bad faith or willful or intentional misconduct.

The rights agent may resign at any time by notifying Alexion in writing at least thirty (30) days before the resignation takes effect and Alexion may remove the rights agent at any time by board resolution by notifying the rights agent in writing at least thirty (30) days before the removal takes effect, by specifying a date when such removal will take effect. However, the resignation or removal will not become effective until the Alexion board of directors appoints a successor rights agent by board resolution.

Covenants by Alexion

Among other things, the CVR Agreement provides for certain covenants made by Alexion.

List of Holders

Alexion will furnish to the rights agent, in no event later than ten (10) business days following the Effective Time, the names and addresses of the holders in such form as set forth in the CVR Agreement.

Payment of Milestone Payment

Alexion will duly deposit with the rights agent, on or prior to the Milestone Payment Date, the applicable milestone payment to be made to the holders in accordance with the terms of the CVR Agreement. Such amounts will be considered paid on the Milestone Payment Date if on such date the rights agent has received in accordance with the CVR Agreement money sufficient to pay all such amounts then due.

Assignment Transactions

Alexion will not, and will cause its affiliates, including the Surviving Corporation, not to, consummate any Assignment Transaction (as defined below) unless:

 

   

such transaction is an Assignment Transaction pursuant to which a third party is (a) assigned, or exclusively licensed for any and all uses, all intellectual property necessary or useful for the development or commercialization of any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228 or (b) assigned all or substantially all of the assets used or held for use in connection with any pharmaceutical product containing ACH-4471(danicopan) or ACH-5228 (each a “Program Transaction”);

 

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the acquiror is a pharmaceutical or biotechnology company with (1) substantial experience in conducting clinical development of, and filing for and obtaining approval in accordance with all applicable laws to place on the market and sell in the United States, pharmaceutical products for human use and (2) a development, regulatory and scientific infrastructure, that is at least reasonably comparable to that of Alexion and its affiliates;

 

   

the acquiror expressly assumes in writing all of Alexion’s and its affiliates’ obligations under the CVR Agreement with respect to any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228, as applicable, by an assumption agreement, executed and delivered to the rights agent, in form attached as Annex A to the CVR Agreement; and

 

   

Alexion has delivered to the rights agent an officer’s certificate stating that such transaction complies with the above requirements and all conditions precedent in the CVR Agreement related to such transaction have been complied with.

Notwithstanding the above, Alexion may, in its sole discretion and without the consent of any other party, consummate any Change in Control (as defined below); provided that Alexion or the Surviving Corporation, as applicable, will cause the person acquiring Alexion to expressly assume in writing Alexion’s and the Surviving Corporation’s (as applicable) obligations, duties and covenants under the CVR Agreement. No later than five (5) business days prior to the consummation of any Change in Control, Alexion will deliver to the rights agent an officer’s certificate, stating that such Change in Control complies with these requirements and that all conditions precedent in the CVR Agreement relating to such transaction have been satisfied.

For purposes of this proxy statement and the CVR Agreement, “Assignment Transaction” means any transaction (including a sale of assets, spin-off, split-off or licensing transaction), other than (x) a merger or consolidation involving Alexion in which Alexion is not the surviving entity, (y) any transaction involving Alexion in which Alexion is the surviving entity but in which the stockholders of Alexion immediately prior to such transaction own less than fifty percent (50%) of Alexion’s voting power immediately after the transaction or (z) any sale of all or substantially all of Alexion’s assets (each a “Change in Control”), pursuant to which (a) any rights of Alexion or any of its affiliates (including intellectual property rights) (i) necessary for the development or commercialization of any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228 or (ii) useful for the development or commercialization of any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228 (other than, in the case of any useful but not necessary rights, to the extent that the applicable transaction would not reasonably be expected to result in a material delay in achievement of any of the milestones) or (b) all or substantially all of the assets used or held for use in connection with any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228, in each case (in respect of the foregoing (a) and (b)) are, directly or indirectly, disposed of, sold, licensed, assigned, conveyed, or transferred to or acquired by any person other than by Alexion or any of Alexion’s direct or indirect wholly-owned subsidiaries. An “Assignment Transaction” will not apply to (a) sales of any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228 made by Alexion or its affiliates to distributors in the ordinary course, or ordinary course licensing arrangements between Alexion and its affiliates, on the one hand, and third party distributors, contract research organizations or contract manufacturers on the other hand, entered into in the ordinary course of business for purposes of developing, manufacturing, distributing and selling any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228, in each case, on Alexion’s or its affiliates’ behalf and (b) licenses granted by Alexion or its affiliates so long as Alexion and its affiliates retain any and all necessary rights and useful rights (other than, in the case of any useful but not necessary rights, to the extent that the applicable license would not reasonably be expected to result in a material delay in achievement of any of the milestones) to develop and obtain approval by the FDA and any other applicable regulatory authority to market and sell any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228. For purposes of this definition, any delay that reasonably would be expected to result in failure to achieve any of the milestones will be deemed to be a “material delay.”

 

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Commercially Reasonable Efforts

During each milestone period, Alexion (and its successors and assigns) will, and will cause its (and their) affiliates to, use Commercially Reasonable Efforts (as defined below) to achieve the milestones. Notwithstanding the foregoing, Alexion will have no obligation to develop any pharmaceutical product containing ACH-5228 in any indication other than paroxysmal nocturnal hemoglobinuria.

For purposes of this proxy statement and the CVR Agreement, “Commercially Reasonable Efforts” means, with respect to any pharmaceutical products containing ACH-4471 (danicopan) or ACH-5228, using such efforts and resources typically used by Alexion for the development and commercialization of similar products at similar development stages taking into account, as applicable, any pharmaceutical product containing ACH-4471’s (danicopan’s) or ACH-5228’s advantages and disadvantages, product profile, efficacy, safety, toxicity, tolerability, regulatory authority-approved labeling and pricing, the competitiveness of alternative products in the marketplace or under development, the current or future status as an orphan product, the patent coverage and proprietary position of such product, the likelihood of development success or regulatory approval, the regulatory structure involved, the anticipated profitability of such product, and other relevant scientific, technical and commercial factors typically considered in good faith by Alexion in connection with such similar products. Commercially Reasonable Efforts does not mean that either of Alexion or any of its affiliates guarantee either of the milestones will be achieved or that either of the milestones will be achieved by a specific date, and the fact that a milestone is not actually achieved is not, in and of itself, dispositive evidence that Alexion or any of its affiliates did not in fact utilize its Commercially Reasonable Efforts in attempting to achieve such milestone. The application of Commercially Reasonable Efforts will not necessarily require Alexion to disadvantage any particular currently available competing products or products currently under development by Alexion or any of its affiliates or which may in the future enter development by Alexion or any of its affiliates, the success of which may reduce the prospects of achieving the relevant milestone. Any payments payable under the CVR Agreement, including milestone payments, may not be taken into account in determining Commercially Reasonable Efforts.

Other Covenants

Alexion will not enter into any agreement with any third party that is, or otherwise take any actions or inactions, in conflict with the CVR Agreement in any material respect or adversely affect the performance of its obligations under the CVR Agreement.

Alexion agrees that its development and regulatory activities in connection with any pharmaceutical product containing ACH-4471 (danicopan) or ACH-5228 will be carried out in compliance with all applicable laws in all material respects.

Amendments

Amendments without the Consent of Holders

Without the consent of any holders or the rights agent, Alexion, when authorized by a board resolution, at any time and from time to time, may enter into one or more amendments to the CVR Agreement, for any of the following purposes:

 

   

to evidence the succession of another person as a successor rights agent and the assumption by any such successor of the covenants and obligations of the rights agent in the CVR Agreement;

 

   

to add to the covenants of Alexion such further covenants, restrictions, conditions or provisions as Alexion shall consider to be reasonably necessary or desirable for the protection of the holders; provided that, in each case, such provisions do not materially adversely affect the interests of the holders;

 

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to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under the CVR Agreement; provided that, in each case, such provisions do not materially adversely affect the interests of the holders;

 

   

as may be necessary or appropriate to ensure that the CVRs are not subject to registration under the Securities Act, the Exchange Act or any applicable state securities or “blue sky” laws; provided that, such amendments do not materially adversely affect the interests of the holders;

 

   

to reduce the number of CVRs, in the event any holder agrees to renounce such holder’s rights under the CVR Agreement;

 

   

subject to the CVR Agreement’s restrictions on Assignment Transactions, to evidence the succession of another person to Alexion and the assumption by any such successor of the covenants of Alexion contained in the CVR Agreement;

 

   

to evidence the assignment of the CVR Agreement by Alexion as provided in the provisions of the CVR Agreement that relate to Assignment Transactions; or

 

   

any other amendment to the CVR Agreement that would provide any additional rights or benefits to the holders or that does not materially adversely affect the legal rights under the CVR Agreement of any such holder.

Promptly after the execution by Alexion of any amendment pursuant to the conditions bulleted above, Alexion will deliver to the rights agent pursuant to the notice provisions in the CVR Agreement and will mail (or cause the rights agent to mail) a notice thereof by first class mail to the holders at their addresses as they appear on the CVR Register, setting forth such amendment.

Amendments with the Consent of Holders

With the prior consent of the Majority Holders, whether evidenced in writing or taken at a meeting of the holders, Alexion, when authorized by a board resolution, and the rights agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of the CVR Agreement, even if such addition, elimination or change is materially adverse to the interest of the holders. Promptly after the execution by Alexion and the rights agent of any such amendment, Alexion will mail (or cause the rights agent to mail) a notice thereof by first class mail to the holders at their addresses as they appear on the CVR Register, setting forth such amendment.

In executing any amendment permitted by the CVR Agreement with or without the consent of holders, the rights agent will be entitled to receive, and will be fully protected in relying upon, an opinion of counsel stating that the execution of such amendment is authorized or permitted by the CVR Agreement. The rights agent may, but is not obligated to, enter into any such amendment that affects the rights agent’s own rights, privileges, covenants or duties under the CVR Agreement or otherwise.

Termination

The CVR Agreement will be terminated upon the earlier to occur of (a) the payment by the rights agent to each holder of both milestone payments required to be paid under the terms of the CVR Agreement, (b) the delivery of a written notice of termination duly executed by Alexion and the Majority Holders and (c) the expiration of both milestone periods. The termination of the CVR Agreement will not affect or limit the right to receive the milestone payments to the extent earned prior to termination, and the provisions applicable thereto will survive the expiration or termination of the CVR Agreement.

 

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MARKET PRICES AND DIVIDEND DATA

Our common stock is listed on NASDAQ under the symbol “ACHN.” As of [●], 20[●], there were [●] shares of common stock outstanding, held by approximately [●] stockholders of record. We have never declared or paid any cash dividends on our common stock.

The following table presents the high and low intra-day sale prices of our common stock on NASDAQ during the fiscal quarters indicated:

 

     Common Stock Prices  
     High      Low  

Fiscal Year 2019 — Quarter Ended

     

December 31 (through [●], 2019)

   $ [●]      $ [●]  

September 30

     5.03        2.35  

June 30

     3.48        2.64  

March 31

     3.30        1.54  

Fiscal Year 2018 — Quarter Ended

     

December 31

   $ 3.98      $ 1.29  

September 30

     3.86        2.33  

June 30

     3.93        2.67  

March 31

     4.34        2.58  

Fiscal Year 2017 — Quarter Ended

     

December 31

   $ 4.82      $ 2.69  

September 30

     5.66        3.54  

June 30

     5.17        3.15  

March 31

     4.74        3.71  

Fiscal Year 2016 — Quarter Ended

     

December 31

   $ 8.25      $ 3.78  

September 30

     9.49        7.36  

June 30

     10.06        7.48  

March 31

     10.66        5.57  

The closing sale price for our common stock on October 15, 2019, which was the last trading day before the merger was publicly announced, was $3.65 per share. On [●], 20[●], the latest practicable trading day before the printing of this proxy statement, the closing price for our common stock on NASDAQ was $[●] per share. You are encouraged to obtain current market quotations for our common stock.

Following the Merger, there will be no further market for our common stock and it will be delisted from NASDAQ and deregistered under the Exchange Act. As a result, following the Merger we will no longer file periodic reports with the SEC.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information concerning beneficial ownership of our common stock as of [●], 20[●] by:

 

   

each stockholder, or group of affiliated stockholders, known to us to beneficially own more than 5% of our outstanding common stock;

 

   

each of our named executive officers;

 

   

each of our directors; and

 

   

all of our current executive officers and directors as a group.

 

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The table below is based upon information supplied by officers, directors and principal stockholders and Schedule 13Gs and 13Ds filed with the SEC through [●], 20[●].

The percentage ownership is based upon [●] shares of common stock outstanding as of [●], 20[●].

For purposes of the table below, we deem shares of common stock subject to options or warrants that are currently exercisable or exercisable within sixty (60) days of [●], 20[●] and common stock subject to restricted stock unit awards or stock appreciation rights that will vest within sixty (60) days of [●], 20[●] to be outstanding and to be beneficially owned by the person holding the options, warrants, restricted stock unit award or stock appreciation rights for the purpose of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all of the shares of common stock beneficially owned by them, subject to community property laws, where applicable.

 

Name and Address of Beneficial Owner (1)

   Number of Shares
Beneficially Owned
     Percentage of Shares
Beneficially Owned
 
5% Stockholders      
RTW Investments, LP(1)
412 West 15th Street, Floor 9
New York, NY 10011
     13,749,383        [9.82 ]% 
BlackRock, Inc.(2)
55 East 52nd Street
New York, NY 10022
     12,101,177        [8.64 ]% 
The Vanguard Group(3)
100 Vanguard Blvd.
Malvern, PA 19355
     8,617,525        [6.15 ]% 
Dimensional Fund Advisors LP(4) 
Building One
6300 Bee Cave Road
Austin, TX 78746
     7,442,477        [5.31 ]% 
Directors and Named Executive Officers      
Jason Fisherman, M.D.(5)      344,250        *  
Kurt Graves(6)      340,459        *  
Michael D. Kishbauch(7)      169,000        *  
David I. Scheer(8)      355,999        *  
Robert L. Van Nostrand(9)      292,750        *  
Frank Verwiel, M.D.(10)      142,750        *  
Nicole Vitullo(11)      3,707,722        [2.64 ]% 
Paul Firuta(12)      125,000        *  
Anthony Gibney(13)      156,250        *  
Joseph Truitt(14)      1,356,890        *  
Steven Zelenkofske(15)      156,250        *  
Brian Di Donato(16)      62,500        *  
All current directors and executive officers as a group (13 individuals)(17)      7,502,319        [5.21 ]% 

 

*

Represents holdings of less than one percent of our outstanding stock.

(1)

Consists of 12,792,049 shares of common stock held by RTW Master Fund, Ltd. and shares of common stock held by one or more other funds (together the “Funds”), which are managed by RTW Investments, LP (the “Adviser”). The Adviser, in its capacity as the investment manager of the Funds, has the power to vote and the power to direct the disposition of all shares held by the Funds. Accordingly, the Adviser may be

 

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  deemed to beneficially own an aggregate of 13,749,383 shares. Roderick Wong is the Managing Partner of the Adviser. Each of RTW Master Fund, Ltd., the Funds, the Adviser and Roderick Wong disclaims beneficial ownership of the such shares except to the extent of any pecuniary interest therein. This information is from a Schedule 13G/A filed on February 14, 2019.
(2)

Consists of 12,101,177 shares of common stock held by BlackRock, Inc., which has sole voting power with respect to 11,746,050 shares and sole dispositive power with respect to 12,101,177 shares. This information is from a Schedule 13G/A filed by BlackRock, Inc. on February 4, 2019.

(3)

Consists of 8,617,525 shares of common stock held by The Vanguard Group, Inc. (“The Vanguard Group”), which has sole dispositive power with respect to 8,488,811 shares and shared dispositive power with respect to 128,714 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, is the beneficial owner of 122,833 shares as a result of its serving as investment manager of collective trust accounts, and Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, is the beneficial owner of 20,528 shares as a result of its serving as investment manager of Australian investment offerings. This information is from a Schedule 13G/A filed by the Vanguard group on February 11, 2019.

(4)

Consists of 7,442,477 shares of common stock held by Dimensional Fund Advisors LP, which has sole dispositive power with respect to 7,442,477 shares and sole voting power with respect to 6,976,138 shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or subadviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Dimension Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Dimension Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of Achillion that are owned by the Dimension Funds and may be deemed to be the beneficial owner of the shares of Achillion held by the Dimension Funds. However, all securities reported are owned by the Dimension Funds. Dimensional disclaims beneficial ownership of such securities. This information is from a Schedule 13G filed on February 8, 2019.

(5)

Includes stock options to purchase 272,750 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(6)

Includes stock options to purchase 317,750 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(7)

Consists of stock options to purchase 169,000 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(8)

Includes stock options to purchase 272,750 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●] held by David Scheer and 63,249 shares of common stock held by Scheer Investment Holdings III, LLC. Mr. Scheer, a director of Achillion, is the Managing Member of Scheer Investment Holdings III, LLC. As such, he may be deemed to have sole or shared voting and investment power with respect to the shares held by Scheer Investment Holdings III, LLC. Mr. Scheer disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein.

(9)

Includes stock options to purchase 272,750 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(10)

Consists of stock options to purchase 142,750 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(11)

Consists of 3,393,382 shares of common stock held by Domain Partners VIII, L.P., 25,159 shares of common stock held by DP VIII Associates, L.P., as well as 36,431 shares of common stock and stock options to purchase 252,750 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●] held by Nicole Vitullo. Nicole Vitullo, a director of Achillion, is a Managing Member of Domain Associates, LLC. Ms. Vitullo may be deemed to have sole or shared voting and investment power with respect to the shares held by Domain Associates, LLC. Ms. Vitullo disclaims beneficial ownership of such shares except to the extent of her pecuniary interest therein.

 

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(12)

Consists of stock options to purchase 125,000 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(13)

Consists of stock options to purchase 156,250 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(14)

Includes stock options to purchase 1,353,390 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(15)

Consists of stock options to purchase 156,250 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(16)

Consists of stock options to purchase 62,500 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●].

(17)

Includes stock options to purchase 3,843,889 shares of our common stock currently exercisable or exercisable within 60 days of [●], 20[●]. None of the securities held by our current officers and directors are pledged.

FUTURE STOCKHOLDER PROPOSALS

If the Merger is completed, we will have no public stockholders and there will be no public participation in any future meetings of stockholders of Achillion. However, if the Merger is not completed, stockholders will continue to be entitled to attend and participate in stockholder meetings.

Achillion will hold an annual meeting in 2020 only if the Merger has not already been completed.

Stockholders interested in submitting a proposal (other than the nomination of directors) for inclusion in the proxy materials to be distributed by us for the 2020 annual meeting of stockholders, if held, may do so by following the procedures prescribed in Rule 14a-8 of the Exchange Act. To be eligible for inclusion in Achillion’s proxy materials, stockholder proposals must be received at our principal executive offices not later than December 17, 2019 for inclusion in the proxy statement in accordance with Rule 14a-8 for that meeting.

In addition, our by-laws require that we be given advance notice of stockholder nominations for election to the Board of Directors and of other matters which stockholders wish to present for action at an annual meeting of stockholders, other than matters included in our proxy statement in accordance with Rule 14a-8. The required notice must be in writing and received by our Corporate Secretary, Martha E. Manning, Esq., at our principal offices not later than March 1, 2020 or earlier than January 31, 2020. Our by-laws also specify requirements relating to the content of the notice which stockholders must provide, including a stockholder nomination for election to the Board of Directors, to be properly presented at the 2020 Annual Meeting of Stockholders.

A copy of our amended and restated bylaw provisions governing the notice requirements set forth above may be obtained by writing to our Corporate Secretary, Martha E. Manning, Esq., Achillion Pharmaceuticals, Inc., 1777 Sentry Parkway West, VEVA Building #14 Suite 200, Blue Bell, Pennsylvania 19422. A current copy of our bylaws also is filed with the SEC and available at www.sec.gov and www.achillion.com.

WHERE YOU CAN FIND MORE INFORMATION

Achillion files annual, quarterly and current reports, proxy statements and other information with the SEC.

You may read and copy any reports, statements or other information that we file with the SEC at its public reference room at the following location: Station Place, 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of those documents at prescribed rates by writing to the Public Reference Section of the SEC at that address. Please call the SEC at (800) SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at www.sec.gov.

 

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You may obtain any of the documents we file with the SEC, without charge, by requesting them in writing or by telephone from us at the following address:

Achillion Pharmaceuticals, Inc.

Attention: Martha E. Manning, Esq., Corporate Secretary

1777 Sentry Parkway West, VEVA Building #14 Suite 200

Blue Bell, Pennsylvania 19422

If you would like to request documents from us, please do so as soon as possible, to receive them before the Special Meeting. Please note that all of our documents that we file with the SEC are also promptly available through our website at www.achillion.com.

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders May Call:

Toll-Free at (888) 750-5834 (from the U.S. and Canada)

or +1 (412) 232-3651 (from other locations)

Banks & Brokers May Call Collect: (212) 750-5833

MISCELLANEOUS

Achillion has supplied all information relating to Achillion, and Alexion has supplied, and Achillion has not independently verified, all of the information relating to Alexion and Merger Sub contained in this proxy statement.

You should rely only on the information contained in this proxy statement and the annexes to this proxy statement in voting on the Merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated [●], 20[●]. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement), and the mailing of this proxy statement to stockholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

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ANNEX A

Execution Version

AGREEMENT AND PLAN OF MERGER

dated as of

October 15, 2019

among

Achillion Pharmaceuticals, Inc.,

Alexion Pharmaceuticals, Inc.,

and

Beagle Merger Sub, Inc.

 


Table of Contents

TABLE OF CONTENTS

 

         Page  

ARTICLE 1 DEFINITIONS

     A-1  

Section 1.01.

  Definitions      A-1  

Section 1.02.

  Other Definitional and Interpretative Provisions      A-10  

ARTICLE 2 THE MERGER

     A-10  

Section 2.01.

  The Closing      A-10  

Section 2.02.

  The Merger      A-10  

Section 2.03.

  Conversion of Shares      A-11  

Section 2.04.

  Surrender and Payment      A-11  

Section 2.05.

  Dissenting Shares      A-12  

Section 2.06.

  Company Equity Awards; ESPP      A-13  

Section 2.07.

  Adjustments      A-14  

Section 2.08.

  Withholding Rights      A-14  

Section 2.09.

  Lost Certificates      A-15  

ARTICLE 3 THE SURVIVING CORPORATION

     A-15  

Section 3.01.

  Certificate of Incorporation      A-15  

Section 3.02.

  Bylaws      A-15  

Section 3.03.

  Directors and Officers      A-15  

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     A-15  

Section 4.01.

  Corporate Existence and Power      A-15  

Section 4.02.

  Corporate Authorization      A-16  

Section 4.03.

  Governmental Authorization      A-16  

Section 4.04.

  Non-contravention      A-16  

Section 4.05.

  Capitalization      A-16  

Section 4.06.

  Subsidiaries      A-17  

Section 4.07.

  SEC Filings and the Sarbanes-Oxley Act      A-17  

Section 4.08.

  Financial Statements; Internal Controls      A-18  

Section 4.09.

  Disclosure Documents      A-19  

Section 4.10.

  Absence of Certain Changes      A-19  

Section 4.11.

  No Undisclosed Material Liabilities      A-20  

Section 4.12.

  Litigation      A-20  

Section 4.13.

  Compliance with Applicable Law      A-20  

Section 4.14.

  Material Contracts      A-20  

Section 4.15.

  Taxes      A-22  

Section 4.16.

  Employee Benefit Plans      A-24  

Section 4.17.

  Labor and Employment Matters      A-26  

Section 4.18.

  Insurance Policies      A-26  

Section 4.19.

  Environmental Matters      A-26  

Section 4.20.

  Intellectual Property      A-27  

Section 4.21.

  Regulatory Matters      A-28  

Section 4.22.

  Properties      A-30  

Section 4.23.

  Interested Party Transactions      A-30  

Section 4.24.

  Compliance with the U.S. Foreign Corrupt Practices Act and Other Applicable Anti-Corruption Laws      A-31  

Section 4.25.

  Finders’ Fees      A-31  

Section 4.26.

  Opinion of Financial Advisor      A-31  

 

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Section 4.27.

  Antitakeover Statute      A-31  

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT

     A-32  

Section 5.01.

  Corporate Existence and Power      A-32  

Section 5.02.

  Corporate Authorization      A-32  

Section 5.03.

  Governmental Authorization      A-32  

Section 5.04.

  Non-contravention      A-32  

Section 5.05.

  Disclosure Documents      A-33  

Section 5.06.

  Litigation      A-33  

Section 5.07.

  Financing      A-33  

Section 5.08.

  Ownership of Shares      A-33  

ARTICLE 6 COVENANTS

     A-33  

Section 6.01.

  Conduct of the Company      A-33  

Section 6.02.

  Stockholder Meeting; Board Recommendation; Proxy Material      A-35  

Section 6.03.

  No Solicitation      A-37  

Section 6.04.

  Access to Information      A-39  

Section 6.05.

  Notice of Certain Events      A-39  

Section 6.06.

  401(k) Plans      A-40  

Section 6.07.

  Employee Benefit Plan Matters      A-40  

Section 6.08.

  State Takeover Laws      A-41  

Section 6.09.

  CVR Agreement      A-41  

Section 6.10.

  Obligations of Merger Subsidiary      A-41  

Section 6.11.

  Voting of Shares      A-42  

Section 6.12.

  Director and Officer Liability      A-42  

Section 6.13.

  Reasonable Best Efforts      A-42  

Section 6.14.

  Certain Filings      A-44  

Section 6.15.

  Public Announcements      A-44  

Section 6.16.

  Further Assurances      A-44  

Section 6.17.

  Section 16 Matters      A-44  

Section 6.18.

  Confidentiality      A-44  

ARTICLE 7 CONDITIONS TO THE MERGER

     A-45  

Section 7.01.

  Conditions to the Obligations of Each Party      A-45  

Section 7.02.

  Conditions to the Obligations of Parent and Merger Subsidiary      A-45  

Section 7.03.

  Conditions to the Obligations of the Company      A-46  

ARTICLE 8 TERMINATION

     A-46  

Section 8.01.

  Termination      A-46  

Section 8.02.

  Effect of Termination      A-47  

ARTICLE 9 MISCELLANEOUS

     A-48  

Section 9.01.

  Notices      A-48  

Section 9.02.

  Survival of Representations and Warranties      A-48  

Section 9.03.

  Amendments and Waivers      A-48  

Section 9.04.

  Expenses      A-49  

Section 9.05.

  Binding Effect; No Third Party Beneficiaries; No Assignment      A-50  

Section 9.06.

  Governing Law      A-50  

Section 9.07.

  Jurisdiction      A-50  

Section 9.08.

  Waiver of Jury Trial      A-51  

Section 9.09.

  Counterparts; Effectiveness      A-51  

Section 9.10.

  Entire Agreement      A-51  

 

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Section 9.11.

  Severability      A-51  

Section 9.12.

  Specific Performance      A-51  

Section 9.13.

  Disclosure Schedule      A-51  

Section 9.14.

  Rules of Construction      A-52  

 

Exhibit A    –     Form of Amended and Restated Certificate of Incorporation of Surviving Corporation
Exhibit B    –     Form of CVR Agreement
Exhibit C    –     Form of General Release
Exhibit D    –     Form of Non-Competition Agreement

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of October 15, 2019, among Achillion Pharmaceuticals, Inc., a Delaware corporation (the “Company”), Alexion Pharmaceuticals, Inc., a Delaware corporation (“Parent”), and Beagle Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Subsidiary”).

WHEREAS, the board of directors of the Company has unanimously (i) approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the merger of Merger Subsidiary with and into the Company, with the Company being the surviving corporation (the “Merger”), upon the terms and subject to the conditions set forth herein, (ii) determined that this Agreement and such transactions are fair to, and in the best interests of, the Company and its stockholders (other than Parent and its Subsidiaries) and (iii) resolved to recommend that the Company’s stockholders approve the adoption of this Agreement;

WHEREAS, each of the boards of directors of Parent and Merger Subsidiary has (i) approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the Merger, upon the terms and subject to the conditions set forth herein and (ii) determined that this Agreement and such transactions are fair to, and in the best interests of, Parent and Merger Subsidiary, respectively;

WHEREAS, Parent, as the sole stockholder of Merger Subsidiary, shall, on the date hereof immediately following execution and delivery of this Agreement, adopt this Agreement and approve the transactions contemplated by this Agreement, including the Merger;

WHEREAS, subject to the terms and conditions of this Agreement, at or prior to the Effective Time (as defined below), Parent and a rights agent mutually agreeable to Parent and the Company (the “Rights Agent”) will enter into a Contingent Value Rights Agreement in substantially the form attached hereto as Exhibit B (subject to changes permitted by Section 6.09) (the “CVR Agreement”); and

WHEREAS, the Company, Parent and Merger Subsidiary desire to make certain representations, warranties, covenants and agreements in connection with this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Definitions.

(a) As used herein, the following terms have the following meanings:

Acquisition Proposal” means any offer, proposal, inquiry or indication of interest from any Third Party relating to any transaction or series of related transactions involving (i) any acquisition or purchase by any Person, directly or indirectly, of 15% or more of any class of outstanding voting or equity securities of the Company, or any tender offer (including a self-tender) or exchange offer that, if consummated, would result in any Person beneficially owning 15% or more of any class of outstanding voting or equity securities of the Company, (ii) any merger, amalgamation, consolidation, share exchange, business combination, joint venture or other similar transaction involving the Company, the business of which constitutes 15% or more of the net revenues, net income or assets of the Company, (iii) any sale, exchange, transfer, license (other than licenses in the ordinary course of business), or other disposition of 15% or more of the consolidated assets of the Company (measured by the lesser of book or fair market value thereof) or (iv) any liquidation, dissolution, recapitalization, extraordinary dividend or other significant corporate reorganization of the Company, the business of which accounts for 15% or more of the consolidated net revenues, net income or assets of the Company.

 

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Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. As used in this definition, the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

Antitrust Laws” means applicable federal, state, local or foreign antitrust, competition, premerger notification or trade regulation laws, regulations, decrees or orders designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition.

Applicable Law” means, with respect to any Person, any Law that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

Closing Date” means the date of Closing (as defined below).

COBRA” means the requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code and any similar state law.

Code” means the Internal Revenue Code of 1986, as amended.

Company 401(k) Plan” means the Achillion Pharmaceuticals, Inc. 401(k) Retirement Savings Plan.

Company Balance Sheet” means the consolidated balance sheet of the Company as of December 31, 2018 and the footnotes thereto set forth in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018.

Company Balance Sheet Date” means December 31, 2018.

Company Board” means the Board of Directors of the Company. For purposes of this Agreement, unless otherwise specifically provided for herein, any determination or action by the Company Board shall be a determination or action approved by the greater of a majority of the entire number of directors or the number of directors required to approve such action at a meeting duly called and held at which all members of the Company Board were present and voting.

Company Common Stock” means the common stock of the Company, par value $0.001 per share.

Company Compensatory Award” means any Company Stock Option or other equity-based award denominated in shares of Company Common Stock.

Company IP” means any and all Intellectual Property that is owned by, purported to be owned by, or exclusively licensed to the Company, or has been used, is used or is held for use in the business of the Company as previously conducted, currently conducted or as currently proposed to be conducted.

Company Material Adverse Effect” means (A) any effect, change, event or occurrence that would or would reasonably be expected to be materially adverse to the business, financial condition or results of operations of the Company, or (B) any effect, change, event or occurrence that would or would reasonably be expected to, individually or in the aggregate, materially impair, prevent or delay the Company’s ability to consummate the Merger and the other transactions contemplated by this Agreement in a timely manner on the terms set forth herein, excluding in the case of clause (A) above, any such material adverse effect resulting from

 

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or arising out of (i) the announcement, pendency or performance of the Merger (including any loss of or adverse change in the relationship of the Company with its employees, customers, partners or suppliers related thereto), (ii) any change in the market price or trading volume of the Company Common Stock or change in the Company’s credit ratings (it being understood that any cause of any such change may be taken into consideration when determining whether a Company Material Adverse Effect has occurred), (iii) general market, economic or political conditions (including acts of terrorism, war, national or international calamity, natural disaster or any similar event) that do not disproportionately affect the Company, as compared to other companies participating in the same industry as the Company, (iv) general conditions in the industry in which the Company operates that do not disproportionately affect the Company as compared to other companies participating in the same industry as the Company, (v) any changes (after the date hereof) in GAAP or Applicable Law, (vi) any failure to take any action in compliance with the restrictions or other prohibitions set forth in Section 6.01(b), or the taking of any specific action at the written direction of Parent or expressly required by this Agreement, (vii) any Proceeding made or brought by any holder of shares of Company Common Stock (on the holder’s own behalf or on behalf of the Company) arising out of or related to this Agreement or any of the transactions contemplated hereby (including the Merger) or (viii) any failure by the Company to meet internal or analysts’ estimates or projections (it being understood that any cause of any such failure may be taken into consideration when determining whether a Company Material Adverse Effect has occurred).

Company Software” means the computer software used by the Company (whether in source code, object code or other form).

Company Stock Option” means each compensatory option to purchase Company Common Stock outstanding under any Company Stock Plan or otherwise.

Company Stock Plan” means any stock option, stock incentive or other equity compensation plan or agreement sponsored or maintained by the Company or Affiliate of the Company.

Contract” means any legally binding written or oral contract, agreement, note, bond, indenture, mortgage, guarantee, option, lease (or sublease), license, sales or purchase order, warranty, commitment, or other instrument, obligation, arrangement or understanding of any kind.

Controlled Group Liability” means any and all material liabilities under Title IV of ERISA, under Section 302 of ERISA, and under Sections 412 and 4971 of the Code, other than such liabilities that arise solely out of, or relate solely to, the Company Employee Plans.

Delaware Law” means the General Corporation Law of the State of Delaware.

EMA” means the European Medicines Agency or any successor agency thereto.

Environmental Law” means any Applicable Law or any agreement with any Governmental Authority or other Person relating to human health and safety, the environment or any Hazardous Substance.

Environmental Permits” means, with respect to any Person, all Governmental Authorizations relating to or required by Environmental Law and affecting, or relating in any way to, the business of such Person or any of its Subsidiaries.

Equity Interest” means any share, capital stock, partnership, member or similar interest in any entity, and any option, warrant, right or security convertible, exchangeable or exercisable therefor.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate” of any entity means any other entity that, together with such entity, would be treated as a single employer within the meaning of Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA.

 

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Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Executive Officer” shall have the meaning set forth in Rule 3b-7 of the Exchange Act.

FDA” means the United States Food and Drug Administration or any successor agency thereto.

FDCA” means the U.S. Food, Drug, and Cosmetic Act of 1938, as amended.

GAAP” means generally accepted accounting principles in the United States, as in effect on the date hereof.

General Release” means a general release of claims in favor of the Company substantially in the form attached hereto as Exhibit C.

Good Clinical Practices” means, with respect to the Company, standards for clinical trials for pharmaceuticals (including all applicable requirements and guidance documents relating to protection of human subjects), as set forth in the FDCA and applicable regulations promulgated thereunder (including, for example, 21 C.F.R. Parts 50, 54, and 56) and FDA guidance documents, as amended from time to time, and such standards of good clinical practice (including all applicable requirements relating to protection of human subjects) as are required by Regulatory Authorities in any other countries in which the products of the Company are intended to be sold, including applicable regulations or guidelines from the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use, to the extent such standards are more stringent than in the United States.

Good Manufacturing Practices” means, with respect to the Company, standards for the manufacture, processing, packaging, testing, transportation, handling and holding of drug products, as set forth in the FDCA and applicable regulations promulgated thereunder (including for example, 21 C.F.R. Parts 210 and 211) and FDA guidance documents, as amended from time to time, and such standards of good manufacturing practices as are required by Regulatory Authorities in any other countries in which the products of the Company are intended to be sold, including applicable regulations or guidelines from the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use, to the extent such standards are more stringent than in the United States.

Governmental Authority” means any government or any state, department, local authority or other political subdivision thereof, or any governmental or quasi-governmental body, agency, authority (including any central bank, Taxing Authority or transgovernmental or supranational entity or authority), minister or instrumentality (including any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

Governmental Authorizations” means, with respect to any Person, all licenses, permits, certificates, waivers, consents, franchises (including similar authorizations or permits), exemptions, variances, expirations and terminations of any waiting period requirements and other authorizations and approvals issued to such Person by or obtained by such Person from any Governmental Authority, or of which such Person has the benefit under any Applicable Law.

Hazardous Substance” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including any substance, waste or material regulated under any Environmental Law.

Health Care Laws” means the FDCA and the regulations promulgated thereunder, the Public Health Service Act (42 U.S.C. § 201 et seq.), and the regulations promulgated thereunder, all federal and state health

 

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care fraud and abuse laws, including the Federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Anti-Inducement Law (42 U.S.C. § 1320a-7a(a)(5)), the exclusion laws (42 U.S.C. § 1320a-7), and the regulations promulgated pursuant to such statutes, the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §§ 1320d et seq.), the regulations promulgated thereunder and comparable state laws, all applicable laws, rules and regulations, ordinances, judgments, decrees, orders, writs and injunctions administered by the FDA and other Regulatory Authorities, including those governing or relating to Good Clinical Practices, recordkeeping, the manufacture, testing, development, approval, processing, and use of any compounds or products manufactured by or on behalf of the Company, including applicable regulations at 21 C.F.R. Parts 11, 50, 54, 56, 58, 312, and 314 and the FDA’s current Good Manufacturing Practice Regulations at 21 C.F.R. Parts 210 and 211 for products sold in the United States, each as may be amended from time to time.

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

IND” means an Investigational New Drug Application submitted to the FDA pursuant to 21 C.F.R. Part 312 (as amended from time to time) with respect to a Product Candidate, or the equivalent application or filing submitted to any Regulatory Authority outside the United States (including any supra-national agency such as the EMA), and all supplements, amendments, variations, extensions and renewals thereof that may be submitted with respect to the foregoing.

Indebtedness” means, collectively, any indebtedness for borrowed money, indebtedness evidenced by any bond, debenture, note, mortgage, indenture or other debt instrument or debt security, amounts owing as deferred purchase price for the purchase of any property, or guarantees with respect to any indebtedness or obligation of a type described above of any other Person.

Intellectual Property” means any or all of the following, including all right, title and interest therein or thereto: all Patents; all copyrights and database rights, registrations and applications therefor, works of authorship (including software), rights in databases, moral rights or other similar rights; all Trademarks and goodwill associated therewith; rights in trade secrets and other confidential information, inventions, discoveries, improvements, know-how, ideas, materials, compositions, formulations, methods, methodologies, processes, procedures, tests, formulae, techniques, specifications, designs, tools, algorithms, data, information, and technology (including research, development, manufacturing, business or marketing information and processes, assays, procedures, studies, practices and sourcing information); all domain names, registrations or applications therefor, and rights of privacy or publicity; and all other intellectual property or rights in confidential information of any kind or nature, however denominated, throughout the world.

IRS” means the U.S. Internal Revenue Service.

Knowledge of the Company” means knowledge, after reasonable inquiry, of each of the individuals identified in Section 1.01 of the Company Disclosure Schedule.

Law” means any international, national, federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority.

Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance, license, claim, infringement, right of first refusal, preemptive right, community property right or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

 

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Non-Competition Agreement” means a non-competition, non-solicitation and confidentiality agreement, which includes post-employment restrictive covenants, substantially in the form attached hereto as Exhibit D.

Order” means, with respect to any Person, any order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority or arbitrator that is binding upon or applicable to such Person or its property.

Other Company Representations” means the representations and warranties of the Company contained in Article 4, other than the Specified Company Representations and the representations and warranties of the Company contained in Section 4.05.

Parent Material Adverse Effect” means any effect, change, event or occurrence that would or would reasonably be expected to, individually or in the aggregate, materially impair, prevent or delay Parent or Merger Subsidiary’s ability to consummate the Merger and the other transactions contemplated by this Agreement in a timely manner on the terms set forth herein.

Patent” means any United States, international or foreign patent or application therefor, including all reissues, divisions, divisionals, renewals, extensions, provisionals, continuations and continuations-in-part thereof, and all patents, applications, documents and filings claiming priority to or serving as a basis for priority thereof.

PBGC” means the Pension Benefit Guaranty Corporation.

Permitted Liens” means (i) Liens disclosed on the Company Balance Sheet, (ii) statutory liens for Taxes that are (A) not yet due and payable as of the Closing Date or (B) being contested in good faith by appropriate proceedings (and for which adequate accruals or reserves have been established on the Company Balance Sheet in the case of clause (B)), (iii) licenses of or other grants of rights to use or obligations with respect to Intellectual Property, and (iv) landlords’, mechanics’, carriers’, workmen’s, repairmen’s or other like liens or other similar encumbrances arising or incurred in the ordinary course of business consistent with past practice that, in the aggregate, do not materially impair the value or the present or intended use and operation of the assets to which they relate.

Per Share Value Paid” means, as of any Valuation Point, the sum of (i) the Cash Merger Consideration, (ii) the amount per Share in cash previously paid in respect of any earlier Valuation Points (if any) and (iii) the amount per Share in cash to be paid at such Valuation Point under the CVR Agreement.

Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

Personal Data” means all personal information, including protected health information, as defined under applicable Privacy and Information Security Requirements.

Privacy and Information Security Requirements” means all Laws relating to the Processing of personally identifiable information and protected health information, including the General Data Protection Regulation (EU) 2016/679 (the “GDPR”) and any national laws supplementing the GDPR (such as in the U.K., the Data Protection Act 2018), the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, including the regulations promulgated thereunder, and any other applicable state or foreign privacy Laws.

Proceeding” means any suit, claim, complaint, action, litigation, arbitration, injunction, demand, citation, subpoena, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation of any nature, whether at law or in equity, commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Authority or any arbitrator or arbitration panel.

 

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Process” or “Processing” means the operation or set of operations that is performed on Personal Data pursuant to applicable Privacy and Information Security Requirements.

Product Candidate” means any pharmaceutical product developed, manufactured and/or tested by or on behalf of the Company that has not received a Regulatory Authorization for commercial distribution other than in connection with pre-clinical or clinical trials.

Registered IP” means all United States, international and foreign: Patents; Trademark registrations and applications therefor; copyright and database right registrations and applications therefor; domain name registrations; and any other Company IP that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any Governmental Authority, in each case, owned by, purported to be owned by, under obligation of assignment to, or filed in the name of, the Company.

Regulatory Authority” means any national or supranational Governmental Authority, including the FDA and the EMA, with responsibility for granting any Regulatory Authorizations with respect to the Product Candidates.

Regulatory Authorizations” means any approvals, clearances, authorizations, registrations, certifications, licenses and permits granted by any Regulatory Authority, including any INDs, NDAs and MAAs.

Representatives” means, with respect to any Person, the directors, officers, employees, financial advisors, attorneys, accountants, consultants, agents and other authorized representatives of such Person, acting in such capacity.

Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder.

SEC” means the Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Shares” means shares of Company Common Stock.

Specified Holder” means (a) any holder of Company Stock Options who is employed by the Company as of immediately prior to the Effective Time at the level of Executive Director or higher and (b) any other holder of Company Stock Options identified by Parent within thirty (30) days following the date of this Agreement who is an officer or employee of the Company as of the date of this Agreement.

Specified Holder Option” means a Company Stock Option held by a Specified Holder.

Specified Company Representations” means the representations and warranties of the Company contained in Sections 4.01(a), 4.02, 4.04(i), 4.25 and 4.26.

Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

Superior Proposal” means any bona fide, unsolicited, written Acquisition Proposal which did not result from or arise out of a breach of Section 6.03 of this Agreement, made by a Third Party, which the Company Board determines in good faith, after considering the advice of its outside legal counsel and a financial advisor of nationally recognized reputation, and after taking into account all of the terms and conditions of such Acquisition

 

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Proposal (including any termination or break-up fees, expense reimbursement provisions and conditions to consummation) and after taking into account all financial, legal, regulatory, and other aspects of such Acquisition Proposal (including the financing terms and the ability of such Third Party to finance such Acquisition Proposal), is more favorable to the Company’s stockholders (other than Parent and its Affiliates) from a financial point of view than as provided hereunder (including any changes to the terms of this Agreement proposed by Parent in response to such Superior Proposal pursuant to and in accordance with Section 6.03 or otherwise); provided that for purposes of the definition of “Superior Proposal,” the references to “15%” in the definition of Acquisition Proposal shall be deemed to be references to “50%.”

System” means any software, hardware, network (excluding any public networks), electronics, platform, communications equipment that interfaces with systems or software, telecommunications, website and related information technology system, databases, and all other forms of information technology equipment used by the Company in connection with its business.

Tax” means any federal, state, local, foreign or other tax, governmental fee, or other like or similar assessment or charge of any kind whatsoever imposed by any Taxing Authority (including ad valorem, alternative or add-on minimum, capital, capital stock, customs and import duties, disability, documentary stamp, employment, environmental, estimated, excise, franchise, gains, goods and services, gross income, gross receipts, imputed underpayment, income, intangible, inventory, lease, license, mortgage recording, net income, net worth, occupation, payroll, personal property, premium, production, profits, property, real property, recapture, recording, registration, rent, sales, service, severance, social security, stamp, transfer, transfer gains, unemployment, use, value added, windfall profits, and withholding), together with any interest, fine, penalty, addition to tax, or additional amount imposed with respect to (x) any such item, (y) any contest or dispute thereof, or (z) any such interest, fine, penalty, addition to tax, or additional amount, whether disputed or not in the case of any of the foregoing.

Tax Return” means any report, return, document, declaration, statements, or other information required to be filed with or supplied to or actually filed with or supplied to a Taxing Authority with respect to or relating to Taxes, including (A) information returns, (B) any document with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration, statement, or other information, (C) any schedule or attachment to any of the foregoing, (D) and any amendment with respect to any of the foregoing and any amendment thereto.

Taxing Authority” means any Governmental Authority or any quasi-governmental or private body responsible for or having jurisdiction over the administration, assessment, collection, determination, or imposition of any Tax.

Third Party” means any Person or “group” (as defined under Section 13(d) of the Exchange Act) of Persons, other than Parent or any of its Affiliates.

Trademarks” means all trademarks, trade names, service marks, service names, brands, trade dress, logos, other source identifiers, and registrations and applications therefor throughout the world.

Treasury Regulations” means the regulations promulgated under the Code by the United States Department of the Treasury.

Valuation Point” means each Milestone Payment Date (as defined in the CVR Agreement).

 

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(b) Each of the following terms is defined in the Section set forth opposite such term:

 

Term    Section
Adverse Recommendation Change    6.03(d)
Agreement    Preamble
Board Recommendation    6.02(b)
Cash Merger Consideration    2.03(a)
Centerview    4.25
Certificate of Merger    2.02(a)
Certificates    2.04(a)
Closing    2.01
Company    Preamble
Company Disclosure Schedule    4
Company Employee Plan    4.16(a)
Company Related Parties    9.04(e)
Company SEC Documents    4.07(a)
Company Securities    4.05(c)
Confidentiality Agreement    6.18
Continuing Employees    6.07(a)
CVR    2.03(a)
CVR Agreement    Recitals
Dissenting Shares    2.05
Effective Time    2.02(b)
End Date    8.01(b)(i)
ESPP    2.06(d)
Exchange Agent    2.04(a)
Final Exercise Date    2.06(d)
Foreign Competition Laws    4.03
Governmental Antitrust Authority    6.13(b)
In the Money Option    2.06(a)
Indemnified Parties    6.12(b)
Insurance Policies    4.18
Intervening Event    6.03(d)(ii)
Lease Agreement    4.22(c)
Leased Real Property    4.22(c)
Malicious Code    4.20(k)
Material Contract    4.14(b)
Maximum Premium    6.12(a)
Merger    Recitals
Merger Consideration    2.03(a)
Merger Subsidiary    Preamble
Notice Period    6.03(d)(i)
Out of the Money Option    2.06(b)
Parent    Preamble
Parent Benefit Plans    6.07(b)
Parent Termination Fee    9.04(f)
Payment Fund    2.04(a)
Proxy Statement    4.09
Rights Agent    Recitals
Stockholder Approval    4.02(a)
Stockholder Meeting    6.02(a)
Surviving Corporation    2.02(c)

 

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Termination Fee    9.04(b)
Uncertificated Shares    2.04(a)
WARN Act    4.17(b)

Section 1.02. Other Definitional and Interpretative Provisions. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that Person. References to any statute are to that statute, as amended from time to time, and to the rules and regulations promulgated thereunder. References to “$” and “dollars” are to the currency of the United States. References from or through any date shall mean, unless otherwise specified, from and including or through and including, respectively. When calculating the period of time before which, within which or following which, any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

ARTICLE 2

THE MERGER

Section 2.01. The Closing. Upon the terms and subject to the conditions set forth herein, the closing of the Merger (the “Closing”) will take place at 10:00 a.m., Boston time, as soon as practicable (and, in any event, within two (2) Business Days) after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger set forth in Article 7 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions), unless this Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto. The Closing shall be held at the offices of Foley Hoag LLP, Seaport West, 155 Seaport Boulevard, Boston, Massachusetts 02210, unless another place is agreed to in writing by the parties hereto.

Section 2.02. The Merger.

(a) Upon the terms and subject to the conditions set forth herein, as soon as practicable after the Closing, the Company shall file with the Delaware Secretary of State a certificate of merger (the “Certificate of Merger”) in connection with the Merger in such form as is required by, and executed and acknowledged in accordance with, Delaware Law.

(b) The Merger shall become effective on such date and at such time (the “Effective Time”) as the Certificate of Merger has been duly filed with the Delaware Secretary of State (or at such later time as may be agreed by the parties that is specified in the Certificate of Merger).

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be the surviving corporation (the “Surviving Corporation”). From and after the Effective Time, the Surviving Corporation shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Subsidiary, all as provided under Delaware Law.

Section 2.03. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof:

(a) except as otherwise provided in Section 2.03(b), Section 2.03(c), or Section 2.05, each share of Company Common Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive (i) $6.30 in cash, without interest (the “Cash Merger Consideration”) and (ii) one (1) contractual contingent value right pursuant to the CVR Agreement (a “CVR”), in each case, without interest thereon ((i) and (ii) collectively, the “Merger Consideration”);

(b) each share of Company Common Stock held by the Company as treasury stock or owned by Parent or Merger Subsidiary immediately prior to the Effective Time shall be canceled, and no payment shall be made with respect thereto;

(c) each share of Company Common Stock held by any Subsidiary of Parent (other than Merger Subsidiary) immediately prior to the Effective Time shall be converted into such number of shares of common stock, par value $0.001 per share, of the Surviving Corporation such