-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UhNmlR03eARlgkS5KZEt3endFCGJLi42ANlUNVw+RPWOEI+9zqRZoRLjeSQG35oR AlXeRHfFkjChzI+X6IRsGA== 0000940180-97-000737.txt : 19970825 0000940180-97-000737.hdr.sgml : 19970825 ACCESSION NUMBER: 0000940180-97-000737 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 36 FILED AS OF DATE: 19970822 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RHONE POULENC RORER INC CENTRAL INDEX KEY: 0000217028 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 231699163 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-11847 FILM NUMBER: 97668366 BUSINESS ADDRESS: STREET 1: 500 ARCOLA RD STREET 2: P O BOX 1200 M/S 5B14 CITY: COLLEGEVILLE STATE: PA ZIP: 19426-0107 BUSINESS PHONE: 6104548000 FORMER COMPANY: FORMER CONFORMED NAME: RORER GROUP INC DATE OF NAME CHANGE: 19900731 FORMER COMPANY: FORMER CONFORMED NAME: RORER AMCHEM INC DATE OF NAME CHANGE: 19770604 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RHONE POULENC S A CENTRAL INDEX KEY: 0000807198 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 000000000 STATE OF INCORPORATION: I0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 25 QUAI PAUL DOUMER STREET 2: 92408 COURBEVOIE CEDEX CITY: FRANCE STATE: I0 BUSINESS PHONE: 33147681234 MAIL ADDRESS: STREET 1: 25 QUAI PAUL DOUMER STREET 2: 92408 COURBEVOIE CEDEX CITY: FRANCE STATE: I0 SC 14D1 1 SCHEDULE 14D1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SCHEDULE 13D* UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 10) ---------------- RHONE-POULENC RORER INC. (NAME OF SUBJECT COMPANY) ---------------- RHONE-POULENC S.A. (BIDDER) ---------------- COMMON STOCK, WITHOUT PAR VALUE (TITLE OF CLASS OF SECURITIES) ---------------- 76242T 10 4 (CUSIP NUMBER OF CLASS OF SECURITIES) ---------------- YVES BRISSY RHONE-POULENC S.A. 25, QUAI PAUL DOUMER 92408 COURBEVOIE CEDEX, FRANCE 011-331-47-68-12-34 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) ---------------- WITH COPIES TO: HUBERTUS V. SULKOWSKI, ESQ. CREIGHTON O'M. CONDON, ESQ. SHEARMAN & STERLING SHEARMAN & STERLING 114, AVENUE DES CHAMPS-ELYSEES 599 LEXINGTON AVENUE 75008 PARIS, FRANCE NEW YORK, NEW YORK 011-331-53-89-70-00 (212) 848-4000 CALCULATION OF FILING FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE* - ------------------------------------------------------------------------------ $4,846,433,601.00 $969,286.72
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- * Calculated by multiplying $97, the per share tender offer price, by 49,963,233 the sum of the number of shares of Common Stock sought in the Offer and the 4,439,111 shares of Common Stock subject to options vested as of July 31, 1997. [_Check]box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: _____________ Filing Party: _______________________ Form or Registration No.: ___________ Date Filed: _________________________ - ------------------------------------------------------------------------------- * This Statement also constitutes Amendment No. 10 to the Statement on Schedule 13D of Rhone-Poulenc S.A. with respect to the Common Stock, without par value, of Rhone-Poulenc Rorer Inc. which may be deemed to be beneficially owned by Rhone-Poulenc S.A. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 (the "Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CUSIP NO. 76242T 10 4 1NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF PERSON Rhone-Poulenc S.A. - -------------------------------------------------------------------------------- 2CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (See Instructions) (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4SOURCE OF FUNDS (See Instructions) WC, BK - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [_] REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION France - -------------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 97,163,370 shares of common stock - -------------------------------------------------------------------------------- 8CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES (See Instructions) [_] - -------------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) Approximately 68.1%, according to the Company's records as of July 31, 1997. - -------------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON (See Instructions) CO 2 This Tender Offer Statement on Schedule 14D-1 and Amendment No. 9 to the Statement on Schedule 13D (this "Statement") filed by Rhone-Poulenc S.A., a societe anonyme organized under the laws of the Republic of France ("Purchaser") relates to the offer by Purchaser to purchase all of the issued and outstanding shares (the "Shares") of common stock, without par value, of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation, at a price of $97 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 22, 1997 (the "Offer to Purchase") and in the related Letter of Transmittal (which together constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), which has its principal executive offices at 500 Arcola Road, Collegeville, Pennsylvania, 19426-0107. (b) The exact title of the class of equity securities being sought is shares of Common Stock, without par value, of the Company. The Company has advised Purchaser that, as of July 31, 1997, there were 142,687,492 Shares issued and outstanding. The information set forth under "INTRODUCTION" and "THE TENDER OFFER--Section 1. Terms of the Offer; Expiration Date" of the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market in which the Shares are traded and certain high and low sales prices for the Shares in such principal market set forth in "THE TENDER OFFER--Section 6. Price Range of Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is filed by Purchaser. The information concerning the name, state or other place of organization, principal business and address of the principal office of Purchaser, and the information concerning the name, business address, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted, material occupations, positions, offices or employments during the last five years and citizenship of each of the executive officers and directors of Purchaser is set forth under "INTRODUCTION", "THE TENDER OFFER--Section 8. Certain Information Concerning Purchaser" and Schedule I of the Offer to Purchase and is incorporated herein by reference. (e) and (f) During the last five years, neither Purchaser, nor, to the best knowledge of Purchaser, any of the persons listed in Schedule I of the Offer to Purchase has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) The information set forth under "SPECIAL FACTORS--Background of the Offer", "SPECIAL FACTORS--The Merger Agreement", "SPECIAL FACTORS--Related Party Transactions" and "THE TENDER OFFER--Section 8. Certain Information Concerning Purchaser" in the Offer to Purchase is incorporated herein by reference. (b) The information set forth under "INTRODUCTION", "SPECIAL FACTORS-- Background of the Offer", "SPECIAL FACTORS--Purpose and Structure of the Offer and the Merger; Reasons of Purchaser for the Offer and the Merger", "SPECIAL FACTORS--Plans for the Company After the Offer and the Merger; Certain Effects of the Offer", "SPECIAL FACTORS--The Merger Agreement", "THE TENDER OFFER-- Section 7. Certain Information Concerning the Company" and "THE TENDER OFFER-- Section 8. Certain Information Concerning Purchaser" of the Offer to Purchase is incorporated herein by reference. 3 ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(c) The information set forth under "THE TENDER OFFER--Section 9. Financing of the Offer and the Merger" of the Offer to Purchase is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth under "INTRODUCTION", "SPECIAL FACTORS-- Background of the Offer and the Merger", "SPECIAL FACTORS--Purpose and Structure of the Offer and the Merger; Reasons of Purchaser for the Offer and the Merger", "SPECIAL FACTORS--Plans for the Company After the Offer and the Merger; Certain Effects of the Offer" and "SPECIAL FACTORS--The Merger Agreement" of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth under "SPECIAL FACTORS--Plans for the Company After the Offer and the Merger; Certain Effects of the Offer" and "THE TENDER OFFER--Section 11. Effect of the Offer on the Market for the Shares; the NYSE, the Paris Bourse and Exchange Act Registration" of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth under "SPECIAL FACTORS--Beneficial Ownership of Common Stock" and "THE TENDER OFFER--Section 8. Certain Information Concerning Purchaser" of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth under "INTRODUCTION", "SPECIAL FACTORS--Background of the Offer and the Merger", "SPECIAL FACTORS--Purpose and Structure of the Offer and the Merger; Reasons of Purchaser for the Offer and the Merger", "SPECIAL FACTORS--Plans for the Company After the Offer and the Merger; Certain Effects of the Offer", "SPECIAL FACTORS--The Merger Agreement" and "THE TENDER OFFER--Section 8. Certain Information Concerning Purchaser" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth under "INTRODUCTION", "SPECIAL FACTORS--Opinion of Goldman, Sachs & Co." and "THE TENDER OFFER--Section 14. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Purchaser's Consolidated Financial Statements and related Notes thereto included in Purchaser's Form 20-F for the fiscal year ended December 31, 1996 and the information set forth under "THE TENDER OFFER--Section 8. Certain Information Concerning Purchaser" and Schedule VI of the Offer to Purchase are incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) Not applicable. (b) and (e) The information set forth under "THE TENDER OFFER--Section 13. Certain Legal Matters and Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. 4 (d) The information set forth under "THE TENDER OFFER--Section 11. Effect of the Offer on the Market for the Shares, the NYSE, the Paris Bourse and Exchange Act Registration" of the Offer to Purchase is incorporated herein by reference. (e) The information set forth under "THE TENDER OFFER--Section 13. Certain Legal Matters and Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and Letter of Transmittal and the Agreement and Plan of Merger, dated as of August 19, 1997 between Purchaser, the Merger Subsidiary (as defined in the Offer to Purchase) and the Company, copies of which are attached hereto as Exhibits (a)(1), (a)(2) and (c)(3), is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Form of Offer to Purchase dated August 22, 1997. (a)(2) Form of Letter of Transmittal sent to holders of Shares. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter from Morgan Stanley & Co. Incorporated and UBS Securities LLC to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to Clients. (a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in The Wall Street Journal on August 22, 1997. (a)(8) Press Release issued by Purchaser on August 19, 1997. (a)(9) English translation of French-language Communique published in Les Echos and La Tribune on August 22, 1997. (b)(1) Summary of Terms and Conditions (FF 2,500,000 Short Term Credit Facility) dated August 6, 1997 between Purchaser and *. (b)(2) Summary of Terms and Conditions (FF 2,000,000,000 Short Term Credit Facility) dated August 1, 1997 between Purchaser and *. (b)(3) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit Loan Facility) dated August 6, 1997 between Purchaser and *. (b)(4) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit Facility) dated August 1, 1997 between Purchaser and *. (b)(5) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit Facility) dated August 4, 1997 between Purchaser and *. (b)(6) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit Facility) dated August 1, 1997 between Purchaser and *. (b)(7) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit Facility) dated August 5, 1997 between Purchaser and *. (b)(8) Summary of Terms and Conditions (FF 750,000,000 Revolving Credit Facility) dated August 1, 1997 between Purchaser and *. 5 (b)(9) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated July 31, 1997 between Purchaser and *. (b)(10) Summary of Terms and Conditions (USD 80,000,000 Five Year Bilateral Credit Facility) dated July 23, 1997 between Purchaser and *. (b)(11) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated August 5, 1997 between Purchaser and *. (b)(12) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit Facility) dated August 4, 1997 between Purchaser and *. (b)(13) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated August 4, 1997 between Purchaser and *. (b)(14) Summary of Terms and Conditions (USD 150,000,000 Revolving Credit Facility) dated August 7, 1997 between Purchaser and *. (b)(15) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated August 7, 1997 between Purchaser and *. (b)(16) Summary of Terms and Conditions (FF 4,000,000,000 Short Term Credit Facility) dated August 8, 1997 between Purchaser and *. (b)(17) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit Facility) undated between Purchaser and *. (b)(18) Summary of Terms and Conditions (USD 850,000,000 Bridge Loan Facility) dated August 8, 1997 between Purchaser and *. (c)(1) Form of Stock Option Agreement. (c)(2) Acquisition Agreement, dated as of March 12, 1990 between Purchaser and Rorer Group Inc., predecessor in interest to the Company (incorporated herein by reference to the registration statement on Form F-4 of the Purchaser (Registration Number 33-35645)). (c)(3) Agreement and Plan of Merger, dated as of August 19, 1997 among Purchaser, the Merger Subsidiary and the Company. (d) Not applicable. (e) Not applicable. (f) Not applicable. (g)(1) Complaint filed in Brickell v. Rhone-Poulenc S.A. (Supreme Court of the State of New York, County of New York, filed July 9, 1997). (g)(2) Complaint filed in Steiner v. Rhone-Poulenc S.A. (United States District Court for the Eastern District of Pennsylvania, filed July 15, 1997). (g)(3) Complaint filed in Krim v. Rhone-Poulenc S.A. et al. (New Jersey Superior Court, Mercer County, filed July 15, 1997). (g)(4) Complaint filed in Simon v. Robert E. Cawthorn, et al. (Pennsylvania Court of Common Pleas, Trial Division, Montgomery County, filed July 31, 1997). (g)(5) Motion to Dismiss Complaint filed in Brickell v. Rhone-Poulenc S.A. (Supreme Court of the State of New York, County of New York, filed August 11, 1997). (g)(6) Motion to Dismiss Complaint filed in Steiner v. Rhone-Poulenc S.A. (United States District Court for the Eastern District of Pennsylvania, filed August 6, 1997). - -------- * Request for Confidential Treatment Filed by Purchaser on August 22, 1997. 6 After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. August 22, 1997 RHONE-POULENC S.A. By: /s/ Jean-Rene Fourtou ---------------------------------- Name: Jean-Rene Fourtou Title: Chairman and Chief Executive Officer 7 EXHIBIT INDEX
EXHIBIT NO. ------- (a)(1) Form of Offer to Purchase dated August 22, 1997. (a)(2) Form of Letter of Transmittal sent to holders of Shares. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter from Morgan Stanley & Co. Incorporated and UBS Securities LLC to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to Clients. (a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in The Wall Street Journal on August 22, 1997. (a)(8) Press Release issued by Purchaser on August 19, 1997. (a)(9) English translation of French-language Communique published in Les Echos and La Tribune on August 22, 1997. (b)(1) Summary of Terms and Conditions (FF 2,500,000 Short Term Credit Facility) dated August 6, 1997 between Purchaser and *. (b)(2) Summary of Terms and Conditions (FF 2,000,000,000 Short Term Credit Facility) dated August 1, 1997 between Purchaser and *. (b)(3) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit Loan Facility) dated August 6, 1997 between Purchaser and *. (b)(4) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit Facility) dated August 1, 1997 between Purchaser and *. (b)(5) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit Facility) dated August 4, 1997 between Purchaser and *. (b)(6) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit Facility) dated August 1, 1997 between Purchaser and *. (b)(7) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit Facility) dated August 5, 1997 between Purchaser and *. (b)(8) Summary of Terms and Conditions (FF 750,000,000 Revolving Credit Facility) dated August 1, 1997 between Purchaser and *. (b)(9) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated July 31, 1997 between Purchaser and *. (b)(10) Summary of Terms and Conditions (USD 80,000,000 Five Year Bilateral Credit Facility) dated July 23, 1997 between Purchaser and *. (b)(11) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated August 5, 1997 between Purchaser and *. (b)(12) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit Facility) dated August 4, 1997 between Purchaser and *. (b)(13) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated August 4, 1997 between Purchaser and *. (b)(14) Summary of Terms and Conditions (USD 150,000,000 Revolving Credit Facility) dated August 7, 1997 between Purchaser and *. (b)(15) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit Facility) dated August 7, 1997 between Purchaser and *.
EXHIBIT NO. ------- (b)(16) Summary of Terms and Conditions (FF 4,000,000,000 Short Term Credit Facility) dated August 8, 1997 between Purchaser and *. (b)(17) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit Facility) undated between Purchaser and *. (b)(18) Summary of Terms and Conditions (USD 850,000,000 Bridge Loan Facility) dated August 8, 1997 between Purchaser and *. (c)(1) Form of Stock Option Agreement. (c)(2) Acquisition Agreement, dated as of March 12, 1990 between Purchaser and Rorer Group Inc., predecessor in interest to the Company (incorporated herein by reference to the registration statement on Form F-4 of the Purchaser (Registration Number 33-35645)). (c)(3) Agreement and Plan of Merger, dated as of August 19, 1997 between Purchaser, the Merger Subsidiary and the Company. (g)(1) Complaint filed in Brickell v. Rhone-Poulenc S.A. (Supreme Court of the State of New York, County of New York, filed July 9, 1997). (g)(2) Complaint filed in Steiner v. Rhone-Poulenc S.A. (United States District Court for the Eastern District of Pennsylvania, filed July 15, 1997). (g)(3) Complaint filed in Krim v. Rhone-Poulenc S.A. et. al. (New Jersey Superior Court, Mercer County, filed July 15, 1997). (g)(4) Complaint filed in Simon v. Robert E. Cawthorn, et al. (Pennsylvania Court of Common Pleas, Trial Division, Montgomery County, filed July 31, 1997). (g)(5) Motion to Dismiss Complaint filed in Brickell v. Rhone-Poulenc S.A. (Supreme Court of the State of New York, County of New York, filed August 11, 1997). (g)(6) Motion to Dismiss Complaint filed in Steiner v. Rhone-Poulenc S.A. (United States District Court for the Eastern District of Pennsylvania, filed August 6, 1997).
- -------- * Request for Confidential Treatment filed by Purchaser on August 22, 1997. EX-99.(A)(1) 2 FORM OF OFFER TO PURCHASE Exhibit (a)(1) Offer to Purchase for Cash All Outstanding Shares of Common Stock of Rhone-Poulenc Rorer Inc. at $97 Net Per Share by Rhone-Poulenc S.A. --------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED. --------------- THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF THE THEN ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, WITHOUT PAR VALUE PER SHARE (THE "SHARES") OF RHONE-POULENC RORER INC. (THE "COMPANY"), OTHER THAN SHARES (THE "PURCHASER SHARES") OWNED BY RHONE-POULENC S.A. ("PURCHASER"), WHICH, WHEN TAKEN TOGETHER WITH THE PURCHASER SHARES, CONSTITUTES AT LEAST 90% OF THE THEN ISSUED AND OUTSTANDING SHARES (THE "MINIMUM CONDITION"). SEE "THE TENDER OFFER--SECTION 12. CERTAIN CONDITIONS TO THE OFFER". --------------- THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF A COMMITTEE OF THE BOARD OF DIRECTORS COMPRISED OF THE INDEPENDENT DIRECTORS (AS DEFINED HEREIN), HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED HEREIN) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY, AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. --------------- IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Shares in the United States should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Shares, and any other required documents, to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") (at the Depositary's address set forth on the back cover of this Offer to Purchase) or tender such Shares pursuant to the procedure for book-entry transfer set forth in "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares" or (2) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedure for guaranteed delivery set forth in "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares". Questions or requests for assistance may be directed to Georgeson & Company Inc. (the "Information Agent"), Morgan Stanley & Co. Incorporated (the "Dealer Manager") or UBS Securities LLC (the "Co-Dealer Manager") at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. --------------- THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. --------------- The Dealer Managers for the Offer are: MORGAN STANLEY DEAN WITTER UBS SECURITIES August 22, 1997 TABLE OF CONTENTS
PAGE ---- INTRODUCTION.......................................................................... 1 Note to Holders of Shares Desiring to Tender in the United States................... 3 Note to Holders of Shares in France................................................. 3 Note aux Actionnaires en France..................................................... 3 SPECIAL FACTORS....................................................................... 5 Background of the Offer............................................................. 5 Recommendation of the Company Board; Fairness of the Offer and the Merger........... 10 Recommendation of the Special Committee and the Company Board..................... 10 Fairness of the Offer and the Merger.............................................. 10 Opinion of Goldman, Sachs & Co. .................................................... 12 Company Budget Information and Financial Projections................................ 17 Cautionary Statement Concerning Forward-Looking Statements.......................... 19 Position of Purchaser Regarding Fairness of the Offer and the Merger................ 19 Purpose and Structure of the Offer and the Merger; Reasons of Purchaser for the Offer and the Merger............................................................. 20 Plans for the Company After the Offer and the Merger; Certain Effects of the Offer.. 21 Rights of Shareholders in the Offer and the Merger.................................. 21 Filing Notice of Intention to Demand Fair Value..................................... 22 Record Owners and Beneficial Owners................................................. 22 Notice to Demand Payment............................................................ 22 Payment of Fair Value of Shares..................................................... 23 Estimate by Dissenter of Fair Value of Shares....................................... 23 Valuation Proceedings............................................................... 23 Costs and Expenses of Valuation Proceedings......................................... 23 Other............................................................................... 24 The Merger Agreement................................................................ 24 Interests of Certain Persons in the Offer and the Merger............................ 28 Beneficial Ownership of Common Stock................................................ 29 Related Party Transactions.......................................................... 31
THE TENDER OFFER.......................................................... 33 1. Terms of the Offer; Expiration Date............................... 33 2. Acceptance for Payment and Payment for Shares..................... 34 3. Procedures for Accepting the Offer and Tendering Shares........... 35 4. Withdrawal Rights................................................. 37 5. Certain U.S. Federal and French Income Tax Consequences........... 38 6. Price Range of Shares; Dividends.................................. 39 7. Certain Information Concerning the Company........................ 39 8. Certain Information Concerning Purchaser and the Merger Subsidiary....................................................... 42 9. Financing of the Offer and the Merger............................. 43 10. Dividends and Distributions....................................... 44 11. Effect of the Offer on the Market for the Shares; the NYSE, the Paris Bourse and Exchange Act Registration....................... 44 12. Certain Conditions of the Offer................................... 45 13. Certain Legal Matters and Regulatory Approvals.................... 46 14. Fees and Expenses................................................. 49 15. Miscellaneous..................................................... 50
PAGE ----- SCHEDULE I. Directors and Executive Officers of Purchaser and the Merger Subsidiary....................................... I-1 SCHEDULE II. Opinion of Goldman, Sachs & Co........................... II-1 SCHEDULE III. Sections 1930(a) and 1571-80 (Subchapter of Chapter 15) of the Pennsylvania Business Corporation Law............ III-1 SCHEDULE IV. Audited Financial Statements (and Related Notes) for the Company for the Years Ended December 31, 1995 and December 31, 1996....................................... IV-1 SCHEDULE V. Unaudited Financial Statements (and Related Notes) for the Company for the Three-Month and Six-Month Periods Ended June 30, 1997..................................... V-1 SCHEDULE VI. Summary Financial Statements for Purchaser for the Years Ended December 31, 1995 and December 31, 1996........... VI-1
To the Holders of Common Stock of Rhone-Poulenc Rorer Inc. INTRODUCTION Rhone-Poulenc S.A., a societe anonyme organized under the laws of the Republic of France ("Purchaser"), hereby offers to purchase all issued and outstanding shares (the "Shares") of common stock, without par value per share (the "Common Stock"), of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), at a price of $97 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of Morgan Stanley & Co. Incorporated ("Morgan Stanley") and UBS Securities LLC ("UBS"), which are acting as the Dealer Manager and the Co-Dealer Manager, respectively, for the Offer (together, in such capacities, the "Dealer Managers"), ChaseMellon Shareholder Services, L.L.C. (the "Depositary"), Societe Generale (the "French Depositary") and Georgeson & Company Inc. (the "Information Agent") incurred in connection with the Offer. See "THE TENDER OFFER--Section 14. Fees and Expenses". Purchaser currently owns 97,163,370 Shares (the "Purchaser Shares"), constituting approximately 68.1% of the currently issued and outstanding Shares. The purpose of the Offer is to facilitate the acquisition of all of the remaining Shares for cash and thereby enable Purchaser to acquire 100% of the Common Stock of the Company. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF A COMMITTEE OF THE BOARD OF DIRECTORS (THE "SPECIAL COMMITTEE") COMPRISED OF INDEPENDENT DIRECTORS (AS DEFINED HEREIN) HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. The Company has advised Purchaser that Goldman, Sachs & Co. ("Goldman Sachs") has delivered to the Board its written opinion that the $97 per Share in cash to be received by the shareholders of the Company other than Purchaser and its subsidiaries in the Offer and the Merger (as defined below) is fair to such holders. See "SPECIAL FACTORS--Opinion of Goldman, Sachs & Co." for further information concerning the opinion of Goldman Sachs. The Company has filed with the Securities and Exchange Commission (the "Commission") a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to shareholders herewith. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF THE THEN ISSUED AND OUTSTANDING SHARES, OTHER THAN THE PURCHASER SHARES, WHICH, WHEN TAKEN TOGETHER WITH THE PURCHASER SHARES, CONSTITUTES AT LEAST 90% OF THE THEN ISSUED AND OUTSTANDING SHARES (THE "MINIMUM CONDITION"). SEE "THE TENDER OFFER--SECTION 12. CERTAIN CONDITIONS TO THE OFFER", WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. The Company has advised Purchaser that, as of July 31, 1997, there were 142,687,492 Shares (including 5,169,412 Shares held by the Company's Employee Benefits Trust) issued and outstanding and 10,410 Shares held in the treasury of the Company. Employee stock options ("Employee Options") exercisable for 6,723,603 Shares were outstanding pursuant to the Company's stock option plan as of July 31, 1997, 4,439,111 of which were vested as of July 31, 1997. As of July 31, 1997, 1,750 shares of Money Market Preferred Stock, without par value (liquidation preference $100,000 per share) of the Company were issued and outstanding. According to Company's records, as of August 13, 1997, there were approximately 7,054 holders of record of the issued and outstanding Shares. Purchaser beneficially owns 97,163,370 Shares, 91,669,462 of which were acquired in two transactions completed in July 1990 (taking into account a two-for-one split of the Shares that was effected on June 7, 1991) and the remainder of which were acquired in subsequent open market and privately negotiated transactions (see "SPECIAL FACTORS--Background of the Offer"). Assuming all such vested Employee Options are exercised, the Minimum Condition would be satisfied if 35,250,573 Shares were validly tendered in the Offer and not withdrawn. On March 12, 1990, the Company and Purchaser entered into an Acquisition Agreement (the "Acquisition Agreement") pursuant to which the Purchaser acquired approximately 68.68% of the outstanding Shares. Approximately 50.1% of such Shares were acquired in a cash tender offer at a price which represented a premium of approximately 58.4% to the pre-announcement price of the Shares, with the remaining Shares acquired in consideration for the contribution to the Company of Purchaser's human pharmaceutical business and certain other consideration. The Acquisition Agreement prohibited the Purchaser from owning more than 68.68% of the issued and outstanding Shares prior to July 31, 1997. At any time after July 31, 1997, Purchaser is permitted to increase its ownership of Shares above 75% of the issued and outstanding Shares, but only pursuant to a Qualifying Tender Offer (as defined below). As discussed more fully below, except with respect to the minimum offering period being reduced from 30 business days to 28 business days with the agreement of the Special Committee, the Offer is a Qualifying Tender Offer under the Acquisition Agreement. The Minimum Condition satisfies one of the requirements for a Qualifying Tender Offer, and ensures that in order for the Offer to be successful, approximately two-thirds of the Shares not owned by Purchaser must be tendered into the Offer. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of August 19, 1997 (the "Merger Agreement"), among Purchaser, RP Vehicle, Inc., a Pennsylvania corporation specifically organized for the purpose of effecting the Merger and a direct, wholly owned subsidiary of Purchaser (the "Merger Subsidiary"), and the Company. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement, in accordance with the requirements of a Qualifying Tender Offer and the relevant provisions of the Pennsylvania Business Corporation Law of 1988 ("PBCL"), the Merger Subsidiary will be merged with and into the Company (the "Merger"), with the Company as the surviving corporation. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time held by shareholders other than Purchaser or any direct or indirect subsidiary of Purchaser shall be cancelled and shall be converted automatically into the right to receive $97 in cash, or any higher price that may be paid per Share pursuant to the Offer, without interest (the "Merger Consideration"), subject to dissenters rights. Shares held in the treasury of the Company or owned by Purchaser or any direct or indirect wholly owned subsidiary of Purchaser or the Company will remain issued and outstanding. The Merger Agreement is more fully described in "SPECIAL FACTORS--The Merger Agreement". Shareholders who fully comply with the statutory dissenters procedures set forth in the PBCL, the relevant portions of which are attached to this Offer to Purchase as Schedule III, will be entitled to receive, in connection with the Merger, cash for the fair value of their Shares as determined pursuant to the procedures prescribed by the PBCL. NO DISSENTERS RIGHTS ARE AVAILABLE IN CONNECTION WITH THE OFFER. SEE "SPECIAL FACTORS--RIGHTS OF SHAREHOLDERS IN THE MERGER". The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including the approval and adoption of the Merger Agreement by the requisite vote of the shareholders of the Company. See "SPECIAL FACTORS--The Merger Agreement". Under the Company's Articles of Incorporation and the PBCL, the affirmative vote of a majority of the outstanding Shares is required to approve and adopt the Merger Agreement and the Merger. Consequently, Purchaser currently has sufficient voting power to approve and adopt the Merger Agreement and the Merger without the vote of any other shareholder. 2 NOTE TO HOLDERS OF SHARES DESIRING TO TENDER IN THE UNITED STATES This Offer to Purchase and the accompanying documents contain information required to be disclosed by the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act"), including financial information regarding the Company and Purchaser, a description of the terms, conditions and background of the Offer, and the procedures for tendering Shares for purchase. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. NOTE TO HOLDERS OF SHARES IN FRANCE Any holder of Shares through SICOVAM, the French clearing system, desiring to tender its Shares in France should refer to the Communique dated as of the date hereof, published in the August 22, 1997 issues of Les Echos and La Tribune and the avis published by the Societe des Bourses Francaises on August 22, 1997. Copies of the Communique, as well as the Offer to Purchase and accompanying documents, are available at the offices of: Rhone-Poulenc S.A., 25, quai Paul Doumer, 92408 Courbevoie Cedex, France; Morgan Stanley S.A., 25, rue Balzac, 75008 Paris, France; Union de Banques Suisses S.A., 69 Boulevard Haussmann, 75008 Paris, France; or the French depositary, Societe Generale, Tour Societe Generale, 17, Cours Valmy, 92972 Paris-La Defense, France. These documents can also be obtained, free of charge, from the institution holding each shareholder's Shares in France. An English translation of the Communique is also being filed with this Offer and is available through the Commission. U.S. HOLDERS ARE EXCLUDED FROM TENDERING THEIR SHARES IN FRANCE. ALL HOLDERS TENDERING IN FRANCE SHOULD READ THE COMMUNIQUE IN ITS ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO SUCH TENDERING. Due to centralization and settlement delays in France, any holder desiring to tender its Shares in France will have to send instructions to its financial intermediary no later than September 25, 1997, unless the Offer is extended. Any withdrawal with respect to Shares tendered in France will have to be made, unless the Offer is extended, no later than September 25, 1997. Following such date, unless the Offer is extended, holders tendering Shares in France will not have withdrawal rights. Any shareholder may, at all times through the Expiration Date, tender Shares in the United States. French holders who desire to tender their Shares in the United States are urged to contact the Information Agent. As an accommodation to holders tendering their Shares in France, consideration for such Shares is payable, at the holder's election, in United States Dollars or the equivalent amount in French Francs converted at the average weighted rate used by Societe Generale the day after the expiration of the Offer in the United States to convert funds deposited with it. NOTE AUX ACTIONNAIRES EN FRANCE Les actionnaires dont les actions sont admises en SICOVAM et qui souhaitent apporter leurs actions a l'Offre en France devront se referer au Communique en date de la presente Offre, publie dans l'edition du 22 Aout 1997 des Echos et de La Tribune et a l'avis de la Societe de Bourses Francaises publie le 22 Aout 1997. Le Communique, ainsi que l'Offer to Purchase et les documents qui l'accompagnent sont tenus a la disposition des actionnaires aux adresses suivantes: Rhone-Poulenc S.A., 25, quai Paul Doumer, 92408 Courbevoie Cedex, France; Morgan Stanley S.A., 25, rue Balzac, 75008 Paris, France; Union de Banques Suisses S.A., 69 boulevard Haussmann, 75008 Paris, France; ou Societe Generale, Tour Societe Generale, 17, cours Valmy, 92972 Paris-La Defense, France, l'etablissement centralisateur. Ces documents peuvent egalement etre obtenus, sans frais, aupres des intermediaires financiers teneurs de compte de chaque actionnaire. Une version en anglais du communique est deposee avec cette Offre et peut etre obtenue aupres de la Commission. LES DETENTEURS D'ACTIONS AUX ETATS-UNIS NE PEUVENT PAS APPORTER LEURS ACTIONS A L'OFFRE EN FRANCE. TOUS LES ACTIONNAIRES APPORTANT LEURS TITRES EN FRANCE SONT INVITES A LIRE LE COMMUNIQUE DANS SON INTEGRALITE AVANT DE PRENDRE TOUTE DECISION. En raison des delais de centralisation des ordres et de reglement livraison en France, les actionnaires qui souhaitent apporter leurs actions a l'offre en France devront faire parvenir leurs instructions a leur etablissement teneur de compte au plus tard le 25 Septembre 1997 inclus sauf prorogation. La revocation de 3 tous ordres passes en France devra intervenir avant le 25 Septembre 1997 inclus, sauf prorogation, date apres laquelle les actionnaires apportant leurs titres en France ne pourront plus revoquer leurs ordres. Tous les actionnaires peuvent apportent leurs titres aux Etats-Unis, a tout moment jusqu'au 1er Octobre 1997. Les detenteurs d'Actions en France qui desirent apporter leurs titres aux Etats-Unis sont invites a contacter l'Information Agent. Pour ceux qui apporteraient leurs titres en France, le reglement du prix de ces titres peut etre effectue, au choix de l'actionnaire, en dollars U.S. ou en francs francais, au taux de change moyen pondere auquel la Societe Generale aura realise la conversion des fonds le lendemain du jour de cloture de l'Offre aux Etats-Unis. 4 SPECIAL FACTORS BACKGROUND OF THE OFFER Pursuant to the Acquisition Agreement, Purchaser acquired, in two transactions, Shares representing approximately 68.68% of the Company's then issued and outstanding Shares on a fully diluted basis. First, upon expiration on May 5, 1990 of its tender offer for Shares, Purchaser purchased Shares tendered to it representing approximately 50.1% of the then issued and outstanding Shares on a fully diluted basis. Then, on July 31, 1990, the Company issued additional Shares to Purchaser in consideration of the contribution by Purchaser to the Company of its human pharmaceutical business, the issuance by Purchaser to the Company of certain contingent value rights (which were subsequently transferred to holders of Shares other than Purchaser) and certain other transactions. In accordance with the terms of the Acquisition Agreement, the Company Board is comprised of seven individuals selected by Purchaser, three executive officers of the Company and three individuals (Messrs. Frey and Riepe and Dr. Topol), who are Independent Directors (as defined in the Acquisition Agreement). Pursuant to certain standstill provisions set forth in the Acquisition Agreement, through July 31, 1997 and subject to certain conditions, Purchaser was prohibited from making purchases of Shares that would increase its ownership of Shares above 68.68% of the then issued and outstanding Shares. In compliance with such provisions, Purchaser has from time to time purchased Shares in order to maintain its ownership interest in the Company at approximately 68.68%. The Acquisition Agreement provides that after July 31, 1997, Purchaser is permitted to purchase Shares in open market transactions provided that such purchases do not increase its ownership interest above 75% of the then issued and outstanding Shares. Nevertheless, Purchaser is permitted under the Acquisition Agreement to acquire Shares in excess of the 75% limitation provided that it acquires such additional Shares pursuant to a tender offer meeting the following conditions (a "Qualifying Tender Offer"): (i) the offer must be conditioned upon there being validly tendered and not withdrawn prior to the expiration of the offer such number of the then issued and outstanding Shares, other than the Purchaser Shares, which, when taken together with the Purchaser Shares, constitutes at least 90% of the then issued and outstanding Shares; (ii) the offer must be a "tender offer" for purposes of, and must be made in compliance with, Section 14(d)(1) of the Exchange Act; (iii) the offer must not be permitted to expire without the purchase of any Shares pursuant to the offer unless the offer has been open for a minimum of 30 business days; and (iv) the offer must be proposed to be followed by a merger between the Company and Purchaser or a subsidiary of Purchaser in which all Shares (other than Shares beneficially owned by Purchaser or its subsidiaries) are converted into the right to receive an amount in cash equal to the amount paid per Share in the offer and in connection with which it is proposed that the Company shall enter into agreements with the holders of any options to purchase Shares pursuant to which such options shall be purchased at a cash price per option equal to the excess of the amount paid per Share in the offer over the exercise price of such option. In the spring of 1997, as part of a long-term strategic planning process, management of Purchaser began examining restructuring options, including the possibility of accelerating its transformation into a life sciences company. One option considered was a potential business combination with the Company. During this period, management of the Purchaser contacted UBS and Morgan Stanley to obtain financial advisory services in connection with management's study of restructuring options for Purchaser's businesses. On June 25, 1997, the Board of Directors of Purchaser (the "Purchaser Board") met in Courbevoie, France, at which meeting Mr. Jean-Rene Fourtou, Chairman and Chief Executive Officer of Purchaser, and Mr. Igor Landau, a director of Purchaser and Group President supervising the pharmaceuticals segment, reported on management's study, including the possibility of a business combination with the Company. At such meeting, the Purchaser Board agreed with management's decision to proceed with the study. Following the meeting, Mr. Landau contacted various members of the Company Board to inform them of the meeting and of Purchaser's forthcoming press release. 5 On June 26, 1997, Purchaser issued a press release (the "June 26, 1997 Announcement") announcing that, among other things, it was studying a potential initiative to continue to strengthen its presence in life sciences and to increase its strategic flexibility by increasing Purchaser's ownership of the Company from approximately 68.3% to 100% through a business combination with the Company at $92 per Share, which, if pursued, would be proposed after the expiration, on July 31, 1997, of the standstill period under the Acquisition Agreement. The press release reported that, if a business combination were pursued, part of the financing would be obtained through a capital increase by Purchaser. The press release also announced that Purchaser was studying another potential initiative regarding a possible combination of Purchaser's chemicals and fibers and polymers businesses into a new company ("NewChemco") and a public offering of shares of NewChemco, market conditions permitting, with Purchaser retaining a substantial majority interest. On June 26, 1997, the Company issued a press release indicating that it intended to review the matters described in the June 26, 1997 Announcement with the Company Board at a regularly scheduled meeting to be held on July 2, 1997. On July 2, 1997 in Antony, France, during the regularly scheduled meeting of the Company Board, Mr. Landau advised the Company Board of Purchaser's studies and, in view thereof, recommended that the Company Board appoint a special committee of Independent Directors. The Company Board then voted to form the Special Committee, comprised of Messrs. Frey and Riepe and Dr. Topol, the three Independent Directors on the Company Board. The Company Board empowered the Special Committee to use its best efforts to negotiate with Purchaser in order to secure the best available transaction on terms and conditions which the Special Committee believes are fair to and in the best interests of the Company. In addition, the Company Board authorized, among other things, the Special Committee to retain independent legal counsel and financial advisors and the Company to enter into an agreement with each of the members of the Special Committee requiring the Company to indemnify each of them to the fullest extent permitted by law in connection with his service as a member of the Special Committee. Following the Company Board meeting on July 2, 1997, two members of the legal department and a member of the finance department of the Company were appointed by the Chairman and Chief Executive Officer of the Company to assist the Special Committee in the administrative aspects of its function in order to ensure that it and its advisors had full and open access to all Company information and personnel (the "Company Representatives"). In addition, the Special Committee met and determined to retain the law firms of Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps"), as special counsel, and Morgan Lewis & Bockius LLP, as Pennsylvania counsel. The Special Committee also determined to send requests for proposals to certain investment banking firms to serve as financial advisor to the Special Committee. The firms were selected based on their international reputation, expertise in the pharmaceutical industry and the belief that they had no relationship with Purchaser or any of its affiliates. On July 8, 1997, the Special Committee met by telephone conference with its legal advisors and the Company Representatives. The Special Committee was briefed on the process and legal implications relating to any proposal to be received from Purchaser following the expiration of the standstill period under the Acquisition Agreement as well as their fiduciary responsibilities under the PBCL. On July 9, 1997, the Special Committee convened with its legal advisors and the Company Representatives to review the proposals submitted by the investment banking firms and to select certain of such firms to interview. On July 16, 1997 and July 17, 1997, members of the Special Committee met with representatives of the investment banking firms and on July 21, 1997, the Special Committee retained Goldman Sachs as its financial advisor based on, among other things, its expertise in the pharmaceutical industry, advisory experience in similar transactions and the representation that Goldman Sachs did not have an existing engagement with Purchaser nor would it accept an assignment from Purchaser during its engagement by the Special Committee. On July 23, 1997, members of the Special Committee met with Goldman Sachs, the Company Representatives and Skadden, Arps to discuss, among other things, due diligence and timing as well as strategy. 6 On July 25, 1997, Mr. Landau had a telephone discussion with Mr. Riepe, Chairman of the Special Committee, during which Mr. Riepe noted that the standstill period under the Acquisition Agreement was nearing completion and stated that if Purchaser were to make a proposal concerning a transaction involving the Company, the Special Committee would prefer that such a proposal be made formally to the Special Committee. Mr. Landau endorsed this approach but cautioned that any such proposal would be subject to certain timing constraints imposed by Purchaser's need to arrange financing. Mr. Riepe later reported the substance of his conversation to the other members of the Special Committee, Goldman Sachs and Skadden, Arps. On July 31 and August 1, Mr. Landau had two telephone discussions with Mr. Riepe. In each of these conversations, Mr. Landau reiterated that, in the event Purchaser went forward with a transaction involving the Company, it would be subject to certain timing considerations in connection with Purchaser's arrangements for financing such a transaction. In particular, the capital increase described in the June 26 Announcement would be subject to timing constraints in view of, among other things, expected market conditions in France. As a result of these timing constraints, Purchaser believed it would need to reach a decision no later than August 10 as to whether to proceed. Mr. Landau expressed Purchaser's preference to proceed with a consensual transaction, but also indicated that Purchaser would consider commencing a tender offer prior to obtaining the Special Committee's agreement in order to retain the ability ultimately to close the tender offer on Purchaser's desired schedule. In such a case Mr. Landau expected that discussions with the Special Committee would continue. During the July 31, 1997 telephone conversation, Mr. Riepe explained to Mr. Landau that Goldman Sachs was continuing its due diligence investigation of the Company but was awaiting management projections in order to complete its valuation analysis of the Company. Mr. Riepe also stated to Mr. Landau that any proposal made by Purchaser needed to be fair to the Company and its minority shareholders, and in order for the Special Committee and Purchaser to agree expeditiously on the terms and conditions of any transaction it was essential that the per Share consideration offered by Purchaser exceed $92 per Share. Messrs. Landau and Riepe agreed that their respective advisors would have access to the same Company information (including any projections prepared by management) and would each participate in management due diligence sessions. Messrs. Landau and Riepe also agreed that their respective financial advisors should discuss any proposals before taking them up with the principals. Shortly following these calls, Mr. Riepe updated Goldman Sachs and Skadden, Arps on his conversations with Mr. Landau, and Goldman Sachs reported on the progress of its due diligence investigation. Each of the other Special Committee members was later contacted by Goldman Sachs to be updated on such earlier conversation. On August 7, 1997, Mr. Riepe conferred with Goldman Sachs and Skadden, Arps for the purpose of receiving a status report on Goldman Sachs' due diligence and general timing considerations. On August 9, 1997, the August Projections (as defined below) were delivered by the Company to Goldman Sachs, who in turn forwarded such projections to Morgan Stanley. On Monday, August 11, 1997, Messrs. Landau and Riepe conferred by telephone and agreed that Morgan Stanley would have the opportunity to conduct management due diligence sessions with Goldman Sachs in attendance during the week of August 11, 1997. Mr. Landau informed Mr. Riepe that Purchaser believed that August 18 would be the last possible date on which Purchaser would consider announcing a tender offer if it determined to proceed. Messrs. Landau and Riepe then agreed that their respective financial advisors should meet no later than Thursday, August 14, 1997, to discuss valuation issues. Mr. Landau repeated Purchaser's preference to commence a tender offer upon terms and conditions agreed upon with the Special Committee, and proposed to travel to the United States to meet with Mr. Riepe over the upcoming weekend, if Mr. Riepe felt that such a meeting would be justified. Messrs. Landau and Riepe agreed that the possibility of a meeting would be considered following the results of the meeting between their respective financial advisors. On August 12 and 13, 1997, Goldman Sachs and Morgan Stanley met with the Company's management for due diligence sessions. On August 13, 1997, the Special Committee met by telephone conference with Goldman Sachs and Skadden, Arps at which time Goldman Sachs advised the Special Committee of the progress of its due diligence investigation and its preliminary views on valuation of the Company. The Special Committee authorized 7 Goldman Sachs to discuss with Morgan Stanley at their meeting to be held the following day their preliminary view of value. In addition, the Special Committee discussed at length the implications, process and strategy in the event Purchaser were to commence a unilateral tender offer as Mr. Landau had intimated to Mr. Riepe. On August 14, 1997, Morgan Stanley and Goldman Sachs held a meeting to discuss valuation issues. Although Morgan Stanley noted that Purchaser was not making a formal proposal, Morgan Stanley informed Goldman Sachs that it believed, based on the August Projections, that if a proposal were to be made, such proposal would not exceed $92 per Share and that an unrecommended tender offer could be commenced at a lower price. On August 15, 1997, Morgan Stanley confirmed to Goldman Sachs that any proposal that Purchaser might make would not exceed $92 per Share for a transaction recommended by the Special Committee and that, due to timing considerations, Purchaser was expected to reach a decision on whether to make a proposal and, if made, to announce a tender offer on Monday, August 18, 1997, regardless of whether agreement had yet been reached with the Special Committee. Morgan Stanley also reiterated that Purchaser and its advisors were prepared to negotiate and reach agreement with the Special Committee before such date and, if an agreement was not reached within such time frame, to continue to negotiate with the Special Committee after commencement of a tender offer. Goldman Sachs advised Morgan Stanley that in the Special Committee's view a unilateral tender offer would be detrimental to the Company and its various constituencies regardless of Purchaser's intention to continue discussions in order to reach a consensual transaction. On August 15, 1997, members of the Special Committee met with Goldman Sachs and Skadden, Arps by telephone conference. At this meeting Goldman Sachs summarized the results of its meeting with Morgan Stanley. The Special Committee concluded that it was appropriate to send the following letter to Purchaser, Morgan Stanley and Shearman & Sterling, Purchaser's legal advisors: Dear Igor: As you are aware, at the request of Rhone-Poulenc, on July 2, 1997, the Board of Directors of Rhone-Poulenc Rorer Inc. appointed a special committee of independent directors of RPR to evaluate any proposal made by Rhone-Poulenc to acquire the remaining common shares of RPR which RP does not own. Further, the Special Committee's mandate requires us to use our best efforts to negotiate any proposal in order to secure the best available transaction on terms and conditions which the Special Committee believes are fair and in the best interest of RPR and the minority stockholders. To that end, the Special Committee interviewed and selected legal and financial advisors in anticipation of receiving a proposal after the expiration date of the standstill agreement between RP and RPR. Rhone-Poulenc has expressed its desire to acquire the remaining outstanding interest in RPR although to date RP has not made a formal proposal to do so. Nonetheless, the Special Committee and its advisors stand ready to continue discussions with the objective of developing a transaction which the Special Committee would be in a position to recommend to stockholders. You have indicated a preference for a transaction that is accompanied by such a recommendation. Unfortunately, we understand from a meeting between our financial advisors yesterday that RP will announce on Monday its intention to commence a unilateral tender offer at a price at or below $92.00 per share unless we agree to a transaction at $92.00 by no later than Sunday evening. The Special Committee does not believe that this approach is consistent with RP's obligations as the controlling stockholder of RPR; and we are confident that our acquiescence to such an approach would be affirmatively detrimental to RPR and its minority stockholders and would not be consistent with our fiduciary obligations. In addition, we believe a unilateral offer by RPR's controlling stockholder which is not accompanied by a recommendation of the Special Committee would be harmful to RPR's other important constituencies, including its employees. If you wish to proceed with a transaction recommended by the Special Committee, it is incumbent upon Rhone-Poulenc and its advisors to discuss with the Special Committee and its advisors RP's views as to the valuation of RPR. If you proceed on a unilateral basis, you will be attempting to circumvent the protections afforded by a special committee's role in helping to ensure that a transaction in the best interests of RPR and all of its relevant constituencies will be completed successfully. Igor, as you know, the Special Committee and its advisors have been working as expeditiously and thoroughly as possible to complete our due diligence process. Much has been accomplished in the last two 8 weeks, yet the Special Committee's advisors received RPR financial projections only one week ago. Consistent with our mandate, we are ready, willing and able to meet with you and your advisors to negotiate the terms and conditions of a transaction to acquire the remaining outstanding shares on a basis reflecting the full and fair value of RPR, provided RP is prepared to negotiate in good faith and without the threat of a unilateral, below market, imminent tender offer commenced on an arbitrary date. Sincerely, /s/ James S. Riepe James S. Riepe, Chairman Special Committee of the Board of Directors In response to such letter, on August 16, 1997 Mr. Landau sent the following letter to Mr. Riepe, the other members of the Special Committee and the Special Committee's financial and legal advisors: Dear Jim, Thank you for your letter of August 15, 1997. I would like to assure you that I fully agree with you that it is our mutual responsibility to try to achieve an agreement on the terms of an offer which reflects a fair valuation of Rhone-Poulenc Rorer. For this reason, Rhone-Poulenc recommended to RPR's Board of Directors the creation of the Special Committee to represent the interests of the minority shareholders. The Special Committee was appointed one and a half months ago, and its advisors completed their due diligence on RPR's financial projections one week ago. It therefore seems to us reasonable to expect that, at this time, the Special Committee and its advisors have all the information they need to negotiate and reach an agreement. As you suggested in your letter, in order to proceed with a transaction recommended by the Special Committee, we and our respective advisors need to discuss with you our views as to the valuation of RPR. RP's advisors have already communicated to the Special Committee's advisors our valuation views. At this point, we are waiting to hear your views. In order to move forward, I suggest that our respective advisors meet today to take the next step in preparation for a meeting between you and me and our respective advisors. I will be in Boston on Sunday for this purpose, as I proposed to you one week ago. To summarize, Rhone-Poulenc, as you state in your letter with regard to the Special Committee, is ready, willing and able to meet and negotiate in good faith with the expectation of reaching an agreement on the terms and conditions of an offer. I look forward to meeting you tomorrow with our respective advisors. Sincerely, /s/ Igor Landau Igor Landau Directeur General At a meeting of the Special Committee and its advisors on the morning of August 16, 1997, the Special Committee discussed the letter received from Mr. Landau. In addition, Mr. Riepe reported that several Company Board members had called him to convey their belief that Purchaser preferred to engage in a transaction which was recommended by the Special Committee, but that Purchaser was concerned that the market price of the Shares could rise to unrealistic levels in the near term and that Purchaser needed to commence promptly an equity offering to finance any transaction. At this meeting, the Special Committee concluded that it would not be willing to negotiate with the threat of a unilateral tender offer; however, it would enter into negotiations and consider reducing the 30-business day offer period required under the definition of Qualifying Tender Offer if Purchaser agreed not to commence a unilateral tender offer in the immediate future and gave the Special Committee an indication of value, which could not be below market. 9 On August 16, 1997, in telephone conversations between Morgan Stanley and Goldman Sachs, Goldman Sachs communicated the terms upon which the Special Committee was prepared to enter into negotiations with Purchaser. Following those conversations, Mr. Landau spoke with Mr. Riepe by telephone, and they agreed that it was in the interest of all parties concerned, including the Company and its minority shareholders, that, if agreement were to be reached on the terms and conditions of a transaction, such agreement be reached as soon as possible and that the Special Committee should have adequate opportunity to duly consider the proposed terms and conditions. Messrs. Landau and Riepe further agreed to seek to finalize negotiations no later than August 19. Messrs. Landau and Riepe decided to meet in Boston, Massachusetts, on Sunday, August 17, 1997, if Mr. Riepe felt such a meeting would be useful following further discussions with his financial advisors. During the evening of August 16, 1997, Morgan Stanley and Goldman Sachs met to discuss their respective views on valuation. During the morning and afternoon of August 17, 1997, the Special Committee met with its advisors in Boston, Massachusetts to discuss in detail Goldman Sachs' views on valuation. Following the Special Committee meeting and throughout the next day numerous discussions and meetings were held between Messrs. Landau and Riepe and their respective advisors. During the evening of August 18, Mr. Landau agreed to confer with Purchaser Board members the following morning with respect to the possibility of proceeding with an offer of $97 per Share; Mr. Riepe agreed to convene a Special Committee meeting on August 19 to consider a $97 per Share transaction; and it was agreed that the parties' respective legal counsel would proceed with negotiation of the Merger Agreement. During the morning of August 19, Mr. Landau called Mr. Riepe to advise him that the Purchaser Board members with whom he conferred would support a recommended transaction at $97 per Share. At a meeting held in the evening of August 19, 1997, the Special Committee unanimously recommended and approved the Merger Agreement and Merger. The Company Board then met and approved and adopted the Merger Agreement and the Merger Agreement was executed. On August 20, Purchaser and the Company announced the Offer. RECOMMENDATION OF THE COMPANY BOARD; FAIRNESS OF THE OFFER AND THE MERGER Recommendation of the Special Committee and the Company Board On August 19, 1997, the Special Committee unanimously determined that each of the Offer and the Merger is fair to, and in the best interests of, the Company, and unanimously voted to recommend and approve the Offer, the Merger and the Merger Agreement. On August 19, 1997, the Company Board, by a unanimous vote of all directors present and voting, based in part on the unanimous recommendation and approval of the Special Committee, approved the Merger Agreement and the transactions contemplated thereby and determined that each of the Offer and the Merger is fair to, and in the best interests of, the Company. The Company Board, by a unanimous vote of all directors present and voting, has recommended that all holders of Shares accept the Offer and tender their Shares pursuant to the Offer. The directors of the Company Board designated by Purchaser and present at the Company Board meeting (other than Mr. Cawthorn) recused themselves from voting due to their inherent conflict of interest. Mr. Cawthorn did not recuse himself because, unlike the other Purchaser designees, he had no affiliations with Purchaser other than being a Purchaser designee to the Company Board, and in fact was the former Chairman of the Board, President and Chief Executive Officer of the Company. Furthermore, Mr. Cawthorn beneficially owns 98,620 Shares and holds options to purchase 326,789 Shares, and therefore has a significant economic incentive in addition to his fiduciary duties to ensure that the best available transaction for the Company was obtained. Fairness of the Offer and the Merger Special Committee. In reaching its determinations referred to immediately above, the Special Committee considered the following factors, each of which, in the view of the Special Committee, supported such determinations: 10 (i) the historical market prices and recent trading activity of the Shares, including (x) that the Offer of $97 per Share represents a premium of approximately 22% over the $79.44 per Share closing price on June 25, 1997, the day prior to the June 26, 1997 Announcement, a premium of approximately 20% over the $80.88 per Share closing price on June 13, 1997, which was the 52-week high closing price for the Shares prior to the June 26, 1997 Announcement, and a premium of approximately 53.1% over the $63.38 per Share closing price on July 24, 1996, which was the 52-week low closing price prior to the June 26, 1997 Announcement, (y) that the weighted average per Share price between June 26, 1997 and August 17, 1997 was $92.48 per Share, and (z) that the Shares never traded on the New York Stock Exchange (the "NYSE") above $96 per Share following the June 26, 1997 Announcement; (ii) the history of the negotiations between the Special Committee and its representatives and Purchaser and its representatives, including that (a) the negotiations resulted in an increase in the price at which Purchaser was prepared to acquire the Shares from $92 to $97 per Share, and (b) the Special Committee's belief that Purchaser would not further increase the Offer price, and accordingly $97 per Share was, in the opinion of the Special Committee, the highest price which could be obtained from Purchaser; (iii) the opinion of Goldman Sachs that based upon and subject to the assumptions and qualifications stated therein the $97 per Share to be received by the shareholders of the Company (other than Purchaser and its subsidiaries) in the Offer and the Merger is fair to such holders, and the report and analysis presented to the Special Committee in connection therewith (See "SPECIAL FACTORS--Opinion of Goldman Sachs & Co.); (iv) the fact that the standstill provisions in the Acquisition Agreement expired on July 31, 1997 after which time Purchaser is permitted to acquire in the open market such number of Shares which together with the Shares owned by Purchaser would not exceed 75% of the outstanding Shares, and to the extent Purchaser wanted to exceed the 75% threshold, Purchaser was entitled to commence a Qualifying Tender Offer which could be at a price per Share below Purchaser's original price of $92 per Share or otherwise substantially below the $97 per Share Offer price; (v) the belief that a Qualifying Tender Offer unilaterally commenced by Purchaser without a recommendation of the Special Committee may have been successfully completed at a price lower than that negotiated and recommended by the Special Committee; (vi) the possibility that, because of potentially lower than expected projected Company earnings or a decline in the trading price of the Shares or the stock market in general, the consideration the minority shareholders would obtain in a future transaction might be less advantageous than the consideration they will receive pursuant to the Offer and the Merger; (vii) the Special Committee recognized that the sale of control of the Company to Purchaser occurred in 1990 upon consummation of the transactions contemplated in the Acquisition Agreement; (viii) Purchaser has sufficient stock ownership to control a disposition of the Company and the Special Committee and Goldman Sachs were not authorized to, and did not, solicit third party indications of interest for the acquisition of the Company or its businesses; (ix) the terms of the Offer, the Merger and the Merger Agreement, including (a) that the Minimum Condition may not be waived; (b) that the terms and conditions of the Offer may not be changed in any manner which is materially adverse to the minority shareholders without the consent of the Special Committee; (c) that the recommendation of the Special Committee may be withdrawn, modified or amended to the extent the Special Committee believes it necessary to do so in the exercise of its fiduciary duties; (d) that the Offer is not subject to any financing condition; (e) that the terms of the Merger Agreement may only be amended or waived by the Special Committee; and (f) the limited nature of other conditions to the Offer and the Merger; (x) the Minimum Condition requirement that the Offer not be consummated unless at least 68.7% of the Shares not held by Purchaser be validly tendered pursuant to the Offer and not withdrawn; (xi) the availability of dissenters' rights for the minority shareholders under the PBCL in connection with the Merger; and 11 (xii) the risk that the Company would suffer the loss of key employees and other adverse consequences if Purchaser were to commence a unilateral tender offer. Company Board. In reaching its determinations referred to above, the Company Board considered the following factors, each of which, in the view of the Company Board, supported such determinations: (i) the conclusions and recommendations of the Special Committee; (ii) the factors referred to above as having been taken into account by the Special Committee, including the receipt by the Special Committee of the opinion of Goldman Sachs addressed solely to the Special Committee that based upon and subject to the assumptions stated therein the $97 per Share to be received by the shareholders of the Company (other than Purchaser and its subsidiaries) in the Offer and the Merger is fair to such holders and the analysis presented to the Company Board; and (iii) the fact that the Offer price and the terms and conditions of the Merger Agreement were the result of arm's-length negotiations between the Special Committee and Purchaser. The members of the Company Board, including the members of the Special Committee, evaluated the Offer and the Merger in light of their knowledge of the business, financial condition and prospects of the Company, and based upon the advice of financial and legal advisors. In light of the number and variety of factors that the Company Board and the Special Committee considered in connection with their evaluation of the Offer and the Merger, neither the Company Board nor the Special Committee found it practicable to assign relative weights to the foregoing factors, and, accordingly, neither the Company Board nor the Special Committee did so. The Company Board, including the members of the Special Committee, believes that the Offer and the Merger are procedurally fair because, among other things: (i) the Offer is in all material respects a Qualifying Tender Offer as defined in the Acquisition Agreement and the Merger will be conducted in accordance with requirements of the Acquisition Agreement; (ii) the Special Committee consisted of Independent Directors appointed to represent the interests of the shareholders other than Purchaser; (iii) the Special Committee retained and was advised by independent legal counsel; (iv) the Special Committee retained Goldman Sachs as its independent financial advisor to assist it in evaluating a potential transaction with Purchaser and received advice from Goldman Sachs; (v) the existence of the Minimum Condition (which may not be waived) has the effect of requiring approximately two-thirds of the Company's shareholders (other than Purchaser) to tender their Shares into the Offer in order for it to be consummated; (vi) the deliberations pursuant to which the Special Committee evaluated the Offer and the Merger and alternatives thereto; and (vii) the fact that the $97 per Share price and the other terms and conditions of the Merger Agreement resulted from active arm's- length bargaining between representatives of the Special Committee, on the one hand, and representatives of Purchaser, on the other. The Board and the Special Committee recognized that the Merger is not structured to require the approval of a majority of the shareholders of the Company other than Purchaser, and that Purchaser currently has sufficient voting power to approve the Merger without the affirmative vote of any other shareholder of the Company. A condition to the Merger, however, is that the Purchaser shall have purchased all Shares tendered in the Offer. Consummation of the Offer is conditioned upon there being validly tendered, and not withdrawn, such number of the then issued and outstanding Shares, other than the Purchaser Shares, which, when taken together with the Purchaser Shares, constitutes 90% of the then issued and outstanding Shares, which effectively requires that approximately two-thirds of the minority shareholders tender their Shares. OPINION OF GOLDMAN, SACHS & CO. Goldman Sachs has acted as financial advisor to the Special Committee in connection with the Merger, as described under "SPECIAL FACTORS--Background of the Offer and the Merger". On August 19, 1997, Goldman Sachs delivered its oral opinion, which was subsequently confirmed in writing, to the Special Committee that, as of the date of such opinion, the $97 per Share in cash to be received by the holders of Shares other than Purchaser and its subsidiaries in the Offer and the Merger is fair to such holders. 12 THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AUGUST 19, 1997, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS SCHEDULE II AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS OF THE COMPANY ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. In connection with its opinion, Goldman Sachs reviewed, among other things, (i) the Merger Agreement; (ii) the Annual Reports to Shareholders and Annual Reports on Form 10-K of the Company for the five years ended December 31, 1996; (iii) certain interim reports to shareholders and Quarterly Reports on Form 10-Q; (iv) certain other communications from the Company to its shareholders; and (v) certain internal financial analyses and forecasts for the Company prepared by its management. Goldman Sachs held discussions with members of the senior management of the Company regarding its past and current business operations, financial condition and future prospects. Goldman Sachs also held discussions with members of the senior management of Centeon L.L.C. ("Centeon"), a joint venture in which the Company has a 50% interest. In addition, Goldman Sachs reviewed the reported price and trading activity for the Shares, compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations and performed such other studies and analyses as it considered appropriate. Goldman Sachs relied upon the accuracy and completeness of all of the financial and other information reviewed by it and has assumed such accuracy and completeness for purposes of rendering its opinion. In addition, Goldman Sachs has not made an independent evaluation or appraisal of the assets and liabilities of the Company or any of its subsidiaries, and Goldman Sachs has not been furnished with any such evaluation or appraisal. Goldman Sachs was not requested or authorized to solicit, and did not solicit, interest from any party with respect to an acquisition of the outstanding Shares, the Company or its constituent businesses. The opinion of Goldman Sachs referred to herein was provided for the information and assistance of the Special Committee in connection with its consideration of Offer and the Merger and does not constitute a recommendation as to whether any holder of Shares should tender such Shares in the Offer. The following is a summary of certain of the financial analyses used by Goldman Sachs in connection with providing its opinion to the Special Committee on August 19, 1997. (i) Historical Stock Trading Analysis. Goldman Sachs reviewed the historical trading prices and volumes for the Shares for the period from August 14, 1995 to August 18, 1997. Such analysis indicated that the closing price per Share during such period ranged from $42.13 to $95.94. Goldman Sachs also reviewed the weighted average trading prices for the Shares for four periods. Such analysis indicated that the weighted average price per Share for the period from July 31, 1993 (the date of the retirement of the Company's contingent value rights) to June 25, 1997 (the day prior to the June 26, 1997 Announcement) was $52.31; for the one year period ending June 25, 1997 was $72.22; for the period from October 10, 1996 (the date a product recall by Centeon was announced) to June 25, 1997 was $73.11; and for the period from June 26, 1997 to August 18, 1997 was $92.48 (ii) Selected Companies Analysis. Goldman Sachs reviewed and compared certain financial information relating to the Company to corresponding financial information, ratios and public market multiples for publicly traded corporations: Abbott Laboratories, American Home Products Corp., Bristol-Myers Squibb Co., Eli Lilly & Co., Merck & Co. Inc., Pfizer Inc., Pharmacia & Upjohn, Inc., Schering-Plough Corp. and Warner-Lambert Co. (the "Selected Companies"). The Selected Companies were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to the Company. Goldman Sachs calculated and compared various financial multiples and ratios. The multiples of the Company were calculated using per Share prices of $79.44 and $94.56, the closing prices of the Shares on the NYSE on June 25, 1997 and August 18, 1997, respectively, and a per Share price of $97.00, the price to be paid in the Offer. The multiples and ratios for the Company were based on publicly available information and information provided by the Company's management and the multiples for each of the Selected Companies were based on the most recent publicly available information. With 13 respect to the Selected Companies, Goldman Sachs considered levered market capitalization in United States dollars (i.e., the market value of common equity plus book value of debt less cash) as a multiple of Latest Twelve Months ("LTM") sales, as a multiple of LTM earnings before interest, taxes, depreciation and amortization ("EBITDA") and as a multiple of LTM earnings before interest and taxes ("EBIT"). Goldman Sachs' analyses of the Selected Companies indicated levered multiples of LTM sales, which ranged from 2.5x to 6.0x with a mean and median of 5.0x, LTM EBITDA, which ranged from 8.2x to 26.9x with a mean of 16.8x and a median of 16.1x, and LTM EBIT, which ranged from 10.5x to 32.9x with a mean of 19.8x and a median of 18.0x, compared to levered multiples of 2.6x, 11.9x and 17.0x, respectively, for the Company based on a stock price of $79.44 per Share, 3.1x, 13.8x and 19.6x, respectively, for the Company based on a stock price of $94.56 per Share and 3.1x, 14.1x and 20.0x, respectively, for the Company based on a stock price of $97.00 per Share. Goldman Sachs also considered estimated calendar year 1997 and 1998 price/earnings ratios, which, for the Selected Companies, ranged from 20.3x to 38.9x with a mean of 26.6x and a median of 24.2x for estimated calendar year 1997 and 17.3x to 29.6x with a mean of 22.2x and a median of 20.5x for estimated calendar year 1998 compared to 22.1x and 18.7x, respectively, for the Company based on a stock price of $79.44 per Share, 26.3x and 22.3x, respectively, for the Company based on a stock price of $94.56 per Share and 26.9x and 22.8x, respectively for the Company based on a stock price equal to $97.00 per Share; LTM EBITDA margins, LTM EBIT margins and LTM net margins, which, for the Selected Companies, ranged from 18.8% to 38.1% with a mean of 30.2% and a median of 30.4%, 15.3% to 31.0% with a mean of 25.6% and a median of 26.8% and 10.3% to 21.7% with a mean of 17.5% and a median of 17.6%, respectively, compared to 22.2%, 15.5% and 7.6%, respectively, for the Company; estimated calendar year 1997 price/earnings to total return ratios, which, for the Selected Companies, ranged from 1.4x to 2.2x with a mean of 1.7x and a median of 1.6x compared to 1.4x for the Company based on a stock price of $79.44 per Share, 1.7x for the Company based on a stock price of $94.56 per Share and 1.8x based on a stock price equal to the $97.00 per Share; estimated calendar year 1997 and 1998 price/earnings growth multiples which, for the Selected Companies, ranged from 1.7x to 2.4x with a mean and median of 2.0x for estimated calendar year 1997 and 1.5x to 1.8x with a mean and median of 1.7x for estimated calendar year 1998 compared to 1.6x and 1.3x, respectively, for the Company based on a stock price of $79.44 per Share and 1.9x and 1.6x, respectively, for the Company based on stock price of $94.56 per Share and 1.9x and 1.6x, respectively, for the Company based on a stock price equal to $97.00 per Share; and a five-year average earnings per Share ("EPS") growth rate (obtained through Institutional Brokers Estimate System) for the Selected Companies ranging from 10.0% to 16.5% with a mean of 13.4% and a median of 13.0% compared to 14.0% for the Company. (iii) Discounted Cash Flow Analysis. Goldman Sachs performed discounted cash flow analyses using the August Projections (as hereinafter defined) prepared by the Company (the "Base Case") and using the August Projections and adding to the Base Case certain products in the Company's research and development pipeline that were excluded ("Excluded Pipeline") from the Base Case (the "Base Case Plus Excluded Pipeline"). Goldman Sachs calculated a net present value of free cash flows for the fourth quarter of 1997 and for the years 1998 through 2002 using discount rates ranging from 10.0% to 11.0%. Goldman Sachs calculated the Company's terminal values in the year 2002 based on the marginal free cash flow growth rate in 2002 to estimate free cash flow in 2003 and perpetual growth rates of free cash flows ranging from 5.0% to 6.0%. These terminal values were then discounted to present value using discount rates ranging from 10.0% to 11.0%. Such analyses indicated implied per Share values ranging from $72.88 to $114.54 in the Base Case and $84.70 to $132.93 in the Base Case Plus Excluded Pipeline. (iv) Component Analysis. Goldman Sachs performed separate valuation analyses on three financial components of the Company: the Base Case excluding the contribution to earnings and cash flow from Centeon L.L.C. ("Centeon"), the Company's 50/50 joint venture with Behringwerke AG, a subsidiary of Hoechst AG ("Base Case without Centeon"), the Excluded Pipeline and Centeon. Goldman Sachs performed discounted cash flow analyses on the Base Case without Centeon, calculating a net present value of free cash flows for the fourth quarter of 1997 and the years 1998 through 2002 using discount rates ranging from 10.0% to 11.0%. Goldman Sachs calculated terminal values in the year 2002 based on the marginal free cash flow growth rate in the year 2002 to estimate free cash flow in 2003 and perpetual growth 14 rates of free cash flows ranging from 5.0% to 6.0%. These terminal values were then discounted to present value using discount rates ranging from 10.0% to 11.0%. Such analysis indicated implied per Share values ranging from $62.76 to $99.72. Goldman Sachs also performed discounted cash flow analyses on the Base Case without Centeon including the Excluded Pipeline, calculating the net present value of free cash flows for the fourth quarter of 1997 and the years 1998 through 2002 using discount rates ranging from 10.0% to 11.0%. Goldman Sachs calculated terminal values in the year 2002 based on the marginal free cash flow growth rate in the year 2002 to estimate free cash flow in 2003 and perpetual growth rates of free cash flows ranging from 5.0% to 6.0%. These terminal values were then discounted to present value using discount rates ranging from 10.0% to 11.0%. Goldman Sachs then subtracted the net present values obtained for the Base Case without Centeon from the net present values obtained for the Base Case without Centeon including the Excluded Pipeline to determine the implied net present value of the Excluded Pipeline. Such analyses indicated implied per Share values of the Excluded Pipeline ranging from $9.55 to $14.84. Goldman Sachs also valued the Excluded Pipeline by using a Monte Carlo simulation to determine the probability-weighted value of the Excluded Pipeline using management estimates for probability of technical success and cash flows for the initial development period and the first ten years from date of launch for each product for the Excluded Pipeline and standard pharmaceutical product lifecycle sales and cash flow curves for an additional 15 years for each product. Such analysis indicated implied per Share values for the Excluded Pipeline, assuming 1 standard deviation around the mean, ranging from $9.00 to $17.00. Goldman Sachs calculated the net present value of Centeon using management's projections for the years 1998 through 2000 and a terminal value equal to 10.0x year 2000 operating income. Using discount rates of 12.0% to 15.0%, such analysis indicated implied per Share values of Centeon of $7.88 and $7.31, respectively. (v) Selected Transactions Analysis. Goldman Sachs analyzed certain information relating to the following transactions involving sales of control in the pharmaceutical industry since 1990: Hoechst/Marion-Merrell Dow; Glaxo plc/Wellcome plc; American Home Products/American Cyanamid; Roche Ltd./Syntex; Rhone-Poulenc S.A./Rorer Group Inc. (the "Selected Transactions"). Such analysis indicated that for the Selected Transactions (i) total entity value as a multiple of LTM sales ranged from 2.0x to 3.6x with a mean of 2.7x and a median of 2.5x, as compared to 3.2x for the total entity value of the Company, (ii) total entity value as a multiple of LTM EBIT ranged from 10.2x to 23.4x with a mean of 15.7x and a median of 12.3x, as compared to 20.4x for the total entity value of the Company and (iii) the total equity market value as a multiple of LTM net income ranged from 15.8x to 38.7x with a mean of 24.2x and a median of 22.1x, as compared to 35.8x for the total equity market value of the Company. (vi) Selected Buyouts By Significant Existing Shareholders. Goldman Sachs analyzed certain information relating to the premiums paid in selected transactions involving buyouts of a minority interest by an existing significant shareholder since 1988. Such analysis indicated initial bid price premiums over market price one month prior to the announcement of the transaction which ranged from negative 8.4% to 241.7% with a mean of 27.0% and a median of 20.0% and final premiums over market price one month prior to the announcement of the transaction ranging from negative 20.0% to 241.7% with a mean of 34.2% and a median of 26.1%, each as compared to a 30.8% premium of the $97.00 per Share to be paid in the Offer over the per Share closing price on the NYSE on May 28, 1997 (four weeks prior to the June 26, 1997 Announcement). (vii) Present Value of Implied Future Stock Price. Goldman Sachs performed an analysis to determine the present value of implied future Share prices based on four different scenarios of estimates of EPS for the Company for the years 1998 through 2002. Goldman Sachs used the EPS estimates from the Base Case and the Base Case Plus Excluded Pipeline, each with and without including the impact of reducing the Company's excess inventory position with customers included in the Company's management's projections ("De-load", respectively without De-load, the "Base Case Without De-load" 15 and the "Base Case Plus Excluded Pipeline Without De-load"). Goldman Sachs calculated the implied future Share prices using price/earnings multiples of 21.0x and 23.0x. These implied future Share prices were then discounted to present value using discount rates of 10.5% and 14.0%. This analysis indicated that the present value of the implied future Share price for the years 1997 through 2001 using price/earnings multiples of 21.0x and 23.0x and based upon a discount rate of 10.5% ranged from $72.03 to $112.03 in the Base Case, $78.54 to $112.32 in the Base Case Without De-load, $72.24 to $129.74 in the Base Case Plus Excluded Pipeline and $78.75 to $130.04 in the Base Case Plus Excluded Pipeline Without De-load, and, based upon a discount rate of 14.0% ranged from $72.03 to $99.21 in the Base Case, $78.54 to $99.49 in the Base Case Without De-load, $72.24 to $114.86 in the Base Case Plus Excluded Pipeline and $78.75 to $115.14 in the Base Case Plus Excluded Pipeline Without De-load. (viii) Impact on EPS Analysis. Goldman Sachs performed an analysis to determine the impact on Purchaser of an acquisition of the Shares held by holders other than Purchaser and its subsidiaries at prices per Share ranging from $92.00 to $104.00. Such analysis indicated substantial dilution to Purchaser's 1998 estimated EPS and that Purchaser's pro forma net debt to total capital ratio ranged from 53.8% to 54.4%. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs' opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all such analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or Purchaser or the contemplated transaction. The analyses were prepared solely for purposes of Goldman Sachs' providing its opinion to the Special Committee as to the fairness of the $97 per Share in cash to be received by the holders of Shares in the Offer and the Merger and do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Purchaser, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast. As described above, Goldman Sachs' opinion to the Special Committee was one of many factors taken into consideration by the Special Committee in making its determination to recommend the adoption of the Merger Agreement to the Board of Directors of the Company. The foregoing summary does not purport to be a complete description of the analysis performed by Goldman Sachs and is qualified by reference to the written opinion of Goldman Sachs set forth on Schedule II attached hereto. Goldman Sachs, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. The Special Committee selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm, has substantial experience in transactions similar to the Offer and the Merger, has expertise in the pharmaceutical industry and represented that it did not have an existing engagement with Purchaser, nor would it accept an assignment from Purchaser during its engagement by the Special Committee. Goldman Sachs provides a full range of financial, advisory and brokerage services and in the course of its normal trading activities may from time to time effect transactions and hold positions in the securities or options on securities of the Company and/or Purchaser for its own account and for the account of customers. As of the date hereof, Goldman Sachs holds for its own account a long position of 828,962 Shares. Pursuant to a letter agreement dated July 21, 1997 (the "Engagement Letter"), the Company engaged Goldman Sachs to act as exclusive financial advisor to the Special Committee in connection with its consideration of any proposals made by Purchaser to acquire all or substantially all of the outstanding Shares held by shareholders other than Purchaser. Pursuant to the terms of the Engagement Letter, the Company agreed 16 to pay Goldman Sachs (i) a financial advisory fee of $500,000, (ii) a fee of $1,500,000 upon the delivery of its opinion and (iii) a transaction fee equal to (A) (I) 1.5% of the amount by which $96.00 exceeds $93.50 plus (II) 2.0% of the amount by which $97.00 exceeds $96.00 times (B) the number of Shares (including Shares issuable pursuant to options, warrants and convertible securities) acquired by Purchaser. The Company has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including attorney's fees, and to indemnify Goldman Sachs against certain liabilities, including certain liabilities under the federal securities laws. COMPANY BUDGET INFORMATION AND FINANCIAL PROJECTIONS The Company does not, as a matter of course, make public forecasts or projections as to future sales, earnings or other income statement data. However, in connection with Purchaser's position as a controlling shareholder of the Company, Purchaser has received and examined certain analyses prepared by the Company which include projections of future financial results. In addition, as a result of the review of the Company's financial position and outlook, in the context of preparing for the Offer, Purchaser has received and examined the August Projections for the years 1997 through 2002. Such information has been set forth below for the limited purpose of giving the Company's shareholders access to financial projections by the Company's management that were available for review by Purchaser in connection with the Offer. Preliminary 1997 Budget. In connection with its preparation of its annual budget in December 1996, the Company's management provided projections for the year ended December 31, 1997 (the "Preliminary 1997 Budget") to the Company Board at its meeting on December 13, 1996. The Preliminary 1997 Budget did not take into account the potential impact of the voluntary suspension (the "Centeon Suspension") of certain production and distribution activities by Centeon and accordingly reflects the operating plan of Centeon for 1997. The Company's management was unable to take into account such effect due to the uncertain outcome of (i) the then ongoing review by the U.S. Food & Drug Administration of manufacturing processes at a U.S. production facility of Centeon and (ii) an upcoming meeting of Centeon's Board of Directors that was to discuss the Centeon 1997 budget. For information regarding the Centeon Suspension, see "Schedule IV--Note 5 to Consolidated Financial Statements". The Preliminary 1997 Budget also assumed sustainable growth in net sales, increased cost reduction, a deceleration of research and development expenses and further improvements to gross margins due to changes in the Company's product mix. The Preliminary 1997 Budget further assumed a French franc/U.S. dollar exchange rate of FF5.50 = $1. Selected information presented in the Preliminary 1997 Budget is set forth below:
YEARS ENDING DECEMBER 31, ------------------------- 1996 FORECAST 1997 BUDGET ------------- ----------- (DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE INFORMATION) Net Sales....................................... $5,403 $5,409 Gross Margin.................................... 3,736 3,915 Operating income................................ 751 897 Income before tax(1)............................ 686 926 Earnings per Share.............................. 3.12 4.30
-------- (1) Includes equity in earnings of Centeon of $82 million and $179 million in 1996 and 1997, respectively. 1997 Budget. In light of the impact of the Centeon Suspension, the Company Board appointed a special budget committee (the "Budget Committee"), comprised of Messrs. Frey, Landau and Riepe, to update the Preliminary 1997 Budget to reflect the impact of the Centeon Suspension. At the February 20, 1997 meeting of the Company Board, the Company's management informed the Company Board on the status of its initial review of the Preliminary 1997 Budget and indicated that projected earnings per Share for 1997 could be reduced from $4.30 to approximately $3.65 per Share, principally to reflect the impact of the Centeon Suspension. 17 Following approval of Centeon's 1997 budget by Centeon's Board of Directors at its March 4, 1997 meeting, the Budget Committee met on March 24, 1997 to approve budgetary data projecting earnings per Share for 1997 of $3.65. The Preliminary 1997 Budget was finalized by management in April 1997 and presented to the Company Board at its meeting on May 7, 1997 (the "1997 Budget"). The 1997 Budget included the effect of the Centeon Suspension, but was otherwise based on the same assumptions as the Preliminary 1997 Budget. Selected information presented in the 1997 Budget is set forth below:
YEARS ENDING DECEMBER 31, ------------------------------------ 1996 ACTUAL 1997 BUDGET ---------------- ----------- (DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE INFORMATION) Net sales.......................... $5,421 $5,414 Gross margin....................... 3,755 3,900 Operating income................... 661 869 Income before tax(1)............... 699 800 Earnings per Share................. 3.16 3.65
-------- (1) Includes equity in earnings of Centeon of $85 million and $36 million in 1996 and 1997, respectively. August Projections. On August 9, 1997, certain projections for the years ending December 31, 1997 through 2002 (the "August Projections") were delivered by the Company's management to Goldman Sachs, which in turn forwarded such projections to Morgan Stanley. Morgan Stanley delivered the August Projections to Purchaser on August 11, 1997. The August Projections were produced by the Company in connection with a study commenced in July, 1997 at the request of the Special Committee and were delivered to Goldman Sachs at the request of the Special Committee. The August Projections are based on the following assumptions: a French franc/U.S. dollar exchange rate from 1998-2002 of FF5.50 = $1; increased competition in the US respiratory market, and the continuation of French government pressure to contain health care costs; a gross margin improvement due to the product mix and to divestitures of certain product lines; increased expenditures in promotional efforts regarding the Company's strategic products; and an increase in French corporate income taxes as proposed recently by the French government from 36.6% to 41.6% for calendar years 1997 and 1998. It was also indicated by the Company that there was at the end of June 1997 a high level of inventory of certain of the Company's products currently held by certain U.S. customers. The Company has not made any determination as to whether and over what time period any inventory adjustments may be necessary. If the Company decides to take actions to reduce inventories on a basis of a three year adjustment (as was assumed in the August Projections that management provided to Goldman Sachs), the projected increase in net sales would be reduced by $80 million in each of the years 1998, 1999 and 2000, with the impact on sales and earnings per Share as reflected below. The August Projections are summarized below: AUGUST PROJECTIONS (DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
FORECAST FORECAST '97 IN '98 1997 STRUCTURE(1) 1998 1999 2000 2001 2002 -------- ----------- ------ ------ ------ ------ ------ Net sales............... $5,112 $5,041 $5,262 $5,648 $6,071 $6,573 $7,001 Gross margin............ 3,694 3,642 3,842 4,125 4,444 4,758 5,046 Operating income........ 780 731 822 947 1,082 1,233 1,372 Centeon joint ven- ture(2)................ (41) (41) 55 75 120 150 180 Income before tax....... 722 653 777 930 1,123 1,302 1,492 Earnings per Share...... 3.28 2.93 3.43 4.14 5.11 5.97 6.88
- -------- (1) Excludes the effect of certain product lines divested by the Company in 1997. (2) Equity in earnings of Centeon. 18 Excluding the impact of any adjustments to inventory levels, the projected net sales and earnings per Share would be as reflected below: (DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
FORECAST FORECAST '97 IN '98 1997 STRUCTURE 1998 1999 2000 2001 2002 -------- ---------- ------ ------ ------ ------ ------ Net sales................ $5,112 $5,041 $5,342 $5,728 $6,151 $6,573 $7,001 Earnings per Share....... 3.28 2.93 3.72 4.43 5.40 5.97 6.88
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS: Certain matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include the information set forth above concerning the Preliminary 1997 Budget, the 1997 Budget and the August Projections (together, the "Projections"). Such information has been included in this Offer to Purchase for the limited purpose of giving the Company's shareholders access to financial projections by the Company's management that were made available to Purchaser. Such information was prepared by the Company's management for internal use and not with a view to publication. The foregoing budget information and Projections were based on assumptions concerning the Company's products and business prospects in 1997 through 2002, including the assumption that the Company would continue to operate under the same ownership structure as then existed. The budget information and Projections were also based on other revenue and operating assumptions. Information of this type is based on estimates and assumptions that are inherently subject to significant economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the Company's control. Accordingly, there can be no assurance that the projected results would be realized or that actual results would not be significantly higher or lower than those set forth above. In addition, neither the budget information nor the Projections were prepared with a view to public disclosure or compliance with the published guidelines of the Commission or the guidelines established by the American Institute of Certified Public Accountants regarding projections and forecasts and are included in this Offer to Purchase only because such information was made available to Purchaser by the Company. Neither the Purchaser's nor the Company's independent accountants have examined, compiled or applied any agreed upon procedures to this information and, accordingly, assume no responsibility for this information. Neither the Purchaser nor the Company nor any other party assumes any responsibility for the accuracy or validity of the foregoing projections. POSITION OF PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER Purchaser believes that the consideration to be received by the Company's shareholders, other than Purchaser, pursuant to the Offer and the Merger is fair to the Company's shareholders other than Purchaser. Purchaser bases its belief on the following facts: (i) the fact that the Special Committee concluded that the Offer and the Merger are fair to, and in the best interests of, the Company (ii) notwithstanding the fact that Goldman Sachs' opinion was provided solely for the information and assistance of the Special Committee and that Purchaser is not entitled to rely on such opinion, the fact that the Special Committee received an opinion from Goldman Sachs that the $97 per Share in cash to be received by the holders of Shares other than Purchaser and its subsidiaries in the Offer and the Merger is fair to such holders (iii) the Offer is a Qualifying Tender Offer under the Acquisition Agreement (other than with respect to the minimum offering period, which has been reduced from 30 business days to 28 business days with the agreement of the Special Committee) and as such is consistent with the original intent of the parties to the Acquisition Agreement, and furthermore the Merger will be conducted in accordance with the requirements of the Acquisition Agreement, (iv) the presence of the Minimum Condition ensures that in order for the Offer to be successful approximately two-thirds of the Shares not held by Purchaser will have to be tendered into the Offer, (v) the historical and projected financial performance of the Company and its financial results, (vi) the consideration to be paid in the Offer represents a premium of 24.8% over the average closing price for the one month period prior to June 26, 1997, (vii) the 19 consideration to be paid in the Offer represents a premium of 22.1% over the reported closing price on the last full trading day prior to the June 26, 1997 Announcement of Purchaser's study of a possible business combination with the Company, on which date the last reported sale price was near its historic closing high, (viii) the Acquisition Agreement was negotiated on an arm's- length basis in 1990 and has resulted in the shareholders of the Company benefiting from substantial appreciation in the value of their Shares since 1990, (ix) the same consideration will be paid in both the Offer and the Merger and (x) the Offer and the Merger will each provide consideration to the shareholders entirely in cash. Purchaser did not find it practicable to assign, nor did it assign, relative weights to the individual factors considered in reaching its conclusion as to fairness. In light of the nature of the Company's business, Purchaser did not deem net book value or liquidation value to be relevant indicators of the value of the Shares. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF PURCHASER FOR THE OFFER AND THE MERGER The purpose of the Offer and the Merger is for Purchaser directly to increase, within the terms established by the Acquisition Agreement, its ownership of Shares from approximately 68.1% to 100%. Upon consummation of the Merger, the Company will become a direct wholly owned subsidiary of Purchaser. The acquisition of the Shares not owned by Purchaser has been structured as a cash tender offer followed by a cash merger in order to (i) comply with the requirements of the Acquisition Agreement, (ii) effect a prompt and orderly transfer of ownership of the Company from the public shareholders to Purchaser and (iii) provide shareholders with cash for all of their Shares. Under the PBCL, the approval of the Company Board and the affirmative vote of the holders of a majority of the issued and outstanding Shares are required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. The Company Board has approved and adopted the Merger Agreement and the transactions contemplated thereby, and the only remaining required corporate action of the Company is the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the Shares. Purchaser already has sufficient voting power to cause the approval and adoption of the Merger without the affirmative vote of any other shareholder of the Company. Pursuant to the Acquisition Agreement, however, Purchaser may only exercise such voting power to effect a merger of the Company subsequent to a Qualifying Tender Offer as defined in the Acquisition Agreement. The Offer satisfies the requirements of a Qualifying Tender Offer except for the reduction in the minimum offering period from 30 business days to 28 business days as approved by the Special Committee, In the Merger Agreement, the Company has agreed to take all action necessary to convene a special meeting of its shareholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby and to use its reasonable best efforts to obtain such approval and adoption. Purchaser has agreed that all Shares owned by it and its subsidiaries will be voted in favor of the Merger Agreement and the transactions contemplated thereby. Purchaser's principal strategic objective has been to reinforce its position in the life sciences. In order to further this objective, Purchaser has considered various means of expanding its collaboration with the Company, including increasing its voting equity interest to 100%. Purchaser concluded that such an acquisition would enhance Purchaser's strategic flexibility and allow it to benefit from opportunities in the businesses in which Purchaser and the Company operate. Purchaser also concluded that the combination of Purchaser and the Company would result in Purchaser and its affiliates having only one life sciences company with publicly-listed common stock, and a separate listing of the specialty chemicals and services to industry business. Such steps would bring about a clearer differentiation between life sciences, on the one hand, and specialty chemicals and services, on the other. Purchaser concluded that this clarification should promote an improvement in Purchaser's market valuation. Consequently, Purchaser concluded that an acquisition by Purchaser of the remaining Shares should be considered. Purchaser chose to undertake the transaction at this time because (i) such a transaction was prohibited by the Acquisition Agreement prior to the end of the standstill period on July 31, 1997 and (ii) such transaction is consistent with Purchaser's stated strategy of reinforcing its position in life sciences. 20 PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE OFFER Pursuant to the Merger Agreement, upon completion of the Offer, Purchaser and the Merger Subsidiary intend to effect the Merger in accordance with the Merger Agreement. See "SPECIAL FACTORS--The Merger Agreement". Except as otherwise described in this Offer to Purchase, Purchaser has no current plans or proposals which relate to or would result in: (a) other than the Merger, an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company; (b) a sale or transfer of a material amount of assets of the Company; (c) any change in the management of the Company or any change in any material term of the employment contract of any executive officer; or (d) any other material change in the Company's corporate structure or business. Nevertheless, Purchaser may initiate a review of the Company and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel to determine what changes, if any, would be desirable following the Merger in order best to organize and integrate the activities of the Company and Purchaser. In particular, Purchaser may study the possibility of changing the Company Board by changing the number or term of directors, and may also consider material changes in the present dividend rate and policy, indebtedness and capitalization of the Company. In particular, Purchaser expressly reserves the right to make any changes that it deems necessary or appropriate in light of its review or in light of future developments. As a result of the Offer, the direct and indirect interest of Purchaser in the Company's net book value and net earnings will increase to the extent of the number of Shares acquired under the Offer. Following consummation of the Merger, Purchaser's direct and indirect interest in such items will increase to 100% (other than the issued and outstanding shares of preferred stock of the Company), and Purchaser and its subsidiaries will be entitled to all benefits resulting from that interest, including all income generated by the Company's operations (other than income payable to holders of such preferred stock), and any future increase in the Company's value and the right to elect all members of the Company Board (other than the right of holders of preferred stock to elect members of the Company Board under certain circumstances). Similarly, Purchaser will also bear the risk of losses generated by the Company's operations and any decrease in the value of the Company after the Merger. Upon consummation of the Merger, the Company will become a privately held corporation. Accordingly, shareholders will not have the opportunity to participate directly in the earnings and growth of the Company after the Merger and will not have any right to vote on corporate matters. Similarly, shareholders will not face the risk of losses generated by the Company's operations or decline in the value of the Company after the Merger. Following the consummation of the Merger, the Shares will no longer be quoted on the NYSE and Purchaser intends to cause the Shares to be no longer quoted on the Premier Marche (marche a reglement mensual) of the Bourse de Paris (the "Paris Bourse"). In addition, the registration of the Shares under the Exchange Act will be terminated. Accordingly, following the Merger there will be no publicly-traded Common Stock of the Company outstanding. See "THE TENDER OFFER--Section 11. Effect of the Offer on the Market for the Shares; the NYSE, Paris Bourse and Exchange Act Registration". It is expected that, if Shares are not accepted for payment by Purchaser pursuant to the Offer and the Merger is not consummated, the Company's current management, under the general direction of the Company Board, will continue to manage the Company as an ongoing business. RIGHTS OF SHAREHOLDERS IN THE OFFER AND THE MERGER NO DISSENTERS RIGHTS ARE AVAILABLE IN CONNECTION WITH THE OFFER. However, if the Merger is consummated, shareholders who fully comply with the statutory dissenters procedures set forth in the PBCL, the relevant portions of which are attached to this Offer to Purchase as Schedule III, will be entitled to receive cash for the fair value of their Shares as determined pursuant to the procedures prescribed by the PBCL. Merely voting against the Merger Agreement will not perfect a shareholder's dissenters rights. Shareholders are urged to review 21 carefully the dissenting shareholders' rights provisions of the PBCL, a description of which is provided below and the full text of which is attached to this Offer to Purchase as Schedule III and incorporated herein by reference. SHAREHOLDERS WHO FAIL TO COMPLY STRICTLY WITH THE APPLICABLE PROCEDURES WILL FORFEIT THEIR DISSENTERS RIGHTS IN CONNECTION WITH THE MERGER. See Schedule III to this Offer to Purchase. Sections 1571-80 of the PBCL ("Subchapter D") and 1930(a) of the PBCL, copies of which are attached to this Offer to Purchase as Schedule III, entitle any holder of record of Shares who objects to the Merger, in lieu of receiving the consideration for such Shares provided under the Merger Agreement, to demand in writing that he be paid in cash the fair value of his Shares. Section 1572 of the PBCL defines "fair value" as: "The fair value of shares immediately before the effectuation of the corporate action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action". Any shareholder contemplating making demand for fair value is urged to review carefully the provisions of Subchapter D, particularly the procedural steps required to perfect his dissenters' rights thereunder. DISSENTERS RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SUBCHAPTER D ARE NOT FULLY AND PRECISELY SATISFIED. The following summary does not purport to be a complete statement of the provisions of Subchapter D of the PBCL and is qualified in its entirety by reference to Schedule III and the PBCL. FILING NOTICE OF INTENTION TO DEMAND FAIR VALUE Before the vote of the shareholders is taken on the Merger, the dissenting shareholder must deliver to the Company a written notice of intention to demand that he be paid the fair value of his Shares if the Merger is effected. Such written notice must be sent to the Secretary of the Company at Rhone- Poulenc Rorer Inc., 500 Arcola Road, Collegeville, Pennsylvania 19426. Neither the tendering of Shares in the Offer, nor a vote against the Merger, is sufficient to satisfy the requirement of delivering a written notice to the Company. In addition, the shareholder must not effect any change in the beneficial ownership of his Shares from the date of filing the notice with the Company through the consummation of the Merger, and Shares for which payment of fair value is sought must not be voted in favor of the Merger. Failure by a dissenting shareholder to comply with any of the foregoing will result in the forfeiture of any right to payment of fair value for his Shares. RECORD OWNERS AND BENEFICIAL OWNERS A record holder of Shares held in whole or in part for the benefit of another person may assert dissenters rights as to fewer than all of the Shares registered in his name only if he dissents with respect to all the Shares beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf he dissents. A beneficial owner of Shares who is not the record holder may assert dissenters rights with respect to Shares held on his behalf if he submits to the Company the written consent of the record holder not later than the time of assertion of dissenters rights. A beneficial owner may not dissent with respect to fewer than all of the Shares owned by him, whether or not such Shares are registered in his name. NOTICE TO DEMAND PAYMENT If the Merger is approved, the Company shall mail to all dissenters who gave due notice of their intention to demand payment of fair value and who refrained from voting in favor of the Merger, a notice stating where and when a demand for payment must be sent and certificates for Shares deposited in order to obtain payment. The notice shall be accompanied by a copy of Subchapter D and a form for demanding payment. The time set for the receipt of demands and the deposit of certificates shall not be less than 30 days from the mailing of the notice. Failure by a shareholder to demand payment or deposit certificates pursuant to such notice will cause such shareholder to lose all right to have a court determine the fair value of his Shares. If the Merger has not been effected within 60 days after the date set for demanding payment and depositing certificates, the Company 22 shall return any certificates that have been deposited. The Company, however, may at any later time send a new notice regarding demand for payment and deposit of certificates with like effect. PAYMENT OF FAIR VALUE OF SHARES Promptly after the consummation of the Merger or upon timely receipt of demand for payment if the Merger has already been effected, the Company shall remit to dissenters who have made timely demand and deposited their certificates the amount the Company estimates to be the fair value of their Shares or give written notice that no remittance will be made under Section 1577 of the PBCL. Such remittance or notice shall be accompanied by (i) the closing balance sheet and statement of income of the Company for a fiscal year ending not more than 16 months prior to the date of remittance or notice together with the latest available interim financial statements, (ii) a statement of the Company's estimate of the fair value of the Shares, and (iii) a notice of the right of the dissenting shareholder to demand payment or supplemental payment, as the case may be, accompanied by a copy of Subchapter D. If the Company does not remit the amount of its estimate of the fair value of the Shares, it shall return all certificates that have been deposited and may make a notation thereon that a demand for payment has been made. If Shares with respect to which notation has been so made shall be transferred, each new certificate issued therefor shall bear a similar notation, together with the name of the original dissenting holder or owner of such Shares. A transferee of such Shares shall not acquire by such transfer any rights in the Company other than those that the original dissenter had after making demand for payment of fair value for such Shares. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES If a dissenting shareholder believes that the amount estimated or paid by the Company for his Shares is less than their fair value, the shareholder may send to the Company his own estimate of the fair value which shall be deemed a demand for payment of the amount of the deficiency. If the dissenter does not file his own estimate of fair value within 30 days after the mailing by the Company of its remittance or estimate of fair value, the dissenter shall be entitled to no more than the amount remitted to him or estimated by the Company. VALUATION PROCEEDINGS Within 60 days after the latest of (i) the consummation of the Merger, (ii) timely receipt of any demands for payment and (iii) timely receipt of any shareholder estimates of fair value, if any demands for payment remain unsettled, the Company may file in court an application for relief requesting that the fair value of the Shares be determined by the court. Each dissenter whose demands have not been settled shall be made a party to the proceeding and shall be entitled to recover the amount by which the fair value of his Shares is found to exceed the amount, if any, previously remitted, plus interest. Such dissenter shall also be entitled to interest on such amount from consummation of the Merger until the date of payment as is fair and equitable under the circumstances, taking into account all relevant factors including the average rate currently paid by the Company on its principal bank loans. If the Company fails to file an application within the 60-day period, any dissenter who has not settled his claim may do so in the name of the Company within 30 days after the expiration of this 60-day period. If no dissenter files an application within such 30-day period, each dissenter who has not settled his claim shall be paid no more than the Company's estimate of the fair value of his Shares and may bring an action to recover any amount not previously remitted. COSTS AND EXPENSES OF VALUATION PROCEEDINGS The costs and expenses of any valuation proceedings, including the reasonable compensation and expenses of any appraiser appointed by the court, shall be determined by the court and assessed against the Company except that any part of such costs and expenses may be assessed as the court deems appropriate against all or some of the dissenters whose action in demanding supplemental payment is found by the court to be dilatory, obdurate, arbitrary, vexatious or in bad faith. The court may also assess the fees and expenses of counsel and 23 experts for any or all of the dissenters against the Company if the Company fails to comply substantially with Subchapter D or acts in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner. The court can also assess any such fees or expenses incurred by the Company against a dissenter if such dissenter is found to have acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner. If the court finds that the services of counsel for any dissenter were of substantial benefit to the other dissenters and should not be assessed against the Company, it may award to such counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefitted. OTHER Section 1712 of the PBCL provides that a director of a Pennsylvania corporation stands in a fiduciary relation to such corporation and must perform his duties as a director in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. Section 1105 of the PBCL provides in substance that a shareholder of a Pennsylvania corporation shall not have any right to obtain, in the absence of fraud or fundamental unfairness, an injunction against any proposed merger, nor any right to claim the right to valuation and payment of the fair value of his Shares because of the merger, except that he may dissent and claim such payment if and to the extent provided in Subchapter D of PBCL Chapter 15, described above. Absent fraud or fundamental unfairness, such dissenters rights are the exclusive remedy of such shareholders. However, the United States Court of Appeals, Third Circuit, interpreting the predecessor statute to Section 1105 of the PBCL in Herskowitz v. NutriSystem, Inc., concluded that dissenters rights co- exist with common law causes of action, such as rescission or money damages, in the context of an action for breach of fiduciary duty or misrepresentation in a cash-out merger. Shareholders should be aware that due to the enactment of the PBCL in 1988 it is unclear whether the decision in Herskowitz remains applicable to dissenters' rights. IN VIEW OF THE COMPLEXITIES OF THESE PROVISIONS OF PENNSYLVANIA LAW, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER SHOULD CONSULT THEIR OWN LEGAL COUNSEL. SEE SCHEDULE III ATTACHED HERETO FOR A REPRODUCTION OF THE TEXT OF THE RELEVANT SECTIONS OF THE PBCL. THE MERGER AGREEMENT The following is a summary of the Merger Agreement, a copy of which is filed as an Exhibit to the Schedule 14D-1 filed by Purchaser with the Commission in connection with the Offer. Such summary is qualified in its entirety by reference to the Merger Agreement. The Offer. The Merger Agreement provides for the commencement of the Offer as promptly as practicable after the date thereof, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction of certain conditions that are described in "THE TENDER OFFER-- Section 12. Certain Conditions of the Offer" hereof. Purchaser has agreed that no change in the Offer may be made which decreases the price per Share payable in the Offer, which changes the number of Shares to be purchased in the Offer, which changes the form of the consideration payable in the Offer, which amends or adds to the conditions to the Offer set forth in "THE TENDER OFFER--Section 12. Certain Conditions of the Offer" or which makes any other change in the terms or conditions of the Offer which is materially adverse to the holders of Shares. The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof, and in accordance with Pennsylvania Law, at the Effective Time, the Merger Subsidiary will be merged with and into the Company. The Company will continue as the surviving corporation of the Merger and will become a direct wholly owned subsidiary of Purchaser. At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time held by shareholders (other than any Shares owned directly or indirectly by Purchaser), shall be cancelled and, subject to dissenters rights under Pennsylvania law, shall be converted automatically into the right to receive from the Company the Merger Consideration. 24 The Merger Agreement provides that the directors of the Merger Subsidiary immediately prior to the Effective Time will be the initial directors of the Company and that the officers of the Company immediately prior to the Effective Time remain officers of the Company. The Merger Agreement provides that, at the Effective Time, the Articles of Incorporation and Bylaws of the Company will remain unmodified. The Merger Agreement provides, in accordance with the requirement of the Acquisition Agreement that this Offer be a Qualifying Tender Offer (see "INTRODUCTION"), that immediately prior to the Effective Time, each outstanding option to purchase Shares (in each case, an "Option"), whether or not then exercisable, shall be cancelled and each holder of a cancelled Option shall be entitled to receive an indemnity payment (the "Exercise Amount") in cash, in consideration for the cancellation of each such Option, at the same time as the Merger Consideration is received by the holders of Shares, equal to the product of (i) the number of Shares to be issued upon the exercise of such Option and (ii) the excess, if any, of the amount paid per Share pursuant to the Offer over the exercise price per Share previously subject to such Option. The Merger Agreement also provides that Purchaser and the Company's Compensation Committee will define, prior to the Effective Time, alternatives to such treatment of Options, which alternatives may include deferral of the payment of the Exercise Amount and conversion into options to purchase securities of Purchaser. Purchaser or the designated paying agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger Agreement to any holder of Shares and/or Options such amounts that Purchaser or the paying agent is required to deduct and withhold with respect to the making of such payment under the United States Internal Revenue Code of 1986, as amended, the rules and regulations promulgated thereunder or any provision of state, local or foreign tax law. Purchaser is making no representation regarding the tax consequences of the treatment of Options described above, and each holder of Options should consult his or her tax advisor with respect to such consequences. Agreements of Purchaser, the Merger Subsidiary and the Company. Pursuant to the Merger Agreement, the Company shall, in accordance with applicable law and the Company's Articles of Incorporation and Bylaws, (i) duly call, give notice of, convene and hold a special meeting of its shareholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby (the "Shareholders' Meeting"), (ii) include in the proxy statement for the Shareholders' Meeting the recommendation of the Company Board and the Special Committee that the shareholders of the Company approve and adopt the Merger Agreement and the transactions contemplated thereby, subject to their respective fiduciary duties as advised by independent counsel and (iii) use its reasonable best efforts to obtain such approval and adoption. At the Shareholders' Meeting, Purchaser shall cause all Shares then owned by it and its subsidiaries to be voted in favor of the approval and adoption of the Merger Agreement and the transactions contemplated thereby. Purchaser currently has sufficient voting power to approve the Merger, even if no other shareholder votes in favor of the Merger. The Merger Agreement provides that the Company shall, if required by applicable law, as soon as practicable following consummation of the Offer, file a proxy statement with the Commission under the Exchange Act (the "Proxy Statement"), and shall use its reasonable best efforts to have the Proxy Statement cleared by the Commission and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Shareholders' Meeting at the earliest practicable time. Pursuant to the Merger Agreement, the Company has covenanted and agreed that, between the date of the Merger Agreement and the Effective Time, unless Purchaser shall otherwise agree in writing, the businesses of the Company and its subsidiaries shall be conducted only in, and the Company and its subsidiaries shall not take any action, except in the ordinary course of business and in a manner consistent with past practice; and the Company shall use its reasonable best efforts to preserve substantially intact the business organization of the Company and its subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and its subsidiaries and to preserve the current relationships of the Company and its subsidiaries 25 with customers, suppliers and other persons with which the Company or any of its subsidiaries has significant business relations. The Company and Purchaser are each obligated under the Merger Agreement to give each other prompt notice of (i) the occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of which would be likely to cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate in any material respect and (ii) any failure of the Company, Purchaser or the Merger Subsidiary, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it thereunder. Pursuant to the Merger Agreement, the Company shall, to the fullest extent permitted under applicable law and regardless of whether the Merger becomes effective, indemnify and hold harmless, each present and former director, officer, employee, fiduciary and agent of the Company and each of its subsidiaries (collectively, the "Indemnified Parties") against all costs and expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as an officer, director, employee, fiduciary or agent, whether occurring before or after the Effective Time, until the expiration of the statute of limitations relating thereto (and shall pay any expenses in advance of the final disposition of such action or proceeding to each Indemnified Party to the fullest extent permitted under Pennsylvania law, upon receipt from the Indemnified Party to whom expenses are advanced of any undertaking to repay such advances required under Pennsylvania law). In the event of any such claim, action, suit, proceeding or investigation, (i) the Company shall pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to the Company, promptly after statements therefor are received and (ii) the Company shall cooperate in the defense of any such matter; provided, however, that the Company shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld); and provided further that the Company shall not be obligated to pay the fees and expenses of more than one counsel (plus appropriate local counsel) for all Indemnified Parties in any single action except (x) that the persons who served as directors of the Company who were not designees of Purchaser shall be entitled to retain one additional counsel (plus appropriate local counsel) to represent them at the expense of the Company, and (y) to the extent that two or more of such Indemnified Parties shall have conflicting interests in the outcome of such action, in which case such additional counsel (including local counsel) as may be required to avoid any such conflict or likely conflict may be retained by the Indemnified Parties at the expense of the Company, and provided further that, in the event that any claim for indemnification is asserted or made within the period prior to the expiration of the applicable statute of limitations, all rights to indemnification in respect of such claim shall continue until the disposition of such claim. All rights pursuant to the foregoing indemnification provisions of the Merger Agreement are deemed to be a contract between the Company and each of the Indemnified Parties. The Merger Agreement provides that the Company shall use its reasonable efforts to maintain in effect for six years from the Effective Time, if available, the current directors' and officers' liability insurance policies maintained by the Company covering those persons who are currently covered by such policies (provided that the Company may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that in no event shall the Company be required to expend more than an amount per year equal to 150% of current annual premiums paid by the Company for such insurance. In the event that, but for the proviso to the immediately preceding sentence, the Company would be required to expend more than 150% of current annual premiums, the Company shall obtain the maximum amount of such insurance obtainable by payment of annual premiums equal to 150% of current annual premiums. In the event the Company or any successor or assign (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successor and assign of the Company, or at Purchaser's option, Purchaser, shall assume the foregoing indemnification obligations and the 26 indemnification agreements dated as of July 2, 1997, between the Company and the members of the Special Committee. Pursuant to the terms of the Merger Agreement and subject to the conditions thereof, each of the parties thereto shall (i) use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement, including, without limitation, using its reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its subsidiaries as are necessary for the consummation of the transactions and to fulfill the conditions to the Offer and the Merger. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of the Merger Agreement, the proper officers and directors of each party to the Merger Agreement and the Company shall use their reasonable best efforts to take all such action. Pursuant to the Merger Agreement, the parties thereto agreed that the Acquisition Agreement shall be terminated as of the Effective Time and that all representations, warranties and agreements between the parties thereto which, by the terms of such agreement, survive either or both the Closing Date (as that term is defined in the Acquisition Agreement) or the termination of such agreement shall all be terminated as of the Effective Time. Representations and Warranties. The Merger Agreement contains various customary representations and warranties of the parties thereto, including representations by the Company, Purchaser and the Merger Subsidiary as to the enforceability of the Merger Agreement and by the Company as to compliance with law, corporate status and capitalization and the accuracy of financial statements and filings with the Commission. Conditions to the Merger. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) to the extent required by Pennsylvania law and the Company's Articles of Incorporation and Bylaws, the Merger Agreement and the transactions contemplated thereby shall have been approved and adopted by the affirmative vote of the shareholders of the Company; (b) no foreign, United States or state governmental authority or other agency or commission or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of preventing or prohibiting consummation of the Merger or the effective operation of the business of the Company and its subsidiaries after the Effective Time; and (c) Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition shall not be applicable to the obligations of Purchaser or Merger Subsidiary if, in breach of the Merger Agreement, Purchaser fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. Termination; Fees and Expenses. The Merger Agreement may be terminated and the Merger and the other transactions contemplated by the Merger Agreement may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated thereby by the shareholders of the Company: (a) by mutual written consent duly authorized by the Boards of Directors of Purchaser, the Merger Subsidiary and the Special Committee on behalf of the Company; or (b) by either Purchaser or the Special Committee on behalf of the Company if (i) the Effective Time shall not have occurred on or before March 31, 1998; provided, however, that such right to terminate the Merger Agreement shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (c) by Purchaser (i) if due to an occurrence or circumstance that would result in a failure to satisfy any condition to the Offer, Purchaser shall have (A) failed to commence the Offer within 30 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days 27 following the commencement of the Offer, unless such termination or failure to pay for Shares shall have been caused by or resulted from the failure of Purchaser or Merger Subsidiary to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by Purchaser or Merger Subsidiary of any material representation or warranty of either of them contained in the Merger Agreement or (ii) if prior to the purchase of Shares pursuant to the Offer, the Special Committee shall have withdrawn or modified in a manner adverse to Purchaser or the Merger Subsidiary its approval or recommendation of the Offer, the Merger Agreement, the Merger or any transaction contemplated by the Merger Agreement or shall have resolved to do any of the foregoing; or (d) by the Company, upon approval of the Special Committee, if due to an occurrence or circumstance that would result in a failure to satisfy any of the conditions to the Offer, Purchaser shall have (i) failed to commence the Offer within 30 days following the date of the Merger Agreement, (ii) terminated the Offer without having accepted any Shares for payment thereunder or (iii) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such termination or failure to pay for Shares shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in the Merger Agreement or the material breach by the Company of any material representation or warranty of it contained in the Merger Agreement; or (e) by the Company, upon approval of the Special Committee, (i) if any representation or warranty of Purchaser and the Merger Subsidiary in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of the Merger Agreement, or (ii) Purchaser or the Merger Subsidiary shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of Purchaser or the Merger Subsidiary to be performed or complied with by it under the Merger Agreement. In the event of the termination of the Merger Agreement, the Merger Agreement shall forthwith become void. Except as set forth below, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby shall be paid by the party incurring such fees and expenses, whether or not the transactions contemplated by the Merger Agreement are consummated. Amendment and Waiver. The Merger Agreement may be amended in writing by the parties thereto by or on behalf of their respective Boards of Directors (and approved by the Special Committee) at any time prior to the Effective Time. Except as otherwise provided by the Merger Agreement, any party thereto may (i) extend the time for the performance of any obligation or other act of any other party thereto, (ii) waive any inaccuracy in the representations and warranties contained therin and (iii) waive compliance with any agreement or condition contained therein, other than the Minimum Condition. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER In considering the recommendation of the Company Board and the Special Committee with respect to the Offer and the Merger, shareholders should be aware that certain officers and directors of Purchaser and the Company have interests in the Offer and the Merger which are described below and which may present them with certain potential conflicts of interest. Currently, of the thirteen directors of the Company, one is also a director of Purchaser and three are executive officers of Purchaser. Mr. Jean Marc Bruel, a director of the Company, is also a Vice-Chairman and a director of Purchaser; Mr. Igor Landau, a director of the Company, is also a Group President of Purchaser; Mr. Jean-Pierre Tirouflet, a director of the Company, is also Senior Executive Group Vice-President of Purchaser; and Mr. Michel de Rosen, Chairman and Chief Executive Officer of the Company, is also an executive officer of Purchaser. Mr. Robert E. Cawthorn is a designee of Purchaser to the Company Board, although Mr. Cawthorn is not an employee of Purchaser. See "SPECIAL FACTORS-- Beneficial Ownership of Common Stock" for information regarding Shares and options to acquire Shares beneficially owned by certain of Purchaser's executive officers or directors. See also "Schedule I--Directors and Executive Officers of Purchaser". Shareholders also should be aware that Purchaser has certain interests that present actual or potential conflicts of interest in connection with the Offer and the Merger. As a result of Purchaser's current ownership of 28 approximately 68.1% of the issued and outstanding Shares and its nominees constituting a majority of the Company's directors, Purchaser may be deemed to control the Company. The Special Committee and the Board were aware of these actual and potential conflicts of interest and considered them along with the other matters described under "SPECIAL FACTORS--Recommendation of the Company Board; Fairness of the Offer and the Merger". Purchaser has been advised that Mr. Antoine Jeancourt-Galignani, representative of Assurance Generales de France on the Purchaser's Board of Directors, and Messrs. Philippe Desmarescaux, Landau and Michel de Rosen, executive officers of Purchaser, intend to tender Shares owned by them pursuant to the Offer. Purchaser has not been advised by any other executive officers, directors or affiliates of the Company whether any of such persons intends to tender Shares owned by them pursuant to the Offer. BENEFICIAL OWNERSHIP OF COMMON STOCK The following table sets forth certain information, as of August 8, 1997, regarding the ownership of Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the issued and outstanding Common Stock, and any director or executive officer of the Company or Purchaser who is the beneficial owner of Shares or Options issued by the Company:
NUMBER OF SHARES SUBJECT TO PERCENTAGE OF OPTIONS ISSUED COMMON STOCK NUMBER OF SHARES BY THE BENEFICIALLY NAME OF BENEFICIAL OWNER OWNED DIRECTLY COMPANY(1) OWNED - ------------------------ ---------------- ---------------- ------------- Purchaser...................... 97,163,370 0 68.1% Alain Audubert................. 0 6,685 * Jean-Jacques Bertrand.......... 3,267 64,864 * John A. Bond................... 0 2,957 * Robert E. Cawthorn............. 98,620 326,789 * Richard T. Collier............. 3,000 22,929 * Stephen P. Connelley........... 1,397 45,645 * Philippe Desmarescaux.......... 2,863 0 * Charles-Henri Filippi.......... 2,000 10,000 * Richard Forrest................ 0 70,256 * Dale F. Frey................... 0 4,000 * Claude Helene.................. 0 20,000 * Antoine Jeancourt-Galignani (representative of Assurances Generales de France).......... 210 0 * Manfred E. Karobath, M.D....... 6,911 140,993 * Igor Landau.................... 200 20,000 * Hadia Lefavre.................. 0 1,251 * Philippe Maitre................ 0 10,702 * John D. Michelmore............. 7,046 62,155 * Bernard Reculeau............... 4,040 70,902 * James S. Riepe................. 864 10,000 * Michel de Rosen................ 8,629 106,814 * Timothy G. Rothwell............ 0 15,702 * S.G. Equities International, subsidiary of Societe Generale...................... 5,000 0 * Societe Generale............... 2,000 0 * Jean-Pierre Tirouflet.......... 0 20,000 *
- -------- (1) Certain of the directors and executive officers of Purchaser listed in Schedule I attached hereto (6 persons in all) have the right to acquire options to purchase from Purchaser up to an aggregate of 628,500 of the issued and outstanding Shares which are currently owned by Purchaser and included in the amount of Shares set forth opposite Purchaser's name above. Michel de Rosen has the right to acquire options to purchase up to 146,000 of such Shares. * Represents less than 1%. 29 BNP Arbitrage, an affiliate of the Banque Nationale de Paris, a director of Purchaser, has effected the following transactions in Shares during the past 60 days:
AMOUNT DATE OF SHARES PRICE PER SHARE PLACE OF TRADE TYPE OF TRADE - ---- --------- --------------- -------------- -------------------- June 19, 1997.... 200 $78.88 NYSE Open Market Purchase June 19, 1997.... 500 $79.00 NYSE Open Market sale June 19, 1997.... 200 $78.88 NYSE Open Market sale June 19, 1997.... 200 $78.88 NYSE Open Market sale June 26, 1997.... 1,500 $90.56 NYSE Open Market purchase June 26, 1997.... 2,500 $91.19 NYSE Open Market purchase June 26, 1997.... 1,000 $91.06 NYSE Open Market sale June 26, 1997.... 1,000 $91.00 NYSE Open Market sale June 26, 1997.... 1,100 $91.06 NYSE Open Market sale June 27, 1997.... 500 $91.38 NYSE Open Market purchase June 27, 1997.... 1,000 $91.06 NYSE Open Market sale June 30, 1997.... 1,000 $90.81 NYSE Open Market purchase June 30, 1997.... 1,000 $90.81 NYSE Open Market sale July 1, 1997..... 1,000 $91.19 NYSE Open Market purchase July 2, 1997..... 600 $92.00 NYSE Open Market purchase July 2, 1997..... 1,000 $92.13 NYSE Open Market sale July 3, 1997..... 1,000 $92.25 NYSE Open Market purchase July 3, 1997..... 1,400 $93.00 NYSE Open Market sale July 3, 1997..... 200 $92.50 NYSE Open Market sale July 7, 1997..... 2,300 $93.25 NYSE Open Market purchase July 7, 1997..... 400 $93.33 NYSE Open Market sale July 7, 1997..... 100 $93.23 NYSE Open Market sale July 7, 1997..... 1,000 $93.00 NYSE Open Market sale July 8, 1997..... 1,000 $93.38 NYSE Open Market purchase July 9, 1997..... 1,000 $93.63 NYSE Open Market sale July 9, 1997..... 300 $93.63 NYSE Open Market sale July 9, 1997..... 500 $93.63 NYSE Open Market sale July 10, 1997.... 1,600 $93.69 NYSE Open Market purchase July 10, 1997.... 1,100 $93.75 NYSE Open Market sale July 10, 1997.... 500 $93.69 NYSE Open Market sale July 15, 1997.... 500 $93.44 NYSE Open Market purchase July 17, 1997.... 500 $93.44 NYSE Open Market sale July 18, 1997.... 400 $92.75 NYSE Open Market purchase July 18, 1997.... 400 $92.75 NYSE Open Market purchase July 18, 1997.... 300 $92.75 NYSE Open Market sale July 18, 1997.... 500 $92.75 NYSE Open Market sale July 24, 1997.... 2,000 $93.31 NYSE Open Market purchase July 25, 1997.... 200 $93.38 NYSE Open Market sale July 25, 1997.... 500 $93.38 NYSE Open Market sale July 25, 1997.... 1,000 $93.44 NYSE Open Market sale July 28, 1997.... 300 $93.56 NYSE Open Market sale July 30, 1997.... 1,000 $94.38 NYSE Open Market purchase July 30, 1997.... 300 $94.38 NYSE Open Market sale July 30, 1997.... 700 $94.00 NYSE Open Market sale
30 Purchaser has effected the following transactions in Shares during the past 60 days:
AMOUNT DATE OF SHARES PRICE PER SHARE PLACE OF TRADE TYPE OF TRADE - ---- --------- --------------- -------------- -------------------------------- July 15, 1997........... 6,000 $32.125 Private sale Sale pursuant to option exercise July 30, 1997........... 1,000 $32.125 Private sale Sale pursuant to option exercise
The Company has not effected any transactions in Shares during the past 60 days. To the best of the Company's knowledge, no officer or director of the Company has effected any transaction in Shares during the past 60 days. According to Purchaser's records, since January 1, 1995, the Company and Purchaser have purchased the following number of Shares at the following average price per Share:
COMPANY PURCHASER ----------------------- ----------------------- NUMBER OF AVERAGE PRICE NUMBER OF AVERAGE PRICE SHARES PER SHARE SHARES PER SHARE --------- ------------- --------- ------------- 1995: First Quarter................. 264 $63.0000 45,800 $40.76 Second Quarter................ 0 0.0000 72,000 41.28 Third Quarter................. 0 0.0000 25,000 44.87 Fourth Quarter................ 237 49.0042 185,585 48.66 1996: First Quarter................. 1,511 $59.5071 207,500 $59.38 Second Quarter................ 3,143 64.5041 781,500 59.78 Third Quarter................. 192 71.3958 0 0.00 Fourth Quarter................ 102 75.3297 1,406,337 72.69 1997: First Quarter................. 728 $71.6250 0 $ 0.00 Second Quarter................ 171,035 74.0218 531,436 77.58 Third Quarter (through August 15, 1997).................... 0 0.0000 0 0.00
RELATED PARTY TRANSACTIONS Purchaser and its affiliates manage their cash separately. In certain large countries such as the United States, France, the United Kingdom and Germany, the local entities have access to Purchaser's cash pooling arrangements whereby they can, at their own request, lend to or borrow from Purchaser at market terms and conditions. Amounts receivable from Purchaser and affiliates totaled $48.9 million and $61.3 million at December 31, 1996 and 1995, respectively. The 1996 balance included $6.3 million of accounts receivable from sales of products and services to Purchaser (1995: $8.5 million) and $39.4 million classified as other current assets (1995: $36.8 million). Accounts payable related to purchase of materials and services from Purchaser and affiliates were $16.8 million at December 31, 1996 (1995: $12.2 million); accrued and other liabilities due to Purchaser at December 31, 1996 were $30.0 million (1995: $20.9 million). In 1996, sales to Purchaser and affiliates were $31.3 million (1995: $31.1 million). Materials purchased from Purchaser totaled $38.7 million in 1996 (1995: $41.4 million). At December 31, 1996, debt to Purchaser and affiliates totaled $259.8 million (1995: $653.0 million). Interest expense incurred with respect to Purchaser indebtedness in 1996 was $22.3 million (1995: $12.4 million). In addition, Purchaser provides the Company with a $500.0 million medium-term currency facility, with interest based on London Interbank Offer Rate ("LIBOR") plus a margin, and has guaranteed certain obligations of the Company under certain joint ventures. Purchaser charges the Company for expenses incurred on its behalf, including research, data processing, insurance, legal, tax, advertising, public relations and management fees. Such charges are reflected in the financial statements and amounted to approximately $24.0 million in 1996 (1995: $23.6 million). Purchaser believes that the expenses so charged are representative of amounts that the Company would have incurred if it had been operated as an unaffiliated entity. In 1995, the Company acquired from Purchaser the businesses of Cooperation Pharmaceutique Francaise ("Cooper"), primarily in France, and a pharmaceuticals business in Brazil for cash and preferred stock of a 31 subsidiary of the Company aggregating approximately $273.2 million. The preferred shares, accounted for as minority interest in other liabilities, have a liquidation preference of approximately FF645.0 million (approximately $123.1 million) and pay dividends of 7.5% per annum on a stated value of FF145.0 million. The acquisition agreements call for potential adjustments to the purchase price of the businesses based on several factors, including earnings performance. In December 1995, the Company issued $500.0 million of undated capital equity notes to Purchaser. The notes have a liquidation preference that ranks senior to the Shares, but junior to all existing and future Company preferred stock. Semiannual remuneration on the unpaid principal balance of the equity notes is based on LIBOR plus a margin and was approximately $35.2 million in 1996. The capital equity notes are redeemable only at the Company's option, but not earlier than five years after issuance, subject to certain exceptions. In addition, the Company has entered into various licensing and confidentiality agreements with Purchaser and its affiliates regarding certain intellectual property rights. In the ordinary course of their businesses, Purchaser and the Company engage in a variety of commercial and financial transactions with several of the companies (and/or their affiliates) which are represented on the Purchaser Board (such as the Banque Nationale de Paris, Credit Lyonnais, Credit Suisse First Boston, Fiat and Societe Generale). These commercial and financial transactions are conducted on an arm's-length basis in accordance with the Purchaser's standard business practices. 32 THE TENDER OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment, and will pay for, all Shares validly tendered prior to the Expiration Date (as hereinafter defined) and not withdrawn as permitted by "THE TENDER OFFER--Section 4. Withdrawal Rights". The term "Expiration Date" means 5:00 p.m., New York City time, on Wednesday, October 1, 1997, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Purchaser expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any of the conditions specified in "THE TENDER OFFER--Section 12. Certain Conditions of the Offer", by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Shares. See "THE TENDER OFFER--Section 4. Withdrawal Rights". Subject to the applicable regulations of the Commission, Purchaser also expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, (i) to delay acceptance for payment of, or, regardless of whether such Shares were theretofore accepted for payment, payment for, any Shares, pending receipt of any regulatory approval specified in "THE TENDER OFFER--Section 13. Certain Legal Matters and Regulatory Approval", (ii) to terminate the Offer and not accept for payment any Shares upon the occurrence of any of the conditions, specified in "THE TENDER OFFER--Section 12. Certain Conditions of the Offer" and (iii) to waive any condition, other than the Minimum Condition, or otherwise amend the Offer in any respect, by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. The Merger Agreement provides that, without the consent of the Special Committee, Purchaser will not (i) decrease the price per Share payable in the Offer, (ii) change the number of Shares to be purchased in the Offer, (iii) change the form of consideration payable in the Offer, (iv) impose conditions to the Offer in addition to those set forth in "THE TENDER OFFER--Section 12. Certain Conditions of the Offer" or (v) make any other change in the terms or conditions of the Offer which is materially adverse to the holders of Shares. Purchaser acknowledges that (i) Rule 14e- 1(c) under the Exchange Act requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of this paragraph), any Shares upon the occurrence of any of the conditions specified in "THE TENDER OFFER--Section 12. Certain Conditions of the Offer" without extending the period of time during which the Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service and, in France, to Les Echos and La Tribune. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Purchaser will extend the Offer to the extent required by Rules 14d- 4(c), 14d-6(d) and 14e-1 under the Exchange Act. 33 Subject to the terms of the Merger Agreement, if, prior to the Expiration Date, Purchaser should decide to decrease the number of Shares being sought or to increase or decrease the consideration being offered in the Offer, such decrease in the number of Share being sought or such increase or decrease in the consideration being offered will be applicable to all shareholders whose Shares are accepted for payment pursuant to the Offer and, if at the time notice of any such decrease in the number of Shares being sought or such increase or decrease in the consideration being offered is first published, sent or given to holders of such Shares, the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that such notice is first so published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or United States federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies, and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment, and will pay for, all Shares validly tendered prior to the Expiration Date and not properly withdrawn, promptly after the latest to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions to the Offer set forth in "THE TENDER OFFER-- Section 12. Certain Conditions of the Offer". Subject to applicable rules of the Commission, Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory approvals specified in "THE TENDER OFFER--Section 13. Certain Legal Matters and Regulatory Approvals" or in order to comply in whole or in part with any other applicable law. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (A) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depositary Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares", (B) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) in lieu of the Letter of Transmittal and (C) any other documents required under the Letter of Transmittal. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to the Depositary or the French Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering shareholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid, regardless of any delay in making such payment. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and 34 Tendering Shares", such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, Purchaser shall increase the consideration offered to any holders of Shares pursuant to the Offer, such increased consideration shall be paid to all holders of Shares that are purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transaction or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a holder of Shares validly to tender Shares in the United States pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary (including an Agent's Message if the tendering shareholder has not delivered a Letter of Transmittal), in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such book-entry confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer. The Depositary will establish accounts with respect to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book- Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, either the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such 35 term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and the Share Certificates evidencing such shareholder's Shares are not immediately available or such shareholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such shareholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal are received by the Depositary within three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram or facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Purchaser. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. Purchaser also reserves the absolute right to waive any condition of the Offer or any defect or irregularity in the tender of any Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, the Dealer Manager, the Co-Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Other Requirements. By executing the Letter of Transmittal as set forth above, a tendering shareholder irrevocably appoints designees of Purchaser as such shareholder's proxies, each with full power of substitution, 36 in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after August 19, 1997). All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such shareholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Purchaser will, with respect to the Shares for which the appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares. The acceptance for payment by Purchaser of Shares pursuant to any of the procedures described above will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. 4. WITHDRAWAL RIGHTS. Tenders of the Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after October 21, 1997. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this Section 4. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on the such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares", any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, the Dealer Manager, the Co-Dealer Manager, the Depositary, the Information Agent or any other person will be under duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 37 Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares". 5. CERTAIN U.S. FEDERAL AND FRENCH INCOME TAX CONSEQUENCES. U.S. Federal Income Tax. The receipt of cash for Shares pursuant to the Offer or in the Merger will be a taxable transaction for U.S. federal income tax purposes under the Code and may also be a taxable transaction under applicable state, local or foreign tax laws. In general, a shareholder will recognize gain or loss for U.S. federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's adjusted tax basis in such Shares. Assuming the Shares constitute capital assets in the hands of the shareholder, such gain or loss will be capital gain or loss and, in the case of an individual shareholder, will be taxable at various preferential rates depending on the extent to which such shareholder's holding period for the Shares tendered pursuant to the Offer or converted pursuant to the Merger exceeds one year. Gain or loss will be calculated separately for each block of Shares tendered pursuant to the Offer or converted pursuant to the Merger. The deduction of capital losses is subject to certain limitations. Prospective investors should consult their own tax advisors in this regard. In general, in order to prevent backup federal income tax withholding at a rate of 31% on the cash consideration to be received in the Offer or pursuant to the Merger, each shareholder who is not otherwise exempt from such requirements must provide such shareholder's correct taxpayer identification number (and certain other information) by completing the Substitute Form W-9 in the Letter of Transmittal. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF SHAREHOLDERS, INCLUDING BROKER-DEALERS, SHAREHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN CORPORATIONS. THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO CHANGE POSSIBLY WITH RETROACTIVE EFFECT. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS. French Income Tax. The receipt of cash for Shares pursuant to the Offer or in the Merger will be a taxable transaction for French tax purposes for French tax residents. In general, a resident of France for tax purposes who is a shareholder will recognize gain or loss for French tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's tax basis in such Shares. French resident individuals will generally be subject to tax in France at a rate of 20.9% if their sales of securities exceed FF 100,000 in 1997. Capital losses can be offset against capital gains of the same nature, but such deduction is subject to certain limitations. No assurance is provided as to whether the indemnity paid to shareholders in connection with the Merger will be subject to treatment as capital gains tax. French resident corporations will generally be subject to tax at the effective rate of 36 2/3%, as ordinary income, unless the Shares were held in a special participation account for more than two years, in which case the rate is reduced to an effective rate of 20.9%. The French government has announced that the rate of ordinary corporate income tax will be increased to 41.6% for gain recognized in 1997 for corporations with sales of FF 50 million or more. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN SHAREHOLDERS, INCLUDING SHAREHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR WHOSE PARTICIPATION IN THE COMPANY IS AT LEAST EQUAL TO THE EQUIVALENT OF FF 150 MILLION. THE FRENCH INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO CHANGE POSSIBLY WITH RETROACTIVE EFFECT. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM. 38 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally traded on the NYSE under the symbol "RPR". The following table sets forth, for the quarters indicated, the high and low prices per Share on NYSE as reported by the Dow Jones News Service and the quarterly dividends paid per Share:
DIVIDEND NYSE: HIGH LOW PAID ----- ---- ---- -------- 1995: First Quarter.................................... $43 1/2 $35 7/8 $ .30 Second Quarter................................... 43 1/4 40 1/8 .30 Third Quarter.................................... 45 7/8 40 3/8 .30 Fourth Quarter................................... 54 1/2 43 3/4 .30 1996: First Quarter.................................... $66 7/8 $50 1/2 $ .30 Second Quarter................................... 69 1/4 58 .32 Third Quarter.................................... 77 3/4 62 1/8 .32 Fourth Quarter................................... 80 1/2 66 .32 1997: First Quarter.................................... $78 1/8 $70 1/8 $ .32 Second Quarter................................... 91 9/16 68 .32 Third Quarter (through August 21, 1997).......... 96 1/8 90 3/4 --
On June 25, 1997, the last full trading day prior to the public announcement of Purchaser's consideration of a possible business combination with the Company, the closing price per Share as reported on the NYSE was $79 7/16. On August 19, 1997, the last full trading day prior to announcement of the commencement of the Offer, the closing price per Share as reported on the NYSE was $95 1/8. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Purchaser assumes no responsibility for the accuracy or completeness of the information concerning the Company furnished by the Company or contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Purchaser. General. The Company is a Pennsylvania corporation with its principal offices located at 500 Arcola Road, Collegeville, Pennsylvania 19426. The Company is primarily engaged in the discovery, development, manufacture and marketing of a broad line of pharmaceutical products for human use. Financial Information. Set forth below is certain selected financial information relating to the Company which has been excerpted or derived from the audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the "Form 10-K") and the unaudited financial statements contained in the Company's June 30 Form 10- Q. More comprehensive financial information is included in the Form 10-K and the Company's June 30 Form 10-Q and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to such reports and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below. In addition, Schedules IV and V hereto set forth the Company's audited financial statements for the fiscal year ended December 31, 1996 and the Company's unaudited financial statements for the period ended June 30, 1997, respectively. 39 RHONE-POULENC RORER INC. SELECTED FINANCIAL INFORMATION (DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
SIX MONTHS ENDED FISCAL YEAR ENDED JUNE 30, DECEMBER 31, ------------------ -------------------- 1997 1996 1996 1995 -------- -------- -------- -------- (UNAUDITED) INCOME STATEMENT DATA: Net sales.......................... $2,323.8 $2,618.5 $5,420.6 $5,142.1 Cost of products sold.............. 691.4 878.0 1,666.0 1,746.4 Selling, delivery and administra- tive expenses..................... 946.2 1,046.7 2,109.7 1,863.7 Research and development expenses.. 405.2 414.3 882.1 766.2 Restructuring and other charges.... -- -- 102.6 126.5 -------- -------- -------- -------- Operating income................. 281.0 279.5 660.2 639.3 Interest expense, net.............. 76.2 84.5 169.6 84.9 Other (income) expense, net........ (20.8) (77.4) (199.8) 16.4 -------- -------- -------- -------- Income before income taxes....... 225.6 272.4 690.4 538.0 Provision for income taxes......... 70.1 85.2 216.9 181.5 -------- -------- -------- -------- Net income....................... 155.5 187.2 473.5 356.5 Dividends on preferred stock and remunerations on capital equity notes...................... 21.9 21.3 44.8 18.7 -------- -------- -------- -------- Net income available to common shareholders.................... $ 133.6 $ 165.9 $ 428.7 $ 337.8 ======== ======== ======== ======== PER SHARE DATA: Average number of shares issued and outstanding during period(1)....... 137.0 135.3 135.8 134.2 Primary earnings per common share.. $ .98 $ 1.23 $ 3.16(2) $ 2.50(3) ======== ======== ======== ========
- -------- (1) Does not include shares held in the Company's treasury or Employee Benefits Trust. (2) Net income available to common shareholders. (3) Net income available to common shareholders, pro forma. 40
AT JUNE 30, AT DECEMBER 31, ------------------ ------------------- 1997 1996 1996 1995 -------- -------- --------- -------- (UNAUDITED) BALANCE SHEET DATA: ASSETS Cash and cash equivalents............. $ 114.4 $ 60.9 $ 100.6 $ 115.4 Cash pooling arrangements with Rhone- Poulenc S.A.......................... 4.2 10.4 3.2 16.0 Short-term investments and notes re- ceivable............................. 63.1 66.7 38.7 -- Trade accounts receivable, less re- serves............................... 858.6 870.6 984.1 956.8 Inventories........................... 796.7 832.8 800.7 765.6 Other current assets.................. 762.3 797.1 846.2 935.8 -------- -------- --------- -------- Total current assets.............. 2,599.3 2,638.5 2,773.5 2,789.6 Time deposits, at cost................ 128.4 83.0 128.4 83.0 Property, plant and equipment, net of accumulated depreciation............. 1,426.5 1,556.5 1,525.9 1,621.0 Goodwill, net of accumulated amortiza- tion................................. 2,601.0 2,836.9 2,739.0 2,953.5 Intangibles, net of accumulated amor- tization............................. 707.4 849.2 766.7 866.8 Other assets.......................... 839.1 769.1 834.6 673.2 -------- -------- --------- -------- Total assets...................... $8,301.7 $8,733.2 $ 8,768.1 $8,987.1 ======== ======== ========= ======== LIABILITIES Short-term debt....................... $ 157.9 $ 414.6 126.7 511.8 Accounts payable...................... 427.1 529.8 594.7 601.8 Other current liabilities............. 1,109.4 1,143.4 1,331.5 1,291.5 -------- -------- --------- -------- Total current liabilities......... 1,694.4 2,087.8 2,052.9 2,405.1 Long-term debt........................ 2,432.0 2,415.2 2,272.0 2,159.0 Notes payable to Rhone-Poulenc S.A. and affiliates....................... 187.9 249.5 253.0 525.4 Deferred income taxes................. 241.6 363.1 218.0 365.5 Other liabilities, including minority interests............................ 1,208.4 1,201.5 1,322.4 1,174.9 -------- -------- --------- -------- Total liabilities................. $5,764.3 $6,317.1 $ 6,118.3 $6,629.9 ======== ======== ========= ======== SHAREHOLDERS' EQUITY Money market preferred stock without par value (liquidation preference $100,000 per share); authorized, issued and outstanding 1,750 shares.. 175.0 175.0 175.0 175.0 Capital equity notes.................. 500.0 500.0 500.0 500.0 Common stock, without par value; stated value $1 per share; authorized 600,000,000 shares........ 142.6 141.0 141.6 139.5 Capital in excess of stated value..... 273.9 204.2 234.8 153.2 Retained earnings..................... 1,883.8 1,662.3 1,837.9 1,580.3 Employee Benefits Trust............... (198.1) (185.7) (185.7) (185.7) Cumulative translation adjustments.... (239.8) (80.7) (53.8) (5.1) -------- -------- --------- -------- Total shareholders' equity........ 2,537.4 2,416.1 2,649.8 2,357.2 -------- -------- --------- -------- Total liabilities and sharehold- ers' equity...................... $8,301.7 $8,733.2 $ 8,768.1 $8,987.1 ======== ======== ========= ========
Company Budget Information and Financial Projections. The Company does not, as a matter of course, make public forecasts or projections as to future sales, earnings or other income statement data. However, in connection with Purchaser's review of the transactions contemplated by the Offer and the Merger, Purchaser examined certain projections prepared by the Company. See "SPECIAL FACTORS--Company Budget Information and Financial Projections". 41 The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the Commission by telephoning 1-800-SEC-0330. The Company's filings are also available to the public on the SEC Internet site (http://www.sec.gov.). Copies of such materials may also be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain reports and other information concerning the Company may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. 8. CERTAIN INFORMATION CONCERNING PURCHASER AND THE MERGER SUBSIDIARY. Purchaser is a societe anonyme organized under the laws of the Republic of France. Its principal offices are located at 25, quai Paul Doumer, 92408 Courbevoie Cedex, France. Purchaser and its affiliates comprise one of the leading groups worldwide in life sciences and specialty chemicals. The Merger Subsidiary is a Pennsylvania corporation established on August 18, 1997 and has not carried on any activities other than the execution of the Merger Agreement. Its principal offices are located at Twelfth Floor, Packard Building, 111 South 15th Street, Philadelphia, Pennsylvania 19102-2678. The Merger Subsidiary is a direct wholly owned subsidiary of Purchaser. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of Purchaser and the Merger Subsidiary and certain other information are set forth in Schedule I hereto. Purchaser owns 97,163,370 Shares, representing approximately 68.1% of the 142,687,492 Shares issued and outstanding at July 31, 1997. Except as described in this Offer to Purchase, (i) none of Purchaser, the Merger Subsidiary, nor, to the best knowledge of Purchaser and the Merger Subsidiary, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of Purchaser or the Merger Subsidiary or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any Shares and (ii) none of Purchaser, the Merger Subsidiary, nor, to the best knowledge of Purchaser and the Merger Subsidiary, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. Except as provided in the Merger Agreement or as otherwise described in this Offer to Purchase, none of Purchaser, the Merger Subsidiary nor, to the best knowledge of Purchaser and the Merger Subsidiary, any of the persons listed in Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, finder's fees, joint ventures, loan or option arrangements, puts or call, guarantees of loans, guaranties against loss, guaranties of profits, division of profits or loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, since January 1, 1995, none of Purchaser, the Merger Subsidiary nor, to the best knowledge of Purchaser and the Merger Subsidiary, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as 42 set forth in this Offer to Purchase, since January 1, 1995, there have been no contacts, negotiations or transactions between Purchaser or any of their subsidiaries or, to the best knowledge of Purchaser, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. Purchaser is subject to the informational reporting requirements of the Exchange Act applicable to foreign private issuers, and in accordance therewith files reports, including annual reports on Form 20-F, and other information with the Commission. Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048, and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the Commission by telephoning 1-800- SEC-0330. Copies of such materials may also be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain reports and other information concerning the Purchaser may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. 9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required by Purchaser to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $4.8 billion. Purchaser has entered into binding term sheets with Societe Generale, Banque Nationale de Paris, Credit Lyonnais and Union Bank of Switzerland regarding multicurrency credit facilities pursuant to which it intends to borrow up to an aggregate of approximately FF8.5 billion and $850 million of unsecured indebtedness maturing in less than one year. The all-in cost of such drawn short-term indebtedness ranges from 0.10% to 0.125% over LIBOR or Paris Interbank Offer Rate ("PIBOR"). Purchaser has entered into binding term sheets with the following banks creating multicurrency credit facilities pursuant to which it intends to borrow up to an aggregate of approximately FF12.75 billion and $230 million of unsecured indebtedness maturing in five years: Societe Generale, Banque Nationale de Paris, Natexis, Banque Paribas, Credit Agricole Indosuez, Bayerische Landesbank, Caisse Centrale des Banques Populaires, Royal Bank of Canada, Credit Commercial de France, Credit Commercial et Industriel de Paris, Midland Bank plc, Credit Lyonnais, Citibank, N.A. and Union Bank of Switzerland. The all-in cost of such drawn medium-term indebtedness ranges from 0.17% to 0.20% over LIBOR or PIBOR. The balance will be drawn on existing credit facilities. Purchaser may also use funds from its working capital and/or its affiliates' working capital, or from existing undrawn credit facilities. The decision as to the allocation of funding among existing or anticipated credit facilities and working capital will be made based on Purchaser's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions and such other factors as Purchaser may deem appropriate. Purchaser anticipates that any indebtedness incurred through borrowings under the credit facilities listed above will be repaid from a variety of sources, which may include, but may not be limited to, funds generated internally by Purchaser and its affiliates (including, following the Merger, funds generated by the Company), bank refinancing, and the public or private sale of debt or equity securities. Purchaser intends to repay a portion of the indebtedness related to the Offer from proceeds of a public offering of shares of the Purchaser to be commenced, market conditions permitting, following the successful completion of the Offer. Purchaser expects the proceeds of such offering to be approximately FF 7 billion (which is currently approximately $1.155 billion). In addition, Purchaser expects to make a public offering of shares of NewChemco in 1998, subject to, among other things, market conditions, and to make dispositions of certain non-strategic assets. The source and allocation of various methods of repayment will be determined and may be modified by Purchaser based on market conditions and such other factors as Purchaser may deem appropriate. 43 10. DIVIDENDS AND DISTRIBUTIONS. If, on or after August 19, 1997, the Company should declare or pay any dividend on the Shares or make any other distribution (including the issuance of additional shares of capital stock pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is payable or distributable to shareholders of record on a date prior to the transfer to the name of Purchaser or its nominee or transferee on the Company's stock transfer records of the Shares pursuant to the Offer, then, without prejudice to Purchaser's rights under "THE TENDER OFFER--Section 12. Certain Conditions of the Offer", (i) the purchase price per Share payable by Purchaser pursuant to the Offer will be reduced (subject to the Merger Agreement) to the extent any such dividend or distribution is payable in cash and (ii) any non-cash dividend, distribution or right shall be received and held by the tendering shareholder for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, Purchaser will be entitled to all the rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. 11. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; THE NYSE, THE PARIS BOURSE AND EXCHANGE ACT REGISTRATION. The Purchase of Shares by Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards for continued inclusion in the NYSE or the Paris Bourse. According to the NYSE's published guidelines, the Shares would not be eligible to be included for listing if, among other things, the number of Shares publicly held falls below 600,000, the number of holders of Shares falls below 1,200 (holding at least 100 Shares) or the aggregate market value of such publicly held Shares does not exceed $5,000,000. If, as a result of the purchase of Shares pursuant to the Offer, the Merger or otherwise, the Shares no longer meet the requirements of the NYSE for continued listing, and the listing of the Shares might be discontinued and, in such event, the market for the Shares could be adversely affected. According to the Paris Bourse's published regulations, a number of factors would be considered in determining whether the Shares would no longer be eligible for listing, including whether (i) the market capitalization of the Shares listed on the Paris Bourse is less than FF 50 million at year-end, (ii) the Shares are traded less than every two trading days and (iii) the average daily trading volume is less than one hundred Shares. In the event the Shares were no longer eligible for listing on the NYSE or the Paris Bourse, quotations might still be available from other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of such Shares remaining at such time, the interest in maintaining a market in such Shares on the part of securities firms, the possible termination of registration of such Shares under the Exchange Act as described below and other factors. The Shares are currently "margin securities", as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with 44 shareholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to the "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for NYSE reporting. Purchaser currently intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon as practicable after consummation of the Offer if the requirements for termination of registration are met. 12. CERTAIN CONDITIONS OF THE OFFER. Purchaser shall not accept for payment any Shares tendered pursuant to the Offer unless such number of the then issued and outstanding Shares, other than the Purchaser Shares, which, when taken together with the Purchaser Shares, constitutes at least 90% of the then issued and outstanding Shares, shall have been validly tendered and not withdrawn prior to the expiration of the Offer (the "Minimum Condition"). Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or pay, subject to the applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act, for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer to the extent expressly provided in the Merger Agreement and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Minimum Condition shall not have been satisfied or (ii) at any time on or after the date of the Merger Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been instituted or be pending any action or proceeding by any Governmental Entity (as defined in the Merger Agreement) (i) challenging or seeking to make illegal, materially delay or otherwise directly or indirectly restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by Purchaser or any other affiliate of Purchaser or the consummation of any other transaction contemplated by the Merger Agreement, (ii) seeking to prohibit or limit materially the ownership or operation by the Company, Purchaser or any of their subsidiaries of all or any material portion of the business or assets of the Company or any of its subsidiaries, or to compel the Company, Purchaser or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company or any of its subsidiaries, as a result of the transaction contemplated by the Merger Agreement, (iii) seeking to impose or confirm limitations on the ability of Purchaser or any other affiliate of Purchaser to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by Purchaser pursuant to the Offer or otherwise on all matters properly presented to the Company's shareholders, including, without limitation, the approval and adoption of the Merger Agreement and the Merger, (iv) seeking to require divestiture by Purchaser or any other affiliate of Purchaser of any Shares, or (v) which otherwise has a Material Adverse Effect (as defined in the Merger Agreement) on the Company. (b) there shall have been any order or injunction issued, or any Law (as defined in the Merger Agreement) enacted, entered, enforced, promulgated, amended, issued or deemed applicable to Purchaser, the Company or any subsidiary or affiliate of Purchaser or the Company which has resulted, or is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) there shall have occurred any change, condition, event or development that has a Material Adverse Effect; (d) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities of the Company on the NYSE or the Paris Bourse; (ii) any general suspension of, or limitation on prices for, trading in equity securities on the Paris Bourse; (iii) any decline, measured from the date hereof, in the Standard & Poor's 500 Index by an amount in excess of 20%; (iv) any change in currency exchange rates, measured from the close of business on August 19, 1997, resulting in an increase of 15% or more in the Per Share Amount (as defined in the Merger Agreement) as translated from United States Dollars into French Francs; (v) a declaration of a banking moratorium or any suspension of payments in respect of banks 45 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND THE MERGER SUBSIDIARY 1. Directors and Executive Officers of Purchaser. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of Purchaser. Unless otherwise indicated, the current business address of each person is Rhone-Poulenc S.A., 25, quai Paul Doumer, 92408 Courbevoie Cedex, France. Unless otherwise indicated, each such person is a citizen of France. A. DIRECTORS
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------- Jean-Rene Fourtou....... Director, Chairman of the Board and Chief Executive Of- ficer of Rhone-Poulenc S.A. (since 1986); Director of Rhone-Poulenc Japan, Rhone-Poulenc Limited, Rhone- Poulenc Quimica S.A., Air France, The Equitable, Axa Assurances Iard, Axa Assurance Vie Mutuelle, Axa Assur- ance Vie, Axa Iard Mutuelle, Midi Participations, As- surance Iard Mutuelle, Alpha Assurance Vie, Alpha As- surance Vie Mutuelle, Uni Europe Assurance Mutuelle, Schneider S.A., Societe Generale and Pernod Ricard; Vice-President of the Supervisory Board of Axa UAP; Member of the Supervisory Board of Gerot Holding A.G. and the Supervisory Board of Casino. Jean-Marc Bruel......... Director of Rhone-Poulenc S.A. (since December 1993), Institut Merieux S.A., Rhone-Poulenc Rorer Inc., Rhone- Poulenc Japan, Rhone Poulenc Quimica, Sita, V.E.V., Wilson Gestion and Ecole Centrale des Arts et des Manu- factures de Paris; Vice Chairman of Rhone-Poulenc (su- pervises Quality, Safety and Environmental Protection, Industrialization and South American and Asian-Pacific operations) (since November 1992); Chairman of Rhone- Poulenc China and Fondation Vilette-Entreprises; Member of the Supervisory Board of Banque Paribas and the Ex- ecutive Committee of Institut de Protection et de Surete Nucleaire. Serge Kampf............. Director of Rhone-Poulenc S.A. (since March 1993), Cap c/o Cap Gemini Sogeti Gemini America (U.S.A.), Cap Gemini Holding Inc. 11, rue Tilsit (U.S.A.), Gemini Consulting Holding Ltd (U.K.), Hoskyns 75017 Paris, France Group plc (U.K.), Cap Gemini France S.A., Cap Gemini Telecom S.A. and Gemini Consulting Holding S.A.; Chair- man and Chief Executive Officer of Cap Gemini Sogeti (business management consulting) (since January 1975); Chief Executive Officer of Cap Gemini (Switzerland) S.A., Gemini Consulting Holding BV, Gemini Consulting Inc. (Delaware) and Cap Gemini Service S.A.; Managing Director of Cap Gemini Europe BV and Cap Gemini Benelux BV; Cap Gemini S.A.'s representative on the Board of Cap Gemini Universite S.A. and the Board of Cap Gemini Innovation S.A.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------- Alain Merieux........... Director of Rhone-Poulenc S.A. (since 1986), Compagnie c/o Institut Merieux Generale d'Industrie et de Participation S.A. and Com- S.A. pagnie Plastic Omnium S.A.; Chairman and Chief Execu- 17, rue Bourgelat tive Officer of Institut Merieux S.A. (research and de- 69002 Lyon, France velopment in biology, medicine and pharmaceuticals) (since July 1965), Biomerieux S.A., Biomerieux Alliance S.A. and Transgene S.A. Didier Pineau- Director of Rhone-Poulenc S.A. (since January 1997), Valencienne............. Compagnie Generale d'Industrie et de Participation c/o Schneider S.A. (CGIP) (since 1992), Equitable (USA) (since 1991) and 64-70, avenue J.B. Sema Group plc (United Kingdom) (since 1990); Chairman Clement and Chief Executive Officer of Schneider S.A. 92646 Boulogne- (industrial/electric) (since 1981), Schneider Electric Billancourt Cedex, S.A. and Square D; Member of the European Advisory France Board of Bankers Trust Company (USA) (since 1990), the Advisory Board of Booz Allen & Hamilton (since 1992), the Supervisory Committee of AXA-UAP (since 1990), the Supervisory Board of Banque Paribas (since 1989) and the Advisory Committee of Banque de France (since 1989). Michel Renault.......... Director of Rhone-Poulenc S.A. (since March 1993), c/o Credit Lyonnais Aerospatiale, Albatros Investissement, Bertrand Faure, 19, boulevard des D.M.C. (Dollfus Mieg & Cie) and V.E.V. S.A.; Chief Ex- Italiens ecutive Officer of Credit Lyonnais (banking) (since 75001 Paris, France September 1992); Chairman of Slivam, Consortium Auxiliaire de Participations, Credit Lyonnais Europe S.A., Credit Lyonnais Espana (since 1995) and the Su- pervisory Board of Bfg Bank A.G. (since 1995); Credit Lyonnais' representative on the Board of Clinvest, the Board of Credito Bergamasco (since 1995), the Board of Groupe Flo and the Supervisory Board of Lagardere Groupe. Assurances Generales de France, represented by Antoine Jeancourt- Assurances Generales de France: Director of Rhone- Galignani............... Poulenc S.A (since March 1993), AGF-IART (since June c/o Assurances Generales 1996), Comptoir des Entrepreneurs (since June 1996), de France Eustache (since February 1997), AGF 2X (since 1997) and 87, rue de Richelieu Credit National (since 1997); Member of the Supervisory 75060 Paris Cedex 02, Board of Euler (since November 1996) and the Supervi- France sory Board of Worms & Cie (since December 1995). Antoine Jeancourt-Galignani: Assurances Generales de France's representative on the Board of Rhone-Poulenc (since February 1994), the Board of Credit National and the Board of Euler; Chairman and Chief Executive Offi- cer of Assurances Generales de France (insurance) (since January 1994), Chairman and Chief Executive Of- ficer of Banque Indosuez (1979-1993), AGF Internation- al, AGF-IART, AGF-Vie and Compagnie Financiere du Phe- nix; Director of Bouygues, Societe Generale, Total, and Kaufman and Broad Home Corporation Los Angeles; Chair- man of the Supervisory Board of Euro Disney SCA; Member of the Supervisory Board of Compagnie Financiere de Paribas, the Supervisory Board of Aachener u. Munchener (AMB), Aix la Chapelle and the Supervisory Board of Pinault-Printemps-Redoute.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------------------- Banque Nationale de Paris, represented by Banque National de Paris: Director of Rhone-Poulenc Baudouin Prot........... S.A. (Since April 1994), Director and Member of the Su- c/o Banque Nationale de pervisory Board of a large number of companies. Paris 16, boulevard des Italiens 75009 Paris, France Baudouin Prot: Banque Nationale de Paris' representa- tive on the Board of Rhone-Poulenc S.A. (since December 1996); President of Banque Nationale de Paris (banking) (since September 1996); Chairman of the Board of Compa- gnie Immobiliere de France; Chairman of the Supervisory Board of Meunier Promotion; Director of Banque Nationale de Paris Intercontinentale, BNP U.K. Holdings Limited, Pechiney and Banque de Bretagne; Member of the Supervisory Board and Banque pour l'Expansion Industrielle (Banexi); Banque Nationale de Paris' rep- resentative on the Board of Lucia and the Supervisory Board of Accor. Credit Suisse First Boston, a Swiss corporation, represented Credit Suisse First Boston: Director of Rhone-Poulenc by Rudolph Hug.......... S.A. (since December 1993). c/o Credit Suisse Uetlbergstrasse 231 8001 Zurich, Switzerland Rudolph Hug: Director of Rhone-Poulenc S.A. (since De- cember 1993); President of Credit Suisse (through 1996); Director of Credit Suisse First Boston Aktien- gesellschaft Frankfurt, Krupp Hoesch Maschinenbau GmbH Essen, Siemens Beteiligungen AG Zurich, Societe Inter- nationale Pirelli S.A. Bale, Societe Internationale Saint-Gobain Fribourg and Sulzer S.A. Winterthour; Mem- ber of the Executive Board and Credit Suisse Zurich (banking) (since 1987); President of Credit Suisse (Luxembourg) S.A. Luxembourg, Credit Suisse First Bos- ton Canada Toronto and Credit Suisse First Boston (Mos- cow) Limited Moscow. Fiat France S.A., represented by Giorgio Fiat France S.A.: Director of Rhone-Poulenc S.A. (since Frasca.................. December 1993) and Europ Assistance S.A. c/o Societe Fiat France 140, avenue des Champs- Elysees 75008 Paris, France Giorgio Frasca: Fiat France S.A.'s representative on the Board of Europ Assistance S.A. (since 1994) and the Board of Rhone-Poulenc S.A. (since December 1993); Chairman and Chief Executive Officer of Fiat France S.A. (automobiles) (since 1984) and Iveco France S.A.; Director of Le Continent & Le Continent Vie, Magneti Marelli France, Saint Louis and Ufima; La Stampa S.p.A.'s representative on the Board of Le Monde Presse S.A.; Member of the Coordination Committee of Fiat S.p.A. Societe Financiere et Immobiliere, Marcel Dassault, represented by Financiere et Immobiliere Marcel Dassault: Director of Philippe Hustache....... Rhone-Poluenc S.A. (since April 1994), Electricite et c/o Societe Financiere Eaux de Madagascar and Genset. et Immobiliere Marcel Dassault 9, rond-point des Champs-Elysees 75008 Paris, France Philippe Hustache: Director of Rhone-Poulenc S.A. (since June 1995); President and Director of Societe Financiere et Immobiliere Marcel Dassault (real estate management) (since April 1994); Chief Executive Officer of EIF Aquitaine S.A. (1988-1994); Director of Transgene, Banque Odier Bungener Courvoisier (OBC), Sanofi, Societe Centrale d'Investissement (SCI), Dassault Electronique, Banque Vernes and Compagnie Nationale Porte-Feuille (CNP) Belgium; Societe Financiere et Immobiliere Marcel Dassault's representa- tive on the Board of Kapt and Kapt Aquitaine.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------------------- Societe Generale, represented by Marc Societe Generale: Director of Rhone-Poulenc S.A. (since Vienot.................. December 1993), Bertrand Faure, Credit General c/o Societe Generale Industriel, Europe Computer Systeme Finextel, Union Tour Societe Generale Immobiliere de France, Genefim, Klepierre, Salvepar, 92972 Paris La Defense Sefimeg, Silic and TF1; Member of the Supervisory Board Cedex, France of Accor, the Supervisory Board of Siparex and the Su- pervisory Board of Worms & Cie. Marc Vienot: Societe Generale's representative on the Board of Rhone-Poulenc S.A. (since December 1993); Chairman and Chief Executive Officer of Societe Generale (banking) (since 1986); Director of Associa- tion Francaise des Banques, Association Francaise des Entreprises Privees, Alcatel Alsthom, Association Nationale des Societes par Actions (A.N.S.A.), Compa- gnie Generale des Eaux, Havas and Societe Generale Marocaine de Banques; Societe Generale's representative on the Board of TF1; Member of Conseil National du Credit. Jean Eldin.............. Director of Rhone-Poulenc S.A. (since June 1994); Em- ployee of Rhone-Poulenc S.A. (since 1953). Pierre Houche........... Director of Rhone-Poulenc S.A. (since June 1994); Em- ployee of Rhone-Poulenc S.A. (since 1970). Alain Magnanelli........ Director of Rhone-Poulenc S.A. (since June 1994); Em- ployee of Rhone-Poulenc S.A. (since 1961).
B. EXECUTIVE OFFICERS Purchaser's current executive officers and certain biographical information concerning such individuals are set forth below.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------------------- Jean-Rene Fourtou....... Director, Chairman of the Board and Chief Executive Of- ficer of Rhone-Poulenc S.A. (since 1986); Director of Rhone-Poulenc Japan, Rhone-Poulenc Limited, Rhone-Poulenc Quimica S.A., Air France, The Equitable, Axa Assurances Iard, Axa Assurance Vie Mutuelle, Axa Assurance Vie, Axa Iard Mutuelle, Midi Participations, Assurance Iard Mutuelle, Alpha Assurance Vie, Alpha Assurance Vie Mutuelle, Uni Europe Assurance Mutuelle, Schneider S.A., Societe Generale and Pernod Ricard; Vice-President of the Su- pervisory Board of Axa UAP; Member of the Supervisory Board of Gerot Holding A.G. and the Supervisory Board of Casino. Jean-Marc Bruel......... Director of Rhone-Poulenc S.A. (since December 1993), Institut Merieux S.A., Rhone-Poulenc Rorer Inc., Rhone- Poulenc Japan, Rhone Poulenc Quimica, Sita, V.E.V., Wilson Gestion and Ecole Centrale des Arts et des Manu- factures de Paris; Vice Chairman of Rhone-Poulenc (su- pervises Quality, Safety and Environmental Protection, Industrialization and South American and Asian-Pacific operations) (since November 1992); Chairman of Rhone- Poulenc China and Fondation Vilette-Entreprises; Member of the Supervisory Board of Banque Paribas and the Ex- ecutive Committee of Institut de Protection et de Surete Nucleaire.
I-4
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------------------- Philippe Desmarescaux... Group President (since December 1992), supervises the Chemical segment, Research and Development and North American operations (since January 1995); Chairman and Director of Rhone-Poulenc Inc.; Director of Rhone- Poulenc Japan, Groupe Seb S.A., SNPE, Societe Francaise de Chimie and Universite Catholique de Lyon; Chairman of the Board of Institut de Chimie et de Physique de Lyon and the Board of Ecole Normale Superieure de Lyon; Vice-Chairman of Ecole de Chimie, Physique and Electronique de Lyon. Alain Godard............ Chairman of Animal and Plant Health segment (January 1997); Chief Executive Officer, Agro Segment (1992- 1996); Director of Rhone-Poulenc Animal Nutrition, Merial, Centre de Cooperation Internationale en Recher- che Agronomique pour le Developpement and Institut Na- tional de la Recherche Agronomique. Igor Landau............. Group President. (Supervises the Pharmaceuticals seg- ment, Corporate Communication and operations in the Eu- ropean Union and the European Free Trade Association) (since December 1992); Director of Rhone-Poulenc Rorer, Pasteur Merieux Serums & Vaccins Institut Merieux; Mem- ber of the Supervisory Board of Rhodia AG, Institut de Developpement Industriel and Rhone-Poulenc Limited. Rene Penisson........... Group Senior Vice President Human Resources (since 1990); Director of Rhone-Poulenc Fibres & Polymeres S.A. (since 1994) and Rhone-Poulenc Japan, Ltd. Martin Pinot............ Executive Vice President of the Chemical segment and President of the segment's European Zone (since March 1997), President of Fibers and Polymers segment (1993- February 1997). Michel de Rosen......... Chairman of Rhone-Poulenc Rorer Inc. (since 1996); c/o Rhone-Poulenc Rorer Chief Executive Officer of Rhone-Poulenc Rorer Inc. Inc. (since 1995), President of Rhone-Poulenc Rorer Inc. 500 Arcola Road (1993-1996), President of Fibers and Polymers Segment Collegeville, (1988-1993). Pennsylvania 19426-0107 USA Jean-Pierre Tirouflet... Group Executive Vice President (since November 1992); President of the Fibers and Polymers segment, Group Fi- nance, Corporate Strategy and Development, Control, In- formation Systems and Legal Functions, and Interna- tional Affairs, the Garden Care division and operations in Central and Eastern Europe and the CIS; Director of Rhone-Poulenc Fibres & Polymeres, Rhone-Poulenc Inc., Rhone-Poulenc Chemicals Asia Pacific Pte Ltd, Rhone- Poulenc Rorer Inc., Rhone-Poulenc Viscosuisse (starting September 1997), Institut Merieux (since April 1994) and Objectif Rendement (since June 1986); Member of Su- pervisory Board of Cecar (since December 1993), Super- visory Board of Cap Gemini (since May 1996) and Super- visory Board of Indosuez (since March 1996).
I-5 2. Directors and Executive Officers of the Merger Subsidiary. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of the Merger Subsidiary. Unless otherwise indicated, the current business address of each person is c/o Rhone- Poulenc S.A., 25, quai Paul Doumer, 92408 Courbevoie Cedex, France. A. DIRECTORS
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------- Igor Landau............. Sole Director; Group President of Purchaser (since De- cember 1992); Director of Rhone-Poulenc Rorer, Pasteur Merieux Serums & Vaccins, Institut Merieux; Member of the Supervisory Board of Rhodia AG, Institut de Developpement Industriel and Rhone-Poulenc Limited. Citizen of France.
B. EXECUTIVE OFFICERS The Merger Subsidiary's current executive officers and certain biographical information concerning such individuals are set forth below.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF - ---------------------------- ------------------------------------------- Igor Landau............. President; Group President of Purchaser (since December 1992); Director of Rhone-Poulenc Rorer, Pasteur Merieux Serums & Vaccins, Institut Merieux; Member of the Su- pervisory Board of Rhodia AG, Institut de Developpement Industriel and Rhone-Poulenc Limited. Citizen of France. Harold Frederick Secretary and Treasurer; Executive Vice President and Boardman, Jr. ......... General Counsel of Rhone-Poulenc Inc. (since February 1996); Vice President and General Counsel of Hoffman LaRoche Inc. (since January 1989). Citizen of the United States of America.
I-6 SCHEDULE II Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004 Tel: 212-902-1000 PERSONAL AND CONFIDENTIAL [LOGO OF GOLDMAN SACHS] August 19, 1997 Special Committee of the Board of Directors Rhone-Poulenc Rorer Inc. 500 Arcola Road Collegeville, PA 19426 Gentleman: You have requested our opinion as to the fairness to the holders, other than Rhone-Poulenc S.A. ("Rhone-Poulenc") and its subsidiaries, (the "Public Shareholders") of the outstanding shares of Common Stock without par value (the "Common Shares") of Rhone-Poulenc Rorer, Inc. (the "Company") of the $97.00 per Common Share in cash proposed to be paid to the Public Shareholders by Rhone-Poulenc in the Tender Offer (as defined below) and the Merger (as defined below) pursuant to the Agreement and Plan of Merger dated as of August 19, 1997 among Rhone-Poulenc, RP Vehicle, Inc., a wholly owned subsidiary of Rhone-Poulenc, and the Company (the "Agreement"). The Agreement provides for a tender offer (the "Tender Offer") for all of the issued and outstanding Common Shares pursuant to which Rhone-Poulenc will pay $97.00 per Common Share in cash for each Common Share accepted. The Agreement further provides that following completion of the Tender Offer, Merger Sub will be merged with and into the Company (the "Merger") and each issued and outstanding Common Share (other than Common Shares owned directly or indirectly by Rhone-Poulenc) will be converted into the right to receive $97.00 in cash. We have been informed that as of the date hereof Rhone-Poulenc is the holder of approximately 68.1% of the outstanding Common Shares. The Common Shares held by Rhone-Poulenc were acquired pursuant to the Acquisition Agreement between Rhone-Poulenc and Rorer Group Inc. (the predecessor name of the Company), dated as of March 12, 1990 (the "Acquisition Agreement"). We have also been informed that a standstill provision contained in the Acquisition Agreement expired on July 31, 1997. Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with the Company, having acted as the financial advisor to the Special Committee of the Board of Directors of the Company in connection with, and having participated in certain of the negotiations leading to, the Agreement. In the course of the trading activities of Goldman, Sachs & Co. prior to our retention in connection with this matter, the Firm accumulated a long position of 828,962 Common Shares. In connection with this opinion, we have reviewed, among other things, the Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company for the five years ended December 31, 1996; certain interim reports to stockholders and Quarterly Reports on Form 10-Q; certain other communications from the Company to its stockholders; and certain internal financial analyses and forecasts for the Company prepared by its management. We have held discussions with members of the senior management of the Company regarding its past and current business operations, financial condition and future prospects. We also have held discussions with members of the senior management of Centeon L.L.C., a joint venture in which the Company has a 50% interest, regarding its past and current business operations, financial condition and future prospects. In II-1 addition, we have reviewed the reported price and trading activity for the Common Shares, compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the pharmaceutical industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied upon the accuracy and completeness of all of the financial and other information reviewed by us and have assumed such accuracy and completeness for purposes of rendering this opinion. In addition, we have not made an independent evaluation or appraisal of the assets and liabilities of the Company or any of its subsidiaries and we have not been furnished with any such evaluation or appraisal. We were not requested or authorized to solicit, and did not solicit, interest from any party with respect to an acquisition of the outstanding Common Shares, the Company or its constituent businesses. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Special Committee of the Board of Directors of the Company in connection with its consideration of the transactions contemplated by the Agreement and such opinion does not constitute a recommendation as to whether any holder of Common Shares should tender such Common Shares in the Tender Offer. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the $97.00 per Common Share in cash to be received by the Public Shareholders in the Tender Offer and the Merger is fair to such holders. Very truly yours, /s/ Goldman, Sachs & Co. - ---------------------- (GOLDMAN, SACHS & CO.) II-2 SCHEDULE III SECTIONS 1930(A) AND 1571-80 (SUBCHAPTER OF CHAPTER 15) OF THE PENNSYLVANIA BUSINESS CORPORATION LAW SECTION 1930. DISSENTERS RIGHTS (A) GENERAL RULE. -- If any shareholder of a domestic business corporation that is to be a party to a merger or consolidation pursuant to a plan of merger or consolidation objects to the plan of merger or consolidation and complies with the provisions of Subchapter D of Chapter 15 (relating to dissenters rights), the shareholder shall be entitled to the rights and remedies of dissenting shareholders therein provided, if any. See also section 1906(c) (relating to dissenters rights upon special treatment). CHAPTER 15 SUBCHAPTER D. -- DISSENTERS RIGHTS SECTION 1571. APPLICATION AND EFFECT OF SUBCHAPTER (A) GENERAL RULE. -- Except as otherwise provided in subsection (b), any shareholder of a business corporation shall have the right to dissent from, and to obtain payment of the fair value of his shares in the event of, any corporate action, or to otherwise obtain fair value for his shares, where this part expressly provides in this subchapter. See: Section 1906(c) (relating to dissenters rights upon special exchanges). Section 1930 (relating to dissenters rights). Section 1931(d) (relating to dissenters rights in share exchanges). Section 1932(c) (relating to dissenters rights in asset transfers). Section 1952(d) (relating to dissenters rights in division). Section 1962(c) (relating to dissenters rights in conversion). Section 2104(b) (relating to procedure). Section 2324 (relating to corporation option where a restriction on transfer of a security is held invalid). Section 2325(b) (relating to minimum vote requirement). Section 2704(c) (relating to dissenters rights upon election). Section 2705(d) (relating to dissenters rights upon renewal of election). Section 2907(a) (relating to proceedings to terminate breach of qualifying conditions). Section 7104(b)(3) (relating to procedure). (B) EXCEPTIONS. -- (1) Except as otherwise provided in paragraph (2), the holders of the shares of any class or series of shares that, at the record date fixed to determine the shareholders entitled to notice of and to vote at the meeting at which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to be voted on, are either: (i) listing on a national securities exchange; or (ii) held of record by more than 2,000 shareholders; shall not have the right to obtain payment of the fair value of any such shares under this subchapter. (2) Paragraph (1) shall not apply to and dissenters rights shall be available without regard to the exception provided in that paragraph in the case of: (i) Shares converted by a plan if the shares are not converted solely into shares of the acquiring, surviving, new or other corporation or solely into such shares and money in lieu of fractional shares. III-1 (ii) Shares of any preferred or special class unless the articles, the plan or the terms of the transaction entitle all shareholders of the class to vote thereon and require for the adoption of the plan or the effectuation of the transaction the affirmative vote of a majority of the votes cast by all shareholders of the class. (iii) Shares entitled to dissenters rights under section 1906(c) (relating to dissenters rights upon special treatment). (3) The shareholders of a corporation that acquires by purchase, lease, exchange or other disposition all or substantially all of the shares, property or assets of another corporation by the issuance of shares, obligations or otherwise, with or without assuming the liabilities of the other corporation and with or without the intervention of another corporation or other person, shall not be entitled to the rights and remedies of dissenting shareholders provided in this subchapter regardless of the fact, if it be the case, that the acquisition was accomplished by the issuance of voting shares of the corporation to be outstanding immediately after the acquisition sufficient to elect a majority or more of the directors of the corporation. (C) GRANT OF OPTIONAL DISSENTERS RIGHTS. -- The bylaws or a resolution of the board of directors may direct that all or a part of the shareholders shall have dissenters rights in connection with any corporate action or other transaction that would otherwise not entitle such shareholders to dissenters rights. (D) NOTICE OF DISSENTERS RIGHTS. -- Unless otherwise provided by statute, if a proposed corporate action that would give rise to dissenters rights under this subpart is submitted to a vote at a meeting of shareholders, there shall be included in or enclosed with the notice of meeting: (1) a statement of the proposed action and a statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the terms of this subchapter; and (2) a copy of this subchapter. (E) OTHER STATUTES. -- The procedures of this subchapter shall also be applicable to any transaction described in any statute other than this part that makes reference to this subchapter for the purpose of granting dissenters rights. (F) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE. -- This subchapter may not be relaxed by any provision of the articles. (G) CROSS REFERENCES. -- See sections 1105 (relating to restriction on equitable relief), 1904 (relating to a de facto transaction doctrine abolished) and 2512 (relating to dissenters rights procedure). SECTION 1572. DEFINITIONS The following words and phrases when used in this subchapter shall have the meanings given to them in this section unless the context clearly indicates otherwise: "CORPORATION." The issuer of the shares held or owned by the dissenter before the corporate action or the successor by merger, consolidation, division, conversion or otherwise of that issuer. A plan of division may designate which of the resulting corporations is the successor corporation for the purposes of this subchapter. The successor corporation in a division shall have sole responsibility for payments to dissenters and other liabilities under this subchapter except as otherwise provided in the plan of division. "DISSENTER." A shareholder or beneficial owner who is entitled to and does assert dissenters rights under this subchapter and who has performed every act required up to the time involved for the assertion of those rights. "FAIR VALUE." The fair value of shares immediately before the effectuation of the corporation action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action. III-2 "INTEREST." Interest from the effective date of the corporate action until the date of payment at such rate as is fair and equitable under all the circumstances, taking into account all relevant factors, including the average rate currently paid by the corporation on its principal bank loans. SECTION 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS (A) RECORD HOLDERS OF SHARES. -- A record holder of shares of a business corporation may assert dissenters rights as to fewer than all of the shares registered in his name only if he dissents with respect to all the shares of the same class or series beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf he dissents. In that event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different shareholders. (B) BENEFICIAL OWNERS OF SHARES. -- A beneficial owner of shares of a business corporation who is not the record holder may assert dissenters rights with respect to shares held on his behalf and shall be treated as a dissenting shareholder under the terms of this subchapter if he submits to the corporation not later than the time of the assertion of dissenters rights a written consent of the record holder. A beneficial owner may not dissent with respect to some but less than all shares of the same class or series owned by the owner, whether or not the shares so owned by him are registered in his name. SECTION 1574. NOTICE OF INTENTION TO DISSENT If the proposed corporate action is submitted to a vote at a meeting of shareholders of a business corporation, any person who wishes to dissent and obtain payment of the fair value of his shares must file with the corporation, prior to the vote, a written notice of intention to demand that he be paid the fair value for his shares if the proposed action is effectuated, must effect no change in the beneficial ownership of his shares from the date of such filing continuously through the effective date of the proposed action and must refrain from voting his shares in approval of such action. A dissenter who fails in any respect shall not acquire any right to payment of the fair value of his shares under this subchapter. Neither a proxy nor a vote against the proposed corporate action shall constitute the written notice required by this section. SECTION 1575. NOTICE TO DEMAND PAYMENT (A) GENERAL RULE. -- If the proposed corporate action is approved by the required vote at a meeting of shareholders of a business corporation, the corporation shall mail a further notice to all dissenters who gave due notice of intention to demand payment of the fair value of their shares and who refrained from voting in favor of the proposed action. If the proposed corporate action is to be taken without a vote of shareholders, the corporation shall send to all shareholders who are entitled to dissent and demand payment of the fair value of their shares a notice of the adoption of the plan or other corporate action. In either case, the notice shall: (1) State where and when a demand for payment must be sent and certificates for certificated shares must be deposited in order to obtain payment. (2) Inform holders of uncertificated shares to what extent transfer of shares will be restricted from the time that demand for payment is received. (3) Supply a form for demanding payment that includes a request for certification of the date on which the shareholder, or the person on whose behalf the shareholder dissents, acquired beneficial ownership of the shares. (4) Be accompanied by a copy of this subchapter. (B) TIME FOR RECEIPT OF DEMAND FOR PAYMENT. -- The time set for receipt of demand and deposit of certificated shares shall be not less than 30 days from the mailing of the notice. III-3 SECTION 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC. (A) EFFECT OF FAILURE OF SHAREHOLDER TO ACT. -- A shareholder who fails to timely demand payment, or fails (in the case of certificated shares) to timely deposit certificates, as required by a notice pursuant to section 1575 (relating to notice to demand payment) shall not have any right under this subchapter to receive payment of the fair value of his shares. (B) RESTRICTION ON UNCERTIFICATED SHARES. -- If the shares are not represented by certificates, the business corporation may restrict their transfer from the time of receipt of demand for payment until effectuation of the proposed corporate action or the release of restrictions under the terms of section 1577(a) (relating to failure to effectuate corporate action). (C) RIGHTS RETAINED BY SHAREHOLDER. -- The dissenter shall retain all other rights of a shareholder until those rights are modified by effectuation of the proposed corporate action. SECTION 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES (A) FAILURE TO EFFECTUATE CORPORATE ACTION. -- Within 60 days after the date set for demanding payment and depositing certificates, if the business corporation has not effectuated the proposed corporate action, it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. (B) RENEWAL OF NOTICE TO DEMAND PAYMENT. -- When the uncertificated shares have been released from transfer restrictions and deposited certificates have been returned, the corporation may at any later time send a new notice conforming to the requirements of section 1575 (relating to notice to demand payment), with like effect. (C) PAYMENT OF FAIR VALUE OF SHARES. -- Promptly after effectuation of the proposed corporate action, or upon timely receipt of demand for payment if the corporate action has already been effectuated, the corporation shall either remit to dissenters who have made demand and (if their shares are certificated) have deposited their certificates the amount that the corporation estimates to be the fair value of the shares, or give written notice that no remittance under this section will be made. The remittance or notice shall be accompanied by: (1) The closing balance sheet and statement of income of the issuer of the shares held or owned by the dissenter for a fiscal year ending not more than 16 months before the date of remittance or notice together with the latest available interim financial statements. (2) A statement of the corporation's estimate of the fair value of the shares. (3) A notice of the right of the dissenter to demand payment or supplemental payment, as the case may be, accompanied by a copy of this subchapter. (D) FAILURE TO MAKE PAYMENT. -- If the corporation does not remit the amount of its estimate of the fair value of the shares as provided by subsection (c), it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. The corporation may make a notation on any such certificate or on the records of the corporation relating to any such uncertificated shares that such demand has been made. If shares with respect to which notation has been so made shall be transferred, each new certificate issued therefor or the records relating to any transferred uncertificated shares shall bear a similar notation, together with the name of the original dissenting holder or owner of such shares. A transferee of such shares shall not acquire by such transfer any rights in the corporation other than those that the original dissenter had after making demand for payment of their fair value. SECTION 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES (A) GENERAL RULE. -- If the business corporation gives notice of its estimate of the fair value of the shares, without remitting such amount, or remits payment of its estimate of the fair value of a dissenter's shares as III-4 permitted by section 1577(c) (relating to payment of fair value of shares) and the dissenter believes that the amount stated or remitted is less than the fair value of his shares, he may send to the corporation his own estimate of the fair value of the shares, which shall be deemed a demand for payment of the amount or the deficiency. (B) EFFECT OF FAILURE TO FILE ESTIMATE. -- Where the dissenter does not file his own estimate under subsection (a) within 30 days after the mailing by the corporation of its remittance or notice, the dissenter shall be entitled to no more than the amount stated in the notice or remitted to him by the corporation. SECTION 1579. VALUATION PROCEEDINGS GENERALLY (A) GENERAL RULE. -- Within 60 days after the latest of: (1) effectuation of the proposed corporate action; (2) timely receipt of any demands for payment under section 1575 (relating to notice to demand payment); or (3) timely receipt of any estimates pursuant to section 1578 (relating to estimate by dissenter of fair value of shares); if any demands for payment remain unsettled, the business corporation may file in court an application for relief requesting that the fair value of the shares be determined by the court. (B) MANDATORY JOINDER OF DISSENTERS. -- All dissenters, wherever residing, whose demands have not been settled shall be made parties to the proceeding as in an action against their shares. A copy of the application shall be served on each such dissenter. If a dissenter is a nonresident, the copy may be served on him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and international procedure). (C) JURISDICTION OF THE COURT. -- The jurisdiction of the court shall be plenary and exclusive. The court may appoint an appraiser to receive evidence and recommend a decision on the issue of fair value. The appraiser shall have such power and authority as may be specified in the order of appointment or in any amendment thereof. (D) MEASURE OF RECOVERY. -- Each dissenter who is made a party shall be entitled to recover the amount by which the fair value of his shares is found to exceed the amount, if any, previously remitted, plus interest. (E) EFFECT OF CORPORATION'S FAILURE TO FILE APPLICATION. -- If the corporation fails to file an application as provided in subsection (a), any dissenter who made a demand and who has not already settled his claim against the corporation may do so in the name of the corporation at any time within 30 days after the expiration of the 60-day period. If a dissenter does not file an application within the 30-day period, each dissenter entitled to file an application shall be paid the corporation's estimate of the fair value of the shares and no more, and may bring an action to recover any amount not previously remitted. SECTION 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS (A) GENERAL RULE. -- The costs and expenses of any proceeding under section 1579 (relating to valuation proceedings generally), including the reasonable compensation and expenses of the appraiser appointed by the court, shall be determined by the court and assessed against the business corporation except that any part of the costs and expenses may be apportioned and assessed as the court deems appropriate against all or some of the dissenters who are parties and whose action in demanding supplemental payment under section 1578 (relating to estimate by dissenter of fair value of shares) the court finds to be dilatory, obdurate, vexatious or in bad faith. (B) ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH APPEAR. -- Fees and expenses of counsel and of experts for the respective parties may be assessed as the court deems appropriate against the corporation and in favor of any or all dissenters if the corporation failed to comply substantially with the III-5 requirements of this subchapter and may be assessed against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights provided by this subchapter. (C) AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS. -- If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated and should not be assessed against the corporation, it may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefitted. III-6 SCHEDULE IV REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Rhone-Poulenc Rorer Inc.: We have audited the accompanying consolidated balance sheets of Rhone- Poulenc Rorer Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rhone-Poulenc Rorer Inc. and subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. - ------------------------------------- COOPERS & LYBRAND L.L.P. Philadelphia, Pennsylvania January 22, 1997 IV-1 AUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) FOR THE COMPANY FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1996 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------- RESTATED 1996 1995 1994 ---------- ---------- ------------- Net sales.................................. $ 5,420.6 $ 5,142.1 $ 4,486.6 Cost of products sold...................... 1,666.0 1,746.4 1,555.8 Selling, delivery and administrative expenses.................................. 2,109.7 1,863.7 1,605.8 Research and development expenses.......... 882.1 766.2 606.1 Restructuring and other charges............ 102.6 126.5 121.2 ---------- ---------- ---------- Operating income......................... 660.2 639.3 597.7 Interest expense........................... 212.7 105.2 55.3 Interest income............................ (43.1) (20.3) (8.2) Gain on sales of assets.................... (110.7) (49.5) (46.2) Other (income) expense, net................ (89.1) 65.9 83.9 ---------- ---------- ---------- Income before income taxes............... 690.4 538.0 512.9 Provision for income taxes................. 216.9 181.5 145.8 ---------- ---------- ---------- Net income............................... 473.5 356.5 367.1 Dividends on preferred stock and remuneration on capital equity notes...... 44.8 18.7 19.2 ---------- ---------- ---------- Net income available to common shareholders............................ $ 428.7 $ 337.8 $ 347.9 ========== ========== ========== Primary earnings per common share: Net income available to common shareholders............................ $ 3.16 ========== Net income available to common shareholders, pro forma................. $ 2.50 $ 2.50 ========== ==========
See Notes to Consolidated Financial Statements. IV-2 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN MILLIONS)
DECEMBER 31, ------------------ 1996 1995 -------- -------- ASSETS Current: Cash and cash equivalents.................................. $ 100.6 $ 115.4 Cash pooling arrangements with Rhone-Poulenc S.A........... 3.2 16.0 Short-term investments..................................... 38.7 -- Trade accounts receivable less reserves of $111.3 (1995: $87.3).................................................... 984.1 956.8 Inventories................................................ 800.7 765.6 Assets held for sale....................................... 1.0 228.8 Other current assets....................................... 845.2 707.0 -------- -------- Total current assets................................... 2,773.5 2,789.6 Time deposits, at cost..................................... 128.4 83.0 Property, plant and equipment, net......................... 1,525.9 1,621.0 Goodwill, net.............................................. 2,739.0 2,953.5 Intangibles, net........................................... 766.7 866.8 Other assets............................................... 834.6 673.2 -------- -------- Total assets........................................... $8,768.1 $8,987.1 ======== ======== LIABILITIES Current: Short-term debt............................................ $ 119.9 $ 384.2 Notes payable to Rhone-Poulenc S.A. & affiliates........... 6.8 127.6 Accounts payable........................................... 594.7 601.8 Income taxes payable....................................... 110.5 91.0 Accrued employee compensation.............................. 153.2 137.8 Other current liabilities.................................. 1,067.8 1,062.7 -------- -------- Total current liabilities.............................. 2,052.9 2,405.1 Long-term debt............................................. 2,272.0 2,159.0 Notes payable to Rhone-Poulenc S.A. & affiliates........... 253.0 525.4 Deferred income taxes...................................... 218.0 365.5 Other liabilities, including minority interests............ 1,322.4 1,174.9 -------- -------- Total liabilities...................................... 6,118.3 6,629.9 -------- -------- Contingencies.............................................. SHAREHOLDERS' EQUITY Money market preferred stock, without par value (liquidation preference $100,000 per share); issued and outstanding: 1,750 shares................................. 175.0 175.0 Capital equity notes....................................... 500.0 500.0 Common stock, without par value; stated value $1 per share; authorized 600,000,000 shares; issued and outstanding: 136,615,917 shares (1995: 134,528,487 shares)............. 141.6 139.5 Capital in excess of stated value.......................... 234.8 153.2 Retained earnings.......................................... 1,837.9 1,580.3 Employee Benefits Trust.................................... (185.7) (185.7) Cumulative translation adjustments......................... (53.8) (5.1) -------- -------- Total shareholders' equity............................. 2,649.8 2,357.2 -------- -------- Total liabilities and shareholders' equity............. $8,768.1 $8,987.1 ======== ========
See Notes to Consolidated Financial Statements. IV-3 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------- RESTATED 1996 1995 1994 ----------- ----------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................... $ 473.5 $ 356.5 $ 367.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......... 339.0 225.2 193.2 Provision for deferred income taxes.... (61.1) (15.8) (67.5) Deferred royalty income................ 200.6 (24.0) 24.0 Gain on sales of assets................ (110.7) (49.5) (46.2) Reassessment of asset carrying values.. 102.6 25.4 30.6 (Increase) decrease in trade accounts receivable, net....................... (71.3) (35.2) 47.3 Increase in inventories................ (116.8) (104.1) (37.6) Increase in accounts payable........... 26.7 83.5 19.6 Increase (decrease) in income taxes payable............................... (24.9) (81.4) 13.3 Restructuring charges (payments), net.. (125.9) 3.5 68.3 Noncash (income) losses of equity affiliates, net....................... (11.7) 35.4 21.1 Other items, net....................... (117.3) 82.4 52.2 ----------- ----------- --------- Net cash provided by operating activities.......................... 502.7 501.9 685.4 ----------- ----------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Assets sold.............................. 462.7 86.2 143.8 Capital expenditures..................... (341.6) (281.5) (229.9) Sales/prepayments of investments and product rights.......................... 147.1 34.2 18.8 Purchases of investments and product rights.................................. (96.0) (154.0) (26.8) Businesses acquired, net of cash acquired of $474.7 in 1995....................... (30.0) (2,763.3) -- Net investment hedging, net.............. (1.8) (14.8) (29.8) ----------- ----------- --------- Net cash provided by (used in) investing activities................ 140.4 (3,093.2) (123.9) ----------- ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings, net............... (364.1) 420.3 (223.1) Proceeds from issuance of long-term debt.................................... 2,256.0 2,231.3 67.9 Repayment of long-term debt.............. (2,393.9) (173.0) (47.4) Shares repurchased for Employee Benefits Trust................................... -- -- (109.9) Dividends and remuneration paid.......... (215.9) (179.9) (170.7) Issuance of capital equity notes......... -- 500.0 -- Redemption of Market Auction Preferred Shares.................................. -- (225.0) -- Issuances of common stock................ 78.1 14.0 2.6 ----------- ----------- --------- Net cash provided by (used in) financing activities................ (639.8) 2,587.7 (480.6) ----------- ----------- --------- Effect of exchange rate changes on cash.. (18.1) .2 2.5 ----------- ----------- --------- Net increase (decrease) in cash and cash equivalents............................. (14.8) (3.4) 83.4 Cash and cash equivalents at beginning of year.................................... 115.4 118.8 35.4 ----------- ----------- --------- Cash and cash equivalents at end of year.................................... $ 100.6 $ 115.4 $ 118.8 =========== =========== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: CASH PAID DURING YEAR FOR: Interest, net of amounts capitalized... $ 133.7 $ 99.2 $ 61.7 Income taxes........................... $ 302.7 $ 259.3 $ 201.0 RECONCILIATION OF ASSETS ACQUIRED AND LIABILITIES ASSUMED: Fair value of assets acquired.......... $ -- $ 4,505.2 $ 280.1 Liabilities assumed.................... -- (1,348.2) (173.0) ----------- ----------- --------- Net assets acquired.................. $ -- $ 3,157.0 $ 107.1 =========== =========== ========= Cash paid for acquisitions............. $ -- $ 3,238.0 $ -- Capital contribution from RP S.A....... -- (273.2) 107.1 Preferred stock of subsidiary issued... -- 131.6 -- Other non-cash items................... -- 60.6 -- ----------- ----------- --------- Total consideration.................. $ -- $ 3,157.0 $ 107.1 =========== =========== =========
See Notes to Consolidated Financial Statements. IV-4 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ACCOUNTING POLICIES Principles of Accounting The Company's consolidated financial statements are prepared on a basis in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Certain prior year items have been reclassified to conform to current classifications. Principles of Consolidation The consolidated financial statements include the accounts of Rhone-Poulenc Rorer Inc. and subsidiaries which are more than 50 percent owned and/or controlled. All subsidiaries are consolidated on the basis of twelve-month periods ending December 31. Investments in corporate joint ventures and other companies in which the Company has a 20 to 50 percent ownership and has no control are accounted for by the equity method. Cost investments, less than 20 percent owned, are carried at their original cost. Cash and Cash Equivalents, Time Deposits and Restricted Cash The Company considers cash on hand, cash in banks, certificates of deposit, time deposits and U.S. government and other short-term securities with maturities of three months or less when purchased as cash and cash equivalents. Investments with a maturity period of greater than three months but less than one year are classified as short-term investments. Certain mortgage-backed certificates, repurchase obligations and certificates of deposit with maturities of more than one year are classified as long-term time deposits. At December 31, 1996, the Company has $61.5 million (1995: $109.6 million) of restricted cash, of which approximately $40.1 million (1995: $53.7 million) is classified as a current asset, representing funds on deposit with a bank in an interest-bearing escrow account for payment of future operating lease obligations. Inventories Inventories are valued at the lower of cost or market, using the first-in, first-out (FIFO) or average cost methods. Property, Plant and Equipment Property, plant and equipment are recorded at cost. For financial accounting purposes, depreciation is computed principally on the straight-line method over the estimated useful lives of the assets (generally, 20 to 30 years for buildings and 5 to 15 years for machinery and equipment). For income tax purposes, certain assets are depreciated using accelerated methods. Goodwill and Intangible Assets Goodwill represents the excess of cost over the fair market value of net assets of businesses acquired. Goodwill is amortized on a straight-line basis over a period not to exceed forty years and is reported net of accumulated amortization of $294.9 million in 1996 and $241.6 million in 1995. The Company assesses potential impairment of enterprise goodwill by comparing the carrying value of goodwill at the balance sheet date with anticipated undiscounted future operating income before amortization. Intangibles, which principally represent the cost of acquiring patents and product rights, are amortized over their estimated useful lives and are reported net of accumulated amortization of $231.4 million in 1996 and $106.3 million in 1995. IV-5 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Impairment of Long-Lived Assets The Company reviews its long-lived assets, including related allocated goodwill, and identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In determining the amount of an impairment loss, the Company compares an asset's carrying value to its fair market value as measured by market price or discounted future cash flows. Royalties The Company recognizes royalties paid (received) as increases (reductions) in cost of products sold. Advertising Advertising costs are generally expensed within the fiscal year that the costs are incurred, except for direct response advertising, which is capitalized and amortized over the expected period of future benefit. Advertising expenses primarily associated with the use of public media, medical publications and symposia totaled $238.9 million in 1996 and $200.3 million in 1995. Foreign Currency Translation Financial information relating to the Company's subsidiaries located outside the United States is translated using the current rate method. Local currencies are considered the functional currencies except in countries with highly inflationary economies. Income Taxes The Company and substantially all of its United States subsidiaries file a consolidated federal income tax return. No provision has been made for United States income taxes or withholding taxes on the unremitted earnings of non- U.S. subsidiaries which are intended to be indefinitely reinvested. The Company follows Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Recently Issued Accounting Standards In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share," effective for fiscal periods ending after December 15, 1997. The Statement simplifies earnings per share calculations and requires presentation of both basic and fully diluted earnings per share on the face of the statement of income. The Company does not expect that adoption of SFAS No. 128 will have a material impact on the Company's earnings per share calculations. NOTE 2. ACQUISITIONS FROM RHONE-POULENC S.A. In 1995, the Company acquired from Rhone-Poulenc S.A. ("RP") the businesses of Cooperation Pharmaceutique Francaise ("Cooper"), primarily in France, and a pharmaceutical business in Brazil for cash and preferred stock of a French subsidiary aggregating approximately $273.2 million. The preferred shares, accounted for as minority interest in other liabilities, have a liquidation preference approximating FF645.0 million and pay dividends of 7.5% per annum on a stated value of FF145.0 million. The acquisition agreements call for potential adjustments to the purchase price of the businesses based on several factors, including earnings performance. For accounting purposes, the acquisitions of these entities under common control were treated on an "as-if pooling" basis and, accordingly, the Company restated its 1994 results to include the accounts of Cooper and IV-6 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) the Brazilian business as of April 1, 1994 (the date that Cooper was acquired by RP) and January 1, 1994, respectively. The effect of restatements in periods prior to 1994 was not material. The assets and liabilities of the acquired businesses were recorded by the Company at the carrying values used by RP as of the restatement dates. Earnings per share for the restated periods reflect pro forma adjustments giving effect to interest on indebtedness and preferred dividends relative to the acquisition transactions. NOTE 3. FISONS In October 1995, the Company acquired the outstanding shares of Fisons plc ("Fisons"), a U.K.-based pharmaceutical company, for a total purchase price including expenses of $2,993.0 million. The acquisition was accounted for under the purchase method and, accordingly, the purchase price was allocated based upon the fair values of the assets and liabilities acquired. Purchase price allocations, which were finalized in 1996, resulted in goodwill of $2,159.0 million and intangibles of $640.0 million, to be amortized on a straight-line basis over lives of 40 years and 20 years, respectively. The net reduction to the preliminary goodwill balance of $2,278.0 million estimated at December 31, 1995 primarily reflected adjustments to tax reserves and pension liabilities, and contingencies associated with the sale of the Scientific Instruments Division. Total net deferred tax and other liabilities, including restructuring of the Fisons business and disposal contingencies, included in the purchase price allocation approximated $495.0 million. In connection with the acquisition, the Company recorded a charge of $21.0 million for acquired research and development in 1995 related to Fisons research and development activities for which technological feasibility had not yet been established and no alternative future use existed. In addition to its pharmaceutical operations, the Fisons business included certain discontinued operations, namely the Laboratory Supplies Division, a distributor of laboratory equipment and supplies and clinical diagnostic products, and the Scientific Instruments Division, a manufacturer of instruments used in surface science and in elemental spectrometry and analysis. Substantially all of the Laboratory Supplies Division was sold prior to completion of the acquisition with related proceeds of $336.2 million. A smaller unit of the division was sold in November 1995 for approximately $35.0 million. In March 1996, the sale of the majority of Fisons' Scientific Instruments Division to Thermo Instruments Systems Inc. was completed; the remaining mass spectrometry and PlasmaTrace assets of the division were also sold in March. Total consideration approximated $271.8 million, representing $235.9 million in cash and the assignment of $35.9 million of external debt. At December 31, 1995, the net assets of the Scientific Instruments Division were recorded at their estimated net realizable value and classified as assets held for sale on the consolidated balance sheet. Results of operations of the Scientific Instruments Division from the date of acquisition to the date of sale were not material. In July 1996, the Company finalized its agreement with Medeva plc to sell certain U.S.-based ex-Fisons fixed assets and license certain intellectual property rights for total cash consideration of $370.0 million. At the end of a four-and-one-half year period, Medeva has the option to purchase the intellectual property rights. The upfront cash payment includes fixed asset sale proceeds and certain prepayments under the licensing arrangement, including licensing fees and a purchase option payment which are refundable in certain circumstances. NOTE 4. APPLIED IMMUNE SCIENCES, INC. In both 1995 and 1994, Applied Immune Sciences, Inc. ("AIS"), in which the Company had a 37% interest, achieved a development milestone requiring RPR to purchase an additional one million AIS shares approximately equal to an additional 5% interest. In connection therewith, the Company recorded pretax charges for acquired research and development expense in equity losses of affiliates totaling $13.0 million and $11.0 million, respectively. IV-7 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In the fourth quarter of 1995, the Company purchased for a cash price of $91.6 million, including expenses, the remaining 53%, or 7.2 million outstanding shares, of AIS not previously owned by RPR. Under the step- purchase method, the Company recorded additional intangible assets of approximately $73.5 million. The Company also recorded a charge to operations of $22.6 million for acquired research and development related to research and development activities for which technological feasibility had not yet been established and no alternative future use existed. In 1996, the Company recorded pretax charges of $102.6 million from the reassessment of the carrying values of certain AIS-related assets, principally intangibles and fixed assets, following the Company's decision to substantially curtail ex-vivo cell processing projects which had been mainly initiated by AIS. NOTE 5. CENTEON JOINT VENTURE Under terms of a September 28, 1995 Amendment to the Joint Venture Agreement (the "Amendment"), the Company's Armour Pharmaceutical Company subsidiary ("Armour") and Behringwerke AG ("Behring"), a subsidiary of Germany's Hoechst AG, completed the formation of Centeon, a 50/50 global joint venture in the plasma proteins business. The joint venture's Board of Directors was formally established on January 1, 1996, at which time joint control and profit-sharing provisions took effect. Accordingly, the Company deconsolidated Armour's net assets at December 31, 1995. The operations of the Armour plasma businesses are included in the Company's reported results for the twelve months ended December 31, 1995; in 1996, the Company's interest in the results of the joint venture is reported as (income) losses of equity affiliates included in other (income) expense, net (see Note 9). In October 1996, Centeon initiated a voluntary worldwide recall of all in- date lots of Albuminar(R)/Plasma-Plex(R) products as a precautionary measure in response to manufacturing concerns with respect to these products at a U.S. production facility. The manufacture of Albuminar(R)/Plasma-Plex(R) and other plasma-derived products at the location was temporarily suspended by Centeon while the U.S. Food and Drug Administration ("FDA") and Centeon conducted a comprehensive review of the manufacturing processes at the facility. In December 1996, Centeon voluntarily suspended the production of certain pharmaceutical products (such as Dilacor XR(R) and calcitonin products) manufactured for the Company at the U.S. facility. Due to available inventory and alternate sources of supply, there has been no significant interruption in supply of the Company's pharmaceutical products. In January 1997, Centeon entered into a consent decree with the U.S. Government which specifies conditions for the shipment by Centeon of both plasma-based products and certain pharmaceutical products. The consent decree, which has a term of at least five years, provides, among other things, that Centeon will not distribute product manufactured at the facility until (1) a third party expert retained by Centeon has inspected the facility and reported to the FDA the status of both the observations made by the FDA and Centeon's compliance with current Good Manufacturing Practices ("GMPs"), (2) Centeon has certified to its compliance with GMPs and (3) the FDA has made such inspections at the facility as it deems necessary and has notified Centeon that it appears to be in compliance with GMPs and may distribute the manufactured products. Centeon resumed production of both plasma-based and pharmaceutical products at the facility in late January 1997. In March, Centeon voluntarily halted production of both plasma-based and pharmaceutical products in order to address certain production issues. In mid-March, Centeon and the FDA received a first report from the third party expert as contemplated by the consent decree. This report indicated that Centeon had made significant corrective actions consistent with the observations made during the FDA investigation and identified certain additional actions needed to be taken. Centeon is addressing these additional actions. Centeon believes IV-8 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) that these actions together with the other conditions of distribution under the consent decree will be satisfied, so that, based on a phased-in resumption of manufacturing, distribution of plasma-based products, after completion of testing and lot release by the FDA, will begin during the second quarter of 1997. Centeon also expects that it will be in a position to resume distribution during the second quarter of the pharmaceutical products manufactured for the Company at the facility. The Company's interest in Centeon's results for the year ended December 31, 1996 included charges of $44.0 million, representing charges associated with anticipated returns of recalled products from customers, writeoff of certain inventories, and related expenses. Summarized financial information with respect to Centeon for the year ended December 31, 1996 is as follows:
1996 --------------------- (DOLLARS IN MILLIONS) Current assets...................................... $529.4 Noncurrent assets................................... 318.6 Current liabilities................................. 409.0 Noncurrent liabilities.............................. 284.0 Net sales*.......................................... $904.3 Gross margin........................................ 384.5 Income before income taxes.......................... 125.2
- -------- * Includes sales to certain RPR affiliates totaling $27.8 million. NOTE 6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following unaudited pro forma financial information has been prepared as if the acquisitions of Fisons and AIS and the formation of Centeon had occurred at the beginning of the periods presented. The results of operations of Fisons' Laboratory Supplies Division and Scientific Instruments Division are not included in the pro forma results for 1995 and 1994. The pro forma information presents the results of the Armour businesses contributed to Centeon as non-operating income from equity affiliates; sales recorded by these businesses approximated $489.0 million and $415.1 million in 1995 and 1994, respectively. The pro forma information also reflects 100% of the operating results of AIS as research and development expenses and eliminates the equity losses associated with the Company's prior equity investment in AIS. Adjustments have been made for financing charges and goodwill amortization, and income taxes are provided at an effective income tax rate of 36%. The pro forma information does not purport to be indicative of the Company's results of operations had the transactions actually occurred on the dates presented nor is it necessarily indicative of future operating results.
FOR THE YEARS ENDED DECEMBER 31, ----------------------- 1995 1994 ----------- ----------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net sales.......................................... $ 5,316.1 $ 4,799.3 Operating income................................... 607.5 162.0 Net income (loss) from continuing operations before nonrecurring charges available to common shareholders...................................... 341.6 (66.4) Earnings (loss) per common share, restated pro forma............................................. $ 2.53 $ (.56) Average common shares outstanding.................. 134.2 135.3
Pro forma operating income for the year ended December 31, 1995 excludes $126.5 million of acquisition-related charges recorded by the Company including pretax restructuring charges of $60.0 million, acquired research and development expense of $43.6 million, and integration and other costs related to the Fisons acquisition of $22.9 million. IV-9 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Pro forma operating income for the year ended December 31, 1994 includes charges of $259.3 million recorded by Fisons in connection with the restructuring of its pharmaceutical operations and charges of $121.2 million for an RPR global restructuring plan. Pro forma net income (loss) from continuing operations before nonrecurring charges excludes a $133.4 million pretax gain on Fisons' sale of the greater portion of its research and development operations in the second quarter of 1995. Research and development expenses associated with the activities sold approximating $23.9 million are also excluded from the 1995 pro forma results. Pro forma net income (loss) from continuing operations before nonrecurring charges also excludes one-time charges related to the Company's investments in AIS, including acquired research and development expense and the reassessment of call option values, totaling $13.0 million and $31.4 million in 1995 and 1994, respectively. NOTE 7. RESTRUCTURING CHARGES In 1995, the Company recorded a $60.0 million pretax charge related to the restructuring of RPR operations as a direct result of the Fisons acquisition. As part of the Fisons purchase price allocation, the Company also recorded a $100.0 million liability for the restructuring of Fisons operations. The combined $160.0 million liability represented expected cash outlays, principally severance-related, associated with eliminating positions primarily in the marketing, administrative and manufacturing functions. As of December 31, 1996, workforce reductions approximated 1,900 positions, many of which were based in the U.S. and the U.K. although other locations were also affected. A rollforward of the remaining 1995 restructuring provision from January 1, 1996 is as follows:
TRANSLATION JANUARY 1, ADJUSTMENTS/ DECEMBER 31, 1996 PAYMENTS OTHER 1996 ---------- -------- ------------ ------------ (DOLLARS IN MILLIONS) Social costs................... $148.5 $ (99.3) $(8.0) $41.2 Third parties.................. 11.5 (17.0) 5.5 -- ------ ------- ----- ----- Total........................ $160.0 $(116.3) $(2.5) $41.2 ====== ======= ===== =====
In 1994, the Company recorded a $121.2 million pretax charge in connection with a global restructuring plan that was substantially completed in 1995. Workforce reductions approximated 1,100 positions and were primarily from manufacturing, sales/marketing and administrative functions in North America and in France, although other locations in Europe and elsewhere were also affected. At December 31, 1996, the remaining reserve was $11.3 million representing outstanding social costs. Total cash outlays related to the plan through December 31, 1996 totaled $89.2 million, with outlays of $7.5 million in 1996, $47.6 million in 1995 and $34.1 million in 1994. Asset writeoffs in conjunction with certain production facilities totaled $26.9 million, of which $7.5 million and $19.4 million were recorded in 1995 and 1994, respectively. NOTE 8. GAIN ON SALES OF ASSETS In 1996, the Company recorded a pretax gain of $81.5 million on the sale of certain nonstrategic European self-medication product rights and inventories to Hoffmann-La Roche. The Company also recorded pretax gains on the sales of a nonstrategic product in France and its Belgium over-the-counter business totaling $29.2 million. In 1995, the Company recorded pretax gains of $49.5 million on sales of assets, principally the transfer of the Company's Canadian over-the-counter business to Ciba-Geigy Ltd. ("Ciba"), and the sale of certain European product rights. In 1994, similar gains, including the gain on the sale of certain assets related to the IV-10 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Company's U.S. over-the-counter business to Ciba, totaled $46.2 million. Under terms of the U.S. transfer agreement with Ciba, the Company received a one- time payment totaling $178.0 million which included a prepaid royalty of $24.0 million for the year 1995. Additional royalties of $24.0 million are expected per year for six years. At the end of the seven-year period, Ciba has the option to purchase the U.S. product intellectual property assets for approximately $143.0 million. NOTE 9. OTHER (INCOME) EXPENSE, NET
1996 1995 1994 ------- ------- ------- (DOLLARS IN MILLIONS) (Income) losses of equity affiliates................ $ (83.0) $ 44.4 $ 46.5 Minority interest................................... 8.7 4.9 3.3 Foreign exchange (gains) losses..................... (3.5) (4.7) 10.5 Other, net.......................................... (11.3) 21.3 23.6 ------- ------ ------ Other (income) expense, net......................... $ (89.1) $ 65.9 $ 83.9 ======= ====== ======
(Income) losses of equity affiliates in 1996 principally represented the Company's interest in the Centeon joint venture (see Note 5). Equity losses associated with AIS prior to the Company's 1995 acquisition of AIS' remaining outstanding shares totaled $38.3 million in 1995 and $28.6 million in 1994, including acquired research and development of $13.0 million and $11.0 million, respectively. Other, net for 1996 included gains on sales of nonstrategic cost investments and increased provisions for anti-hemophilic factor litigation. Other, net for 1995 and 1994 included charges of $25.4 million and $30.6 million, respectively, related to the reassessment of the carrying value of certain assets including those associated with the Company's prior investment in The Immune Response Corporation (1995) and AIS call options (1994). NOTE 10. EARNINGS PER SHARE Earnings per common share were computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding. For purposes of earnings per share calculations, net income available to common shareholders in 1995 and 1994 was adjusted for the pro forma effects of interest on indebtedness and preferred dividends relative to the acquisitions of businesses from RP totaling $1.6 million and $9.1 million, respectively. The weighted average number of shares used to compute primary earnings per common share was 135,790,590, 134,228,677 and 135,254,692 for the years 1996, 1995 and 1994, respectively. Common share equivalents in the form of stock options were excluded from the calculation as their dilutive effect was not material. NOTE 11. INVENTORIES
1996 1995 ---------- ---------- (DOLLARS IN MILLIONS) Finished goods........................................ $ 376.9 $ 346.2 Work in process....................................... 159.8 140.6 Raw materials and supplies............................ 264.0 278.8 ---------- ---------- Inventories........................................... $ 800.7 $ 765.6 ========== ==========
IV-11 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 12. PROPERTY, PLANT AND EQUIPMENT, NET
1996 1995 ---------- ---------- (DOLLARS IN MILLIONS) Land.................................................. $ 76.3 $ 62.2 Buildings............................................. 839.7 880.0 Machinery and equipment............................... 1,731.7 1,604.0 Construction in progress.............................. 339.3 330.3 ---------- ---------- 2,987.0 2,876.5 Less accumulated depreciation......................... 1,461.1 1,255.5 ---------- ---------- Property, plant and equipment, net.................... $ 1,525.9 $ 1,621.0 ========== ==========
The Company incurred $217.6 million and $109.9 million in interest cost in 1996 and 1995, respectively, of which $4.9 million and $4.7 million, respectively, was capitalized as part of the cost of additions to property, plant and equipment. NOTE 13. DEBT Short-term debt consisted of the following:
1996 1995 ---------- ---------- (DOLLARS IN MILLIONS) Notes payable to banks................................. $ 89.3 $ 354.7 Current portion of long-term debt...................... 30.6 29.5 ---------- ---------- Short-term debt........................................ $ 119.9 $ 384.2 ========== ========== Notes payable to Rhone-Poulenc S.A. and affiliates..... $ 6.8 $ 127.6 ========== ==========
The weighted average interest rate of total outstanding short-term debt was 10.8% at December 31, 1996 (1995: 7.9%). Long-term debt, net of current portion, consisted of the following:
1996 1995 ---------- ---------- (DOLLARS IN MILLIONS) Notes payable at variable rates averaging 5.2% and 5.9% at 1996 and 1995 year-end, respectively (expected to be refinanced long-term)............... $ 1,940.5 $ 1,825.0 9.25% Series A Senior Notes due 2004, with interest payable quarterly (guaranteed by Rhone-Poulenc S.A.)............................................... 48.3 52.7 9.05% Series B Senior Notes due 1997, with interest payable quarterly (guaranteed by Rhone-Poulenc S.A.)............................................... -- 4.3 Notes, mortgages and capitalized lease obligations at rates averaging 7.8% (1995: 8.1%)................... 283.2 277.0 ---------- ---------- Long-term debt....................................... $ 2,272.0 $ 2,159.0 ========== ========== Notes payable to Rhone-Poulenc S.A. and affiliates at rates averaging 3.9% and 6.0% at 1996 and 1995 year- end, respectively (expected to be refinanced long- term)............................................... $ 39.2 $ 500.0 Notes payable to Rhone-Poulenc S.A. and affiliates principally due in 2000 at rates averaging 5.0% (1995: 8.4%)........................................ 213.8 25.4 ---------- ---------- Notes payable to Rhone-Poulenc S.A. and affiliates... $ 253.0 $ 525.4 ========== ==========
IV-12 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) At December 31, 1996, the Company had total committed lines of credit of $2,325.0 million. Of this amount, $1,825.0 million represented multicurrency medium-term facilities with fourteen banks expiring in the year 2000. The additional $500.0 million represented two medium-term credit agreements with Rhone-Poulenc S.A. expiring in 2000 and 2002. Borrowings under these medium- term credit facilities bear interest at the London Interbank Offered Rate ("LIBOR"), plus any applicable margin and commitment fee. At December 31, 1996, borrowings outstanding under the above arrangements totaled $594.7 million. These borrowings plus an additional $1,385.0 million of short-term borrowings were classified as long-term debt at December 31, 1996 as the Company had the ability and intent to refinance these amounts on a long-term basis under the above medium-term facilities. The $1,979.7 million of reclassified borrowings were in various currencies with interest rates as follows: $874.6 million in U.S. Dollars at 5.7%, $140.1 million in French Francs at 3.8%, $714.7 million in German Marks at 5.7%, $145.0 million in Japanese Yen at .7% and $105.3 million in Great British Pounds at 6.3%. Amounts available under unused uncommitted lines of credit approximated $991.0 million at December 31, 1996 (1995: $624.0 million). The aggregate maturities of all long-term debt at December 31, 1996, including related party debt, were: $30.6 million in 1997, $43.2 million in 1998, $206.1 million in 1999, $2,200.4 million in 2000, $17.7 million in 2001, and $57.6 million thereafter. The weighted average interest rate of total debt outstanding at December 31, 1996 was 6.0% (1995: 6.4%). Pursuant to the remaining portion of a U.S. shelf registration for $500.0 million, the Company has the ability to issue $325.0 million in public debt securities and/or preferred shares. NOTE 14. LEASE COMMITMENTS The Company's capital lease obligations pertain primarily to certain administrative and research facilities. Effective January 1, 1996, the Company leased to Centeon under capital lease arrangements certain buildings, machinery and equipment in the U.S. and France which support production and research and development activities. Related rental income in 1996 totaled $3.6 million. The Company occupies certain facilities and leases certain equipment and large-load vehicles under operating lease agreements. In 1992, the Company sold its U.S. corporate offices and research facility to a third party and leased it back for an initial term of thirty years with options to renew for a longer period. The Company also leased the underlying land to the third party for sixty years and subleased it back for thirty years with the facility. Related average annual accounting rent is $22.5 million. Rent expense under operating leases was $125.5 million, $104.2 million and $55.0 million in 1996, 1995 and 1994, respectively. Related rental income totaled $55.4 million and $37.7 million in 1996 and 1995, respectively. IV-13 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Future minimum lease commitments and lease receivables under all leases with initial or remaining noncancelable lease terms in excess of one year at December 31, 1996 are as follows:
CAPITAL LEASES OPERATING LEASES ----------------------- ----------------------- LEASE LEASE LEASE LEASE COMMITMENTS RECEIVABLES COMMITMENTS RECEIVABLES ----------- ----------- ----------- ----------- (DOLLARS IN MILLIONS) 1997........................ $ 8.2 $ 6.9 $123.1 $41.4 1998........................ 6.2 6.5 80.0 19.7 1999........................ 3.7 6.3 63.6 11.0 2000........................ 3.2 5.9 45.5 -- 2001........................ 3.2 5.7 43.4 -- Thereafter.................. 15.4 94.5 585.7 -- ----- ------ ------ ----- Minimum lease payments/receipts.......... 39.9 125.8 $941.3 $72.1 ====== ===== Less imputed interest/unearned income... (8.0) (66.5) ----- ------ Present value of minimum lease payments (current--$6.6, noncurrent--$25.3)......... $31.9 ===== Net investment in capital leases (current--$2.9, non- current--$56.4)............ $ 59.3 ======
NOTE 15. INCOME TAXES The components of income before income taxes are:
1996 1995 1994 ------- ------- ------- (DOLLARS IN MILLIONS) United States....................................... $ 23.5 $ 241.3 $ 241.0 Non-U.S. ........................................... 666.9 296.7 271.9 ------- ------- ------- Income before income taxes.......................... $ 690.4 $ 538.0 $ 512.9 ======= ======= =======
The components of the provision for income taxes are:
1996 1995 1994 ------- ------- ------- (DOLLARS IN MILLIONS) Current: United States................................... $ 62.0 $ 96.9 $ 103.4 Non-U.S......................................... 216.0 100.4 109.9 ------- ------- ------- 278.0 197.3 213.3 ------- ------- ------- Deferred: United States................................... (89.0) (22.6) (51.7) Non-U.S......................................... 27.9 6.8 (15.8) ------- ------- ------- (61.1) (15.8) (67.5) ------- ------- ------- Provision for income taxes........................ $ 216.9 $ 181.5 $ 145.8 ======= ======= =======
IV-14 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Deferred income taxes are provided for temporary differences between book and tax bases of the Company's assets and liabilities. Temporary differences giving rise to a significant portion of the deferred tax assets and liabilities at December 31 are:
1996 1995 ---------- ---------- (DOLLARS IN MILLIONS) Assets (liabilities): Depreciation and amortization..................... $ (231.7) $ (328.2) Intercompany profit in ending inventory........... 81.8 60.8 Net operating loss carryforwards.................. 64.0 57.5 Pension........................................... 42.1 69.2 Tax credit carryforwards.......................... 38.6 -- Deferred royalty income........................... 37.9 -- Restructuring..................................... 27.4 35.8 Distributable earnings............................ (6.6) (66.9) Other, including nondeductible accruals........... 114.7 188.6 ---------- ---------- 168.2 16.8 Less valuation allowance.......................... (5.1) (91.9) ---------- ---------- Deferred income taxes, net........................ $ 163.1 $ (75.1) ========== ==========
The portion of the above net deferred tax assets (liabilities) classified as current was $278.7 million and $211.1 million at December 31, 1996 and 1995, respectively. At December 31, 1996, total deferred tax assets were $585.0 million and total deferred tax liabilities were $416.8 million before netting. At December 31, 1995, similar temporary differences gave rise to total deferred tax assets of $587.0 million and total deferred tax liabilities of $570.2 million. The decrease in the valuation allowance in 1996 was primarily Fisons-related and was accordingly reflected as a reduction in goodwill. The differences between the U.S. statutory income tax rate and the Company's effective income tax rate are:
1996 1995 1994 ------ ------ ------ (PERCENT OF INCOME BEFORE INCOME TAXES) U.S. statutory income tax rate.......................... 35.0% 35.0% 35.0% Puerto Rico operations.................................. (2.8) (3.1) (5.0) Non-U.S. tax rate differential.......................... 1.4 (2.2) (1.8) Research and development tax credits.................... (0.8) (1.0) (1.4) Acquired research and development....................... -- 2.8 -- Other, net.............................................. (1.4) 2.2 1.6 ------ ------ ------ Effective income tax rate............................... 31.4% 33.7% 28.4% ====== ====== ======
The Company has subsidiaries in Ireland, Puerto Rico and Singapore, where earnings are either exempt or substantially exempt from income taxes under local government incentive programs, the latest of which expires in the year 2010. The Company has net operating loss carryforwards of $180.7 million for tax return purposes which expire principally through the years 1997 to 2011. IV-15 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company's U.S. income tax returns have been examined and settled with the Internal Revenue Service through 1989. The Company believes that potential adjustments from any open years would not have a material impact on the Company's financial position or results of operations. At December 31, 1996, unremitted earnings of subsidiaries which are intended to be indefinitely reinvested and, accordingly, for which no additional U.S. income taxes or foreign withholding taxes have been provided totaled $832.0 million. It would not be practical to compute the estimated deferred tax liability on these earnings. NOTE 16. PENSIONS AND OTHER POSTRETIREMENT BENEFITS PENSIONS The Company has several defined benefit pension plans which cover a majority of its employees throughout the world. In the United States, the Company's funding policy is to contribute funds to a trust as necessary to provide for current service and for any unfunded projected benefit obligation over a reasonable period. To the extent that these requirements are fully covered by assets in the trust, a contribution may not be made in a particular year. Obligations under non-U.S. plans are systematically provided by depositing funds with trustees, under insurance policies or through book reserves. The funded status of the Company's plans at December 31 was as follows:
1996 1995 --------------------------- ---------------------------- PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS ------------- ------------- -------------- ------------- (DOLLARS IN MILLIONS) Vested benefit obligations............ $(676.0) $(449.7) $(716.5) $(428.6) Nonvested benefits...... (3.6) (90.7) (3.5) (87.8) ------- ------- ------- ------- Accumulated benefit obligation............. (679.6) (540.4) (720.0) (516.4) Projected future salary increases.............. (25.6) (76.0) (6.8) (65.5) ------- ------- ------- ------- Projected benefit obligation............. (705.2) (616.4) (726.8) (581.9) Fair value of plan assets (invested primarily in equities and bonds)............. 895.8 226.2 782.0 184.3 ------- ------- ------- ------- Plan assets in excess of (less than) projected benefit obligation..... 190.6 (390.2) 55.2 (397.6) Unrecognized net transition (asset) liability.............. .2 5.5 (.8) 2.5 Unrecognized net (gain) loss................... (43.6) 67.2 (27.1) 86.6 Unrecognized prior service cost........... 17.4 3.9 20.1 (3.8) Adjustment required to recognize minimum liability.............. -- (66.3) -- (63.5) ------- ------- ------- ------- Prepaid (accrued) pension cost........... $ 164.6 $(379.9) $ 47.4 $(375.8) ======= ======= ======= =======
The accumulated benefit obligation of U.S. plans included in the above table was $190.0 million in 1996 and $186.1 million in 1995. U.S. plan assets were $201.1 million and $165.4 million at December 31, 1996 and 1995, respectively. Of the net accrued pension cost, $356.6 million and $359.4 million are included in other noncurrent liabilities in 1996 and 1995, respectively. IV-16 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following items were the components of net periodic pension cost for the years ended December 31:
1996 1995 1994 ------- ------ ------ (DOLLARS IN MILLIONS) Service cost........................................ $ 26.4 $ 21.3 $ 19.5 Interest cost....................................... 98.6 56.7 46.2 Actual return on plan assets........................ (102.1) (39.7) (26.6) Amortization and deferral........................... 17.9 8.2 5.7 ------- ------ ------ Net periodic pension cost........................... $ 40.8 $ 46.5 $ 44.8 ======= ====== ======
Net periodic pension cost for U.S. plans included in the above amounts was $6.7 million, $9.0 million and $12.2 million for 1996, 1995 and 1994, respectively. The following weighted average assumptions, which are based on the economic environment of each applicable country, were used to determine the return on plan assets and benefit obligations:
1996 1995 1994 ---- ---- ---- Discount rate................................................. 8.2% 8.1% 7.9% Expected return on plan assets................................ 9.4% 9.1% 9.6% Rate of future compensation increases......................... 4.3% 4.7% 3.8%
For U.S. plans, the discount rate was 7.75% in 1996 and 1995 and 8.5% in 1994. The expected return on plan assets of 9.5% remained constant from 1994 through 1996. The rate of future compensation increases of 4.5% remained constant from 1994 through 1996. SAVINGS PLANS The Company sponsors defined contribution savings plans covering substantially all U.S. employees. Company contributions to the plans may not exceed three thousand dollars per employee. Amounts charged to expense were $5.9 million, $7.1 million and $7.3 million in 1996, 1995 and 1994, respectively. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS In the United States, the Company grants retirees access to its medical, prescription and life insurance programs for a premium targeted to equal the cost of such benefits. The Company's non-U.S. affiliates generally contribute to government insurance programs during the employees' careers and do not sponsor additional postretirement programs. POSTEMPLOYMENT BENEFITS Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The new standard did not materially affect the Company's financial position or results of operations. NOTE 17. STOCK PLANS Stock options and restricted shares have been granted to employees under plans approved by the shareholders in 1982 and 1985, as amended and restated in 1988 and 1990 ("the Stock Plan"). The aggregate number of shares originally available for issuance or transfer to employees under these plans was 7,000,000. Option prices are equal to the fair market value of the shares on the date of grant. Options are exercisable during IV-17 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) a period determined by the Company, but in no event later than ten years from the date granted. Shares issued under a restricted grant may not be sold or otherwise disposed of for a period designated by the Company. Restricted shares are returned to the Company if the grantee's employment terminates during the period of restriction. During the restriction period, the grantee is entitled to vote the shares and receive any dividends paid. Effective January 1, 1993, the Company substantially curtailed the granting of restricted shares to employees. The Stock Plan, as amended and restated, permits the Company to grant stock appreciation rights in tandem with stock options. As of December 31, 1996, no such rights have been granted. The Equity Compensation Plan adopted in 1990 supplements the Stock Plan by providing for an additional 6,000,000 shares that may be issued to participants after all shares authorized pursuant to the terms of the Stock Plan have been utilized. The terms of the Equity Compensation Plan are substantially the same as those of the Stock Plan. The 1995 Equity Compensation Plan further supplements the Stock Plan by providing for an additional 5,000,000 shares. The terms of the 1995 Equity Compensation Plan are substantially the same as those of the Stock Plan and the Equity Compensation Plan. The Company applies Accounting Principles Board Opinion 25 ("APB 25") in accounting for its fixed stock option plans. Under the intrinsic value method prescribed by APB 25, no compensation expense has been recorded by the Company in the periods reported. Had compensation expense for awards made in 1996 and 1995 from these plans been determined under the fair value method of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
FOR THE YEARS ENDED DECEMBER 31 ----------------------- 1996 1995 ----------- ----------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net income.......................................... $ 421.3 $ 334.0 Primary earnings per common share................... $ 3.10 $ 2.48
The Company used the Black-Scholes pricing model to determine the fair value of stock options granted in 1996 and 1995 using the following assumptions: expected life of the option ranging from 5 to 6 years and expected forfeiture rate ranging from 12.8% to 17.9% depending on the job grade classification; expected stock price volatility of 22.2%; expected dividend rate of 2.5%; and risk-free interest rate ranging from 5.6% to 5.9% in 1996 and 7.0% to 7.1% in 1995 depending on expected life of the option. The impact of applying SFAS No. 123 in this pro forma disclosure is not indicative of the impact on future years' reported net income because SFAS No. 123 does not apply to stock options granted prior to 1995, the Company's stock options vest over three years, and additional stock options awards are anticipated in future years. IV-18 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) A summary of the status of the Company's stock option plans as of December 31, 1996, 1995 and 1994 and changes during the years then ended is presented below:
1996 1995 1994 ------------------------ ----------------------- ----------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE (IN THOUSANDS) PRICE (IN THOUSANDS) PRICE (IN THOUSANDS) PRICE -------------- --------- -------------- -------- -------------- -------- Options outstanding at January 1.............. 7,991 $42.14 7,147 $42.06 5,815 N/A Additions (deductions): Granted................ 1,414 61.56 1,702 40.74 1,898 N/A Exercised.............. (2,108) 37.07 (433) 32.60 (116) N/A Canceled............... (431) 50.44 (425) 44.26 (450) N/A ------------ ------------ ------------ Options outstanding at December 31............ 6,866 47.03 7,991 42.14 7,147 N/A ============ ============ ============ Options exercisable at December 31............ 4,382 44.98 4,693 41.26 3,443 N/A ============ ============ ============ Weighted average fair value of options granted during the year................... $15.38 $10.89 N/A ============ ============ ============ Shares reserved for future grants.......... 5,564 6,551 2,862 ============ ============ ============ Price range of options exercised during the year................... $4.67-$63.00 $4.67-$46.38 $8.24-$30.18 ============ ============ ============ Price range of options outstanding............ $4.67-$64.00 $4.67-$64.00 ============ ============ Price range of options exercisable............ $4.67-$64.00 $4.67-$64.00 ============ ============
The following table summarizes information about stock options outstanding and stock options exercisable at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------ ------------------------------- WEIGHTED AVERAGE SHARES REMAINING WEIGHTED AVERAGE SHARES WEIGHTED AVERAGE RANGE OF EXERCISE PRICES (IN THOUSANDS) CONTRACTUAL LIFE EXERCISE PRICE (IN THOUSANDS) EXERCISE PRICE - ------------------------ -------------- ---------------- ---------------- -------------- ---------------- $ 8.24-$14.61........... 68 1.8 years $12.38 68 $12.38 $30.13-$38.75........... 1,549 6.2 years $33.85 1,173 $33.45 $40.00-$49.25........... 2,991 6.8 years $42.12 2,035 $42.80 $52.38-$55.50........... 31 5.5 years $55.36 31 $55.36 $60.25-$67.38........... 2,227 7.6 years $63.73 1,075 $63.46 ----- ----- $ 8.24-$67.38........... 6,866 6.9 years $47.03 4,382 $44.98 ===== =====
IV-19 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 18. SHAREHOLDERS' EQUITY
MARKET MONEY COMMON CAPITAL IN AUCTION MARKET CAPITAL STOCK AT EXCESS OF EMPLOYEE CUMULATIVE PREFERRED PREFERRED EQUITY STATED STATED RETAINED BENEFITS TRANSLATION SHARES STOCK NOTES VALUE VALUE EARNINGS TRUST ADJUSTMENTS --------- --------- ------- -------- ---------- -------- -------- ------------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Balance, December 31, 1993................... $ 225.0 $175.0 $ -- $139.0 $ 290.0 $1,207.3 $ (75.8) $(139.3) Net income--1994........ -- -- -- -- -- 367.1 -- -- Cash dividends, $1.12 per common share....... -- -- -- -- -- (151.5) -- -- Dividends on preferred shares................. -- -- -- -- -- (19.2) -- -- Capital contributions from Rhone-Poulenc S.A. .................. -- -- -- -- 107.1 -- -- -- Shares repurchased for Employee Benefits Trust.................. -- -- -- -- -- -- (109.9) -- Issuance of shares under employee benefit plans.................. -- -- -- .1 15.1 -- -- -- Translation adjustments, including hedging...... -- -- -- -- -- -- -- 80.4 ------- ------ ------ ------ ------- -------- ------- ------- Balance, December 31, 1994................... 225.0 175.0 -- 139.1 412.2 1,403.7 (185.7) (58.9) Net income--1995........ -- -- -- -- -- 356.5 -- -- Cash dividends, $1.20 per common share....... -- -- -- -- -- (161.2) -- -- Dividends on preferred shares................. -- -- -- -- -- (18.7) -- -- Redemption of Market Auction Preferred Shares................. (225.0) -- -- -- -- -- -- -- Issuance of capital equity notes to Rhone- Poulenc S.A............ -- -- 500.0 -- -- -- -- -- Adjustment of capital contributions for acquisition liabilities............ -- -- -- -- (273.2) -- -- -- Issuance of shares under employee benefit plans.................. -- -- -- .4 14.2 -- -- -- Translation adjustments, including hedging...... -- -- -- -- -- -- -- 53.8 ------- ------ ------ ------ ------- -------- ------- ------- Balance, December 31, 1995................... -- 175.0 500.0 139.5 153.2 1,580.3 (185.7) (5.1) Net income--1996........ -- -- -- -- -- 473.5 -- -- Cash dividends, $1.26 per common share....... -- -- -- -- -- (171.1) -- -- Dividends on preferred shares................. -- -- -- -- -- (9.6) -- -- Remuneration on capital equity notes........... -- -- -- -- -- (35.2) -- -- Issuance of shares under employee benefit plans.................. -- -- -- 2.1 81.6 -- -- -- Translation adjustments, including hedging...... -- -- -- -- -- -- -- (48.7) ------- ------ ------ ------ ------- -------- ------- ------- Balance, December 31, 1996................... $ -- $175.0 $500.0 $141.6 $ 234.8 $1,837.9 $(185.7) $ (53.8) ======= ====== ====== ====== ======= ======== ======= =======
The Company has outstanding $175.0 million of money market preferred stock issued in three series consisting of 750 shares, 500 shares and 500 shares, respectively. The initial dividend period for all series commenced on August 1, 1993 at initial dividend rates of 4.7% per annum for a two-year period for Series 1; 5.125% per annum for a three-year period for Series 2; and 5.84% per annum for a five-year period for Series 3. After expiration of the initial dividend periods, dividends are determined at separate auctions for each series. The average dividend rate in 1996 on Series 1 stock was 5.21% per annum (1995: 5.11%) and on Series 2 stock was 5.20% per annum. The money market preferred stock ranks prior to common shares of the Company as to dividends. Holders have no voting rights except in the event that preferred dividends are in arrears for at least 180 consecutive days. In such event, the authorized number of the Company's Board of Directors would be increased by two and the holders of record of the preferred shares may elect these additional directors. The preferred stock is not convertible into common stock or other shares of the Company and holders thereof have no preemptive rights. Upon the liquidation, dissolution, or winding up of the Company, or upon redemption of the preferred stock at the Company's option, holders would be entitled to a liquidation preference of $100,000 per share plus any accumulated and unpaid dividends thereon. In 1995, the Company redeemed its remaining outstanding Market Auction Preferred Shares ("MAPS") Series A, C and D for $225.0 million plus accrued dividends. Dividend rates, determined at separate auctions for each series, averaged 5.98% during 1995 (1994: 4.63%). In December 1995, the Company issued $500.0 million of undated capital equity notes to Rhone-Poulenc S.A. The notes have a liquidation preference that ranks senior to all RPR common stock, but junior to all existing IV-20 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) and future RPR preferred stock. Semiannual remuneration on the unpaid principal balance of the equity notes is based on LIBOR plus a margin. If the Company is unable to meet statutory standards for dividend payments on outstanding common or preferred stock, the Company may satisfy the equity note remuneration requirements with the issuance of additional capital equity notes ("remuneration notes"). Terms of the remuneration notes would be similar to the equity notes except for a higher rate of remuneration. The capital equity notes are redeemable only at the Company's option, but not earlier than five years after issuance, subject to certain exceptions. At December 31, 1996 and 1995, there were 2,676,800 preferred shares without par value authorized and unissued. In 1996, the Company increased the number of authorized common shares to 600,000,000. In 1994, the Company completed the open market repurchase of five million of its common shares as authorized by the Board of Directors in March 1993 with the acquisition of 3.1 million shares at a cost of $109.9 million. These shares are being held in an Employee Benefits Trust to fund future benefits in the United States. In 1995, the Company acquired Cooper and a pharmaceutical business in Brazil from Rhone-Poulenc S.A. For accounting purposes, the acquisitions of these entities under common control were treated on an "as-if pooling" basis and, accordingly, the Company restated its 1994 results to include the accounts of Cooper and the Brazilian business as of April 1, 1994 and January 1, 1994, respectively. The assets and liabilities of the acquired businesses were recorded by the Company at the carrying values used by RP as of the restatement dates and the value of net assets acquired was reflected in the 1994 capital in excess of stated value account as a capital contribution from RP. The Company subsequently reduced capital in excess of stated value to reflect the purchase obligations related to the acquisition transactions of approximately $273.2 million. NOTE 19. FINANCIAL INSTRUMENTS The Company's financial instruments consisted of the following:
DECEMBER 31, 1996 DECEMBER 31, 1995 --------------------- --------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE --------- --------- --------- --------- (ASSET (LIABILITY) IN MILLIONS) Cash and cash equivalents..... $ 100.6 $ 100.6 $ 115.4 $ 115.4 Cash pooling arrangements with RP........................... 3.2 3.2 16.0 16.0 Time deposits, generally maturing within 1-5 years.... 146.4 146.4 83.0 83.0 Cost investments: Practical to estimate....... 18.0 29.8 9.0 13.6 Not practical to estimate... 14.2 N/A 19.9 N/A Other investments, including restricted cash.............. 85.2 89.4 112.6 118.7 Long-term debt................ (2,555.6) (2,561.2) (2,713.9) (2,722.7) Foreign currency exchange contracts.................... 10.4 * 10.4 (7.6)* (7.6) Interest swap arrangements.... (23.7)* (42.0) (3.7)* (3.8)
- -------- * The carrying amount represents the net unrealized gain (loss) or net interest receivable (payable) associated with the contracts at the end of the period. None of the Company's financial instruments are held for trading purposes. IV-21 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) FAIR VALUE The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Cash, cash equivalents and cash pooling arrangements with RP The carrying amount approximates the fair value due to the short-term maturity of these instruments. Time deposits The carrying amount approximates the fair value due to the variable rate nature of the long-term deposits. Cost and other investments For those investments for which it was practical, fair value was estimated using quoted or best estimates of market prices or pricing models. An estimate of fair market value could not be reasonably made for certain cost investments for which there are no quoted market prices. Long-term debt The majority of the Company's long-term debt is at variable rates of interest and, therefore, the Company believes that the carrying amount approximates fair value. For long-term debt at fixed interest rates, fair value was determined by discounting future cash flows based on interest rates currently available to the Company for debt with similar terms and maturities. Foreign currency exchange contracts The fair value of foreign currency exchange contracts was estimated by valuing the contracts at current exchange rates. Interest swap arrangements The fair value of interest swap arrangements reflects the amount at which they could be settled based on bank pricing models. CREDIT RISK The Company places its cash investments and time deposits with credit- worthy, high quality financial institutions and, by policy, limits the amount of credit exposure to any one institution. The Company therefore does not anticipate nonperformance by any of the counterparties to these financial instruments. Concentrations of credit risk with respect to trade receivables is limited due to a large customer base in a wide geographic area. Foreign currency exchange contracts do not expose the Company to accounting risk due to exchange rate movements as gains and losses on the contracts offset gains and losses on the transactions being hedged. Management believes that the risk of incurring losses on these contracts due to default by the counterparty is remote as the contracts are entered into with major financial institutions. Interest swap arrangements do not involve exchanges of underlying principal amounts, therefore the Company's exposure to credit loss is significantly less than the notional amounts of the contracts. Management believes that the risk of incurring losses due to default by the counterparty is remote as the arrangements are entered into with major financial institutions. IV-22 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK NET INVESTMENT HEDGES Unhedged net investment positions fluctuate with currency movements with corresponding translation adjustments recorded in shareholders' equity. The Company may utilize foreign currency arrangements, including foreign currency exchange contracts and foreign currency-denominated borrowings, to limit the exposure of its net investments in foreign subsidiaries to currency fluctuations and limit the volatility of reported equity. Gains and losses from these arrangements, which are designated as hedges of the Company's net foreign investments, are recorded as translation adjustments in shareholders' equity and offset the gains and losses on the related net investments. For the year ended December 31, 1996, the increase in shareholders' equity, net of tax effects, associated with net investment hedging arrangements totaled $16.8 million (1995: reduction of $5.2 million). In determining which, if any, net investment positions to hedge, the Company considers such factors as the magnitude of the exposed position and the cost of financing the hedging instruments. The Company's significant net foreign investment positions at December 31, 1996 included the Great British Pound ("GBP"), French Franc, German Mark and Japanese Yen. Throughout the year, the Company hedged a portion of these net investment exposures utilizing foreign currency exchange contracts and foreign currency-denominated borrowings. At December 31, 1996, the Company was party to foreign currency exchange contracts to sell French Francs with notional amounts totaling FF431.4 million ($82.4 million). These contracts matured in the first quarter of 1997. The Company also had certain variable-rate foreign currency-denominated borrowings outstanding in the U.S. including FF499.3 million ($95.3 million) and (Yen)15,147 million ($130.1 million). The Company had no net investment hedging instruments outstanding at December 31, 1995. FOREIGN CURRENCY TRANSACTION HEDGES The Company enters into foreign currency exchange contracts to minimize exposure of foreign currency transactions (such as export sales, raw materials purchases, and short-term intercompany financings) and firm commitments to fluctuating exchange rates. Gains or losses from these contracts are recognized in the basis of the transaction being hedged. Cash flows from these contracts are classified in the same category as the hedged transactions. The Company's principal net transactional exposures by major currency before the effects of foreign currency exchange contracts were as follows:
DECEMBER 31, 1996 DECEMBER 31, 1995 --------------------- --------------------- LOCAL U.S. DOLLAR LOCAL U.S. DOLLAR CURRENCY EQUIVALENT CURRENCY EQUIVALENT -------- ----------- -------- ----------- (ASSET (LIABILITY) IN MILLIONS) U.S. dollars*......................... 619 $ 619 139 $ 139 FF.................................... 506 97 (332) (68) GBP................................... (318) (540) (158) (246) DEM................................... (77) (50) 73 51 All other (generally <$45 million).... various (15) various 82 ----- ----- Total............................. $ 111 $ (42) ===== =====
- -------- * Represents U.S. dollar-denominated transactions of affiliates with functional currencies other than the U.S. dollar. IV-23 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company's policy is to hedge substantially all of its foreign currency transactional exposures. At December 31, 1996, the Company had entered into multiple forward contracts maturing in the first quarter of 1997 to buy and sell various currencies with notional amounts totaling $819.8 million and $936.9 million, respectively. Similar contracts which matured in the first quarter of 1996 totaled $478.3 million and $445.7 million, respectively, at December 31, 1995. At the acquisition date, Fisons had certain foreign currency exchange contracts in place that were speculative in nature to sell various currencies totaling $238.0 million. These contracts were effectively closed out at December 31, 1995 through the purchase of opposite contracts and the $9.2 million cost of settlement was fully accrued. The contracts were settled in 1996. As the Company conducts a significant portion of its operations outside the U.S., it is exposed to the impact of foreign exchange fluctuations on the U.S. dollar value of reported earnings. To manage this exposure, the Company may hedge a portion of its non-U.S.-based forecasted quarterly pretax earnings utilizing foreign currency exchange contracts. The portion of earnings that the Company hedges is based on a cost-benefit assessment which considers naturally offsetting exposures and the cost of hedging instruments. Such foreign currency exchange contracts are marked to market in other (income) expense, net. For the periods reported, the net gains/losses on these contracts were not significant due principally to the general stability vis-a- vis the U.S. dollar of the currencies hedged. Cash flows associated with the contracts are reported as part of cash flows from operating activities. There were no related contracts outstanding at December 31, 1996 and 1995. As part of the treasury services the Company performs for Centeon, at December 31, 1996, the Company had outstanding certain foreign currency exchange contracts to which Centeon was the counterparty. The notional amounts of these contracts to buy and sell various foreign currencies totaled $19.9 million and $7.2 million, respectively. The contracts, which expired in January 1997, reflected rates that were established on an arms-length basis; the related carrying values at December 31, 1996 was not significant. INTEREST SWAP ARRANGEMENTS The Company enters into interest rate swap contracts to manage its exposures to movements in interest rates and minimize its overall cost of borrowings. The net receivable or payable under the interest rate swaps is recognized as an adjustment to interest expense over the life of the underlying contracts. In 1996 and 1995, the Company was party to contracts to convert certain floating rate obligations into fixed rate instruments and contracts to convert certain fixed rate debt into floating rate debt as determined by the interest rate environment of the currency in which the underlying obligation was denominated. The Company's weighted average interest rate for the year ended December 31, 1996 was reduced by 8 basis points or approximately $2.3 million (1995: 6 basis points or $.5 million; 1994: 17 basis points or $1.3 million) as a result of interest rate swap contracts. In 1996, the Company initiated a long-term GBP-denominated intercompany loan from a U.S. subsidiary to a U.K. subsidiary totaling GBP 544.9 million ($850.0 million). The foreign exchange on the loan is recorded as a translation adjustment in shareholders' equity in accordance with SFAS No. 52 and resulted in an increase in shareholders' equity approximating $66.7 million in 1996. Interest on the intercompany loan is paid in GBP based on one-year LIBOR. With respect to the transaction, the Company entered into certain five-year arrangements ("dual currency swaps") with several banks whereby the U.S. subsidiary pays the banks GBP at rates based on one-year LIBOR times specified GBP principal amounts equal in total to the intercompany loan. The subsidiary receives from the banks U.S. dollars at rates based on one-month LIBOR plus a margin. There is no exchange of underlying principal. The interest income/expense differential is recorded as an adjustment to interest expense and was not significant in 1996. IV-24 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Interest rate swap arrangements outstanding at December 31, 1996 were as follows:
NOTIONAL U.S. DOLLAR FIXED OR CARRYING FAIR MARKET AMOUNT EQUIVALENT VARIABLE AMOUNT VALUE TERM AVERAGE RATE -------- ----------- -------- -------- ----------- ----------- ----------------------------- (RECEIVABLE (PAYABLE) IN MILLIONS) INTEREST RATE SWAPS*: $300 $300 Fixed $ (0.1) $ (3.8) 11/95-11/00 Pay 5.81%; Receive 3-month LIBOR (5.55%) (Yen)3000 26 Fixed (0.1) (0.4) 4/95- 4/98 Pay 2.01%; Receive 3-month LIBOR (5.91%) GBP100 170 Variable 1.4 2.5 3/96- 1/99 Pay 6-month LIBOR (6.0%); Receive 7.3% DUAL CURRENCY SWAPS: GBP545 $843 N/A $(24.9) $(40.3) 8/96- 7/01 Pay 1-year LIBOR (6.34%); Receive 1-month LIBOR (6.38%)
- -------- *The Company was party to similar interest rate swap contracts at December 31, 1995. NOTE 20. INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREA The Company is primarily engaged in the discovery, development, manufacture and marketing of a broad line of pharmaceutical products for human use. Among the Company's principal markets are France, currently the Company's largest market presence, the United States, Germany, the United Kingdom and Italy. The Company also has an expanding presence in Japan and South American countries. The Company has twelve pharmaceutical plants in France, two in the U.S., nine in Other Europe and twenty-four in the Rest of World region. The principal markets in which the Company conducts its business are subject to various governmental regulations with respect to the approval, manufacture and marketing of pharmaceutical products. In many markets, governments have instituted programs that impact pharmaceutical prices, reimbursement levels or prescription volumes. The nature of these regulations and their effect vary greatly from country to country. It is not possible to predict the extent to which the Company or the pharmaceutical industry might be affected by future legislative or regulatory developments. Information about the Company's operations for the years 1996, 1995 and 1994 by geographic area follows. Inter-area affiliated sales are not significant. Corporate loss before income taxes includes corporate administrative expenses, worldwide net interest expense and worldwide (income) losses of equity affiliates. IV-25 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1996 1995 1994 -------- -------- -------- (DOLLARS IN MILLIONS) Net sales: United States................................ $1,280.1 $1,314.2 $1,261.9 France....................................... 1,794.6 1,819.6 1,506.7 Other Europe................................. 1,417.4 1,207.4 1,015.5 Rest of World................................ 928.5 800.9 702.5 -------- -------- -------- Total net sales............................ $5,420.6 $5,142.1 $4,486.6 ======== ======== ======== Income before income taxes: United States................................ $ 207.4 $ 351.9 $ 356.9 France....................................... 107.2 245.9 172.6 Other Europe................................. 372.5 132.0 92.8 Rest of World................................ 200.3 62.5 77.6 Corporate.................................... (197.0) (254.3) (187.0) -------- -------- -------- Total income before income taxes........... $ 690.4 $ 538.0 $ 512.9 ======== ======== ======== Identifiable assets: United States................................ $1,467.1 $4,232.9 $1,107.2 France....................................... 2,099.6 1,801.9 1,519.6 Other Europe................................. 2,126.8 1,140.4 1,001.7 Rest of World................................ 1,142.1 787.4 518.6 Corporate.................................... 1,932.5 1,024.5 505.2 -------- -------- -------- Total identifiable assets.................. $8,768.1 $8,987.1 $4,652.3 ======== ======== ========
In 1996, U.S. income before income taxes ("IBT") included $97.4 million of charges related to the reassessment of certain intangibles and fixed asset carrying values associated with the ex-vivo cell processing initiatives of AIS. France IBT included $23.2 million of gains on the sale of nonstrategic assets. Other Europe IBT included $87.5 million of gains on the sales of nonstrategic assets including certain self-medication product rights. Corporate IBT reflected income from equity affiliates totaling $83.0 million which included $44.0 million of charges associated with the estimated impact of Centeon's voluntary recall of all in-date lots of albumin products. In 1995, U.S. IBT included $13.1 million of restructuring charges and $35.6 million of AIS-related acquired research and development. France IBT included $22.8 million from gains on sales of certain product rights. Other Europe IBT included $46.9 million of restructuring charges and $37.3 million of other charges related to the Fisons plc acquisition, including acquired research and development expense. In 1994, U.S. IBT included gains on asset sales, net of restructuring charges, of $15.1 million. France and Other Europe IBT included $49.0 million and $28.8 million, respectively, of restructuring charges, net of gains on sales of assets. The Rest of World area IBT included restructuring charges of $13.2 million. For presentation purposes, goodwill and intangibles and related amortization expense recorded in connection with the acquisition of Fisons were allocated to the U.S. at December 31, 1995. In 1996, these balances were reflected in the appropriate geographic region. NOTE 21. RELATED PARTY TRANSACTIONS RHONE-POULENC S.A. The entities comprising the Company manage their cash separately. In the largest countries such as the U.S., France, the U.K. and Germany, the local entities have access to RP cash pooling arrangements whereby they can, at their own request, lend to or borrow from RP at market terms and conditions. IV-26 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) Amounts receivable from RP and affiliates totaled $48.9 million and $61.3 million at December 31, 1996 and 1995, respectively. The 1996 balance included $6.3 million of accounts receivable from sales of products and services to RP (1995: $8.5 million) and $39.4 million classified as other current assets (1995: $36.8 million). Accounts payable related to purchase of materials and services from RP and affiliates were $16.8 million at December 31, 1996 (1995: $12.2 million); accrued and other liabilities due to RP at December 31, 1996 were $30.0 million (1995: $20.9 million). In 1996, sales to RP and affiliates were $31.3 million (1995: $31.1 million; 1994: $29.7 million). Materials purchased from RP totaled $38.7 million in 1996 (1995: $41.4 million; 1994: $36.8 million). At December 31, 1996, debt with RP and affiliates totaled $259.8 million (1995: $653.0 million). Interest expense incurred with respect to RP indebtedness in 1996 was $22.3 million (1995: $12.4 million; 1994: $15.8 million). RP charges the Company for expenses incurred on its behalf, including research, data processing, insurance, legal, tax, advertising, public relations and management fees. Such charges are reflected in the financial statements and amounted to approximately $24.0 million in 1996 (1995: $23.6 million; 1994: $24.5 million). Management believes that the expenses so charged are representative of amounts that the Company would have incurred if it had been operated as an unaffiliated entity. In the 1995 second quarter, the Company acquired Cooper and a pharmaceutical business in Brazil from RP for cash and preferred stock of an RPR subsidiary aggregating approximately $273.2 million. The preferred shares, accounted for as minority interest in other liabilities, have a liquidation preference approximating FF645.0 million (approximately $123.1 million) and pay dividends of 7.5% per annum on a stated value of FF145.0 million. The acquisition agreements call for potential adjustments to the purchase price of the businesses based on several factors, including earnings performance. In December 1995, the Company issued $500.0 million of undated capital equity notes to RP. Semiannual remuneration on the unpaid principal balance of the equity notes is based on LIBOR plus a margin and approximated $35.2 million in 1996. CENTEON The Company and Centeon participate in a cash pooling arrangement whereby the entities comprising Centeon can borrow from or lend to RPR at market terms and conditions. Receivables and investments related to Centeon classified as current assets totaled $50.2 million at December 31, 1996. At December 31, 1996, the Company's net investment in capital leasing arrangements with Centeon totaled $59.3 million; related rental income for the year totaled $3.6 million. Current liabilities due to Centeon totaled $35.3 million. Notes payable to Centeon totaled $8.4 million at December 31, 1996. Purchases of certain plasma-based products from Centeon totaled $27.8 million in 1996. The Company is a party to a toll manufacturing agreement with Centeon with respect to the manufacture, finishing and/or packaging of certain pharmaceutical compounds and products. Charges at full standard cost to RPR under this agreement totaled $49.5 million in 1996. In 1996, the Company received a net cash distribution from Centeon totaling $71.3 million. The Company and Centeon have entered into certain service agreements which are generally renewable on an annual basis. The Company charges Centeon for such services as treasury, accounting, information systems, product distribution, tax and legal. These charges approximated $6.0 million in 1996. IV-27 RHONE-POULENC RORER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) NOTE 22. CONTINGENCIES The Company is involved in litigation incidental to its business including, but not limited to: (1) approximately 541 pending lawsuits in the United States, Canada and Ireland against the Company and its Armour Pharmaceutical Company subsidiary ("Armour"), in which it is claimed by individuals infected with the Human Immunodeficiency Virus ("HIV") that their infection with HIV and, in some cases, resulting illnesses, including Acquired Immune Deficiency Syndrome-related conditions or death therefrom, may have been caused by administration of anti-hemophilic factor ("AHF") concentrates processed by Armour in the early and mid-1980's. Armour has also been named as a defendant in certain proposed class action lawsuits filed on behalf of HIV-infected hemophiliacs and their families. None of these cases involve Armour's currently distributed AHF concentrates. In August 1996, the Company, with three other U.S. plasma fractionators defending the U.S. AHF litigation, signed a Settlement Agreement with the plaintiffs with respect to this litigation which, subject to certain conditions, provides for payment of $100,000 to each eligible claimant or claimant group and the payment of up to $40 million in attorneys fees. One significant condition of the settlement is that potential subrogation claims by third party medical providers be resolved to the mutual satisfaction of the parties and that the class members' eligibility for federal program entitlements be maintained. The Company and the other fractionator-defendants are working with the plaintiffs' counsel to resolve these issues; (2) legal actions pending against one or more subsidiaries of the Company and various groupings of more than one hundred pharmaceutical companies, in which it is generally alleged that certain individuals were injured as a result of the development of various reproductive tract abnormalities because of in utero exposure to diethylstilbestrol ("DES") (typically, two former operating subsidiaries of the Company are named as defendants, along with numerous other DES manufacturers, when the claimant is unable to identify the manufacturer); (3) antitrust actions alleging that certain pharmaceutical companies, including the Company, engaged in price discrimination practices to the detriment of certain independent community pharmacists and consumers; and (4) alleged breach of contract by a subsidiary of the Company with respect to agreements involving a bisphosphonate compound and Lozol(R). The eventual outcomes of the above matters of pending litigation cannot be predicted with certainty. The defense of these matters and the defense of expected additional lawsuits related to these matters may require substantial legal defense expenditures. The Company follows Statement of Financial Accounting Standards No. 5 in determining whether to recognize losses and accrue liabilities relating to such matters. Accordingly, the Company recognizes a loss if available information indicates that a loss or range of losses is probable and reasonably estimable. The Company estimates such losses on the basis of current facts and circumstances, prior experience with similar matters, the number of claims and the anticipated cost of administering, defending and, in some cases, settling such claims. The Company has also recorded as an asset certain insurance recoveries which are determined to be probable of occurrence. If a contingent loss is not probable but is reasonably possible, the Company discloses this contingency in the notes to its consolidated financial statements if it is material. Based on the information available, the Company does not believe that reasonably possible uninsured losses in excess of amounts recorded for the above matters of litigation would have a material adverse impact on the Company's financial position, results of operations or cash flows. The Company has been advised of its potential liability related to alleged past waste disposal practices, including potential involvement at five sites on the U.S. National Priority List created by the Comprehensive Environmental Response Compensation and Liability Act (Superfund). For the majority of these sites, the Company's estimated liability is not significant. With respect to two of the sites, the Company is currently not able to estimate its share of potential liability as the assessment of site conditions, the identification of remediation methods and costs, and the quantification of relative contributions among potentially responsible parties have not yet advanced to the stage where a reasonable estimate of loss can be made. As of December 31, 1996, the Company had unused standby letters of credit outstanding of $101.5 million. The letters of credit are issued primarily in the form of guarantees or performance bonds. IV-28 RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of Rhone-Poulenc Rorer Inc. is responsible for the information and representations contained in this report. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles and that the other information in this annual report is consistent with those statements. In preparing the financial statements, management is required to include amounts based on estimates and judgments which it believes are reasonable under the circumstances. In fulfilling its responsibilities for the integrity of the data presented and to safeguard the Company's assets, management employs a system of internal accounting controls designed to provide reasonable assurance, at appropriate cost, that the Company's assets are protected and that transactions are appropriately authorized, recorded and summarized. This system of control is supported by the selection of qualified personnel, by organizational assignments that provide appropriate delegation of authority and division of responsibilities, and by the dissemination of written policies and procedures. This control structure is further reinforced by a program of internal audits including a policy that requires responsive action by management. Coopers & Lybrand L.L.P., the Company's independent accountants, performs audits in accordance with generally accepted auditing standards. The independent accountants conduct a review of internal accounting controls to the extent required by generally accepted auditing standards and perform such tests and procedures as they deem necessary to arrive at an opinion on the fairness of the financial statements presented herein. The Board of Directors, through the Audit Committee comprised solely of directors who are not employees of the Company, meets with management, the internal auditors and the independent accountants to ensure that each is properly discharging its respective responsibilities. Both the independent accountants and the internal auditors have free access to the Audit Committee, without management present, to discuss the results of their work, including internal accounting controls and the quality of financial reporting. The Audit Committee met three times in 1996. /s/ Michel de Rosen - ------------------------------------- MICHEL DE ROSEN CHAIRMAN AND CHIEF EXECUTIVE OFFICER /s/ Patrick Langlois - ------------------------------------- PATRICK LANGLOIS EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER /s/ Philippe Maitre - ------------------------------------- PHILIPPE MAITRE VICE PRESIDENT AND CORPORATE CONTROLLER IV-29 RHONE-POULENC RORER INC. AND SUBSIDIARIES QUARTERLY DATA (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
QUARTER ENDED 1996 QUARTER ENDED 1995 ------------------------------------------- ------------------------------------------- RESTATED MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net sales............... $1,272.4 $1,346.1 $1,278.0 $1,524.1 $1,098.4 $1,241.3 $1,212.7 $1,589.7 Gross profit............ 838.2 902.3 907.4 1,106.7 694.4 813.6 792.8 1,094.9 Net income available to common shareholders.... 74.0 91.9 97.4 165.4 89.5 85.7 107.3 55.3 Earnings per common share.................. .55 .68 .72 1.21 .66 .64 .80 .41 Market price per common share: High................... 66.875 69.250 77.750 80.500 43.500 43.125 45.875 54.500 Low.................... 50.500 58.000 62.125 66.000 36.250 40.375 40.500 43.750 Common dividends paid... .30 .32 .32 .32 .30 .30 .30 .30
- -------- Results for the third quarter of 1996 included charges of $33.8 million ($.17 per share) associated with the estimated impact of Centeon's voluntary worldwide recall of albumin products sold under the trademarks Albuminar(R) and Plasma-Plex(R). Results for the fourth quarter of 1996 included charges of $102.6 million ($.50 per share) from the reassessment of certain intangibles and fixed asset carrying values related to AIS. Fourth quarter 1996 results also included gains on the sales of certain nonstrategic European assets totaling $110.7 million ($.51 per share). Results for the first quarter of 1995 are restated to include the results of Cooperation Pharmaceutique Francaise and a pharmaceutical business in Brazil, acquired from Rhone-Poulenc S.A., and earnings per common share for the period reflect pro forma adjustments giving effect to interest and preferred dividends relative to these acquisitions. Results for the first quarter of 1995 included pretax income of $11.1 million ($.04 per share) from gains on sales of certain assets and product rights ($49.5 million), including the Company's U.S. and Canadian over-the-counter businesses, net of charges for acquired research and development expense ($13.0 million) and the reassessment of certain asset carrying values ($25.4 million). Results for the fourth quarter of 1995 included $126.5 million ($.75 per share) of acquisition-related restructuring and other charges, including $60.0 million of pretax restructuring charges, $43.6 million of acquired research and development charged to operations and $22.9 million of integration and other costs. Earnings per common share amounts for each quarter are required to be computed independently and, therefore, the sum of the four quarters does not necessarily equal the amount computed for the total year. Rhone-Poulenc Rorer Inc. (ticker symbol: RPR) common shares are listed and traded on the New York and Paris stock exchanges, and are traded, unlisted, on the Philadelphia, Boston, Pacific and Midwest stock exchanges. On February 28, 1997, there were 7,339 holders of record of RPR common shares. IV-30 SCHEDULE V UNAUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) FOR THE COMPANY FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1997 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Rhone-Poulenc Rorer Inc.: We have reviewed the accompanying condensed consolidated balance sheet of Rhone-Poulenc Rorer Inc. and subsidiaries as of June 30, 1997, and the related condensed consolidated statements of income and cash flows for the three- and six-month periods ended June 30, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Rhone-Poulenc Rorer Inc. and subsidiaries as of December 31, 1996, and the related consolidated statements of income and cash flows for the year then ended (not presented herein); and in our report dated January 22, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1996, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Coopers & Lybrand L.L.P. _____________________________________ Coopers & Lybrand L.L.P. Philadelphia, Pennsylvania July 17, 1997 V-1 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED--AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------- ------------------- 1997 1996 1997 1996 --------- --------- -------- --------- Net sales.......................... $ 1,238.0 $ 1,346.1 $2,323.8 $ 2,618.5 Cost of products sold.............. 367.0 443.8 691.4 878.0 Selling, delivery and administrative expenses........... 500.4 532.5 946.2 1,046.7 Research and development expenses.. 220.2 214.4 405.2 414.3 --------- --------- -------- --------- Operating income................. 150.4 155.4 281.0 279.5 Interest expense, net.............. 37.5 43.5 76.2 84.5 Other (income), net................ (15.4) (36.6) (20.8) (77.4) --------- --------- -------- --------- Income before income taxes....... 128.3 148.5 225.6 272.4 Provision for income taxes......... 39.6 46.3 70.1 85.2 --------- --------- -------- --------- Net income....................... 88.7 102.2 155.5 187.2 Dividends on preferred stock and remuneration on capital equity notes............................. 11.8 10.3 21.9 21.3 --------- --------- -------- --------- Net income available to common shareholders.................... $ 76.9 $ 91.9 $ 133.6 $ 165.9 ========= ========= ======== ========= Primary earnings per common share.. $ .56 $ .68 $ .98 $ 1.23 ========= ========= ======== ========= Cash dividends per common share.... $ .32 $ .32 $ .64 $ .62 ========= ========= ======== ========= Average common shares outstanding.. 137.1 135.7 137.0 135.3 ========= ========= ======== =========
See Notes to Condensed Consolidated Financial Statements. V-2 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED--DOLLARS IN MILLIONS)
JUNE 30, DECEMBER 31, 1997 1996 -------- ------------ ASSETS Current: Cash and cash equivalents............................... $ 114.4 $ 100.6 Cash pooling arrangements with Rhone-Poulenc S.A. ...... 4.2 3.2 Short-term investments and notes receivable............. 63.1 38.7 Trade accounts receivable, less reserves of $88.0 (1996: $111.3)................................................ 858.6 984.1 Inventories............................................. 796.7 800.7 Other current assets.................................... 762.3 846.2 -------- -------- Total current assets................................ 2,599.3 2,773.5 Time deposits, at cost.................................. 128.4 128.4 Property, plant and equipment, net of accumulated depreciation of $1,435.5 (1996: $1,461.1).............. 1,426.5 1,525.9 Goodwill, net of accumulated amortization of $320.3 (1996: $294.9)......................................... 2,601.0 2,739.0 Intangibles, net of accumulated amortization of $252.2 (1996: $231.4)......................................... 707.4 766.7 Other assets............................................ 839.1 834.6 -------- -------- Total assets........................................ $8,301.7 $8,768.1 ======== ======== LIABILITIES Current: Short-term debt......................................... $ 157.9 $ 126.7 Accounts payable........................................ 427.1 594.7 Other current liabilities............................... 1,109.4 1,331.5 -------- -------- Total current liabilities........................... 1,694.4 2,052.9 Long-term debt.......................................... 2,432.0 2,272.0 Notes payable to Rhone-Poulenc S.A. & affiliates........ 187.9 253.0 Deferred income taxes................................... 241.6 218.0 Other liabilities, including minority interests......... 1,208.4 1,322.4 -------- -------- Total liabilities................................... 5,764.3 6,118.3 Contingencies........................................... SHAREHOLDERS' EQUITY Money market preferred stock, without par value (liquidation preference $100,000 per share); authorized, issued and outstanding 1,750 shares........ 175.0 175.0 Capital equity notes.................................... 500.0 500.0 Common stock, without par value; stated value $1 per share; authorized 600,000,000 shares; issued and outstanding 137,401,319 shares (1996: 136,615,917 shares)................................................ 142.6 141.6 Capital in excess of stated value....................... 273.9 234.8 Retained earnings....................................... 1,883.8 1,837.9 Employee Benefits Trust................................. (198.1) (185.7) Cumulative translation adjustments...................... (239.8) (53.8) -------- -------- Total shareholders' equity.......................... 2,537.4 2,649.8 -------- -------- Total liabilities and shareholders' equity.......... $8,301.7 $8,768.1 ======== ========
See Notes to Condensed Consolidated Financial Statements. V-3 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED--DOLLARS IN MILLIONS)
SIX MONTHS ENDED JUNE 30, ------------------ 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by operating activities................ $ 13.0 $ 46.5 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures....................................... (130.5) (165.9) Assets sold, net........................................... 25.7 226.0 Purchases of investments/product rights.................... (44.6) (49.7) Sales of investments/product rights........................ 20.9 29.5 Net investment hedging, net................................ 7.7 -- -------- -------- Net cash provided by (used in) investing activities.... (120.8) 39.9 CASH FLOWS FROM FINANCING ACTIVITIES: Debt borrowings (repayments): Short-term debt, net..................................... 40.3 (71.7) Long-term debt, net...................................... 168.5 (9.9) Dividends and remuneration paid............................ (109.5) (105.2) Issuances of common stock.................................. 39.8 52.5 Repurchases of common stock for the Employee Benefits Trust..................................................... (12.4) -- -------- -------- Net cash provided by (used in) financing activities.... 126.7 (134.3) Effect of exchange rate changes on cash and cash equivalents............................................... (5.1) (6.6) -------- -------- Net increase (decrease) in cash and cash equivalents....... 13.8 (54.5) Cash and cash equivalents at beginning of period........... 100.6 115.4 -------- -------- Cash and cash equivalents at end of period................. $ 114.4 $ 60.9 ======== ========
See Notes to Condensed Consolidated Financial Statements. V-4 RHONE-POULENC RORER INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. RESULTS FOR INTERIM PERIODS In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect the adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of financial position, cash flows and results of operations for the periods presented. Certain prior year items have been reclassified to conform to current classifications. The Company's consolidated financial statements are prepared on a basis in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. See Note 10 for disclosure of contingent liabilities and related matters. The statements are presented in accordance with the requirements of Form 10- Q and do not include all disclosures required by generally accepted accounting principles or those made in the Annual Report on Form 10-K. The Annual Report on Form 10-K for the year 1996 is on file with the Securities and Exchange Commission and should be read in conjunction with these condensed consolidated financial statements. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," effective for periods ending after December 15, 1997. The Statement simplifies earnings per share calculations and requires presentation of both basic and diluted earnings per share on the face of the statement of income. Adoption of SFAS No. 128 will not have a material impact on the Company's earnings per share calculations. NOTE 2. ACCOUNTING POLICIES FOR DERIVATIVE FINANCIAL INSTRUMENTS FOREIGN CURRENCY EXCHANGE CONTRACTS Foreign Currency Transactions The Company enters into foreign currency exchange contracts to minimize exposure of foreign currency transactions (such as export sales, raw materials purchases, and short-term intercompany financings) and firm commitments to fluctuating exchange rates. The Company's foreign currency transaction hedges are executed centrally to minimize transaction costs and to monitor consolidated net exposures in all currencies and the effectiveness of the hedging relationships. Contracts hedging foreign currency transactions are marked to market at each balance sheet date under the fair value method; the resulting gains or losses are recognized in other (income), net, offsetting the corresponding losses or gains on the transactions being hedged. Cash flows associated with these foreign currency exchange contracts are classified in the same category as the hedged transactions. The Company may also seek to minimize exposure of its non-U.S.-based forecasted quarterly pretax earnings to foreign currency fluctuations by utilizing foreign currency exchange contracts. These contracts are marked to market in other (income), net at each balance sheet date. Related cash flows are classified as cash flows from operating activities. Net Investment Hedges The Company may utilize foreign currency exchange contracts and foreign currency-denominated borrowings to limit the exposure of its net investments in foreign subsidiaries to currency fluctuations and V-5 RHONE-POULENC RORER INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) thereby limit the volatility of reported equity. These arrangements are designated as hedges of the Company's net foreign investments. Both realized and unrealized gains and losses on these arrangements which offset the gains and losses on the related net investments are recorded as cumulative translation adjustments ("CTA") in shareholders' equity. Cash flows associated with the hedging instruments are classified as cash flows from investing activities. If a foreign currency-denominated borrowing or foreign currency exchange contract that qualifies as a hedge of a net investment is terminated, any gains or losses previously recorded in CTA remain in CTA. These gains or losses would be recognized upon liquidation or sale of all or substantially all of the net foreign investment. The net receivables (payables) related to the Company's foreign currency exchange contracts are included in other current assets (liabilities). Interest Rate Swap Contracts The Company may enter into interest rate swap contracts to manage its exposures to movements in interest rates and to minimize its overall cost of borrowings. The net receivables (payables) under interest rate swap contracts are recorded in other current assets (liabilities) and recognized as adjustments to interest expense. Cash flows related to interest rate swap contracts are included in cash flows from operating activities. If an interest rate swap contract that hedges underlying debt on the balance sheet is terminated, the gain or loss on the contract is deferred and amortized into income as an adjustment to interest expense over the shorter of the remaining life of the terminated swap contract or the remaining time to maturity of the hedged debt. If an interest rate swap contract remains outstanding after termination of the hedging relationship, changes in the market value of the contract are recognized currently in income. NOTE 3. LICENSING AGREEMENT In June 1997, the Company licensed to Watson Laboratories, Inc. ("Watson") exclusive worldwide (except for New Zealand and Korea) distribution rights for Dilacor XR(R) and its generic equivalents for a period of four and one-half years after which time Watson has the option to purchase the product rights. Over the licensing period, RPR expects to receive from Watson annual licensing fees approximating $135.0 million and royalties on future sales of diltiazem products. In connection with the transaction, the Company transferred remaining related inventory to Watson in the second quarter for a value approximating its normal wholesaler selling price. The Company also recorded a pretax gain of $16.0 million in the second quarter on the termination of a generics diltiazem-related partnership with Watson. In July 1997, the Company received a $55 million cash payment from Watson representing the prepayment of both the second half of 1997 licensing fees/royalties and the purchase option, which is refundable if not exercised by Watson. NOTE 4. OTHER (INCOME), NET CENTEON Losses from equity affiliates, principally the Company's interest in the Centeon joint venture, totaled $14.2 million in the second quarter of 1997 and $19.8 million on a year-to date basis as compared with income of $40.6 million and $77.7 million, respectively, for the comparable prior year periods. Centeon's first half of 1997 results were adversely affected by the temporary suspension of production and distribution at its U.S. facility related to an October 1996 voluntary worldwide recall of Albuminar(R)/Plasma-Plex(R) products and a January 1997 consent decree with the U.S. Food and Drug Administration ("FDA"). The negative contribution from Centeon V-6 RHONE-POULENC RORER INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) for the first six months of 1997 was also impacted by $31.5 million of pretax recall-related and manufacturing start-up costs, including costs related to work-in-process and idle capacity issues and costs associated with compliance with the consent decree. In May 1997, the FDA notified Centeon that it appeared to be in compliance with current Good Manufacturing Practices and authorized resumption of distribution of plasma-based products, subject to FDA testing and lot release, and pharmaceutical products at its U.S. facility. Based on a phased-in production schedule, newly-manufactured plasma-based products were sent to the FDA for lot release in June and distribution of new production has begun on a limited basis. Centeon expects product distribution to ramp up gradually over the remainder of the year. Centeon sales for the second quarter of 1997, including sales to certain RPR affiliates, totaled $175.9 million (1996: $259.0 million). Gross margin approximated 28% of sales (1996: 48%). Losses before the effect of income taxes totaled $17.8 million compared to income before taxes ("IBT") of $59.6 million in 1996. On a year-to-date basis, sales totaled $348.0 million (1996: $496.7 million). Gross margin approximated 32% (1996: 52%) and losses before the effect of income taxes totaled $16.5 million (1996: IBT of $141.6) Other Items Other (income), net included a pretax gain of $16.0 million on the termination of a partnership arrangement with Watson. Other (income), net also included net gains totaling $7.3 million and $14.4 million for the three- and six-month periods, respectively, on foreign currency exchange contracts used to hedge a portion of the Company's non-U.S.- based forecasted quarterly pretax earnings. Similar gains totaled $4.7 million for both the comparable prior year periods. NOTE 5. INCOME TAXES The Company records income tax expense based on an estimated full year effective income tax rate. The year-to-date June 30 reported effective income tax rate approximated 31.1% in 1997 compared with 31.3% in 1996. In July 1997, the French government proposed legislation to increase the corporate income tax on both ordinary income and capital gains. The legislation is expected to be enacted in September 1997 with retroactive effect to January 1, 1997. The Company is in the process of quantifying the impact such changes would have on its worldwide effective income tax rate, but estimates that the legislation has the potential to increase the Company's effective income tax rate by up to one and one-half percentage points. NOTE 6. INVENTORIES Inventories consisted of the following:
JUNE 30, DECEMBER 31, 1997 1996 -------- ------------ (DOLLARS IN MILLIONS) Finished goods......................................... $364.7 $376.9 Work in process........................................ 142.7 159.8 Raw materials and supplies............................. 289.3 264.0 ------ ------ $796.7 $800.7 ====== ======
V-7 RHONE-POULENC RORER INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) NOTE 7. SHAREHOLDERS' EQUITY
MONEY MARKET CAPITAL COMMON CAPITAL IN EMPLOYEE CUMULATIVE PREFERRED EQUITY STOCK AT EXCESS OF RETAINED BENEFITS TRANSLATION STOCK NOTES STATED VALUE STATED VALUE EARNINGS TRUST ADJUSTMENTS --------- ------- ------------ ------------ -------- -------- ----------- (DOLLARS IN MILLIONS) Balance, January 1, 1997................... $175.0 $500.0 $141.6 $234.8 $1,837.9 $ (185.7) $ (53.8) Net income.............. 155.5 Cash dividends, $.64 per common share........... (87.7) Dividends on preferred stock.................. (4.7) Remuneration on capital equity notes........... (17.2) Repurchase of shares for Employee Benefits Trust.................. (12.4) Issuance of shares under employee benefit plans.................. 1.0 39.1 Translation adjust- ments.................. (186.0) Balance, June 30, 1997.. $175.0 $500.0 $142.6 $273.9 $1,883.8 $(198.1) $(239.8) ====== ====== ====== ====== ======== ======== =======
In 1997, the Company's Board of Directors approved the open market repurchase from time to time of up to five million of the Company's common shares. In the second quarter of 1997, the Company repurchased approximately 168,000 of its common shares at a cost totaling $12.4 million. These shares are held in an Employee Benefits Trust to fund future employee benefits in the United States. In August 1997, the Company redeemed the outstanding 750 shares of Series 1 money market preferred stock for $75.0 million plus accrued dividends. NOTE 8. RESTRUCTURING In December 1995, the Company established a combined $160.0 million reserve related to the restructuring of Fisons and RPR operations as a direct result of the acquisition of Fisons. The liability represented expected cash outlays, primarily severance-related, associated with eliminating approximately 1,900 positions principally in the marketing, administrative and manufacturing functions. At June 30, 1997, the remaining 1995 restructuring reserve of $28.9 million represented outstanding social costs. For the three- and six-month periods ended June 30, 1997, cash outlays associated with the 1995 restructuring program totaled $2.7 million and $10.4 million, respectively (1996: $49.0 million and $76.8 million, respectively). NOTE 9. RELATED PARTY TRANSACTIONS RHONE-POULENC S.A. The entities comprising the Company manage their cash separately. In the largest countries such as the U.S., France, the U.K. and Germany, the local entities have access to RP cash pooling arrangements whereby they can, at their own request, lend to or borrow from RP at market terms and conditions. Receivables from RP at June 30, 1997 included $8.9 million in accounts receivable from sales of products to RP, $16.0 million classified as other current assets, and $6.1 million classified as other non-current assets. V-8 RHONE-POULENC RORER INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) Accounts payable related to the purchase of materials and services from RP were $13.6 million at June 30, 1997; accrued and other liabilities due to RP totaled $16.6 million. As of June 30,1997 the Company had $2.7 million of short-term and $187.9 million of long-term debt outstanding with RP. Sales to RP totaled $6.0 million in the second quarter and $10.7 million on a year-to-date basis. Services purchased from and interest paid to RP totaled $7.4 million in the second quarter and $15.4 million for the six-month period. For the comparable 1996 periods, sales to RP were $7.9 million and $17.7 million respectively. Materials and services purchased from and interest paid to RP totaled $4.3 million and $16.0 million, respectively. In connection with the 1995 acquisitions from RP, a subsidiary of the Company issued preferred shares to RP which have a liquidation preference approximating 645.0 million French francs (approximately $109.7 million) and pay dividends of 7.5% per annum on a stated value of 145.0 million French francs. The preferred shares are accounted for as minority interest and are reflected in other liabilities. The acquisition agreements call for potential adjustments to the purchase price of the businesses based on several factors, including earnings performance. CENTEON Short-term notes receivable from Centeon, which bear interest after 45 days at LIBOR plus a margin, totaled $33.5 million at June 30, 1997. Other current receivables related to Centeon totaled $2.0 million at June 30, 1997. At June 30, 1997, the Company's net investment in capital leasing arrangements with Centeon totaled $55.9 million. In 1997, the Company issued a shareholders loan to Centeon totaling $22.0 million and bearing interest at LIBOR plus a margin. The shareholder loan is due on September 30, 1997, but is renewable for successive 90-day periods, ending on December 31, 1999, subject to certain partial repayment provisions and financial ratio requirements of Centeon. Current liabilities due to Centeon at June 30, 1997 totaled $6.2 million; notes payable to Centeon totaled $18.3 million. In the second quarter, the Company made a $16.0 million cash payment to Centeon representing the return of an excess distribution made in 1996 of RPR's share of Centeon's 1996 earnings. NOTE 10. CONTINGENCIES The Company is involved in litigation incidental to its business, including, but not limited to: (1) approximately 557 pending lawsuits in the United States, Canada and Ireland against the Company and its Armour Pharmaceutical Company subsidiary ("Armour"), in which it is claimed by individuals infected with the Human Immunodeficiency Virus ("HIV") that their infection with HIV and, in some cases, resulting illnesses, including Acquired Immune Deficiency Syndrome-related conditions or death therefrom, may have been caused by administration of antihemophilic factor ("AHF") concentrates processed by Armour in the early-and mid-1980's. Armour has also been named as a defendant in certain proposed class action lawsuits filed on behalf of HIV-infected hemophiliacs and their families. None of the cases involves Armour's currently distributed AHF concentrates. In August 1996, the Company, with the three other U.S. plasma fractionators defending the U.S. AHF litigation, signed a Settlement Agreement with the plaintiffs with respect to this litigation which, subject to certain conditions, provides for payment of $100,000 to each eligible claimant or claimant group and the payment of up to $40 million in attorneys fees. Following a fairness hearing in May 1997, the court declared the class settlement offer to be fair to the class. In July 1997, two appeals filed with respect to the settlement were withdrawn and then dismissed by the Seventh Circuit Court of Appeals. Payment into the settlement fund will begin in August 1997; (2) antitrust actions alleging that certain pharmaceutical companies, including the Company, engaged in price discrimination practices to the detriment of certain independent community pharmacists and consumers; and (3) alleged breach of contract by a subsidiary of the Company with respect to agreements involving a bisphosphonate compound and Lozol(R). V-9 RHONE-POULENC RORER INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) The eventual outcomes of the above matters of pending litigation cannot be predicted with certainty. The defense of these matters and the defense of additional lawsuits related to these matters may require substantial legal defense expenditures. The Company follows Statement of Financial Accounting Standards No. 5 in determining whether to recognize losses and accrue liabilities relating to such matters. Accordingly, the Company recognizes a loss if available information indicates that a loss or range of losses is probable and reasonably estimable. The Company estimates such losses on the basis of current facts and circumstances, prior experience with similar matters, the number of claims and the anticipated cost of administering, defending and, in some cases, settling such claims. The Company has also recorded as an asset certain insurance recoveries which are determined to be probable of occurrence. If a contingent loss is not probable but is reasonably possible, the Company discloses this contingency in the notes to its consolidated financial statements if it is material. Based on the information available, the Company does not believe that reasonably possible uninsured losses in excess of amounts recorded for the above matters of litigation would have a material adverse impact on the Company's financial position, results of operations or cash flows. The Company has been advised of its potential liability related to alleged past waste disposal practices, including potential involvement at three sites on the U.S. National Priority List created by the Comprehensive Environmental Response Compensation and Liability Act (Superfund). The Company's estimated liability for these sites is not significant. V-10 SCHEDULE VI SUMMARY FINANCIAL STATEMENT FOR PURCHASER FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 Purchaser's Consolidated Financial Statements, and the Notes related thereto, are incorporated herein by reference to pages F-1 to F-29 of the Purchaser's Annual Report on Form 20-F for the fiscal year ended December 31, 1996. Such report and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048, and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the Commission by telephoning 1-800-SEC-0330. Copies of such materials may also be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain reports and other information concerning the Company may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Solely for the convenience of the reader, summary financial information regarding Purchaser is set forth below. Such summary information is qualified in its entirety by reference to the Consolidated Financial Statements, and the Notes related thereto contained in the Purchaser's 1996 Form 20-F, incorporated herein by reference.
1996 1995 ------------- ------------- (IN MILLIONS FRENCH FRANCS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net sales........................................ 85,818 84,793 Operating expenses Production costs and expenses.................. (54,282) (54,829) Administrative and selling expenses............ (22,041) (20,781) Amortization of intangible assets.............. (1,623) (1,235) Provision for restructuration.................. (457) (1,095) Other charges--Fisons/AIS...................... (523) (630) ------------- ------------- Operating income................................. 6,892 6,223 Other income (expenses) Equity in earnings (losses) of affiliated com- panies........................................ 829 406 Interest expense--net.......................... (2,151) (1,726) Gains on sales of assets--net.................... 844 100 Other income--net................................ (228) (45) Income before taxes and minority interests....... 6,186 4,958 Provision for income taxes....................... (1,597) (887) Income before minority interests................. 4,589 4,071 Minority interests in net income of consolidated subsidiaries.................................... (718) (753) ------------- ------------- Net income before preferred remuneration..... 3,871 3,318 Preferred remuneration........................... (1,131) (1,184) Net income available for distribution to com- mon shareholders............................ 2,740 2,134 ============= ============= PER SHARE IN FF: . Common stock--Ordinary shares "A".............. 8.44 6.71 . Preferred shares "B"........................... 9.69 7.96 BALANCE SHEET DATA: Current Assets Cash........................................... 1,040 1,050 Short-term deposits............................ 3,100 1,452 Marketable securities.......................... 1,321 1,821 Net trade accounts and notes receivable........ 12,357 12,090 Inventories.................................... 16,266 15,583 Prepaid expenses and other current assets...... 12,830 13,355 ------------- ------------- Total current assets......................... 46,914 45,351
VI-1
1996 1995 ------- ------- Investments and other assets Investments in equity method investees..................... 3,721 3,938 Deposits and long-term receivables......................... 2,085 1,839 Other investments.......................................... 2,771 2,580 Deferred charges and other assets.......................... 9,816 7,791 ------- ------- 18,393 16,148 Property, plant and equipment At cost.................................................... 83,796 79,407 Less: accumulated depreciation............................. (46,901) (44,388) ------- ------- 36,895 35,019 Intangible assets Gross value................................................ 46,728 44,010 Less accumulated amortization.............................. (7,090) (5,120) 39,638 38,890 ------- ------- TOTAL ASSETS............................................. 141,840 135,408 ======= ======= Current liabilities Bank overdrafts............................................ 2,991 2,577 Trade accounts and notes payable........................... 8,816 8,974 Current portion of long-term debt.......................... 2,624 1,981 Short-term borrowings...................................... 6,673 9,881 Other current liabilities.................................. 18,141 16,699 ------- ------- Total current liabilities................................ 39,245 40,112 ======= ======= Long-term debt Debentures................................................. 9,101 9,203 Bank borrowings............................................ 17,840 17,276 ------- ------- 26,941 26,479 Other long-term liabilities Deferred income taxes...................................... 3,595 2,719 Provision for supplementary pension and retirement indemni- ties...................................................... 6,681 6,275 Provision for restructuration.............................. 740 1,018 Other provisions long-term liabilities..................... 6,594 5,770 ------- ------- 17,610 15,782 Commitments and contingencies Mandatorily redeemable partnership interest................ 2,429 2,273 Minority interests in net assets of consolidated subsidiar- ies....................................................... 6,334 5,763 Amortizable preferred securities........................... 2,728 2,830 Shareholders' equity Participating shares--1983 and Series A-1989............... 996 997 Capital equity notes--1986, 1991 and 1993.................. 5,767 5,767 Preference shares, Series A--1993.......................... 2,312 2,312 Preferred shares "B", Par value FF25: 926,820 outstanding.. 23 23 Common stock--Ordinary shares "A", Par value FF25:327,320,864 outstanding.............................. 8,183 8,003 Additional paid-in capital of Rhone-Poulenc S.A............ 16,146 15,558 Retained earnings and other additional paid-in capital..... 17,877 15,903 Translation reserve........................................ (4,751) (6,394) Total shareholders' equity............................... 46,553 42,169 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... 141,840 135,408 ======= =======
VI-2 Facsimiles of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal and certificates evidencing Shares and any other required documents should be sent or delivered by each shareholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT TRANSMISSION: COURIER: CHASEMELLON CHASEMELLON SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON SERVICES, L.L.C. INSTITUTIONS SERVICES, L.L.C. SHAREHOLDER P.O. BOX ONLY) (201) 329- 120 BROADWAY, SERVICES 3305SOUTH 8936 13TH FLOOR NEW L.L.C. 85 HACKENSACK, NJ YORK, NY 10271 CHALLENGER 07606 ATTN: ROADMAIL DROP ATTN: REORGANIZATION REORG. DEPT. REORGANIZATION DEPT. RIDGEFIELD DEPT. PARK, NJ 07660 ATTN: REORGANIZATION DEPT. CONFIRM BY TELEPHONE: (201) 296-4860 -------------- Questions or requests for assistance may be directed to the Information Agent, the Dealer Manager or the Co-Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: [LOGO OF GEORGESON & COMPANY INC.] UNITED STATES: EUROPE: Wall Street Plaza Moor House--17th Floor New York, New York 10005 119 London Wall Bankers and Brokers Call London EC2Y 5ET Collect: England (212) 440-9800 +44-171-454-7100 ALL OTHERS CALL TOLL FREE: (800) 223-2064 The Dealer Managers for the Offer are: MORGAN STANLEY DEAN WITTER UBS SECURITIES Morgan Stanley & Co. Incorporated UBS Securities LLC 1585 Broadway 299 Park Avenue New York, New York 10036 New York, New York 10171 (212) 761-7139 Call Toll Free: 1-888-821-5176 EX-99.(A)(2) 3 FORM OF LETTER OF TRANSMITTAL Exhibit (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF Rhone-Poulenc Rorer Inc. PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 22, 1997 OF Rhone-Poulenc S.A. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT CHASEMELLON TRANSMISSION: CHASEMELLON COURIER: SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON SERVICES, L.L.C. INSTITUTIONS ONLY) SERVICES, L.L.C. SHAREHOLDER P.O. BOX 3305 (201) 329-8936 120 BROADWAY, 13TH SERVICES L.L.C. SOUTH HACKENSACK, CONFIRM BY FLOOR 85 CHALLENGER ROAD NJ 07606 TELEPHONE: NEW YORK, NY 10271 MAIL DROP REORG. ATTN: (201) 296-4860 ATTN: DEPT. REORGANIZATION REORGANIZATION RIDGEFIELD PARK, NJ DEPT. DEPT. 07660 ATTN: REORGANIZATION DEPT. ---------------- DELIVERY OF THIS LETTER OF TRANSMITTAL, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION, TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) - ---------------------------------------------------------------- SHARE TOTAL NUMBER OF NUMBER OF CERTIFICATE SHARES EVIDENCED BY SHARES NUMBER(S)* SHARE CERTIFICATE(S)* TENDERED** ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- TOTAL SHARES.....................
- -------------------------------------------------------------------------------- * Need not be completed by shareholders delivering Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. This Letter of Transmittal is to be completed by shareholders either if certificates evidencing Shares (as defined below) are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure described under "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Shareholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined under "THE TENDER OFFER--Section 1. Terms of the Offer; Expiration Date" in the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedure described under "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. See Instruction 2. [_]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________________________________________ Check Box of Applicable Book-Entry Transfer Facility: (CHECK ONE) [_] DTC [_] PDTC Account Number ___________________________ Transaction Code Number __________________ [_]CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ____________________________________________ Window Ticket No. (if any) _________________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Name of Institution which Guaranteed Delivery ______________________________ If delivery is by book-entry transfer, check box of applicable Book-Entry Transfer Facility: (CHECK ONE) [_] DTC [_] PDTC Account Number ___________________________ Transaction Code Number __________________ 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Rhone-Poulenc S.A., a societe anonyme organized under the laws of the Republic of France ("Purchaser"), the above- described shares (the "Shares") of common stock, without par value per share, of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), pursuant to Purchaser's offer to purchase all issued and outstanding Shares, at $97 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 22, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the issued and outstanding Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith, in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby and all dividends, distributions (including, without limitation, distributions of additional Shares) and rights declared, paid or distributed in respect of such Shares on or after August 19, 1997 (collectively, "Distributions") and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates evidencing such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints Igor Landau and Yves Brissy and each of them, as the attorneys and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, deem proper and otherwise act (by written consent or otherwise) with respect to all the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or other action and all Shares and other securities issued in Distributions in respect of such Shares, which the undersigned is entitled to vote at any meeting of shareholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with other terms of the Offer. Such acceptance for payment shall revoke all other proxies and powers of attorney granted by the undersigned at any time with respect to such Shares (and all Shares and other securities issued in Distributions in respect of such Shares), and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the undersigned with respect thereto. The undersigned understands that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance of such Shares for payment, Purchaser must be able to exercise full voting and other rights with respect to such Shares, including, without limitation, voting at any meeting of the Company's shareholders then scheduled. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, that when such Shares are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restriction, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the assignment and transfer of the Shares tendered hereby and all Distributions. 3 In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby, or deduct from such purchase price, the amount or value of such Distribution as determined by Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Offer to Purchase under "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares" and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. Purchaser's acceptance of such Shares for payment will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please issue the check for the purchase price of all Shares purchased, and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered". Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions", please mail the check for the purchase price of all Shares purchased and all Share Certificates evidencing Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered". In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of, and mail such check and Share Certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please credit any Shares tendered hereby and delivered by book-entry transfer, but which are not purchased by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not purchase any of the Shares tendered hereby. 4 SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check To be completed ONLY if the check for the purchase price of Shares for the purchase price of Shares or Share Certificates evidencing purchased or Share Certificates Shares not tendered or not pur- evidencing Shares not tendered or chased to be issued in the name not purchased are to be mailed to of someone other than the under- someone other than the under- signed, or if Shares tendered signed, or the undersigned at an hereby and delivered by book-en- address other than that shown un- try transfer which are not pur- der "Description of Shares Ten- chased are to be returned by dered". credit to an account at one of the Book-Entry Transfer Facili- ties other than that designated above. Mail [_] check [_] Share Cer- tificate(s) to: Name______________________________ PLEASE PRINT Issue [_] check [_] Share Address __________________________ Certificate(s) to: __________________________________ (ZIP CODE) Name _____________________________ __________________________________ PLEASE PRINT TAXPAYER IDENTIFICATION OR SOCIAL Address __________________________ SECURITY NUMBER (SEE SUBSTITUTE __________________________________ FORM W-9 ON REVERSE SIDE) (ZIP CODE) __________________________________ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) [_]Credit Shares delivered by book-entry transfer and not purchased to the account set forth below: Check appropriate box: [_] DTC [_] PDTC Account Number: __________________ 5 IMPORTANT SHAREHOLDERS: SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) ------------------------------------------------------ ------------------------------------------------------ SIGNATURE(S) OF HOLDER(S) Dated: _____________ , 1997 (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney- in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5). Name(s): _____________________________________________ ------------------------------------------------------ PLEASE PRINT Capacity (full title) ________________________________ Address: _____________________________________________ ------------------------------------------------------ (ZIP CODE) Area Code and Telephone No: __________________________ Taxpayer Identification or Social Security No.: ______ (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW. 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. All signatures on this Letter of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-5 promulgated under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered hereby and such holder(s) has (have) completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Share Certificates. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth under "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. Share Certificates evidencing all physically tendered Shares, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the reverse hereof prior to the Expiration Date (as defined in Section 1 under "THE TENDER OFFER--Section 1. Terms of the Offer; Expiration Date" in the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares pursuant to the guaranteed delivery procedure described in under "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates evidencing all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book- entry transfer, in each case together with a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery, all as described under "THE TENDER OFFER-- Section 3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. The method of delivery of this Letter of Transmittal, Share Certificates and all other required documents, including delivery through any Book-Entry Transfer Facility, is at the option and risk of the tendering shareholder, and the delivery will be deemed made only when actually received by the Depositary. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a facsimile hereof), all tendering shareholders waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule and attached hereto. 7 4. Partial Tenders (not applicable to shareholders who tender by book-entry transfer). If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Shares without alteration, enlargement or any other change whatsoever. If any Share tendered hereby is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates evidencing the Shares tendered hereby. 7. Special Payment and Delivery Instructions. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such 8 Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse of this Letter of Transmittal must be completed. Shareholders delivering Shares tendered hereby by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such shareholder may designate in the box entitled "Special Payment Instructions" on the reverse hereof. If no such instructions are given, all such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated on the reverse hereof as the account from which such Shares were delivered. 8. Questions and Requests for Assistance or Additional Copies. Questions and requests for assistance may be directed to the Information Agent or the Co- Dealer Managers at their respective addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. 9. Substitute Form W-9. Each tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify, under penalty of perjury, that such number is correct and that such shareholder is not subject to backup withholding of federal income tax. If a tendering shareholder has been notified by the Internal Revenue Service that such shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such shareholder has since been notified by the Internal Revenue Service that such shareholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to a 31% federal income tax withholding on the payment of the purchase price of all Shares purchased from such shareholder. If the tendering shareholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). 9 IMPORTANT TAX INFORMATION Under the federal income tax law, a shareholder whose tendered Shares are accepted for payment is required by law to provide the Depositary (as payer) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's social security number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service, and payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. If a shareholder makes a false statement that results in no imposition of backup withholding, and there is no reasonable basis for such statement, a $500 penalty may also be imposed by the Internal Revenue Service. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit a statement, signed under penalties of perjury, attesting to such individual's exempt status. Forms of such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. A shareholder should consult his or her advisor as to such shareholder's qualification for exemption from backup withholding and the procedure for obtaining such exemption. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN), and that (i) such shareholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such shareholder that such shareholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are held in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W- 9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. 10 PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. SUBSTITUTE PART I--Taxpayer Identification FORM W-9 Number--For all accounts, enter --------------------- taxpayer identification number Social Security in the box at right (For most Number individuals, this is your so- cial security number. If you do not have a number, see Ob- taining a Number in the en- closed Guidelines.) Certify by signing and dating below. Note: If the account is in more than one name, see the chart in the enclosed Guidelines to deter- mine which number to give the payer. OR __________________ Taypayer Identification Number (If awaiting TIN write "Applied For") --------------------------------------------------------- Payer's request PART II--For Payees Exempt From Backup Withholding, for Taxpayer see the enclosed Guidelines and complete as Identification instructed therein. Number (TIN) - ------------------------------------------------------------------------------- CERTIFICATION--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you receive another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.) - ------------------------------------------------------------------------------- SIGNATURE: _______________________________________ DATE _________ , 1997 NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 FACSIMILES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY SIGNED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL AND CERTIFICATES EVIDENCING SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH SHAREHOLDER OR SUCH SHAREHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW. THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT TRANSMISSION: COURIER: CHASEMELLON CHASEMELLON SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON SERVICES, L.L.C. INSTITUTIONS ONLY) SERVICES, L.L.C. SHAREHOLDER P.O. BOX 3305 (201) 329-8936 120 BROADWAY, SERVICES L.L.C. SOUTH HACKENSACK, 13TH FLOOR 85 CHALLENGER ROAD NJ 07606 NEW YORK, NY 10271 MAIL DROP REORG. ATTN: CONFIRM BY ATTN: DEPT. REORGANIZATION TELEPHONE: REORGANIZATION RIDGEFIELD PARK, DEPT. (201) 296-4860 DEPT. NJ 07660 ATTN: REORGANIZATION DEPT. ---------------- QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION AGENT OR THE CO-DEALER MANAGERS AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS LISTED BELOW. ADDITIONAL COPIES OF THE OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED DELIVERY MAY BE OBTAINED FROM THE INFORMATION AGENT. A SHAREHOLDER MAY ALSO CONTACT BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES FOR ASSISTANCE CONCERNING THE OFFER. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO OF GEORGESON & COMPANY INC.] UNITED STATES: EUROPE: Wall Street Plaza Moor House--17th Floor 119 London New York, New York 10005 Wall London EC2Y 5ET England +44- Banks and Brokers Call Collect: 171-454-7100 (212) 440-9800 ALLOTHERS CALL TOLL FREE: (800) 223-2064 THE DEALER MANAGERS FOR THE OFFER ARE: MORGAN STANLEY DEAN WITTER UBS SECURITIES MORGAN STANLEY & CO. INCORPORATED UBS SECURITIES LLC 1585 BROADWAY 299 PARK AVENUE NEW YORK, NEW YORK 10036 NEW YORK, NY 10171 (212) 761-7139 CALL TOLL FREE: 1-888-821-5176 August 22, 1997 EX-99.(A)(3) 4 FORM OF NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF Rhone-Poulenc Rorer Inc. (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) (i) if certificates ("Share Certificates") evidencing shares of common stock, without value per share (the "Shares"), of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), are not immediately available, (ii) if Share Certificates and all other required documents cannot be delivered to ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"), prior to the Expiration Date (as defined in Section 1 under "THE TENDER OFFER" in the Offer to Purchase (as defined below)) or (iii) if the procedure for delivery by book- entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by facsimile transmission to the Depositary. See Section 3 under "THE TENDER OFFER" in the Offer to Purchase. The Depositary for the Offer is: ChaseMellon Shareholder Services, L.L.C. BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT TRANSMISSION: COURIER: CHASEMELLON CHASEMELLON SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON SERVICES, L.L.C. INSTITUTIONS ONLY) SERVICES, L.L.C. SHAREHOLDER P.O. BOX 3305 (201) 329-8936 120 BROADWAY, SERVICES L.L.C. SOUTH HACKENSACK, 13TH FLOOR 85 CHALLENGER ROAD NJ 07606 NEW YORK, NY 10271 MAIL DROP REORG. ATTN: CONFIRM BY ATTN: DEPT. REORGANIZATION TELEPHONE: REORGANIZATION RIDGEFIELD PARK, DEPT. (201) 296-4860 DEPT. NJ 07660 ATTN: REORGANIZATION DEPT. -------------- DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Rhone-Poulenc S.A., a societe anonyme organized under the laws of the Republic of France, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 22, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described under "The TENDER OFFER-- Section 3. Procedures for Accepting and Tendering Shares" in the Offer to Purchase. Number of Shares: ___________________ ------------------------------------- Certificate Nos. (If Available): ------------------------------------- Signature(s) of Holder(s) - ------------------------------------- Dated: , 1997 - ------------------------------------- Name(s) of Holders: Please Check one box if Shares will be delivered by book-entry transfer: ------------------------------------- Please Type or Print [_] The Depository Trust Company ------------------------------------- [_] Philadelphia Depository Trust Address Company ------------------------------------- Account No. _________________________ Zip Code ------------------------------------- Area Code and Telephone Number 2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of the Medallion Signature Guarantee Program, guarantees to deliver to the Depositary, at one of its addresses set forth above, either Share Certificates evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company, in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, and any other required documents, all within three New York Stock Exchange, Inc. trading days of the date hereof. - --------------------------------- --------------------------------- Name of Firm Authorized Signature - --------------------------------- --------------------------------- Address Title - --------------------------------- Name:_________________________________ Zip Code Please Type or Print - --------------------------------- Dated:_________________________ , 1997 Area Code and Telephone No. DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.(A)(4) 5 LETTER TO BROKERS, DEALERS MORGAN STANLEY DEAN WITTER UBS SECURITIES Morgan Stanley & Co. Incorporated UBS Securities LLC 1585 Broadway 229 Park Avenue New York, New York 10036 New York, New York 10171 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK of Rhone-Poulenc Rorer Inc. at $97 NET PER SHARE by Rhone-Poulenc S.A. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIREAT 5:00 P.M., NEW YORK CITY TIME, ONWEDNESDAY, OCTOBER 1, 1997 UNLESS THE OFFERIS EXTENDED. August 22, 1997 To Brokers, Dealers, Commercial Banks,Trust Companies and Other Nominees: Morgan Stanley & Co. Incorporated and UBS Securities LLC have been appointed by Rhone-Poulenc S.A., a societe anonyme organized under the laws of the Republic of France ("Purchaser"), to act as Dealer Managers in connection with Purchaser's offer to purchase all issued and outstanding shares (the "Shares") of common stock, without par value per share, of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), at a price of $97 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase, dated August 22, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF THE THEN ISSUED AND OUTSTANDING SHARES, OTHER THAN SHARES OWNED BY PURCHASER (THE "PURCHASER SHARES"), WHICH, WHEN TAKEN TOGETHER WITH THE PURCHASER SHARES, CONSTITUTES AT LEAST 90% OF THE THEN ISSUED AND OUTSTANDING SHARES. Enclosed for your information and use are copies of the following documents: 1. Offer to Purchase, dated August 22, 1997; 2. Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents are not immediately available or cannot be delivered to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. A letter to shareholders of the Company from Michel de Rosen, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates evidencing such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or facsimile thereof) properly completed and duly executed and any other required documents. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described under "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Dealer Managers, the Depositary and the Information Agent as described in the Offer) in connection with the solicitation of tenders of Shares pursuant to the Offer. However, Purchaser will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Morgan Stanley & Co. Incorporated, UBS Securities LLC, or Georgeson & Company, Inc. (the "Information Agent") at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent, at the addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. VERY TRULY YOURS, MORGAN STANLEY DEAN WITTER UBS SECURITIES NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU, OR ANY OTHER PERSON, THE AGENT OF PURCHASER, THE DEALER MANAGERS, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.(A)(5) 6 LETTER TO CLIENTS OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK of Rhone-Poulenc Rorer Inc. at $97 NET PER SHARE by Rhone-Poulenc S.A. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIREAT 5:00 P.M., NEW YORK CITY TIME,ON WEDNESDAY, OCTOBER 1, 1997 UNLESS THE OFFERIS EXTENDED. August 22, 1997 To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated August 22, 1997 (the "Offer to Purchase"), and a related Letter of Transmittal in connection with the offer by Rhone-Poulenc S.A., a societe anonyme organized under the laws of the Republic of France ("Purchaser"), to purchase all issued and outstanding shares (the "Shares") of common stock, without par value per share, of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), at a price of $97 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). We are the holder of record of Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $97 per Share, net to you in cash. 2. The Offer is being made for all issued and outstanding Shares. 3. The Board of Directors of the Company and a special committee thereof comprised of the independent directors have each determined that each of the Offer and the Merger Agreement (as defined in the Offer to Purchase) is fair to, and in the best interests of, the Company, and recommend that shareholders accept the Offer and tender their Shares pursuant to the Offer. 4. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED. 5. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer such number of the then issued and outstanding Shares, other than Shares owned by Purchaser (the "Purchaser Shares"), which, when taken together with the Purchaser Shares, constitutes 90% of the then issued and outstanding Shares. 6. You will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE SO THAT WE WILL HAVE AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Morgan Stanley & Co. Incorporated, UBS Securities LLC or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF RHONE-POULENC RORER INC. BY RHONE-POULENC S.A. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated August 22, 1997, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the offer by Rhone- Poulenc S.A., a societe anonyme organized under the laws of the Republic of France, to purchase all issued and outstanding shares (the "Shares") of common stock, without par value per share, of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Dated: , 1997 SIGN HERE _______________________________________ _______________________________________ Signature(s) Number of Shares to be _______________________________________ Tendered: _______________________________________ Please type or print name(s) Shares* _______________________________________ _______________________________________ Please type or print address _______________________________________ Area Code and Telephone Number _______________________________________ Taxpayer Identification or Social Security Number - -------- *Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 3 EX-99.(A)(6) 7 FORM W-9 TAX GUIDELINES GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - -------------------------------------------------------------------------------
GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF -- - -------------------------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals (joint account) The actual owner of the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor (Uniform Gift to Minors Act) The minor(2) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) The ward, minor, 6. Account in the name of guardian or committee for a or incompetent designated ward, minor, or incompetent person person(3) 7. a The usual revocable savings trust account (grantor is The grantor- also trustee) trustee(1) b So-called trust account that is not a legal or valid The actual trust under State law owner(1) 8. Sole proprietorship account The owner(4)
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GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF -- - ------------------------------------------------------------------------------ 9. A valid trust, estate, or pension trust The legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or educational organization The organization account 12. Partnership account held in the name of the business The partnership 13. Association, club, or other tax-exempt organization The organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of Agriculture in the name The public of a public entity (such as a State or local government, entity school district, or prison) that receives agricultural program payments
- ------------------------------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your num- ber, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual re- tirement plan. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a) . An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to non-resident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDEN- TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend, in- terest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are re- quired to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Cer- tain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are sub- ject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or im- prisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.(A)(7) 8 SUMMARY ADVERTISEMENT EXHIBIT (A)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase, dated August 22, 1997 and the related Letter of Transmittal, and is being made to all holders of Shares. Purchaser (as defined below) is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Morgan Stanley & Co. Incorporated, UBS Securities LLC or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of Rhone-Poulenc Rorer Inc. at $97 Net Per Share by Rhone-Poulenc S.A. Rhone-Poulenc S.A., a societe anonyme organized under the laws of the Republic of France ("Purchaser"), is offering to purchase all of the issued and outstanding shares (the "Shares") of common stock, without par value, of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), at a price of $97 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 22, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). Following the Offer, Purchaser intends to effect the Merger described below. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer such number of the then issued and outstanding Shares, other than Shares owned by Purchaser (the "Purchaser Shares"), which, when taken together with the Purchaser Shares, constitutes 90% of the then issued and outstanding Shares. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of August 19, 1997 (the "Merger Agreement"), among Purchaser, Merger Subsidiary (as defined below) and the Company. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with relevant provisions of the Pennsylvania Business Corporation Law of 1988 (the "PBCL"), RP Vehicle, Inc. ("Merger Subsidiary"), a Pennsylvania corporation specifically organized for the purpose of effecting the merger and a direct wholly owned subsidiary of Purchaser, will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time held by shareholders other than Purchaser or any direct or indirect subsidiary of Purchaser shall be cancelled and shall be converted automatically into -1- the right to receive $97 in cash, or any higher price that may be paid per Share in the Offer, without interest. Shareholders who fully comply with the statutory dissenters procedures set forth in the PBCL will be entitled to receive, in connection with the Merger, cash for the fair value of their Shares as determined pursuant to the procedures prescribed by the PBCL. No dissenters rights are available in connection with the Offer. The Board of Directors of the Company, by unanimous vote of all directors present and voting, based upon, among other things, the unanimous recommendation and approval of a special committee of the Board of Directors comprised of the Merger that shareholders accept the Offer and tender their Shares pursuant to the Offer. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering shareholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid, regardless of any delay in making such payment. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in Section 2 under "THE TENDER OFFER" in the Offer to Purchase) pursuant to the procedure set forth in Section 3 under "THE TENDER OFFER" in the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or in the case of a book-entry transfer an Agent's Message (as defined in Section 3 under "THE TENDER OFFER" in the Offer to Purchase) and (iii) any other documents required under the Letter of Transmittal. Purchaser expressly reserves the right, in its sole discretion, subject to the terms of the Merger Agreement, at any time and from time to time, to extend for any reason the period of time during which the Offer is open, occurrence of any condition specified in Section 12 under "THE TENDER OFFER" in the Offer to Purchase, by giving oral or written notice of such extension to the Depositary. Any such extension will be followed as promptly as practicable by public announcement thereof, such announcement to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date of the Offer. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Shares. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to 5:00 p.m., New York City time, on Wednesday, October 1, 1997 (or the latest time and date at which the Offer, if extended by Purchaser, shall expire) and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also -2- be withdrawn at any time after October 21, 1997. For the withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in Section 3 under "THE TENDER OFFER" in the Offer to Purchase), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 under "THE TENDER OFFER" in the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including the time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information which should be read in their entirety before any decision is made with respect to the Offer. Questions and requests for assistance or for additional copies of the Offer to Purchase and the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent or the Dealer Managers as set forth below, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent and the Dealer Managers) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 Call Toll Free: 1-800-223-2064 -3- The Dealer Managers for the Offer are: MORGAN STANLEY DEAN WITTER UBS SECURITIES Morgan Stanley & Co. Incorporated UBS Securities LLC 1585 Broadway 299 Park Avenue New York, New York 10036 New York, New York 10171 (212) 761-7139 Call Toll Free: 1-888-821-5176 August 22, 1997 -4- EX-99.(A)(8) 9 PRESS RELEASE ISSUED BY THE PURCHASER EXHIBIT (A)(8) LAUNCH OF TENDER OFFER BY RHONE-POULENC FOR SHARES OF RHONE-POULENC RORER: AGREEMENT REACHED ON $97 PER SHARE (Paris, August 20, 1997) -- Rhone-Poulenc (NYSE: RP) announced today its decision to increase its ownership of Rhone-Poulenc Rorer Inc. (NYSE: RPR) to 100% by launching a cash tender offer for RPR common stock that it does not already own at a price of $97 per share. The transaction amounts to approximately FF 27 billion. Rhone-Poulenc Rorer's board of directors, having received a unanimous recommendation from the Special Committee composed of its independent board members, has given its approval, to the offer proposed by Rhone-Poulenc. A definitive agreement was signed between the two companies yesterday evening. It stipulates that shares not acquired in the offer will be acquired in a second step merger at the same price. The offer will commence within the next five business days, the maximum amount of time permitted under Securities and Exchange Commission (SEC) regulations. The terms and conditions of the tender offer will at that time be made public in the United States by a filing with the SEC, in France by the publication of a notice issued by the Societe des Bourses Francaises (SBF) and in both countries through an announcement in the press. The offer is conditional on enough shares being tendered such that Rhone- Poulenc would own, following the closing of the tender offer, at least 90 percent of Rhone-Poulenc Rorer's outstanding shares. Rhone-Poulenc currently owns 68.1 percent of Rhone-Poulenc Rorer's Shares. Recalling that this decision is in keeping with the two major initiatives announced on June 26, 1997, (increasing its ownership of Rhone-Poulenc Rorer to 100 percent and combining the chemicals/fibers businesses within one company which would be listed in 1998) Jean-Rene Fourtou, Chairman and Chief Executive Officer of Rhone-Poulenc said: "This is an important step in our plan to reinforce our position in life sciences. We are offering an attractive price to Rhone-Poulenc Rorer's minority shareholders, and we look forward to completing the transaction quickly." Rhone-Poulenc Rorer is a global pharmaceuticals company dedicated to improving human health. The Company has sales of $5.4 billion and invested $882 million in research and development in 1996. Rhone-Poulenc is one of the world's leading life sciences and specialty chemicals companies. Through its innovative products, Rhone-Poulenc contributes to the improvement of human, animal and plant health and to the quality and safety of products used in industry and daily life. In 1996, the Group recorded sales of FF 86 billion ($16 billion). EX-99.(A)(9) 10 ENGLISH TRANSLATION OF FRENCH COMMUNIQUE Exhibit (A)(9) Unofficial Translation COMMUNIQUE Tender Offer for the Shares of RHONE-POULENC RORER [LOGO] Listed on the Premier Marche (monthly settlement market) of the Paris Bourse By RHONE-POULENC [LOGO] - -------------------------------------------------------------------------------- . Price : 97 US$ per share . Payment : in US dollars or, at the discretion of the shareholder, in French francs . Period: from August 22, 1997 through October 1, 1997. . Transmission of tender of the Shares in France: to banks, brokerage firms or financial agents at the discretion of the shareholders, through September 25, 1997. . Orders placed in France may be cancelled through September 25, 1997. . Number of shares sought: 100% of the share capital of Rhone-Poulenc Rorer Inc. ("Rorer"). . Minimum number of shares that must be tendered for the Offer to close: 90% of the capital of Rorer, including the approximately 68.1% held by Rhone-Poulenc. . Should the Offer succeed, it is planned that the Rorer shares that are not tendered in the Offer be cancelled against payment of an indemnity per share equal (in U.S. dollars) to the tender offer price, as part of a merger under the laws of the State of Pennsylvania (United States). Shareholders in France will be paid in French francs. . After these operations, the Rorer shares will no longer be listed. - -------------------------------------------------------------------------------- This communique is available to shareholders at Rhone-Poulenc S.A., 25, quai Paul Doumer, 92408, Courbevoie Cedex, Morgan Stanley S.A., 25, rue Balzac, 75406 Paris Cedex 08, UBS S.A., 69, boulevard Haussmann, 75362 Paris Cedex 08, and at Societe Generale, Tour Societe Generale, 17, cours Valmy, 92972 Paris-La Defense, the French depositary, and can be obtained at no cost from financial agents. Global Coordinators MORGAN STANLEY DEAN WITTER UBS SECURITIES 1 1. PRESENTATION OF THE OFFER I. TERMS OF THE OFFER A. PRICE, DURATION Rhone-Poulenc S.A. ("Rhone-Poulenc") offers to purchase at the price of US$ 97, net, all the shares of Rhone-Poulenc Rorer Inc. ("Rorer") which are tendered according to the stipulations, terms and conditions summarized hereafter ("the Offer "). Rorer shares are listed on the New York Stock Exchange and on the Premier Marche (monthly settlement market) of the Paris Bourse. The Offer is for 100% of the capital of Rorer. Because Rorer is a company governed by the laws of the State of Pennsylvania (United States), the Offer is subject to American federal law and the laws of the State of Pennsylvania. The provisions of the general regulations of the Council of French Exchanges do not apply to the Offer. The Offer is open from August 22, 1997 through 5:00 p.m., October 1, 1997, New York time, unless Rhone-Poulenc decides to extend the period of time during which the Offer is open or a change in certain terms of the Offer makes it necessary to extend the Offer. In the event this date is extended, all shares tendered and not withdrawn shall remain subject to the Offer. Institutions at which accounts are held must communicate the instructions of their clients and transfer the corresponding shares to Societe Generale, the French depositary, no later than October 1, 1997 at 12 noon, Paris time, unless the Offer is extended. Therefore, shareholders wishing to tender their shares in France must instruct the institution holding their shares no later than September 25, 1997, unless the Offer is extended. Shares tendered in Paris may be withdrawn no later than October 1, 1997, unless the Offer is extended. Rhone-Poulenc reserves the right to extend the term of the Offer, to postpone acceptance of or payment for the shares tendered until it obtains the authorizations which may be required, to terminate the Offer should one or more of the conditions set forth in paragraph B hereinafter occur, to waive any such condition, or to change the price or the other terms of the Offer. However, Rhone-Poulenc has agreed not to reduce the price per share of the Offer, not to reduce the minimum number of shares that must be tendered in the Offer, and not to add additional conditions to the Offer without the agreement of Rorer. Any change in the closing date or in the terms of the Offer shall be communicated through a notice from the Societe des Bourses Francaises and a press release. Any distribution of dividends, shares or otherwise made with respect to the Rorer shares between August 20, 1997 and the delivery of the shares to Rhone- Poulenc shall reduce the price of the Offer (insofar as the distribution is made in cash) or must be transferred to Rhone-Poulenc (in other cases). A notice from the Societe des Bourses Francaises, setting forth the terms of the Offer, was published on August 22, 1997. Shareholders can tender their shares in the United States until October 1, 1997, unless the Offer is extended. Any shares tendered in the United States may be withdrawn until October 1, 1997, unless the Offer is extended. They are advised to consult the American documentation and to contact Georgeson & Company, Inc. at Wall Street Plaza, New York, New York 10005, (800) 223-2064, or at Moor House - 17th floor, 119 London Wall, London EC2Y 5ET, 44 171 454-7100. A copy of the American documentation relating to the Offer, including the "Offer to Purchase", which includes all the information required by American federal law and the laws of the State of Pennsylvania and which is summarized in this communique, is available to shareholders from Rhone-Poulenc S.A., 25, quai Paul Doumer, 92408 Courbevoie Cedex, from Morgan Stanley S.A., 25, rue Balzac, 75406 Paris Cedex 08, from UBS S.A., 69, 2 boulevard Haussmann, 75362 Paris Cedex 08, and from Societe Generale, Tour Societe Generale, 17, cours Valmy, 92972 Paris - La Defense, and may be obtained at no cost from financial agents. This Communique, as well as an English language summary ad, may be viewed on the Internet at http://www.rhone-poulenc.com. (Heading: current events). The Offer to Purchase may be viewed on the Internet at http://www.sec.gov. B. CONDITIONS The Offer shall be consummated only if all the Rorer shares tendered in the Offer (which have not been withdrawn on the expiration date) represent at least 90% of the Rorer shares, taking into account the 97,163,370 shares already held by Rhone-Poulenc, which represent, out of a total of 142,687,492 shares as of July 31, 1997, approximately 68.1% of the capital of Rorer. This condition would be fulfilled if 37,306,616 shares were tendered in the Offer (and assuming that all exercisable options were exercised). Furthermore, Rhone-Poulenc reserves the right to modify or terminate the Offer or extend the date of acceptance or payment for the Rorer shares tendered in the Offer if any of the following conditions shall exist prior to the acceptance for payment of the Shares: . The initiation of any legal action or governmental proceeding by any entity, or the institution of measures, governmental orders or new laws which might have an adverse effect on the Offer, the merger or Rorer and its subsidiaries, including, in particular, any measure that might limit, delay or materially increase the cost of the Offer; . The occurrence of any events which might have a material adverse effect on Rorer. . The suspension (or aggravation of suspension) or general limitation of trading of Rorer shares on the New York Stock Exchange or the Paris Bourse or, of shares in general on the Paris Bourse, a decrease of more than 20% in the Standard & Poor's 500 Index from August 22, 1997, a change in the exchange rate between the French franc and the U.S. dollar from August 19, 1997 which causes an increase in the French franc price of the Offer of at least 15%, a moratorium or suspension of payments affecting banks in the United States or France, any limitation imposed by a governmental authority which would have a materially adverse effect on Rhone-Poulenc's ability to finance the purchase of the Rorer shares, or a war, conflict or catastrophe involving the United States of America or France; . The withdrawal or modification in a manner adverse to Rhone-Poulenc or RP Vehicle Inc. of the approval or recommendation of the Special Committee. . Inaccurate declaration or breach by Rorer of any representation or covenant set forth in the merger agreement. . The termination of the merger agreement. . An agreement among Rhone-Poulenc, RP Vehicle Inc. and Rorer (with the agreement of the Special Committee) for Rhone-Poulenc to delay or terminate the Offer. C. PARTICIPATION IN THE OFFER Rorer shareholders desiring to tender their shares in the Offer in France must, no later than September 25, 1997, transmit a sell order to the bank, brokerage firm or financial agent of their choice. The French depositary is Societe Generale, and in the United States, the depositary is ChaseMellon Shareholder Services, L.L.C. D. WITHDRAWAL Rorer shareholders who have tendered their shares to the Offer in France may withdraw their shares up to and including September 25, 1997. 3 Any shareholder wishing to withdraw his shares must so instruct the agent holding his account. Shares which have been withdrawn may again be tendered before the expiration date. E. SETTLEMENT Settlement of Rorer shares tendered in the Offer shall be made after the orders have been centralized in France and the United States. Shareholders presenting their shares in France will be paid in U.S. dollars, unless they have expressly indicated on the sell order their election for payment in French francs, in which case the exchange rate used shall be the average weighted exchange rate used by Societe Generale the day after the closing of the Offer in the United States. Shareholders shall receive the Offer price, net of all brokerage or stock market fees. F. FINANCING The total amount of the funds required to close the Offer and the second- step merger (including fees and expenses) is approximately US$ 4.8 billion. Rhone-Poulenc has entered into binding term sheets with leading banks to borrow (a) approximately FF 8.5 billion and US$ 850 million to be reimbursed in less than one year at LIBOR or PIBOR plus a margin of 0.10% to 0.125%, and (b) approximately FF 12.75 billion and US$ 230 million to be reimbursed in five years at LIBOR or PIBOR plus a margin of 0.17% to 0.20%. In relation to the balance, Rhone-Poulenc has lines of available credit. Rhone-Poulenc intends to reimburse these loans from a variety of sources, which may include the self-financing of the Rhone-Poulenc group (including Rorer), bank refinancing, or the issue of securities. Thus, Rhone-Poulenc plans, if the Offer is successfully completed, to proceed with a public issue of its shares for an amount of approximately FF 7 billion. In addition, Rhone-Poulenc plans to offer to the public in 1998, market conditions permitting, a minority share of the capital of a new subsidiary grouping its specialty chemicals and fibers and polymers activities. Furthermore, Rhone-Poulenc has announced a plan to divest non-strategic assets. The decision as to the sources and allocation of funding which will be used will be determined, and may be modified, depending on market conditions and such other factors as Rhone-Poulenc may deem appropriate. This amount does not include the Commission of the holding account agencies, which is to be borne by Rhone-Poulenc and is equal to 1% of the sum of each transaction, capped at FF 2.000 per file. Neither Rorer nor Rhone-Poulenc has the necessary information to provide a realistic estimate relation to this. G. EXPENSES RELATING TO THE OFFER The legal and administrative expenses and the total amount of payments to third parties relating to the Offer are estimated to be US$ 10.000.000. II. FRENCH TAX TREATMENT Shareholders should note that the information provided herein is only a summary of the tax treatment at the time of the launch of the Offer applicable only to capital gains on securities and that their individual situation should be reviewed with a tax advisor. Rhone-Poulenc cannot guarantee that the indemnity paid in connection with the merger to non-tendering shareholders will be treated as capital gains. Rhone-Poulenc declines all liability with respect to the tax consequences of the Offer or the merger for shareholders. A. FRENCH RESIDENTS 1. FRENCH RESIDENT INDIVIDUALS Under current law (Article 92 B of the General Tax Code ("CGI")), capital gains on the sale of securities realized in 1997 are taxed in their entirety if the annual amount of securities sold exceeds, by taxable household, a threshold of FF 100,000, at the current rate of 20.9 %, which consists of: . 16% (Article 200A.2) as income tax, . 3.4% as general social security contribution, 4 . 1% as withholding for social security contributions, . 0.50% as the contribution towards reimbursement of the social security debt. Capital losses can only be charged against capital gains of a similar nature realized during 1997 or the following five years. 2. FRENCH RESIDENT CORPORATIONS Capital gains realized in 1997 are taxable at the ordinary rate, which is currently a rate of 33.33% plus a temporary surtax of 10% (36.67%). However, when the securities sold have been held through an investment securities account or in a special account and have been held for more than two years, the capital gains realized upon disposal are eligible to be taxed at the reduced tax rate for long-term capital gains, which is currently 19% plus a temporary surtax of 10% (20.9%), subject to satisfying the obligation to allocate to the special reserve for long-term capital gains. Shareholders should note that the French Government has proposed a new temporary increase of 15% in corporate income tax for companies with revenues of at least FF 50 million, so that the effective corporate tax rate would increase to 41.67% for 1997. Investment securities will, nevertheless, continue to benefit from the reduced rate on long-term capital gains subject to satisfying the conditions mentioned above. B. NON-RESIDENTS Taxation as set forth in Article 92 B of the General Tax Code does not apply to capital gains realized upon the sale of securities in return for payment made by corporations or persons who are not fiscally domiciled in France within the meaning of Article 4B of the General Tax Code, or whose headquarters are outside France, provided that the capital gains are not attributable to a permanent establishment or a fixed base in France. III. PURPOSE OF THE DEAL AND THE BIDDER'S INTENTIONS A. PURPOSE OF THE OFFER The Offer is motivated by Rhone-Poulenc's desire to strengthen its presence in the life sciences sector by holding 100% of Rorer, its subsidiary. Should the Offer and merger be successfully completed, the Rorer shares would no longer be listed and the Rhone-Poulenc share would be the only listed share of the Rhone- Poulenc group in the life sciences industry. Furthermore, Rhone-Poulenc has announced that the future specialty chemicals and fibers and polymers company would be listed on the market in 1998, market conditions permitting, so as to create a clear distinction between the shares listed in the life sciences sector and those listed in the specialty chemicals sector. The increase of Rhone-Poulenc's interest in Rorer to 100% will be carried out as a tender offer followed by a merger, as set forth in the agreement signed on March 12, 1990, between Rhone-Poulenc and Rorer, pursuant to which Rhone- Poulenc acquired in 1990 about 68% of Rorer's capital. The agreement further provided that Rhone-Poulenc could not increase its interest in Rorer's capital beyond 68.68% until July 31, 1997. After that date, Rhone-Poulenc may acquire Rorer shares on the market up to 75%. Rhone-Poulenc may increase its interest above 75% through a tender offer, provided that such tender offer be subject to the condition that a minimum number of shares be tendered so that Rhone-Poulenc will hold at least 90% of Rorer's capital and be followed by a merger between Rorer and Rhone-Poulenc (or a subsidiary of Rhone-Poulenc) which must satisfy certain conditions and result in the purchase of 100% of Rorer's capital. The merger planned by Rhone-Poulenc and described below complies with the agreement of March 12, 1990. B. THE MERGER On August 19, 1997, Rhone-Poulenc, its subsidiary, and Rorer signed an agreement providing for a merger pursuant to the laws of the State of Pennsylvania which will be completed as soon as possible after the close of the Offer. Through the merger, RP Vehicle, Inc., Pennsylvania corporation created for the transaction and a wholly owned subsidiary of Rhone-Poulenc will merge with and into Rorer. After the merger, all the Rorer shares held by shareholders other than Rhone-Poulenc or its direct or indirect subsidiaries will be canceled. The holders of these 5 canceled shares will receive consideration per share equal to the Offer price (without interest) in U.S. dollars and Rorer will become a wholly owned subsidiary of Rhone-Poulenc. Shareholders who hold their shares through the Sicovam will receive a sum in French francs, equal to the counter-value of the Offer price, the applicable rate being the average weighted exchange rate used by Societe Generale the day after the closing of the Offer in the United States. The shares issued by RP Vehicle, Inc. will be canceled without any consideration received in exchange. At the close of the merger, each option to purchase Rorer shares, whether exercisable or not, will be canceled in exchange for payment of an indemnity equal, for each share underlying such option, to the Offer price, minus the exercise price for such options. This indemnity will be paid on the date of payment for shares canceled in the merger. The merger agreement provides that Rhone-Poulenc and the compensation committee of Rorer will define, prior to close of the merger, alternatives to such immediate cash payment referred to above, which may include deferred payment and conversion into options to purchase Rhone-Poulenc shares, in substitution for Rorer's shares. The tax treatment of the options depends on the specific conditions which apply to each beneficiary, and the holders are advised to consult a tax advisor. The merger shall be submitted for approval to a Rorer shareholders' meeting to be held as soon as possible after the close of the Offer. Rhone-Poulenc intends to vote in favor of the merger and has sufficient voting power to approve and adopt the Merger Agreement. The merger is subject to the following other conditions: . the absence of new laws or regulations or decision by a public authority prohibiting or limiting the planned transaction, prohibiting the operation or limiting the activity of Rorer or its subsidiaries after completion of the merger. . the acquisition by Rhone-Poulenc of the tendered shares (unless this condition is not met because of a violation by Rhone-Poulenc of its obligations under the Merger Agreement). The Merger Agreement may be terminated by agreement of the Boards of Directors of Rhone-Poulenc, RP Vehicle, Inc., and Rorer and the Special Committee, if the merger is not definitively completed at the very latest on March 31, 1998, if a court or authority prohibits the merger, if Rhone-Poulenc cannot complete the Offer, if the Special Committee modifies its recommendation or in the event of breaches of representations made by Rhone-Poulenc and RP Vehicle, Inc. in the Merger Agreement, or in the event they breach their obligations thereunder. Under the laws of the State of Pennsylvania, a shareholder contesting the price of shares canceled at the time of a merger may demand payment of fair value for his shares. The Offer to Purchase, which is made available to shareholders, summarizes the procedure and the applicable provisions of the 1988 Pennsylvania Business Corporation Law. Shortly after the announcement on June 26, 1997 of the possibility of an offer on the Rorer shares by Rhone-Poulenc, four separate shareholders class actions were filed against Rhone-Poulenc in the United States. The shareholders claim, among other things, Rhone-Poulenc's abuse of its dominant position as majority shareholder, an infringement of minority rights, and an unfair price. They seek an injunction against the Offer and, if applicable, its rescission and the payment of damages in an unspecified amount. Rhone-Poulenc believes these suits lack merit and intends to vigorously defend against them. C. CONSEQUENCES OF THE TRANSACTION If the merger is successfully completed, Rhone-Poulenc intends to cause the Rorer shares not to be listed on the Premier Marche (monthly settlement market) of the Paris Bourse or on the New York Stock Exchange. Rhone-Poulenc has no current plans or proposals to modify materially the business or structure of Rorer. Nevertheless, Rhone-Poulenc may initiate a review of Rorer's operations in order to proceed, should it be necessary, 6 with the modifications required for the benefit of Rorer. In particular, Rhone- Poulenc may plan a change in the number of its directors or in their terms of office or Rorer's dividend distribution policy and indebtedness ratio. IV. FACTORS TO BE CONSIDERED IN ASSESSING THE OFFER A. MARKET PRICE The table below sets forth the Rorer share prices on the Paris Bourse and the New York Stock Exchange and the quarterly dividend paid per share:
Paris Bourse /(1)/ NYSE /(1)/ Dividend paid (French francs) (U.S. dollars) High Low High Low 1995: 1st quarter 211.50 186.10 43.500 36.250 0.30 2nd quarter 211.00 197.00 43.250 40.375 0.3 3rd quarter 227.00 194.30 45.875 40.500 0.3 4th quarter 269.00 217.00 54.500 43.750 0.3 1996: 1st quarter 334.00 251.00 66.875 50.500 0.3 2nd quarter 358.60 301.00 69.250 58.000 0.32 3rd quarter 399.00 305.10 77.750 62.125 0.32 4th quarter 423.00 341.10 80.500 66.000 0.32 1997: 1st quarter 448.00 390.20 78.125 70.125 0.32 2nd quarter 535.00 389.90 94.5625 68.000 0.32 3rd quarter 588.00 584.00 96.000 90.750 -- (until August 19)
/(1)/ Source: SBF- Bourse de Paris /(2)/ Source: Dow Jones News Source On June 25, 1977, the trading day preceding the announcement by Rhone- Poulenc of the possibility of a business combination with Rorer, the reported closing price of Rorer shares was FF 468.60 on the Paris Bourse and US$ 79.4375 on the New York Stock Exchange. The reported closing price of the Rorer shares was FF 588 on the Paris Bourse and US$ 95,125 U.S. dollars on the New York Stock Exchange on August 19, 1997, the last trading day preceding the announcement of the Offer on each of these markets. B. THE OPINION OF RHONE-POULENC Rhone-Poulenc believes that the price per share offered in the Offer and the merger is fair to Rorer's other shareholders. The criteria used by Rhone- Poulenc in making this determination are the following: . The Special Committee has determined that the Offer and the merger are fair to and in the interests of Rorer and has received the opinion of Goldman, Sachs & Co. described below; . The projected financial performance of Rorer and its financial results; . The Offer price represents a premium of 22.1% over the reported closing price on the New York Stock Exchange prior to the announcement of the possibility of an offer on June 26, 1997, the date on which the price of Rorer's share had almost reached its historical maximum, and a premium of 24.8% over the average closing prices for the one-month period preceding June 26, 1997; 7 . The acquisition agreement of March 12, 1990 between Rhone-Poulenc and Rorer was the subject of real negotiations and allowed Rorer shareholders to benefit from a significant appreciation in the value of their shares since that date; . The Offer and the merger generally comply with the conditions of the agreement of March 12, 1990; . The Offer cannot be completed unless it results in Rhone-Poulenc's controlling at least 90% of Rorer's capital, which guarantees that about two-thirds of the shares held by the public must be tendered in the Offer for it to be successful; . The Offer price and the merger consideration shall have the same value expressed in U.S. dollars; . All the shareholders will receive a cash payment. Rhone-Poulenc did not use the criteria of net book value and Rorer's liquidation value in its valuation. C. THE OPINION OF RORER'S BOARD OF DIRECTORS On July 2, 1997 after the announcement by Rhone-Poulenc of the possibility of a tender offer for the Rorer shares, the Board of Directors of Rorer established a special committee, comprised of three independent directors (Messrs. Frey and Riepe and Dr. Topol), to examine any proposal made by Rhone- Poulenc to acquire Rorer. The special committee retained independent legal and financial advisors. After discussions and negotiations with Rhone-Poulenc, the special committee unanimously approved and recommended the Offer and the merger on August 19, 1997. The Board of Directors of Rorer unanimously approved the merger agreement during its meeting of August 19, 1997 and felt that the Offer and the merger were fair and in the interests of Rorer. The Board unanimously recommended to the shareholders to accept the Offer and tender their shares. In reaching its determinations referred to immediately above, the special committee considered the following factors, each of which, in the view of the special committee, supported such determinations: . the historical market prices and recent trading activity of the Rorer shares, including (x) the Offer of US$ 97.00 per share represents a premium of approximately 22% over the US$ 79.44 per share closing price on June 25, 1997, the day prior to the June 26, 1997 announcement, and a premium of approximately 20% over the US$ 80.88 per share closing price on June 13, 1997, which was the 52-week high closing price for the shares prior to the June 26, 1997 announcement, (y) that the weighted average per share price between June 26, 1997 and August 17, 1997 was US$ 92.48 per share, and (c) that the shares never traded on the New York Stock Exchange (the "NYSE") above US$ 96.00 per share following the June 26, 1997 announcement. . the history of the negotiations between the special committee and its representatives and Rhone-Poulenc and its representatives, including that (a) the negotiations resulted in an increase in the price at which Rhone-Poulenc was prepared to acquire the shares from US$ 92.00 to US$ 97.00 per share, and (b) the special committee's belief that Rhone- Poulenc would not further increase the Offer price and, accordingly, US$ 97.00 per share was, in the opinion of the special committee, the highest price which could be obtained from Rhone-Poulenc. . the opinion from Goldman, Sachs & Co. based upon and subject to the assumptions and qualifications stated therein that the U.S.$ 97.00 per share to be received by the holders other than Rhone-Poulenc and its subsidiaries in the Offer and merger is fair to such holders; a copy of the opinion of Goldman, Sachs & Co. is attached as annex to the Offer to Purchase. Shareholders are urged to, and should reach such opinion in its entirety. . the fact that the standstill provisions in the agreement dated March 12, 1996, expired on July 31, 1997, after which time Rhone-Poulenc is permitted to acquire in the open market such number of shares, which, together with the shares owned by Rhone-Poulenc, would not exceed 75% of the outstanding shares, and to the extent Rhone-Poulenc wanted to exceed the 75% threshold, 8 Rhone-Poulenc was entitled to commence a tender offer complying with the requirements of the March 12, 1990 agreement, which could be at a price per share below Rhone-Poulenc's original price of US$ 92.00 per share or otherwise substantially below the US$ 97.00 per share Offer price. . the belief that a tender offer complying with the requirements of the March 12, 1990 agreement unilaterally commenced by Rhone-Poulenc without a recommendation of the special committee may have been successful at a price lower than that negotiated and recommended by the special committee. . the possibility that, because of potentially lower than expected projected Rorer earnings, or a decline in the trading price of the shares or the stock market in general, the consideration that the minority shareholders would obtain in a future transaction might be less advantageous than the consideration they will receive pursuant to the Offer and the merger. . the special committee recognized that the sale of control of Rorer to Rhone-Poulenc occurred in 1990 upon consummation of the transactions contemplated in the March 12, 1990 agreement. . Rhone-Poulenc has sufficient stock ownership to control a disposition of Rorer, and the special committee and Goldman, Sachs & Co. were not authorized to, and did not, solicit third-party indications of interest for the acquisition of Rorer or its businesses. . the terms of the Offer, the merger and the merger agreement, including (a) that the 90% minimum condition may not be waived; (b) that the terms and conditions of the Offer may not be changed in a manner which is materially adverse to the minority shareholders without the consent of the special committee; (c) that the recommendation of the special committee may be withdrawn, modified or amended to the extent the special committee believes it necessary to do so in the exercise of its fiduciary duties; (d) that the Offer is not subject to any financing condition; (e) that the terms of the merger agreement may only be amended or waived by the special committee; and (f) the limited nature of other conditions to the Offer and the merger. . the 90% minimum condition requirement that the Offer not be consummated unless at least 68.7% of the shares not held by Rhone-Poulenc be validly tendered pursuant to the Offer and not withdrawn. . the availability of dissenters' rights for the minority shareholders under Pennsylvania law in connection with the merger. . the risk that Rorer would suffer the loss of key employees and other adverse consequences if Rhone-Poulenc were to commence a unilateral tender offer. The Board believes that the Offer and the merger are fair on the procedural level, in particular, because they comply with the agreement of March 12, 1990, the independence of the members of the special committee, the engagement by the special committee of independent legal and financial advisors, because of the fact that at least about two-thirds of the shares (other than those held by Rhone-Poulenc) must be contributed to the Offer for the Offer to be completed, the deliberations of the special committee, and the fact that the price of US$ 97 has been truly negotiated by the special committee and Rhone-Poulenc. The special committee and the Board have noted that Rhone-Poulenc's vote would be sufficient to approve the merger, but have noted that Rhone-Poulenc must acquire all shares tendered, and that the Offer is subject to the condition that Rhone-Poulenc hold at least 90% of the capital of Rorer at the close of the Offer, taking into account the shares it already holds. 2. PRESENTATION OF RHONE-POULENC S.A. The document de reference of Rhone-Poulenc was filed with France's Commission des Operations de Bourse on March 11, 1997 under number R 97-036. 9 3. PRESENTATION OF RORER A. GENERAL INFORMATION ON RORER AND ITS CAPITAL The information below was provided by Rorer or was obtained from public sources, and consequently, Rhone-Poulenc assumes no responsibility with respect to this information. 1. INFORMATION ON RORER Rorer is incorporated in the State of Pennsylvania (United States of America). Its headquarters are located at 500 Arcola Road, Collegeville, Pennsylvania 19426. Rorer is primarily engaged in the discovery, development, production and marketing of a wide range of pharmaceutical products for human health. 2. INFORMATION ON RORER'S CAPITAL According to information provided by Rorer, on July 31, 1997, there were 142,687,492 common shares issued and outstanding with no par value (of which 5,169,412 were common shares with no par value held by Rorer's employee benefit trust) and there were 10,410 common shares with no par value held by Rorer. A maximum of 4,439,111 options granted to employees pursuant to Rorer's stock option plan were exercisable on July 31, 1997. As of July 31, 1997, there were also 1,750 preferred shares (Money Market Preferred Stock) with no par value, and with a preferred liquidation right of $100,000 per preferred share. On July 31, 1997 Rhone-Poulenc held 97,163,370 shares of Rorer, i.e., 68.1% of the issued and outstanding shares. There were 7,054 shareholders of record of issued and outstanding shares of Rorer as of August 13, 1997. This figure includes financial intermediaries holding Rorer shares on behalf of their clients. Rorer shares are listed on the Premier Marche (monthly settlement market) of the Paris Bourse and on the New York Stock Exchange. B. FINANCIAL INFORMATION 1. SUMMARIES OF RORER'S INCOME STATEMENTS AND BALANCE SHEET The income statements of Rorer for fiscal years 1995 and 1996 and for the first six months of fiscal years 1996 and 1997 are summarized below.
1st six months Fiscal year (not audited) (audited) (In US$ million) 1997 1996 1996 1995 Net sales 2,323.8 2,618.5 5,420.6 5,142.1 Cost of products sold 691.4 878 1,666.0 1,746.4 Selling, delivery and administrative expenses 946.3 1,046.7 2,109.7 1,863.7 Research & development expenses 405.2 414.3 882.1 766.2 Restructuring and other charges 102.6 126.5 Operating income 281 279.5 660.2 639.3 Interest expense, net 76.2 84.5 169.6 84.9 Other income (expenses), net (20.8) (77.4) (199.8) 16.4 Income before taxes 225.6 272.4 690.4 538 Provision for income taxes 70.1 85.2 216.9 181.5 Net income 155.5 187.2 473.5 356.5
10 Dividends on preferred stock and remuneration on capital equity notes 21.9 21.3 44.8 18.7 Net income available to common shareholders 133.6 165.9 428.7 337.8 Per Share Data: 1st six months Fiscal year (not audited) (audited) (In US$ million) 1997 1996 1996 1995 Average number of shares issued and outstanding during period/(1)/ 137.0 135.3 135.8 134.2 Net earnings per common 0.98 1.23 3.16/(2)/ 2.50/(3)/ share
/(1)/ Does not include shares held by Rorer or by Rorer's Employee Benefits Trust /(2)/ Net income available to common shareholders /(3)/ Income available to common shareholders pro forma. The consolidated balance sheets of Rorer as of December 31, 1995 and 1996 and as of June 30, 1996 and 1997 are summarized below:
At June 30 At December 31 (unaudited) (audited) (In US$ million) 1997 1996 1996 1995 ASSETS Cash & cash equivalents 114.4 60.9 100.6 115.4 Cash pooling arrangements with Rhone-Poulenc S.A. 4.2 10.4 3.2 16.0 Short-term investments and notes receivables 63.1 66.7 38.7 Trade accounts, less reserves 858.6 870.6 984.1 956.8 Inventories 796.7 832.8 800.7 765.6 Other current assets 762.3 797.1 846.2 935.8 Total current assets 2,599.3 2,638.5 2,773.5 2,789.6 Time deposits, at cost 128.4 83.0 128.4 83.0 Property, plant and equipment, net of accumulated depreciation 1,426.5 1,556.5 1,525.9 1,621.0 Goodwill, net of accumulated amortization 2,601.0 2,836.9 2,739.0 2,953.5 Intangibles, net of accumulated amortization 707.4 849.2 766.7 866.8 Other assets 839.1 769.1 834.6 673.2 Total assets 8,301.7 8,733.2 8,768.1 8,987.1
11 LIABILITIES At June 30 At December 31 (unaudited) (audited) Short-term debt 157.9 414.6 126.7 511.8 Accounts payable 427.1 529.8 594.7 601.8 Other current liabilities 1,109.4 1,143.4 1,331.5 1,291.5 Total current liabilities 1,694.4 2,087.8 2,052.9 2,405.1 Long-term debt 2,432.0 2,415.2 2,272.0 2,159.0 Notes payable to Rhone- Poulenc S.A. and affiliates 187.9 249.5 253.0 525.4 Deferred income 241.6 363.1 218.0 365.5 Other liabilities, including minority interests 1,208.4 1,201.5 1,322.4 1,174.9 Total liabilities 5,764.3 6,317.1 6,118.3 6,629.9 Shareholders equity Money market preferred stock without par value (liquidation preference $100,000 per share); authorized, issued and outstanding 1,750 shares 175.0 175.0 175.0 175.0 Capital equity notes 500.0 500.0 500.0 500.0 Common stock, without par value, stated value $1 per share; authorized 600,000,000 shares 142.6 141.0 141.6 139.5 Capital in excess of stated value 273.9 204.2 234.8 153.2 Retained earnings 1,883.8 1,662.3 1,837.9 1,580.3 Employee Benefits Trust (198.1) (185.7) 185.7) (185.7) Cumulative translation (239.8) (80.7) (53.8) (5.1) adjustments Total shareholders' equity 2,537.4 2,416.1 2,649.8 2,357.2 Total liabilities and shareholders' equity 8,301.7 8,733.2 8,768.1 8,987.1
Rorer is subject to the disclosure obligations of the Securities Exchange Act of 1934 with respect to the communication of financial data. The audited consolidated accounts of Rhone-Poulenc for fiscal years ending December 31, 1995 and 1996 are attached to the "Offer to Purchase" available to shareholders. 2. RORER'S BUDGETS AND FINANCIAL FORECASTS As a general rule, Rorer does not publish projections of its activity or its financial position. Nevertheless, Rhone-Poulenc, as part of the planned transaction, has received and reviewed certain projections prepared by Rorer. PRELIMINARY 1997 BUDGET Rorer's management presented a budget forecast for 1997 to the Rorer Board of Directors on December 13, 1996. This budget does not take into account the possible impact of the suspension of certain production and distribution operations of Centeon L.L.C., the joint venture between Rorer and Behringwerke A.G. (a subsidiary of Hoechst A.G.) and reflects the operation and plan of Centeon. Indeed, the inspection of a production unit by the U.S. Food 12 & Drug Administration was being conducted and this budget had thus to be submitted for the approval of the Board of Directors of Centeon on May 4, 1997. The 1997 budget is also based on the assumption of a significant increase in net sales, a continuing decrease in expenses, a decrease in research and development costs, an improvement in gross margins due to changes in the mix of Rorer products, and an exchange rate of US$ 1 to FF 5.50.
1996 1997 (Projections) (Budget) In US$ million Sales 5,403 5,409 Gross margin 3,736 3,915 Operating income 686 897 Income before tax /(1)/ 686 926 Earnings per share 3.12 4.30
/(1)/ Including Rorer's share in Centeon's profits of US$ 82 million and of US$ 1789 million in 1996 and 1997, respectively. 1997 BUDGET (MAY 1997) This projected budget was later revised by a committee established for this purpose and by Rorer's management, and it was approved by Rorer's Board of Directors on May 7, 1997. This budget takes into account the effects of the suspension of Centeon's activities, and is also based on the same assumptions as the 1997 preliminary budget. The main items of the revised budget are indicated below:
1996 1997 (Actual) (Budget) In US$ million, except for per share information Net sales /(1)/ $5,421 $5,414 Gross margin 3,755 3,900 Operating income 661 869 Income before tax /(1)/ 699 800 Earnings per share 3.16 3.65
/(1)/ Including Rorer's shares in Centeon's profits of US$ 85 million and of US$ 36 million in 1996 and 1997, respectively. NEW PROJECTIONS These projections, which were developed by Rorer for the years 1997 to 2002, are the result of a study performed at the request of the special committee. The projections are based on the following assumptions, among others: a rate of exchange of FF 5.50 to US$ 1.00 from 1998 to 2002, the increased competition in the United States in the respiratory domain, a continued pressure from the French Government to limit health expenses, an improvement in gross margin resulting from an improvement in product mix and the termination of certain product lines, an increase in expenses for the marketing of Rorer's strategic products, and an increase in the French corporate income tax from 36-2/3% to 41-2/3% proposed by the government for 1997 and 1998. Rorer has also indicated that at the end of June 1997, there was an increased amount of stock in relation to certain products of Rorer with certain American clients. Rorer has not yet determined if any adjustment of stock is necessary or over what period such adjustment would have to be made. If Rorer determined to take measures to reduce the stock over a period of three years (hypothesis retained by Goldman, Sachs & Co. for the August Projections), the increase in net sales would be reduced by US$ 80 million for each of the years 1998, 1999 and 2000, with an effect on sales and earnings per share as set out below (net profit per ordinary share). 13 These projections are summarized below: Six Year Plan Comparison - Preliminary Simulation (U.S. dollars in millions, except per share information)
1997 1997 1998 1999 2000 2001 2002 forecast forecast with 1998 structure/1/ Net sales 5,112 5,041 5,262 5,648 6,071 6,573 7,001 Gross margin 3,694 3,642 3,842 4,125 4,444 4,758 5,046 Operating income 780 731 822 947 1,082 1,233 1,372 Centeon joint venture/(2)/ (41) (41) 55 75 120 150 180 Income before income taxes 722 653 777 930 1,123 1,302 1,492 Earnings per share Adjusted Earnings per share/(3)/ 3.28 2.93 3.43 4.14 5.11 5.97 6.88
/(1)/ Does not include the effect of the sale of certain product lines realized by Rorer in 1997. /(2)/ Rorer's share in Centeon earnings. Excluding adjustments to the stocks level, projected sales and earnings per share would be as follows: (US dollars in millions except per share information)
1997 forecast 1997 with 1988 forecast structure 1998 1999 2000 2001 2002 Net sales 5,112 5,041 5,342 5,728 6,151 6,573 7,001 Adjusted Earnings per share 3.28 2.93 3.72 4.43 5.40 5.97 6.88
It is important to note that this budget and these projections were based on certain production assumptions and anticipated sales for the years 1997 through 2002 and, notably, on the assumption that the share ownership structure is not modified) as well as on certain assumptions regarding sales and business activities. Information of this type is based on estimates and assumptions that are inherently subject to significant economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the Company's control. Accordingly, there can be no assurance that the projected results would be realized or that actual results would not be higher or lower than those set forth above. In addition, the budget information and the projections were prepared by Rorer's management for internal purposes and not with a view to public disclosure and, as such, do not comply with the guidelines established for the publication of this type of information. These data have been included in this communique to make available to Rorer shareholders financial projections provided to Rhone-Poulenc. Rorer's auditors have not reviewed or verified the projections or the procedures used in their preparation. None of Rhone-Poulenc, Rorer, Rorer's auditors, nor any other party to the Offer and the subsequent merger assumes any responsibility for the accuracy or validity of these projections. 14 3. RELATIONSHIP BETWEEN RORER AND RHONE-POULENC 1. COMMON DIRECTORS AND SENIOR EXECUTIVES At present, only one of Rorer's thirteen directors is also a director of Rhone-Poulenc and three are senior executives of Rhone-Poulenc. Jean-Marc Bruel, Igor Landau and Jean-Pierre Tirouflet, Rorer directors, are, respectively, Vice-Chairman and director, President and Executive Vice President of Rhone-Poulenc. Michel de Rosen, Chief Executive Officer and Chairman of Rorer's Board of Directors, is also a member of Rhone-Poulenc's executive committee. 2. CONTRACTUAL RELATIONS Certain Rorer subsidiaries, particularly in the United States, France, the United Kingdom and Germany, may participate in Rhone-Poulenc's cash pooling arrangements and, as such, lend or borrow from Rhone-Poulenc at prevailing market terms and conditions. Rhone-Poulenc invoices Rorer for certain expenses incurred in Rorer's interest (research, data processing, insurance, legal, tax, advertising, public relations and management fees). Rorer and Rhone-Poulenc believe that the amounts invoiced to Rorer are the amounts that would have been invoiced to Rorer if it were independent from Rhone-Poulenc. The table below provides the amounts outstanding from cash pooling operations between them and the services provided by Rhone-Poulenc over the last two fiscal years.
Amounts at December 31 (in US$ millions) 1996 1995 Amounts receivable from Rhone- Poulenc and affiliates 48.9 61.3 Accounts receivable from sales of products and services to Rhone- Poulenc 6.3 8.5 Other current assets 39.4 36.8 Amounts at December 31 (in US$ millions) 1996 1995 Amounts payable related to purchase of materials and services from Rhone-Poulenc and affiliates 16.8 12.2 Accrued and other liabilities due to affiliates 30.0 20.9 Debt to Rhone-Poulenc and affiliates 259.8 653.0 Amounts accrued yearly (in US$ million) Sales to Rhone-Poulenc and affiliates 31.3 31.1 Materials purchased from Rhone- Poulenc 38.7 41.4 Interest expense incurred with respect to Rhone-Poulenc indebtedness 22.3 12.4 Services invoiced by Rhone- Poulenc 24.0 23.6
15 In addition, Rhone-Poulenc has granted Rorer a medium-term credit facility for five hundred million dollars, at LIBOR plus margin, and has guaranteed certain indebtedness of Rorer related to certain joint ventures. In 1995, Rorer acquired from Rhone-Poulenc the businesses of Cooperation Pharmaceutique Francaise ("Cooper"), primarily in France, and a pharmaceuticals business in Brazil for cash and preferred stock of a subsidiary of Rorer aggregating approximately US$ 273.2 million paid respectively in preferred shares of an affiliate or Rorer and in cash. The preferred shares, accounted for as minority interest in other liabilities, have a liquidation preference of approximately FF 645 million (approximately US$ 123.1 million) and pay dividends of 7.5% per annum on a stated value of FF 145 million. Furthermore, the acquisition agreement calls for potential adjustments to the purchase price based on several factors, including earnings performance. In December 1995, Rorer issued US$ 500 million of undated capital equity notes to Rhone-Poulenc. The notes have a liquidation preference that ranks senior to the Rorer shares, but junior to all existing and future Rorer preferred stock. Semiannual remuneration on the unpaid principal balance of the equity notes is based on LIBOR plus a margin, and was approximately US$ 35.2 million in 1996. The capital equity notes are redeemable only at Rorer's option, but not earlier than five years after issuance, subject to certain exceptions. In addition, Rorer has entered into various licensing and confidentiality agreements with Rhone-Poulenc and its affiliates regarding intellectual property rights. In the ordinary course of their businesses, Rorer and Rhone-Poulenc engage in a variety of commercial and financial transactions with several of the companies which are represented on the Board of Directors of Rhone-Poulenc (such as the Banque Nationale de Paris, Credit Lyonnais, Credit Suisse First Boston, Fiat and Societe Generale). Global Coordinators MORGAN STANLEY DEAN WITTER UBS SECURITIES Centralizing Agency in France SOCIETE GENERALE Information Agent GEORGESON & COMPANY INC. -------------- RHONE-POULENC S.A., 25, QUAI PAUL DOUMER - 92408 COURBEVOIE CEDEX 16 EX-99.(B)(1) 11 TERM SHEET REGARDING A BRIDGE LOAN DATED 8/6/97 Exhibit (B)(1) [LOGO OF RHONE-POULENC S.A. APPEARS HERE] RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 2,500,000,000 SHORT TERM CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A ("RP"). Short Term Facility Amount: FRF 2,500,000,000 or its equivalent in any freely available and convertible currency. Short Term Facility Description: A revolving credit facility ("the Short Term Facility") which shall be repaid and redrawn throughout its life. The Short Term Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Short Term Facility Purpose: bridge facility granted in conjunction with the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower. Lender: * Final Maturity: 30 June 1998. Repayment Date The Short Term Facility will be repaid in instalments on the dates and in amount shown in the following table: (1) Repayment Dates (2) Amounts (FRF) 29 December 1997 1,030,000,000 Final Maturity 1,470,000,000 Availability : Subject to 2 (two) business days' notice for French Francs and 3 (three) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 5 Advances shall be outstanding at any one time in a maximum of 4 currencies. Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of undrawn part of the Short Term Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.05% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). For interest periods greater than 6 months, interests will be paid after the end of every period of 6 months and on the latest day of such interest period. Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Facility Fee The Borrower will pay a facility fee in French Francs at a rate p.a. of 0.05% on the total amount (reduced and uncancelled) of the Short Term Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties : respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Short Term Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Short Term Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Short Term Facility are legally valid, binding and enforceable; (vi) Execution and performance of Short Term Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Short Term Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Short Term Facility Agreement. (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Short Term Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Short Term Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Short Term Facility. (B) Financial covenant: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Short Term Facility by reference to the 1996 Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Short Term Facility. In this event the Lender may (i) declare any undrawn portion of the Short Term Facility to be cancelled (and no further notice of drawing may be issued) and/or (ii) any drawn portion of the Short Term Facility to become due and payable prior to its maturity as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Short Term Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Short Term Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may give rise to a right (x) to cancel the undrawn portion of the Short Term Facility and to refuse future drawings and/or (y) to declare any drawn portion of the Short Term Facility to become due and payable prior to its maturity). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Short Term Facility. Documentation: French language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, Changes in circumstances, illegality, market disruption and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to-market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures; (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Short Term Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (26,941) (including Participating Loans), Bank Overdrafts (2,991), Current Portion of Long Term Debt (2,624) and Short Term Borrowings (6,673) and (ii) the sum of Cash (1,040), Short Term Deposits (3,100) and Marketable Securities (1,321) as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity (141,848) and (ii) the sum of Total Current Liabilities (39,245), Long Term Debt (including Participating Loans) (26,941), Other Long Term Liabilities (17,610) and Mandatorily Redeemable Partnership Interest (2,429) as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Governing Law - Jurisdiction The Short Term Facility Agreement will be governed by French law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms October 31, 1997. and Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf Date: August 6, 1997. of RHONE-POULENC S.A. /s/ Michel DELRUE -------------------------------- Michel DELRUE Directeur des Services Financiers for and on behalf Date: August 6, 1997. of * .............. * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(2) 12 TERM SHEET REGARDING A BRIDGE LOAN DATED 8/1/97 Exhibit (B)(2) [LOGO OF RHONE-POULENC S.A. APPEARS HERE] RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 2,000,000,000 SHORT TERM CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS -------------------------------
Borrower: RHONE-POULENC S.A.("RP"). Short Term Facility Amount: FRF 2,000,000,000 or its equivalent in any freely available and convertible currency. Short Term Facility A revolving credit short term facility ("the Short Description: Term Facility") which shall be repaid and redrawn throughout its life. The Short Term Facility will be denominated in French Francs and committed in French Francs and may be used in FRF and US Dollars or in any other Convertible Currency on an as-available basis. Convertible Currency means CHF, DEM, GBP, and ESP. Short Term Facility Purpose: bridge loan granted in conjunction with the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower Lender: * Final Maturity: The Short Term Facility will be repaid in full 364 days from the date of first Advance under the Short Term Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 364 days ("Advances"). Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. No more than 10 Advances shall be outstanding at any one time in a maximum of five currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the undrawn part of the Short Term Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups).
- ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Interest and Margin: The Borrower will pay interest at LIBOR for the relevant currency (with the exception of PIBOR in the case of French Francs), plus 0.05% (Margin) p.a. For interest periods greater than 6 months, interests will be paid after the end of every period of 6 months and on the latest day of such interest period. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in GBP which will be calculated on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Default rate If the Borrower fails to pay any sums due by it under the Facility, the Borrower shall, from the date when such sum fell due, pay interest on the unpaid sum up to the date upon which such sum is actually received by the Lender at the rate per annum which is the aggregate of (i) one per cent (1%) and (ii) the rate which would have been applied to the Advances outstanding under the Short Term Facility at the time of the default. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate p.a. of 0.05% on the total amount (reduced and uncancelled) of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. In the event of Cancellation, the facility fee will be calculated at the beginning of each quarter. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower, reasonably satisfactory to the Lender. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vi), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Short Term Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Short Term Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations;
(iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Short Term Facility are legally valid, binding and enforceable; (vi) Execution and performance of Short Term Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Short Term Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of (x) 1996 audited financial statements (the "1996 Consolidated Financial Statements") and (y) subsequent audited financial statements (the "Annual Consolidated Financial Statements"), to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Short Term Facility Agreement. (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Short Term Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Short Term Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower's Annual Consolidated Financial Statements as soon as available and in any event within 180 days of financial year-end, and, in any event within 60 days after the end of each financial year, delivery of a certificate certifying compliance with the financial covenant referred to in paragraph (B) below. Delivery of the Borrower's unaudited semi annual consolidated financial statements as soon as available and in any event within 90 days of the first half of each of RP's financial year. (ii) Preparation of 1997 audited consolidated financial statements for Borrower (the "1997 Consolidated Financial Statements") and Annual Consolidated Financial Statements to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Short Term Facility by reference to the Annual Consolidated Financial Statements. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event, provided that such encumbrance remains confined to such asset and improvements and additions thereto and does not secure any Financial Indebtedness not so secured at the time of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition provided that such encumbrance remains confined to such asset and improvements and additions thereto and does not secure any Financial Indebtedness not so secured at the time of such event. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above, provided that such Financial Indebtedness is not increased or secured by any additional assets or revenues. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. (K) In the event of a breach of the requirement referred to under Undertaking (B) above, the Lender shall be entitled to declare a Event of Default under the Facility. If this breach remains unremedied for 90 days after notice by the Lender of such Event of Default, the Lender may (i) declare any undrawn portion of the Short Term Facility to be cancelled (and no further notice of drawing may be issued) and/or (ii) any drawn portion of the Short Term Facility to become due and payable immediately as a result of such a breach. Documentation: French language. Documentation (to be established by the Lender) will also include other customary provisions for a transaction of this type including, inter alia, Changes in circumstances, illegality, market disruption and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Short Term Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Fees and expenses The Borrower will pay to the Lender all reasonable fees and expenses including legal fees, incurred in connection with the preparation, negotiation and execution of this Short Term Facility and with the enforcement of its rights under the Short Term Facility Agreement upon presentation of duly documented evidence. Notwithstanding the above, the Borrower shall require the Lender to respect guidelines as to the legal expenses which the Borrower wish to cap after further discussion with Lender. Governing Law - The Short Term Facility Agreement will be governed Jurisdiction by French law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and October 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower and to the set up of a satisfactory documentation. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 1, 1997 RHONE-POULENC S.A. /s/ Michel DELRUE --------------------------------- Michel DELRUE Directeur des Services Financiers for and on behalf of * Date: August 1, 1997 /s/ -------------------------------------- * /s/ -------------------------------------- * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. EX-99.(B)(3) 13 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/6/97 Exhibit (B)(3) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 1,500,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A ("RP"). Facility Amount: FRF 1,500,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: this Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 2 (two) business days' notice for French Francs and 3 (three) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 5 Advances shall be outstanding at any one time in a maximum of 4 currencies. Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of undrawn part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. Any cancellation will apply first to the Short Time Facility entered into between the Lender and the Borrower on the date of the Facility. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.09% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). For interest periods greater than 6 months, interests will be paid after the end of every period of 6 months and on the latest day of such interest period. Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate p.a. of 0.09% on the total amount (reduced and uncancelled) of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Financial Covenant: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the 1996 Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. In this event the Lender may (i) declare any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued) and/or (ii) any drawn portion of the Facility to become due and payable prior to its maturity as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may give rise to a right (x) to cancel the undrawn portion of the Facility and to refuse future drawings and/or (y) to declare any drawn portion of the Facility to become due and payable prior to its maturity). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: French language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, Changes in circumstances, illegality, market disruption and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures; (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (26,941) (including Participating Loans), Bank Overdrafts (2,991), Current Portion of Long Term Debt (2,624) and Short Term Borrowings (6,673) and (ii) the sum of Cash (1,040), Short Term Deposits (3,100) and Marketable Securities (1,321) as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity (141,848) and (ii) the sum of Total Current Liabilities (39,245), Long Term Debt (including Participating Loans) (26,941), Other Long Term Liabilities (17,610) and Mandatorily Redeemable Partnership Interest (2,429) as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Governing Law - Jurisdiction The Facility Agreement will be governed by French law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and October 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 6, 1997. RHONE-POULENC S.A. /s/ Michel DELRUE ............. Michel DELRUE Directeur des Services Financiers for and on behalf of Date: August 6, 1997 * .............. * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(4) 14 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/1/97 Exhibit (B)(4) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 1,500,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS Borrower: RHONE-POULENC S.A. ("RP") Facility Amount: FRF 1,500,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in French Francs and committed in French Francs and may be used in FRF and US Dollars or in any other Convertible Currency on an as-available basis. Convertible Currency means CHF, DEM, GBP, and ESP. Facility Purpose: this Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. No more than 10 Advances shall be outstanding at any one time in a maximum of five currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the undrawn part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Interest and Margin: The Borrower will pay interest at LIBOR for the relevant currency (with the exception of PIBOR in the case of French Francs), plus 0.11% (Margin) p.a. For interest periods greater than 6 months, interests will be paid after the end of every period of 6 months and on the latest day of such interest period. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in GBP which will be calculated on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Default rate If the Borrower fails to pay any sums due by it under the Facility, the Borrower shall, from the date when such sum fell due, pay interest on the unpaid sum up to the date upon which such sum is actually received by the Lender at the rate per annum which is the aggregate of (i) one per cent (1%) and (ii) the rate which would have been applied to the Advances outstanding under the Facility at the time of the default. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate p.a. of 0.08% on the total amount (reduced and uncancelled) of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. In the event of Cancellation, the facility fee will be calculated at the beginning of each quarter. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower, reasonably satisfactory to the Lender. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vi), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii)Accuracy and fairness of (x) 1996 audited financial statements (the "1996 Consolidated Financial Statements") and (y) subsequent audited financial statements (the "Annual Consolidated Financial Statements"), to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower's Annual Consolidated Financial Statements as soon as available and in any event within 180 days of financial year-end, and, in any event within 60 days after the end of each financial year, delivery of a certificate certifying compliance with the financial covenant referred to in paragraph (B) below. Delivery of the Borrower's unaudited semi annual consolidated financial statements as soon as available and in any event within 90 days of the first half of each of RP's financial year. (ii) Preparation of 1997 audited consolidated financial statements for Borrower (the "1997 Consolidated Financial Statements") and Annual Consolidated Financial Statements to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the Annual Consolidated Financial Statements. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event, provided that such encumbrance remains confined to such asset and improvements and additions thereto and does not secure any Financial Indebtedness not so secured at the time of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition provided that such encumbrance remains confined to such asset and improvements and additions thereto and does not secure any Financial Indebtedness not so secured at the time of such event. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above, provided that such Financial Indebtedness is not increased or secured by any additional assets or revenues. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. (K) In the event of a breach of the requirement referred to under Undertaking (B) above, the Lender shall be entitled to declare a Event of Default under the Facility. If this breach remains unremedied for 90 days after notice by the Lender of such Event of Default, the Lender may (i) declare any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued) and/or (ii) any drawn portion of the Facility to become due and payable immediately as a result of such a breach. Documentation: French language. Documentation (to be established by the Lender) will also include other customary provisions for a transaction of this type including, inter alia, Changes in circumstances, illegality, market disruption and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Fees and expenses The Borrower will pay to the Lender all reasonable fees and expenses including legal fees, incurred in connection with the preparation, negotiation and execution of this Facility and with the enforcement of its rights under the Facility Agreement upon presentation of duly documented evidence. Notwithstanding the above, the Borrower shall require the Lender to respect guidelines as to the legal expenses which the Borrower wish to cap after further discussion with Lender. Governing Law-Jurisdiction The Facility Agreement will be governed by French law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and October 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower and to the set up of a satisfactory documentation. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 1, 1997 RHONE-POULENC S.A. /s/ Michel DELRUE ------------- Michel DELRUE Directeur des Services Financiers for and on behalf of Date: August 1, 1997 * /s/ /s/ -------------- -------------- * * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(5) 15 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/4/97 Exhibit (B)(5) [LOGO OF RHONE-POULENC S.A. APPEARS HERE] RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 2,000,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS Borrower: RHONE-POULENC S.A ("RP"). Facility Amount: FRF 2,000,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 50,000,000 and in integral multiples of FRF 10,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. No more than 10 Advances shall be outstanding at any one time in a maximum of 5 currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or undrawn part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 10,000,000. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). Interest and Margin: The Borrower will pay interest at LIBOR for the relevant currency (with the exception of PIBOR in the case of French Francs), plus 0.10% (Margin) p.a. For interest periods greater than 6 months, interests will be paid after the end of every period of 6 months and on the latest day of such interest period. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in GBP which will be calculated on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate of 0.10% p.a. on the total amount of the Facility, calculated as of the date of signing on an actual/360 day basis and payable each semester in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement. (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower (the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the 1996 Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 90 days after notice by the Lender of a Potential Termination Event, the Lender may declare any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued). No drawn portion of the Facility to become due and payable prior to its maturity as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may only give rise to a right to cancel the undrawn portion of the Facility and to refuse future drawings). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, changes in circumstances, including illegality and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Governing Law - The Facility Agreement will be governed by French Jurisdiction law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and December 31, 1997. Conditions: The commitment of the Borrower and the Lender are subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 4, 1997. RHONE-POULENC S.A. /s/ Michel DELRUE ............................ Michel DELRUE Directeur des Services Financiers for and on behalf of * Date: August 4, 1997. /s/ /s/ ........................... ..................... * * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(6) 16 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/1/97 Exhibit (B)(6) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 1,000,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A ("RP"). Facility Amount: FRF 1,000,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 50,000,000 and in integral multiples of FRF 10,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). For interest periods greater than 6 months, interests will be paid after the end of every period of 6 months and on the latest day of such interest period. No more than 5 Advances shall be outstanding at any one time in a maximum of 4 currencies. Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the undrawn part of the Facility in a minimum amount of FRF 50,000,000 and in integral multiples of FRF 10,000,000. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). In this case: the Borrower will pay to the Lender a prepayment commission (the "Prepayment Commission") equal to the amount by which (i) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date exceeds ------- (ii) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date. The reinvestment interests mean the interests calculated in accordance with the investment rate (the "Reinvestment Rate"). The Reinvestment Rate means the PIBOR (or the LIBOR for Advances in currencies other than French Francs) quoted one (two in the case of the LIBOR) Business Days before the Prepayment Date, for the period from and including the Prepayment Date to and excluding the Maturity Date. The discount rate applicable to the calculation of the present value of interests referred to (i) and (ii) will be the PIBOR (or the LIBOR for Advances in currencies other than French Francs) applicable to the remaining period. If not available, discount rate will be the rate offered to the Lender by Reference Banks. Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and GBP and at LIBOR for any other relevant currency, plus 0.18% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance . LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Commitment Fee: The Borrower will pay a commitment fee in French Francs at a rate p.a. of 0.09% on any undrawn (reduced and uncancelled) part of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii)Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings current, pending or threatened against the Borrower at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement. (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii)No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: . Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. . Consolidated Net Worth greater to or equal to FRF 50,000,000,000 The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the 1996 Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 45 days after notice by the Lender of a Potential Termination Event, the Lender may declare any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued). No drawn portion of the Facility to become due and payable prior to its maturity as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify promptly the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may only give rise to a right to cancel the undrawn portion of the Facility and to refuse future drawings). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, merger, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. (K) There occurs any change in the situation of the Borrower as provided for by Article 60 of the French law n(DEGREES)84-46 of the 24th January 1984. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, the following: (A) Changes in circumstances, including illegality, market disruption and increased costs; and (B) The ability of the Lender to transfer its rights and obligations in minimum amounts of FRF 100,000,000 (or equivalent) and integral multiple of FRF 20,000,000 (or equivalent) with the prior written consent of the Borrower (such consent not to be unreasonably withheld). This ability will be possible only six (6) months after signing of the Facility Agreement. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Governing Law - Jurisdiction The Facility Agreement will be governed by French law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and October 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 1, 1997. RHONE-POULENC S.A. /s/ Michel DELRUE ..................... Michel DELRUE Directeur des Services Financiers for and on behalf of Date: August 1, 1997. * /s/ /s/ ......................... ................. * * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(7) 17 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/5/97 Exhibit (B)(7) [LOGO OF RHONE-POULENC S.A. APPEARS HERE] RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 1,000,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A ("RP"). Facility Amount: FRF 1,000,000,000 or its equivalent in any freely available and convertible currency as agreed with the Lender. Facility Description: A revolving credit facility (the "Facility") which shall be repaid and may be redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-agreed basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 5 Advances shall be outstanding at any one time in a maximum of 4 currencies. Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. Cancellation: Upon a minimum of 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.18% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance, or any PIBOR (or LIBOR) page corresponding to the relevant currency. LIBOR or PIBOR, as the case may be, will be replaced by the succeeding rate in consequence of the introduction of the EURO currency after 1 January 1999. Commitment Fee The Borrower will pay a commitment fee in French Francs at a rate p.a. of 0.10% on any undrawn (reduced and uncancelled) part of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken and the Facility complies with the corporate purpose of the Borrower; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement. (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default or Potential Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower (the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to assess compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the 1996 Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 45 days after notice by the Lender of a Potential Termination Event, the Lender may declare any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued). No drawn portion of the Facility to become due and payable prior to its maturity as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EU controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may only give rise to a right to cancel the undrawn portion of the Facility and to refuse future drawings). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. (K) A final judgement or final judgements for the payments of money are entered by a court or courts of competent jurisdiction against the Borrower and a such judgement or judgements remain unstayed or undischarged for a period of 30 days, and the aggregate amount of such judgements exceeds USD 60,000,000 or the equivalent thereof in other currencies. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, Changes in circumstances, illegality, market disruption and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Potential Event of Default shall mean any event which ,with the giving of notice or the lapse of any period of time, in each case under the Facility Agreement, would constitute an Event of Default under the Facility Agreement and which is not capable of being cured without material adverse effect on the Borrower. Governing Law - The Facility Agreement will be governed by French Jurisdiction law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and December 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 5, 1997. RHONE-POULENC S.A. /s/ Michel Delrue ------------------------- Michel DELRUE Directeur des Services Financiers for and on behalf of Date: August 5, 1997. * /s/ /s/ --------------------- -------------------- * * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(8) 18 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/1/97 Exhibit (B)(8) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 750,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A ("RP"). Facility Amount: FRF 750,000,000 or its equivalent in any Convertible Currency. Convertible Currency means USD, CHF, DEM, ECU and ESP. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 2 (two) business days' notice for French Francs and for other currencies, the Borrower may draw Advances in minimum amounts of FRF 50,000,000 and in integral multiples of FRF 10,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 6 Advances shall be outstanding at any one time in a maximum of 4 currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of FRF 50,000,000 and in integral multiples of FRF 10,000,000. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). Interest and Margin: The Borrower will pay interest at LIBOR for the relevant currency plus 0,085% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in GBP which will be calculated on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or, if not available, by Reference Banks. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Facility Fee: The Borrower will pay a facility fee in French Francs at a rate of 0.085% p.a. on the total amount (reduced and uncancelled) of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement. (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. (K) There occurs any change in the situation of the Borrower as provided for by Article 60 of the French law n(degrees)84-46 of the 24th January 1984. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, the following: (A) Changes in circumstances, including illegality and increased costs; and (B) The ability of the Lender to transfer its rights and obligations in minimum amounts of FRF 50,000,000 (or equivalent) and integral multiple of FRF 20,000,000 (or equivalent) with the prior written consent of the Borrower (such consent not to be unreasonably withheld). Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Governing Law-Jurisdiction The Facility Agreement will be governed by French law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and October 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. The commitment of the Lender is subject to the set up of a satisfactory documentation. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 1, 1997. RHONE-POULENC S.A. /s/ Michel DELRUE ----------------------- Michel DELRUE Directeur des Services Financiers for and on behalf of Date: August 1, 1997. * [SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE] ------------------------ ------------------------ * * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(9) 19 TERM SHEET REGARDING A CREDIT FACILITY DATED 7/31/97 Exhibit (B)(9) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 500,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A. Facility Amount: FRF 500.000.000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 50,000,000 and in integral multiples of FRF 10,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 10 (ten) Advances shall be outstanding at any one time in a maximum of 5 (five) currencies. Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of FRF 50,000,000 and in integral multiples of FRF 10,000,000. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). In this case: (A) the Borrower will pay to the Lender a prepayment commission (the "Prepayment Commission") equal to the amount by which (i) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date exceeds ------- (ii) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date. The reinvestment interests mean the interests calculated in accordance with the investment rate (the "Reinvestment Rate"); or, if such is the case: (B) the Lender will pay to the Borrower a Prepayment Commission equal to the amount by which (i) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; exceeds ------- (ii) the present value (on the Prepayment Date) of the interest due under the Facility on they principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; The Reinvestment Rate means the PIBOR (or the LIBOR for Advances in currencies other than French Francs) quoted one (two in the case of the LIBOR) Business Days before the Prepayment Date, for the period from and including the Prepayment Date to and excluding the Maturity Date. The discount rate applicable to the calculation of the present value of interests referred to (A) (i) and (ii) and (B) (i) and (ii) will be the PIBOR (or the LIBOR for Advances in currencies other than French Francs) applicable to the remaining period. If not available, discount rate will be the rate offered to the Lender by Reference Banks. Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.11% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate of 0.09% p.a. on the total amount of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Management Fee: The Borrower will pay a Management Fee in French Francs to the Lender, of 0.01% flat on the total Facility Amount and payable within 5 days of the date of signing of the Facility. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement. (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the 1996 Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 180 days after notice by the Lender of a Potential Termination Event, the Lender may declare any undrawn portion of the Facility to be cancelled, and no further notice of drawing may be issued. No drawn portion of the Facility shall become due and payable prior to its maturity solely as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: -In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. -Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. -Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. -Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. -Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. -Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. -Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. -Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non- payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. -Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit . -Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may only give rise to a right to cancel the undrawn portion of the Facility and to refuse future drawings). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: French language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, the following: (A) Changes in circumstances, including illegality and increased costs; and (B) The ability of the Lender to transfer its rights and obligations in minimum amounts of FRF 50,000,000 (or equivalent) and integral multiple of FRF 10,000,000 (or equivalent) with the prior written consent of the Borrower (such consent not to be unreasonably withheld). Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Governing Law - The Facility Agreement will be governed by French Jurisdiction law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and December 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: July 30, 1997 RHONE-POULENC S.A. /s/ Michael DELRUE --------------------------------- Michel DELRUE Directeur des Services Financiers for and on behalf of * Date: July 30, 1997 /s/ --------------------------------- * /s/ --------------------------------- * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(10) 20 TERM SHEET REGARDING A CREDIT FACILITY DATED 7/23/97 Exhibit (B)(10) [LETTERHEAD OF * APPEARS HERE] Rhone-Poulenc S.A. 25 quai Paul Doumer 92408 Courbevoie Cedex Attention: Mr. Michel Delrue Paris La Defense, July 23, 1997. Dear Sirs, USD 80 Million Five Year Bilateral Credit Facility (the "Facility") 1 - Commitment terms - -------------------- You have advised us that Rhone-Poulenc (the "Company") desires to establish the Facility, the proceeds of which would be used for the acquisition of shares of Rhone-Poulenc Rorer Inc. * is pleased to inform you of its commitment to provide the amount of the Facility, subject to the terms and conditions described in this letter (the "Letter") and the attached Annex I. This letter and Annex I are referred to collectively as the "Documents". 2 - Conditions Precedent - ------------------------ This commitment is subject to: (i) the preparation, execution and delivery of mutually acceptable financing documentation, incorporating, inter alia, substantially the terms and conditions outlined in Annex I, (ii) in *'s opinion, the absence of a material adverse change in (A) the business, condition (financial or otherwise), operations, performance or prospects of the Company since December 31, 1996 and (B) any change in the loan, financial or capital market conditions generally that in * opinion would materially affect the relative economic return on the Facility; (iii) the accuracy and completeness of all representations that you make to us and all information that you furnish to us and your compliance with the terms of the Documents. 3 - Commitment Termination - -------------------------- * commitment set forth in this Letter will terminate on December 31, 1997. Prior to such date, this Letter may be terminated by * if any event occurs or information has become available such that, in its judgement, it believes that any - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 condition set forth in this Letter and Annex I is or may not be satisfied. The provisions under Paragraphs 5 and 6 below shall survive the expiration or termination of this Letter. 4. Indemnification - ----------------- 4.1 Whether of not the Facility is consummated, you agree to indemnify and hold harmless *, each of its affiliates and in each case their directors, officers, employees, agents, advisers and representatives (each, an "Identified Party") from and against any and all damages, losses, liabilities, costs and expenses (including, without limitation, fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to any investigation, litigation or proceeding (which is commenced against an Indemnified Party or in which it is involved or the preparation of any defence with respect thereto (and irrespective of the identity of the person commencing the relative action), arising out of or in connection with or relating to the Documents or the financing documentation or the transactions contemplated hereby or any use made or proposed to be made with the proceeds of the Facility, except to the extent such damage, loss, liability, cost or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. 4.2 You agree that no Indemnified Party shall have any liability whatsoever to the Company for or in connection with the transactions referred to above, except to the extent such liability results from such Indemnified Party's gross negligence or wilful misconduct but save that in those circumstances no Indemnified Party shall have any liability to the Company for loss (whether direct or indirect) of profits, business or anticipated savings or for any indirect or consequential loss. 5. Confidentiality/Information - ------------------------------ 5.1 You agree that the Documents are for your confidential use and benefit only and may not be relied on by any other person and may only be disclosed by you to your officers, employees advisors, and then to any third party on a "need to know" basis. 5.2 * may be providing banking services to parties whose interests may conflict with yours. Neither * nor any of its affiliates will furnish confidential information obtained from you to any of its other customers or make available to you confidential information from any other customer. 5.3 You represent and warrant that (i) all information that has been or will hereafter by made available to * by you or any of your representatives in connection with the transactions contemplated hereby is and will be complete and correct in all material respects in light of the circumstances under which such statements are made and (ii) all financial projections (if any) provided by your to * will be prepared in good faith and based upon reasonable assumptions, although we recognize they can be subject to uncertainties as to their realisation. You further agree that you will ensure - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 all such information remains correct in all material respects and up to date, * will not verify, and will not rely on, the accuracy of any information you provide. 6. Governing Law/Entire Agreement - --------------------------------- The Documents shall be governed by, and construed in accordance with, the laws of England. The parties hereto submit to the non-exclusive jurisdiction of the English court and waive any defence of inconvenience forum which may be available. The Documents set forth the entire agreement between the parties with respect to the matters addressed therein and supersedes all prior communications, written or oral, with respect thereto and may only be modified in writing. Please indicate your acceptance of the provisions hereof by signing the enclosed copy of this Letter and returning them to * before September 1, 1997, date by which the commitment offer of * set forth above (if not so accepted prior thereto) will expire. If you elect to deliver the above documents by facsimile (which shall be effective upon receipt), please arrange for the executed originals to follow by next-day courier. Yours faithfully * [SIGNATURE APPEARS HERE] By: ACCEPTED AND AGREED Title: Vice President on: /s/ Michel Delrue By: Michel Delrue Title: Director des Service Financiers July 31, 1997 - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. SUMMARY OF LEGAL TERMS AND CONDITIONS ------------------------------------- Borrower: RHONE-POULENC SA Facility Amount: USD 80,000,000 or its equivalent in any freely available and convertible currency. Facility description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to US Dollars and committed in, but not limited to US Dollars, and may be used in other currencies on an as- available basis. Facility Purpose: The proceeds of the Facility will be used for the acquisition of shares of Rhone-Poulenc Rorer Inc. not currently held by the Borrower. The Facility will be available for general corporate purpose. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business day's notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of USD 20,000,000 and in integral multiples of USD 5,000,000 (or equivalents in other currencies) for periods of 1, 2, 3, or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 10 Advances shall be outstanding at any one time in a maximum of five currencies. Cancellation: Upon 10 business days' written notice, the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of USD 20,000,000 and in integral multiples of USD 5,000,000. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 2 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased costs) including the requirements for tax gross-ups). Interest and Margin: The Borrower will pay interest at Libor for the relevant currency (with the exception of PIBOR in the case of French Francs), plus a Margin of 20 bp p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 days basis (except for Advances in GBP which will be calculated on 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks. Commitment fee: 10 bp payable quarterly on the unused portion of the Facility. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board Resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Warranties: Representations and Warranties to be made in respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) the Borrower is duly incorporated and validly existing; (ii) the Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; 3 (iv) No encumbrances exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licenses, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; The acquisition of the shares of Rhone-Poulenc Rorer Inc. not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration, or similar tax (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending or threatened for winding- up, dissolution, or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information (i) Delivery of the Borrower's consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower (the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practice since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition Maximum Gearing Ratio: not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the 1996 Consolidated Financial Statements. (C) Other usual undertakings including (i) Compliance with all relevant laws, permits, and licenses material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower's other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default. (iv) Negative pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: . in connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or improvement. 5 . Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL, or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. . Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. . Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. . Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. . Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. . Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower (the "Borrower's Obligations"), in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's obligations. . Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) related to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. 6 . Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. . Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does no exceed 7.5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its right to carry on its operations. Events of Default Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 business days after the Lender has given a notice to the Borrower. (B) Breach of the above Maximum Gearing Ratio Undertaking. (C) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 business days after notice by the Lender of such default. (D) Any Financial Indebtedness of the Borrower exceeding FFR 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (E) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (F) Borrower is subject to an amicable settlement ("reglement amiable") under French law. 7 (G) Merger, change of ownership, insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (H) A moratorium or restructuring is made or declared in respect of all or any indebtedness or Borrower whereby the assets are submitted to the control of its creditors. (I) Appointment of an administrator, receiver in respect of the Borrower. (J) Borrower is declared insolvent or declares in writing that is unable to pay its debts as and when they are due. (K) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: English language Documentation will also include other customary provisions for a transaction of this type including, inter alia, the following: (A) Changes in circumstances, including illegality and increased costs; (B) Right of set-off, and (C) The ability of the Lender to transfer its rights and obligations in minimum amounts of USD 20,000,000 (or equivalent) and integral multiple of USD 5,000,000 (or equivalent) with the prior written consent of the Borrower (such consent not to be unreasonably withheld). 8 Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: "Financial Indebtedness" shall mean: ----------------------------------- (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under nay debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to-market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures; (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. "Material Adverse change" shall mean: ------------------------------------ any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. "Consolidated Indebtedness" shall mean the difference ----------------------------------------------------- between: ------- (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and 9 (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. "Consolidated Net Worth" shall mean the difference -------------------------------------------------- between: -------- (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), other Long term Liabilities and Mandatorily Redeemable Partnersip Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Validity of terms December 31, 1997 and conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone- Poulenc Inc. not currently held by the Borrower. [SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE] EX-99.(B)(11) 21 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/5/97 Exhibit (B)(11) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 500,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A. Facility Amount: FRF 500,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. No more than 10 (ten) Advances shall be outstanding at any one time in a maximum of 5 (five) currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the undrawn part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). In this case: (A) the Borrower will pay to the Lender a prepayment commission (the "Prepayment Commission") equal to the amount by which (i) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date exceeds ------- (ii) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date. The reinvestment interests mean the interests calculated in accordance with the investment rate (the "Reinvestment Rate"); or, if such is the case: (B) the Lender will pay to the Borrower a Prepayment Commission equal to the amount by which (i) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; exceeds ------- (ii) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; The Reinvestment Rate means the PIBOR (or the LIBOR for Advances in currencies other than French Francs) quoted one (two in the case of the LIBOR) Business Days before the Prepayment Date, for the period from and including the Prepayment Date to and excluding the Maturity Date. The discount rate applicable to the calculation of the present value of interests referred to (A) (i) and (ii) and (B) (i) and (ii) will be the PIBOR (or the LIBOR for Advances in currencies other than French Francs) applicable to the remaining period. If not available, discount rate will be the rate offered to the Lender by Reference Banks. Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.10% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance . LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate p.a. of 0.10% on the total amount (reduced and uncancelled) of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following : (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no Material Adverse Change. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a Material Adverse Change; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the most recent Consolidated Financial Statements of the Borrower. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the facility. If this breach remains unremedied for 90 days after notice by the Lender of a Potential Termination Event, the Lender may (i) declare any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued) and/or (ii) any drawn portion of the Facility to become due and payable prior to its maturity as a result of such a breach. (C) Other usual undertakings uncluding: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may give rise to a right (x) to cancel the undrawn portion of the Facility and to refuse future drawings and/or (y) to declare any drawn portion of the Facility to become due and payable prior to its maturity). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, changes in circumstances, including illegality, market disruption and increased costs Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Transferability The Lender will be able to transfer its rights and obligations under the Facility in minimum amounts of FRF 50,000,000 (or equivalent) and integral multiple of FRF 20,000,000 (or equivalent) with the prior written consent of the Borrower (such consent not to be unreasonably withheld), to the extent that such transfer takes place after the expiration of a 6 months' period after signing of the Facility Agreement. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Governing Law - The Facility Agreement will be governed by English Jurisdiction law. Any dispute arising from this Agreement shall be submitted to the Courts of England. Validity of Terms and 31 October, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 5, 1997 RHONE-POULENC S.A.: /s/ Michel DELRUE --------------------------------- Michel DELRUE Directeur des Services Financiers for and on behalf of Date: August 5, 1997 * /s/ ---------------------------------- * /s/ ---------------------------------- * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(12) 22 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/4/97 Exhibit (B)(12) [LOGO OF RHONE-POULENC S.A. APPEARS HERE] RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 1,000,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A ("RP"). Facility Amount: FRF 1,000,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 6 Advances shall be outstanding at any one time in a maximum of 4 currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). In this case: (A) the Borrower will pay to the Lender a prepayment commission (the "Prepayment Commission") equal to the amount by which (i) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date exceeds ------- (ii) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date. The reinvestment interests mean the interests calculated in accordance with the investment rate (the "Reinvestment Rate"); or, if such is the case: (B) the Lender will pay to the Borrower a Prepayment Commission equal to the amount by which (i) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; exceeds ------- (ii) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; The Reinvestment Rate means the PIBOR (or the LIBOR for Advances in currencies other than French Francs) quoted one (two in the case of the LIBOR) Business Days before the Prepayment Date, for the period from and including the Prepayment Date to and excluding the Maturity Date. The discount rate applicable to the calculation of the present value of interests referred to (A) (i) and (ii) and (B) (i) and (ii) will be the PIBOR (or the LIBOR for Advances in currencies other than French Francs) applicable to the remaining period. If not available, discount rate will be set by Reference Banks. Interest and Margin: The Borrower will pay interest at LIBOR for the relevant currency (with the exception of PIBOR in the case of French Francs), plus 0,10% (Margin) p.a. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in GBP which will be calculated on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate of 0.10% p.a. on the total amount of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement. (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the 1996 Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 90 days after notice by the Lender of a Potential Termination Event, the Lender may (i) declare any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued) and/or (ii) any drawn portion of the Facility to become due and payable prior to its maturity as a result of such a breach. In this case the Prepayment Commission will be paid by the Borrower, or the Lender, in accordance with Prepayment provisions. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge : The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may only give rise to a right to cancel the undrawn portion of the Facility and to refuse future drawings). (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, the following: (A) Changes in circumstances, including illegality and increased costs; and (B) The ability of the Lender to transfer its rights and obligations in minimum amounts of FRF 100,000,000 (or equivalent) and integral multiple of FRF 20,000,000 (or equivalent) with the prior written consent of the Borrower (such consent not to be unreasonably withheld). Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Governing Law- The Facility Agreement will be governed by French Jurisdiction law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and October 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 4, 1997. RHONE-POULENC S.A. /s/ Michel DELRUE ------------------------ Michel DELRUE Directeur des Services Financiers for and on behalf of * Date: August 4, 1997. /s/ /s/ ------------------------ ------------------------ * * - ------------- * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(13) 23 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/4/97 Exhibit (B)(13) [LOGO OF RHONE- POULENC S.A. APPEARS HERE] RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 500,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A. Facility Amount: FRF 500,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility ("the Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 2 (two) business days' notice for French Francs and 3 (three) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 50,000,000 and in integral multiples of FRF 10,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). No more than 10 (ten) Advances shall be outstanding at any one time in a maximum of 5 (five) currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of FRF 50,000,000 and in integral multiples of FRF 10,000,000. - ------------- * Request for Confidential Treatment filed by Purchaser on August 22, 1997 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). In this case: (A) the Borrower will pay to the Lender a prepayment commission (the "Prepayment Commission") equal to the amount by which (i) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date exceeds ------- (ii) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date. The reinvestment interests mean the interests calculated in accordance with the investment rate (the "Reinvestment Rate"); or, if such is the case: (B) the Lender will pay to the Borrower a Prepayment Commission equal to the amount by which (i) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; exceeds ------- (ii) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date; The Reinvestment Rate means the PIBOR (or the LIBOR for Advances in currencies other than French Francs) quoted one (two in the case of the LIBOR) Business Days before the Prepayment Date, for the period from and including the Prepayment Date to and excluding the Maturity Date. The discount rate applicable to the calculation of the present value of interests referred to (A) (i) and (ii) and (B) (i) and (ii) will be the PIBOR (or the LIBOR for Advances in currencies other than French Francs) applicable to the remaining period. If not available, discount rate will be the rate offered to the Lender by Reference Banks. Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.10% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance. Facility Fee: The Borrower will pay a facility fee in French Francs at a rate of 0.10% p.a. on the total amount of the Facility, calculated as of the date of signing on an actual/360 day basis and payable each quarter in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii)Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax, (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement. (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower' consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower' other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default; (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's, scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower, (the "Borrower's Obligations",) in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided that (A) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier that the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise the following: (A) failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, the following: (A) Changes in circumstances, including illegality and increased costs; and (B) The ability of the Lender to transfer its rights and obligations in minimum amounts of FRF 50,000,000 (or equivalent) and integral multiple of FRF 10,000,000 (or equivalent) with the prior written consent of the Borrower (such consent not to be unreasonably withheld). Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Governing Law - The Facility Agreement will be governed by French Jurisdiction law. Any dispute arising from this Agreement shall be submitted to the Courts of Paris. Validity of Terms and October 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of Date: August 4, 1997 RHONE-POULENC S.A.: [SIGNATURE APPEARS HERE] ------------------------ Michel DELRUE Directeur des Services Financiers for and on behalf of * * Date: August 4, 1997 [SIGNATURE APPEARS HERE] ------------------------ ----------------------- - ------------- * Request for Confidential Treatment filed by Purchaser on August 22, 1997 EX-99.(B)(14) 24 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/7/97 Exhibit (B)(14) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") USD 150,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A. Facility Amount: USD 150,000,000,000 or its equivalent in any freely available and convertible European currency. Facility Description: A revolving credit facility (the "Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, U.S. Dollars and committed in, but not limited to, U.S. Dollars, or their equivalent in any freely available and convertible European currency, and may be used in other currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 2 (two) business days' notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of USD 20,000,000 and in integral multiples of USD 5,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"). Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. No more than 10 (ten) Advances shall be outstanding at any one time in a maximum of 5 (five) currencies. _______ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 2 Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the undrawn part of the Facility in a minimum amount of USD 20,000,000 and in integral multiples of USD 5,000,000. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirements for tax gross-ups). In this case the Borrower will pay to the Lender a prepayment commission (the "Prepayment Commission") equal to the amount by which (i) the present value (on the Prepayment Date) of the interest due (including Margin) under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date exceeds ------- (ii) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date. The reinvestment interests mean the interests calculated in accordance with the investment rate (the "Reinvestment Rate"). The Reinvestment Rate means the PIBOR (or the LIBOR for Advances in currencies other than French Francs) quoted one (two in the case of the LIBOR) Business Days before the Prepayment Date, for the period from and including the Prepayment Date to and excluding the Maturity Date. The discount rate applicable to the calculation of the present value of interests referred to (i) and (ii) will be the PIBOR (or the LIBOR for Advances in currencies other than French Francs) applicable to the remaining period. If not available, discount rate will be the rate offered to the Lender by Reference Banks (according to mechanism to be agreed with the Lender). Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.20% (Margin) p.a. 3 Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). For interest periods greater than 6 months, interest will be paid after the end of every period of 6 months and on the latest day of such interest period. Interest rates will set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks (according to mechanism to be agreed with the Lender), as published 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior the date of an Advance. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Commitment Fee: The Borrower will pay a commitment fee in US Dollars at a rate p.a. of 0.10% on the undrawn (reduced and uncancelled) part of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion from the General Counsel of the Borrower together with a legal opinion as to English law from UK Counsel to the Lender. Representations and Representations and warranties to be made in respect of Warranties: the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; 4 (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements (or with any law, regulation or judicial official order); (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no Material Adverse Change. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender Offer to be made by the Borrower shall not be considered by the Lender as a Material Adverse Change; (x) No material litigation or other proceeding at the date of signing which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on 5 the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower's annual audited consolidated financial statements as soon as available and in any event within 120 days of financial year-end, and, in any event within 45 days after the end of each financial year, delivery of a certificate certifying compliance with the financial covenant referred to in paragraph (B) below. Delivery of the Borrower's unaudited semiannual consolidated financial statements as soon as available and in any event within 90 days of the first half of each of RP's financial year, and, in any event within 45 days after the end of each financial year, delivery of a certificate certifying compliance with the financial covenant referred to in paragraph (B) below. (ii) Preparation of audited consolidated financial statements for Borrower (the "Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements, and compliance of Consolidated Financial Statements with US GAAP. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. 6 (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December and 30 June of each year throughout the term of the Facility by reference to its Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 90 days after notice by the Lender of a Potential Termination Event, the Lender may declare (i) any undrawn portion of the Facility to be cancelled (and no further notice of drawing may be issued) and/or (ii) any drawn portion of the Short Term Facility to become due and payable prior to its maturity as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower's other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default. (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or 7 EEC controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower (the "Borrower's Obligations"), in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided (A) that the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a 8 maturity date which is not earlier than the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. (vii) Borrower does not modify its activities so as to change significantly the nature or scope of its business other than pursuant to its strategy as publicly announced on 26th June 1997. (viii) Borrower to remain the principal Borrowing Vehicle of the RP Group. Events of Default: Events of Default shall comprise the following: (A) Failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days after the Lender has given notice to the Borrower. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may give rise to a right (x) to cancel the undrawn portion of the Facility and to refuse future drawings and/or (y) to declare any drawn portion of the Facility to become due and payable prior to its maturity.) (C) Any Financial Indebtedness of the Borrower (or any Subsidiary as defined below) exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated 9 maturity by way of a declared default after expiry of any applicable grace period. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. (K) Material qualification of Consolidated Financial Statements. (L) Change of ownership of the Borrower. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, changes in circumstances, including illegality, market disruption and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other 10 deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark- to-market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. 11 Subsidiary means any company or other entity controlled by the Borrower under the terms of Article 355-1 of the French law no 66-537 of the 24th July 1966. Transferability: The Lender shall have the right at any time to assign its rights and liabilities under the Facility Agreement (in minimum amounts of USD 20,000,000 and in integral multiples of USD 5,000,000 or equivalents in other currencies) to any other prime bank with the prior written consent of the Borrower, such consent not to be reasonably withheld by the Borrower and for such purpose the Lender shall give one month's prior notice of its intention to the Borrower). The effect of any assignment shall not be to require the Borrower to bear any obligation to gross up for additional taxes or to incur liability for increased costs. Expenses: The Borrower will pay to the Lender all reasonable fees and expenses including legal fees (subject to agreed caps), incurred in connection with the preparation, negotiation and execution of the Facility Agreement and with the enforcement of its rights under the Facility Agreement upon presentation of duly documented evidence. Governing Law - Jurisdiction: The Facility Agreement will be governed by English law. Any dispute arising from this Agreement shall be submitted to the Courts of England. Validity of Terms and December 31, 1997. Conditions: The commitment of the Borrower is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower. 12 Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of RHONE-POLENC S.A.: Date: August 7, 1997 /s/ ------------------------------------------ Michel DELRUE Directeur des Services Financiers for and on behalf of *: Date: August 7, 1997 /s/ ---------------------------------------- /s/ ---------------------------------------- _______ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. EX-99.(B)(15) 25 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/7/97 Exhibit (B)(15) RHONE-POULENC S.A. (the "Borrower") * (the "Lender") FRF 500,000,000 REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS ------------------------------- Borrower: RHONE-POULENC S.A. ("RP") Facility Amount: FRF 500.000.000 or its equivalent in US dollars or any freely available and convertible European currency. Facility Description: A revolving credit facility (the "Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in, but not limited to, French Francs and committed in, but not limited to, French Francs, or their equivalent in US Dollars, and may be used in other major European currencies on an as-available basis. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement (the "Final Maturity Date"). Availability: Subject to 1 (one) business day's notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 50,000,000 and in integral multiples of FRF 10,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such other periods of up to 12 months as the Lender may agree ("Advances"), provided, however, that no such period may exceed the Final Maturity Date. Any drawing notice shall be received by the Lender from the Borrower by not later than 10.00 a.m. (Paris time) for French francs and by not later than 10.00 a.m. (London time) for other currencies. ______ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 2 No more than 10 (ten) Advances shall be outstanding at any one time in a maximum of 5 (five) currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the undrawn part of the Facility in a minimum amount of FRF 50,000,000 and in integral multiples of FRF 10,000,000. Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups). In this case the Borrower will pay to the Lender a prepayment commission (the "Prepayment Commission") equal to the amount by which (i) the present value (on the Prepayment Date) of the interest due under the Facility on the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date exceeds ------- (ii) the present value (on the Prepayment Date) of the reinvestment interest that the Lender is able to obtain on an amount equal to the principal repaid amount for the period from and including the Prepayment Date to and excluding the Maturity Date. The reinvestment interests mean the interests calculated in accordance with the investment rate (the "Reinvestment Rate"). The Reinvestment Rate means the PIBOR (or the LIBOR for Advances in currencies other than French Francs) quoted one (two in the case of the LIBOR) Business Days before the Prepayment Date, for the period from and including the Prepayment Date to and excluding the Maturity Date. The discount rate applicable to the calculation of the present value of interests referred to (i) and (ii) will be the PIBOR (or the LIBOR for Advances in currencies other than French Francs) applicable to the remaining period. If not available, discount rate will be the rate offered to the Lender by Reference Banks. 3 Interest and Margin: The Borrower will pay interest at PIBOR in the case of French Francs and at LIBOR for any other relevant currency, plus 0.20% (Margin) p.a. Interest will be payable at the end of each interest period and will be calculated on an actual/360 day basis (except for Advances in currency where the market calculates on a 365 day basis). Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks, as published (or obtained from the Reference Banks) 1 (one) Business Day (PIBOR) or 2 (two) Business Days (LIBOR) prior to the date of an Advance. LIBOR or PIBOR, as the case may be, will be replaced by any applicable rate in consequence of the introduction of the EURO currency after 1 January 1999. Default rate: If the Borrower fails to pay any sums due by it under the Facility, the Borrower shall, from the date when such sum fell due, pay interest on the unpaid sum up to the date upon which such sum is actually received by the Lender at the rate per annum which is the aggregate of (i) one per cent (1%) and (ii) the rate which would have been applied to the relevant Advance outstanding under the Facility at the time of the default. Commitment Fee: The Borrower will pay a commitment fee in French Francs at a rate of 0.10% p.a. on any undrawn (reduced and uncancelled) part of the Facility, calculated as of the date of signing on an actual/360 day basis and payable quarterly in arrears. Conditions Precedent: Shall comprise the following on signing: (A) Constitutional documents of the Borrower; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; (D) Legal Opinion provided by the General Counsel of the Borrower; and 4 (E) No Event of Default or Material Adverse Change at the date of signing. Representations and Representations and warranties to be made in Warranties: respect of the Borrower at signing, and (i), (ii), (iii), (iv), (v), (vii), (xii) and (xiii) inclusive to be repeated at each Advance date. (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed on the date of the signature of the Facility Agreement to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of 1996 audited financial statements (the "1996 Consolidated Financial Statements"); (ix) Between the 1996 Consolidated Financial Statements and the date of signing, there has been no adverse change in the consolidated financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the 5 Borrower's capacity to meet its obligations under the Facility Agreement. The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender Offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceeding at the date of signing which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending of threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default or Potential Event of Default. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower's audited consolidated financial statements as soon as available and in any event within 180 days of financial year-end, an English copy of which shall be delivered within 45 days thereafter. (ii) Preparation of 1997 audited consolidated financial statements for Borrower (the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. 6 (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the audited Consolidated Financial Statements (the "Consolidated Financial Statements") furnished pursuant to (A)(i) "Undertakings". (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower's other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default or Potential Event of Default. (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender give its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvements. - Created to secure Financial Indebtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such Encumbrance. 7 - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower (the "Borrower's Obligations"), in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as of such refinancing, not borne by the Borrower. - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided (A) that the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date 8 which is not earlier than the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the amount of Financial Indebtedness secured thereby does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. (vii) The Borrower will not modify its activities so as to change significantly the nature or scope of its business other than pursuant to its strategy as publicly announced on 26th June 1997. Events of Default: Events of Default shall comprise the following: (A) Failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is not remedied within 5 Business Days. (B) Breach of other obligations which, where capable of remedy in the reasonable opinion of the Lender, remains unremedied for 15 Business Days (except in the case of the undertaking as to financial condition under Undertaking (B) above, for which the period shall be 90 days) after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may give rise to a right (x) to cancel the undrawn portion of the Facility and to refuse future drawings and/or (y) to declare any drawn portion of the Facility to become due and payable prior to its maturity.) (C) (i) Any Financial Indebtedness of the Borrower exceeding an aggregate principal amount of FRF 150,000,000 (or equivalent), or any Financial Indebtedness of the Borrower and any of its Subsidiaries, as defined below, exceeding an 9 aggregate principal amount of FRF 250,000,000 (or equivalent), becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, or (ii) Any Financial Indebtedness of the Borrower or any Subsidiary of the Borrower in respect of which the Lender or any member of the * (as defined below) is a lender, exceeding an aggregate principal amount of FRF 25,000,000 (or equivalent) or any amount of interest on such Financial Indebtedness, is not paid when due or becomes due and payable before its stated maturity, in each case after expiry of any applicable grace period. (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. (K) The Borrower consolidates or merges with any other entity unless the Borrower is the surviving entity or the surviving entity shall have assumed expressly and effectively or by - ----------- * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 10 law all obligations of the Borrower under the Facility Agreement. (L) There occurs an event or series of events which, in the reasonable opinion of the Lender, irremediably compromises the ability of the Borrower to perform in a timely manner any of its payment obligations under the Facility Agreement as provided for by Article 60 of the French law n(degree)84-46 of the 24th January 1984. Documentation: English language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, changes in circumstances, including illegality, market disruption and increased costs. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: Financial Indebtedness shall mean: (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time 11 and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures; (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. Material Adverse Change shall mean any event on the assets or financial condition of the RP Group taken as a whole having a material adverse effect in the reasonable opinion of the Lender on the ability of the Borrower to perform in a timely manner all or any of its payment obligations under the Facility Agreement. Consolidated Indebtedness shall mean the difference between (i) the sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. Consolidated Net Worth shall mean the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. Potential Event of Default shall mean any event which with the giving of notice or the lapse of any period of time would constitute an Event of Default under the Facility Agreement. * shall mean * and any other company or other entity the accounts of which are consolidated therewith. Subsidiary means any company or other entity controlled by the Borrower under the terms of Article 355-1 of the French law n(degree)66-537 of the 24th July 1966. - ----------- * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 12 Transferability: The Lender shall have the right at any time to assign its rights and liabilities under the Facility Agreement to any bank or any financial institution within the * . The Lender shall have the right at any time to assign its rights and liabilities under the Facility Agreement to any other prime bank with the prior written consent of the Borrower, such consent not to be reasonably withheld by the Borrower and for such purpose the Lender shall give one month's prior notice of its intention of the Borrower). The effect of any assignment shall not be to require the Borrower to bear any obligation to gross up for additional taxes or to incur liability for increased costs. Costs: The Borrower shall be liable for all expenses of the Lender incurred in connection with the negotiation, preparation or completion of the Facility Agreement, up to a maximum of FRF 50,000. Governing Law - The Facility Agreement will be governed by French Jurisdiction: law. Any dispute arising from the Facility Agreement shall be submitted to the Courts of Paris. Validity of Terms and The parties shall negotiate in good faith a Facility Conditions: Agreement based on the above Summary Terms and Conditions with a view to be executed by the parties no later than December 31, 1997. - ----------- * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 13 Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of RHONE-POULENC S.A.: Date: August 7, 1997 /s/ ---------------------------------- Michel DELRUE Directeur des Services Financiers for and on behalf of *: Date: August 7, 1997 /s/ ---------------------------------- ______ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. EX-99.(B)(16) 26 TERM SHEET REGARDING A CREDIT FACILITY DATED 8/8/97 Exhibit (B)(16) RHONE POULENC SA (the "Borrower") FRF 4,000,000,000 SHORT TERM CREDIT FACILITY SUMMARY OF LEGAL TERMS AND CONDITIONS ------------------------------------- Borrower: RHONE POULENC S.A. Facility Amount: Short Term FRF 4,000,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility (the "Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in French Francs and committed in French Francs and may be used in other currencies listed below on an as-available basis: USD, JPY, DEM, GBP, CHF, CAD. Facility Purpose: Bridge financing for the partial financing of the acquisition of the minority shareholding in R.P. Rorer. Lender: * Final Maturity: The Facility will be repaid in full 365 days from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business day's notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such monthly periods of up to 12 months as the Lender may agree ("Advances"). No more than 10 Advances shall be outstanding at any one time in a maximum of five currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. ______ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 2 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups), subject to payment of break-up costs. Interests: The Borrower will pay interest at LIBOR for the relevant currency (with the exception of PIBOR in the case of French Francs), plus Margin p.a. Interest will be payable at the end of each interest period and will be calculated on an actual 360 day basis (except for Advances in GBP which will be calculated on a 365 day basis); provided, however, that, in case of Advances lasting more than six months, the Margin portion of the interests shall be paid in two payments, the first one falling due after six months for amounts accrued at that time, the second one on the day the Advance shall be repaid. Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks. Utilization Margin: 0,05% Facility Fee: 0,05% payable quarterly in arrears on the total amount of the Facility. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower and "Kbis"; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorizations, together with certification of relevant signing authorities; and (D) Legal Opinion provided the General Counsel of the Borrower. 3 Representations and Warranties: Representations and warranties to be made in respect of the Borrower at signing, to be repeated at each Advance date, except (vii), (ix), (x), (xi), shall include inter alia (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank at least pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of the Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licenses, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of latest audited financial statements (the "Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Since the latest Consolidated Financial Statements, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. 4 The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceedings which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default; and (xiv) The Borrower has subscribed all customary insurance policies consistent and prudent in his line of business, covering risks of loss and liabilities, and environmental risks. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower's corporate and consolidated financial certified statements as soon as available and in any event within 180 days of financial year-end. (ii) Preparation of 1997 audited consolidated financial statements for the Borrower (the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. 5 (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with the Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the latest Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 180 days after notice by the Lender of a Potential Termination Event, the Lender may declare any undrawn portion of the Facility to be cancelled, and no further notice of drawing may be issued. No drawn portion of the Facility shall become due and payable prior to its maturity solely as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licenses material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower's other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of an Event of Default. (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrances in respect of Financial Indebtedness unless the Lender gives its consent, except encumbrances - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvement. 6 - Created to secure Financial Indebtedness owing to EIB, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EU controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by an encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower (the "Borrower's Obligations") in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower, which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. 7 - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided (A) that to the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier than the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the global amount of Financial Indebtedness secured does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise inter alia the following: (A) Failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations unless, to the extent it can be remedied, it shall have been remedied within 20 Business Days after notice by the Lender of such default. (The breach referred to under Undertaking (B) above may only give rise to a right to cancel the undrawn portion of the Facility and to refuse future drawings.) (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. 8 (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of the Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) The Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: French language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, changes in circumstances, including illegally and increased costs. Law: French law. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: "Financial Indebtedness" shall mean: 9 (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures. (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. "Consolidated Indebtedness" shall mean the difference between: (i) The sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings, and (ii) The sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. "Consolidated Net Worth" shall mean the difference between: (i) Total Liabilities and Total Stockholders Equity and 10 (ii) The sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. The commitment of the Lender is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc. not currently held by the Borrower, and to negociation in good-faith of a satisfactory documentation. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of RHONE-POULENC S.A.: Date: /s/ ----------------------- for and on behalf of THE LENDER: Date: August 8, 1997 /s/ ----------------------- * - ------------ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. EX-99.(B)(17) 27 TERM SHEET REGARDING A CREDIT FACILITY UNDATED Exhibit (B)(17) RHONE POULENC SA (the "Borrower") FRF 2,000,000,000 REVOLVING CREDIT FACILITY SUMMARY OF LEGAL TERMS AND CONDITIONS ------------------------------------- Borrower: RHONE POULENC S.A. Facility Amount: Medium Term FRF 2,000,000,000 or its equivalent in any freely available and convertible currency. Facility Description: A revolving credit facility (the "Facility") which shall be repaid and redrawn throughout its life. The Facility will be denominated in French Francs and committed in French Francs and may be used in other currencies listed below on an as-available basis: USD, JPY, DEM, GBP, CHF, CAD. Facility Purpose: The Facility will be used for general corporate purposes. Lender: * Final Maturity: The Facility will be repaid in full five years from the date of signing of the Facility Agreement. Availability: Subject to 1 (one) business day's notice for French Francs and 2 (two) business days' notice for other currencies, the Borrower may draw Advances in minimum amounts of FRF 100,000,000 and in integral multiples of FRF 20,000,000 (or equivalents in other currencies) for periods of 1, 2, 3 or 6 months or such monthly periods of up to 12 months as the Lender may agree ("Advances"). No more than 10 Advances shall be outstanding at any one time in a maximum of five currencies. Cancellation: Upon 10 business days' written notice the Borrower may cancel without premium or penalty all or part of the Facility in a minimum amount of FRF 100,000,000 and in integral multiples of FRF 20,000,000. ________ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 2 Prepayment: Prepayment of Advances shall be permitted in cases of illegality and increased cost (including the requirement for tax gross-ups) subject to payment of break-up costs. Interests: The Borrower will pay interest at LIBOR for the relevant currency (with the exception of PIBOR in the case of French Francs), plus Margin p.a. Interest will be payable at the end of each interest period and will be calculated on an actual 360 day basis (except for Advances in GBP which will be calculated on a 365 day basis); provided, however, that, in the case of Advances lasting more than six months, the Margin portion of the interest shall be paid in two payments, the first one falling due after six months for amounts accrued at that time, the second one on the day the Advance shall be repaid. Interest rates will be set by reference to Telerate page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not available, by Reference Banks. Utilisation Margin: Depends on the ratio "R" EBITDA/interest: Margin of 0,11% if R less than 6 0,09% if R greater than or = 6 Facility Fee: Depends on the ratio "R" EBITDA/interest: Margin of 0,11% if R less than 6 0,09% if R greater than or = 6 payable quarterly in arrears on the total amount of the Facility. Conditions Precedent: Shall comprise the following: (A) Constitutional documents of the Borrower and "Kbis"; (B) Copies of all relevant Board resolutions; (C) Copies of all other consents and authorisations, together with certification of relevant signing authorities; and (D) Legal Opinion provided by the General Counsel of the Borrower. 3 Representations and Warranties: Representations and warranties to be made in respect of the Borrower at signing, to be repeated at each Advance date, except (vii), (ix), (x), (xi), shall include inter alia (i) The Borrower is duly incorporated and validly existing; (ii) The Borrower has power to enter into and perform pursuant to the Facility Agreement and all necessary corporate actions relevant thereto have been taken; (iii) Obligations of the Borrower under the Facility Agreement will rank at least pari passu with other unsecured and unsubordinated obligations; (iv) No encumbrance exists over present or future assets or revenues, except as expressly permitted or disclosed to the Lender (see below); (v) Obligations under the Facility are legally valid, binding and enforceable; (vi) Execution and performance of Facility Agreement will not be in conflict with or in breach of obligations in other agreements; (vii) All necessary consents, licences, permits, etc. relevant to the Facility have been obtained and are in full force and effect; (viii) Accuracy and fairness of latest audited financial statements (the "Consolidated Financial Statements") to the best of the Borrower's knowledge and belief; (ix) Since the latest Consolidated Financial Statements, there has been no adverse change in the financial condition of the Borrower which is material in the context of its operation taken as a whole which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement. 4 The acquisition of the shares of Rhone- Poulenc Rorer Inc not currently held by the Borrower in connection with a proposed tender offer to be made by the Borrower shall not be considered by the Lender as a material adverse change in the financial condition of the Borrower; (x) No material litigation or other proceeding which is material in the context of its operation taken as a whole (to the best of the Borrower's knowledge and belief) which could have a material adverse effect on the Borrower's capacity to meet its obligations under the Facility Agreement; (xi) No stamp, registration or similar tax (other than French "Timbres de Dimension") in connection with the execution, delivery, performance or enforcement of the Facility Agreement; (xii) No proceedings pending or threatened for winding-up, dissolution or similar process; (xiii) No existing Event of Default; (xiv) The Borrower has subscribed all customary insurance policies consistent and prudent in his line of business, covering risks of loss and liabilities, and environmental risks. Undertakings: (A) Undertakings as to financial information: (i) Delivery of the Borrower's corporate and consolidated financial certified statements as soon as available and in any event within 180 days of financial year-end. (ii) Preparation of 1997 audited consolidated financial statements for Borrower (the "1997 Consolidated Financial Statements") to reflect any changes that have occurred in accounting practices since the 1996 Consolidated Statements. 5 (iii) Provision of such other information as the Lender may reasonably request in order to access compliance with Borrower's obligations under the Facility. (B) Undertakings as to financial condition: Ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined below) not to exceed 1. The Borrower shall ensure that this financial covenant is met as at 31st December of each year throughout the term of the Facility by reference to the latest Consolidated Financial Statements. In the event of a breach in the performance of this requirement, the Lender shall be entitled to declare a Potential Termination Event under the Facility. If this breach remains unremedied for 180 days after notice by the Lender of a Potential Termination Event, the Lender may declare any undrawn portion of the Facility to be cancelled, and no further notice of drawing may be issued. No drawn portion of the Facility shall become due and payable prior to its maturity solely as a result of such a breach. (C) Other usual undertakings including: (i) Compliance with all relevant laws, permits, and licences material in the context of the Facility. (ii) Pari passu status vis-a-vis all the Borrower's other unsecured and unsubordinated creditors. (iii) To notify the Lender in writing of any Event of Default. (iv) Negative Pledge: The Borrower shall not create or permit to be outstanding any encumbrance in respect of Financial Indebtedness unless the Lender gives its consent, except encumbrances: - In connection with the purchase, maintenance or improvement of an asset, providing the amount of Financial Indebtedness secured remains confined to such asset or such improvement. 6 - Created to secure Financial Indebtedness owing to EIB, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any other governmental or EU controlled financial institution which in its normal lending practice requires such Encumbrance. - Existing at a time when a corporation is merged into, consolidated with or acquired by the Borrower and not created in contemplation of such event. - Existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition. - Arising out of a refinancing of any indebtedness secured by an encumbrance permitted above. - Arising after orders of attachment, distraint or similar legal process arising in connection with court proceedings so long as the claims secured are being contested in good faith. - Created over assets held in trust by another person, which assets are to be used by such other person solely for satisfying the Borrower's scheduled payment obligations in respect of principal and/or interest in respect of any Financial Indebtedness of the Borrower (the "Borrower's Obligations") in circumstance where such other person has undertaken responsibility for the discharge of the Borrower's Obligations. - Over assets or receivables of the Borrower, which encumbrances have been given in connection with the refinancing of such assets or receivables and where the risks (except in relation to any credit enhancement provided by the Borrower in respect of such assets or receivables) relating to non-payment in respect of such assets or receivables are, as a result of such refinancing, not borne by the Borrower. 7 - Over a deposit made by the Borrower using the proceeds of a Financial Indebtedness of the Borrower provided (A) that the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower and (B) that such loan has a maturity date which is not earlier than the date for repayment of such deposit. - Not in one of the above categories to secure Financial Indebtedness as long as the global amount of Financial Indebtedness secured does not exceed 7,5% of Consolidated Net Worth. (v) Borrower will pay all transfer, stamp or registration fees or similar taxes or charges which may become payable. (vi) Borrower will maintain its corporate existence and its rights to carry on its operations. Events of Default: Events of Default shall comprise inter alia the following: (A) Failure of the Borrower to make any payment on the due date under the terms of the Facility, unless such failure occurs solely for administrative or technical reasons and the default is remedied within 5 Business Days after the Lender has given a notice to the Borrower. (B) Breach of other obligations unless, to the extent it can be remedied, it shall have been remedied within 20 Business Days after notice by the Lender of such default. (The Breach referred to under Undertaking (B) above may only give rise to a right to cancel the undrawn portion of the Facility and to refuse future drawings.) (C) Any Financial Indebtedness of the Borrower exceeding FRF 150,000,000 (or equivalent) becomes due and payable before its stated maturity by way of a declared default after expiry of any applicable grace period, unless such default is contested in good faith by the Borrower by appropriate proceedings. 8 (D) Any representation or warranty of the Borrower is materially incorrect in any respect when made or repeated. (E) Borrower is subject to an amicable settlement ("reglement amiable") under French law. (F) Insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower except in the case of the liquidation or the dissolution where the terms have been approved by the Lender. This excludes a merger for arm's length consideration within the Borrower's group. (G) A moratorium or restructuring is made or declared in respect of all or any indebtedness of the Borrower whereby the assets are submitted to the control of its creditors. (H) Appointment of an administrator, receiver in respect of the Borrower. (I) The Borrower is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due. (J) It becomes unlawful for the Borrower to comply with its obligations under the Facility. Documentation: French language. Documentation will also include other customary provisions for a transaction of this type including, inter alia, changes in circumstances, including illegality and increased costs. Law: French law. Taxation: All payments of principal, interest and fees will be made free and clear of all present and future taxes, levies, duties or other deductions of any nature whatsoever, levied either now or at any future time. Key definitions: "Financial Indebtedness" shall mean: 9 (i) Any indebtedness for monies borrowed; (ii) Any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) Any indebtedness under any acceptance credit; (iv) Any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument on which either of the Borrower is liable; (v) Any Indebtedness for money owing in respect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to- market basis at the relevant time and to include, vis-a-vis any particular counterparty, application of the relevant ISDA netting procedures; (vi) Any payment obligations under any lease entered into for the purpose of obtaining or raising finance. "Consolidated Indebtedness" shall mean the difference between: (i) The sum of Long Term Debt (including Participating Loans), Bank Overdrafts, Current Portion of Long Term Debt and Short Term Borrowings, and (ii) The sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP included in the annual financial statements most recently delivered by RP to the Lender. "Consolidated Net Worth" shall mean the difference between: (i) Total Liabilities and Total Stockholders Equity and 10 (ii) The sum of Total Current Liabilities, Long Term Debt (including Participating Loans), Other Long Term Liabilities and Mandatorily Redeemable Partnership Interest as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the annual financial statements most recently delivered by RP to the Lender. 11 Validity of Terms and Conditions: December 31, 1997. The commitment of the Lender is subject to the realisation of the acquisition of the shares of Rhone-Poulenc Rorer Inc not currently held by the Borrower, and to negotiation in good faith of a satisfactory documentation. Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions. for and on behalf of RHONE-POULENC S.A.: Date: /s/ ---------------------------------- for and on behalf of THE LENDER: Date: /s/ ---------------------------------- EX-99.(B)(18) 28 TERM SHEET REGARDING A BRIDGE LOAN DATED 8/8/97 Exhibit (B)(18) PROJECT JUPITER US$850,000,000 BRIDGE LOAN FACILITY (THE "BRIDGE LOAN FACILITY") SUMMARY OF PRINCIPAL TERMS AND CONDITIONS * is pleased to provide below an outline of the terms and conditions upon which it would be prepared to make the Bridge Loan Facility available. 1. BORROWER: Rhone-Poulenc S.A. ("RP"). 2. LENDER: * 3. FACILITY: A bridge loan facility of up to US$850,000,000 to be made available to the Borrower. The facility will be available in US Dollars and other freely available eurocurrencies. 4. PURPOSE: The proceeds of the Bridge Loan Facility will be used by the Borrower in discharge of the consideration payable by the Borrower for the acquisition of the shares of Rhone-Poulenc Rorer ("RPR") not currently owned by the Borrower (the "RPR MINORITY SHARES") in connection with a proposed tender offer (the "TENDER OFFER") to be made by the Borrower for the RPR Minority Shares. 5. DRAWDOWN: Subject to satisfaction of all conditions precedent to the availability of the Bridge Loan Facility, the Bridge Loan Facility will be available to be drawn in one amount during the period commencing on the date on which the Tender Offer is effective and ending on the earlier of (i) lapse of the Tender Offer and (ii) 30 November 1997 (the "AVAILABILITY PERIOD"). 6. INTEREST: (i) Interest and advance periods will be 1, 3 or 6 months or such other periods as may be agreed with the Lender. (ii) The rate of interest shall be LIBOR plus the Margin. Interest will accrue from day to day and be calculated on the basis of accrual days elapsed and a 360 day year. (iii) The Margin shall be 0.125% per annum. (iv) If the Borrower fails to pay any amount owing by it on the due date for payment the Margin applicable to the unpaid sum shall be increased by 1% with effect from the due date. 7. FEES: The Borrower will pay commitment fees to the Lender at a rate of 0.06125% per annum on the daily undrawn uncancelled portion of the Bridge Loan Facility quarterly in arrears and on the expiry of the Availability Period from the date of signing of the Bridge Loan Facility agreement (whether or not the financing transactions contemplated herein are completed) (such fees to accrue from day to day and to be calculated on the basis of actual days elapsed and a 360 day year). 8. FINAL MATURITY: The date (the "FINAL REPAYMENT DATE") falling 364 days after (and including), the date of signing of the Bridge Loan Facility. ________ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 1 9. REPAYMENT: The Bridge Loan Facility shall be repaid in installments on the dates and in the amounts shown in the following table:
(1) REPAYMENT DATES (2) AMOUNT (US$) 29 December 1997.......... 125,000,000 31 March 1998............. 270,000,000 30 June 1998.............. 265,000,000 Final Repayment Date...... 190,000,000
10. MANDATORY PREPAYMENT: (i) in full on a change of control of the Bor- rower; (ii) within 5 business days of realisation, the * Percentage (as defined in paragraph 24) of the net proceeds of any equity of-fering or other capital raising exercise by any member of the RP Group (excluding equity offerings for employees pursuant to employee share schemes and employee share option schemes) (including, for the avoid- ance of doubt the IPO of the RP Chemicals and Fibres and Polymers business)) each an "EQUITY OFFERING"); (iii) in full on recission of the Acquisition and/or the Bridge Loan Facility agreement or any documents entered into in connec- tion therewith. (iv) in full in the event that either: (a) it becomes unlawful for the Borrower to comply with its obligations under or in connection with the Bridge Loan Facility agreement; or (b) any provision of the Bridge Loan Fa- cility agreement become unenforceable; Mandatory prepayment of part to be applied against scheduled repayment installments in order of maturity. No amounts prepaid may be redrawn. 11. VOLUNTARY PREPAYMENT: Permitted at any time, upon at least seven business days' notice, subject to: (i) the relevant prepayment being in a minimum amount of US$50,000,000; (ii) broken funding indemnity from the Borrow- er. No amounts prepaid may be redrawn. 12. CANCELLATION: Automatic cancellation of undrawn amounts on the last day of the Availability Period. The Bridge Loan Facility may be canceled in whole or in part upon seven business days prior written notice to the Lender in minimum amounts of US$50,000,000 and integral multiples thereof. Any cancellation of the Bridge Loan Facility shall be irrevocable. 13. DOCUMENTATION: The Bridge Loan Facility arrangements will be documented by a facility agreement (on normal Euromarket syndicated loan terms) which will set out, inter alia, the conditions precedent to drawing, the representations and warranties, the undertakings and the events of default. Increased costs, pro-rata sharing, set-off, market ________ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 2 disruption, illegality and currency exposure protection provisions will be documented in the Bridge Loan Facility agreement in accordance with normal banking practice. 14. CONDITIONS PRECEDENT: (a) Conditions precedent to signing of the Bridge Loan Facility to be completed to the satisfaction of the Lender prior to the Bridge Loan Facility becoming available will include: (i) copies of the up to date constitu- tional documents and corporate author- ities for the Borrower accompanied by related incumbency certificates; (ii) legal opinions from legal counsel to the Borrower together with a legal opinion as to English law from UK counsel to the Lender. (b) Conditions precedent to drawing of the Bridge Loan Facility to be completed to the satisfaction of the Lender prior to the Bridge Loan Facility becoming available will include: (i) copies of the up to date constitu- tional documents and corporate author- ities for the Borrower accompanied by related incumbency certificates; (ii) due execution of the Bridge Loan Fa- cility agreement; (iii) representations and warranties are true and accurate on the date of ini- tial drawdown of the Bridge Loan Facility; (iv) no event of default or potential event of default (as defined in paragraph 24). 15. REPRESENTATIONS AND Representations and warranties from the WARRANTIES: Borrower in relation to itself and material Subsidiaries (as defined in paragraph 24), to include: (i) the Borrower is duly incorporated and val- idly existing; (ii) obligations of the Borrower under the Bridge Loan Facility agreement will rank pari passu with other unsecured and unsubordinated obligations; (iii) the Borrower has power to enter into and perform pursuant to the Bridge Loan Fa- cility agreement and all necessary corpo- rate actions relevant thereto have been taken; (iv) all material consents, licences, permits, filings, etc. relevant to the Bridge Loan Facility agreement have been obtained or made and are in full force and effect; (v) execution and performance of Bridge Loan Facility agreement will not be in conflict with or in breach of any material obliga- tions in other agreements; (vi) obligations under the Bridge Loan Facility agreement are legally valid, binding and enforceable; (vii) no insolvency events; (viii) no material litigation or other proceed- ings which would, or would be reasonably likely to, constitute a material adverse change; 3 (ix) no security interests or guarantees save for agreed exceptions; (x) good title to and/or valid leases or licences of, or other valid right to use, all material assets necessary to conduct its business; (xi) accuracy and fairness of published ac- counts; (xii) no material adverse change since 31 De- cember 1996; (xiii) (a) no event of default has occurred un- der the Bridge Loan Facility agreement; and (b) to its best knowledge and be- lief, having made due and careful en- quiry no default has occurred under any other material agreement to which it and/or any Material Subsidiary is a par- ty; (xiv) no material outstanding tax liabilities (unless such liabilities are being con- tested in good faith and by appropriate proceedings); (xv) contents of Legal Report, management bud- get and other information provided to the Lender accurate in all material respects as at date given; (xvi) no material undisclosed facts relating to the Acquisition; (xvii) no liability to make deductions or with- holdings from payments to the Lender; (xviii) no stamp, registration or similar tax, (other than French "Timbres de Dimen- sion") in connection with the execu- tion, delivery, performance or enforce- ment of the Bridge Loan Facility agree- ment; (xix) continued availability of Group loan fa- cilities after drawdown under the Bridge Loan Facility; Representations and warranties to be given/repeated as appropriate on date of signing of the Bridge Loan Facility agreement, on the date of any request for a utilisation thereof, on each drawdown date and quarterly thereafter (with the exception of representations (xii), (xiii)(b), (xv), (xvi), (xvii) and (xviii) which shall be given on the date of the Bridge Loan Facility). 16. GENERAL UNDERTAKINGS: Undertakings from the Borrower in relation to itself and ech Material Subsidiary, to include: (i) maintenance of authorisations and consents required in relation to the Acquisition and the Bridge Loan Facility agreement and all documents entered into in connection therewith; (ii) subject to exceptions agreed between RP and the Lender (including, for this purpose, intra group restructurings) limitations or amalgamation, merger or consolidation or material change in the nature or scope of the business of the Borrower and any other Material Subsidiary without the prior approval of the Lender; (iii) compliance with all relevant laws, per- mits and licences and making of all fil- ings material in the context of the Bridge Loan Facility agreement; 4 (iv) each Borrower and Material Subsidiary to maintain its corporate existence and its right to carry on its operations, provided that (except for any merger of the Bor- rower with any entity) the merger of Mate- rial Subsidiaries in relation to the IPO of the RP chemicals business will be per- mitted; (v) pari passu status vis-a-vis all the Bor- rower's other unsecured and unsubordinated creditors; (vi) maintenance of insurances, including pub- lic liability cover; (vii) payment of all taxes before penalties be- come payable (unless being contested in good faith and by appropriate proceed- ings); (viii) restrictions on creation of security over Borrower or Material Subsidiary as- sets save for Permitted Security (as de- fined in paragraph 24); (ix) maximum amount of financial indebtedness in aggregate of RP Group not to exceed Ffr66,000,000,000 or equivalent; (x) no loans or other similar financial accom- modations other than in normal course of business for intra-group funding transac- tions; (xi) no repayment of Financial Indebtedness in- curred in connection with the acquisition of the RPR Minority Shares (other than to the Lender) prior to the Final Repayment Date except for (a) an amount of FF1,000,000,000 of the Balancing Bridge Loan Facilities on 31st December, 1997; (b) an amount of FF1,500,000,000 of the Balancing Bridge Loan Facilities on 30th June, 1998; and (c) repayments and immediate redrawings of such Financial Indebtedness to the ex- tent such Financial Indebtedness arises under revolving credit facili- ties; (xii) hedging activity of the Borrower and each Material Subsidiary to be carried out in accordance with the Borrower's usual business practice; (xiii) (a) as soon as available and in any event within 90 days after the end of the first half of each of RP's financial years (aa) RP's unaudited financial statements for that financial half year (in English) and (bb) the unau- dited consolidated financial state- ments of the RP Group (in English), for that financial half year, and as soon as available and in any event with 45 days after the end of the first half of each of RP's financial years, delivery of a certificate of a director on the executive board of RP certifying compliance with the finan- cial covenant referred to in para- graph (xxi) below and the non-exist- ence of any event of default or po- tential event of default; (b) as soon as available and in any event within 120 days after the end of each of RP's financial years (aa) RP's au- dited financial statement for that fi- nancial year (in 5 English) and (bb) the audited consoli- dated financial statements of the RP Group (in English), for that financial year, and, as soon as available and in any event within 45 days after the end of each of RP's financial years, deliv- ery of a certificate of a director on the executive board of RP certifying compliance with the financial covenant referred to in paragraph (xxi) below and the non-existence of any event of de- fault or potential event of default; (xiv) delivery to the Lender of details of liti- gation or other similar proceedings which would be likely to result in material ad- verse change; (xv) provision of such other information as the Lender may reasonably request in order to assess compliance by the Borrower with its obligations under the Bridge Loan Facility agreement; (xvi) requirement to notify Lender of any event of default or potential event of default; (xvii) requirement to notify the Lender of any change in the auditors; (xviii) ratio of Consolidated Indebtedness to Consolidated Net Worth (as such terms are defined in paragraph 24) not to ex- ceed 1:1. Covenant compliance to be tested on 31 December and 30 June of each year. Compliance by reference to audited accounts to be certified by RP's auditors; (xix) Residual Percentage of the net proceeds of any Equity Offering to be applied in pre- payment of the Balancing Bridge Loan Fa- cilities. 17. EVENTS OF DEFAULT: Events of default to include: (i) payment default (with 3 business days rem- edy period for technical or administrative delay only) and other breach of the Bridge Loan Facility agreement) (with 15 business days remedy period from date of default, if capable of remedy); (ii) any representation or warranty of the Bor- rower is materially incorrect in any re- spect when made or repeated; (iii) cross default in respect of financial in- debtedness of the Borrower or any other member of the RP Group in excess of US$30,000,000 or its equivalent); (iv) the Borrower or any Material Subsidiary is subject to an amicable settlement ("reglement amiable") under French law or any similar proceedings; (v) insolvency, bankruptcy, liquidation, dissolution, etc. of the Borrower or any Material Subsidiary except in the case of a liquidation or dissolution where the terms have been approved by the Lender. This excludes a solvent merger for arm's length consideration within the RP Group; (vi) a moratorium or restructuring is made or declared in respect of all or any indebtedness of the Borrower or any Material Subsidiary or any such person proposes, makes or enters into 6 a general assignment, arrangement or composition with or for the benefit or creditors; (vii) appointment of an administrator, receiver, trustee or similar officer in respect of the Borrower or any Material Subsidiary; (viii) enforcement or distress or execution against property material in the context of the Borrower or any Material Subsidiary unless such distress or execution is dis- charged within 45 days; (ix) the Borrower or any Material Subsidiary is declared insolvent or declares in writing that it is unable to pay its debts as and when they are due; (x) anything analogous to (iv), (v), (vi), (vii), (viii) or (ix) shall occur to the Borrower or any Material Subsidiary under the laws of the jurisdiction under which such person is incorporated; (xi) cessation of business; (xii) material change to constitutional documents detrimental to the Lender; (xiii) compulsory acquisition of material assets of Material Subsidiary where the effect of such compulsory acquisition might materi- ally prejudice the interest of the Lender; (xiv) security interests securing financial in- debtedness in excess of US$30,000,000 (or its equivalent) becoming enforceable; (xv) material qualification of financial state- ments by RP Group auditors. 18. FUNDING PROTECTION: Customary for a transaction of this type including breakage costs, compensation for increased costs and compliance with capital adequacy and other regulatory provisions and market disruption provisions (LIBOR substitute in event of market disruption to be determined in accordance with normal banking practice). 19. TAXES: All payments by the Borrower will be made free and clear of future taxes, levies, duties or deductions whatsoever imposed. Save for agreed exceptions, any withholding or other deduction will be grossed up. All transfer, stamp and registration taxes and other like charges and fees will be paid by the Borrower. 20. EXPENSES: All reasonable expenses including but not limited to legal fees (subject agreed caps) and all other out-of-pocket expenses incurred in connection with the preparation, negotiation, documentation, signing and publicizing of the Bridge Loan Facility shall be for the account of the Borrower, whether or not the Acquisition or financing transactions contemplated herein are completed. 21. ASSIGNMENTS & TRANSFER: Standard provisions will be included in the Bridge Loan Facility agreement permitting the assignment transfer of Bridge Loan Facility commitments and outstandings of the Lender subject to RP's consent (such consent not to be unreasonably withheld or 7 delayed). In the case of a partial transfer, minimum assignment to be US$50,000,000 and thereafter integral multiples of US$10,000,000 unless otherwise agreed with RP. 22. LAW: The Bridge Loan Facility agreement will be governed by English Law. Borrower will subject to the non-exclusive jurisdiction of the English Courts. 23. PUBLICITY: The Arranger may publicise the financing of the Acquisition. The Borrower will be informed of the form and substance of any announcement made by the Lender. 24. DEFINITIONS: For the purposes of the Bridge Loan Facility agreement: "BALANCING BRIDGE LOAN FACILITIES" means bridge loan facilities provided by a bank other than the Lender for the purposes of funding the Acquisition and entered into on or about the same date as this Facility in an aggregate amount which when taken together with this Facility and the Balancing Medium Term Loan Facilities is sufficient to fund the purchase price of the Acquisition; "BALANCING MEDIUM TERM LOAN FACILITIES" means medium term loan facilities entered into for the purposes of funding the Acquisition entered into on or about the date of this Facility and in an aggregate amount which when taken together with the amount of this Facility and the Balancing Bridge Loan Facilities is sufficient to fund the purchase price of the Acquisition; "CONSOLIDATED INDEBTEDNESS" means the difference between (i) the sum of Long Term Debt, Participating Loans, Bank Overdraft, Current Portion of Long Term Debt and Short Term Borrowing and (ii) the sum of Cash, Short Term Deposits and Marketable Securities as each of the foregoing amounts shall be determined from the items so described in the consolidated balance sheet of RP and its subsidiaries included in the half yearly or annual financial statements most recently delivered by RP to the Lender; "CONSOLIDATED NET WORTH" means the difference between (i) Total Liabilities and Total Stockholders Equity and (ii) the sum of Total Current Liabilities, Long Term Debt, Participating Loans and Other Long Term Liabilities as each of the foregoing amounts shall be determined from the items so described in the half yearly or annual consolidated financial statements of RP and its subsidiaries most recently delivered by RP to the Lender; "FINANCIAL INDEBTEDNESS" shall mean: (i) any indebtedness for monies borrowed; (ii) any indebtedness (actual or contingent) under a guarantee, security, indemnity or other commitment designed to protect any creditor against loss in respect of any financial indebtedness of any third party; (iii) any indebtedness under any acceptance credit; (iv) any indebtedness under any debenture, note, bill of exchange, bonds, commercial paper, certificate of deposit or similar instrument; 8 (v) Any indebtedness for money owing in re- spect of any interest swap, or currency swap, such indebtedness to be measured on a mark-to-market basis at the relevant time and to include, vis-a-vis any partic- ular counterparty, application of the rel- evant ISDA netting procedures; (vi) Any payment obligations under any lease entered into for the purposes of obtaining or raising finance. "MATERIAL ADVERSE CHANGE" means any event having a material adverse effect in the reasonable opinion of the Lender on the ability of (i) the Borrower to perform in a timely manner all or any of its obligations, including, without limitation, its payment obligations, under the Bridge Loan Facility agreement or any other documentation entered into in connection therewith or (ii) on the business, assets or financial conditions of the RP Group taken as a whole in the context of the ability of the Borrower to discharge its payment obligations; "MATERIAL SUBSIDIARY" means Institut Merieux S.A. (France), Pasteur Merieux Connaught, Rhone-Poulenc Rorer Inc. (U.S.A.). Rhone- Poulenc Holdings Inc. (U.S.A.), Rhone Poulenc Agrochimie, Rhone-Poulenc Chimi and Rhone- Poulenc Nutrition Animale; "POTENTIAL EVENT OF DEFAULT" means any event which with the giving of notice or the lapse of any period of time, in each case under the terms of the Bridge Loan Facility agreement, would constitute an event of default under the terms of the Bridge Loan Facility agreement; "PERMITTED SECURITY" means Security Interests: (i) in connection with Financial Indebtedness incurred for the purchase, maintenance or improvement of an asset, provided (a) the amount of Financial Indebtedness secured remains confined to the acquired assets and (b) that in relation to maintenance and improvement, the amount of Financial Indebtedness secured under any security granted for the financing of such mainte- nance and/or improvement does not exceed the cost of such maintenance and/or im- provement; (ii) created at the time of incurring the Fi- nancial Indebtedness to secure Finance In- debtedness owing to EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE MODERNISATION, FONDS DE DEVELOPPMENT ECONOMIQUE ET SOCIAL or any other governmental or EEC controlled financial institution which in its normal lending practice requires such encum- brance; (iii) existence at a time when a corporation is merged into, consolidated with or ac- quired by the Borrower or any Material Subsidiary and not created in contempla- tion of such event provided such Security Interest remains confined to such as- 9 sets and improvements and additions thereto and does not secure any financial indebted- ness not so secured at the time of such event; (iv) existing on any asset prior to the acquisi- tion thereof by the Borrower or any Material Subsidiary and not created in contemplation of such acquisition provided such Security Interest remains confined to such asset and improvements and additions thereto and does not secure any financial indebtedness not so secured at the time of such event; (v) arising out of a refinancing of any financial indebtedness secured by encumbrances permitted above provided that such financial indebtedness is not increased or secured by any additional assets or revenues; (vi) arising after orders of attachment, distraint or similar legal process arising in connection with court proceeding so long as execution or other enforcement thereof is effectively stayed and the claims secured are being contested in good faith and by ap- propriate proceedings and the attachment, distraint or other proceedings do not result in an event of default or other breach of the terms of the Bridge Facility agreement; (viii) created over assets held in trust by an- other person, which assets are to be used by such other person solely for satisfying the Borrower's or any Material Subsidiary's scheduled payment obligations in respect of principal and/or interest in respect of any financial indebtedness of the Borrower or any Material Subsidiary (the "OBLIGOR'S OBLIGATIONS") in circum- stances where such other person has under- taken responsibility for the discharged of the Obligor's Obligations; (viii) created over a deposit made by the Bor- rower or any Material Subsidiary using the proceeds of Financial Indebtedness lent by the depositary or such proceeds provided that (a) the depositary of such proceeds lends an amount at least equal to the amount of the deposit to a subsidiary of the Borrower or relevant Material Subsidi- ary and (b) such loan has a maturity date which is not earlier than the date for re- payments of such deposit; (ix) not in one of the above categories to secure financial indebtedness as long as the amount of financial indebtedness secured thereby does not exceed 7.5% of Consolidated Net Worth. "RESIDUAL PERCENTAGE" means the percentage equal to the aggregate of 100% less the * Percentage; "* PERCENTAGE" means the percentage borne by US$850,000,000 to the aggregate of US$850,000,000 and the aggregate US$ initial amount of the Balancing Bridge Loan Facilities; __________ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 10 25. CONDITION: This offer is made on condition that there is no material adverse change in the financial condition of the Borrower, nor in the international credit markets, between now and the signing of the Bridge Loan Facility agreement. 11 Please signify your acceptance of the terms and conditions set out above by signing and returning a copy of this Summary of Terms and Conditions by no later than [11th August] 1997 after which date this offer will expire unless previously accepted. For and on behalf of RHONE-POULENC S.A. /s/ - ------------------------------------- Date: For and on behalf of *: /s/ /s/ - ------------------------------------- ----------------------------------- Date: 8/8/97 Date: 8/8/97 ________ * Request for Confidential Treatment filed by Purchaser on August 22, 1997. 12 EX-99.(C)(1) 29 FORM OF STOCK OPTION AGREEMENT EXHIBIT (C)(1) UNOFFICIAL TRANSLATION DRH Cadres RHONE-POULENC S.A. ETABLISSEMENT INTERSERVICES 25, QUAI PAUL DOUMER 92408 COURBEVOIE CEDEX TEL (1) 47 68 12 34 FAX (1) 47 68 19 11 TLX 610500 F RHONE Courbevoie, [ ] To: [ ] RHONE-POULENC RORER STOCK OPTIONS Dear Sir, The Executive Committee, at its [ ] meeting has decided to grant you, in your capacity as [ ], [ ] Rhone-Poulenc Rorer stock options. The conditions for the exercise of these options are as follows: 1. EXERCISE DATE AND DURATION The options will be exercisable from [ ] through [ ]. Each option gives a right to buy a common share of RHONE-POULENC RORER. During the exercise period, the options can be exercised in one or several exercises. Each option exercise shall be notified to the company pursuant to conditions to be specified at a later date. 2. EXERCISE PRICE The exercise price of the options is [ ] per option. This price has been determined on the basis of the market price of RHONE POULENC RORER shares. 3 OPTION PRICE The purchase price per option is $2. It is payable, at the latest, upon exercise of the options and, in any case, before [ ]. 4. EMPLOYMENT CONDITIONS The options can be exercised only if you are an employee of a company of the RHONE POULENC Group at the time of exercise. Nevertheless, a) if an option holder has retired, has taken early retirement, or is permanently disabled at the time of exercise, he will be allowed to exercise his options on the same terms as those that would apply if he were still an employee of RHONE-POULENC, and b) if an option holder dies before exercising his options, his heirs will be entitled to exercise his options in his place on the same terms as those applying to the deceased. 5. SHARES TRANSFER RESTRICTIONS The shares acquired through the exercise of the options shall not be transferable until 12 months after the exercise date, unless RHONE-POULENC S.A. shall set a shorter period. In case of transfer, the shares shall first be offered to RHONE POULENC S.A., under conditions to be specified at a later date. RHONE POULENC shall indicate within 30 days if it intends to acquire such shares. RHONE POULENC S.A. shall purchase the shares at the market price applicable on the day of transfer. For this contract to be enforceable, we would ask you to please sign this contract, preceding your signature with the handwritten notation "read and approved", and return it to us. Sincerely yours, EX-99.(C)(3) 30 AGREEMENT AND PLAN OF MERGER EXHIBIT (C)(3) ================================================================================ AGREEMENT AND PLAN OF MERGER Among RHONE-POULENC S.A. RP VEHICLE, INC. and RHONE-POULENC RORER INC. Dated as of August 19, 1997 ================================================================================
TABLE OF CONTENTS ARTICLE I THE OFFER Page SECTION 1.01. The Offer............................................... 2 SECTION 1.02. Company Action.......................................... 3 ARTICLE II THE MERGER SECTION 2.01. The Merger.............................................. 4 SECTION 2.02. Effective Time; Closing................................. 4 SECTION 2.03. Effect of the Merger.................................... 5 SECTION 2.04. Articles of Incorporation; By-laws...................... 5 SECTION 2.05. Directors and Officers.................................. 5 SECTION 2.06. Conversion of Securities................................ 6 SECTION 2.07. Options and Warrants.................................... 6 SECTION 2.08. Dissenting Shares....................................... 7 SECTION 2.09. Surrender of Shares; Stock Transfer Books............... 7 SECTION 2.10. Withholding Rights...................................... 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.01. Organization and Qualification; Subsidiaries............ 9 SECTION 3.02. Articles of Incorporation and Bylaws.................... 9 SECTION 3.03. Capitalization.......................................... 10 SECTION 3.04. Authority Relative to this Agreement.................... 10 SECTION 3.05. No Conflict; Required Filings and Consents.............. 10 SECTION 3.06. Compliance.............................................. 11 SECTION 3.07. SEC Filings; Financial Statements....................... 12 SECTION 3.08. Offer Documents; Schedule 14D-9; Schedule 13E-3; Proxy Statement............................................... 13 SECTION 3.09. Brokers................................................. 13
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY Page SECTION 4.01. Corporation Organization................................ 14 SECTION 4.02. Authority Relative to this Agreement.................... 14 SECTION 4.03. No Conflict; Required Filings and Consents.............. 14 SECTION 4.04. Offer Documents; Proxy Statement........................ 15 SECTION 4.05. Brokers................................................. 15 SECTION 4.06. Ownership of Merger Subsidiary; No Prior Activities..... 15 SECTION 4.07. Financing............................................... 16 ARTICLE V COVENANTS SECTION 5.01. Conduct of the Business Pending the Merger.............. 16 SECTION 5.02. Shareholders' Meeting; Voting of Shares................. 17 SECTION 5.03. Proxy Statement......................................... 17 SECTION 5.04. Access to Information; Confidentially................... 17 SECTION 5.05. Directors' and Officers' Indemnification and Insurance.. 18 SECTION 5.06. Notification of Certain Matters......................... 19 SECTION 5.07. Further Action; Reasonable Best Efforts................. 20 SECTION 5.08. Public Announcements.................................... 20 SECTION 5.09. Termination of Agreements............................... 20 SECTION 5.10. Financing............................................... 20 ARTICLE VI COVENANTS SECTION 6.01. Conditions to the Merger................................ 20
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ARTICLE VII TERMINATION, AMENDMENT AND WAIVER Page SECTION 7.01. Termination............................................. 21 SECTION 7.02. Effect of Termination................................... 22 SECTION 7.03. Amendment............................................... 23 SECTION 7.04. Waiver.................................................. 23 ARTICLE VIII GENERAL PROVISIONS SECTION 8.01. Non-Survival of Representations, Warranties and Agreement............................................... 23 SECTION 8.02. Notices................................................. 23 SECTION 8.03. Certain Definitions..................................... 24 SECTION 8.04. Severability............................................ 25 SECTION 8.05. Entire Agreement; Assignment............................ 26 SECTION 8.06. Parties in Interest..................................... 26 SECTION 8.07. Specific Performance.................................... 26 SECTION 8.08. Fees and Expenses....................................... 26 SECTION 8.09. Governing Law........................................... 26 SECTION 8.10. Headings................................................ 26 SECTION 8.11. Counterparts............................................ 27 SECTION 8.12. Consent to Jurisdiction: Appointment of Agent for Service of Process...................................... 27
Annex A: Conditions to the Offer
Glossary of Defined Terms (Not Part of this Agreement) ---------------------------- Defined Term Location of Definition - ------------ ---------------------- Acquisition Agreement................................. Recitals affiliate............................................. (S)8.03(a) Agent................................................. (S)8.12 Agreement............................................. Preamble beneficial owner...................................... (S)8.03(b) Blue Sky Laws......................................... (S)3.05(b) Board................................................. Recitals business day.......................................... (S)8.03(c) Certificates.......................................... (S)2.09(b) Code.................................................. (S)2.10 Company............................................... Preamble Company Preferred Stock............................... (S)3.03 control............................................... (S)8.03(d) Dissenting Shares..................................... (S)2.08(a) Effective Time........................................ (S)2.02 Exchange Act.......................................... (S)1.02(b) Exercise Amount....................................... (S)2.07(a) Goldman, Sachs........................................ Recitals Governmental Entity................................... (S)3.05(b) Indemnified Parties................................... (S)5.05(b) Law................................................... (S)3.05(a) Material Adverse Effect............................... (S)3.01 Merger ............................................... Recitals Merger Consideration.................................. (S)2.06(a) Merger Documents...................................... (S)2.02 Merger Subsidiary..................................... Preamble Minimum Condition..................................... (S)1.01(a) Money Market Preferred Stock.......................... (S)3.03 Offer................................................. Recitals Offer Documents....................................... (S)1.01(b) Offer to Purchase..................................... (S)1.01(b) Option................................................ (S)2.07(a) Parent................................................ Preamble Parent Shares......................................... Recitals Paying Agent.......................................... (S)2.09(a) Pennsylvania Law...................................... Recitals
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Defined Term Location of Definition - ------------ ---------------------- Per Share Amount...................................... Recitals person................................................ (S)8.03(e) Proxy Statement....................................... (S)3.08 Schedule 14D-1........................................ (S)1.01(b) Schedule 14D-9........................................ (S)1.02(b) Schedule 13E-3........................................ (S)1.01(b) SEC................................................... (S)1.01(b) SEC Reports........................................... (S)3.07(a) Securities Act........................................ (S)3.07(a) Shareholders' Meeting................................. (S)5.02 Shares................................................ Recitals Special Committee..................................... Recitals Special Committee Approval............................ Recitals Subsidiary............................................ (S)3.01 subsidiary............................................ (S)8.03(f) Surviving Corporation................................. (S)2.01 Transactions.......................................... (S)1.01(b)
AGREEMENT AND PLAN OF MERGER, dated as of August 19, 1997 (this "Agreement"), among RHONE-POULENC S.A., a French societe anonyme (hereinafter --------- "Parent"), RP VEHICLE, INC., a Pennsylvania corporation and a direct wholly ------ owned subsidiary of Parent ("Merger Subsidiary"), and RHONE-POULENC RORER INC., ----------------- a Pennsylvania corporation (the "Company"). ------- WHEREAS, Parent beneficially owns approximately 68.1% (the "Parent Shares") ------------- of the Common Shares (without par value) stated value $1 per share of the Company ("Shares"); ------ WHEREAS, Parent and the Company have entered into an Acquisition Agreement, dated as of March 12, 1990 (the "Acquisition Agreement"), pursuant to which --------------------- Parent acquired a substantial portion of the Parent Shares and pursuant to which Parent agreed to certain restrictions on subsequent acquisitions of Shares; WHEREAS, Parent has proposed that it acquire all of the issued and outstanding Shares not owned by Parent; WHEREAS, the Board of Directors of the Company (the "Board") and a special ----- committee comprised of the Independent Directors (as defined in the Acquisition Agreement) of the Board (the "Special Committee") have determined that it is in ----------------- the best interests of the Company to approve Parent's proposed acquisition and have voted (i) to recommend that the shareholders of the Company accept the Offer (as defined below) and tender their Shares pursuant to the Offer and (ii) to approve the merger (the "Merger") of Merger Subsidiary with and into the ------ Company, with the Company being the surviving corporation, in accordance with the Pennsylvania Business Corporation Law of 1988 ("Pennsylvania Law") following ---------------- consummation of the Offer; WHEREAS, it is proposed that Parent will make a cash tender offer (the "Offer") in compliance with (i) Section 14(d)(1) of the Exchange Act (as defined - ------ below) and the rules and regulations promulgated thereunder and (ii) the terms of Section 7.6 of the Acquisition Agreement, to acquire all the issued and outstanding Shares for $97.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "Per --- Share Amount") net to the seller in cash, upon the terms and subject to the - ------------ conditions of this Agreement; and that the Offer will be followed by the Merger, pursuant to which each issued and outstanding Share not owned by Parent will be converted into the right to receive the Per Share Amount, upon the terms and subject to the conditions provided herein; and WHEREAS, the Special Committee has received the opinion of Goldman, Sachs & Co. ("Goldman, Sachs") that the consideration to be received by the holders of -------------- Shares (other than Parent and its subsidiaries) pursuant to the Offer and the Merger is fair to such holders; 2 NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Subsidiary and the Company hereby agree as follows: ARTICLE I THE OFFER --------- SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have --------- been terminated in accordance with Section 7.01, Parent shall commence within the meaning of Rule 14d-2 under the Exchange Act (as hereinafter defined) the Offer as promptly as practicable after the date hereof, but in no event later than five business days after the initial public announcement of Parent's intention to commence the Offer. Parent shall not accept for payment any Shares tendered pursuant to the Offer unless there shall have been validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares which, when taken together with the Parent Shares, constitutes at least 90% of the then issued and outstanding Shares (the "Minimum Condition"). Parent shall, on the ----------------- terms and subject to the conditions of the Offer (including the Minimum Condition), accept for payment and pay for Shares tendered as soon as practicable after the date which is the later of (x) October 1, 1997 and (y) the date on which it legally may do so. The obligation of Parent to accept for payment and pay for Shares tendered pursuant to the Offer shall be further subject to the satisfaction of the conditions set forth in Annex A hereto. Parent expressly reserves the right to increase the Per Share Amount. Without the prior written consent of the Special Committee, Parent will not (i) decrease the Per Share Amount, (ii) change the number of Shares to be purchased in the Offer, (iii) change the form of the consideration payable in the Offer, (iv) amend or add to the conditions to the Offer set forth in Annex A hereto; or (v) make any other change in the terms or conditions of the Offer which is materially adverse to the holders of Shares. Under no circumstances shall Parent waive the Minimum Condition. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition), Parent shall pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn. (b) As soon as reasonably practicable on the date of commencement of the Offer, Parent shall file with the Securities and Exchange Commission (the "SEC") --- (i) a Tender Offer Statement on Schedule 14D-1, including the exhibits thereto (together with all amendments and supplements thereto, the "Schedule 14D-1"), -------------- including the exhibits thereto with respect to the Offer and (ii) a Rule 13e-3 Transaction Statement on Schedule 13E-3, including the exhibits thereto (together with all amendments and supplements thereto, the 3 "Schedule 13E-3") with respect to the Offer and the other transactions -------------- contemplated hereby (the "Transactions"). The Schedule 14D-1 and the Schedule ------------ 13E-3 shall contain or shall incorporate by reference an offer to purchase (the "Offer to Purchase") and forms of the related letter of transmittal and any ----------------- related summary advertisement (the Schedule 14D-1, the Schedule 13E-3, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Offer ----- Documents"). Parent, Merger Subsidiary and the Company agree to correct promptly - --------- any information provided by any of them for use in the Offer Documents which shall have become false or misleading, and Parent and Merger Subsidiary further agree to take all steps necessary to cause the Schedule 14D-1 and the Schedule 13E-3 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable Law (as defined hereinafter). The Company, the Special Committee and their respective counsel shall be given the opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC. Parent and Merger Subsidiary shall provide the Company, the Special Committee and their respective counsel with a copy of any written comments or telephonic notification of any oral comments Parent or Merger Subsidiary may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof. Parent and its counsel shall provide the Company and the Special Committee and their respective counsel with a reasonable opportunity to participate in all communications with the SEC and its staff, including any meetings and telephone conferences, relating to the Transactions or this Agreement. SECTION 1.02. Company Action. (a) The Company hereby approves of and -------------- consents to the Offer and represents that (i) the Special Committee and the Board at meetings duly called and held on August 19, 1997, have each, by unanimous vote of all directors present and voting, (A) determined that this Agreement and the Transactions, including each of the Offer and the Merger, are fair to and in the best interests of the Company, (B) approved this Agreement and the Transactions and (C) resolved to recommend that the shareholders of the Company accept the Offer and tender their Shares pursuant to the Offer and approve and adopt this Agreement and the Transactions; provided that such -------- recommendation may be withdrawn, modified or amended to the extent the Board or the Special Committee deems it necessary to do so in the exercise of its fiduciary duties, as advised by independent counsel, and (ii) Goldman, Sachs has delivered to the Special Committee a written opinion that the consideration to be received by the holders of Shares (other than Parent and its subsidiaries) pursuant to the Offer and the Merger is fair to the holders of Shares. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Special Committee and the Board described in the immediately preceding sentence. (b) As soon as reasonably practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on 4 Schedule 14D-9, including all exhibits thereto (together with all amendments and supplements thereto, the "Schedule 14D-9"), containing the recommendations of -------------- the Special Committee and the Board described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and ------------ any other applicable federal securities laws. The Company, Parent and Merger Subsidiary agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given the opportunity to review and comment on the Schedule 14D-9 and any amendments thereto prior to the filing thereof with the SEC. The Company shall provide Parent and its counsel with a copy of any written comments or telephonic notification of any oral comments the Company may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt thereof. The Company and its counsel shall provide Parent and its counsel with a reasonable opportunity to participate in all communications with the SEC and its staff, including any meetings and telephone conferences, relating to the Transactions or this Agreement. (c) In connection with the Transactions, the Company (i) shall promptly furnish Parent with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of Shares and (ii) shall furnish Parent with such additional information, including, without limitation, updated listings and computer files of shareholders, mailing labels and security position listings, and such other assistance as Parent, Merger Subsidiary or their agents may reasonably request in connection with the Offer and the Merger. ARTICLE II THE MERGER ---------- SECTION 2.01. The Merger. Upon the terms and subject to the conditions ---------- set forth in this Agreement, and in accordance with Pennsylvania Law, at the Effective Time Merger Subsidiary shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Subsidiary shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). --------------------- 5 SECTION 2.02. Effective Time; Closing. As promptly as practicable after ----------------------- the satisfaction or, if permissible, waiver of the conditions set forth in Article VI, the parties hereto shall cause the Merger to be consummated by delivering to the Secretary of the Commonwealth of Pennsylvania the articles of merger and any clearance certificates required by Section 139 of Pennsylvania Law, each in such form or forms as may be required by, and executed and acknowledged in accordance with, the relevant provisions of Pennsylvania Law (such documents being referred to collectively as the "Merger Documents"), and shall make all other filings and ---------------- recordings required by Pennsylvania Law in connection with the Merger. The Merger shall become effective at the time of filing of the appropriate Merger Documents with the Secretary of the Commonwealth of Pennsylvania, or at such later time, which shall be as soon as reasonably practicable, specified as the effective time in the Merger Documents (the "Effective Time"). Prior to such -------------- filing, a closing shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York USA 10022, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VI. SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of -------------------- the Merger shall be as provided in the applicable provisions of Pennsylvania Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Merger Subsidiary shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 2.04. Articles of Incorporation; By-laws. (a) The Articles of ---------------------------------- Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation following the Effective Time until thereafter amended as provided by Pennsylvania Law. (b) The By-laws of the Company, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation following the Effective Time until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such By-laws. SECTION 2.05. Directors and Officers. (a) The directors of Merger ---------------------- Subsidiary immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and By-laws of the Surviving Corporation. 6 (b) The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. SECTION 2.06. Conversion of Securities. At the Effective Time, by virtue ------------------------ of the Merger and without any action on the part of Merger Subsidiary, the Company or the holders of any of the following securities: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned directly or indirectly by Parent) shall be cancelled and, subject to Section 2.08, shall be converted automatically into the right to receive from the Company an amount equal to the Per Share Amount in cash (the "Merger Consideration") payable, without -------------------- interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.09, of the certificate that formerly evidenced such Share; (b) Each Share issued and outstanding immediately prior to the Effective Time owned directly or indirectly by Parent shall remain issued and outstanding and no payment or distribution shall be made with respect thereto; (c) Each share of Common Stock, par value $.01 per share, of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall be cancelled and no payment or distribution shall be made with respect thereto; and (d) Each outstanding share of Money Market Preferred Stock (as hereinafter defined) issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and no payment or distribution shall be made with respect thereto. SECTION 2.07. Options and Warrants. (a) Immediately prior to the -------------------- Effective Time, each outstanding option to purchase Shares (in each case, an "Option"), whether or not then exercisable, shall be canceled and each holder ------- of a canceled Option shall be entitled to receive an indemnity payment (the "Exercise Amount") in cash from the Company, in consideration for the --------------- cancellation of each such Option, at the same time as the Merger Consideration is received by the holders of Shares, equal to the product of (i) the number of Shares to be issued upon the exercise of such Option and (ii) the excess, if any, of the amount paid per Share pursuant to the Offer over the exercise price per Share previously subject to such Option; (b) Parent and the Company hereby agree that Parent, on the one hand, and the Compensation Committee of the Company, on the other hand, will define, prior to the Effective Time, alternatives to the treatment of Options set forth in Section 2.07(a), which 7 alternatives may include (i) deferral of the payment of the amount payable pursuant to Section 2.07(a) and (ii) conversion into options to purchase securities of Parent. SECTION 2.08. Dissenting Shares. (a) Notwithstanding any provision ----------------- of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and which are held by shareholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have filed with the Company, prior to the vote on the Merger by the Company's shareholders, a written notice of intention to demand that such shareholder be paid the fair value for his Shares if the proposed action is effected and thereafter demanded properly in writing payment of fair value for such Shares in accordance with, and otherwise complied in all respects with, Sections 1930 and 1571 through 1580 of Pennsylvania Law (collectively, the "Dissenting Shares") ----------------- shall be canceled but not be converted into or represent the right to receive the Merger Consideration. Such shareholders shall be entitled instead to receive payment of the court determined fair value of such Shares (which may be more than, equal to, or less than the Merger Consideration) in accordance with the provisions of such Sections 1930 and 1571 through 1580, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to fair value for such Shares under such Sections 1930 and 1571 through 1580 shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.09, of the certificate or certificates that formerly evidenced such Shares. (b) The Company shall give Parent (i) prompt notice of any demands for payment of fair value received by the Company, withdrawals of such demands, and any other instruments served pursuant to Pennsylvania Law and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for payment of fair value under Pennsylvania Law. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for payment of fair value or offer to settle or settle any such demands. SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior ----------------------------------------- to the Effective Time, Parent shall designate a bank or trust company to act as agent (the "Paying Agent") for the holders of Shares in connection with the ------------ Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.06(a). Such funds shall be deposited with the Paying Agent by the Surviving Corporation promptly following the Effective Time and shall be invested by the Paying Agent as directed by the Surviving Corporation. (b) Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each person who was, at the Effective Time, a holder of record of Shares 8 entitled to receive the Merger Consideration pursuant to Section 2.06(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the "Certificates") shall pass, only upon proper delivery of the Certificates to the ------------ Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly evidenced by such Certificate. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. (c) At any time commencing 180 days after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither Parent, the Company nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law. (d) At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, except for Parent, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law. SECTION 2.10. Withholding Rights. The Surviving Corporation and the ------------------ Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares and/or Options such amounts that the 9 Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the United States Internal Revenue Code of 1986, as amended (the "Code"), the rules and regulations ---- promulgated thereunder or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Surviving Corporation or the Paying Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares and/or Options in respect of which such deduction and withholding was made by the Surviving Corporation or the Paying Agent. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company hereby represents and warrants to Parent and Merger Subsidiary that: SECTION 3.01. Organization and Qualification; Subsidiaries. Each of -------------------------------------------- the Company and each subsidiary of the Company (a "Subsidiary") is a corporation ---------- duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect (as defined below). The Company and each Subsidiary is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Material Adverse Effect. The term "Material Adverse ---------------- Effect" means any change or effect that is or is reasonably likely to be - ------ materially adverse to the business, operations, properties, financial condition, assets or liabilities of the Company and the Subsidiaries taken as a whole. SECTION 3.02. Articles of Incorporation and Bylaws. The Company has ------------------------------------ heretofore furnished to Parent a complete and correct copy of the Articles of Incorporation and the Bylaws or equivalent organizational documents, each as amended to date, of the Company. Such Articles of Incorporation, Bylaws or equivalent organizational documents are in full force and effect, and neither the Company nor any Subsidiary is in violation of any provision of its Articles of Incorporation, Bylaws or equivalent organizational documents. 10 SECTION 3.03. Capitalization. The authorized capital stock of the -------------- Company consists of 600,000,000 Shares and 3,000,000 shares of preferred stock, without par value ("Company Preferred Stock"). As of July 31, 1997, (i) ----------------------- 142,687,492 Shares (including 5,169,412 Shares held by the Rhone-Poulenc Rorer Inc. Employee Benefits Trust) are issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) 10,410 Shares are held in the treasury of the Company, and (iii) 6,723,603 options were outstanding pursuant to the Company's employee stock option plans, each such Option entitling the holder thereof to purchase one Share. As of July 31, 1997, 1,750 shares of Money Market Preferred Stock, without par value (liquidation preference $100,000 per share), of the Company (the "Money Market Preferred ---------------------- Stock") are issued and outstanding. Except as set forth above, there are no - ----- options, warrants or other rights, agreements, arrangements or commitments of any character issued or authorized by the Company relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital stock of any Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any person. Each outstanding share of capital stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable and each such share owned by the Company or another Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or such other Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. SECTION 3.04. Authority Relative to this Agreement. The Company has ------------------------------------ all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then outstanding Shares if and to the extent required by applicable law, and the filing and recordation of appropriate merger documents as required by Pennsylvania Law). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Subsidiary, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The restrictions on business combinations contained in 11 Subchapter F of Chapter 25 of Pennsylvania Law have been satisfied with respect to the Transactions. SECTION 3.05. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Articles of Incorporation or Bylaws or equivalent organizational documents of the Company or any Subsidiary, (ii) conflict with or violate any United States federal, state or local or any foreign statute, law, rule, regulation, ordinance, code, order, or any other requirement or rule of law (a "Law"), applicable to the Company or any Subsidiary or by which any property or --- asset of the Company or any Subsidiary is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of either of them is bound or affected, except for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, have a Material Adverse Effect or prevent or materially delay the performance by the Company of any of its obligations under this Agreement or the consummation of any of the Transactions. (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States federal, state or local or any foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (a "Governmental Entity"), except (i) ------------------- for applicable requirements, if any, of the Exchange Act, French securities laws, state securities or "blue sky" laws ("Blue Sky Laws") and state takeover ------------- laws and the filing of the applicable Merger Documents with the Secretary of the Commonwealth of Pennsylvania and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate have a Material Adverse Effect or prevent or materially delay the performance by the Company of any of its obligations under this Agreement or the consummation of any of the Transactions. SECTION 3.06. Compliance. Except as previously disclosed, neither ---------- the Company nor any Subsidiary is in conflict with, or in default or violation of, (i) any Law applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to 12 which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the Company or any Subsidiary is bound or affected, except for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect or prevent or materially delay the performance by the Company of any of its obligations under this Agreement or the consummation of any of the Transactions. SECTION 3.07. SEC Filings; Financial Statements. (a) The Company --------------------------------- has filed all forms, reports and documents required to be filed by it with the SEC since December 31, 1994, and has heretofore delivered to Parent, in the form filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended December 31, 1994, 1995, and 1996, respectively, (ii) its Quarterly Reports on Form 10-Q for the periods ended March 31 and June 30, 1997, (iii) all proxy statements relating to the Company's meetings of shareholders (whether annual or special) held since December 31, 1994, and (iv) all other forms, reports and other registration statements (other than Quarterly Reports on Form 10-Q not referred to in clause (ii) above) filed by the Company with the SEC since December 31, 1994 (the forms, reports and other documents referred to in clauses (i), (ii), (iii) and (iv) above being referred to herein, collectively, as the "SEC Reports"). The SEC Reports (i) were prepared in all material ----------- respects in accordance with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act, as the case may -------------- be, and the rules and regulations thereunder and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the SEC Reports was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of the unaudited interim financial statements, as permitted by Form 10-Q under the Exchange Act) and each fairly presented the consolidated financial position, results of operations and changes in financial position of the Company and the consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except that the unaudited interim financial statements are subject to normal and recurring year- end adjustments which are not expected to be material in amounts. (c) Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Subsidiaries at December 31, 1996, including the notes thereto, included in the Company's Annual Report on Form 10- K for the fiscal year then ended, or on the unaudited consolidated balance sheet of the Company and the consolidated Subsidiaries at June 30, 1997, including the notes thereto, included in the Company's 13 Quarterly Report on Form 10-Q for the period then ended, the Company and the consolidated Subsidiaries have no liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) which would be required to be reflected on a consolidated balance sheet, or in the notes thereto, prepared in accordance with generally accepted accounting principles, except for liabilities and obligations incurred in the ordinary course of business consistent with past practice since June 30, 1997 and which would not have a Material Adverse Effect. SECTION 3.08. Offer Documents; Schedule 14D-9; Schedule 13E-3; Proxy ------------------------------------------------------ Statement. Neither the Schedule 14D-9 nor any information supplied by the - --------- Company for inclusion in the Offer Documents or the Schedule 13E-3 shall, at the respective times the Schedule 14D-9, the Offer Documents, the Schedule 13E-3 or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to shareholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. Neither the proxy statement to be sent to the shareholders of the Company in connection with the Shareholders' Meeting (as hereinafter defined) nor the information statement to be sent to such shareholders, as appropriate (such proxy statement or information statement, as amended or supplemented, being referred to herein as the "Proxy Statement"), shall, at the date the Proxy --------------- Statement (or any amendment or supplement thereto) is first mailed to shareholders of the Company, at the time of the Shareholders' Meeting, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Shareholders' Meeting which shall have become false or misleading. Notwithstanding the foregoing, the Company makes no representation and warranty with respect to information supplied by Parent, Merger Subsidiary or any of their representatives which is contained in any of the foregoing documents or the Offer Documents. The Schedule 14D-9 and the Proxy Statement shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. SECTION 3.09. Brokers. No broker, finder or investment banker (other ------- than Goldman, Sachs) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to Parent a complete and correct copy of all agreements between the Company and Goldman, Sachs pursuant to which such firm would be entitled to any payment relating to the Transactions. 14 ARTICLE IV REPRESENTATIONS AND WARRANTIES ------------------------------ OF PARENT AND MERGER SUBSIDIARY ------------------------------- Parent and Merger Subsidiary hereby, jointly and severally, represent and warrant to the Company that: SECTION 4.01. Corporate Organization. Parent is a societe anonyme ---------------------- duly organized and validly existing under the laws of the Republic of France and Merger Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the state of Pennsylvania. SECTION 4.02. Authority Relative to this Agreement. Each of Parent ------------------------------------ and Merger Subsidiary has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by Parent and Merger Subsidiary, the performance by Parent and Merger Subsidiary of their respective obligations hereunder and the consummation by Parent and Merger Subsidiary of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Parent or Merger Subsidiary are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by Pennsylvania Law). This Agreement has been duly and validly executed and delivered by Parent and Merger Subsidiary and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Subsidiary enforceable against each of Parent and Merger Subsidiary in accordance with its terms. SECTION 4.03. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by Parent and Merger Subsidiary do not, and the performance of this Agreement by Parent and Merger Subsidiary will not, (i) conflict with or violate the statuts (articles of association) and By-laws of Parent or the Articles of Incorporation or By-laws of Merger Subsidiary, (ii) conflict with or violate any Law applicable to Parent or Merger Subsidiary or by which any property or asset of either of them is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent or Merger Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Merger Subsidiary is a party or by which Parent or Merger Subsidiary or any property or asset of either of them is bound or affected, 15 except for any such conflicts, violations, breaches, defaults or other occurrences which would not prevent, individually or in the aggregate have a Parent Material Adverse Effect or materially delay the performance by Parent or Merger Subsidiary of any of its obligations under this Agreement or the consummation of any of the Transactions. The term "Parent Material Adverse ----------------------- Effect" means any change of effect that is or is reasonably likely to be - ------ materially adverse to the business, operations, properties, financial condition, assets or liabilities of Parent and its subsidiaries taken as a whole. (b) The execution and delivery of this Agreement by Parent and Merger Subsidiary do not, and the performance of this Agreement by Parent and Merger Subsidiary will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) for applicable requirements, if any, of the Exchange Act, French securities laws, Blue Sky Laws and state takeover laws, and the filing of the applicable Merger Documents with the Secretary of the Commonwealth of Pennsylvania and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have a Parent Material Adverse Effect or prevent or materially delay the performance by Parent or Merger Subsidiary of any of its obligations under this Agreement or the consummation of any of the Transactions. SECTION 4.04. Offer Documents; Proxy Statement. None of the Offer -------------------------------- Documents nor any of the information supplied by Parent or Merger Subsidiary specifically for inclusion in the Schedule 14D-9 shall, at the time the respective documents or the Schedule 14D-9 are filed with the SEC or are first published, sent or given to shareholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The information supplied by Parent for inclusion in the Proxy Statement will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to shareholders of the Company, at the time of the Shareholders' Meeting, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Shareholders' Meeting which shall have become false or misleading. Notwithstanding the foregoing, Parent and Merger Subsidiary make no representation or warranty with respect to any information supplied by the Company or any of its representatives which is contained in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. 16 SECTION 4.05. Brokers. No broker, finder or investment banker (other ------- than Morgan Stanley & Co. Incorporated, Union de Banques Suisses Paris and UBS Limited) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent or Merger Subsidiary. SECTION 4.06. Ownership of Merger Subsidiary; No Prior Activities. --------------------------------------------------- (a) Merger Subsidiary was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. (b) As of the date hereof through the Effective Time, all of the outstanding capital stock of the Merger Subsidiary will be owned directly by Parent. As of the date hereof and through the Effective Time, there will be no options, warrants or other rights (including registration rights), agreements, arrangements or commitments to which Merger Subsidiary is a party of any character relating to the issued or unissued capital stock of, or other equity interests in, Merger Subsidiary or obligating Merger Subsidiary to grant, issue or sell any shares of the capital stock of, or other equity interests in, Merger Subsidiary, by sale, lease, license or otherwise. There are no obligations, contingent or otherwise, of Merger Subsidiary to repurchase, redeem or otherwise acquire any shares of the capital stock of Merger Subsidiary. (c) As of the date hereof and as of the Effective Time, except for obligations or liabilities incurred in connection with its incorporation or organization and the transactions contemplated by this Agreement, Merger Subsidiary has not and will not have incurred, directly or indirectly, through any subsidiary or affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person. SECTION 4.07. Financing. Parent has or will have available, prior to --------- the expiration of the Offer, and will, as necessary, provide to Merger Subsidiary on a timely basis, sufficient funds to enable Parent and Merger Subsidiary to consummate the Offer, the Merger and the other transactions contemplated hereby and to pay all related fees and expenses. ARTICLE V COVENANTS --------- SECTION 5.01. Conduct of the Business Pending the Merger. The ------------------------------------------ Company covenants and agrees that, between the date of this Agreement and the Effective Time, unless Parent shall otherwise agree in writing, the businesses of the Company and the Subsidiaries 17 shall be conducted only in, and the Company and the Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company shall use its reasonable best efforts to preserve substantially intact the business organization of the Company and the Subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and the Subsidiaries and to preserve the current relationships of the Company and the Subsidiaries with customers, suppliers and other persons with which the Company or any Subsidiary has significant business relations. SECTION 5.02. Shareholders' Meeting; Voting of Shares. In order to --------------------------------------- consummate the Merger, the Company, acting through the Board, shall, in accordance with applicable law and the Company's Articles of Incorporation and Bylaws, (a) duly call, give notice of, convene and hold a special meeting of its shareholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on this Agreement and the Transactions (the "Shareholders' Meeting") and (b) (i) include in the Proxy Statement the --------------------- recommendation of the Board and the Special Committee that the shareholders of the Company approve and adopt this Agreement and the Transactions, subject to their respective fiduciary duties as advised by independent counsel and (ii) use its reasonable best efforts to obtain such approval and adoption. At the Shareholders' Meeting, Parent shall cause all Shares then owned by it and its subsidiaries to be voted in favor of the approval and adoption of this Agreement and the Transactions. SECTION 5.03. Proxy Statement. If required by applicable law, as --------------- soon as practicable following consummation of the Offer, the Company shall file the Proxy Statement with the SEC under the Exchange Act, and shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC. Parent, Merger Subsidiary and the Company shall cooperate with each other in the preparation of the Proxy Statement, and the Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give Parent and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Parent and Merger Subsidiary agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Shareholders' Meeting at the earliest practicable time. 18 SECTION 5.04. Access to Information; Confidentiality. (a) From the -------------------------------------- date hereof to the Effective Time, the Company shall, and shall cause the Subsidiaries and the officers, directors, employees, auditors and agents of the Company and the Subsidiaries to, afford the officers, employees and agents, including financing sources, of Parent and Merger Subsidiary complete access during normal business hours and without disrupting the orderly conduct of business by the Company and its Subsidiaries to the officers, employees, agents, properties, offices, plants and other facilities, books and records of the Company and each Subsidiary, and shall furnish Parent and Merger Subsidiary with all financial, operating and other data and information as Parent or Merger Subsidiary, through its officers, employees or agents, may reasonably request. (b) No investigation pursuant to this Section 5.04 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. SECTION 5.05. Directors' and Officers' Indemnification and Insurance. ------------------------------------------------------ (a) The By-laws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are set forth in Article VII of the Bylaws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at the Effective Time were directors, officers, employees, fiduciaries or agents of the Company, unless such modification shall be required by law. (b) The Company shall, to the fullest extent permitted under applicable law and regardless of whether the Merger becomes effective, indemnify and hold harmless, and, after the Effective Time, the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless, each present and former director, officer, employee, fiduciary and agent of the Company and each Subsidiary (collectively, the "Indemnified ----------- Parties") against all costs and expenses (including attorneys' fees), judgments, - ------- fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as an officer, director, employee, fiduciary or agent, whether occurring before or after the Effective Time, until the expiration of the statute of limitations relating thereto (and shall pay any expenses in advance of the final disposition of such action or proceeding to each Indemnified Party to the fullest extent permitted under Pennsylvania Law, upon receipt from the Indemnified Party to whom expenses are advanced of any undertaking to repay such advances required under Pennsylvania Law). In the event of any such claim, action, suit, proceeding or investigation, (i) the Company or the Surviving Corporation, as the case may be, shall pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to the Company or 19 the Surviving Corporation, promptly after statements therefor are received and (ii) the Company and the Surviving Corporation shall cooperate in the defense of any such matter; provided, however, that neither the Company nor the Surviving Corporation shall be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld); and provided further that neither the Company nor the Surviving Corporation shall be obligated pursuant to this Section 5.05(b) to pay the fees and expenses of more than one counsel (plus appropriate local counsel) for all Indemnified Parties in any single action except (x) that the persons who served as directors of the Company who were not designees of Parent shall be entitled to retain one additional counsel (plus appropriate local counsel) to represent them at the expense of the Company or the Surviving Corporation, and (y) to the extent that two or more of such Indemnified Parties shall have conflicting interests in the outcome of such action, in which case such additional counsel (including local counsel) as may be required to avoid any such conflict or likely conflict may be retained by the Indemnified Parties at the expense of the Company or the Surviving Corporation; and provided further that, in the event that any claim for indemnification is asserted or made within the period prior to the expiration of the applicable statute of limitations, all rights to indemnification in respect of such claim shall continue until the disposition of such claim. All rights under this Section 5.05(b) shall be deemed to be a contract between the Company and each of the Indemnified Parties. (c) The Surviving Corporation shall use its reasonable best efforts to maintain in effect for six years from the Effective Time, if available, the current directors' and officers' liability insurance policies maintained by the Company covering those persons who are currently covered by such policies (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that in no event shall the Surviving Corporation be required to expend pursuant to this Section 5.05(c) more than an amount per year equal to 150% of current annual premiums paid by the Company for such insurance. In the event that, but for the proviso to the immediately preceding sentence, the Surviving Corporation would be required to expend more than 150% of current annual premiums, the Surviving Corporation shall obtain the maximum amount of such insurance obtainable by payment of annual premiums equal to 150% of current annual premiums. (d) In the event the Company or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Company or the Surviving Corporation, as the case may be, or at Parent's option, Parent, shall assume the obligations set forth in this Section 5.05 and the indemnification agreements, dated as of July 2, 1997, between the Company and the members of the Special Committee. 20 SECTION 5.06. Notification of Certain Matters. The Company shall ------------------------------- give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (i) the occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any failure of the Company, Parent or Merger Subsidiary, as the case may be, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.06 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 5.07. Further Action; Reasonable Best Efforts. Upon the --------------------------------------- terms and subject to the conditions hereof, each of the parties hereto shall (i) use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Transactions, including, without limitation, using its reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of each Governmental Entity and parties to contracts with the Company and the Subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Offer and the Merger. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement and the Surviving Corporation shall use their reasonable best efforts to take all such action. SECTION 5.08. Public Announcements. Parent, Merger Subsidiary and -------------------- the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or any Transaction and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a securities exchange to which Parent or the Company is a party. SECTION 5.09. Termination of Agreements. The parties hereto hereby ------------------------- agree that the Acquisition Agreement shall be terminated as of the Effective Time. For purposes of clarity, it is understood by the parties hereto that all representations, warranties and agreements between the parties which, by the terms of such agreement, survive either or both the Closing Date (as that term is defined in the Acquisition Agreement) or the termination of such agreement shall all be terminated as of the Effective Time. SECTION 5.10. Financing. Parent shall ensure that it or Merger --------- Subsidiary, as the case may be, has sufficient funds to acquire all the outstanding Shares in the Offer and the Merger and pay all related fees and expenses. 21 ARTICLE VI CONDITIONS TO THE MERGER ------------------------ SECTION 6.01. Conditions to the Merger. The respective obligations ------------------------ of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Shareholder Approval. This Agreement and the Transactions -------------------- shall have been approved and adopted by the affirmative vote of the shareholders of the Company to the extent required by Pennsylvania Law and the Articles of Incorporation and Bylaws of the Company; (b) No Order. No Governmental Entity shall have enacted, issued, -------- promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) which is then in effect and has the effect of preventing or prohibiting consummation of the Merger or the effective operation of the business of the Company and the Subsidiaries after the Effective Time; (c) Offer. Parent or its permitted assignee shall have purchased ----- all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition shall not be applicable to the obligations of Parent or Merger Subsidiary if, in breach of this Agreement or the terms of the Offer, Parent fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. ARTICLE VII TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 7.01. Termination. This Agreement may be terminated and the ----------- Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the Transactions by the shareholders of the Company: (a) by mutual written consent duly authorized by the Boards of Directors of Parent, Merger Subsidiary and the Special Committee on behalf of the Company; or 22 (b) by either Parent or the Special Committee on behalf of the Company if (i) the Effective Time shall not have occurred on or before March 31, 1998; provided, however, that the right to terminate this Agreement under this Section 7.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (c) by Parent, if (i) due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in Annex A hereto, Parent shall have (A) failed to commence the Offer within 30 days following the date of this Agreement, or (B) terminated the Offer without having accepted any Shares for payment thereunder or failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such termination or failure to pay for Shares shall have been caused by or resulted from the failure of Parent or Merger Subsidiary to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by Parent or Merger Subsidiary of any material representation or warranty of either of them contained in this Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the Special Committee shall have withdrawn or modified in a manner adverse to Parent or Merger Subsidiary its approval or recommendation of the Offer, this Agreement, the Merger or any other Transaction or shall have resolved to do any of the foregoing; or (d) by the Company, upon approval of the Special Committee, if due to an occurrence or circumstance that would result in a failure to satisfy any of the conditions set forth in Annex A hereto, Parent shall have (i) failed to commence the Offer within 30 days following the date of this Agreement, or (ii) terminated the Offer without having accepted any Shares for payment thereunder or (iii) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such termination or failure to pay for Shares shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in this Agreement or the material breach by the Company of any material representation or warranty of it contained in this Agreement; or (e) by the Company, upon approval of the Special Committee, if any representation or warranty of Parent and Merger Subsidiary in this Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in 23 each case as if such representation or warranty was made as of such time on or after the date of this Agreement; or Parent or Merger Subsidiary shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of Parent or Merger Subsidiary to be performed or complied with by it under this Agreement. SECTION 7.02. Effect of Termination. In the event of the termination --------------------- of this Agreement pursuant to Section 7.01, this Agreement shall forthwith become void, and there shall be no liability on the part of any party hereto, except (i) as set forth in Section 8.01 and (ii) nothing herein shall relieve any party from liability for any willful breach hereof. SECTION 7.03. Amendment. This Agreement may be amended by the --------- parties hereto by action taken by or on behalf of their respective Boards of Directors (and approved by the Special Committee) at any time prior to the Effective Time; provided, however, that, after the approval and adoption of this Agreement and the Transactions by the shareholders of the Company, no amendment may be made which would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger, imposes conditions to the Merger other than set forth in Section 6.01 or would otherwise amend or change the terms and conditions of the Merger in a manner materially adverse to the holders of the Shares (other than Parent and its affiliates) or would adversely affect the rights of the Indemnified Persons under Section 5.05. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 7.04. Waiver. At any time prior to the Effective Time except ------ as otherwise provided in this Agreement, any party hereto may (i) extend the time for the performance of any obligation or other act of any other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any agreement or condition contained herein, other than the Minimum Condition. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby and, in the case of any extension or waiver by which the Company is to be bound, only if approved by the Special Committee. ARTICLE VIII GENERAL PROVISIONS ------------------ SECTION 8.01. Non-Survival of Representations, Warranties and ----------------------------------------------- Agreements. The representations, warranties and agreements in this Agreement - ---------- shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 7.01, as the case 24 may be, except that (i) the agreements set forth in Articles II and VIII and Section 5.05 shall survive the Effective Time indefinitely and (ii) the agreements set forth in Article VIII shall survive the termination of this Agreement indefinitely. SECTION 8.02. Notices. All notices, requests, claims, demands and ------- other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telecopy or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.02): if to Parent or Merger Subsidiary: Rhone-Poulenc S.A. 25, quai Paul Doumer 92408 Courbevoie Cedex, France Telecopier No: (33-1) 47-68-11-33 Attention: General Counsel with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Telecopier No: (212) 848-7179 Attention: Creighton O'M. Condon, Esq. if to the Company: Rhone-Poulenc Rorer Inc. 500 Arcola Road Collegeville, PA 19426 Telecopier No: (610) 454-8985 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 25 Telecopier No: (212) 735-2000 Attention: Margaret L. Wolff, Esq. SECTION 8.03. Certain Definitions. For purposes of this Agreement, ------------------- the term: (a) "affiliate" of a specified person means a person who directly --------- or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified person; (b) "beneficial owner" with respect to any Shares means a person ---------------- who shall be deemed to be the beneficial owner of such Shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares; (c) "business day" means any day on which the principal offices ------------ of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized by law or executive order to close in the City of New York; (d) "control" (including the terms "controlled by" and "under ------- ------------- ----- common control with") means the possession, directly or indirectly or as ------------------- trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (e) "person" means an individual, corporation, partnership, ------ limited partnership, limited liability company, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and 26 (f) "subsidiary" or "subsidiaries" of the Company, the Surviving ---------- ------------ Corporation, Parent or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries. SECTION 8.04. Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 8.05. Entire Agreement; Assignment. The Acquisition ---------------------------- Agreement and this Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supercede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, except that Parent and Merger Subsidiary may assign all or any of their rights and obligations hereunder to any wholly-owned subsidiary Parent provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations. To the extent that any terms of the Acquisition Agreement and this Agreement are inconsistent, the terms of this Agreement shall control. SECTION 8.06. Parties in Interest. This Agreement shall be binding ------------------- upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Section 5.05 (which is intended to be for the benefit of the persons covered thereby and may be enforced by such persons). SECTION 8.07. Specific Performance. The parties hereto agree that -------------------- irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. SECTION 8.08. Fees and Expenses. All fees and expenses incurred in ----------------- connection with this Agreement and the Transactions shall be paid by the party incurring such fees and expenses, whether or not such transactions are consummated. 27 SECTION 8.09. Governing Law. Except to the extent that Pennsylvania ------------- Law is mandatorily applicable to the Transactions, this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without regard to conflicts of laws principle thereof). All actions and proceedings arising out of or relating to this Agreement shall be heard and exclusively determined in any New York state or federal court sitting in the County of New York and the parties hereto hereby consent to the jurisdiction of such courts in any such action or proceeding. SECTION 8.10. Headings. The descriptive headings contained in this -------- Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 8.11. Counterparts. This Agreement may be executed in one or ------------ more counterparts (including by facsimile transmission), and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 8.12. Consent to Jurisdiction: Appointment of Agent for ------------------------------------------------- Service of Process. Parent hereby (a) submits to the jurisdiction of any New - ------------------ York State and Federal courts sitting in New York City with respect to such matters arising out of or relating hereto, (b) agrees that all claims with respect to such action or proceeding may be heard and determined in such New York State or Federal court, (c) waives the defense of an inconvenient forum, (d) consents to service of process upon it by mailing or delivering such service to its agent CT Corporation System, 1633 Broadway, New York, New York 10019 (the "Agent") and authorizes and directs its Agent to accept such service, (e) agrees ----- that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law, and (f) to the extent that it or its properties have or hereafter may acquire immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise),waives such immunity in respect of its obligations under this Agreement. IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. RHONE-POULENC S.A. By /s/ Igor Landau ________________________________________________ Name: Title: RP VEHICLE, INC. By /s/ Igor Landau ________________________________________________ Name: Title: RHONE-POULENC RORER INC. By /s/ Timothy Rothwell ________________________________________________ Name: Title: ANNEX A CONDITIONS TO THE OFFER ----------------------- Notwithstanding any other provision of the Offer, Parent shall not be required to accept for payment or pay, subject to the applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer to the extent expressly provided in this Agreement and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Minimum Condition shall not have been satisfied or (ii) at any time on or after the date of this Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been instituted or be pending any action or proceeding by any Governmental Entity, (i) challenging or seeking to make illegal, materially delay or otherwise directly or indirectly restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by Parent or any other affiliate of Parent or the consummation of any other Transaction; (ii) seeking to prohibit or limit materially the ownership or operation by the Company, Parent or any of their subsidiaries of all or any material portion of the business or assets of the Company or any of its subsidiaries, or to compel the Company, Parent or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company or any of its subsidiaries, as a result of the Transactions; (iii) seeking to impose or confirm limitations on the ability of Parent or any other affiliate of Parent to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by Parent pursuant to the Offer or otherwise on all matters properly presented to the Company's shareholders, including, without limitation, the approval and adoption of the Agreement and the Merger; (iv) seeking to require divestiture by Parent or any other affiliate of Parent of any Shares; or (v) which otherwise has a Material Adverse Effect on the Company; (b) there shall have been any order or injunction issued, or any Law enacted, entered, enforced, promulgated, amended, issued or deemed applicable to Parent, the Company or any subsidiary or affiliate of Parent or the Company which has resulted, or is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) there shall have occurred any change, condition, event or development that has a Material Adverse Effect; (d) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities of the Company on the NYSE or the Paris Bourse; (ii) A-2 any general suspension of, or limitation on prices for, trading in equity securities on the Paris Bourse; (iii) any decline, measured from the date hereof, in the Standard & Poor's 500 Index by an amount in excess of 20%; (iv) any change in currency exchange rates, measured from the close of business on the date of this Agreement, resulting in an increase of 15% or more in the Per Share Amount as translated from U.S. dollars into French Francs; (v) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or the Republic of France; (vi) any limitation (whether or not mandatory) by any Governmental Entity, on, or other event that, could reasonably be expected to have a material adverse effect on the extension of credit by banks or other lending institutions, which limitation or other event is reasonably likely to materially affect the ability of Parent to pay for the Shares; (vii) a commencement of war or armed hostilities or other national or international calamity directly or indirectly involving the United States or the Republic of France; or (viii) in the case of any of the foregoing existing on the date hereof, a material acceleration or worsening thereof; (e) (A) the Special Committee shall have withdrawn or modified in a manner adverse to Parent or Merger Subsidiary the adoption or recommendation of the Offer, the Merger or the Agreement, or (B) the Special Committee shall have resolved to do any of the foregoing; (f) any representation or warranty of the Company in this Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect; provided in any such case, such representation and warranty shall continue to be incorrect in any material respect at the time of such termination; (g) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under this Agreement; (h) this Agreement shall have been terminated in accordance with its terms; or (i) Parent, Merger Subsidiary and the Company (with the approval of the Special Committee) shall have agreed that Parent shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; which, in the reasonable judgment of Parent in any such case, and regardless of the circumstances (including any action or inaction by Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. A-3 The foregoing conditions are for the sole benefit of Parent and may be asserted by Parent regardless of the circumstances giving rise to any such condition or may be waived by Parent in whole or in part at any time and from time to time in its reasonable discretion. The failure by Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. EX-99.(G)(1) 31 COMPLAINT FILED IN BRICKELL V. RHONE POULENC S.A. EXHIBIT (G)(1) SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ++ BRICKELL PARTNERS, A Florida + Partnership, Individually On Its Own + Behalf And On Behalf Of All Others + Index No. 603493 97, Similarly Situated, + + + + CLASS ACTION COMPLAINT Plaintiff, + ++ + + JURY TRIAL DEMANDED - against - + + RHONE-POULENC S.A., + + Defendant. + ++ Plaintiff, by its attorneys, for its class action complaint against defendant, alleges upon information and belief, except as to Paragraph 2, which is alleged upon knowledge. Plaintiff's information and belief is based on, inter alia, the investigation conducted by its attorneys, including review of documents filed with the Securities and Exchange Commission, articles in the financial news media, press releases, and other publicly available information. 1. Plaintiff brings this action individually and as a class action on behalf of all persons, other than defendant and persons or entities related to it, who own the common stock of Rhone-Poulenc Rorer Inc. ("Rorer" or the "Company") and thus are similarly situated (the "Class"), for injunctive and other relief. Plaintiff seeks injunctive relief herein to, inter alia, enjoin the implementation of an inherently unfair transaction whereby the defendant, the Company's majority shareholder, Rhone-Poulenc S.A. ("Rhone-Poulenc")-- which owns approximately 60% of the outstanding common stock of Rorer and controls the operations of the Company--will acquire all of the remaining shares of the Company that it does not already own for a grossly inadequate price. Alternatively, in the event that the proposed transaction is implemented, plaintiff seeks to recover damages caused by the breach of fiduciary duties owed by the defendant. PARTIES 2. Plaintiff Brickell Partners is a Florida partnership, and at all relevant times has been, the owner of Rorer common stock. 3. Defendant Rhone-Poulenc is a corporation duly organized and existing under the laws of France and maintains its principal place of business at 25 Quai Paul Doumer, 92408 Courbevoie Cedex, France. Rhone-Poulenc's American depositary receipts ("ADRs") trade on the New York Stock Exchange ("NYSE"). Rhone-Poulenc researches, develops, produces, markets, and sells human and animal pharmaceuticals and is engaged in the chemical, fiber, and polymer business. Rhone-Poulenc presently owns or controls approximately 68.3% of Rorer's outstanding stock. 4. By reason of its dominant position as the majority stockholder of Rorer and its ability to control the business and corporate affairs of Rorer at all relevant times, Rhone-Poulenc owed and owes Rorer stockholders fiduciary duties of fairness and trust, and was and is obligated to refrain from using its dominant position over Rorer to enrich itself at the expense of other stockholders. JURISDICTION AND VENUE 5. Venue in this action lies in New York County. Rhone-Poulenc's ADRs are listed and traded on the NYSE. 6. At all relevant times, Rhone-Poulenc did or performed acts within or without the State that subject it to the jurisdiction of the Courts of the State of New York. CLASS ACTION ALLEGATIONS 7. Plaintiff brings this class action in its own behalf and as a class action, pursuant to Article 9 of the Civil Practice, Law and Rules, on behalf of itself and all stockholders of Rorer, except defendant herein and any person, firm, trust, corporation, or other entity related to or affiliated with defendant, all of whom are being and will continue to be threatened with injury arising from defendant's actions as is described more fully below. 8. This action is properly maintainable as a class action. 9. The Class is so numerous that joinder of all members is impracticable. Approximately 43 million shares of the Company's common stock are owned by at least several hundred public shareholders of record other than Rhone-Poulenc. 10. There are questions of law and fact common to the Class including, inter alia, whether; a. the offer is grossly unfair to the public stockholders of the Company; b. defendant willfully and wrongfully failed to maximize stockholder value through an adequate auction or market check process; c. defendant, by virtue of its dominant and control position over Rorer, has breached and will continue to breach its fiduciary and other common law duties owed by it to plaintiff and the other members of the Class; and d. plaintiff and the other members of the Class would be irreparably damaged by the wrongs complained of herein. 11. Plaintiff is committed to prosecuting the action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Plaintiff is an adequate representative of the Class. 12. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendant, or adjudications with respect to individual members of the Class which would, as a practical matter, be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 13. Defendant has acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. SUBSTANTIVE ALLEGATIONS 14. Rorer is a corporation duly organized and existing under the laws of the State of Pennsylvania and which maintains its principal executive offices at 500 Arcola Road, Collegeville, Pennsylvania 19242. Rorer is primarily engaged in the development, manufacture, and marketing of a line of pharmaceutical products, including prescription drugs, over-the-counter medicines and plasma- derived products. Rorer is a majority-owned subsidiary of Rhone-Poulenc. Rorer has approximately 136.8 million shares of common stock outstanding, of which approximately 68.3% are owned by Rhone-Poulenc. The remaining approximately 43 million shares are held by at least several hundred public shareholders of record other than defendant. Rorer's stock is publicly traded on the NYSE. 15. On June 26, 1997, Rhone-Poulenc announced it was considering an offer (the "Offer") to acquire all of the shares of Rorer it does not already own in a cash transaction whereby Rhone-Poulenc would pay $92.00 cash for each of such shares. The proposed transaction would provide Rorer shareholders with a premium of only 16% over the trading price of Rorer stock at the close of business on June 25, 1997. 2 16. Rhone-Poulenc is taking advantage of its majority stock ownership position in Rorer by posing the inadequate Offer on Rorer's public stockholders. The Offer is part of a sweeping corporate overhaul of Rhone- Poulenc, meant to benefit Rhone-Poulenc. Pursuant to the planned overhaul, Rhone-Poulenc intends to spin off its chemical, fibers, and polymer operations, in order to become one of the world's biggest pharmaceutical companies, by combining Rorer's business with Rhone-Poulenc's vaccine and animal health businesses. According to The Wall Street Journal of June 27, 1997, the chemical business has been less profitable than the pharmaceutical business and has weighed down Rhone-Poulenc's profits and price share. Thus, Rhone-Poulenc's plan is to divest itself of its less profitable businesses and, taking advantage of its dominant position over Rorer, acquire from the public shareholders of Rorer, at an inadequate consideration, Rorer's more profitable pharmaceutical business. 17. Rhone-Poulenc announced the Offer during the period when a so-called "standstill agreement" precludes it from acquiring all of the publicly traded shares of Rorer. The restriction under the "standstill agreement", dating from a 1990 merger with Rorer Inc. that created the current Rorer, expires July 31, 1997. 18. Because of its position of dominance and control of Rorer, Rhone-Poulenc has announced the Offer at this time so that it can cap the price of Rorer at no more than the approximate amount of the Offer, thereby limiting the price it will have to pay for the balance of Rorer's stock. By announcing the Offer now, Rhone-Poulenc has locked in the offer price and avoided having to make a higher offer were Rorer's stock, unaffected by the Offer, to rise between now and July 31, 1997. 19. Rhone-Poulenc is presently the largest stockholder of Rorer, and seeks to acquire Rorer's pharmaceutical business, growth, and cash flow to squeeze out Rorer's public stockholders at a price which is wholly inadequate. 20. Even in light of what has been publicly disclosed about Rorer's present business and future prospects, the Offer is grossly unfair, inadequate, and provides value to Rorer's shareholders substantially below the fair or inherent value of the Company. The intrinsic value of the equity of Rorer is materially greater than the consideration contemplated by the Offer price, taking into account Rorer's pharmaceutical business, asset value, liquidation value, its expected growth, and it revenues and cash flow. 21. The Offer is wrong, unfair, harmful to Rorer's public stockholders, wholly inadequate, and will deny Class members their right to share proportionately in the true value of Rorer's valuable assets, profitable business and future growth in profits and earnings, while usurping the same for the benefit of defendant. 22. The Offer is not the result of arm's length negotiations but was fixed arbitrarily by Rhone-Poulenc, which dominates and controls Rorer, as part of its unlawful plan and scheme to obtain 100% ownership of Rorer at the lowest possible price and to usurp for itself Rorer's profitable pharmaceutical business. 23. Defendant has violated fiduciary and other common law duties owed to plaintiff and the other members of the Class in that it is using its dominant, control position over Rorer to enrich itself at the expense of Rorer's other stockholders. 24. As a result of defendant's actions, plaintiff and the Class have been and will be damaged by the breaches of fiduciary duty and, therefore, plaintiff and the Class will not receive the fair value of Rorer's assets and businesses. 25. Unless enjoined by this Court, defendant will continue to breach its fiduciary duties owed to plaintiff and the Class, and will succeed in its plan to exclude plaintiff and the Class from the fair proportionate share of Rorer's valuable assets and businesses, all to the irreparable harm of the Class. 26. Plaintiff and the Class have no adequate remedy of law. 3 WHEREFORE, plaintiff prays for judgment and relief as follows: a. declaring that this lawsuit is properly maintainable as a class action and certifying plaintiff as representative of the Class; b. declaring that defendant has committed, or sided and abetted in committing, a gross abuse of trust and have breached its fiduciary duties to plaintiff and the other members of the Class; c. preliminarily and permanently enjoining defendant and its counsel, agents, employees, and all persons acting under, in concert with, or for them, from proceeding with the Offer; d. awarding compensatory damages against defendant, in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; e. ordering defendant to permit a shareholders' committee comprised of Class members and the proposed Class representative, to ensure a fair procedure, adequate procedural safeguards, and independent input by plaintiff and the Class in connection with any transaction for the shares of Rorer; f. awarding plaintiff and the Class their costs and disbursements and reasonable allowances for plaintiff's counsel and experts' fees and expenses; and g. granting such other and further relief as may be just and proper. Dated: July 8, 1997 Respectfully submitted WECHSLER HARWOOD HALEBIAN & PFEIFFER LLP 805 Third Avenue New York, New York 10022 (212) 735-7400 Attorneys for Plaintiffs Of Counsel: SAVETT, FRUTKIN, PODELL & RYAN, P.C. 320 Walnut Street, Suite 508 Philadelphia, PA 19106 (215) 923-5400 4 EX-99.(G)(2) 32 COMPLAINT FILED IN STEINER V. RHONE POULENC S.A. EXHIBIT (G)(2) IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ++ KENNET STEINER, + + Plaintiff, + + + CIVIL ACTION NO. + - against - ++ + COMPLAINT FOR INJUNCTIVE RELIEF + RHONE-POULENC S.A., + + Defendant. + ++ Plaintiff, by his attorneys, alleges upon personal knowledge as to himself and his own acts, and upon information and belief as to all other matters based upon the investigation conducted by and through his attorneys which included, among other things, a review of the filings by Rhone-Poulenc Rorer Inc. ("Rorer" or the "Company") and Rhone-Poulenc S.A. ("Rhone-Poulenc") with the Securities and Exchange Commission ("SEC"), news wire services, news releases, and other publicly disseminated filings and materials, as follows: JURISDICTION AND VENUE 1. This action is brought to remedy violations of Sections 14(d) and 14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 15 U.S.C. (S)(S) 78n(d) and 78n(e). 2. The subject matter jurisdiction of this Court is based upon Section 27 of the Exchange Act, 15 U.S.C. (S) 78aa. 3. Venue is properly laid in the Eastern District of Pennsylvania, because many of the acts, transactions, and conduct constituting violations of law complained of herein, including, inter alia, communications to Rorer, the target of an improper tender offer by Rhone-Poulenc, have occurred in this District. 4. In connection with the acts, conduct, and other wrongs complained of herein, defendant, directly and indirectly, used the means and instrumentalities of interstate commerce, including the mails and the facilities of national securities markets, i.e., the facilities of the New York Stock Exchange ("NYSE"). THE PARTIES 5. Plaintiff Kenneth Steiner, at all relevant times, has been the owner of common stock of Rorer. 6. Defendant Rhone-Poulenc is a corporation duly organized and existing under the laws of France and maintains its principal place of business at 25 Quai Paul Doumer, 92408 Courbevoie Cedex, France. Rhone-Poulenc's American depository receipts ("ADRs") trade on the NYSE. Rhone-Poulenc researches, develops, produces, markets, and sells human and animal pharmaceuticals and is engaged in the chemical, fiber, and polymer business. Rhone-Poulenc presently owns or controls approximately 68.3% of the outstanding stock of Rorer. FACTS 7. Rorer is a corporation duly organized and existing under the laws of the State of Pennsylvania and which maintains its principal executive offices at 500 Arcola Road, Collegeville, Pennsylvania 19242. Rorer is primarily engaged in the development, manufacture, and marketing of a line of pharmaceutical products, including prescription drugs, over-the-counter medicines and plasma- derived products. Rorer is a majority-owned subsidiary of Rhone-Poulenc. Rorer has approximately 136.8 million shares of common stock outstanding, of which approximately 68.3% are owned by Rhone-Poulenc. The remaining approximately 43 million shares are held by at least several hundred public shareholders of record other than defendant. Rorer's stock is publicly traded on the NYSE. 8. On June 26, 1997, Rhone-Poulenc announced it was considering an offer (the "Offer") to acquire all of the shares of Rorer it does not already own in a cash transaction whereby Rhone-Poulenc would pay $92.00 cash for each of such shares. 9. Rhone-Poulenc is taking advantage of its majority stock ownership position in Rorer by imposing the inadequate Offer on Rorer's public stockholders. The offer is part of a sweeping corporate overhaul of Rhone- Poulenc, meant to benefit Rhone-Poulenc. Pursuant to the planned overhaul, Rhone-Poulenc intends to spin off its chemical, fibers, and polymer operations, in order to become one of the world's biggest pharmaceutical companies, by combining Rorer's business with Rhone-Poulenc's vaccine and animal health businesses. According to The Wall Street Journal of June 27, 1997, the chemical business has been less profitable than the pharmaceutical business and has weighed down Rhone-Poulenc's profits and price share. Thus, Rhone-Poulenc's plan is to divest itself of its less profitable businesses and, taking advantage of its dominant position over Rorer, acquire from the public shareholders of Rorer, without complying with the requirements of the Exchange Act, Rorer's more profitable pharmaceutical business. 10. Rhone-Poulenc announced the Offer during the period when a so-called "standstill agreement" precludes it from acquiring all of the publicly traded shares of Rorer. The restriction-under the "standstill agreement", dating from a 1990 merger with Rorer Inc. that created the current Rorer, expires July 31, 1997. 11. Because of its position of dominance and control of Rorer, Rhone-Poulenc announced the offer on June 26, 1997 to manipulate the price of Rorer shares so that they do not trade at a price materially higher than the Offer, thereby limiting the price it will have to pay for the balance of Rorer's stock. By announcing the Offer on June 26, 1997, Rhone-Poulenc began the tender offer process without complying with the requirements of the Exchange Act and the rules promulgated thereunder, attempted to limit the offer price, and avoided having to make a materially higher offer were Rorer's stock, unaffected by the Offer, to rise materially between now and July 31, 1997. 12. On July 8, 1997, when the price of Rorer shares rose to $93.625, $1.625 above the Offer price, Jean-Rene Fourtou, Chairman and Chief Executive Officer of Rhone-Poulenc, stated in an interview with Bloomberg Information Television: "The share price of (Rorer) is slightly above our offer price, which clearly poses a problem. "We are going to move as quickly as possible . . . Fast, if we reach a rapid accord with the minority shareholders and their representatives on the board-- which I hope will happen--a little more slowly otherwise. As of August 1 we'll be ready to move quickly." (Emphasis added). 13. Following the announcement of the Offer, shareholders of Rorer who did not possess crucial material information regarding their decisions whether to hold or sell their shares of Rorer and who were, and are, otherwise poorly informed as a result of defendant's incomplete or non-existent disclosures, were required to make their decisions without the requisite disclosures being made by Rhone-Poulenc. CLAIM VIOLATION OF SECTIONS 14(D) AND 14(E) OF THE EXCHANGE ACT 14. Plaintiff repeats and realleges the preceding paragraphs of this Complaint as though fully set forth herein. 15. This claim, pursuant to Sections 14(d) and 14(e) of the Exchange Act, is being brought by plaintiff against defendant to enjoin the Offer, which is an improper tender offer, commenced by defendant. 16. In preparing, publishing and disseminating the Offer, and subsequently commenting publicly on the Offer, defendant knowingly or recklessly commenced and continued an improper tender offer in violation of Sections 14(d) and 14(e) of the Exchange Act. 2 17. By reason of the foregoing, defendant violated Sections 14(d) and 14(e) of the Exchange Act and defendant should be preliminary and permanently enjoined from continuing the Offer, together with such other and further relief as may be proper. WHEREFORE, plaintiff demands judgment as follows: 1. preliminarily and permanently enjoining defendant's conduct; 2. awarding plaintiff the costs of this suit, including reasonable attorneys' and experts' fees and other disbursements; and 3. such other and further relief as may be just and proper. Dated: July 15, 1997 SAVETT FRUTKIN PODELL & RYAN, P.C. By: /s/ Robert P. Frutkin ------------------------------- Robert P. Frutkin (I.D. No. 21366) 320 Walnut Street, Suite 508 Philadelphia, PA 19106 (215) 923-5400 WECHSLER HARWOOD HALEBIAN & FEFFER LLP Robert I. Harwood Samuel K. Rosen 805 Third Avenue New York, New York 10022 (212) 935-7400 Attorneys for Plaintiff 3 EX-99.(G)(3) 33 COMPLAINT FILED IN KRIM V. RHONE POULENC S.A. EXHIBIT (G)(3) KANTROWITZ & GOLDHAMER 111 Chestnut Ridge Road Montvale, New Jersey 07645 (201) 391-7000 STULL, STULL & BRODY 6 East 45th Street New York, New York 10017 (212) 687-7230 LAW FIRM OF HARVEY GREENFIELD 10 East 40th Street New York, NY 10016 (212) 679-0600 SCHIFFRIN & CRAIG 3 Bala Plaza East, Suite 400 Bala CynWyd, PA 19004 (610) 667-7706 Attorneys for Plaintiff SUPERIOR COURT OF NEW JERSEY COUNTY OF MERCER ++ JERRY KRIM, on behalf of himself and + all others similarly situated, + Index No. MER-L-002486-97 + + Plaintiff, + CLASS ACTION COMPLAINT + + -against- + ++ RHONE-POULENC S.A., JEAN JACQUES + BERTRAND, JEAN MARC BRUEL, + ROBERT E. CAWTHORN, MICHEL DE ROSEN, + JURY TRIAL CHARLES-HENRI FILIPPI, CLAUDE + DEMANDED HELENE, IGOR LANDAU and JEAN-PIERRE + TIROUFLET + + Defendants. + ++ Plaintiff, by his attorneys, alleges upon information and belief, based, in part, upon an investigation conducted by and through the undersigned counsel, except with respect to their ownership of Rhone Poulenc Rorer, Inc. ("RPR" or the "Company") common stock and their suitability to serve as class representatives, which are alleged upon personal knowledge as follows: 1. Plaintiff is, and has been at all relevant times, the owner of shares of the common stock of the Company, RPR. 2. Defendant Rhone-Poulenc S.A. ("Rhone"), is incorporated in France and has its principal U.S. office in Princeton, New Jersey, County of Mercer. Accordingly, venue is properly placed in Mercer Country pursuant to R 4:3-2. Rhone, through its consolidated subsidiaries and associated companies, produces chemicals, pharmaceuticals, fibers, polymers and other products. 3. RPR is a corporation duly organized and existing under the laws of the State of Pennsylvania. The number of shares of RPR common stock outstanding as of the close of business on April 30, 1997 was 137,175,187. As of June 26, 1997, Rhone currently owned 68.3% of the outstanding voting securities of RPR. RPR maintains its principal corporate offices at 500 Arcola Road, Collegeville, Pennsylvania 19426-0107. 4. Defendant Jean-Jacques Bertrand ("Bertrand"), has been Chairman and Chief Executive Officer of RPR since 1995 and a director of RPR since 1990. Bertrand was selected to be a director of RPR by Rhone. 5. Defendant Jean Marc Bruel ("Bruel"), has been Vice-Chairman of the Rhone- Poulenc Group since 1992 and a director of RPR since 1990. Bruel is a member of the Executive Committee of Rhone and a director of Rhone. Bruel was selected to be a director of RPR by Rhone. 6. Defendant Robert E. Cawthorn ("Cawthorn"), has been Chairman Emeritus of RPR since 1996 and a director of RPR since 1984. Cawthorn was selected to be director of RPR by Rhone. 7. Defendant Michel de Rosen ("Rosen"), has been Chairman of RPR since 1996 and Chief Executive Officer since 1995 and a director of RPR since 1993. Rosen is also a member of the Executive Committee of Rhone. 8. Defendant Charles-Henri Filippi ("Filippi"), has been a director of RPR since 1990. Filippi was selected to be a director of RPR by Rhone. 9. Defendant Claude Helene ("Helene"), has been Senior Vice President and Director Scientific of Rhone since 1990 and a director of RPR since 1990. Helene was selected to be a director of RPR by Rhone. 10. Defendant Igor Landau ("Landau"), has been President and Chairman of the RPR's Health Sector since 1996 and a director since 1990. Landau has been Chairman of Rhone's Health Sector since 1990 and is also a member of the Executive Committee of Rhone. Landau was selected to be a director of RPR by Rhone. 11. Defendant Jean Pierre Tirouflet ("Tirouflet"), has been Executive Vice President of Chief Financial Officer of RPR since 1992 and a director of RPR since 1990. Tirouflet has been a member of the Executive Committee of Rhone since 1990. Tirouflet was selected to be a director of RPR by Rhone. 12. The defendants described in paragraphs 4-11 above are hereinafter sometimes collectively referred to as the "individual defendants" or the "director defendants." 13. By virtue of the individual defendants' positions as officers and/or directors of RPR, said defendants are in a fiduciary relationship with the plaintiff and other public shareholders of RPR and owe plaintiff and other members of the Class the highest obligation of good faith, fair dealing, loyalty and due care. 14. The individual defendants are members of the board of RPR and are affiliated with Rhone. Rhone, by virtue of its 68.3% interest in RPR is a controlling shareholder of RPR and is orchestrating the proposed transaction to take RPR private, which is at issue in this Complaint, for its own benefit, and at the expense of RPR's minority shareholders. Shareholders not affiliated with the controlling shareholder, Rhone, are minority shareholders, holding only 31.7% of RPR's shares. 15. The individual defendants, by reason of their corporate directorships, stand in a fiduciary position relative to RPR's minority shareholders, whose fiduciary duties, at all times relevant herein, require them to exercise their best judgment, and to act in a prudent manner, and in the best interests of the Company's minority shareholders. Said defendants owe the public minority of RPR the highest duty of good faith, fair dealing, due care, loyalty, and full, candid and adequate disclosure. 16. Each defendant herein is sued individually as an aider and abettor, as well as in his capacity as a director of the Company (in the case of the individual defendants), or as a control person and the liability of each arises from the fact that he has engaged in all or part of the unlawful acts, plans, schemes, or transactions herein. 2 CLASS ACTION ALLEGATIONS 17. Plaintiff brings this action on his own behalf and as a class action, pursuant to New Jersey law, on behalf of all shareholders of the common stock of RPR (except the defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants' action as more fully described herein. 18. This action is properly maintainable as a class action. 19. The class is so numerous that joinder of all members is impracticable. As of the close of business on April 30, 1997, there were 137,175,187 shares of RPR common stock outstanding and which were held by at least thousands of shareholders throughout the United States. 20. A class action is superior to other methods for the fair and efficient adjudication of the claims herein asserted, and no unusual difficulties are likely to be encountered in the management of this class action. The likelihood of individual class members prosecuting separate claims is remote. 21. There are questions of law and fact which are common to the class and which predominate over questions affecting any individual class member. The common questions include, inter alia, the following: (a) whether defendants have breached their fiduciary and other common law duties owed by them to plaintiff and the other members of the class; (b) whether defendants are pursuing a scheme and course of conduct designed to eliminate the public shareholders of RPR in violation of the laws of the State of New Jersey in order to benefit from a proposed acquisition of RPR by Rhone at the expense and to the detriment of the plaintiff and the other public minority shareholders who are members of the class; (c) whether defendants are acting on both sides of the possible going- private transaction, thus presenting a conflict of interest, self-dealing and overreaching; (d) whether the said proposed acquisition, hereinafter described, constitutes a breach of the duty of fair dealing with respect to the members of the class; and, (e) whether the class is entitled to injunctive relief or damages as a result of the wrongful conduct of the defendants. 22. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of the plaintiff are typical of the claims of other members of the class and plaintiff has the same interests as the other members of the class. A class action is superior to any other type of adjudication of this controversy. 23. Defendants have acted in a manner which affects plaintiff and all other members of the class, thereby making appropriate injunctive relief and/or corresponding declaratory relief with respect to the class as a whole. SUBSTANTIVE ALLEGATIONS 24. For the last few months RPR has not been performing particularly well. Centeon, a joint venture plasma proteins company of which RPR owns 50%, has had recent manufacturing and regulatory problems having a negative contributory effect upon RPR's earnings. Now it appears that RPR's misfortunes appear to have either leveled off or begun to improve. 25. On or about April 24, 1997, RPR announced that the three month earnings per share was $0.41, vs. $0.55 for the same period in the previous year. Excluding Centeon's contribution, earnings per share would have risen 33%. 26. Despite the sharp first quarter decline, sales for 1997 were expected to post modest growth and RPR is now poised for continuing future growth. Domestic pharmaceutical sales were to benefit from healthy gains in 3 Lovenox, low molecular weight heparin, and RPR's Azmacort and Nasacort asthma/allergy treatments, while overseas volume were to be bolstered by gains in the Doliprane and Imovane analgesic/neurological lines. New products such as Rilutek for Lou Gehrig's disease and Taxotere and Campto anticancer agents were also expected to contribute to gains. Earnings per share were projected at $3.50 for 1997 and $4.25 for 1998. 27. Timothy Rothwell, President of RPR, said on April 24, 1997, "Based on the incremental contribution of our new products, I believe that it is quite realistic for us to generate sales of 5-6% on a comparable basis for all of 1997," and "Results that will drive future growth in our four key therapeutic areas are beginning to emerge. The ESSENCE trial demonstrated that Lovenox is superior to heparin in unstable angina, a treatment currently regarded as standard therapy. This, in addition to ongoing trials in other cardiovascular indications, may enable Lovenox to become RPR's first billion dollar drug within the next five years." (emphasis added). 28. On June 26, 1997, Rhone announced that it was in the process of a major initiative to increase Rhone's ownership of RPR from 68.3% to 100% through a business combination with RPR, which would entitle the public minority shareholders of RPR to receive $92 per share. Such business combination would be proposed after the expiration on July 31, 1997, of the standstill period under the Rhone-RPR acquisition agreement of March 12, 1990. 29. The proposed purchase price of $92, which is only a 16% premium over the June 25, 1997 closing price of $79 per share, does not represent the true value of the assets or the future prospects underlying each share of RPR. 30. By virtue of its dominance and control over RPR, Rhone, together with the individual defendants, has engaged in a plan involving acts which are grossly unfair to plaintiff and the other members of the class. The purpose of the plan is to enable Rhone to acquire 100% equity ownership of RPR and its assets for its own benefit, and at the expense of the other RPR minority stockholders, who would be deprived of their equity investment and the benefits to accrue thereafter, for a grossly inadequate price. 31. Defendants' announcement of the proposed bid fails to disclose the improving prospects for RPR due to the growth prospects for the Company. 32. Because of Rhone's almost 70% equity power and overwhelming control over RPR's board of directors and operations, no third party, as a practical matter, can attempt any competing bid for RPR, as the success of any such bid would require the consent and cooperation of Rhone. In fact, because of the predominant control of RPR by Rhone, it is a foregone conclusion that whatever Rhone may offer, such offer will be accepted. 33. The proposed transaction serves no legitimate business purpose of RPR but rather is an attempt by defendants to unfairly benefit Rhone from the transaction at the expense of RPR's minority public stockholders. The proposed plan will deny plaintiff and the other members of the class their right to share proportionately in the future success and growth in profitability of RPR and its valuable assets, while permitting defendants to reap huge benefits from the contemplated transaction. 34. The price of $92 per share to be paid to the class members is unconscionable, unfair and grossly inadequate. The terms of the proposed merger constitute an unfair and illegal business practice upon the minority stockholders because, among other things: (a) the intrinsic value of the stock of RPR is materially in excess of $92 per share, giving due consideration to the possibilities of growth and profitability of RPR in light of its business, earnings and earnings power, both present and future. (b) The $92 per share price is not the result of arm's length negotiations and was not based upon any independent evaluation of the current value of RPR shares, assets or business, but was fixed arbitrarily by defendants, as part of a plan by Rhone to obtain complete ownership of RPR's assets and business at the lowest possible price, to obtain for itself benefits disproportionate with those to be received by the public stockholders, which facts were not and perhaps will not be disclosed since it is not in defendants' interests to disclose such facts. 35. Because the defendants are in possession of corporate information concerning RPR's assets, businesses and future financial prospects, the degree of knowledge and economic power between defendants and the public 4 stockholders is unequal, making it grossly and inherently unfair and comprises "unfair dealing" by Rhone to obtain ownership of RPR's assets from the minority public common shareholders. 36. By reason of the foregoing acts, practices and course of conduct, Rhone has breached and continues to breach its duty as a controlling stockholder of RPR and the individual defendants have breached and continue to breach their duties as directors of RPR, to the remaining stockholders including plaintiff and the other members of the class herein. 37. Plaintiff and the other members of the class will suffer irreparable damage unless defendants are enjoined from continuing to breach their fiduciary duties and from carrying out the aforesaid plan and scheme. 38. Plaintiff and the other members of the class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment against the defendants jointly and severally, as follows: (1) declaring this action to be class action and certifying plaintiff as the class representatives and his counsel as class counsel; (2) enjoining, preliminary and permanently, Rhone's offer for acquisition of the RPR stock owned by plaintiff and the other members of the class; (3) to the extent, if any, that the contemplated transaction or transactions complained of are consummated prior to the entry of this Court's final judgment, rescinding such transaction or transactions, and granting, inter alia, rescissionary damages; (4) directing that defendants pay to plaintiff and the other members of the class all damages caused to them and account for all profits and any special benefits obtained as a result of their unlawful conduct; (5) awarding to plaintiff the costs and disbursements of this action, including a reasonable allowance for the fees and expenses of plaintiff's attorney's and experts; and (6) Granting plaintiff and the other members of the class such other and further relief as may be just and proper. Dated: June 27, 1997 KANTROWITZ & GOLDHAMER By: /s/ Gary S. Graifman ---------------------------- GARY S. GRAIFMAN 111 Chestnut Ridge Road Montvale, New Jersey 07645 (201) 391-7000 Attorneys for Plaintiff OF COUNSEL: STULL, STULL & BRODY 6 East 45th Street New York, New York 10017 (212) 687-7230 LAW FIRM OF HARVEY GREENFIELD 10 East 40th Street New York, NY 10016 (212) 679-0600 SCHIFFRIN & CRAIG 3 Bala Plaza East, Suite 400 Bala CynWyd, PA 19004 (610) 667-7706 5 DESIGNATION OF TRIAL ATTORNEY Please take notice that in accordance with R. 4:25-4 Gary S. Graifman, Esq. is designated as trial counsel. Dated: Montvale, New Jersey June 27, 1997 KANTROWITZ & GOLDHAMER BY: _________________________________ Gary S. Graifman, Esq. (GSG-2276) JURY DEMAND Plaintiff, JERRY KRIM, by his attorneys, KANTROWITZ & GOLDHAMER, pursuant to Rule 4:35-1(a) hereby makes demand for a jury trial on all issues which may be tried by a jury to be determined in the above entitled action. Dated: Montvale, New Jersey June 27, 1997 KANTROWITZ & GOLDHAMER BY: _________________________________ Gary S. Graifman, Esq. (GSG-2276) CERTIFICATION PURSUANT TO R. 4:5-1 I hereby certify that the matter in controversy is not the subject of any other action or proceeding, pending or contemplated of which I presently know, and that I know of no other party who should be joined as a party at this time except that, to the best of my knowledge. I know of no other cases filed by unrelated plaintiffs. Dated: Montvale, New Jersey June 27, 1997 KANTROWITZ & GOLDHAMER _____________________________________ GARY S. GRAIFMAN 6 EX-99.(G)(4) 34 COMPLAINT FILED IN SIMON V. ROBERT E. CAWTHORN EXHIBIT (G)(4) Sherrie R. Savett THIS IS NOT AN ARBITRATION Attorney No. 17646 ASSESSMENT OF DAMAGES HEARING Stephen D. Ramos REQUIRED Attorney No. 35010 Berger & Montague, P.C. Plaintiff Mark L. Simon 1622 Locust Street Philadelphia, Pennsylvania 19103 Telephone: (215) 875-3000 Attorneys for Plaintiff ++ MARK L. SIMON, On Behalf Of + MONTGOMERY COUNTY COURT OF COMMON Himself, And All Others + PLEAS, TRIAL DIVISION Similarly Situated, 212 East + 39th Street New York, NY 10016 + + + CIVIL ACTION NO. 97-14262 + + Plaintiff, ++ CLASS ACTION COMPLAINT + + -against- + JURY TRIAL DEMANDED + ROBERT E. CAWTHORN, CLAUDE + HELENE, JEAN-JACQUES BERTRAND, + MICHEL DE ROSEN, DALE F. FREY, + JEAN-MARC BRUEL, CHARLES-HENRI + FILIPPI, E. MANFRED KAROBATH, + TIMOTHY G. ROTHWELL, ERIC J. + TOPOL, IGOR LANDAU, JEAN-PIERRE + TIROUFLET, RHONE-POULENC, S.A., + and RHONE-POULENC RORER, INC., + 500 Arcola Road + Collegeville, Pennsylvania + + Defendants. + ++ NOTICE TO DEFEND You have been sued in court. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this complaint and notice are served, by entering a written appearance personally or by attorney, and filing in writing with the court your defense or objections to the claims set forth against you. You are warned that if you fail to do so this case may proceed without you, and a judgment may be entered against you by the court without further notice for any money claimed in the complaint or for any other claim or relief requested by the plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. LAWYER REFERENCE SERVICE Montgomery County 100 West Airy Street Norristown, PA 19401 (610) 279-9660 Sherrie R. Savett THIS IS NOT AN ARBITRATION Attorney No. 17646 ASSESSMENT OF DAMAGES Stephen D. Ramos HEARING REQUIRED Attorney No. 35010 Berger & Montague, P.C. Plaintiff Mark L. Simon 1622 Locust Street Philadelphia, Pennsylvania 19103 Telephone: (215) 875-3000 Attorneys for Plaintiff MARK L. SIMON, On Behalf Of MONTGOMERY COUNTY Himself, And All Others COURT OF COMMON PLEAS, Similarly Situated, 212 East TRIAL DIVISION 39th Street New York, NY 10016 CIVIL ACTION NO. 97-14262 Plaintiff, CLASS ACTION COMPLAINT -against- JURY TRIAL DEMANDED ROBERT E. CAWTHORN, CLAUDE HELENE, JEAN-JACQUES BERTRAND, MICHEL DE ROSEN, DALE F. FREY, JEAN-MARC BRUEL, CHARLES-HENRI FILIPPI, E. MANFRED KAROBATH, TIMOTHY G. ROTHWELL, ERIC J. TOPOL, IGOR LANDAU, JEAN-PIERRE TIROUFLET, RHONE-POULENC, S.A., and RHONE-POULENC RORER, INC., 500 Arcola Road Collegeville, Pennsylvania Defendants. Plaintiff, by his attorneys, alleges upon information and belief, except as to paragraph 1 which plaintiff alleges upon knowledge, as follows: 1. Plaintiff, Mark L. Simon, is and has been at all times relevant to this action, the owner of shares of Rhone-Poulenc Rorer, Inc. ("RPR" or the "Company") common stock. 2. Defendant RPR is a corporation duly organized and existing under the laws of the state of Pennsylvania and is located at 500 Arcola Road, Collegeville, Pennsylvania. The Company discovers, develops, manufactures and markets a broad line of pharmaceutical products for human use, including prescription medicines, over-the-counter medicines and plasma-derived products, manufactures and sells bulk pharmaceuticals and limited quantities of other chemicals and develops, manufactures and commercializes both in-vivo and ex- vivo cell and gene therapy products. As of March 14, 1997, there were more than 141 million shares of RPR common stock outstanding. RPR's common stock trades on the New York Stock Exchange. The Company had 1996 sales of $5.42 billion. 3. (a) Defendant Rhone-Poulenc, S.A. ("RP"), is a corporation duly organized and existing under the laws of France and is located at 25, Quai Paul Doumer, 92408 Courbevoie, France. Pursuant to the terms of an acquisition agreement between the Company and RP dated as of March 12, 1990 (the "Acquisition Agreement"), RP acquired approximately 68.3% or 96.8 million shares of RPR's outstanding shares in the following two transactions in 1990: (i) Upon the expiration on May 5, 1990 of RP's tender offer, RP purchased RPR shares tendered to it representing approximately 50.1% of RPR's outstanding shares; (ii) On July 31, 1990, RPR issued additional shares to RP in consideration of the contribution to the Company by RP of its Human Pharmaceutical Business. By virtue of its stock ownership of 68.3% of RPR common stock, RP controls RPR. 2 (b) Pursuant to the terms of the Acquisition Agreement, RP is subject to a standstill period extending until July 31, 1997, during which RP can not acquire additional shares except under certain conditions provided for in the Acquisition Agreement. The Acquisition Agreement further provided that RP would vote all of its RPR shares to elect, and the Company would use its best efforts to cause to be elected to the Company's Board of Directors, seven directors selected by RP (the "RP Designees"), three executive officers of the Company (the "Rorer Designees"), and three individuals who were independent persons selected by the nominating committee of the RPR board of directors. 4. Defendant Michel de Rosen ("de Rosen") is and, at all relevant times, was Director, Chairman and Chief Executive Officer of the Company. Defendant de Rosen is a Rorer Designee and also serves as a member of the Executive Committee of RP. 5. Defendants Robert E. Cawthorn ("Cawthorn"), Jean-Marc Bruel ("Bruel"), Charles-Henri Filippi ("Filippi"), Claude Helene ("Helene"), Jean-Jacques Bertrand ("Bertrand"), Igor Landau ("Landau") and Jean-Pierre Tirouflet ("Tirouflet") are and, at all relevant times, were RP Designees to the Company's Board of Directors. Defendant Cawthorn is Chairman Emeritus of RPR. Defendant Bruel is Vice Chairman of Rhone-Poulenc Group, and a director and member of the Executive Committee of RP. Defendant Helene is Senior Vice President and Director Scientifique of RP. Defendant Bertrand was Executive Vice President of the Company until 1993. Defendant Landau is President and Chairman, Health Sector, of RP. Defendant Tirouflet is Executive Vice President and Chief Financial Officer and a member of the Executive Committee of RP. 6. Defendants E. Manfred Karobath ("Karobath") and Timothy G. Rothwell ("Rothwell") are RPR Designees and, at all relevant times, have been members of the RPR Board of Directors. Defendant Karobath is executive Vice President of RPR and President of RPR Research & Development. Defendant Rothwell is President of RPR. 7. Defendants James S. Riepe ("Riepe"), Eric J. Topol, M.D. ("Topol") and Dale F. Frey ("Frey") are and, at all relevant times, were members of the RPR Board of Directors. 8. The directors of RPR referred to in paragraphs 4-7 (collectively, the "Individual Defendants") owe fiduciary duties to RPR and its stockholders, including plaintiff. 9. Defendant RP, as the majority stockholder and a control person of RPR, and the Individual Defendants, as officers and/or directors of RPR, are in a fiduciary relationship with RPR and its stockholders and owe to plaintiff and the other RPR shareholders the highest obligations of good faith, loyalty, fair dealing, due care and candor. CLASS ACTION ALLEGATIONS 10. Plaintiff brings this action on his own behalf and as a class action, pursuant to Pa.R.Civ.P. 1701 et. seq., on behalf of all common stockholders of RPR, or their successors in interest, who are being and will be harmed by defendants' actions described below (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of defendants. 11. This action is properly maintainable as a class action for the following reasons: (a) The Class is so numerous that joinder of all members is impracticable. Members of the Class own, in the aggregate, approximately 44 million shares of RPR common stock, which trades on the New York Stock Exchange, a developed and efficient market. While the exact number of the members of the Class is unknown to plaintiff at this time, and can only be ascertained through appropriate discovery, plaintiff believes that the Class is comprised of at least hundreds of members. (b) Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting only individual members of the Class. Among the questions of law and fact common to the Class are: 3 (i) whether defendants have engaged in or are continuing to act in a manner constituting a breach of their fiduciary duties to plaintiff and the Class, including those of good faith, loyalty, fair dealing, due care and candor and to refrain from self-dealing; (ii) whether defendants have engaged or are continuing to act in a manner calculated to benefit themselves at the expense of the RPR stockholders other than defendants; (iii) whether plaintiff and the other Class members would be irreparably damaged if the defendants are not enjoined in the manner described below; and (iv) whether plaintiff and the other members of the Class have sustained damages and, if so, what is the proper measure of their damages. (c) Plaintiff's claims are typical of the claims of the Class in that plaintiff, plaintiff has the same interests as the other members of the Class, and all members of the Class have been and will be harmed by defendants wrongful conduct as complained of herein. (d) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff will fairly and adequately represent the interests of the Class. Plaintiff has no conflict of interest in the maintenance of this action as a class action and plaintiff has or can acquire adequate financial resources to assure that the interests of the Class will not be harmed. (e) A class action will provide fair and efficient adjudication of this controversy since the prosecution of separate actions by individual members of the Class would create a risk of (1) inconsistent or varying adjudications which would confront defendant with incompatible standards of conduct; and (2) adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. (f) Plaintiff does not anticipate any difficulties in the management of this action as a class action. (g) This forum is appropriate for the litigation of the claims of the entire Class. (h) In view of the complexities of the issues and the expenses of the litigation, the separate claims of individual Class members are insufficient in amount to support separate actions. (i) It is unlikely that the amount which may be recovered by individual Class members will be so small in relation to the expense and effort of administering the action as not to justify a class action. 12. Class certification is also appropriate pursuant to PA.R.Civ.P. 1701 et. seq., because separate adjudications would pose a risk of establishing incompatible standards of conduct for defendants and/or of substantially impeding the ability of other shareholders to protect their interests in this matter, and because defendants have acted on grounds generally applicable to the class, making appropriate final injunctive and/or declaratory relief with respect to the class as a whole. 13. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this controversy and the requirements of PA.R.Civ.P. 1701 et. seq., are satisfied. CLAIM FOR RELIEF 14. On or about June 26, 1997, RP announced that is seeking to purchase the 31.7% interest in RPR it does not already own in a transaction valued at approximately $4.3 billion or $92 per share. RP has stated that it will not make a definite decision on buying the minority stake until the standstill provisions of the Acquisition Agreement expire on July 31, 1997. RP will present its proposal at the RPR Board of Directors meeting on July 2, 1997. 15. By announcing the price at which it would make an offer, if it determined after July 31, 1997 to make a definitive offer, defendant RP artificially capped the price which shareholders of RPR could receive in any proposed transaction. This effort to cap the price was exacerbated by comments made by RP's Chairman and 4 Chief Executive Officer, Jean-Rene Fortou. When asked whether the deal could be in jeopardy if RPR's share price rises above $92 per share, Fortou replied: "I don't imagine a situation like that could happen," explaining that he expects RPR's price to remain stable. 16. Concurrent with the announcement of RP's intentions, an announcement was made by an advisory panel of the U.S. Food and Drug Administration that RPR should be permitted to market its blood thinning drug Lovenox for patients with serious heart conditions. RPR has high hopes for Lovenox and has stated that expanded uses of the drug could help it become a $1 billion a year seller. Worldwide sales of Lovenox are currently $500 million. Had this announcement regarding the FDA panel recommendation been in the absence of the RP announcement, it is likely that RPR stock would have surged. Thus, the purported premium represented by the $92 per share price RP would pay if it made an offer does not represent a genuine 16% premium and further illustrates the manner in which the RP announcement caps the price of RPR's shares. 17. The timing of RP's announcement is designed to take advantage of RPR's depressed stock price which is a function of the recall of plasma products by RPR's Centeon joint venture, which recall had a devastating effect on RPR's 1996 earnings. In October 1996, Centeon, a joint venture in which the Company has a 50% interest, initiated a voluntary worldwide recall of all in-date lots of Albuminar/Plasma-Plex products as a precautionary measure in response to manufacturing concerns with respect to these products at a U.S. production facility and temporarily suspended the manufacture of plasma-derived products at the location. In January 1997, Centeon entered into a consent decree with the U.S. Government which set conditions for the shipment by Centeon of both plasma-based products and certain pharmaceutical products manufactured for the Company at the facility. As a result of the foregoing, RPR's shares price lagged through mid-1997. As Marie Helene Leopold, a pharmaceutical analyst at Paribas Capital Markets, noted: It if weren't for Centeon, the price Rhone-Poulenc would have had to pay would have been much higher. The outlook for RPR predicts a sharp earnings recovery during the second half of 1997 and earnings growth of 20% annually for the rest of the decade. 18. RP's announcement is purportedly part of a plan to focus its business on pharmaceuticals. In its June 26th announcement, RP also said it will spin off its chemicals and fibers businesses into a new company in 1998. As David Scott of Institutional Capital, an institutional investor noted: "This step turns a mediocre company [RP] into a good company and even more importantly a great stock." Indeed, upon announcement of RP's intentions to acquire the outstanding minority RPR shares held by the Class at $92 per share, the price of RP's own stock increased sharply, indicating that RP's proposed buyout of the RPR minority is a great deal for RP, though not for the Class. 19. As set forth above, RP already owns 68.3% of the outstanding common stock of RPR. Accordingly, RP has the power to squeeze out RPR's minority shareholders, i.e., the Class, at an unfair price. The loyalties of the Director Defendants, seven of whom are RP designees to the Company's Board of Directors, are, at best, divided. The Individual Defendants are beholden to RP, the majority owner of RPR, and cannot be expected to act in the best interest of the Class consisting of RPR's minority stockholders, even though the Board announced the formation of a special committee of purportedly independent directors to "review" any proposal made by RP. 20. The purpose of the proposed transaction is to enable RP to acquire the remaining shares of RPR it does not already own and to acquire RPR's valuable assets for RP's own benefit at the expense of the Class of RPR's public stockholders, who will be deprived of the opportunity to reap the benefit of RPR's imminent and expected financial improvement. 21. The proposed acquisition comes at a time when RPR is expected to increase revenues and perform well. In fact, management expects Lovenox/Clexane, RPR's new core product, with sales of $500 million in 1996, to become its first billion dollar drug in five years. RP and the Director Defendants have timed this transaction to capture RPR's positive performance and use it to their own ends, without paying an adequate or fair price for the remaining RPR shares owned by the members of the Class. 5 22. Defendants, including the Director Defendants who are under the control and influence of RP, are in a position of control and power over the RPR minority stockholders and have access to internal financial information about RPR, its true value, expected increase in true value and the benefits to RP of 100% ownership of RPR to which plaintiff and the Class members are not privy. Defendants are using their positions of power and control, including the disparity of knowledge of RPR's true value, to benefit RP in this transaction, to the detriment of plaintiff and the Class. 23. In making the June 26th announcement, RP has undervalued the RPR common stock by ignoring the full value of its assets and future prospects. The proposed merger consideration does not reflect the value of RPR's valuable assets, as known to Defendants, to the detriment and disadvantage of RPR's minority public stockholders. 24. The Director Defendants have clear and material conflicts of interest and are acting to better the interests of RP at the expense of RPR's public stockholders. 25. The June 26th announcement serves no legitimate business purpose of RPR but rather is an attempt by defendants to unfairly benefit RP and the RPR Designees at the expense of RPR's public stockholders. The proposed plan will provide for a grossly inadequate consideration, deny plaintiff and the other members of the class their right to share proportionately in the future success of RPR and its valuable assets, while permitting RP to reap substantial benefits from any transaction. 26. Because defendants, as the controlling shareholder, officers, and directors of RPR, are in possession of corporate information concerning the assets, businesses and future financial prospects of those affiliates, the degree of knowledge and economic power between defendants and the public stockholders of RPR is unequal, making it grossly and inherently unfair for RP to obtain ownership of RPR's assets from the public common shareholders at the unfair and inadequate price which defendants have publicly announced. 27. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require: . undertake an appropriate evaluation of RPR's worth as an acquisition candidate; . act vigorously and independently so that the interests of RPR's public stockholders will be protected from overreaching by RP, including but not limited to the retention of independent advisors by the special committee to evaluate critically the proposed RP offer and negotiate at arm's length with RP on behalf of RPR's minority stockholders; . adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all conflicts be resolved in the best interests of RPR's public stockholders; and . if a merger transaction is to go forward, require that it be approved by a majority of the minority, i.e., by a majority of the 31.7% of RPR shares held by the Class, and not crammed down by a vote of the controlling block of RPR shares held by RP. 28. As a result of defendants' failure to take such steps to date, plaintiff and the other members of the Class have been and will be damaged in that they have not and will not receive their proportionate share of the value of the Company's assets and business, and have been and will be prevented from obtaining a fair price for their common stock. 29. Defendants, in failing to disclose the material non-public information in their possession as to the true value of RPR's assets and business prospects, the full extent of the future earnings potential of the Company and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and are breaching their fiduciary duties to the member of the Class. 6 30. As a result of the defendants' unlawful actions, plaintiff and the other members of the Class will be irreparably harmed in that they will not receive their fair portion of the value of RPR's assets and business and will be prevented from obtaining the real value of their equity ownership in the Company. Unless the proposed merger is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the members of the Class, will not engage in vigorous, bona fide, arm's length negotiations on the terms of RPR's buy-out proposal, and will not supply to RPR's public stockholders all material information to enable them to determine the fair value of their RPR shares and to cast informed votes on the proposed merger, and so defendants will be able to consummate the proposed transaction on grossly unfair terms, all to the irreparable harm of the members of the Class. Once the proposed transaction is consummated and RP has secured total control of RPR, it will be impossible to undo the transaction. 31. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff prays for judgment and relief as follows: A. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; B. Declaring that defendants have breached their fiduciary and other duties to plaintiff and the other members of the Class; C. Entering an order requiring defendants to take the steps set forth hereinabove; D. Preliminarily and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the proposed buy-out transactions; E. In the event the proposed buy-out is consummated, rescinding it and setting it aside; F. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; G. Awarding costs and disbursements, including plaintiff's counsels' fees and experts' fees; and H. Granting such other and further relief as to the Court may deem just and proper. JURY TRIAL DEMAND Plaintiff demands a trial by jury on all issues. Dated: July 31, 1997 BERGER & MONTAGUE, P.C. /s/ Sherrie R. Savett ----------------------------------- Sherrie R. Savett Stephen D. Ramos 1622 Locust Street Philadelphia, Pennsylvania 19103 (215) 875-3000 OF COUNSEL: ABBEY, GARDY & SQUITIERI, LLP 212 East 39th Street New York, New York 10016 (212) 889-3700 7 VERIFICATION I, MARK L. SIMON, do hereby verify that the statements made in the Class Action Complaint are true and correct according to my knowledge, information and belief. I understand that the statements in said Complaint are made subject to the penalties of 18 Pa.C.S.(S)494 relating to unsworn falsification to authorities. Dated: July 28, 1997 /s/ Mark L. Simon ------------------------------------ MARK L. SIMON 8 EX-99.(G)(5) 35 MOTION TO DISMISS - BRICKELL EXHIBIT (G) (5) SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK - ------------------------------------------------------x : BRICKELL PARTNERS, a Florida : Partnership, Individually On Its Own : Behalf And On Behalf Of All Others : Similarly Situated, : : Index No. 603493/97 Plaintiff, : : NOTICE OF MOTION - against - : TO DISMISS : RHONE-POULENC S.A., : ORAL ARGUMENT : REQUESTED Defendant. : : - ------------------------------------------------------x PLEASE TAKE NOTICE, that upon the affidavit of Brian Schwab, sworn to August 8, 1997, the accompanying memorandum of law, and upon the pleadings in this action, Defendant Rhone-Poulenc S.A. will move this Court on September 9, 1997, at the Motion Support Office Courtroom (Room 130), 60 Centre Street, New York, New York at 9:30 a.m. or as soon thereafter as counsel may be heard, for an order pursuant to Sections 3211(a)(2), 3211(a)(8) and 327 of the New York Civil Practice Law and Rules: (a) Dismissing the Complaint in its entirety for lack of proper service; (b) Dismissing the Complaint for lack of personal jurisdiction; (c) Dismissing the Complaint for lack of subject matter jurisdiction; (d) Dismissing the Complaint based on the doctrine of forum non conveniens; and 2 (e) Awarding such other and further relief as the Court may deem just and equitable. PLEASE TAKE FURTHER NOTICE that, pursuant to CPLR (S) 2214(b), answering affidavits, if any, shall be served at least seven (7) days prior to the return date of this motion. Dated: New York, New York August 11, 1997 SHEARMAN & STERLING Citicorp Center 153 East 53rd Street New York, New York 10022 (212) 848-4000 Attorneys for Defendant Rhone-Poulenc S.A. To: WECHSLER HARWOOD HALEBIAN & FEFFER LLP 805 Third Avenue New York, New York 10022 (212) 935-7400 Attorneys for Plaintiff SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK - ------------------------------------------------------x : BRICKELL PARTNERS, FLORIDA : PARTNERSHIP, INDIVIDUALLY ON ITS OWN : BEHALF AND ON BEHALF OF ALL OTHERS : SIMILARLY SITUATED, : : Index No. 603493/97 Plaintiff, : : v. : : RHONE-POULENC S.A., : : Defendant. : : - ------------------------------------------------------x AFFIDAVIT OF BRIAN J. SCHWAB IN SUPPORT OF RHONE-POULENC S.A.'S MOTION TO DISMISS THE COMPLAINT ---------------------------------------------------- COUNTRY OF FRANCE) ) SS.: CITY OF PARIS ) BRIAN J. SCHWAB, being duly sworn, deposes and says: 1. I am a senior legal counsel of Rhone-Poulenc S.A. based in Courbevoie, France. The following facts are true to the best of my knowledge. 2. Rhone-Poulenc S.A. ("RPSA") is a French Societe anonyme organized and existing under the laws of the French Republic. 3. RPSA's legal headquarters are in Courbevoie, France. 4. RPSA is not a citizen of any State of the United States. 5. RPSA is not registered or otherwise licensed to do business in New York. 6. RPSA does not maintain an office, mailing address, telephone listing or bank account in New York. 7. RPSA does not own or lease any property or real estate in New York. 8. RPSA is not required to pay sales, use or any other tax in New York. 9. RPSA does not contract to supply goods in New York. 10. RPSA does not market goods or advertise goods in New York. 11. RPSA has never held a shareholders' meeting in New York. 12. Rhone-Poulenc Inc. ("RPI"), a New York Corporation with its principal place of business in Cranbury, New Jersey, is an indirect subsidiary of RPSA. 13. RPI is a free-standing corporation, with sales in 1996 of approximately 52.3 billion dollars. RPI and RPSA observe all traditional corporation formalities. 14. RPI and RPSA each maintain their own bank accounts, accounting systems, payroll systems, financial records and budgets. 15. RPI and RPSA have separate boards of directors, with no commonality of directors between the two companies. 16. RPI and RPSA each file separate tax returns. 17. RPI and RPSA do not commingle corporate assets. 18. RPSA does not exercise any control over RPI's day-to-day business operations. /s/ Brian J Schwab ---------------------- Brian J. Schwab [NOTARY STAMP APPEARS HERE] INDEX NO. 603493/97 ================================================================================ NEW YORK SUPREME COURT COUNTY OF NEW YORK -------------------- BRICKELL PARTNERS, A FLORIDA PARTNERSHIP, INDIVIDUALLY ON ITS OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF, -AGAINST- RHONE-POULENC S.A., DEFENDANT. ================================================================================ MEMORANDUM OF LAW OF DEFENDANT RHONE-POULENC S.A. IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT ================================================================================ SHEARMAN & STERLING CITICORP CENTER 153 EAST 53RD STREET NEW YORK, NEW YORK 10022 (212)848-4000 ATTORNEYS FOR DEFENDANT RHONE-POULENC S.A. OF COUNSEL: KENNETH M. KRAMER KATHRYN TABNER JENNIFER M. DANNEL AUGUST 11, 1997 ================================================================================ TABLE OF CONTENTS TABLE OF AUTHORITIES........................................................ ii PRELIMINARY STATEMENT....................................................... 1 STATEMENT OF FACTS.......................................................... 2 ARGUMENT.................................................................... 3 I. PLAINTIFF HAS FAILED TO EFFECT SERVICE ON DEFENDANT RHONE-POULENC..................................................... 3 II. THIS COURT DOES NOT HAVE PERSONAL JURISDICTION OVER RHONE-POULENC..................................................... 6 III. AS NO OFFER TO PURCHASE THE REMAINING SHARES HAS BEEN MADE, AND INDEED MAY NOT BE MADE UNTIL THE STANDSTILL AGREEMENT EXPIRES, THERE IS NO JUSTICIABLE CASE OR CONTROVERSY BEFORE THIS COURT............................. 9 IV. THIS COURT SHOULD EXERCISE ITS DISCRETION UNDER THE DOCTRINE OF FORUM NON CONVENIENS AND DISMISS THIS ACTION AGAINST A FRENCH CORPORATION REGARDING DECISIONS MADE AND ACTIONS TAKEN IN FRANCE........................ 10 A. The Alleged Transaction Out Of Which This Dispute Arose Occurred In A Foreign Jurisdiction........................... 12 B. Burden On The New York Courts................................ 13 C. Burden On The Defendants..................................... 14 D. An Alternative Forum......................................... 16 E. The Residency of the Parties................................. 16 CONCLUSION.................................................................. 17
TABLE OF AUTHORITIES
Cases Page(s) - ----- ------- Apple Records, Inc. v. Capitol Records, Inc., 137 A.D.2d 50, - -------------------------------------------- 529 N.Y.S.2d 279 (1st Dep't 1988) ........................................7 Brooke Group Ltd. v. JCH Syndicate 488, 214 A.D.2d 486, 625 N.Y.S.2d - -------------------------------------- 223 (1st Dep't 1995), aff'd, 87 N.Y.2d 530, 640 N.Y.S.2d 479 (1996) .....12 ----- Continental Ins. Co. v. Polaris Indus. Partners L.P. 199 A.D.2d 222, - ---------------------------------------------------- 606 N.Y.S.2d 164 (1st Dep't 1993) .......................................14 De Torres v. Arocena, 155 Misc. 2d 52, 587 N.Y.S.2d 495 - -------------------- (Sup. Ct. N.Y. Co. 1992) ................................................13 Derso v. Volkswaeen of America, Inc., 159 A.D.2d 937, - ------------------------------------- 552 N.Y.S.2d 1001 (4th Dep't 1990) .......................................5 Frank Management, Inc. v. Weber, 145 Misc. 2d 995. - -------------------------------- 549 N.Y.S.2d 317 (Sup. Ct. N.Y. Co. 1989) ................................7 Grossman v. Sapphire Petroleums Ltd., 195 N.Y.S.2d 851 - ------------------------------------ (Sup. C. Kings Co. 1959) .................................................8 Heaps v. Simon & Schuster Co., 150 A.D.2d 164, - ----------------------------- 540 N.Y.S.2d 437 (1st Dep't 1989) ................................ 11,14,15 Inspection Security and Law Enforcement Employees, District Council 82, - ------------------------------------------------- v. Cuorio, 64 N.Y.2d 233, 485 N.Y.S.2d 719 (1984) ........................9 --------- Irrigation & Indus, Dev. Corp. v. Indus S.A., 37 N.Y.2d 522, - -------------------------------------------- 375 N.Y.S.2d 296 (1975) .................................................12 Islamic Republic of Iran v. Pahlavi, 62 N.Y.2d 474, 478 N.Y.S.2d 597 - ----------------------------------- (1984), cert. denied, 469 U.S. 1108 (1985) .....................11,13,15,16 ------------ In re: Jamaica Water Supply Co., 158 Misc. 2d 378. 600 N.Y.S.2d 914 - ------------------------------- (Sup. Ct. Queens Co. 1993) ............................................9,10 Joseph Walker & Sons v. Lehigh Coal & Navigation Co., 8 Misc. 2d 1005, - ---------------------------------------------------- 167 N.Y.S.2d 632 (Sup. Ct. N.Y. Co. 1957) ................................8
ii
Cases Page(s) - ----- ------- Loeneard v. Santa Fe Indus..Inc., 70 N.Y.2d 262, 519 N.Y.S.2d 801 (1987)................................. 7 - -------------------------------- Mollendo Equip. Co. v. Sekisan Trading Co., 56 A.D.2d 750, 392 N.Y.S.2d 427 - ------------------------------------------ (1st Dep't 1977), aff'd, 43 N.Y.2d 916, 403 N.Y.S.2d 729 (1978)..................................... 14 ----- Morley v. Morley. 191 A.D. 2d 372. 595 N.Y.S.2d 200 - ---------------- (1st Dep't 1993).................................................................................... 16 P.T. Delami Garrent Indus. v. Cassa di Risparmio di Torino. 164 Misc. - ---------------------------------------------------------- 2d 38. 623 N.Y.S.2d 476 (Sup. Ct. N.Y. Co. 1994). aff'd sub nom. World Point Trading PTE. Ltd. v. Credito Italiano. -------------- ------------------------------------------------- 225 A.D. 26 153 (1st Dep't 1996).................................................................... 13 Piper Aircraft Co, v. Reyno. 454 U.S. 235 (1981)......................................................... 13,14 - --------------------------- Robbins v. Ring, 9 Misc. 2d 44. 166 N.Y.S.2d 483 - --------------- (Sup. Ct. N.Y. Co. 1957)............................................................................ 8 Silver v. Great Am. Ins. Co., 29 N.Y.2d 356. 328 N.Y.S.2d 398 (1972)..................................... 13,16 - ---------------------------- Tetra Finance (HK) Ltd. v. Patrv, 115 A.D.2d 408, 490 N.Y.S.2d 37 - -------------------------------- (1st Dep't 1985).................................................................................... 12 Vazquez v. Sund. Emba AB. 152 A.D.2d 389, 548 N.Y.S.2d 728 - ------------------------ (2d Dep't 1989)..................................................................................... 4 Zelouf v. Republic Nat'l Bank of New York, 225 A.D.2d 419, 640 N.Y.S.2d 15 - ----------------------------------------- (1st Dept't 1996.................................................................................... 12 Statutes - -------- BCL (S) 307 (McKinney 1997).............................................................................. 3,4,5 CPLR (S) 302 (a)(2) (McKinney 1997)...................................................................... 6,8 CPLR (S) 302 (a)(3) (McKinney 1997)...................................................................... 6,8 CPLR (S) 311 (a)(1) (McKinney 1997)...................................................................... 5 CPLR (S) 327 (McKinney 1997)............................................................................. 1,10 CPLR (S) 327 (a) (McKinney 1997)......................................................................... 11
iii STATUTES - -------- CPLR (S) 3211 (a)(2) (McKinney 1997).......................................1 CPLR (S) 3211 (a)(g) (McKinney 1997).......................................1 iv SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK - ---------------------------------------x BRICKELL PARTNERS, a Florida : Partnership, Individually On Its Own : Behalf And On Behalf Of All Others : Similarly Situated, : : Index No. 603493/97 Plaintiff, : : - against - : : RHONE-POULENC S.A., : : Defendant. : - ---------------------------------------x MEMORANDUM OF LAW OF DEFENDANT RHONE-POULENC S.A. IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT ----------------------------------- Defendant Rhone-Poulenc S.A. ("Rhone-Poulenc") respectfully submits this memorandum of law in support of its motion, pursuant to N.Y. CIV. PRAC. L. & R. ("CPLR") (S) 3211(a)(2), (8) and 327, to dismiss the complaint of Brickell Partners (the "Complaint") (1) for lack of proper service on Rhone-Poulenc; (2) for lack of personal jurisdiction over Rhone-Poulenc; (3) for lack of subject matter jurisdiction under the ripeness doctrine; and (4) based upon the doctrine of forum non conveniens. PRELIMINARY STATEMENT --------------------- This lawsuit does not belong in any court, much less one located in the State of New York. Plaintiff, who hails from Florida, is suing Rhone- Poulenc, a French corporation, over an event which has not even occurred, and indeed, according to the 2 allegations of the Complaint itself, cannot even occur until after a fixed date in the future. The allegations of the Complaint demonstrate that the alleged harm to plaintiff is nonexistent; so too is any conceivable nexus to New York. Courts in this State, as in any other jurisdiction, have much more pressing business than to be available to render advisory opinions in disputes having absolutely no connection to this State. Perhaps plaintiff, in what it does not allege in the Complaint, concedes this; along with its failure to articulate a nonspeculative, justiciable cause of action against Rhone-Poulenc, it was unable either to effect proper service on or to establish a basis for personal jurisdiction over Rhone-Poulenc. As it is lacking in substance, fails to follow proper procedure, and does not assert any conceivable basis for burdening the Courts of this State, the Complaint should be dismissed. STATEMENT OF FACTS/1/ ------------------ Plaintiff is a Florida partnership that owns common stock of Rhone- Poulenc Rorer Inc. ("Rorer"). Complaint (P) 2. Rorer, a majority-owned subsidiary of Rhone-Poulenc, is a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania, with its principal place of business in Collegeville, Pennsylvania. Id. (P) 14. Defendant Rhone-Poulenc is --- a corporation duly organized and existing under the laws of France, with its principal place of business in France. Id. (P) 3. Rhone-Poulenc is engaged in --- the research, development, production, marketing and sale of human and animal pharmaceuticals, and is also involved in the chemical, fiber and polymer businesses. Id. --- ____________________ /1/ Except where indicated, the facts set forth herein are taken from the Complaint, and those facts are assumed to be true only for the purposes of this motion. 3 Rhone-Poulenc's American depository receipts ("ADRs") are traded on the New York Stock Exchange ("NYSE"). Id. Rhone-Poulenc is the majority shareholder of --- Rorer, with present ownership of approximately 68.3% of Rorer's outstanding stock. Id. Rorer's stock is publicly traded on the NYSE. Id. (P) 14. --- --- On June 26, 1997, Rhone-Poulenc stated that it was considering the possibility of acquiring the remaining shares of Rorer by making an offer to purchase these shares at $92.00 per share. Complaint (P) 15. Under the terms of a "standstill agreement," in effect since 1990, Rhone-Poulenc is prohibited from acquiring any Rorer shares until July 31, 1997. Id. --- ARGUMENT -------- I. PLAINTIFF HAS FAILED TO EFFECT SERVICE ON DEFENDANT RHONE-POULENC Rhone-Poulenc is a foreign corporation not authorized to do business in New York. Affidavit of Brian J. Schwab ("Schwab Affidavit") (P)(P) 2, 5, sworn to August 8, 1997. Section 307 of the Business Corporation Law (and the Hague Convention on Service) governs the service of process on foreign corporations who are subject to the general jurisdiction of the New York courts but who are not authorized to do business in New York. BCL (S) 307 ("Section 307"). The provisions of Section 307 are not available if -- as Rhone-Poulenc so maintains -- New York lacks personal jurisdiction over the party being served. See Point II infra. If, however, this Court determines that it has --- ----- personal jurisdiction over 4 Rhone-Poulenc, thereby bringing this action under the ambit of Section 307, it is clear that plaintiff failed to effect proper service on Rhone-Poulenc. The procedures to effect service under Section 307 involve several steps. First, plaintiff must serve a copy of the summons and complaint on the Secretary of State by personally delivering to him or his deputy a copy of the process together with a statutory filing fee. Second, plaintiff must serve notice of the service and a copy of the process on the foreign corporation by either: i) delivering notice and a copy of the process personally to Rhone- Poulenc in France and in accordance with the French laws covering the service of process; or ii) mailing notice and a copy of the process to Rhone-Poulenc by registered mail with return receipt requested at the post office address specified for the purpose of mailing process./2/ Finally, plaintiff must file an affidavit of compliance and a copy of the process with the clerk of the court within thirty (30) days after the personal service or the receipt of the return receipt (or other official proof of delivery) if the service was made by mail. Service of process shall be complete ten (10) days after the affidavit of compliance and the process are filed with the clerk of the court. BCL (S) 307 (McKinney 1997). Plaintiff failed to complete any of the above service requirements, and instead attempted only to serve Rhone-Poulenc Inc., an indirect subsidiary of Rhone-Poulenc with its principal place of business in Cranbury, New Jersey. Schwab Affidavit (P) 12. Even ___________________ /2/ It should be noted that if Section 307 applies, plaintiff is required to comply with the terms of the Hague Convention on Service when serving Rhone- Poulenc with copies of notice and process in France. Vazquez v. Sund Emba AB, ----------------------- 152 A.D. 2d 389, 395, 548 N.Y.S.2d 728, 731 n.4 (2d Dep't 1989). 5 disregarding plaintiff's failure to follow Section 307's requirements for service on a foreign corporation, service on Rhone-Poulenc Inc. cannot effect service on defendant Rhone-Poulenc. The CPLR allows for service upon a domestic or foreign corporation -- although unlike Rhone-Poulenc, only one authorized to business in New York -- to be made through personal delivery of the summons upon "an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service." CPLR (S) 311(a)(1). Thus, under the CPLR, service of process on a subsidiary does not constitute adequate service on a foreign parent corporation unless the subsidiary is an agent of the parent. A subsidiary is an agent for purposes of service only when it "is so dominated by its parent corporation that it is acting as a `mere department' of the parent." Derso v. Volkswagen of America, ------------------------------- Inc., 159 A.D.2d 937, 937, 552 N.Y.S. 2d 1001, 1002 ( 4th Dep't 1990) (quoting - ---- Low v. Bayerische Motoren Werke, AG, 88 A.D.2d 504, 506, 449 N.Y.S.2d 733 (1st - ----------------------------------- Dep't 1982)). Rhone-Poulenc Inc. is not a "mere department" of Rhone-Poulenc S.A., as the two corporations observe all corporate formalities, have separate boards of directors and maintain their own bank accounts, accounting and payroll systems, financial records and budgets. See Schwab Affidavit (P)(P) 13, 14, 15. --- Most importantly, Rhone-Poulenc does not exercise any control over RPI's day-to- day operations. Id. (P) 18. As Rhone-Poulenc Inc. is not an agent of its --- parent Rhone-Poulenc, this Court should dismiss the Complaint for lack of proper service. 6 II. THIS COURT DOES NOT HAVE PERSONAL JURISDICTION OVER RHONE-POULENC Because Rhone-Poulenc is a foreign corporation, it is subject to the personal jurisdiction of a New York court only through application of CPLR (S) 302, New York's "long-arm" statute, which establishes various bases of personal jurisdiction over nondomiciliaries by virtue of their acts. Seemingly attempting to apply the long-arm statute, plaintiff bases this Court's jurisdiction over nonresident Rhone-Poulenc on its contention that "[a]t all relevant times, Rhone-Poulenc did or performed acts within or without the State that subject it to the jurisdiction of the Courts of the State of New York." Complaint (P) 6. With the noteworthy omission of the word "tortious," this allegation tracks the language of CPLR (S) 302(a)(2) and (3). CPLR (S) 302(a)(2) and (3) provide, in pertinent part, that a non-domiciliary is subject to the jurisdiction of New York if it: (a)(2): "commits a tortious act within the state. . . " (a)(3): "commits a tortious act without the state causing injury to person or property within the state. . . .if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce." CPLR (S) 302(a)(2)-(3) (McKinney 1997). Plaintiff's reliance on either of these bases of personal jurisdiction is both strikingly, and fatally, flawed. The statute on its face applies only to tort claims, and plaintiffs did not -- and indeed cannot -- plead the performance of a "tortious act." 7 Plaintiff's claims are "breach of fiduciary and other common law duties," Complaint (P) 23, causes of action which New York courts have refused to treat as tort claims. See Loengard v. Santa Fe Indus., Inc., 70 N.Y.2d 262, 519 --- --------------------------------- N.Y.S.2d 801 (1987) (holding that the six-year contract statute of limitations, rather than the three-year tort statute of limitations, applied to an action based on a claim of unjust enrichment resulting from a breach of fiduciary duty); Frank Management, Inc. v. Weber, 145 Misc. 2d 995, 549 N.Y.S.2d 317 (Sup. ------------------------------- Ct. N.Y. Co. 1989) (applying the contract statute of limitations to a claim for breach of fiduciary obligation where damages were sought). Loengard v. Santa Fe Indus., Inc., 70 N.Y.2d 262, 519 N.Y.S.2d 801 --------------------------------- (1987), is particularly instructive, as it involves virtually identical facts. In Loengard, minority shareholders brought an action against majority -------- fiduciaries to recover damages resulting from an alleged underpayment for their shares following a "freeze-out" merger. Id. at 264, 802. The Loengard --- -------- plaintiffs' claims, as in this case, were based on alleged breaches of fiduciary duty. Id. Holding that a claim based on a breach of fiduciary duty is --- "essentially equitable in nature," the Court of Appeals concluded that such a claim was governed by the six-year contract statute of limitations. Id. at 266- --- 67, 803-04. While a breach of fiduciary duty claim may, in some circumstances, be actionable in tort, see Apple Records, Inc. v. Capitol Records, Inc., 137 --- -------------------------------------------- A.D.2d 50, 529 N.Y.S.2d 279 (1st Dep't 1988), the proper "focus is on whether a noncontractual duty was violated; a duty imposed on individuals as a matter of social policy, as opposed to those imposed consensually as a matter of contractual agreement." Id. at 55, 282. Here, however, as in Loengard, no such --- -------- noncontractual duty 8 exists. Plaintiff's claim regarding Rhone-Poulenc's alleged breach of its fiduciary duties to Rorer's shareholders does not sound in tort, and thus the CPLR's "tortious act" long-arm provisions do not apply to subject Rhone-Poulenc to personal jurisdiction in New York. Moreover, even if this Court were to determine that plaintiff's claims are actionable in tort, and that the acts complained of did not occur within the State of New York, plaintiff fails to plead the New York contacts required by CPLR (S) 302(a)(3), which include: regularly doing business or engaging in conduct in New York, deriving substantial revenue from, or expecting the act to have consequences in, New York. As detailed in the Schwab Affidavit, Rhone- Poulenc is not registered or licensed to do business in New York and is not required to pay any taxes in New York. Id. (P)(P) 5, 8. Rhone-Poulenc also --- does not contract to supply any goods in New York nor does it market or advertise goods in New York. Id. (P)(P) 9, 10. In short, Rhone-Poulenc has no --- connection to New York. Plaintiff further alleges that venue properly lies in New York because Rhone-Poulenc's ADRs are listed and traded on the NYSE. Complaint (P) 5. This allegation should not suffice to establish venue, and it similarly does not establish jurisdiction. It is long settled in this State that trading of a foreign corporation's stock on a stock exchange in New York does not create jurisdiction over the corporation. Joseph Walker & Sons v. Lehigh Coal & ------------------------------------- Navigation Co., 8 Misc. 2d 1005, 1006-07, 167 N.Y.S.2d 632, 632-34 (Sup. Ct. - -------------- N.Y. Co. 1957); Robbins v. Ring, 9 Misc. 2d 44, 45-46, 166 N.Y.S.2d 483, 484-85 --------------- (Sup. Ct. N.Y. Co. 1957); see also Grossman v. Sapphire Petroleums Ltd., 195 -------- ------------------------------------ N.Y.S. 2d 851, 9 853 (Sup. Ct. Kings Co. 1959). Thus, this Court should dismiss the Complaint for lack of personal jurisdiction over Rhone-Poulenc. III. AS NO OFFER TO PURCHASE THE REMAINING SHARES HAS BEEN MADE, AND INDEED MAY NOT BE MADE UNTIL THE STANDSTILL AGREEMENT EXPIRES, THERE IS NO JUSTICIABLE CASE OR CONTROVERSY BEFORE THIS COURT Under the ripeness doctrine, it is axiomatic that courts are to decide cases and controversies, and refrain from rendering "advisory opinions." See, --- e.g., New York State Inspection, Sec. and Law Enforcement Employees v. Cuomo, 64 - ---- --------------------------------------------------------------------- N.Y.2d 233, 241, 485 N.Y.S.2d 719, 723 n.2 (1984) (holding that, as the ripeness doctrine barred consideration of the matter brought, "any further consideration would require this court to tender an advisory opinion, a practice not in accord with the settled policy in this State"). "Where the harm sought to be enjoined is contingent upon events which may not come to pass, the claim to enjoin the purported hazard is nonjusticiable as wholly speculative and abstract." Id. at --- 723. As "nonjusticiability implicates the subject matter jurisdiction of the Court, the petition must be dismissed." In re Jamaica Water Supply Co., 158 ------------------------------ Misc. 2d 378, 396, 600 N.Y.S.2d 914, 927 (Sup. Ct. Queens Co. 1993). It is precisely this kind of speculative harm that plaintiff seeks to enjoin in this case. By plaintiff's own admission, Rhone-Poulenc has merely announced that it was "considering an offer" to purchase Rorer's stock. Complaint (P) 15. As such, the allegations of the Complaint are based on an uncertain future event that may or may not occur. Indeed, plaintiff concedes the uncertain nature of its claim by its references to "the proposed transaction" and the "planned overhaul." Id. (P)(P) 15, 16. Moreover, as --- plaintiff further 10 concedes, Rhone-Poulenc currently is prohibited, by virtue of the standstill agreement, from taking any action to acquire Rorer's shares until July 31, 1997. Id. (P) 17. Thus, not only does plaintiff plead that the allegedly injurious - --- event has not yet happened, it goes on to admit that any possibility of the "offer" taking place may only happen some time in the future, if at all. Any consideration by this Court of claims stemming from such a concededly contingent event necessarily should be barred by the ripeness doctrine. Accordingly, as the Complaint "does not present a justiciable question in that it calls for an advisory opinion, presents a question which is not ripe for judicial review, and presents a question which is contingent," In -- re Jamaica Water Supply Co., 158 Misc. 2d at 396, 600 N.Y.S. 2d at 927, this - --------------------------- Court should dismiss plaintiff's Complaint. IV. THIS COURT SHOULD EXERCISE ITS DISCRETION UNDER THE DOCTRINE OF FORUM NON CONVENIENS AND DISMISS THIS ACTION AGAINST A FRENCH CORPORATION REGARDING DECISIONS MADE AND ACTIONS TAKEN IN FRANCE Even if this Court were to find that plaintiff has alleged a justiciable controversy and that Rhone-Poulenc is subject to the jurisdiction of the New York courts, this Court should decline to exercise its jurisdiction over this case. As is evident from a review of the Complaint, this case simply has no connection to New York. The principle that New York courts should not accept jurisdiction over actions that have no connection with this State is codified in CPLR 327, which provides that "[w]hen the court finds that in the interest of substantial justice the action should be heard in another 11 forum, the court, on the motion of any party, may stay or dismiss the action in whole or in part on any conditions that may be just." CPLR 327(a) (McKinney 1997). Under the doctrine of forum non conveniens, a court may dismiss an action where it determines that, although jurisdictionally sound, the action would be better adjudicated elsewhere. Islamic Republic of Iran v. Pahlavi, 62 ----------------------------------- N.Y.2d 474, 478-79, 478 N.Y.S.2d 597, 599 (1984), cert. denied, 469 U.S. 1108 ------------ (1985). The Court should consider the following factors in determining whether to dismiss an action on forum non conveniens grounds: (1) the fact that the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction; (2) the potential hardship to the defendant; (3) the unavailability of an alternative forum; (4) the residency of the parties; and (5) the burden on the New York courts. Id. at 479, 600. No one factor is --- determinative and this Court acts within its discretion when it considers and applies the relevant factors. Id. at 479, 600. --- In deciding a motion based on forum non conveniens, the "overall focus must relate to the question or whether New York is an inconvenient forum and whether another forum is available which will best serve the ends of justice and the convenience of the parties.'" Heaps v. Simon & Schuster Co., 150 A.D.2d ----------------------------- 164, 165, 540 N.Y.S.2d 437, 438 (1st Dep't 1989) (quoting Irrigation & Indus. ------------------- Dev. Corp. v. Indag, S.A., 37 N.Y.2d 522, 525, 375 N.Y.S.2d 296, 299 - ------------------------- (1975)(quoting Silver v. Great Am. Ins. Co., 29 N.Y.2d 356, 361, 328 N.Y.S.2d ---------------------------- 398, 402 (1972)). Because there is absolutely no connection between this lawsuit and the state of New York, all factors point to dismissal. EX-99.(G)(6) 36 MOTION TO DISMISS - STEINER EXHIBIT (G)(6) UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA - -------------------------------------X KENNETH STEINER, : : Plaintiff, : : Civ. Action No. v. : 97-4605 (WHY) : RHONE-POULENC S.A., : : Defendant. : : - -------------------------------------X MOTION TO DISMISS COMPLAINT --------------------------- Defendant Rhone-Poulenc S.A. hereby moves this Court for an Order dismissing plaintiff's Complaint for insufficient service of process pursuant to Fed. R. Civ. P. 12(b)(5), for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), and for such other and further relief as the Court may deem just and proper. In support of its motion, defendant Rhone-Poulenc S.A. relies upon the accompanying Memorandum of Law and the annexed declaration of Yves Brissy. Defendant Rhone-Poulenc S.A. requests that the Court schedule oral argument on the motion. Dated: August 6, 1997 Philadelphia, Pennsylvania /s/ Martha Johnston ------------------- Jay A. Dubow Martha Johnston WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP Twelfth Floor Packard Building S.E. Corner 15th and Chestnut Streets Philadelphia, PA 19102-2678 (215) 977-2058 Counsel for Defendant Rhone-Poulenc S.A. Of Counsel: Kenneth M. Kramer Kathryn Tabner Jennifer M. Dehmel SHEARMAN & STERLING 153 East 53rd Street New York, NY 10022 (212) 848-4000 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA - --------------------------------------x KENNETH STEINER, : : Plaintiff, : : Civ. Action No. : 97-4605 (WHY) v. : : RHONE-POULENC S.A., : : Defendant. : - --------------------------------------x DEFENDANT RHONE-POULENC S.A.'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT ------------------------------------------------- Jay A. Dubow Martha Johnston WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP Twelfth Floor Packard Building S.E. Corner 15th and Chestnut Streets Philadelphia, PA 19102-2678 (215)977-2058 Counsel for Defendant Rhone-Poulenc S.A. Of Counsel: Kenneth M. Kramer Kathryn Tabner Jennifer M. Dehmel SHEARMAN & STERLING 153 East 53rd Street New York, NY 10022 (212) 848-4000 TABLE OF CONTENTS PAGE ---- PRELIMINARY STATEMENT....................................................... 1 STATEMENT OF FACTS.......................................................... 2 ARGUMENT.................................................................... 3 I. Plaintiff's Service of RPI is Insufficient Service on Rhone-Poulenc... 3 II. The Complaint Must be Dismissed as it Fails to Allege that Rhone-Poulenc Has Commenced a Tender Offer.......................................... 4 CONCLUSION.................................................................. 8 TABLE OF AUTHORITIES CASES Akzona Inc. v. E.I. Du Pont de Nemours & Co., 607 F.Supp. 227 (D.Del. 1984)....3 - -------------------------------------------- E.H.I. of Florida, Inc. v. Insurance Co. of N. Am., 499 F.Supp. 1053 (E.D.Pa - -------------------------------------------------- 1980), affd, 652 F.2d 310 (3rd Cir. 1981)....................................6,7 ---- Hanson Trust PLC v. SCM Corp., 774 F.2d 47 (2d Cir. 1985)....................5,6 - ----------------------------- Lasky v. Continental Prods. Corp., 97 F.R.D. 716 (E.D. Pa. 1983)...............3 - --------------------------------- Mirrow v. Club Med. Inc., 118 F.R.D. 418 (E.D. Pa. 1986).......................3 - ------------------------ Pension Benefit Guar. Corp. v. White Consol. Indus. Inc., 998 F.2d 1192 - -------------------------------------------------------- (3d Cir. 1993), cert. denied, 510 U.S. 1042 (1994).............................4 ------------ Sturm v. Clark, 835 F.2d 1009 (3d Cir. 1987)...................................4 - -------------- Wellman v. Dickinson, 475 F. Supp. 783 (S.D.N.Y. 1979), affd. 682 F.2d 355 (2d - -------------------- ----- Cir. 1982), cert. denied, 460 U.S. 1069 (1983).................................5 ------------ STATUTES Fed. R. Civ. P. 12(b)(5) and 12(b)(6).......................................................................1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA - -------------------------------------X KENNETH STEINER, : : Plaintiff, : : Civ. Action No. v. : 97-4605 (WHY) : RHONE-POULENC S.A., : : Defendant. : : - -------------------------------------X DEFENDANT RHONE-POULENC S.A.'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT ------------------------------------------------- Defendant Rhone-Poulenc S.A. ("Rhone-Poulenc") respectfully submits this Memorandum of Law in support of its motion to dismiss plaintiff's Complaint pursuant to Fed. R. Civ. P. 12(b)(5) and 12(b)(6). PRELIMINARY STATEMENT --------------------- On July 15, 1997, plaintiff attempted to bring suit against Rhone- Poulenc to enjoin an alleged tender offer that had not even commenced by serving its Complaint not on Rhone-Poulenc, but on one of its subsidiaries. In its haste to bring suit to enjoin conduct that Rhone-Poulenc was not even contractually permitted to take prior to July 31, 1997, plaintiff has filed a Complaint that is lacking in any substantive allegations and then served it in a procedurally deficient manner. The Complaint must be dismissed as plaintiff has failed in serve process upon the defendant itself. In the alternative, the Complaint must be dismissed because it fails to allege that Rhone-Poulenc has engaged in any conduct that violates the federal securities law. STATEMENT OF FACTS/1/ ------------------ Rhone-Poulenc is a French societe anonyme with its principal place of business in Courbevoie Cedex, France. Complaint (Paragraph) 6. Kenneth Steiner owns shares of Rhone-Poulenc Rorer Inc. ("Rorer"), a Pennsylvania corporation. Id. (Paragraphs) 5,7. Rhone-Poulenc owns or controls approximately 68.3% of the - -- outstanding shares of Rorer. Id. (Paragraph) 6. -- Based upon the terms of the 1990 standstill agreement between Rhone- Poulenc and Rorer, Rhone-Poulenc is precluded from acquiring the remainder of the publicly traded shares of Rorer prior to July 31, 1997. Complaint (Paragraph) 10. According to the Complaint, on June 26, 1997, Rhone-Poulenc announced that it was "considering an offer to acquire" the remaining shares of Rorer at a price of $92.00 per share. Id. (Paragraph) 8. -- Rhone-Poulenc Inc. ("RPI), an indirect subsidiary of Rhone-Poulenc, is a New York corporation with its principal place of business in Cranbury, New Jersey. Declaration of Yves Brissy ("Brissy Dec.") sworn to August 6, 1997, attached hereto as Exhibit A, (Paragraph) 5. RPI and Rhone-Poulenc observe all corporate formalities, have separate boards of directors and maintain separate bank accounts. Id. (Paragraphs) 6,7,8. In addition, Rhone-Poulenc does not -- exercise any control over RPI's day-to-day business operations. Id. (Paragraph) -- 11. - ------------------- 1 Except where indicated, the facts set forth herein are taken from the Complaint and those facts are assumed to be true only for the purposes of this motion. 2 ARGUMENT -------- I. PLAINTIFF'S SERVICE ON RPI IS INSUFFICIENT SERVICE ON RHONE-POULENC ------------------------------------------------------------------- Plaintiff served his Complaint on RPI, a subsidiary of Rhone-Poulenc, at one of RPI's offices in New Jersey. Plaintiff's purported service on Rhone- Poulenc via RPI is insufficient as a matter of law and since RPI is not the alter ego or the agent of its parent Rhone-Poulenc, this Court should dismiss the action for lack of proper service. Service on a subsidiary as a means of obtaining jurisdiction over its parent is insufficient where the parent and the subsidiary maintain separate corporate identities, unless the subsidiary is shown to be the alter ego or the agent of the parent. See Mirrow v. Club Med. Inc., 118 F.R.D. 418, 419 (E.D. ---------------------------- Pa. 1986); see also Lasky v. Continental Prods. Corp., 97 F.R.D. 716, 716-17 ------------------------------------------ (E.D. Pa. 1983) (service on subsidiary insufficient to obtain jurisdiction over parent as plaintiff failed to allege that subsidiary was "so dominated and controlled" by parent). To meet its burden of proof that RPI is the alter ego or agent of Rhone-Poulenc, plaintiff must demonstrate that "the separate corporate identities of the subsidiary and parent are a fiction and that the subsidiary is, in fact, being operated as a department of the parent." Akzona ------ Inc. v. E.I. Du Pont de Nemours & Co., 607 F. Supp. 227,237 (D. Del. 1984). - ------------------------------------- As demonstrated in the Brissy Declaration, Rhone-Poulenc and RPI do maintain separate corporate identities and observe all traditional corporate formalities. Brissy Dec. (Paragraph) 6. RPI is also not the alter ego or agent of Rhone-Poulenc. RPI is a significant operating corporation 3 with sales in 1996 of approximately $2.3 billion dollars. Id. (Paragraph) 6. -- Most importantly, Rhone-Poulenc does not interfere in the day-to-day operations of RPI. Id. (Paragraph) 11. In sum, Rhone-Poulenc and RPI are separate -- companies. The Complaint simply lacks any allegations to the contrary and in fact nowhere does it allege any basis for service Rhone-Poulenc via RPI. Therefore, service on RPI did not qualify as service on Rhone-Poulenc and the Complaint must be dismissed./2/ II. THE COMPLAINT MUST BE DISMISSED AS IT FAILS TO ALLEGE THAT RHONE-POULENC HAS COMMENCED A TENDER OFFER ------------------------------------------ Plaintiff seeks to enjoin the "offer" that Rhone-Poulenc has allegedly commenced for the remaining shares of Rorer. In considering a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, "all allegations in the complaint and all reasonable inferences that can be drawn therefrom must be accepted as true and viewed in the light most favorable to the non-moving party." Sturm v. Clark, 835 F.2d 1009, 1011 (3d Cir. 1987). When -------------- deciding motions to dismiss, the court must generally confine its review to "allegations contained in the complaint, exhibits attached to the complaint and matters of public record." Pension Benefit Guar. Corp. v. White Consol. Indus. --------------------------------------------------- Inc., 998 F.2d 1192, 1196 (3d Cir. 1993), cert. denied, 510 U.S. 1042 (1994). - ---- ------------ Even accepting all of the allegations of the Complaint as true, the Complaint does not allege that - ------------------- 2 Plaintiff has failed to comply with the requirements of the Hague Convention on Service which, since France is a signatory to it, governs service upon a foreign defendant such as Rhone-Poulenc. 4 Rhone-Poulenc has commenced a tender offer and in doing so, has violated either Section 14(d) or 14(e) of the Securities Exchange Act of 1934. The Complaint does not allege that Rhone-Poulenc has commenced a "conventional" tender offer by publishing the required information and filing and circulating a Form 14D-1. Nor is there any allegation that Rhone-Poulenc has commenced an "unconventional" tender offer. Two judicially created tests have been used for determining whether certain conduct gives rise to an "unconventional" tender offer. In Wellman v. Dickinson, 475 F. Supp. 783 -------------------- (S.D.N.Y. 1979), aff'd, 682 F.2d 355 (2d Cir. 1982), cert. denied, 460 U.S. 1069 ----- ------------ (1983), the court established an eight factor test as follows: (1) active and widespread solicitation of public shareholders for the shares of an issuer; (2) solicitation made for a substantial percentage of the issuer's stock; (3) offer to purchase made at a premium over the prevailing market price; (4) terms of the offer are firm rather than negotiable; (5) offer contingent on the tender of a fixed number of shares, often subject to a fixed maximum number to be purchased; (6) offer open only for a limited period of time; (7) offeree subjected to pressure to sell his stock; . . . [8] public announcements of a purchasing program concerning the target company precede or accompany rapid accumulation of large amounts of the target company's securities. Id. at 823-24. As an alternative to the eight factor test, the Second Circuit - -- has also developed a test based upon the statutory purpose of the Williams Act to determine whether that Act should apply to particular conduct. Hanson Trust ------------ PLC v. SCM Corp., 774 F.2d 47 (2d Cir. 1985). Under the Hanson test, - ---------------- ------ the question of whether a solicitation constitutes a "tender offer" within the meaning of (Section) 14(d) turns on whether, viewing the transaction in the light of the totality of circumstances, there 5 appears to be a likelihood that unless the preacquisition filing strictures of that statute are followed there will be a substantial risk that solicitees will lack information needed to make a carefully considered appraisal of the proposal put before them. 774 F.2d at 57. Under either test, the allegations of the Complaint are insufficient to allege that Rhone-Poulenc has commenced an unconventional tender offer. There has been no active and widespread solicitation for the shares of Rorer. Rather, as the Complaint alleges, there has been a statement by Rhone-Poulenc that it might consider making an offer in the future. Complaint (Paragraph) 8. Since - ----- there has been no offer by Rhone-Poulenc, there has been no solicitation for a substantial percentage of the shares of Rorer, the "offer" did not include a premium and the terms of the alleged offer did not state that it was for a fixed number of shares or contingent on the tender of a certain number of shares. There is no set time on this alleged offer and since there is no offer, there is no pressure on any of the alleged offerees to sell their shares. Finally, since Rhone-Poulenc was contractually barred from purchasing shares of Rorer at the time when plaintiff alleged that it had commenced a tender offer, there has been no rapid accumulation of Rorer shares. Even under the Hanson test, ------ Rhone-Poulenc's conduct does not constitute a tender offer because there is simply no information that a solicitee would require to consider and evaluate a nonexistent offer. 774 F.2d at 57. Therefore, since Rhone-Poulenc has not commenced a tender offer, it could not have violated Section 14(d). Section 14(e) of the Williams Act, which is a general antifraud provision, only applies to a tender offer. E.H.I. of Florida, Inc. v. Insurance ------------------------------------ Co. of N. Am., 499 F. Supp. 1053, 1063 (E.D. Pa. 1980), aff'd, 652 F.2d 310 (3d - ------------- ----- Cir. 1981). As the allegations in the 6 Complaint cannot meet the standards for a finding that Rhone-Poulenc has commenced a tender offer, any statements made by Rhone-Poulenc do not qualify for analysis under Section 14(e). Id. (holding that Section 14(e) only applies -- if the alleged conduct constituted a tender offer). Accordingly, since Rhone-Poulenc has not commenced a tender offer, the Complaint fails to state a claim and must be dismissed. 7 CONCLUSION ---------- For the foregoing reasons, this Court should dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(5) and 12(b)(6) and grant defendant such other and further relief that the Court deems appropriate. Respectfully submitted, /s/ Martha Johnston ------------------- Jay A. Dubow Martha Johnston WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP Twelfth Floor Packard Building S.E. Corner 15th and Chestnut Streets Philadelphia, PA 19102-2678 (215) 977-2058 Counsel for Defendant Rhone-Poulenc S.A. Dated: August 6, 1997 Philadelphia, Pennsylvania Of Counsel: Kenneth M. Kramer Kathryn Tabner Jennifer M. Dehmel SHEARMAN & STERLING 153 East 53rd Street New York, NY 10022 (212) 848-4000 8 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA - -------------------------------------X KENNETH STEINER, : : Plaintiff, : : Civ. Action No. v. : 97-4605 (WHY) : RHONE-POULENC S.A., : : Defendant. : : - -------------------------------------X DECLARATION OF YVES BRISSY IN SUPPORT OF RHONE-POULENC S.A.'S MOTION TO DISMISS THE COMPLAINT ---------------------------------------------------- Yves Brissy, pursuant to 28 U.S.C. (Section) 1746, declares under penalty of perjury: 1. I am the General Counsel of Rhone-Poulenc S.A. ("RPSA") based in Courbevoie, France. The following facts are true to the best of my knowledge. 2. RPSA is a French Societe anonyme organized and existing under the laws of the French Republic. 3. RPSA's legal headquarters are in Courbevoie, France. 4. RPSA is not a citizen of any State of the Untied States. 5. Rhone-Poulenc Inc. ("RPI"), a New York corporation with its principal place of business in Cranbury, New Jersey, is an indirect subsidiary of RPSA. 6. RPI is a free-standing corporation, with sales in 1996 of approximately $2.3 billion dollars. RPI and RPSA observe all traditional corporate formalities. 7. RPI and RPSA each maintain their own bank accounts, accounting systems, payroll systems, financial records and budgets. 8. RPI and RPSA have separate boards of directors, with no commonality of directors between the two companies. 9. RPI and RPSA each file separate tax returns 10. RPI and RPSA do not commingle corporate assets. 11. RPSA does not exercise any control over RPI's day-to-day business operations. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. /s/ Yves Brissy Yves Brissy General Counsel Executed on August 6, 1997 at Courbevoie, France CERTIFICATE OF SERVICE ---------------------- I hereby certify that a true and correct copy of defendant Rhone-Poulenc S.A.'s Memorandum of Law and the annexed declaration of Yves Brissy was served by hand on August 6, 1997 on: Robert P. Frutkin Savett Frutkin Podell & Ryan, P.C. 320 Walnut Street, Suite 508 Philadelphia, Pennsylvania 19106 and by pre-paid Federal Express on: Robert I. Harwood Samuel K. Rosen Wechsler Harwood Halebian & Feffer LLP 805 Third Avenue New York, New York 10022 /s/ Martha Johnston ------------------------- Martha Johnston UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA - -------------------------------------X KENNETH STEINER, : : Plaintiff, : : Civ. Action No. v. : 97-4605 (WHY) : RHONE-POULENC S.A., : : Defendant. : : - -------------------------------------X ORDER ----- AND NOW, upon consideration of the Motion of Defendant Rhone-Poulenc S.A. to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(5) and 12(b)(6), and any response thereto; and the Court finding that good cause exists for granting the Motion; it is hereby ORDERED and DECREED that defendants' Motion to Dismiss the Complaint is GRANTED, and the above-entitled action is hereby dismissed with prejudice. BY THE COURT: ------------------------------- J. -----END PRIVACY-ENHANCED MESSAGE-----