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Upsher-Smith Lab Inc

Offer for Proximagen Group PLC
RNS Number : 2536F
Upsher-Smith Laboratories Inc.
13 June 2012
 



 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION

 

13 June 2012

RECOMMENDED OFFER

for

PROXIMAGEN GROUP PLC

by

USL Pharma International UK LIMITED
a wholly-owned subsidiary of UPSHER-SMITH LABORATORIES, INC.

to be effected

by means of a Scheme of Arrangement

under Part 26 of the Companies Act 2006

Summary

·      The Board of Proximagen and the Board of Upsher-Smith are pleased to announce that they have reached agreement on the terms of a unanimously recommended offer by USL, a wholly-owned subsidiary of Upsher-Smith, for the entire issued and to be issued share capital of Proximagen (other than shares held by Upsher-Smith).  It is intended that the Acquisition be implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.

·      Under the terms of the Acquisition, Proximagen Shareholders will be entitled to receive:

            for each Proximagen Share:              320 pence in cash; and

up to a further 192 pence in either cash or Loan Notes by way of a contingent value right (a CVR)

·      The Acquisition excluding the CVRs values Proximagen's fully diluted share capital at approximately £223.0 million ($346.7 million) on the basis of a fully diluted share capital of 69,689,794 Proximagen Shares.

·      The Acquisition including the CVRs potentially values Proximagen's fully diluted share capital at up to approximately £356.8 million ($554.7 million) on the basis of a fully diluted share capital of 69,689,794 Proximagen Shares.

·      The Acquisition represents an immediate cash premium, excluding the CVR, of approximately:

·     16.4 per cent. to 275 pence, being the Closing Price per Proximagen Share on 12 June 2012 (being the last Business Day prior to the date of this announcement);

·     50.5 per cent. to approximately 213 pence, being the three month average Closing Price per Proximagen Share up to 12 June 2012;

·     84.6 per cent. to approximately 173 pence, being the six month average Closing Price per Proximagen Share up to 12 June 2012; and

·     21.8 per cent. to the enterprise value of Proximagen on 12 June 2012.

·      Pursuant to the terms of the Acquisition, Proximagen Shareholders will receive one CVR for each Proximagen Share that they hold. The CVR is intended to enable Proximagen Shareholders to share in the future success of two existing Proximagen programs, VAP-1 and PRX00933. Each CVR will entitle Proximagen Shareholders to receive up to a further 192 pence in either cash or in Loan Notes (subject to applicable securities laws) at the election of the Proximagen Shareholder, subject to and in accordance with the terms and conditions of the CVR.

·      The cash consideration payable by USL under the Acquisition will be funded from cash on the balance sheet of the Upsher-Smith Group and new debt facilities arranged by J.P. Morgan Securities LLC, U.S. Bank National Association and Wells Fargo Securities, LLC in the form of a $300 million secured credit agreement to be provided by JPMorgan Chase Bank, N.A., U.S. Bank National Association and Wells Fargo Bank, National Association to Upsher-Smith.  It is not intended that the payment of any interest or other charges in respect of such facility will depend on the business of Proximagen. 

·      It is intended that the Acquisition will be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 or, if USL elects, a takeover offer (as that term is defined under section 974 of the Companies Act 2006) to Proximagen Shareholders.  The purpose of the Scheme is to enable USL to acquire the whole of the issued and to be issued share capital of Proximagen that Upsher-Smith does not already own.  The Scheme, which will be subject to the Conditions set out in Appendix I to this announcement, will require the sanction of the Court.

·      The Board of Proximagen, which has been so advised by WG Partners, considers the terms of the Acquisition to be fair, reasonable and in the best interests of Proximagen Shareholders as a whole.  In providing financial advice to the Board of Proximagen, WG Partners has taken into account the Board's commercial assessments.  WG Partners is providing the independent financial advice for the purposes of Rule 3 of the City Code and is also acting as financial adviser to the Board of Proximagen.  Accordingly, the Board of Proximagen unanimously recommends that Proximagen Shareholders vote in favour of the resolutions relating to the Acquisition at the Meetings (or in the event that the Acquisition is implemented by way of an Offer, to accept or procure acceptance of such Offer).

·      USL has received irrevocable undertakings from those members of the Board of Proximagen who hold interests in the Proximagen Shares (in respect of themselves and, where relevant, their spouse, civil partner, de facto partner or similar) to vote in favour of the Scheme or to procure that the registered holder votes in favour of the Scheme (or, in the event that the Acquisition is implemented by way of an Offer, to accept the Offer or procure acceptance of the Offer) in respect of their entire beneficial holdings which total 901,256 Proximagen Shares in aggregate representing approximately 1.43 per cent. of Proximagen's issued share capital as at the date of this announcement. 

·      In addition, USL has also received irrevocable undertakings from certain other Proximagen Shareholders, namely Invesco Asset Management, IP Group plc, King's College London, Lansdowne Partners and H. Lundbeck A/S, to vote in favour of the Scheme or to procure that the registered holder votes in favour of the Scheme (or, in the event that the Acquisition is implemented by way of an Offer, to accept the Offer or procure acceptance of the Offer) in respect of their entire beneficial holdings of such shares (or, in the case of Invesco Asset Management, the Proximagen Shares which it manages on a discretionary basis for its clients and, in the case of Lansdowne Partners, as agent for Lansdowne funds) which total 44,552,330Proximagen Shares in aggregate representing approximately 70.58 per cent. of Proximagen's issued share capital as at the date of this announcement. 

·      In aggregate, therefore, USL has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the Proximagen General Meeting in respect of a total of 45,453,586 Proximagen Shares, representing 72.01 per cent. of the share capital of Proximagen in issue as at the date of this announcement.  Further details of these irrevocable undertakings are set out in Appendix III to this announcement.

·      The Acquisition will be subject, inter alia, to the satisfaction or waiver of the Conditions set out in Appendix I to this announcement and in the Scheme Document.  Further details of the Scheme will be set out in the Scheme Document which will be posted to Proximagen Shareholders within 28 days of the date of this announcement.

·      Commenting on the Acquisition, Mark Evenstad, the Chief Executive Officer of Upsher-Smith said:

"Upsher-Smith is delighted to announce today's transaction, together with the unanimous recommendation of the Board of Proximagen.  We have been very impressed with the quality and breadth of Proximagen's portfolio of programs, and the commitment and expertise of Proximagen's employees.  Having worked closely with Proximagen as both a commercial partner and a strategic shareholder since 2008, we believe that Proximagen has significant potential and we are excited about the opportunity of bringing new therapies to market that will benefit patients."

·      Commenting on the decision by the Board of Proximagen to recommend the Acquisition, Kenneth Mulvany, the Chief Executive Officer of Proximagen said:

"I am delighted that the Board of Proximagen has been able to unanimously recommend the offer made by Upsher-Smith for Proximagen which potentially values Proximagen at up to £356.8 million and believe that it represents a great opportunity for our shareholders, our staff and our drug development programs.  This deal demonstrates that the UK biotechnology sector can, with supportive investors, bring together scientific excellence and business acumen and generate significant returns for shareholders.  On these terms, the deal returns significant value to our investors who have continually been committed to Proximagen and believed not only in Proximagen's business model but also in the UK's ability to generate commercial returns from great science and innovation.

The strategic fit between Proximagen and Upsher-Smith is particularly complementary and we believe that the Acquisition represents a very good opportunity for Proximagen's portfolio of programs to benefit from the extensive resources of Upsher-Smith and the consequent progress in their development.  Proximagen and Upsher-Smith have been strategic partners since 2008 and, having worked closely with Upsher-Smith for more than four years, I am confident that Proximagen's staff and programs will be in very good hands and have a very bright future in the Enlarged Group."

This summary should be read in conjunction with the following full announcement and the Appendices.   The Acquisition will be subject to the Conditions and other terms set out in Appendix I to this announcement and to the full terms and conditions which will be set out in the Scheme Document.  Appendix II contains bases and sources of certain information contained in this announcement.  Details of irrevocable undertakings received by Upsher-Smith are set out in Appendix III to this announcement.  Illustrative CVR payment calculations are set out in Appendix IV to this announcement.  Certain terms used in this summary and the full announcement are defined in Appendix V to this announcement.

A copy of this announcement will be available, free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, at Proximagen's website at www.proximagen.com and at Upsher-Smith's website at www.upsher-smith.com by no later than 12 noon (London time) on the Business Day following the date of this announcementNeither the contents of Proximagen's website, the contents of Upsher-Smith's website, nor the contents of any other website accessible from hyperlinks on either Proximagen's or Upsher-Smith's website, is incorporated into or forms part of, this announcement.



Enquiries:

Upsher-Smith and USL

Mark Evenstad, Chief Executive Officer

Tom Burke, Chief Operating Officer

 

+1 (763) 315 2000

J.P. Morgan Cazenove           

(Financial adviser to Upsher-Smith and USL)

James Mitford

Christopher Dickinson

 

+44 (0) 20 7742 4000

Kovak-Likly Communications

(PR adviser to Upsher-Smith)

Elizabeth Likly, Principal

Bruce Likly, Principal

 

+1 (203) 762 8833

Proximagen

Kenneth Mulvany, Chief Executive Officer

James Hunter, Finance Director

 

+44 (0) 20 7400 7700

WG Partners

(Financial adviser to Proximagen)

David Wilson

Stephen Waterman

Karri Vuori

 

+44 (0) 20 7149 6000

 

Cenkos Securities plc

(Nominated adviser and broker to Proximagen)

Bobbie Hilliam (NOMAD)

Julian Morse

 

+44 (0) 20 7397 8900

M:Communications (Media enquiries)

(PR adviser to Proximagen)

Mary-Jane Elliott

Sarah Macleod

Hollie Vile

 

+44 (0) 20 7920 2330

proximagen@mcomgroup.com

 

This announcement is not intended to and does not constitute or form part of any offer to sell or subscribe for or any invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise.  The Acquisition will be made solely pursuant to the terms of the Scheme Document (or, if applicable, the Offer Document), which will contain the full terms and conditions of the Acquisition or to elect to sell shares in connection with the Acquisition, as the case may be), including details of how to vote in respect of the Acquisition.  Any decision in respect of, or other response to, the Acquisition should be made only on the basis of the information contained in the Scheme Document.

This announcement has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom and the United States may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom and the United States should inform themselves about, and observe any applicable requirements.  In particular, the ability of persons who are not resident in the United Kingdom or the United States to vote with respect to their Proximagen Shares in relation to the Scheme at the Meetings, to execute and deliver Forms of Proxy appointing another to vote at the Meetings on their behalf and to execute and deliver the Form of Election, may be affected by the laws of the relevant jurisdictions in which they are located. 

Copies of this announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction.  If the Acquisition is implemented by way of an Offer (unless otherwise permitted by applicable law and regulation), the Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

J.P. Morgan Limited, which conducts its UK investment banking business as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as financial adviser to Upsher-Smith and USL and for no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Upsher-Smith and USL for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Charles Stanley & Co Limited, trading as Charles Stanley Securities and WG Partners, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as financial adviser to Proximagen and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Proximagen for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Cenkos Securities plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser and broker to Proximagen and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Proximagen for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Notice to US investors in Proximagen

The Acquisition relates to the shares of an English company that is a foreign private issuer (as defined under Rule 3b-4 under the US Exchange Act) and is being made by means of a scheme of arrangement provided for under English company law.  A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act.  Accordingly, the Acquisition is subject to the disclosure requirements and practices applicable in the UK to schemes of arrangement, including the City Code and the AIM Rules, which differ from the disclosure requirements of United States tender offer and proxy solicitation rules.  Financial information included in this announcement and the Scheme Document has been or will have been prepared in accordance with accounting standards applicable in the United Kingdom that may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.  If, in the future, USL exercises the right to implement the Acquisition by way of a takeover offer, such offer will be made in compliance with applicable laws and regulations including US securities laws to the extent applicable. 

No registration statement will be filed with the SEC or any state securities regulators in the US in connection with the Acquisition, and the Loan Notes to be issued pursuant to the terms of the Class I CVRs will not be registered under the US Securities Act.

Neither the SEC, nor any US state securities commission or any other regulatory authority, has passed upon, or endorsed the merits of, or approved or disapproved of the Loan Notes to be issued in connection with the Acquisition, or determined if this announcement is accurate or adequate.  Any representation to the contrary is a criminal offence in the US.

Notice to New Hampshire residents

Neither the fact that a registration statement or an application for a license has been filed under Chapter 421-B of the New Hampshire Revised Statutes Annotated, 1955, as amended, or "RSA," with the state of New Hampshire nor the fact that a security is effectively registered or a person is licensed in the state of New Hampshire constitutes a finding by the Secretary of State that any document filed under RSA 421-B is true, complete and not misleading.  Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the Secretary of State has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security or transaction.  It is unlawful to make, or cause to be made, to any prospective purchaser, customer or client any representation inconsistent with the provisions of this paragraph.

Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to USL, Upsher-Smith and Proximagen.  These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts.  Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, aim, will, may, would, could or should or other words of similar meaning or the negative thereof.  Forward-looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, economic performance, financial conditions, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the operations of the Upsher-Smith Group or the Proximagen Group; and (iii) the effects of government regulation on the business of the Upsher-Smith Group or the Proximagen Group.

These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements.  These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future.  All subsequent oral or written forward-looking statements attributable to USL, Upsher-Smith or Proximagen or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above.

Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of Upsher-Smith, Proximagen or the Enlarged Group following completion of the Acquisition, unless otherwise stated.

Dealing and Opening Position Disclosure Requirements

Under Rule 8.3(a) of the City Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. Under Rule 8.3(b) of the City Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the City Code). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.



 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION

 

13 June 2012

RECOMMENDED OFFER

for

PROXIMAGEN GROUP PLC

by

USL Pharma International UKLIMITED LTD
a wholly-owned subsidiary of UPSHER-SMITH LABORATORIES, INC.

to be effected

by means of a Scheme of Arrangement

under Part 26 of the Companies Act 2006

 

 

1.         Introduction

The Board of Proximagen and the Board of Upsher-Smith are pleased to announce that they have reached agreement on the terms of a unanimously recommended offer by USL, a wholly-owned subsidiary of Upsher-Smith, for the entire issued and to be issued share capital of Proximagen (other than shares held by Upsher-Smith).  It is intended that the Acquisition be implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.

2.         The Acquisition

Under the terms of the Acquisition, which will be subject to the Conditions and other terms set out in Appendix I to this announcement and to be set out in the Scheme Document, Proximagen Shareholders will be entitled to receive:

for each Proximagen Share:              320 pence in cash; and

up to a further 192 pence in either cash or Loan Notes by way of a contingent value right (a CVR)

The Acquisition excluding the CVRs values Proximagen's fully diluted share capital at approximately £223.0 million ($346.7 million) on the basis of a fully diluted share capital of 69,689,794 Proximagen Shares.

The Acquisition including the CVRs potentially values Proximagen's fully diluted share capital at up to approximately £356.8 million ($554.7 million) on the basis of a fully diluted share capital of 69,689,794 Proximagen Shares.

The Acquisition represents an immediate cash premium, excluding the CVR, of approximately:

·       16.4 per cent. to 275 pence, being the Closing Price per Proximagen Share on 12 June 2012 (being the last Business Day prior to the date of this announcement);

·       50.5 per cent. to approximately 213 pence, being the three month average Closing Price per Proximagen Share up to 12 June 2012;

·       84.6 per cent. to approximately 173 pence, being the six month average Closing Price per Proximagen Share up to 12 June 2012; and

·       21.8 per cent. to the enterprise value of Proximagen on 12 June 2012.

Pursuant to the terms of the Acquisition, Proximagen Shareholders will receive one CVR for each Proximagen Share that they hold. The CVR is intended to enable Proximagen Shareholders to share in the future success of two existing Proximagen programs, VAP-1 and PRX00933. Each CVR will entitle Proximagen Shareholders to receive up to a further 192 pence in either cash or in Loan Notes at the election of the Proximagen Shareholder (subject to applicable securities laws), subject to and in accordance with the terms and conditions of the CVR.

It is intended that the Acquisition will be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 or, if USL elects, a takeover offer (as that term is defined under section 974 of the Companies Act 2006). The purpose of the Scheme is to enable USL to acquire the whole of the issued and to be issued share capital of Proximagen that Upsher-Smith does not already own.  The Scheme, which will be subject to the Conditions set out in this announcement, will require the sanction of the Court.

In the event that the Acquisition is to be implemented by way of an Offer, the Proximagen Shares will be acquired pursuant to the Offer fully paid and free from all liens, charges, equitable interests, encumbrances and rights of pre-emption and any other interests of any nature whatsoever and together with all rights attaching thereto.  Any New Proximagen Shares issued to USL pursuant to the Scheme will be issued on the same basis.

3.         CVRs and Loan Notes

CVRs

Pursuant to the terms of the Acquisition, Proximagen Shareholders will receive one CVR for each Proximagen Share that they hold. The CVR is intended to enable Proximagen Shareholders to share in the future success of two existing Proximagen programs, VAP-1 and PRX00933 (together the CVR Programs). Each CVR will entitle Proximagen Shareholders to receive up to a further 192 pence (the CVR Cap) in either cash or in Loan Notes at the election of the Proximagen Shareholder (subject to applicable securities laws), subject to and in accordance with the terms and conditions of the CVR.

Proximagen owns the worldwide rights to VAP-1, a small molecule vascular adhesion protein program for treating inflammation (amongst other potential indications).  The lead compound has completed the single ascending dose phase of a Phase I study and the multiple ascending dose phase has recently been initiated.  The Phase I study is due to be completed by the end of 2012.  This will be followed by a Phase II proof of concept study in 2013 and, if successful, the Enlarged Group would expect to out-licence this CVR Program at that time. 

Proximagen also owns the worldwide rights to PRX00933, an oral 5-HT2c agonist for treating obesity. In Phase II trials, PRX00933 showed a dose-dependent and statistically significant decrease in body weight and has been shown to be safe and well tolerated and has been administered to approximately 400 patients.  The Enlarged Group will endeavour to out-licence this CVR Program following the completion of the Acquisition. 

The CVR is a complex instrument and a number of factors will determine the actual amount paid (if any) to Proximagen Shareholders by way of the CVRs, details of which will be set out in the Scheme Document.

The CVRs will provide CVR Holders with a contingent right to receive Loan Notes (subject to applicable securities laws) or cash payments over a period of up to 5 years (the CVR Term).  The total amount payable under each CVR is subject to the CVR Cap (being 192 pence) and the amount payable will be a proportion of CVR Net Revenues (as defined below) received from the commercialisation of either or both of the CVR Programs determined in accordance with the following formula:

CVRs entitlement = 57.5% of Net Revenues derived from the VAP-1 CVR Program and 39.5% of Net Revenues from the PRX00933 CVR Program (the CVR Net Revenues)

For these purposes:

Net Revenues include revenues received from the commercialisation of the relevant CVR Program (e.g. licensing fees, milestone payments, royalties and other similar payments) less the Enlarged Group's Development Costs in respect of that CVR Program.

Illustrative examples of how the formula would be applied to determine the amount of payment due (if any) under the CVR, in each case on the basis of the assumptions described therein, are set out in Appendix IV of this announcement.

Actual payments will depend entirely upon Net Revenues generated by the CVR Programs and are capped at a maximum level.  The minimum payment on any payment date, or over the entire period, could be zero.  There will be no interest conferred by a CVR in the economic activities of the combined business generally.

The CVRs will be an obligation of USL pursuant to the CVR Deed Poll.  USL's obligations under the CVRs will be guaranteed by Upsher-Smith. 

J.P. Morgan Cazenove has not been required to confirm, and has not confirmed, that resources are available to Upsher-Smith to satisfy payments under the CVRs or the Loan Notes and shareholders will be at risk if, for any reason, Upsher-Smith is not in a position to meet the guarantee of USL's obligations.

The CVR Deed Poll will contain certain provisions relating to the development of the CVR Programs, as follows:

·          It is proposed that a high level development and commercialisation plan for the CVR Programs will be agreed in advance with Upsher-Smith.  The CVR representative will be appointed by USL to (amongst other things) monitor the performance of USL and Upsher-Smith of their obligations under the CVR Deed Poll.   The parties have invited Peter Allen the current non-executive chairman of Proximagen, to be the CVR representative.  Where a material departure is proposed to the development and commercialisation plan, the departure will need to be agreed in advance with, and will be subject to, the approval of the designated CVR representative.

·          USL and Upsher-Smith will be obliged to use "diligent efforts" to develop the CVR Programs in a commercial manner during the CVR Term.  "Diligent efforts" includes using such efforts and employing such resources normally used by persons in a business of a nature similar to the Enlarged Group relating to the research, development or commercialisation of programs of a similar stage in their development, and includes the obligation to act in good faith relating to the implementation of the development and commercialisation plan and any variation of such plan and to not take any action (or fail to take action) with the direct aim of avoiding, reducing, delaying or frustrating their obligations in respect of the CVRs pursuant to the CVR Deed Poll.

·          In the event that the entire share capital of Upsher-Smith is acquired by a third party during the CVR Term, the CVRs will be paid out in full up to the limit of the CVR Cap.

Proximagen Shareholders will be entitled to make an election as to whether they receive either Class I CVRs or Class II CVRs.  Each Class I CVR will entitle the Class I CVR Holder to receive Loan Notes (subject to applicable securities laws), in an amount up to the CVR Cap, the principal of which will be redeemable in cash on the relevant redemption date.  Each Class II CVR will entitle the Class II CVR Holder to receive further cash, in an amount up to the CVR Cap.

The CVRs will be non-transferable other than to certain permitted transferees and no application will be made for the CVRs to be listed or dealt in on any stock exchange.  The CVRs will be governed by English law and will not be represented by any certificate or other evidence of title.  No interest is payable in respect of the CVRs, and the merger consideration represented by the CVRs will only be payable in certain circumstances described herein and in the Scheme Document.  The Loan Notes will not be issued to US Persons or persons located in the United States.  Accordingly, such US investors will only have the option to take Class II CVRs. 

If the laws of any relevant jurisdiction make it illegal for Proximagen Shareholders to hold CVRs or would require any qualification of the CVRs under any applicable laws or regulations, they may not be entitled to the CVRs or the amounts which may be payable thereon.

Further details on the CVRs will be contained in the Scheme Document.

Loan Notes

The Loan Notes will be governed by English law and will be issued, credited as fully paid, in integral multiples of 1 pence nominal value.  The Loan Notes will have the benefit of an unsecured guarantee from Upsher-Smith in respect of all obligations for the life of the Loan Notes.  The Loan Notes will be non-transferable other than to certain permitted transferees and no application will be made for them to be listed or dealt in on any stock exchange.  The Loan Notes will not be qualifying corporate bonds.

The Loan Notes will bear interest from the date of issue to the relevant holder of the Loan Notes at a rate per annum  at the higher of (i) zero; and (ii) 0.25 per cent. below LIBOR.  Interest will be payable semi-annually on 30 June and 31 December each year (or, if that day is not a Business Day, on the immediately following Business Day). 

The Loan Notes will be issued in a number of tranches in accordance with the terms of the Class I CVRs.

The term of each tranche of the Loan Notes will be one year from the date of issue of that tranche.  On the expiry of the term, USL will redeem the outstanding Loan Notes for cash at par (together with accrued interest less any tax required by law to be withheld or deducted therefrom).  A holder of the Loan Notes may opt to redeem his notes in full prior to the expiry of the term, subject to that holder giving three months' written notice to USL of the redemption, such notice to expire not less than six months and one day following the date of issue.

Full details of the Loan Notes will be contained in the Scheme Document. 

Proximagen Shareholders should consider carefully, in light of their own investment objectives and tax position, whether they wish to elect for Class I CVRs which will entitle the Class I CVR Holder to receive Loan Notes and are strongly advised to seek their own independent financial advice before making any such election.

4.         Background to and reasons for the Acquisition

Upsher-Smith and Proximagen have been working closely together on projects since 2008, including tonabersat, a clinical stage program, and the PRX1 program which is in pre-clinical development.  Upsher-Smith and Proximagen have built a strong and mutually respectful relationship through their existing work that has brought each company's scientific and management teams closer as they have grown their respective capabilities in a manner that is complementary to the overall partnership. The Acquisition will further strengthen this existing relationship between the two organisations.

The Acquisition provides Upsher-Smith with expanded research and development capabilities and a platform for future growth in product development.  Proximagen's pipeline contains a number of programs in various stages of development across a number of therapeutic classes including central nervous system, inflammation, oncology and ophthalmology. 

Proximagen also provides Upsher-Smith with an expanded geographical research and development footprint. Upsher-Smith intends to retain operations in Cambridge and London and integrate them to form a robust research and development platform for future growth.

The combination of Upsher-Smith's clinical development and commercialisation expertise with Proximagen's research and development platform delivers a vertically integrated pharmaceutical company with a number of assets from discovery through commercialisation.  Proximagen's high level of scientific expertise brings a solid R&D engine to Upsher-Smith's strong product development and commercialisation capabilities.  The Acquisition will blend each company's respective strengths to deliver deeper and broader capabilities, supporting the acceleration of Upsher-Smith's vision of becoming a leader in the central nervous system space.

5.         Background to and reasons for the recommendation

As Proximagen announced in its 2011 preliminary results on 5 March 2012, Proximagen has built a diversified and balanced portfolio of clinical and pre-clinical programs over the past three years.   However, a portfolio of this size requires significant investment and whilst Proximagen has been successful in attracting investment into its programs from its partners and investors, the Board of Proximagen believes that a company such as Upsher-Smith, which shares a therapeutic focus with Proximagen and generates significant revenues from its marketed products, is well placed to fund the further development of the programs.  As such, the Acquisition represents a very good opportunity for Proximagen's portfolio of programs to benefit from the extensive resources of Upsher-Smith and the consequent progress in their development.

The Directors of Proximagen believe that the expanded research and development capabilities of the Enlarged Group will lead to increased opportunities for the highly regarded Proximagen research and development team.  Integrating Proximagen's existing Cambridge and London operations into Upsher-Smith's organisation allows Proximagen employees to continue developing Proximagen's promising product pipeline with minimal disruption.

The terms of the Acquisition also represent a significant premium in cash to Proximagen's share price prior to the date of this announcement and the Directors consider that the terms of the Acquisition are a fair reflection of the current and potential value of Proximagen's portfolio of programs whilst allowing Proximagen Shareholders to maintain an interest in the potential future success of the CVR Programs up to a potential value of 192 pence per Proximagen Share.  Accordingly the directors of Proximagen unanimously recommend that Proximagen Shareholders vote in favour of the Scheme. 

The recommendation follows an extensive review by Proximagen and its advisers of the options available to Proximagen.  The Directors of Proximagen believe that the acquisition of Proximagen by Upsher-Smith represents an excellent opportunity for all Proximagen Shareholders to realise a significant return on their investment created through Proximagen's highly successful track record to date and also to share in the future success of two of Proximagen's exciting clinical stage assets.  The transaction itself is in line with Proximagen's long-term strategy of maximising returns for shareholders, whilst looking to mitigate risk. 

6.         Recommendation

The Board of Proximagen, which has been so advised by WG Partners, considers the terms of the Acquisition to be fair, reasonable and in the best interests of Proximagen Shareholders as a whole.  In providing financial advice to the Board of Proximagen, WG Partners has taken into account the Board's commercial assessments.  WG Partners is providing the independent financial advice for the purposes of Rule 3 of the City Code.

Accordingly, the Board of Proximagen unanimously recommends that Proximagen Shareholders vote in favour of the Scheme resolutions relating to the Acquisition at the Meetings (or in the event that the Acquisition is implemented by way of an Offer, to accept the Offer).

7.         Irrevocable undertakings

USL has received irrevocable undertakings from those members of the Board of Proximagen who hold interests in the Proximagen Shares (in respect of themselves and, where relevant, their spouse, civil partner, de facto partner or similar) to vote in favour of the Scheme or to procure that the registered holder votes in favour of the Scheme (or, in the event that the Acquisition is implemented by way of an Offer, to accept the Offer or procure acceptance of the Offer) in respect of their entire beneficial holdings which total 901,256 Proximagen Shares in aggregate representing approximately 1.43 per cent. of Proximagen's issued share capital as at the date of this announcement. 

In addition, USL has also received irrevocable undertakings from certain other Proximagen Shareholders, namely Invesco Asset Management, IP Group plc, King's College London, Lansdowne Partners and H. Lundbeck A/S, to vote in favour of the Scheme or to procure that the registered holder votes in favour of the Scheme (or, in the event that the Acquisition is implemented by way of an Offer, to accept the Offer or procure acceptance of the Offer) in respect of their entire beneficial holdings of such shares (or, in the case of Invesco Asset Management, the Proximagen Shares which it manages on a discretionary basis for its clients and, in the case of Lansdowne Partners, as agent for Lansdowne funds) which total 44,552,330 Proximagen Shares in aggregate representing approximately 70.58 per cent. of Proximagen's issued share capital as at the date of this announcement.

In aggregate, therefore, USL has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the Proximagen General Meeting in respect of a total of 45,453,586 Proximagen Shares, representing 72.01 per cent. of the share capital of Proximagen in issue as at the date of this announcement. 

Further details of these irrevocable undertakings are set out in Appendix III.

Copies of the irrevocable undertakings will be on display on Proximagen's and Upsher-Smith's websites (www.proximagen.com and www.upsher-smith.com respectively) by no later than 12 noon (London time) on the Business Day following the date of this announcement.

8.         Information relating to Upsher-Smith and USL

Upsher-Smith

Upsher-Smith, founded in 1919, is an independent and privately-owned specialty pharmaceutical company headquartered in Maple Grove, Minnesota that focuses on product growth and innovation for branded, branded-generic and generic pharmaceuticals.  Upsher-Smith has a particular focus on providing therapies to assist people suffering from central nervous system diseases (including epilepsy, Parkinson's disease and Alzheimer's disease) and also produces products relating to cardiology, dermatology and women's health.  In addition to products currently marketed, Upsher-Smith has an emerging neurology pipeline with three products in clinical development, two of which are in Phase III clinical trials.

Upsher-Smith's central nervous system pipeline in clinical development includes USL255, an investigational extended-release topiramate for the management of epilepsy in adults, which is being studied in an ongoing international Phase III clinical trial (PREVAIL). Upsher-Smith is also developing USL261, an investigational intranasal midazolam for the rescue treatment of seizures in patients on stable anti-epileptic drug regimens who require control of intermittent bouts of increased seizure activity, frequently referred to as seizure clusters.  USL261 has been granted orphan drug designation for this use by the U.S. Food and Drug Administration and is currently in Phase III of development.  Another Upsher-Smith development program involves USL260 (tonabersat), an investigational drug in Phase I of development that is a potential first-in-class neuronal gap junction modulator that is also being explored as a potential treatment for epilepsy.

Upsher-Smith has offices in Plymouth, Minnesota, Denver, Colorado and Morristown, New Jersey, in the United States, and has 640 employees.  Upsher-Smith's executive management team includes Mark Evenstad, President and Chief Executive Officer, Tom Burke, Chief Operating Officer, Stephen Robinson, Chief Financial Officer, Dr. William Pullman, Chief Scientific Officer and Joel Green, Chief Legal Officer.

Upsher-Smith generated total revenues of $451 million during its last financial year, ending 1 January  2012, and earnings before interest, income taxes, deprecation and amortisation of $151 million.  As at 1 January 2012, Upsher-Smith had total assets of $253 million.

Upsher-Smith currently holds approximately 16 per cent. of the issued share capital of Proximagen, having originally entered the stock through a co-development partnering agreement in July 2008 and followed on by participating in Proximagen's June 2009 fundraising and making market purchases thereafter.

USL

USL is a newly incorporated English company which is a wholly-owned subsidiary of Upsher-Smith established to effect the Acquisition.  USL has not traded prior to the date of this announcement (except for entering into transactions relating to the Acquisition).

Further details of USL will be contained in the Scheme Document.

9.         Information relating to Proximagen

Proximagen is a European biotechnology company focused on the development and commercialisation of novel therapeutics for diseases of the central nervous system and inflammation.  Proximagen is developing potential new best-in-class therapeutics in its core disease areas including epilepsy, Parkinson's disease and Alzheimer's disease, as well as in other areas such as inflammation, oncology and ophthalmology.  Proximagen has a number of existing partnerships with pharmaceutical companies including Upsher-Smith and H. Lundbeck A/S.  Proximagen is currently developing a broad pipeline of drug candidate programs, with four programs in the clinical development stage and more than ten earlier-stage assets being progressed.

Proximagen is incorporated in England and was admitted to trading on AIM in March 2005.  Proximagen is headquartered in London with research facilities located near Cambridge.  Proximagen's executive management team comprises Kenneth Mulvany, the Chief Executive Officer and James Hunter, the Finance Director.  Proximagen's senior management team also includes Dr. Bruce Campbell (non-clinical Development), Michael Brennan (Corporate Development) and Tim Sparey (Business Development).

Proximagen generated revenues of £0.2 million during its last financial year, ending 30 November 2011 (£0.13 million during the six months ending 31 May 2012), and made a net loss after tax of £6.2 million in the last financial year (£3.98 million during the six months ending 31 May 2012).  As at 30 November 2011 Proximagen had net assets of £52.6 million and cash and cash equivalents of approximately £51.6 million (£48.8 million and £48 million respectively as at 31 May 2012).  Proximagen's market capitalisation prior to the date of this announcement was approximately £173.6 million.

10.       Offer Related Arrangements

Confidentiality Agreement

Upsher-Smith and Proximagen entered into the Confidentiality Agreement pursuant to which each of Upsher-Smith and Proximagen have agreed to keep confidential information about the other party and not to disclose to third parties (other than permitted recipients) confidential information exchanged by them unless required by law or regulation.  These confidentiality obligations will remain in force until completion of the Acquisition, or for a period of five years from the date that negotiations in respect of the Acquisition cease or are terminated.

11.        Financing of the Acquisition

The cash consideration payable by USL under the Acquisition will be funded from cash on the balance sheet of the Upsher-Smith Group and new debt facilities arranged by J.P. Morgan Securities LLC, U.S. Bank National Association and Wells Fargo Securities, LLC in the form of a $300 million secured credit agreement (the Credit Agreement) to be provided by JPMorgan Chase Bank, N.A., U.S. Bank National Association and Wells Fargo Bank, National Association to Upsher-Smith.  It is not intended that the payment of any interest or other charges in respect of such facility will depend on the business of Proximagen.  Upsher-Smith has agreed that it will not waive, amend or vary any term of the Scheme (or, in the event that the Acquisition is implemented by way of a takeover offer, the Offer) in a manner or to an extent that is reasonably likely to be materially prejudicial to the interests of the Lenders under the Credit Agreement unless such waiver, amendment or variation (1) is required by any law or regulation (including the Code), the London Stock Exchange, the Panel or a court of competent jurisdiction or (2) is made with the consent of the Administrative Agent and the Required Lenders (acting on the instructions of the Required Lenders) (each as defined in the Credit Agreement) (acting reasonably).  J.P. Morgan Cazenove is satisfied that resources are available to USL sufficient to satisfy in full the immediate cash consideration payable under the Acquisition.

J.P. Morgan Cazenove has not been required to confirm, and has not confirmed, that resources are available to Upsher-Smith to satisfy payments under the CVRs or the Loan Notes and shareholders will be at risk if, for any reason, Upsher-Smith is not in a position to meet the guarantee of USL's obligations.

Further information on the debt financing of the Acquisition will be set out in the Scheme Document.

12.       Management, employees and intentions regarding the Proximagen Group

Upsher-Smith has high regard for the skills and experience of the existing management and employees of Proximagen.  Upsher-Smith confirms their existing rights, including pension rights will be fully observed.

Upsher-Smith attaches great importance to Proximagen's Cambridge and London operations, which have contributed to Proximagen's success to date, and which Upsher-Smith would anticipate playing an important role in the development of the Enlarged Group.  Accordingly, it is Upsher-Smith's intention to retain operations in Cambridge and London and Proximagen's existing operating structure.

13.       Proximagen Option Schemes

The Scheme will extend to any Proximagen Shares that are unconditionally allotted or issued pursuant to the exercise of options or the vesting of awards under the Proximagen Option Schemes in each case on or prior to the Scheme Record Time.

Proximagen has outstanding options over a total of 951,530 Proximagen Shares under the EMI Plan and 5,618,663 Proximagen Shares under the Unapproved Plan.  In the event of Proximagen Shareholders approving the Scheme and the Court sanctioning the Scheme it is proposed that the Proximagen Option Schemes would be amended to permit the options to vest and become exercisable in advance of the change of control in order to preserve potential UK corporation tax relief under the Corporation Tax Act 2009 and allow option holders to participate in the Scheme as shareholders of Proximagen.   All options that have not been exercised prior to the Effective Date shall lapse.

Options will be exercisable on a cashless basis to enable option holders to exercise their options without the need to pay to Proximagen upfront the relevant exercise amount with respect to each option, with such exercise amount deducted from the cash component of his or her consideration received under the Scheme and paid to Proximagen.  Where there is a liability to employers' National Insurance Contributions on the exercise of the options, this will be met by Proximagen. 

Further details regarding the proposals for participants in the Proximagen Option Schemes will be set out in the Scheme Document and in separate letters to be sent to participants in the Proximagen Option Schemes within the next 28 days. In the event that this Acquisition is to be implemented by way of an Offer, proposals will be put to the holders of options under the Proximagen Option Schemes to enable them to participate in the Offer on an equivalent basis in the event that such Offer becomes wholly unconditional.

14.       Expected timetable

Proximagen currently anticipates that:

(a)      it will despatch the Scheme Document, together with the Forms of Proxy and Form of Election, to Proximagen Shareholders and, for information only, to the holders of options granted under the Proximagen Option Schemes within the next 28 days (or such later date as may be agreed with the Panel);

(b)      the Court Meeting and Proximagen General Meeting is expected to take place on or around 20 July 2012; and

(c)      subject to the Scheme becoming unconditional and effective in accordance with its terms, the Acquisition is expected to become effective on or around 14 August 2012, with the consideration being issued to Proximagen Shareholders no later than 14 days after the Effective Date.

The timing of events which relate to the implementation of the Acquisition is, however, subject to the approval of the Court and is therefore subject to change.  A full anticipated timetable will be set out in the Scheme Document. 

If the Acquisition does not become effective by the Long Stop Date, the Acquisition will lapse except where the approval of Proximagen Shareholders at the Court Meeting and Proximagen General Meeting is obtained before this date, in which case the Long Stop Date for the Acquisition may be extended to such later date as USL and Proximagen may agree and, if appropriate, the Court and the Panel may approve.

15.       Disclosure of interests in Proximagen Shares

Upsher-Smith holds 10,015,700 Proximagen Shares (representing 15.9 per cent of Proximagen's issued share capital as at the date of this announcement) and Mark Evenstad, a director of USL holds 10,000 Proximagen Shares (representing 0.02 per cent of Proximagen's issued share capital as at the date of this announcement).

Each of USL and Upsher-Smith confirms that it is making on the date of this announcement an Opening Position Disclosure, setting out the details required to be disclosed by it under Rule 8.1(a) of the City Code.  The Opening Position Disclosure does not include all relevant details in respect of USL's concert parties and USL confirms that a further disclosure in accordance with Rule 8.1(a) and Note 2(a)(i) on Rule 8 of the City Code will be made as soon as possible, if required.

As at the close of business on 12 June 2012, being the last practicable date prior to the publication of this announcement, save for: (i) the disclosures in this paragraph 15; and (ii) the irrevocable undertakings referred to in paragraph 7 above, none of USL or any of its directors or Upsher-Smith or any of its directors or, so far as Upsher-Smith and the Board of USL are aware, any person acting, or deemed to be acting, in concert with USL:

·             had an interest in, or right to subscribe for, relevant securities of Proximagen;

·             had any short position in (whether conditional or absolute and whether in the money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery of, relevant securities of Proximagen;

·             had procured an irrevocable commitment or letter of intent to accept the terms of the Acquisition in respect of relevant securities of Proximagen; or

·             had borrowed or lent any Proximagen Shares.

Furthermore, save for the irrevocable undertakings described in paragraph 7 above, no arrangement exists between USL, Upsher-Smith or Proximagen or an associate of USL, Upsher-Smith or Proximagen in relation to Proximagen Shares.  For these purposes, an arrangement includes any indemnity or option arrangement, any agreement or any understanding, formal or informal, of whatever nature, relating to Proximagen Shares which may be an inducement to deal or refrain from dealing in such securities.

16.       Scheme of Arrangement

It is intended that the Acquisition will be effected by a court sanctioned scheme of arrangement between Proximagen and the Scheme Shareholders under Part 26 of the Companies Act 2006.  The purpose of the Scheme is to provide for USL to become owner of the whole of the issued and to be issued share capital of Proximagen.

Under the Scheme, the Acquisition is to be principally achieved by:

The Acquisition will be subject to the Conditions and further terms and conditions referred to in Appendix I to this announcement and to be set out in the Scheme Document.

To become effective, the Scheme requires, amongst other things, the approval of the Proximagen Shareholders by the passing of a resolution at the Court Meeting.  The resolution must be approved by a majority in number representing not less than three-fourths of the voting rights of the holders of the Proximagen Shares (or the relevant class or classes thereof, if applicable) present and voting, either in person or by proxy, at the Court Meeting.  To become effective, the Scheme also requires the passing of a special resolution at the Proximagen General Meeting, requiring the approval of Proximagen Shareholders representing at least three-fourths of the votes cast at the Proximagen General Meeting (either in person or by proxy). 

Following the Meetings, the Scheme must be sanctioned by the Court and the associated Capital Reduction must be confirmed by the Court.  The Scheme will become effective in accordance with its terms on delivery of the Scheme Court Order, the Reduction Court Order and the Statement of Capital giving details of Proximagen's share capital, as altered by the Capital Reduction, attached thereto to the Registrar of Companies, and, in relation to the Capital Reduction, the Reduction Court Order and attached minute being filed with and registered by the Registrar of Companies.

The expected timetable for the implementation of the Scheme is as follows:

Court Meeting to approve the Scheme            20 July 2012 or as soon as reasonably practicable thereafter

 

Proximagen General Meeting                         20 July 2012 or as soon as reasonably practicable thereafter

 

Court hearing to approve the Scheme            9 August 2012 or as soon as reasonably practicable thereafter

 

Court hearing to confirm the Capital               13 August 2012 or as soon as reasonably

Reduction                                                        practicable thereafter

 

Effective Date of Scheme                                14 August 2012 or the Business Day following the Court Hearing to confirm the Capital Reduction, if later

 

Upon the Scheme becoming effective, it will be binding on all Proximagen Shareholders, irrespective of whether or not they attended or voted at the Meetings and the consideration due under the Acquisition will be despatched by USL to Scheme Shareholders no later than 14 days after the Effective Date.

The Scheme will contain a provision for USL and Proximagen to jointly consent, on behalf of all persons concerned, to any modification of or addition to the Scheme or to any condition that the Court may approve or impose.  Proximagen has been advised that the Court would be unlikely to approve any modification of, or addition to, or impose a condition to the Scheme which might be material to the interests of Scheme Shareholders unless Scheme Shareholders were informed of such modification, addition or condition.  It would be a matter for the Court to decide, in its discretion, whether or not a further meeting of the Scheme Shareholders should be held in these circumstances.

The Scheme Document will include full details of the Scheme, together with notices of the Court Meeting and the Proximagen General Meeting and the expected timetable, and will specify the action to be taken by Scheme Shareholders.

The Scheme will be governed by English law.  The Scheme will be subject to the applicable requirements of the City Code, the Panel and the AIM Rules.  The bases and sources of certain information contained in this announcement are set out in Appendix II to this announcement.  Illustrative CVR payment calculations are set out in Appendix IV to this announcement.  Certain terms used in this announcement are defined in Appendix V to this announcement.

17.       Delisting and re-registration

Prior to the Scheme becoming effective and subject to any applicable requirements of the AIM Rules, Upsher-Smith intends to procure the making of an application by Proximagen for cancellation of the trading in Proximagen Shares on AIM on the first Business Day following the Effective Date.

Share certificates in respect of the Proximagen Shares will cease to be valid and should be destroyed following the Effective Date.

As soon as practicable after the Effective Date, it is intended that Proximagen will be re-registered as a private limited company under the relevant provisions of the Companies Act 2006.

18.       Overseas Proximagen Shareholders

The distribution of this announcement to, and the availability of the Acquisition to, persons who are not resident in the United Kingdom or the United States may be affected by the laws of their relevant jurisdiction. Such persons should inform themselves of and observe any applicable legal or regulatory requirements of their jurisdiction.

Further details in relation to Overseas Proximagen Shareholders will be contained in the Scheme Document.

19.       Rule 2.10 disclosure

In accordance with Rule 2.10 of the City Code, Proximagen confirms that as at the close of business on 12 June 2012, being the last Business Day before this announcement, it had 63,119,601 ordinary shares in issue and admitted to trading on the AIM Market of the London Stock Exchange under ISIN reference GB00B06FMX57.

20.       Documents on display

Copies of the following documents will, by no later than 12 noon (London time) on the Business Day following the date of this announcement, be made available on Upsher-Smith's website at www.upsher-smith.com and Proximagen's website at www.proximagen.com until the Effective Date:

·             the irrevocable undertakings referred to in paragraph 7 above and summarised in Appendix III to this announcement;

·             the Confidentiality Agreement;

·             the Credit Agreement;

·             the Intercompany Loan Agreement dated 12 June 2012 between USL (as borrower) and Upsher-Smith (as lender);

·             the Syndication and Fee Letter dated 12 June 2012 between Upsher-Smith, J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A.;

·             the Guaranty dated 12 June 2012 between USL Pharma, Inc. (as the subsidiary guarantor) in favour of JPMorgan Chase Bank, N.A. (as administrative agent for the secured parties);

·             the Pledge and Security Agreement dated 12 June 2012 between Upsher-Smith and USL Pharma, Inc. (as grantors) and JPMorgan Chase Bank, N.A. (as administrative agent for the secured parties);

·             the Confirmatory Grant of Security Interest in United States Trademarks dated 12 June 2012, by Upsher-Smith (as grantor) and JPMorgan Chase Bank, N.A. (as administrative agent for the secured parties);

·             the Confirmatory Grant of Security Interest in United States Patents dated 12 June 2012, by Upsher-Smith (as grantor) and JPMorgan Chase Bank, N.A. (as administrative agent for the secured parties);

·             the Wells Fargo Letter dated 12 June 2012 between Wells Fargo Bank, National Association and Upsher-Smith; and

·             the U.S. Bank Letter dated 12 June 2012 between U.S. Bank National Association and Upsher-Smith.

With the consent of the Panel, which has been given, under Rule 26.1, from the time of publishing of the Scheme Document, the side letter relating to market flex provisions applicable to the financing of the Acquisition will be made available on Upsher-Smith's website at www.upsher-smith.com until the completion of the Acquisition.

21.       General

Upsher-Smith reserves the right to elect to implement the Acquisition by way of an Offer for the entire issued and to be issued share capital of Proximagen not already held by USL or any subsidiary or nominees of Upsher-Smith as an alternative to the Scheme.  In such an event, an Offer will be implemented on the same terms (subject to appropriate amendments), so far as applicable, as those which would apply to the Scheme, but with an acceptance condition which will be set at 90 per cent. (or such lower percentage as Upsher-Smith may decide or the Panel may require), as referred to in Part A of Appendix I to this announcement.  Upsher-Smith has agreed that any such Offer would remain open for acceptance for at least 60 days after the Offer Document is published.

The Acquisition will be subject to the Conditions and other terms set out in this announcement and to the full terms and conditions which will be set out in the Scheme Document.  Appendix I to this announcement contains a summary of the principal terms and conditions.  Appendix II to this announcement contains bases and sources of certain information contained in this announcement.  Details of irrevocable undertakings received by USL are set out in Appendix III to this announcement.  Illustrative CVR payment calculations are set out in Appendix IV to this announcement.  Certain terms used in this announcement are defined in Appendix V to this announcement.

A copy of this announcement will be available, free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, at Proximagen's website at www.proximagen.com and at Upsher-Smith's website at www.upsher-smith.com by no later than 12 noon (London time) on the Business Day following the date of this announcement.  Neither the contents of Proximagen's website, the contents of Upsher-Smith's website, nor the content of any other website accessible from hyperlinks on either Proximagen's or Upsher-Smith's website, is incorporated into or forms part of, this announcement.

Enquiries:

Upsher-Smith and USL

Mark Evenstad, Chief Executive Officer

Tom Burke, Chief Operating Officer

 

+1 (763) 315 2000

J.P. Morgan Cazenove                                                                     

(Financial adviser to Upsher-Smith and USL)

James Mitford

Christopher Dickinson

 

+44 (0) 20 7742 4000

Kovak-Likly Communications

(PR adviser to Upsher-Smith)

Elizabeth Likly, Principal

Bruce Likly, Principal

 

+1 (203) 762 8833

Proximagen

Kenneth Mulvany, Chief Executive Officer

James Hunter, Finance Director

+44 (0) 20 7400 7700

WG Partners               

(Financial adviser to Proximagen)

David Wilson

Stephen Waterman

Karri Vuori

 

+44 (0) 20 7149 6000

Cenkos Securities plc

(Nominated adviser and broker to Proximagen)

Bobbie Hilliam (NOMAD)

Julian Morse

 

+44 (0) 20 7397 8900

M:Communications (Media enquiries)

(PR adviser to Proximagen)

Mary-Jane Elliott

Sarah Macleod

Hollie Vile

 

+44 (0) 20 7920 2330

proximagen@mcomgroup.com

 

This announcement is not intended to and does not constitute or form part of any offer to sell or subscribe for or any invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise.  The Acquisition will be made solely pursuant to the terms of the Scheme Document (or, if applicable, the Offer Document), which will contain the full terms and conditions of the Acquisition or to elect to sell shares in connection with the Acquisition, as the case may be), including details of how to vote in respect of the Acquisition.  Any decision in respect of, or other response to, the Acquisition should be made only on the basis of the information contained in the Scheme Document.

This announcement has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom and the United States may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom and the United States should inform themselves about, and observe any applicable requirements.  In particular, the ability of persons who are not resident in the United Kingdom or the United States to vote with respect to their Proximagen Shares in relation to the Scheme at the Meetings, to execute and deliver Forms of Proxy appointing another to vote at the Meetings on their behalf and to execute and deliver the Form of Election may be affected by the laws of the relevant jurisdictions in which they are located. 

Copies of this announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction.  If the Acquisition is implemented by way of an Offer (unless otherwise permitted by applicable law and regulation), the Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

J.P. Morgan Limited, which conducts its UK investment banking business as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as financial adviser to Upsher-Smith and USL and for no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Upsher-Smith and USL for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Charles Stanley & Co Limited, trading as Charles Stanley Securities and WG Partners, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as financial adviser to Proximagen and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Proximagen for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Cenkos Securities plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser and broker to Proximagen and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Proximagen for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Notice to US investors in Proximagen

The Acquisition relates to the shares of an English company that is a foreign private issuer (as defined under Rule 3b-4 under the US Exchange Act) and is being made by means of a scheme of arrangement provided for under English company law.  A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act.  Accordingly, the Acquisition is subject to the disclosure requirements and practices applicable in the UK to schemes of arrangement, including the City Code and the AIM Rules, which differ from the disclosure requirements of United States tender offer and proxy solicitation rules.  Financial information included in this announcement and the Scheme Document has been or will have been prepared in accordance with accounting standards applicable in the United Kingdom that may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.  If, in the future, USL exercises the right to implement the Acquisition by way of a takeover offer, such offer will be made in compliance with applicable laws and regulations including US securities laws to the extent applicable. 

No registration statement will be filed with the SEC or any state securities regulators in the US in connection with the Acquisition, and the Loan Notes to be issued pursuant to the terms of the Class I CVRs will not be registered under the US Securities Act.

Neither the SEC, nor any US state securities commission or any other regulatory authority, has passed upon, or endorsed the merits of, or approved or disapproved of the Loan Notes to be issued in connection with the Acquisition, or determined if this announcement is accurate or adequate.  Any representation to the contrary is a criminal offence in the US.

Notice to New Hampshire residents

Neither the fact that a registration statement or an application for a license has been filed under Chapter 421-B of the New Hampshire Revised Statutes Annotated, 1955, as amended, or "RSA," with the state of New Hampshire nor the fact that a security is effectively registered or a person is licensed in the state of New Hampshire constitutes a finding by the Secretary of State that any document filed under RSA 421-B is true, complete and not misleading.  Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the Secretary of State has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security or transaction.  It is unlawful to make, or cause to be made, to any prospective purchaser, customer or client any representation inconsistent with the provisions of this paragraph.

Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to USL, Upsher-Smith and Proximagen.  These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts.  Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, aim, will, may, would, could or should or other words of similar meaning or the negative thereof.  Forward-looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, economic performance, financial conditions, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the operations of the Upsher-Smith Group or the Proximagen Group; and (iii) the effects of government regulation on the business of the Upsher-Smith Group or the Proximagen Group.

These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements.  These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future.  All subsequent oral or written forward-looking statements attributable to USL, Upsher-Smith or Proximagen or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above.

Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of Upsher-Smith, Proximagen or the Enlarged Group following completion of the Acquisition, unless otherwise stated.

Dealing and Opening Position Disclosure Requirements

Under Rule 8.3(a) of the City Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. Under Rule 8.3(b) of the City Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the City Code). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.



APPENDIX I

CONDITIONS AND CERTAIN FURTHER TERMS OF THE SCHEME AND THE ACQUISITION

Part A:             Conditions of the Scheme

The Acquisition will be conditional upon the Scheme becoming unconditional and becoming effective by no later than the Long Stop Date, or such later date (if any) as USL and Proximagen may (with the consent of the Panel) agree and, if required, the Court may allow.

(A)        The Scheme will be conditional upon:

(i)         its approval by a majority in number representing not less than three-fourths of the voting rights of the holders of Proximagen Shares (or the relevant class or classes thereof, if applicable) present and voting, either in person or by proxy, at the Court Meeting and at any separate class meeting which may be required by the Court or at any adjournment of any such meeting;

(ii)        all resolutions necessary to approve and implement the Scheme being duly passed by the requisite majority or majorities at the Proximagen General Meeting or at any adjournment of that meeting; and

(iii)        the sanction of the Scheme with or without modification (but subject to any such modification being acceptable to USL and Proximagen) and the confirmation of the Capital Reduction by the Court and the delivery of the Scheme Court Order and the Reduction Court Order and Statement of Capital to the Registrar of Companies.

In addition, USL and Proximagen have agreed that the Acquisition will be conditional upon the following conditions and, accordingly, the necessary actions to make the Scheme effective will not be taken unless the following conditions (as amended if appropriate) have been satisfied (and continue to be satisfied pending the commencement of the Court Hearing) or, where relevant, waived prior to the Scheme being sanctioned by the Court: 

(B)        all necessary notifications, filings and applications having been made, all regulatory and statutory obligations in any relevant jurisdiction having been complied with, all appropriate waiting and other time periods (including any extensions of such waiting and other time periods) under any applicable legislation or regulations of any relevant jurisdiction having expired, lapsed or been terminated in each case in respect of the Acquisition or any aspect of the Acquisition or its financing, the acquisition or proposed acquisition of any shares or other securities in, or control of, Proximagen or any other member of the Wider Proximagen Group by any member of the Wider Upsher-Smith Group or the carrying on by any member of the Wider Proximagen Group of its business;

(C)        except as Publicly Announced or fairly disclosed in Disclosed Information, there being no provision of any agreement, arrangement, licence, permit or other instrument to which any member of the Wider Proximagen Group is a party or by or to which any such member or any of its assets is or may be bound, entitled or subject, which in each case as a consequence of the Acquisition, the acquisition or proposed acquisition of any shares or other securities in Proximagen or because of a change in the control or management of Proximagen, could or might reasonably be expected to result in (to an extent or in a manner which is material and adverse in the context of the Acquisition or would have a material and adverse effect on the Wider Proximagen Group as a whole):

(i)         any such agreement, arrangement, licence, permit or instrument or the rights, liabilities, obligations or interests or business of any member of the Wider Proximagen Group thereunder, or interests or business of any such member in or with any other person, firm, company or body (or any arrangements to which any such member is a party relating to any such interests or business), being or becoming capable of being terminated or modified or adversely affected or any obligation or liability arising or any action being taken or arising thereunder;

(ii)        the rights, liabilities, obligations or interests of any member of the Wider Proximagen Group under any such agreement, arrangement, licence, permit or instrument or the interests or business of any such member in or with, any person, firm, company or body (or any arrangement or arrangements relating to any such interests or business) being terminated, adversely modified or adversely affected or any onerous obligation or liability arising or any adverse action being taken thereunder;

(iii)        any asset owned or used by any member of the Wider Proximagen Group, or any interest in such asset, being or falling to be disposed of or charged or ceasing to be available to any member of the Wider Proximagen Group or any right arising under which any such asset or interest could be required to be disposed of or charged or cease to be available to any member of the Wider Proximagen Group;

(iv)        the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property, assets or interest of any member of the Wider Proximagen Group or any such mortgage, charge or other security (whenever created, arising or having arisen) becoming enforceable or being capable of being enforced;

(v)         the value of any member of the Wider Proximagen Group or its financial or trading position or prospects being prejudiced or adversely affected;

(vi)        any member of the Wider Proximagen Group ceasing to be able to carry on business under any name which it at present uses;

(vii)       the creation of any liability (actual or contingent) by any member of the Wider Proximagen Group;

(viii)      any liability of any member of the Wider Proximagen Group to make any severance, termination, bonus or other payment to any of its directors or other officers;

(ix)       any requirement on any member of the Wider Proximagen Group to acquire, subscribe, pay up or repay any shares or other securities; or

(x)        any monies borrowed by or any other indebtedness (actual or contingent) of, or any grant available to any member of the Wider Proximagen Group, being or becoming repayable or capable of being declared repayable immediately or prior to its or their stated maturity date or repayment date, or the ability of such member of the Wider Proximagen Group to borrow monies or incur any indebtedness becoming or being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;

and no event having occurred which, under any provision of any agreement, arrangement, licence, permit or other instrument to which any member of the Wider Proximagen Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, could reasonably be expected to result in any of the events or circumstances as are referred to in sub-paragraphs (i) to (x) of this condition;

(D)        no government or governmental, quasi-governmental, supranational, statutory, regulatory, environmental or investigative body, central bank, court, trade agency, association, institution or any other body or person whatsoever in any jurisdiction (each a Third Party) having decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference, or enacted, made or proposed any statute, regulation, decision or order, or having taken any other steps, and there not continuing to be outstanding any statute, regulation or order of any Third Party, in each case which would or might reasonably be expected to (to an extent or in a manner which is material and adverse in the context of the Acquisition):

(i)         require, prevent or delay the divestiture, or materially alter the terms of any proposed divestiture by Upsher-Smith or any other member of the Wider Upsher-Smith Group or by Proximagen or any other member of the Wider Proximagen Group of all or any portion of their respective businesses, assets or properties or impose any limitation on the ability of any of them to conduct their respective businesses (or any of them) or to own any of their respective assets or properties or any part thereof;

(ii)        require, prevent or delay the divestiture by any member of the Wider Upsher-Smith Group of any shares or other securities in Proximagen;

(iii)        impose any limitation on, or result in a delay in, the ability of any member of the Wider Upsher-Smith Group directly or indirectly to acquire or to hold or to exercise effectively any rights of ownership in respect of shares or loans or securities convertible into shares or any other securities (or the equivalent) in any member of the Wider Proximagen Group or the Wider Upsher-Smith Group or to exercise voting or management control over any such member;

(iv)        otherwise materially adversely affect any or all of the business, assets, liabilities, financial or trading position, profits, operational performance or prospects of any member of the Wider Upsher-Smith Group or of any member of the Wider Proximagen Group;

(v)         make the Acquisition or its implementation or the acquisition or proposed acquisition by USL or any member of the Wider Upsher-Smith Group of any shares or other securities in, or control or management of Proximagen void, illegal, and/or unenforceable under the laws of any jurisdiction, or otherwise, directly or indirectly, restrain, restrict, prohibit, prevent, delay or otherwise interfere with the implementation thereof, or impose additional material adverse conditions or obligations with respect thereto, or otherwise challenge, or interfere with the Acquisition or its implementation;

(vi)        require any member of the Wider Upsher-Smith Group or the Wider Proximagen Group to acquire, or to offer to acquire, any shares or other securities (or the equivalent) or interest in any member of the Wider Proximagen Group or the Wider Upsher-Smith Group owned by any third party;

(vii)       impose any limitation on the ability of any member of the Wider Upsher-Smith Group or the Wider Proximagen Group to conduct or integrate or co-ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider Upsher-Smith Group or the Wider Proximagen Group; or

(viii)      require any member of the Wider Proximagen Group to relinquish, terminate or amend in any way any contract to which any member of the Wider Proximagen Group is a party; or

(ix)       result in any member of the Wider Proximagen Group ceasing to be able to carry on business under any name under which it presently does so,

and all applicable waiting and other time periods during which any such Third Party could institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference or any other step under the laws of any jurisdiction in respect of the Acquisition or the acquisition or proposed acquisition of any Proximagen Shares having expired, lapsed or been terminated;

(E)        all notifications, notices, filings or applications in connection with the Acquisition or any aspect of the Acquisition or its financing that are necessary having been made and all authorisations, orders, grants, consents, clearances, licences, confirmations, permissions and approvals which are necessary (Authorisations), in any jurisdiction, for and in respect of the Acquisition or any aspect of the Acquisition or its financing,  or the acquisition or proposed acquisition by any member of the Wider Upsher-Smith Group of any shares or other securities in, or control of, Proximagen by any member of the Wider Upsher-Smith Group having been obtained in terms and in a form reasonably satisfactory to USL from all appropriate Third Parties and persons or bodies with whom any member of the Wider Proximagen Group has entered into contractual arrangements, and all such Authorisations together with all authorisations, orders, grants, consents, clearances, licences, confirmations, permissions and approvals (Business Authorisations) necessary or appropriate for any member the Wider Upsher-Smith Group to carry on its business remaining in full force and effect (where the absence of such Authorisations or Business Authorisations would be material and adverse in the context of the Acquisition) and all filings necessary for such purpose have been made and there being no notice or intimation of any intention to revoke or not to renew any of the same at the time at which the Acquisition becomes otherwise unconditional and all necessary statutory or regulatory obligations in any jurisdiction having been complied with;

(F)        since 30 November 2011 and except as Publicly Announced or fairly disclosed in Disclosed Information, no member of the Wider Proximagen Group having (to an extent or in a manner which is material in the context of the Acquisition or would have a material and adverse effect on the Wider Proximagen Group taken as a whole):

(i)         save as between Proximagen and wholly-owned subsidiaries of Proximagen or for Proximagen Shares issues pursuant to the award of Proximagen Shares under the Proximagen Option Schemes, issued, agreed to issue, authorised or proposed the issue of additional shares of any class, or of securities convertible into or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities or redeemed, purchased or repaid any of its own shares or other securities or reduced or made any other change to any part of its share capital;

(ii)        other than to another member of the Proximagen Group, recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution whether payable in cash or otherwise;

(iii)        save for transactions between members of the Proximagen Group, merged or demerged with any body corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any assets or any right, title or interest in any asset (including shares and trade investments) or authorised or proposed or announced any intention to propose any merger, demerger, acquisition, disposal, transfer, mortgage, charge or security interest, in each case, other than in the ordinary course of business;

(iv)        save for transactions between members of the Proximagen Group, made or authorised or proposed or announced an intention to propose any change in its loan capital;

(v)         issued, authorised or proposed the issue of any debentures or (save in the ordinary course of business or for transactions between members of the Proximagen Group) incurred or increased any indebtedness or become subject to any liability (actual or contingent);

(vi)        implemented, or authorised, proposed or announced its intention to implement, any reconstruction, amalgamation, scheme, commitment or other transaction or arrangement otherwise than in the ordinary course of business or in respect of the Acquisition;

(vii)       entered into or varied or authorised, proposed or announced its intention to enter into or vary any contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) which is of a long term, onerous or unusual nature or magnitude or which is or could be materially restrictive on the businesses of any member of the Wider Proximagen Group or the Wider Upsher-Smith Group or which involves or could involve an obligation of such a nature or magnitude or which is other than in the ordinary course of business and which is material in the context of the Wider Proximagen Group taken as a whole;

(viii)      (other than in respect of a member which is dormant and was solvent at the relevant time) taken any corporate action or had any legal proceedings instituted or threatened against it or petition presented or order made for its winding-up (voluntary or otherwise), dissolution or reorganisation or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or had any such person appointed;

(ix)       been unable to pay its debts as they fall due or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business;

(x)        entered into any contract, transaction or arrangement which would be materially restrictive on the business of any member of the Wider Proximagen Group or the Wider Upsher-Smith Group other than to a nature and extent which is normal in the context of the business concerned;

(xi)       waived or compromised any material claim otherwise than in the ordinary course of business;

(xii)       entered into any material contract, commitment, arrangement or agreement otherwise than in the ordinary course of business or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced any intention to, or to propose to, effect any of the transactions, matters or events referred to in this condition;

(xiii)      in respect of the Proximagen Group, made any alteration to its memorandum or articles of association (in each case, other than an alteration in connection with the Scheme);

(xiv)      proposed, agreed to provide or modified the terms of any employee share scheme, incentive scheme or other benefit relating to the employment or termination of employment of any person employed by the Wider Proximagen Group or entered into or changed the terms of any contract with any director or senior executive,

and, for the purposes of this condition, the term Proximagen Group shall mean Proximagen and its wholly-owned subsidiaries;

(G)       since 30 November 2011 and save as Publicly Announced or fairly disclosed in Disclosed Information, or where not material in the context of the Wider Proximagen Group taken as a whole:

(i)         no material adverse change or deterioration having occurred (or circumstances having arisen which would or might be expected to result in any adverse change or deterioration) in the business, assets, liabilities, financial or trading position or profits, operational performance or prospects of any member of the Wider Proximagen Group;

(ii)        no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider Proximagen Group is or may become a party (whether as a plaintiff, defendant or otherwise) and no investigation by any Third Party against or in respect of any member of the Wider Proximagen Group having been instituted, announced, implemented or threatened by or against or remaining outstanding in respect of any member of the Wider Proximagen Group;

(iii)        no enquiry or investigation by, or complaint or reference to, any Third Party having been threatened in writing, announced, implemented or instituted by or against or remaining outstanding against or in respect of any member of the Wider Proximagen Group;

(iv)        no contingent or other material liability in respect of any member of the Wider Proximagen Group having arisen or become apparent or increased that might reasonably be likely to adversely affect any member of the Wider Proximagen Group that is material in the context of the Wider Proximagen Group taken as a whole;

(v)        no amendment or termination of any joint venture or partnership to which any member of the Wider Proximagen Group is a party having been agreed or permitted; and

(vi)        no steps having been taken which are likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Wider Proximagen Group which is necessary for the proper carrying on of its business,

in each case, to an extent or in a manner which is material in the context of the Acquisition and would have a material and adverse effect on the Wider Proximagen Group, taken as a whole;

(H)        except as Publicly Announced or fairly disclosed in Disclosed Information, USL not having discovered:

(i)         that any financial, business or other information concerning the Wider Proximagen Group as contained in the information publicly disclosed at any time by or on behalf of any member of the Wider Proximagen Group, is misleading or contains any misrepresentation of fact or omits to state a fact necessary to make that information not misleading;

(ii)        that any member of the Wider Proximagen Group is subject to any liability (actual or contingent) that has not been Publicly Announced or fairly disclosed in Disclosed Information;

(iii)        that any member of the Wider Proximagen Group, partnership, company or other entity in which any member of the Wider Proximagen Group has a significant economic interest and which is not a subsidiary undertaking of Proximagen is subject to any liability (contingent or otherwise) which is not disclosed in the annual report and accounts of Proximagen for the year ended 30 November 2011; or

(iv)        any information which affects the import of any information disclosed in writing at any time by or on behalf of any member of the Wider Proximagen Group,

in each case, to an extent or in a manner which is material in the context of the Acquisition and would have a material and adverse effect on the Wider Proximagen Group, taken as a whole; and

(I)         except as Publicly Announced or fairly disclosed in Disclosed Information, USL not having discovered that:

(i)         any past or present member of the Wider Proximagen Group has failed to comply with any and/or all applicable legislation or regulation, of any jurisdiction with regard to the disposal, spillage, release, discharge, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health or animal health or otherwise relating to environmental matters, or that there has otherwise been any such disposal, spillage, release, discharge, leak or emission (whether or not the same constituted a non-compliance by any person with any such legislation or regulations, and wherever the same may have taken place) any of which disposal, spillage, release, discharge, leak or emission would be likely to give rise to any liability (actual or contingent) on the part of any member of the Wider Proximagen Group;

(ii)        there is, or is likely to be, for that or any other reason whatsoever, any liability (actual or contingent) of any past or present member of the Wider Proximagen Group to make good, repair, reinstate or clean up any property or any controlled waters now or previously owned, occupied, operated or made use of or controlled by any such past or present member of the Wider Proximagen Group, under any environmental legislation, regulation, notice, circular or order of any Third Party in any jurisdiction;

(iii)        any past or present member of the Wider Proximagen Group has not complied with the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and any laws implementing the same, the UK Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act of 1977; or

(iv)        there is, or is likely to be expected to be, or there has been, any:

(a)        claim brought against any member of the Wider Proximagen Group by a person or class of persons in respect of;
(b)        circumstances that exist whereby a person or class of persons would be likely to have a claim; or
(c)        liability (actual or contingent) of any member of the Wider Proximagen Group as a result of or relating to,

any material, chemical, product or process of manufacture or materials now or previously held, used, sold, manufactured, carried out or under development or research by any past or present member of the Wider Proximagen Group,

in each case, other than under paragraphs (i) and (ii), which is material in the context of the Wider Proximagen Group, taken as a whole.

For the purposes of these conditions the Wider Proximagen Group means Proximagen and its subsidiary undertakings, associated undertakings and any other undertaking in which Proximagen and/or such undertakings (aggregating their interests) have a significant interest and the Wider Upsher-Smith Group means Upsher-Smith and its subsidiary undertakings, associated undertakings and any other undertaking in which Upsher-Smith and/or such undertakings (aggregating their interests) have a significant interest and for these purposes subsidiary undertaking and undertaking have the meanings given by the Companies Act 2006, associated undertaking has the meaning given by paragraph 19 of Schedule 6 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 other than paragraph 19(1)(b) of Schedule 6 to those Regulations which shall be excluded for this purpose, and significant interest means a direct or indirect interest in ten per cent. or more of the equity share capital (as defined in the Companies Act 2006).

USL reserves the right to waive, in whole or in part, all or any of conditions (A) to (I) above, except for condition (A).

If Upsher-Smith or USL is required by the Panel to make an offer for Proximagen Shares under the provisions of Rule 9 of the City Code, Upsher-Smith or USL may make such alterations to any of the above conditions as are necessary to comply with the provisions of that Rule.

Conditions (A) to (I) (inclusive, but excluding Condition A(iii)) must be fulfilled, or be determined by USL to be or remain satisfied or (if capable of waiver) be waived prior to the commencement of the Court Hearing, failing which the Acquisition will lapse and the Scheme will not proceed.  USL shall be under no obligation to waive (if capable of waiver), to determine to be or remain satisfied or treat as fulfilled any of the Conditions (A) to (I) (inclusive) at any time prior to the Long Stop Date, notwithstanding that the other Conditions (or any of them) may at an earlier date have been waived (if capable of waiver), satisfied or fulfilled and that there are, at such earlier date, no circumstances indicating that any such Condition may not be capable of satisfaction or fulfilment.

The Acquisition will lapse and the Scheme will not proceed if, prior to the date of the Court Meeting, the Acquisition, or any matter arising from the Acquisition, is referred to the Competition Commission in the United Kingdom.

USL reserves the right to elect (with the consent of the Panel) to implement the Acquisition by way of a takeover offer (as defined in section 974 of the Companies Act 2006) as it may determine in its absolute discretion.  In such event, such offer will be implemented on the same terms, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments to reflect the change in method of effecting the Acquisition, but with an acceptance condition which will be set by reference to shares carrying 90 per cent. (or such lower percentage as Upsher-Smith may decide or the Panel may require) in value of the Proximagen Shares to which the Offer relates.  Upsher-Smith has agreed that any such Offer would remain open for acceptance for at least 60 days after the Offer Document is published.

The availability of the Acquisition to persons not resident in the United Kingdom or the United States may be affected by the laws of the relevant jurisdictions.  Persons who are not resident in the United Kingdom or the United States should inform themselves about and observe any applicable requirements.  If the laws, rules or regulation of any jurisdiction (including any state securities or "blue sky" laws of any state of the United States, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands) would require any registration or qualification in connection with the Acquisition as a consequence of the residence and/or principal place of business of any Proximagen Shareholder, then such Proximagen Shareholder may not be entitled to the benefit of the CVRs.

The Scheme will be governed by English law and be subject to the jurisdiction of the English courts, to the conditions set out above and in the formal Scheme Document and related Forms of Proxy and Form of Election.  The Scheme will comply with the applicable rules and regulations of the FSA and the London Stock Exchange and the City Code.

Part B:             Certain further terms of the Acquisition

Proximagen Shares which will be acquired under the Acquisition will be acquired with full title guarantee, fully paid and free from all liens, equities, charges, encumbrances, options, rights of pre-emption and any other third party rights and interests of any nature and together with all rights now or hereafter attaching or accruing to them, including voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid on or after the date of this announcement.



APPENDIX II

SOURCES OF INFORMATION AND BASES OF CALCULATION

In this announcement:

1.         Unless otherwise stated:

·      financial information relating to the Upsher-Smith Group has been extracted or derived (without any adjustment) from Upsher-Smith's audited annual report and accounts for the year ended 1 January 2012; and

·      financial information relating to the Proximagen Group has been extracted or derived (without any adjustment) from the audited annual report and accounts for Proximagen for the year ended 30 November 2011 and the unaudited interim accounts for Proximagen for the six month period ended 31 May 2012.

2.         The value of the Acquisition is calculated:

·      by reference to the price of 275 pence per Proximagen Share, being the Closing Price on 12 June 2012, the last Business Day prior to this announcement; and

·      on the basis of the fully diluted number of Proximagen Shares in issue referred to in paragraph 4 below.

3.         As at the close of business on 12 June 2012, being the last Business Day prior to the date of this announcement, Proximagen had in issue 63,119,601 Proximagen Shares.  The International Securities Identification Number for Proximagen Shares is GB00B06FMX57.

4.         The fully diluted share capital of Proximagen (being 69,689,794 Proximagen Shares) is calculated on the basis of:

·      the number of issued Proximagen Shares referred to in paragraph 3 above; and

·      the maximum number of Proximagen Shares which could be issued on or after the date of this announcement on the vesting of awards under the Proximagen Option Schemes, amounting in aggregate to 6,570,193 Proximagen Shares.

5.         Unless otherwise stated, all prices and closing prices for Proximagen Shares are closing middle market quotations derived from the AIM appendix to the Daily Official List (SEDOL).

6.         The premia implied by the Offer Consideration have been calculated with reference to  a price of 275 pence per Proximagen Share on 12 June 2012, being the last Business Day before this announcement.

7.         Where figures have been displayed in both £ and $, conversions have been based on a $/£ exchange rate of 1.5545 (being the published exchange rate by Bloomberg at 4:00pm (London time) on 12 June 2012 (being the last Business Day before the date of this announcement)).

8.         The enterprise value premium has been calculated:



APPENDIX III

DETAILS OF IRREVOCABLE UNDERTAKINGS

Directors' Irrevocable Undertakings[1] 

USL has received irrevocable commitments from each of the members of the Board of Proximagen, as listed below, in respect of their own beneficial holdings of Proximagen Shares and (to the extent relevant) the beneficial holdings of each Board member's spouse, civil partner, de factor partner, or similarly-related person, representing in aggregate approximately 1.43 per cent. of the existing issued ordinary share capital of Proximagen.  These commitments require each member of the Board of Proximagen to vote or procure that the registered holder votes in favour of the resolutions relating to the Acquisition at the Meetings (or, in the event the Acquisition is implemented by means of the Offer, to accept, or procure acceptance of, the Offer).

Name of Proximagen Director

Number of Proximagen Shares

% of Proximagen issued share capital

Kenneth Mulvany

798,567

1.27%

Peter Allen

20,000

0.03%

Ann Jacqueline Hunter

6,305

0.01%

James Hunter

20,000

0.03%

Michael Ashton

56,384

0.09%

TOTAL

901,256

1.43%

These irrevocable commitments will continue to be binding in the event that a higher competing offer is made for Proximagen.

These irrevocable commitments will cease to be binding on the earliest to occur of the following events: 

·      If the Acquisition is implemented by way of the Offer and the Offer lapses or is withdrawn without becoming or being declared unconditional in all respects; 

·      If USL announces, with the consent of any relevant authority (if required) and before the Scheme Document or Offer Document is posted, that it does not intend to proceed with the Acquisition; or

·      If the Scheme does not become effective by 14 December 2012 (or such later date as USL and Proximagen agree in writing and that the Court approves).

Shareholder Irrevocable Undertakings

USL has received irrevocable commitments from the following shareholders in Proximagen in respect of their beneficial holdings of Proximagen Shares (or, in the case of Invesco Asset Management Limited, the Proximagen Shares which it manages on a discretionary basis for its clients and, in the case of Lansdowne Partners Limited, as agent for Lansdowne funds) representing in aggregate approximately 70.58 per cent. of the existing issued ordinary share capital of Proximagen.  These commitments are subject to certain limitations and exceptions as described below.

These commitments require each such shareholder to vote or procure that the registered holder votes in favour of the resolutions relating to the Acquisition at the Meetings (or, in the event the Acquisition is implemented by means of the Offer, to accept, or procure acceptance of, the Offer).

Name of Proximagen Shareholder

 

Number of Proximagen Shares

Approximate % of Proximagen issued share capital

Invesco Asset Management Limited

 

16,956,326

26.86%

Lansdowne Partners Limited

14,849,580

23.53%

H Lundbeck A/S

5,738,100

9.09%

IP Group plc

4,804,000

7.61%

Kings College London

2,204,324

3.49%

TOTAL

44,552,330

70.58%

King's College London

The irrevocable commitments given by King's College London will continue to be binding in the event that a higher competing offer is made for Proximagen.  The irrevocable commitments given by King's College London will cease to be binding on the earliest to occur of the following events: 

·      If the Acquisition is implemented by way of the Offer and the Offer lapses or is withdrawn without becoming or being declared unconditional in all respects; 

·      If USL announces, with the consent of any relevant authority (if required) and before the Scheme Document or Offer Document is posted, that it does not intend to proceed with the Acquisition and no new, revised or replacement Scheme or Offer is announced by USL in accordance with the City Code at the same time or within 28 days thereafter; or

·      If the Scheme does not become effective by 31 December 2012 (or such later date as the shareholder giving the commitment agrees in writing).

Lansdowne Partners Limited

The irrevocable commitment given by Lansdowne Partners Limited will cease to be binding on the earliest to occur of the following events:  

·      If the Acquisition is implemented by way of the Offer and the Offer lapses or is withdrawn without becoming or being declared unconditional in all respects; 

·      If USL announces, with the consent of any relevant authority (if required) and before the Scheme Document or Offer Document is posted, that it does not intend to proceed with the Acquisition and no new, revised or replacement Scheme or Offer is announced by USL in accordance with the City Code at the same time or within 28 days thereafter; or

·      If the Scheme does not become effective by 31 December 2012 (or such later date as the shareholder giving the commitment agrees in writing).

·      If:

a competing offer for all of the issued and to be issued Proximagen Shares has been announced in accordance with the requirements of the City Code that includes cash and/or cash equivalent consideration equal to or exceeding 120 per cent. of the value of the cash consideration per Proximagen Share available under the terms of the Acquisition and which the shareholder giving the commitment determines attributes an overall value to each Proximagen Share that is more attractive than the overall value attributable under the Acquisition having regard to the total amount of the cash and non-cash elements of the Acquisition and the competing offer;

USL does not, within ten days of announcement  of such competing offer, announce a revised offer which the shareholder determines values each Proximagen Share at a price equal to or greater than the value of the consideration per Proximagen Share under the relevant competing offer, having regard to the total amount of the cash and non-cash elements of the revised offer and such competing offer; and

the shareholder giving the commitment notifies USL within three days of the expiry of such ten day period that its obligations under the irrevocable commitment have ceased to have effect. 

H. LundbeckA/S

The irrevocable commitment given by H Lundbeck A/S will cease to be binding on the earliest to occur of the following events:  

·      If the Scheme Document is not posted within the period permitted by the Panel;

·      If the Scheme lapses and USL does not switch to an Offer;

·      If the Acquisition is implemented by way of the Offer and the Offer lapses or is withdrawn without becoming or being declared unconditional in all respects;

·      If USL announces, with the consent of any relevant authority (if required) and before the Scheme Document or Offer Document is posted, that it does not intend to proceed with the Acquisition and no new, revised or replacement Scheme or Offer is announced by USL in accordance with the City Code at the same time or within 28 days thereafter; or

·      If the Scheme does not become effective by 31 December 2012 (or such later date as the shareholder giving the commitment agrees in writing).

·      If:

a third party has announced a firm intention to make a competing offer for all of the issued and to be issued Proximagen Shares in accordance with the requirements of the City Code which the shareholder giving the commitment reasonably determines values each Proximagen Share at a price which equals or exceeds 110 per cent. of the value of the consideration per Proximagen Share available under the terms of the Acquisition, having regard to the total amount, cash and non-cash elements of the Acquisition and such competing offer; and

USL does not, within ten days of announcement  of such competing offer, announce a revised offer which the shareholder reasonably determines values each Proximagen Share at a price equal to or greater than the value of the consideration per Proximagen Share under the relevant competing offer, having regard to the total amount, cash and non-cash elements of the revised offer and such competing offer.

IP Group plc

The irrevocable commitment given by IP2IPO Limited and IP2IPO Management VI Limited will cease to be binding on the earliest to occur of the following events:  

·      If the Scheme Document is not posted within the period permitted by the Panel;

·      If the Scheme lapses and USL does not switch to an Offer;

·      If the Acquisition is implemented by way of the Offer and the Offer lapses or is withdrawn without becoming or being declared unconditional in all respects;

·      If USL announces, with the consent of any relevant authority (if required) and before the Scheme Document or Offer Document is posted, that it does not intend to proceed with the Acquisition;

·      If the Scheme does not become effective by 31 December 2012 (or such later date as the shareholder giving the commitment agrees in writing); or

·      If:

a competing offer for all of the issued and to be issued Proximagen Shares has been announced in accordance with the requirements of the City Code that includes cash consideration equal to or exceeding 120 per cent. of the value of the cash consideration (excluding the consideration attributed to the CVRs) per Proximagen Share available under the terms of the Acquisition and which the shareholder giving the commitment determines is more attractive than the overall value attributable under the Acquisition having regard to the total amount of the cash and non-cash elements of the Acquisition and the competing offer;

USL does not, within ten days of announcement  of such competing offer, announce a revised offer which the shareholder determines values each Proximagen Share equal to or greater than the value of the consideration per Proximagen Share under the relevant competing offer, having regard to the total amount of the cash and non-cash elements of the revised offer and such competing offer (with the shareholder having absolute discretion as to what value (if any) to ascribe such non-cash elements); and

the shareholder giving the commitment notifies USL within ten days of the expiry of such ten day period that its obligations under the irrevocable commitment have ceased to have effect. 

Invesco Asset Management Limited 

The irrevocable commitment given by Invesco Asset Management Limited will cease to be binding if, prior to the Effective Date or the Offer becoming unconditional as to acceptances, any third party announces a firm intention to make a general offer for all shares in Proximagen which, in Invesco's reasonable opinion, represents an improvement to the terms of the Acquisition in its entirety, having regard to the total amount of the cash and non-cash elements of the terms of the Acquisition when compared with the third party's offer.

Invesco Asset Management Limited manages client funds on a discretionary basis.  If an underlying client has terminated Invesco's professional relationship in circumstances where such client is not bound to honour the pre-existing obligations or undertaking in respect of the Proximagen Shares, then the irrevocable commitment may cease to be binding in respect of the shares transferred.



APPENDIX IV

Illustrative CVR Payment Calculation

The illustrations and examples contained in this Appendix IV are being provided for illustrative purposes only and should not be regarded as any guarantee or indication of likely performance.

Payments under the CVR are calculated on the basis of the following formula:

CVRs entitlement = 57.5% of Net Revenues derived from the VAP-1 CVR Program and 39.5% of Net Revenues from the PRX00933 CVR Program (the CVR Net Revenues)

For these purposes:

Net Revenues include revenues received from the commercialisation of the relevant CVR Program (e.g. licensing fees, milestone payments, royalties and other similar payments) less the Enlarged Group's Development Costs in respect of that CVR Program.

Below are illustrative computations of the CVR Net Revenues in accordance with the formula described above assuming the total number of CVRs is 59,674,094 and an exchange rate as set out in paragraph 7 of Appendix II:

Example 1

Assumptions:

The VAP-1 program has Development Costs totalling $20 million. This program is out-licensed and Upsher-Smith receives out-licensing revenue of $200 million. No revenue is received in respect of the PRX00933 program.

No previous payments have been made on the CVRs.

Computation of CVR Net Revenues:

Step 1 - The $20 million Development Costs are subtracted from the $200 million revenues received, resulting in $180 million.

Step 2 - $180 million is multiplied by 57.5% producing (for the purposes of this example) CVR Net Revenues in respect of the VAP-1 program of $103.5 million (£66.6 million).

Step 3 - Proximagen shareholders receive approximately 112 pence per CVR.

Example 2 

Assumptions:

The PRX00933 program has Development Costs totalling $20 million. This program is out-licensed and Upsher-Smith receives out-licensing revenue of $200 million.  No revenue is received in respect of the VAP-1 program.

No previous payments have been made on the CVRs.

Computation of CVR Net Revenues

Step 1 - The $20 million Development Costs for the PRX00933 program are subtracted from the $200 million revenues received, resulting in $180 million.

Step 2 - $180  million is multiplied by 39.5% producing (for the purposes of this example) CVR Net Revenues in respect of the PRX00933 program of $71.1 million (£45.7 million).

Step 3 - Proximagen shareholders receive approximately 77 pence per CVR.

Example 3 

Assumptions:

The VAP-1 program has Development Costs totalling $20 million.  This program is out-licensed and Upsher-Smith receives out-licensing revenue of $210 million.

The PRX00933 program has Development Costs totalling $20 million.  This program is out-licensed and Upsher-Smith receives out-licensing revenue of $210 million.

No previous payments have been made on the CVRs.

Computation of CVR Net Revenues

Step 1 - The $20 million Development Costs for the VAP-1 program are subtracted from the $210 million revenues received, resulting in $190 million.

Step 2 - $190 million is multiplied by 57.5% producing (for the purposes of this example) CVR Net Revenues in respect of the VAP-1 program of $109.3 million (£70.3 million).

The $20 million Development Costs for the PRX00933 program is subtracted from the $210 million revenues received, resulting in $190 million.

$190 million is multiplied by 39.5% producing (for the purposes of this example) CVR Net Revenues in respect of the PRX00933 program of $75.1 million (£48.3 million).

The total CVR Net Revenues under this example would be £118.6 million.

Step 3 - Although this represents approximately 199 pence per CVR, as Proximagen Shareholders are only entitled to receive an amount up to the CVR Cap, the Proximagen Shareholders receive (under this example) 192 pence per CVR.

Actual payments will depend entirely upon Net Revenues generated by the CVR Programs and are capped at a maximum level. The minimum payment on any payment date, or over the entire period, could be zero. There will be no interest conferred by a CVR on the economic activities of the combined business generally.

The Panel has determined that an estimate of the value of a CVR in accordance with Rule 24.11 will not be included in the Scheme Document.



APPENDIX V

DEFINITIONS

Acquisition

the proposed acquisition of the entire issued and to be issued share capital of Proximagen by USL (other than the Excluded Shares), to be effected by the Scheme (or by the Offer under certain circumstances described in this announcement)

AIM

AIM, being a market operated by the London Stock Exchange

AIM Rules

the rules published by the London Stock Exchange entitled AIM Rules for Companies in force from time to time

Board

the board of directors of the relevant company

Business Day

a day, (other than a Saturday, Sunday, public or bank holiday) on which banks are generally open for business in London

Capital Reduction

the proposed reduction of share capital of Proximagen pursuant to the Scheme

City Code

the City Code on Takeovers and Mergers

Class I CVRs

the Class I contingent value rights to be issued by USL

Class I CVR Holder

a holder of a Class I CVR

Class II CVRs

the Class II contingent value rights to be issued by USL

Class II CVR Holder

a holder of a Class II CVR

Closing Price

the closing middle market quotation of a share derived from (in respect of Proximagen Shares) the AIM appendix to the Daily Official List for that day

Conditions

the conditions of the Acquisition set out in Appendix I to this announcement

Confidentiality Agreement

the confidentiality agreement dated 22 May 2012 between Upsher-Smith and Proximagen

Court

the High Court of Justice in England and Wales

Court Hearing

the hearing, following the Meetings, by the Court of the application to sanction the Scheme

Court Meeting

the meeting of the Proximagen Shareholders to be convened by order of the Court pursuant to Part 26 of the Companies Act 2006 for the purpose of considering and, if thought fit, approving the Scheme (with or without amendment) and any adjournment thereof

Credit Agreement

has the meaning given in paragraph 11 of this announcement

CVRs

the Class I CVRs and the Class II CVRs

CVR Cap

has the meaning given in paragraph 3 of this announcement

CVR Deed Poll

the deed poll constituting the CVRs

CVR Holder

a holder of a CVR

CVR Net Revenues

has the meaning given in paragraph 3 of this announcement

CVR Programs

has the meaning given in paragraph 3 of this announcement

CVR Term

has the meaning given in paragraph 3 of this announcement

Daily Official List

the Daily Official List published by the London Stock Exchange

Development Costs

development costs of the Enlarged Group that are attributable to a CVR Program

Disclosed Information

any information which has been (i) fairly disclosed by or on behalf of Proximagen or its advisers to Upsher-Smith or its advisers in connection with or in contemplation of (a) the existing co-development and partnering arrangements between Proximagen and Upsher-Smith and (b) the Acquisition prior to the date of this announcement, whether by electronic means, physical form or orally, (ii) disclosed in Proximagen's report and accounts for the year ended 30 November 2011 or its interim accounts for the 6 month period ended 31 May 2012, or (iii) disclosed in this announcement

Effective Date

the date on which the Scheme becomes effective in accordance with its terms

EMI Plan

the Proximagen Neuroscience plc Enterprise Management Incentive Share Option Plan 2005 (as amended on 14 October 2005)

Enlarged Group

following completion of the Acquisition, the combined Upsher-Smith Group and Proximagen Group

Excluded Shares

any Proximagen Shares legally or beneficially held by Upsher-Smith or any of its Subsidiaries or subsidiary undertakings

Form of Election

a form of election to elect for either the Class I CVR or Class II CVR

Forms of Proxy

the forms of proxy for use at the Court Meeting and the Proximagen General Meeting which will accompany the Scheme Document

FSA

the Financial Services Authority

J.P. Morgan Cazenove

J.P. Morgan Limited which conducts its UK investment banking activities as J.P. Morgan Cazenove

LIBOR

London Inter Bank Offer Rate

Listing Rules

the rules and regulations made by the FSA in its capacity as the UK Listing Authority under the Financial Services and Markets Act 2000, and contained in the UK Listing Authority's publication of the same name

Loan Notes

the loan notes to be issued by USL at the election of Class I CVR Holders pursuant to the terms of the Class I CVRs

London Stock Exchange

London Stock Exchange plc

Long Stop Date

31 December 2012, or such later date as USL and Proximagen may agree and the Court (if required) may allow

Meetings

the Court Meeting and the Proximagen General Meeting

Net Revenues

has the meaning given in paragraph 3 of this announcement

New Proximagen Shares

the new Proximagen Shares to be issued to USL credited as fully paid in accordance with the Scheme

Offer

should the Acquisition be implemented by way of a takeover offer, the takeover offer to be made by or on behalf of USL to acquire the entire issued and to be issued share capital of Proximagen and, where the context admits, any subsequent revision, variation, extension or renewal of such offer

Offer Consideration

the consideration payable in connection with the Acquisition

Offer Document

should the Acquisition be implemented by means of the Offer, the document to be sent to Proximagen Shareholders which will contain, inter alia, the terms and conditions of the Offer

Opening Position Disclosure

has the same meaning as in Rule 8 of the City Code

Overseas Proximagen Shareholders

Scheme Shareholders who are resident in, ordinarily resident in, or citizens of, jurisdictions outside the United Kingdom or the United States

Panel

the Panel on Takeovers and Mergers

Phase I

safety screening studies that are typically performed in healthy subjects

Phase II

preliminary proof of concept studies performed in patients and in some cases phase II trials may be designed as pivotal studies

Phase III

pivotal safety and efficacy studies performed in patients

Proximagen

Proximagen Group plc, incorporated in England and Wales with registered number 05333020

Proximagen General Meeting

the general meeting of Proximagen Shareholders to be convened to consider and if thought fit pass, inter alia, a special resolution in relation to the Acquisition

Proximagen Group

Proximagen and its Subsidiary and associated undertakings

Proximagen Option Schemes

the EMI Plan and the Unapproved Plan

Proximagen Shareholders

the holders of Proximagen Shares

Proximagen Shares

the ordinary shares of 1 pence each in the capital of Proximagen

Publicly Announced

announced publicly and delivered by or on behalf of Proximagen through a Regulatory Information Service prior to the date of this announcement

Reduction Court Order

the act of Court confirming the Capital Reduction

Registrar of Companies

the Registrar of Companies in England and Wales

Regulatory Information Service

any of the services set out in Appendix II to the Listing Rules

Restricted Jurisdiction

any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure if information concerning the Acquisition is sent or made available to Proximagen Shareholders in that jurisdiction

Scheme

the proposed scheme of arrangement under Part 26 of the Companies Act 2006 between Proximagen and Proximagen Shareholders to implement the Acquisition

Scheme Court Order

the act of Court sanctioning the Scheme

Scheme Document

the document to be dispatched to Proximagen Shareholders in respect of the Scheme

Scheme Record Time

6.00 p.m. on the last Business Day before the date of the Court hearing to confirm the Capital Reduction

Scheme Shareholder

holders of Scheme Shares

Scheme Shares

1.   the Proximagen Shares in issue at the date of the Scheme Document;

2.   any Proximagen Shares issued after the date of the Scheme Document and prior to the Voting Record Time; and

3.   any Proximagen Shares issued at or after the Voting Record Time and prior to the Scheme Record Time in respect of which the original or any subsequent holder thereof is bound by the Scheme, or shall by such time have agreed in writing to be bound by the Scheme,

other than the Excluded Shares

SEC

the Securities and Exchange Commission

Statement of Capital

the statement of capital in relation to the Capital Reduction required to be sent to the Registrar of Companies in accordance with section 649 of the Companies Act 2006

Subsidiary

has the meaning given in section 1159 of the Companies Act 2006

UK or United Kingdom

the United Kingdom of Great Britain and Northern Ireland

UK Listing Authority

the FSA as the competent authority for listing in the United Kingdom

Upsher-Smith

Upsher-Smith Laboratories, Inc., a Minnesota corporation having its headquarters at 6701 Evenstad Drive, Maple Grove, MN 55369, USA

Upsher-Smith Group

Upsher-Smith and its Subsidiary and associated undertakings

Unapproved Plan

the Proximagen Group plc Unapproved Share Option Plan (as amended on 1 June 2010)

US or United States

the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia

US Exchange Act

United States Security Exchange Act of 1934, as amended

USL

USL Pharma International UK Limited, a company incorporated in England and Wales with registered number 8098631 (or, if Upsher-Smith elects, a nominee or wholly-owned subsidiary of Upsher-Smith notified in writing to Proximagen prior to posting of the Scheme Document (or, if applicable, the Offer Document)

US Persons

has the meaning set out in the US Securities Act

US Securities Act

United States Securities Act of 1933, as amended

Voting Record Time

the time and date specified in the Scheme Document by reference to which entitlement to vote on the Scheme will be determined, expected to be 6.00 p.m. on the day which is two Business Days prior to the date of the Court Meeting or any adjournment thereof (as the case may be)

WG Partners

Charles Stanley & Co Limited, trading under the name of WG Partners, of 25 Luke Street, London EC2A 4AR

$

the lawful currency for the time being of the United States of America

£

the lawful currency for the time being of the United Kingdom

 

 

 



[1] The undertakings and the numbers referred to in this table refer only to those shares which the relevant director is beneficially entitled to and any share such director is otherwise able to control the exercise of in terms of the rights attaching to such share, including the ability to procure the transfer of such share.  These undertakings and the numbers referred to in this table exclude any Proximagen Shares that may be issued or allotted to the Proximagen Directors in future pursuant to any award under the Proximagen Option Schemes. 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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