-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D2wO5OWSmvtWvxkQVrkw3//yoe5PQkGhWruoa2Vf8YGmWvHTynQ0yF/cNh77moVz A8yGf2SR17tu4u0I6ICqyQ== 0000950130-99-006716.txt : 19991124 0000950130-99-006716.hdr.sgml : 19991124 ACCESSION NUMBER: 0000950130-99-006716 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19991123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHIRE PHARMACEUTICALS GROUP PLC CENTRAL INDEX KEY: 0000936402 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: SEC FILE NUMBER: 333-90947 FILM NUMBER: 99763261 BUSINESS ADDRESS: STREET 1: EAST ANTON ANDOVER STREET 2: HAMPSHIRE ENGLAND CITY: ENGLAND SP10 5RG MAIL ADDRESS: STREET 1: EAST ANTON ANDOVER STREET 2: HAMPSHIRE ENGLAND CITY: ENGLAND SP10 5RG 424B2 1 FORM 424B(2) RULE NO. 424(b)(2) REGISTRATION NO. 333-90947 ROBERTS PHARMACEUTICAL CORPORATION Meridian Center II 4 Industrial Way West Eatontown, New Jersey 07724 ---------------- NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 22, 1999 ---------------- To the Shareholders of Roberts Pharmaceutical Corporation: A special meeting of shareholders of Roberts Pharmaceutical Corporation will be held on December 22, 1999, at our offices at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724, at 10:00 a.m., local time, for the following purposes: . To consider and vote on a proposal to approve an agreement and plan of merger among Roberts, Shire Pharmaceuticals Group plc and Ruby Acquisition Sub Inc., a newly formed subsidiary of Shire. In the merger Ruby Acquisition Sub will be merged with and into Roberts, with Roberts continuing as a subsidiary of Shire; and . To consider and vote on such other matters as may properly be presented incident to the conduct of the special meeting. The accompanying Prospectus-Proxy Statement contains information regarding the business to be considered at the special meeting. A copy of the merger agreement is attached as Annex A to the Prospectus-Proxy Statement. The board of directors of Roberts by a unanimous vote has determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are in the best interests of Roberts and its shareholders, and has adopted the merger agreement. The board of directors of Roberts recommends that you vote in favor of the proposal to approve the merger agreement. Holders of Roberts common stock of record at the close of business on October 27, 1999, the record date established by the board of directors of Roberts in connection with the special meeting, are entitled to notice of, and to vote at, the special meeting. Under New Jersey law, holders of Roberts common stock are not entitled to dissenters' rights in connection with the merger. YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO ENSURE YOUR REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO SIGN AND DATE THE ACCOMPANYING PROXY AND MAIL IT AT ONCE IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED. By Order of the Board of Directors, Anthony A. Rascio Vice President and Secretary Eatontown, New Jersey November 23, 1999 Shire Pharmaceuticals Group plc Roberts Pharmaceutical Corporation Roberts Pharmaceutical Corporation is sending this Prospectus-Proxy Statement to its shareholders in connection with a solicitation of proxies by the board of directors of Roberts, a New Jersey corporation, for use at a special meeting. Roberts' board of directors has unanimously approved a merger agreement between Roberts and Shire Pharmaceuticals Group plc. At the special meeting, the Roberts shareholders will consider and vote on a proposal to approve and adopt the merger agreement. If the Roberts shareholders approve the merger, each share of Roberts common stock will represent a right to receive between approximately 1.0427 and approximately 1.2802 American depositary shares of Shire or between 3.1280 and 3.8407 ordinary shares of Shire. You will receive American depositary shares unless you elect to receive ordinary shares. Each American depositary share represents three Shire ordinary shares. Roberts common stock is listed and traded on the American Stock Exchange under the symbol "RPC." The Shire ordinary shares are listed and traded on the London Stock Exchange Limited under the symbol "SHP.L." The Shire American depositary shares are listed and traded on the Nasdaq National Market under the symbol "SHPGY." On July 23, 1999, the last business day before public announcement of the merger agreement, the last reported per share price of Roberts common stock on the American Stock Exchange, the closing middle market quotation for the ordinary shares on the Daily Official List of the London Stock Exchange and the last reported per share price of the American depositary shares as reported on the Nasdaq National Market were $25.00, 565p and $27.00, respectively, and on November 22, 1999, such per share prices were $32.25, 657p and $31.50, respectively. Roberts board of directors urges Roberts shareholders to read and carefully consider the information in this Prospectus-Proxy Statement. Any shareholder of Roberts who gives a proxy may revoke it at any time prior to its use. See "Risk Factors" beginning on page 31 of this Prospectus-Proxy Statement for a discussion of certain matters Roberts shareholders should consider before voting for or against the approval and adoption of the merger agreement. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus-Proxy Statement. Any representation to the contrary is a criminal offense. The date of this Prospectus-Proxy Statement is November 22, 1999 and it is first being mailed to shareholders on or about this date. TABLE OF CONTENTS
Page ---- ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES LAWS......................................................... 1 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........................ 1 QUESTIONS AND ANSWERS ABOUT THE SHIRE/ROBERTS MERGER..................... 2 SUMMARY.................................................................. 4 General.................................................................. 4 The Companies............................................................ 4 The Special Meeting...................................................... 5 Record Date; Shares Entitled to Vote................................... 5 Required Vote.......................................................... 5 Revocability of Proxies................................................ 5 The Merger and the Merger Agreement...................................... 5 What You Will Receive in the Merger.................................... 5 Benefits of the Merger................................................. 7 Recommendation of the Roberts Board of Directors....................... 7 Roberts' Reasons for the Merger........................................ 7 Opinion of Roberts' Financial Advisor.................................. 8 Interests in the Merger of Persons Affiliated with Roberts............. 8 Anticipated Accounting Treatment....................................... 8 Certain U.S. Federal Income Tax Consequences........................... 9 Dissenters' Rights..................................................... 9 Conditions to the Merger............................................... 9 Effective Time of the Merger........................................... 9 Termination of the Merger Agreement.................................... 9 The Option Agreement................................................... 10 Governmental and Regulatory Matters.................................... 10 Comparative Rights of Shareholders..................................... 10 Adoption of U.S. GAAP for Reporting Purposes............................. 11 Summary Historical Consolidated Financial Data of Shire.................. 15 Summary Historical Consolidated Financial Data of Roberts................ 17 Summary Unaudited Pro Forma Combined Financial Data...................... 19 Unaudited Pro Forma Combined Condensed Income Statement Nine Months Ended September 30, 1999...................................................... 20 Unaudited Pro Forma Combined Condensed Income Statement Year Ended December 31, 1998....................................................... 21 Unaudited Pro Forma Combined Condensed Income Statement Six Months Ended December 31, 1997....................................................... 22 Unaudited Pro Forma Combined Condensed Income Statement Year Ended June 30, 1997................................................................ 23 Unaudited Pro Forma Combined Condensed Income Statement Year Ended June 30, 1996................................................................ 24 Unaudited Pro Forma Combined Condensed Balance Sheet As of September 30, 1999.................................................................... 25 Notes.................................................................. 26
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Page ---- Comparative Per Share Data................................................ 28 Notes................................................................... 29 Comparative Market Price Information...................................... 30 Dividend Policy........................................................... 30 RISK FACTORS.............................................................. 31 The following are risks that relate to the merger....................... 31 The following are risks that relate to the operations of both Roberts and Shire.............................................................. 32 The following are risks that relate to Shire and will relate to the com- bined company after the merger....................................................... 38 WHERE YOU CAN FIND MORE INFORMATION....................................... 40 CURRENCIES AND EXCHANGE RATES............................................. 41 SHIRE AFTER THE MERGER.................................................... 42 Overview................................................................ 42 Strategy and Approach................................................... 42 Sales and Marketing..................................................... 43 Combined Marketed Products.............................................. 43 Products Under Development.............................................. 43 Drug Delivery Technologies.............................................. 44 THE SPECIAL MEETING....................................................... 45 Date, Time, Place and Purpose........................................... 45 Matters to Be Considered at the Special Meeting......................... 45 Record Date; Voting Rights; Voting at the Meeting....................... 45 Voting of Proxies....................................................... 45 THE MERGER................................................................ 47 Background of the Merger................................................ 47 Roberts' Reasons for the Merger; Recommendation of the Roberts Board of Directors.............................................................. 49 Shire's Reasons for the Merger.......................................... 51 Opinion of Financial Advisor to Roberts................................. 52 Interests in the Merger of Persons Affiliated with Roberts.............. 60 Dissenters' Rights...................................................... 62 Other Effects of the Merger............................................. 62 Governmental Regulation................................................. 63 Anticipated Accounting Treatment and Effects............................ 63 DESCRIPTION OF INDEBTEDNESS............................................... 64 THE MERGER AGREEMENT...................................................... 65 General; Effective Time and Effects of the Merger....................... 65 Directors of Shire Immediately Following the Merger..................... 65 Conversion of Roberts Shares............................................ 65 The Exchange Ratio...................................................... 67 Average Closing Price, Exchange Ratio and Equivalent Value.............. 67 No Fractional ADSs or Ordinary Shares................................... 68 Exchange of Share Certificates.......................................... 68 Treatment of Roberts Stock Options...................................... 68 Employee Benefits and Options........................................... 69 Indemnification and Insurance........................................... 69 Representations and Warranties.......................................... 69
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Page ---- Conduct of Business Pending Merger...................................... 69 No Solicitation......................................................... 70 Conditions to Consummation of the Merger................................ 70 Termination; Effect of Termination...................................... 72 Amendment............................................................... 74 Waivers................................................................. 74 THE SHAREHOLDER AGREEMENTS................................................ 75 Shire Shareholder Agreements............................................ 75 Roberts Shareholder Agreements.......................................... 75 THE OPTION AGREEMENT...................................................... 75 General................................................................. 75 Notice of Exercise...................................................... 76 Limitation on Total Profit.............................................. 76 MATERIAL TAX CONSEQUENCES................................................. 78 General................................................................. 78 United States Tax Consequences of the Merger to U.S. Persons That Bene- ficially Own Shares of Roberts Common Stock......................................... 79 United States Tax Consequences of the Ownership of Ordinary Shares and ADSs to U.S. Persons that Beneficially Own Shares of Roberts Common Stock........... 80 United Kingdom Tax Consequences of the Ownership of Ordinary Shares and ADSs to U.S. Persons That Beneficially Own Shares of Roberts Common Stock........... 81 DESCRIPTION OF SHIRE SHARE CAPITAL........................................ 84 General................................................................. 84 Share Capital........................................................... 84 Dividends............................................................... 85 Rights in a Winding-Up.................................................. 85 Shareholder Meetings.................................................... 86 Voting Rights........................................................... 86 Authorization to Issue Shares; Preemptive Rights........................ 87 Variation of Rights..................................................... 87 Alteration of Capital................................................... 87 Disclosure of Interests................................................. 88 Share Acquisitions...................................................... 89 Transfer of Shares...................................................... 89 Other Shares Information................................................ 90 DESCRIPTION OF AMERICAN DEPOSITARY SHARES AND AMERICAN DEPOSITARY RECEIPTS...................................................... 91 American Depositary Shares and American Depositary Receipts............. 91 Share Dividends and Other Distributions................................. 91 Deposit, Withdrawal and Cancellation.................................... 92 Voting Rights........................................................... 93 Fees and Expenses....................................................... 93 Payment of Taxes........................................................ 94 Reclassifications, Recapitalizations and Mergers........................ 94 Amendment and Termination............................................... 94 Limitations on Obligations and Liability to ADR Holders................. 95 Requirements for Depositary Actions..................................... 95 Pre-release of ADSs..................................................... 96 The Depositary.......................................................... 96
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Page ---- COMPARATIVE RIGHTS OF ROBERTS SHAREHOLDERS AND SHIRE SHAREHOLDERS.......... 97 Authorized Capital Stock................................................. 97 Shareholder Voting Rights................................................ 97 Special Meetings of Shareholders......................................... 97 Consent of Shareholders in Lieu of Meeting............................... 98 Rights of Inspection..................................................... 98 Amendment of Governing Instruments....................................... 99 Certain Provisions Relating to Share Acquisition......................... 99 Shareholder Rights Plan.................................................. 100 Dissenters' Rights....................................................... 100 Disclosure of Interests.................................................. 100 Sources and Payment of Dividends......................................... 101 Classification of the Board of Directors................................. 101 Removal of Directors..................................................... 102 Vacancies on the Board of Directors...................................... 102 Shareholders' Suits...................................................... 103 Indemnification; Liability of Directors.................................. 103 Preemptive Rights........................................................ 103 Rights of Purchase and Redemption........................................ 104 CERTAIN LEGAL MATTERS...................................................... 105 EXPERTS.................................................................... 105 Annex A--Agreement and Plan of Merger ..................................... A-1 Annex B--Opinion of PaineWebber Incorporated .............................. B-1 Annex C--Opinion of Bear, Stearns & Co. Inc. .............................. C-1
iv ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES LAWS Shire Pharmaceuticals Group plc is a public limited company incorporated under the laws of England and Wales. Some of Shire's directors, officers and controlling persons, as well as certain of the experts named in this Prospectus-Proxy Statement, reside outside the United States of America and all or a substantial portion of their assets and the assets of Shire are located outside the U.S. As a result, with the exception of Shire, it may be difficult for you to effect service of process within the U.S. upon these persons or to enforce judgments of courts of the U.S. against them based on civil liabilities under the U.S. federal securities laws. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The SEC allows this Prospectus-Proxy Statement to incorporate by reference important business and financial information which is not presented in this document or delivered with this document. Documents relating to this information for Roberts, excluding exhibits to those documents, unless they are specifically incorporated by reference in this document, are available without charge upon request to the Company Secretary, Roberts Pharmaceutical Corporation, Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724. Telephone requests may be directed to (732) 676-1200. Documents relating to this information for Shire, excluding exhibits to those documents unless they are specifically incorporated by reference in this document, are available without charge upon request to the Company Secretary, Shire Pharmaceuticals Group plc, East Anton, Andover, Hampshire SP10 5RG, England. Telephone requests may be directed to (44) 1-264-333-455. To ensure timely delivery of documents, please make your request no later than December 10, 1999. Roberts has filed the following documents with the SEC (File No. 1-10432) which are incorporated in this document by reference: (a) Roberts' Annual Report on Form 10-K and Form 10-K/A for the year ending December 31, 1998; (b) Roberts' Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1999, June 30, 1999 and September 30, 1999 and Form 10-Q/A for the quarterly period ended June 30, 1999; (c) Roberts' Current Reports on Form 8-K, filed on January 19, 1999, February 2, 1999, February 9, 1999, March 10, 1999, March 18, 1999, May 6, 1999, May 12, 1999, June 3, 1999, June 10, 1999, July 27, 1999, September 9, 1999, and October 29, 1999; and (d) Roberts' proxy statement for its 1999 annual meeting of shareholders. Shire has filed the following documents with the SEC (File No. 0-29630) which are incorporated in this document by reference: (a) Shire's Annual Report on Form 20-F/A for the year ended December 31, 1998 and (b) Shire's Reports on Form 6-K, filed on January 8, 1999, March 12, 1999, March 23, 1999, April 9, 1999, May 12, 1999, May 17, 1999, July 6, 1999, July 27, 1999, August 30, 1999, October 12, 1999, October 22, 1999, October 26, 1999 and October 28, 1999. Any future filings by either Roberts or Shire under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus-Proxy Statement and prior to the date of the special meeting are also incorporated in this document by reference. Any of these filings will automatically update and replace the information that appears or is incorporated in this Prospectus- Proxy Statement. No person is authorized to give any information or to make any representations not contained in this Prospectus-Proxy Statement or in the documents incorporated in this document by reference in connection with the solicitation and the offering made by this document. If given or made, such information or representation should not be relied upon as having been authorized by Roberts or Shire. This Prospectus-Proxy Statement does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this Prospectus-Proxy Statement, or the solicitation of a proxy from any person, in any jurisdiction in which it is unlawful to make this offer, solicitation of an offer or proxy solicitation. Neither the delivery of this Prospectus-Proxy Statement nor any distribution of the securities made under this Prospectus-Proxy Statement will, under any circumstances, create an implication that there has been no change in the affairs of Roberts or Shire since the date of this Prospectus-Proxy Statement other than any change contained in the documents incorporated in this document by reference. QUESTIONS AND ANSWERS ABOUT THE SHIRE/ROBERTS MERGER Q. When do you expect the merger to be completed? A. Roberts and Shire hope to complete the merger by December 23, 1999. For a description of the conditions to completing the merger, see "The Merger Agreement--Conditions to Consummation of the Merger." Q. What is a Shire ADS? A. An ADS (which stands for American depositary share) of Shire is a security which allows shareholders to more easily hold and trade interests in Shire in the U.S. Shire is an English company which issues ordinary shares, equivalent in many respects to common stock in a U.S. company. Each ADS represents three ordinary shares. Otherwise, the ADSs are not practically different from ordinary shares and carry practically the same rights. However, only the ADSs will be traded on the NASDAQ National Market. The ordinary shares are traded on the London Stock Exchange and are quoted in pounds sterling. In the merger, unless you decide otherwise, you will receive ADSs. Shire will give you an opportunity to make your decision at the time you surrender your stock certificates. You will be able to withdraw the ordinary shares underlying your ADSs whenever you want, if you pay a fee to the financial institution which acts as a depositary for the ADSs. The fee is currently set at $5 for each 100 or fewer ADSs you convert. For a more detailed description of the ADSs, see "Description of American Depositary Receipts." For a comparison of the ordinary shares to your current Roberts shares, see "Comparative Rights of Roberts Shareholders and Shire Shareholders." Q. If I am not going to attend the special meeting in person, should I return my proxy instead? A. Yes. After carefully reading and considering the information contained in this Prospectus-Proxy Statement, please fill out and sign your proxy. Then return it to Roberts in the enclosed return envelope as soon as possible so that Roberts can count the vote of your shares at the special meeting. Q. What if I plan to attend the special meeting in person? A. You may request a ticket for admission to the special meeting by marking the appropriate box on the proxy which we have enclosed with this Prospectus-Proxy Statement and returning it no later than December 10, 1999. If you hold Roberts shares through a third party, such as a broker, you should send an account statement or similar documentation of ownership to the Company Secretary, Roberts Pharmaceutical Corporation, Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724 requesting a ticket. Q. If my shares are held in "street name" by my broker, will my broker vote my shares for me? A. No. Your broker will not be able to vote your Roberts shares without instructions from you. You should instruct your broker how to vote your Roberts shares, following the directions provided by your broker. If you do not instruct your broker how to vote, your broker will not vote your shares for or against the merger. Q. Should I send in my stock certificates now? A. No. After Shire and Roberts complete the merger, we will send you written instructions for exchanging your stock certificates. These instructions will also allow you to elect to receive ordinary shares instead of ADSs. Q. What do I need to do now? A. Just indicate on your proxy how you want to vote and mail your signed and dated proxy in the enclosed return envelope as soon as possible so that we can count the vote of your Roberts shares at the special meeting. 2 Who Can Help Answer Questions? If you have more questions about the merger, you should contact: Dr. Stuart Z. Levine Vice President -- Corporate Communications Roberts Pharmaceutical Corporation Meridian Center II 4 Industrial Way West Eatontown, New Jersey 07724 (732) 676-1200 3 SUMMARY The following is a summary of certain information in this Prospectus-Proxy Statement. This summary highlights the key aspects of the merger. To understand the merger more fully and for a more complete description of the legal terms of the merger, you should read and consider carefully all of the information contained or incorporated by reference in this Prospectus-Proxy Statement and in the annexes attached to this Prospectus-Proxy Statement. General This Prospectus-Proxy Statement relates to the proposed merger of Ruby Acquisition Sub with and into Roberts under the merger agreement, a copy of which is attached as Annex A to this Prospectus-Proxy Statement. In the merger, you will receive, for each Roberts share, ADSs unless you decide to receive ordinary shares. Each ADS represents three ordinary shares. You will receive no fewer than approximately 1.0427 ADSs, which is equivalent to 3.1280 ordinary shares, and no more than approximately 1.2802 ADSs, which is equivalent to 3.8407 ordinary shares, for each Roberts common share. Shire and Roberts will determine the exchange ratio based on the average trading price of the ADSs for the fifteen consecutive trading days ending three trading days before the date they consummate the merger. The Companies Shire Pharmaceuticals Group plc East Anton Andover Hampshire SP10 5RG ENGLAND Telephone: (44)1-264-333-455 Shire is a specialty pharmaceutical company focused primarily on two therapeutic areas: central nervous system disorders and metabolic/bone diseases. Shire's principal products include Adderall(R), for the treatment of Attention Deficit Hyperactivity Disorder, the Calcichew(R) range, promoted primarily as adjuncts in the treatment of osteoporosis, and Reminyl(R), for the treatment of Alzheimer's disease for which Shire recently completed Phase III clinical trials. Shire's revenues come from three sources: sales of products by its own sales and marketing operations in the U.S., the U.K. and Ireland, and to its licensees; licensing and development fees; and royalties. Shire recorded revenues (turnover) of (Pounds)80.3 million and a profit after tax of (Pounds)6.2 million for the year ended December 31, 1998, or $133.4 million and $10.3 million, respectively, using an exchange rate of (Pounds)0.601 for each $1.00. Shire used U.K. generally accepted accounting principles in calculating these amounts. After the transaction, the combined company will adopt U.S. generally accepted accounting principles for primary reporting purposes. See "Adoption of U.S. GAAP for Reporting Purposes." On October 25, 1999, Shire announced that it had acquired the German and French subsidiaries of Fuisz Technologies Limited and entered into an agreement to acquire Fuisz's Italian subsidiary. The purchase price for all three subsidiaries was $39.5 million. See "Shire After the Merger--Sales and Marketing." Roberts Pharmaceutical Corporation Meridian Center II 4 Industrial Way West Eatontown, New Jersey 07724 Telephone: (732) 676-1200 Roberts is an international pharmaceutical company which licenses, acquires, develops and commercializes post-discovery drugs in selected therapeutic categories. Roberts was founded to take advantage of the large and growing opportunity to license, acquire, develop and commercialize post-discovery drugs in selected therapeutic categories. Roberts has organized its drug development, acquisition and marketing activities to focus on late-stage development drugs in Phase II or Phase III clinical trials and currently marketed prescription pharmaceutical products which do not meet the strategic objectives or profit thresholds of larger pharmaceutical companies or are made available by 4 government agencies and research institutions. The therapeutic categories targeted by Roberts are Cardiovascular, Gynecology/Endocrinology, Urology, Oncology, Hematology and Gastroenterology. The Special Meeting Record Date; Shares Entitled to Vote Only Roberts shareholders of record at the close of business on October 27, 1999 are entitled to notice of, and to vote at, the special meeting. On the record date, there were 32,046,720 shares of Roberts common stock outstanding and entitled to vote which were held by approximately 920 holders of record. Each holder of record of shares of Roberts common stock on the record date is entitled to cast one vote per Roberts share, exercisable in person or by a properly executed proxy, on each matter submitted at the special meeting. See "The Special Meeting--Record Date; Voting Rights; Voting at the Meeting." Required Vote A quorum for the special meeting will exist if at least a majority of the Roberts shares are present or represented by proxy. If there is a quorum, at least two-thirds of the votes cast by the holders of shares of Roberts common stock present or represented by proxy at the special meeting must vote in favor of the merger. Brokers who hold Roberts shares as nominees will not have discretionary authority to vote such Roberts shares in the absence of instructions from their beneficial owners. Broker "non-votes" and abstentions count as present for establishing a quorum, but are neither a vote for nor against the merger. Yamanouchi Group Holdings Inc., the owner of 5,048,500 shares of Roberts common stock, and Robert A. Vukovich, the owner of 1,733,671 shares of Roberts common stock, have each entered into a shareholder agreement with Shire. They have each agreed to vote for the merger agreement, which means that holders of approximately 21.3% of the outstanding shares of common stock of Roberts have already committed to vote for the merger agreement. See "The Shareholder Agreements--Shire Shareholder Agreements." Revocability of Proxies Before the vote at the special meeting, a Roberts shareholder may revoke a proxy by filing with the Secretary of Roberts a later-dated proxy relating to the same shares or a written notice of revocation bearing a date later than the date of the proxy or by attending the special meeting and voting in person. See "The Special Meeting--Voting of Proxies." The Merger and the Merger Agreement What You Will Receive in the Merger In the merger you will receive in exchange for each share of Roberts common stock, ADSs, each representing three ordinary shares, unless you choose to receive Shire ordinary shares. For each share of Roberts common stock, Roberts shareholders will receive: . a fixed exchange ratio of 3.4122 ordinary shares, or 1.1374 ADSs, if the average closing price of the ADSs for the 15 consecutive trading days ending the third trading day prior to closing is greater than or equal to $23.73 and less than or equal to $29.01; . a floating exchange ratio between approximately 3.4122 and approximately 3.1280 ordinary shares, or approximately 1.1374 and approximately 1.0427 ADSs, if the average closing price of the ADSs is greater than $29.01 and less than or equal to $31.65, which is equivalent to $33.00 per Roberts share; . a floating exchange ratio between approximately 3.8407 and approximately 3.4122 ordinary shares, or approximately 1.2802 and approximately 1.1374 ADSs, if the average closing price of the ADSs is equal to or greater than $21.09 and less than $23.73, which is equivalent to $27.00 per Roberts share; 5 . a fixed exchange ratio of 3.8407 ordinary shares, or approximately 1.2802 ADSs, if the average closing price of the ADSs is below $21.09; and . a fixed exchange ratio of 3.1280 ordinary shares, or approximately 1.0427 ADSs, if the average closing price of the ADSs is greater than $31.65. The following chart briefly summarizes how the exchange ratio for the merger is calculated:
Calculated average trading price per ADS Number of Hypothetical (one ADS ADSs to be value received represents three issued for each for each ordinary shares) Roberts share Roberts share - ---------------- --------------- -------------- less than $21.09 Approximately less than 1.2802 $27.00 depending on the ADS price $21.09-$23.72 27 divided by $27.00 the average ADS price $23.73-$29.01 1.1374 between $27.00 and $33.00 depending on the ADS price $29.02-$31.65 33 divided by $33.00 the average ADS price more than $31.65 Approximately more than 1.0427 $33.00 depending on the ADS price
The following chart shows what a holder of 100 shares of Roberts common stock would receive in the merger at different ADS prices.
Number of ADSs issued for every Market Fractional Hypothetical Exchange 100 Roberts value of Share Cash ADS Price Ratio Shares ADSs Consideration - ------------ -------- ----------- -------- ------------- 20.00 1.2802 128.02 2,560.47 .47 21.00 1.2802 128.02 2,688.49 .49 22.00 1.2273 122.73 2,700.00 16.00 23.00 1.1739 117.39 2,700.00 9.00 24.00 1.1374 113.74 2,729.76 17.76 25.00 1.1374 113.74 2,843.50 18.50 26.00 1.1374 113.74 2,957.24 19.24 27.00 1.1374 113.74 3,070.98 19.98 28.00 1.1374 113.74 3,184.72 20.72 29.00 1.1374 113.74 3,298.46 21.46 30.00 1.1000 110.00 3,300.00 -- 31.00 1.0645 106.45 3,300.00 14.00 32.00 1.0427 104.27 3,336.53 8.53 33.00 1.0427 104.27 3,440.80 8.80 34.00 1.0427 104.27 3,545.07 9.07 35.00 1.0427 104.27 3,649.33 9.33
We have more fully described how the exchange ratio works under the heading "The Merger Agreement--The Exchange Ratio." Based upon the 15 trading days ending prior to and including November 22, 1999, the most recent practicable date prior to filing of this document, the average trading price of the ADSs is $31.98. Based upon this average, you would receive approximately 1.0427ADSs (or 3.1280 ordinary shares) in the merger for each Roberts share you own. However, the actual number of ADSs (or ordinary shares) which Shire will issue in the merger will depend on the market prices of ADSs immediately prior to the completion of the merger. Depending on the level of such prices, you may receive more or fewer ADSs or ordinary shares in the merger. We explain this risk in more detail under the heading "Risk Factors." 6 Unless a holder otherwise elects, Shire will provide each Roberts shareholder with one-third of an ADS for each ordinary share the holder would be entitled to receive. The ADSs are subject to the terms and conditions of a deposit agreement. Shire will not issue fractional ADSs or ordinary shares. Instead, Shire will pay you cash for any fractional ADS or ordinary share which you are otherwise entitled to receive based upon the trading prices of these securities on the trading day immediately following the merger. See "The Merger Agreement--Conversion of Roberts Shares" and "--No Fractional ADSs or Ordinary Shares." With respect to the treatment of options of Roberts, see "The Merger Agreement--Treatment of Roberts Stock Options." Benefits of the Merger The parties believe that the merger brings together two of the fastest growing publicly traded specialty pharmaceutical companies, which share a common strategic vision. Both companies have built effective sales and marketing organizations to promote specialty products to defined customer groups. In addition, through selective in-licensing of development compounds, both companies seek to build long term shareholder value by taking these compounds through the development and registration process. The parties expect the principal benefits of the merger to be: . Broadening of current product portfolios and areas of therapeutic focus; . Addition of products with significant potential that are close to reaching the market; . Realization of significant operating benefits; . Increased critical mass in the U.S., the U.K. and Ireland and the addition of a Canadian presence to Shire's direct marketing effort; . A larger base from which to build European infrastructure; . Increased attractiveness to obtain product licenses from others; . Complementary research and development and sales and marketing infrastructures; . Increased shareholder base and liquidity; and . Greater financial resources to pursue product and/or company acquisitions. Recommendation of the Roberts Board of Directors On July 22, 1999, the Roberts board unanimously approved the merger agreement and the merger as being in the best interests of Roberts and the Roberts shareholders. The Roberts board unanimously recommends that you vote FOR the approval and adoption of the merger agreement. See "The Merger-- Roberts' Reasons for the Merger; Recommendation of the Roberts Board of Directors." Roberts' Reasons for the Merger On July 22, 1999, the Roberts board unanimously determined that the merger agreement, the option agreement and the transactions contemplated by them were in the best interests of Roberts' shareholders. The board, therefore, approved the merger and recommended that the shareholders also approve the merger agreement and the transactions contemplated by the merger agreement. In approving these transactions, and recommending approval by the shareholders, the Roberts board considered: . The consideration Shire offered and the premium it represented to Roberts' share price; . That there were no other formal offers for a business combination; . The opinion of PaineWebber that the merger consideration was fair, from a financial point of view, to the Roberts shareholders; . The substantial ownership position that the Roberts shareholders would have in the combined company; . That the largest shareholders of Roberts and Shire agreed to vote in favor of the merger; . That the combined company would have a broader product offering; . That the combined company would have a broader development portfolio; 7 . That the combined company would have greater financial resources; . That the combined company would increase investor profile and liquidity; . That the merger is a tax-free transaction for the Roberts shareholders; . That the merger would receive pooling of interests accounting treatment under U.S. GAAP; . The merger's effect on earnings of the combined company; . The interests in the merger of persons affiliated with Roberts; . The effect of the merger agreement on potential third party proposals regarding business combinations; . Other strategic alternatives, including other business combinations and remaining independent; . That Adderall(R) is Shire's only major product; . That regulatory approval is not certain; . That pending the merger the conduct of Roberts' business would be restricted; . That pending the merger Roberts' business relationships may be damaged because of the uncertainty of completing the transaction; . That Roberts would no longer be an independent company; and . That Roberts' shareholders would hold Shire ADSs or ordinary shares. Opinion of Roberts' Financial Advisor In deciding to approve the merger, the Roberts board considered the opinion of its financial advisor, PaineWebber, that the merger consideration was fair to Roberts shareholders from a financial point of view. The full text of the written opinion of PaineWebber, which sets forth assumptions made, matters considered, procedures followed and the scope of the review undertaken, is attached to this Prospectus-Proxy Statement as Annex B. The written opinion of PaineWebber is not a recommendation as to how you should vote in regard to the approval and adoption of the merger agreement. We encourage you to read the opinion of PaineWebber in its entirety. Interests in the Merger of Persons Affiliated with Roberts In considering the recommendation of the Roberts board with respect to the merger agreement, you should be aware that some of the officers and directors of Roberts have interests in the merger that are different from and in addition to your interests. . Shire's board will appoint some of Roberts' directors as directors of Shire after the merger; . Some executive officers of Roberts will be, or may become, entitled to receive a severance payment as a result of the merger; . Any employee whose employment is terminated "without cause" after the merger will be entitled to a severance payment; . Options granted under the 1996 Equity Incentive Plan will vest and become exercisable after the merger; . As a result of the merger, Roberts' Supplemental Executive Retirement Plan will be fully funded and its participants will be credited with 10 years of service and become vested; . Shire and John T. Spitznagel, President and Chief Executive Officer of Roberts, will enter into a consulting agreement; and . Shire has agreed to indemnify Roberts' directors and officers after the merger and provide comparable directors' and officers' liability insurance for up to six years. For further information, see "The Merger --Interests in the Merger of Persons Affiliated with Roberts." Anticipated Accounting Treatment The parties intend the merger to qualify as a "pooling of interests" transaction under U.S. generally accepted accounting principles, which 8 means that the companies will be treated as if they had always been combined. The merger will be accounted for as a purchase under U.K. GAAP. Following the merger, Shire will adopt U.S. GAAP accounting for both U.S. and U.K. reporting purposes. For more information regarding the impact of this change in accounting methodology on the combined company see "The Merger--Anticipated Accounting Treatment and Effects." Certain U.S. Federal Income Tax Consequences For U.S. federal income tax purposes, the parties intend that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and that, in general, Roberts shareholders will not recognize any gain or loss because of the merger, except with respect to cash, if any, received in lieu of fractional ordinary shares or ADSs. The tax consequences of the merger to you will depend on the facts of your own situation. You should read carefully the discussion in "Material Tax Consequences" and other sections of this Prospectus-Proxy Statement. We suggest you consult your own tax advisors as to the specific tax consequences to you of the merger. Dissenters' Rights Under New Jersey law, you are not entitled to dissenters' rights in connection with the merger. See "The Merger--Dissenters' Rights" and "Comparative Rights of Roberts Shareholders and Shire Shareholders--Dissenters' Rights." Conditions to the Merger Roberts and Shire will not complete the merger unless they satisfy or waive a number of conditions. These include: . approval of the merger and other transactions contemplated by the merger agreement by the requisite vote of the respective shareholders of Roberts and Shire (this condition may not be waived by Roberts or Shire); . there must be no order, injunction, decree or judgment in effect that materially restrains or prohibits the merger and there must be no pending or threatened proceeding by a governmental authority questioning the validity or legality of the merger; . both Roberts and Shire must receive letters from their respective independent accountants concurring with management's view regarding the availability of "pooling of interests" accounting under U.S. GAAP; and . the ordinary shares to be issued in the merger must be admitted to the Official List of the LSE and the listing must have become effective and the ADSs must be approved for listing on Nasdaq. Effective Time of the Merger If the shareholders of Roberts and Shire approve and adopt the merger agreement and the other conditions to the merger are satisfied or, where permissible, waived, Shire and Roberts will consummate the merger by filing a certificate of merger with the Secretary of State of the State of New Jersey. See "The Merger Agreement--General; Effective Time and Effects of the Merger." Termination of the Merger Agreement Roberts and Shire can agree to terminate the merger agreement at any time prior to completing the merger. Either one of them can terminate the merger agreement if it is not in material breach of the merger agreement and: . the terminating party receives a proposal from a third party which the terminating party's board of directors determines is a superior proposal; . the merger is not completed by December 31, 1999; or 9 . a governmental authority permanently enjoins or prohibits the merger. Each of Roberts and Shire can terminate the merger agreement if: . the board of directors of the other company withdraws or amends or adversely modifies its recommendation or approval of the merger to its shareholders or fails to reconfirm such recommendation within five business days of a request for such a reconfirmation by the other company; or . the other company recommends an acquisition transaction proposed by a third party; or . the other company breaches or fails to comply with any of its representations, warranties or agreements under the merger agreement, and such breach cannot be or is not cured prior to December 31, 1999; or . if the other company's shareholders do not approve the merger. If Roberts or Shire terminates the merger agreement, depending on the circumstances of that termination, either Roberts or Shire may become obligated to pay a termination fee of $30 million. See "The Merger Agreement-- Termination; Effect of Termination." The Option Agreement At the same time the merger agreement was signed, Roberts and Shire entered into an option agreement, dated as of July 26, 1999. In this agreement, Roberts granted Shire an option to purchase shares representing up to 19.9% of the outstanding shares of Roberts common stock at a price per share in cash equal to $30.00 in the event that Shire is entitled to a termination fee under the merger agreement. If Shire exercises the option, the maximum total compensation that Shire may receive from the termination fee under the merger agreement and any consideration from the sale of Roberts shares acquired from the exercise of the option is $32 million. See "The Option Agreement." Governmental and Regulatory Matters U.S. antitrust laws prohibit Roberts and Shire from completing the merger until the transaction has been notified to the Antitrust Division of the Department of Justice and the Federal Trade Commission and a required waiting period has expired. On August 10, 1999, Roberts and Shire each filed the required notification and report forms with the Antitrust Division and the FTC. The required waiting period expired on September 10, 1999. The President of the United States can prohibit an acquisition of a U.S. company by a foreign person such as Shire if, among other things, the acquisition would impair the national security of the U.S. Roberts and Shire made a voluntary filing seeking a finding that the merger does not impair the national security of the U.S on October 21, 1999. In the U.K., the Secretary of State can refer any qualifying merger situation to the Competition Commission for investigation as to whether the merger may be expected to operate against the public interest. The merger of Roberts and Shire is a qualifying merger situation for the purposes of U.K. law. There is no obligation to obtain prior clearance of a qualifying merger in the U.K. However, if a qualifying merger is completed without prior clearance being given, there is a risk that the merger may subsequently be referred to the Competition Commission and that divestitures might ultimately be required. The parties made no submission to the U.K. authorities in relation to the merger, but on July 26, 1999, Shire received from the U.K. Office of Fair Trading a letter requesting information about the businesses of Shire and Roberts. A response to that letter was provided on July 29 and was followed by subsequent communications. On October 18, 1999, the Office of Fair Trading confirmed that the merger had been cleared. Comparative Rights of Shareholders In the merger, you will have the option to receive either ADSs or ordinary shares. Each ADS represents three ordinary shares. 10 Your rights as a holder of ADSs will in some cases be different from the rights of a holder of ordinary shares. For example, as an ADS holder, you will not be entitled to attend, speak and vote at Shire shareholders' meetings although holders of ordinary shares may do so. However, you will be able to instruct the depositary how to vote the ordinary shares underlying your ADSs. Holders of ADSs may generally withdraw and directly hold the ordinary shares underlying such ADSs at any time. There are numerous differences between the rights of a shareholder in Roberts, a New Jersey corporation, and the rights of a shareholder in Shire, an English company. . Shareholder Voting Rights. Roberts shareholders are entitled to one vote per Roberts share at any Roberts shareholders meeting. At a general meeting of shareholders of Shire, holders of ordinary shares are entitled to one vote per ordinary share if voting is on a poll and one vote per holder present in person at the meeting if voting is by a show of hands. . Pre-emptive Rights. Under Roberts' certificate of incorporation, pre- emptive rights must be expressly granted by the Roberts board. Under English law, a shareholder is entitled to pre-emptive rights with respect to new equity issuances for cash unless a special resolution is or has been passed in a general meeting of shareholders to the contrary. . Disclosure of Interests. Owners of ordinary shares will be subject to different, and in some cases more stringent, notification, disclosure and other obligations under English law and under applicable regulations of U.K. non-governmental authorities than those to which owners of shares of Roberts common stock are subject under New Jersey law. Under the terms of the deposit agreement, holders of Shire ADSs are bound to comply with the same notification and disclosure requirements as Shire shareholders. You should also be aware that it may be difficult to effect service of a process to begin a lawsuit against directors and officers of Shire who are not residents of the U.S. Adoption of U.S. GAAP for Reporting Purposes Historically, Shire has presented accounts prepared under U.K. GAAP in both its annual and interim reports, including those distributed to U.S. shareholders and within filings made with the SEC. Shire's annual reports have incorporated a reconciliation of earnings and net assets to U.S. GAAP. The SEC has not required full U.S. GAAP financial statements of Shire which is a "foreign private issuer." A company is deemed to be a "foreign private issuer" if it is organized under the laws of a non-U.S. country and does not have more than 50% ownership of voting shares held by U.S. resident shareholders. Given that Shire anticipates that more than 50% of the combined company's shareholders will be U.S. residents, Shire is likely to lose its foreign registrant status. As a result, the SEC will require publication of full U.S. GAAP financial statements in all SEC filings and distributions to U.S. shareholders. In order to allow for consistency in reporting financial results to U.S. and U.K. shareholders, the combined company intends to adopt U.S. GAAP for primary reporting purposes in the U.K. Summary financial statements prepared as required by U.K. company law and a reconciliation of the combined company's financial results to U.K. GAAP will be provided in the footnotes of its annual report. Interim reports circulated to U.K. shareholders will meet the minimum requirements of the London Stock Exchange for provision of U.K. GAAP information. Furthermore, full U.K. GAAP statutory accounts will be prepared to satisfy U.K. reporting requirements under the Companies Act 1985, which requires such accounts to be filed on an annual basis, within seven months of the accounting period end. Such U.K. GAAP accounts will be publicly available. There are certain differences between U.S. GAAP and U.K. GAAP. The principal differences are summarized in note 24 to Shire's Audited Consolidated Financial Statements incorporated by reference in this Prospectus-Proxy Statement and include the following: 11 i. Accounting for business combinations (a) Goodwill Prior to December 31, 1998, goodwill arising from the acquisition of a business could be written off to retained earnings under U.K. GAAP. This treatment is not allowed by U.S. GAAP, which requires goodwill to be capitalized and amortized over a period of up to 40 years. Under U.S. GAAP, Shire amortizes goodwill over a period of 5-30 years on a straight-line basis. The goodwill is evaluated annually for realisability based on expectations of undiscounted cash flows and earnings from operations for each subsidiary having a material goodwill balance. Impairments to goodwill are recognized if future expected cash flows are not sufficient to recover the goodwill. If a material impairment were identified, goodwill would be written down to its fair value. (b) In-process research and development Under U.K. GAAP, fair values are not attributed to in-process research and development. Under U.S. GAAP, acquired research and development is expensed to the extent that technological feasibility has not been established and the technology has no future alternative uses. A charge of (Pounds)50,626,000 was recorded in 1997 under U.S. GAAP, which related to the write-off of in-process research and development in conjunction with the Shire Laboratories Inc. acquisition. ii. Deferred taxation Under U.K. GAAP, deferred tax is provided in respect of timing differences only to the extent that liabilities are expected to occur in the foreseeable future. Net deferred tax assets are only recognized to the extent that they are expected to be recoverable without any replacement by equivalent debit balances. Under U.S. GAAP, deferred taxation is recorded in respect of all temporary differences between the tax bases and book values of assets and liabilities which will result in taxable or tax deductible amounts in future years. Deferred tax assets under U.S. GAAP are recognized to the extent that it is more likely than not that they will be realized. Under U.K. GAAP, deferred taxes are not normally recognized in respect of the difference between the fair value attributable to net assets of an acquired business and their underlying tax basis. Under U.S. GAAP, such deferred tax attributes are recognized in the allocation of values. Any subsequent adjustments to the valuation allowances established at the date of acquisition against deferred tax assets recognized on that date are treated as an adjustment to the purchase price. Accordingly, it has no effect on net income/(loss) and shareholder's equity in relation to deferred tax assets arising on acquisition. Valuation allowances against deferred tax assets have not been provided to the extent that future taxable income and tax planning strategies are expected to enable losses brought forward to be utilized. iii. Share options Under U.K. GAAP, a compensation expense must generally be recognized on share option schemes based on the difference between the fair value of the shares at the date of grant and the exercise price, over the vesting period of the options. A compensation expense does not have to be recognized for certain schemes that are open to all employees on similar terms at a discount against the fair value of the shares of not more than 20 percent. In contrast, under U.S. GAAP, a compensation expense must generally be recognized based on the difference between the fair value of the shares at the measurement date and the exercise price, over the vesting period of the options. The measurement date for calculating compensation cost is the date on which both the exercise price and the number of shares under option are known with certainty. If a fixed price option for a specific number of shares is granted, compensation cost is the excess of the quoted market price of the stock at the date of the grant over the exercise price of such option. Such compensation cost is amortized over the vesting period of the option. However, where either the strike price or number of shares underlying an option is uncertain, "variable option accounting" is required, whereby the quoted market price used in the measurement of compensation cost is not the price at the grant date but the price at the measurement date. Estimates of compensation cost are recorded before the measurement date based on the quoted market price of the stock at intervening dates. Recorded compensation expense between the 12 grant date and the measurement date may either increase or decrease because changes in the quoted market price of the stock require recomputations of the estimated compensation cost. A number of Shire's currently outstanding options include performance incentive clauses which tie the amount of shares under option to the stock market performance of Shire ordinary shares. As the number of shares under option is dependent on the stock price performance of Shire ordinary shares, such options require "variable option accounting," leading to a compensation charge which is dependent on the underlying performance of Shire ordinary shares. As the Shire ordinary share price has appreciated in recent periods, the U.S. GAAP compensation charges for the years ended December 31, 1997 and 1998 and for the nine months ended September 30, 1999 are significantly higher than the corresponding U.K. GAAP compensation charges. Further details of Shire's share option schemes are summarized on page 46 of Shire's Annual Report incorporated by reference in this Prospectus-Proxy Statement. 13 The following two tables illustrate the historical reconciliation of net profit/(loss) and the effect of such reconciliation on earnings per share. Reconciliation of net profit/(loss) from U.K. GAAP to U.S. GAAP
Year ended December 31, Nine Months Ended ------------------------------ September 30, 1998 1997 1999 ------------- --------------- ----------------- Net profit/(loss) as reported under U.K. GAAP............. (Pounds)6,247 (Pounds) (421) (Pounds)17,363 Adjustments for: Write-off of in-process research and development.. -- (50,626) -- Amortization of goodwill... (6,709) (2,459) (5,103) Recognition of deferred tax asset..................... 7,765 1,312 1,771 Share option compensation costs..................... (5,124) (1,412) (8,397) Net profit/(loss) as reported under U.S. GAAP............. (Pounds)2,179 (Pounds)(53,606) (Pounds) 5,634 Comparison of earnings/(loss) per share under U.K. GAAP and U.S. GAAP Year ended December 31, Nine Months Ended ------------------------------ September 30, 1998 1997 1999 ------------- --------------- ----------------- U.K. GAAP Basic earnings/(loss) per ordinary share............ 4.5p 0.4p 12.2p Diluted earnings/(loss) per ordinary share............ 4.3p 0.4p 11.7p U.S. GAAP Basic earnings/(loss) per ordinary share............ 1.6p (57.6)p 3.9p Diluted earnings/(loss) per ordinary share............ 1.5p (57.6)p 3.8p
14 Summary Historical Consolidated Financial Data of Shire Summary Financial Data The following summary financial information of Shire for each of the fiscal periods in the five year period ended December 31, 1998 has been derived from Shire's Audited Consolidated Financial Statements and the notes to such financial statements incorporated by reference in this Prospectus-Proxy Statement. Summary financial information for the nine month period to September 30, 1999 has been derived from Shire's unaudited consolidated financial statements for the nine months to September 30, 1999. The selected financial data has been prepared using U.K. and U.S. GAAP, which differ in certain respects. The principal differences between U.K. GAAP and U.S. GAAP are summarized in note 24 to Shire's audited consolidated financial statements incorporated by reference in this Prospectus-Proxy Statement. Following the merger, Shire intends to report under U.S. GAAP, with selected U.K. GAAP reconciliation. See "Adoption of U.S. GAAP for Reporting Purposes." The results of operations for the nine months ended September 30, 1999 are not necessarily indicative of the results of operations to be expected for the fiscal year ending December 31, 1999.
Year Ended 15 Months June 30, Ended --------------------------------------------- June 30, 1994(1) 1995 1996 1997 ------------- ------------- -------------- -------------- Statement of Operations Data: U.K. GAAP Turnover/(revenues).. (Pounds)7,465 (Pounds)6,102 (Pounds)21,043 (Pounds)23,072 Operating profit/(loss).. (2,349) (6,127) 2,569 (1,399) Profit/(loss) on ordinary activities before taxation....... (2,244) (7,197) 2,722 (146) Profit/(loss) on ordinary activities after taxation....... (2,190) (7,200) 2,555 (146) Fully diluted earnings/(loss) per ordinary share.......... (0.119) (0.394) 0.057 (0.002) Weighted average ordinary shares outstanding.... 18,288 18,289 45,208 67,153 U.S. GAAP Revenues........ 21,043 23,072 Income/(loss) from operations before write- off of in- process research and development.... 2,302 (1,659) (Loss)/income from operations..... (12,426) (52,285) (Loss)/income before income taxes.......... (12,273) (51,032) Net (loss)/income.. (12,189) (50,238) Fully diluted net (loss)/income per ordinary share(4)....... (0.28) (0.75) Fully diluted net (loss)/income per ADS........ (0.83) (2.24) Year Ended Nine Months Ended Six Months December 31, September 30, Ended ------------------------------------------- ----------------- December 31, Actual 1997 1997(2) 1998 1998(3) 1999 1999(3) ---------------- --------------- --------------- ----------- -------------- --------- (unaudited) (unaudited) (in thousands, except per ordinary share and per ADS amounts) Statement of Operations Data: U.K. GAAP Turnover/(revenues).. (Pounds) 28,605 (Pounds)41,798 (Pounds)80,328 $131,738 (Pounds)92,516 $151,726 Operating profit/(loss).. 2,230 1,582 7,879 12,922 21,501 35,262 Profit/(loss) on ordinary activities before taxation....... 2,452 2,411 9,099 14,922 23,153 37,971 Profit/(loss) on ordinary activities after taxation....... (380) (421) 6,247 10,245 17,363 28,475 Fully diluted earnings/(loss) per ordinary share.......... (0.003) (0.004) 0.043 0.071 0.117 0.192 Weighted average ordinary shares outstanding.... 112,660 93,145 144,399 144,399 148,526 148,526 U.S. GAAP Revenues........ 28,605 41,798 80,328 131,738 92,516 151,726 Income/(loss) from operations before write- off of in- process research and development.... (1,469) (2,289) (2,143) (3,514) 10,018 16,430 (Loss)/income from operations..... (1,469) (52,915) (2,143) (3,514) 10,018 16,430 (Loss)/income before income taxes.......... (1,247) (52,086) (923) (1,514) 11,670 19,139 Net (loss)/income.. (2,857) (53,606) 2,179 3,574 5,634 9,240 Fully diluted net (loss)/income per ordinary share(4)....... (0.03) (0.57) 0.02 0.03 0.04 0.06 Fully diluted net (loss)/income per ADS........ (0.08) (1.73) 0.05 0.07 0.11 0.18
15 Summary Historical Consolidated Financial Data of Shire Summary Financial Data
As of June 30, As of December 31, --------------------------------------------------- ---------------------------------------- 1994(1) 1995 1996 1997 1997(2) 1998 1998(3) ----------- ----------- ----------- ------------- -------------- -------------- -------- Balance Sheet Data: U.K. GAAP Fixed assets.... (Pounds)503 (Pounds)447 (Pounds)578 (Pounds)3,436 (Pounds)11,950 (Pounds)12,609 $ 20,679 Cash and current investments.... 960 2,068 25,425 16,875 10,283 29,665 48,631 Secured loan notes.......... -- (5,212) -- -- -- -- -- Other net current assets (liabilities).. 358 (1,161) 1,893 (4,155) (1,047) 9,828 16,118 Creditors due in more than one year........... -- -- -- (2,211) (11,246) (1,508) (2,473) Provision for liabilities and charges........ -- -- (2,750) -- -- -- -- ----------- ----------- ----------- ------------- -------------- -------------- -------- Net assets...... 1,821 (3,858) 25,146 13,945 9,940 50,594 82,975 U.S. GAAP Cash and cash equivalents.... 25,425 16,875 10,283 29,665 48,651 Other current assets......... 5,880 7,829 17,475 24,212 39,708 Other assets.... 5,425 15,862 153,109 155,250 254,610 ----------- ------------- -------------- -------------- -------- Total assets.... 36,730 40,566 180,867 209,127 342,969 Current liabilities.... 3,987 5,781 18,522 14,384 23,590 Other liabilities.... 2,750 2,211 11,246 1,508 2,473 Shareholders' equity......... 29,993 32,574 151,099 193,235 316,906 ----------- ------------- -------------- -------------- -------- Total liabilities and shareholders' equity......... 36,730 40,566 180,867 209,127 342,969 As of September 30, ------------------------- 1999 1999(3) --------------- --------- Balance Sheet Data: U.K. GAAP Fixed assets.... (Pounds)17,885 $ 29,282 Cash and current investments.... 52,508 86,113 Secured loan notes.......... (5,354) (8,781) Other net current assets (liabilities).. 7,899 12,954 Creditors due in more than one year........... (2,702) (4,431) Provision for liabilities and charges........ -- -- --------------- --------- Net assets...... 70,236 115,137 U.S. GAAP Cash and cash equivalents.... 52,508 86,113 Other current assets......... 48,318 79,242 Other assets.... 137,849 226,072 --------------- --------- Total assets.... 238,675 391,427 Current liabilities.... 26,428 43,342 Other liabilities.... 2,702 4,431 Shareholders' equity......... 209,545 343,654 --------------- --------- Total liabilities and shareholders' equity......... 238,675 391,427
- -------- (1) In 1994, Shire elected to change its fiscal year end from March 31 to June 30. (2) During 1997, Shire changed its fiscal year end from June 30 to December 31. The results for the year ended December 31, 1997 are presented for comparative purposes. These accounts do not comprise statutory accounts within the meaning of the Companies Act 1985 since they are drawn up for a non-statutory period. (3) Translation of pounds sterling into dollars has been made at the rate of (Pounds)1.00 = $1.64 (the noon buying rate on September 30, 1999). Such translation is provided solely for the convenience of the reader and does not reflect financial information based on generally accepted accounting principles for foreign currency translations. (4) Includes the write-off of that portion of the purchase price of the acquisitions of Shire Pharmaceutical Contracts Limited, Shire Laboratories Inc. and Shire Richwood Inc. allocated to in-process research and development where technological feasibility has not yet been established and for which there were no alternative future uses. Such write-offs amount to (Pounds)14,728,000 for the fiscal year ended June 30, 1996 and (Pounds)50,626,000 for the fiscal year ended June 30, 1997. 16 Summary Historical Consolidated Financial Data of Roberts The following table presents the selected consolidated financial data for Roberts as of the dates and for the periods indicated. The selected consolidated financial data for each of the five years in the period ended December 31, 1998 have been derived from the audited Consolidated Financial Statements of Roberts, which are incorporated by reference in this Prospectus- Proxy Statement. The selected consolidated financial data as of and for the periods ended September 30, 1998 and 1999 have been derived from unaudited Consolidated Financial Statements of Roberts which, in the opinion of Roberts' management, have been prepared on a basis substantially consistent with the audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the information for the period. The results of such interim periods are not necessarily indicative of the results for the full fiscal year. You should read the data presented below in conjunction with Roberts' audited Consolidated Financial Statements for each of the fiscal years in the five year period ended December 31, 1998 and the unaudited Consolidated Financial Statements as of and for the periods ended September 30, 1998 and 1999, which are incorporated in this Prospectus-Proxy Statement by reference.
Nine Months Ended Years Ended December 31, September 30, -------------------------------------------------- ----------------- 1994 1995 1996 1997 1998 1998 1999 ------- -------- -------- -------- -------- -------- -------- (in thousands, except per share data) (unaudited) Statement of Operations Data: Total Revenue........... $89,020 $113,427 $ 98,111 $122,508 $175,445 $119,925 $147,493 Operating Income (Loss) from Continuing Operations............. 25,802 6,873 (50,195)(1) (762) 27,378 16,452 35,567 Income (Loss) from Continuing Operations.. 20,618 2,703 (34,275) 2,517 16,787 10,208 19,757 Net (Loss) Income from Discontinued Operations............. (1,206) (27,045) 556 -- -- -- -- Net Income (Loss)....... 19,412 (24,342) (33,719) 2,517 16,787 10,208 19,757 Earnings (Loss) Per Share of Common Stock from Continuing Operations--Basic...... l.12 .15 (2.47)(2) .06 .54 .33 .62 (Loss) Earnings Per Share of Common Stock from Discontinued Operations--Basic...... (.06) (1.46) .03 -- -- -- -- Earnings (Loss) Per Share of Common Stock-- Basic.................. 1.06 (1.31) (2.44) .06 .54 .33 .62 Average Number of Common Shares--Basic Outstanding............ 18,400 18,536 19,133 29,414 31,049 30,912 31,716 Earnings (Loss) Per Share of Common Stock from Continuing Operations--Diluted.... $ 1.10 $ .15 $ (2.47)(2) $ .06 $ .53 $ .33 $ .61 (Loss) Earnings Per Share of Common Stock from Discontinued Operations--Diluted.... (.06) (1.45) .03 -- -- -- -- Earnings (Loss) Per Share of Common Stock-- Diluted................ 1.04 (1.30) (2.44) .06 .53 .33 .61 Average Number of Common Shares--Diluted Outstanding............ 18,708 18,623 19,133 29,497 31,460 31,297 32,283
17
As of September As of December 31, 30, -------------------------------------------- ----------------- 1994 1995 1996 1997 1998 1998 1999 -------- -------- -------- -------- -------- -------- -------- (unaudited) Balance Sheet Data: Total Assets............ $336,192 $340,290 $372,225 $367,855 $526,236 $514,913 $550,987 Long-Term Debt and Redeemable Preferred Stock (excluding current installments).. 22,411 16,183 10,639 10,327 126,739 130,302 122,188 Total Shareholders' Equity................. 259,129 235,467 309,759 317,303 341,810 334,330 367,340
(1) Intangible Dispositions and Write-Offs. During the fourth quarter of 1996, Roberts completed the sale of the majority of its non-core nonprescription products along with the NUCOFED and QUIBRON brands in two independent sales transactions. These sales, net of proceeds, resulted in a one-time, non-cash write-off of $11.9 million, which amounted to $7.6 million net of taxes. Also, during the fourth quarter of 1996, Roberts expensed certain purchased development products and recorded an impairment loss of long-lived intangible assets totaling $25.4 million, which amounted to $17.8 million net of taxes. The loss from operations and net loss for the year ending December 31, 1996 increased as a result of the purchase of development products and the sale and writedown of the intangible assets in the amounts of $37.3 million for operating income and $25.4 million for net loss. (2) According to a position taken by the SEC staff, effective March 13, 1997, on accounting for preferred stock which is convertible at a discount to market, Roberts recorded a charge of $11.6 million, which for earnings per share purposes amounted to $.61 per share. This charge to earnings per share is consistent with the SEC staff's position that the 10% discount available to holders of Roberts' 5% Convertible Preferred Stock should be amortized between the issuance date and the first date that conversion could occur, which is the earlier of the date on which the registration statement is declared effective or the close of business on the 91st day following the original issuance of the 5% Convertible Preferred Stock. To clarify the adjustments indicated above, a reconciliation of dilutive Earnings Per Share for the twelve months ended December 31, 1996 is composed of the following elements: Net (loss) from continuing operations before the consideration of purchased research and development, write-off and the sale of intangible assets, the recognition of the discount upon the issuance of 5% Preferred Stock or preferred dividends............ $ (.47) Purchased research and development and the write-off and sale of intangible assets................................................ (1.33) 5% Preferred Stock dividends...................................... (.06) Issuance of 5% Preferred Stock convertible into common stock at a 10% discount to market........................................... $ (.61) ------ (.67) Net (loss) from continuing operations............................. (2.47) Income from discontinued operations............................... .03 (Loss) attributable to common stock............................... $(2.44) ======
18 Summary Unaudited Pro Forma Combined Financial Data The following unaudited pro forma combined financial statements give effect to the proposed merger of Shire and Roberts as a pooling of interests under U.S. GAAP. The unaudited pro forma condensed balance sheet presents the combined financial position of Shire and Roberts as of September 30, 1999 assuming that the proposed merger has occurred as of September 30, 1999. Such pro forma information is based upon the historical financial statements of Shire and Roberts and has been prepared to illustrate the effects of the merger. In calculating the Shire Roberts pro forma information, an average ADS trading price in the range $23.73 to $29.01 has been assumed. Following the merger it is anticipated that Shire will no longer qualify as a foreign private issuer. Shire, as the continuing registrant, will adopt U.S. GAAP as the basis for financial reporting. You should read the pro forma combined financial data in conjunction with the historical financial statements of Shire and Roberts incorporated herein by reference. The pro forma combined financial data are presented for illustrative purposes only and are not necessarily indicative of any future results of operations or the results that might have occurred if the merger had actually occurred on the indicated dates. 19 Unaudited Pro Forma Combined Condensed Income Statement Nine months ended September 30, 1999
Shire Roberts Shire Roberts Pro Forma ------------------------------------------------------ ------------------------- -------------------------- Adjustments U.S. U.S. U.S. U.K. GAAP (1) U.S. GAAP GAAP(2) GAAP(3) U.S. GAAP(4) U.S. GAAP(5) GAAP(6) -------------- ----------- -------------- --------- --------- -------------- --------------- --------- (in thousands, except per ordinary share and per ADS amounts) Total revenue.... (Pounds)92,516 (Pounds)-- (Pounds)92,516 $ 149,876 $ 147,493 (Pounds)91,045 (Pounds)183,561 $ 297,369 Operating expenses........ (71,015) (11,483) (82,498) (133,647) (111,926) (69,090) (151,588) (245,573) Operating income/(loss)... 21,501 (11,483) 10,018 16,229 35,567 21,955 31,973 51,796 Interest income.. 1,679 -- 1,679 2,720 2,780 1,716 3,395 5,500 Interest expense......... (27) -- (27) (44) (7,270) (4,488) (4,515) (7,314) Other, net....... -- -- -- -- (449) (277) (277) (449) Income/(loss) before income taxes........... 23,153 (11,483) 11,670 18,905 30,628 18,906 30,576 49,533 Income taxes..... (5,790) (246) (6,036) (9,778) (10,871) (6,710) (12,746) (20,649) Net income/(loss)... 17,363 (11,729) 5,634 9,127 19,757 12,196 17,830 28,884 Earnings/(loss) per ordinary share -- basic........ 0.12 -- 0.04 0.06 0.62 0.38 -- -- -- diluted...... 0.12 -- 0.04 0.06 0.61 0.38 -- -- Weighted average ordinary shares outstanding -- basic........ 142,769 -- 142,769 142,769 31,716 31,716 -- -- -- diluted...... 148,526 -- 148,526 148,526 32,283 32,283 -- -- Pro forma information based on exchange ratio of 3.4122 (10) Pro forma earnings/(loss) per ordinary share -- basic........ 0.07 0.12 -- diluted...... 0.07 0.11 Pro forma weighted average ordinary shares outstanding -- basic........ 250,990 250,990 -- diluted...... 258,682 258,682 Pro forma earnings/(loss) per ADS -- basic........ 0.21 0.35 -- diluted...... 0.21 0.33 Pro forma information based on exchange ratio of 3.8407 (10) Pro forma earnings/(loss) per ordinary share -- basic........ 0.07 0.11 -- diluted...... 0.07 0.11 Pro forma weighted average ordinary shares outstanding -- basic........ 264,581 264,581 -- diluted...... 272,515 272,515 Pro forma earnings/(loss) per ADS -- basic........ 0.20 0.33 -- diluted...... 0.20 0.32 Pro forma information based on exchange ratio of 3.1280 (10) Pro forma earnings/(loss) per ordinary share -- basic........ 0.07 0.12 -- diluted...... 0.07 0.12 Pro forma weighted average ordinary shares outstanding -- basic........ 241,977 241,977 -- diluted...... 249,507 249,507 Pro forma earnings/(loss) per ADS -- basic........ 0.22 0.36 -- diluted...... 0.21 0.35
20 Unaudited Pro Forma Combined Condensed Income Statement Year Ended December 31, 1998
Shire Roberts ------------------------------------------------------ -------------------------- Adjustments U.S. U.S. U.K. GAAP (1) U.S. GAAP GAAP(2) GAAP(3) U.S. GAAP(4) -------------- ----------- -------------- --------- --------- --------------- (in thousands, except per ordinary share and per ADS amounts) Total revenue.... (Pounds)80,328 (Pounds)-- (Pounds)80,328 $ 133,344 $ 175,445 (Pounds)105,690 Operating expenses........ (72,449) (10,022) (82,471) (136,902) (148,067) (89,197) Operating income/(loss)... 7,879 (10,022) (2,143) (3,558) 27,378 16,493 Interest income.. 1,434 -- 1,434 2,380 4,108 2,475 Interest expense......... (214) -- (214) (355) (6,157) (3,709) Other, net....... -- -- -- -- (318) (192) Income/(loss) before income taxes........... 9,099 (10,022) (923) (1,533) 25,011 15,067 Income taxes..... (2,852) 5,954 3,102 5,149 (8,224) (4,954) Net income/(loss)... 6,247 (4,068) 2,179 3,616 16,787 10,113 Earnings/(loss) per ordinary share -- basic........ 0.05 -- 0.02 0.03 0.54 0.33 -- diluted...... 0.04 -- 0.02 0.03 0.53 0.32 Weighted average ordinary shares outstanding -- basic........ 136,924 -- 136,924 136,924 31,049 31,049 -- diluted...... 144,399 -- 144,399 144,399 31,460 31,460 Pro forma information based on exchange ratio of 3.4122(10) Pro forma earnings/(loss) per ordinary share -- basic........ -- diluted...... Pro forma weighted average ordinary shares outstanding -- basic........ -- diluted...... Pro forma earnings/(loss) per ADS -- basic........ -- diluted...... Pro forma information based on exchange ratio of 3.8407(10) Pro forma earnings/(loss) per ordinary share -- basic........ -- diluted...... Pro forma weighted average ordinary shares outstanding -- basic........ -- diluted...... Pro forma earnings/(loss) per ADS -- basic........ -- diluted...... Pro forma information based on exchange ratio of 3.1280(10) Pro forma earnings/(loss) per ordinary share -- basic........ -- diluted...... Pro forma weighted average ordinary shares outstanding -- basic........ -- diluted...... Pro forma earnings/(loss) per ADS -- basic........ -- diluted...... Shire Roberts Pro Forma ---------------------------- U.S. U.S. GAAP(5) GAAP(6) ---------------- ----------- Total revenue.... (Pounds)186,018 $ 308,789 Operating expenses........ (171,668) (284 ,969) Operating income/(loss)... 14,350 23,820 Interest income.. 3,909 6,488 Interest expense......... (3,923) (6,512) Other, net....... (192) (318) Income/(loss) before income taxes........... 14,144 23,478 Income taxes..... (1,852) (3,075) Net income/(loss)... 12,292 20,403 Earnings/(loss) per ordinary share -- basic........ -- -- -- diluted...... -- -- Weighted average ordinary shares outstanding -- basic........ -- -- -- diluted...... -- -- Pro forma information based on exchange ratio of 3.4122(10) Pro forma earnings/(loss) per ordinary share -- basic........ 0.05 0.08 -- diluted...... 0.05 0.08 Pro forma weighted average ordinary shares outstanding -- basic........ 242,869 242,869 -- diluted...... 251,747 251,747 Pro forma earnings/(loss) per ADS -- basic........ 0.15 0.25 -- diluted...... 0.15 0.24 Pro forma information based on exchange ratio of 3.8407(10) Pro forma earnings/(loss) per ordinary share -- basic........ 0.05 0.08 -- diluted...... 0.05 0.08 Pro forma weighted average ordinary shares outstanding -- basic........ 256,173 256,173 -- diluted...... 265,228 265,228 Pro forma earnings/(loss) per ADS -- basic........ 0.14 0.24 -- diluted...... 0.14 0.23 Pro forma information based on exchange ratio of 3.1280(10) Pro forma earnings/(loss) per ordinary share -- basic........ 0.05 0.09 -- diluted...... 0.05 0.08 Pro forma weighted average ordinary shares outstanding -- basic........ 234,045 234,045 -- diluted...... 242,806 242,806 Pro forma earnings/(loss) per ADS -- basic........ 0.16 0.26 -- diluted...... 0.15 0.25
21 Unaudited Pro Forma Combined Condensed Income Statement Six Months Ended December 31, 1997
Shire Roberts Shire Roberts Pro Forma ------------------------------------------------------- ------------------------- -------------------------- U.K. Adjustments U.S. U.S. U.S. U.S. U.S. U.S. GAAP (1) GAAP GAAP(2) GAAP(3) GAAP(4) GAAP(5) GAAP(6) --------------- ----------- --------------- -------- -------- --------------- --------------- --------- (in thousands, except per ordinary share and per ADS amounts) Total revenue.... (Pounds) 28,605 (Pounds)-- (Pounds) 28,605 $ 46,912 $ 65,892 (Pounds) 40,178 (Pounds) 68,783 $ 112,804 Operating expenses........ (26,375) (3,699) (30,074) (49,321) (67,918) (41,413) (71,487) (117,239) Operating income/(loss)... 2,230 (3,699) (1,469) (2,409) (2,026) (1,235) (2,704) (4,435) Interest income.. 337 -- 337 553 2,503 1,526 1,863 3,056 Interest expenses........ (115) -- (115) (189) (323) (197) (312) (512) Other, net....... -- -- -- -- (2,167) (1,321) (1,321) (2,167) Income/(loss) before income taxes........... 2,452 (3,699) (1,247) (2,045) (2,013) (1,227) (2,474) (4,058) Income taxes..... (2,832) 1,222 (1,610) (2,640) 2,332 1,422 (188) (308) Net income/(loss)... (380) (2,477) (2,857) (4,685) 319 195 (2,662) (4,366) Earnings/(loss) per ordinary share -- basic........ (0.00) -- (0.03) (0.04) 0.01 0.01 -- -- -- diluted...... (0.00) -- (0.03) (0.04) 0.01 0.01 -- -- Weighted average ordinary shares outstanding -- basic........ 112,660 -- 112,660 112,660 28,982 28,982 -- -- -- diluted...... 112,660 -- 112,660 112,660 30,108 30,108 -- -- Pro forma information based on exchange ratio of 3.4122(10) Pro forma earnings/(loss) per ordinary share -- basic........ (0.01) (0.02) -- diluted...... (0.01) (0.02) Pro forma weighted average ordinary shares outstanding -- basic........ 211,552 211,552 -- diluted...... 211,552 211,552 Pro forma earnings/(loss) per ADS -- basic........ (0.04) (0.06) -- diluted...... (0.04) (0.06) Pro forma information based on exchange ratio of 3.8407(10) Pro forma earnings/(loss) per ordinary share -- basic........ (0.01) (0.02) -- diluted...... (0.01) (0.02) Pro forma weighted average ordinary shares outstanding -- basic........ 223,971 223,971 -- diluted...... 223,971 223,971 Pro forma earnings/(loss) per ADS -- basic........ (0.04) (0.06) -- diluted...... (0.04) (0.06) Pro forma information based on exchange ratio of 3.1280(10) Pro forma earnings/(loss) per ordinary share -- basic........ (0.01) (0.02) -- diluted...... (0.01) (0.02) Pro forma weighted average ordinary shares outstanding -- basic........ 203,316 203,316 -- diluted...... 203,316 203,316 Pro forma earnings/(loss) per ADS -- basic........ (0.04) (0.06) -- diluted...... (0.04) (0.06)
22 Unaudited Pro Forma Combined Condensed Income Statement Year Ended June 30, 1997
Shire Roberts Shire Roberts Pro Forma ------------------------------------------------------- ------------------------- ------------------------- Adjustments U.S. U.S. U.S. U.K.GAAP (1) U.S. GAAP GAAP(2) GAAP(3) U.S. GAAP(4) U.S. GAAP(5) GAAP(6) -------------- ------------ -------------- --------- --------- -------------- -------------- --------- (in thousands, except per ordinary share and per ADS amounts) Total revenue.... (Pounds)23,072 (Pounds) -- (Pounds)23,072 $ 37,146 $ 110,696 (Pounds)68,755 (Pounds)91,827 $ 147,842 Operating ex- penses.......... (24,471) (50,886) (75,357) (121,325) (151,633) (94,182) (169,539) (272,958) Operating income/(loss)... (1,399) (50,886) (52,285) (84,179) (40,937) (25,427) (77,712) (125,116) Interest income.. 1,278 -- 1,278 2,058 4,810 2,988 4,266 6,868 Interest ex- penses.......... (25) -- (25) (40) (1,011) (628) (653) (1,051) Other, net....... -- -- -- -- 90 56 56 90 Income/(loss) from continuing operations before income taxes........... (146) (50,886) (51,032) (82,161) (37,048) (23,011) (74,073) (119,209) Income taxes..... -- 794 794 1,278 10,937 6,793 7,587 12,215 Income/(loss) from continuing operations...... (146) (50,092) (50,238) (80,883) (26,111) (16,218) (66,456) (106,994) Earnings/(loss) per ordinary share -- basic........ (0.00) -- (0.75) (1.20) (1.07) (0.66) -- -- -- diluted...... (0.00) -- (0.75) (1.20) (1.07) (0.66) -- -- Weighted average ordinary shares outstanding -- basic........ 67,153 -- 67,153 67,153 24,499 24,499 -- -- -- diluted...... 67,153 -- 67,153 67,153 24,499 24,499 -- -- Pro forma infor- mation based on exchange ratio of 3.4122(10) Pro forma earnings/(loss) per ordinary share -- basic........ (0.44) (0.71) -- diluted...... (0.44) (0.71) Pro forma weighted average ordinary shares outstanding -- basic........ 150,748 150,748 -- diluted...... 150,748 150,748 Pro forma earnings/(loss) per ADS -- basic........ (1.32) (2.13) -- diluted...... (1.32) (2.13) Pro forma infor- mation based on exchange ratio of 3.8407(10) Pro forma earnings/(loss) per ordinary share -- basic........ (0.41) (0.66) -- diluted...... (0.41) (0.66) Pro forma weighted average ordinary shares outstanding -- basic........ 161,246 161,246 -- diluted...... 161,246 161,246 Pro forma earnings/(loss) per ADS -- basic........ (1.24) (1.99) -- diluted...... (1.24) (1.99) Pro forma infor- mation based on exchange ratio of 3.1280 Pro forma earnings/(loss) per ordinary share -- basic........ (0.46) (0.74) -- diluted...... (0.46) (0.74) Pro forma weighted average ordinary shares outstanding -- basic........ 143,786 143,786 -- diluted...... 143,786 143,786 Pro forma earnings/(loss) per ADS -- basic........ (1.39) (2.23) -- diluted...... (1.39) (2.23)
23 Unaudited Pro Forma Combined Condensed Income Statement Year Ended June 30, 1996
Shire Roberts -------------------------------------------------------------- --------------------------------- Adjustments U.K. GAAP (1) U.S. GAAP U.S. GAAP(2) U.S. GAAP(3) U.S. GAAP(4) -------------- ----------- ------------------ ------------- ------------- ------------------ (in thousands, except per ordinary share and per ADS amounts) Total revenue.... (Pounds)21,043 (Pounds)-- (Pounds) 21,043 $ 32,617 $ 110,920 (Pounds) 71,561 Operating expenses........ (18,474) (14,995) (33,469) (51,877) (115,217) (74,334) Operating income (loss).......... 2,569 (14,995) (12,426) (19,260) (4,297) (2,772) Interest income.. 606 -- 606 939 1,875 1,210 Interest expenses........ (453) -- (453) (702) (3,007) (1,940) Other, net....... -- -- -- -- 36 23 Income (loss) from continuing operations before income taxes........... 2,722 (14,995) (12,273) (19,023) (5,393) (3,479) Income taxes..... (167) 251 84 130 581 375 Income (loss) from continuing operations...... 2,555 (14,744) (12,189) (18,893) (4,812) (3,104) Earnings/(loss) per ordinary share -- basic........ 0.06 -- (0.28) (0.43) (0.26) (0.17) -- diluted...... 0.06 -- (0.28) (0.43) (0.26) (0.17) Weighted average ordinary shares outstanding -- basic........ 44,154 -- 44,154 44,154 18,672 18,672 -- diluted...... 45,208 -- 44,154 44,154 18,672 18,672 Pro forma information based on exchange ratio of 3.4122(10) Pro forma earnings/(loss) per ordinary share -- basic........ -- diluted...... Pro forma weighted average ordinary shares outstanding -- basic........ -- diluted...... Pro forma earnings/(loss) per ADS -- basic........ -- diluted...... Pro forma information based on exchange ratio of 3.8407(10) Pro forma earnings/(loss) per ordinary share -- basic........ -- diluted...... Pro forma weighted average ordinary shares outstanding -- basic........ -- diluted...... Pro forma earnings/(loss) per ADS -- basic........ -- diluted...... Pro forma information based on exchange ratio of 3.1280 Pro forma earnings/(loss) per ordinary share -- basic........ -- diluted...... Pro forma weighted average ordinary shares outstanding -- basic........ -- diluted...... Pro forma earnings/(loss) per ADS -- basic........ -- diluted...... Shire Roberts Pro Forma -------------------------- U.S. U.S. GAAP(5) GAAP(6) --------------- ---------- Total revenue.... (Pounds)92,604 $ 143,537 Operating expenses........ (107,803) (167,094) Operating income (loss).......... (15,199) (23,557) Interest income.. 1,816 2,814 Interest expenses........ (2,393) (3,709) Other, net....... 23 36 Income (loss) from continuing operations before income taxes........... (15,753) (24,416) Income taxes..... 459 711 Income (loss) from continuing operations...... (15,294) (23,705) Earnings/(loss) per ordinary share -- basic........ -- -- -- diluted...... -- -- Weighted average ordinary shares outstanding -- basic........ -- -- -- diluted...... -- -- Pro forma information based on exchange ratio of 3.4122(10) Pro forma earnings/(loss) per ordinary share -- basic........ (0.14) (0.22) -- diluted...... (0.14) (0.22) Pro forma weighted average ordinary shares outstanding -- basic........ 107,867 107,867 -- diluted...... 107,867 107,867 Pro forma earnings/(loss) per ADS -- basic........ (0.43) (0.66) -- diluted...... (0.43) (0.66) Pro forma information based on exchange ratio of 3.8407(10) Pro forma earnings/(loss) per ordinary share -- basic........ (0.13) (0.20) -- diluted...... (0.13) (0.20) Pro forma weighted average ordinary shares outstanding -- basic........ 115,868 115,868 -- diluted...... 115,868 115,868 Pro forma earnings/(loss) per ADS -- basic........ (0.40) (0.61) -- diluted...... (0.40) (0.61) Pro forma information based on exchange ratio of 3.1280 Pro forma earnings/(loss) per ordinary share -- basic........ (0.15) (0.23) -- diluted...... (0.15) (0.23) Pro forma weighted average ordinary shares outstanding -- basic........ 102,560 102,560 -- diluted...... 102,560 102,560 Pro forma earnings/(loss) per ADS -- basic........ (0.45) (0.69) -- diluted...... (0.45) (0.69)
24 Unaudited Pro Forma Combined Condensed Balance Sheet As of September 30, 1999
U.K. GAAP -------------- U.S. GAAP ASSETS Current assets: Cash and current investments.... (Pounds)52,508 Inventory, net.. 7,612 Accounts receivable, net............ 18,685 Notes receivable..... -- Other current assets......... 2,676 -------------- Total current assets......... 81,481 Property and equipment, net.. 3,423 Intangible assets, net..... 14,462 Other assets..... -- -------------- Totals assets... (Pounds)99,366 ============== LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Current installments of long term debt.. (Pounds) 5,354 Accounts payable and accrued expenses........ 17,672 Taxes, other than income taxes.... 2,236 Income taxes payable......... 197 Other current liabilities..... 969 -------------- Total current liabilities.... 26,428 Long term debt, including capital lease obligations..... 1,825 Other liabilities..... 877 Shareholders' equity.......... 70,236 -------------- Total liabilities and shareholders' equity......... (Pounds)99,366 ============== Shire Roberts Shire Roberts Pro Forma ----------------------------------------- ------------------------ -------------------------------------- U.S. U.S. Merger U.S. Adjustments (7) U.S. GAAP GAAP(8) GAAP U.S. GAAP(9) Adjustment(9) U.S. GAAP GAAP ---------------- --------------- -------- -------- --------------- ------------- --------------- -------- (in thousands, except per ordinary share and per ADS amounts) U.S. GAAP ASSETS Current assets: Cash and current investments.... (Pounds) -- (Pounds) 52,508 $ 86,113 $ 63,323 (Pounds) 38,612 (Pounds)-- (Pounds) 91,120 $149,436 Inventory, net.. -- 7,612 12,484 29,186 17,796 -- 25,408 41,670 Accounts receivable, net............ -- 18,685 30,643 41,552 25,337 -- 44,022 72,195 Notes receivable..... -- -- -- 6,259 3,816 -- 3,816 6,259 Other current assets......... 7,402 10,078 16,528 12,174 7,423 -- 17,501 28,702 ---------------- --------------- -------- -------- --------------- ------------- --------------- -------- Total current assets......... 7,402 88,883 145,768 152,494 92,984 -- 181,867 298,262 Property and equipment, net.. -- 3,423 5,614 37,049 22,591 -- 26,014 42,663 Intangible assets, net..... 119,964 134,426 220,459 348,761 212,659 -- 347,085 569,220 Other assets..... 11,943 11,943 19,586 12,683 7,734 -- 19,677 32,269 ---------------- --------------- -------- -------- --------------- ------------- --------------- -------- Totals assets... (Pounds)139,309 (Pounds)238,675 $391,427 $550,987 (Pounds)335,968 (Pounds)-- (Pounds)574,643 $942,414 ================ =============== ======== ======== =============== ============= =============== ======== LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Current installments of long term debt.. (Pounds) -- (Pounds) 5,354 $ 8,781 $ 7,899 (Pounds) 4,816 (Pounds)-- (Pounds) 10,170 $ 16,680 Accounts payable and accrued expenses........ -- 17,672 28,982 16,895 10,302 10,000 37,974 62,277 Taxes, other than income taxes.... -- 2,236 3,667 -- -- -- 2,236 3,667 Income taxes payable......... -- 197 323 -- -- -- 197 323 Other current liabilities..... -- 969 1,589 35,825 21,845 22,814 37,414 ---------------- --------------- -------- -------- --------------- ------------- --------------- -------- Total current liabilities.... -- 26,428 43,342 60,619 36,963 10,000 73,391 120,361 Long term debt, including capital lease obligations..... -- 1,825 2,993 122,188 74,505 -- 76,330 125,181 Other liabilities..... -- 877 1,438 840 512 -- 1,389 2,278 Shareholders' equity.......... 139,309 209,545 343,654 367,340 223,988 (10,000) 423,533 694,594 ---------------- --------------- -------- -------- --------------- ------------- --------------- -------- Total liabilities and shareholders' equity......... (Pounds)139,309 (Pounds)238,675 $391,427 $550,987 (Pounds)335,968 (Pounds)-- (Pounds)574,643 $942,414 ================ =============== ======== ======== =============== ============= =============== ========
25 Notes 1. Adjustments reflecting differences between U.S. GAAP and U.K. GAAP:
Year ended Year ended Six months ended Year ended Nine months ended June 30, 1996 June 30, 1997 Dec. 31, 1997 Dec. 31, 1998 September 30, 1999 ------------- ------------- ---------------- -------------- ------------------ Amortization of goodwill............... (Pounds)(167) (Pounds)(220) (Pounds)(2,334) (Pounds)(6,709) (Pounds)(5,103) Write off of in process research and development............ (14,728) (50,626) -- -- -- Recognition of deferred tax asset.............. 251 794 1,222 7,765 1,771 Share option compensation costs..... (100) (40) (1,365) (3,313) (6,380) Tax benefits of share option deductions...... -- -- -- (1,811) (2,017) ------------ ------------ -------------- -------------- -------------- Total................. (14,744) (50,092) (2,477) (4,068) (11,729)
The following represent adjustments made to the Shire historical financial statements to convert them from U.K. GAAP to U.S. GAAP: (a) adjustment to record amortization charge on goodwill associated with previous acquisitions of Shire, namely Shire Pharmaceutical Contracts Ltd., Shire Laboratories Inc. and Shire Richwood Inc. Goodwill is being amortized on a straight line basis over its estimated useful life which ranges from 5 to 30 years. The weighted average amortisable life of goodwill at September 30, 1999 was 21 years. (See note 7a). (b) adjustment for the write off of that portion of the purchase price of the acquisition of Shire Pharmaceutical Contracts Limited, Shire Laboratories Inc. and Shire Richwood Inc. allocated to in process research and development where technological feasibility has not yet been established and for which there were no alternative future uses. (c) adjustment to recognize deferred tax assets which arise primarily from net operating loss carryforwards; (d) adjustment to record stock option compensation costs based on APB Opinion 25. See "Adoption of U.S. GAAP for Accounting Purposes." (e) adjustment to record the tax benefits of non qualifying stock options. See note 24 of Shire's audited financial statements for a discussion of these items. 2. Translation of pounds sterling into U.S. dollars has been made at the following rates based upon the average noon buying rates for the period. Such translation is based on generally accepted accounting principles for foreign currency translations.
Year ended Year ended Six months ended Year ended Nine months ended June 30, 1996 June 30, 1997 Dec. 31, 1997 Dec. 31, 1998 September 30, 1999 ------------- ------------- ---------------- ------------- ------------------ U.S. dollars per (Pounds)1.00........... 1.55 1.61 1.64 1.66 1.62
3. To present the results of Roberts for the years ended June 30, 1997 and 1996, and for the six month period ended December 31, 1997 the quarterly results on Form 10-Q were combined. There were no periods excluded from or included more than once in the recast financial statements. 26 4. Translation of U.S. dollars into pounds sterling has been made at the following rates based upon the average noon buying rates for the period. Such translation is based on generally accepted accounting principles for foreign currency translations.
Year ended Year ended Six months ended Year ended Nine months ended June 30, 1996 June 30, 1997 Dec. 31, 1997 Dec. 31, 1998 September 30, 1999 ------------- ------------- ---------------- ------------- ------------------ Pounds sterling per $1.00.................. 0.65 0.62 0.61 0.60 0.62
5. Represents total of Shire and Roberts U.S. GAAP income statements stated in pounds sterling. 6. Represents total of Shire and Roberts U.S. GAAP income statements stated in U.S. dollars. 7. Reflects adjustment:
September 30, 1999 ------------------ Capitalization of goodwill arising on acquisitions, net of amortization....................................... 119,964 Recognition of deferred tax asset...................... 19,345 ------- 139,309
(a) adjustment to record goodwill and related accumulated amortization associated with previous acquisitions of Shire, namely Shire Pharmaceutical Contracts Ltd., Shire Laboratories Inc. and Shire Richwood Inc. Goodwill is being amortized on a straight line basis over its estimated useful life which ranges from 5 to 30 years; Capitalization of goodwill arising on acquisitions, net of amortization:
Goodwill Completed Assembled and other Deferred products workforce intangibles consideration Total --------- --------- ----------- ------------- ------- As at September 30, 1999................... 100,433 1,324 12,620 5,587 119,964
The weighted average amortisable life of goodwill at September 30, 1999 was 21 years. (b) adjustment to recognize deferred tax assets which arise primarily from net operating loss carryforwards. 8. Translation of pounds sterling into U.S. dollars has been made at the rate of (Pounds)1.00 = $1.64 (the noon buying rate on September 30, 1999) based on generally accepted accounting principles for foreign currency translations. Translation of U.S. dollars into pounds sterling has been made at the rate of $1.00 = (Pounds)0.61. 9. The unaudited pro forma combined income statement does not reflect costs expected to be incurred by Shire and Roberts directly related to the merger as these costs will not have a continuing impact on the financial results. The costs attributable to professional fees, UK stamp duty tax levied on the value of the Shire ordinary shares issued under the merger agreement and the distribution of proxy materials are estimated at $35 million. Shire intends to take a restructuring charge in the fourth quarter of 1999 following consummation of the merger. The exact amount of the restructuring charge has not yet been determined, but will be accounted for under the requirements of EITF 94-3 when determined. 10. Pro forma weighted average ordinary shares have been calculated using the exchange ratios of 3.4122, 3.8407 and 3.1280 which are the mid, highest and lowest number of ordinary shares that can be issued for each Roberts share under the terms of the merger agreement. Earnings per share information is presented under the 3 scenarios to demonstrate the effect of the exchange ratio on the pro forma results. 27 Comparative Per Share Data The following table presents certain historical per share data for Shire and Roberts and unaudited pro forma and equivalent pro forma combined per share data to reflect the consummation of the merger based upon the historical financial results of Shire and Roberts presented under U.S. GAAP and the conversion of each Roberts share into 1.1374 ADSs (the exchange ratio as of July 23, 1999). The pro forma data are not necessarily indicative of actual or future operating results or of the financial position that would have occurred or will occur upon consummation of the merger. The data presented below should be read in conjunction with the separate historical consolidated financial statements of Shire and Roberts which are incorporated in this Prospectus-Proxy Statement by reference.
Nine Months Ended September 30, 1999 --------------------------------------------------------------------------------------- Roberts Equivalent Shire Historical Roberts Historical Pro Forma Combined Pro Forma(1) ---------------------- ------------------ --------------------- --------------------- Note 2 Note 3 Basic earnings per ordinary share......... (Pounds)0.04 $0.06 $0.62 (Pounds)0.38 (Pounds)0.07 $0.12 (Pounds)0.24 $0.39 Diluted earnings per ordinary share......... 0.04 0.06 0.61 0.38 0.07 0.11 0.23 0.38 Basic earnings per ADS.. 0.12 0.19 1.86 1.15 0.21 0.35 0.73 1.19 Diluted earnings per ADS.................... 0.11 0.18 1.83 1.13 0.21 0.33 0.70 1.13 Book value per ordinary share (4).............. 1.46 2.39 11.38 7.06 1.67 2.74 5.69 9.34 Book value per ADS...... 4.38 7.18 34.14 21.17 5.00 8.21 17.08 28.01 Year Ended December 31, 1998 --------------------------------------------------------------------------------------- Roberts Equivalent Shire Historical Roberts Historical Pro Forma Combined Pro Forma(1) ---------------------- ------------------ --------------------- --------------------- Note 2 Note 3 Basic earnings per ordinary share......... (Pounds)0.02 $0.03 $0.54 (Pounds)0.33 (Pounds)0.05 $0.08 (Pounds)0.17 $0.27 Diluted earnings per ordinary share......... 0.02 0.03 0.53 0.32 0.05 0.08 0.17 0.27 Basic earnings per ADS.. 0.05 0.08 1.62 0.98 0.15 0.25 0.52 0.85 Diluted earnings per ADS.................... 0.05 0.08 1.60 0.96 0.15 0.24 0.50 0.83 Book value per ordinary share (4).............. 1.37 2.27 10.86 6.52 1.56 2.58 5.31 8.82 Book value per ADS...... 4.11 6.82 32.58 19.55 4.67 7.75 15.94 26.46 Six Months Ended December 31, 1997 --------------------------------------------------------------------------------------- Roberts Equivalent Shire Historical Roberts Historical Pro Forma Combined Pro Forma(1) ---------------------- ------------------ --------------------- --------------------- Note 2 Note 3 Basic earnings/(loss) per ordinary share..... (Pounds)(0.03) $ (0.04) $0.01 (Pounds)0.01 (Pounds)(0.01) $(0.02) (Pounds)(0.04) $(0.07) Diluted earnings/(loss) per ordinary share..... (0.03) (0.04) 0.01 0.01 (0.01) (0.02) (0.04) (0.07) Basic earnings/(loss) per ADS................ (0.08) (0.12) 0.03 0.02 (0.04) (0.06) (0.13) (0.21) Diluted earnings/(loss) per ADS................ (0.08) (0.12) 0.03 0.02 (0.04) (0.06) (0.13) (0.21)
28
Year Ended June 30, 1997 ------------------------------------------------------------------------------------------ Roberts Equivalent Shire Historical Roberts Historical Pro Forma Combined Pro Forma(1) --------------------- --------------------- --------------------- --------------------- Note 2 Note 3 Basic earnings/(loss) per ordinary share..... (Pounds)(0.75) $(1.20) $(1.07) (Pounds)(0.66) (Pounds)(0.44) $(0.71) (Pounds)(1.50) $(2.42) Diluted earnings/(loss) per ordinary share..... (0.75) (1.20) (1.07) (0.66) (0.44) (0.71) (1.50) (2.42) Basic earnings/(loss) per ADS................ (2.24) (3.61) (3.20) (1.99) (1.32) (2.13) (4.50) (7.26) Diluted earnings/(loss) per ADS................ (2.24) (3.61) (3.20) (1.99) (1.32) (2.13) (4.50) (7.26) Year Ended June 30, 1996 ------------------------------------------------------------------------------------------ Roberts Equivalent Shire Historical Roberts Historical Pro Forma Combined Pro Forma(1) --------------------- --------------------- --------------------- --------------------- Note 2 Note 3 Basic earnings per ordinary share......... (Pounds)(0.28) $(0.43) $(0.26) (Pounds)(0.17) (Pounds)(0.14) $(0.22) (Pounds)(0.48) $(0.75) Diluted earnings per ordinary share......... (0.28) (0.43) (0.26) (0.17) (0.14) (0.22) (0.48) (0.75) Basic earnings per ADS.. (0.83) (1.29) (0.77) (0.50) (0.43) (0.66) (1.47) (2.25) Diluted earnings per ADS.................... (0.83) (1.29) (0.77) (0.50) (0.43) (0.66) (1.47) (2.25)
Notes 1. The equivalent pro forma per share amounts were calculated by multiplying pro forma income per share and pro forma book value per share by the exchange ratio of 3.4122. 2. Translation of pounds sterling into U.S. dollars has been made at the following rates based upon the average noon buying rates for the period. Such translation is based on generally accepted accounting principles for foreign currency translations.
Year ended Year ended Six months ended Year ended Nine months ended June 30, 1996 June 30, 1997 Dec. 31, 1997 Dec. 31, 1998 September 30, 1999 ------------- ------------- ---------------- ------------- ------------------ U.S. dollars per (Pounds)1.00........... 1.55 1.61 1.64 1.66 1.62
3. Translation of U.S. dollars into pounds sterling has been made at the following rates based upon the average noon buying rates for the period. Such translation is based on generally accepted accounting principles for foreign currency translations.
Year ended Year ended Six months ended Year ended Nine months ended June 30, 1996 June 30, 1997 Dec. 31, 1997 Dec. 31, 1998 September 30, 1999 ------------- ------------- ---------------- ------------- ------------------ Pounds sterling per $1.00.................. 0.65 0.62 0.61 0.60 0.62
4. Represents the amount of shareholders' equity, stated based on U.S. GAAP, divided by the number of shares outstanding at each period end. The number of shares assumed to be outstanding, on a pro forma basis using the exchange ratio of 3.4122, at each period end are as follows: At December 31, 1998 249,925,000 At September 30, 1999 253,879,000
29 Comparative Market Price Information Shire ADSs are listed and traded on Nasdaq under the symbol "SHPGY." Each ADS represents three ordinary shares. Roberts shares are listed and traded on Amex under the symbol "RPC." Shire ordinary shares are listed and traded on the London Stock Exchange Limited under the symbol "SHP.L." The following table presents the per share closing market prices for the ADSs and Roberts shares on Nasdaq and the Amex, respectively, and the closing mid-market quotation for the ordinary shares as quoted in the Daily Official List of the LSE, for the periods indicated.
Roberts Shire ADSs Shire Ordinary Shares Shares ---------------- ------------------------- ------------- High Low High Low High Low ------ ------ ------------ ------------ ------ ------ 1999 4th Quarter (through November 22, 1999) .... $33.19 $27.44 (Pounds)6.87 (Pounds)5.59 $34.00 $29.88 3rd Quarter ............ 29.31 23.75 6.13 5.01 30.25 21.69 2nd Quarter............. 26.00 18.88 5.28 3.96 24.00 17.00 1st Quarter............. 25.50 19.13 5.17 3.74 26.06 18.50 1998 4th Quarter............. 22.50 18.63 4.35 3.46 24.63 17.25 3rd Quarter............. 27.81 16.56 5.41 2.94 24.31 16.63 2nd Quarter............. 23.00 19.00 4.44 3.80 23.00 13.25 1st Quarter............. 21.44 20.00 4.10 2.87 14.25 9.69 1997 4th Quarter............. -- (1) -- 2.88 2.60 11.75 9.56 3rd Quarter............. -- -- 2.84 2.35 12.75 9.88 2nd Quarter............. -- -- 2.37 2.17 13.50 10.19 1st Quarter............. -- -- 2.39 2.17 14.50 11.38
- -------- (1) The initial offering of ADSs was in March 1998. On July 23, 1999, the last trading date before public announcement of the execution of the merger agreement, the closing price per ADS was $27.00, the closing price per Roberts share was $25.00 and the closing mid-market quotation per ordinary share was 565p. On November 22, 1999, such per share prices were $31.50, $32.25 and 657p, respectively. On October 14, 1999, there were approximately 9,597,822 issued and outstanding ADSs and 143,628,836 ordinary shares in issue, including ordinary shares underlying ADSs. On that date, approximately 100% of the ADSs were held in the U.S. by 27 record holders, one of which is the Depository Trust Company. On October 15, 1999, there were approximately 31,997,043 issued and outstanding shares of Roberts common stock, of which 99.9% were held in the U.S. by 838 record holders. Dividend Policy Historically, Shire has not paid any dividends. Shire does not anticipate paying any dividends on ordinary shares, or indirectly on ADSs, in the foreseeable future. As a matter of English law, Shire may pay dividends only out of its distributable profits, which are its accumulated realized profits under U.K. GAAP, so far as not previously utilized by distribution or capitalization, less its accumulated, realized losses, so far as not previously written off in a reduction or reorganization of capital duly made. As of December 31, 1998, Shire had an accumulated deficit of (Pounds)1.6 million. Future dividend policy will be dependent upon Shire's distributable profits, the financial condition of Shire, the terms of any then existing debt facilities and other relevant factors existing at that time. Roberts has not paid any cash dividends on Roberts shares in the past and it is unlikely that it will pay any dividends on Roberts shares in the foreseeable future. 30 RISK FACTORS You should carefully consider the following risk factors in evaluating whether to vote FOR or AGAINST the approval and adoption of the merger agreement. The following are risks that relate to the merger. If Shire and Roberts do not successfully integrate their operations, the merger may not benefit us or our shareholders. The combination of Shire and Roberts involves the integration of separate companies that have previously operated independently. If the integration is not completed successfully or takes longer than planned, the anticipated benefits of the merger may be lost or delayed. We may have difficulties integrating our sales forces, manufacturing facilities and infrastructure in the U.S. In integrating the operations of Roberts, Shire may encounter difficulties or experience the loss of key employees, customers or suppliers. In addition, Shire and Roberts must successfully integrate the operations and management of the two companies to achieve the potential benefits that were a factor in the Shire board's and the Roberts board's approving the merger. Because the exchange ratio is based on a range of trading prices, we can not determine today the value you will receive for your Roberts shares. The exchange ratio establishing the number of ordinary shares (or ADSs) you receive in the merger is fixed in the event the average ADS trading price at the close of the market for the 15 trading days ending the third trading day before the merger is below $21.09, between $23.73 and $29.01, or above $31.65. This means that a decrease in the value of the ADSs within these ranges will decrease the value of the consideration you receive for your Roberts shares. For a tabular presentation of the hypothetical values you would receive for each Roberts share you own based on various ADS trading values see "The Merger Agreement-- The Exchange Ratio." You should also note that neither Shire nor Roberts can terminate the merger agreement as a result of these fluctuations. The trading value of the ADSs will vary between the date of this Prospectus- Proxy Statement and the date of the completion of the merger. Because the merger may occur at a date later than the special meeting, the share prices at the time of the special meeting may not be indicative of the consideration you will receive at the closing of the merger. Persons affiliated with Roberts have interests that may conflict with the interests of Roberts shareholders in the merger. Some members of Roberts' management have interests in the merger that are different from or in addition to your interests as a Roberts shareholder. As a result, these individuals may have interests different from your own. Specifically: . some of Roberts' directors will be appointed directors of Shire after the merger; . six senior executives of Roberts will be entitled under their employment agreements to receive, if their employment is terminated after the merger in circumstances described in their employment agreements, severance payments equal to three or four times their salary, plus additional payments; . a number of other executives, if their employment is terminated after the merger, will be entitled to receive a severance payment equal to one year's salary plus other payments; . under Roberts' Change of Control Severance Plan, any employee whose employment is terminated "without cause" after the merger will be entitled to a severance payment; . options granted under the 1996 Equity Incentive Plan will vest and become exercisable after the merger; . under the terms of Roberts' SERP and as a result of the merger, the plan participants will become fully vested and Roberts will be required to credit each of the plan participants with 10 years of service with Roberts and fund the SERP in an amount sufficient to pay all benefits under the plan; . when the merger is completed, John T. Spitznagel, President and Chief Executive Officer of Roberts, will resign his position with Roberts and become entitled to severance benefits under his employment 31 agreement. Mr. Spitznagel and Shire will enter into a consulting agreement for a term of 42 months for a total consideration of $940,000 per annum; and . Shire has agreed to indemnify each of Roberts' current directors and officers against losses and claims arising in connection with their actions as a director or officer prior to the merger and to provide insurance for up to six years. We have described the interests of these persons in more detail under the heading "Interests in the Merger of Persons Affiliated with Roberts." Termination fees and an option agreement could make an alternative transaction more difficult or expensive. Shire or Roberts must pay to the other a termination fee of $30 million if the merger agreement terminates under specified circumstances. Shire and Roberts have also entered into an option agreement which provides Shire with the right to acquire up to 19.9% of Roberts' outstanding common stock under specified conditions. The termination fees and the option agreement could deter interested third parties from entering into an alternative transaction with either Shire or Roberts more beneficial to shareholders by making such an alternative more difficult or expensive. Roberts' shareholders will experience a reduction in basic and diluted earnings per share on a pro forma basis. The merger will reduce Roberts' basic and diluted earnings per share on a pro forma basis for the nine months ended September 30, 1999, the year ended December 31, 1998 and the six months ended December 31, 1997. On a historical basis for Roberts, diluted earnings per share from continuing operations for these periods were $0.61, $0.53 and $0.01, respectively. On a historical basis for Roberts, basic earnings per share from continuing operations for these periods were $0.62, $0.54 and $0.01 respectively. On a Roberts equivalent pro forma basis, after giving effect to the merger, basic earnings per share would have been $0.39, $0.27 and $(0.07) respectively. On a Robert's equivalent pro forma basis, after giving effect to the merger, diluted earnings per share would have been $0.38, $0.27 and $(0.07), respectively. Roberts shareholders will also experience a reduction in book value per share on a pro forma basis. On a historical basis for Roberts, book value per share for the periods ended September 30, 1999 and December 31,1998 was $11.38 and $10.86 respectively. On a Roberts equivalent pro forma basis, after giving effect to the merger, book value per share would have been $9.34 at September 30, 1999 and $8.82 at December 31, 1998. The pro forma earnings per share information contained in this paragraph is the Roberts pro forma equivalent data which is calculated by multiplying the pro forma income per share by 3.4122, the exchange ratio as of September 1, 1999. Whether the merger will ultimately add to or reduce Roberts' earnings per share and book value per share will depend on the actual results achieved by Shire after the merger when compared to the results that could have been achieved by Roberts on a stand-alone basis. The following are risks that relate to the operations of both Roberts and Shire. If we cannot obtain the financing necessary to fund our expansion, we will not be able to respond to changes in demand from our customers. We anticipate that our existing capital resources, together with cash expected from operations and available from bank borrowings, should be sufficient to finance our current and anticipated operations and working capital requirements for the next twelve months. However, the acquisition and licensing of products, the expansion of our sales force, and any expansion or relocation of our facilities would require substantial capital resources. If adequate funds are not available, we may be unable to pursue acquisitions, or be forced to curtail in-licensing or research and development programs. To satisfy our capital requirements, we may need to raise additional funds through public and private financings, including equity financings. We may also seek additional funding through corporate collaborations and other financing arrangements. We do not know whether adequate funds will be available when needed or on terms acceptable to us. Alternatively, we may need to obtain funds through arrangements with future collaborative partners or others that may require us to relinquish rights to some or all of our technologies or product candidates. If we are successful in obtaining additional financing, the terms of the financing may have the effect of diluting the value of ordinary shares and ADSs. 32 We intend to continue to explore acquisitions and if we do not successfully integrate future acquisitions, we may have products or operations that do not yield any benefit to us or our shareholders. We intend to pursue product acquisitions that could complement or expand our business. However, we may not be able to identify appropriate product acquisition candidates in the future. If a product acquisition candidate is identified, we do not know if we will be able to successfully negotiate the terms of that acquisition, finance that acquisition or integrate an acquired product into our existing business and products. The negotiation and consummation of potential product acquisitions could cause diversion of management's time and resources. If we consummate one or more significant product acquisitions through the issuance of ordinary shares or ADSs, holders of ordinary shares and ADSs could suffer significant dilution of their ownership interests. If we do not successfully complete our clinical trials, our products will not receive authorization for manufacture and sale. Before obtaining regulatory approvals for the commercial sale of each of our products under development, we must demonstrate through clinical trials that the product is of appropriate quality, safe and effective for the claimed use. Clinical trials of any product under development may not demonstrate the quality, safety and efficacy of such product or will result in an approvable or a marketable product. Our failure to demonstrate adequately the quality, safety and efficacy of a therapeutic drug under development would delay or prevent regulatory approval of the product. In addition, regulatory authorities in Europe or the U.S. (including the U.K. Medicines Control Agency and the U.S. FDA) may require additional clinical trials, which could result in increased costs and significant development delays. The completion rate of clinical trials is dependent upon, among other factors, obtaining adequate clinical supplies and recruiting patients. Delays in patient enrollment in clinical trials may also result in increased costs and program delays. Additional delays can occur in instances in which we share control over the planning and execution of product development with collaborative partners. We intend to continue to out-license a number of our products and the clinical development of such out-licensed products would then be the responsibility of the licensee. We cannot assure you that if clinical trials are completed, we or our collaborative partners will file for or receive required authorizations to manufacture and/or market potential products in a timely manner. Because our industry is highly regulated, we must utilize a large amount of resources before we can produce and sell our products. The clinical development, manufacture, marketing and sale of pharmaceutical products are subject to extensive regulation, including separate regulation by each country in the European Union, the E.U. itself and federal, state and local regulation in the U.S. Unanticipated legislative and other regulatory actions and developments concerning various aspects of our operations and products may restrict our ability to sell one or more of our products or sell them at a profit. The primary regulatory authorities which regulate our ability to manufacture and sell pharmaceutical products include the MCA in the U.K., the FDA and the DEA in the U.S. and the Health Protection Branch of the Ministry of Health in Canada. Drug companies that manufacture or market drugs are required to obtain regulatory approval before marketing most drug products. Regulatory approval is generally based on the results of: . preclinical testing; . clinical data; . manufacturing, chemistry and control data; and . bioavailability. The generation of data is regulated and any generated data are susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Required regulatory approvals may not be obtained in a timely manner, if at all. In addition other regulatory requirements for any such proposed products may be met. Even if we obtain regulatory approvals, the terms of any product approval, including labeling, may be more restrictive than we desire and could affect the marketability of our products. 33 Regulatory authorities have the power to: . revoke or suspend approvals of previously approved products; . require the recall of products that fail to meet regulatory requirements; and . close manufacturing plants that do not operate in conformity with current Good Manufacturing Practices and/or other regulatory requirements or approvals. Such delays or actions could affect our ability to manufacture and sell our products. We face a risk of product liability claims for which we may not have adequate insurance. Testing, manufacturing, marketing and selling pharmaceutical products entail a risk of product liability. If, in the absence of insurance, we do not have sufficient financial resources to satisfy a liability resulting from such a claim or to fund the legal defense of such a claim, we could become insolvent. Product liability insurance coverage is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. Although Shire carries primary product liability insurance in the amount of (Pounds)100 million per claim and (Pounds)100 million in the aggregate on a claims-made basis and umbrella liability insurance, which can also be used for product liability claims, in the amount of (Pounds)20 million per claim and (Pounds)20 million in the aggregate this coverage may not be adequate. This insurance coverage does not include phentermine, which is not separately insured by Shire in the current year. See "--Shire is named as a defendant in a large number of lawsuits involving phentermine." In addition, we do not know if insurance coverage for present or future products will continue to be available. Larger competitors may be able to take our market share by developing superior or more cost-effective products. The manufacture and sale of pharmaceuticals is highly competitive. If any products are approved by the FDA to compete with one of our principal drugs, sales of those drugs will likely fall. Many of our competitors are large, well-known pharmaceutical, chemical and health care companies which have considerably greater resources than we do. Many of our present and potential competitors have research and development capabilities that may allow them to develop new or improved products that may compete with our products. Companies with more resources and larger research and development expenditures have a greater ability to fund research and clinical trials necessary for regulatory applications. They may also have an improved likelihood of obtaining approval of drugs competing with those currently marketed or under development by us. The pharmaceutical industry is characterized by rapid product development and technological change. Our pharmaceuticals could be rendered obsolete or uneconomical by the development of new pharmaceuticals or as the result of either technological advances affecting the cost of production or marketing or pricing action by one or more of our competitors. Our sales will decline if our products are not accepted by the medical community. Our ability to sell any pharmaceutical products after the receipt of regulatory approval will depend in part on the acceptance of those products by physicians and patients. Unanticipated side effects or unfavorable publicity concerning any of our products generally or those of our competitors could have an adverse effect on our ability to maintain and/or obtain regulatory approvals or successfully market our products. Our future results of operations will also depend on continued market acceptance of our current products and the lack of substitutes which are cheaper or more effective. Reimbursement policies of third parties may affect the marketing of our products. Our ability to market our products will depend in part on reimbursement levels for the cost of the products and related treatment established by health care providers, including government authorities, private health insurers and other organizations, such as HMOs and managed care organizations. Third party payors are increasingly challenging the pricing of pharmaceutical products and reviewing their reimbursement practices. In addition, the purchase 34 of pharmaceutical products could be significantly influenced by the following, which would result in lower prices and a reduced demand for our products: . the trend toward managed health care in the U.S.; . the growth of organizations such as HMOs and MCOs; . legislative proposals to reform health care and government insurance programs; and . price controls and non-reimbursement of new and highly priced medicines for which the economic and therapeutic rationales are not established. These cost containment measures and health care reform could affect our ability to sell our products. The reimbursement status of a newly approved pharmaceutical product may be uncertain. Reimbursement might not be available for some of our products. Reimbursement for a product, if granted, may not be maintained. Limits placed on reimbursement could reduce the demand for, or make it harder for people to buy our products. The unavailability or inadequacy of third party reimbursement for our products would reduce or possibly eliminate demand for our products. We are unable to predict whether governmental authorities will enact additional legislation or regulation which will affect third party coverage and reimbursement that reduces demand for our products. Continued consolidation could cause a decline in our sales. In both the U.S. and the U.K., a small number of large wholesale distributors control a significant share of each market. In addition, the number of independent drug stores and small chains has decreased as retail pharmacy consolidation has occurred. Consolidation or financial difficulties could cause customers to reduce their inventory levels, or otherwise reduce purchases of our products. Any loss of our key personnel could prevent us from developing new products. Our success is dependent on our ability to attract and retain highly qualified management and scientific personnel. We face intense competition for personnel from other companies, academic institutions, government entities and other organizations. We may not be able to successfully attract and retain such personnel. In general, we have agreements with some of our key scientific and management personnel for periods of one year or less. The loss of such personnel, or the inability to attract and retain the additional, highly skilled employees required for our activities, could prevent us from developing new products. We have key man insurance for Rolf Stahel, Chief Executive of Shire, in the amount of $1 million. We may not achieve sustained profitability due to a number of factors, some of which are beyond our control. Shire has experienced losses on ordinary activities after taxation in four out of the past five fiscal years. Roberts has experienced losses in three out of the past five fiscal years. We may not achieve sustained profitability. Our results of operations have varied, and will vary in the future, from period to period, due to a variety of factors, including: . costs incurred to acquire, license, develop and market our pharmaceutical products; . spending on research and development of our products; . the introduction of new products by us or our competitors; . cost increases from our third-party manufacturers; . supply interruptions; . the expiration of our intellectual property protection; . the mix of products sold by us; 35 . changes in our marketing and sales expenditures; and . market acceptance of our products. A reduction in the value of the U.S. dollar could reduce our earnings. Changes in exchange rates, particularly those between the U.S. dollar and pound sterling will affect our results of operations. For the year ended December 31, 1998, approximately 66% of Shire's revenue was earned in U.S. dollars while approximately 52% of Shire's expenses were in pounds sterling. Any material decrease in the value of the U.S. dollar compared to the pound could reduce our earnings by decreasing the value of our revenues relative to our expenses. If we are unable to renew or extend contracts with manufacturers or licensees as they expire, we may not be able to develop or manufacture some of our products. We have entered into licensing and co-development agreements with a number of parties. We face the risk that, upon expiration or termination of a third party agreement, we may not be able to renew or extend the agreement with the third party as our interests may no longer coincide. In addition, we may not be able to obtain an alternative supplier for the necessary goods or services on commercially viable terms if at all. Our development agreements generally are terminable upon the occurrence of events described in the agreements, such as the non-payment of royalties or the insolvency of one of the parties to the agreement, and, in some cases, upon notice. In such circumstances we may be unable to continue to develop or market our products as planned and could be required to abandon or divest a product line. The principal components of our products are active and inactive pharmaceutical ingredients and special packaging materials. Many of these components are available only from one supplier. We may not be able to establish or maintain good relationships with suppliers. Additionally, we do not know if suppliers will continue to exist or be able to supply ingredients which meet regulatory requirements. We currently contract for some of our manufacturing needs with manufacturers that comply with current Good Manufacturing Practices, and other applicable laws and regulations. Our third- party manufacturers may not be able to supply finished products which meet these requirements. The availability of finished products may also be interrupted because of noncompliance with regulatory requirements. In the case of a new product, we are also subject to the risk that third party manufacturers will not be able to meet our need to supply market requirements for production in sufficient quantities. The development and approval of our products depends on our ability to procure active ingredients and special packaging materials from sources approved by regulatory authorities. Because the marketing approval process requires manufacturers to specify their own proposed suppliers of active ingredients and special packaging materials in their applications, regulatory approval of a new supplier would be required if active ingredients or such packaging materials were no longer available from the specified supplier. The need to qualify a new supplier could delay our development and marketing efforts. If we fail to adequately protect our intellectual property, competitors may manufacture and market products similar to ours. An important part of our business strategy is the protection of our products and technologies by means of patents, proprietary technology and trademarks. Our success depends upon the ability of our collaborators and licensors to protect their own intellectual property rights. Patents and patent applications covering a number of the technologies and processes owned or licensed to us have been granted or are pending in various countries, including the U.S. We intend to enforce vigorously our patent rights and believe that our collaborators intend to enforce vigorously patent rights they have licensed to us. However, such patent rights may not prevent other entities from developing, using or commercializing products that are similar or functionally equivalent to our products or technologies or processes for formulating or manufacturing similar or functionally equivalent products. Such patent rights may be successfully challenged in the future. Additionally, our products or the technologies or processes used to formulate or manufacture those products 36 may now or in the future infringe the patent rights of third parties. It is also possible that third parties will obtain patent or other proprietary rights that might be necessary or useful for the development, manufacture or sale of our products. If third parties are the first to invent a particular product or technology, it is possible that those parties will obtain patent rights that will be sufficiently broad to prevent us or our strategic collaborators from developing, manufacturing or selling our products. We may need to obtain licenses for intellectual property rights from others to develop, manufacture and market commercially viable products. We may not be able to obtain these licenses on commercially reasonable terms, if at all. In addition, any licensed patents or proprietary rights may not be valid and enforceable. There has been substantial litigation in the pharmaceutical industry with respect to the manufacture, use and sale of new products that are the subject of conflicting patent rights. These lawsuits relate to the validity and infringement of patents. The expense of defending lawsuits brought against us could cause us not to defend these suits and abandon the products. In the past, innovators of products which we are in the process of developing have filed patent infringement lawsuits challenging notices of non-infringement submitted as part of regulatory filings. These lawsuits may be brought by innovators against us or our collaborative partners while we or our collaborative partners pursue regulatory approvals for our products. The ultimate outcome of this type of litigation, if brought, may not be favorable. Our own patents may be subject to infringement by others. While we may pursue litigation in order to protect these rights, we may not be successful in these lawsuits. We are also required to certify to regulatory authorities, such as the FDA, when seeking approval of some of our products that the product does not infringe upon third party rights. A patent holder may challenge a notice of non-infringement or invalidity by filing suit for patent infringement within 45 days of receiving notice. This challenge, if made, would prevent regulatory approval in the U.S. until the suit is resolved or until at least 30 months had elapsed. We also rely on trade secrets and other un-patented proprietary information, which we generally seek to protect by confidentiality and nondisclosure agreements with our employees, consultants, advisors and collaborators. These agreements may not effectively prevent disclosure of confidential information and may not provide us with an adequate remedy in the event of unauthorized disclosure of such information. For example, although we rely on proprietary information and trade secrets relating to Adderall(R), Adderall(R) is not patent protected and competitors may be able to produce competing products. If our employees, scientific consultants or collaborators develop inventions or processes that may be applicable to our products under development, such inventions and processes will not necessarily become our property, but may remain the property of those persons or their employers. Protracted and costly litigation could be necessary to enforce and determine the scope of our proprietary rights. Our failure to obtain or maintain patent and trade secret protection, for any reason, could allow other companies to make competing products and reduce the sales of our products. We have filed applications to register various trademarks for use in connection with pharmaceuticals and related laboratory services in the U.S. and intend to continue to trademark new product names as they are developed. In addition, with respect to certain products, we rely on the trademarks of third parties. These trademarks may not afford adequate protection, or that we or those third parties will have the financial resources to enforce any rights under any of these trademarks. Our inability or the inability of these third parties to protect their trademarks because of successful third party claims to those trademarks could allow others to use our trademarks and dilute their value. If we do not achieve a diversified customer base, we will be vulnerable to the loss of important individual customers. In the U.S., our customers include McKesson Corp., Bergen Brunswig Corp. and Cardinal Health, Inc. In the U.K., our customers include The Boots Company plc, AAH Pharmaceuticals Limited and Unichem plc. For the fiscal year ended December 31 1998, Shire's two largest customers, McKesson Corp. and Cardinal Health, Inc. accounted for approximately 20% and 9% of its revenues, respectively. The loss of either of these customer accounts could substantially reduce our revenues. 37 The following are risks that relate to Shire and will relate to the combined company after the merger. Any decrease in the sale of Adderall(R) could significantly reduce revenues. In 1998, sales of Adderall(R) were approximately $80.5 million, representing approximately 59% of Shire's revenues. Any factors which decrease sales or reduce production of Adderall(R) would significantly reduce Shire's revenues. An explosion in August 1998 at Shire's then supplier of the active ingredients for Adderall(R) halted its production for a total of 84 days. If a similar incident were to occur again, we would experience a substantial decrease in revenues. Other factors which could adversely affect sales of Adderall(R) include: . development of competitive pharmaceuticals; . technological advances; . increased production costs; . marketing or pricing actions by Shire's competitors; . changes in prescription writing practices; . the occurrence of adverse reactions to Adderall; . changes in reimbursement policies of third party payors; or . product liability claims. Shire is named as a defendant in a large number of lawsuits involving phentermine and if we are found liable in some or all of those lawsuits for damages in excess of our assets we would be required to reorganize or seek bankruptcy protection. Shire is currently a defendant in approximately 3,000 lawsuits, in both federal and state courts, which seek damages for, among other things, personal injury arising from our phentermine products supplied for the treatment of obesity by Shire and several other pharmaceutical companies. Shire has been sued as a manufacturer and distributor of phentermine, an anorectic used in the short-term treatment of obesity and one of the products addressed by the lawsuits. If Shire is found liable in some or all of these lawsuits for damages in excess of its assets, it would be required to consider reorganizing and seeking protection in bankruptcy or initiating insolvency proceedings. The suits relate to phentermine either alone or together with fenfluramine or dexfenfluramine. In 98 of these suits, the plaintiffs have specifically alleged in the complaint or subsequent discovery that they used Oby-Cap or Oby-Trim, phentermine products produced by Shire. The lawsuits generally allege the following claims: . the defendants marketed phentermine and the other products for the treatment of obesity and misled users about the products and the dangers associated with them; . the defendants failed to adequately test phentermine individually and when taken in combination with the other drugs; and . the defendants knew or should have known about the negative effects of the drugs and should have informed the public about such risks and/or failed to provide appropriate warning labels. Shire became involved with phentermine through its acquisition of certain assets of Rexar Pharmacal Corp. in January 1994. In addition to liability as a result of its own production of Oby-Cap, plaintiffs may seek to impose liability on Shire as a successor to Rexar. Class certification has been sought for certain of the claims made against Shire and the other defendants. In addition, pending federal lawsuits have been consolidated as a multidistrict litigation in the Eastern District of Pennsylvania. Shire intends to vigorously defend all the lawsuits and pursue all available reasonable defenses. Legal expenses have thus far been paid by the insurers of Eon Labs Manufacturing Inc., the supplier to Shire. Through approximately August 1999, Eon and its distributors, including Shire, had exhausted $25 million in insurance proceeds defending the lawsuits. Additional insurance is available to Shire and the other Eon distributors through Eon's carriers in the amount of $22.75 million in the aggregate. In addition, Shire has its own insurance up to a maximum of $3 million for lawsuits filed in the period to April 28, 1998, an unlimited indemnity given by Eon and a limited indemnity from the former shareholders of SRI given at the time of acquisition of SRI by Shire. Shire has already spent a substantial amount of resources in managing these lawsuits and will continue to do so. 38 We will have to make substantial severance payments to Roberts' senior management team if they leave Shire or are terminated without cause. Fifteen senior executives of Roberts, comprising all the Senior Vice Presidents and Vice Presidents, are entitled under their agreements with Roberts to be paid cash if they terminate their employment after one year and before two years following completion of the merger or if they are terminated by Shire without cause at any time. The total amount of payments that could be made by Shire is $7.0 million. In addition, as a result of accelerated vesting following the merger, the same executives can exercise a total of 936,550 options. 39 WHERE YOU CAN FIND MORE INFORMATION Roberts and Shire are each subject to the informational requirements of the Securities Exchange Act of 1934, and Roberts files reports, proxy statements and other information, and Shire files annual reports and certain other information, with the Securities and Exchange Commission, or the SEC. You can inspect and copy those reports, proxy statements and other information at the SEC's public reference room located at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the public reference facilities in the SEC's regional offices located at: 7 World Trade Center, 13th Floor, New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can obtain copies of this material at prescribed rates by writing to the Securities and Exchange Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC toll free at 1-800-SEC-0330. The SEC also maintains an internet Website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including Roberts but not Shire. The address of this Website is http://www.sec.gov. Shire has filed with the SEC a registration statement on Form F-4 to register the Shire ordinary shares, including ordinary shares underlying the ADSs, to be issued to Roberts shareholders in the merger and a registration statement on Form F-6 in respect of the Shire ADSs under the Securities Act. This Prospectus-Proxy Statement is a part of the registration statement on Form F-4 and constitutes a prospectus of Shire in respect of the Shire ordinary shares underlying the Shire ADSs and the Shire ordinary shares to be issued to Roberts shareholders in connection with the merger, in addition to being a proxy statement of Roberts for the special meeting. As allowed by SEC rules, this Prospectus-Proxy Statement does not contain all the information you can find in the registration statements or the exhibits to the registration statements. Statements contained in this Prospectus-Proxy Statement concerning any other documents are not necessarily complete and, in each instance, reference is made to the copies of these documents filed as exhibits to the registration statements. Each of these statements is qualified in its entirety by this reference. 40 CURRENCIES AND EXCHANGE RATES References in this Prospectus-Proxy Statement to "dollars," "$" or "c" are to the currency of the U.S., and references to "pounds sterling," "pounds," "(Pounds)," "pence" or "p" are to the currency of the United Kingdom. There are 100 pence to each pound. Solely for your convenience, this Prospectus-Proxy Statement contains translations of certain pounds sterling amounts into U.S. dollars at specified rates. These translations should not be taken as assurances that the pounds sterling amounts currently represent these U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated or at any other rate at any time. In this Prospectus-Proxy Statement, unless otherwise stated, pounds sterling have been translated into U.S. dollars at a rate of $1.64 per (Pounds)1.00, the noon buying rate in New York City for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 1999, which we refer to in this Prospectus-Proxy Statement as the noon buying rate. On November 22, 1999, the noon buying rate was $1.62 per (Pounds)1.00. The following table sets forth, for each period indicated, the high and low noon buying rates for one pound sterling expressed in U.S. dollars, the average noon buying rate during the period, and the noon buying rate at the end of the period, based upon information provided by the Federal Reserve Bank of New York:
Nine Months Ended Year Ended December 31, September 30, ----------------------- 1999 1998 1997 1996 ------------- ------- ------- ------- High...................................... $1.6585 $1.7222 $1.7035 $1.7123 Low....................................... $1.5515 $1.6114 $1.5775 $1.4948 Average................................... $1.6131 $1.6573 $1.6376 $1.5607 Period End................................ $1.6457 $1.6628 $1.6427 $1.7123
The following table sets forth, for each period indicated, the high and low rates for one U.S. dollar expressed in pounds sterling, the average rate during the period, and the rate at the end of this period, based upon information obtained from the Federal Reserve Bank of New York:
Nine Months Ended Year Ended December 31, September 30, -------------------------------------------- 1999 1998 1997 1996 -------------- -------------- -------------- -------------- High............... (Pounds)0.6030 (Pounds)0.5807 (Pounds)0.5870 (Pounds)0.5840 Low................ (Pounds)0.6445 (Pounds)0.6206 (Pounds)0.6339 (Pounds)0.6690 Average............ (Pounds)0.6199 (Pounds)0.6034 (Pounds)0.6106 (Pounds)0.6408 Period End......... (Pounds)0.6076 (Pounds)0.6014 (Pounds)0.6088 (Pounds)0.5840
41 SHIRE AFTER THE MERGER Overview After the merger, we will be a specialty pharmaceutical company with four areas of therapeutic focus: central nervous system disorders, gastrointestinal disorders, metabolic/bone diseases and cancer. We refer to ourselves as "specialty" because our principal products tend to be prescribed by specialists as opposed to primary care physicians. In the U.S., the number of prescribers specializing in a particular disease area tends to range from 2,000 to 10,000 compared with a total of approximately 200,000 primary care physicians. Accordingly, a comparatively small salesforce such as ours can promote specialty products effectively but could not be expected to achieve the necessary coverage of primary care physicians. Our principal products will include Adderall(R) for the treatment of Attention Deficit Hyperactivity Disorder, Carbatrol(R) for the treatment of epilepsy, Pentasa(R) for the treatment of ulcerative colitis, Agrylin(R) for the treatment of elevated blood platelets and ProAmatine(R) for the treatment of low blood pressure in the U.S. and the Calcichew(R) range used primarily as adjuncts in the treatment of osteoporosis in the U.K. In addition, we will have a number of products in late stage development including Reminyl(R) for the treatment of Alzheimer's disease, Dirame(R) for the treatment of moderate to moderately severe pain, Lambda(R) for the treatment of high blood phosphate levels associated with kidney failure, RL0903 for the treatment of prostate cancer and Emitasol(R) for the treatment of nausea and vomiting. Roberts has license agreements with other pharmaceutical companies giving Roberts exclusive rights to develop and market its three largest products, Pentasa(R), ProAmatine(R) and Agrylin(R), and some of its products under development, including RL0903, Dirame(R), Tazofelone(R) and Sampatrilat(R). Roberts' exclusive rights under these agreements will not change as a result of the merger. In addition, ProAmatine(R) and Agrylin(R), which have been granted Orphan Drug status by the FDA, will continue to have Orphan Drug status after the merger. After the merger, our revenues will continue to be derived from three sources: sales of products by our own sales and marketing operations principally in the U.S., the U.K. and Canada; licensing and development fees; and royalties. On a pro forma basis, we had revenues (turnover) of (Pounds)186.0 million and a profit after tax of (Pounds)14.1 million for the year ended December 31, 1998 or $308.8 million and $23.5 million, respectively, in each case based upon an exchange rate of $1.66 for each pound sterling, the average of the noon buying rates for the period. Strategy and Approach Our strategy is to develop products and, where appropriate, to market them through our own sales organizations in the major markets of the world. The key elements of our operating strategy are described below: Market proprietary products through our own sales force. We believe that higher financial returns can be achieved by marketing our products directly, as opposed to receiving royalties on licensees' sales. The merger significantly enhances our sales and marketing capability in the U.S. and the U.K. The merger also provides a platform for expansion in Canada through Roberts' operation there. We intend to continue to expand our sales and marketing capability, as opportunities arise, particularly in the major European markets. If suitable opportunities cannot be found, we intend to establish our own sales and marketing organizations in those territories, possibly in conjunction with the purchase of a product or products from third parties. Manage development risk. Recognizing the inherent risks of failure in drug development, both Roberts and Shire have historically sought to manage development risk by maintaining a broad and balanced development portfolio. Shire has also sought to selectively leverage relationships with collaborative parties. Neither company has undertaken discovery research for new chemical entities. Instead, as a combined company we anticipate continuing to rely on our broad network of contacts to identify product candidates which can be developed either internally or through collaborative partnerships. 42 Focus on late-stage development products. Roberts has organized its activities to focus on late-stage development drugs. Shire has also sought to identify promising product candidates already under development or exploit a number of proprietary drug delivery technologies to develop products. In addition to developing our proprietary pipeline products, our principal objective will be to concentrate our operations on licensing, acquiring, developing, marketing and selling proven products and technologies. Both companies have Sales and Marketing We intend to use our sales and marketing infrastructure to sell and market most of our licensed and internally developed products. Our combined sales and marketing operations in the U.S., the U.K. and Canada will consist of 269, 92 and 25 sales representatives, respectively. Following the merger, this expanded sales force will have a broader portfolio of products with opportunities to benefit from increased coverage. We also believe that the merger will create a larger base from which to build a sales and marketing infrastructure in Continental Europe. On October 25, 1999, Shire announced that it had acquired the German and French subsidiaries of Fuisz Technologies Limited and entered into an agreement to acquire Fuisz's Italian subsidiary. The purchase price for the three subsidiaries, all of which are marketing companies, was $39.5 million. All three companies have a low asset base and no manufacturing facilities and consist of a total sales force of 55, of which 20 are employees and the remainder are contract sales representatives. Combined Marketed Products The table below lists the key currently marketed products of Shire and Roberts by therapeutic areas, indicating the owner or licensor of the product and who is marketing the product in which territory.
Marketed By/Relevant Products Principal Indication(s) Owner/Licensor Territory - -------- ----------------------- -------------- -------------------- Treatments for central nervous system disorders Adderall(R) ADHD Shire Shire/U.S. DextroStat(R) ADHD Shire Shire/U.S. Carbatrol(R) Epilepsy Shire Shire/U.S. Treatments for metabolic/bone diseases Calcichew(R) range Osteoporosis adjunct Nycomed Shire/U.K. and Ireland Treatments for blood disorders/cancer Agrylin(R) Elevated blood platelets Roberts Roberts/U.S. and Canada ProAmatine(R) Low blood pressure Nycomed Roberts/U.S. and Canada Treatments for gastrointestinal disorders Pentasa(R) Ulcerative colitis Ferring Roberts/U.S. Treatments for other indications Noroxin(R) Urinary tract infections Merck Roberts/U.S. Colace(R)/Peri- Colace(R) Constipation Roberts Roberts/U.S. and Canada
Products Under Development After the merger, we will seek to maintain a broad and balanced approach to our development of new products by, among other things, leveraging third-party research and development expertise. We have no plans to become directly involved in discovery research for new chemical entities, preferring instead to license 43 compounds from third parties and develop them through the clinical phase with a view to marketing them through our own sales and marketing organization. On a combined basis Roberts and Shire spent approximately $60 million on research and development in the year ended December 31, 1998. The table below lists the key products under development by Shire and Roberts by therapeutic area, including their development status and their territorial rights. Where either company has secured a licensee for a product, this fact is also indicated.
Principal Product(s) Indication(s) Status Territorial Rights Licensee(s) ---------- ------------ ------ ------------------ ---------- Treatments for central nervous system disorders Reminyl(R) (galantamine) Alzheimer's disease In registration Global Janssen Dirame(R) Moderate/moderately Phase III Global severe pain SLI381 ADHD Phase I Global SPD417 Manic depression Phase I Global SPD503 ADHD Pre-clinical Global SPD418 Epilepsy Pre-clinical Global SPC502 Stroke Pre-clinical Global excl. Nordic and Baltic countries Treatments for metabolic/bone diseases Lambda(R) High blood Phase III Global phosphate levels in patients with kidney failure ProAmatine(R) Low blood pressure Phase II U.S., U.K., Canada in dialysis patients Treatments for gastroenterological disorders Pentasa(R) (500mg) Ulcerative colitis Phase III U.S. Emitasol(R) Nausea and vomiting Phase III U.S., Canada Inflammatory bowel Tazofelone(R) disease Phase II Global Irritable bowel LY315535 syndrome Phase I North America Treatments for oncological diseases RL0903 Prostate cancer Phase III North America, Europe
Drug Delivery Technologies We have a platform of five drug delivery technologies that can be applied to drugs in order to enhance their effectiveness or their convenience to patients in terms of dosage regimen. Generally, this involves re-formulating the drug into a new delivery system designed either to enhance the absorption of the drug into the blood stream or, alternatively, to delay absorption of the drug into the bloodstream, thereby requiring the patient to take fewer daily doses. Our portfolio of drug delivery technologies includes three technologies designed to improve the oral delivery of drugs, a technology for rapid absorption through the tissues of the mouth and a system for delivering drug through the skin from an adhesive patch. We intend to make these technologies available to third parties in return for development fees, milestones and royalties. We also intend to employ these technologies selectively to products being developed internally where we believe the characteristics of the product can be improved or modified to secure a competitive advantage. 44 THE SPECIAL MEETING Date, Time, Place and Purpose This Prospectus-Proxy Statement is being furnished to Roberts shareholders in connection with the solicitation of proxies by the Roberts board for use at the special meeting scheduled to be held at Roberts' offices at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724, on December 22, 1999, at 10:00 a.m., local time, and at any adjournment or postponement thereof. Matters to Be Considered at the Special Meeting At the special meeting, Roberts shareholders will be asked to consider and vote on the merger proposal. Record Date; Voting Rights; Voting at the Meeting The Roberts board has fixed October 27, 1999 as the record date for determination of Roberts shareholders entitled to notice of, and to vote at, the special meeting. Each holder of record of Roberts shares on the record date is entitled to cast one vote per share, exercisable in person or by a properly executed proxy, on each matter submitted at the special meeting. On the record date, there were 32,046,720 Roberts shares outstanding and entitled to vote which were held by approximately 920 holders of record. The presence, in person or by a properly executed proxy, of a majority of the Roberts shares outstanding and entitled to vote at the special meeting is necessary to constitute a quorum at the special meeting. The merger proposal requires the affirmative vote of at least two-thirds of the votes cast by the holders of Roberts shares present or represented by proxy at the special meeting. Directors and officers of Roberts and their affiliates collectively own shares representing approximately 5.8% of the outstanding Roberts common stock. Dr. Robert A. Vukovich, Chairman of the Board of Roberts and holder of 5.4% of the outstanding Roberts common stock has agreed to vote his shares in favor of the merger. Yamanouchi Group Holdings Inc., which owns 15.8% of Roberts' common stock, has also agreed to vote its shares in favor of the merger. Voting of Proxies All Roberts shareholders who are entitled to vote and are represented at the special meeting by properly executed proxies received prior to or at the special meeting and not revoked will be voted at the special meeting in accordance with the instructions indicated in the proxies. If no instructions are indicated, those proxies will be voted FOR approval of the merger proposal. Under rules applicable to brokers, a broker is precluded from exercising voting discretion with respect to the approval of the merger proposal and thus, absent specific instructions from the beneficial owner of those Roberts shares, is not empowered to vote those Roberts shares for or against the merger proposal. Roberts shares represented by those "broker non- votes" as well as Roberts shares held by shareholders who abstain from voting on the merger proposal will be counted for purposes of determining whether there is a quorum at the special meeting. However, neither abstentions nor broker "non-votes" are considered votes for or against the merger and will therefore have no impact on the approval of the merger. Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by: . filing (including by telegram or facsimile) with the Secretary of Roberts, before the taking of the vote at the special meeting, a written notice of revocation bearing a later date than the date of the proxy or by giving notice of revocation in the open meeting; .submitting a later-dated proxy; or .attending the special meeting and voting in person. 45 In order to vote in person at the special meeting, Roberts shareholders must attend the meeting and cast their votes in accordance with the voting procedures established for such meeting. Attendance at the special meeting will not in and of itself constitute a revocation of a proxy. Any written notice of revocation or subsequent proxy must be sent to: Roberts Pharmaceutical Corporation, Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724, Attention: Secretary. Roberts will bear the costs of the special meeting and the solicitation of proxies. 46 THE MERGER Background of the Merger The Roberts board and management regularly consider Roberts' strategic alternatives as part of their ongoing efforts to enhance shareholder value. These alternatives have included merging with a strategic partner to gain access to greater financial resources and marketing capabilities. Over the past several years, directors and management of Roberts have had contact with a number of organizations that were potentially interested in a strategic combination. In May 1998, Roberts engaged PaineWebber Incorporated to provide financial advice in connection with possible strategic combinations. In addition to its discussions with Shire, from June 1998 to May 1999, Roberts and PaineWebber also had exploratory discussions from time to time with, and in certain cases furnished confidential information to, five large, fully integrated pharmaceutical companies. However, these discussions were exploratory and did not progress to the point of a comprehensive exchange of information or full negotiations of a price or structure for a transaction that the Roberts board believed worthy of consideration. Following discussions between Shire and Bear, Stearns & Co. Inc. and its affiliate Bear Stearns International Limited on various strategic combination alternatives in the specialty pharmaceutical sector, Bear Stearns arranged an introductory meeting between Rolf Stahel, Chief Executive of Shire, and John T. Spitznagel, President and Chief Executive Officer of Roberts, on May 17, 1999. Shire and Roberts executed reciprocal confidentiality agreements on June 1, 1999, prior to a full day meeting at the offices of Bear Stearns in New York City during which Shire presented Roberts with an overview of its business, Roberts presented Shire with an overview of its business and preliminary discussions regarding a potential combination were held. Additional meetings between the representatives of Shire and Roberts were held the following day at Roberts' Eatontown, New Jersey headquarters and Roberts' Oakville, Ontario, Canada facility. On June 16, 1999, Shire delivered a letter to Roberts setting forth a non-binding indication of interest at $25-26 of Shire shares for the outstanding shares of Roberts. This price range represented a 36 to 41% premium over Roberts' June 15, 1999 stock price and a 32 to 37% premium over the average closing price for the 20 previous trading days. At a telephonic meeting held on June 21, 1999, the Roberts board considered Roberts' strategic alternatives in light of the terms of Shire's initial proposal and exploratory discussions with other potential merger partners. Subsequent to such meeting, Roberts indicated to Shire that the $25-26 consideration outlined in Shire's initial proposal was insufficient. In order to evaluate the possibility of increasing its bid, Shire requested the ability to pursue additional due diligence, including further investigation of Roberts' existing and pipeline drugs and potential combination synergies. Following agreement by Roberts to allow additional due diligence, meetings between the senior management of Roberts and Shire and their advisors took place in New York City on June 28 and 29, 1999 at the offices of PaineWebber. During these meetings Roberts made available detailed business, product, financial and legal information, among other items. In addition, senior management of both Shire and Roberts discussed their respective operations and the expected benefits of a merger of the two companies. On June 29, 1999, the Roberts board held a telephonic meeting to discuss the progress of due diligence. At this meeting, Roberts' financial advisors discussed generally the mergers and acquisitions activity in the pharmaceutical and biotechnology industry. The Roberts board then authorized management to continue its discussions with Shire. After this meeting a non-binding proposal dated July 1, 1999 was sent by Shire to Roberts in which Shire proposed a fixed exchange ratio of 1.1374 ADSs for each share of Roberts common stock, which implied an offer price of $30.00 based on the closing price of Shire ADSs on July 1, 1999. The implied offer of $30.00 represented a 25% premium over the Roberts June 30, 1999 stock price and a 56% premium over the average closing price for the 20 previous trading days. 47 At a telephonic meeting held on July 2, 1999, the Roberts board considered Shire's revised proposal and directed management and its advisors to proceed with additional due diligence. At the meeting, Roberts' financial advisors reviewed with the Roberts board certain information concerning Shire and the proposed terms of a merger. Further due diligence meetings were held on July 8, 1999 and July 9, 1999 at Shire's corporate offices in Andover, U.K. Concurrently with such due diligence meetings, meetings were held at Shire Laboratories in Rockville, Maryland on July 8, 1999 and at Shire Richwood in Florence, Kentucky on July 9, 1999. On July 12, 1999, the Roberts board held a telephonic meeting to discuss the proposed transaction with Shire. Also participating in the meeting were Roberts' financial and legal advisors. After a review of the due diligence conducted by Roberts management and by PaineWebber, the Roberts board authorized management to proceed with negotiation of definitive agreements for the proposed business combination. From July 14 through July 16, 1999, Roberts' U.S. special counsel conducted legal due diligence at the offices of Shire's U.S. legal counsel. On July 19, 1999, Roberts' counsel in the U.K. conducted legal due diligence at the offices of Shire in Andover, U.K. Between July 12 and July 21, Shire conducted additional due diligence with respect to Roberts. During the period from July 9 to July 21, the transaction documents, including the merger agreement, option agreement, shareholder agreements and John T. Spitznagel's consulting agreement, were negotiated among the respective parties, including Shire, Roberts and their respective legal, tax and financial advisors. Discussions included the exchange ratio, the conditions under which the termination fees would be paid, the terms and conditions of the option agreement, and the terms and conditions of John T. Spitznagel's ongoing consulting agreement. On July 19, 1999, the Roberts board held a telephonic board meeting with its advisors in attendance at which Roberts management reported on the status of the ongoing discussions with Shire. Based on this report, the Roberts board authorized management to continue negotiations to finalize the proposed business combination transaction with Shire's management and its advisors. On July 22, 1999, the Roberts board met to discuss the merger, the terms of the merger agreement, including the proposed exchange ratio, the option agreement and the shareholder agreements. Representatives of PaineWebber and Roberts' legal counsel attended the meeting. At the meeting, the Roberts board reviewed various materials relevant to the transaction and received presentations from Roberts management, its legal counsel, its financial advisor, PaineWebber, and its independent auditors. Included in the presentation was a review of the principal terms of the transaction, including related tax and accounting treatment, the regulatory approvals required to consummate the proposed merger and the fiduciary responsibilities of the Roberts board in considering the proposed transaction. The Roberts board also gave specific consideration to the option agreement and the termination fee of $30 million payable to Shire in certain circumstances pursuant to the merger agreement. The Roberts board noted that an option agreement and a fee of this kind were both reasonable and customary in the market, and were each demanded by Shire as a condition to executing the merger agreement. The Roberts board also determined that the terms of the option agreement and termination fee which were negotiated by management were sufficiently limited so as not to interfere with a bid from any source the board believed could make a competing offer. In addition, PaineWebber delivered its opinion to the Roberts board that the proposed merger consideration is fair, from a financial point of view, to the holders of Roberts shares. The PaineWebber opinion is attached to this Prospectus-Proxy Statement as Annex B. The Roberts board then unanimously approved the merger agreement and option agreement. Also on July 22, 1999, the Shire board met to discuss the merger, the terms of the merger agreement and the proposed exchange ratio. Representatives of Bear Stearns and Shire's legal counsel attended the meeting. At the meeting, the opinion of Bear, Stearns & Co. Inc. was delivered to the Shire board that the exchange ratio is fair, from a financial point of view, to Shire. The Bear Stearns opinion is attached to this Prospectus-Proxy Statement as Annex C. The Shire board also considered other key terms of the merger agreement, the option agreement, the shareholder agreements and John T. Spitznagel's consulting agreement. 48 The Shire board also gave specific consideration to the Roberts termination fee of $30 million contained in the merger agreement. The Shire board noted that such a fee is both reasonable and customary in the market, and was required by Roberts as a condition to executing the merger agreement. The Shire board then approved the merger agreement and option agreement, contingent upon approval of a special committee, consisting of Rolf Stahel and Stephen Stamp, pending the resolution of certain outstanding points to the satisfaction of such committee. During July 22 and 23, 1999 negotiations continued between the representatives of Shire and Roberts, and on July 23, 1999, after the close of trading of the relevant stock markets in both the U.S. and the U.K., the merger agreement, option agreement and shareholder agreements were executed. Roberts' Reasons for the Merger; Recommendation of the Roberts Board of Directors On July 22, 1999, the Roberts board, by a unanimous vote, concluded that the merger, the terms of the merger agreement, the option agreement and the transactions contemplated thereby were in the best interests of Roberts and its shareholders. Accordingly, the Roberts board adopted the merger agreement and recommended that the shareholders of Roberts approve the merger agreement. In determining whether to recommend approval of the merger agreement and the transactions contemplated thereby and in adopting the merger agreement and the option agreement, the Roberts board considered each of the following material factors: .Consideration Offered and Premium over Roberts' Share Price. The value of the ADS consideration and the ordinary share consideration provided for in the merger agreement relative to the then-current market price of Roberts shares. Based on the market prices of the ADSs and Roberts shares on July 21, 1999, Roberts shareholders would receive a premium of approximately 25% over the closing sale price of Roberts shares of $24.50. The premium is approximately 35% over the average closing sale price of Roberts shares for the period of twenty consecutive trading days ending on July 21, 1999. .Fairness Opinion. The opinion of PaineWebber delivered to the Roberts board that, as of the date of the opinion, the merger consideration under the merger agreement was fair, from a financial point of view, to holders of Roberts shares. .Substantial Ownership of Roberts Shareholders in Combined Company. That holders of Roberts shares will receive approximately 42% to approximately 47% of the total issued share capital of the combined company following the merger depending on the exchange ratio. .Large Shareholders' Support of Merger. The willingness of major holders of Roberts shares and of Shire ordinary shares to execute shareholder agreements evidencing their agreement to vote their shares to approve the merger agreement. .Broader Product Offering. The ability of the combined Roberts and Shire to diversify its product offerings and increase the number of products with strong market positions. The additional resources and sales force coverage that the combined company will possess are expected to enhance the sales potential of its key products, including Adderall, Pentasa, Carbatrol, Agrylin and ProAmatine. .Broader Development Portfolio. That key late-stage development projects of the combined Shire and Roberts will include Reminyl(R) (galantamine) for Alzheimer's disease, Dirame(R) (propiram) for analgesia, Emitasol(R) (nasal metoclopramide) for nausea, Lambda(R) (lanthanum carbonate) for hyperphosphatemia and RL0903 (LHRH implant) for prostate cancer. The combined company will have a broader development portfolio which will include one product in registration and five products in Phase III trials. .Access to Greater Financial Resources to Pursue Further Growth Opportunities. As of June 30, 1999 the aggregated indebtedness and the aggregated cash and investments of the combined company were $130 million and $126 million, respectively. 49 .Increased Marketing Capability. The combined company will have a combined sales force of 269, 92 and 25 sales representatives in the U.S., the U.K. and Canada, respectively. The combined company should be able to expand its direct marketing capability into continental Europe, through a potential combination of product and company acquisitions. Further, because Roberts and Shire do not have competing products, their separate sales forces should compliment each other and afford new marketing avenues for the products offered by Roberts and Shire. .Increased Investor Profile and Liquidity. The combined company is expected to benefit from a wider shareholder base and the greater liquidity of its securities. .Transaction Is Tax-Free. The U.S. federal income tax consequences of the transaction, including the ability of Roberts shareholders to have a tax- free exchange of their Roberts shares, and the risk that the merger might fail to qualify as a tax-free reorganization under U.S. tax law as a result of actions outside the control of Roberts. .Pooling of Interests Accounting Treatment. The intended accounting of the merger as a pooling of interests under U.S. GAAP which results in combined financial statements prepared on a basis consistent with the underlying view that shareholder interests in the two companies have simply been combined, and in the preservation of the historical cost approach for both Roberts and Shire. This will facilitate future comparison and benchmarking of the combined company against key international competitors. .Earnings of Combined Company. That the combination of Roberts and Shire, without taking into account any expected synergies, is projected to be dilutive to U.S. GAAP earnings through 2000 and accretive to earnings starting 2001. .Strategic Alternatives for Increasing Shareholder Value. The Roberts board considered pursuing several alternatives to increasing shareholder value, including the merger with Shire, other potential business combinations, strategic joint ventures or partnerships and remaining an independent company. PaineWebber had been retained to assist Roberts in exploring these options. Based on all of the information available to the Roberts board, it determined that the strategic combination with Shire and the premium being offered by it presented, at that point, the best opportunity to create greater shareholder value. .No Other Formal Offers. Discussions with other parties led to no formal offers and the Roberts board believed there were no, and there would not be in the near future any, other business combination opportunities with the significant premium offered by Shire. .Interests of Certain Persons. That certain members of the Roberts board and management had interests in the merger different from the interests of the shareholders. The interests of these persons are more fully described under the heading "Interests in the Merger of Persons Affiliated with Roberts." .The Effect of Merger Agreement on Third Party Proposals. The Roberts board considered the possible effect of the terms of the merger agreement with respect to any third party proposals to acquire Roberts after the execution of the merger agreement. The Roberts board considered that the provisions of the merger agreement providing for the payment of a termination fee, as well as the provisions of the option agreement, could have the effect of discouraging alternative proposals for a business combination with Roberts. If any third party proposal were made that the Roberts board determined to be a superior proposal (see "The Merger Agreement"), the Roberts board could only terminate the merger agreement if it paid a termination fee to Shire. .Shire Product Offering and Development Pipeline. That Shire has only one major product, Adderall, and most of its products in development are still in the early stages of the development cycle. In addition, Shire's most significant product in development, Reminyl, has been licensed to a third party and represents only a revenue stream. 50 .Regulatory Approval Not Certain. That the merger is subject to clearance under anti-trust laws in both the United States and the United Kingdom. The combination of Shire and Roberts requires the filing of merger notifications in the United States to the Federal Trade Commission and the Department of Justice, and in the United Kingdom to the Office of Fair Trading. The merger could be blocked or delayed by any of the Federal Trade Commission, the Department of Justice or the Office of Fair Trading. .Restrictions on Conduct of Business Pending Merger Completion. That the terms and conditions of the merger agreement include restrictions on the conduct of Roberts' business pending completion of the merger and permit Roberts to conduct its business only in the ordinary course during that period. .Ongoing Business Relationships. That pending completion of the merger, Roberts' relationships with employees, customers, government agencies and partners might be damaged because of the uncertainty of completing the transaction. .Independent Business. That following the merger, Roberts will no longer be an independent company. .Roberts' Shareholders Will Hold ADSs and not Common Stock. That in the merger the Roberts shareholders will have their holdings represented by Shire ADSs or Shire ordinary shares and will have a currency exchange risk as a result of future dividends having to be converted from pounds to dollars. In light of the Roberts board's knowledge of the business and operations of Roberts and its business judgment, the Roberts board considered and evaluated each of the factors listed above during the course of its deliberations before approving the merger agreement. In view of the wide variety of factors considered in connection with its evaluation of the merger, the Roberts board found it impracticable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in making its determinations. After considering all of the foregoing factors, the Roberts board concluded that a combination with Shire, under the terms in the merger agreement and the related documentation, is in the best interests of Roberts and its shareholders. The Roberts board believes the factors listed above, when considered together, support the fairness of the merger to Roberts and its shareholders and the Roberts board believes that these factors, when considered together, support its recommendation that Roberts shareholders vote for approval of the merger agreement. Shire's Reasons for the Merger Shire's management believes that the merger brings together two of the fastest growing publicly traded specialty pharmaceutical companies, which share a common strategic vision. Both companies have built effective sales and marketing organizations to promote specialty products to defined customer groups. In addition, through selective in-licensing of development compounds, both companies seek to build long term shareholder value by taking these compounds through the development and registration process. The principal benefits of the merger are expected to include: .Broadens product portfolio and expands areas of therapeutic focus. In Adderall(R), Pentasa(R), Carbatrol(R), Agrylin(R) and ProAmatine(R), the combined company has a portfolio of five key products, each with significant sales potential. The additional resources and sales force coverage that the enlarged group will have are expected to help increase the sales potential of these products. The combined company will have a combined sales force of 269, 92 and 25 sales representatives in the U.S., the U.K. and Canada, respectively. In addition, the merger broadens the therapeutic focus of Shire from the central nervous system, metabolic/bone disease and female health to include cardiovascular, gynecology/endocrinology, urology, oncology/hematology and gastroenterology. The proposed merger would reduce the percentage of total revenues contributed by Adderall(R) from approximately 70% for the first six months of 1999 to approximately 30% on a pro forma basis. 51 .An enriched product pipeline. The combined company's key projects that are close to reaching market will include: Reminyl(R) (galantamine) for Alzheimer's disease, Dirame(R) (propiram) for analgesia, Emitasol(R) (nasal metoclopramide) for nausea, Lambda(R) (lanthanum carbonate) for hyperphosphatemia, and RL0903 (GnRH implant) for prostatic cancer. The combined company will have one product in registration and a further five products in Phase III. .Expected operating synergies. The proposed merger is expected to result in significant operating synergies, including elimination of certain duplicative costs; U.S. distribution synergies, including increased utilization of Roberts' new U.S. distribution center; and use of Shire's proprietary drug delivery technologies to fulfill the needs of certain of Roberts' products in development. .Strengthens geographic presence. The contemplated transaction will further strengthen Shire's presence in the U.S., the U.K. and Ireland. In addition, it will allow distribution of Shire products in Canada through Roberts' Canadian operations. The proposed combination will also allow the joint development of a continental European marketing infrastructure. The combined company intends to expand its direct marketing capability in continental Europe through a combination of product and company acquisitions. .Provides critical mass. The proposed merger will enhance the combined company's competitiveness through economies of scale and provide a strong platform for further growth from both existing pipeline products and product and company acquisitions. The transaction will combine complementary development and sales and marketing infrastructures, facilitating the development and distribution of pipeline products, as well as provide the combined company with greater negotiating leverage in pursuing licensing of products. In its chosen therapeutic areas, the combined company's aim is to become a "licensee of choice" for companies that do not possess their own sales and marketing capabilities. .Greater financial resources to pursue further growth opportunities. At June 30, 1999, Shire had no indebtedness and $79 million in cash and investments, while Roberts had approximately $130 million in indebtedness and $47 million in cash and investments. The merger will increase the combined company's ability to finance the acquisition of pipeline products and/or other companies and allow the pursuit of larger product and/or company acquisitions than could be pursued alone. .Increased investor profile and liquidity. Management believes that the combined company will benefit from a wider shareholder base and greater liquidity. In addition, the board considered the following factors: .Integration process. Roberts is a similar size to Shire and therefore presents a significant challenge in terms of integration. Substantial restructuring may be required, particularly in the U.S. .Non-prescription pharmaceuticals. Roberts owns a manufacturing facility in Canada and has a significant interest in non-prescription pharmaceuticals, neither of which conform to Shire's current strategic interests. .Loss of Foreign Private Issuer Status. After the merger, Shire will have the status of a full SEC registrant and will no longer benefit from foreign private issuer status. In addition to the aforementioned factors, the Shire board also considered the key terms of the merger agreement, the option agreement, the shareholder agreements and John T. Spitznagel's consulting agreement, as well as the Roberts termination fee of $30 million contained in the merger agreement. Consideration was also given to potential risks associated with the merger, such as the ability to realize expected synergies, the lack of a fixed price per Roberts share and the interests of various individuals in the merger. Opinion of Financial Advisor to Roberts PaineWebber, as part of its engagement by Roberts, was retained to render an opinion as to whether the merger consideration was fair, from a financial point of view, to the holders of Roberts common stock. The 52 following is a summary of the report presented on July 22, 1999, by PaineWebber to the Roberts board in connection with the rendering of its opinion. The full text of the PaineWebber opinion, dated July 22, 1999, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Annex B to this Prospectus-Proxy Statement. You should read the PaineWebber opinion carefully and in its entirety. This summary of the PaineWebber opinion is qualified in its entirety by reference to the full text of the PaineWebber opinion. In connection with the consideration by the Roberts board of the merger agreement, PaineWebber delivered its written opinion, dated July 22, 1999, to the effect that, as of that date, and based upon its review and assumptions and subject to the limitations summarized below, the merger consideration is fair, from a financial point of view, to the holders of Roberts common stock. The PaineWebber opinion was directed to, and prepared at the request and for the information of, the Roberts board and does not constitute a recommendation to any holder of Roberts common stock as to how any such shareholder should vote with respect to the merger. In arriving at its opinion, PaineWebber, among other things: .Reviewed, among other public information, Roberts' Annual Reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 1998; Roberts' Form 10-Q and the related unaudited financial information for the three months ended March 31, 1999; and certain unaudited financial information of Roberts for the six months ended June 30, 1999. .Reviewed, among other public information, a Shire Annual Report and a Shire Transitional Report, each on Form 20-F and related financial information for the two fiscal years ended December 31, 1998; and certain unaudited financial information for the three months ended March 31, 1999. .Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of Roberts and Shire, which, with respect to Roberts, were furnished to PaineWebber by or on behalf of Roberts and, with respect to Shire, were otherwise publicly available. .Conducted discussions with members of senior management of Roberts and Shire concerning their respective businesses and prospects. .Reviewed the historical market prices and trading activity for Roberts shares and Shire ordinary shares and ADSs and compared them with those of certain other publicly traded companies which PaineWebber deemed to be relevant. .Compared the financial position and operating results of Roberts and Shire with those of certain other publicly traded companies which PaineWebber deemed to be relevant. .Compared the financial terms of the merger with the financial terms of certain other business combinations which PaineWebber deemed to be relevant. .Reviewed a draft of the merger agreement dated July 21, 1999. .Reviewed a draft of the option agreement dated July 21, 1999. .Reviewed drafts of the shareholder agreements dated July 21, 1999. .Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as PaineWebber deemed necessary, including PaineWebber's assessment of general economic, market and monetary conditions. In preparing its opinion, PaineWebber relied on the accuracy and completeness of all information that was publicly available, supplied or otherwise communicated to PaineWebber by or on behalf of Roberts and Shire, and PaineWebber did not assume any responsibility to independently verify such information. With respect to 53 the financial forecasts examined by PaineWebber, PaineWebber assumed, with Roberts' consent, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgment of the management of Roberts as to the future performance of Roberts. PaineWebber also relied upon assurances of the management of Roberts and Shire that they were unaware of any facts that would make the information or financial forecasts provided to PaineWebber incomplete or misleading. PaineWebber was not engaged to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Roberts or Shire, nor was PaineWebber furnished with any such evaluations or appraisals. PaineWebber also assumed the following with Roberts' consent: .The merger will receive pooling-of-interests accounting treatment under U.S. GAAP. .The merger will qualify as a tax-free reorganization under U.S. tax law. .All material liabilities (contingent or otherwise, known or unknown) of Roberts and Shire were as set forth in the consolidated financial statements of Roberts and Shire, respectively. The PaineWebber opinion was based upon economic, monetary and market conditions existing on the date of the PaineWebber opinion. Furthermore, PaineWebber expressed no opinion as to the price or trading ranges at which Roberts shares or Shire ordinary shares and ADSs will trade after the date of the PaineWebber opinion. The PaineWebber opinion does not address the relative merits of the merger and any other transactions or business strategies that may have been discussed by the Roberts board of directors as alternatives to the merger, or the decision of the Roberts board of directors to proceed with the merger. PaineWebber was not requested to, and did not, solicit third party indications of interest in acquiring all or any portion of Roberts. Roberts did not place any limitations upon PaineWebber with respect to the procedures followed or factors considered in rendering its opinion. The following paragraphs summarize the significant analyses performed by PaineWebber in arriving at its opinion. Historical Share Performance. PaineWebber reviewed trading prices for the shares of Roberts common stock. This share performance review indicated that for the twelve months ended July 21, 1999, the low and high closing prices for the Roberts shares on the American Stock Exchange were $15.94 and $26.88. PaineWebber also reviewed the following Roberts share price averages over the following periods prior to July 21, 1999 as set forth in the following table:
Trading Period Average Price -------------- ------------- Latest 10 days................. $24.46 Latest 20 days................. $22.70 Latest 30 days................. $21.35 Latest 60 days................. $19.99 Latest 180 days................ $21.23 Latest twelve months........... $20.87
PaineWebber also reviewed trading prices for the ADSs. This share performance review indicated that for the twelve months ended July 21, 1999, the low and high closing prices for the ADSs on the Nasdaq National Market were $14.13 and $29.38. PaineWebber also reviewed the following Shire ADS price averages over the following periods prior to July 21, 1999 as set forth in the following table:
Trading Period Average Price -------------- ------------- Latest 10 days................. $27.81 Latest 20 days................. $26.71 Latest 30 days................. $25.49 Latest 60 days................. $24.17 Latest 180 days................ $22.27 Latest twelve months........... $21.76
54 Selected Comparable Public Company Analysis. Using publicly available information, PaineWebber compared selected historical and projected financial, operating and stock market performance data of Roberts and Shire to the corresponding data of certain publicly traded companies that PaineWebber deemed to be relevant for Roberts and Shire. The Roberts comparable companies consisted of: Biovail Corporation International King Pharmaceuticals, Inc. Dura Pharmaceuticals, Inc. Medeva plc Forest Laboratories, Inc. Medicis Pharmaceutical Corporation IVAX Corporation Watson Pharmaceuticals, Inc. Jones Pharma Incorporated
PaineWebber reviewed, among other information, the comparable companies' multiples of total enterprise value, which consists of the market value of equity plus total debt less cash and cash equivalents as of March 31, 1999 (as of December 31, 1998 for Medeva plc), to: .latest twelve months revenue, .latest twelve months earnings before interest, taxes, depreciation and amortization, or EBITDA, and .latest twelve months earnings before interest and taxes, or EBIT. Multiples of total enterprise value represent the value of a particular company as a measure of certain identified operating statistics. These operating statistics include revenue, EBITDA and EBIT as described above. PaineWebber also reviewed, among other information, the comparable companies' multiples of market value to: .latest twelve months net income, .calendar year 1999 earnings per share, or EPS estimate, .calendar year 2000 EPS estimate, and .calendar year 2001 EPS estimate. All calendar year 1999, 2000 and 2001 EPS results for the Roberts comparable companies were based on publicly available consensus estimates from First Call Research. Multiples of market value represent the value of a particular company's equity as a multiple of certain identified operating statistics. These operating statistics include net income and calendar year 1999, 2000 and 2001 EPS. The Roberts comparable companies analysis resulted in the following range of values as of July 21, 1999:
Analysis Multiple Range -------- -------------- Latest twelve months revenue.............................. 1.52x to 12.17x Latest twelve months EBITDA............................... 5.0x to 35.1x Latest twelve months EBIT................................. 6.2x to 42.7x Latest twelve months net income........................... 7.7x to 64.2x Calendar year 1999 EPS estimate........................... 11.5x to 39.6x Calendar year 2000 EPS estimate........................... 10.7x to 26.3x Calendar year 2001 EPS estimate........................... 8.7x to 20.3x
55 Based on an exchange ratio of 1.1374 ADSs for each outstanding share of Roberts common stock, Roberts' implied multiples, calculated on the same basis as the Roberts comparable companies, were as follows:
Analysis Roberts Implied Multiple -------- ------------------------ Latest twelve months revenue..................... 5.73x Latest twelve months EBITDA...................... 19.1x Latest twelve months EBIT........................ 24.2x Latest twelve months net income.................. 39.7x Calendar year 1999 EPS estimate.................. 35.0x Calendar year 2000 EPS estimate.................. 26.2x Calendar year 2001 EPS estimate.................. 14.8x
Calendar year 1999, 2000 and 2001 EPS for Roberts were based on estimates provided by Roberts management. The shire comparable companies consisted of: Biovail Corporation International King Pharmaceuticals, Inc. Celltech Chiroscience plc Medeva plc Dura Pharmaceuticals, Inc. Medicis Pharmaceutical Corporation Forest Laboratories, Inc. SkyePharma plc IVAX Corporation Watson Pharmaceuticals, Inc. Jones Pharma Incorporated
The Shire comparable companies analysis resulted in the following range of values as of July 21, 1999:
Analysis Multiple Range -------- --------------- Latest twelve months revenue.............................. 1.52x to 19.88x Latest twelve months EBITDA............................... 5.0x to 35.1x Latest twelve months EBIT................................. 6.2x to 42.7x Latest twelve months net income........................... 7.7x to 64.2x Calendar year 1999 EPS estimate........................... 11.5x to 39.6x Calendar year 2000 EPS estimate........................... 10.7x to 55.0x Calendar year 2001 EPS estimate........................... 8.7x to 20.3x
All calendar 1999, 2000 and 2001 EPS results for the Shire comparable companies were based on publicly available consensus estimates from First Call Research. Data for the latest twelve months were as of March 31, 1999 (as of December 31, 1998 for Medeva plc and SkyePharma plc). Based upon the closing price of ADS on July 21, 1999 of $26.75, Shire's implied multiples, calculated on the same basis as the Shire comparable companies, were as follows:
Analysis Shire Multiple Range -------- -------------------- Latest twelve months revenue......................... 8.34x Latest twelve months EBITDA.......................... 48.8x Latest twelve months EBIT............................ 55.1x Latest twelve months net income...................... 62.6x Calendar year 1999 EPS estimate...................... 37.2x Calendar year 2000 EPS estimate...................... 26.2x Calendar year 2001 EPS estimate...................... 17.5x
56 The calendar year 1999, 2000 and 2001 EPS results for Shire were based on publicly available estimates from First Call research Selected Comparable Mergers and Acquisitions Analysis. PaineWebber reviewed publicly available financial information for selected mertgers and acquisiktions involving specialty and emerging pharmaceutical companies. The selected mergers and acquisitions PaineWebber analyzed included the following:
Acquiror Target -------- ------ Johnson & Johnson Centocor, Inc. Abbott Laboratories Alza Corporation Solvay SA Unimed Pharmaceuticals, Inc. Warner-Lambert Company Agouron Pharmaceutical, Inc. Watson Pharmaceuticals, Inc. TheraTech, Inc. Mylan Incorporated Penederm Incorporated Cardinal Health, Inc. R.P. Scherer Corporation Alpharma Inc. Arthur Cox (Hoechst AG) Elan Corporation, plc Carnrick Laboratories, Inc. (GWC Health, Inc.) Abbott Laboratories MediSense, Inc. Rhone Poulenc Rorer Fisons plc Watson Pharmaceuticals, Inc. Circa Pharmaceutical Incorporated Hoechst AG Marion Merrell Dow Roche Holding AG Syntex Corporation
PaineWebber reviewed the consideration paid based on the offer price of comparable transactions and calculated multiples of total enterprise value. The comparable transactions analysis resulted in the following range of values:
Analysis Multiple Range -------- ---------------- Latest twelve months revenue............................. 1.54x to 36.8x Latest twelve months EBITDA.............................. 9.4x to 66.2x Latest twelve months EBIT................................ 11.3x to 104.9x Latest twelve months net income.......................... 13.8x to 1777.0x One year forward EPS..................................... 175x to 120.0x Two year forward EPS..................................... 16.0x to 87.8x
The one year and two year forward EPS were based on publicly available consensus estimates from First Call Research. Based on an exchange ratio of 1.1374 ADSs for each outstanding share of Roberts common stock, Roberts' implied multiples, calculated on the same basis as the comparable transactions, were as follows:
Analysis Roberts Implied Multiple -------- ------------------------ Latest twelve months revenue..................... 5.73x Latest twelve months EBITDA...................... 19.1x Latest twelve months EBIT........................ 24.2x Latest twelve months net income.................. 39.7x One year forward EPS............................. 35.0x Two year forward EPS............................. 26.2x
One year forward and two year forward EPS for Roberts were based on estimates provided by Roberts management. 57 Discounted Cash Flow Analysis. PaineWebber analyzed Roberts based on an unleveraged discounted cash flow analysis of the projected financial performance of Roberts. Such projected financial performance was based upon a forecast for Roberts provided by Roberts management. The discounted cash flow analysis determined the discounted present value of the unleveraged after-tax cash flows generated over the forecast period and then added a terminal value based upon a range of revenue and EBITDA multiples and discount rates which PaineWebber deemed appropriate. Premiums Paid Analysis. PaineWebber reviewed purchase price per share premiums paid in publicly disclosed merger transactions of non-financial domestic companies announced and completed from January 1, 1998 to July 16, 1999. This analysis indicated the following premiums to the targets' closing stock prices:
Period prior to announcement High Low ---------------------------- ----- ----- One day.................................................... 114.3% (11.2)% One week................................................... 139.2% (14.4)% Four weeks................................................. 185.9% (16.9)%
PaineWebber also reviewed the purchase price per share premiums paid in the comparable transactions described in the "Selected comparable mergers and acquisitions analysis" above. This analysis indicated the following premiums to the targets' closing stock prices as set forth in the following table:
Period prior to announcement High Low ---------------------------- ----- ----- One day.................................................... 61.1% (10.3)% One week................................................... 81.1% (4.2)% Four weeks................................................. 185.9% (8.3)%
The implied premiums to Roberts closing share price based on an implied exchange ratio of 1.1374 ADSs per Roberts share for the one day, one week and four week periods prior to July 21, 1999 were as set forth in the following table:
Roberts Implied Period prior to July 21, 199 Premium ---------------------------- --------------- One day................................................... 38.3% One week.................................................. 22.9% Four weeks................................................ 58.1%
Contribution Analysis. PaineWebber analyzed Roberts' and Shire's relative contribution to the combined entity, based on Roberts' management projections and publicly available estimates for Shire, for the fiscal years 1999 and 2000 with respect to revenue, EBIT and net income, as set forth in the following table:
Roberts Contribution Analysis to Pro Forma Entity -------- -------------------- 1999 Revenue.............................................. 46.9% EBIT................................................. 51.3% Net income........................................... 66.2% 2000 Revenue.............................................. 44.6% EBIT................................................. 49.4% Net income........................................... 50.0%
Based on an exchange ratio of 1.1374 ADSs for each outstanding share of Roberts common stock, holders of Roberts shares will own approximately 44.0% of the outstanding shares of the combined entity after giving effect to the merger. 58 The results of this contribution analysis are not necessarily indicative of the contributions that the respective businesses of Roberts and Shire may make to the combined entity in the future. Pro Forma Merger Analysis. PaineWebber performed an analysis of the potential pro forma effect of the merger on Shire's projected EPS. In performing this analysis, PaineWebber assumed the following with Roberts' consent: .The merger will be accounted for under U.S. GAAP pooling-of-interests accounting treatment. .Reconciliation of Shire's financial results to U.S. GAAP. .Certain synergies may be achieved as a result of the merger. PaineWebber combined the projected operating results of Roberts provided by Roberts management with publicly available estimates for Shire, adjusted to U.S. GAAP, to arrive at the combined company projected net income. PaineWebber divided this result by the pro forma diluted shares outstanding to arrive at a combined company diluted EPS amount. PaineWebber then compared the calculated combined company EPS to the EPS estimate for Shire on a stand-alone basis to determine the pro forma impact of the merger on Shire. The summary of the PaineWebber opinion set forth above does not purport to be a complete description of the data or analyses presented by PaineWebber. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant quantitative methods of financial analyses and the application of those methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. Accordingly, PaineWebber believes that its analysis must be considered as a whole and that considering any portion of such analysis and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the opinion. In its analyses, PaineWebber made numerous assumptions or estimates with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Roberts and Shire. Any assumptions or estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth therein. Accordingly, such assumptions or estimates are inherently subject to substantial uncertainty and neither Roberts nor PaineWebber can guarantee the accuracy of such assumptions or estimates. In addition, analyses relating to the value of businesses do not purport to be appraisals or to reflect the prices at which businesses may actually be sold. Roberts selected PaineWebber to be its financial advisor in connection with the merger because PaineWebber is a prominent investment banking and financial advisory firm with experience in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements and valuations for corporate purposes. Pursuant to an engagement letter between Roberts and PaineWebber dated May 29, 1998, PaineWebber earned a fee of $750,000 for rendering the opinion. In addition, PaineWebber will receive a fee, payable upon completion of the merger, of approximately $6.2 million, and will be reimbursed for certain of its related expenses. PaineWebber will not be entitled to any additional fees or compensation in the event the merger is not approved or otherwise consummated. Roberts also agreed, under separate agreement, to indemnify PaineWebber, its affiliates and each of its directors, officers, agents and employees and each person, if any, controlling PaineWebber or any of its affiliates against certain liabilities, including liabilities under U.S. federal securities laws. In the ordinary course of business, PaineWebber may actively trade the securities of Roberts and Shire for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions in such securities. 59 Interests in the Merger of Persons Affiliated with Roberts General. Some members of Roberts' senior management and the Roberts board may be deemed to have interests in the merger that are in addition to and/or potentially different from the interests of shareholders of Roberts generally. The Roberts board was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated by the merger agreement. In considering the recommendations of the Roberts board in respect of the merger agreement and the transactions contemplated by the merger agreement, the Roberts shareholders should be aware that these interests may present actual or potential conflicts of interest with respect to the merger. Shire Board Appointments. Shire has agreed, except as limited by the exercise of fiduciary duties and to the extent permitted by law, to cause Dr. Robert Vukovich, Chairman of the Board of Roberts, John T. Spitznagel, Chief Executive Officer and a director of Roberts, and Dr. Zola Horovitz, Ronald Nordmann and Joseph Smith, each a director of Roberts, to be appointed as non- executive directors of Shire following the merger. These appointees will fill five of the eleven directorships which Shire will have immediately after the merger. Senior Management Employment Agreements. Under the terms of employment agreements with Messrs. Spitznagel, Loy, Rascio, Rogalin, Berardi and Tierney, in the event that their employment is terminated following a change of control other than for the officer's willful misconduct, the officer is entitled to receive severance compensation of: .base compensation, at the annual rate at the time of termination, for three years, or four years in the case of Mr. Spitznagel, after the termination, .additional payments equal to three times, or four times in the case of Mr. Spitznagel, the greater of $50,000 or the officer's average annual bonus and incentive compensation for the period commencing March 4, 1996 in the case of Mr. Spitznagel, August 31, 1992 in the case of Mr. Loy, July 1, 1988 in the case of Mr. Rascio, February 5, 1996 in the case of Mr. Rogalin, November 3, 1997 in the case of Mr. Berardi and April 8, 1997 in the case of Dr. Tierney, and ending upon the termination of employment, and .an amount equal to three times, or four times in the case of Mr. Spitznagel, any payment made by Roberts to the 401(k) Plan on behalf of the officer during the fiscal year prior to termination. Following a change in control of Roberts, each of Messrs. Spitznagel, Loy, Rogalin, Rascio, Berardi and Tierney has the right to terminate his employment agreement and receive the full amount of his severance compensation, if he remains in the employ of Roberts or any successor thereto for a period of one (1) year following a change in control and provides Roberts with notice of termination during the thirty (30) day period immediately following the end of the one (1) year period, or at any time after the change in control if his duties are diminished, his place of employment is relocated more than twenty (20) miles from its prior location, or his annual compensation is reduced. The merger constitutes a change in control for purposes of these agreements. The Internal Revenue Code of 1986, as amended, imposes an excise tax on and limits Roberts' deduction of payments to employees whose employment has been terminated following a change in control if the payments meet certain requirements and exceed the limit set forth in the Code. Generally, this limit is equal to three times the employee's average annual compensation for the five taxable years preceding the year in which the change of control occurs. The employment agreements with Messrs. Spitznagel, Loy, Rogalin, Rascio, Berardi and Tierney provide that Roberts shall pay any excise taxes assessed against the officers in connection with any severance compensation payments made or benefits conferred under the employment agreements, including, in connection with a change in control of Roberts. In March 1999, the Roberts board authorized amendments to each of the employment agreements with Messrs. Spitznagel, Loy, Rogalin, Rascio, Berardi and Tierney to provide that Roberts shall pay any and all income taxes, including excise taxes, incurred by them as a result of their receiving payments to cover the additional income and excise taxes. 60 In the event of the termination of an officer's employment with Roberts for any reason, each of these employment agreements provides that the officer shall have the right to elect, during the one year period after the date of termination, to exercise all options previously granted to the officer under all stock option plans maintained by Roberts, regardless of whether the options would then be exercisable. The current terms of each of the employment agreements, which are automatically renewed for successive one year periods upon their expiration, expire on August 31, 2001, with the exception of Mr. Spitznagel's employment agreement which expires on August 31, 2002. Retention Agreements. Roberts has retention agreements with ten senior executives, other than the six identified above, providing that in the event: .Roberts terminates the employment of the executive following a "change of control," as defined in each retention agreement, .the executive terminates his or her employment during the thirty day period following the first anniversary of the change of control, or .the executive terminates his or her employment following a change of control for certain specified reasons such as diminution in duties or compensation or relocation, then the executive shall be entitled to receive an award for service equal to the executive's annual compensation at the time of termination and an amount equal to the executive's incentive bonus for the year immediately preceding the year in which the executive's employment was terminated. In the event of the termination of an officer's employment with Roberts for any reason, each of these retention agreements provides that the executive shall have the right to elect, during the one year period after the date of termination, to exercise all options previously granted to the executive under all stock option plans maintained by Roberts, regardless of whether the options would then be exercisable. The merger constitutes a change of control for purposes of the retention agreements. Employee Severance Policy. Roberts has adopted a Change of Control Severance Plan covering all employees who are not parties to employment agreements or retention agreements. The severance plan provides that a participant in the plan would receive, in the event of a termination by Roberts "without cause" or by a participant for "good reason" within two years following a "change of control," each as defined in the severance plan: .continuation of base salary following termination of employment for a length of time equal to the sum of three weeks for each complete year of service with Roberts and three weeks for any partial year of service in which the participant was employed for more than 6 months; .any accrued but unpaid base salary through the date of termination; .any actual earned annual bonus for any completed year which has not yet been paid; .the participant's average target bonus for the year of termination, prorated through his or her date of termination; and .a payment in respect of accrued vacation and sick pay. In addition, the severance plan provides that Roberts would continue to provide the participant with medical and dental benefits for the participant and his or her eligible dependents during the period in which the plan participant is paid severance benefits and would provide outplacement services for the participant at a cost of up to 10% of the participant's base salary. The severance plan provides that it may not be amended or terminated within two years following a change of control. The merger constitutes a change of control for purposes of the severance plan. 1996 Equity Incentive Plan. All options granted under the 1996 Equity Incentive Plan will vest and be fully exercisable upon completion of the merger. 61 Supplemental Executive Retirement Plan. The Roberts Supplemental Executive Retirement Plan provides certain protections for Messrs. Spitznagel, Loy, Rogalin, Rascio, Berardi and Tierney following a "change of control," as defined in the plan. The plan provides that upon a change of control, each participant shall become fully vested and each participant shall be given credit for 10 years of service with Roberts. In addition, the plan provides that upon a change of control, Roberts shall fund a grantor trust with sufficient assets to pay each participant his accrued benefits under the plan. The merger constitutes a change of control for purposes of the plan. John T. Spitznagel Consulting Agreement. It is expected that Shire will enter into a consulting agreement with Mr. Spitznagel shortly following the merger. The consulting agreement is expected to provide that: .Mr. Spitznagel will have "good reason" to terminate his employment with Roberts under his employment agreement and that Shire will cause Roberts to provide him with the payments and benefits he is entitled to upon a "good reason" termination; .Mr. Spitznagel will provide consulting services to Shire for at least 42 months following the merger, unless he terminates the agreement prior to the end of the 42nd month upon 30 days' notice; and .Shire will pay Mr. Spitznagel at a rate of $400,000 per annum for his consulting services, $150,000 per annum as an office allowance, $250,000 per annum to comply with certain restrictive covenants contained therein, and $140,000 per annum for tax, financial and estate planning advice, life insurance and health insurance. The consulting agreement is expected to include a number of restrictive covenants, including a non-compete/non-solicitation provision running for the life of the consulting agreement and 12 months thereafter and a confidentiality provision. Director and Officer Indemnification and Insurance. Shire has agreed that until the sixth anniversary of the merger, it will indemnify, defend and hold harmless anyone who served as an officer or director of Roberts or any of its subsidiaries against or from all losses, claims, damages and expenses, including attorneys' fees, arising out of actions or omissions occurring at any time before the merger to the same extent permitted or required by the existing provisions for indemnification of officers and directors of Roberts contained in the certificates of incorporation and by-laws of Roberts and its subsidiaries. Furthermore, Shire has agreed that, until the sixth anniversary of the merger, it will cause to be maintained in effect the policies of directors' and officers' liability insurance maintained by Roberts and its subsidiaries as of the date of the merger agreement with respect to claims arising from facts or events that occurred on or before the merger. 401(k) Plan. Under the Employee Savings and Protection Plan, or the 401(k) Plan, for all employees of Roberts who are employed as of December 31 of each year, Roberts may, in its discretion, contribute a percentage of each employee's salary or wages paid that year into each employee's 401(k) Plan account, whether the employee is making elective contributions to the 401(k) Plan or not. Historically, Roberts has contributed 2% of each employee's salary or wages paid that year. The merger agreement states that employees who are employed at the time of the merger shall receive 2% of their salary or wages for the 1999 calendar year, notwithstanding their employment status on December 31, 1999. Dissenters' Rights In accordance with Chapter 11 of the New Jersey Business Corporation Act, no holder of Roberts shares shall be entitled to dissenters' rights. Other Effects of the Merger It is a condition to the merger that the LSE shall have admitted to the Official List (subject to allotment) the Shire ordinary shares to be allotted by Shire in connection with the merger and that such admission shall 62 have become effective in accordance with the rules and regulations of the LSE. It is also a condition to the merger that the Shire ADSs to be issued in the merger shall have been approved for listing on Nasdaq. If the merger is consummated, Roberts shares will cease to be listed on the Amex. For information concerning the income tax consequences of the ownership of Shire ADSs, see "Certain Tax Consequences." Following the merger, Roberts will cease filing periodic reports with the SEC under the Exchange Act. Governmental Regulation U.S. Antitrust Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder, certain transactions, including the merger, may not be consummated unless certain waiting period requirements have been satisfied. On August 10, 1999, Roberts and Shire each filed a Pre-merger Notification and Report Form in accordance with the provisions of the Hart- Scott-Rodino Act with the Antitrust Division and the FTC. The required waiting period expired on September 10, 1999. Exon-Florio The provisions of Exon-Florio promulgated under the Omnibus Trade and Competitiveness Act of 1988 empower the President of the United States to prohibit or suspend an acquisition of, or investment in, a U.S. company by a foreign person if the President finds, after investigation, credible evidence that the foreign person might take action that threatens to impair the national security of the U.S. and that other provisions of existing law do not provide adequate and appropriate authority to protect the national security. Any determination that an investigation is called for must be made within 30 days of notice of the proposed transaction. In the event such a determination is made, any such investigation must be completed within 45 days of such determination. Thereafter, any decision to take action must be announced within 15 days of completion of the investigation. Authority under these provisions has been delegated to the Committee on Foreign Investment in the United States. On October 21, 1999, Roberts and Shire made a voluntary filing to this committee seeking a finding that the merger does not impair the national security of the U.S. U.K. Antitrust In the U.K., the Secretary of State can refer any qualifying merger situation to the Competition Commission for investigation as to whether the merger may be expected to operate against the public interest. The merger of Roberts and Shire is a qualifying merger situation for the purposes of U.K. law. There is no obligation to obtain prior clearance of a qualifying merger in the U.K. However, if a qualifying merger is completed without prior clearance being given, there is a risk that the merger may subsequently be referred to the Competition Commission and that divestments might ultimately be required. No submission has been made to the U.K. authorities in relation to the merger, but on July 26, 1999, Shire received from the U.K. Office of Fair Trading a letter requesting various general information about the businesses of Shire and Roberts. A response to that letter was provided on July 29 and was followed by subsequent communications. On October 18, 1999, the Office of Fair Trading confirmed that the merger had been cleared. Anticipated Accounting Treatment and Effects The merger is intended to qualify as a pooling of interests transaction under U.S. GAAP, which means the recorded assets and liabilities of Roberts will be carried forward to the combined business at their recorded amounts. The historical revenues and expenses of Roberts, for all periods, will be combined with those of Shire, whose financial statements will then be restated. The merger will be accounted for as a purchase under U.K. GAAP, which, based on the Shire ADS price as of July 21, 1999 and the Roberts balance sheet as of June 30, 1999, will produce goodwill of approximately $700 million that will be amortized over 20 years. 63 DESCRIPTION OF INDEBTEDNESS Roberts is a party to a credit agreement, dated as of June 24, 1998, among itself, DLJ Capital Funding, Inc. and various other lenders. The outstanding indebtedness under this credit agreement is $125 million. The interest rate per annum is calculated as the 30 Day LIBOR rate plus 2%, which as of October 14, 1999 is 7.45% per annum. The funds provided under this credit agreement financed Roberts' acquisition of its Pentasa(R) product. Pursuant to the terms of the credit agreement, a change of control of Roberts is an event of default permitting the lenders to accelerate payment of the principal amount outstanding. The merger constitutes a change of control under the credit agreement. Roberts and Shire's United States subsidiaries, as borrowers, and Shire entered into an agreement dated November 19, 1999, to replace the existing credit facility with a $250 million credit facility consisting of a $125 million five-year revolving credit facility (including a $25 million letter of credit facility) and a $125 million five-year term loan facility. The applicable interest rate on the new credit facility will range between .50% and 1.50% over the higher of DLJ's prime rate or the Federal Funds Rate plus 1/2 of 1% or between 1.50% and 2.50% over the London Interbank Overnight rate, in each case depending on the credit rating of the indebtedness incurred under the new credit facility. All obligations under the new credit facility will be jointly and severally guaranteed by Shire and by all of Shire's subsidiaries (other than the borrowers) and will initially be secured by all material property (in the case of licenses, subject to the consent of the other parties thereto) owned by Shire and its subsidiaries and the capital stock of Shire's subsidiaries. If Shire's credit rating reaches specified levels, the new credit facility will not be secured. The new credit facility will contain customary covenants, including restrictions on: .debts and liens; .the sale of assets; .mergers and acquisitions; .transactions with affiliates; .sales and leaseback transactions; .loans and investments; and .capital expenditures. The terms of the credit agreement will also contain maintenance tests which will require Shire to maintain a minimum net worth, a specified leverage ratio and a specified coverage ratio. 64 THE MERGER AGREEMENT The following description of the material provisions of the merger agreement is only a summary and does not purport to be complete. This description is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this Prospectus-Proxy Statement as Annex A and is incorporated herein by reference. General; Effective Time and Effects of the Merger The merger agreement provides that, subject to the approval of the merger agreement by the affirmative vote of at least two-thirds of the votes cast by the holders of Roberts shares present or represented by proxy at the special meeting and a majority of the shareholders of Shire voting at the meeting to be convened of Shire shareholders and the satisfaction or waiver of other conditions to the merger, Ruby Acquisition Sub will be merged with and into Roberts, with Roberts continuing as the surviving corporation and as a wholly- owned subsidiary of Shire. If the merger agreement is approved by the shareholders of Roberts and Shire, and the other conditions to the merger are satisfied or, where permissible, waived, the effective time will occur at the time of filing of a certificate of merger with the Secretary of State of the State of New Jersey. At the effective time, the certificate of incorporation and by-laws of Roberts, as in effect immediately prior to the effective time, will be the certificate of incorporation and by-laws of the surviving corporation until thereafter changed or amended as provided therein or by applicable law. Directors of Shire Immediately Following the Merger The newly combined board of directors of Shire will be comprised of eleven members, six from Shire's current board and five from Roberts' current board: Dr. James Cavanaugh Non-executive Chairman Rolf Stahel Chief Executive Stephen Stamp* Group Finance Director Dr. Wilson Totten Group R&D Director Dr. Bernard Canavan Non-executive Dr. Zola Horovitz Non-executive Ronald Nordmann Non-executive Dr. Barry Price Non-executive Joseph Smith Non-executive John T. Spitznagel Non-executive Dr. Robert Vukovich Non-executive
- -------- * On October 29, 1999, Shire announced that on December 13, 1999, Stephen Stamp will be replaced as Group Finance Director by Angus Russell. Conversion of Roberts Shares The merger agreement provides that, as of the effective time, by virtue of the merger and without any action on the part of any Roberts shareholder: . each share of Roberts common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive either ordinary shares or ADSs; this does not include any shares of Roberts common stock owned by Roberts or Shire or by any of their subsidiaries; . each share of common stock of Ruby Acquisition Sub issued and outstanding immediately prior to the effective time will be canceled; 65 . each share of Roberts common stock that is owned by Roberts or Shire or by any of their subsidiaries will be canceled and retired and will cease to exist; and . each Roberts shareholder will receive, for each share of Roberts common stock held by it: -- a fixed exchange ratio of 3.4122 ordinary shares if the average closing price of the ADSs for the 15 consecutive trading days ending the third trading day prior to closing is equal to or greater than $23.73 and less than or equal to $29.01; -- a floating exchange ratio between approximately 3.4122 and approximately 3.1280 if the average closing price is greater than $29.01 and less than or equal to $31.65 (equivalent to $33.00 per Roberts share); -- a floating exchange ratio between approximately 3.8407 and approximately 3.4122 if the average closing price is equal to or greater than $21.09 and less than $23.73 (equivalent to $27.00 per Roberts share); -- a fixed exchange ratio of 3.8407 if the average closing price is below $21.09; and -- a fixed exchange ratio of 3.1280 if the average closing price is greater than $31.65. Shire will provide each Roberts shareholder with one-third of an ADS for each ordinary share such holder would be entitled to receive unless such shareholder elects to receive ordinary shares. 66 The Exchange Ratio The chart below sets forth a range of possible average closing prices for the ADSs, the corresponding exchange ratio for ADSs to be received in the merger and the equivalent market value per share of Roberts common stock assuming that an ADS had a value equal to the average closing price. The exchange ratio will be determined based on the average ADS trading price at the close of the market during the 15 trading days ending the third trading day before the merger is completed. The average closing prices set forth below are for illustrative purposes and are not intended to be an exhaustive list of possible average closing prices. On the date a holder of Roberts common stock receives ADSs, they may have a value equal to, greater than or less than the equivalent values set forth below. Average Closing Price, Exchange Ratio and Equivalent Value
Calculated Average Trading Price per ADS (one ADS represents ADS Hypothetical Value three ordinary Exchange for Each Roberts shares) Ratio Share ------------------- -------- ------------------ 20.00 1.2802 25.60 20.50 1.2802 26.25 21.00 1.2802 26.89 ....................... 21.50 1.2558 27.00 22.00 1.2273 27.00 Fixed Price 22.50 1.2000 27.00 23.00 1.1739 27.00 ....................... 23.50 1.1489 27.00 24.00 1.1374 27.30 24.50 1.1374 27.87 25.00 1.1374 28.44 25.50 1.1374 29.00 26.00 1.1374 29.57 26.50 1.1374 30.14 27.00 1.1374 30.71 27.50 1.1374 31.28 28.00 1.1374 31.85 28.50 1.1374 32.42 29.00 1.1374 32.98 ....................... 29.50 1.1186 33.00 30.00 1.1000 33.00 Fixed Price 30.50 1.0820 33.00 31.00 1.0645 33.00 ....................... 31.50 1.0476 33.00 32.00 1.0427 33.37 32.50 1.0427 33.89 33.00 1.0427 34.41
If the ADS price is below $20.00, the exchange ratio remains at 1.2802 and the hypothetical value for each Roberts share will be lower than the value presented in the table. If the ADS price is above $33.00, the exchange ratio remains at 1.0427 and the hypothetical value for each Roberts share will be higher than the value presented in the table. We do not know what the market prices of Roberts common stock or ADSs will be at the effective time or during the period in which the average closing price is calculated. Because the exchange ratio is based on an average of the closing price of the ADSs for a period prior to the effective time, the market price of the Roberts 67 common stock at the effective time may be less than, equal to or greater than the average closing price for the ADSs. The market value of the ADSs that holders of Roberts common stock will receive upon consummation of the merger may vary significantly from the market value of the ADSs that holders of Roberts common stock would receive if the merger was consummated and holders of Roberts common stock received ADSs on the date of this Prospectus-Proxy Statement or on the date of the special meeting. No Fractional ADSs or Ordinary Shares No fractional ADSs or ordinary shares will be issued in the merger. Instead, each holder of Roberts common stock who otherwise would be entitled to receive a fractional ADS or ordinary share will be paid an amount in cash, without interest, in an amount equal to such fraction multiplied with respect to ADSs, by the last reported sale price of the ADSs on Nasdaq on the trading day immediately following the closing date, and with respect to ordinary shares, by the latest closing mid-market price of the ordinary shares on the trading day immediately following the closing date. Exchange of Share Certificates At the effective time, Shire will deposit, in trust, with Morgan Guaranty Trust Company of New York, as exchange agent, for the benefit of the holders of Roberts common stock, that number of ordinary shares issuable in exchange for Roberts common stock. As soon as practicable after the effective time, the exchange agent will mail to each record holder of a certificate or certificates, which immediately prior to the effective time represented outstanding Roberts common stock: . a letter of transmittal which specifies that delivery will be effected, and risk of loss and title to the certificates shall pass, only upon proper delivery of the certificates to the exchange agent; and . instructions for use in effecting the surrender of the certificates in exchange for the merger consideration. Upon surrender to the exchange agent of a certificate for cancellation, together with a properly executed letter of transmittal, and other documents as may be reasonably required pursuant to the instructions to the letter of transmittal, in exchange for such certificates, the holder will be entitled to receive the merger consideration. Treatment of Roberts Stock Options At the effective time, Shire will assume each of Roberts' stock option plans and all options will be adjusted so that each holder of an option will have such option apply to that number of ordinary shares (adjusted to the nearest whole share) equal to the product of the number of all options of such optionee immediately prior to the effective time and the exchange ratio. The exercise price per share for each option assumed, adjusted to the nearest pence, will equal the old exercise price per Roberts share divided by the exchange ratio, except for incentive stock options, which will be adjusted in order to continue the qualification of those options as "incentive stock options" under U.S. tax laws. The duration and other terms of each assumed or replaced option immediately after the effective time will be the same as the corresponding options that were in effect immediately before the effective time. As of the record date, approximately 3,151,048 shares of Roberts common stock were issuable upon the exercise of outstanding Roberts options. Such Roberts options will be converted at the effective time into Shire ordinary share options. 68 Employee Benefits and Options In the merger agreement, Shire has agreed: . that until December 31, 2001, it will maintain wages, compensation levels, employee pension and welfare plans that are, in the aggregate, equal or greater in value than those wages, compensation levels and other benefits that were in effect prior to the date of the merger agreement; . that it will pay bonuses up to $1,500,000 for calendar year 1999 to Roberts employees and up to $1,000,000 to its four corporate officers; and . that it will assume or replace all options issued under Roberts' stock option plans so that each holder of an option shall have such options apply to that number of ordinary shares equal to the number of options held by the holder multiplied by the exchange ratio. The exercise price for the options will be adjusted such that, in the aggregate, the option holder will pay the same amount for Shire ordinary shares as would have been paid for the Roberts shares. Indemnification and Insurance In the merger agreement, Shire has agreed that, after the effective time, it will indemnify all directors and officers or Roberts for all losses with respect to actions or omissions by them on or prior to the merger and that Shire will, for a period of six years after the effective time, maintain in effect Roberts' directors' and officers' liability insurance with respect to acts or omissions occurring prior to the merger covering each person currently covered by Roberts' directors' and officers' liability insurance. Representations and Warranties The merger agreement contains customary representations and warranties made by Roberts and Shire with respect to, among other things: . due organization and good standing; . capitalization; . corporate authority to enter into the contemplated transactions; . lack of conflicts with corporate governance documents; . reports and financial statements; . absence of certain changes or events; . compliance with law; . brokers or finders; . absence of litigation; . filing of tax returns; . absence of labor complaints; . environmental matters; and . marketing practices. Conduct of Business Pending Merger During the period from the date of the merger agreement and continuing until the effective time, each of Roberts and Shire has agreed as to itself and its subsidiaries that, among other things it and its subsidiaries will carry on their respective businesses only in the ordinary course and will use reasonable efforts to maintain and preserve its business organization, assets, employees and business relationships and to maintain all of its properties and assets in useful and good condition. 69 The merger agreement contains certain other covenants of Roberts and Shire relating to the conduct of their respective businesses before the effective time, including: . covenants relating to the declaration and payment of dividends and changes in share capital; . the issuance of securities; . the amendment of corporate governance documents; . the incurrence of indebtedness and the acquisition of equity interests; . the maintenance of benefits plans and compensation; . the entering into of material agreements; and . the preservation of the availability of pooling-of-interests accounting treatment. No Solicitation According to the terms of the merger agreement, Roberts and Shire have each agreed that, prior to the effective time, neither it, any of its affiliates, nor any of the respective directors, officers, employees, agents or representatives of the foregoing, will: . solicit or initiate, including by way of furnishing or disclosing non- public information, any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving Roberts or Shire, as the case may be, or the acquisition of all or any significant part of the assets or capital stock of Roberts or Shire, as the case may be; or . negotiate, explore or otherwise engage in discussions with any person with respect to any transaction referred to above, or which may reasonably be expected to lead to a proposal for such a transaction or enter into any agreement, arrangement or understanding with respect to any such transaction or which would require it to abandon, terminate or fail to consummate the merger or any other transaction contemplated by the merger agreement; provided, however, that Roberts and Shire may, in response to an unsolicited written proposal from a third party regarding a bona fide, written and unsolicited proposal or offer made by any persons or group with respect to a merger, consolidation or other business combination or an acquisition of all or any significant part of the assets or capital stock of Roberts or Shire, as the case may be, on terms which the board of directors of Roberts or Shire, as the case may be, determines in good faith, and in the exercise of reasonable judgment, based on the advice of independent financial advisors and legal counsel, to be more favorable to its shareholders than the merger, furnish information to, negotiate or otherwise engage in discussions with such third party, if the board of directors of Roberts or Shire, as the case may be, determines in good faith, after consultation with its financial advisors and based upon advice of outside counsel that such action is required for the board of directors to comply with its fiduciary duties under applicable law. According to the terms of the merger agreement, Roberts and Shire have agreed to promptly advise each other of any information they have from a person with respect to any transaction of the type referred to above and to give each other an update on an ongoing basis or upon the reasonable request of Roberts or Shire, as the case may be, on the status of any such transaction. Conditions to Consummation of the Merger Conditions to Each Party's Obligations to Consummate the Merger The respective obligations of Roberts, Shire and Acquisition Sub to effect the merger are subject to the satisfaction or waiver of the following conditions: . Shareholder Approvals. The merger and the other transactions contemplated by the merger agreement having been duly approved by the requisite vote of Roberts and Shire shareholders; 70 . Certain Approvals. All filings, notices, approvals, confirmations, consents, declarations and/or decisions required to be made, given or obtained by Roberts or Shire with or from any governmental or regulatory authority in connection with the consummation of the merger and the other transactions contemplated by the merger agreement; . No Proceeding or Litigation. No order, injunction, decree or judgment of any court or governmental body or agency being in effect which materially restrains or prohibits the transactions contemplated by the merger agreement, and no suit, action, investigation, inquiry or proceeding by any governmental body or agency or legal or administrative proceeding by any governmental body or agency having been instituted, or threatened in writing, which questions the validity or legality of the transactions contemplated by the merger agreement; . Securities Laws. The registration statements on Forms F-4 and F-6 having become effective and there not being any stop order or proceedings seeking a stop order with respect to such registration statements. Additional Conditions to the Obligations of Roberts The obligation of Roberts to effect the merger is subject to the satisfaction or waiver of each of the following additional conditions prior to the effective time: . Representations and Warranties. Each of the representations and warranties of Shire and Acquisition Sub set forth in the merger agreement being true and correct in all material respects at and as of the effective time as if made at and as of such time and Roberts having received a certificate signed on behalf of Shire and Acquisition Sub to such effect, except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard; . Agreements. Shire and Acquisition Sub having performed or complied in all material respects with each covenant, agreement and obligation to be performed or complied with by it under the merger agreement on or prior to the closing date, and Roberts having received a certificate signed on behalf of Shire and Acquisition Sub to such effect; . Consents from Third Parties. Shire having obtained the consent or approval of each person whose consent or approval is required in order to consummate the merger and the other transactions contemplated by the merger agreement; . Listing. The London Stock Exchange having granted admission of the ordinary shares comprising the merger consideration to the Official List, subject only to allotment; and the allotment of the ordinary shares comprising the merger consideration having occurred, subject only to admission becoming effective in accordance with paragraph 7.1 of the Listing Rules of the London Stock Exchange; . Tax Opinions. Roberts having received an opinion dated on or about the date that is two business days prior to the date this Prospectus-Proxy Statement is first being mailed, relying on appropriate representations, of either Milbank, Tweed, Hadley & McCloy LLP, U.S. special counsel to Roberts, or Cahill Gordon & Reindel, U.S. counsel to Shire, to the effect that the merger will constitute a reorganization described in Section 368(a)(1)(A) of the Internal Revenue Code of 1986, and Section 368(a)(2)(E) of the Code and no gain or loss will be recognized by Roberts or any of its shareholders except that (i) a shareholder who receives cash in lieu of fractional ordinary shares or ADSs will recognize capital gain or capital loss equal to the difference between the cash received and such shareholder's basis of the shares of Roberts common stock allocated to the fractional interest and (ii) any shareholder required to enter into a gain recognition agreement within the meaning of Treas. Reg. (S) 1.367(a)-3(c)(1)(iii)(B) must do so in order to avoid immediate gain recognition and may be required to recognize gain at the time and in the amount specified in the gain recognition agreement; . Pooling Letter. Roberts having received a letter from its independent auditors, dated as of the closing date, setting forth the concurrence of Roberts' independent auditors with the conclusion of Roberts' management that it will be appropriate to account for the merger as a "pooling of interests" under U.S. 71 GAAP, Accounting Principles Board Opinion No. 16 and all rules, regulations and policies of the SEC, if the merger is consummated in accordance with the merger agreement; and . Nasdaq. The ADSs being issued in the merger having been approved for listing on the Nasdaq National Market System. Additional Conditions to the Obligations of Shire and Acquisition Sub The obligation of Shire and Acquisition Sub to effect the merger is subject to the satisfaction or waiver of each of the following additional conditions prior to the effective time: . Agreements. Roberts having performed or complied in all material respects with each covenant, agreement and obligation to be performed or complied with by it under the merger agreement on or prior to the closing date, and Shire having received a certificate signed on behalf of Roberts to such effect; . Representations and Warranties. Each of the representations and warranties of Roberts set forth in the merger agreement being true and correct in all material respects at and as of the effective time as if made at and as of such time, and Shire having received a certificate signed on behalf of Roberts by an executive officer of Roberts to such effect, except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard; and . Pooling Letter. Shire having received a letter from its independent auditors, dated as of the closing date, setting forth the concurrence of Shire's independent auditors with the conclusion of Shire's management that it will be appropriate to account for the merger as a "pooling of interests" under U.S. GAAP, Accounting Principles Board Opinion No. 16 and all rules, regulations and policies of the SEC, if the merger is consummated in accordance with the merger agreement. Termination; Effect of Termination The merger agreement may be terminated: . by mutual written consent of Shire and Roberts; . by either Shire or Roberts upon written notice to the other party if: -- any governmental entity has issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the merger and such order, decree or ruling or other action has become final and nonappealable; or -- the effective time has not occurred on or before December 31, 1999 unless a later date is established by mutual written consent of Shire and Roberts or unless the failure to consummate the merger is the result of a breach of a covenant set forth in the merger agreement or a misrepresentation or breach of any warranty set forth in the merger agreement by the party seeking to terminate the merger agreement; . by the board of directors of Shire or Roberts if: -- Shire shareholder approval has not been obtained upon a vote taken at Shire's shareholder meeting; or -- Roberts shareholder approval has not been obtained upon a vote taken at the special meeting, unless due to delay or default on the part of Roberts, in the case of the Shire shareholder approval, or due to delay or default on the part of Shire or Acquisition Sub, in the case of the Roberts shareholder approval; . by the Shire board if: -- there has been a breach in any material respect of any representation, warranty, covenant or agreement on the part of Roberts set forth in the merger agreement which breach is not curable on 72 or prior to December 31, 1999, except, where any statement in a representation or warranty includes a standard of materiality, if such statement is true and correct in all respects giving effect to such standard; or -- the Roberts board fails to recommend the approval of the merger agreement and the merger to Roberts shareholders; or -- the Roberts board withdraws or amends or modifies in a manner adverse to Shire its recommendation or approval of the merger agreement or the merger or fails to reconfirm such recommendation within five business days of a reasonable written request for such confirmation by Shire; . by the Shire board if it reasonably determines that a proposal for an acquisition of Shire is more favorable to its shareholders than the merger; provided, however, that Shire may not terminate the merger agreement unless: -- five business days has elapsed after delivery to Roberts of a written notice of such determination by the Shire board and, during such five- business-day period, Shire has informed Roberts of the material terms and conditions and financing arrangements of such proposal for an acquisition of Shire and the identity of the person or group making such proposal; and -- at the end of such five business-day period, the Shire board continues reasonably to believe that such proposal is more favorable to its shareholders than the merger and promptly thereafter Shire enters into a definitive acquisition, merger or similar agreement to effect such transaction; . by the Roberts board if: -- there is a breach in any material respect of any representation, warranty, covenant or agreement on the part of Shire or Acquisition Sub set forth in the merger agreement which breach is not curable on or prior to December 31, 1999, except, where any statement in a representation or warranty includes a standard of materiality, if the statement is true and correct in all respects giving effect to such standard; -- the Shire board fails to recommend the approval of the merger agreement and the merger to Shire's shareholders; or -- the Shire board withdraws or amends or modifies in a manner adverse to Roberts its recommendation or approval of the merger agreement or the merger or fails to reconfirm such recommendation within five business days of a reasonable written request for such confirmation by Roberts; or . by the Roberts board if it reasonably determines that a proposal for an acquisition of Roberts is more favorable to its shareholders than the merger; provided, however, that Roberts may not terminate the merger agreement unless: -- five business days has elapsed after delivery to Shire of a written notice of such determination by the Roberts board and, during such five-business-day period, Roberts has informed Shire of the material terms and conditions and financing arrangements of such proposal for an acquisition of Roberts and the identity of the person or group making such proposal; and -- at the end of such five business day period the Roberts board continues reasonably to believe that such proposal is more favorable to its shareholders than the merger and promptly thereafter Roberts enters into a definitive acquisition, merger or similar agreement to effect such transaction. Termination Payments Payable by Roberts Under the merger agreement, if any of the following events occur, Roberts has agreed to pay Shire a termination fee of $30 million: . Shire terminates the merger agreement because the Roberts board fails to approve the merger agreement and the merger or withdraws or amends its recommendation or approval or fails to reconfirm such 73 recommendation within five business days of a reasonable written request for such confirmation by Shire; . Roberts terminates the merger agreement because the Roberts board reasonably believes that a proposal for an acquisition of Roberts is more favorable to its shareholders than the merger; or . Shire or Roberts terminates the merger agreement because the effective time has not occurred on or prior to December 31, 1999 or Roberts shareholder approval has not been obtained following the public announcement other than by Shire of a proposal for a transaction for the acquisition of Roberts and such termination was not solely the result of any action or inaction by Shire and, prior to or within six months after any such termination described in this clause, Roberts or any of its subsidiaries enters into a definitive agreement for, or consummates, a transaction for the acquisition of Roberts in which the merger consideration received by Roberts or its shareholders in that transaction is equal to or greater than the value of the merger consideration received in the Shire/Roberts merger. Termination Payments Payable by Shire Under the merger agreement, if any of the following events occur, Shire has agreed to pay Roberts a termination fee of $30 million: . Roberts terminates the merger agreement because the Shire board fails to approve the merger agreement and the merger or withdraws or amends its recommendation or approval or fails to reconfirm such recommendation within five business days of a reasonable written request for such confirmation by Roberts; or . Shire terminates the merger agreement because the Shire board reasonably believes that a proposal for an acquisition of Shire is more favorable to its shareholders than the merger; or . Shire or Roberts terminates the merger agreement because the effective time has not occurred on or prior to December 31, 1999 or Shire shareholder approval has not been obtained following the public announcement other than by Roberts of a proposal for a transaction for the acquisition of Shire and such termination was not solely the result of any action or inaction by Roberts, and, prior to or within six months after any termination described in this clause, Shire or any of its subsidiaries enters into a definitive agreement for, or consummates, a transaction for the acquisition of Shire. Amendment The merger agreement may be amended by the parties thereto at any time before or after any required approval of matters presented in connection with the merger by the shareholders of Roberts or the shareholders of Shire; provided, however, that, after any such approval, no amendment can be made that by law requires further approval by such shareholders without the further approval of such shareholders. The merger agreement may be amended by an instrument in writing signed on behalf of each of the parties thereto prior to the effective time with respect to any of the terms contained therein; provided, however, that, after the merger agreement is adopted by the Roberts shareholders, no amendment or modification can change the amount or form of the consideration to be paid pursuant to the merger agreement. Waivers At any time prior to the effective time, either Shire, Roberts or Acquisition Sub may: . extend the time for the performance of any of the obligations or other acts of any other party to the merger agreement; . waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; or . subject to the amendment provisions described above, waive compliance by any other party to the merger agreement with any of the provisions of any of the agreements or with any conditions to its own obligations. 74 THE SHAREHOLDER AGREEMENT Shire Shareholder Agreements At the same time of the execution of the merger agreement, Shire entered into shareholder agreements with Yamanouchi Group Holdings Inc., the owner of 5,048,500 shares, or 15.8%, of Roberts common stock, and Dr. Robert A. Vukovich, the owner of 1,733,671 shares, or 5.4%, of Roberts common stock. Under the shareholder agreements, each of Yamanouchi and Vukovich has agreed to vote their respective shares of common stock for the approval and adoption of the merger agreement and any actions required to be approved by shareholders related thereto and against any proposal or transaction which could prevent or delay the consummation of the merger agreement, except in certain limited circumstances. In addition, under the shareholder agreements, Shire has agreed to register the ADSs to be received by Yamanouchi and Vukovich in the merger on a registration statement on Form S-3 for an offering to be made on a continued or delayed basis in the future pursuant to Rule 415 under the Securities Act of 1933. Also, Yamanouchi and Vukovich have agreed not to transfer their Roberts shares except in the merger and not to sell the Shire ordinary shares or ADSs they will receive in the merger until the combined company has published 30 days of financial results. Roberts Shareholder Agreements At the same time of the execution of the merger agreement, Roberts entered into shareholder agreements with four limited partnerships controlled by HealthCare Ventures which collectively own 12,214,810 ordinary shares of Shire. Dr. James Cavanaugh, Shire's non-executive chairman, is the president of the management company of these limited partnerships. Under these shareholder agreements, HealthCare Ventures has agreed to vote such ordinary shares for the approval and adoption of the merger agreement and any actions required to be approved by shareholders related thereto and against any proposal or transaction which could reasonably prevent or delay the consummation of the merger agreement. THE OPTION AGREEMENT General At the same time of the execution of the merger agreement and as an inducement and condition to entering into the merger agreement, Roberts and Shire entered into an option agreement. The following description sets forth the material provisions of the option agreement but is qualified in its entirety by reference to the option agreement, which is filed as an exhibit to the registration statement on Form F-4 and incorporated herein by reference in its entirety. Under the option agreement, Roberts granted Shire an unconditional irrevocable option to purchase a number of shares representing up to 19.9% of the issued and outstanding shares of common stock of Roberts at a price per share in cash equal to $30.00. The option agreement provides that Shire may exercise the option on only one occasion prior to termination of the option agreement, in whole or in part, by delivering a written notice, upon the occurrence of any event that entitles Shire to receive a payment of $30 million from Roberts payable according to the terms of the merger agreement. To the extent the option has not been exercised, the option agreement will terminate upon the earlier of the effective time or termination of the merger agreement in accordance with its terms unless Shire is entitled to receive the $30 million payment from Roberts, in which case the option agreement will terminate one business day after Shire receives such payment or the $30 million payment could no longer be payable based on the terms of the merger agreement. Arrangements such as the option agreement are customarily entered into in connection with corporate mergers and acquisitions in an effort to increase the likelihood that the transactions will be consummated in 75 accordance with their terms, and to compensate the grantee for the efforts undertaken and the expenses, losses and opportunity costs incurred by it in connection with the transactions if they are not consummated under certain circumstances involving an acquisition or potential acquisition of the issuer by a third party. The option agreement was entered into to accomplish these objectives. The option agreement may have the effect of discouraging offers by third parties to acquire Roberts prior to the effective time, even if such persons were prepared to offer to pay consideration to Roberts shareholders which has a higher current market price than the ordinary shares or the ADSs to be received by Roberts shareholders pursuant to the merger agreement. The option agreement is not subject to the approval of Roberts shareholders, and is effective whether or not Roberts shareholders approve the merger agreement at the special meeting. Notice of Exercise According to the terms of the option agreement, Shire may exercise the option by sending Roberts a written notice specifying .the number of Roberts shares to be purchased; and .a date for the closing of such purchase. Based on the terms of the option agreement, the date specified by Shire for exercising the option must be not less than two business days nor more than ten days from the later of (x) the date the exercise notice is given and (y) the expiration or termination of any waiting period, and any extensions thereof, under the Hart-Scott-Rodino Act. Limitation on Total Profit The option agreement provides that in no event will the amount Shire receives from the sum of the following exceed $32 million: . the amount before taxes but net of reasonable and customary commissions payable in connection with such transactions received by Shire from the sale of the shares of Roberts common stock acquired from exercise of the option less the exercise price for such Roberts shares; . any amounts before taxes but net of reasonable and customary commissions payable in connection with such transactions received by Shire on the transfer of the option to any unaffiliated persons or to Roberts; and . a $30 million payment by Roberts to Shire according to the terms of the merger agreement. If Shire would otherwise receive more than $32 million, Shire in its sole discretion, will take one of the following actions to reduce this amount to $32 million: .reduce the number of shares of Roberts common stock subject to the option; .pay cash to Roberts; .reduce the amount of the $30 million payment; or .any combination thereof. The option agreement also provides that the option may not be exercised for a number of shares of Roberts common stock as would, as of the date notice is given by Shire that it will exercise the option, result in the receipt by Shire of a hypothetical amount of more than $32 million. For purposes of the option agreement, this hypothetical amount is the sum of: . the amount before taxes but net of reasonable and customary commissions payable in connection with such transactions received by Shire from the sale of the shares of Roberts common stock acquired from exercise of the option less the exercise price for such Roberts shares; 76 . any amounts before taxes but net of reasonable and customary commissions payable in connection with such transactions received by Shire on the transfer of the option to any unaffiliated persons or to Roberts; and . a $30 million payment by Roberts to Shire according to the terms of the merger agreement. This hypothetical amount is determined as of the date notice is given by Shire that it will exercise the option, assuming that the option were exercised on such date for the number of shares of Roberts common stock for which Shire exercises the option and assuming that such shares were sold for cash at the closing market price as of the close of business on the preceding trading day, less customary brokerage commissions. 77 MATERIAL TAX CONSEQUENCES General The following general discussion summarizes (i) the material U.S. federal income tax consequences to U.S. persons who are deemed to be the beneficial owners of shares of Roberts common stock who exchange their stock for ADSs or ordinary shares in accordance with the merger and (ii) the material U.S. and U.K. tax consequences to those persons of the ownership and disposition of ADSs and ordinary shares. This discussion is based upon existing U.S. federal income tax law and existing U.K. tax law, including legislation, regulations, administrative rulings and court decisions, as in effect on the date hereof, all of which are subject to change, possibly with retroactive effect. For U.S. federal income tax purposes, a U.S. person is: .an individual citizen or resident of the U.S.; . a corporation created or organized in or under the laws of the U.S., any state thereof or the District of Columbia; . a partnership, trust or estate treated, for U.S. federal income tax purposes, as a domestic partnership, trust or estate. This discussion assumes that U.S. persons who are deemed to beneficially own shares of Roberts common stock do so as a capital asset as of the effective time. This discussion does not purport to address all material tax consequences of ownership of ADSs or ordinary shares and does not discuss all aspects of U.S. federal income taxation or U.K. taxation that may be relevant to all U.S. persons who are deemed to beneficially own shares of Roberts common stock in light of their particular circumstances, such as those whose stock was acquired pursuant to the exercise of an employee stock option or otherwise as compensation or U.S. persons who are subject to special treatment under the U.S. federal income tax laws. This category includes those holders that hold their stock as part of a straddle, hedge or conversion transaction, financial institutions, insurance companies, tax-exempt organizations and broker-dealers. This discussion of the income tax consequences also does not address any aspects of state or local taxation or foreign taxation, other than certain U.K. tax consequences. In general, for U.S. tax purposes, U.S. persons who are deemed to be the beneficial owners of ADSs will be treated as the owners of the underlying ordinary shares that are represented by such ADSs and deposits and withdrawals of ordinary shares by those persons in exchange for ADSs will not be subject to U.S. federal income tax. U.S. persons are urged to consult their tax advisors regarding the U.S. federal, state and local and other tax consequences of owning and disposing of ordinary shares and ADSs. In particular, U.S. persons are urged to confirm with their advisors that they are beneficial owners of ordinary shares or ADSs and of the cash dividend paid with respect thereto and that they: . are an individual or a corporation resident in the U.S. for purposes of the United Kingdom-United States Income Tax Convention (and, in the case of a corporation are not also resident in the U.K. for U.K. tax purposes); . are not a corporation which, alone or together with one or more associated corporations, controls, directly or indirectly, 10% or more of the voting stock of Shire; . hold the ordinary shares or ADSs in a manner which is not effectively connected with a permanent establishment in the U.K. through which such U.S. person carries on business or with a fixed base in the U.K. from which such person performs independent personal services; and . are not otherwise ineligible for benefits under the U.K.-U.S. Income Tax Convention with respect to income and gains derived in connection with the ordinary shares or ADSs. The U.S. and the U.K. have announced that they intend to enter into negotiations to update the U.K.-U.S. Income Tax Convention. U.S. persons are also urged to discuss with their advisors any possible consequences of their failure to meet the qualifications of the immediately preceding paragraph. 78 Each U.S. person deemed to beneficially own shares of Roberts common stock is advised to consult his, her or its own tax advisors as to the U.S. federal income tax and U.K. tax consequences of the merger for the facts and circumstances that may be unique to that person, and as to any estate, gift, state, local or non-U.S. tax consequences of the merger and the ownership and disposition of ADSs or ordinary shares. United States Tax Consequences of the Merger to U.S. Persons That Beneficially Own Shares of Roberts Common Stock The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. Roberts has received the opinion of Milbank, Tweed, Hadley & McCloy LLP to the effect that for U.S. federal income tax purposes (i) the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code; and (ii) no gain or loss will be recognized by a U.S. shareholder of Roberts common stock on the exchange of shares of Roberts common stock for ADSs or ordinary shares, except with respect to cash received in lieu of a fractional interest in an ADS or an ordinary share. This opinion fulfills one of the conditions to the merger agreement. See "The Merger Agreement-- Conditions to Consummation of the Merger." This tax opinion is expressly based upon the accuracy of certain representations made to such counsel by Roberts and Shire, as well as upon certain assumptions. The assumptions made may include the assumption that a U.S. person that is a "5% shareholder" of Shire after the merger will, in accordance with applicable Treasury Regulations under Section 367(a) of the Code, file a gain recognition agreement with the IRS, as explained more fully below. For purposes of this discussion, whether a U.S. person is a "5% shareholder" of Shire after the merger will be determined in accordance with applicable Treasury Regulations under Section 367(a) of the Code. This tax opinion is not binding on the IRS or a court and does not preclude the IRS or a court from adopting a contrary position. Roberts will not seek a ruling from the IRS as to the tax treatment of the merger as a reorganization or as a non-recognition exchange of shares of Roberts common stock for ordinary shares or ADSs. Fractional interests in ADSs or ordinary shares will not be issued to Roberts shareholders in the merger. Instead, Roberts shareholders will receive cash for any fractional ADS or fractional ordinary share owed to them based upon the trading prices of these securities on the trading day immediately following the merger. A U.S. person who receives cash with respect to the sale of a fractional ADS or ordinary share will be treated as having received a fractional ADS or ordinary share pursuant to the merger and then as having sold that fractional ADS or ordinary share for cash. The amount of any capital gain or loss attributable to that sale will be equal to the difference between the cash received with respect to the fractional ADS or ordinary share and the tax basis that is allocated to the fractional ADS or ordinary share. In the case of an individual U.S. person, any gain will be subject to U.S. federal income tax at a maximum rate of 20% if the U.S. person has a holding period for the fractional ADS or ordinary share of more than 12 months at the effective time. This holding period will include the U.S. person's holding period for the Roberts common stock deemed exchanged for the fractional ADS or ordinary share. A U.S. person deemed to beneficially own shares of Roberts common stock who: .receives ADSs or ordinary shares in the merger; .is a "5% shareholder" of Shire after the merger; and . fails to file an agreement with the IRS as provided by Treasury Regulations Section 1.367(a)-8 which generally allows a U.S. person to avoid recognizing gain at the time of a transfer of domestic stock to a foreign corporation; 79 will not qualify for non-recognition treatment and will recognize any gain but not any loss. In the case of an individual U.S. person deemed to beneficially own shares of Roberts common stock, any gain would be subject to U.S. federal income tax at a maximum rate of 20% if that person has a holding period in its shares of Roberts common stock of more than 12 months at the effective time. Any holder of shares of Roberts common stock who will be a "5% shareholder" of Shire after the merger is urged to consult with his, her or its own tax advisor concerning the decision to file such an agreement with the IRS and the procedures to be followed in connection with that filing. United States Tax Consequences of the Ownership of Ordinary Shares and ADSs to U.S. Persons that Beneficially Own Shares of Roberts Common Stock The following is a summary of material U.S. federal income tax consequences of the ownership of ordinary shares or ADSs by a U.S. person that receives ADSs or ordinary shares in connection with the merger and holds ordinary shares or ADSs as capital assets. Taxation of Dividends Under the U.S. federal income tax laws, U.S. persons will include in gross income the gross amount of any dividend paid by Shire out of its current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, as ordinary income when the dividend is actually or constructively received by such person, in the case of ordinary shares, or by the depositary, in the case of ADSs. The dividend will not be eligible for the dividends- received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a return of capital to the extent of the U.S. person's basis in the ordinary shares or ADSs and thereafter as capital gain. As a result of recent changes in U.K. law, the payment from the U.K. Inland Revenue that certain U.S. persons would otherwise be entitled to receive under the U.K.-U.S. Income Tax Convention in connection with a dividend paid by Shire is now completely offset by a corresponding U.K. withholding tax. See "--United Kingdom Tax Consequences of the Ownership of Ordinary Shares and ADSs to U.S. Persons That Beneficially Own Shares of Roberts Common Stock-- Taxation of Distributions." Even though no net payment under the treaty is made, a U.S. person receiving a dividend from Shire generally will be required to include in income the gross amount of the treaty payment as a dividend and be entitled to a foreign tax credit or deduction in respect of the withholding tax, as discussed below. Subject to certain limitations and the provisions of the next paragraph, any U.K. withholding tax will be creditable against the U.S. person's U.S. federal income tax liability. See "--United Kingdom Tax Consequences of the Ownership of Ordinary Shares and ADSs to U.S. Persons That Beneficially Own Shares of Roberts Common Stock." For foreign tax credit limitation purposes, the dividend will be income from sources outside the U.S., but generally will be treated separately, together with other items of "passive income," or, in the case of certain holders, "financial services income." The rules relating to the determination of the foreign tax credit are complex and U.S. persons deemed to beneficially own shares of Roberts common stock should consult with their own tax advisors to determine whether and to what extent a credit would be available. U.S. persons that do not elect to claim a foreign tax credit may instead claim a deduction for any U.K. withholding tax. It is anticipated that, after the merger, Shire will be at least 50% owned by U.S. persons. Under Section 904(g) of the Code, dividends paid by a foreign corporation that is at least 50% owned by U.S. persons may be treated as U.S. source income rather than foreign source income for foreign tax credit purposes to the extent the foreign corporation has more than an insignificant amount of U.S. source income, and the effect of this rule may be to treat a portion of the dividends paid by Shire as U.S. source income. Section 904(g)(10) of the Code permits a U.S. person to elect to treat Shire dividends as foreign source income for foreign tax credit limitation purposes, if the dividend income is separated from other income items for purposes of calculating the holder's foreign tax credit. Although there is no form prescribed for making this election, applicable Treasury Regulations suggest that the election is made by claiming the credit in the manner described in this paragraph. 80 Taxation of Capital Gains Upon a sale or other disposition of ordinary shares or ADSs, a U.S. person will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. person's tax basis in such ordinary shares or the ADSs. The determination of the U.S. person's tax basis is made in U.S. dollars. Generally, gain or loss will be long-term capital gain or loss if the U.S. person's holding period for the ordinary shares or ADSs exceeds one year and any such gain generally will be income from sources within the U.S. for foreign tax credit limitation purposes. Any loss realized by a U.S. person generally will be treated as from sources within or without the U.S. for purposes of the foreign tax credit. Long-term capital gain for a non-corporate U.S. person is generally subject to a maximum tax rate of 20%. Backup Withholding and Information Reporting In general, information reporting requirements will apply to dividend payments or other taxable distributions in respect of ordinary shares or ADSs made within the U.S. to a non-corporate U.S. person, and "backup withholding" at the rate of 31% will apply to the payments if the holder or beneficial owner fails to provide an accurate taxpayer identification number in the manner required by U.S. law and applicable regulations, if there has been notification from the IRS of a failure by the holder or beneficial owner to report all interest or dividends required to be shown on its federal income tax returns or, in certain circumstances, if the holder or beneficial owner fails to comply with applicable certification requirements. In general, payment of the proceeds from the sale of ordinary shares or ADSs to or through a U.S. office of a broker is subject to both U.S. backup withholding and information reporting requirements, unless the holder or beneficial owner certifies its non-U.S. status under penalties of perjury or otherwise establishes an exemption. U.S. information reporting and backup withholding generally will not apply to a payment made outside the U.S. of the proceeds of a sale of ordinary shares or ADSs through an office outside the U.S. of a non-U.S. broker. However, U.S. information reporting requirements but not backup withholding will apply to a payment made outside the U.S. of the proceeds of a sale of ordinary shares or ADSs through an office outside the U.S. of a broker: .that is a U.S. person; . that derives 50% or more of its gross income for a specified three-year period from the conduct of a trade or business in the U.S.; .that is a "controlled foreign corporation" as to the U.S.; or . with respect to payments made after December 31, 2000, that is a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons (as defined in U.S. Treasury Regulations) who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during its tax year, such foreign partnership is engaged in a U.S. trade or business, unless the broker has documentary evidence in its files that the holder or beneficial owner is a non-U.S. person or the holder or beneficial owner otherwise establishes an exemption. Amounts withheld under the backup withholding rules may be credited against a U.S. person's U.S. tax liability, and a holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS. United Kingdom Tax Consequences of the Ownership of Ordinary Shares and ADSs to U.S. Persons That Beneficially Own Shares of Roberts Common Stock The tax treatment of dividends paid in respect of the ordinary shares and ADSs will depend upon the U.K. law and practice in force at the time dividends are paid. The following summary is based upon U.K. law and practice, including the U.K.-U.S. Income Tax Convention and the United Kingdom-United States Estate and Gift Tax Convention, which may change. The summary of U.K. tax matters below does not address the tax 81 consequences for U.S. Persons that are resident (or, in the case of individuals, ordinarily resident) in the U.K. for U.K. tax purposes or for the purposes of the Treaty or that are corporations which, alone or together with one or more associated companies, control directly or indirectly 10% or more of the voting stock or power of Shire. For the purposes of the U.K.-U.S. Income Tax Convention, U.S. persons who are deemed to beneficially own ADSs will be treated as owners of the ordinary shares underlying the ADSs. Taxation of Distributions Dividends paid by Shire to U.S. persons generally will not be subject to any U.K. withholding tax. Under the U.K.-U.S. Income Tax Convention, certain U.S. persons that receive a dividend from Shire are entitled to a payment form the U.K. Inland Revenue in an amount equal to the tax credit to which a U.K. resident individual taxpayer would have been entitled had he received the dividend. This payment from the U.K. Inland Revenue generally is subject to a U.K. withholding tax equal to 15% of the sum of the cash dividend and the tax credit to which a U.K. resident individual would have been entitled, up to a maximum of the amount of the tax credit. As a result of a recent change in U.K. law, the amount of the tax credit has been reduced to an amount lower that the 15% U.K. withholding tax. Accordingly, no U.S. person will be entitled to receive any net payment from the U.K. Inland Revenue under the U.K.-U.S. Income Tax Convention. For example, if Shire were to pay a cash dividend of $90, certain U.S. persons entitled to the benefits of the U.K.-U.S. Income Tax Convention would be entitled to receive a payment from the U.K. Inland Revenue of $10 minus U.K. withholding tax. The amount of U.K. withholding tax would be $10, which is the lesser of $10 and 15% of the sum of the base dividend of $90 and the $10 payment. As a result, the U.S. persons would receive the $90 dividend from Shire but no net payment from the U.K. Inland Revenue. Although no net payment is received from the U.K. Inland Revenue, the gross amount of the $10 tax credit and the related $10 U.K. withholding tax generally must be taken into account separately for United States federal income tax purposes, as discussed above. See "United States Tax Consequences of the Ownership of Ordinary Shares and ADSs to U.S. Persons That Beneficially Own Shares of Roberts Common Stock-- Taxation of Dividends." Taxation of Capital Gains A U.S. person who is not resident or ordinarily resident for tax purposes in the U.K. normally will not be liable for U.K. tax on capital gains realized on the disposal of his ordinary shares or ADSs unless at the time of the disposal, the U.S. person carries on a trade, which for this purpose includes a profession or vocation, in the U.K. through a branch or agency and the ordinary shares or ADSs are or have been used, held or acquired for the purposes of that trade or branch or agency. A U.S. person who is an individual and who has, on or after March 17, 1998, ceased to be resident or ordinarily resident for tax purposes in the U.K. for a period of less than five tax years and who disposes of ordinary shares or ADSs during that period may be liable for U.K. tax on capital gains realized, subject to any available exemption or relief. Inheritance and Gift Taxes Provided that any gift or estate tax due in the U.S. is paid, the U.K.-U.S. Estate and Gift Tax Convention generally relieves from U.K. inheritance tax the transfer of ordinary shares or of ADSs where the shareholder or holder of the ordinary shares or ADSs making the transfer is domiciled, for the purposes of the U.K.-U.S. Estate and Gift Tax Convention, in the U.S. and is not a national of the U.K. for the purposes of the U.K.-U.S. Estate and Gift Tax Convention. This will not apply if the ordinary shares or ADSs are part of the business property of an individual's permanent establishment of an enterprise in the U.K. or pertain to the fixed base in the U.K. of a person providing independent personal services. In the unusual case where ordinary shares or ADSs are subject to both U.K. inheritance tax and U.S. estate or gift tax, the U.K.-U.S. Estate and Gift Tax Convention generally provides for tax paid in the U.K. to be credited against tax payable in the U.S. or for tax paid in the U.S. to be credited against tax payable in the U.K. based on priority rules set forth in the U.K.-U.S. Estate and Gift Tax Convention. 82 Stamp Duty and Stamp Duty Reserve Tax Shire and Roberts will be jointly and severally liable for all stamp duties, stamp duty reserve tax and other similar taxes and governmental levies imposed in connection with the issuance or creation of the ordinary shares constituting the merger consideration and any ADSs in connection therewith and any other U.K. stamp duty, stamp duty reserve tax, other similar governmental charge or any interest or penalties thereon that may be payable by Shire and Roberts pursuant to the Deposit Agreement. See "Description of American Depositary Shares and American Depositary Receipts." Any tax or duty payable by the Depositary or the Custodian on the initial issue of ADSs to the Depositary or the Custodian as the provider of clearance services or the issuer of depositary receipts will be charged by the Depositary or the Custodian to Shire and Roberts. If ADSs are transferred after initial issue into a clearance service or depositary receipt arrangement, including a transfer of ADSs to the Custodian, stamp duty and/or stamp duty reserve tax will be payable in respect of the ADSs. The stamp duty and/or stamp duty reserve tax is generally payable on the consideration given for the transfer and is payable at the rate of, 1.5 percent rounded up if necessary to the nearest multiple of (Pounds)5 in the case of stamp duty or 1.5 percent in the case of stamp duty reserve tax. In accordance with the terms of the Deposit Agreement, any tax or duty payable by the Depositary or the Custodian on any transfer of ADSs to the Depositary or the Custodian after the initial issue of ADSs will be due and payable by the holder of the resulting ADSs to the Depositary. See "Description of American Depositary Shares and American Depositary Receipts." No stamp duty will be payable on the acquisition or transfer of ADRs representing ADSs or beneficial ownership of ADRs representing ADSs, provided that any instrument of transfer or written agreement to transfer remains at all times outside the U.K. and provided further that any instrument of transfer or written agreement to transfer is not executed in the U.K. and the transfer does not relate to any matter or thing done or to be done in the U.K. An agreement for the transfer of ADRs representing ADSs or beneficial ownership of ADRs representing ADSs will not give rise to a liability for stamp duty reserve tax. A transfer for value of the ordinary shares generally will be subject to ad valorem stamp duty, and potentially also to stamp duty reserve tax. Stamp duty will arise on the execution of an instrument to transfer ordinary shares and stamp duty reserve tax will arise on the entry into an agreement, in writing or otherwise, to sell ordinary shares. If a stock transfer form is executed and duly stamped within six years of the entering into of an agreement to transfer U.K. shares, any outstanding stamp duty reserve tax liability will be cancelled and any stamp duty reserve tax which has been paid may be reclaimed. Stamp duty and stamp duty reserve tax are normally a liability of the transferee. Any transfer for value of the underlying ordinary shares represented by ADSs may give rise to a liability on the transferee to U.K. stamp duty or stamp duty reserve tax. The amount of stamp duty is calculated at the applicable rate on the consideration for the transfer of the ordinary shares, this being 1.5 percent rounded up if necessary to the nearest multiple of (Pounds)5 and 1.5 percent of the amount or value of the consideration in the case of stamp duty reserve tax. On a transfer of ordinary shares from the custodian of the depositary to a holder of an ADS upon cancellation of the ADS, only fixed stamp duty per instrument of transfer will be payable, which is currently (Pounds)5 per instrument. 83 DESCRIPTION OF SHIRE SHARE CAPITAL The following sections include information concerning the ordinary shares, based on English law and a summary of material provisions of the Memorandum and Articles of Association of Shire. This information and summary do not purport to be complete and are qualified in their entirety by reference to the full Memorandum and Articles of Association, copies of which have been filed as exhibits to the registration statement of which this Prospectus-Proxy Statement forms a part. General All of Shire's issued ordinary shares are, and all of the ordinary shares issued pursuant to the merger in the form of ADSs represented by ADRs will be, upon completion of the offering, fully paid or credited as fully paid and nonassessable. Certificates representing the ordinary shares are issued in registered form, although a directors' resolution passed on September 26, 1996 authorized the transfer of shares in Shire by means of CREST, a paperless settlement system enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by a written instrument. So long as this directors' resolution is in force, the Articles of Association in relation to the ordinary shares will not apply to any uncertificated ordinary shares to the extent that the Articles of Association are inconsistent with the holding of ordinary shares in uncertificated form, the transfer of title to any ordinary shares by means of the CREST system and any provisions of the regulations relating to CREST. Under English law, shareholders who are not residents of the U.K. may hold, vote and transfer their shares in the same manner as U.K. residents but the Articles provide that, where a shareholder has a registered address outside the U.K., the shareholder is not entitled to receive any notice from Shire unless that shareholder has specified an address within the U.K. at which these notices may be served. Share Capital Shire was incorporated with an authorized share capital of (Pounds)50,000 divided into 50,000 ordinary shares of (Pounds)1 each, of which two shares were taken by the subscribers to the Memorandum of Association. The authorized share capital of Shire at the date of this Prospectus-Proxy Statement is, and immediately prior to the effective time will be, (Pounds)10,000,000 divided into 200,000,000 ordinary shares, of which 143,722,798 ordinary shares of 5p each are in issue at the date of this Prospectus-Proxy Statement. A maximum of 278,511,666 ordinary shares of 5p each will be in issue upon completion of the merger. By ordinary resolution passed on May 10, 1999, the directors were generally and unconditionally authorized to exercise all powers of Shire to allot relevant securities, within the meaning of Section 80 of the Companies Act, up to an aggregate nominal amount of (Pounds)2,361,070. This authority expires on the earlier of fifteen months after the date of this resolution and the conclusion of the annual general meeting of Shire in 2000. However, Shire may make offers or agreements before the expiration which would or might require relevant securities to be allotted after the expiration and the directors may allot relevant securities in pursuance of the offers or agreements as if the authority conferred by that resolution had not expired. By special resolution passed on May 10, 1999, the directors were empowered under Section 95(1) of the Companies Act to allot equity securities, as defined in Section 94(2) of the Companies Act, under the authority referred to in the paragraph above as if Section 89(1) of the Companies Act relating to shareholders' rights of pre-emption did not apply to any of these allotments, provided that this power is limited to: . the allotment of equity securities in connection with a rights issue, open offer or otherwise in favor of ordinary shareholders where the equity securities have been offered to holders of ordinary shares as nearly in proportion to their then holdings of ordinary shares, provided that the directors may make such exclusion or other arrangements as they may deem necessary or expedient to deal with fractional entitlements, ordinary shares represented by depositary receipts or legal or practical problems under the laws of, or the requirements of, any recognized regulatory body or stock exchange in any territory; and . the allotment of equity securities for cash up to an aggregate nominal amount of (Pounds)354,515 otherwise than pursuant to the previous paragraph. 84 This power expires on the earlier of fifteen months from the date of the resolution or the conclusion of the annual general meeting of Shire in 2000, except that Shire may before this expiration make an offer or agreement that would or might require equity securities to be allotted after the expiration and the directors may allot equity securities under the offer or agreement as if that power had not expired. The provisions of Section 89(1) of the Companies Act confer on shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid in cash, other than by way of allotment to employees under an employees' share scheme as defined in Section 743 of the Companies Act. This section applies to the authorized but unissued share capital of Shire, to the extent not disapplied in accordance with Section 95 of the Companies Act. Dividends Subject to the Companies Act and other applicable law, Shire may by ordinary resolution from time to time declare dividends to be paid to shareholders according to their rights and interests in the profits available for distribution, but no dividend shall be declared in excess of the amount recommended by the board of directors. Except insofar as the rights attaching to, or the terms of issue of, any share in Shire otherwise provide, all dividends shall be apportioned and paid proportionately according to the amounts paid on the shares during any portion or portions of the period in respect of which the dividend is paid. The board of directors may from time to time and subject to the Companies Act and other applicable law also pay to the shareholders an amount of interim dividends that the board of directors considers to be justified by the profits of Shire available for distribution. The board may, if authorized by an ordinary resolution of Shire, allot to those holders of a particular class of shares who have elected to receive them further shares of that class or ordinary shares instead of cash in respect of all or part of a dividend or dividends specified by the resolution. The value of the shares allotted will be calculated by reference to the average of the middle market quotations for a fully-paid share of Shire of that class derived from the Daily Official List of the London Stock Exchange for the five business days commencing on the day the ordinary shares are first quoted "ex" the relevant dividend. Final dividends are recommended by the board of directors following the end of the fiscal year to which they relate and are paid subject to approval by the shareholders at Shire's annual general meeting pursuant to an ordinary resolution. Any dividend unclaimed for a period of 12 years from the date such dividend is due for payment shall be forfeited and shall cease to remain owing by Shire. Where a person is, under the provisions as to the transmission of shares contained in the Articles of Association, entitled to become a shareholder, the board may at any time serve a notice on this person requiring him to elect either to be registered himself or to have a person nominated by him registered as a member. If the notice is not complied with within 60 days, the board may withhold payment of all dividends payable in respect of these shares until the requirements of the notice have been complied with. Where any person has an interest of 0.25% or more in the nominal value of shares of a particular class in Shire, the board may withhold dividends payable on shares held by this person if there has been a failure to provide Shire with information concerning interests on those shares required to be provided under the Articles of Association and the Companies Act until this failure has been remedied. Rights in a Winding-Up Holders of ordinary shares are entitled to participate in any distribution of the balance of the assets on a winding-up, after provision for or payment of liabilities and creditors under the Insolvency Act 1986 and the Companies Act. On a winding-up, the liquidator may, with any sanction required by law divide among the shareholders the whole or any part of the assets of Shire in kind, whether they shall consist of property of the same kind or not, and, for that purpose, set those values as the liquidator determines fair upon any property to be divided and determine how the division shall be carried out as between the shareholders or different classes of shareholders. 85 Shareholder Meetings An annual general meeting of shareholders must be held once each year within a period of not more than 15 months after the date of the last preceding annual general meeting. The board of directors may convene an extraordinary general meeting of shareholders at its discretion. General meetings may be held at the time and place as may be determined by the board of directors. An annual general meeting shall be convened on at least 21 days' written notice to shareholders entitled to receive notices. Most extraordinary general meetings may be convened on at least 14 days' written notice, but extraordinary general meetings at which it is proposed to pass special resolutions must be convened on at least 21 days' written notice. Two shareholders entitled to vote must be present in person or by proxy to constitute a quorum for all purposes at general meetings except that the absence of a quorum shall not preclude the choice or appointment of a chairman of the meeting. Voting Rights Subject to any special rights, terms or restrictions as to voting upon which any shares may be issued or held and to any other provisions of the Articles of Association, every shareholder present in person at a general meeting shall have one vote on a show of hands, and on a poll every shareholder present in person or by proxy shall have one vote for every ordinary share of which he is the holder. No shareholder shall, unless otherwise authorized by the board of directors, be entitled to be present or vote at any general meeting of Shire or at any separate general meeting of the holders of any class of shares in Shire unless all calls or other sums presently payable by the shareholder in respect of shares in Shire have been paid. See also "--Disclosure of Interests" below. For a description of the method by which the ordinary shares held by the Depositary will be voted, see "Description of American Depositary Shares and American Depositary Receipts --Voting Rights." Voting at any general meeting of shareholders is by a show of hands unless a poll is duly demanded. A poll may be demanded by: .the chairman of the meeting; .not less than five shareholders present in person or by proxy entitled to vote at the meeting; . any shareholder or shareholders present in person or by proxy and representing in aggregate not less than one-tenth of the total voting rights of all shareholders entitled to attend and vote at the meeting; or . any shareholder or shareholders present in person or by proxy holding shares conferring a right to attend and vote at the meeting on which shares there have been paid sums in the aggregate equal to not less than one-tenth of the total sum paid on all the shares conferring that right. Since under English law voting rights are only conferred on registered holders of shares, a person holding through a nominee may not directly demand a poll. This includes holders of ADSs that are not registered holders of shares. Unless otherwise required by law or the Articles of Association, voting in a general meeting is by ordinary resolution. This category includes: .resolutions for the election of directors; .the approval of financial statements; .the declaration of final dividends; .the appointment of auditors; .the increase of authorized share capital; and .the grant of authority to issue shares. 86 An ordinary resolution requires the affirmative vote of a majority of the votes of those who are eligible to vote and vote in person in the case of individuals or are represented by duly authorized representatives in the case of corporations. If a poll is demanded, the affirmative vote of shareholders who are present in person or by proxy in the case of individuals or are represented by duly authorized representatives in the case of corporations and who in the aggregate hold shares conferring a majority of the votes actually cast on the resolution is required. A special resolution or an extraordinary resolution requires the affirmative vote of not less than three-fourths of those who are eligible to vote and vote in person in the case of individuals or are represented by duly authorized representatives in the case of corporations. If a poll is demanded, the affirmative vote of shareholders who are present in person or by proxy in the case of individuals or are represented by duly authorized representatives in the case of corporations and who in the aggregate hold shares conferring three-fourths of the votes actually cast on the resolution is required. Examples of special resolutions include resolutions relating to matters concerning an alteration of Shire's Memorandum of Association or Articles of Association or a members' voluntary winding-up of Shire or the disapplication of statutory preemption rights in respect of the issuance of equity securities to be paid wholly in cash. An example of an extraordinary resolution is one which modifies the rights of any class of shares at a meeting of the holders of such class. The chairman of the meeting has a second or deciding vote in the case of a tied vote. Authorization to Issue Shares; Preemptive Rights The Companies Act provides that the directors may be authorized by means of an ordinary resolution of the shareholders to issue up to the maximum number of ordinary shares designated in such resolution for a maximum period not exceeding five years, although generally in the case of companies whose shares are quoted on the Official List of the London Stock Exchange, these authorizations expire and are renewed at the same time as the disapplication of pre-emptive rights. See "--Share Capital" above. The Companies Act confers on shareholders, to the extent not disapplied and other than in respect of issuances under employee share plans, rights of pre-emption in respect of the issuance of equity securities that are or are to be paid for wholly in cash. These provisions may be disapplied by a special resolution of the shareholders, either generally or specifically, for a maximum period not exceeding five years, although in the case of companies whose shares are quoted on the Official List of the London Stock Exchange, the disapplications do not generally last longer than 15 months from the date of the resolution or, if earlier, the date of the next annual general meeting. With respect to future issuances of ordinary shares or ADSs that are or are to be paid for wholly in cash and except to the extent already disapplied, shareholders will have to approve the disapplication of preemptive rights. Variation of Rights If at any time the share capital of Shire is divided into different classes of shares, the rights attached to any class may be varied or abrogated, subject to the provisions of the Companies Act, in the manner as may be provided by those rights or, in the absence of such a provision, either with the written consent of the holders of at least three-fourths of the nominal amount of the issued shares of the class or with the sanction of any extraordinary resolution passed at a separate general meeting of the holders of the issued shares of that class but not otherwise. At every such separate meeting, the quorum shall be two persons present in person holding or representing by proxy at least one- third in nominal amount of the issued shares of the class or, at an adjourned meeting, any holder of the shares in question whether present in person or by proxy. The rights conferred upon the holders of any class of shares shall not, unless expressly attached to the terms of issuance of the shares, be determined to be altered by the creation or issuance of further shares ranking pari passu with those shares. Alteration of Capital Subject to the provisions of the Companies Act and to any special rights previously conferred on the holders of any existing shares, any share may be issued with or have attached to it the rights and restrictions as Shire may determine by ordinary resolution or, if no resolution has been passed, as the board of directors may decide. Redeemable shares may be issued subject to the provisions of the Companies Act and to any rights conferred on the holders of any class of existing shares. 87 Shire may by ordinary resolution: .increase its share capital; . consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares; . subject to the provisions of the Companies Act, subdivide all or any of its shares into shares of a smaller nominal amount and decide that the shares resulting from the subdivision have among themselves a preference or other advantage or are subject to a restriction; and . cancel any shares which have not been taken or agreed to be taken by any person and diminish the amount of its authorized share capital by the amount of the shares so canceled. Subject to the provisions of the Companies Act and the rights attached to existing shares, Shire may by special resolution reduce its authorized and issued share capital, any capital redemption reserve and any share premium account in any manner. Shire may also, subject to the requirements of the Companies Act and to the rights conferred on holders of any class of shares, purchase all or any of its own shares, including any redeemable shares. Disclosure of Interests Section 198 of the Companies Act provides that a person, including a company and other legal entities, that acquires an interest of 3.0% or more of any class of shares, including through ADRs, comprising part of a company's issued share capital carrying the right to vote in all circumstances at a general meeting of such company is required to notify the company of its interest within two days following the day on which the notification obligation arises. After the 3.0% level is exceeded, similar notifications must be made in respect of increases or decreases taking the shareholding above or below a whole percentage figure. Interests held by some investment fund managers may be disregarded for the purposes of calculating the 3.0% threshold, but the disclosure obligation will still apply where those interests exceed 10% or more of any class of Shire's relevant share capital and to increases or decreases taking the shareholding above or below a whole percentage figure after that time. For purposes of the notification obligation, the interest of a person in shares means any kind of interest in shares including an interest in any shares: .in which a spouse, or child or stepchild under the age of 18 is interested; .in which a corporate body is interested and either -- that corporate body or its directors are generally accustomed to act in accordance with that person's directions or instructions or -- that person controls one-third or more of the voting power of that corporate body; or . in which another party is interested and the person and that other party are parties to a "concert party" agreement under Section 204 of the Companies Act. An agreement is a "concert party" agreement if: -- it provides for one or more parties to acquire interests in shares of a particular company, -- it imposes obligations or restrictions on any one or more of the parties as to the use, retention or disposal of the interests acquired under the agreement and -- any interest in Shire's shares is in fact acquired by any of the parties under the agreement. In addition, Section 212 of the Companies Act provides that a public company may by written notice require a person whom the company knows or has reasonable cause to believe to be, or to have been at any time during the three years immediately preceding the date on which the notice is issued, interested in shares comprised in the company's issued share capital carrying the right to vote in all circumstances at a general meeting of such company to confirm that fact or to indicate whether or not that is the case, and where such person holds or during the relevant time had held an interest in those shares, to give such further information as may be required relating to that interest and any other interest in the shares of which that person is aware. 88 Where notice is served by a company under the foregoing provisions on a person who is or was interested in shares of the company and that person fails to give the company any information required by the notice within the time specified in the notice, the company may apply to the English court for an order directing that the shares in question be subject to restrictions prohibiting, among other things, any transfer of those shares, the exercise of the voting rights in respect of those shares, the taking up of rights in respect of those shares and, other than in liquidation, payments in respect of those shares. A person who fails to fulfill the obligation imposed by Sections 198 to 202 and 212 of the Companies Act described above is subject to criminal penalties. Share Acquisitions The City Code on Takeovers and Mergers, issued and administered by the Panel on Takeovers and Mergers in London, is applicable to Shire because Shire is a public limited company incorporated and resident in England and Wales. The City Code is intended to operate principally to ensure fair and equal treatment of all shareholders in companies to which it applies. When persons hold or acquire certain percentages of voting rights of a U.K. public company such as Shire, these persons may be required, in certain circumstances, to make an offer to all shareholders of that company for its shares. For purposes of the City Code, the term persons includes all persons "acting in concert" as that term is defined in the City Code. Transfer of Shares Any holder of ordinary shares may transfer all or any of those shares in the manner authorized by the Stock Transfer Act 1963. The instrument of transfer shall be signed by or on behalf of the transferor and, in the case of a partly paid share, by or on behalf of the transferee. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members of Shire in respect of it. The directors may, in their absolute discretion and without assigning any reason, refuse to register any transfer of shares unless: . it is in respect of a fully paid share; provided that where any nil paid or partly paid shares are admitted to the Official List of the London Stock Exchange, such discretion may not be exercised in such a way as to prevent dealings in such shares taking place on an open and proper basis; . it is duly stamped, is lodged with Shire and is accompanied by the certificate for the shares to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer; . it is in respect of only one class of shares; . it is in favor of not more than four transferees; and . it is in respect of a share on which Shire has no lien. Notwithstanding anything in the Articles to the contrary, any shares in Shire may be issued, held, registered, converted to, transferred or otherwise dealt with in uncertificated form and converted from uncertificated form to certificated form in accordance with The Uncertificated Securities Regulations 1995 (SI 1995/3272) including any modification of and rules made under those provisions or any regulations in substitution for those provisions made under Section 207 of the Companies Act 1989 for the time being in force and practices instituted by an operator of the relevant system. Any provision of the Articles shall not apply to any uncertificated shares to the extent that those provisions are inconsistent with: . the holding of shares in uncertificated form; . the transfer of title of shares by means of a relevant system; or . any provision of the regulations referred to in this paragraph. 89 Other Shares Information There are currently no U.K. foreign exchange controls on the payment of dividends on the ordinary shares or the conduct of Shire's operations. There are no restrictions under Shire's Memorandum and Articles of Association or under English law that limit the right of non-resident or foreign owners to hold or vote Shire's ordinary shares. However, no shareholders are entitled to receive notices from Shire, including notices of shareholders' meetings, unless they have given an address in the U.K. to Shire to which those notices may be sent. Notwithstanding the foregoing, Shire provides information to the depositary, which in turn forwards that information to the holders of ADSs. 90 DESCRIPTION OF AMERICAN DEPOSITARY SHARES AND AMERICAN DEPOSITARY RECEIPTS American Depositary Shares and American Depositary Receipts Morgan Guaranty Trust Company of New York as depositary will issue the ADSs which you will be entitled to receive pursuant to the merger. Each ADS will represent ownership interest in three shares which we will deposit with the custodian under the deposit agreement among Shire, the depositary and yourself as an ADR holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but not distributed by them directly to you. Your ADSs will be evidenced by what are known as American depositary receipts. An ADR may be issued in either book-entry or certificated form by the depositary. If an ADR is issued in book-entry form, you will receive periodic statements from the depositary showing your ownership interest in ADSs. The depositary's office is located at 60 Wall Street, New York, NY 10260. You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of ADR holders described in this section. You should consult with your broker or financial institution to find out what those procedures are. Because the depositary's nominee will actually be the registered owner of the shares, you must rely on it to exercise the rights of a shareholder on your behalf. The obligations of the depositary and its agents are set out in the deposit agreement. The deposit agreement and the ADSs are generally governed by New York law. The following is a summary of the material terms of the deposit agreement. Because it is a summary, it does not contain all the information that may be important to you. For more complete information, you should read the entire deposit agreement and the form of ADR which contains the terms of your ADSs. You can read a copy of the deposit agreement which is filed as an exhibit to the registration statement of which this Prospectus-Proxy Statement forms a part. You may also copy the deposit agreement, which is located at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. Share Dividends and Other Distributions How will I receive dividends and other distributions on the Shares underlying my ADSs? The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after deducting its expenses. You will receive these distributions in proportion to the number of underlying shares your ADSs represent. Shire may make various types of distributions with respect to its securities. Except as stated below, to the extent the depositary is legally permitted it will deliver such distributions to ADR holders in proportion to their interests in the following manner: . Cash. The depositary shall convert cash distributions from foreign currency to U.S. dollars if this is permissible and can be done on a reasonable basis. The depositary will endeavor to distribute such cash in a practicable manner, and may deduct any taxes required to be withheld, any expenses of converting foreign currency and transferring funds to the U.S., and certain other expenses and adjustments. In addition, before making a distribution the depositary will deduct any taxes withheld. If the exchange rates fluctuate during a time when the depositary cannot convert the currency, you may lose some or all of the value of the distribution. 91 . Shares. In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such shares. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds will be distributed to the ADR holders entitled thereto. . Rights to receive additional shares. In the case of a distribution of rights to subscribe for additional shares or other rights, if Shire provides satisfactory evidence that the depositary may lawfully distribute such rights, the depositary may arrange for ADR holders to instruct the depositary as to the exercise of such rights. However, if Shire does not furnish such evidence, the depositary may .sell such rights if practicable and distribute the net proceeds as cash, or .allow such rights to lapse, whereupon ADR holders will receive nothing. Shire has no obligation to file a registration statement under the Securities Act in order to make any rights available to ADR holders. . Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either (i) distribute such securities or property in any manner it deems fair and equitable or (ii) sell such securities or property and distribute any net proceeds in the same way it distributes cash. Any U.S. dollars will be distributed by checks drawn on a bank in the U.S. for whole dollars and cents. Fractional cents will be withheld without liability for interest and added to future cash distributions. The depositary may choose any practical method of distribution for any specific ADR holder, including the distribution of foreign currency, securities or property, or it may retain such items, without paying interest on or investing it, on behalf of the ADR holder as deposited securities. The depositary may not be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other securities at a specified price. We cannot assure you that any of such transactions can be completed within a specified time period. Deposit, Withdrawal and Cancellation How does the depositary issue ADSs? The depositary will issue ADSs if you or your broker deposit shares or evidence of rights to receive shares with the custodian. In the case of the ADSs to be issued pursuant to the merger, Shire will arrange to deposit such shares. Shares deposited in the future with the custodian must be accompanied by certain documents, including instruments showing that such shares have been properly transferred or endorsed to the person on whose behalf the deposit is being made. The custodian will hold all deposited shares for the account of the depositary. This includes those shares being deposited by or on behalf of Shire in connection with the merger. ADR holders thus have no direct ownership interest in the shares and only have such rights as are contained in the deposit agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for the deposited shares. The deposited shares and any such additional items are referred to as "deposited securities". Upon each deposit of shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement, including the payment of the fees and charges of the depositary, the depositary will issue an ADR or ADRs in the name of the person entitled thereto evidencing the number of ADSs to which such person is entitled. Certificated ADRs will be delivered at the depositary's principal New York office or any other location that it may designate as its transfer office. If ADRs are in book-entry 92 form, a statement setting forth such ownership interest will be mailed to holders by the depositary. All of the ADSs issued outside of the merger will, unless specifically requested to the contrary, be part of the depositary's book-entry direct registration system and registered holders will receive periodic statements from the depositary which will show the number of ADSs registered in such holder's name. An ADR holder can always request that the ADSs not be held through the depositary's direct registration system and that a certificated ADR be issued. How do ADR holders cancel an ADS and obtain deposited securities? When you turn in your ADS at the depositary's office, it will, upon payment of certain applicable fees, charges and taxes, deliver at the custodian's office the underlying shares. At your risk, expense and request, the depositary may deliver at such other place as you may request. The depositary may only restrict the withdrawal of deposited securities in connection with: . temporary delays caused by closing transfer books of the depositary or Shire or the deposit of shares in connection with voting at a shareholders' meeting, or the payment of dividends, .the payment of fees, taxes and similar charges, or .compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs. This right of withdrawal may not be limited by any other provision of the agreement. Voting Rights How do I vote? If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting rights for the shares which underlie your ADSs. After receiving voting materials from Shire, the depositary will notify all of the ADR holders of any shareholder meeting or solicitation of consents or proxies. This notice will describe how you may instruct the depositary to exercise the voting rights for the shares which underlie your ADSs. For instructions to be valid, the depositary must receive them on or before the date specified. The depositary will try, as far as practical, subject to the provisions of and governing the underlying shares or other deposited securities, to vote or to have its agents vote the shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct. The depositary will not itself exercise any voting discretion. Furthermore, neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote. Because there is no guarantee that you will receive voting materials in time to instruct the depositary to vote, it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Fees and Expenses What fees and expenses will I be responsible for paying? ADR holders will be charged a fee for each issuance of ADSs after the initial issuance of ADSs, including issuances resulting from distributions of shares, rights and other property, and for each surrender of ADSs in exchange for deposited securities. The fee in each case is $5.00 for each 100 ADSs or any portion thereof issued or surrendered. ADR holders or persons depositing shares may also be charged the following expenses: .stock transfer or other taxes and other governmental charges; .cable, telex and facsimile transmission and delivery charges; 93 . transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and .expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars. Shire will pay all other charges and expenses of the depositary and any agent of the depositary pursuant to agreements from time to time between Shire and the depositary. However, Shire will not pay any charges and expenses of the custodian. The fees described above may be amended from time to time. Payment of Taxes ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution. If an ADR holder owes any tax or other governmental charge, the depositary may (1) deduct the amount thereof from any cash distributions, or (2) sell deposited securities and deduct the amount owing from the net proceeds of such sale. In either case the ADR holder remains liable for any shortfall. Additionally, if any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up or combination of deposited securities or any withdrawal of deposited securities, except under limited circumstances mandated by securities regulations. If any tax or governmental charge is required to be withheld on any non-cash distribution, the depositary may sell the distributed property or securities to pay such taxes and distribute any remaining net proceeds to the ADR holders entitled thereto. Reclassifications, Recapitalizations and Mergers If Shire takes certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation or other reclassification of deposited securities and (ii) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all the assets of Shire, then the depositary may choose to: 1) amend the form of ADR; 2) distribute additional or amended ADRs; 3) distribute cash, securities or other property it has received in connection with such actions; 4) sell any securities or property received and distribute the proceeds as cash; or 5) none of the above. If the depositary does not choose any of (1)--(4), any of the cash, securities or other property it receives shall constitute part of the deposited securities and each ADS will then represent a proportionate interest in such property. Amendment and Termination How may the deposit agreement be amended? Shire may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at least 30 days notice of any amendment that imposes or increases any fees or charges, other than taxes and other charges specifically payable by ADR holders under the deposit agreement, or affects any substantial existing right of ADR holders. If an ADR holder continues to hold ADRs or ADSs after being so notified, such ADR holder is deemed to agree to such amendment. An amendment can become effective before notice is given if this is necessary to ensure compliance with a new law, rule or regulation. 94 No amendment will impair your right to surrender your ADSs and receive the underlying securities. If a governmental body adopts new laws or rules which require the deposit agreement or ADS to be amended, we and the depositary may make the necessary amendments, which could take effect before you receive notice thereof. How may the deposit agreement be terminated? The depositary may terminate the deposit agreement by giving the ADR holders at least 30 days prior notice, and it must do so at Shire's request. After termination, the depositary's only responsibility will be (i) to deliver deposited securities to ADR holders who surrender their ADRs, and (ii) to hold or sell distributions received on deposited securities. As soon as practicable after the expiration of six months from the termination date, the depositary will sell the deposited securities which remain and hold the net proceeds of such sales, without liability for interest, in trust for the ADR holders who have not yet surrendered their ADRs. After making such sale, the depositary shall have no obligations except to account for such proceeds and other cash. Limitations on Obligations and Liability to ADR Holders Limits on Shire's Obligations and the Obligations of the Depositary; Limits on Liability to ADR Holders and Holders of ADSs The deposit agreement expressly limits the obligations and liability of the depositary, Shire and its respective agents. Neither Shire nor the depositary will be liable: . if Shire or the depositary is prevented or hindered in performing any obligation by circumstances beyond its control, including, without limitation, requirements of law, rule, regulation, the terms of the deposited securities, and acts of God; .for exercising or failing to exercise discretion under the deposit agreement; .if Shire or the depositary performs its obligations without gross negligence or bad faith; or . for any action based on advice or information from legal counsel, accountants, any person presenting shares for deposit, any holder, or other qualified person. Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs. Shire and its agents shall only be obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs, which in Shire's opinion may involve it in expense or liability, if indemnity satisfactory to it against all expense, including fees and disbursements of counsel, and liability be furnished as often as Shire requires. The depositary will not be responsible for failing to carry out instructions to vote the ADSs or for the manner in which the ADSs are voted or the effect of the vote. The depositary may own and deal in securities and in ADSs. Requirements for Depositary Actions Shire, the depositary or the custodian may refuse to .issue, register or transfer an ADR or ADRs, .effect a split-up or combination of ADRs, .deliver distributions on any such ADRs, or 95 . unless the deposit agreement provides otherwise, permit the withdrawal of deposited securities, until the following conditions have been met: -- the holder has paid all taxes, governmental charges, and fees and expenses as required in the deposit agreement; -- the holder has provided the depositary with any information it may deem necessary or proper, including, without limitation, proof of identity and the genuineness of any signature; and -- the holder has complied with such regulations as the depositary may establish under the deposit agreement. Unless the deposit agreement provides otherwise, the depositary may also suspend the issuance of ADSs, the deposit of shares, the registration, transfer, split-up or combination of ADRs, or the withdrawal of deposited securities if the register for ADRs or any deposited securities is closed or if the depositary or Shire decides any such action is advisable. Pre-release of ADSs The depositary may also issue ADRs prior to the deposit with the custodian of shares or rights to receive shares. This is called a pre-release of the ADS. A pre-release is closed out as soon as the underlying shares are delivered to the depositary. The depositary may pre-release ADSs only if: .the depositary has received collateral for the full market value of the pre-released ADRs; and .each recipient of pre-released ADRs agrees in writing that he or she -- owns the underlying shares, -- assigns all rights in such shares to the depositary, -- holds such shares for the account of the depositary and -- will deliver such shares to the custodian as soon as practicable, and promptly if the depositary so demands. In general, the number of pre-released ADSs will not evidence more than 30% of all ADSs outstanding at any given time, excluding those evidenced by pre- released ADRs. However, the depositary may change or disregard such limit from time to time under certain circumstances. The Depositary Who is the depositary? Morgan Guaranty Trust Company of New York, a New York banking corporation, is a commercial bank offering a wide range of banking and trust services to its customers in the New York metropolitan area, throughout the U.S. and around the world. 96 COMPARATIVE RIGHTS OF ROBERTS SHAREHOLDERS AND SHIRE SHAREHOLDERS As a result of the merger, Roberts shareholders will receive, at their option, either ADSs or ordinary shares of Shire, a public limited company incorporated under the laws of England and Wales. The following is a summary of the material differences between the current rights of Shire shareholders and Roberts shareholders under English law and the New Jersey Business Corporation Act, respectively, and under Roberts' Certificate of Incorporation and By-laws and Shire's Memorandum and Articles of Association. The following summary does not purport to be a complete description of the rights of shareholders of Shire and shareholders of Roberts under, and is qualified in its entirety by reference to, relevant English law, the New Jersey Business Corporation Act, Roberts' Certificate of Incorporation and By-laws and Shire's Memorandum or Articles of Association. For information as to where the governing instruments of Roberts and Shire may be obtained, see "Where You Can Find More Information." Authorized Capital Stock The authorized capital stock of Roberts currently consists of 100,000,000 shares of common stock, $.01 par value per share, and 10,000,000 shares of Class B Preferred Stock, $.01 par value per share. The authorized share capital of Shire currently consists of (Pounds)10,000,000 divided into 200,000,000 ordinary shares. Shareholder Voting Rights Under the New Jersey Business Corporation Act, each outstanding share is entitled to one vote on each matter submitted to a vote at a shareholders meeting unless the certificate of incorporation provides otherwise. A majority of the shares present at a meeting or represented by proxy constitutes a quorum. In addition, the certificate of incorporation may provide for cumulative voting at all elections of directors of the corporation. Roberts' Certificate of Incorporation does not provide for cumulative voting. Under English law, a shareholder entitled to vote at a shareholders' meeting is entitled to one vote on a show of hands regardless of the number of shares he or she holds; provided, however, that any group of five ordinary shareholders and any shareholder representing at least 10% of the voting rights of all the members having the right to vote at the meeting have the statutory right to demand a vote by a poll, which means that each ordinary shareholder would be entitled to one vote for each ordinary share held by the shareholder. The number and percentage of shareholders referred to in the preceding sentence may be set lower in a company's articles of association. Shire's Articles of Association do not allow a poll to be demanded by a lower number of shareholders or a shareholder holding a lower percentage of the ordinary shares than that designated under English law. Shire's Articles of Association specify that two members present in person or by proxy and entitled to vote shall be a quorum. Cumulative voting is not recognized under English law. Special Meetings of Shareholders New Jersey law provides that a special meeting of shareholders may be called by the president or the board of directors, or by any shareholder, director or officer as may be provided in the bylaws. Roberts' By-laws provide that the Chairman of the Board, the board of directors and the President may call a special meeting. Upon application of the holder or holders of not less than ten (10) percent of all the shares entitled to vote at a meeting, the Superior Court of New Jersey, for good cause shown, may order that a special meeting be called. Under English law, an extraordinary general meeting of shareholders may be called by the board of directors or shareholders holding at least one-tenth of the paid-up capital of the company carrying voting rights at general meetings. An ordinary resolution requires 14 days' clear notice, an extraordinary resolution requires 14 days' clear notice and a special resolution requires 21 days' clear notice. In addition, in the case of an 97 annual general meeting, all the shareholders who are permitted to attend and vote may agree to a shorter notice period. In the case of an extraordinary general meeting, a majority of the shareholders holding at least 95% by nominal value of the shares which can be voted at the meeting can agree to a shorter notice period. Extraordinary resolutions are relatively unusual and are confined to matters out of the ordinary course of business, such as a proposal to wind up the affairs of the company. Special resolutions generally involve proposals to: .change the name of the company; .alter its capital structure; .change or amend the rights of shareholders; .permit the company to issue new shares for cash without applying the shareholders' preemptive rights; .amend the company's objects or purpose clause in its memorandum of association; .amend the company's articles of association; or . carry out other matters for which the company's articles of association or the Companies Act prescribe that a special resolution is required. All other proposals relating to the ordinary course of the company's business, such as the election of directors and transactions, such as mergers, acquisitions and dispositions, are the subject of an ordinary resolution. Consent of Shareholders in Lieu of Meeting Under New Jersey law, except as otherwise provided by the corporation's certificate of incorporation, any action required or permitted to be taken at a shareholders meeting may be taken by written consent without a meeting, without prior written notice and without a vote. Except for the annual election of directors which requires the written consent to be unanimous, such action may be taken upon the written consent of the holders of the minimum number of votes that would be required to authorize the action at a meeting at which all shareholders entitled to vote were present and voting. Under English law, shareholders of a public company such as Shire are not permitted to pass resolutions by written consent. Rights of Inspection Under New Jersey law, any shareholder may upon written request receive a copy of the corporation's balance sheet as at the end of the preceding fiscal year and its profit and loss and surplus statement for such fiscal year. In addition, New Jersey law grants the right to inspect and make extracts from a corporation's minutes of shareholder proceedings and its record of shareholders only for any proper purpose: .to shareholders of record for at least 6 months preceding the demand; . to holders of at least 5% of the outstanding shares of any class or series of the corporation's stock upon five days written demand; or .to shareholders upon receipt of court order. Except when closed under the provisions of the Companies Act, the register and index of names of shareholders of an English company may be inspected during business hours for free, by its shareholders, or for a fee by any other person. In both cases, the documents may be copied for a fee. The shareholders of an English public company may also inspect, without charge, during business hours minutes of meetings of the shareholders and obtain copies of the minutes for a fee, and service contracts of the company's directors, if the contracts have an unexpired term of more than 12 months or require more than 12 months' notice to terminate. In addition, the published annual accounts of a public company are required to be available for shareholders at a general meeting and a shareholder is entitled to a copy of these accounts. 98 A Shire member, other than a director or officer, has no rights to inspect an accounting record or other document except if he is authorized by the board. The accounting records shall be kept at the office or at another place decided by the board and shall be available during business hours for the inspection of the directors and other officers. Amendment of Governing Instruments Generally, a New Jersey corporation's board of directors may approve, and its shareholders may adopt, one or more amendments to its certificate of incorporation upon the affirmative vote of the majority of the votes cast by the holders of shares entitled to vote thereon, unless a greater requirement is specified in the certificate of incorporation. Except for the two-thirds voting standard required for certain business combinations, Roberts' Certificate of Incorporation requires the affirmative vote of a majority of votes cast at a meeting at which a quorum is present. In some limited circumstances, however, the board of directors may make amendments to the certificate of incorporation without shareholder approval. New Jersey law provides that a board of directors has the power to make, alter and repeal a corporation's bylaws, unless such power is reserved to the corporation's shareholders in the corporation's certificate of incorporation, but bylaws made by the board of directors may be altered or repealed, and new bylaws may be made by the shareholders of a corporation. Roberts' By-laws provide for alteration or amendment of the corporation's By-laws by the board of directors or by shareholders. Under English law, shareholders have the power to amend the objects or purpose clause in a company's memorandum of association and any provisions of the company's articles of association by special resolution, subject to, in the case of amendments to the objects clause of the memorandum of association, the right of dissenting shareholders to apply to the courts to cancel the amendments. Under English law, the board of directors is not authorized to change the memorandum of association or the articles of association. Amendments affecting the rights of the holders of any class of shares may, depending on the rights attached to the class and the nature of the amendments, also require approval by extraordinary resolution of the classes affected in separate class meetings. Certain Provisions Relating to Share Acquisition The New Jersey Business Corporation Act generally prevents a New Jersey corporation from entering into certain business combinations, including certain mergers, dispositions of assets or shares and recapitalizations, with an interested shareholder, unless: . the corporation's board of directors approved the business combination or transaction prior to the time the shareholder became an interested shareholder; or . after the expiration of five years from the time at which the shareholder became an interested shareholder, (i) the business combination is approved by the board of directors and by a vote of two-thirds of the outstanding voting stock not owned by the interested shareholder or (ii) the business combination provides for the interested shareholder to pay a price calculated pursuant to a formula designed to ensure that all other shareholders receive at least the highest price per share to be paid by such interested shareholder. An interested shareholder is defined as any person or entity that is the beneficial owner of at least 10% of a corporation's voting stock or an affiliate or associate of the corporation who was the owner of 10% or more of the corporation's voting stock at any time in the preceding five years. In the case of a company listed on the London Stock Exchange, shareholder approval must be obtained for certain acquisitions or disposals of assets involving directors or substantial shareholders or their associates. In addition, takeovers of public companies, which are generally those listed on the London Stock Exchange, are regulated by the City Code, which is comprised of non-statutory rules unenforceable at law, and administered 99 by the Takeover Panel, a body consisting of representatives of City of London financial and professional institutions which oversees the conduct of take- overs. The City Code provides that when any person acquires, whether by a series of transactions over a period of time or not, shares which, together with shares held or acquired by persons acting in concert with him, represent 30% or more of the voting rights of a public company or any person, together with persons acting in concert with him, holds at least 30% but not more than 50% of the voting rights and that person, or any person acting in concert with him, acquires any additional shares, the person must generally make an offer for all of the equity shares of the company, whether voting or non-voting, and any class of voting non-equity shares of the company held by that person or any person acting in concert with him, for cash, or accompanied by a cash alternative, at not less than the highest price paid by the person or these persons for the relevant shares during the 12 months preceding the date of the offer. Shareholder Rights Plan Roberts has entered into a Rights Agreement, dated as of December 16, 1996, between Roberts and Continental Stock Transfer & Trust Company, as Rights Agent, as amended, pursuant to which Roberts has issued rights to purchase its Class B--Series A Junior Participating Preferred Stock. Roberts has taken all action necessary to render the rights issued pursuant to the terms of the Rights Agreement inapplicable to the merger and the related agreements and transactions. In addition, Roberts has amended the Rights Agreement to change the threshold of share ownership from 15% to 10% in determining whether a Roberts shareholder shall be deemed an "Acquiring Person" under the Rights Agreement. Shire does not have a shareholder rights plan. Dissenters' Rights Under New Jersey law, with certain exceptions, a shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder's shares in the event of, a merger or a consolidation to which the corporation is a party. Unless the certificate of incorporation provides otherwise, dissenters' rights do not apply to holders of shares of any class or series if (i) such class or series is listed on a national securities exchange or held of record by not less than 1,000 holders, or shareholders receive in such transaction cash and/or securities which are listed on a national securities exchange or held of record by not less than 1,000 shareholders, or (ii) no vote of the corporation's shareholders is required for effecting the proposed merger or consolidation. Roberts' Certificate of Incorporation does not alter the dissenters' rights provided for under New Jersey law. While English law does not generally provide for dissenters' rights, a shareholder may apply to a court for an order on the ground that the relevant company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or some part of its members or that any proposed act or omission of the company is or would be so prejudicial and the court may make such order as it thinks fit for giving relief in respect of the matters complained of. In addition, in the context of a takeover regulated by the City Code, where the person making the relevant acquisition has given notice to the holders of any shares to which the takeover relates that such person desires to acquire those shares, a holder may apply for an order from the court that the person making the acquisition shall not be bound and entitled to acquire those shares or ask the court to specify terms of acquisition different from those of the takeover. Disclosure of Interests There is no requirement under New Jersey law relating to the disclosure of interests of shares held by a corporation's shareholders. The Companies Act provides that anyone who acquires an interest or becomes aware that he has acquired an interest in 3% or more of any class of shares of a public company's issued share capital carrying rights to vote at general shareholder meetings must notify that company in writing of his interest within two days. Thereafter, any increase or decrease of a whole percentage or decrease which reduces the interest to below 3% 100 must be notified in writing to the company. In addition, the Companies Act provides that a public company may, by notice in writing, require a person whom the company knows or reasonably believes to be or to have been within the three preceding years, interested in the company's issued voting share capital to confirm whether this is or is not the case, and if this is the case, to give further information that the company requires relating to his interest and any other interest in the company's shares of which he is aware. The disclosure must be made within a reasonable period as specified in the relevant notice which may be as short as one or two days. When a notice is served by a company on a person who is or was interested in shares of the company and that person fails to give the company any information required by the notice within the time specified in the notice, the company may apply to the court for an order directing that the shares in question be subject to restrictions prohibiting, among other things, any transfer of the shares, the exercise of voting rights, the issue of further shares, and, other than in a liquidation, dividends and other payments. These restrictions may also void any agreement to transfer the shares. For the purpose of the above obligations, the interest of a person in shares means, subject to certain exceptions, any kind of interest in shares including interests in any shares: .in which his spouse, or his child or stepchild under the age of 18 is interested; . in which a corporate body is interested and either (i) that corporate body is or its directors are accustomed to act in accordance with that person's directions or instructions or (ii) that person controls one- third or more of the voting power of that corporate body; or . in which another party is interested and the person and that other party are parties to an agreement which provides for one or more parties to it to acquire interest in shares of the company, which imposes obligations or restrictions on any one or more of the parties as to the use, retention or disposal of such interests acquired pursuant to such agreement and pursuant to which any interest in the company's shares is in fact acquired by any of the parties. The holding of an ADR evidencing an ADS would generally constitute an interest in the underlying ordinary shares. Sources and Payment of Dividends New Jersey law prohibits a corporation from making a distribution to its shareholders if, after giving effect to such distribution, the corporation would be unable to pay its debts as they become due in the usual course of business or the corporation's total assets would be less than its total liabilities. Subject to the prior rights of holders of preferred shares, an English company may pay dividends on its ordinary shares only out of its distributable profits, defined as accumulated, realized profits less accumulated, realized losses, and not out of share capital, which includes share premiums, which are equal to the excess of the consideration for the issue of shares over the aggregate nominal amount of such shares. Amounts credited to the share premium account, however, may be used to pay up unissued shares which may then be distributed to shareholders in proportion to their holdings. In addition, under English law, Shire will not be permitted to make a distribution if, at the time, the amount of its net assets is less than the aggregate of its issued and paid-up share capital and undistributable reserves. Subject to these limitations, the Shire board will have the power under the Shire memorandum and articles of association to pay cash dividends. Classification of the Board of Directors New Jersey law permits but does not require the adoption of a classified board of directors with staggered terms under which a part of the board of directors is elected each year. Under New Jersey law, the authorization for a classified board of directors must be included in the corporation's certificate of incorporation or an amendment thereto. Additionally, the maximum term of each class of directors is five years. Neither the Roberts Certificate of Incorporation nor any amendment to the Certificate contains a provision for the adoption of a classified board of directors of Roberts. New Jersey law allows the board of directors, by resolution adopted by a majority of the entire board, to designate an executive committee or other committee or 101 committees, each consisting of one or more members of the board, with the power and authority, to the extent permitted by law, to act on behalf of the entire board if the certificate or bylaws so provide. Roberts' By-laws authorize the designation of one or more committees that will have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, except as proscribed by statute. English law permits a company to provide for the classification of the board of directors with respect to the term of office that any director may hold. Shire's Articles do not provide for such classification of the Shire board of directors. Shire's Articles require that at each annual general meeting one- third of the directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to but not exceeding one-third, shall retire from office. If there are fewer than three directors who are subject to retirement by rotation, one shall retire from office. Subject to the Articles of Association, the directors to retire by rotation at an annual general meeting include, so far as necessary to obtain the number required, first, a director who wishes to retire and not offer himself for reappointment, and, second, those directors who have been longest in office since their last appointment or reappointment. Although this tri- annual rotation is similar to a classified board, it is different in that any director who is one of the one-third of directors who have been longest in office since their last election or appointment at the time of the annual meeting will retire from office regardless of the actual year of such director's last appointment. A retiring director is eligible for re-election. Removal of Directors In general, under New Jersey law, any or all of the directors of a corporation may be removed for cause, or, unless otherwise provided in the certificate of incorporation, without cause by the vote of a majority of the votes cast by the holders of the shares then entitled to vote at an election of directors; however, if the board of directors is classified, shareholders are not entitled to remove directors without cause. Roberts' By-laws state that any director or directors may be removed from office either with or without cause by the shareholders by a majority of votes cast at a meeting at which a quorum is present. Under the Companies Act, shareholders may remove a director without cause by ordinary resolution, irrespective of any provisions of the company's articles of association or service contract the director has with the company, provided that 28 days' clear notice of the resolution is given to the company. Under the Shire Articles of Association, Shire may by ordinary resolution remove a director before the expiration of his period of office and may by ordinary resolution appoint another person who is willing to act to be a director in his place. A person appointed in this way is treated, for the purposes of determining the time at which he or another director is to retire, as if he had become a director on the date on which the person in whose place he is appointed was last appointed or reappointed a director. Vacancies on the Board of Directors Under New Jersey law, unless the certificate of incorporation or bylaws provide otherwise, a vacancy, however caused, and newly created directorships resulting from an increase in the authorized number of directors may be filled by the affirmative vote of a majority of the remaining directors. In addition, any directorship not filled by the board may be filled by the shareholders at a shareholders meeting held for such purpose. Under English law, shareholders may by ordinary resolution, at a meeting at which any director retires, appoint a person to be a director to fill a vacancy or to become an additional director, subject to any maximum provided in the company's articles of association. Shire's Articles of Association state that there is no maximum number of directors. The board of directors has the power to appoint a director to serve until the next general meeting of the company, whereupon the director concerned is required to retire but will be eligible for election. 102 Shareholders' Suits Under New Jersey law, a shareholder may institute a lawsuit on behalf of the corporation. An individual shareholder also may commence a lawsuit on behalf of himself and other similarly situated shareholders where the requirements for maintaining a class action under New Jersey law have been met. While English law only permits a shareholder to initiate a lawsuit on behalf of the company in limited circumstances, the Companies Act permits a shareholder whose name is on the register of shareholders of the company to apply for a court order when the company's affairs are being or have been conducted in a manner unfairly prejudicial to the interests of all or some shareholders, including the shareholder making the claim, or when any act or omission of the company is or would be so prejudicial. A court has wide discretion in granting relief , and may authorize civil proceedings to be brought in the name of the company by a shareholder on terms that the court directs. Except in these limited circumstances, English law does not generally permit class action lawsuits by shareholders on behalf of the company or on behalf of other shareholders. Indemnification; Liability of Directors New Jersey law contains a provision and limitation regarding officers' and directors' liability and regarding indemnification by a corporation of its officers, directors, and employees. New Jersey law permits a New Jersey corporation to include a provision in its certificate of incorporation which eliminates or limits the personal liability of a director or officer to the corporation or its shareholders for monetary damages for breach of fiduciary duties as a director or officer. Roberts' Certificate of Incorporation limits the liability of the directors and officers of Roberts to the fullest extent permitted by law. However, New Jersey law prohibits the exculpation of liability of a director or officer for any breach of duty based upon an act or omission: .in breach of the director's or officer's duty of loyalty to the corporation or its shareholders; .not in good faith or involving a knowing violation of law; or .resulting in receipt by such person of an improper personal benefit. Under New Jersey law, corporations are also permitted to indemnify directors, officers, employees and agents in certain circumstances and required to indemnify directors under certain circumstances. Roberts' By-laws provide that a director, officer, employee or agent shall, in general, be indemnified by the corporation if he has acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In addition, corporations must indemnify a director to the extent the director has been successful on the merits or otherwise. Under New Jersey law and Roberts' By-laws, Roberts may purchase insurance on behalf of any director, officer, employee or agent for expenses incurred in any proceeding and any liabilities asserted against that person, whether or not Roberts would have the power to indemnify such person. English law does not permit a company to indemnify a director or officer of the company, or any person employed by the company as an auditor, against any liability arising from negligence, default, breach of duty or breach of trust against the company, except that indemnification is allowed for liabilities incurred in proceedings in which judgment is entered in favor of the director or officer or the director or officer is acquitted, or the director or officer is held liable, but the court finds that he acted honestly and reasonably and that relief should be granted. The Companies Act enables companies to purchase and maintain insurance for directors, officers and auditors against any liability arising from negligence, default, breach of duty or breach of trust against the company. Preemptive Rights Under New Jersey law, shareholders have preemptive rights to purchase shares only if the certificate of incorporation so provides. Roberts' Certificate of Incorporation states that a holder of any shares of capital stock of Roberts shall have preemptive rights to subscribe or to purchase any issuances of capital stock of 103 Roberts only to the extent that, and on the terms and conditions upon which, the Roberts board expressly grants in a written agreement between such holder and Roberts. The Roberts board is given the authority to authorize the granting of such preemptive rights to any holders of its capital stock. Under English law, the issuance for cash of equity securities, being those which, with respect to dividends or capital, carry a right to participate beyond a specified amount, or rights to subscribe for or convert into equity securities must be offered first to the existing equity shareholders in proportion to the respective nominal values of their holdings, unless a special resolution to the contrary has been passed by shareholders in a general meeting. Rights of Purchase and Redemption New Jersey law prohibits a corporation from repurchasing or redeeming its shares if: . after giving effect to such repurchase or redemption, the corporation would be unable to pay its debts as they become due in the usual course of business or the corporation's total assets would be less than its total liabilities; .after giving effect to such repurchase or redemption, the corporation would have no equity outstanding; .the redemption or repurchase price exceeded that specified in the securities acquired; or . such repurchase or redemption is contrary to any restrictions contained in the corporation's certificate of incorporation. Roberts' Certificate of Incorporation does not contain any provision limiting the ability to repurchase or redeem shares. Under English law, a company may issue redeemable shares if authorized by its memorandum and articles of association, subject to any conditions stated therein. The Shire Memorandum and Articles of Association provide that shares may be issued on terms that they are to be redeemed or are liable to be redeemed. The Companies Act provides that, subject to some other of its provisions, a limited company having a share capital may, if authorized by its articles of association, purchase its own shares, including any redeemable shares. A company may redeem or repurchase shares only if the shares are fully paid and, in the case of public companies, only out of distributable profits, or the proceeds of a new issue of shares made for the purpose of the repurchase or redemption. In the case of an open-market purchase by a company of its own shares, authority to make the market purchase must be given by an ordinary resolution of the company's shareholders. That authority may be general or for a specific transaction. A company may only make an off-market purchase of its own shares in pursuance of a contract authorized by a special resolution. The London Stock Exchange requires that where a company has issued shares which are listed on the London Stock Exchange and are convertible into a class of shares to be repurchased, the holders of the convertible shares must first pass an extraordinary resolution approving any repurchase at a separate class meeting. The London Stock Exchange requires that purchases pursuant to a general authority of 15% or more of a company's share capital must be made through either a tender or partial offer to all shareholders, at a stated maximum or fixed price. Purchases pursuant to a general authority below the 15% threshold may be made through the open market other than by tender or partial offer, provided that the price is not more than 5% above the average of the middle market quotations taken from the daily official list of the London Stock Exchange for the five business days before the purchase date. 104 CERTAIN LEGAL MATTERS Certain legal matters relating to the ADSs will be passed upon by Cahill Gordon & Reindel (a partnership including a professional corporation), New York, New York, U.S. counsel for Shire. Certain U.K. legal matters, including the validity of the ordinary shares, will be passed upon by Slaughter and May, London, England, U.K. counsel for Shire. Milbank, Tweed, Hadley & McCloy LLP, U.S. special counsel for Roberts, will deliver its opinion to Roberts concerning the U.S. federal income tax consequences of the merger. EXPERTS Ernst & Young LLP, independent auditors, have audited Roberts' consolidated financial statements and schedule included in its annual report on Form 10-K/A for the year ended December 31, 1998, as set forth in their report, which is incorporated by reference in this Prospectus-Proxy Statement and elsewhere in the registration statement. Roberts' financial statements and schedule are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. The consolidated financial statements of Roberts Pharmaceutical Corporation appearing in Roberts Pharmaceutical Corporation's Annual Report (Form 10-K) for the years ended December 31, 1996 and December 31, 1997, have been audited by PricewaterhouseCoopers LLP, independent accountants, as set forth in their reports included in such financial statements and incorporated in this Prospectus-Proxy Statement by reference. Such financial statements referred to above are incorporated in this Prospectus-Proxy Statement by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Shire for each of the years ended June 30, 1996 and 1997, the six months ended December 31, 1997 and the year ended December 31, 1998, appearing in Shire's Form 20-F for the year ended December 31, 1998 and incorporated in this Prospectus-Proxy Statement by reference, have been audited and reported upon by Arthur Andersen, independent auditors. Such consolidated financial statements have been incorporated in this Prospectus-Proxy Statement by reference in reliance upon the reports of Arthur Andersen, and upon the authority of such firm as experts in auditing and accounting. The financial statements of Richwood Pharmaceutical Company Inc. for the years ended December 31, 1995 and 1996 incorporated in this Prospectus-Proxy Statement by reference have been audited by Ernst & Young LLP, independent auditors, as stated in their report in such financial statements, and are incorporated by reference in this Prospectus-Proxy Statement in reliance upon the report of such firm given their authority as experts in accounting and auditing. The financial statements incorporated in this Prospectus-Proxy Statement by reference to the Form 6-K dated August 26, 1999 of Pharmavene, Inc. for the year ended December 31, 1996 and the period from February 16, 1990 (inception) to December 31, 1996 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in accounting and auditing. 105 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER AMONG SHIRE PHARMACEUTICALS GROUP plc, RUBY ACQUISITION SUB INC. AND ROBERTS PHARMACEUTICAL CORPORATION DATED AS OF JULY 26, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS 1.1. Definitions....................................................... A-1 ARTICLE II THE MERGER; CONVERSION AND EXCHANGE OF STOCK 2.1. Merger............................................................ A-6 2.2. Effective Time.................................................... A-6 2.3. Effects of the Merger............................................. A-6 2.4. Further Assurances................................................ A-6 2.5. Merger Consideration.............................................. A-7 2.6. Exchange Provisions............................................... A-8 2.7. Consideration for Ordinary Shares................................. A-9 2.8. Tax-Free Reorganization........................................... A-9 ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1. Representations and Warranties of Roberts......................... A-9 (a)Organization; Standing and Power............................... A-9 (b)Subsidiaries and Investments................................... A-9 (c)Capitalization................................................. A-9 (d)Authority...................................................... A-10 (e)Noncontravention............................................... A-10 (f)Government Approval; Consents.................................. A-10 (g)SEC Documents.................................................. A-11 (h)Information Supplied........................................... A-11 (i)Absence of Certain Changes or Events........................... A-11 (j)Compliance with Law............................................ A-12 (k)Affiliate Arrangements......................................... A-12 (l)Transaction Fees............................................... A-12 (m)Litigation..................................................... A-12 (n)Taxes and Tax Returns.......................................... A-12 (o)Real Property.................................................. A-13 (p)Licenses, Permits and Authorizations........................... A-13 (q)ERISA and Employee Matters..................................... A-14 (r)Labor Relations................................................ A-14 (s)Intellectual Property Rights................................... A-15 (t)Insurance...................................................... A-15 (u)Books and Records.............................................. A-15 (v)Undisclosed Liabilities........................................ A-16 (w)FDA, DEA Matters............................................... A-16 (x)Environmental Matters.......................................... A-17 (y)Products....................................................... A-18 (z)Marketing Practices............................................ A-18 (aa)Affiliates.................................................... A-18 (bb)Pooling....................................................... A-19 (cc)Business Combination.......................................... A-19
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Page ---- 3.2. Representations and Warranties of Shire........................... A-19 (a)Organization; Standing and Power............................... A-19 (b)Subsidiaries and Investments................................... A-19 (c)Capitalization................................................. A-19 (d)Authority...................................................... A-20 (e)Noncontravention............................................... A-20 (f)Government Approval; Consents.................................. A-20 (g)Reports and Financial Statements............................... A-20 (h)Information Supplied........................................... A-21 (i)Absence of Certain Changes or Events........................... A-21 (j)Compliance with Law............................................ A-22 (k)Affiliate Arrangements......................................... A-22 (l)Transaction Fees............................................... A-22 (m)Litigation..................................................... A-22 (n)Taxes and Tax Returns.......................................... A-22 (o)Real Property.................................................. A-22 (p)Licenses, Permits and Authorizations........................... A-23 (q)ERISA and Employee Matters..................................... A-23 (r)Labor Relations................................................ A-24 (s)Intellectual Property Rights................................... A-24 (t)Insurance...................................................... A-25 (u)Books and Records.............................................. A-25 (v)Undisclosed Liabilities........................................ A-25 (w)FDA, DEA Matters............................................... A-25 (x)Environmental Matters.......................................... A-26 (y)Products....................................................... A-27 (z)Marketing Practices............................................ A-28 (aa)Ordinary Shares............................................... A-28 (bb)Pooling....................................................... A-28 (cc)Merger Consideration.......................................... A-28 (dd)Active Trade or Business...................................... A-28 (ee)Asset Acquisitions............................................ A-28 (ff) Ownership of Roberts Shares.................................. A-28 ARTICLE IV COVENANTS OF ROBERTS 4.1. Regular Course of Business........................................ A-29 4.2. Certain Prohibited Activities..................................... A-29 4.3. Notice of Certain Events.......................................... A-30 4.4. Access............................................................ A-30 4.5. Approvals......................................................... A-30 4.6. No Solicitation................................................... A-30 4.7. Pooling of Interests.............................................. A-31 4.8. ISRA.............................................................. A-31
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Page ---- ARTICLE V COVENANTS OF SHIRE AND ACQUISITION SUB 5.1. Regular Course of Business...................................... A-31 5.2. Certain Prohibited Activities................................... A-31 5.3. Notice of Certain Events........................................ A-32 5.4. Access.......................................................... A-32 5.5. Approvals....................................................... A-32 5.6. No Solicitation................................................. A-32 5.7. Pooling of Interests............................................ A-33 5.8. Indemnification................................................. A-33 ARTICLE VI AGREEMENTS REGARDING OPTIONS AND OTHER BENEFITS 6.1. Stock Option Plans.............................................. A-34 6.2. Continuation of Benefits........................................ A-34 6.3. Severance Policy and Other Agreements........................... A-34 6.4. 1999 Bonus...................................................... A-34 6.5. Waiver of Preexisting Conditions; Credit for Deductibles; Service Credit.................................................. A-35 ARTICLE VII CONDITIONS PRECEDENT 7.1. Conditions to the Obligations of Each Party to Effect the Merger.......................................................... A-35 (a)Shareholder Approvals........................................ A-35 (b)Certain Approvals............................................ A-35 (c)No Proceeding or Litigation.................................. A-35 (d)Securities Laws.............................................. A-35 7.2. Additional Conditions to the Obligations of Roberts............. A-35 (a)Agreements................................................... A-35 (b)Representations and Warranties............................... A-35 (c)Officer's Certificate........................................ A-36 (d)Consents from Third Parties.................................. A-36 (e)Listing...................................................... A-36 (f)Tax Opinions................................................. A-36 (g)Pooling Letter............................................... A-36 (h)Nasdaq....................................................... A-36 7.3. Additional Conditions to the Obligations of Shire and Acquisition Sub................................................. A-36 (a)Agreements................................................... A-36 (b)Representations and Warranties............................... A-36 (c)Roberts Officer's Certificate................................ A-36 (d)Pooling Letter............................................... A-37
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Page ---- ARTICLE VIII OTHER AGREEMENTS 8.1. Preparation of Form F-4, Form F-6, the Proxy Statement and the UK Disclosure Document.......................................... A-37 8.2. Roberts Shareholders Meeting.................................... A-37 8.3. Shire Shareholders Meeting...................................... A-37 8.4. Acquisition Sub Actions......................................... A-37 ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 9.1. Termination..................................................... A-38 9.2. Effect of Termination........................................... A-39 9.3. Amendment....................................................... A-40 9.4. Waiver.......................................................... A-40 ARTICLE X GENERAL PROVISIONS 10.1. Public Statements............................................... A-40 10.2. Notices......................................................... A-40 10.3. Interpretation.................................................. A-41 10.4. Counterparts.................................................... A-41 10.5. Entire Agreement................................................ A-41 10.6. Governing Law................................................... A-41 10.7. Validity........................................................ A-41 10.8. Assignment...................................................... A-42 10.9. Expenses........................................................ A-42 10.10. Enforcement..................................................... A-42
EXHIBITS Exhibit 1 Option Agreement Exhibit 2-A Shareholder Agreement--Roberts Shareholders Exhibit 2-B Shareholder Agreement--Shire Shareholders Exhibit 3 Section 145 Letter SCHEDULES Schedule 1 Entities Required to Execute the Shareholder Agreement Schedule 2 Knowledge Officers Schedule 3 Officers and Directors of Surviving Corporation
A-iv AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 26, 1999, among Shire Pharmaceuticals Group plc, a public limited company organized under the laws of England and Wales ("Shire"), Ruby Acquisition Sub Inc., a New Jersey corporation ("Acquisition Sub") and a direct wholly owned Subsidiary of Shire, and Roberts Pharmaceutical Corporation, a New Jersey corporation ("Roberts"). WHEREAS, the parties hereto desire to consummate a merger (the "Merger") whereby Acquisition Sub will be merged with and into Roberts and Roberts will be the surviving corporation in the Merger, all upon the terms and conditions set forth herein and in accordance with the New Jersey Business Corporation Act ("New Jersey Law"); WHEREAS, the respective Boards of Directors (or a duly authorized committee thereof) of each of Shire, Acquisition Sub and Roberts have approved this Agreement, the Merger and the other transactions contemplated hereby; WHEREAS, the Merger is intended to be treated as a tax-free reorganization pursuant to the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, concurrently with the execution of this Agreement and as a condition and inducement to Shire and Acquisition Sub to enter into this Agreement Roberts has granted to Shire an irrevocable option to acquire authorized but unissued shares of common stock, par value $.01 per share of Roberts (the "Common Stock") representing 19.9% of the outstanding shares of Common Stock as provided in an Option Agreement in the form attached hereto as Exhibit 1; and WHEREAS, concurrently with the execution of this Agreement and as a condition and inducement to the parties to enter into this Agreement, the persons listed on Schedule 1-A hereto have committed to vote in favor of approving this Agreement as provided in a Shareholder Agreement in the form attached hereto as Exhibit 2-A and the entity listed on Schedule 1-B hereto has committed to vote in favor of approving this Agreement as provided in a Shareholder Agreement in the form attached hereto as Exhibit 2-B. NOW, THEREFORE, in consideration of the premises and the representations, warranties and agreements herein contained, the parties hereby agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the terms defined in this Article have the meanings assigned to them in this Article: "Acquisition Sub" has the meaning set forth in the preamble hereto. "Agreement" has the meaning set forth in the preamble hereto. "Business Day" means a day other than a Saturday, a Sunday or a day on which banks in New York, New York or London, England are permitted or required by law to close. "Cash Equivalents" means (a) cash, (b) marketable direct obligations issued by the United States government or any agency thereof and backed by the full faith and credit of the United States, in each case maturing within three months from the date of acquisition thereof, and (c) investments in money market funds which invest substantially all of their assets in assets of the types described in clauses (a) and (b) of this definition. "CERCLA" has the meaning set forth in Section 3.1(x)(v). "Certificate of Merger" has the meaning set forth in Section 2.2. A-1 "Closing" has the meaning set forth in Section 2.2. "Closing Date" has the meaning set forth in Section 2.2. "Code" has the meaning set forth in the preamble hereto. "Common Stock" has the meaning set forth in the preamble hereto. "Constituent Corporations" has the meaning set forth in Section 2.1. "DEA" has the meaning set forth in Section 3.1(w). "Depositary" has the meaning set forth in Section 2.5(f). "DOJ" has the meaning set forth in Section 3.1(w) "Effective Time" has the meaning set forth in Section 2.2. "Employment Obligations" has the meaning set forth in Section 3.1(q). "Environmental Law" means CERCLA, the Resource Conservation and Recovery Act of 1976, as amended, the New Jersey Industrial Site Recovery Act ("ISRA"), the Illinois Responsible Property Transfer Act ("RPTA"), the Toxic Substances Control Act, as amended, and any other applicable federal, state, local or foreign statute, rule, regulation, order, judgment, directive, decree or the common law regulating, relating to, or imposing liability or standards of conduct concerning air emissions, water discharges, noise emissions, or exposure to or the release or threatened release or discharge of any Hazardous Material into the environment, the generation, handling, use, treatment, storage, transport, disposal or remediation of any Hazardous Material, or otherwise concerning pollution or the protection of the outdoor or indoor environment, (including, without limitation, ambient or indoor air, surface water, groundwater, soil, subsurface strata and natural resources, including, without limitation, wetlands, flora and fauna, or public or employee health or safety, or the experimental use of animals or disposal of animal carcasses). "Environmental Permit" means any permit, license, approval, consent or other authorization by a federal, state, local or non-U.S. government or regulatory entity pursuant to any Environmental Law. "Equity Equivalent" has the meaning set forth in Section 3.1(c). "ERISA" has the meaning set forth in Section 3.1(q). "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended. "Exchange Agent" has the meaning set forth in Section 2.6(b). "Exchange Ratio" has the meaning set forth in Section 2.5(a). "FDA" has the meaning set forth in Section 3.1(w). "Filed SEC Documents" has the meaning set forth in Section 3.1(i). "Form F-4" has the meaning set forth in Section 3.1(h). "Form F-6" has the meaning set forth in Section 8.1. "FSA" means The Financial Services Act 1986 of the United Kingdom. A-2 "Hazardous Material" means any pollutant, contaminant, or hazardous, toxic, medical, biohazardous, infectious or dangerous waste, substance, constituent or material, any asbestos, any petroleum, oil (including crude oil or any fraction thereof), any radioactive substance, animal carcass, any toxin, chemical, virus, infectious disease or disease-causing agent, or any other substance, waste, constituent, chemical or material that can give rise to liability under any Environmental Law. "Holders" means the holders of record of certificates of Common Stock as of the Effective Time. "Indebtedness" means with respect to any entity (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (d) all obligations secured by a Lien on property or assets of such entity, (e) financing leases which would be treated as debt under either US GAAP or UK GAAP and (f) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (a) through (e) above. "Intellectual Property" has the meaning set forth in Section 3.1(s)(i). "knowledge" will be deemed to be present as to Roberts when the matter in question was actually known by an officer of Roberts identified on Schedule 2-A attached hereto and will be deemed to be present as to Shire when the matter in question was actually known by an officer of Shire identified on Schedule 2-B attached hereto. "Lien" means any lien, claim, pledge, assignment, hypothecation, conditional sale, retention of title, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind other than a mechanic's, warehousemen's or similar statutory lien or any agreement to provide any of the foregoing. "LSE" means The London Stock Exchange. "MCA" has the meaning set forth in Section 3.1(w). "Merger" has the meaning set forth in the preamble hereto. "Merger Consideration" has the meaning set forth in Section 2.5(a). "New Jersey Law" has the meaning set forth in the preamble hereto. "Option" means a right and option to purchase one share of Common Stock which was granted pursuant to either of the Roberts Option Plans. "Optionee" has the meaning set forth in Section 6.1. "Ordinary Shares" means validly issued, fully paid and nonassessable ordinary shares, with a nominal value of U.K. five pence each, of Shire. "Permits" means all approvals, authorizations, qualifications, consents, licenses, franchises, orders and other permits of all governmental or regulatory agencies or bodies, whether federal, state, local or non-U.S. "Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with US GAAP or UK GAAP, as the case may be, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent and (iii) any minor imperfection of title or similar Lien which individually or in the aggregate with other such Liens does not materially impair the value of the property subject to such Lien or the use of such property in the conduct of the business of Roberts or Shire, as the case may be, or any of its Subsidiaries. A-3 "Proxy Statement" means a proxy statement relating to the approval by the shareholders of Roberts of this Agreement (as amended or supplemented from time to time). "Public UK Documents" has the meaning set forth in Section 3.2(i). "Rights" means the Rights issued pursuant to the Rights Agreement. "Rights Agreement" means the Rights Agreement, dated as of December 16, 1996, between Roberts and Continental Stock Transfer and Trust Company, as amended through the date hereof. "Roberts" has the meaning set forth in the preamble hereto. "Roberts Acquisition Transaction" has the meaning set forth in Section 4.6(a). "Roberts Disclosure Schedule" has the meaning set forth in Section 3.1. "Roberts Governmental Approvals" has the meaning set forth in Section 3.1(f). "Roberts Insurance Policies" has the meaning set forth in Section 3.1(t). "Roberts Intellectual Property" has the meaning set forth in Section 3.1(s)(i). "Roberts Material Adverse Effect" means any condition, change or effect that is materially adverse to the business, results of operations or financial condition of Roberts and its Subsidiaries taken as a whole, but excluding conditions, changes or effects that (a) are caused by general economic conditions or conditions affecting the pharmaceutical industry as a whole, whether in the United States or internationally, which conditions do not affect Roberts and its Subsidiaries in a disproportional manner or (b) are related to or result from any action or inaction on the part of Shire or any of its affiliates. "Roberts Option Plans" means Roberts' Incentive Stock Option Plan, Equity Incentive Plan, Restricted Stock Option Plan and Employee Stock Purchase Plan. "Roberts Product Sites" has the meaning set forth in Section 3.1(x)(v). "Roberts Shareholder Approval" has the meaning set forth in Section 3.1(d). "Roberts Shareholders Meeting" has the meaning set forth in Section 8.2. "Roberts Superior Proposal" has the meaning set forth in Section 4.6(b). "Roberts Third Party Approvals" has the meaning set forth in Section 3.1(f). "Roberts Third Party Site" has the meaning set forth in Section 3.1(x)(vi). "SARs" has the meaning set forth in Section 3.1(c). "SEC" means the Securities and Exchange Commission. "SEC Documents" has the meaning set forth in Section 3.1(g). "Securities Act" means the U.S. Securities Act of 1933, as amended. "Shareholder Protection Act" means Chapter 10A of the New Jersey Law. "Shire" has the meaning set forth in the preamble hereto. "Shire Acquisition Transaction" has meaning set forth in Section 5.6. A-4 "Shire ADRs" means the American Depositary Receipts representing the Shire ADSs issued pursuant to a Deposit Agreement, dated as of April 1, 1998, between Shire and the Depositary. "Shire ADSs" means American Depositary Shares, each representing three Ordinary Shares, of Shire. "Shire Disclosure Schedule" has the meaning set forth in Section 3.2. "Shire Governmental Approvals" has the meaning set forth in Section 3.2(f). "Shire Insurance Policies" has the meaning set forth in Section 3.2(t). "Shire Intellectual Property" has the meaning set forth in Section 3.2(s)(i). "Shire Material Adverse Effect" means any condition, change or effect that is materially adverse to the business, results of operations or financial condition of Shire and its Subsidiaries taken as a whole, but excluding conditions, changes or effects that (a) are caused by general economic conditions or conditions affecting the pharmaceutical industry as a whole, whether in the United Kingdom or internationally, which conditions do not affect Shire and its Subsidiaries in a disproportionate manner or (b) are related to or result from any action or inaction on the part of Roberts or any of its affiliates. "Shire Option Plans" means Shire's SHL Scheme, SPC Scheme, Executive Scheme (Part A and Part B), Sharesave Scheme, Employee Stock Purchase Plan, Pharmavene Stock Option Plan and Richwood Stock Option Plan, collectively. "Shire Product Sites" has the meaning set forth in Section 3.2(x)(v). "Shire Share Value" means one-third of the average of the last reported sale price per Shire ADR on the Nasdaq National Market over the fifteen consecutive trading days ending on the third trading day immediately preceding the Closing Date. "Shire Shareholder Approval" has the meaning set forth in Section 3.2(d). "Shire Shareholders Meeting" has the meaning set forth in Section 8.3. "Shire Superior Proposal" has the meaning set forth in Section 5.6(b). "Shire Third Party Approvals" has the meaning set forth in Section 3.2(f). "Shire Third Party Site" has the meaning set forth in Section 3.2(x)(vi). "Subsidiary" of any person means (i) any corporation of which the outstanding capital stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such person or (ii) any other person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such person. "Surviving Corporation" has the meaning set forth in Section 2.1. "Tax" or "Taxes" means (i) all federal, state, local or non-U.S. taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, alternative minimum, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or other additional amounts imposed by any taxing authority in connection with any item described in clause (i) and (iii) all transferee, successor, several or contractual liability in respect of any items described in clause (i) or (ii). A-5 "Tax Returns" means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes. "UK Disclosure Documents" means the documentation necessary for the implementation of this Agreement including a circular to Shire's shareholders containing (i) a notice convening an extraordinary general meeting of Shire at which a resolution will be proposed to approve the allotment of share capital necessary to give effect to this Agreement, and (ii) such other information as required by applicable law, together with a U.K. prospectus and forms of proxy. "UK GAAP" has the meaning set forth in Section 3.2(g). "UK Prospectus" means a prospectus prepared in accordance with the FSA with respect to the Ordinary Shares. "US GAAP" has the meaning set forth in Section 3.1(g). ARTICLE II THE MERGER; CONVERSION AND EXCHANGE OF STOCK 2.1. Merger. At the Effective Time, in accordance with and subject to the terms and conditions of this Agreement and New Jersey Law, Acquisition Sub shall be merged with and into Roberts and Roberts shall continue its corporate existence under New Jersey Law as the surviving corporation (Acquisition Sub and Roberts are sometimes referred to herein collectively as the "Constituent Corporations," and Roberts, as the surviving corporation in the Merger, is sometimes referred to herein as the "Surviving Corporation"). 2.2. Effective Time. Subject to the provisions of this Agreement, the parties agree to cause to be duly executed a Certificate of Merger (the "Certificate of Merger"), which shall be duly delivered to the Secretary of State for the State of New Jersey for filing as provided by New Jersey Law. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State for the State of New Jersey (the "Effective Time"). Prior to such filings of the Certificate of Merger, a closing (the "Closing") will be held at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, which shall be on the second Business Day after the satisfaction or waiver of the conditions set forth in Article VII hereof, unless another time, date or place is agreed by the parties hereto or unless this Agreement has been terminated in accordance with its terms. The date of the Closing shall be referred to herein as the "Closing Date." The parties agree that the Effective Time shall occur on the Closing Date. 2.3. Effects of the Merger At the Effective Time, (a) the effects of the Merger shall be as provided under all applicable provisions of New Jersey Law, (b) the Certificate of Incorporation of Roberts as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided therein and in accordance with New Jersey Law, (c) the By-Laws of Roberts as in effect immediately prior to the Effective Time shall be the By-Laws of the Surviving Corporation until thereafter amended as provided therein and in accordance with New Jersey Law, (d) the individuals listed on Schedule 3-A shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their successors have been duly elected and qualified in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation, and (e) the individuals listed on Schedule 3-B shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their successors have been duly elected and qualified in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation. 2.4. Further Assurances If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, A-6 obligation, title or interest in, to or under any of the rights, properties or assets of either of the Constituent Corporations as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of each of the Constituent Corporations or otherwise, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of the Constituent Corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, obligation, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement so long as such actions and things are consistent with the terms of this Agreement and the Certificate of Merger. 2.5. Merger Consideration (a) At the Effective Time, by virtue of the Merger and without any action on the part of the Holders, each issued and outstanding share of Common Stock (other than shares canceled in accordance with Section 2.5(d)) together with the associated Right shall be converted into the right to receive from Shire a number of Ordinary Shares (the "Merger Consideration") determined as set forth below (the "Exchange Ratio"): (i) If the Shire Share Value is equal to or greater than $7.91 and equal to or less than $9.67, the Exchange Ratio shall be 3.4122; (ii) If the Shire Share Value is equal to or greater than $7.03 and less than $7.91, the Exchange Ratio shall be determined by dividing $27.00 by the Shire Share Value; (iii) If the Shire Share Value is less than $7.03, the Exchange Ratio shall be 3.8407; (iv) If the Shire Share Value is greater than $9.67 and less than or equal to $10.55, the Exchange Ratio shall be determined by dividing $33.00 by the Shire Share Value; and (v) If the Shire Share Value is greater than $10.55, the Exchange Ratio shall be 3.1280. (b) Each issued and outstanding share of capital stock of Acquisition Sub shall be canceled. (c) In consideration of the cancellation of shares of capital stock of Acquisition Sub pursuant to Section 2.5(b) and the issuance of Ordinary Shares pursuant to Section 2.5(a), the Surviving Corporation shall issue one fully paid and nonassessable share of its common stock, par value $.01 per share, to Shire for each share canceled pursuant to Section 2.5(b). (d) Each share of Common Stock (and associated Rights) that is owned by Roberts or any Subsidiary of Roberts, or Shire or any Subsidiary of Shire, shall automatically be canceled and retired and shall cease to exist, and no Ordinary Shares or other consideration shall be delivered in exchange therefor. (e) The parties acknowledge that listing of the Ordinary Shares comprising the Merger Consideration on the London Stock Exchange will not be permitted unless and until this Agreement is unconditional in all respects, including the filings of the Certificate of Merger having taken place as provided for in Section 2.2. The parties therefore agree that, without prejudice to Articles VII, VIII and IX of this Agreement, once the Ordinary Shares have been allotted, they shall use their respective best efforts to procure that filings of the Certificate of Merger takes place immediately before 9:30 a.m. (New York time) on the Closing Date, and that the Ordinary Shares to be issued pursuant to this Agreement are admitted to the Official List of the London Stock Exchange at 2:30 p.m. (London time). (f) Notwithstanding Section 2.5(a), unless the Holders otherwise elect, Shire will provide Holders with one-third of a Shire ADS (represented by Shire ADRs) for each Ordinary Share such Holder would be entitled to receive pursuant to Section 2.5(a). Holders must irrevocably elect to receive all or any portion of their Ordinary Shares as Ordinary Shares in lieu of such Shire ADSs at the time they surrender their certificates representing shares of Common Stock in accordance with the provisions described in Section 2.6. The receipt of Shire ADSs will be deemed for all purposes of this Agreement as the receipt of the underlying Ordinary Shares and such Shire ADSs will be deemed for all purposes of this Agreement to constitute Merger Consideration. Shire will pay all fees and expenses associated with the issuance of the Ordinary Shares A-7 constituting Shire ADSs to Morgan Guaranty Trust Company of New York, as depositary (the "Depositary"), for the issuance by the Depositary of the associated Shire ADRs. (g) Shire shall not be required to pay any fractional Ordinary Shares or Shire ADSs pursuant to this Section 2.5. In lieu of receiving a fractional Ordinary Share or Shire ADS, each Holder otherwise entitled to (i) a fractional Ordinary Share shall receive cash (without interest) in an amount equal to (a) the latest closing mid-market price of the Ordinary Shares on the London Stock Exchange on the day immediately following the Closing Date divided by (b) the fractional interest of an Ordinary Share that would otherwise be payable and (ii) a fractional Shire ADS shall receive cash (without interest) in an amount equal to (a) the last reported sale price of Shire ADRs on the Nasdaq National Market for the day immediately following the Closing Date divided by (b) the fractional interest of a Shire ADS that would otherwise be payable. 2.6. Exchange Provisions (a) At the Effective Time, all shares of Common Stock (and associated Rights), by virtue of the Merger and without any action on the part of the Holders, shall no longer be outstanding and shall be canceled and retired and shall cease to exist, and each Holder of a certificate representing any such share of Common Stock shall thereafter cease to have any rights with respect to such share of Common Stock (and associated Right) except the right to receive the Merger Consideration for such share of Common Stock (and associated Right) specified in Section 2.5. (b) Prior to the Effective Time, Shire shall designate a bank or trust company reasonably satisfactory to Roberts to act as Exchange Agent hereunder (the "Exchange Agent"). At the Effective Time, Shire shall (i) issue to and deposit with the Depositary, for the benefit of the holders of shares of Common Stock converted into Shire ADSs in accordance with Sections 2.5(a) and (f), Ordinary Shares in an amount sufficient to permit the Depositary to issue Shire ADSs representing the number of Shire ADSs issuable pursuant to Sections 2.5(a) and (f) and (ii) deposit, in trust, with the Exchange Agent for the benefit of the Holders, Ordinary Shares constituting the Merger Consideration. As soon as practicable after the Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail to each Holder (i) a form of letter of transmittal specifying that delivery shall be effected, and risk of loss and title to certificates of Common Stock shall pass, only upon proper delivery of such certificates to the Exchange Agent and (ii) instructions for use in surrendering such certificates in exchange for the Merger Consideration set forth in Section 2.5. Such letter of transmittal shall also indicate that Holders have an irrevocable right to elect to receive all or any portion of their Ordinary Shares as Ordinary Shares in lieu of Shire ADSs as set forth in Section 2.5(f). Upon surrender of any such certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed, the holder of such certificate shall be entitled to receive in exchange therefor the Merger Consideration. Shire shall cause the Depositary to issue Shire ADRs through and upon the instructions of the Exchange Agent, for the benefit of the holders of shares of Common Stock who have not elected to receive Ordinary Shares pursuant to Section 2.5(f). Neither the Exchange Agent nor any party hereto shall be liable to any Holder for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. Shire and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Holder such amounts as the Surviving Corporation or the Exchange Agent is required to deduct and withhold under the Code or any provision of national, state or local law, with respect to the making of such payment. To the extent such amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of whom such deduction and withholding was made. Any Merger Consideration payable to Holders pursuant to Section 2.5 which remains undistributed to the Holders for a period of six months after the Closing Date shall be delivered to the Surviving Corporation upon its request, and any Holders who have not surrendered to the Exchange Agent certificates for Common Stock or complied with the instructions in the letter of transmittal, as the case may be, shall thereafter look only to the Surviving Corporation for payment of such Merger Consideration. The Surviving Corporation shall instruct the Exchange Agent to invest all cash held by it in Cash Equivalents. Interest earned on such Cash Equivalents shall be paid to the Surviving Corporation. (c) Until so surrendered, each certificate representing Common Stock shall represent, after the Effective Time, solely the right to receive the Merger Consideration specified in Section 2.5. The Merger Consideration A-8 issued upon the surrender of Common Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such Common Stock (and associated Rights). 2.7. Consideration for Ordinary Shares The consideration for the allotment by Shire of Ordinary Shares constituting the Merger Consideration shall be the cancellation of all shares of Common Stock pursuant to Section 2.6(a). 2.8. Tax-Free Reorganization For U.S. income tax purposes, the parties intend that the Merger be treated as a tax-free reorganization pursuant to the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code. Each party hereto agrees not to take any position inconsistent with the foregoing on any Tax Return, unless required by law. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1. Representations and Warranties of Roberts. Roberts represents and warrants to Shire and Acquisition Sub that, except (A) as set forth in the Roberts Disclosure Schedule delivered by Roberts to Shire at or prior to the execution of this Agreement (the "Roberts Disclosure Schedule") (each section of which qualifies the correspondingly numbered representation and warranty) and (B) with respect to paragraphs (j), (m), (o), (p), (q), (r), (t), (w), (x) and (y) of this Section 3.1, as does not have, or could not reasonably be expected to have, individually or in the aggregate, a Roberts Material Adverse Effect, the following is true and correct: (a) Organization; Standing and Power Roberts is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey. Roberts has all requisite corporate power and authority to own, lease and operate its assets and to carry on its business as now being conducted. Roberts is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its assets owned or leased or the nature of its activities makes such qualification necessary (such jurisdictions being specified in Section 3.1(a) of the Roberts Disclosure Schedule) except where the failure to be so qualified would not have a Roberts Material Adverse Effect. Copies of the Certificate of Incorporation and By-Laws of Roberts as in effect on the date hereof have been previously delivered to Shire. (b) Subsidiaries and Investments Section 3.1(b) of the Roberts Disclosure Schedule lists each Subsidiary of Roberts. Each such Subsidiary is a corporation duly organized, validly existing and (in applicable jurisdictions) in good standing under the laws of its jurisdiction of incorporation. Each such Subsidiary has all requisite corporate power and authority to own, lease and operate its assets and to carry on its business as now being conducted. All such Subsidiaries are duly qualified as foreign corporations to do business, and (in applicable jurisdictions) are in good standing, in each jurisdiction where the character of their respective assets owned or leased or the nature of their respective activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not have a Roberts Material Adverse Effect. All the outstanding shares of capital stock of each such Subsidiary have been validly issued and are fully paid (and in applicable jurisdictions, nonassessable) and are owned by Roberts, by another Subsidiary of Roberts or by Roberts and another such Subsidiary, free and clear of all Liens, other than Liens which (individually or in the aggregate) would not have a Roberts Material Adverse Effect. Except for the capital stock of its Subsidiaries, Roberts does not own any stock, partnership or other equity interest in, or any debt or equity securities of, any person or entity. (c) Capitalization. The authorized capital stock of Roberts consists of 110,000,000 shares of capital stock, including 10,000,000 shares of Class B Preferred Stock par value $.10 per share (of which 5,500,000 shares have been designated as Series B 5% Convertible Preferred Stock, all of which have been converted into Common Stock), 500,000 shares of Series A Junior Participating Preferred Stock par value $.10 per share and 100,000,000 shares of Common Stock. At the close of business on July 21, 1999 A-9 (i) 31,889,077 shares of Common Stock were issued and outstanding, (ii) 387,594 shares of Common Stock were held by Roberts in its treasury, (iii) 3,353,188 shares of Common Stock were reserved for issuance on exercise of outstanding options under the Roberts Option Plans, (iv) 150 shares of Common Stock were reserved for issuance upon the exercise of the warrant issued to A.B. Laffer, V.A. Canto & Associates and (v) 500,000 shares of Series A Junior Participating Preferred Stock were reserved for issuance under the Rights Agreement and no other shares of capital stock were issued, reserved for issuance or outstanding. All outstanding shares of capital stock of Roberts are, and all shares which are reserved for issuance will be, when issued in accordance with the Roberts Option Plans, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except as set forth above, as of the date of this Agreement, there are not any securities convertible into or exchangeable or exercisable for capital stock ("Equity Equivalent") of any of Roberts or any of its Subsidiaries (including, without limitation, any option, warrant, right to subscribe, call or commitment of any kind or character whatsoever requiring the issuance, sale or transfer by Roberts or any of its Subsidiaries of any shares of their capital stock or any securities convertible into or exchangeable or exercisable for such capital stock). As of the date of this Agreement, there are not any outstanding contractual obligations of Roberts or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Roberts or any of its Subsidiaries. Roberts has delivered to Shire a complete and correct copy of the Rights Agreement as amended and supplemented to the date of this Agreement. There are no outstanding stock appreciation, phantom stock, profit participation or similar rights (collectively, "SARs") with respect to Roberts. Roberts has delivered to Shire a complete list of all outstanding Indebtedness of Roberts and its Subsidiaries. (d) Authority Roberts has the requisite corporate power and authority to execute and deliver this Agreement and, subject to Roberts Shareholder Approval (as defined below) and the receipt of the consents and waivers set forth in Section 3.1(d) of the Roberts Disclosure Schedule, to consummate the transactions contemplated by this Agreement to be consummated by Roberts. The execution and delivery of this Agreement by Roberts and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Roberts, subject to the approval of this Agreement and the transactions contemplated hereby by the affirmative vote of holders of at least two-thirds of the shares of Common Stock voted at a meeting (the "Roberts Shareholder Approval"). This Agreement has been duly executed and delivered by Roberts and constitutes a valid and binding obligation of Roberts, enforceable against Roberts in accordance with its terms, subject to applicable bankruptcy, insolvency moratorium or other similar laws relating to creditors' rights and general principles of equity. (e) Noncontravention Neither the execution and delivery of this Agreement by Roberts nor the consummation of the transactions contemplated hereby nor compliance by Roberts with any of the provisions hereof will (i) violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, could constitute a default) under, or result in the termination, modification or suspension of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien upon, right to acquire or obligation to dispose of any of the properties, assets or rights of Roberts or any of its Subsidiaries under, any of the terms, conditions or provisions of (x) the Certificate of Incorporation or By-Laws of Roberts or any of its Subsidiaries or (y) any note, bond, mortgage, credit agreement, indenture, deed of trust, license, Permit, authorization, lease, agreement or instrument or obligation to which Roberts or any of its Subsidiaries is party or by which they are bound or to which they or any of their assets may be subject, or (ii) violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Roberts or any of its Subsidiaries, their operations or any of their assets, except for such violations, conflicts or breaches referred to in clauses (i)(y) and (ii) which would not, individually or in the aggregate, have a Roberts Material Adverse Effect. (f) Government Approval; Consents. No consents and approvals are required to be obtained by Roberts from non-governmental third parties ("Roberts Third Party Approvals") in order to lawfully and A-10 contractually permit it to perform its obligations under this Agreement and consummate the transactions contemplated hereby. No notice to, filing with, or authorization, consent or approval of, any federal, state, local or non- U.S. public body or authority is necessary for the execution, delivery or performance of this Agreement by Roberts or the consummation of the transactions contemplated hereby ("Roberts Governmental Approvals"). (g) SEC Documents. (i) Roberts has filed all required reports, schedules, forms, statements and other documents with the SEC since January 1, 1998 (the "SEC Documents"). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of Roberts included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Roberts and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year- end audit adjustments). (ii) Roberts is eligible to use Form S-3 for the filing of a registration statement with the SEC under the Securities Act. (h) Information Supplied. None of the information supplied or to be supplied by Roberts for inclusion or incorporation by reference in (i) the registration statement on Form F-4 to be filed with the SEC by Shire in connection with the issuance of Ordinary Shares and Shire ADSs in the Merger (the "Form F-4") will, at the time the Form F-4 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the UK Disclosure Documents will, on the date the UK Disclosure Documents are first mailed to the shareholders of Shire or at the time of the Shire shareholders meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading or (iii) the Proxy Statement will, at the date it is first mailed to Roberts shareholders or at the time of the Roberts Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation is made by Roberts with respect to statements made or incorporated by reference therein based on information supplied by Shire. (i) Absence of Certain Changes or Events. Except as disclosed in the SEC Documents filed and publicly available prior to the date of this Agreement (the "Filed SEC Documents"), since December 31, 1998 there has not been (i) any material adverse change in the business, financial condition or results of operations of Roberts and its Subsidiaries, taken as a whole, (ii) any destruction or loss of (whether or not covered by insurance) any property, asset or right that has had or is likely to have a Roberts Material Adverse Effect, (iii) any authorization or issuance by Roberts of any of its capital stock or the issuance of any debt security or other evidence of Indebtedness of Roberts or any of its Subsidiaries, (iv) any redemption or other acquisition by Roberts of any of its capital stock or by Roberts or any of its Subsidiaries of any of their debt securities or other evidences of Indebtedness, or any payment made with respect to any of the foregoing (other than any regular, periodic payment of interest made with respect to a A-11 debt security or other evidence of Indebtedness), (v) any declaration, setting aside or payment of any dividend or other distribution or payment (whether in cash, capital stock or otherwise) in respect of any capital stock of Roberts, (vi) any disposal or lapse of any Roberts Intellectual Property, (vii) any Lien (other than a Permitted Lien) incurred on any material property, assets or rights of Roberts or any of its Subsidiaries, (viii) any incurrence by Roberts or any of its Subsidiaries of any liability which has had or is likely to have a Roberts Material Adverse Effect, (ix) any incurrence of Indebtedness or any guarantee by Roberts or any of its Subsidiaries of any liability of any other person or entity outside of the ordinary course of business, (x) to the knowledge of Roberts, any development with respect to regulatory approval of any products of Roberts or any of its Subsidiaries which has had or is likely to have a Roberts Material Adverse Effect, (xi) to the knowledge of Roberts, any development with respect to relationships with any contract manufacturer or contract research organization with which Roberts or any of its Subsidiaries has a business relationship which has had or is likely to have a Roberts Material Adverse Effect or (xii) any change in Roberts' Tax accounting methods, any new election made with respect to Taxes, any modification or revocation of any existing election made with respect to Taxes, or any settlement or other disposition of any Tax matter. (j) Compliance with Law. Neither Roberts nor any of its Subsidiaries is in violation or noncompliance in any material respect with any statute, law, ordinance, regulation, rule, order or other legal requirement of any government, authority or any other governmental department or agency applicable to its business or operations, or any judgment, decree or order of any court to which it is a party. (k) Affiliate Arrangements. Neither Roberts nor any of its Subsidiaries is a party to any contract, agreement, arrangement, understanding or other commitment with any director, officer or securityholder of Roberts or any of its Subsidiaries or, to the knowledge of Roberts, any person or entity controlled by any such person. (l) Transaction Fees. Roberts has not retained any broker, finder, financial adviser, investment banker or other person or entity which is entitled to any brokerage, finder's or similar fee or commission in connection with this Agreement or the transactions contemplated hereby. (m) Litigation. There is no claim, action, suit or proceeding pending or, to the knowledge of Roberts, threatened against Roberts or any of its Subsidiaries or any of their respective properties, assets or rights before any court or governmental or regulatory authority or body. (n) Taxes and Tax Returns. (i) Roberts has duly and timely filed all federal, state, local and non-U.S. Tax Returns required to be filed by it and its Subsidiaries, and each such Tax Return is complete and accurate in all material respects, (ii) Roberts has timely paid all Taxes due and payable by it and its Subsidiaries and has made adequate provision (through a current accrual on its most recent financial statements) for any Taxes that are not yet due and payable and (iii) Roberts has withheld and paid in a timely manner all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, including amounts of or the value of awards and prizes paid to Roberts' employees. Any deficiencies or assessments asserted in writing by any taxing authority have been paid or fully settled and no issue raised by any such taxing authority reasonably could be expected to result in a proposed deficiency for any prior, parallel or subsequent period (including periods subsequent to the Effective Time). There are no claims or assessments pending (or, to the best knowledge of Roberts, threatened) against Roberts or any of its Subsidiaries for any alleged federal, state, local or non-U.S. Tax deficiency and no issue has been raised in writing by any federal, state, local or non-U.S. taxing authority or representative thereof. No consent has been filed relating to Roberts pursuant to Section 341 of the Code. No claim has ever been made by an authority in a jurisdiction where Roberts does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Section 3.1(n) of the Roberts Disclosure Schedule lists all federal, state, local and non-U.S. jurisdictions in which Roberts files Tax Returns, and indicates those Tax Returns that have been A-12 audited and those that currently are the subject of audit. Roberts has not consented to an extension of the statute of limitations with respect to any Tax period. Roberts is not a party to any Tax allocation or sharing agreement. Roberts (i) has never been a member of an "affiliated group" (within the meaning of Section 1504 of the Code) and has never been a member of any combined, consolidated, affiliated or unitary group for any state, local or non-U.S. Tax purposes and (ii) has no liability for the Taxes of any person under Treas. Reg. (S) 1.1502-6 (or any similar provision of state, local or non-U.S. law), as a transferee or successor, by contract, or otherwise. Roberts has never had any "undistributed personal holding company income" (as defined in Section 545 of the Code). Roberts is not required to make any adjustment pursuant to Section 481 of the Code (or any comparable provision of state, local or non-U.S. law) by reason of a change in accounting method or otherwise. Roberts has never requested a ruling from, or entered into a closing agreement with, the Internal Revenue Service or any other taxing authority. None of Roberts' assets is "tax-exempt use property" (as defined in Section 168(h)(1) of the Code) or may be treated as owned by any other person pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 (as in effect immediately prior to the enactment of the Tax Reform Act of 1986). Roberts is not a party to any agreement or arrangement that provides for the payment of any amount that could constitute a "parachute payment" within the meaning of Section 280G of the Code. Roberts is not, and has never been, a "United States real property holding corporation" within the meaning of Section 897 of the Code. Roberts has not made any elections under Section 108, 168, 338, 441, 472, 1017, 1033 or 4977 of the Code (or any predecessor provisions thereof). Roberts has previously delivered to Shire true and complete copies of (i) all federal, state, local and non-U.S. income or franchise Tax Returns for each of the last three taxable years ending prior to the date of this Agreement (except for those Tax Returns that have not yet been filed) and (ii) any audit reports issued within the last three years by the Internal Revenue Service or any other taxing authority. (o) Real Property. Section 3.1(o) of the Roberts Disclosure Schedule sets forth a complete and accurate list of all material real property owned or leased by Roberts or any of its Subsidiaries, including (i) with respect to owned real property, the date of its acquisition, any Liens on or with respect to such real property (other than Permitted Liens), the name of the holder of any such Lien and the amount and nature of any obligation secured by any such Lien and (ii) with respect to leased real property, the name of the lessor of such real property, a list of all instruments and documents governing the terms of such leasehold interest, any Lien on or with respect to such leasehold interest (other than Permitted Liens), the name of the holder of any such Lien and the amount and nature of any obligation secured by any such Lien. Roberts is not a lessor with respect to any material real property owned by it or any of its Subsidiaries and has not granted any sublease of any leasehold interest in any material real property leased by it or any of its Subsidiaries. With respect to such material real property, (i) there are no eminent domain proceedings pending or threatened against it, (ii) such properties and the improvements thereon (including the roof and structural portions of each building) are in good operating order and condition, subject to ordinary wear and tear, and (iii) the use thereof does not violate any zoning or similar land use laws or other government regulations other than such violations which, individually or in the aggregate, would not adversely affect the ability of the Surviving Corporation to use, operate or occupy any of such properties following the Effective Time. The real property owned or leased by Roberts and its Subsidiaries is sufficient for the conduct of its business. (p) Licenses, Permits and Authorizations. Section 3.1(p) of the Roberts Disclosure Schedule sets forth a complete and accurate list of all material Permits held by or on behalf of Roberts and its Subsidiaries, including (i) the agency or body issuing such Permit, (ii) the person or entity to whom such Permit was issued and (iii) the date such Permit expires or is required to be renewed. Each such Permit is, to the knowledge of Roberts, in full force and effect and Roberts, or the person or entity who holds such Permit on Roberts' behalf, is in compliance in all material respects with all of its obligations with respect thereto, and, to the knowledge of Roberts, no event has occurred or condition exists which permits or, upon the giving of notice or lapse of time or both, would permit revocation, nonrenewal, modification, suspension or termination of any such Permit. A-13 (q) ERISA and Employee Matters. Section 3.1(q) of the Roberts Disclosure Schedule sets forth a complete and accurate list of all employment and consultancy agreements, all employee benefit plans (within the meaning of Section 3(3) of ERISA) or retirement benefits scheme (within the meaning of Section 611 of the Income and Corporation Taxes Act 1988) and all other written plans, arrangements or policies relating to stock options, stock purchases, compensation, deferred compensation, supplemental retirement arrangements, other incentive programs, severance, fringe benefits or other employee benefits (collectively "Employment Obligations") covering all present and former officers, directors, employees, consultants and agents of Roberts and its Subsidiaries and any of their spouses or dependents. Roberts has made available to Shire true, complete and correct copies of (i) each such Employment Obligation, (ii) the most recent annual report on Form 5500 as filed with the Internal Revenue Service with respect to each applicable Employment Obligation, (iii) the most recent summary plan description (or similar document) with respect to each applicable Employment Obligation, (iv) each trust agreement and insurance or annuity contract relating to any Employment Obligation and (v) the most recent actuarial valuation report for each applicable Employment Obligation. (i) Roberts and its Subsidiaries are in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code with respect to each Employment Obligation, (ii) except for PBGC premiums, all of which that are due have been paid, neither Roberts nor any of its Subsidiaries has material liability under Title IV of ERISA, (iii) neither Roberts nor any of its Subsidiaries has engaged in a prohibited transaction or breach of fiduciary duty that would subject it to a material tax imposed under Section 4975 of the Code or material liability pursuant to Section 409 or 502 of ERISA, (iv) neither Roberts nor any of its Subsidiaries has been a party to or contributed to any "multiemployer plan" as defined in Section 4001(a) of ERISA, (v) no pension plan covering any present or former officers, directors or employees of Roberts or any of its Subsidiaries is or has been subject to Title IV of ERISA, (vi) except for liability for contributions and benefits pursuant to the Employment Obligations, neither Roberts nor any of its Subsidiaries has incurred any material liability under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans and (vii) except claims for benefits payable in the normal operation of such Employment Obligations, there are no investigations by any governmental agency, termination proceedings or other claims, suits or proceedings against or involving any such Employment Obligation or asserting any rights to or claims for benefits under any such Employment Obligation. In respect of any Employment Obligations benefiting Roberts UK employees, (i) the only benefits provided are defined contribution benefits and no promise, assurance or undertaking has been given to any of the employees (whether legally binding or not) as to the provision of retirement, death or disability benefits at a particular level, (ii) there are not in respect of any retirement benefits scheme or the benefits under it any actions, suits or claims pending or threatened (other than routine claims or benefits) against the trustees or administrators of that scheme or against Shire. Each Employment Obligation of Roberts and its Subsidiaries (if any) that is intended to be a tax-qualified plan has been the subject of a determination letter from the Internal Revenue Service to the effect that such Employment Obligation and each related trust is qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), as applicable, respectively, of the Code, no such determination letter has been revoked, and revocation has not been threatened and no event has occurred and no circumstances exist that would reasonably be expected to adversely affect the tax qualification of such Employment Obligation. Each of the Employment Obligations with respect to employees or former employees employed by Roberts or any of its Subsidiaries outside of the United States are in compliance in all material respects with all applicable law (including, where applicable, Article 141 of the Treaty of Rome) and, to the extent not mandated by the laws of the applicable jurisdiction, copies of the applicable written plan document have been made available to Shire. (r) Labor Relations. (i) There is no unfair labor practice complaint pending against Roberts or any of its Subsidiaries or, to the knowledge of Roberts, threatened against them, before the National Labor Relations Board or any other U.S. or non-U.S. governmental or regulatory authority, and, to the knowledge of Roberts, no grievance or arbitration proceeding arising out of or under any of their Employment Obligations is so pending against Roberts or any of its Subsidiaries or threatened against A-14 them; (ii) to the knowledge of Roberts, there is no basis for an unfair labor practice finding against Roberts or any of its Subsidiaries; (iii) no strike, labor dispute, slowdown or stoppage is pending or, to the knowledge of Roberts, threatened against Roberts or any of its Subsidiaries; and (iv) no union has ever represented any employee of Roberts or any of its Subsidiaries. (s) Intellectual Property Rights. (i) Section 3.1(s) of the Roberts Disclosure Schedule sets forth a complete and accurate list (including registration numbers and dates of filing, renewal and termination, where applicable, for each jurisdiction where filed) of all patents, patent applications, trademarks, trademark registrations and applications, copyrights, copyright applications, service marks, service mark registrations and applications and trade names (whether or not registered or registrable) ("Intellectual Property") owned by Roberts or any of its Subsidiaries which is material to Roberts and its Subsidiaries, taken as a whole ("Roberts Intellectual Property"), including any Liens thereon, the name of the holder of any such Lien and the amount and nature of any obligation secured by any such Lien. All Roberts Intellectual Property is owned by Roberts or its Subsidiaries free and clear of all Liens, no Roberts Intellectual Property has been canceled, abandoned or otherwise terminated and all patent applications, trademark applications and copyright applications included in Roberts Intellectual Property have been duly filed and are recorded on the public record in the name of Roberts or one of its Subsidiaries and all renewal fees have been duly paid other than where such action would not have a Roberts Material Adverse Effect. Neither Roberts nor any of its Subsidiaries has granted any license or other rights with respect to any Roberts Intellectual Property to any other person or entity. (ii) Roberts has no knowledge that any of its or its Subsidiaries' granted patents are invalid; to the knowledge of Roberts, no Roberts Intellectual Property is being infringed by any third party in any material respect; and, to the knowledge of Roberts, its current operations do not infringe a granted patent of a third party in any material respect. (iii) Neither Roberts nor any of its Subsidiaries has any license or other rights with respect to any Intellectual Property owned by any other person or entity. (iv) All technology, processes, techniques and methods of manufacture used in or necessary to the manufacturing or research operations of Roberts and its Subsidiaries, except to the extent the same are in the public domain, are subject to valid and effective confidentiality agreements between Roberts and its employees, have been memorialized to the extent required by good manufacturing practice and, to the knowledge of Roberts, are the subject of no claim, whether or not asserted, that their use or employment by Roberts or any of its Subsidiaries violates the rights of any person. (t) Insurance. Section 3.1(t) of the Roberts Disclosure Schedule sets forth (i) a complete and accurate list of all policies of insurance of Roberts and its Subsidiaries currently in force, including surety bonds or other credit support therefor (the "Roberts Insurance Policies"), the current annual premiums for each Roberts Insurance Policy, the types of risk covered and limits of coverage and (ii) a description of claims experience of Roberts (x) in the twelve months immediately preceding the date hereof with respect to all matters and (y) since its incorporation with respect to product liability matters, matters arising by reason of clinical trials, environmental matters and workmen's compensation. All Roberts Insurance Policies are in full force and effect and all premiums due thereon have been paid. Roberts has complied in all material respects with the terms and provisions of the Roberts Insurance Policies. Roberts has never applied for and been refused or denied any policy of insurance with respect to product liability matters, matters arising by reason of clinical trials, environmental matters and workmen's compensation. Roberts' insurance coverage is adequate in kind and amount based on current industry practice. (u) Books and Records. (i) The books of account and other financial records of Roberts and its Subsidiaries that have been made available to Shire prior to the date hereof or are made available thereafter are or will be true, complete and correct in all material respects and do not and will not contain any omissions which, in light of the circumstances in which they are made, are materially misleading. (ii) The minute books and other records of Roberts and its Subsidiaries that have been made available to Shire prior to the date hereof or are made available thereafter contain records of all meetings A-15 of Roberts and its Subsidiaries prior to the date hereof and prior to the Effective Time, respectively, are or will be accurate in all material respects and reflect accurately in all material respects all other corporate action of the shareholders and directors and any committees of the Board of Directors of Roberts and its Subsidiaries. (v) Undisclosed Liabilities. Except as set forth in the Filed SEC Documents and except for liabilities and obligations incurred in the ordinary course of business consistent with past practice and U.S. GAAP, neither Roberts nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by US GAAP to be set forth on a consolidated balance sheet of Roberts and its consolidated Subsidiaries or in the notes thereto and which, individually or in the aggregate, could reasonably be expected to have a Roberts Material Adverse Effect. (w) FDA, DEA Matters. Section 3.1(w) of the Roberts Disclosure Schedule sets forth a complete and accurate list of (i) each investigational new drug filing made by Roberts or any of its Subsidiaries with the U.S. Food and Drug Administration (the "FDA") or any non-U.S. equivalent (including, without limitation, the U.K. Medicines Control Agency (the "MCA") and Health Protection Branch of the Ministry of Health of Canada), (ii) each clinical trial protocol submitted by Roberts or any of its Subsidiaries to the FDA or any non-U.S. equivalents, (iii) each new drug application and abbreviated or supplemental new drug application filed by Roberts or any of its Subsidiaries pursuant to the Federal Food, Drug and Cosmetic Act, as amended, or any non-U.S. equivalents, (iv) each product license application filed by Roberts or any of its Subsidiaries pursuant to the Public Health Service Act, as amended, or any non-U.S. equivalents and (v) each establishment license application filed with respect to any product of Roberts or any of its Subsidiaries under the Public Health Service Act, as amended, or any non-U.S. equivalents. (i) There are no lawsuits, arbitrations, legal or administrative or regulatory proceedings, charges, complaints or investigations by the FDA, the U.S. Drug Enforcement Agency (the "DEA"), the U.S. Department of Justice (the "DOJ") or any state or non-U.S. regulatory agency pending or, to the best knowledge of Roberts, threatened against or relating to Roberts, any of its Subsidiaries or any of their products, (ii) there have been no product recalls or similar actions by Roberts or any of its Subsidiaries, (iii) each clinical trial with respect to products of Roberts and its Subsidiaries has been conducted in accordance with its clinical trial protocol and applicable regulations and Roberts or one of its Subsidiaries has filed all required notices (and made available to Shire copies thereof) of adverse drug experiences, injuries or deaths relating to clinical trials of such products, and Roberts or one of its Subsidiaries has filed all required notices of any such occurrence, (iv) to the best knowledge of Roberts, all clinical trials have been and are being conducted in substantial compliance with all applicable good clinical practice regulations, (v) neither Roberts nor any of its Subsidiaries nor, to the best knowledge of Roberts, any of their respective officers, employees or agents has made an untrue statement of material fact or fraudulent statement to the FDA, the MCA, the DEA or other regulatory agencies, failed to disclose a material fact required to be disclosed to any of them or committed an act, made a statement or failed to make a statement that could reasonably be expected to provide a basis for any of them to invoke the policy respecting "Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities" set forth in 56 Fed. Reg. 46191 (September 10, 1991) or equivalent regulations, (vi) there are no unresolved reports, warning letters or other documents received from or issued by the FDA, the MCA, the DEA or other regulating agencies that indicate or suggest material lack of compliance with applicable regulatory requirements by Roberts, any of its Subsidiaries or persons providing services for the benefit of any of them, (vii) to the best knowledge of Roberts, no person has filed a claim for loss or potential loss under any indemnity covering participants in clinical trials of products of Roberts and its Subsidiaries, (viii) to Roberts' knowledge, no material modifications to the process by which products of Roberts or any of its Subsidiaries that have been or are being used in clinical trials are manufactured will be necessary in order to manufacture commercial quantities of such products, (ix) as to each drug of Roberts or any of its Subsidiaries for which a new drug application or abbreviated new drug application has been approved by the FDA or other regulating agencies, the applicant and all persons performing operations covered by the A-16 application are in substantial compliance with 21 U.S.C. Section 355 or 357, 21 C.F.R. Part 314 or 430 et seq. (or non-U.S. equivalents), respectively, and all terms and conditions of the application, (x) Roberts and its Subsidiaries are in compliance with all applicable registration and listing requirements set forth in 21 U.S.C. Section 360 and 21 C.F.R. Part 207 and, to the extent required, Roberts or one of its Subsidiaries has obtained licenses from the DEA and is in compliance with all such licenses and all applicable regulations promulgated by the DEA, (xi) all manufacturing operations conducted by or, to the knowledge of Roberts, for the benefit of Roberts and its Subsidiaries have been and are being conducted in compliance with applicable good manufacturing practice regulations including those set forth in 21 C.F.R. Parts 210 and 211, (xii) neither Roberts nor any of its Subsidiaries has received any written notice that the FDA, the MCA, the DEA or other regulating agencies has commenced, or threatened to initiate, any action to withdraw its approval or request the recall of any product of Roberts or its Subsidiaries or withdraw advertising or sales promotion materials or commenced, or threatened to initiate, any action to enjoin production at any facility owned or used by Roberts or any of its Subsidiaries or any of their manufacturing locations, (xiii) as to each article of drug or consumer product currently manufactured and/or distributed by or on behalf of Roberts or its Subsidiaries, such article is not adulterated or misbranded within the meaning of the FDCA, 21 U.S.C. Sections 301 et seq., and all advertising and sales promotional materials of Roberts or its Subsidiaries are otherwise in conformance with applicable regulations and (xiv) neither Roberts nor any of its Subsidiaries nor, to the knowledge of Roberts, any of their respective officers, employees, agents or affiliates has been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. Section 335(a) or authorized by 21 U.S.C. Section 335a(b). To the knowledge of Roberts, Roberts' contractors are in compliance with all applicable law and regulations and in respect of the FDA and DEA have secured all licenses, renewals and quotas necessary to their operation. Roberts has made available to Shire copies of all written communications to or from the FDA and the DEA relating specifically to Roberts, its Subsidiaries and their respective operations or business. (x) Environmental Matters. (i) Each of Roberts and its Subsidiaries possesses all Environmental Permits required under applicable Environmental Laws to conduct its business as currently conducted and to own and operate its assets, and is in compliance in all material respects with the terms and conditions of such Environmental Permits. (ii) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not affect the validity or require the transfer of any Environmental Permits held by Roberts or its Subsidiaries, and will not require any notification, disclosure, registration, reporting, filing, investigation or remediation under any Environmental Law. (iii) Each of Roberts and its Subsidiaries is in compliance in all material respects with all applicable Environmental Laws and has no material liability under any Environmental Law. (iv) There is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, proceeding, notice or demand letter, or request for information pending or, to the knowledge of Roberts threatened, under any Environmental Law (x) against Roberts or its Subsidiaries or (y) to the knowledge of Roberts against any person or entity in connection with which liability could reasonably be expected to be imputed or attributed by law or contract to Roberts or its Subsidiaries. (v) No property or facility presently or formerly owned, leased or operated by Roberts or its Subsidiaries, and no property or facility at which Hazardous Materials of Roberts or its Subsidiaries have been stored, treated or disposed of or at which any Hazardous Materials have been manufactured, handled, tested, formulated, prepared, encapsulated, packaged, bottled or stored for Roberts or its Subsidiaries ("Roberts Product Sites") is listed or proposed for listing on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System, both promulgated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or on any comparable list established under any Environmental Law. A-17 (vi) There has been no disposal, spill, discharge, emission or release of any Hazardous Material by Roberts or its Subsidiaries on, at, under or from any property presently or formerly owned, leased or operated by Roberts or its Subsidiaries and there are no Hazardous Materials located in, at, on or under any such facility or property, or, to the knowledge of Roberts, at any Roberts Product Site or other location where Hazardous Materials of Roberts or any of its Subsidiaries have been stored, treated or disposed of (a "Roberts Third Party Site"), in each case that could reasonably be expected to result in the incurrence of any material liability, by Roberts or its Subsidiaries under any Environmental Law. (vii) There are no underground storage tanks or other underground storage receptacles or related piping, or any impoundments containing Hazardous Materials located on any facility or property owned, leased or operated by Roberts or any of its Subsidiaries. (viii) No Lien has been recorded against any properties, assets or facilities owned, leased or operated by Roberts or any of its Subsidiaries under any Environmental Law. (ix) Neither Roberts nor any of its Subsidiaries is obligated to perform any investigation or other action under any Environmental Law pursuant to any order, decree, judgment or agreement by which it is bound, or has assumed by contract or agreement any obligation or liability under any Environmental Law. Roberts has made available to Shire all material records and files, including, but not limited to, all assessments, reports, studies, audits, analyses, tests and data, in possession, custody or control of Roberts or its Subsidiaries concerning compliance by Roberts and its Subsidiaries with, or liability under, any Environmental Law, including, without limitation, those concerning the existence of Hazardous Materials at facilities or properties currently or formerly owned, operated or leased by Roberts or its Subsidiaries or at any Roberts Product Site or Roberts Third Party Site. (y) Products. Each of the products produced or sold by Roberts and its Subsidiaries: (i) is, and at all times up to and including the date hereof has been, in compliance in all material respects with all applicable federal, state, local and non-U.S. laws and regulations; (ii) is, and at all relevant times has been, fit for the ordinary purposes for which it is intended to be used and conforms in all material respects to any promises or affirmations of fact made on the container, label or promotional materials for such product or in connection with its sale; and (iii) contains no design or manufacturing defect. Neither Roberts nor any of its Subsidiaries has received notice of any product warranty claims. Neither Roberts nor any of its Subsidiaries is aware of any facts which are reasonably likely to cause (i) the withdrawal or recall of any product sold or intended to be sold by Roberts or its Subsidiaries, (ii) a change in the marketing classification, labeling or promotional materials of any such products, or (iii) a termination or suspension of marketing of any such products. There are no material claims pending or, to the knowledge of Roberts, threatened against Roberts or its Subsidiaries with respect to the quality of or absence of defects in such products nor are there any facts known to Roberts relating to the quality of or absence of defects in such products which, if known by a potential claimant or governmental authority, could reasonably be expected to give rise to a claim or proceeding. To the knowledge of Roberts, no supplier of a raw material required for the manufacture of a material product of Roberts and its Subsidiaries for which there is not a permissible replacement obtainable under commercially reasonable terms has indicated that it will not continue to supply such raw material on terms consistent with those on the date hereof. (z) Marketing Practices. Roberts' operations and commercial conduct and those of its Subsidiaries have at all times conformed in all material respects to the Code of Marketing Practices of the Pharmaceutical Research Industry Association. (aa) Affiliates. Roberts has delivered to Shire a letter identifying all persons who, as of the date hereof, may be deemed to be affiliates of Roberts for purposes of Rule 145 under the Securities Act ("Affiliates") and the written agreement of each such person in the form of Exhibit 3 hereto. A-18 (bb) Pooling. Neither Roberts nor any of its Affiliates has taken or agreed to take any action or failed to take any action that would prevent the Merger from being treated for financial accounting purposes as a "pooling of interests" in accordance with US GAAP and the regulations and interpretations of the SEC. (cc) Business Combination. Neither the execution and delivery of this Agreement, the Option Agreement, the Shareholder Agreements nor the consummation of the transactions contemplated hereby or thereby, as the case may be, will (i) violate the Shareholder Protection Act or (ii) cause, directly or indirectly, a Triggering Event, as that term is defined in the Rights Agreement. 3.2. Representations and Warranties of Shire. Shire represents and warrants to Roberts that, except (A) as set forth in the Shire Disclosure Schedule delivered by Shire to Roberts at or prior to the execution of this Agreement (the "Shire Disclosure Schedule") (each section of which qualifies the correspondingly numbered representation and warranty), and (B) with respect to paragraphs (j), (m), (o), (p), (q), (r), (t), (w), (x) and (y) of this Section 3.2, as does not have, or could not reasonably be expected to have, individually or in the aggregate, a Shire Material Adverse Effect, the following is true and correct: (a) Organization; Standing and Power. Shire is a corporation duly organized and validly existing under the laws of the United Kingdom. Shire has all requisite corporate power and authority to own, lease and operate its assets and to carry on its business as now being conducted. Shire is duly qualified as a foreign corporation to do business in each jurisdiction where the character of its assets owned or leased or the nature of its activities makes such qualification necessary (such jurisdictions being specified in Section 3.2(a) of the Shire Disclosure Schedule) except where the failure to be so qualified would not have a Shire Material Adverse Effect. Copies of the Memorandum and Articles of Association of Shire as in effect on the date hereof have been previously delivered to Roberts. Acquisition Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey. Acquisition Sub has not conducted any activities other than in connection with its organization, the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby. (b) Subsidiaries and Investments. Section 3.2(b) of the Shire Disclosure Schedule lists each Subsidiary of Shire. Each such Subsidiary is a corporation duly organized, validly existing and (in applicable jurisdictions) in good standing under the laws of its jurisdiction of incorporation. Each such Subsidiary has all requisite corporate power and authority to own, lease and operate its assets and to carry on its business as now being conducted. All such Subsidiaries are duly qualified as foreign corporations to do business, and (in applicable jurisdictions) are in good standing, in each jurisdiction where the character of their respective assets owned or leased or the nature of their respective activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not have a Shire Material Adverse Effect. All the outstanding shares of capital stock of each such Subsidiary have been validly issued and are fully paid (and in applicable jurisdictions, nonassessable) and are owned by Shire, by another Subsidiary of Shire or by Shire and another such Subsidiary, free and clear of all Liens, other than Liens which (individually or in the aggregate) would not have a Shire Material Adverse Effect. Except for the capital stock of its Subsidiaries, Shire does not own any stock, partnership or other equity interest in, or any debt or equity securities of, any person or entity. (c) Capitalization. The authorized share capital of Shire as of the date of this Agreement is (Pounds)10,000,000 divided into 200,000,000 Ordinary Shares. At the close of business on July 20, 1999 (i) 143,509,230 Ordinary Shares were issued and (ii) the board of directors of Shire were generally and unconditionally authorized to allot relevant securities up to a nominal amount of (Pounds)2,361,070 and no other share capital was issued or reserved for issuance. All such Ordinary Shares of Shire are, and all Ordinary Shares reserved for issuance will be, when issued, duly authorized, validly issued and fully paid and not subject to preemptive rights other than as required by law or the LSE rules. The Ordinary Shares to be issued in the Merger will not be subject to preemption from existing shareholders of Shire. Except as set forth above, as of the date of this Agreement, there are not any Equity Equivalents of any of Shire or any A-19 of its Subsidiaries (including, without limitation, any option, warrant, right to subscribe, call or commitment of any kind or character whatsoever requiring the issuance, sale or transfer by Shire or any of its Subsidiaries of any shares of their capital stock or any securities convertible into or exchangeable or exercisable for such capital stock). As of the date of this Agreement, there are not any outstanding contractual obligations of Shire or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Shire or any of its Subsidiaries. There are no outstanding SARs with respect to Shire. Shire has delivered to Roberts a complete list of all outstanding indebtedness of Shire and its Subsidiaries. (d) Authority. Each of Shire and Acquisition Sub has the requisite corporate power and authority to execute and deliver this Agreement and, subject to Shire Shareholder Approval (as defined below), to perform its respective obligations hereunder. The execution and delivery of this Agreement by each of Shire and Acquisition Sub and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors, or a duly authorized committee thereof, of each of Shire and Acquisition Sub. No other corporate proceedings on the part of Shire (other than the approval of this Agreement and the transactions contemplated hereby by the holders of not less than a majority of the Ordinary Shares present and voting or on a poll (the "Shire Shareholder Approval")) or Acquisition Sub are necessary to authorize the performance of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Shire and Acquisition Sub, and constitutes a valid and binding obligation of each of Shire and Acquisition Sub, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. (e) Noncontravention. Neither the execution and delivery of this Agreement by Shire or Acquisition Sub nor the consummation of the transactions contemplated hereby nor compliance by Shire or Acquisition Sub with any of the provisions hereof will (i) violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, could constitute a default) under, or result in the termination, modification or suspension of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien upon, right to acquire or obligation to dispose of any of the properties, assets or rights of Shire or any of its Subsidiaries under, any of the terms, conditions or provisions of (x) the Memorandum and Articles of Association of Shire or equivalent charter documents of any of its Subsidiaries or (y) any note, bond, mortgage, credit agreement, indenture, deed of trust, license, Permit, authorization, lease, agreement or instrument or obligation to which Shire or any of its Subsidiaries is party or by which they are bound or to which they or any of their assets may be subject, or (ii) violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Shire or any of its Subsidiaries, their operations or any of their assets, except for such violations, conflicts or breaches referred to in clauses (i)(y) and (ii) which would not, individually or in the aggregate, have a Shire Material Adverse Effect. (f) Government Approval; Consents. No consents and approvals are required to be obtained by Shire or Acquisition Sub from non-governmental third parties ("Shire Third Party Approvals") in order to lawfully and contractually permit it to perform its obligations under this Agreement and consummate the transactions contemplated hereby. No notice to, filing with, or authorization, consent or approval of, any U.K. or non-U.K. public body or authority is necessary for the execution, delivery or performance of this Agreement by Shire or Acquisition Sub or the consummation of the transactions contemplated hereby ("Shire Governmental Approvals"). (g) Reports and Financial Statements. (i) Shire has delivered to Roberts (A) its annual report for its fiscal year ended December 31, 1998, (B) all documents distributed to Shire's shareholders relating to meetings of the shareholders of Shire since January 1, 1998, and (C) all of its other reports and statements distributed to Shire shareholders together with copies of all prospectuses and listing particulars issued by Shire or any of its Subsidiaries since January 1, 1998 (the "Shire Documents"). As of the date of its distribution to shareholders, each such report or statement distributed to shareholders did not contain any A-20 untrue statement of material fact or omit a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The audited consolidated financial statements of Shire included in the Shire Documents were prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP") (except in the case of unaudited statements) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), and present a true and fair view of the consolidated financial position of Shire and its consolidated Subsidiaries as of the dates of approval of such financial statements by the board of directors of Shire and the consolidated results of their operations and cash flows for the periods set forth therein. (h) Information Supplied. None of the information supplied or to be supplied by Shire for inclusion or incorporation by reference in (i) the Form F-4 will, at the time the Form F-4 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the UK Disclosure Documents will, on the date the UK Disclosure Documents are first mailed to the shareholders of Shire, or at the time of the Shire shareholders meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading or (iii) the Proxy Statement will, at the date it is first mailed to Roberts shareholders or at the time of the Roberts Shareholders Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The UK Disclosure Documents will contain all particulars relating to Shire and Roberts required to comply in all material respects with all United Kingdom statutory and other legal provisions (including, without limitation, the Companies Act, the FSA and the rules and regulations made thereunder and the rules and requirements of the LSE) and all such information contained in such documents will be substantially in accordance with the facts and will not omit anything material likely to affect the import of such information. The Form F-4 will comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations thereunder, except that no representation is made by Shire with respect to statements made or incorporated by reference therein based on information supplied by Roberts. (i) Absence of Certain Changes or Events. Except as disclosed in the Shire Documents filed and publicly available, or as disclosed in announcements made by Shire in compliance with the continuing obligations of the LSE prior to the date of this Agreement (the "Public UK Documents"), since December 31, 1998 there has not been (i) any material adverse change in the business, assets, financial condition or results of operations of Shire and its Subsidiaries, taken as a whole, (ii) any destruction or loss of (whether or not covered by insurance) any property, asset or right that has had or is likely to have a Shire Material Adverse Effect, (iii) any authorization or issuance by Shire of any of its capital stock or the issuance of any debt security or other evidence of Indebtedness of Shire or any of its Subsidiaries, (iv) any redemption or other acquisition by Shire of any of its capital stock or by Shire or any of its Subsidiaries of any debt securities or other evidences of Indebtedness, or any payment made with respect to any of the foregoing (other than any regular, periodic payment of interest made with respect to a debt security or other evidence of Indebtedness), (v) any declaration, setting aside or payment of any dividend or other distribution or payment (whether in cash, capital stock or otherwise) in respect of any capital stock of Shire, (vi) any disposal or lapse of any Shire Intellectual Property or Shire Intellectual Property License, (vii) any Lien (other than a Permitted Lien) incurred on any material property, assets or rights of Shire or any of its Subsidiaries, (viii) any incurrence by Shire or any of its Subsidiaries of any liability which has had or is likely to have a Shire Material Adverse Effect, (ix) any incurrence of Indebtedness or any guarantee by Shire or any of its Subsidiaries of any liability of any other person or entity outside of the ordinary course of business, (x) to the knowledge of Shire, any development with respect to regulatory approval of any products of Shire or any of its Subsidiaries which has had or is likely to have a Shire Material Adverse Effect, (xi) to the knowledge of Shire, any development with respect to relationships with any contract A-21 manufacturer or contract research organization with which Shire or any of its Subsidiaries has a business relationship which has had or is likely to have a Shire Material Adverse Effect or (xii) any change in Shire's Tax accounting methods, any new election made with respect to Taxes, any modification or revocation of any existing election made with respect to Taxes, or any settlement or other disposition of any Tax matter. (j) Compliance with Law. Neither Shire nor any of its Subsidiaries is in violation or non-compliance in any material respect with any statute, law, ordinance, regulation, rule, order or other legal requirement of any government, authority or any other governmental department or agency applicable to its business or operations, or any judgment, decree or order of any court to which it is a party. (k) Affiliate Arrangements. Neither Shire nor any of its Subsidiaries is a party to any contract, agreement, arrangement, understanding or other commitment with any director, officer or securityholder of Shire or any of its Subsidiaries or, to the knowledge of Shire, any person or entity controlled by any such person. (l) Transaction Fees. Shire has not retained any broker, finder, financial adviser, investment banker or other person or entity which is entitled to any brokerage, finder's or similar fee or commission in connection with this Agreement or the transactions contemplated hereby. (m) Litigation. There is no claim, action, suit or proceeding pending or, to the knowledge of Shire, threatened against Shire or any of its Subsidiaries or any of their respective properties, assets or rights before any court or governmental or regulatory authority or body. (n) Taxes and Tax Returns. (i) Shire has duly and timely filed all U.K. and non-U.K. Tax Returns required to be filed by it and its Subsidiaries, and each such Tax Return is complete and accurate in all material respects, (ii) Shire has timely paid all Taxes due and payable by it and its Subsidiaries and has made adequate provision (through a current accrual on its most recent financial statements) for any Taxes that are not yet due and payable and (iii) Shire has withheld and paid in a timely manner all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, including amounts of or the value of awards and prizes paid to Shire's employees. Any deficiencies or assessments asserted in writing by any taxing authority have been paid or fully settled and no issue raised by any such taxing authority reasonably could be expected to result in a proposed deficiency for any prior, parallel or subsequent period (including periods subsequent to the Effective Time). There are no claims or assessments pending (or, to the best knowledge of Shire, threatened) against Shire or any of its Subsidiaries for any alleged U.K. or non-U.K. Tax deficiency and no issue has been raised in writing by any U.K. or non-U.K. taxing authority or representative thereof. No claim has ever been made by an authority in a jurisdiction where Shire does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Section 3.2(n) of the Shire Disclosure Schedule lists all U.K. and non-U.K. jurisdictions in which Shire files Tax Returns, and indicates those Tax Returns that have been audited and those that currently are the subject of audit. Shire has not consented to an extension of the statute of limitations with respect to any Tax period. Shire is not a party to any Tax allocation or sharing agreement. Shire (i) has never been a member of any combined, consolidated, affiliated or unitary group for any U.K. or non-U.K. Tax purposes and (ii) has no liability for the Taxes of any person as a transferee or successor, by contract, or otherwise. Shire has never requested a ruling from, or entered into a closing agreement with any taxing authority. Shire has previously delivered to Roberts true and complete copies of (i) all U.K. and non-U.K. income or franchise Tax Returns for each of the last three taxable years ending prior to the date of this Agreement (except for those Tax Returns that have not yet been filed) and (ii) any audit reports issued within the last three years by any taxing authority. (o) Real Property. Section 3.2(o) of the Shire Disclosure Schedule sets forth a complete and accurate list of all material real property owned or leased by Shire or any of its Subsidiaries, including (i) with respect to owned real property, the date of its acquisition, any Liens on or with respect to such real A-22 property (other than Permitted Liens), the name of the holder of any such Lien and the amount and nature of any obligation secured by any such Lien and (ii) with respect to leased real property, the name of the lessor of such real property, a list of all instruments and documents governing the terms of such leasehold interest, any Lien on or with respect to such leasehold interest (other than Permitted Liens), the name of the holder of any such Lien and the amount and nature of any obligation secured by any such Lien. Shire is not a lessor with respect to any material real property owned by it or any of its Subsidiaries and has not granted any sublease of any leasehold interest in any material real property leased by it or any of its Subsidiaries. With respect to such material real property, (i) there are no eminent domain proceedings pending or threatened against it, (ii) such properties and the improvements thereon (including the roof and structural portions of each building) are in good operating order and condition, subject to ordinary wear and tear, and (iii) the use thereof does not violate any zoning or similar land use laws or other government regulations other than such violations which, individually or in the aggregate, would not adversely affect the ability of Shire and its Subsidiaries to use, operate or occupy any of such properties following the Effective Time. The real property owned or leased by Shire and its Subsidiaries is sufficient for the conduct of their business. (p) Licenses, Permits and Authorizations. Section 3.2(p) of the Shire Disclosure Schedule sets forth a complete and accurate list of all material Permits held by or on behalf of Shire and its Subsidiaries, including (i) the agency or body issuing such Permit, (ii) the person or entity to whom such Permit was issued and (iii) the date such Permit expires or is required to be renewed. Each such Permit is, to the knowledge of Shire, in full force and effect and Shire, or the person or entity who holds such Permit on Shire's behalf, is in compliance in all material respects with all of its obligations with respect thereto, and, to the knowledge of Shire, no event has occurred or condition exists which permits or, upon the giving of notice or lapse of time or both, would permit revocation, nonrenewal, modification, suspension or termination of any such Permit. (q) ERISA and Employee Matters. Section 3.2(q) of the Shire Disclosure Schedule sets forth a complete and accurate list of all employment and consultancy agreements, all employee benefit plans (within the meaning of Section 3(3) of ERISA) or retirement benefits scheme (within the meaning of Section 611 of the Income and Corporation Taxes Act 1988) and all other written plans, arrangements or policies relating to stock options, stock purchases, compensation, deferred compensation, supplemental retirement arrangements, other incentive programs, severance, fringe benefits or other employee benefits (collectively "Shire Employment Obligations") covering all present and former officers, directors, employees, consultants and agents of Shire and its Subsidiaries and any of their spouses or dependents. Shire has made available to Roberts true, complete and correct copies of (i) each Shire Employment Obligation, (ii) the most recent annual report on Form 5500 as filed with the Internal Revenue Service with respect to each applicable Shire Employment Obligation, (iii) the most recent summary plan description (or similar document) with respect to each applicable Shire Employment Obligation, (iv) each trust agreement and insurance or annuity contract relating to any Shire Employment Obligation and (v) the most recent actuarial valuation report for each applicable Shire Employment Obligation. With respect to all Shire Employment Obligations benefiting Shire's U.S. employees, (i) Shire and its Subsidiaries are in compliance in all material respects with all applicable provisions of ERISA and the Code with respect to each Shire Employment Obligation, (ii) except for PBGC premiums, all of which that are due have been paid, neither Shire nor any of its Subsidiaries has any material liability under Title IV of ERISA, (iii) neither Shire nor any of its Subsidiaries has engaged in a prohibited transaction or breach of fiduciary duty that would subject it to a material tax imposed under Section 4975 of the Code or material liability pursuant to Section 409 or 502 of ERISA, (iv) neither Shire nor any of its Subsidiaries has been a party to or contributed to any "multiemployer plan" as defined in Section 4001(a) of ERISA, (v) no pension plan covering any present or former officers, directors or employees of Shire or any of its Subsidiaries is or has been subject to Title IV of ERISA, (vi) except for liability for contributions and benefits pursuant to such Shire Employment Obligations, neither Shire nor any of its Subsidiaries has incurred any material liability under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability A-23 provisions of the Code relating to employee benefit plans and (vii) except claims for benefits payable in the normal operation of such Shire Employment Obligations, there are no investigations by any governmental agency, termination proceedings or other claims, suits or proceedings against or involving any such Shire Employment Obligation or asserting any rights to or claims for benefits under any such Shire Employment Obligation. In respect of any Shire Employment Obligations benefiting Shire UK employees, (i) the only benefits provided are defined contribution benefits and no promise, assurance or undertaking has been given to any of the employees (whether legally binding or not) as to the provision of retirement, death or disability benefits at a particular level and (ii) there are not in respect of any retirement benefits scheme or the benefits under it any actions, suits or claims pending or threatened (other than routine claims or benefits) against the trustees or administrators of that scheme or against Shire. Each Shire Employment Obligation of Shire and its Subsidiaries (if any) that is intended to be a tax-qualified plan has been the subject of a determination letter from the Internal Revenue Service to the effect that such Shire Employment Obligation and each related trust is qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), as applicable, respectively, of the Code, no such determination letter has been revoked, and revocation has not been threatened and no event has occurred and no circumstances exist that would reasonably be expected to adversely affect the tax qualification of such Shire Employment Obligation. Each of the Shire Employment Obligations with respect to employees or former employees employed by Shire or any of its Subsidiaries outside of the United States are in compliance in all material respects with all applicable law (including, where applicable, Article 141 of the Treaty of Rome) and, to the extent the benefits provided thereunder are not mandated by the laws of the applicable jurisdiction, copies of the applicable written plan document have been made available to Roberts. (r) Labor Relations. (i) There is no unfair labor practice complaint pending against Shire or any of its Subsidiaries or, to the knowledge of Shire, threatened against them before the National Labor Relations Board or any other U.S. or non-U.S. governmental or regulatory authority, and, to the knowledge of Shire, no grievance or arbitration proceeding arising out of or under any of their Shire Employment Obligations is so pending against Shire or any of its Subsidiaries or threatened against them; (ii) to the knowledge of Shire, there is no basis for an unfair labor practice finding against Shire or any of its Subsidiaries; (iii) no strike, labor dispute, slowdown or stoppage is pending or, to the knowledge of Shire, threatened against Shire or any of its Subsidiaries; and (iv) no union has ever represented any employee of Shire or any of its Subsidiaries. (s) Intellectual Property Rights. (i) Section 3.2(s)(i) of the Shire Disclosure Schedule sets forth a complete and accurate list (including registration numbers and dates of filing, renewal and termination, where applicable, for each jurisdiction where filed) of all Intellectual Property owned by Shire and its Subsidiaries which is material to Shire and its Subsidiaries, taken as a whole ("Shire Intellectual Property"), including any Liens thereon, the name of the holder of any such Lien and the amount and nature of any obligation secured by any such Lien. All Shire Intellectual Property is owned by Shire or its Subsidiaries free and clear of all Liens, no Shire Intellectual Property has been canceled, abandoned or otherwise terminated and all patent applications, trademark applications and copyright applications included in Shire Intellectual Property have been duly filed and are recorded on the public record in the name of Shire or one of its Subsidiaries and all renewal fees have been duly paid other than where such action would not have a Shire Material Adverse Effect. Neither Shire nor any of its Subsidiaries has granted any license or other rights with respect to any Shire Intellectual Property to any other person or entity. (ii) Shire has no knowledge that any of its or its Subsidiaries' granted patents are invalid; to the knowledge of Shire, no Shire Intellectual Property is being infringed by any third party in any material respect; and, to the knowledge of Shire, its current operations do not infringe a granted patent of a third party in any material respect. A-24 (iii) Neither Shire nor any of its Subsidiaries has any license or other rights with respect to any Intellectual Property owned by any other person or entity. (iv) All technology, processes, techniques and methods of manufacture used in or necessary to the manufacturing or research operations of Shire and its Subsidiaries, except to the extent the same are in the public domain, are subject to valid and effective confidentiality agreements between Shire and its employees, have been memorialized to the extent required by good manufacturing practice and, to the knowledge of Shire, are the subject of no claim, whether or not asserted, that their use or employment by Shire or any of its Subsidiaries violates the rights of any person. (t) Insurance. Section 3.2(t) of the Shire Disclosure Schedule sets forth (i) a complete and accurate list of all policies of insurance of Shire and its Subsidiaries currently in force, including surety bonds or other credit support therefor (the "Shire Insurance Policies"), the current annual premiums for each Shire Insurance Policy, the types of risk covered and limits of coverage and (ii) a description of claims experience of Shire (x) in the twelve months immediately preceding the date hereof with respect to all matters and (y) since its incorporation with respect to product liability matters, matters arising by reason of clinical trials, environmental matters and workmen's compensation. All Shire Insurance Policies are in full force and effect and all premiums due thereon have been paid. Shire has complied in all material respects with the terms and provisions of the Shire Insurance Policies. Shire has never applied for and been refused or denied any policy of insurance with respect to product liability matters, matters arising by reason of clinical trials, environmental matters and workmen's compensation. Shire's insurance coverage is adequate in kind and amount based on current industry practice. (u) Books and Records. (i) The books of account and other financial records of Shire and its Subsidiaries that have been made available to Roberts prior to the date hereof or are made available thereafter are or will be true, complete and correct in all material respects and do not, and will not, contain any omissions which, in light of the circumstances in which they are made, are materially misleading. (ii) The minute books and other records of Shire and its Subsidiaries that have been or will be made available to Roberts contain records of all meetings of Shire and its Subsidiaries prior to the date hereof and prior to the Effective Time, respectively, are or will be accurate in all material respects and reflect accurately in all material respects all other corporate action of the shareholders and directors and any committees of the Board of Directors of Shire and its Subsidiaries. (v) Undisclosed Liabilities. Except as set forth in the Public UK Documents and except for liabilities and obligations incurred in the ordinary course of business consistent with past practice and UK GAAP neither Shire nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by UK GAAP to be set forth on a consolidated balance sheet of Shire and its consolidated Subsidiaries or in the notes thereto and which, individually or in the aggregate, could reasonably be expected to have a Shire Material Adverse Effect. (w) FDA, DEA Matters. Section 3.2(w) of the Shire Disclosure Schedule sets forth a complete and accurate list of (i) each investigational new drug filing made by Shire or any of its Subsidiaries with the FDA or any non-U.S. equivalents (including, without limitation, the MCA), (ii) each clinical trial protocol submitted by Shire or any of its Subsidiaries to the FDA or any non-U.S. equivalents, (iii) each new drug application and abbreviated or supplemental new drug application filed by Shire or any of its Subsidiaries pursuant to the Federal Food, Drug and Cosmetic Act, as amended, or any non-U.S. equivalents (iv) each product license application filed by Shire or any of its Subsidiaries pursuant to the Public Health Service Act, as amended, or any non-U.S. equivalents and (v) each establishment license application filed with respect to any product of Shire or any of its Subsidiaries under the Public Health Service Act, as amended or any non-U.S. equivalents. (i) There are no lawsuits, arbitrations, legal or administrative or regulatory proceedings, charges, complaints or investigations by the FDA, the DEA, the DOJ or any state or non-U.S. regulatory agency pending or, to the best knowledge of Shire, threatened against or relating to Shire, any A-25 of its Subsidiaries or any of their respective products, (ii) there have been no product recalls or similar actions by Shire or any of its Subsidiaries, (iii) each clinical trial with respect to products of Shire and its Subsidiaries has been conducted in accordance with its clinical trial protocol and applicable regulations and Shire or one of its Subsidiaries has filed all required notices (and made available to Roberts copies thereof) of adverse drug experiences, injuries or deaths relating to clinical trials of such products, and Shire or one of its Subsidiaries has filed all required notices of any such occurrence, (iv) to the best knowledge of Shire, all clinical trials have been and are being conducted in substantial compliance with all applicable good clinical practice regulations, (v) neither Shire nor any of its Subsidiaries nor, to the best knowledge of Shire, any of their respective officers, employees or agents has made an untrue statement of material fact or fraudulent statement to the FDA, the MCA, the DEA or other regulatory agencies, failed to disclose a material fact required to be disclosed to any of them or committed an act, made a statement or failed to make a statement that could reasonably be expected to provide a basis for any of them to invoke the policy respecting "Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities" set forth in 56 Fed. Reg. 46191 (September 10, 1991) or equivalent regulations, (vi) there are no unresolved reports, warning letters or other documents received from or issued by the FDA, the MCA, the DEA or other regulatory agencies that indicate or suggest material lack of compliance with FDA or DEA regulatory requirements by Shire, any of its Subsidiaries or persons providing services for the benefit of any of them, (vii) to the best knowledge of Shire, no person has filed a claim for loss or potential loss under any indemnity covering participants in clinical trials of products of Shire and its Subsidiaries, (viii) to Shire's knowledge, no material modifications to the process by which products of Shire or any of its Subsidiaries that have been or are being used in clinical trials are manufactured will be necessary in order to manufacture commercial quantities of such products, (ix) as to each drug of Shire or one of its Subsidiaries for which a new drug application or abbreviated new drug application has been approved by the FDA or other regulatory agencies, the applicant and all persons performing operations covered by the application are in substantial compliance with 21 U.S.C. Section 355 or 357, 21 C.F.R. Part 314 or 430 et seq. (or any non-U.S. equivalents), respectively, and all terms and conditions of the application, (x) Shire and its Subsidiaries are in compliance with all applicable registration and listing requirements set forth in 21 U.S.C. Section 360 and 21 C.F.R. Part 207 and, to the extent required, Shire and its Subsidiaries have obtained licenses from the DEA and are in compliance with all such licenses and all applicable regulations promulgated by the DEA, (xi) all manufacturing operations conducted by or, to the knowledge of Shire, for the benefit of Shire and its Subsidiaries have been and are being conducted in compliance with applicable good manufacturing practice regulations including those set forth in 21 C.F.R. Parts 210 and 211, (xii) neither Shire nor any of its Subsidiaries has received any written notice that the FDA, the MCA, the DEA or other regulatory agencies has commenced, or threatened to initiate, any action to withdraw its approval or request the recall of any product of Shire or its Subsidiaries or withdraw advertising or sales promotion materials or commenced, or threatened to initiate, any action to enjoin production at any facility owned or used by Shire or any of its Subsidiaries or any of their manufacturing locations, (xiii) as to each article of drug or consumer product currently manufactured and/or distributed by or on behalf of Shire or its Subsidiaries, such article is not adulterated or misbranded within the meaning of the FDCA, 21 U.S.C. Sections 301 et seq., and all advertising and sales promotional materials of Shire or its Subsidiaries are otherwise in conformance with applicable regulations and (iv) neither Shire nor any of its Subsidiaries nor, to the knowledge of Shire, any of their respective officers, employees, agents or affiliates has been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. Section 335(a) or authorized by 21 U.S.C. Section 335a(b). To the knowledge of Shire, Shire's contractors are in compliance with all applicable law and regulations and in respect of the FDA and DEA have secured all licenses, renewals and quotas necessary to their operation. Shire has made available to Roberts copies of all written communications to or from the FDA and the DEA relating specifically to Shire, its Subsidiaries and their respective operations or business. (x) Environmental Matters. (i) Each of Shire and its Subsidiaries possesses all Environmental Permits required under applicable Environmental Laws to conduct its business as currently conducted and A-26 to own and operate its assets, and is in compliance in all material respects with the terms and conditions of such Environmental Permits. (ii) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not affect the validity or require the transfer of any Environmental Permits held by Shire or its Subsidiaries, and will not require any notification, disclosure, registration, reporting, filing, investigation or redemption under any Environmental Law. (iii) Each of Shire and its Subsidiaries is in compliance in all material respects with all applicable Environmental Laws and has no material liability under any Environmental Law. (iv) There is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, proceeding, notice or demand letter, or request for information pending or, to the knowledge of Shire threatened, under any Environmental Law (x) against Shire or its Subsidiaries or (y) to the knowledge of Shire against any person or entity in connection with which liability could reasonably be expected to be imputed or attributed by law or contract to Shire or its Subsidiaries. (v) No property or facility presently or formerly owned, leased or operated by Shire or its Subsidiaries, and no property or facility at which Hazardous Materials of Shire or its Subsidiaries have been stored, treated or disposed of or at which any Hazardous Materials have been manufactured, handled, tested, formulated, prepared, encapsulated, packaged, bottled, or stored for Shire or its Subsidiaries ("Shire Product Sites") is listed or proposed for listing on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System, both promulgated under CERCLA, or on any comparable list established under any Environmental Law. (vi) There has been no disposal, spill, discharge, emission or release of any Hazardous Material by Shire or its Subsidiaries on, at, under or from any property presently or formerly owned, leased or operated by Shire or its Subsidiaries and there are no Hazardous Materials located in, at, on or under any such facility or property, or, to the knowledge of Roberts, at any Shire Product Site or other location where Hazardous Materials of Shire or any of its Subsidiaries have been stored, treated or disposed of (a "Shire Third Party Site"), in each case that could reasonably be expected to result in the incurrence of any material liability, by Shire or its Subsidiaries under any Environmental Law. (vii) There are no underground storage tank or other underground storage receptacles or related piping, or any impoundments containing Hazardous Materials located on any facility or property owned, leased or operated by Shire or any of its Subsidiaries. (viii) No Lien has been recorded against any properties, assets or facilities owned, leased or operated by Shire or any of its Subsidiaries under any Environmental Law. (ix) Neither Shire nor any of its Subsidiaries is obligated to perform any investigation or other action under any Environmental Law pursuant to any order, decree, judgment or agreement by which it is bound, or has assumed by contract or agreement any obligation or liability under any Environmental Law. Shire has made available to Roberts all material records and files, including, but not limited to, all assessments, reports, studies, audits, analyses, tests and data, in possession, custody or control of Shire or its Subsidiaries concerning compliance by Shire and its Subsidiaries with, or liability under, any Environmental Law, including, without limitation, those concerning the existence of Hazardous Materials at facilities or properties currently or formerly owned, operated or leased by Shire or its Subsidiaries or at any Shire Product Site or Shire Third Party Site. (y) Products. Each of the products produced or sold by Shire and its Subsidiaries: (i) is, and at all times up to and including the date hereof has been, in compliance in all material respects with all A-27 applicable U.K. and non-U.K. laws and regulations; (ii) is, and at all relevant times has been, fit for the ordinary purposes for which it is intended to be used and conforms in all material respects to any promises or affirmations of fact made on the container, label or promotional materials for such product or in connection with its sale; and (iii) contains no design or manufacturing defect. Neither Shire nor any of its Subsidiaries has received notice of any product warranty claims. Neither Shire nor any of its Subsidiaries is aware of any facts which are reasonably likely to cause (i) the withdrawal or recall of any product sold or intended to be sold by Shire or its Subsidiaries, (ii) a change in the marketing classification, labeling or promotional materials of any such products, or (iii) a termination or suspension of marketing of any such products. There are no material claims pending or, to the knowledge of Shire, threatened against Shire or its Subsidiaries with respect to the quality of or absence of defects in such products nor are there any facts known to Shire relating to the quality of or absence of defects in such products which, if known by a potential claimant or governmental authority, could reasonably be expected to give rise to a claim or proceeding. To the knowledge of Shire, no supplier of a raw material required for a material product of Shire and the Subsidiaries for which there is not a permissible replacement obtainable under commercially reasonable terms, has indicated that it will not continue to supply such raw materials on terms consistent with those on the date hereof. (z) Marketing Practices. Shire's operations and commercial conduct and those of its Subsidiaries have at all times conformed in all material respects to the Code of Marketing Practices of the Pharmaceutical Research Industry Association. (aa) Ordinary Shares. As of the Effective Time, the Ordinary Shares comprising the Merger Consideration (including Ordinary Shares delivered to the Depositary underlying the Shire ADSs constituting Merger Consideration) will have been duly authorized for issuance and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued and fully paid. (bb) Pooling. Neither Shire nor any of its Affiliates has taken or agreed to take any action or failed to take any action that would prevent the Merger from being treated for financial accounting purposes as a "pooling of interests" in accordance with US GAAP and the regulations and interpretations of the SEC. (cc) Merger Consideration. As of the Effective Time, the Shire ADSs and Ordinary Shares received by the Holders as Merger Consideration will represent less than fifty percent of both the total voting power and the total value of the outstanding stock of Shire within the contemplation of Treas. Reg. (S) 1.367(a)-3(c)(1)(i). (dd) Active Trade or Business. Shire, a "qualified subsidiary" (as defined in Treas. Reg. (S) 1.367(a)-3(c)(5)(vii)) of Shire or a "qualified partnership" (as defined in Treas. Reg. (S) 1.367(a)-3(c)(5)(viii)) of which Shire is a partner will, as of the Effective Time, have been engaged in an active trade or business outside the United States for the entire 36- month period immediately before the Effective Time, within the meaning of and as contemplated by Treas. Reg. (S) 1.367(a)-3(c)(3). None of Shire, any qualified subsidiary of Shire or any qualified partnership of which Shire is a partner has, nor will have as of the Effective Time, any intention to dispose of or discontinue any trade or business referred to in the previous sentence if doing so would cause the active trade or business test of Treas. Reg. (S) 1.367(a)-3(c)(3) not to be satisfied. (ee) Asset Acquisitions. As of the Effective Time, none of Shire, any qualified subsidiary of Shire or any qualified partnership of which Shire is a partner (each as defined above in Section 3.2(dd)) will own any assets acquired outside the ordinary course of business within the preceding 36- month period that would cause Shire to fail to satisfy the "substantiality test" set forth in Treas. Reg. (S) 1.367(a)-3(c)(3)(iii). (ff) Ownership of Roberts Shares. Except as contemplated in this Agreement and the Option Agreement as of the date hereof and the Effective Time, none of Shire, any of its Subsidiaries or, to Shire's knowledge, any of its "affiliates" or "associates" (as such terms are defined in the Shareholder A-28 Protection Act), (i) owns, or during the five-year period prior to the date hereof owned, or has any rights to acquire or vote any shares of Common Stock or (ii) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of Common Stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, Common Stock. ARTICLE IV COVENANTS OF ROBERTS 4.1. Regular Course of Business. Except in connection with the performance by Roberts of its obligations under the Agreement, until the Effective Time, Roberts shall conduct its and its Subsidiaries' business only in the ordinary course and shall use reasonable efforts to maintain and preserve its business organization, assets, employees and business relationships and to maintain all of its material properties and assets in useful and good condition, ordinary wear and tear excepted. 4.2. Certain Prohibited Activities. Until the Effective Time, except as contemplated by this Agreement or as set forth on Section 4.2 of the Roberts Disclosure Schedule, Roberts shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Shire: (a) cease to be a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, or in good standing as a foreign corporation in any jurisdiction where the character of its assets or nature of its business makes such qualification necessary; (b) authorize or issue any additional shares of its capital stock, any Equity Equivalents, any debt securities or other evidence of its indebtedness or any SARs; (c) repay any of its Indebtedness prior to scheduled maturity (other than in the ordinary course of business) or redeem or otherwise acquire any of its capital stock or any Equity Equivalents or make any payment with respect to any of the foregoing (other than regular, periodic payments of interest made with respect to any Indebtedness); (d) split, combine or reclassify any of its capital stock or declare, set aside or pay any dividend or other distribution in respect of any of its capital stock; (e) acquire any stock, partnership or other equity interest in or any equity or debt security of any other person or entity; (f) amend its Certificate of Incorporation or By-Laws (or equivalent charter documents); (g) violate or fail to comply in any material respect with any statute, law, ordinance, regulation, rule, order or other legal requirement of any government, authority or any other governmental department or agency, or any judgment, decree or order of any court or governmental body or agency applicable to its business or operations (other than any violations or failures to comply which could not reasonably be expected, individually or in the aggregate, to have a Roberts Material Adverse Effect); (h) enter into any contract, agreement or other commitment with any present or former director, officer or securityholder of Roberts or any person or entity controlled by any such person other than in the ordinary course of business and where the amount involved is not in excess of $500,000; (i) acquire or dispose of any material real property or any material leasehold interest in real property, or create or suffer to exist any Lien on any material assets owned or leased by it; (j) fail to comply in all material respects with all of its obligations with respect to all material Permits or voluntarily take or omit to take any action which could reasonably be expected to result in the revocation, nonrenewal, modification, suspension or termination of any such Permit (other than any violations or failures to comply which could not reasonably be expected, individually or in the aggregate, to have a Roberts Material Adverse Effect); (k) (i) grant to any officer of Roberts or any of its Subsidiaries any increase in compensation, (ii) grant to any employee of Roberts or any of its Subsidiaries any increase in severance or termination pay, (iii) enter into any employment, severance or termination agreement with any employee of Roberts or any of its Subsidiaries or (iv) enter into any Employment Obligation, or permit the modification or termination of any existing Employment Obligation; (l) dispose of, permit to lapse, modify, terminate, grant any interest to any person or entity in, or create or suffer to exist any Lien on or with respect to, any Roberts Intellectual Property; (m) take any action that would cause it to fail to maintain in full force and effect, comply in all material respects with all of the terms and provisions of or pay all premiums due on any Insurance Policy; (n) enter into any material agreement or permit the modification or termination of any material agreement outside the ordinary course of business; (o) merge or consolidate with any other person or entity or acquire control of or purchase all or substantially all of the assets of any other person or entity; (p) voluntarily incur or permit the A-29 incurrence of any liability not in the ordinary course of business and in excess of $1,000,000; (q) adopt a plan of complete or partial liquidation; or (r) undertake any action which would jeopardize accounting for the Merger as a pooling of interests. 4.3. Notice of Certain Events. Roberts will give notice to Shire, promptly after obtaining knowledge thereof, of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. 4.4. Access. Roberts shall afford the officers, employees and representatives of Shire, and its counsel and auditors, reasonable access during normal business hours prior to the Effective Time to its facilities, properties, equipment, files, accounts, books and records so that Shire may have full opportunity to make such investigations as it may desire to make of the affairs of Roberts. Shire will hold, and will cause its respective officers, employees, accountants, counsel, financial advisers and other representatives and affiliates to hold, any confidential information in accordance with the terms of that certain Confidentiality Agreement dated as of June 1, 1999, between Shire and Roberts. 4.5. Approvals. Roberts shall use all reasonable efforts to take or cause to be taken all action, and to do or cause to be done all things reasonably necessary, proper or advisable in order to fulfill and perform its obligations under this Agreement or otherwise consummate and make effective the transactions contemplated hereby. Roberts shall use all commercially reasonable efforts to obtain or cause to be obtained all Roberts Governmental Approvals and Roberts Third Party Approvals. 4.6. No Solicitation. (a) Prior to the Effective Time, Roberts agrees that neither it, any of its Subsidiaries, nor any of their respective directors, officers, employees, agents or representatives of the foregoing, will, directly or indirectly, (i) solicit or initiate (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving Roberts or the acquisition of all or any significant part of the assets or capital stock of Roberts (a "Roberts Acquisition Transaction") or (ii) negotiate, explore or otherwise engage in discussions with any person (other than Shire and its representatives) with respect to any Roberts Acquisition Transaction, or which may reasonably be expected to lead to a proposal for a Roberts Acquisition Transaction or enter into any agreement, arrangement or understanding with respect to any such Roberts Acquisition Transaction or which would require it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement; provided, however, that Roberts may, in response to an unsolicited written proposal from a third party regarding a Roberts Superior Proposal (as hereinafter defined), furnish information to, negotiate or otherwise engage in discussions with such third party, if the Board of Directors of Roberts determines in good faith, after consultation with its financial advisors and based upon advice of outside counsel that such action is required for the Board of Directors to comply with its fiduciary duties under applicable law. (b) Except as may be required pursuant to the fiduciary duties of Roberts' Board of Directors under applicable law, Roberts agrees that, as of the date hereof, it and its Subsidiaries, and the respective directors, officers, employees, agents and representatives of the foregoing, shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any person (other than Shire and its representatives) conducted heretofore with respect to any Roberts Acquisition Transaction. Roberts agrees to promptly advise Shire of any inquiries or proposals received by, any such information requested from, or any negotiations or discussions sought to be initiated or continued with, Roberts or its Subsidiaries, or any of the respective directors, officers, employees, agents or representatives of the foregoing, in each case from a person (other than Shire and its representatives) with respect to a Roberts Acquisition Transaction, and the terms hereof, including the identity of such third party and the general terms of any financing arrangement or commitment in connection with such Roberts Acquisition Transaction, and, except as may otherwise be A-30 required pursuant to the fiduciary duties of Roberts' Board of Directors under applicable law, to update on an ongoing basis or upon Shire's reasonable request, the status thereof, as well as any actions taken or other developments pursuant to this Section 4.6. As used herein, "Roberts Superior Proposal" means a bona fide, written and unsolicited proposal or offer made by any persons (or group) (other than Shire or any of its Subsidiaries) with respect to a Roberts Acquisition Transaction (i) on terms which the Board of Directors of Roberts determines in good faith, and in the exercise of reasonable judgment (based on the advice of independent financial advisors and legal counsel), to be more favorable to Roberts and its shareholders than the transactions contemplated hereby (including taking into account the financing thereof.) 4.7. Pooling of Interests. Roberts shall use all reasonable efforts to cause the Merger to be accounted for as a "pooling of interests" in accordance with US GAAP, Accounting Principles Board Opinion 16 and applicable SEC rules, regulations and policies and shall take no action that would cause such accounting treatment not to be obtained. 4.8. ISRA. Roberts shall obtain from the New Jersey Department of Environmental Protection either (i) a declaration of non-applicability of the New Jersey Industrial Site Recovery Act ("ISRA") to the Merger or any other transactions contemplated thereby, or (ii) approval of a negative declaration or other action required to comply with ISRA, in each case which is reasonably acceptable to Shire. ARTICLE V COVENANTS OF SHIRE AND ACQUISITION SUB 5.1. Regular Course of Business. Except in connection with the performance by Shire and Acquisition Sub of their respective obligations under this Agreement, until the Effective Time, Shire shall conduct its and its Subsidiaries' business only in the ordinary course and shall use reasonable efforts to maintain and preserve its business organization, assets, employees and business relationships and to maintain all of its material properties and assets in useful and good condition, ordinary wear and tear excepted. 5.2. Certain Prohibited Activities. Until the Effective Time, except as contemplated by this Agreement or as set forth on Section 5.2 of the Shire Disclosure Schedule, Shire shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Roberts: (a) cease to be a corporation duly organized, validly existing and, where applicable, in good standing under its jurisdiction of incorporation, or in good standing as a foreign corporation in any applicable jurisdiction where the character of its assets or nature of its business makes such qualification necessary; (b) authorize or issue any additional shares of its capital stock, any Equity Equivalents, any debt securities or other evidence of its indebtedness or any SARs; (c) repay any of its Indebtedness prior to scheduled maturity (other than in the ordinary course of business) or redeem or otherwise acquire any of its capital stock or any Equity Equivalents or make any payment with respect to any of the foregoing (other than regular, periodic payments of interest made with respect to any Indebtedness); (d) split, combine or reclassify any of its capital stock or declare, set aside or pay any dividend or other distribution in respect of any of its capital stock; (e) acquire any stock, partnership or other equity interest in or any equity or debt security of any other person or entity; (f) amend its Memorandum and Articles of Association (or equivalent charter documents); (g) violate or fail to comply in any material respect with any statute, law, ordinance, regulation, rule, order or other legal requirement of any government, authority or any other governmental department or agency, or any judgment, decree or order of any court or governmental body or agency applicable to its business or operations (other than any violations or failures to comply which could not reasonably be expected, individually or in the aggregate, to have a Shire Material Adverse Effect); (h) enter into any contract, agreement or other commitment with any present or former director, officer or securityholder of Shire or any person or entity controlled by any such person other than in the ordinary course of business and where the amount involved is not in excess of $500,000; (i) fail to comply in all material respects with all of its obligations with respect to all material Permits or voluntarily take or omit to take any action which could reasonably be expected to result in the revocation, nonrenewal, modification, suspension or termination of any A-31 such Permit (other than any violations or failures to comply which could not reasonably be expected, individually or in the aggregate, to have a Shire Material Adverse Effect); (j) (i) grant to any officer of Shire or any of its Subsidiaries any increase in compensation, (ii) grant to any employee of Shire or any of its Subsidiaries any increase in severance or termination pay, (iii) enter into any employment, severance or termination agreement with any employee of Shire or any of its Subsidiaries or (iv) enter into any Employment Obligation or permit the modification or termination of any existing Employment Obligation; (k) dispose of, permit to lapse, modify, terminate, grant any interest to any person or entity in, or create or suffer to exist any Lien with respect to, any Shire Intellectual Property; (l) take any action that would cause it to fail to maintain in full force and effect, comply in all material respects with all of the terms and provisions of or pay all premiums due on any Insurance Policy; (m) enter into any material agreement or permit the modification of any material agreement outside the ordinary course of business; (n) merge or consolidate with any other person or entity or acquire control of or purchase all or substantially all of the assets of any other person or entity; (o) voluntarily incur or permit the incurrence of any liability not in the ordinary course of business and in excess of $1,000,000; (p) adopt a plan of complete or partial liquidation; or (q) undertake any actions which would jeopardize accounting for the Merger as a pooling of interests. 5.3. Notice of Certain Events. Each of Shire and Acquisition Sub will give notice to Roberts promptly after obtaining knowledge thereof, of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. 5.4. Access. Shire and Acquisition Sub shall afford the officers, employees and representatives of Roberts, and its counsel and auditors, reasonable access during normal business hours during the period prior to the Effective Time to their respective facilities, properties, equipment, files, accounts, books and records so that Roberts may have full opportunity to make such investigations as it may desire to make of the affairs of Shire and Acquisition Sub. Roberts will hold, and will cause its respective officers, employees, accountants, counsel, financial advisers, and other representatives and affiliates to hold, any confidential information in accordance with the terms of that certain Confidentiality Agreement dated as of June 1, 1999, between Shire and Roberts. 5.5. Approvals. Each of Shire and Acquisition Sub shall use all reasonable efforts to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary, proper or advisable in order to fulfill and perform its obligations under this Agreement or otherwise consummate or make effective the transactions contemplated hereby. Each of Shire and Acquisition Sub shall use all commercially reasonable efforts to obtain all Shire Governmental Approvals and Shire Third Party Approvals. 5.6. No Solicitation. (a) Prior to the Effective Time, Shire agrees that neither it, any of its Subsidiaries, nor any of their respective directors, officers, employees, agents or representatives of the foregoing, will, directly or indirectly, (i) solicit or initiate (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving Shire or the acquisition of all or any significant part of the assets or capital stock of Shire (a "Shire Acquisition Transaction") or (ii) negotiate, explore or otherwise engage in discussions with any person (other than Roberts and its representatives) with respect to any Shire Acquisition Transaction, or which may reasonably be expected to lead to a proposal for a Shire Acquisition Transaction or enter into any agreement, arrangement or understanding with respect to any such Shire Acquisition Transaction or which would require it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement; provided, however, that Shire may, in response to an unsolicited written proposal from a third party regarding a Shire Superior Proposal (as hereinafter defined), furnish information to, negotiate or otherwise engage in discussions with such third party, if the Board of Directors of Shire determines in good faith, after consultation with its financial advisors and based upon advice of outside counsel that such action is required for the Board of Directors to comply with its fiduciary duties under applicable law. A-32 (b) Except as may be required pursuant to the fiduciary duties of Shire's Board of Directors under applicable law, Shire agrees that, as of the date hereof, it and its Subsidiaries, and the respective directors, officers, employees, agents and representatives of the foregoing, shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any person (other than Roberts and its representatives) conducted heretofore with respect to any Shire Acquisition Transaction. Shire agrees to promptly advise Roberts of any inquiries or proposals received by, any such information requested from, or any negotiations or discussions sought to be initiated or continued with, Shire or its Subsidiaries, or any of the respective directors, officers, employees, agents or representatives of the foregoing, in each case from a person (other than Shire and its representatives) with respect to a Shire Acquisition Transaction, and the terms hereof, including the identity of such third party and the general terms of any financing arrangement or commitment in connection with such Shire Acquisition Transaction, and, except as may otherwise be required pursuant to the fiduciary duties of Shire's Board of Directors under applicable law, to update on an ongoing basis or upon Roberts' reasonable request, the status thereof, as well as any actions taken or other developments pursuant to this Section 5.6. As used herein, "Shire Superior Proposal" means a bona fide, written and unsolicited proposal or offer made by any persons (or group) (other than Roberts or any of its Subsidiaries) with respect to a Shire Acquisition Transaction (i) on terms which the Board of Directors of Shire determines in good faith, and in the exercise of reasonable judgment (based on the advice of independent financial advisors and legal counsel), to be more favorable to Shire and its shareholders than the transactions contemplated hereby (including taking into account the financing thereof.) 5.7. Pooling of Interests. Shire shall use all reasonable efforts to cause the Merger to be accounted for as a "pooling of interests" in accordance with US GAAP, Accounting Principles Board Opinion 16 and applicable SEC rules, regulations and policies and shall take no action that would cause such accounting treatment not to be obtained. 5.8. Indemnification. (a) From and after the Effective Time and until the sixth anniversary of the Effective Time and for so long thereafter as any claim for indemnification asserted on or prior to such date has not been fully adjudicated, Shire and the Surviving Corporation shall indemnify, defend and hold harmless each individual who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, a director or officer of Roberts or any of its Subsidiaries against all losses, claims, damages, costs, expenses (including attorneys' fees) or liabilities (including attorneys' fees) arising out of actions or omissions or alleged actions or omissions occurred at or prior to the Effective Time to the same extent and on the same terms and conditions (including with respect to advancement of expenses) permitted or required under applicable law and Roberts' Certificate of Incorporation and By-Laws in effect at the date hereof. (b) For a period of six years after the Effective Time, Shire and the Surviving Corporation shall cause to be maintained in effect the current policies of directors' and officers' liability insurance maintained by Roberts (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the insured parties) with respect to claims arising from facts or events which occurred on or before the Effective Time; provided, however, that if the premiums with respect to such insurance exceed 150% of the annual premiums paid as of the date hereof by Roberts for such insurance, Shire and the Surviving Corporation shall be obligated to purchase directors' and officers' liability insurance with the maximum coverage as can be obtained at an annual premium equal to 150% of the annual premiums paid by Roberts as of the date hereof. (c) The provisions of this Section are intended to be for the benefit of, and shall be enforceable by, each indemnified party and each party entitled to insurance coverage under paragraph (b) above, respectively, and his or her heirs and legal representatives, and shall be in addition to any other rights an indemnified party may have under the certificates or articles of incorporation or by-laws of the Surviving Corporation or any of its Subsidiaries, under the New Jersey Law or otherwise. A-33 ARTICLE VI AGREEMENTS REGARDING OPTIONS AND OTHER BENEFITS 6.1. Stock Option Plans. (a) At the Effective Time, Roberts shall, if necessary, have amended (and Shire and the Surviving Corporation shall have approved and adopted, respectively) each of the Roberts Option Plans to provide that each of the Options shall be assumed by Shire (or the Surviving Corporation) and made applicable to the purchase of Ordinary Shares as provided in this Section 6.1. Shire shall assume or replace such Options (or fraction thereof) so that each holder of an Option (an "Optionee") shall have such Optionee's Option apply to that number of Ordinary Shares (adjusted to the nearest whole share) equal to the product of (i) the number of all Options of such Optionee immediately prior to the Effective Time and (ii) the Exchange Ratio. The exercise price per share for each Optionee's Options (adjusted to the nearest pence) assumed or replaced will equal the old exercise price per share of Common Stock divided by the Exchange Ratio; provided, however, that in the case of any Option to which Section 421 of the Code continues to apply by reason of its qualification under Section 422 of the Code ("incentive stock options"), the option price, the number of shares purchasable pursuant to such option and the terms and conditions of exercise of such option shall be determined in order to comply with Section 424(a) of the Code and the regulations promulgated thereunder. Without limiting the foregoing, the duration and other terms of each assumed or replaced Option immediately after the Effective Time (unless otherwise agreed in writing by the Optionee with respect to a particular Option) shall be the same as the corresponding Options that were in effect immediately before the Effective Time, except that all references to Roberts in the Roberts Option Plans (and the corresponding references in each option agreement documenting each such Option) shall be deemed to be references to Shire or the Surviving Corporation, as applicable; provided, however, that the exercise price with respect to each Ordinary Share shall not be less than the nominal value of (Pounds)0.05 thereof. Roberts will terminate its Employee Stock Purchase Plan prior to the closing and extinguish all rights thereunder. (b) As soon as practicable after the Effective Time, Shire shall deliver to each Optionee appropriate notices setting forth such Optionee's rights pursuant to the Shire Option Plans and the agreements evidencing the grants of such Options shall continue in effect on the same terms and conditions. (c) Shire shall take all corporate action necessary to reserve for issuance a sufficient number of Ordinary shares for delivery upon exercise of Options. As soon as practicable after the Effective Time, Shire shall file a registration statement on Form F-3, Form S-8, or another appropriate form, as the case may be (or any successor form), with respect to the Ordinary Shares subject to such options and shall use its reasonable best efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding. 6.2. Continuation of Benefits. During the period from the Effective Time until December 31, 2001, Shire shall maintain or cause to be maintained wages, compensation levels, employee pension and welfare plans for the benefit of employees and former employees of Roberts and its Subsidiaries, which are, in the aggregate, equal or greater in value than those wages, compensation levels and other benefits provided under Roberts' Employment Obligations that are in effect on the date hereof. Nothing in this Agreement shall be construed as limiting in any way the right of Shire after the Effective Time to terminate the employment of or lay-off any employee of Roberts. 6.3. Severance Policy and Other Agreements. Shire shall honor or cause to be honored all severance agreements and employment agreements with Roberts' directors, officers and employees. 6.4. 1999 Bonus. Shire will pay, or cause to be paid, bonuses for calendar year 1999 to Roberts' employees participating in Roberts' RPC Incentive Compensation Program in amounts equal to each such Roberts employee's bonus for the year, on a basis consistent with past practice, within the target range established for each employee (but, in the aggregate, not in excess of U.S.$1,500,000) as determined by the A-34 chief executive of Roberts immediately prior to the Closing Date (all in accordance with the RPC Incentive Compensation Program set forth in Schedule 6.4 of the Roberts Disclosure Schedule). Annual bonus for 1999 for the four senior officers of Roberts who do not participate in the RPC Incentive Compensation Program shall be as determined by the Compensation Committee of Roberts' Board of Directors immediately prior to the Closing Date in a manner which is consistent with past practice based upon performance, and shall be in an aggregate amount not greater than U.S.$1,000,000. 6.5. Waiver of Preexisting Conditions; Credit for Deductibles; Service Credit. Shire will, or will cause the Surviving Corporation to, (i) waive all limitations as to preexisting conditions with respect to participation and coverage requirements applicable to the employees and former employees of Roberts and its Subsidiaries under any welfare plan that such employees or former employees may be eligible to participate in after the Effective Time, (ii) provide each employee of Roberts and its Subsidiaries with credit for any co-payments and deductibles paid during the applicable plan year prior to the Effective Time in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Effective Time, and (iii) provide each employee of Roberts and its Subsidiaries with credit for all service with Roberts and its affiliates for purposes of vesting and eligibility to participate under each employee benefit plan, program, or arrangement of the Purchaser or its affiliates in which such employees are eligible to participate. ARTICLE VII CONDITIONS PRECEDENT 7.1. Conditions to the Obligations of Each Party to Effect the Merger. The respective obligations of each of the parties to effect the Merger shall be subject to the satisfaction or waiver of each of the following conditions at or prior to the Closing: (a) Shareholder Approvals. The Roberts Shareholder Approval and Shire Shareholder Approval shall have been obtained. (b) Certain Approvals. All Roberts Governmental Approvals and Shire Governmental Approvals shall have been obtained, satisfied, waived or expired, as applicable. (c) No Proceeding or Litigation. No order, injunction, decree or judgment of any court or governmental body or agency shall be in effect which materially restrains or prohibits the transactions contemplated hereby, and no suit, action, investigation, inquiry or proceeding by any governmental body or agency or legal or administrative proceeding by any governmental body or agency shall have been instituted, or threatened in writing, which questions the validity or legality of the transactions contemplated hereby. (d) Securities Laws. The Form F-4 filed by Shire and the Form F-6 filed by the Depositary shall have become effective under the Securities Act and Exchange Act, as applicable, and shall not be the subject of any stop order or proceedings seeking a stop order, and Shire shall have received all state securities or "blue sky" authorizations necessary to issue Shire ADRs and Ordinary Shares pursuant to this Agreement. 7.2. Additional Conditions to the Obligations of Roberts. The obligation of Roberts to effect the Merger is also subject to the satisfaction or waiver of each of the following conditions at or prior to Closing: (a) Agreements. Each of Shire and Acquisition Sub shall have performed or complied in all material respects with each covenant, agreement and obligation to be performed or complied with by it hereunder on or prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of Shire and Acquisition Sub set forth in this Agreement shall be true and correct in all material respects (except that where any A-35 statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard) at and as of the Closing Date as if made at and as of such time or, if made as of a specified date, as of such date. (c) Officer's Certificate. Roberts shall have received a certificate, dated the Closing Date, of the President or a Vice President of Acquisition Sub and of a director of Shire to the effect that the conditions specified in paragraphs (a) and (b) above have been fulfilled. (d) Consents from Third Parties. All Shire Third Party Approvals shall have been obtained. (e) Listing. The London Stock Exchange shall have granted admission of the Ordinary Shares comprising the Merger Consideration to the Official List, subject only to allotment; and the allotment of the Ordinary Shares comprising the Merger Consideration shall have occurred, subject only to admission becoming effective in accordance with paragraph 7.1 of the Listing Rules of LSE. (f) Tax Opinions. Roberts shall have received an opinion, relying on appropriate representations, of either Milbank, Tweed, Hadley & McCloy LLP, counsel to Roberts, or Cahill Gordon & Reindel, counsel to Shire to the effect that the Merger will constitute a reorganization described in Code Section 368(a)(1)(A) and Code Section 368(a)(2)(E) and no gain or loss will be recognized by Roberts or any Holder except that (i) a Holder who receives cash in lieu of fractional Ordinary Shares or Shire ADSs will recognize capital gain or capital loss equal to the difference between the cash received and the basis of the Holder's shares of Common Stock allocated to the fractional interest and (ii) any Holder required to enter into a "gain recognition agreement" within the meaning of Treas. Reg. (S) 1.367(a)-3(c)(1)(iii)(B) must do so in order to avoid immediate gain recognition and may be required to recognize gain at the time and in the amount specified in the gain recognition agreement, which opinion shall be dated on or about the date that is two business days prior to the date the Proxy Statement is first mailed to stockholders of Roberts, shall not have been withdrawn or modified in any material respect. (g) Pooling Letter. There shall have been delivered to Roberts a letter from its independent auditors, dated as of the Closing Date and addressed to Roberts, reasonably satisfactory in form and substance to Roberts, setting forth the concurrence of Roberts' independent auditors with the conclusion of Roberts' management that it will be appropriate to account for the Merger as a "pooling of interests" under US GAAP, Accounting Principles Board Opinion No. 16 and all rules, regulations and policies of the SEC, if the Merger is consummated in accordance with this Agreement. (h) Nasdaq. The Shire ADSs to be issued in the Merger and under the Roberts Option Plans after the Merger in accordance with this Agreement shall have been approved for listing on the Nasdaq National Market. 7.3. Additional Conditions to the Obligations of Shire and Acquisition Sub. The obligations of Shire and Acquisition Sub to effect the Merger are also subject to the satisfaction or waiver of each of the following conditions at or prior to the Closing: (a) Agreements. Roberts shall have performed each covenant, agreement and obligation to be performed or complied with by it hereunder on or prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of Roberts set forth in this Agreement shall be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard) at and as of the Closing Date as if made at and as of such time or, if made as of a specified date, as of such date. (c) Roberts Officer's Certificate. Shire shall have received a certificate, dated the date of the Closing, of the President or Vice President of Roberts to the effect that the conditions specified in paragraphs (a) and (b) above have been fulfilled. A-36 (d) Pooling Letter. There shall have been delivered to Shire a letter from its independent auditors, dated as of the Closing Date and addressed to Shire, reasonably satisfactory in form and substance to Shire, setting forth the concurrence of Shire's independent auditors with the conclusion of Shire's management that it will be appropriate to account for the Merger as a "pooling of interests" under US GAAP, Accounting Principles Board Opinion No. 16 and all rules, regulations and policies of the SEC, if the Merger is consummated in accordance with this Agreement. ARTICLE VIII OTHER AGREEMENTS 8.1. Preparation of Form F-4, Form F-6, the Proxy Statement and the UK Disclosure Document. As soon as practicable following the date of this Agreement, Roberts shall, in cooperation with Shire, prepare and file with the SEC the Proxy Statement and Shire shall, in cooperation with Roberts, prepare and file with the SEC the Form F-4, in which the Proxy Statement will be included as a prospectus. Each of Roberts and Shire shall use its best efforts to have the Form F-4 declared effective under the Securities Act as promptly as practicable after such filing. Shire shall also, as promptly as practicable, use its best efforts to cause the Depositary to file with the SEC a registration statement on Form F-6 (the "Form F-6") with respect to Shire ADRs under the Securities Act and use its best efforts to have the Form F-6 declared effective as soon as practicable. Shire shall also take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified) required to be taken under any applicable United States state securities laws in connection with the issuance of Shire ADRs and Ordinary Shares in the Merger and Shire Ordinary Shares under the Roberts Stock Plans and Roberts shall furnish all information concerning Roberts and the holders of Common Stock as may be reasonably requested in connection with any such action. 8.2. Roberts Shareholders Meeting. Roberts shall, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its shareholders (the "Roberts Shareholders Meeting") for the purpose of obtaining the Roberts Shareholder Approval. Except as required to comply with the fiduciary duties of the Board of Directors as advised by outside counsel, Roberts will, through its Board of Directors, recommend to its shareholders approval of all matters required to be so approved. Roberts shall use its best efforts to cause the Proxy Statement to be mailed to Roberts' shareholders as promptly as practicable after the Form F-4 is declared effective under the Securities Act and, if necessary, after the Proxy Statement shall have been so mailed, promptly circulate amended, supplemental or supplemented proxy materials and, if required in connection therewith, resolicit proxies, it being understood that Roberts shall not be required to hold more than one meeting of shareholders. 8.3. Shire Shareholders Meeting. Shire will, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold an extraordinary general meeting of its ordinary shareholders (the "Shire Shareholders Meeting") for the purpose of obtaining the Shire Shareholder Approval. Except as required to comply with the fiduciary duties of the Board of Directors as advised by outside counsel, Shire will, through its Board of Directors, recommend to its shareholders approval of all such matters required to be so approved. In connection with the Shire Shareholders Meeting (i) Shire will, as soon as practicable after the date of this Agreement, prepare and file with the LSE, and will use its best efforts to have cleared by the LSE and will thereafter mail to its shareholders the UK Disclosure Documents, which will comply with all legal requirements applicable to the Shire Shareholders Meeting and (ii) if necessary, after the UK Disclosure Documents have been so posted, promptly circulate amended, supplemental or supplemented materials and, if required in connection therewith, resolicit votes, it being understood that Shire shall not be obligated to hold more than one meeting of shareholders. 8.4. Acquisition Sub Actions. Shire will take all action within its control which is necessary or appropriate to cause Acquisition Sub to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. A-37 ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 9.1. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after the Roberts Shareholder Approval or the Shire Shareholder Approval: (a) by mutual written consent of Shire and Roberts; (b) by either Shire or Roberts upon notice thereof given in writing to the other party if (i) any governmental entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger and such order, decree or ruling or other action shall have become final and nonappealable (a "Final Order") or (ii) the Effective Time has not occurred on or before December 31, 1999 unless a later date is established by mutual written consent of Shire and Roberts or unless the failure to consummate the Merger is the result of a breach of a covenant set forth in this Agreement or a misrepresentation or breach of any warranty set forth in this Agreement by the party seeking to terminate this Agreement; (c) by the Board of Directors of Shire or Roberts, if (x) the Shire Shareholder Approval shall fail to be obtained upon a vote therefor taken at the Shire Shareholders Meeting or (y) Roberts Shareholder Approval shall fail to be obtained upon a vote therefor taken at the Roberts Shareholders Meeting, unless due to delay or default on the part of Roberts, in the case of the Roberts Shareholder Approval, or due to delay or default on the part of Shire or Acquisition Sub, in the case of the Shire Shareholder Approval; (d) by action of the Board of Directors of Shire and notice thereof given in writing to Roberts if (i) there has been a breach in any material respect (except that where any statement in a representation or warranty includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard) of any representation, warranty, covenant or agreement on the part of Roberts set forth in this Agreement which breach is not curable on or prior to December 31, 1999 or (ii) the Board of Directors of Roberts (x) fails to recommend the approval of this Agreement and the Merger to Roberts' shareholders in accordance with Section 8.2 hereof, or (y) withdraws or amends or modifies in a manner adverse to Shire its recommendation or approval in respect of this Agreement or the Merger or fails to reconfirm such recommendation within 5 business days of a reasonable written request for such confirmation by Shire; (e) by the Board of Directors of Shire if they shall reasonably determine that a proposal for a Shire Acquisition Transaction constitutes a Shire Superior Proposal; provided, however, that Shire may not terminate this Agreement pursuant to this clause (e) unless (i) 5 business days shall have elapsed after delivery to Roberts of a written notice of such determination by such Board of Directors and, during such 5-business-day period, Shire shall have informed Roberts of the material terms and conditions and financing arrangements of such proposal for a Shire Acquisition Transaction and the identity of the person or group making such proposal for a Shire Acquisition Transaction and (ii) at the end of such 5-business-day period, such Board of Directors shall continue reasonably to believe that such proposal for a Shire Acquisition Transaction constitutes a Shire Superior Proposal and promptly thereafter Shire shall enter into a definitive acquisition, merger or similar agreement to effect such Shire Superior Proposal; (f) by action of the Board of Directors of Roberts and notice thereof given in writing to Shire if (i) there is a breach in any material respect (except that where any statement in a representation or warranty includes a standard of materiality, such statement shall be true and correct in all respects giving effect to such standard) of any representation, warranty, covenant or agreement on the part of Shire or Acquisition Sub set forth in this Agreement which breach is not curable on or prior to December 31, 1999 or (ii) the Board of Directors of Shire (x) fails to recommend the approval of this Agreement and the Merger to Shire's shareholders in accordance with Section 8.3 hereof, or (y) withdraws or amends or A-38 modifies in a manner adverse to Roberts its recommendation or approval in respect of this Agreement or the Merger or fails to reconfirm such recommendation within 5 business days of a reasonable written request for such confirmation by Roberts; or (g) by the Board of Directors of Roberts if they shall reasonably determine that a proposal for a Roberts Acquisition Transaction constitutes a Roberts Superior Proposal; provided, however, that Roberts may not terminate this Agreement pursuant to this clause (g) unless (i) 5 business days shall have elapsed after delivery to Shire of a written notice of such determination by such Board of Directors and, during such 5-business-day period, Roberts shall have informed Shire of the material terms and conditions and financing arrangements of such proposal for a Roberts Acquisition Transaction and the identity of the person or group making such proposal for a Roberts Acquisition Transaction and (ii) at the end of such 5-day-business period, such Board of Directors shall continue reasonably to believe that such proposal for a Roberts Acquisition Transaction constitutes a Roberts Superior Proposal and promptly thereafter Roberts shall enter into a definitive acquisition, merger or similar agreement to effect such Roberts Superior Proposal. 9.2. Effect of Termination. In the event of termination of this Agreement as provided in Section 9.1, this Agreement shall forthwith become void and have no effect and there shall be no liability or obligation on the part of Shire, Roberts, Acquisition Sub or any their respective officers or directors other than provisions of the last sentence of Section 4.4, the last sentence of Section 5.4, Section 10.9, Section 10.10 and this Section 9.2, which will survive termination and except to the extent that such termination results from the willful and material breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement. (b) If (x) Shire shall have terminated this Agreement pursuant to Section 9.1(d)(ii) or (y) Roberts shall have terminated this Agreement pursuant to Section 9.1(g), or (z) Shire or Roberts shall have terminated this Agreement pursuant to Sections 9.1(b)(ii) or (c)(y) following the public announcement (other than by Shire or any of its affiliates) of a proposal for a Roberts Acquisition Transaction by any person (other than the transactions contemplated by this Agreement) and such termination was not solely the result of any action or inaction by Shire which resulted in the failure of the conditions in Section 7.1(a), (b) or (c) or Section 7.2, and, prior to or within six months after any termination described in this clause (z), Roberts (or any of its Subsidiaries) shall have entered into a definitive agreement for, or shall have consummated, a Roberts Acquisition Transaction, in which the consideration received by Roberts or its shareholders is equal to or greater than the value of the Merger Consideration on the date of this Agreement then, in any of such cases, Roberts shall pay Shire a termination fee of $30.0 million, provided, however, no fee shall be payable pursuant to this Section 9.2(b) if at the time of termination of this Agreement pursuant to Section 7.1(a) either (aa) the waiting period under the HSR Act (including any voluntary extension or such period) shall not have expired or (bb) any governmental entity is asserting an objection under applicable antitrust laws to the transactions contemplated by this Agreement or (cc) a Final Order has been issued and remains outstanding. Any fee payable under this Section 9.2(b) shall be paid in same day funds (A) contemporaneous with a termination described in either clause (x) or (y) of this Section 9.2(b), and no notice of termination pursuant to such sections shall be effective and this Agreement shall not terminate, until such termination fee is received by Shire, or (B) concurrently with or prior to the entering into of the definitive agreement for, or the consummation of, such Roberts Acquisition Transaction, in the case of a termination described in clause (z) of this Section 9.2(b). (c) If (x) Roberts shall have terminated this Agreement pursuant to Section 9.1(f)(ii) or (y) Shire shall have terminated this Agreement pursuant to Section 9.1(e), or (z) Shire or Roberts shall have terminated this Agreement pursuant to Sections 9.1(b)(ii) or (c)(x) following the public announcement (other than by Roberts or any of its affiliates) of a proposal for a Shire Acquisition Transaction by any person (other than the transactions contemplated by this Agreement) and such termination was not solely the result of any action or inaction by Roberts which resulted in the failure of the conditions in Section 7.1(a), (b) or (c) or Section 7.3, and, prior to or within six months after any termination described in this clause (z), Shire (or any of its A-39 Subsidiaries) shall have entered into a definitive agreement for, or shall have consummated, a Shire Acquisition Transaction, then, in any of such cases, Shire shall pay Roberts a termination fee of $30.0 million, provided, however, no fee shall be payable pursuant to this Section 9.2(c) if at the time of termination of this Agreement pursuant to Section 7.1(a) either (aa) the waiting period under the HSR Act (including any voluntary extension or such period) shall not have expired or (bb) any governmental entity is asserting an objection under applicable antitrust laws to the transactions contemplated by this Agreement or (cc) a Final Order has been issued and remains outstanding. Any fee payable under this Section 9.2(c) shall be paid in same day funds (A) contemporaneous with a termination described in either clause (x) or (y) of this Section 9.2(c), and no notice of termination pursuant to such sections shall be effective and this Agreement shall not terminate, until such termination fee is received by Roberts, or (B) concurrently with or prior to the entering into of the definitive agreement for, or the consummation of, such Shire Acquisition Transaction, in the case of a termination described in clause (z) of this Section 9.2(c). 9.3. Amendment. This Agreement may be amended by the parties hereto at any time before or after any required approval of matters presented in connection with the Merger by the shareholders of Roberts or the shareholders of Shire; provided, however, that after any such approval, there shall be made no amendment that by law requires further approval by such shareholders without the further approval of such shareholders. This Agreement may be amended by an instrument in writing signed on behalf of each of the parties hereto. 9.4. Waiver. At any time prior to the Closing, any party may (a) extend the time for the performance of any of the obligations or other acts of any other party hereto, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 9.3, waive compliance with any of the agreements of any other party or with any conditions to its own obligations. Except as otherwise required by law, (x) any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by or on behalf of such party by a duly authorized signatory and (y) the failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. ARTICLE X GENERAL PROVISIONS 10.1. Public Statements. Each of Shire and Acquisition Sub, on the one hand, and Roberts, on the other hand, agree that neither they nor their respective directors, officers, employees or agents shall disclose to any third party (other than to their professional advisers) or publicly issue any press release or other statement to the press or any third party with respect to this Agreement or transactions contemplated hereby, except as may be required by law or the rules of the American Stock Exchange or LSE rule, without the consent of the other parties hereto. 10.2. Notices. All notices and other communications hereunder shall be in writing (including telex or similar writing) and shall be deemed given if delivered in person or by messenger, cable, telegram or telex or facsimile transmission or by a reputable overnight delivery service which provides for evidence of receipt to the parties at the following addresses or telecopier numbers (or at such other address or telecopy number for a party as shall be specified by like notice): (a) if to Shire or Acquisition Sub, to: Shire Pharmaceuticals Group plc East Anton Andover, Hants SP10 5RG United Kingdom Telecopy: 011 44 1 264 334 658 Attention: Rolf Stahel, Chief Executive A-40 with a copy to: John P. Mitchell, Esq. Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 USA Telephone: (212) 701-3000 Telecopy: (212) 269-5420 (b) if to Roberts, to: Roberts Pharmaceutical Corporation Meridian Center II 4 Industrial Way West Eatontown, NJ 07724 Telecopy: (732) 676-1300 Attention: General Counsel with a copy to: Lawrence Lederman, Esq. Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 USA Telecopy: (212) 530-5219 10.3. Interpretation. When reference is made in this Agreement to a Subsection, Section, Exhibit or Schedule, such reference is to a Subsection or Section of or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" and "including" are used in this Agreement, they are deemed to be followed by the words "without limitation". For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (i) the terms defined include the plural as well as the singular, (ii) all accounting terms not otherwise defined herein have the meanings assigned under United States generally accepted accounting principles, and (ii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision. 10.4. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 10.5. Entire Agreement. This Agreement (including the Exhibits and Schedules hereto) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; provided that the Confidentiality Agreements referred to in Sections 4.4 and 5.4 hereof shall survive the termination of this Agreement in accordance with their terms. 10.6. Governing Law. Except where by its terms New Jersey Law is governing, this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law of such state. 10.7. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. A-41 10.8. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, whether by operation of law or otherwise, without the express prior written consent of each of the other parties hereto. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors. 10.9. Expenses. Except as otherwise expressly provided herein, each party shall bear its own expenses incurred in connection with the transactions contemplated by this Agreement. 10.10. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. The parties accordingly agree that the parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of New York, Borough of Manhattan, or in New York state court located in the Borough of Manhattan, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any Federal court located in the State of New York, Borough of Manhattan, or any New York state court located in the Borough of Manhattan if any dispute arises out of the Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iii) agrees that it will not bring any action relating to this Agreement in any court other than such a Federal or state court sitting in the State of New York located in the Borough of Manhattan. IN WITNESS WHEREOF, Shire, Acquisition Sub and Roberts have caused this Agreement to be executed and delivered by their respective duly authorized officers, all as of the date first above written. SHIRE PHARMACEUTICALS GROUP PLC /s/ Rolf Stahel By___________________________________ Name: Rolf Stahel Title: Chief Executive RUBY ACQUISITION SUB INC. /s/ Rolf Stahel By___________________________________ Name: Rolf Stahel Title: President RUBY ACQUISITION SUB INC. /s/ Rolf Stahel By___________________________________ Name: Rolf Stahel Title: President ROBERTS PHARMACEUTICAL CORPORATION /s/ John T. Spitznagel By___________________________________ Name: John T. Spitznagel Title: President A-42 Investment Banking Division PaineWebber Incorporated 1285 Avenue of the Americas New York, NY 10019 212 713-2000 PaineWebber July 22, 1999 Confidential - ------------ Board of Directors Roberts Pharmaceutical Corporation Meridian Center II 4 Industrial Way West Eatontown, New Jersey 07724 Ladies and Gentlemen: Roberts Pharmaceutical Corporation (the "Company") and Shire Pharmaceuticals Group plc (the "Acquiring Company") propose to enter into an agreement (the "Agreement") pursuant to which the Company will be merged with a wholly-owned subsidiary of the Acquiring Company in a transaction (the "Merger") in which each share of the Company's common stock, par value $0.01 per share (the "Shares"), will be converted into the right to receive 1.1374 (the "Exchange Ratio") American Depositary Receipts of the Acquiring Company (the "ADRs") or, at the option of the holder, Ordinary Shares, nominal value 5 pence per share, of the Acquiring Company (the "Merger Consideration"). One ADR is equal to three Ordinary Shares of the Acquiring Company. The Exchange Ratio is subject to adjustment between 1.0427 and 1.2802 in the event of certain changes in the price of the ADRs as set forth in the draft Agreement dated July 21, 1999. In connection with the Merger, the parties also propose to enter into an agreement (the "Option Agreement") pursuant to which the Company will grant the Acquiring Company an option to acquire 6,345,926 Shares which, if issued, would represent approximately 19.9% of the total number of currently outstanding Shares. In addition, certain shareholders of the Company holding in the aggregate approximately 25% of the Shares propose to enter into agreements with the Acquiring Company (the "Shareholder Agreements") pursuant to which such shareholders will agree to vote for the approval of the Merger. You have asked us whether or not, in our opinion, the proposed Merger Consideration to be received by the shareholders of the Company pursuant to the Merger is fair to such shareholders from a financial point of view. PaineWebber In arriving at the opinion set forth below, we have, among other things: (1) Reviewed the Company's Annual Reports, Forms 10-K and related financial information for the three fiscal years ended December 31, 1998; the Company's Form 10-Q and the related unaudited financial information for the three months ended March 31, 1999; and certain unaudited financial information of the Company for the six months ended June 30, 1999; (2) Reviewed the Acquiring Company's Annual Reports, Forms 20-F and related financial information for the two fiscal years ended December 31, 1998, and certain unaudited financial information of the Acquiring Company for the three months ended March 31, 1999; (3) Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of the Company and the Acquiring Company, furnished to us by the Company or which were otherwise publicly available; (4) Conducted discussions with members of senior management of the Company and the Acquiring Company concerning their respective businesses and prospects; (5) Reviewed the historical market prices and trading activity for the Shares and the ADRs and compared them with that of certain publicly traded companies which we deemed to be relevant; (6) Compared the financial position and results of operations of the Company and the Acquiring Company with that of certain companies which we deemed to be relevant; (7) Compared the proposed financial terms of the transactions contemplated by the Agreement with the financial terms of certain other mergers and acquisitions which we deemed to be relevant; (8) Reviewed a draft of the Agreement dated July 21, 1999; (9) Reviewed a draft of the Option Agreement dated July 21, 1999; (10) Reviewed drafts of the Shareholder Agreements dated July 21, 1999; and, (11) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. PaineWebber In preparing our opinion, we have relied on the accuracy and completeness of all information publicly available, supplied or otherwise communicated to us by the Company and the Acquiring Company, and we have not assumed any responsibility to independently verify such information. With respect to the financial forecasts examined by us, we have assumed that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgment of the management of the Company as to the future performance of the Company. We have also relied upon assurances of the management of the Company and the Acquiring Company, respectively, that they are unaware of any facts that would make the information or financial forecasts provided to us incomplete or misleading. We have not been engaged to make, and have not made, any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company or the Acquiring Company nor have we been furnished with any such evaluations or appraisals. We have also assumed with your consent, that (i) the Merger will be accounted for under the pooling-of-interests method of accounting under U.S. generally accepted accounting principles, (ii) the Merger will be a tax free reorganization and (iii) any material liabilities (contingent or otherwise, known or unknown) of the Company and the Acquiring Company are as set forth in the consolidated financial statements of the Company and the Acquiring Company, respectively. This opinion is directed to the Board of Directors of the Company and does not constitute a recommendation to any shareholder of the Company as to how any such shareholder should vote on the Merger. This opinion does not address the relative merits of the Merger and any other transactions or business strategies discussed by the Board of Directors of the Company as alternatives to the Merger or the decision of the Board of Directors of the Company to proceed with the Merger. We were not requested to, and did not, solicit third party indications of interest in acquiring all or any portion of the Company. No opinion is expressed herein as to the price at which the securities to be issued in the Merger to the shareholders of the Company may trade at any time. Our opinion is based on economic, monetary and market conditions existing on the date hereof. In the ordinary course of business, PaineWebber Incorporated may trade in the securities of the Company and the Acquiring Company for our own account and for the accounts of our customers and, accordingly, may at any time hold long or short positions in such securities. PaineWebber Incorporated is currently acting as financial advisor to the Company in connection with the Merger and will be receiving a fee in connection with the rendering of this opinion and upon consummation of the Merger. PaineWebber On the basis of, and subject to the foregoing, we are of the opinion that the proposed Merger Consideration to be received by the shareholders of the Company pursuant to the Merger, taken as a whole, is fair to such shareholders from a financial point of view. This opinion has been prepared for the information of the Board of Directors of the Company in connection with the Merger and shall not be reproduced, summarized, described or referred to, provided to any person or otherwise made public or used for any other purpose without the prior written consent of PaineWebber Incorporated, provided, however, that this letter may be -------- ------- reproduced in full in the Proxy Statement related to the Merger. Very truly yours, PAINEWEBBER INCORPORATED /s/ PaineWebber Incorporated ---------------------------- [LETTERHEAD OF BEAR, STEARNS & CO. INC.] July 23, 1999 Shire Pharmaceuticals Group plc East Anton Andover Hampshire SP10 5RG United Kingdom Attention: Board of Directors Gentlemen: We understand that Shire Pharmaceuticals Group plc ("Shire") and Roberts Pharmaceutical Corporation ("Roberts") are considering a transaction pursuant to which a newly-formed wholly-owned subsidiary of Shire ("Acquisition Sub") would be merged with and into Roberts in a stock-for-stock exchange (the "Merger"). Pursuant to the Merger, each outstanding share of common stock of Roberts would be converted into the right to receive 3.4122 shares (the "Exchange Ratio") of Shire Ordinary Shares of common stock (the "Merger Consideration"). We understand that, unless the holders (the "Holders") of Roberts common stock otherwise elect, Shire will provide Holders with one-third of a Shire American Depository Share ("Shire ADS") for each Shire Ordinary Share such Holder would be entitled to receive pursuant to the Exchange Ratio. The Exchange Ratio shall be subject to adjustment as follows: i) if the Shire ADS price (which shall be determined based on the average of the last reported sale price per Shire ADS on the NASDAQ National Market over the fifteen consecutive trading days ending on the third trading day immediately preceding the consummation of the Merger) is less than $21.09, the Exchange Ratio will be fixed at 3.8407; ii) if the Shire ADS price is between $21.09 and $23.73, the Exchange Ratio will be determined by dividing $27.00 by one-third of the Shire ADS price; iii) if the Shire ADS price is between $23.73 and $29.01, the Exchange Ratio will be fixed at 3.4122; iv) if the Shire ADS price is between $29.01 and $31.65, the Exchange Ratio will be determined by dividing $33.00 by one-third of the Shire ADS price; and v) if the Shire ADS price is greater than $31.65, the Exchange Ratio will be fixed at 3.1280. If Roberts terminates the Merger for certain reasons, Shire will be entitled to (i) receive a termination fee of $30 million from Roberts, and (ii) exercise an option to purchase up to 6,345,926 newly-issued shares of Roberts common stock at a price of $30.00 per share in accordance with the terms of an Option Agreement (the "Option Agreement") to be entered into by Shire and Roberts. If Shire terminates the Merger for certain reasons, Roberts shall be entitled to receive a termination fee of $30 million from Shire. C-1 Shire Pharmaceuticals Group plc July 23, 1999 Page 2 You have provided us with a draft of the Agreement and Plan of Merger (the "Agreement") and a draft of the Option Agreement both dated July 23, 1999. We understand that in conjunction with the Merger, Shire will be adopting U.S. Generally Accepted Accounting Principles ("U.S. GAAP") as its primary accounting standard. We further understand that the Merger will be accounted for under U.S. GAAP as a pooling of interest. You have asked us to render our opinion as to whether the "Exchange Ratio" is fair, from a financial point of view, to Shire. In the course of our analyses for rendering this opinion, we have: 1. reviewed a July 23, 1999 draft of the Agreement and a July 23, 1999 draft of the Option Agreement; 2. reviewed Roberts' Annual Reports to Shareholders and Annual Reports on Form 10-K for the fiscal years ended December 31, 1997 and 1998, and its Quarterly Report on Form 10-Q for the period ended March 31, 1999; 3. reviewed certain operating and financial information, including projections, provided to us by Roberts' management relating to Roberts' business and prospects; 4. met with certain members of Roberts' senior management to discuss its operations, historical financial statements and future prospects; 5. reviewed Shire's Transition Report and Accounts on Form 20-F for the six months ended December 31, 1997, its Annual Report and Accounts on Form 20-F for the fiscal year ended December 31, 1998, and its interim results for the three months ended March 31, 1999; 6. reviewed certain operating and financial information, including Wall Street equity research analyst projections that were adjusted by the senior management of Shire (the "Adjusted Shire Analyst Projections"), relating to Shire's business and prospects; 7. met with certain members of Shire's senior management to discuss its operations, historical financial statements and future prospects; 8. reviewed analyses provided to us by Shire's management relating to the anticipated financial performance of Roberts subsequent to the Merger; 9. reviewed certain estimates of cost savings and other combination benefits expected to result from the Merger, prepared and provided to us by the senior management of Shire; 10. reviewed the historical prices and trading volumes of the common stock of Shire and Roberts; C-2 Shire Pharmaceuticals Group plc July 23, 1999 Page 3 11. reviewed publicly available financial data, stock market performance data and valuation parameters of companies which we deemed generally comparable to Shire and Roberts; 12. reviewed the terms of recent acquisitions of companies which we deemed generally comparable to Roberts; and 13. conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. In the course of our review, we have relied upon and assumed, without independent verification, the accuracy and completeness of the financial and other information, including without limitation the Adjusted Shire Analyst Projections and the projections (in the case of Roberts), provided to us by Shire and Roberts. With respect to Shire's and Roberts' projected financial results and potential synergies that could be achieved upon consummation of the Merger, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the senior managements of Shire and Roberts as to the expected future performance of Shire and Roberts, respectively. We have not assumed any responsibility for the independent verification of any such information or of the projections provided to us and we have further relied upon the assurances of the senior managements of Shire and Roberts that they are unaware of any facts that would make the information or projections provided to us incomplete or misleading. In arriving at our opinion, we have not performed or obtained any independent appraisal of the assets or liabilities of Shire and Roberts, nor have we been furnished with any such appraisals. Our opinion is necessarily based on economic, market and other conditions, and the information made available to us, as of the date hereof. We have assumed that the Merger (i) will qualify as a tax-free "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended and (ii) will be accounted for as a pooling of interests under U.S. GAAP. We do not express any opinion as to the price or range of prices at which the Ordinary Shares or ADSs of Shire may trade subsequent to the consummation of the Merger. We have acted as a financial advisor to Shire in connection with the Merger and will receive a fee for such services. Bear Stearns acted as lead managing underwriter on Shire's public offering of Shire ADS's in March 1998. In the ordinary course of business, Bear Stearns may actively trade the equity securities of Shire and Roberts for its own account and for the account of its customers and, accordingly, may at any time hold a long or short position in such securities. It is understood that this letter is intended for the benefit and use of the Board of Directors of Shire and does not constitute a recommendation to the Board of Directors of Shire or any holders of Shire's Ordinary Shares as to how to vote in connection with the Merger. This opinion does not address Shire's underlying business decision to pursue the Merger. This letter is not to be used for any other purpose, or reproduced, disseminated, quoted or referred to at any time, in whole or in part, without C-3 Shire Pharmaceuticals Group plc July 23, 1999 Page 4 our prior written consent; provided, however, that this letter may be included in its entirety in any proxy statement / prospectus to be distributed to holders of Shire Ordinary Shares or ADSs or Roberts Common Stock in connection with the Merger. Based on and subject to the foregoing, it is our opinion that the Exchange Ratio is fair, from a financial point of view, to Shire. Very truly yours, BEAR, STEARNS & CO. INC. /s/ Steven R. Frank By: _________________________________ Senior Managing Director C-4 -----END PRIVACY-ENHANCED MESSAGE-----