SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
(Rule 14d-101)
Solicitation/Recommendation
Statement Under Section 14(d)(4)
of the Securities Exchange Act
of 1934
Memory Pharmaceuticals
Corp.
(Name of Subject
Company)
Memory Pharmaceuticals
Corp.
(Name of Person Filing
Statement)
Common Stock, $0.001 par value per share
(Title of Class of
Securities)
58606R403
(CUSIP Number of Class of
Securities)
Vaughn M. Kailian
Chief Executive Officer
Memory Pharmaceuticals Corp.
100 Philips Parkway
Montvale, New Jersey 07645
(201) 802-7100
(Name, Address and Telephone
Number of Person Authorized to Receive Notices and
Communications on Behalf of
Person Filing Statement)
Copy to:
Ellen B. Corenswet, Esq.
J. D. Weinberg, Esq.
Covington & Burling LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
(212) 841-1000
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o
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender
offer.
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TABLE OF CONTENTS
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Item 1.
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Subject
Company Information.
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(a)
Name and Address.
The name of the
subject company to which this Solicitation/Recommendation
Statement on
Schedule 14D-9
(together with the exhibits and annexes, this
Schedule 14D-9
)
relates is Memory Pharmaceuticals Corp., a Delaware corporation
(
Memory
). The address of the principal
executive offices of Memory is 100 Philips Parkway Montvale, New
Jersey 07645, and its telephone number is
(201) 802-7100.
(b)
Securities.
The title of the class of
equity securities to which this
Schedule 14D-9
relates is Memorys common stock, par value $0.001 per
share (the
Common Stock
). The shares of
Common Stock are hereinafter referred to as the
Shares
.
As of December 1, 2008 there were 82,243,050 Shares
outstanding.
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Item 2.
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Identity
and Background of Filing Person.
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(a)
Name and Address.
The name, address
and telephone number of Memory, which is the person filing this
Schedule 14D-9
and is the subject company to which this
Schedule 14d-9
relates, are set forth in Item 1(a) above.
(b)
Tender Offer.
This
Schedule 14D-9
relates to a tender offer by 900 North Point Acquisition
Corporation, a Delaware corporation (
Merger
Sub
) and a wholly-owned subsidiary of
Hoffmann-La Roche Inc., a New Jersey corporation
(
Parent
), disclosed in a Tender Offer
Statement on Schedule TO, dated December 3, 2008 (as
amended or supplemented from time to time, the
Schedule TO
), to purchase all
outstanding Shares at a purchase price of $0.61 per share
(the
Offer Price
), net to the seller in cash,
without interest thereon and less any required withholding
taxes, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated December 3, 2008 (as amended
or supplemented from time to time, the
Offer to
Purchase
), and in the related Letter of Transmittal
(as amended or supplemented from time to time, the
Letter of Transmittal
, which together with
the Offer to Purchase constitutes the
Offer
).
The Offer is made in accordance with the Agreement and Plan of
Merger, dated as of November 25, 2008, among Parent, Merger
Sub and Memory (the
Merger Agreement
). The
Schedule TO was filed with the Securities and Exchange
Commission (the
SEC
) on December 3,
2008. Copies of the Offer to Purchase and Letter of Transmittal
are filed as Exhibits (a)(1)(A) and (a)(1)(B) hereto,
respectively, and are incorporated herein by reference.
The Merger Agreement provides that, subject to the satisfaction
or waiver of certain conditions, following completion of the
Offer and in accordance with the Delaware General Corporation
Law (the
DGCL
), Merger Sub will merge with
and into Memory (the
Merger
), with Memory
continuing as the surviving corporation (the
Surviving
Corporation
). At the effective time of the Merger (the
Effective Time
), each Share (other than
Shares owned by Parent, Merger Sub or any subsidiary of Parent
or Memory or Shares held in the treasury of Memory or by any
stockholder of Memory who is entitled to and properly exercises
appraisal rights under the DGCL) will be converted into the
right to receive cash in an amount equal to the price per share
paid in the Offer (the
Merger Price
) without
interest and less any required withholding taxes, and all the
Shares shall cease to be outstanding, shall automatically be
cancelled and shall cease to exist. A copy of the Merger
Agreement is filed as Exhibit (e)(1) hereto and is incorporated
herein by reference.
The Schedule TO states that the address of Merger Sub is
1220 N. Market Street, Suite 334, Wilmington, Delaware 19801,
and the address of Parent is 340 Kingsland Street, Nutley, New
Jersey 07110.
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Item 3.
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Past
Contacts, Transactions, Negotiations and
Agreements.
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Except as set forth in this
Schedule 14D-9,
as of the date hereof, there are no material agreements,
arrangements or understandings or any actual or potential
conflicts of interest between Memory or its affiliates and
(i) its executive officers, directors or affiliates or
(ii) Parent, Merger Sub or their respective executive
officers, directors or affiliates.
1
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(a)
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Arrangements
with Current Executive Officers and Directors of
Memory.
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Interests
of Certain Persons
Certain members of Memorys management and board of
directors (the
Board
) may be deemed to have
certain interests in the transactions contemplated by the Merger
Agreement that are different from or in addition to the
interests of Memorys stockholders generally. The Board was
aware of these interests and considered, among other matters,
that such interests may be different from or in addition to the
interests of Memory stockholders generally in approving the
Merger Agreement and the transactions contemplated thereby.
Director
and Officer Exculpation, Indemnification and
Insurance
Memorys amended and restated certificate of incorporation
(the
Certificate
) contains certain provisions
permitted under the DGCL relating to the liability of
Memorys directors. These provisions eliminate a
directors personal liability to Memory or Memorys
stockholders for monetary damages resulting from a breach of
fiduciary duty, except in circumstances involving certain
wrongful acts for which a director would possibly be personally
liable to Memory or Memorys stockholders for such damages
including the following:
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for any breach of the directors duty of loyalty to Memory
or its stockholders;
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
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for any liability under Section 174 of the DGCL (unlawful
payment of dividends or unlawful stock purchases or
redemptions); and
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for any transaction in which the director derives an improper
personal benefit.
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The Certificate also contains provisions that require Memory to
indemnify its directors, officers, and those persons serving, at
the request of Memory, as a director, officer, partner, employee
or trustee, or in a related capacity with, another entity (each
such person an
Indemnitee
), to the fullest
extent permitted by law. The indemnification provisions also
permit Memory to indemnify other employees or agents of Memory,
or other persons serving Memory. An Indemnitee will be
indemnified by Memory against all expenses and liabilities
actually and reasonably incurred by the Indemnitee or on the
Indemnitees behalf in connection with any action, suit, or
proceeding, whether civil, criminal, administrative or
investigative (a
Proceeding
), to which such
person is made a party because of the Indemnitees status
or former status as a director, officer or other agent of
Memory. In order to be able to rely on these provisions, the
Indemnitee must have acted in good faith and in a manner
reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful. Memory will either reimburse or advance to
the Indemnitee all expenses incurred in defense of any
Proceeding or in enforcing his or her rights. The Certificate
provides that Memory shall not indemnify any Indemnitee seeking
indemnification in connection with a Proceeding initiated by
such Indemnitee, unless the proceeding was authorized by the
Board and, to the extent that it is determined that the
Indemnitee was not entitled to be indemnified by Memory, such
Indemnitee will repay all amounts so advanced by Memory. This
description of the indemnification provisions in the Certificate
is qualified in its entirety by reference to the Certificate,
which is filed as Exhibit (e)(10) hereto and is
incorporated herein by reference.
Under the Merger Agreement, the Surviving Corporation has
agreed, for a period of six years after the Effective Time, to
advance expenses to and to indemnify and hold harmless, the
present and former officers, directors, employees and employee
benefit plan fiduciaries of Memory or any of its subsidiaries,
against all acts or omissions occurring on or prior to
completion of the Merger. The Surviving Corporation also has
agreed, for a period of six years after the Effective Time, that
the certificate of incorporation and bylaws of the Surviving
Corporation will contain provisions no less favorable with
respect to the indemnification of the present or former
directors, officers and employees of Memory or any of its
subsidiaries than those in effect as of the date of the Merger
Agreement.
Under the Merger Agreement, Parent has agreed to cause the
Surviving Corporation, and the Surviving Corporation has agreed,
for a period of six years after the Effective Time, to maintain
in effect policies of directors and officers
insurance and fiduciary liability insurance (collectively, the
D&O Insurance
) with terms, conditions,
2
retentions and limits of liability that are at least as
favorable as those currently maintained by Memory, or,
alternatively, to purchase comparable D&O Insurance for
such six year period with terms, conditions, retentions and
limits of liability that are at least as favorable as those
currently maintained by Memory. Notwithstanding the foregoing,
the Surviving Corporation will not be required to pay an annual
premium in excess of 225% of the aggregate annual amounts
currently paid by Memory to maintain such existing policies. In
the event that equivalent coverage cannot be obtained, or can be
obtained only by paying aggregate premiums in excess of 225% of
such amount, the Surviving Corporation shall only be required to
obtain the best available coverage as can be obtained by paying
aggregate premiums equal to 225% of such amount.
Change
of Control Agreements
Memory is a party to employment agreements with David A.
Lowe, Ph.D., Michael P. Smith, Stephen R.
Murray, M.D., Ph.D., Jzaneen Lalani, and James R.
Sulat, Memorys Chief Scientific Officer, Chief Financial
Officer, Chief Medical Officer, General Counsel and Corporate
Secretary, and former Chief Financial Officer and former
President and Chief Executive Officer, respectively, that
provide for benefits that would be paid in the event of a Change
of Control (as defined below) of Memory pursuant to the terms of
the agreements. The consummation of the Offer will constitute a
Change of Control under these agreements and therefore could
trigger the payment of the benefits described below. In
addition, outstanding options held by any of the individuals
named above will be cashed out pursuant to the Merger Agreement
as described below in this Item 3(a) under the heading
Acceleration of Options.
For purposes of this section, the following definitions apply to
the change of control provisions of the agreements discussed
below:
A
Change of Control
shall be deemed to have occurred if
Memory is consolidated with or acquired by another entity in a
merger, sale of all or substantially all of Memorys assets
or shares of stock or otherwise (excluding (i) transactions
solely for the purpose of reincorporating Memory in a different
jurisdiction or recapitalizing or reclassifying Memorys
stock, or (ii) any merger or consolidation in which the
stockholders of Memory immediately prior to such merger or
consolidation continue to own at least a majority of the
outstanding voting securities of Memory or the surviving entity
after such merger or consolidation).
Memory has
Cause
to terminate any of the individuals
named above if he or she (i) is convicted of a felony,
which adversely affects his or her ability to perform Memory
obligations or materially affects the business activities or
goodwill of Memory, (ii) is willfully disloyal,
deliberately dishonest, or breaches his or her fiduciary duty,
(iii) breaches the terms of his or her employment
agreement, materially breaches any provision of any
confidentiality agreement with Memory or fails or refuses to
carry out any material tasks or responsibilities for a period of
more than thirty (30) days after receipt of written notice
of such failure, or (iv) commits any act of fraud,
embezzlement or deliberate disregard of a policy of Memory known
to the executive officer or contained in a policy manual which
results in material loss, damage or injury to Memory.
Each of the individuals named above is said to have
Good
Reason
to resign from his or her employment if such
resignation occurs within ninety (90) days of: (i) a
material diminution in such individuals responsibilities
(provided that such diminution is not in connection with the
termination of his or her employment for
Cause
),
(ii) a change in such individuals principal work
location by more than 50 miles from Memorys principal
offices, or (iii) a reduction by Memory of such
individuals base salary, unless such reduction is pursuant
to a general reduction in the salaries of Memorys
executive officers. In addition, (i) Mr. Smith is also
said to have
Good Reason
should he be required to report
to an individual in a position lower than Memorys Chief
Executive Officer and (ii) Mr. Sulat is also said to
have
Good Reason
should he be required to report to an
individual in a position lower than Memorys Chief
Executive Officer or he ceases to be a member of the board.
David
A. Lowe, Ph.D., Chief Scientific Officer of
Memory
Memory has an employment letter agreement with Dr. Lowe for
an unspecified term that provides for an annualized base salary
of $381,177. In the event that Memory terminates
Dr. Lowes employment without Cause, or if he resigns
for Good Reason within 18 months after a Change of Control, he
is entitled to receive a severance amount equal to
12 months of his then-current base salary, less applicable
deductions. Dr. Lowe is also entitled to
3
receive continued medical and dental coverage for one year
following his separation from service. If, within three months
prior to, or within 18 months after, a Change of Control,
(x) Memory terminates Dr. Lowes employment
without Cause or (y) Dr. Lowe terminates his
employment for Good Reason, Dr. Lowes unvested stock
options will become fully vested.
Michael
P. Smith, Chief Financial Officer of Memory
Memory has an employment letter agreement with Mr. Smith
for an unspecified term under which he currently receives an
annualized base salary of $268,060. In the event that Memory
terminates Mr. Smiths employment without Cause, or if
he resigns for Good Reason within 18 months after a Change of
Control, he is entitled to receive a severance amount equal to
12 months of his then-current base salary, less applicable
deductions. Mr. Smith also will receive continued medical
and dental coverage for one year following his separation from
service. If, within three months prior to, or within
18 months after, a Change of Control, (x) Memory
terminates Mr. Smiths employment without Cause or
(y) Mr. Smith terminates his employment for Good
Reason, Mr. Smiths unvested stock options will become
fully vested.
Stephen
R. Murray, M.D., Ph.D., Chief Medical Officer of
Memory
Memory has an employment letter agreement with Mr. Murray
for an unspecified term under which he currently receives an
annualized base salary of $294,000. In the event that Memory
terminates Mr. Murrays employment without Cause, or
if he resigns for Good Reason within 18 months after a Change of
Control, he is entitled to receive a severance amount equal to
12 months of his then-current base salary, less applicable
deductions. Mr. Murray also will receive continued medical
and dental coverage for one year following his separation from
service. If, within three months prior to, or within
18 months after, a Change of Control, (x) Memory
terminates Mr. Murrays employment without Cause or
(y) Mr. Murray terminates his employment for Good
Reason, Mr. Murrays unvested stock options will
become fully vested.
Jzaneen
Lalani, General Counsel and Corporate Secretary of
Memory
Memory has an employment letter agreement with Ms. Lalani
for an unspecified term under which she currently receives an
annualized base salary of $283,764. In the event that Memory
terminates Ms. Lalanis employment without Cause, or
if she resigns for Good Reason within 18 months after a Change
of Control, she is entitled to receive a severance amount equal
to 12 months of her then-current base salary, less
applicable deductions. Ms. Lalani also will receive
continued medical and dental coverage for one year following her
separation from service. If, within three months prior to, or
within 18 months after, a Change of Control,
(x) Memory terminates Ms. Lalanis employment
without Cause or (y) Ms. Lalani terminates her
employment for Good Reason, Ms. Lalanis unvested
stock options will become fully vested.
James
R. Sulat, Former Chief Financial Officer and Former President
and Chief Executive Officer of Memory
Memory has an employment letter agreement with Mr. Sulat
under which he is currently working on a
one-half
time basis and receives a base salary at an annualized full-time
rate of $410,000. In the event that Mr. Sulats
employment is terminated for any reason, other than by Memory
for Cause, he will be entitled to receive, following
termination, (i) severance equal to 12 months of his
full-time base salary, (ii) the average of his annual
bonuses for the three prior years in a lump sum,
(iii) continued medical and dental coverage for one year
and (iv) accelerated vesting of 25% of his then unvested
stock options. In the event that Memory terminates
Mr. Sulats employment without Cause or he terminates
his employment for Good Reason before December 31, 2008,
Mr. Sulat will also be entitled to receive his then-current
salary, continued vesting of his stock options and continued
medical and dental coverage through December 31, 2008, in
addition to the severance benefits described above.
Notwithstanding the above, Mr. Sulats unvested stock
options will become fully vested if, within three months prior
to, or within 18 months after, a Change of Control,
(x) Memory terminates Mr. Sulats employment
without Cause or (y) Mr. Sulat terminates his
employment for Good Reason. Any vested non-qualified stock
options held by Mr. Sulat will remain exercisable until the
later to occur of (i) ninety (90) days after the date
of termination and (ii) January 15 of the calendar year
immediately succeeding the date of termination.
4
Acceleration
of Options
Pursuant to the Merger Agreement, all outstanding options,
whether vested or unvested, will be cancelled upon consummation
of the Merger. For each option that has an exercise price lower
than the Merger Price per Share at the time of the Merger, the
option holder will receive a payment equal to the options
spread at the time of the Merger, subject to
applicable withholding taxes. Accordingly, for any cancelled
option with an exercise price lower than the Merger Price per
Share, the option holder will receive an amount, for each Share
subject to the option, equal to (i) the Merger Price per
Share minus (ii) the exercise price of the option. If an
options exercise price is greater than or equal to the
Merger Price per Share, the option holder will receive no
payment with respect to that option.
Summary
Information
The tables below set forth the amounts payable to Memorys
executive officers and directors pursuant to the cash-out of
outstanding options in the Merger. The table with this
information for executive officers also sets forth the amounts
payable to each executive officer if his or her employment is
terminated by the executive officer for Good Reason or by Memory
without Cause in connection with an event constituting a Change
of Control (as specified in their respective employment
agreements described above). The columns under Cash-Out of
Stock Options below do not include any options with an
exercise price greater than the Offer Price. For information
concerning the shares of Memorys common stock owned by the
executive officers, directors and their affiliates, see
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT in the Information Statement filed as
Annex II (the
Information Statement
).
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To be Received
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Pursuant to a
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Termination of Employment
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After a Change
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in Control Without
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Cause or for
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Cash-Out of
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Good Reason as
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Stock Options
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Defined in the
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Previously
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Employment Agreements
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Vested
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Accelerated
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Total
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Cash
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Other
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Executive Officers
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Options
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Options
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Options
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Severance
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Benefits
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Vaughn M. Kailian(1)
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$
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David A. Lowe
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$
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3,375
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$
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14,625
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$
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18,000
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$
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381,177
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$
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11,527
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Michael P. Smith
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$
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2,250
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$
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9,750
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$
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12,000
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$
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268,060
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$
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16,062
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Stephen R. Murray
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$
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2,250
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$
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9,750
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$
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12,000
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$
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294,000
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$
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5,298
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Jzaneen Lalani
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$
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2,813
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$
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12,188
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$
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15,001
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$
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283,764
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$
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16,062
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James R. Sulat(2)
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$
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$
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$
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$
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479,125
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$
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16,062
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(1)
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Mr. Kailian has served as the President and Chief Executive
Officer of Memory since February 2008.
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(2)
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Mr. Sulat served as Memorys President and Chief
Executive Officer from May 2005 until February 2008, and as
Memorys Chief Financial Officer from February 2008 until
October 2008.
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Cash-Out of
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Stock Options
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Previously
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Vested
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Accelerated
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Non-Employee Directors
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Options
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Options
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Total
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Paul Blake
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$
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$
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2,000
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$
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2,000
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Anthony B. Evnin, Ph.D.
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$
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$
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2,000
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$
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2,000
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Jonathan J. Fleming
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$
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$
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2,000
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$
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2,000
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Walter Gilbert, Ph.D.
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$
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225
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$
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2,375
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$
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2,600
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Robert I. Kriebel
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$
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$
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2,000
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$
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2,000
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Michael E. Meyers, M.P.H.
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$
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$
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2,000
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$
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2,000
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Peter F. Young
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$
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$
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2,000
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$
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2,000
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5
Employee
Benefit Matters
The Merger Agreement provides that Parent, for one year after
the Effective Time, will provide to its or the Surviving
Corporations (or their subsidiaries) employees who
were employees of Memory or its subsidiaries immediately prior
to the Effective Time (the
Continuing
Employees
) compensation and benefits (other than
equity-based compensation) that will be in the aggregate
substantially equivalent to the compensation and benefits
provided to such employees immediately prior to the Effective
Time. The Merger Agreement also provides that Parent shall give
full credit to Continuing Employees for prior service to Memory
or its subsidiaries for purposes of calculating employee
benefits, unless such credit would result in a duplication of
benefits.
The Merger Agreement requires that Memory suspend all payroll
deductions, cause the exercise of each outstanding purchase
right and prevent any further purchase interval or offering
periods under Memorys Second Amended and Restated 2004
Employee Stock Purchase Plan no later than the Effective Time.
Further, the Merger Agreement requires that Memory terminate the
ESPP immediately prior to the Effective Time (and subject to the
consummation of the Merger).
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(b)
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Arrangements
with Parent and Merger Sub.
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Merger
Agreement, Tender and Support Agreement, and Confidentiality
Agreement
The summary of the Merger Agreement, the Tender and Support
Agreement, and the Confidentiality Agreement and the Addendum
thereto contained in The Transaction Documents of the Offer to
Purchase and the description of the conditions to the Offer
contained in Conditions to the Offer of the Offer to Purchase
are incorporated herein by reference.
On October 29, 2008, Memory and Roche entered into a
confidentiality agreement (the
Confidentiality
Agreement
), in connection with a potential business
combination transaction between the parties, under which Roche
agreed to keep confidential the information furnished to it and
its representatives by or on behalf of Memory for five years
from the date of the Confidentiality Agreement, and to use such
information only for purposes of evaluating a transaction with
Memory.
This summary is qualified in its entirety by reference to the
Merger Agreement, the Tender and Support Agreement, and the
Confidentiality Agreement, which are filed as
Exhibits (e)(1), (e)(2) and (e)(8) respectively, hereto and
are incorporated herein by reference.
Takeover
Laws
Memory is incorporated under the laws of the State of Delaware.
In general, Section 203 of the DGCL prevents an
interested stockholder (including a person who owns
or has the right to acquire 15% or more of a corporations
outstanding voting stock) from engaging in a business
combination (defined to include mergers and certain other
actions) with a Delaware corporation for a period of three years
following the date such person became an interested stockholder
unless, among other things, the business combination
is approved by the board of directors of such corporation prior
to such date. In connection with the Merger Agreement, on
November 24, 2008, the Board approved the Merger Agreement
and the transactions contemplated thereby, including the Offer
and the Merger for purposes of (i) Section 203 of the
DGCL and (ii) any moratorium, control
share acquisition, business combination,
fair price or other form of anti-takeover law or
regulation of any jurisdiction that may purport to be applicable
to the Merger Agreement, with the result that the voting
requirements and other limitations on business combinations set
forth in Section 203 of the DGCL shall not be applicable to
the Offer, the Merger or the transactions contemplated by the
Merger Agreement and the Board intends that no other form of
anti-takeover law or regulation shall be applicable to the
Offer, the Merger or the transactions contemplated by the Merger
Agreement.
6
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Item 4.
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The
Solicitation or Recommendation.
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The Board has: (i) determined that the Merger Agreement and
the transactions contemplated thereby are fair to and in the
best interests of Memorys stockholders; (ii) approved
and declared advisable the Merger Agreement and the transactions
contemplated thereby; and (iii) resolved (subject to the
Boards right to make an adverse recommendation change as
described in the Merger Agreement) to recommend the acceptance
of the Offer and adoption of the Merger Agreement by the
stockholders of Memory.
A copy of the letter to Memorys stockholders communicating
the Boards recommendation is filed as
Exhibit (a)(2)(A) hereto and is incorporated herein by
reference.
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(b)
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Background
and Reasons for the Recommendation.
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Background
of the Offer
As part of the continuous evaluation of Memorys business,
Memorys Board of Directors has periodically explored and
assessed strategic alternatives for the Company. These
alternatives included strategies to grow and expand
Memorys business and operations through collaboration and
licensing arrangements and alternatively to consider
opportunities for a merger or other business combination of
Memory, or its operations or assets, with one or more
pharmaceutical or biotechnology companies.
In furtherance of Memorys long-term strategy of entering
into collaboration agreements for preclinical and clinical
development and commercialization of its development candidates
and early stage programs, Memory entered into its first
collaboration agreement, for its PDE4 inhibitor program, in 2002
with Parent and an affiliated company, F. Hoffmann-La Roche
Ltd (together,
Roche
). During the course of
this collaboration, which was effectively terminated in June
2007, Memory designated two drug candidates for clinical
development: MEM 1414, which completed Phase 1
clinical trials, and MEM 1917 and Roche paid Memory
a total of $26 million pursuant to the collaboration
agreement. Memory is obligated to make milestone payments to
Roche upon specified development, regulatory and
commercialization milestones, and to pay royalties to Roche,
with respect to drug candidates covered by the collaboration
agreement.
In 2003, Memory and Roche entered into a second collaboration
agreement with respect to Memorys nicotinic alpha-7
agonist program (as amended, the
2003 Roche
Agreement
). Under the 2003 Roche Agreement, Memory has
granted to Parent an exclusive worldwide license to its
intellectual property on nicotinic alpha-7 receptor compounds.
Parent is obligated to make payments to Memory upon the
occurrence of certain events with respect to R3487/MEM 3454 (the
lead drug candidate in this program) and any other compounds
developed under this program, as well as to pay royalties on
commercialized products. Memory retains a co-promotion right in
the United States with respect to R3487/MEM 3454. As of
September 30, 2008, Roche had paid Memory $43 million
under the 2003 Roche Agreement and is required to make a
$5 million milestone payment in December 2008.
Memory is currently conducting a Phase 2 clinical trial of
R3487/MEM 3454 in cognitive impairment associated with
schizophrenia (CIAS), the top-line results of which are expected
to be announced by the end of April 2009. Memory has also
recently completed a Phase 1 program of
R4996/MEM 63908 in Alzheimers disease, the results of
which are expected to be announced in December 2008.
In addition to its activities with respect to R3487/MEM 3454 and
its other drug candidates and programs, during 2008,
Memorys Board of Directors and management have devoted
significant attention to reducing costs, raising capital,
maintaining the listing of Memorys common stock on NASDAQ,
seeking collaboration partners for Memorys non-partnered
early stage programs and exploring other strategic alternatives.
As part of its cost reduction efforts, in March 2008, Memory
reduced its work force by approximately 20%, targeting
reductions in the area of discovery research. In September 2008,
Memory targeted a further reduction in its work force by
approximately 55% in order to focus its resources on its
clinical development programs.
With respect to the continued NASDAQ listing of its Common
Stock, in December 2007 Memory was informed that it was not in
compliance with the $1.00 minimum closing bid price requirement
for continued listing on The
7
NASDAQ Global Market. In early April 2008, Memory received a
letter from The NASDAQ Stock Market stating that Memory was no
longer in compliance with the minimum $10 million
stockholders equity requirement for continued listing on
The NASDAQ Global Market. Memorys Board of Directors
determined that, as part of an overall plan to finance Memory
and remain listed on The NASDAQ Global Market, Memory would seek
to raise equity capital in a PIPE financing or other private
placement.
In connection with the proposed financing efforts, in May 2008,
Memory engaged Lazard Frères & Co. LLC
(
Lazard
) to act as placement agent in a
potential private placement of Memorys equity securities.
In mid-May 2008, Memorys management also proposed to Roche
an amendment to the 2003 Roche Agreement that would, among other
things, permit Memory to recognize deferred revenue from Roche
under this agreement on a more accelerated basis. This
acceleration of revenue recognition would be beneficial in
helping Memory to achieve compliance with the NASDAQ
stockholders equity listing requirement. During these
discussions, Roche indicated to Memory that it would be willing
to entertain entering into a broader strategic relationship with
Memory. Roche expressed support for Memory as its partner in an
important collaboration and was aware of Memorys financial
condition and the possibility of its common stock being delisted
from NASDAQ. Discussions between executives of Roche and
Memorys management continued through mid-July, during
which time the parties discussed a range of possibilities
including an equity investment, licensing arrangement and a
possible acquisition. However, the parties determined not to
pursue a broader strategic relationship at that time.
The Memory Board of Directors met in early June to consider its
alternatives, including pursuing discussions with Roche or
moving forward with its proposed PIPE equity financing. The
Board also considered the possibility that Memorys common
stock might be delisted and, if so, whether to consider a
deregistration of Memorys common stock, thereby preserving
cash that would otherwise be expended to maintain the
companys status as a public company. The Board of
Directors determined to move forward with the PIPE financing and
to consider the alternative of deregistration of its Common
Stock under the Securities Exchange Act of 1934 if its Common
Stock were delisted by NASDAQ.
At a meeting in July 2008, the Board directed management to
pursue a common stock PIPE financing to raise approximately
$20 million, as part of a plan proposed by Memory to NASDAQ
to allow Memorys common stock to be transferred to The
NASDAQ Capital Market rather than be delisted. The Chief
Executive Officer of Memory also updated the Board on his
discussions with Roche. During late July through October 2008,
Memorys management and Lazard, in accordance with
Memorys directives, contacted
and/or
met
with over 40 potential investors for a private placement.
In early October, Memory received a term sheet for a private
placement, which was submitted by funds managed by MPM Asset
Management LLC (
MPM
), the largest Memory
stockholder and an affiliate of the Chief Executive Officer who
is also a director of Memory (and who recused himself from the
negotiations on behalf of both Memory and MPM). MPM proposed a
private placement of preferred stock, for a minimum of
$7 million in proceeds, in which MPM would commit to invest
$5 million and Venrock Associates and one of its
principals, who is a director of Memory, had indicated that they
would expect to invest $1 million. The proposed terms
included the issuance of warrants to purchase a number of shares
of Common Stock equal to 50% of the shares issued in the
transaction (on an as converted basis). The transaction was
conditioned upon Memorys obtaining (i) at least
$2 million from other investors, which could include
Venrock, and (ii) stockholder approval of the transaction.
The price per underlying common share was to be based on the
lower of the market price preceding the signing of definitive
agreements and the market price at the time stockholder approval
was obtained.
On October 13, 2008, the Board of Directors of Memory met
to review and consider the proposed terms of the MPM financing.
Also present were members of management as well as
representatives of Covington & Burling LLP
(Covington)
, outside counsel to Memory.
Representatives of Lazard also joined for a portion of the
meeting and provided an overview of the PIPE financing efforts
to date and then current market conditions for equity
financings. The Board noted that, other than the MPM term sheet,
Memory had only received one other proposal, which was later
withdrawn. The Board believed that, although discussions were
continuing with a small number of other potential investors, it
was not likely that any of these parties would be in a position
to consummate a transaction in the immediate future. The Board
acknowledged the highly dilutive effect on existing stockholders
that the MPM financing would have, particularly given
Memorys declining stock price. However, the Board also
8
acknowledged the difficulty of raising funds prior to completion
of Memorys CIAS trial and the fact that Memory faced
delisting of its common stock in the near future. The Board
believed that having a financing completed and announced at that
time could be a countervailing positive factor. The Board also
determined that it would be preferable to increase the size of
the financing, if possible. Management was directed to continue
negotiations with MPM and to determine if it would be feasible
to bring additional investors into the financing.
While negotiations with MPM were continuing, on October 22,
2008, Memory received from Roche a letter, dated
October 21, 2008, outlining a potential transaction in
which Roche would consider acquiring 100% of the outstanding
shares of Memorys common stock at an aggregate valuation
range of $40 to $50 million. This letter was preceded by a
call from an executive of Roche to the Chief Executive Officer
of Memory in which the Roche executive indicated that the letter
was forthcoming and described its contents. The Board of
Directors of Memory met that same day to review the letter and
to determine next steps. Also present were members of
management, as well as representatives of Covington and Lazard.
A representative of Covington advised the directors of their
fiduciary duties under Delaware law in connection with a
possible sale of Memory. The Board discussed engaging Lazard,
which has significant experience in representing biotech and
pharmaceutical companies in mergers and acquisitions, as
Memorys financial advisor in connection with the proposed
Roche transaction in addition to its role of placement agent in
a possible equity financing. The Board of Directors also
discussed the importance of maintaining the MPM financing as an
alternative in the event that Memory were not able to agree upon
an acceptable transaction with Roche. The Board agreed that
management should proceed with negotiations with Roche in a
manner so as not to jeopardize any other alternatives. After
further discussion, the Board also authorized Memorys
management to solicit other third parties, with the assistance
of Lazard, as Memorys financial advisor, as expeditiously
as possible to determine whether any such parties would have an
interest in acquiring Memory.
The Board of Directors determined that it would be advisable to
appoint three directors as designated directors to
advise and direct management in its dealings with Roche, subject
to the oversight and direction of the full Board of Directors.
Jonathan J. Fleming, Chairman of the Board, Robert I. Kriebel,
Chairman of the Audit Committee, and Michael E. Meyers, M.P.H.
were approved as the designated directors. It was also agreed
that all directors would be invited to participate in all
meetings of the designated directors.
On October 23 and 24, 2008, representatives of Memory and Roche
discussed Roches non-binding proposal, principally
Memorys views with respect to the proposed valuation, and
discussed potential timing and the conduct of due diligence by
Roche.
Also, on October 24, 2008, Memory received notice from the
NASDAQ Listing Qualifications Panel that the listing of
Memorys Common Stock would be transferred from The NASDAQ
Global Market to The NASDAQ Capital Market, effective upon the
opening of trading on October 28, 2008. The Panel also
notified Memory that it had until October 31, 2008 to
comply with The NASDAQ Capital Market minimum market
capitalization requirement of $35 million or the
alternative requirement of $2.5 million in
stockholders equity in order to remain listed.
On October 24, 2008, management disclosed to MPM certain
information concerning the letter from Roche and informed MPM
that Memory intended to pursue negotiations with Roche regarding
a potential acquisition of Memory. After further discussions,
MPM acknowledged that negotiations regarding a financing would
be postponed until Memory determined whether to enter into a
transaction with Roche.
On October 25, 2008, the designated directors held a
meeting, together with a number of other directors, members of
management and representatives of Covington, to discuss the
proposal from Roche and the postponement of discussions with
MPM. Management also updated the Board of Directors on
developments with NASDAQ. The Board authorized management to
inform NASDAQ of the Roche discussions in order to seek a
postponement of the NASDAQ compliance requirements from
October 31, 2008 to December 3, 2008 (the last date to
which the NASDAQ Listing Qualifications Panel indicated it had
the authority to permit postponement).
On October 27, 2008, representatives of Memory and Roche
continued discussions regarding timing of a transaction and
valuation, as well as integration and operational issues. Memory
proposed that, as a means to enhance the valuation proposed by
Roche, Roche consider restructuring its offer to include a
contingent value right
9
(CVR) which would be payable upon the achievement of
a specified milestone or milestones with respect to
Memorys business.
On October 28, 2008, a meeting of the designated directors
was held, at which a number of the other directors, members of
management and Covington were present. The directors discussed
the third party solicitation efforts to be conducted on behalf
of Memory, including the companies to be contacted, and the
proposed form of confidentiality agreement to be presented to
Roche and other potential parties. Management also reviewed the
status of discussions with NASDAQ regarding a postponement of
the delisting determination deadline to December 3, 2008.
The designated directors reviewed a proposed term sheet for a
CVR to be proposed to Roche as a means to increase the overall
potential price to stockholders.
On October 29, 2008, Roche and Memory entered into a
confidentiality agreement and Memory began to provide due
diligence materials to Roche and its advisors.
On October 31, 2008, Memory received notice from the NASDAQ
Listing Qualifications Panel that the Panel had granted
Memorys request for an extension until December 3,
2008 to comply with the NASDAQ Capital Market minimum market
capitalization requirement of $35 million or the
alternative requirement of $2.5 million in
stockholders equity in order to remain listed.
On November 3 and 4, 2008, representatives of Roche met with
Memorys management near Memorys offices in Montvale,
New Jersey, principally to allow the Roche representatives to
conduct due diligence on Memorys operations. In addition,
Memorys management raised issues regarding valuation and
the CVR proposal.
During October and November 2008, 11 potential bidders were
contacted to determine their interest in a possible transaction
with Memory. One additional potential bidder contacted
Memorys Chief Executive Officer during this same period.
Two of these parties entered into confidentiality agreements and
conducted preliminary due diligence but none made an offer with
respect to a transaction.
On November 5, 2008, Davis Polk & Wardwell
(Davis Polk)
, Roches outside counsel,
distributed the first drafts of the merger agreement and a
tender and support agreement pursuant to which certain
stockholders of Memory would agree to tender their shares in a
tender offer by Roche for all outstanding shares of
Memorys Common Stock.
On November 7, 2008, the designated directors, together
with a number of other members of the Board, members of
management and representatives of Covington, met to discuss the
offer from Roche and the key business and legal issues. In
addition to price, these issues included, among others,
(i) revising the definition of a Company Material
Adverse Effect to ensure that certain potential events,
such as the outcome of Memorys Phase 2 CIAS trial,
would not fall within this definition, (ii) ensuring that
Memory could continue to discuss collaborations and equity
financings with third parties during the transaction (to be
available in the event the transaction with Roche was not
successfully consummated) and would be permitted to conduct the
trials that are ongoing or expected to be started in the near
future, (iii) limiting the applicability of a termination
fee to reasonable circumstances, (iv) providing for a time
frame for the transaction that is expeditious and compatible
with anticipated upcoming events for Memory and
(v) eliminating an obligation on the part of the directors,
officers and their affiliated funds to refrain from supporting
any other transaction for a specified period if the Offer or
Merger were not consummated or a superior proposal were
recommended by the Board.
On November 8, 2008, Covington, on behalf of Memory, sent
to Davis Polk a markup of the first drafts of the merger
agreement and tender and support agreement.
On November 11, 2008,
all-day
negotiations took place regarding the merger agreement and the
tender and support agreement among representatives of Memory,
Roche, Covington and Davis Polk.
On November 12, 2008, following substantial completion of
its financial and operational due diligence, Roche submitted a
written offer to acquire all outstanding shares of Memorys
Common Stock in a tender offer for a price, payable in cash, of
$0.55 per share, or approximately $45 million in the
aggregate, and indicated that this offer would be valid until
December 1, 2008. Separately, Roche indicated that it was
unwilling to pursue Memorys CVR proposal. A meeting of the
designated directors was convened that same day to review
Roches offer. A number of other directors also
participated in this meeting, as did Memorys management
and legal and financial advisors.
10
On November 13, 2008, a second meeting of the designated
directors was held to discuss Memorys response to
Roches offer of $0.55 per share of Common Stock, in which
a number of the other directors participated, as well as
Memorys management and legal and financial advisors. The
directors discussed a proposed written response to Roches
offer, a copy of which had been circulated to the directors
prior to the meeting. The directors authorized management to
respond to Roche with a non-binding counteroffer representing an
aggregate valuation of approximately $70 million for
Memory. The letter containing the counteroffer was delivered to
Roche on November 13, 2008.
On November 14, 2008, in accordance with Memorys
directives, a representative of Memorys financial advisor,
on behalf of Memory, telephoned an executive of Roche to discuss
Memorys counteroffer, and members of Memorys
management team contacted Roches deal team representatives
to provide further information with respect to Memorys
position on price. Roche indicated in both of these
conversations that it had carefully evaluated its offer and did
not intend to increase its proposed purchase price.
On November 17, 2008, the Board convened a special meeting,
at which management reported that on November 17, 2008, the
Chief Executive Officer of Memory contacted an executive of
Roche. In this conversation, the Roche executive indicated that
Roche was not willing to increase its offer from $0.55 per share
of Common Stock. The Roche executive stated that, if Memory
believed that a higher price was appropriate, Memory should make
another counteroffer but that, in any event, Roche would not be
willing to consider any proposal outside its original range of
$40 to $50 million, particularly in light of the costs that
Roche expected to incur in connection with winding down the
operations of Memory. The Board received an update from
Memorys financial advisor on the third party solicitation
efforts conducted to date. The Board noted that the parties
contacted to date had indicated that they were not interested in
pursuing an acquisition transaction with Memory at this time and
that one party had indicated that Roches relationship with
Memory was a deterrent to any interest it might otherwise have
in acquiring Memory. The Board discussed at length an
appropriate response to Roche and also discussed whether to
reconsider the MPM financing, given the expected inability to
obtain a valuation from Roche in excess of $45 to
$50 million. For the ensuing discussion, Mr. Kailian
and Dr. Evnin, each of whom had a potential conflict of
interest with respect to an MPM financing, were excused from the
meeting. Representatives of Covington advised the Board of
Directors regarding its fiduciary duties, given that both the
MPM financing and the Roche offer could constitute a change of
control transaction under Delaware law. The Board discussed the
deficiencies of the MPM financing terms, compared to the Roche
offer. These deficiencies included the fact that the funds
raised in the MPM financing would only be sufficient to
fund Memorys operations for approximately two
additional months, that current stockholders would be highly
diluted by such a financing, the lower valuation inherent in the
MPM financing, and the lack of liquidity available to
stockholders, which would worsen after Memorys common
stock were delisted in December. The Board renewed its
determination to focus on a sale to Roche, setting aside again
the potential MPM financing, and authorized management to
respond to Roche with a counteroffer of $0.61 per share of
Common Stock, representing an aggregate valuation of
approximately $50 million.
Management communicated to Mr. Kailian, who was the contact
person for communicating with the senior executive at Roche,
that he should make the counteroffer to Roche of approximately
$50 million, which represented an offer of $0.61 per share.
Mr. Kailian made such counteroffer to Roche orally on
November 19, 2008, which was confirmed in a letter from
Memory to Roche on November 20, 2008. On November 21,
2008, a Roche representative communicated to Memorys
financial advisor its agreement to the Boards counteroffer
of $0.61 per share of Common Stock, subject to Memorys
agreement on the remaining issues regarding the terms and
conditions of the transaction agreements. The parties agreed to
move forward as quickly as possible to resolve the remaining
open issues and to finalize Roches due diligence
investigation and the transaction agreements.
On November 22, 2008, the Board held a telephonic meeting
to discuss the proposed transaction in which members of
management and representatives of Memorys legal and
financial advisors participated. Management reviewed with the
directors the final open business points and received direction
from the Board of Directors on these points. Representatives of
Covington reviewed in detail with the directors a summary of the
terms of the merger agreement and tender and support agreement.
In particular, counsel reviewed the structure and timing of, and
conditions to, the tender offer, the nonsolicitation of third
party acquisition proposals and fiduciary out provisions
(including the matching rights of Roche), the termination
rights, and the amount of and triggers for the termination fee.
Counsel noted that Memory would not be prohibited, under the
Merger Agreement, from engaging
11
in discussions with potential collaboration partners and would
preserve the right, if the tender offer is not consummated by
January 10, 2009, to commence discussions with potential
equity investors. Lazard reviewed with the Board of Directors
its preliminary financial analysis of the $0.61 per Share cash
consideration. Also at this meeting, the Board was advised on
the potential size of the termination fee, based on the
discussions between the parties regarding the range of such fee,
and whether the deal protection terms in the Merger Agreement,
including a termination fee in the amount proposed, would not be
an impediment to a third party making a competing offer to
acquire Memory. Counsel reviewed with the directors the terms of
the tender and support agreement which each of them,
Memorys executive officers and their affiliates would be
required to enter into as a condition to Roches entering
into the merger agreement.
From November 20 to November 24, 2008, Roche completed its
due diligence and the parties negotiated the final terms and
conditions of the transaction agreements.
On November 24, 2008, the Board of Directors held a
telephonic meeting, with Memorys management and
representatives of Memorys legal and financial advisors
participating, to discuss the substantially final forms of the
Merger Agreement and the tender and support agreement, which had
previously been circulated to the Board, and to consider whether
or not to approve the agreements and recommend the transaction
to Memorys stockholders. A representative of Covington
first updated the Board on the outcome of negotiations over the
remaining business issues since the prior Board meeting. A
representative of Covington also reviewed, a final time, the
Boards fiduciary duties in determining whether to approve
the Roche transaction. Having reviewed in detail the terms of
the merger agreement and tender and support agreement at the
November 22 meeting, a representative of Covington pointed out
that a detailed summary of the agreements was previously
provided to the Board and answered questions from the directors.
A representative of Covington also described to the Board
certain benefits to be received by the directors and executive
officers as a result of in the proposed transaction, consisting
of the arrangements described above under Arrangements
with Current Executive Officers and Directors of Memory.
Also at this meeting, Lazard reviewed with the Board of
Directors Lazards financial analysis of the $0.61 per
Share consideration and rendered to the Memory Board of
Directors an oral opinion, which opinion was confirmed by
delivery of a written opinion, dated November 24, 2008, to
the effect that, as of that date and based upon and subject to
the assumptions, factors and qualifications set forth in its
opinion, the $0.61 per Share consideration to be paid in the
Offer and the Merger, taken together, to holders of Shares
(other than Parent, Merger Sub any other subsidiary of Parent or
Memory, the respective affiliates of Parent and Merger Sub and
holders who are entitled to and properly demand an appraisal of
their Shares) was fair, from a financial point of view, to such
holders. After further discussion, the Board approved
resolutions: (1) determining that the merger agreement and
the transactions contemplated thereby are fair to and in the
best interests of Memorys stockholders, (2) approving
and declaring advisable the merger agreement and the
transactions contemplated by the Merger Agreement,
(3) resolving to recommend acceptance of the Offer and
adoption of the merger agreement by the stockholders of Memory
and (4) approving the tender and support agreement.
On November 25, 2008, Memory, Parent and Merger Sub entered
into the Merger Agreement and publicly announced the transaction.
Reasons
for Recommendation
In evaluating the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, the
Board consulted with Memorys senior management and
advisors and, in recommending that Memorys stockholders
accept the Offer, considered a number of factors, including the
following:
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Memorys Financial Condition and Financing
Prospects.
Despite efforts over the past six
months to raise equity capital through a PIPE financing in order
to fund Memorys operations and to maintain its common
stock listing on The NASDAQ Global Market, Memory had been
unable to attract interest other than from existing
stockholders. These stockholders had offered terms unfavorable
to the other stockholders, including substantial dilution to
stockholders due to Memorys declining Common Stock price,
the significant warrant coverage sought in the MPM financing,
the delay entailed by MPMs requirement of a stockholder
approval vote prior to consummating the transaction and the
consequent likelihood that, because delisting by NASDAQ would
likely occur before the closing, the Common Stock price would
decline even further before
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the purchase price was set. Based on the results of its
financing efforts and given the even deeper downturn in the
economy, Memory had not developed a financing plan that would
allow it to regain compliance with the rules of The NASDAQ
Global Market or The NASDAQ Capital Market or to fund its
operations for more than approximately six months.
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Memorys Business Prospects.
The Board
discussed Memorys current business plan, which has been
substantially scaled back from its pre-2008 activities,
including the risks associated with achieving and executing upon
this plan as an independent public company and the strategic
alternatives available to Memory. The Board considered, among
other factors, that its stockholders would continue to be
subject to the risks and uncertainties of the Companys
financial and clinical development plans and prospects. These
risks and uncertainties include risks relating to the
Companys reliance upon a limited number of early-stage
development programs; the potential impact of a negative outcome
in Memorys
R3487/MEM
3454 Phase 2 clinical trial in CIAS, for which top-line data is
expected to be available by the end of April 2009; potential
difficulties or delays in other clinical development efforts;
and the fact that Memory is not likely to have its first
commercial product, if at all, until at least 2014.
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Memorys Relationship with Roche.
The
Board of Directors considered the fact that Memory has had a
close working relationship with Roche, under two extensive
collaboration and license agreements, since 2002, one of which
is for Memorys most advanced development program. Because
of this relationship, Roche is more knowledgeable about Memory
and its business than other potential acquisition partners were
or could reasonably be expected to become. Also because this
transaction allows Roche to bring Memorys Nicotinic
Alpha-7 program entirely within Roches operations, the
Board considered that Memory may be perceived by Roche to be
more valuable to Roche in comparison to Memorys value to
other potential acquirors. In addition, as noted by at least one
company that was solicited to determine its interest in
acquiring Memory, Roches relationship and its rights under
the 2003 Roche Agreement could possibly have a chilling effect
on the interest of other parties in pursuing an acquisition of
the entire company.
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Liquidity Issues.
Memorys Board
acknowledged that the trading market for its Common Stock is
volatile and that the Common Stock is thinly traded. If Memory
had not entered into the Roche transaction and Memorys
Common Stock were delisted from The NASDAQ Capital Market (which
NASDAQ has informed Memory would occur if Memory were not in
compliance on December 3, 2008), the Board of Directors
would have expected trading in Memorys Common Stock to be
even more sporadic, potentially resulting in further price
decreases. An all cash tender offer, as proposed by Roche,
provides immediate liquidity at closing and certainty of value
for Memorys stockholders.
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Discussions with Other Potential Parties.
The
Board noted that the efforts on behalf of Memory to seek
proposals from other parties to acquire Memory had focused on
companies that were believed to be the most likely potential
acquirors of Memory, based on their prior business relationship
with Memory, their familiarity with Memorys programs
and/or
the
overlap between their disease focus and Memorys.
Notwithstanding these efforts, no offers were received by Memory
from any of these parties.
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Transaction Financial Terms; Premium to Market
Price.
The Board considered the relationship of
the $0.61 per share price to be paid in cash under the Merger
Agreement to the current and historical market prices of
Memorys Common Stock, which Offer Price represents
(i) a 319% premium over the closing stock price of $0.146
on November 24, 2008, the last trading date prior to the
announcement of the proposed transaction, (ii) a 351%
premium over the average closing stock price of $0.135 during
the 30 trading days ended on November 24, 2008, and
(iii) a 210% premium over the average closing stock price
of $0.197 over the three months ended on November 24, 2008.
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Financial analysis and opinion of Lazard
. The
Board considered Lazards financial advice and analyses,
including Lazards opinion, dated November 24, 2008,
to the Memory Board as to the fairness, from a financial point
of view and as of the date of the opinion, of the $0.61 per
Share consideration to be paid in the Offer and the Merger,
taken together, to holders of the Shares (other than Parent,
Merger Sub, any other subsidiary of Parent or Memory, the
respective affiliates of Parent and Merger Sub and holders who
are entitled to and properly demand an appraisal of their
Shares), as more fully described below under the caption
Opinion of Memorys Financial Advisor.
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13
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Ability to Respond to Unsolicited Takeover Proposals and
Terminate the Merger Agreement to Accept a Superior Proposal;
Certain Other Discussions Permitted
. The Board
considered the provisions in the Merger Agreement that provide
for the ability of Memory, subject to the terms and conditions
of the Merger Agreement, to provide information to and engage in
negotiations with third parties that make an unsolicited
acquisition proposal, and, subject to payment of a termination
fee and the other conditions set forth in the Merger Agreement,
to enter into a transaction with a party that makes a superior
acquisition proposal. The Board considered that these provisions
(including the termination fee provisions) of the Merger
Agreement, based in part on advice received, would not be a
significant deterrent to competing offers being made that might
be superior to the Offer Price and the Merger Consideration. In
addition, the Merger Agreement permits Memory, subject to the
terms and conditions of the Merger Agreement, to engage in
discussions with potential collaboration partners during the
term of the Merger Agreement and, if the Offer has not been
consummated by January 10, 2009, to enter into discussions
with potential investors regarding an equity financing to be
available in the event that the Roche transaction is not
consummated, subject to certain limitations.
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Timing of Transaction.
The Board considered
the fact that the parties would be able to complete due
diligence and negotiations and to enter into the Merger
Agreement prior to Memorys common stock being delisted
from The NASDAQ Capital Market. The Board further considered the
fact that the Offer and the Merger would be likely to be
consummated prior to the completion of Memorys Phase 2
clinical trial of R3487/MEM 3454 in CIAS. The Board also
considered the anticipated timing of consummation of the
transactions contemplated by the Merger Agreement generally and
the structure of the transaction as a cash tender offer, which
would allow stockholders to receive the transaction
consideration in a relatively short timeframe, followed by the
Merger in which stockholders would receive the same
consideration as received by stockholders who tendered their
shares in the Offer.
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Conditions to the Consummation of the Offer and the Merger;
Likelihood of Closing
. The Board considered the
reasonable likelihood of the consummation of the transactions
contemplated by the Merger Agreement in light of the nature of
the conditions in the Merger Agreement to the obligation of
Roche to accept for payment and pay for the shares of common
stock tendered pursuant to the Offer, including that the
consummation of the Offer and the Merger are not contingent on
Roches ability to secure financing. The Board further
considered the fact that Roche agreed to exclude from the
definition of Company Material Adverse Effect in the
Merger Agreement a number of potential adverse issues such as
the outcome of the CIAS trial or any studies being conducted by
Roche with respect to Nicotinic Alpha-7 compounds licensed under
the 2003 Roche Agreement. Finally, the Board considered the
relative likelihood of obtaining required regulatory approvals
for the proposed transaction and the terms of the Merger
Agreement regarding the obligations of both companies to pursue
such approvals.
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Appraisal Rights.
The Board determined that
Memorys stockholders would have a sufficient remedy if
they disapproved of the transaction because those of
Memorys stockholders who do not tender their Memory common
stock in the Offer and meet the other required conditions will
be entitled to appraisal rights under Delaware law in connection
with the Merger.
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Tender and Support Agreement.
The Board
considered that the executive officers and directors of Memory
and their affiliates owning approximately 29.5% of the
outstanding Memory common stock would be entering into a tender
and support agreement with Roche to tender their shares and vote
in favor of the Merger.
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The Board also considered a number of uncertainties and risks in
their deliberations concerning the transactions contemplated by
the Merger Agreement, including the following:
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Alternatives to Sale.
The Board considered the
alternatives to a sale of Memory, including continuing to
operate as an independent public company, and in particular, the
potential for stockholders of Memory to share in any future
earnings or share value growth of Memory, but also the risks and
uncertainties associated with continuing to operate as a public
company.
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14
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Cash Consideration.
The Board considered the
fact that, subsequent to completion of the Merger, Memory will
no longer exist as an independent public company and that the
nature of the transaction as a cash transaction would prevent
Memorys stockholders from being able to participate in any
value creation that Memory could generate going forward, as well
as any future appreciation in the value of the combined company.
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Restrictions on Soliciting Additional Offers; Termination
Fee.
The Board considered the restrictions that
the Merger Agreement imposes on actively soliciting competing
proposals and the requirement, under the Merger Agreement, that,
under certain circumstances, Memory would be required to pay to
Roche a termination fee of $1.5 million.
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Effects of a Public Announcement of the Offer and Merger on
Memorys Business Operations.
The Board
considered the effect of a public announcement of the execution
of the Merger Agreement on its operations and employees,
particularly the possibility that the announcement could create
uncertainly among Memorys current employees, business
partners and collaboration partners as to the future of their
relationships with Memory and the pendency of the transaction
could potentially lead to departures of employees or the
termination of agreements with third parties, which could have a
negative effect on Memory if the transaction were not
consummated.
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Conditions to the Consummation of the
Offer.
The Board considered that, under the
Merger Agreement, Memory has agreed that it will conduct its
business in the ordinary course of business consistent with past
practice and that, subject to specified exceptions, Memory will
not take a number of actions related to the conduct of its
business without the prior consent of Roche. Although Memory has
negotiated advance approvals of certain activities under these
provisions, the Board recognized that the Merger Agreement could
limit Memorys ability to operate its business and pursue
opportunities in the manner in which it would do so absent such
limitations.
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Taxable Nature of the Transaction.
The Board
considered that any gains Memorys stockholders receive
from an all-cash transaction would generally be taxable for
U.S. federal income tax purposes.
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Potential Conflicts of Interest.
The Board
considered the interests of Memorys directors and
executive officers that are different from, or in addition to,
the interests of Memorys stockholders. The Board did not
believe that these interests should affect its decision to
approve the Offer and the Merger in light of the fact that such
interests are primarily based on contractual arrangements that
were in place prior to the negotiation of the Merger Agreement
and the Boards assessment that the judgment and
performance of the directors and executive officers would not be
impaired by such interests.
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The Board believed that, overall, the potential benefits of the
Offer and the Merger to Memory stockholders outweighed the risks
of the Offer and the Merger.
The foregoing discussion of information and factors considered
by the Board is not intended to be exhaustive. In light of the
variety of factors considered in connection with its evaluation
of the Offer and the Merger, the Board did not find it
practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching
its determinations and recommendations. Moreover, each member of
the Board applied his own personal business judgment to the
process and may have given different weight to different factors.
Opinion
of Memorys Financial Advisor
Lazard is acting as financial advisor to Memory in connection
with the Offer and the Merger. As part of that engagement, the
Memory board of directors requested that Lazard evaluate the
fairness, from a financial point of view, of the $0.61 per Share
consideration to be paid in the Offer and the Merger, taken
together, to holders of Shares (other than Parent, Merger Sub,
any other subsidiary of Parent or Memory, the respective
affiliates of Parent and Merger Sub and holders who are entitled
to and properly demand an appraisal of their Shares). At a Board
meeting held on November 24, 2008 to evaluate the Offer and
the Merger, Lazard delivered to the Board an oral opinion, which
opinion was confirmed by delivery of a written opinion, dated
November 24, 2008, to the effect that, as of that date and
based upon and subject to certain assumptions, factors and
qualifications, the $0.61 per Share consideration to be paid in
the Offer and the Merger, taken together, to holders of Shares
(other than Parent, Merger Sub,
15
any other subsidiary of Parent or Memory, the respective
affiliates of Parent and Merger Sub and holders who are entitled
to and properly demand an appraisal of their Shares) was fair,
from a financial point of view, to such holders.
The full text of Lazards opinion, which sets forth,
among other things, the procedures followed, assumptions made,
matters considered and qualifications and limitations on the
review undertaken by Lazard in connection with its opinion, is
attached to this document as Annex I and is incorporated
into this document by reference. The description of
Lazards opinion set forth in this document is qualified in
its entirety by reference to the full text of Lazards
opinion. Lazards opinion was addressed to the Board, was
only one of many factors considered by the Board in its
evaluation of the Offer and the Merger and only addresses the
fairness of the $0.61 per Share consideration from a financial
point of view. Lazards opinion does not address the
relative merits of the Offer or the Merger as compared to any
other transaction or business strategy in which Memory might
engage or the merits of the underlying decision by Memory to
engage in the Offer or the Merger. Lazards opinion is not
intended to, and does not, constitute a recommendation to any
stockholder as to whether such stockholder should tender Shares
in the Offer or how such stockholder should vote or act with
respect to the Offer or the Merger or any matter relating to the
Offer or the Merger. Lazards opinion was necessarily based
on economic, monetary, market and other conditions as in effect
on, and the information made available to Lazard as of,
November 24, 2008, the date of its opinion. Lazard assumes
no responsibility for updating or revising its opinion based on
circumstances or events occurring after the date of the
opinion.
In connection with its opinion, Lazard:
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reviewed the financial terms and conditions of a draft as of
November 24, 2008 of the merger agreement;
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analyzed certain publicly available historical business and
financial information relating to Memory;
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reviewed revenue forecasts and other data provided to Lazard by
Memory relating to Memorys lead product candidate,
R3487/MEM 3454, under alternative product development and
commercialization scenarios and discussed with the senior
management of Memory its assessment as to the relative
likelihood of achieving the future financial results reflected
in such forecasts under such scenarios;
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held discussions with members of Memorys senior management
with respect to the businesses and prospects of Memory,
including the views of such management as to the liquidity needs
of, and capital resources available to, Memory to fund its
operations;
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reviewed public information with respect to certain other
companies in lines of business Lazard believed to be generally
relevant in evaluating the business of Memory;
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reviewed the financial terms of certain business combinations
involving companies in lines of business Lazard believed to be
generally relevant in evaluating the business of Memory;
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reviewed historical stock prices and trading volumes of Memory
Common Stock; and
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conducted such other financial studies, analyses and
investigations as Lazard deemed appropriate.
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Lazard assumed and relied upon the accuracy and completeness of
the foregoing information, without independent verification of
such information. Lazard did not conduct any independent
valuation or appraisal of any of the assets or liabilities,
contingent or otherwise, of Memory or concerning the solvency or
fair value of Memory, and Lazard was not furnished with such
valuation or appraisal. Lazard was advised, and Lazard assumed,
with Memorys consent, that R3487/MEM 3454 accounts for
substantially all of the value of Memory. Lazard further was
advised that, other than revenue forecasts for R3487/MEM 3454
referred to above, no financial forecasts relating to Memory
beyond calendar year 2009 had been prepared by Memorys
management and, therefore, Lazard was advised to rely solely on
such revenue forecasts for R3487/MEM 3454 for purposes of the
financial analysis of Memory performed by Lazard. With respect
to those revenue forecasts, Lazard assumed, with Memorys
consent, that they were reasonably prepared on bases reflecting
the best currently available estimates and judgments of
Memorys management as to the future financial performance
of Memory under the alternative scenarios reflected in those
forecasts. Lazard assumed no responsibility for and expressed no
view as to such forecasts or the assumptions on which they were
based. Lazard also relied, with Memorys consent, on the
assessments of
16
Memorys management as to the validity of, and risks
associated with, the product candidates of Memory, including,
without limitation, the timing and probability of successful
development, testing and marketing, and of approval by
appropriate governmental authorities, of such product candidates.
In rendering its opinion, Lazard assumed, with Memorys
consent, that the Offer and the Merger would be consummated on
the terms described in the Merger Agreement, without any waiver
or modification of any material terms or conditions by Memory or
Parent. Lazard also assumed, with Memorys consent, that
the merger agreement, when executed, would conform to the draft
reviewed by Lazard in all material respects. Lazard further
assumed, with Memorys consent, that obtaining the
necessary regulatory or third party approvals and consents for
the Offer and the Merger would not have an adverse effect on
Memory or the Offer and the Merger. Lazard did not express any
opinion as to any tax or other consequences that might result
from the Offer and the Merger, nor did Lazards opinion
address any legal, tax, regulatory or accounting matters, as to
which Lazard understood that Memory obtained such advice as it
deemed necessary from qualified professionals. Lazard expressed
no view or opinion as to any terms or other aspects of the Offer
and the Merger (other than the $0.61 per Share consideration to
the extent expressly specified in its opinion), including,
without limitation, the form or structure of the Offer and the
Merger or any tender and support or other agreements or
arrangements entered into in connection with, or otherwise
contemplated by, the Offer and the Merger. In addition, Lazard
expressed no view or opinion as to the fairness of the amount or
nature of, or any other aspects relating to, the compensation to
any officers, directors or employees of any parties to the Offer
and the Merger, or class of such persons, relative to the $0.61
per Share consideration or otherwise. Further, Lazard did not
express any opinion as to the price at which shares of Memory
common stock would trade at any time subsequent to the
announcement of the Offer and the Merger. Except as described
above, Memory imposed no other instructions or limitations on
Lazard with respect to the investigations made or the procedures
followed by Lazard in rendering its opinion. The issuance of
Lazards opinion was approved by an authorized committee of
Lazard.
The following is a brief summary of the material financial and
comparative analyses that Lazard deemed to be appropriate for
this type of transaction and that were reviewed with the Memory
board of directors by Lazard in connection with rendering its
opinion. The summary of Lazards analyses described below
is not a complete description of the analyses underlying
Lazards opinion. The preparation of a financial opinion is
a complex analytical process involving various determinations as
to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular
circumstances, and, therefore, is not readily susceptible to
summary description. In arriving at its opinion, Lazard did not
draw, in isolation, conclusions from or with regard to any
factor or analysis considered by it. Rather, Lazard made its
determination as to fairness on the basis of its experience and
professional judgment after considering the results of all of
the analyses.
In its analyses, Lazard considered industry performance, general
business, economic, market and financial conditions and other
matters, many of which are beyond the control of Memory. No
company or transaction used in Lazards analyses is
identical to Memory or the Offer and the Merger, and an
evaluation of the results of those analyses is not entirely
mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the public
trading, acquisition or other values of the companies analyzed.
The estimates contained in Lazards analyses and the ranges
of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less
favorable than those suggested by the analyses. In addition,
analyses relating to the value of businesses or securities do
not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, the
estimates used in, and the results derived from, Lazards
analyses are inherently subject to substantial uncertainty.
The financial analyses summarized below include information
presented in tabular format. In order to fully understand
Lazards financial analyses, the tables must be read
together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
Considering the data in the tables below without considering the
full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Lazards
financial analyses.
17
Lead Product Candidate Discounted Cash Flow
Analysis.
Lazard performed a discounted cash flow
analysis to calculate the estimated present value as of
December 31, 2008 of the revenue attributable to
Memorys lead product candidate, R3487/MEM 3454, that
Memory was forecasted to generate from calendar years 2009
through 2027 utilizing internal estimates of Memorys
management under two alternative product development and
commercialization scenarios, referred to as Management Case A
and Management Case B. Estimated revenue under each case was
probability-weighted to reflect managements assessments as
to the likelihood of obtaining regulatory approval to
commercialize R3487/MEM 3454 for Alzheimers Disease and
Cognitive Impairment Associated with Schizophrenia indications
and were discounted to present value as of December 31,
2008 using discount rates ranging from 20.0% to 30.0%. This
analysis indicated the following implied per share equity
reference ranges for Memory under Management Case A and
Management Case B, as compared to the $0.61 per Share
consideration:
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Implied per Share Equity
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Reference Ranges for Memory Based on
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Per Share
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Management Case A
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Management Case B
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Consideration
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$
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0.40 - $0.84
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$
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0.20 - $0.43
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$
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0.61
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Selected Precedent Transactions
Analysis.
Lazard reviewed, to the extent publicly
available, financial information relating to the following three
selected transactions involving companies in the
biopharmaceuticals industry:
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Acquiror
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Target
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Pfizer Inc.
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Coley Pharmaceutical Group, Inc.
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GlaxoSmithKline plc
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Genelabs Technologies, Inc.
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Eli Lilly and Company
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SGX Pharmaceuticals, Inc.
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Lazard reviewed technology values in the selected transactions,
calculated as the equity value implied for the target company
based on the consideration payable in the selected transaction,
less cash and cash equivalents, plus straight debt, per expected
marketed product of the target company taking into account all
of the relevant target companys product candidates as well
as only its lead product candidate(s). Lazard then applied a
range of selected technology values derived from the selected
transactions to the number of Memorys expected marketed
products based both on all of its product candidates and on only
its lead product candidate, R3487/MEM 3454. Financial data for
the selected transactions were based on publicly available
information at the time of announcement of the relevant
transaction. Financial data for Memory were based on
Memorys public filings. The number of expected marketed
products of the target companies and Memory were derived by
applying to their respective product candidates and lead product
candidate(s) cumulative probabilities of marketing approval
based on the Journal of Clinical Pharmacology &
Therapeutics, May 2001, Risks in New Drug Development
Approval Success Rates for Investigational Drugs,
published by the Tufts Center for the Study of Drug Development,
Tufts University. This analysis indicated the following implied
per share equity reference ranges for Memory based both on all
of its product candidates and on only its lead product
candidate, as compared to the $0.61 per Share consideration:
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Implied per Share Equity
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Reference Ranges for Memory Based on
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Per Share
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All Product Candidates
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Lead Product Candidate
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Consideration
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$
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0.27 - $2.04
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$
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0.16 - $0.77
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$
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0.61
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Selected Publicly Traded Companies
Analysis.
Lazard reviewed publicly available
financial information for the following four publicly traded
emerging biopharmaceuticals companies:
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Allon Therapeutics Inc.
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Cortex Pharmaceuticals, Inc.
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Neurocrine Biosciences, Inc.
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Sygnis Pharma AG
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Lazard reviewed technology values of the selected companies,
calculated as market value based on closing stock prices on
November 21, 2008, less cash and cash equivalents, plus
straight debt, per expected marketed product taking into account
all of the product candidates of the selected companies as well
as only their lead product
18
candidate(s). Lazard then applied a range of selected technology
values derived from the selected companies to the number of
Memorys expected marketed products based both on all of
its product candidates and on only its lead product candidate,
R3487/MEM 3454. Financial data for the selected companies and
Memory were based on public filings and other publicly available
information. The number of expected marketed products of the
selected companies and Memory were derived by applying to their
respective product candidates and lead product candidate(s)
cumulative probabilities of marketing approval based on the
Journal of Clinical Pharmacology & Therapeutics, May
2001, Risks in New Drug Development Approval Success Rates
for Investigational Drugs, published by the Tufts Center
for the Study of Drug Development, Tufts University. This
analysis indicated the following implied per share equity
reference ranges for Memory based both on all of its product
candidates and on only its lead product candidate, as compared
to the $0.61 per Share consideration:
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Implied per Share Equity
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Reference Ranges for Memory Based on
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Per Share
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All Product Candidates
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Lead Product Candidate
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Consideration
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$
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0.13 - $0.88
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$
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0.08 - $0.54
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$
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0.61
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Miscellaneous.
Lazard, as part of its
investment banking business, is regularly engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private
placements, leveraged buyouts, and valuations for estate,
corporate and other purposes. Lazard has provided certain
investment banking services to Memory unrelated to the Offer and
the Merger, for which Lazard has received and may receive
compensation. In the ordinary course of their respective
businesses, affiliates of Lazard and LFCM Holdings LLC (an
entity indirectly owned in large part by managing directors of
Lazard) may actively trade securities of Memory and certain
affiliates of Roche for their own accounts and for the accounts
of their customers and, accordingly, may at any time hold a long
or short position in such securities.
Lazard is an internationally recognized investment banking firm
providing a full range of financial advisory and other services.
Lazard was selected to act as Memorys financial advisor
because of its qualifications, experience and reputation in
investment banking and mergers and acquisitions and its
familiarity with Memory.
Lazard prepared the above analyses for the purpose of providing
an opinion to the Memory board of directors as to the fairness,
from a financial point of view, of the $0.61 per Share
consideration to be paid in the Offer and the Merger, taken
together, to holders of Shares (other than Parent, Merger Sub,
any other subsidiary of Parent or Memory, the respective
affiliates of Parent and Merger Sub and holders who are entitled
to and properly demand an appraisal of their Shares). Lazard did
not recommend any specific consideration to the Memory board of
directors or that any given consideration constituted the only
appropriate consideration for the Offer and the Merger.
Lazards opinion and analyses were only one of many factors
taken into consideration by the Memory board of directors in its
evaluation of the Offer and the Merger. Consequently, the
analyses described above should not be viewed as determinative
of the views of the Memory board of directors or Memorys
management with respect to the $0.61 per share consideration or
as to whether the Memory board of directors would have been
willing to determine that a different consideration was fair.
For a description of the terms of Lazards engagement as
Memorys financial advisor, see the discussion under
Item 5 below.
To Memorys knowledge after reasonable inquiry, all of
Memorys executive officers, directors and affiliates
currently intend to tender or cause to be tendered all Shares
held of record or beneficially owned by them pursuant to the
Offer. Pursuant to the tender and support agreement, certain
Memory stockholders and all Memory directors and executive
officers have committed to accept the Offer and to tender all
Shares owned directly or indirectly by them, which represents
approximately 29.5% of the Companys outstanding shares of
Common Stock.
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Item 5.
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Persons/Assets,
Retained, Employed, Compensated or Used.
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In connection with Lazards services as Memorys
financial advisor, Memory has agreed to pay Lazard a customary
fee, a portion of which was payable in connection with the
rendering of Lazards opinion and a substantial portion of
which is contingent upon the closing of the Offer. Memory also
has agreed to reimburse Lazard for its reasonable expenses,
including reasonable attorneys fees, and to indemnify
Lazard and certain related parties against certain liabilities
that may arise out of the rendering of its advice, including
certain liabilities under U.S. federal securities laws.
Neither Memory nor any person acting on its behalf has employed,
retained, compensated or used any person to make solicitations
or recommendations to security holders of Memory with respect to
the Offer or the Merger.
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Item 6.
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Interest
in Securities of the Subject Company.
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No transactions in the Shares have been effected during the past
60 days by Memory, or, to the best of Memorys
knowledge, any of Memorys directors, executive officers,
affiliates or subsidiaries.
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Item 7.
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Purposes
of the Transaction and Plans or Proposals.
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(a) Except as indicated in Items 3 and 4 above, no
negotiations are being undertaken or are underway by Memory in
response to the Offer that relate to a tender offer or other
acquisition of Memorys securities by Memory, any
subsidiary of Memory or any other person.
(b) Except as indicated in Items 3 and 4 above, no
negotiations are being undertaken or are underway by Memory in
response to the Offer that relate to, or would result in,
(i) any extraordinary transaction, such as a merger,
reorganization or liquidation, involving Memory or any
subsidiary of Memory, (ii) any purchase, sale or transfer
of a material amount of assets by Memory or any subsidiary of
Memory or (iii) any material change in the present dividend
rate or policy, or indebtedness or capitalization of Memory.
(c) Except as indicated in Items 3 and 4 above, there
are no transactions, resolutions of the Board, agreements in
principle or signed contracts entered into in response to the
Offer that relate to or would result in one or more of the
matters referred to in this Item 7.
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Item 8.
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Additional
Information.
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Section 14(f)
Information Statement
The Information Statement is being furnished in connection with
the possible designation by Roche of certain persons to be
appointed to the Memory Board. Such persons, if appointed, will
constitute a majority of Memorys Board.
Top-Up
Option
Pursuant to the terms of the Merger Agreement, Memory granted
Merger Sub an irrevocable one-time option (the
Top-Up
Option
), to purchase at a price per share of Common
Stock equal to the price paid per share of Common Stock in the
Offer up to the number of Shares that, when added to the number
of Shares owned by Merger Sub and any of its affiliates at the
time of such exercise, shall constitute one Share more than 90%
of the Shares that would be outstanding immediately after the
issuance of all Shares to be issued upon exercise of such
option, calculated on a fully-diluted basis. The
Top-Up
Option is exercisable only one time and only if the number of
shares issuable upon exercise of the
Top-Up
Option would not exceed the number of authorized but unissued
and unreserved shares of Common Stock and may only be exercised
on or prior to the tenth business day after the expiration of
the Offer pursuant to the Merger Agreement or the expiration of
any subsequent offering period. In no event shall the
Top-Up
Option be exercisable if prohibited by law.
Vote
Required to Approve the Merger
The Board has approved the Offer, the Merger and the Merger
Agreement in accordance with the DGCL. Under Section 253 of
the DGCL, if Merger Sub acquires, pursuant to the Offer or
otherwise, including the issuance
20
by Memory of shares upon the exercise by Merger Sub of the
Top-Up
Option, at least 90% of the outstanding Shares, Merger Sub will
effect the Merger after consummation of the Offer without a vote
by Memorys stockholders (a
Short-Form Merger
). If Merger Sub
acquires, pursuant to the Offer or otherwise, less than 90% of
the outstanding Shares, the affirmative vote of a majority of
the outstanding Shares, including the Shares owned by Merger
Sub, for the adoption of the agreement of merger will be
required under the DGCL to effect the Merger.
Exon-Florio
Amendment
Section 721 of the Defense Production Act of 1950, as
amended (
Exon-Florio
), authorizes the
Committee on Foreign Investment in the United States
(
CFIUS
) to review and investigate mergers,
acquisitions and takeovers that could result in foreign control
of persons engaged in interstate commerce in the United States
to determine the effects of the transaction on the national
security of the United States. The Merger Agreement requires
Memory and Roche to file a joint voluntary notice of the
transactions contemplated by the Merger Agreement with CFIUS,
which joint notice was filed with CFIUS on November 25,
2008. It is a condition to the obligation of Merger Sub to
accept Shares in the Offer that CFIUS will have completed its
national security review and, if necessary, investigation of the
transactions contemplated by the Merger Agreement, and concluded
that there are no unresolved national security concerns
sufficient to warrant further action under Exon-Florio.
Hart-Scott-Rodino
Antitrust Improvements Act of 1976
Under the United States
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the
HSR
Act
) and the rules that have been promulgated
thereunder, certain acquisition transactions may not be
consummated unless Pre-merger Notification and Report Forms have
been filed with the Antitrust Division and the FTC and certain
waiting period requirements have been satisfied. The purchase of
Shares pursuant to the Offer is not subject to such requirements
because the transaction does not meet the jurisdictional minimum
size-of-transaction threshold under the HSR Act.
Regardless of whether a filing is required under the HSR Act,
the FTC and the DOJ frequently scrutinize the legality under the
antitrust laws of transactions such as the Merger. At any time
before or after the purchase of the Shares pursuant to the
Offer, the FTC or DOJ could take such action under the antitrust
laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to
the Offer or seeking the divestiture of Shares purchased by
Merger Sub or Roche. Private parties and state attorney generals
may also bring legal action under federal or state antitrust
laws under certain circumstances. Memory and Roche believe that
the Offer will not violate the antitrust laws. Nevertheless,
there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such challenge is
made, what the result would be.
Memory is not aware of any antitrust or merger control statutes
or regulations of foreign countries that would require the
filing of information with, or the obtaining of the approval of,
antitrust or competition authorities therein with respect to the
purchase of Shares pursuant to the Offer. Memory is not aware of
any other filings, approvals or other actions by or with any
governmental authority or administrative or regulatory agency
other than the forgoing CFIUS filing that would be required for
Merger Subs or Roches acquisition or ownership of
the Shares.
Appraisal
Rights
No appraisal rights are available in connection with the Offer.
However, if the Merger is consummated, persons who are holders
of Shares at the Effective Time will have certain rights under
Section 262 of the DGCL to demand appraisal of their
Shares. Such rights, if the statutory procedures are complied
with, could entitle the holder to a judicial determination of
the fair value of the Shares at the Effective Time
(excluding any element of value arising from the accomplishment
or the expectation of the Merger), to be paid in cash, in lieu
of the Merger Price. The value so determined could be more or
less than the Merger Price. Holders of Shares should be aware
that investment banking opinions as to the fairness from a
financial point of view of the consideration payable in a merger
are not opinions as to fair value under Section 262
of the DGCL.
21
Appraisal rights cannot be exercised at this time. Stockholders
who will be entitled to appraisal rights in connection with the
Merger will receive additional information concerning those
rights and the procedures to be followed in order to perfect
them before such stockholders have to take any action in
connection with such rights.
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Exhibit
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|
|
No.
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|
Description
|
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|
|
|
(a)(1)(A)
|
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Offer to Purchase, dated December 3, 2008 .*
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|
|
(a)(1)(B)
|
|
Form of Letter of Transmittal .*
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|
(a)(1)(C)
|
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Form of Notice of Guaranteed Delivery .*
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(a)(1)(D)
|
|
Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees .*
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|
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|
(a)(1)(E)
|
|
Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees
.*
|
|
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|
(a)(1)(F)
|
|
Guidelines for Certification of Taxpayer Identification Number
on Substitute
Form W-9
.*
|
|
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|
(a)(1)(G)
|
|
Form of Summary Newspaper Advertisement as published on
December 3, 2008.*
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|
(a)(1)(H)
|
|
Joint press release issued by Parent and Memory on
November 25, 2008 (incorporated by reference to the
Schedule 14D-9C
filed by Memory on November 25, 2008).
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|
|
|
(a)(2)(A)
|
|
Letter to stockholders of Memory, dated December 3, 2008,
2008.
|
|
|
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(e)(1)
|
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Agreement and Plan of Merger, dated as of November 25,
2008, among Parent, Merger Sub and Memory (incorporated by
reference to Exhibit 2.1 to the
Form 8-K
filed by Memory on November 25, 2008).
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(e)(2)
|
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Tender and Support Agreement, dated as of November 25,
2008, among Parent, Merger Sub and certain stockholders as
listed on the signature pages thereto.
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|
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(e)(3)
|
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Amended and Restated Employment Letter Agreement, dated
February 11, 2008, between Memory and Michael P. Smith
(incorporated herein by reference to Exhibit 10.4 to
Memorys Current Report on
Form 8-K,
filed on February 11, 2008).
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|
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(e)(4)
|
|
Amended and Restated Employment Letter Agreement, dated
February 11, 2008, between Memory and David A.
Lowe, Ph.D. (incorporated herein by reference to
Exhibit 10 .1 to Memorys Current Report on
Form 8-K,
filed on February 11, 2008).
|
|
|
|
(e)(5)
|
|
Amended and Restated Employment Letter Agreement, dated
February 11, 2008, between Memory and Stephen
Murray, M.D., Ph.D. (incorporated herein by reference
to Exhibit 10.2 to Memorys Current Report on
Form 8-K,
filed on February 11, 2008).
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(e)(6)
|
|
Amended and Restated Employment Letter Agreement, dated as of
February 11, 2008, between Jzaneen Lalani and Memory
(incorporated herein by reference to Exhibit 10.3 to
Memorys Current Report on
Form 8-K,
filed on February 11, 2008).
|
|
|
|
(e)(7)
|
|
Amended and Restated Employment Agreement, dated
September 30, 2008, by and between the Memory and James R.
Sulat (incorporated herein by reference to Exhibit 10.1 to
Memorys Quarterly Report on
Form 10-Q,
filed on November 14, 2008).
|
|
|
|
(e)(8)
|
|
Confidentiality Agreement, dated October 29, 2008, between F.
Hoffmann-La Roche Ltd. and Memory Pharmaceuticals Corp.
|
|
|
|
(e)(9)
|
|
Amended and Restated Certificate of Incorporation of Memory
Pharmaceuticals Corp. (incorporated herein by reference to
Exhibit 3.1 to Memorys Quarterly Report on
Form 10-Q,
filed on August 13, 2008).
|
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|
*
|
|
Incorporated by reference to the Schedule TO filed by
Merger Sub and Parent on December 3, 2008.
|
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Included in materials mailed to stockholders of Memory.
|
22
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
Memory Pharmaceuticals Corp.
Name: Michael P. Smith
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Title:
|
Chief Financial Officer
|
Dated: December 3, 2008
23
Annex
I
[LETTERHEAD
OF LAZARD FRERES & CO. LLC]
November 24,
2008
The Board of Directors
Memory Pharmaceuticals Corp.
100 Philips Parkway
Montvale, New Jersey 07645
Dear Members of the Board:
We understand that Memory Pharmaceuticals Corp., a Delaware
corporation (Memory), Hoffmann-La Roche Inc., a
New Jersey corporation (Roche US), and 900 North
Point Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of Roche US (Sub), propose to enter
into an Agreement and Plan of Merger (such agreement, the
Agreement) pursuant to which Roche US will acquire
Memory (the Transaction). Pursuant to the Agreement,
(i) Sub will commence a tender offer (the Tender
Offer) to purchase all outstanding shares of the common
stock, par value $0.001 per share, of Memory (Memory
Common Stock) at a purchase price of $0.61 per share in
cash (the Consideration), and (ii) subsequent
to the consummation of the Tender Offer, Sub will be merged with
and into Memory and each outstanding share of Memory Common
Stock not previously tendered, other than shares of Memory
Common Stock held by Roche US, Sub, any other subsidiary of
Roche US or Memory (such holders, together with the respective
affiliates of Roche US and Sub, the Roche Holders)
and holders who are entitled to and properly demand an appraisal
of their shares of Memory Common Stock (such holders, together
with the Roche Holders, Excluded Holders), will be
converted into the right to receive the Consideration. The terms
and conditions of the Transaction are more fully set forth in
the Agreement.
You have requested our opinion as of the date hereof as to the
fairness, from a financial point of view, to holders of Memory
Common Stock (other than Excluded Holders) of the Consideration
to be paid to such holders in the Transaction.
In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of a draft
as of November 24, 2008 of the Agreement;
(ii) Analyzed certain publicly available historical
business and financial information relating to Memory;
(iii) Reviewed revenue forecasts and other data provided to
us by Memory relating to Memorys lead product candidate,
R3487/MEM 3454, under alternative product development and
commercialization scenarios and discussed with the senior
management of Memory its assessment as to the relative
likelihood of achieving the future financial results reflected
in such forecasts under such scenarios;
(iv) Held discussions with members of the senior management
of Memory with respect to the business and prospects of Memory,
including the views of such management as to the liquidity needs
of, and capital resources available to, Memory to fund its
operations;
(v) Reviewed public information with respect to certain
other companies in lines of business we believe to be generally
relevant in evaluating the business of Memory;
I-1
The Board of Directors
Memory Pharmaceuticals Corp.
November 24, 2008
Page 2
(vi) Reviewed the financial terms of certain business
combinations involving companies in lines of business we believe
to be generally relevant in evaluating the business of Memory;
(vii) Reviewed historical stock prices and trading volumes
of Memory Common Stock; and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of
the foregoing information, without independent verification of
such information. We have not conducted any independent
valuation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Memory or concerning the solvency
or fair value of Memory, and we have not been furnished with
such valuation or appraisal. As you are aware, we have been
advised, and we have assumed, with the consent of Memory, that
R3487/MEM 3454 accounts for substantially all of the value of
Memory. We further have been advised that, other than revenue
forecasts for R3487/MEM 3454 referred to above, no financial
forecasts relating to Memory beyond calendar year 2009 have been
prepared by the management of Memory and, therefore, we have
been advised to rely solely on such revenue forecasts for
R3487/MEM 3454 for purposes of our financial analysis of Memory.
With respect to such revenue forecasts, we have assumed, with
the consent of Memory, that they have been reasonably prepared
on bases reflecting the best currently available estimates and
judgments of the management of Memory as to the future financial
performance of Memory under the alternative scenarios reflected
therein. We assume no responsibility for and express no view as
to such forecasts or the assumptions on which they are based. We
also have relied, with the consent of Memory, on the assessments
of the management of Memory as to the validity of, and risks
associated with, the product candidates of Memory (including,
without limitation, the timing and probability of successful
development, testing and marketing, and of approval by
appropriate governmental authorities, of such product
candidates).
Further, our opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information
made available to us as of, the date hereof. We assume no
responsibility for updating or revising our opinion based on
circumstances or events occurring after the date hereof. We do
not express any opinion as to the price at which shares of
Memory Common Stock may trade at any time subsequent to the
announcement of the Transaction.
In rendering our opinion, we have assumed, with your consent,
that the Transaction will be consummated on the terms described
in the Agreement, without any waiver or modification of any
material terms or conditions by Memory or Roche US. We also have
assumed, with your consent, that the Agreement, when executed,
will conform to the draft reviewed by us in all material
respects. We further have assumed, with your consent, that
obtaining the necessary regulatory or third party approvals and
consents for the Transaction will not have an adverse effect on
Memory or the Transaction. We do not express any opinion as to
any tax or other consequences that might result from the
Transaction, nor does our opinion address any legal, tax,
regulatory or accounting matters, as to which we understand that
Memory obtained such advice as it deemed necessary from
qualified professionals. We express no view or opinion as to any
terms or other aspects of the Transaction (other than the
Consideration to the extent expressly specified herein),
including, without limitation, the form or structure of the
Transaction or any tender and support or other agreements or
arrangements entered into in connection with, or otherwise
contemplated by, the Transaction. In addition, we express no
view or opinion as to the fairness of the amount or nature of,
or any other aspects relating to, the compensation to any
officers, directors or employees of any parties to the
Transaction, or class of such persons, relative to the
Consideration or otherwise.
Lazard Frères & Co. LLC is acting as financial
advisor to Memory in connection with the Transaction and will
receive a fee for our services, a portion of which is payable in
connection with the rendering of this opinion and a substantial
portion of which is contingent upon the closing of the
Transaction. In addition, we have provided certain investment
banking services to Memory unrelated to the Transaction, for
which we have received and may receive compensation. In the
ordinary course of their respective businesses, affiliates of
Lazard Frères & Co. LLC and LFCM Holdings LLC (an
entity indirectly owned in large part by managing directors of
Lazard) may actively trade
I-2
The Board of Directors
Memory Pharmaceuticals Corp.
November 24, 2008
Page 3
securities of Memory and certain affiliates of Roche US for
their own accounts and for the accounts of their customers and,
accordingly, may at any time hold a long or short position in
such securities. The issuance of this opinion was approved by
the Opinion Committee of Lazard Frères & Co. LLC.
Our engagement and the opinion expressed herein are for the
benefit of the Board of Directors of Memory and our opinion is
rendered to the Board of Directors of Memory in connection with
its evaluation of the Transaction. Our opinion does not address
the relative merits of the Transaction as compared to any other
transaction or business strategy in which Memory might engage or
the merits of the underlying decision by Memory to engage in the
Transaction. Our opinion is not intended to and does not
constitute a recommendation to any stockholder as to whether
such stockholder should tender shares of Memory Common Stock in
the Tender Offer or how such stockholder should vote or act with
respect to the Transaction or any matter relating thereto.
Based on and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Consideration to be paid to
holders of Memory Common Stock (other than Excluded Holders) in
the Transaction is fair, from a financial point of view, to such
holders.
Very truly yours,
LAZARD FRERES & CO. LLC
Jason R. Bernhard
Managing Director
I-3
ANNEX II
Memory Pharmaceuticals Corp.
100 Philips Parkway
Montvale
New Jersey 07645
(201) 802-7100
December 3, 2008
INFORMATION
STATEMENT PURSUANT TO SECTION 14(F) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1
THEREUNDER
NOTICE OF
CHANGE IN MAJORITY OF DIRECTORS
This Information Statement (this
Information
Statement
) is being mailed on or about
December 3, 2008, to the holders of record of common stock,
par value $0.001 per share (the
Common Stock,
or, collectively, the
Shares
), of Memory
Pharmaceuticals Corp., a Delaware corporation
(Memory)
, pursuant to the requirements of
Section 14(f) of the Securities Exchange Act of 1934, as
amended, and
Rule 14f-1
of the Securities and Exchange Commission (the
SEC
) thereunder, in connection with the
possible designation of certain persons by Hoffmann-La Roche
Inc., a New Jersey corporation (
Roche
), to
Memorys Board of Directors (the
Board
).
This Information Statement relates to a tender offer by 900
North Point Acquisition Corporation, a Delaware corporation
(
Merger Sub
) and wholly-owned subsidiary of
Roche, disclosed in a Tender Offer Statement on
Schedule TO, dated December 3, 2008 (as amended or
supplemented from time to time), to purchase all outstanding
Shares at a purchase price of $0.61 per Share (the
Merger Price
), net to the seller in cash,
without interest thereon and less any required withholding
taxes, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated December 3, 2008 and the
related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the
Offer
). The Offer is made in accordance with
the Agreement and Plan of Merger, dated as of November 25,
2008, among Roche, Merger Sub and Memory (the
Merger
Agreement
). All descriptions of the Merger Agreement
in this Information Statement are qualified in their entirety by
reference to the complete text of the Merger Agreement. A copy
of the Merger Agreement has been filed with the SEC as
Exhibit 2.1 to the Current Report on
Form 8-K
filed by Memory on November 25, 2008 and is incorporated
herein by reference.
The Merger Agreement provides that, subject to the satisfaction
or waiver of certain conditions, following completion of the
Offer and in accordance with the Delaware General Corporation
Law (the
DGCL
), Merger Sub will merge with
and into Memory (the
Merger
), with Memory
continuing as the surviving corporation (the
Surviving
Corporation
). At the effective time of the Merger,
each Share (other than Shares held by Memory as treasury stock,
owned by Roche, Merger Sub or any subsidiary of Roche or Memory
or Shares held by any stockholder of Memory who is entitled to
and properly exercises appraisal rights under the DGCL) will be
converted into the right to receive cash in an amount equal to
the price per share paid in the Offer without interest and less
any required withholding taxes, and all the Shares shall cease
to be outstanding, shall automatically be cancelled and shall
cease to exist.
The Merger Agreement provides that from and after the date that
Shares are first accepted for payment by Merger Sub under the
Offer, Roche will be entitled to designate a number of
Memorys directors (the
Roche
Designees
), rounded up to the next whole number, on
the Board, equal to the total number of directors on the Board
(after giving effect to the directors appointed as a result of
designation by Roche) multiplied by the percentage of Shares
beneficially owned by Roche
and/or
Merger Sub relative to the total number of outstanding Shares.
Under the terms of the Merger Agreement, Memory will use its
reasonable best efforts to effect the appointment of the Roche
Designees to the Board.
In addition, the Merger Agreement provides that Memory will also
use its reasonable best efforts to cause the Roche Designees to
constitute the number of members, rounded up to the next whole
number, on each committee of the Board that represents the same
percentage as the Roche Designees represent on the Board.
II-1
Notwithstanding the foregoing, the Merger Agreement provides
that if Roche exercises its right to appoint directors to the
Board, the Board and each committee of the Board will be
comprised of at least the number of independent directors as may
be required by applicable law
and/or
the
rules of The NASDAQ Capital Market.
Following the election or appointment of the Roche Designees to
the Board and until the consummation of the Merger (the
Effective Time
), the approval of a majority
of the directors of Memory then in office who were not
designated by Roche shall be required to authorize (and such
authorization shall constitute the authorization of the Board):
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any amendment or termination of the Merger Agreement by Memory;
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any extension of the time for performance of obligations or
action by Roche or Merger Sub under the Merger Agreement;
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|
any waiver of compliance with any of the conditions or
agreements contained in the Merger Agreement for the benefit of
Memory;
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|
any agreement between Memory and Roche, Merger Sub or any of
their respective affiliates; or
|
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|
the taking of any action by Memory that would prevent or
materially delay the consummation of the Merger.
|
From and after the Effective Time, until successors are duly
elected or appointed and qualified in accordance with the DGCL,
the directors of Merger Sub at the Effective Time will be the
directors of the Surviving Corporation and the officers of
Memory at the Effective Time will be the officers of the
Surviving Corporation.
This Information Statement is required by Section 14(f) of
the Exchange Act and
Rule 14f-1
thereunder in connection with the appointment of the Roche
Designees to the Board.
YOU ARE URGED TO READ THIS ENTIRE INFORMATION STATEMENT
CAREFULLY. PLEASE NOTE THAT WE ARE NOT SOLICITING YOUR
PROXY. NO VOTE OR OTHER ACTION BY MEMORYS STOCKHOLDERS IS
REQUIRED IN RESPONSE TO THIS INFORMATION STATEMENT.
The information contained in this Information Statement
(including information incorporated in this Information
Statement by reference) concerning Roche, Merger Sub and the
Roche Designees has been furnished to Memory by Roche, and
Memory assumes no responsibility for the accuracy or
completeness of such information.
INFORMATION
CONCERNING MEMORY
As of December 1, 2008, Memory had 82,243,050 shares
of common stock issued and outstanding. Memorys Board
currently consists of ten members.
Each record holder of Memory Common Stock is entitled to cast
one vote on matters requiring stockholder action, in person or
by proxy, for each share of Memory Common Stock held. Normally,
the election of directors requires the vote of a plurality of
the votes entitled to vote and actually voting on the election
of directors that are present in person or represented by proxy
at a meeting held for the election of directors.
Business
Memory is a biopharmaceutical company focused on the discovery
and development of innovative drug candidates for the treatment
of a broad range of central nervous system (CNS) conditions,
many of which exhibit significant impairment of memory and other
cognitive functions. These conditions include neurological
diseases associated with aging, such as Alzheimers
disease, and also include certain psychiatric disorders such as
schizophrenia. Although therapies for the treatment of
Alzheimers disease have been available for a number of
years, many of the approved drugs for this disorder are not
effective in a large number of patients and can produce
significant side effects. In addition, while there are therapies
available to treat the positive and negative symptoms of
schizophrenia, there are currently no approved drugs for the
treatment of cognitive impairment associated with schizophrenia
(CIAS).
II-2
Involvement
in Certain Legal Proceedings
There are no material proceedings to which any director, officer
or affiliate of Memory, any owner of record or beneficially of
more than five percent of Memorys Common Stock, or any
associate of any such director, officer, affiliate of Memory, or
security holder is an adverse party to Memory or any of its
subsidiaries or has a material interest adverse to Memory or any
of its subsidiaries.
ROCHE
DESIGNEES
Roche has informed Memory that it intends to choose the Roche
Designees for Memorys Board from the list of persons set
forth in the table below. The following table, prepared from
information furnished to Memory by Roche, sets forth the name,
age and present principal occupation, along with the business
experience for the last five years, with respect to each
individual who may be designated by Roche as one of its
designees.
Roche has also informed Memory that each of the individuals
listed below has consented to act as a director of Memory if so
appointed or elected. If necessary, Roche may choose additional
Roche Designees, subject to the requirements of
Rule 14f-1
under the Exchange Act.
The business address of each person listed below is 340
Kingsland Street, Nutley, New Jersey 07110 and their telephone
number at that address is
(973) 235-5000,
except for Frank J. DAngelo and Bruce Resnick, whose
business address is
c/o Roche
Finance USA Inc., 150 Clove Road, Little Falls, New Jersey 07424
and their telephone number at that address is
(973) 284-6132,
and Peter Eisenring, Andreas Knierzinger and Beat Kraehenmann
whose business address is
c/o F.
Hoffmann-La Roche Ltd at Grenzacherstrasse 124, CH-4070
Basel (Switzerland) and their telephone number at that address
is +41-61-688-1111.
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Current Principal Occupation or Employment
|
Name
|
|
Age
|
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and Five-Year Employment
|
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Gerald Bohm
|
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55
|
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Mr. Bohm has served as Senior Corporate Counsel of Roche since
2008 and Senior Counsel of Roche since 1996.
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Frank J. DAngelo
|
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|
61
|
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Mr. DAngelo has served as the President of Roche Finance
USA Inc. since 1996.
|
James A. Dougherty
|
|
|
50
|
|
|
Mr. Dougherty has served as the Business Development Director of
Roche since 2002.
|
Peter Eisenring
|
|
|
47
|
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|
Mr. Eisenring has been Head of the Tax and Insurance Group of F.
Hoffmann-La Roche Ltd since November 1999.
|
Frederick C. Kentz III
|
|
|
56
|
|
|
Mr. Kentz has been Vice President and General Counsel of Roche
since 1995.
|
Andreas Knierzinger
|
|
|
54
|
|
|
Mr. Knierzinger has been Group Treasurer of F.
Hoffmann-La Roche Ltd since 2003. Prior to that he served
as Head of the Corporate Development from 1999 to 2002.
|
Beat Kraehenmann
|
|
|
51
|
|
|
Dr. Kraehenmann has been Deputy Director of the Corporate
Legal Department at F. Hoffmann-La Roche Ltd since before
2000. He has also served from November 2000 to July 2003 as
Secretary and from February 2001 to July 2003 as Member of the
Board of Directors of Basilea Pharmaceutica Ltd.
|
David P. McDede
|
|
|
51
|
|
|
Mr. McDede has served as Vice President and Treasurer of Roche
since 2003.
|
Bruce Resnick
|
|
|
46
|
|
|
Mr. Resnick has served as Tax Counsel to Roche Finance USA Inc.
since 1996.
|
Nigel Sheail
|
|
|
43
|
|
|
Mr. Sheail has served as Head of Global Licensing of F.
Hoffmann-La Roche Ltd since 1998.
|
Daniel Zabrowski
|
|
|
49
|
|
|
Mr. Zabrowski has served as the Global Head of Pharma Partnering
of Roche since 2007.
|
II-3
Roche has advised Memory that none of the Roche Designees or any
of their affiliates (i) has a familial relationship with
any directors or executive officers of Memory, or (ii) has
been involved in any transactions with Memory or any of its
directors, officers, or affiliates which are required to be
disclosed pursuant to the rules and regulations of the SEC
except as may be disclosed herein.
Roche has advised Memory that none of the Roche Designees during
the past five years, has (i) been party to federal
bankruptcy law or state insolvency law proceedings, whereby a
petition was filed by or against such designee or a receiver,
fiscal agent or similar officer was appointed by a court for the
business or property of such designee, (ii) been convicted
in a criminal proceeding (excluding traffic misdemeanors) or
(iii) been a party to any judicial or administrative
proceeding that resulted in a judgment, decree or final order
with respect to engaging in any type of business practice or
enjoining the person from future violations of, or prohibiting
activities subject to, federal or state securities laws or
federal commodities laws, or a finding of any violation of
federal or state securities laws.
CURRENT
BOARD OF DIRECTORS OF MEMORY
The following table sets forth information as of
December 1, 2008 with respect to Memorys directors.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Paul Blake, M.D.
|
|
|
60
|
|
|
Director
|
Anthony B. Evnin, Ph.D.
|
|
|
67
|
|
|
Director
|
Jonathan J. Fleming
|
|
|
51
|
|
|
Director
|
Walter Gilbert, Ph.D.
|
|
|
76
|
|
|
Director
|
Vaughn M. Kailian
|
|
|
64
|
|
|
President and Chief Executive Officer and Director
|
Robert I. Kriebel
|
|
|
66
|
|
|
Director
|
David A. Lowe, Ph.D.
|
|
|
62
|
|
|
Chief Scientific Officer and Director
|
Michael E. Meyers, M.P.H.
|
|
|
40
|
|
|
Director
|
James R. Sulat
|
|
|
58
|
|
|
Director
|
Peter F. Young
|
|
|
58
|
|
|
Director
|
Paul Blake, M.D.
has served as one of Memorys
directors since November 2007. Dr. Blake has served as the
Senior Vice President and Chief Medical Officer of AEterna
Zentaris Inc., a bio-pharmaceutical company since August 2007.
Previously, Dr. Blake was Senior Vice President, Clinical
Research and Development for Avigenics Inc. from January 2007 to
July 2007. From 2001 to 2006, Dr. Blake was with Cephalon,
Inc., first as Senior Vice President, Clinical Research and
Regulatory Affairs, from 2001 to 2005 and then as Executive Vice
President, Worldwide Medical and Regulatory Operations, from
2005 to 2006. From 1999 to 2001, Dr. Blake was the Chief
Medical Officer for MDS Proteomics, Inc., a division of MDS
International. Previously, he was Senior Vice President and
Medical Director for SmithKline Beecham Pharmaceuticals with
responsibility for its worldwide clinical research and
development operations. Dr. Blake received his M.D. and
B.S. at London University and is a fellow of the American
College of Clinical Pharmacology and the Royal College of
Physicians in the United Kingdom.
Anthony B. Evnin, Ph.D.
has served as one of
Memorys directors since December 1998. Dr. Evnin is a
General Partner of Venrock, a venture capital firm, where he has
been a Partner since 1975. He is currently a member of the Board
of Icagen, Inc., Infinity Pharmaceuticals, Inc., and Sunesis
Pharmaceuticals, Inc., as well as serving on the Board of a
number of privately-held companies. Dr. Evnin received an
A.B. from Princeton University and a Ph.D. in Chemistry from the
Massachusetts Institute of Technology.
Jonathan J. Fleming
is one of Memorys co-founders
and is the Chairman of Memorys Board. Mr. Fleming
served as Chairman from January 1998 to May 2005 and assumed the
position again in October 2006. Mr. Fleming has served as
the Managing Partner of Oxford Bioscience Partners, a venture
capital firm specializing in life science technology since 1996.
Prior to joining Oxford Bioscience, he served as a Founding
Partner of MVP Ventures in Boston, Massachusetts.
Mr. Fleming serves as a member of the board of directors of
Imcor Pharmaceutical Co. (formerly Photogen Technologies, Inc.),
a specialty pharmaceutical company
II-4
focused on developing medical imaging pharmaceutical products.
He also serves as Chairman of the board of directors of
BioProcessors Corporation, a privately-held corporation, and as
a director of seven other privately-held companies, including
Leerink Swann & Company, Inc., a Boston-based
investment bank specializing in health care companies.
Mr. Fleming is a Trustee of the Museum of Science in Boston
and is a Senior Lecturer at the Massachusetts Institute of
Technologys Sloan School of Management. Mr. Fleming
received a B.A. from the University of California, Berkeley and
a Masters in Public Administration from Princeton University.
Walter Gilbert, Ph.D.
is one of Memorys
co-founders and has served as one of Memorys directors and
as a member of Memorys Scientific Advisory Board since
Memorys inception. Dr. Gilbert has served as a
Managing Director and General Partner of BioVentures Investors
II, a venture capital firm, since 2002. Dr. Gilbert has
also served as the Carl M. Loeb University Professor Emeritus at
Harvard University since 1985. He was a founder of Biogen, Inc.
and from 1981 to 1985 served as its Chairman and Chief Executive
Officer. Dr. Gilbert was also a co-founder of Myriad
Genetics, Inc., where he has served as a director and Vice
Chairman of the board of directors since 1992. Dr. Gilbert
also serves as a director of three privately-held companies.
Among other honors, Dr. Gilbert was awarded the Nobel Prize
in Chemistry in 1980 for his contributions to the development of
DNA sequencing methodology and he was elected a Member of the
National Academy of Science in 1976. Dr. Gilbert received
an A.B. (
summa cum laude
) from Harvard College, an M.A.
from Harvard University, and a Ph.D. in Mathematics from
Cambridge University.
Vaughn M. Kailian
was elected to Memorys Board in
October 2006 in connection with Memorys 2006 private
placement and has served as Memorys President and Chief
Executive Officer since February 2008. Mr. Kailian has also
served as a General Partner of MPM Capital L.P. since 2005. From
February 2002 to December 2004, he served as Vice Chairperson of
Millennium Pharmaceuticals, Inc. and as head of the Millennium
commercial organization. From 1990 to 2002, Mr. Kailian was
the Chief Executive Officer, President, and a director of COR
Therapeutics, Inc. From 1967 to 1990, he was employed by Marion
Merrell Dow, Inc., and its predecessor companies in various
international and domestic management, marketing and sales
positions, including President and General Manager of Merrell
Dow USA and Corporate Vice President of Global Commercial
Development of Marion Merrell Dow, Inc. Mr. Kailian serves
as a director of Cephalon, Inc. and NicOx, S.A., and several
privately-held companies. Mr. Kailian also serves as a
director of BIO Ventures for Global Health and the New England
Healthcare Institute, both not-for-profit organizations.
Mr. Kailian received a B.A. from Tufts University.
Robert I. Kriebel
has served as one of Memorys
directors since December 2004. Mr. Kriebel was Senior Vice
President and Chief Financial Officer of Neose Technologies,
Inc., a biopharmaceutical company from 2002 to 2005. From 1991
to 1999, he held various positions at U.S. Bioscience,
Inc., most recently as Executive Vice President, Chief Financial
Officer and Director. From 1974 to 1990, Mr. Kriebel held
various positions with Aventis Inc. (formerly Rhone-Poulenc
Rorer Inc.). From 1987 to 1990, he was Vice President and
Controller of Armour Pharmaceutical Company, a subsidiary of
Rorer Group Inc. In 1986, Mr. Kriebel was Vice
President-Investor Relations of Rorer Group Inc. and from 1979
to 1985, he was Treasurer of Rorer Group Inc. Mr. Kriebel
received a B.S. from Roanoke College. Mr. Kriebel is also a
member of the Board and chairman of the Audit Committee at
Elixir Pharmaceuticals.
David A. Lowe, Ph.D.
has served as Memorys
Chief Scientific Officer since October 2004 and as one of
Memorys directors since April 2005. From 2002 to 2004,
Dr. Lowe served as Executive Vice President and Chief
Scientific Officer at Fidelity Biosciences Group, a division of
Fidelity Investments, where he was responsible for evaluating
private equity investment opportunities in early and mid-stage
biopharmaceutical companies, focusing primarily on companies
that target central nervous system diseases. During this time,
Dr. Lowe also served as President and Chief Executive
Officer of EnVivo Pharmaceuticals Inc., a drug-discovery company
financed by Fidelity Biosciences. From 2000 to 2002,
Dr. Lowe served as Vice President and Therapeutic Area
Head, Central Nervous System at Roche Bioscience. From 1995 to
2000, Dr. Lowe served as Vice President and Global Head of
Central Nervous System Research, Pharmaceutical Division at
Bayer AG. Dr. Lowe is the author/co-author of more than 50
scientific publications and is listed as an inventor on several
pending patent applications. Dr. Lowe received a B.Sc.
(Hons.) from the University of Bristol and a Ph.D. in
Neurobiology from the University of Leeds.
II-5
Michael E. Meyers, M.P.H.
has served as one of
Memorys directors since March 2002. Since
December 2007, Mr. Meyers has served as the Managing
Partner of Arcoda Capital Management LP, an asset management
firm specializing in global healthcare investments. He served as
a Partner and Portfolio Manager with Golden Tree Asset
Management, L.P from October 2006 to April 2007. From 2002 until
2006, Mr. Meyers served as a Managing Partner of Trivium
Capital Management LLC. From 2000 to 2003, Mr. Meyers
served as a Managing Director and Partner of Global Biomedical
Partners, a life sciences venture capital firm. From 1997 to
2000, Mr. Meyers served as Director, Biotechnology and
Pharmaceutical Investment Banking at Merrill Lynch &
Co. From 1993 to 1997, Mr. Meyers served as Vice President,
Health Care Investment Banking at Cowen & Company.
Mr. Meyers received an A.B. from Brandeis University and a
Master of Public Health in Health Policy and Management from
Columbia University.
James R. Sulat
served as Memorys Chief Financial
Officer from February 2008 to October 2008 and served as
Memorys President and Chief Executive Officer from May
2005 until February 2008. Mr. Sulat has also served as one
of Memorys directors since May 2005. From May 2003 to
February 2004, Mr. Sulat served as the Senior Executive
Vice President of Moore Wallace Incorporated. Following the
acquisition of Moore Wallace by R.R. Donnelley and Sons Company
in February 2004, Mr. Sulat became Chief Financial Officer
of R.R. Donnelley and served in that position until May 2004.
Mr. Sulat serves as a director of Maxygen, Inc., Momenta
Pharmaceuticals, Inc. and Intercell AG. Mr. Sulat received
a B.S. from Yale University, and an M.B.A. and an M.S. in Health
Services Administration from Stanford University.
Peter F. Young
has served as one of Memorys
directors since September 2004. Mr. Young has served as
President and Chief Executive Officer of Intranasal
Therapeutics, Inc. since March 2007. From 1999 until 2006,
Mr. Young served as President and Chief Executive Officer
of AlphaVax, Inc. From 1989 to 1999, Mr. Young was with
Glaxo Wellcome, where he led the growth of Glaxos HIV
portfolio, first as
Vice-President,
HIV & Opportunistic Infection Therapeutic
Development & Product Strategy and then as
Vice-President, HIV & Hepatitis, Global Commercial
Development. He previously held various management positions
with Abbott International and Glaxo, both internationally and in
the United States. Mr. Young received a B.A. and an M.B.A.
from Indiana University.
Director
Independence
Memorys Board has determined that Messrs. Fleming,
Kriebel, Meyers, and Young, and Drs. Blake, Evnin and
Gilbert are each an independent director as such
term is defined in NASDAQ Marketplace Rule 4200(a)(15) and
the rules of the SEC.
Attendance
at Board and Committee Meetings
Memorys Board held eight meetings during the year ended
December 31, 2007. Each director attended or participated
in 75% or more of the meetings of the Board and the meetings of
committees of the Board on which such director served during
2007. While the Board has not adopted a formal policy regarding
director attendance at the meetings of stockholders, the Board
typically schedules one of its quarterly meetings on the day of
the annual meeting and the Board plans to continue this practice
in the future. Memorys directors, therefore, are
encouraged to attend Memorys annual meetings of
stockholders. All of Memorys directors attended
Memorys 2007 Annual Meeting of Stockholders.
Committees
of the Board
The Board has a standing Audit Committee, Compensation Committee
and Nominations Committee. Each of these committees is comprised
solely of independent directors. The following lists the members
of each committee as well as the primary responsibilities of
each committee.
Audit
Committee
We have an Audit Committee, currently comprised of
Messrs. Kriebel (Chairman) and Young and Dr. Evnin.
Memorys Board has determined that each member of the Audit
Committee is an independent director as such term is
defined in NASDAQ Marketplace Rule 4200(a)(15) and that
Mr. Kriebel is an audit
II-6
committee financial expert, as such term is defined in
Item 407(d)(5)(ii) of
Regulation S-K.
The Audit Committee held seven meetings during the year ended
December 31, 2007.
The Audit Committee is responsible for the oversight of:
Memorys accounting and financial reporting principles and
policies and Memorys internal controls and procedures;
Memorys financial statements and financial information to
be provided to Memorys stockholders; the independence,
qualifications and performance of Memorys independent
registered public accounting firm and the independent audit;
Memorys disclosure controls and procedures and
Memorys code of ethics; the review of Memorys
financial risk exposures and steps taken by Memory to monitor
and control such exposures, including the review of any policies
related to financial risk assessment and management; the review
of Memorys investment policies; and Memorys
compliance with legal and regulatory requirements. Memorys
independent registered public accounting firm reports directly
to the Audit Committee and the Audit Committee is directly
responsible for the appointment, compensation and oversight of
the work of the independent registered public accounting firm
(including resolution of disagreements between management and
the independent registered public accounting firm regarding
financial reporting). The Audit Committee also has the authority
to retain independent legal, accounting or other advisors. The
Audit Committee has established procedures for the receipt,
retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. The Audit
Committee works closely with management as well as with
Memorys independent registered public accounting firm. The
Audit Committee operates pursuant to a charter, which has been
duly adopted by the Board. A copy of the charter is available on
Memorys website at
www.memorypharma.com
under the
Investors tab.
Compensation
Committee
The Compensation Committee, currently comprised of
Messrs. Fleming (Chairman) and Meyers and Dr. Evnin,
held three meetings during the year ended December 31,
2007. The Compensation Committee is responsible for reviewing,
approving and making recommendations to the Board with respect
to: the compensation of Memorys directors, Memorys
Chief Executive Officer and Memorys other executive
officers; and the adoption, modification or termination of
incentive-compensation plans and equity-based plans. The
Compensation Committee also oversees the administration of
Memorys equity-based plans, which includes interpreting
the terms thereof and granting options and making stock awards
thereunder.
The Compensation Committee has the authority to commission
compensation surveys and to retain consultants to assist in
evaluating executive officer compensation. The Compensation
Committee also has the authority to retain independent legal,
accounting or other advisors. The Compensation Committee
operates pursuant to a charter, which has been duly adopted by
the Board. A copy of the charter is available on Memorys
website at
www.memorypharma.com
under the
Investors tab.
Nominations
Committee
The Nominations Committee, currently comprised of Dr. Evnin
(Chairman) and Mr. Fleming, held three meetings during the
year ended December 31, 2007. The Nominations Committee is
responsible for: reviewing with the Board, on an annual basis,
the requisite skills and criteria for new Board members, as well
as the composition of the Board as a whole; identifying and
nominating Board members; recommending to the Board the
directors to be appointed to each committee of the Board and as
the Chair of each committee; and overseeing an annual
self-evaluation of the Board.
The Nominations Committee has the authority to retain search
firms to be used to identify director nominees and also has the
authority to retain independent legal, accounting or other
advisors. The Nominations Committee operates pursuant to a
charter, which has been duly adopted by the Board. A copy of the
charter is available on Memorys website at
www.memorypharma.com
under the Investors tab.
II-7
Audit
Committee Report
The Audit Committee assists the Board in fulfilling its
oversight responsibilities relating to: (i) Memorys
accounting and financial reporting principles and policies and
its internal controls and procedures; (ii) Memorys
financial statements and financial information to be provided to
the stockholders; and (iii) the independence,
qualifications and performance of Memorys independent
registered public accounting firm and the independent audit.
The Audit Committee is comprised of Messrs. Kriebel and
Young and Dr. Evnin, each of whom has been determined to be
independent by the Board. Upon review of Mr. Kriebels
background and experience, the Board has designated
Mr. Kriebel as Memorys audit committee financial
expert. The Board has adopted a written charter for the Audit
Committee, which was amended in February 2008. A copy of the
charter may be viewed on Memorys website at
http://www.memorypharma.com
under the Investors tab.
KPMG LLP, an independent registered public accounting firm
(
KPMG
), was the principal accountant engaged
to audit the financial statements of Memory for the year ended
December 31, 2007. The Audit Committee has reviewed and
discussed those audited financial statements with Memorys
management and KPMG. The Audit Committee has also discussed with
KPMG the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit
Committees).
The Audit Committee has received the written disclosures and the
letter from KPMG required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit
Committees), and the Audit Committee has discussed with KPMG its
independence from Memory.
Based on the foregoing review and discussions, the Audit
Committee recommended to the Board that Memorys audited
financial statements be included in the Annual Report on
Form 10-K
for the year ended December 31, 2007, filed with the SEC on
March 28, 2008.
Members of the Audit Committee
Robert I. Kriebel (Chairman)
Anthony B. Evnin, Ph.D.
Peter F. Young
Director
Qualifications and Director Nomination Process
Qualifications
for Director Candidates
The Nominations Committee and the Board do not believe that it
is in Memorys best interests to establish rigid criteria
for the selection of prospective director candidates. Rather,
the Nominations Committee and the Board recognize that the
challenges and needs Memory faces will change over time and,
accordingly, believe that the selection of director candidates
should be based on skill sets relevant to the issues Memory
faces or are likely to face at the time of nomination. As a
result, the priorities and emphasis of the Nominations Committee
and of the Board may change from time to time to take into
account changes in business and other trends, as well as the
portfolio of skills and experience of current and prospective
members of Memorys Board. At the same time, the
Nominations Committee and the Board strongly believe that Memory
benefits from diversity in age, skills, background and
experience. We therefore seek director candidates who, in
addition to general management experience and business
knowledge, possess an expertise in one or more of the following
areas: business, medicine, scientific research, drug discovery
and development, health care, pharmaceuticals, finance, law,
corporate governance, risk assessment, and investor relations.
In addition, there are certain general attributes that the
Nominations Committee and the Board believe all prospective
director candidates must possess in order to be recommended to
the Board, including:
|
|
|
|
|
a commitment to professional integrity and ethics;
|
|
|
|
demonstrated leadership ability and the ability to exercise
sound business judgment;
|
|
|
|
independence from conflicts of interest or direct economic
relationship with Memory; and
|
|
|
|
a willingness to devote the required amount of time to attend
Board and committee meetings and to otherwise carry out the
duties and responsibilities of Board membership.
|
II-8
Other than the foregoing, there are no stated minimum criteria
for director candidates. The Nominations Committee will ensure
that at all times, at least a majority of the members of
Memorys Board meet the definition of independent
director under The NASDAQ Stock Market qualification
standards and that director candidates also meet the specific
requirements set forth in the rules of The NASDAQ Stock Market
and in the rules of the SEC regarding membership on a committee
of the Board.
In considering re-nomination criteria, the Nominations Committee
reviews each directors past attendance at meetings and
participation in and contributions to the activities of the
Board, as well as whether the directors qualifications and
skills are consistent with Memorys current needs and
whether the director is willing to continue in service. If any
member of Memorys Board does not wish to continue in
service or if Memorys Board decides not to nominate a
member for re-election, the Nominations Committee will identify
the skills and experience desired in a new director candidate.
Identification
and Evaluation of Director Candidates
The Nominations Committee uses a variety of methods for
identifying director candidates. The Nominations Committee may
receive suggestions for potential director candidates from
current members of the Board, Memorys executive officers
or other sources, which may be either unsolicited or in response
to requests from the Nominations Committee for such candidates.
The Nominations Committee may also, from time to time, engage
firms that specialize in identifying and evaluating potential
director candidates. As described below, the Nominations
Committee will also consider candidates recommended by
stockholders.
The Nominations Committee regularly assesses the appropriate
size and composition of the Board as a whole, the needs of the
Board and the respective committees of the Board, and the
qualification of director candidates in light of these needs.
Once an individual has been identified by the Nominations
Committee as a potential director candidate, the Nominations
Committee makes an initial determination as to whether to
conduct a full evaluation of the prospective director candidate
based upon various factors, including, but not limited to: the
information submitted with the nomination, the Boards own
knowledge of the prospective director candidate, and whether the
prospective director candidate could satisfy the minimum
criteria established by the Nominations Committee. The
Nominations Committee then decides whether to do a comprehensive
evaluation of a prospective director candidate, which includes
one or more interviews with the candidate. In addition, the
Nominations Committee may contact one or more references
provided by the candidate or may contact other members of the
business community or other persons that may have greater
first-hand knowledge of the candidates accomplishments.
After completing its evaluation, the Nominations Committee makes
its recommendation to the full Board as to any person it
determines should be considered by the Board. The Board then
considers and designates its nominees.
Stockholder
Recommendations of Director Candidates
The Nominations Committee does not have a formal policy
regarding consideration of director candidates recommended by
stockholders. The Nominations Committee will consider director
candidates suggested by Memorys stockholders, provided
that the recommendations are made in accordance with the
procedures required under Memorys Amended and Restated
Bylaws and described in the Proxy Statement filed with the SEC
by Memory on Schedule 14A on May 15, 2008 in the
section titled Requirements, Including Deadlines, for
Submission of Proxy Proposals, Nomination of Directors and Other
Business of Stockholders, and incorporated herein by
reference. Stockholder nominees whose nominations comply with
these procedures and who meet the criteria outlined above will
be evaluated by the Nominations Committee in the same manner as
nominees of the Nominations Committee.
Compensation
of Directors
The non-employee members of Memorys Board are reimbursed
for travel, lodging and other reasonable expenses incurred in
attending Board or committee meetings. In addition,
Memorys non-employee directors receive cash compensation
for their service as a member of Memorys Board and its
committees as described
II-9
below. All quarterly fees are payable at the end of each
calendar quarter. The following chart lists the members of each
committee of Memorys Board as of December 31, 2007.
|
|
|
|
|
Audit Committee
|
|
Compensation Committee
|
|
Nominations Committee
|
|
Anthony B. Evnin, Ph.D.
|
|
Anthony B. Evnin, Ph.D.
|
|
Anthony B. Evnin, Ph.D.*
|
Robert I. Kriebel*
|
|
Jonathan J. Fleming*
|
|
Jonathan J. Fleming
|
Peter F. Young
|
|
Michael E. Meyers, M.P.H.
|
|
Vaughn M. Kailian **
|
|
|
|
*
|
|
Committee Chairman
|
|
**
|
|
Mr. Kailian tendered his resignation from the Nominations
Committee upon his appointment as President and Chief Executive
Officer, which was effective as of February 7, 2008.
|
DIRECTOR
COMPENSATION FOR THE YEAR ENDED DECEMBER 31, 2007
The following table provides certain information concerning fees
earned by each of Memorys non-employee directors in the
year ended December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
or Paid in
|
|
|
Option
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
Cash ($)
|
|
|
Awards ($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Paul Blake, M.D.(2)
|
|
|
5,000
|
|
|
|
7,843
|
|
|
|
|
|
|
|
12,843
|
|
Anthony B. Evnin, Ph.D.
|
|
|
45,250
|
|
|
|
20,884
|
|
|
|
|
|
|
|
66,134
|
|
Jonathan J. Fleming
|
|
|
45,250
|
|
|
|
20,884
|
|
|
|
|
|
|
|
66,134
|
|
Walter Gilbert, Ph.D.(3)
|
|
|
17,500
|
|
|
|
20,884
|
|
|
|
9,000
|
|
|
|
47,384
|
|
Vaughn M. Kailian(4)
|
|
|
19,250
|
|
|
|
13,041
|
|
|
|
|
|
|
|
32,291
|
|
Robert I. Kriebel
|
|
|
55,000
|
|
|
|
32,427
|
|
|
|
|
|
|
|
87,427
|
|
Michael E. Meyers, M.P.H.
|
|
|
20,500
|
|
|
|
20,884
|
|
|
|
|
|
|
|
41,384
|
|
Peter F. Young
|
|
|
33,500
|
|
|
|
31,682
|
|
|
|
|
|
|
|
65,182
|
|
|
|
|
(1)
|
|
This column represents the amount Memory has expensed during
2007 under FAS 123R for outstanding stock option awards
granted in 2007 and in previous fiscal years. These award fair
values have been determined based on the assumptions set forth
in
Note 6-Stock
Based Compensation to the financial statements for the
year ended December 31, 2007. As of December 31, 2007:
(i) Messrs. Fleming, Kriebel, Meyers, Young and
Dr. Evnin each held stock options to purchase an aggregate
of 50,000 shares of common stock,
(ii) Dr. Gilbert held stock options to purchase an
aggregate of 80,000 shares of common stock,
(iii) Mr. Kalian held stock options to purchase an
aggregate of 30,000 shares of common stock, and
(iv) Dr. Blake held a stock option to purchase
20,000 shares of common stock.
|
|
(2)
|
|
On November 9, 2007, Dr. Blake was elected to
Memorys Board. In connection with his election, he
received a stock option to purchase 20,000 shares of
Memorys common stock under the Formula Option Grant
Program of Memorys Amended and Restated 2004 Stock
Incentive Plan (the 2004 Plan). The stock option has
an exercise price of $0.90 per share, the closing price of
Memorys common stock on The NASDAQ Global Market on the
grant date. The stock option has a grant date fair value of
$0.69 per share. The stock option vests over three years, with
33% of the underlying shares vesting on the first anniversary of
the grant date and the remainder vesting quarterly over the
following two years.
|
|
(3)
|
|
In 2007, Dr. Gilbert received $9,000 for his service as a
member on Memorys Scientific Advisory Board (SAB) and was
granted a stock option to purchase 10,000 shares of
Memorys common stock. The stock option has an exercise
price of $3.57 per share, the closing price of Memorys
common stock on The NASDAQ Global Market on the grant date,
January 23, 2007, and vests quarterly over a two-year
period. The stock option has a grant date fair value of $2.64
per share. Dr. Gilbert is compensated for his service as a
member on Memorys SAB on the same terms as the other
members of the SAB.
|
|
(4)
|
|
Mr. Kailian was appointed as President and Chief Executive
Officer of Memory as of February 7, 2008 and, since that
time, has not received compensation payable to non-employee
directors.
|
II-10
Standard
Board Fees and Option Grants
Members of Memorys Board receive the following standard
fees and option grants for service on the Board and each of its
committees.
Board
The Chairman of Memorys Board receives $6,000 per calendar
quarter and each of Memorys non-employee directors
receives $3,000 per calendar quarter. Each of Memorys
non-employee directors also receives $1,000 for each regular or
special Board meeting attended by such director in person and
$500 for each regular or special Board meeting attended by such
director by teleconference.
Audit
Committee
In addition to receiving fees for service as a director, the
Chairman of the Audit Committee receives $7,500 per calendar
quarter and the other members of the Audit Committee receive
$2,500 per calendar quarter. Each member of the Audit Committee
also receives $2,000 for each regular or special Audit Committee
meeting attended by such member in person and $1,000 for each
regular or special Audit Committee meeting attended by such
member by teleconference.
Compensation
Committee
In addition to receiving fees for service as a director, the
Chairman of the Compensation Committee receives $3,125 per
calendar quarter and the other members of the Compensation
Committee receive $625 per calendar quarter. Each member of the
Compensation Committee also receives $1,000 for each regular or
special Compensation Committee meeting attended by such member
in person and $500 for each regular or special Compensation
Committee meeting attended by such member by teleconference.
Nominations
Committee
In addition to receiving fees for service as a director, the
Chairman of the Nominations Committee receives $1,500 per
calendar quarter and the other members of the Nominations
Committee receive an additional $250 per calendar quarter. Each
member of the Nominations Committee also receives $500 for each
regular or special Nominations Committee meeting attended by
such member in person and $250 for each regular or special
Nominations Committee meeting attended by such member by
teleconference.
Option
Grants
Memorys 2004 Plan provides a Formula Option Grant program
for non-employee directors. Pursuant to this program, upon
joining Memorys Board, a non-employee director receives a
stock option grant to purchase 20,000 shares of
Memorys common stock at an exercise price equal to the
fair market value on that date (the Initial Grant).
The Initial Grant vests over three years, with the first 33%
vesting on the first anniversary of the grant date and the
remainder vesting quarterly over the following two years. In
addition, on the date of each annual meeting of Memorys
stockholders, all of Memorys non-employee directors who
have served on Memorys Board for at least six months
receive an additional automatic stock option grant to purchase
10,000 shares of Memorys common stock at an exercise
price equal to the fair market value on that date (the
Subsequent Grant). The Subsequent Grant vests in one
installment on the first anniversary of the grant date.
Each director who served as a director on April 5, 2004,
the effective date of Memorys initial public offering,
automatically received a stock option to purchase
20,000 shares of Memorys common stock at the fair
market value on that date. These stock options vested over three
years, with the first 33% vesting on the first anniversary of
the grant date and the remainder vesting quarterly over the
following two years.
II-11
INFORMATION
CONCERNING EXECUTIVE OFFICERS
Memorys executive officers are subject to annual
appointment by the Board at its first meeting following
Memorys Annual Meeting of Stockholders. Set forth below is
information regarding each of Memorys executive officers
as of December 1, 2008. Further information about
Mr. Kailian and Dr. Lowe is presented above under the
heading Current Board of Memory.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Vaughn M. Kailian
|
|
|
64
|
|
|
President and Chief Executive Officer and Director
|
David A. Lowe, Ph.D.
|
|
|
62
|
|
|
Chief Scientific Officer and Director
|
Michael P. Smith
|
|
|
40
|
|
|
Chief Financial Officer
|
Stephen R. Murray, M.D., Ph.D.
|
|
|
46
|
|
|
Chief Medical Officer
|
Jzaneen Lalani
|
|
|
35
|
|
|
General Counsel and Corporate Secretary
|
Jzaneen Lalani
has served as Memorys General
Counsel since February 2007 and as Memorys Corporate
Secretary since June 2004. From June 2004 to February 2007,
Ms. Lalani served as Memorys Vice President, Legal
Affairs. From 2003 to 2004, Ms. Lalani was a member of the
Corporate and Commercial Law Group at Kronish Lieb
Weiner & Hellman LLP, where she worked with
privately-held and publicly-traded companies on transactions
including mergers and acquisitions, financings and securities
offerings. From 1999 to 2003, Ms. Lalani was a member of
the Business & Technology Group at Brobeck
Phleger & Harrison LLP, where her practice also
included representing emerging growth companies and newly-public
companies. Ms. Lalani received a B.Sc. from Queens
University, a LL.B. from the University of Victoria and a
Masters of International Affairs and a Masters of Law from
Columbia University.
Stephen R. Murray, M.D., Ph.D.
has served as
Memorys Chief Medical Officer since August 2007. From
April 2006 to August 2007, Dr. Murray served as
Memorys Vice President, Clinical Development. From 2001 to
2006, Dr. Murray was with Pfizer Pharmaceuticals, first as
Medical Director at Pfizer Pharmaceutics Group (Indications:
schizophrenia, bipolar disorder) from 2001 to 2004, and then as
Senior Medical Director and Worldwide Medical Team Leader,
Schizophrenia, at Pfizer Global Pharmaceuticals from 2004 to
2006. Prior to joining Pfizer, Dr. Murray was a
psychiatrist in private practice for five years. Dr. Murray
received a B.S. from the University of South Carolina and an
M.D. and Ph.D. in molecular and cellular biology from the
Medical University of South Carolina.
Michael P. Smith
has served as Memorys Chief
Financial Officer since October 2008. From July 2006 to October
2008, Mr. Smith served as Memorys Vice President,
Business Development. From 2004 to 2006, he served as the Vice
President of Business Development of QLT, Inc. From 1998 to
2004, Mr. Smith held several senior positions at Chiron
Corporation, including Manager, Corporate Finance and Business
Development and Director, Corporate Development. From 1996 to
1998, he served as Finance/Business Development Manager for
Ascent Logic Corporation. From 1990 to 1994, Mr. Smith was
a Senior Associate at Watson Wyatt Worldwide Consulting.
Mr. Smith received a B.S. from the University of Virginia
and an M.B.A. from the University of California at Berkeley.
II-12
EXECUTIVE
COMPENSATION
The following table provides certain information concerning the
compensation earned for the last two fiscal years by
Memorys Principal Executive Officer and Memorys two
other most highly compensated executive officers who were
serving as executive officers as of December 31, 2007. We
refer to the officers listed in the table below collectively as
Memorys
Named Executive Officers
.
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
All Other
|
|
Total
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Compensation
|
|
Compensation
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
James R. Sulat(4)
|
|
|
2007
|
|
|
|
408,750
|
|
|
|
|
|
|
|
468,057
|
|
|
|
|
|
|
|
876,807
|
|
President & Chief Executive Officer
|
|
|
2006
|
|
|
|
395,000
|
|
|
|
69,125
|
|
|
|
380,563
|
|
|
|
|
|
|
|
844,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Lowe, Ph.D.
|
|
|
2007
|
|
|
|
367,833
|
|
|
|
71,955
|
|
|
|
271,794
|
|
|
|
|
|
|
|
711,582
|
|
Chief Scientific Officer
|
|
|
2006
|
|
|
|
352,917
|
|
|
|
71,000
|
|
|
|
424,746
|
|
|
|
|
|
|
|
848,663
|
|
Michael P. Smith(5)
|
|
|
2007
|
|
|
|
259,167
|
|
|
|
50,700
|
|
|
|
88,318
|
|
|
|
156,510
|
(6)
|
|
|
554,695
|
|
Vice President,
|
|
|
2006
|
|
|
|
125,000
|
|
|
|
100,000
|
(7)
|
|
|
214,000
|
|
|
|
|
|
|
|
439,000
|
|
Business Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts in the Bonus column represent bonuses
attributable to performance in the year shown. Bonuses are paid
in the first quarter of the year subsequent to the year for
which they were earned.
|
|
(2)
|
|
This column represents the amount Memory has expensed for the
year shown under SFAS No. 123R for outstanding stock
option awards granted in the year shown and in previous fiscal
years. Award fair values have been determined based on the
assumptions set forth in
Note 6-Stock
Based Compensation to the financial statements for the
year ended December 31, 2007.
|
|
(3)
|
|
Does not include perquisites or personal benefits paid to Named
Executive Officers unless the aggregate amount paid to a Named
Executive Officer in the year shown was in excess of $10,000.
|
|
(4)
|
|
Mr. Sulat served as Memorys President and Chief
Executive Officer from May 2005 until February 2008, and as
Memorys Chief Financial Officer from February 2008 until
October 2008.
|
|
(5)
|
|
Mr. Smith has served as Memorys Chief Financial
Officer since October 2008. From July 2006 to October 2008, he
served as Memorys Vice President, Business Development.
Mr. Smiths employment with Memory commenced in July
2006.
|
|
(6)
|
|
Includes $110,508 for reimbursement of relocation and temporary
housing expenses and a $39,492 gross up payment for taxes
incurred by Mr. Smith in connection with this reimbursement.
|
|
(7)
|
|
Includes a $50,000 sign-on bonus.
|
II-13
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2007
The following table provides information as of December 31,
2007 regarding exercised and unexercised stock options held by
each of Memorys Named Executive Officers. During the year
ended December 31, 2007, none of the Named Executive
Officers exercised any of their stock options. Each of the stock
options granted to Memorys Named Executive Officers
expires ten years after the date of the grant. Unless otherwise
noted, the stock options vest in equal quarterly installments
over a four-year period commencing on the date of grant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
|
|
|
Option Grant
|
|
Options
|
|
Options (#)
|
|
Price
|
|
Option
|
Name
|
|
Date
|
|
(#) Exercisable
|
|
Unexercisable
|
|
($)
|
|
Expiration Date
|
|
James R. Sulat
|
|
|
05/17/2005
|
|
|
|
312,500
|
|
|
|
187,500
|
|
|
|
2.45
|
|
|
|
05/16/2015
|
|
|
|
|
08/15/2005
|
|
|
|
295,312
|
|
|
|
229,688
|
|
|
|
2.24
|
|
|
|
08/14/2015
|
|
|
|
|
01/23/2007
|
|
|
|
28,125
|
|
|
|
121,875
|
|
|
|
3.57
|
|
|
|
01/23/2017
|
|
|
|
|
08/17/2007
|
|
|
|
15,625
|
|
|
|
234,375
|
|
|
|
2.30
|
|
|
|
08/16/2017
|
|
David A. Lowe, Ph.D.
|
|
|
10/01/2004
|
|
|
|
150,000
|
(1)
|
|
|
0
|
|
|
|
6.98
|
|
|
|
10/01/2014
|
|
|
|
|
03/03/2005
|
|
|
|
68,750
|
|
|
|
31,250
|
|
|
|
5.03
|
|
|
|
03/03/2015
|
|
|
|
|
05/12/2005
|
|
|
|
55,000
|
(1)
|
|
|
0
|
|
|
|
2.39
|
|
|
|
05/11/2015
|
|
|
|
|
10/11/2005
|
|
|
|
42,500
|
|
|
|
42,500
|
|
|
|
2.38
|
|
|
|
10/10/2015
|
|
|
|
|
03/03/2006
|
|
|
|
43,750
|
|
|
|
56,250
|
|
|
|
2.49
|
|
|
|
03/02/2016
|
|
|
|
|
01/23/2007
|
|
|
|
37,500
|
|
|
|
162,500
|
|
|
|
3.57
|
|
|
|
01/23/2017
|
|
|
|
|
08/17/2007
|
|
|
|
4,062
|
|
|
|
60,938
|
|
|
|
2.30
|
|
|
|
08/16/2017
|
|
Michael P. Smith
|
|
|
07/05/2006
|
|
|
|
46,875
|
|
|
|
103,125
|
|
|
|
1.31
|
|
|
|
07/04/2016
|
|
|
|
|
09/29/2006
|
|
|
|
31,250
|
|
|
|
68,750
|
|
|
|
1.02
|
|
|
|
09/28/2016
|
|
|
|
|
01/23/2007
|
|
|
|
11,250
|
|
|
|
48,750
|
|
|
|
3.57
|
|
|
|
01/23/2017
|
|
|
|
|
08/17/2007
|
|
|
|
2,500
|
|
|
|
37,500
|
|
|
|
2.30
|
|
|
|
08/16/2017
|
|
|
|
|
(1)
|
|
Vest in equal quarterly installments over a two-year period
commencing on the date of grant.
|
Executive
Employment Agreements
Memory is a party to employment agreements with David A.
Lowe, Ph.D., Michael P. Smith, Stephen R.
Murray, M.D., Ph.D., Jzaneen Lalani, and James R.
Sulat, Memorys Chief Scientific Officer, Chief Financial
Officer, Chief Medical Officer, General Counsel and Corporate
Secretary, and former Chief Financial Officer and former
President and Chief Executive Officer, respectively, that
provide for benefits that would be paid in the event of a Change
of Control (as defined below) of Memory pursuant to the terms of
the agreements. The consummation of the Offer will constitute a
Change of Control under these agreements and therefore could
trigger the payment of the benefits described below. In
addition, outstanding options held by any of the individuals
named above will be cashed out pursuant to the Merger Agreement
as described below under the heading
Acceleration of
Options.
For purposes of this section, the following definitions apply to
the change of control provisions of the agreements discussed
below:
A
Change of Control
shall be deemed to have occurred if
Memory is consolidated with or acquired by another entity in a
merger, sale of all or substantially all of Memorys assets
or shares of stock or otherwise (excluding (i) transactions
solely for the purpose of reincorporating Memory in a different
jurisdiction or recapitalizing or reclassifying Memorys
stock, or (ii) any merger or consolidation in which the
stockholders of Memory immediately prior to such merger or
consolidation continue to own at least a majority of the
outstanding voting securities of Memory or the surviving entity
after such merger or consolidation).
II-14
Memory has
Cause
to terminate any of the individuals
named above if he or she (i) is convicted of a felony,
which adversely affects his or her ability to perform Memory
obligations or materially affects the business activities or
goodwill of Memory, (ii) is willfully disloyal,
deliberately dishonest, or breaches his or her fiduciary duty,
(iii) breaches the terms of his or her employment
agreement, materially breaches any provision of any
confidentiality agreement with Memory or fails or refuses to
carry out any material tasks or responsibilities for a period of
more than thirty (30) days after receipt of written notice
of such failure, or (iv) commits any act of fraud,
embezzlement or deliberate disregard of a policy of Memory known
to the executive officer or contained in a policy manual which
results in material loss, damage or injury to Memory.
Each of the individuals named above is said to have
Good
Reason
to resign from his or her employment if such
resignation occurs within ninety (90) days of: (i) a
material diminution in such individuals responsibilities
(provided that such diminution is not in connection with the
termination of his or her employment for
Cause
),
(ii) a change in such individuals principal work
location by more than 50 miles from Memorys principal
offices, or (iii) a reduction by Memory of such
individuals base salary, unless such reduction is pursuant
to a general reduction in the salaries of Memorys
executive officers. In addition, (i) Mr. Smith is also
said to have
Good Reason
should he be required to report
to an individual in a position lower than Memorys Chief
Executive Officer and (ii) Mr. Sulat is also said to
have
Good Reason
should he be required to report to an
individual in a position lower than Memorys Chief
Executive Officer or he ceases to be a member of the board.
David
A. Lowe, Ph.D., Chief Scientific Officer of
Memory
Memory has an employment letter agreement with Dr. Lowe for
an unspecified term that provides for an annualized base salary
of $381,177. Dr. Lowe is also entitled to receive annual
bonus payments that depend on Memorys performance and his
individual performance, in each case as determined by
Memorys Board. In the event that Memory terminates
Dr. Lowes employment without Cause, or if he resigns
for Good Reason within 18 months after a Change of Control,
he is entitled to receive a severance amount equal to
12 months of his then-current base salary, less applicable
deductions. Dr. Lowe is also entitled to receive continued
medical and dental coverage for one year following his
separation from service. If, within three months prior to, or
within 18 months after, a Change of Control,
(x) Memory terminates Dr. Lowes employment
without Cause or (y) Dr. Lowe terminates his
employment for Good Reason, Dr. Lowes unvested stock
options will become fully vested.
Michael
P. Smith, Chief Financial Officer of Memory
Memory has an employment letter agreement for an unspecified
term with Mr. Smith under which he currently receives an
annualized base salary of $268,060. Mr. Smith is also
entitled to receive annual bonus payments that depend on
Memorys performance and his individual performance, in
each case as determined by the Board. Mr. Smiths
target bonus is 30% of his base salary. In the event that Memory
terminates Mr. Smiths employment without Cause, or if
he resigns for Good Reason within 18 months after a Change
of Control, he is entitled to receive a severance amount equal
to 12 months of his then-current base salary, less
applicable deductions. Mr. Smith also will receive
continued medical and dental coverage for one year following his
separation from service. If, within three months prior to, or
within 18 months after, a Change of Control,
(x) Memory terminates Mr. Smiths employment
without Cause or (y) Mr. Smith terminates his
employment for Good Reason, Mr. Smiths unvested stock
options will become fully vested.
Stephen
R. Murray, M.D., Ph.D., Chief Medical Officer of
Memory
Memory has an employment letter agreement with Mr. Murray
for an unspecified term under which he currently receives an
annualized base salary of $294,000. In the event that Memory
terminates Mr. Murrays employment without Cause, or
if he resigns for Good Reason within 18 months after a
Change of Control, he is entitled to receive a severance amount
equal to 12 months of his then-current base salary, less
applicable deductions. Mr. Murray also will receive
continued medical and dental coverage for one year following his
separation from service. If, within three months prior to, or
within 18 months after, a Change of Control,
II-15
(x) Memory terminates Mr. Murrays employment
without Cause or (y) Mr. Murray terminates his
employment for Good Reason, Mr. Murrays unvested
stock options will become fully vested.
Jzaneen
Lalani, General Counsel and Corporate Secretary of
Memory
Memory has an employment letter agreement with Ms. Lalani
for an unspecified term under which she currently receives an
annualized base salary of $283,764. In the event that Memory
terminates Ms. Lalanis employment without Cause, or
if she resigns for Good Reason within 18 months after a
Change of Control, she is entitled to receive a severance amount
equal to 12 months of her then-current base salary, less
applicable deductions. Ms. Lalani also will receive
continued medical and dental coverage for one year following her
separation from service. If, within three months prior to, or
within 18 months after, a Change of Control,
(x) Memory terminates Ms. Lalanis employment
without Cause or (y) Ms. Lalani terminates her
employment for Good Reason, Ms. Lalanis unvested
stock options will become fully vested.
James
R. Sulat, Former Chief Financial Officer, and Former President
and Chief Executive Officer of Memory
Memory has an employment letter agreement with Mr. Sulat
under which he is currently working on a one-half time basis and
receives a base salary at an annualized full-time rate of
$410,000. In the event that Mr. Sulats employment is
terminated for any reason, other than by Memory for Cause, he
will be entitled to receive, following termination,
(i) severance equal to 12 months of his full-time base
salary, (ii) the average of his annual bonuses for the
three prior years in a lump sum, (iii) continued medical
and dental coverage for one year, and (iv) accelerated
vesting of 25% of his then unvested stock options. In the event
that Memory terminates Mr. Sulats employment without
Cause or he terminates his employment for Good Reason before
December 31, 2008, Mr. Sulat will also be entitled to
receive his then-current salary, continued vesting of his stock
options and continued medical and dental coverage through
December 31, 2008, in addition to the severance benefits
described above. Notwithstanding the above,
Mr. Sulats unvested stock options will become fully
vested if, within three months prior to, or within
18 months after, a Change of Control, (x) Memory
terminates Mr. Sulats employment without Cause or
(y) Mr. Sulat terminates his employment for Good
Reason. Any vested non-qualified stock options held by
Mr. Sulat will remain exercisable until the later to occur
of (i) ninety (90) days after the date of
termination and (ii) January 15 of the calendar year
immediately succeeding the date of termination.
Acceleration
of Options
Pursuant to the Merger Agreement, all outstanding options,
whether vested or unvested, will be cancelled upon consummation
of the Merger. For each option that has an exercise price lower
than the Merger Price per Share at the time of the Merger, the
option holder will receive a payment equal to the options
spread at the time of the Merger, subject to
applicable withholding taxes. Accordingly, for any cancelled
option with an exercise price lower than the Merger Price per
Share, the option holder will receive an amount, for each Share
subject to the option, equal to (i) the Merger Price per
Share minus (ii) the exercise price of the option. If an
options exercise price is greater than or equal to the
Merger Price per Share, the option holder will receive no
payment with respect to that option.
2007
Bonuses
The 2007 bonuses for Memorys Named Executive Officers are
shown in the Summary Compensation Table above. Determination of
bonus amounts are made by the Compensation Committee after the
end of the fiscal year and are based on the level of achievement
of overall Memory objectives, which are set annually in
collaboration with Memorys Board, and individual
objectives, which are set annually by Memorys President
and Chief Executive Officer together with each Named Executive
Officer. Overall Memory objectives include research and
development objectives and other corporate objectives.
Individual objectives and weightings for each executive officer
vary depending on the executive officers position and
areas of responsibility and the executive officers
contribution to Memorys performance; provided that, the
President and Chief Executive Officers bonus is determined
solely with reference to Memorys overall objectives.
Mr. Sulat, in his prior
II-16
roles as Chief Financial Officer, President and Chief Executive
Officer, is eligible to receive an annual cash bonus of up to
35% of his annual base salary. For 2007, the Compensation
Committee increased the bonus target for each of Memorys
other Named Executive Officers from 25% to 30% of such
executives annualized base salary.
Memorys Board assesses the level of overall achievement by
Memory and Memorys Compensation Committee assesses the
individual performance levels of each Named Executive Officer
(other than the President and Chief Executive Officer). Based on
these assessments, annual bonuses may be above or below target
bonus levels, at the discretion of the Compensation Committee.
For 2007, Memorys research and development objectives
included the commencement or completion of several clinical
trials, the advancement of Memorys development candidates,
the identification of new development candidates from
Memorys preclinical development pipeline and the
achievement of milestones under Memorys collaborations.
Memorys other corporate objectives included raising
additional financing, and further expanding Memorys
in-house clinical development team. For 2007, the Board
determined that a substantial number of Memorys objectives
were met, but not all were achieved in the time frame that
Memory had set. The Board further determined, however, that many
of these objectives were achieved at a later point during the
year or, with respect to particularly challenging objectives,
Memory demonstrated significant progress towards their
achievement. Based on these considerations, the Compensation
Committee set 2007 bonus amounts as shown in the Summary
Compensation Table.
II-17
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to Memory with
respect to the beneficial ownership of Memorys Common
Stock as of December 1, 2008 by (i) each of
Memorys directors, (ii) each of Memorys Named
Executive Officers, (iii) all of Memorys directors
and executive officers as a group, and (iv) each person (or
group of affiliated persons) known by Memory to be the
beneficial owner of more than 5% of Memorys common stock.
Beneficial ownership and percentage ownership are determined in
accordance with the rules of the SEC. This information does not
necessarily indicate beneficial ownership for any other purpose.
Under these rules, the number of shares of common stock deemed
outstanding includes shares issuable upon exercise of stock
options and warrants held by the respective person or group,
which may be exercised within 60 days of December 1,
2008. For purposes of calculating each person or groups
percentage ownership, stock options and warrants exercisable
within 60 days of December 1, 2008 are included for
that person or group, but the stock options or warrants held by
any other person or group are not included. Percentage of
beneficial ownership is based on 82,243,050 shares of
common stock outstanding as of December 1, 2008.
Unless otherwise indicated and subject to applicable community
property laws, to Memorys knowledge, each stockholder
named in the following table possesses sole voting and
investment power over the shares listed, except for those
jointly owned with that persons spouse. Unless otherwise
noted below, the address of each person listed on the table is
c/o Memory
Pharmaceuticals Corp., 100 Philips Parkway, Montvale,
New Jersey 07645.
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Shares Beneficially
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Owned*
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Number of
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Percent
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Name of Beneficial Owner
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Shares
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(%)
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Directors and Named Executive Officers
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Paul Blake, M.D.(1)
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6,600
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*
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Anthony B. Evnin, Ph.D.(2)
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3,866,446
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4.70
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Jonathan J. Fleming(3)(13)
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7,148,701
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8.62
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Walter Gilbert, Ph.D.(4)
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288,135
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*
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Vaughn M. Kailian(5)(15)
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14,527,598
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17.66
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Robert I. Kriebel(6)
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56,750
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*
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David A. Lowe, Ph.D.(7)
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648,650
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*
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Michael E. Meyers, M.P.H.(8)
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127,432
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*
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Michael P. Smith(9)
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239,960
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*
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James R. Sulat(10)
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1,364,360
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1.64
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Peter F. Young(11)
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50,000
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*
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All current directors and executive officers as a group
(13 persons)(12)
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28,854,697
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33.21
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Five Percent Stockholders
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Oxford IV Entities(13)
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4,552,630
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5.47
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Great Point Entities(14)
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9,845,200
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11.97
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MPM Entities(15)
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14,138,993
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17.19
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The Stanley Medical Research Institute(16)
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9,879,059
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11.99
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*
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Represents less than 1%.
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Each of Memorys directors and executive officers, as well
as their affiliates, including the Oxford IV Entities and the
MPM Entities (collectively, the
Tendering
Stockholders
), have entered into a Stockholder Tender
and Support Agreement, dated as of November 25, 2008, with
Roche (the
Tender Agreement
), pursuant to
which each Tendering Stockholder agreed, among other things, to
tender all shares of Common Stock beneficially owned by him or
her pursuant to the Offer (excluding shares subject to
unexercised stock options or warrants), to vote such shares in
favor of the adoption of the Merger Agreement at any meeting of
Memorys stockholders and to grant to Roche an irrevocable
proxy to vote such shares in favor of the Merger Agreement. The
shares subject to the Tender Agreement represent approximately
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II-18
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29.5% of the total outstanding shares of Memory. Each Tendering
Stockholder may withdraw his or her shares from the Offer or
revoke his or her proxy only if the Tender Agreement is
terminated in accordance with its terms. The foregoing summary
is qualified in its entirety by reference to the Tender
Agreement, which has been filed with the SEC as
Exhibit (e)(2) to the Schedule 14d-9 filed by Memory
of even date hereof.
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(1)
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Includes 6,600 shares of common stock issued to Paul
Blake, M.D. upon the exercise of options vested as of
60 days following December 1, 2008.
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(2)
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Includes 293,739 shares of common stock issued to Anthony
B. Evnin, Ph.D., 50,000 shares of common stock
issuable to Dr. Evnin upon the exercise of options vested
as of 60 days following December 1, 2008 and warrants
to purchase 64,473 shares of common stock. Also includes
1,308,275 shares and warrants to purchase
113,289 shares of common stock owned by Venrock Associates
(Venrock), 1,859,411 shares and warrants to
purchase 163,026 shares of common stock owned by Venrock
Associates II, L.P. (Venrock II), and
14,233 shares of Memorys common stock owned by
Venrock Entrepreneurs Fund, L.P. (Entrepreneurs
Fund, and, together with Venrock and Venrock II, the
Venrock Entities). Dr. Evnin is a general
partner of Venrock and Venrock II. Dr. Evnin is also a
member of the General Partner of Entrepreneurs Fund.
Dr. Evnin may be deemed to beneficially own the shares
owned by the Venrock Entities; however, Dr. Evnin disclaims
beneficial ownership of these shares, except to the extent of
his proportionate pecuniary interest therein.
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(3)
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Includes 50,000 shares of common stock issuable to Jonathan
J. Fleming upon the exercise of options vested as of
60 days following December 1, 2008. Also includes
357,715 shares of common stock held by Oxford Bioscience
Partners II L.P. (OBP II), 267,844 shares
of common stock held by Oxford Bioscience Partners (Bermuda) II
Limited Partnership (OBP Bermuda II),
100,306 shares of common stock held by Oxford Bioscience
Partners (Adjunct) II L.P. (OBP Adjunct II),
352,679 shares of common stock held by Oxford Bioscience
Partners (GS-Adjunct) II L.P. (OBP GS-Adjunct II),
and 1,283,317 shares of common stock and warrants to
purchase 184,210 shares of common stock held by Oxford
Bioscience Partners II (Annex) L.P. (OBP
Annex II). OBP Management II L.P. (OBP
Management II) is the general partner of OBP II, OBP
Adjunct II, OBP GS-Adjunct II and OBP
Annex II) and OBP Management (Bermuda) II Limited
Partnership (OBP Management Bermuda II) is the
general partner of OBP Bermuda II. Mr. Fleming is a general
partner of both OBP Management II and OBP Management
Bermuda II. Therefore Mr. Fleming may be deemed to
beneficially own the shares held by OBP II, OBP Adjunct II, OBP
GS-Adjunct II, OBP Annex II and OBP Bermuda II; however, he
disclaims beneficial ownership of these shares, except to the
extent of his proportionate pecuniary interest therein.
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Also includes shares held by the Oxford IV Entities, of
which Mr. Fleming is an affiliate. See footnote 13.
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(4)
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Includes 83,750 shares of common stock issuable to Walter
Gilbert, Ph.D. upon the exercise of options vested as of
60 days following December 1, 2008. Also includes
66,666 shares of common stock issued to Dr. Gilbert,
66,666 shares of common stock issued to
Dr. Gilberts spouse and 52,632 shares of common
stock and warrants to purchase 18,421 shares of common
stock issued to a charitable remainder trust of which
Dr. Gilbert and his spouse are the trustees and the
beneficiaries.
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(5)
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Includes 388,605 shares of common stock issuable to
Mr. Kailian upon the exercise of options vested as of
60 days following December 1, 2008. Also includes
shares held by the MPM Entities, of which Vaughn M. Kailian is
an affiliate. See footnote 15.
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(6)
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Includes 5,000 shares of common stock issued to Robert I.
Kriebel, 50,000 shares of common stock issuable to
Mr. Kriebel upon the exercise of options vested as of
60 days following December 1, 2008 and warrants to
purchase 1,750 shares of common stock.
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(7)
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Includes 26,316 shares of common stock issued to David A.
Lowe, Ph.D., 613,124 shares of common stock issuable
to Dr. Lowe upon the exercise of options vested as of
60 days following December 1, 2008 and warrants to
purchase 9,210 shares of common stock.
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(8)
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Includes 68,222 shares of common stock issued to Michael E.
Meyers, M.P.H., 50,000 shares of common stock issuable to
Mr. Meyers upon the exercise of options vested as of
60 days following December 1, 2008 and warrants to
purchase 9,210 shares of common stock.
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II-19
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(9)
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Includes 9,960 shares of common stock issued to Michael P.
Smith and 239,960 shares of common stock issuable to
Mr. Smith upon the exercise of options vested as of
60 days following December 1, 2008.
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(10)
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Includes 14,487 shares of common stock issued to James R.
Sulat, 1,017,187 shares of common stock issuable to
Mr. Sulat upon the exercise of options vested as of
60 days following December 1, 2008, and
277,423 shares of common stock and warrants to purchase
55,263 shares of common stock issued to a revocable trust
of which Mr. Sulat and his spouse are the trustees and the
members of Mr. Sulats immediate family are the
beneficiaries.
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(11)
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Consists of 50,000 shares of common stock issuable to Peter
F. Young upon the exercise of options vested as of 60 days
following December 1, 2008.
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(12)
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Includes: Messrs. Fleming, Kailian, Kriebel, Meyers, Smith,
Sulat and Young, and Drs. Blake, Evnin, Gilbert, Lowe and
Murray, and Ms. Lalani.
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(13)
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Includes 3,595,503 shares of common stock and warrants to
purchase 911,902 shares of common stock held by Oxford
Bioscience Partners IV L.P. (Oxford IV) and
36,076 shares of common stock and warrants to purchase
9,149 shares of common stock held by mRNA Fund II L.P.
(mRNA II) II. OBP Management IV L.P. (OBP
IV, and together with Oxford IV and mRNA II, the
Oxford IV Entities), is the general partner of
Oxford IV and mRNA II. Jonathan J. Fleming, Jeffery T.
Barnes, Mark P. Carthy, Michael E. Lytton and Alan G. Walton are
the general partners of OBP IV (each a General
Partner and collectively the General
Partners). By virtue of their relationship as affiliated
limited partnerships which share a sole general partner (OBP
IV), Oxford IV and mRNA II may be deemed to share voting
power and the power to direct the disposition of the shares of
common stock which each partnership owns of record. OBP IV, as
the general partner of Oxford IV and mRNA II, may also be
deemed to own beneficially the shares of Oxford IV and mRNA
II. The General Partners may also be deemed to own beneficially
the shares held by Oxford IV and mRNA II. Oxford IV, OBP IV
and the General Partners expressly disclaim beneficial ownership
of the shares held by mRNA II, except to the extent of their
respective pecuniary interest therein, and mRNA II, OBP IV, and
the General Partners expressly disclaim beneficial ownership of
the shares held by Oxford IV, except to the extent of their
respective pecuniary interest therein. The principal business
office of the Oxford IV Entities and the General Partners
(excluding Mr. Walton) are located at 222 Berkeley Street,
Suite 1650, Boston, MA 02116. The principal business office
of Mr. Walton is 315 Post Road West, Westport, CT 06880.
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(14)
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Includes 5,316,407 shares held by Biomedical Value Fund,
L.P. (BMVF) and 4,528,793 shares held by
Biomedical Offshore Value Fund, Ltd. (BOVF, and,
together with BMVF, the Great Point Entities). Great
Point Partners, LLC (Great Point) is the investment
manager of BMVF and BOVF and by virtue of such status may be
deemed to be the beneficial owner of the shares held by BMVF and
BOVF. Dr. Jeffrey R. Jay, as senior managing member of
Great Point, has shared voting and investment power with respect
to these shares. Great Point and Dr. Jay disclaim
beneficial ownership of the shares of common stock held by BMVF
and BOVF, except to the extent of any pecuniary interest. The
principal business address for Great Point is 165 Mason Street,
3rd Floor, Greenwich, CT 06830.
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(15)
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Includes 13,251,643 shares held by MPM BioVentures IV-QP,
L.P. (BV IV QP), 376,819 shares held by MPM
Asset Management Investors BV4 LLC (AM BV4) and
510,531 shares held by MPM BioVentures IV
GmbH & Co. Beteiligungs KG (BV IV GmbH,
and, collectively with BV IV QP and AM BV4, the MPM
Entities). The Registrant has been advised that MPM
BioVentures IV, GP LLC and MPM BioVentures IV LLC are the
direct and indirect general partners of BV IV QP, AM BV4 and BV
IV GmbH. Vaughn M. Kailian, Ansbert Gadicke, Luke Evnin, Steven
St. Peter, William Greene, James Paul Scopa, John Vander Vort
and Ashley Dombkowski are members of the general partner of BV
IV QP and BV IV GmbH and members of AM BV4. Each member of the
group disclaims beneficial ownership of the securities except to
the extent of his or her proportionate pecuniary interest
therein. Mr. Kailian is a member of Memorys Board and
Memorys President and Chief Executive Officer. The
principal business address for BV IV QP, AM BV4 and BV IV GmbH
is The John Hancock Tower, 200 Clarendon Street,
54
th
Floor, Boston, MA 02116.
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(16)
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Includes warrants to purchase 154,128 shares of common
stock.
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II-20
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons
Memory has not entered into any transactions with related
persons during 2007 or 2008 until the date hereof, other than an
employment agreement with Vaughn M. Kailian, its President and
Chief Executive Officer, who is also a director of Memory and an
affiliate of entities affiliated with MPM Asset Management LLC
(which funds, collectively, are the beneficial owners of more
than 5% of Memorys common stock). Under the terms of his
employment agreement, which was effective February 7, 2008,
Mr. Kailian receives an annualized base salary of $410,000.
During the period of Mr. Kailians employment, Memory
will pay or reimburse Mr. Kailian for all out-of-pocket
travel and living expenses (including a gross up payment for any
income tax liability he incurs) in connection with his commuting
expenses from his principal office in San Francisco,
California to Memorys offices in Montvale, New Jersey. No
transaction with a related person, other than as described
herein, is currently proposed.
Policy
Regarding Review and Approval of Related Person
Transactions
Memorys Board has not adopted any written policies or
procedures governing the review, approval or ratification of
related person transactions. As a matter of practice, however,
Memorys Board reviews, approves or ratifies, when
necessary, all transactions with related persons. The
Boards practice is to evaluate whether a related person
(including a director, officer, employee, or other significant
stockholder) will have a direct or indirect interest in a
transaction in which Memory may be a party. Where the Board
determines that such proposed transaction involves a related
person, the Board reviews any and all information it deems
necessary and appropriate to evaluate the fairness of the
transaction to Memory and its stockholders (other than the
interested related person involved in such transaction), and may
consider, among other things, the following factors: the related
persons relationship to Memory and direct or indirect
interest in the transaction, both objective (for example, the
dollar amount of the related persons interest) and
subjective (for example, any personal benefit not capable of
quantification); whether the interested transaction is on terms
no less favorable than terms generally available to an
unaffiliated third-party under the same or similar
circumstances; if applicable, the availability of other sources
of comparable products or services; the benefits to Memory of
the proposed interested transaction; and the impact on a
directors independence in the event the related person is
a director, an associated person of a director or an
entity in which a director is a partner, member, stockholder or
officer. Following such review, the related person transaction
is subject to final approval of the Board as a whole. In
addition, Memorys Audit Committee reviews, at each of its
regularly scheduled quarterly meetings, whether Memory has
entered into any transactions which could be deemed to be a
transaction with a related person.
STOCKHOLDER
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders may communicate with the Board by sending a letter
to Memory Pharmaceuticals Corp. Board of Directors
c/o Corporate
Secretary, 100 Philips Parkway, Montvale, New Jersey 07645. The
Corporate Secretary will receive and review all correspondence
and forward it to the Chairman of the Board, the Chairman of the
Audit Committee or to any individual director or directors to
whom the communication is directed, as appropriate.
Notwithstanding the above, the Corporate Secretary has the
authority to discard or disregard any communication that is
unduly hostile, threatening, illegal or otherwise inappropriate,
or to take any other appropriate actions with respect to such
communications.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires Memorys officers and directors, and persons who
beneficially own more than 10% of a registered class of
Memorys equity securities, to file reports of beneficial
ownership of Memorys common stock (Forms 3, 4, and
5) with the SEC. Officers,
II-21
directors, and greater than 10% stockholders are required to
furnish Memory with copies of all such forms that are so filed.
To Memorys knowledge, based solely on Memorys review
of the copies of such reports and written representations from
Memorys officers and directors that no other reports were
required, during the fiscal year ended December 31, 2007,
all Section 16(a) filing requirements applicable to
Memorys officers, directors and greater than 10%
beneficial owners were complied with, except that
(i) Mr. Kailian filed two late Form 4s, each for
one transaction, (ii) MPM
BioVentures IV-QP,
L.P. filed two late Form 4s, each for one transaction, and
(iii) MPM BioVentures IV GmbH & Co.
Beteiligungs KG filed one late Form 4 for one transaction.
II-22
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