UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934 (Amendment
No. )
Filed by
the Registrant
x
Filed by
a Party other than the Registrant
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Check the
appropriate box:
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x
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2))
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o
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material under §240.14a-12
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FLAMEL TECHNOLOGIES S.A.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate
box):
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0- 11.
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(1)
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Title of each class of securities
to which transaction applies:
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(2)
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Aggregate number of securities
to which transaction applies:
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(3)
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value
of transaction:
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Fee
paid previously with preliminary materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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, 2016
Dear Shareholder:
We cordially invite
you to attend the combined ordinary general meeting and extraordinary general meeting (the “Meeting”) of the shareholders
of Flamel Technologies S.A. (the “Company”) to be held on
, ,
2016, at 1:00 p.m. local time, at the Company’s headquarters, located at 33, avenue du Dr Georges Lévy, 69200 Vénissieux,
France.
Among other important
matters, at the Meeting you will be asked to consider and vote on proposals to change our jurisdiction of incorporation from France
to Ireland by merging the Company with and into our wholly owned Irish corporate subsidiary, Avadel Pharmaceuticals Limited.
As a shareholder of
Flamel Technologies, we appreciate the important role you play in our Company by considering and acting upon the matters described
in the attached proxy statement. Thank you for the time and attention you devote to making thoughtful decisions.
Attached you will
find a notice of meeting and proxy statement providing you with further information about the Meeting and the items upon which
you will be asked to vote, including how to obtain admission to the Meeting if you plan to attend, and, if you hold American Depositary
Shares (ADSs) representing shares, how to instruct the Depositary to vote the shares underlying your ADSs. Also accompanying these
materials is our annual report on Form 10-K for the fiscal year ended December 31, 2015.
Every shareholder
vote is important, and the Company encourages you to vote as promptly as possible.
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Sincerely,
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[GRAPHIC]
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Michael S. Anderson
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Chief Executive Officer
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NOTICE OF COMBINED ORDINARY GENERAL
AND EXTRAORDINARY GENERAL MEETINGS
OF SHAREHOLDERS OF FLAMEL TECHNOLOGIES
S.A.
Matters to be considered at
the ordinary general shareholders’ meeting:
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1.
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To approve the Flamel Technologies
S.A. French statutory financial statements for the year ended December 31, 2015;
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2.
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To approve the allocation of profits
for the year ended December 31, 2015;
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3.
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To ratify, on an advisory basis,
the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting
firm for U.S. financial reporting purposes for the year ending December 31, 2016;
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4.
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To appoint a second lead statutory
auditor and a second deputy statutory auditor pursuant to Article L 823-2 of the French
commercial code;
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5.
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To renew Mr. Michael S. Anderson
as a Director;
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6.
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To renew Mr. Guillaume Cerutti as
a Director;
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7.
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To renew Dr. Francis J.T. Fildes
as a Director;
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8.
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To renew Mr. Christophe Navarre
as a Director;
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9.
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To renew
The Honorable Craig R. Stapleton as a Director;
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10.
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To renew Mr. Benoit Van Assche
as a Director;
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11.
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To
approve the annual amount of directors’ fees to be paid to
the Board of
Directors
(
jetons de presence
);
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12.
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To approve a non-binding advisory
resolution on the compensation of our named executive officers;
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13.
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To approve a non-binding advisory
resolution on the frequency of future advisory votes on our executive compensation on
an annual basis;
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14.
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To approve a non-binding advisory
resolution on the frequency of future advisory votes on our executive compensation every
two years;
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15.
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To approve a non-binding advisory
resolution on the frequency of future advisory votes on our executive compensation every
three years;
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16.
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To approve agreements with related
parties as described in article L.225-38
et seq
. of the French Commercial Code;
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Matters to be considered at
the extraordinary general shareholders’ meeting:
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17.
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To review and approve the “Common Draft
Terms of Cross-Border Merger” (the “Merger Agreement”) providing for a merger (the “Merger”)
by way of acquisition (
absorption
) of the Company by its wholly owned subsidiary Avadel Pharmaceuticals Limited (to
be re-registered in Ireland prior to the Merger as an Irish public limited company, or plc, and renamed Avadel Pharmaceuticals
plc (“Avadel plc”));
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18.
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To grant powers to the Board of
Directors to take such further actions as may be necessary to complete the Merger and
the other transactions contemplated by the Merger Agreement, including the powers to
file, negotiate, sign, amend and publish any document, agreement or instrument necessary
for such purposes, and in particular, to draft, sign and file the certificate of compliance
in relation to the Merger in compliance with the French commercial code;
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19.
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To approve the dissolution without
liquidation of the Company under the condition precedent of the completion of the Merger;
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20.
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To approve the reduction of the
share premium of Avadel plc to allow the creation of distributable reserves of Avadel
plc which are required under Irish law in order to allow Avadel plc to make distributions
and to pay dividends and repurchase or redeem shares following completion of the Merger;
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21.
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To authorize the Board of Directors
to grant up to 750,000 free shares to employees of the Company and its subsidiaries as
well as to corporate officers of the Company pursuant to a “2016 Free Shares Plan”
to be adopted by the Board of Directors pursuant to the shareholders authorization and
the revocation and waiver of shareholders’ preemptive subscription rights with
respect to such shares;
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22.
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To authorize the Board of Directors
to grant stock options to purchase up to 1,500,000 shares to employees of the Company
and its subsidiaries as well as to corporate officers of the Company pursuant to a “2016
Stock Option Plan” to be adopted by the Board of Directors pursuant to the shareholders
authorization and the revocation and waiver of shareholders’ preemptive subscription
rights with respect to such options and the underlying shares
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23.
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To authorize the Board of Directors
to issue stock purchase warrants to purchase up to 350,000 shares to non-employee directors
of the Company and its subsidiaries (including the Chairman of the Board of Directors),
and the revocation and waiver of shareholders’ preemptive subscription rights with
respect to such warrants and the underlying shares;
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24.
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To authorize the Board of Directors
to increase the share capital by issuing shares reserved for the members of a company
savings plan established in application of Articles L.3332-18 et seq. of the French Labor
Code, and the revocation and waiver of shareholders’ preemptive subscription rights
with respect to such shares;
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25.
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To authorize the Board of Directors
or any person delegated by it with the powers necessary to carry out any formalities
required by law to give effect to the resolutions approved at the Meeting; and
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26.
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To transact such other business
as may properly come before the meeting or any adjournment or postponement of the Meeting.
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Enclosed with this
proxy statement are (i) a proxy card (for use by holders of our ordinary shares) or a voting instruction card (for use by holders
of American Depositary Shares (“ADSs”) representing our ordinary shares), as applicable, and (ii) a copy of our annual
report on Form 10-K for the fiscal year ended December 31, 2015. Additional copies of these materials may be obtained without
charge by writing the Secretary of Flamel Technologies S.A. at 33, avenue du Dr Georges Lévy, 69200 Vénissieux,
France, or downloaded from our website at www.flamel.com.
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By order of the Flamel Technologies S.A.
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Board of Directors
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[GRAPHIC]
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Phillandas T. Thompson
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Senior Vice President, General Counsel and Corporate Secretary
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IT IS IMPORTANT
THAT PROXIES BE RETURNED PROMPTLY. IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING, PLEASE VOTE YOUR SHARES BY SIGNING, DATING
AND MAILING THE ENCLOSED VOTING INSTRUCTION CARD (IF YOU HOLD ADSs) OR PROXY CARD (IF YOU HOLD ORDINARY SHARES DIRECTLY). IF YOU
WISH, YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
Important Notice Regarding the Availability
of Proxy Materials for the
Combined Ordinary General Meeting and
Extraordinary General Meeting to Be Held on
, 2016:
The Proxy Statement and Annual Report
for 2015 on Form 10-K are available at www.flamel.com.
TABLE OF CONTENTS
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Page
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QUESTIONS
& ANSWERS
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vii
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PROXY
STATEMENT SUMMARY
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xiv
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2016
Combined Ordinary General Meeting and Extraordinary General Meeting of Shareholders
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xiv
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Agenda
and Voting Recommendations
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xiv
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Board
of Director Nominees
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xvii
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Proxies
and Voting Instructions
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xvii
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Additional
Information
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xvii
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PRELIMINARY
PROXY STATEMENT
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1
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Voting
and Board Recommendations
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1
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Quorum
and Vote Required under French Law
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2
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Shareholder
Communications to Directors
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3
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Expenses
of Solicitation
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3
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Inapplicability
of Double-Voting Rights
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4
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PROPOSALs
WITH RESPECT TO THE ANNUAL FINANCIAL STATEMENTS: Resolutions 1, 2, 3 and 4
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4
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PROPOSALs
TO ELECT DIRECTORS: RESOLUTIONS 5, 6, 7, 8, 9, AND 10
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5
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The
Board of Directors
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5
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Board
Leadership Structure and Role in Risk Oversight
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5
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Role
in Risk Oversight
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5
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Diversity
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6
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Nominees
Standing for Election
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6
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CORPORATE
GOVERNANCE
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8
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Company
Governance
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8
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Board
Practices
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8
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Compensation
Committee
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9
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Audit
Committee
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9
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Nominating
and Corporate Governance Committee
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10
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Policies and Procedures for Related Party Transactions
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10
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Related Party Transactions
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11
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AUDIT
COMMITTEE REPORT
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1
1
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Composition,
Qualifications and Governance
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11
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Responsibilities
and Duties
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11
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Matters
Discussed with Management and Independent Auditors
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12
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EXECUTIVE
OFFICERS
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13
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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15
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EXECUTIVE
COMPENSATION
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17
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Compensation
Discussion and Analysis
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17
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Report
of the Compensation Committee
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22
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Director
Compensation
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27
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PROPOSALS
WITH RESPECT TO DIRECTOR AND EXECUTIVE OFFICER COMPENSATION: RESOLUTIONS 11, 12, 13, 14 AND 15
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28
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PROPOSAL
TO APPROVE AGREEMENTS WITH RELATED PARTIES: RESOLUTION 16
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29
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QUESTIONS
& ANSWERS
The following questions
and answers are intended to address briefly some commonly asked questions regarding the proposed Meeting (as defined below). These
questions and answers only highlight some of the information contained in this proxy statement. They may not contain all of the
information that is important to you. You should read carefully this entire proxy statement, including the annexes.
Why am I receiving these materials?
Flamel Technologies S.A. (the “Company”,
“Flamel”, “we”, “us”, “our”, or similar terms) is providing these materials to
registered holders of our ordinary shares and holders of American Depositary Shares, each of which represents one ordinary share
of Flamel (“ADSs”), in order to solicit your proxy to vote your ordinary shares at the Company’s 2016 combined
ordinary general meeting and extraordinary general meeting of shareholders (the “Meeting”) to be held at 1:00 p.m.
(local time) on , ,
2016 and at any postponement(s) or adjournment(s) thereof. The Meeting will be held at the Company’s headquarters,
located at 33, avenue du Dr Georges Lévy, 69200 Vénissieux, France. We first mailed or made available
printed versions of these materials to registered shareholders and holders ADSs on or about , ,
2016.
What is included in these materials?
These materials include this proxy statement,
a proxy card (for the registered holders of ordinary shares, as explained hereafter), a voting instruction form (for the holders
of ADSs, as explained hereafter), and our annual report on Form 10-K for the fiscal year ended December 31, 2015 filed by the
Company with the Securities and Exchange Commission (the “SEC”) on March 15, 2016 (the “Annual Report”).
The Annual Report is not part of the proxy solicitation materials.
What items will be voted on at the
Meeting?
The Company is aware of 25 items on which
shareholders will be asked to vote at the Meeting. Please see the proxy statement summary immediately below for a listing of all
such items to be voted on at the Meeting.
Could other matters be decided at the
Meeting?
At this time, we are unaware of any matters,
other than as set forth above and the possible submission of additional shareholder resolutions, as described under “Other
Matters” elsewhere in this proxy statement, that may properly come before the Meeting.
To address the possibility of another
matter being presented at the Meeting, holders of ordinary shares who choose to vote by mail may use their proxy card to (i) grant
a proxy to the chairman of the Meeting to vote on any new matters that are proposed during the meeting, (ii) abstain from voting
on (which will be treated as a vote “AGAINST”) such matters, or (iii) grant a proxy to another shareholder, a spouse
or a partner with whom the holder of ordinary shares is in a civil union to vote on such matters. If no instructions are given
with respect to matters about which we are currently unaware, your ordinary shares will be voted “AGAINST” such matters.
If a holder of ordinary shares chooses
to grant a proxy to the chairman of the Meeting, with respect to either all matters or only any additional matters not disclosed
in this proxy statement, the chairman of the Meeting shall issue a vote in favor of adopting such undisclosed resolutions submitted
or approved by the board of directors and a vote against adopting any other such undisclosed resolutions.
Ordinary shares underlying ADSs will not
be voted on any matter not disclosed in the proxy statement.
Who may vote at the Meeting?
As of May 1, 2016, there were 41,241,254
ordinary shares outstanding, of which 40,339,506 were held in the form of ADSs. Registered holders of ordinary shares
on ,
2016, the date of the Meeting, may vote at the Meeting. A holder of ADSs registered in such holder’s name on
the books of The Bank of New York Mellon, which acts as the depositary under our ADS program (the “Depositary”) (a
“registered holder of ADSs”) may instruct the Depositary to vote the ordinary shares represented by such ADSs, provided
that the Depositary receives the holder’s voting instructions by 5:00 p.m., Eastern Time, on ,
2016, which is the date established by the Depositary for such purpose. A holder of ADSs held through a brokerage, bank or other
account (a “beneficial holder of ADSs”) should follow the instructions that its broker, bank or other nominee provides
to vote the ordinary shares underlying its ADSs. The Depositary has fixed a record date for the determination of holders
of ADSs who shall be entitled to give such voting instructions. The Company has been informed by the Depositary that
it has set the ADS record date for the Meeting as
, 2016.
How does the Board of Directors recommend
that I vote?
The Board of Directors recommends that
you vote “FOR” each of the resolutions 1 to 12 (including “FOR” the nominees of the Board of Directors
in resolutions 5 to 10), “FOR” resolution 14 and each of the resolutions 16 to 23 and 25 and 26, and “AGAINST”
resolutions 13, 15 and 24.
Also please see the proxy statement summary
immediately below for the Board of Directors recommendation on each item to be voted on at the Meeting.
If I hold ADSs instead of ordinary
shares, are my rights to attend and vote at the Meeting different?
Yes. Attendance and voting rights are
different depending on whether you hold ordinary shares or ADSs, as follows:
Attendance:
Registered shareholders
may attend the Meeting in person or by appointing a proxy. You may not attend the Meeting in person or by proxy if you hold
only ADSs. However, you may attend and vote at the Meeting if you surrender your ADSs and become registered on the registry
maintained on behalf of the Company at least one (1) French business day before the Meeting. The process for surrendering
your ADSs is coordinated through your broker, or, if you do not hold your ADSs through a broker, directly with The Bank of New
York Mellon, which is the depositary under our ADS program (the “Depositary”). The Company cannot accurately predict
the number of days it will take to complete the process of becoming a registered shareholder.
Registered shareholders who wish to attend
the Meeting are advised that seating will be limited and admission will be on a first-come, first-served basis.
Voting:
Registered shareholders
may vote by attending the Meeting in person or by sending a proxy card to the Company by which they either (i) grant a proxy to
the chairman of the Meeting, (ii) grant a proxy to another shareholder, a spouse or a partner with whom the holder of ordinary
shares is in a civil union or (iii) give their voting instructions (by means of the enclosed proxy card) on the matters to be
decided at the Meeting. The proxy card may be sent to the Company by mail to be addressed to the Company’s headquarters,
at Flamel Technologies, Legal Department - 33 avenue du Dr Georges Lévy, 69200 Venissieux France, or, or (in accordance
with article R.225-95 of the French Commercial Code) or by emailing a digital copy of the proxy card to the Company at general.meeting@flamel.com.
Holders of ADSs may only vote by instructing
the Depositary how to vote the ordinary shares represented by their ADSs. Voting instructions may be given to the Depositary by
completing the voting instructions form provided for ADS holders and mailing such form to their broker or other securities intermediary,
or (if they do not hold their ADSs through such an intermediary) directly to the Depositary; and the Depositary will endeavor
to vote the underlying ordinary shares as so instructed (in the case of ADSs held through a broker or other securities intermediary,
you must rely on the procedures of such intermediary to ensure that your voting instructions are properly communicated to the
Depositary for this purpose). To vote in person at the Meeting or by proxy, an ADS holder must surrender his or her
ADSs and become registered on the registry maintained by or on behalf of the Company at least one (1) French business day before
the Meeting. The Depositary has established
, 2016 as the date by which voting instructions as to ADSs must be received by the Depositary in order for the Depositary to endeavor
to give effect to such instructions at the Meeting.
Under French law shareholders who are
registered on the registry maintained on behalf of the Company at least one (1) French business day before the Meeting will be
entitled to attend the Meeting and vote thereat. For holders of ADSs, the Depositary has established the close of business
on , 2016 as the record date for
determining the holders of ADSs who will be entitled to give voting instructions to the Depositary.
If I am a registered holder of ordinary
shares, how will my ordinary shares be voted if I do not vote?
If you are a registered holder of ordinary
shares and do not vote at the Meeting in person or by submitting your voting instructions by returning your proxy card by mail
or by email, or by granting your voting proxy directly to the chairman of the Meeting or to another shareholder or your spouse
or partner with whom you have entered into a civil union, your ordinary shares will not be counted in respect of any matter on
which votes are cast at the Meeting and will have no effect on the outcome of any such matter.
If you are a registered holder of ordinary
shares and you grant your proxy to another shareholder, a spouse or a partner with whom you are in a civil union, your shares
will be voted as you instruct by the individuals named on the proxy card.
If you are a registered holder of ordinary
shares and you grant your proxy directly to the chairman of the Meeting, such ordinary shares will be voted in accordance with
the recommendations of the Board of Directors.
If you are a registered holder of ordinary
shares and sign and return a proxy card but do not specify how your shares are to be voted, but do not make a selection as to
any matter nor grant a proxy to the chairman of the Meeting, another shareholder, a spouse or a partner with whom you are in a
civil union, your ordinary shares will be treated as abstentions (which will be treated as a vote “AGAINST”) as to
such matter.
How will the ordinary shares represented
by my ADSs be voted if I do not provide voting instructions to the Depositary or my broker or other securities intermediary?
If you are a registered holder of ADSs
and do not provide the Depositary with voting instructions as to how you would like the ordinary shares represented by your ADS
to be voted or you do not return your voting instruction form, pursuant to the terms of the deposit agreement, you may be deemed
by the Depositary to have instructed the Depositary to vote your ordinary shares in accordance with the recommendations of the
Board of Directors.
If you are a beneficial holder of ADSs
and do not provide voting instructions to your broker or other securities intermediary as to how you would like the ordinary shares
represented by your ADSs to be voted or do not return your voting instruction form, the intermediary will not have discretionary
authority to provide voting instructions to the Depositary on any matter. As a result, pursuant to the terms of the deposit agreement,
you may be deemed by the Depositary to have instructed the Depositary to vote such ordinary shares in accordance with the recommendations
of the Board of Directors.
However, if you do not give the Depositary
any voting instructions, the Depositary will not cast any vote with respect to any matter as to which the Company informs the
Depositary (and we have agreed with the Depository to provide such information to the Depositary as promptly as practicable in
writing) that (x) the Company does not wish such vote cast, (y) substantial opposition exists or (z) such matter materially and
adversely affects the rights of holders of our ordinary shares or ADSs. We have notified the Depositary in writing that we do
not wish any votes cast in respect of shares represented by ADSs only with respect to resolutions 13, with respect to the non-binding
advisory resolution as to annual vote on the compensation of our named executive officers, 15, with respect to the non-binding
advisory resolution as to a vote every three years on the compensation of our named executive officers, and 24, to approve the
issuance of 1% of the registered capital to a Company Savings Plan. Thus, any shares underlying ADSs for which a voting instruction
card is not timely received may be voted as to all matters on the agenda in the manner recommended by the Board of Directors herein.
If you hold ADSs, whether as a registered
holder or beneficially through a broker or other securities intermediary, and you provide instructions with respect to some but
not all matters, the ordinary shares represented by your ADSs will be treated as abstentions with respect to the matters as to
which you did not provide voting instructions.
With respect to any other matters that
may come before the Meeting, including consideration of a motion to adjourn the Meeting to another time or place (including for
the purpose of soliciting additional proxies), if proxies are returned, such proxies will be voted in a manner deemed by the proxy
representatives named therein in their discretion to be in our best interests and the best interests of our shareholders. ADS
voting instructions would extend only to the specific questions on the agenda, so shares represented by ADSs would not be voted
as to any other matter that might come before the Meeting.
If I am a registered holder of ordinary
shares, how will my ordinary shares be voted if I grant my proxy to the chairman of the Meeting?
If you are a registered holder of ordinary
shares and you grant your proxy to the chairman of the Meeting, the chairman will vote your ordinary shares in accordance with
the recommendations of the Board of Directors. As a result, your ordinary Shares would be voted “FOR” each of the
resolutions 1 to 12 (including “FOR” the nominees of the board of directors in resolutions 5 to 10), “FOR”
resolution 14 and each of the resolutions 16 to 23 and 25 and 26, and “AGAINST” resolutions 13, 15 and 24.
May shareholders ask questions?
Yes. Representatives of the Company will
answer shareholders’ questions of general interest following the Meeting. In order to give a greater number of shareholders
an opportunity to ask questions, individuals or groups will be allowed to ask only one question and no repetitive or follow-up
questions will be permitted.
From the date of the delivery of the notice
of the Meeting and until the fourth business day preceding the date of the Meeting, (i.e., until ,
2016), registered holders of ordinary shares may submit questions in writing to the Chairman of the Board of Directors, in accordance
with Articles L.225-108 and R.225-84 of the French Commercial Code. Written questions must be submitted by registered
mail with return receipt requested addressed to the registered office or electronically to the following address: general.meeting@flamel.com.
They must be accompanied by a registration certificate.
Can I change my mind after I vote?
If you are a registered holder of ordinary
shares and submit your proxy card to vote by mail or appoint a proxy in advance of the meeting, you will not be able to change
your vote. If you hold ADSs directly or through a broker, bank or other nominee, you must follow the voting instructions provided
by the Depositary or such broker, bank or other nominee if you wish to change your vote. The last instructions you submit prior
to the deadline indicated by the Depositary or the broker, bank or other nominee, as applicable, will be used to instruct the
Depositary how to vote the ordinary shares represented by your ADSs.
Who will count the votes?
Representatives of
will count the votes and will serve as the independent inspector of election.
Is my vote confidential?
Proxy instructions, ballots and voting
tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not
be disclosed either within the Company or to third parties, except:
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·
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As
necessary to meet applicable legal requirements;
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·
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To
allow for the tabulation and certification of votes; and
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·
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To
facilitate a successful proxy solicitation.
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Occasionally, shareholders provide written
comments on their proxy cards, which may be forwarded to the Company’s management and the Board.
What does it mean if I receive more
than one proxy card?
It means that you have multiple accounts
with brokers and/or our transfer agent. Please vote all of these shares. We recommend that you contact your broker and/or the
Company’s transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent
is ,
which may be reached at .
How many votes must be present to hold
the Meeting?
For an ordinary general meeting of shareholders,
20% of the outstanding shares must be present for the meeting to be valid and to act on ordinary resolutions. If a quorum is not
present when we convene the ordinary general meeting, the Board of Directors will give a second notice of such ordinary general
meeting, which shall take place within two months after the first meeting. At the second ordinary general meeting, there is no
minimum number of shares required for a quorum to be deemed present.
For an extraordinary meeting of shareholders,
25% of the outstanding shares must be present for the meeting to be valid and to act on extraordinary resolutions. If a quorum
is not present when we convene the extraordinary general meeting, the Board of Directors will give a second notice of such extraordinary
general meeting, which shall take place within two months after the first meeting. At the second extraordinary general meeting,
20% of the outstanding shares must be present for such second meeting to be valid and to act on extraordinary resolutions.
What will happen if a quorum is not
present at the Meeting?
If the required quorum for either the
ordinary general meeting or the extraordinary general meeting is not present when we convene the Meeting on
, 2016, we intend to adjourn and reconvene the Meeting on
, 2016 at the same location, with the same agenda as described in this notice.
How many votes are needed to approve
the other proposals?
Under French law, a resolution is classified
as ordinary or extraordinary according to its subject matter. For an ordinary resolution to be approved at an ordinary general
meeting, such resolution must receive the “FOR” vote of a simple majority of the shares present, in person or represented
by proxy, and entitled to vote at the meeting (whether such meeting is the initial meeting or a second meeting called after an
adjournment). For an extraordinary resolution to be approved at an extraordinary general meeting, such proposal must receive the
“FOR” vote of a two-thirds majority of the shares present, in person or represented by proxy, and entitled to vote
at the meeting (whether such meeting is the initial meeting or a second meeting called after an adjournment). For each proposal
on our agenda for the Meeting, you may vote “FOR”, “AGAINST” or “ABSTAIN.” Abstentions will
be counted as shares present and entitled to vote at the Meeting. Accordingly, abstentions will have the same effect as a vote
“AGAINST” the proposals.
Your shares are counted as present at
the Meeting if you attend the Meeting in person or if you properly return a proxy by mail. Abstentions will be counted for purposes
of establishing a quorum at the Meeting.
How will a broker “non-vote” affect the vote?
A broker non-vote happens when a bank, broker or other securities intermediary who
holds an ADS does not receive voting instructions from the beneficial owners of such ADS and does not have discretionary voting
power with respect to a resolution to be voted upon at the Meeting. In such a case, the bank, broker or other securities intermediary
is not permitted to instruct the Depositary how to vote with respect to such resolution, and the Depositary may vote the ordinary
shares underlying such ADS in the manner recommended by the Board of Directors. As a result, ADSs that are the subject of a broker
non-vote are included for quorum purposes, and a broker non-vote with respect to a resolution may be counted as a vote cast on
such resolution.
When will the Company announce the
voting results?
The Company will announce the voting results
of the Meeting on a Current Report on Form 8-K filed within four business days of the Meeting.
What if other matters are presented
for consideration at the Meeting?
As of the date of this proxy statement,
we know of no matters that will be presented for consideration at the Meeting other than those matters discussed in this proxy
statement. If any other matters properly come before the Meeting and call for a vote of shareholders, validly executed proxies
in the enclosed form returned to Flamel will be voted in accordance with the recommendation of the Board, in the absence of such
a recommendation, in accordance with the judgment of the proxy holders.
What is “householding?”
Unless we have received contrary instructions,
we may send a single copy of our proxy materials to any household at which two or more shareholders reside if we believe the shareholders
are members of the same family. Each shareholder in the household will continue to receive a separate proxy card. This process,
known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce
our expenses.
If you would like to receive your own
set of our annual disclosure documents this year or in future years, follow the instructions described below. Similarly, if you
share an address with another shareholder and together both of you would like to receive only a single set of our annual disclosure
documents, follow these instructions.
If your shares are registered in your
own name, please contact the Company at our executive offices at Parc Club du Moulin à Vent, 33, avenue du Docteur Georges
Levy 69200 Vénissieux France, Attention: Investor Relations, to inform the Company of your request. If a bank, broker or
other nominee holds your shares, please contact your bank, broker or other nominee directly.
What happens if the Merger is not completed?
If the Merger is not completed for any
reason, we will continue to be a French
société anonyme
and you will continue to hold your shares in us or
ADSs, as applicable, and the ADSs will continue to be traded on the Nasdaq Global Market.
If the Merger is completed, how will
I receive my shares in the Irish company?
We intend to continue the ADS program
following our reincorporation to Ireland. Thus, if at the time of the Merger you hold ADSs, the shares in Avadel plc attributable
to such ADSs will be issued to the depositary, who will deliver to you ADSs representing Avadel plc shares you will beneficially
own through such ADS program. Each new ADS will represent one ordinary share of Avadel plc. Avadel plc will establish an ADS program
with the Bank of New York Mellon as depositary following the Merger. Under such Avadel plc ADS program, each ADS would represent
one ordinary share of Avadel plc. For a summary of the terms and conditions that we anticipate will be applicable to the Avadel
plc ADS program, see “Proposals to Reincorporate the Company as an Irish Public Limited Company – Description of ADSs
Representing Avadel plc Ordinary Shares.”
Whom should I contact if I have additional
questions concerning the proxy statement, proxy card or voting instruction card?
If you have any questions concerning the
information contained in this proxy statement or require assistance completing the proxy card, you may contact
as follows:
PROXY
STATEMENT SUMMARY
This summary highlights
information contained elsewhere in this proxy statement. The Company first mailed or made available printed versions of this proxy
statement and the accompanying materials to its shareholders and holders of its ADSs on or about
, 2016. This summary does not contain all information you should consider, and you should read the entire proxy statement carefully
before voting.
2016 Combined Ordinary
General Meeting and Extraordinary General Meeting of Shareholders
Time and Date:
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1:00pm. (local time) on , ,
2016.
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Place:
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The Company’s
headquarters at 33, avenue du Dr Georges Lévy, 69200 Vénissieux, France.
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Record Date:
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Holders
of ADSs as of the close of business on
, 2016 may instruct the Depositary how to vote the ordinary shares represented by their ADSs at the Meeting.
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Voting:
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Registered holders of ordinary shares on ,
2016, the business day before the Meeting, may vote at the Meeting. A holder of ADSs registered in such holder’s
name on the books of the Depositary may instruct the Depositary to vote the ordinary shares represented by such ADSs, provided
that the Depositary receives the holder’s voting instructions by 5:00 p.m., Eastern Time, on
, 2016, which is the date established by the Depositary for such purpose. A holder of ADSs held through a broker or other
securities intermediary should follow the instructions that its broker or other securities intermediary provides to vote the
ordinary shares underlying its ADSs. The Depositary has fixed a record date for the determination of holders of
ADSs who shall be entitled to give such voting instructions. The Company has been informed by the Depositary that
it has set the ADS record date for the Annual General Meeting as
, 2016.
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Approval of Resolutions:
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Approval of resolutions to be considered at the ordinary general
meeting requires a simple majority of the shares represented at the meeting (in person or
by proxy) and entitled to vote. Approval of resolutions to be considered at the
extraordinary general meeting requires a two-thirds majority of the shares present at the
meeting (in person or by proxy) and entitled to vote.
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Attendance:
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Registered shareholders may attend the Meeting in person or by appointing a proxy. You
may not attend the Meeting in person or by proxy if you hold only ADSs. However, you may attend and vote at the
Meeting if you surrender your ADSs and become registered on the registry maintained on behalf of the Company at least one
(1) French business day before the Meeting. The process for surrendering your ADSs is coordinated through your
broker, or, if you do not hold your ADSs through a broker, directly with the Depositary. The Company cannot accurately
predict the number of days it will take to complete the process of becoming a registered shareholder.
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Agenda and Voting
Recommendations
The resolutions to be submitted for consideration
at our ordinary general meeting and at our extraordinary general meeting are summarized below.
Item
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Description
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Board Recom-
mendation
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Page
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Matters to be considered at the ordinary general shareholders’ meeting:
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1.
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To approve the Flamel Technologies S.A. French statutory financial statements for the year
ended December 31, 2015.
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FOR
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-
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2.
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To approve the allocation of profits for the year ended December 31, 2015
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FOR
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-
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3.
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To ratify, on an advisory basis, the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm for U.S. financial reporting purposes for the year ending December 31, 2016.
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FOR
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-
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4.
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To appoint a second lead statutory auditor and a second deputy statutory auditor pursuant
to Article L 823-2 of the French commercial code
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FOR
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-
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5.
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To renew Mr. Michael S. Anderson as a Director
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FOR
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-
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6.
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To renew Mr. Guillaume Cerutti as a Director
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FOR
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-
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7.
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To renew Dr. Francis J.T. Fildes as a Director
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FOR
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-
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8.
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To renew Mr. Christophe Navarre as a Director
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FOR
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-
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9.
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To renew The Honorable Craig R. Stapleton as a Director
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FOR
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-
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10.
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To renew Mr. Benoit Van Assche as a Director
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FOR
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-
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11.
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To approve the annual amount of directors’
fees to be paid to
the Board of Directors
(
jetons de presence
)
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FOR
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-
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12.
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To approve a non-binding advisory resolution on the compensation of our named executive officers
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FOR
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13.
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To approve a non-binding advisory resolution on the frequency of future advisory votes on
our executive compensation on an annual basis
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AGAINST
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-
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14.
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To approve a non-binding advisory resolution on the frequency of future advisory votes on
our executive compensation every two years
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FOR
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-
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15.
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To approve a non-binding advisory resolution on the frequency of future advisory votes on
our executive compensation every three years
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AGAINST
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-
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16.
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To approve agreements with related parties as described in article L.225-38
et seq
.
of the French Commercial Code
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FOR
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Matters to be considered at the extraordinary general shareholders’ meeting:
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17.
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To review and approve the “Common Draft Terms of Cross-Border
Merger” (the “Merger Agreement”) providing for a merger (the
“Cross-Border Merger”) by way of acquisition (
absorption
) of the Company
by its wholly owned subsidiary Avadel Pharmaceuticals Limited (to be re-registered in Ireland
prior to the Merger as an Irish public limited company, or plc, and renamed Avadel Pharmaceuticals
plc (“Avadel plc”));
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FOR
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-
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18.
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To grant powers to the Board of Directors to take such further actions as may be necessary
to complete the Merger and the other transactions contemplated by the Merger Agreement, including the powers to file, negotiate,
sign, amend and publish any document, agreement or instrument necessary for such purposes, and to draft, sign and file the
certificate of compliance in relation to the Merger in compliance with the French commercial code
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FOR
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-
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19.
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To approve the dissolution without liquidation of the Company under the condition precedent
of the completion of the Cross-Border Merger
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FOR
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-
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20.
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To approve the reduction of the share premium of Avadel plc to allow the creation of distributable
reserves of Avadel plc which are required under Irish law in order to allow Avadel plc to make distributions and to pay dividends
and repurchase or redeem shares following completion of the Merger;
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21.
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To authorize the Board of Directors to grant up to 750,000 free shares to employees of the
Company and its subsidiaries as well as to corporate officers of the Company pursuant to a “2016 Free Shares Plan”
to be adopted by the Board of Directors pursuant to the shareholders authorization and the revocation and waiver of shareholders’
preemptive subscription rights with respect to such shares
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FOR
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-
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22.
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To authorize the Board of Directors to grant stock options to purchase up to 1,500,000 shares
to employees of the Company and its subsidiaries as well as to corporate officers of the Company pursuant to a “2016
Stock Option Plan” to be adopted by the Board of Directors pursuant to the shareholders authorization and the revocation
and waiver of shareholders’ preemptive subscription rights with respect to such options and the underlying shares
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FOR
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-
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23.
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To authorize the Board of Directors to issue stock purchase warrants to purchase up to 350,000
shares to non-employee directors of the Company and its subsidiaries (including the Chairman of the Board of Directors), and
the revocation and waiver of shareholders’ preemptive subscription rights with respect to such warrants and the underlying
shares
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FOR
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-
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24.
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To authorize the Board of Directors to increase the share capital by issuing shares reserved
for the members of a company savings plan established in application of Articles L.3332-18 et seq. of the French Labor Code,
and the revocation and waiver of shareholders’ preemptive subscription rights with respect to such shares
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AGAINST
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-
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25.
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To authorize the Board of Directors or any person delegated by it with the powers necessary
to carry out any formalities required by law to give effect to the resolutions approved at the Meeting
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FOR
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-
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26.
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To transact such other business as may properly come before the Meeting or any adjournment
or postponement of the Meeting
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FOR
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-
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Board of Director
Nominees
The following table
provides summary information about each director nominee. Each director is elected annually by a majority of the votes cast. All
of the director nominees for 2016 are current directors. All non-employee directors are independent.
Nominee
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Director
Since
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Principal Occupation
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Committees
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Michael S. Anderson
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2012
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Chief Executive Officer of Flamel Technologies S.A.
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-
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Guillaume Cerutti
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2011
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Chairman and Chief Executive Officer of Sotheby’s France
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(2)(3)
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Francis J.T. Fildes
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2008
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Director at Fildes Partners Ltd
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(1)(2)
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Christophe Navarre
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2014
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Chief Executive Officer of Moët Hennessy
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(1)(3)
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Craig R. Stapleton
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2011
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Former U.S. Ambassador to France, Senior Advisor to Stone Point Capital,
Director of Abercrombie & Fitch Co.
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(1)(2)(3)(4)
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Benoit Van Assche
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2014
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Former senior executive in the chemical, pharmaceutical and healthcare industries
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(1)(2)(3)
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(1) Member of the Compensation
Committee
(2) Member of the Audit
Committee
(3) Member of the Nominating
and Corporate Governance Committee
(4) Appointed as a Non-Executive
Chairman of the Board of Directors in 2014
Proxies and Voting
Instructions
Registered holders of ordinary shares
may provide proxies and holders of ADSs may provide voting instructions to the Depositary in the manner described below in this
proxy statement.
Additional Information
This proxy statement
incorporates by reference important business and financial information about Flamel from documents filed with the U.S. Securities
and Exchange Commission (“SEC”) that have not been included herein or delivered herewith. Because it is subject to
the informational requirements of the U.S. Securities Exchange Act of 1934, Flamel files annual, quarterly and current reports,
proxy statements and other information with the SEC (File No. 000-28508). You may read and copy any reports, statements or other
information we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference room. Flamel’s SEC filings also are available to the public
at the SEC’s web site at http://www.sec.gov.
We incorporate by
reference the documents listed below that the Company previously filed with the SEC:
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·
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Our
annual report on Form 10-K for the year ended December 31, 2015 filed with the SEC on
March 15, 2016;
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·
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Our
quarterly report on Form 10-Q for the quarter ended March 31, 2016 filed with the SEC
on May 10, 2016;
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·
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Our
Current Report on Form 8-K filed with the SEC on June 2, 2016;
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You may request a
copy of any of these filings, at no cost, by request directed to Flamel at the following address or telephone number:
Flamel Technologies S.A.
Parc Club du Moulin à Vent
33, avenue du Docteur Georges Levy
69200, Vénissieux France
Attention: Office of General Counsel
Telephone: +33 472 78 34 34
PRELIMINARY PROXY
STATEMENT
For the Flamel Technologies S.A. Combined
Ordinary General Meeting
and Extraordinary General Meeting of
Shareholders
to be held ,
2016
General
This proxy statement
is furnished by and on behalf of the Board of Directors (the “Board” or “Board of Directors”) of Flamel
Technologies S.A. (“we,” “us,” “our,” “Flamel,” and the “Company”
or any variation thereof) in connection with the solicitation of proxies for use at the Company’s 2016 combined ordinary
general meeting and extraordinary general meeting of shareholders (the “Meeting”) to be held at 1:00 p.m. (local time)
on ,
2016, at the Company’s headquarters, 33, avenue du Dr Georges Lévy, 69200 Vénissieux, France, and at any adjournments
or postponements thereof.
Voting and Board
Recommendations
Shares
. As
of May 1, 2016, there were 41,241,254 ordinary shares outstanding, of which 40,339,506 were held in the form of ADSs. Registered
holders of ordinary shares on ,
2016, the French business day before the Meeting, may vote at the Meeting. A holder of ADSs registered in such holder’s
name on the books of The Bank of New York, which acts as the depositary under our ADS program (the “Depositary”) (a
“registered holder of ADSs”) may instruct the Depositary to vote the ordinary shares represented by such ADSs, provided
that the Depositary receives the holder’s voting instructions by 5:00 p.m., Eastern Time, on ,
2016, which is the date established by the Depositary for such purpose. A holder of ADSs held through a broker or other securities
intermediary (a “beneficial holder of ADSs”) should follow the instructions that its broker or other securities intermediary
provides to vote the ordinary shares underlying its ADSs. The Depositary has fixed a record date for the determination
of holders of ADSs who shall be entitled to give such voting instructions. The Company has been informed by the Depositary
that it has set the ADS record date for the Meeting as ,
2016.
Attendance
. Registered
shareholders may attend the Meeting in person or by appointing a proxy. Holders of ADSs may not attend the Meeting
in person or by proxy, unless they surrender their ADSs and become registered on the registry maintained on behalf of the Company
one French business day before the Meeting. The process for surrendering your ADSs is coordinated through your broker,
or, if you do not hold your ADSs through a broker, directly with the Depositary. The Company cannot accurately predict
the number of days it will take to complete the process of becoming a registered shareholder. Registered shareholders
who wish to attend the Meeting are advised that seating will be limited and admission will be on a first-come, first-served basis.
Voting
. Registered
shareholders may vote by attending the Meeting in person, by mailing a physical proxy form, or (in accordance with article R.225-95
of the French Commercial Code) by emailing a digital copy of the proxy to us at general.meeting@flamel.com. Holders
of ADSs may only vote by instructing the Depositary how to vote the ordinary shares represented by their ADSs. Voting
instructions may be given to the Depositary by completing the voting instructions form provided for ADS holders and mailing such
form to their broker or other securities intermediary, or (if they do not hold their ADSs through such an intermediary) directly
to the Depositary; and the Depositary will endeavor to vote the underlying ordinary shares as so instructed (in the case of ADSs
held through a broker or other securities intermediary, you must rely on the procedures of such intermediary to ensure that your
voting instructions are properly communicated to the Depositary for this purpose). To vote in person at the Meeting
or by email, an ADS holder must surrender his or her ADSs and become registered on the registry maintained by or on behalf of
the Company one French business day before the Meeting (to vote in person) or by ,
2016 (to vote by email, as the deadline for such voting will be such date). The Depositary has established ,
2016 as the date by which voting instructions as to ADSs must be received by the Depositary in order for the Depositary to endeavor
to give effect to such instructions at the Meeting.
Under French law shareholders
who are registered on the registry maintained on behalf of the Company at the close of business (in Paris) on
will be entitled to attend the Meeting and vote thereat. For holders of ADSs, the Depositary has established the close
of business on , 2016 as the record date
for determining the holders of ADSs who will be entitled to give voting instructions.
If you are a registered
holder of ordinary shares and do not vote at the Meeting in person or by submitting your proxy card by mail, or by granting your
voting proxy directly to the chairman of the Meeting or to another shareholder or your spouse or partner with whom you have entered
into a civil union, your ordinary shares will not be counted in respect of any matter on which votes are cast at the Meeting and
will have no effect on the outcome of any such matter. If you are a registered holder of ordinary shares and you grant your proxy
directly to the chairman of the Meeting, such ordinary shares will be voted in accordance with the recommendations of the Board
of Directors. If you hold ordinary shares and vote by mail or email but do not make a selection as to any matter, your ordinary
shares will be treated as abstentions (which will be treated as a vote “AGAINST”) as to such matter.
If you are a registered
holder of ADSs and do not provide the Depositary with voting instructions as to how you would like the ordinary shares represented
by your ADS to be voted or you do not return your voting instruction form, pursuant to the terms of the deposit agreement, you
may be deemed by the Depositary to have instructed the Depositary to vote your ordinary shares in accordance with the recommendations
of the Board of Directors.
If you are a beneficial
holder of ADSs and do not provide voting instructions to your broker or other securities intermediary as to how you would like
the ordinary shares represented by your ADSs to be voted or do not return your voting instruction form, the intermediary will
not have discretionary authority to provide voting instructions to the Depositary on any matter. As a result, pursuant to the
terms of the deposit agreement, you may be deemed by the Depositary to have instructed the Depositary to vote such ordinary shares
in accordance with the recommendations of the Board of Directors.
If you hold ADSs,
whether as a registered holder or beneficially through a broker or other securities intermediary, and you provide instructions
with respect to some but not all matters, the ordinary shares represented by your ADSs will not be voted with respect to the matters
as to which you did not provide voting instructions.
If you do not give
the Depositary any voting instructions, the Depositary will not cast any vote with respect to any matter as to which the Company
informs the Depositary (and we have agreed with the Depository to provide such information to the Depositary as promptly as practicable
in writing) that (x) the Company does not wish such vote cast, (y) substantial opposition exists or (z) such matter materially
and adversely affects the rights of holders of our ordinary shares or ADSs. We have notified the depositary in writing that we
do not wish any votes cast in respect of shares represented by ADSs only with respect to resolutions 13, with respect to the non-binding
advisory resolution as to annual vote on the compensation of our named executive officers, 15, with respect to the non-binding
advisory resolution as to a vote every three years on the compensation of our named executive officers, and 24, to approve the
issuance of 1% of the registered capital to a Company Savings Plan. Thus, any shares underlying ADSs for which a voting instruction
card is not timely received may be voted as to all matters on the agenda in the manner recommended by the Board of Directors herein.
If you are a registered
holder of ordinary shares and you grant your proxy to the chairman of the Meeting, the chairman will vote your ordinary shares
in accordance with the recommendations of the board of directors. As a result, your ordinary shares would be voted “FOR”
each of the resolutions 1 to 12 (including “FOR” the nominees of the board of directors in resolutions 5 to 10), “FOR”
resolution 14 and each of the resolutions 16 to 23 and 25 and 26, and “AGAINST” resolutions 13, 15 and 24.
Registered shareholders
who wish to attend the Meeting are advised that seating will be limited and admission will be on a first-come, first-served basis.
Unless otherwise stated
or the context otherwise requires, references herein to shares include the shares represented by ADSs and references to our shareholders
include the holders of ADSs.
With respect to any
other matters that may come before the Meeting, including consideration of a motion to adjourn the Meeting to another time or
place (including for the purpose of soliciting additional proxies), if proxies are returned, such proxies will be voted in a manner
deemed by the proxy representatives named therein in their discretion to be in our best interests and the best interests of our
shareholders. ADS voting instructions would extend only to the specific questions on the agenda, so shares represented by ADSs
would not be voted as to any other matter that might come before the Meeting.
Quorum and Vote
Required under French Law
Under French law,
a resolution is classified as ordinary or extraordinary according to its subject matter. For an ordinary general meeting of shareholders,
20% of the outstanding shares must be present for the meeting to be valid and to act on ordinary resolutions, and a simple majority
of the shares present at the meeting is required for an ordinary resolution to be approved at an ordinary general meeting. If
a quorum is not present when we convene the ordinary general meeting, the Board of Directors will give a second notice of such
ordinary general meeting, which shall take place within two months after the first meeting. At the second ordinary general meeting,
there is no minimum number of shares required for a quorum to be deemed present, and ordinary resolutions may be passed by a simple
majority of the shares present at the second ordinary general meeting.
For an extraordinary
meeting of shareholders, 25% of the outstanding shares must be present for the meeting to be valid and to act on extraordinary
resolutions, and a two-thirds majority of the shares present at the meeting is required for an extraordinary resolution to be
approved at an extraordinary general meeting. If a quorum is not present when we convene the extraordinary general meeting, the
Board of Directors will give a second notice of such extraordinary general meeting, which shall take place within two months after
the first meeting. At the second extraordinary general meeting, 20% of the outstanding shares must be present for such second
meeting to be valid and to act on extraordinary resolutions, and a two-thirds majority of the shares present at such second meeting
is required for an extraordinary resolution to be approved at an extraordinary meeting.
Your shares are counted
as present at the Meeting if you attend the Meeting in person or if you properly return a proxy by mail or email, or (in the case
of ADS holders) you properly cause a voting instruction card to be delivered to the Depositary. Abstentions will be counted for
purposes of establishing a quorum at the Meeting.
Under the
Statuts
,
our ByLaws, directors are elected by the vote of the majority of the votes cast. Only votes actually cast will be counted for
the purpose of determining whether a particular nominee received the affirmative vote of a majority of votes cast in an uncontested
election. Abstentions will have no effect on the outcome of the election of directors.
We intend to cause
Avadel plc (Avadel Pharmaceuticals Limited having re-registered as an Irish public limited company (plc) prior to the Merger)
to establish an ADS program with The Bank of New York Mellon as the depositary following the Merger. Under such Avadel plc ADS
program, each ADS would represent one ordinary share of Avadel plc. For a summary of the terms and conditions that we anticipate
will be applicable to the Avadel plc ADS program, see “Proposals to Reincorporate the Company as an Irish Public Limited
Company – Description of ADSs Representing Avadel plc Ordinary Shares.”
Shareholder
Communications to Directors
Shareholders may communicate
directly with the Company’s Directors by writing to The Honorable Craig Stapleton, who is Chairman of our Board of Directors,
at the Company’s principal executive offices. Mr. Stapleton will monitor these communications and provide appropriate summaries
of all received messages to the Board of Directors at its regularly scheduled meetings. Where the nature of a communication warrants,
Mr. Stapleton may decide to obtain the immediate attention of the appropriate committee of the Board, a non-management Director
or the Company’s management or independent advisors. After reviewing shareholder messages, Mr. Stapleton and/or the Board
will determine whether any response is necessary.
Expenses
of Solicitation
All expenses of this
solicitation, including the cost of preparing and mailing this Proxy Statement, will be borne by the Company. The Company may
reimburse brokerage firms and other securities intermediaries representing beneficial owners of ADSs for their reasonable expenses
in forwarding proxy materials to, and in soliciting voting instructions from such beneficial owners. The Company’s Directors,
officers and employees may also solicit votes in person or by telephone, letter, facsimile, electronic mail, or other means of
communications. These Directors, officers and employees will not be additionally compensated, but they may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation.
Inapplicability
of Double-Voting Rights under the French “Loi Florange” Law
On March 29, 2014,
Article 225-123 of the French Commercial Code was enacted pursuant to French Law No. 2014-384. Article 225-123 (known as the “Florange
Law”) assigns double voting rights to fully paid-up shares held in registered form by the same shareholder for at least
two years. However, the Florange Law applies only to companies whose shares are admitted to trade on a “regulated market.”
Because the Company’s ordinary shares trade only as ADSs on the Nasdaq Global Market, which is not a regulated market under
the French Commercial Code these Florange Law provisions do not apply to the Company and are not subject to review by the Annual
Shareholders’ Meeting.
Resolutions
within the competence of the Ordinary General Shareholders Meeting
PROPOSALS WITH RESPECT
TO THE ANNUAL FINANCIAL STATEMENTS
(Resolutions 1, 2, 3 and 4)
French law requires
that we prepare statutory financial statements in accordance with French generally accepted accounting principles (French GAAP),
and that these financial statements, as well as the operations reflected therein, must be approved by our shareholders. A summary
of such 2015 French GAAP statutory financial statements is included as Annex B to this proxy statement. At the Meeting, our statutory
auditors will present their report with respect to our 2015 French GAAP statutory financial statements. Because our statutory
financial statements show positive net earnings for the fiscal year ended December 31, 2015 in the amount of €16,000,628,
our ordinary general shareholders’ meeting is requested to allocate this entire profit to the carry-forward account, which,
following the allocation, will amount to €(54,929,333). Pursuant to article “243 bis” of the French General Tax
Code, it is noted that no dividends have been distributed by the Company for the past three fiscal years.
Resolution 1 approves
our statutory financial statements for the fiscal year ended December 31, 2015 and the transactions disclosed therein and also
approves, in accordance with Section “223
quater
” of the French General Tax Code, the global amount of expenses
as set forth at Section 39-4 of the French General Tax Code which comes to a total of € 12,900 in excess depreciation that
is not tax-deductible and (€ 98,000) not tax-deductible in 2014 but deductible in 2015. It also discharges the Company’s
directors with respect to the exercise of their duties during 2015 other than for any wrongdoing or misconduct not brought to
the attention of shareholders at the Meeting. Resolution 2 allocates the profits for the Company’s statutory financial statements
of €16,000,628, to the carry forward account, which will then amount to € .
The Audit Committee
has proposed and the Board has approved the engagement of PricewaterhouseCoopers LLP to serve as our independent registered public
accounting firm for the fiscal year 2016, for purposes of our financial statements for filing purposes under U.S. securities law
for the year ending December 31, 2016. The Board of Directors is asking shareholders to ratify the selection of PricewaterhouseCoopers
LLP as our independent registered public accounting firm for the fiscal year 2016. Resolution 3 approves, on an advisory basis,
the appointment of PricewaterhouseCoopers LLP as the Company’s registered public accounting firm. It is recalled that at
our Combined Shareholders’ Meeting on June 24, 2014 shareholders approved the appointment of PricewaterhouseCoopers Audit
as our French statutory auditor (“commissaire aux comptes”) for the purpose of auditing the French accounts in accordance
with French law and the term of office of Price Waterhouse Coopers Audit will remain unchanged and shall terminate at the shareholders’
meeting called to approved the financial statements for the financial year ending on December 31, 2019.
Resolution 4 appoints a second lead statutory
auditor and a second deputy statutory auditor pursuant to Article L 823-2 of the French commercial code, as the Company now meets
the threshold for the establishment of consolidated accounts which also requires having two lead statutory auditors and two deputy
statutory auditors. The Company therefore needs to appoint a second lead statutory auditor and a second deputy statutory auditor
for six years. As a consequence, the management and audit committee obtained proposals from different auditor firms. After
a review of those different proposals, we propose to appoint:
- ,
,
as second lead statutory auditors,
- ,
, as second deputy statutory auditors,
for a period of six financial years ending
at the end of the ordinary shareholders meeting which will be called to approve the financial statements for the year ending December
31, 2021.
The Board of Directors
unanimously recommends that shareholders vote “FOR” Resolutions 1, 2, 3, and 4.
PROPOSALS TO ELECT
DIRECTORS
(Resolutions 5-10)
The Board of Directors
French law provides
that the Board be composed of no fewer than three and not more than 18 members, and within those limits the actual number of directors
may be provided for in the
Statuts,
our By-laws, or determined by the shareholders at the Meeting. The number of directors
may be increased or decreased only by decision of the shareholders. No more than a third of directors may be over the age of 75.
The current size of the Board is six directors, including the Chief Executive Officer of the Company.
The Board held seven
meetings during the year ended December 31, 2015. During 2015, all incumbent members of the Board attended at least 75% of
the aggregate number of (i) meetings of the Board and (ii) meetings held by all committees of the Board on which the
director served at the time the director was a member of the Board or the committee.
Board
Leadership Structure and Role in Risk Oversight
Our Board of Directors
has a general policy that the positions of the Chairman and Chief Executive Officer should be held by separate persons. However,
this general policy serves as part of a flexible framework within which the Board may conduct its business, and is not a binding
legal obligation. Our Board believes that it should have the flexibility to make its determination as to whether these positions
should be held by separate persons or one person at any given point in time in the way that it believes best to provide appropriate
leadership for us at that time. Presently, the Board of Directors has established a structure whereby our Chairman position is
a non-executive position held by an independent director. The current Chairman is Craig Stapleton. The Board has continued this
separation, as it currently believes that having a Chairman independent of management helps ensure critical advice, independent
thinking and independent oversight as we continue to implement our strategic plans, and allows our Chief Executive Officer to
more closely focus on our day-to-day business. Our Chairman’s primary responsibilities are to preside at meetings of the
Board and of the non-management and independent Board members, serve as the principal liaison between our Chief Executive Officer
and management, on the one hand, and the Board, on the other hand, and provide not only our other directors, but also our stockholders,
with an independent leadership contact. The Board of Directors recognizes that there could be circumstances in the future that
would lead it to combine the positions of Chairman of the Board and Chief Executive Officer.
Role
in Risk Oversight
Our Board of Directors’
role in risk management is primarily one of oversight with the day-to-day responsibility for risk management implemented by our
management team. At regularly scheduled meetings, the Board receives management updates on our business operations, financial
results and strategy and discusses risks related to the business. In carrying out its risk oversight function, our Board of Directors
has three standing committees: Audit, Compensation and Nominating and Corporate Governance, each of which is responsible for risk
oversight within that committee’s area of responsibility.
As part of its responsibilities,
the Audit Committee oversees our financial policies, including financial risk management. The Audit Committee assists our Board
in its oversight of risk management by discussing with management, particularly the Chief Financial Officer, our guidelines and
policies regarding financial and enterprise risk management and risk appetite, including major risk exposures and the steps management
has taken to monitor and control risk exposures. The Audit Committee also annually receives and considers a report from PricewaterhouseCoopers
Audit regarding the Company’s internal controls over financial reporting.
Each of the other
committees of our Board of Directors considers risks within its areas of responsibility. The Compensation Committee oversees risk
management as it relates to our compensation plans, policies and practices in connection with structuring our executive compensation
programs and reviewing our incentive compensation programs for other employees and has reviewed with management whether our compensation
programs may create incentives for our employees to take excessive or inappropriate risks which could have a material adverse
effect on the Company. Our Compensation Committee has concluded that none of the Company’s compensation programs are reasonably
likely to cause management to take inappropriate or excessive risks. The Nominating and Corporate Governance Committee considers
risks relating to board membership and corporate governance.
Diversity
We have no formal
policy regarding Board diversity. Our priority in selection of Board members is identification of members who will further the
interests of our shareholders through his or her established record of professional accomplishment, the ability to contribute
positively to the collaborative culture among Board members, knowledge of our business and understanding of the competitive landscape
of the industries in which we operate. We will consider, in identifying first-time candidates, nominees for director, or evaluating
individuals recommended by shareholders, the current composition of the Board in light of the diverse communities and geographies
we serve and the interplay of the candidate’s or nominee’s diverse individual experience, education, skills, background
and other qualities and attributes with those of the other Board members. The Nominating and Corporate Governance Committee and
Board monitor the Board’s effectiveness through the Board’s self-evaluation process. The Nominating and Corporate
Governance Committee and the Board believe that the current composition of the Board reflects a group of highly talented individuals
with diverse backgrounds, skills, professional and industry experience, and other personal qualities and attributes best suited
to perform oversight responsibilities for the Company and its shareholders.
Nominees
Standing for Election
The Nominating and
Corporate Governance Committee has recommended and the Board has nominated the following individuals for director: Michael S.
Anderson, Guillaume Cerutti, Francis J.T. Fildes, Christophe Navarre, Ambassador Craig Stapleton, and Ben C. Van Assche. All of
the nominees are current members of our Board and, with the exception of Mr. Anderson, have been determined to be independent
under the rules of the Nasdaq Stock Market. As our Chief Executive Officer and President, Mr. Anderson is not independent. Our
Nominating and Corporate Governance Committee has reviewed each nominee’s qualifications and has recommended to our Board
that each nominee be submitted to a vote of our shareholders at the Meeting, each to serve until the 2017 Meeting of Shareholders
or until his or her successor is duly elected and qualified. Each of our nominees has consented to being named in this Proxy Statement
and has agreed to serve if elected. If a nominee is unavailable to serve as a director, full discretion is reserved to the persons
named as proxies to vote for another nominee proposed by the Nominating and Corporate Governance Committee and the Board, or the
Board may reduce the number of directors to be elected at the 2017 Meeting of Shareholders. Proxies cannot be voted for a greater
number of persons than the number of nominees named in the proxy statement.
Set forth below is
certain biographical information furnished to us by the directors standing for election at the Meeting:
Mr. Michael S.
Anderson
, age 67,
has been a member of Flamel’s Board since June 2012. Mr. Anderson has been Chief Executive
Officer of Flamel since March 2012. Prior to joining Flamel, Mr. Anderson was Chief Executive Officer of Éclat Pharmaceuticals
LLC since its creation in November 2010 until it was acquired by Flamel in March 2012. Before his employment at Éclat,
Mr. Anderson was President and CEO of the generic business division of KV Pharmaceuticals, an executive at ETHEX Corporation and
President and CEO of Ther-Rx Corporation, a leader in women’s healthcare. Mr. Anderson also has worked for Schein Pharmaceuticals
and started his career at A.H Robins. Based on his experience as seasoned and disciplined executive in the pharmaceutical industry,
Mr. Anderson brings to the Flamel Board over 46 years of experience.
Mr. Guillaume Cerutti
,
age 50, has been a member of Flamel’s Board since June 2011. Mr. Cerutti was the Chairman and Chief Executive Officer of
Sotheby’s France, which operates art auction and private sale businesses, a position he has held from September 2007 to
August 2015. In the same field of activity, he will join in September 2016 Christies, as President for Europe, Middle East, Russia
and India. From June 2004 until August 2007, Mr. Cerutti was the CEO of the French Directorate General for Competition, Consumer
Affairs and Repression of Fraud (Ministry of Finance and Economy). From 1996 to 2001, Mr Cerutti was managing director of the
Centre Pompidou (Paris), one of the most important modern and contemporary art museums in the world. From 1991 to 1995, he was
a member of the Inspection Générale des Finances, the internal audit department of the French Ministry for Finance
and the Economy. He currently serves as Chairman of the Board of the ‘Institut de Financement du Cinéma et des Industries
Culturelles’, which offers guarantees and loans for cultural industries. Based on his experience as a CEO and his strong
financial background, Mr. Cerutti brings to the Board and the Audit and Nominating and Corporate Governance Committees over 20
years of experience.
Dr. Francis J.T.
Fildes
, age 71, has been a member of Flamel’s Board since February 2008. Dr. Fildes was Managing Director of Fildes
Partners Ltd , a management consultancy business to the bio-pharmaceutical and healthcare industries, which he founded in September
2002 and held until November 2014. Prior to this, Dr. Fildes held the position of Senior Vice President: Head of Global Drug Development
for AstraZeneca a global pharmaceutical company, from April 1999 until December 2002. Since leaving AstraZeneca, Dr. Fildes has
also been a Director of ProStrakan Pharmaceuticals plc and Keryx Inc, both public biopharmaceutical companies and Strakan Ltd,
Proskelia SA and Pyramed Pharma, three privately funded bio-pharmaceutical Companies. Dr. Fildes is a Fellow of the Royal Society
of Medicine and a Fellow of the Royal Society of Chemistry. Based on his experience as an executive, a director and consultant
in the pharmaceutical industry, Dr. Fildes brings to the Board and the Compensation and Audit Committees over 40 years of experience.
Mr. Christophe
Navarre
,
age 57,
has been a member of Flamel’s Board since June 2014. Since May 1997, Mr. Navarre has
been Chief Executive Officer of Moët Hennessy, the Wines and Spirits division of LVMH Moët Hennessy Louis Vuitton SA,
a worldwide luxury brands company. Mr. Navarre is also a board member of the Comité Colbert, a luxury brand trade association,
a member of the Heineken Advisory Board, and President of the Fédération des Exportateurs de Vins et Spiritueux
de France, the French wine export association. He is an Officer of the French Legion of Honor, a Commandeur de l’Ordre du
Mérite Agricole and an Officier de l’Ordre de la Couronne in Belgium. Based on his experiences as a successful business
leader and board member of public and private companies, Mr. Navarre brings to the Board and the Compensation and Nominating and
Corporate Governance Committees over 34 years of experience.
The Honorable Craig
Stapleton
,
age 71, has been a member of Flamel’s Board of Directors since June 2011. Since January 2009, Mr.
Stapleton has served as Senior Adviser to Stone Point Capital, a private equity firm. Mr. Stapleton served as United States Ambassador
to France from 2005 to 2009. He also served as United States Ambassador to the Czech Republic from 2001 until 2004. Mr. Stapleton
served as President of Marsh and McLennan Real Estate Advisors of New York, a commercial real estate firm, from 1982 until 2001.
He has been a co-owner of the St. Louis Cardinals baseball team since July 2009 and was a co-owner of the Texas Rangers baseball
team from 1989 until 1998. Mr. Stapleton has served on the Board of Directors of Flamel Technologies, S.A. since July 2011 (becoming
Chairman of the Board in July 2014). He also has served as a member of the Board of Directors of the George W. Bush Library and
Foundation since January 2006, and as a member of the Board of Directors of the National September 11 Memorial and Museum at the
World Trade Center since January 2009. Mr. Stapleton currently serves as a director of Abercrombie & Fitch Co., an apparel
retailer, and as a director of two private companies: Carlile Bancshares, Inc., which invests in U.S. community banks, and C3/CustomerContactChannels,
a customer contact outsourcing business. Based on his experiences as an Ambassador, and as a Chairman and director of several
public and private companies, Ambassador Stapleton brings to the Board and the Compensation, Audit, and Nominating and Corporate
Governance Committees over 40 years of experience.
Mr. Benoit (Ben)
C. Van Assche
, age 70, has been a member of Flamel’s Board since June 2014. Mr. Van Assche is a member of the
international jury that assists the government of the Walloon Region in its policy towards clusters of competitiveness, in particular
the BioWin health cluster, a position he has held since December 2006. Based on his experience as a director and senior
executive in the chemical, pharmaceutical and healthcare industries, Mr. Van Assche brings to the Board and the Compensation,
Audit, and Nominating and Corporate Governance Committees over 40 years of experience.
All of the above nominees
have declared their readiness to accept this mandate and that they do not exercise, in France, mandates in other companies which
prevent them from accepting and fulfilling the duties of such office.
The Board of Directors unanimously recommends
that shareholders vote “FOR” Resolutions 5, 6, 7, 8, 9, and 10 to renew the board memberships of each of the aforenamed
six directors.
CORPORATE
GOVERNANCE
Company Governance
In accordance with
French law governing a
société anonyme
, the Company is managed by its Board and by its
Directeur Général
(or “Chief Executive Officer”), who has full executive authority to manage the affairs of the Company, subject
to the prior authorization of the Board or of the Company’s shareholders for certain decisions expressly specified by law.
In addition, the
Directeur Général
may submit to the Board the nomination of one or more, but not more than
five (5)
Directeurs Généraux Délégués
.
The Board reviews
and monitors the Company’s business, financial and technical strategies. In addition, under French law, the Board prepares
and presents the year-end French statutory accounts of the Company to the shareholders and convenes shareholders’ meetings.
Under French law,
a director may be an individual or a legal entity. A legal entity that serves as a director must appoint an individual, as a ‘permanent
representative,’ who represents such legal entity on the Board. There is no limitation, other than applicable age limits,
on the number of terms that a director may serve. Directors are elected by the shareholders and serve until the expiration of
their respective terms, or until their resignation, death or removal, with or without cause, by the shareholders. Vacancies which
exist on the Board: (i) because of the resignation or death of a director, may be filled by the Board pending the next shareholders’
meeting, if the number of remaining directors after such resignation or death exceeds the minimum number of directors set forth
in the Articles of Association; (ii) for whatever reason, must be filled by the Board within three months of such vacancy, if
the number of remaining directors after such vacancy is less than the minimum number of directors set forth in the Articles of
Association but exceeds the minimum legal requirement; and (iii) for whatever reason, must be filled immediately at a shareholders’
meeting if the number of directors after such vacancy is less than the minimum legal requirement.
Board Practices
Non-executive Directors
of the Company receive fees for their services and are entitled to subscribe for warrants (as set forth in the Executive Compensation
section below). Directors’ fees and warrants are proposed by the Board and are submitted for the approval of shareholders
at the ordinary shareholders’ meeting. Non-executive directors are reimbursed, upon request, for expenses incurred in attending
Board meetings. Upon termination, no benefits are provided to non-executive directors.
All directors are
elected by the shareholders at each ordinary shareholders’ meeting approving the annual French statutory accounts of the
Company. A quorum of the Board consists of one-half of the members of the Board, and actions are generally approved by a vote
of the majority of the members present or represented by other members of the Board. The Board has the ability to determine its
own internal rules for certain procedures. The Chairman of the Board does not have the ability to cast a deciding vote in the
event of a tie vote. A director may give a proxy to another director, but a director cannot represent more than one other director
at any particular meeting. Members of the Board represented by another member at meetings do not count for purposes of determining
the existence of a quorum.
Directors are required
to comply with applicable law and the Company’s
statuts
. Under French law, directors are liable for violations of
French legal or regulatory requirements applicable to ‘
sociétés anonymes’
, violation of the Company’s
statuts
or mismanagement. Directors may be held liable for such actions both individually and jointly with the other directors.
French law requires
that companies having at least 50 employees for a period of twelve (12) consecutive months have a
Comité d’Entreprise
(“Employee Representation Committee”) composed of representatives elected from among the personnel. The Employee
Representation Committee was formed in 1997. Two of those representatives are entitled to attend all meetings of the Board of
the Company and shareholders’ meetings, but they do not have any voting rights.
Compensation
Committee
Composition, Qualifications
and Governance
The Board has a Compensation
Committee composed of Francis Fildes (Chairman), Ambassador Craig Stapleton, Christophe Navarre and Ben Van Assche. The Board
has determined that all of the members of the Compensation Committee are independent within the meaning of the listing standards
of Nasdaq. The Compensation Committee makes recommendations to the Board on the compensation of the executive officers of the
Company, including the Chief Executive Officer. The Board makes the final decisions on compensation. The Compensation Committee
has a written charter, which was approved by the Board as of March 2, 2016 and is available on our website at www.flamel.com/about-flamel/governance.
The Compensation Committee reviews the charter annually and works with the Board of Directors to amend them as appropriate to
reflect the evolving role of the Compensation Committee.
Responsibilities
and Duties
The Compensation Committee
considers, recommends and oversees the Company's incentive compensation plans and equity-based plans in which the CEO and other
executive officers and other employees of the Company may be the beneficiaries, including, but not limited to, (a) approving option
grants and restricted stock or other awards to be proposed to the Board for adoption, (b) interpreting the plans, (c) recommending
rules and regulations relating to the plans, (d) recommending modifications to or canceling of existing grants or awards and (e)
recommending imposing limitations, restrictions and conditions upon any grant or award as the Committee deems necessary or advisable.
The Compensation Committee,
on an annual basis, reviews and approves corporate goals and objectives relevant to CEO and executive officers compensation, evaluates
the CEO’s and executive officer’s performance in light of those goals and objectives, and based on this evaluation
recommends to the Board, for the CEO and executive officers, (a) the annual base compensation or salary amount, (b) annual bonus
arrangements, if any, (c) any long-term incentive compensation, (d) any employment agreements, severance arrangements, and change
in control and similar agreements/provisions, and any amendments, supplements or waivers to the foregoing agreements, in each
case as, when and if deemed necessary or advisable and (e) any perquisites, special or supplemental benefits.
Audit
Committee
Composition, Qualifications
and Governance
The Board has an Audit
Committee composed of Guillaume Cerutti (Chairman), Francis J.T. Fildes, Benoit Van Assche, and Ambassador Craig Stapleton. The
Board has determined that all of the members of the Audit Committee are independent within the meaning of applicable SEC regulations
and the listing standards of Nasdaq and that Mr. Cerutti, as the chair of the Committee, is qualified as an audit committee financial
expert within the meaning of SEC regulations. The Board has also determined that Mr. Cerutti has accounting and related financial
management expertise within the meaning of the listing standards of the Nasdaq and that each member is financially literate within
the meaning of the Nasdaq listing standards.
The Audit Committee
has a written charter, which was approved by the Board as of March 2, 2016 and is available on our website at www.flamel.com/about-flamel/governance.
The Audit Committee reviews the charter and calendar annually and works with the Board of Directors to amend them as appropriate
to reflect the evolving role of the Audit Committee
.
Responsibilities
and Duties
The Audit Committee
recommends to the Board the selection of the Company’s independent registered public accounting firm and reviews the findings
of the auditors and operates in accordance with the Audit Committee Charter, which is reviewed annually. The Audit Committee Charter
outlines the roles and responsibilities of the Audit Committee which includes appointment, compensation and oversight of the work
of any registered public accounting firm employed by the Company and review of related party transactions pursuant to the Company’s
policy. The Audit Committee also assists the Board in oversight of: (1) the integrity of the financial statements of the Company;
(2) the adequacy of the Company’s system of internal controls; (3) compliance by the Company with legal and regulatory requirements;
(4) the qualifications and independence of the Company’s independent auditors; and (5) the performance of the Company’s
independent and internal auditors).
Nominating
and Corporate Governance Committee
Composition, Qualifications
and Governance
The Board has a Nominating
and Corporate Governance Committee, composed of Ben Van Assche (Chairman), Guillaume Cerutti, Christophe Navarre, and Ambassador
Craig Stapleton. The Board has determined that all of the members of the Nominating and Corporate Governance Committee are independent
within the meaning of the listing standards of Nasdaq. The Nominating and Corporate Governance Committee has a written charter,
which was approved by the Board as of March 2, 2016 and is available on our website at www.flamel.com/about-flamel/governance.
The Nominating and Corporate Governance Committee reviews the charter and calendar annually and works with the Board of Directors
to amend them as appropriate to reflect the evolving role of the Nominating and Corporate Governance Committee.
Responsibilities
and Duties
The Nominating and
Corporate Governance Committee’s overall purposes are to (1) identify individuals qualified to become Board members; (2)
recommend to the Board director nominees for the next annual or special meeting of shareholders at which directors are to be elected;
(3) recommend individuals to the Board to fill any vacancies or newly created directorships that may occur between such meetings;
(4) identify and recommend directors for membership on Board committees; (5) evaluate Board performance; (6) oversee and set compensation
for the Company’s directors; (7) develop, recommend and oversee compliance with the corporate governance procedures to be
followed by the Company, and oversee compliance with the Company’s Standards of Business Conduct and the Code of Ethics;
(8) review the Company’s reporting in documents filed with the Securities and Exchange Commission (the "SEC"),
to the extent related to corporate governance and other matters set forth in this charter; and (9) oversee public policy and legislative
matters applicable to the Company as well as the Company’s regulatory compliance.
Policies and Procedures
for Related Person Transactions
Our
Board has adopted a written policy with respect to related person transactions which is intended to comply with good corporate
governance practices as well as U.S. securities laws rules and regulations. This policy governs the review, approval or ratification
of covered related person transactions. The Audit Committee of our Board manages this policy.
For
purposes of our related person transactions policy as managed by our Audit Committee, a “related person transaction”
is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which
we (or any of our subsidiaries) were, are or will be a participant, and the amount involved exceeds $120,000 and in which any
related person had, has or will have a direct or indirect interest. For purposes of determining whether a transaction is a related
person transaction, the Audit Committee relies upon Item 404 of Regulation S-K, promulgated under the Securities Exchange
Act of 1934, as amended.
A
“related person” is defined as:
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Any person who is, or at any time since the
beginning of our last fiscal year was, one of our directors or executive officers or a nominee to become one of our directors;
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Any person who is known to be the beneficial
owner of more than five percent of any class of our voting securities;
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Any immediate family member of any of the foregoing
persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law of the director, executive officer, nominee or more than five percent beneficial
owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee
or more than five percent beneficial owner; and
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•
|
Any firm, corporation, or other entity in which
any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person
has a ten percent or greater beneficial ownership interest.
|
The
policy generally provides that we may enter into a related person transaction only if:
|
•
|
the Audit Committee pre-approves such transaction
in accordance with the guidelines set forth in the policy,
|
|
•
|
the transaction is on terms comparable to those
that could be obtained in arm’s length dealings with an unrelated third party and the Audit Committee (or the chairperson
of the Audit Committee) approves or ratifies such transaction in accordance with the guidelines set forth in the policy,
|
|
•
|
the transaction is approved by the disinterested
members of the Board, or
|
|
•
|
the transaction involves compensation approved
by the Compensation Committee of the Board.
|
In
the event a related person transaction is not pre-approved by the Audit Committee and our management determines to recommend such
related person transaction to the Audit Committee, such transaction must be reviewed and by the Audit Committee. After review,
the Audit Committee will approve or disapprove such transaction. When our Chief Legal Officer, in consultation with our Chief
Executive Officer or our Chief Financial Officer, determines that it is not practicable or desirable for us to wait until the
next Audit Committee meeting, the chairperson of the Audit Committee possesses delegated authority to act on behalf of the Audit
Committee. The Audit Committee (or the chairperson of the Audit Committee) may approve only those related person transactions
that are in, or not inconsistent with, our best interests and the best interests of our shareholders, as the Audit Committee (or
the chairperson of the Audit Committee) determines in good faith.
The
Audit Committee has determined that certain types of related person transactions are deemed to be pre-approved by the Audit Committee.
Our related person transaction policy provides that the following transactions, even if the amount exceeds $120,000 in the aggregate,
are considered to be pre-approved by the Audit Committee:
|
•
|
any employment of certain named executive officers
that would be publicly disclosed;
|
|
•
|
director compensation that would be publicly
disclosed;
|
|
•
|
transactions with other companies where the
related person’s only relationship is as a director or owner of less than ten percent of said company (other than a
general partnership), if the aggregate amount involved does not exceed the greater of $200,000 or five percent of that company’s
consolidated gross revenues;
|
|
•
|
transactions where all shareholders receive
proportional benefits;
|
|
•
|
transactions involving competitive bids;
|
|
•
|
transactions with a related person involving
the rendering of services at rates or charges fixed in conformity with law or governmental authority; and
|
|
•
|
transactions with a related person involving
services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services.
|
In
addition, the Audit Committee will review the policy at least annually and recommend amendments to the policy to the Board from
time to time.
The
policy provides that all related person transactions will be disclosed to the Audit Committee, and all material related person
transactions will be disclosed to the Board. Additionally, all related person transactions requiring public disclosure will be
properly disclosed, as applicable, in our various public filings.
The
Audit Committee will review all relevant information available to it about the related person transaction. The policy provides
that the Audit Committee may approve or ratify the related person transaction only if the Audit Committee determines that, under
all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. The policy provides that the
Audit Committee may, in its sole discretion, impose such conditions as it deems appropriate on us or the related person in connection
with approval of the related person transaction.
Related Party Transactions.
Since December 31, 2014, the only related
party transaction we engaged in was the acquisition of FSC Holdings, LLC, which we announced on February 8, 2016. In such transaction,
we acquired FSC Holdings, LLC and its wholly owned subsidiaries FSC Pediatrics, Inc., FSC Therapeutics, LLC, and FSC Laboratories,
Inc. from Deerfield CSF, LLC, an affiliate of Deerfield Management, one of our major shareholders. FSC is a Charlotte, NC-based
specialty pharmaceutical company that markets three pediatric pharmaceutical products indicated for infection, allergy, gastroesophageal
disease (GERD), and a medical device for the administration of aerosolized medication using pressurized Metered Dose Inhalers
(pMDIs) for the treatment of asthma. Under the terms of the acquisition, Flamel will pay $20.25 million over a five year period
to Deerfield for all of its equity interests in FSC Holdings. Specifically, Flamel will pay $1.05 million annually for five years
and will make a final payment in January 2021 of $15.0 million. Flamel will also pay Deerfield a 15% royalty per annum on net
sales of the current FSC products, up to $12.5 million for a period not exceeding ten years.
Shareholder Approval of “Related Party Agreements”
for French Law Purposes
Separate from the related party transaction
policy described above, French law provides for a specific disclosure and review procedure with respect to any direct or indirect
agreements between a corporation and its CEO, chairman, directors, supervisory or management board members, or any shareholder
owning more than 10% of the voting rights, or with another corporation having the same legal representatives. Among other things,
French law requires that our shareholders approve the report of our statutory auditor as to such agreements. The proposal related
to this shareholder approval is set forth in this proxy statement under the caption “Proposal to Approve Agreements with
Related Parties.”
AUDIT
COMMITTEE REPORT
Pursuant to SEC
rules for proxy statements, the Audit Committee of the Board has prepared the following Audit Committee Report. The Audit Committee
intends that this report clearly describe our current audit program, including the underlying philosophy and activities of the
Audit Committee.
Composition,
Qualifications and Governance
The Board has an Audit
Committee comprised of solely independent directors, namely Guillaume Cerutti (Chairman), Francis J.T. Fildes, Benoit Van Assche,
and Ambassador Craig Stapleton. The Audit Committee operates under a written charter adopted by the Board. The Audit Committee’s
responsibilities are set forth in this charter, which was amended and restated effective March 2, 2016. The charter is reviewed
by management at least annually, and any recommended changes are presented to the Audit Committee for review and approval. The
charter is available on our website at www.flamel.com/about-flamel/governance.
Responsibilities
and Duties
The Audit Committee
assists the Board in fulfilling its responsibilities for general oversight of the integrity of the company’s financial statements,
the adequacy of the Company’s system of internal controls and procedures and disclosure controls and procedures, the Company’s
risk management, the Company’s compliance with legal and regulatory requirements, the independent auditors’ qualifications
and independence and the performance of the Company’s internal audit function and independent auditors. The Audit Committee
has sole authority over the selection of the Company’s independent auditors and manages the Company’s relationship
with its independent auditors (who report directly to the Audit Committee). The Audit Committee has the authority to obtain advice
and assistance from outside legal, accounting or other advisors as the Committee deems necessary to carry out its duties and receive
appropriate funding, as determined by the Audit Committee, from the Company for such advice and assistance.
The Audit Committee
met seven times during 2015. The Audit Committee schedules its meetings with a view to ensuring that it devotes appropriate attention
to all of its tasks. The Audit Committee’s meetings generally include private sessions with the Company’s independent
auditors, without the presence of the Company’s management, as well as executive sessions consisting of only Audit Committee
members. In addition to the scheduled meetings, senior management confers with the Audit Committee or its Chair from time to time,
as senior management deems advisable or appropriate, in connection with issues or concerns that arise throughout the year.
Management is responsible
for the Company’s financial reporting process, including its system of internal control over financial reporting, and for
the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the U.S. The
Company’s independent auditors are responsible for auditing those financial statements in accordance with professional standards
and expressing an opinion as to their material conformity with U.S. generally accepted accounting principles and for auditing
the effectiveness of the Company’s internal control over financial reporting. The Audit Committee’s responsibility
is to monitor and review the Company’s financial reporting process and discuss management’s report on the Company’s
internal control over financial reporting. It is not the Audit Committee’s duty or responsibility to conduct audits or accounting
reviews or procedures. The Audit Committee has relied, without independent verification, on management’s representations
that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally
accepted in the U.S. and with respect to whether the Company’s internal control over financial reporting is effective. The
Audit Committee has also relied, without independent verification, on the opinion of the independent auditors included in their
report regarding the Company’s financial statements and effectiveness of internal control over financial reporting.
Matters
Discussed with Management and Independent Auditors
As part of its oversight
of the Company’s financial statements, the Audit Committee reviews and discusses with both management and the Company’s
independent auditors all annual and quarterly financial statements prior to their issuance. During 2015, management advised the
Audit Committee that each set of financial statements reviewed had been prepared in accordance with accounting principles generally
accepted in the U.S., and reviewed significant accounting and disclosure issues with the Audit Committee. These reviews included
discussions with the independent auditors of matters required to be discussed pursuant to Public Company Accounting Oversight
Board (“PCAOB”) Auditing Standard No. 16 (Communication with Audit Committees), including the quality (not merely
the acceptability) of the Company’s accounting principles, the reasonableness of significant judgments, the clarity of disclosures
in the financial statements and disclosures related to critical accounting practices. The Audit Committee has also discussed with
PricewaterhouseCoopers Audit matters relating to its independence, including a review of audit and non-audit fees and the written
disclosures and letter received from PricewaterhouseCoopers Audit required by applicable requirements of the PCAOB regarding PricewarerhouseCoopers
Audit’s communications with the Audit Committee concerning independence. The Audit Committee also considered whether non-audit
services provided by the independent auditors are compatible with the independent auditors’ independence. The Audit Committee
also received regular updates, and written summaries as required by the PCAOB rules (for tax and other services), on the amount
of fees and scope of audit, audit-related, tax and other services provided.
In addition, the Committee
reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company’s internal and disclosure
control structure. As part of this process, the Committee continued to monitor the scope and adequacy of the Company’s internal
auditing program, reviewing staffing levels and steps taken to implement recommended improvements in internal procedures and controls.
The Committee also reviews and discusses legal and compliance matters with management, and, as necessary or advisable, the Company’s
independent auditors.
Based on the Audit
Committee’s discussions with management and the independent auditors and the Audit Committee’s review of the representations
of management and the report of the independent auditors to the Board, and subject to the limitations on the Audit Committee’s
role and responsibilities referred to above and in the Audit Committee charter, the Audit Committee recommended to the Board that
it include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2015 for filing with the SEC.
Submitted by: Audit Committee
Guillaume Cerutti (Chairman of the Audit
Committee)
Ambassador Craig Stapleton
Benoit Van Assche
Francis J.T. Fildes
The Audit Committee
Report does not constitute solicitation material and should not be deemed filed or incorporated by reference into any of our other
filings under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate
this report by reference therein.
EXECUTIVE
OFFICERS
Our executive officers serve at the
discretion of the Board, and serve until they resign, are removed or are otherwise disqualified to serve, or until their successors
are elected and qualified. Our executive officers presently include:
Michael S. Anderson – Chief Executive
Officer
For information regarding Mr. Anderson,
see “Proposals to Elect Directors - Nominees Standing for Election.”
Sandra L. Hatten – Senior Vice
President of Quality and Regulatory Affairs
Sandra L. Hatten, age 59, was appointed
Senior Vice President of Quality and Regulatory Affairs of Flamel in June 2015. Prior to joining Flamel, Ms. Hatten was employed
from October 2010 to June 2015 by Mallinckrodt, plc, a global specialty biopharmaceutical company, where she served as Senior
Vice President of Quality and Regulatory Compliance from February 2014 until June 2015. From October 2010 until September 2012,
Ms. Hatten was employed by Mallinckrodt, as Director and Sr. Director of Quality. From September 2012 until February 2014, Ms.
Hatten held the position of Vice President, Quality and Regulatory Compliance with Mallinckrodt. Ms. Hatten has more than 30 years
of experience in the pharmaceutical industry, during which she has held leadership roles in quality and operations for brand as
well as generic drug manufacturers, where she has been responsible for establishing and implementing broad-based quality programs
across multiple sites. Ms. Hatten holds bachelor’s and master’s degrees from Marshall University in Huntington, West
Virginia.
Phillandas T. Thompson – Senior
Vice President, General Counsel and Corporate Secretary
Phillandas T. (Phil) Thompson, age 42,
has been Senior Vice President and General Counsel of Flamel since November 2013. Before joining Flamel, Mr. Thompson was employed
from January 2012 until November 2013 at West-Ward Pharmaceutical Corp. as Vice President, Legal Affairs, from January 2010 until
November 2011 at Paddock Laboratories, Inc. as Vice President, General Counsel, from April 2006 until January 2010 at KV Pharmaceutical
Co as Vice President, Strategic Business Transactions and Assistant General Counsel, and from October 2002 until March 2006 at
Barr Laboratories, Inc. as Associate General Counsel. Prior to his employment with Barr Laboratories, Mr. Thompson was a corporate
associate at White & Case, LLP. Mr. Thompson is a member of the New York Bar, the Missouri Bar, and the Minnesota Bar and
has several other professional affiliations. Mr. Thompson earned a B.A. from Washington University in St. Louis and is also a
graduate of the University of Michigan Law School (Juris Doctor) and the University of Michigan Business School (Master of Business
Administration).
Michael Kanan – Senior Vice President
and Chief Financial Officer
Michael F. Kanan, age 53, was appointed
Senior Vice President and Chief Financial Officer of Flamel in October 2015. Prior to joining Flamel, Mr. Kanan was employed by
Sigma-Aldrich Corp. from April 2009 until November 2015, where he served as Vice President Finance, Corporate Controller and Chief
Accounting Officer of Sigma-Aldrich from April 2009 until November 2015. Sigma-Aldrich is a life science and high technology company
which was acquired by Merck KGaA, a health care, life science and performance materials company based in Germany, in November
2015. Mr. Kanan began his career at the international accounting firm Deloitte & Touche, and also held accounting and finance
leadership positions with Hutchinson Group, a subsidiary of Total S.A., and Meritor, a global supplier of drivetrain, mobility,
braking and aftermarket solutions for commercial vehicle and industrial markets. Mr. Kanan holds a Bachelor of Arts degree in
Accounting from Michigan State University and became a CPA in 1987.
Gregory J. Davis – Vice President
of Corporate and Business Development
Gregory J. Davis, age 51, was appointed
Vice President of Business Development of Flamel in June 2015. Prior to joining Flamel, Mr. Davis co-founded and was Chief Business
Officer of Flag Therapeutics, Inc., a company engaged in oncology drug discovery and development. Mr. Davis was employed from
March 2010 to September 2012 at Patheon, Inc., a provider of drug development and delivery solutions, located in Durham, North
Carolina, where he held the position of Vice President of Corporate Development. Previously Mr. Davis was employed for eight years
at GlaxoSmithKline as Director of Worldwide Business Development. Mr. Davis has substantial experience leading acquisition and
divestment of products and businesses and structuring licensing agreements. Mr. Davis has a B.A. in Economics from the University
of North Carolina, Chapel Hill and an M.B.A. from its Keenan Flagler Business School.
David Monteith – Vice President
of Research and Development
Dr. David Monteith, age 52, was appointed
Vice President of Research and Development in October 2014. Prior to joining Flamel, Dr. Monteith was employed from 2009 to 2014
at Merck & Co., Inc., a global healthcare solutions company, where he held the position of Associate Vice President of Pharmaceutical
Development for Emerging Markets. From 2000 to 2009, Dr. Monteith was employed by Schering-Plough Corporation, a pharmaceutical
company that merged with Merck & Co., Inc. in November 2009 in various positions from Associate Director, Pharmaceutical Development
to Senior Director, Product Value Enhancement. With over 25 years of experience in the pharmaceutical industry, Dr. Monteith has
held senior leadership roles in the areas of drug delivery and pharmaceutical drug product development. Dr. Monteith is a graduate
in Pharmacy from the University of Strathclyde, Glasgow where he also obtained his Ph.D. from the Department of Pharmaceutics.
He later also received an MBA from the University of Warwick, UK.
Dhiren D’Silva – Vice President
of Irish and European Operations
Dhiren D’Silva, age 43, was appointed
Vice President of Irish and European Operations of Flamel in September 2015. Prior to joining Flamel, Mr. D’Silva was employed
from August 2013 to September 2015 at NPS Pharmaceuticals Inc., a biopharmaceutical company engaged in developing therapies for
patients with rare diseases; NPS was acquired by an affiliate of Shire plc in January 2015. Mr. D’Silva held the position
of Senior Director of International Business Operations at NPS. Prior to his employment with NPS, Mr. D’Silva was employed
from January 2008 to July 2013 at Catalent Pharma Solutions Inc. a drug delivery provider located in Somerset, New Jersey, as
Director of Business Development for its Product Ventures Group, focusing on the development and out-licensing of ANDA’s.
He holds an MBA from the Katholieke Universiteit Leuven (Belgium) as well as a BA in Economics from St. Xavier’s College
in Mumbai, India.
Scott A. Macke – Vice President
of Supply Chain and Operations
Scott A. Macke, age 46, has been Vice
President of Supply Chain and Operations of Flamel since March 2012. He has over 20 years of experience in the pharmaceutical
industry with direct involvement specific to both drug product development and commercialization. Prior to joining Flamel, Mr.
Macke was employed from November 2010 to March 2010 at Éclat Pharmaceuticals, L.L.C., most recently as the Chief Operating
Officer. Prior to his employment at Éclat Pharmaceuticals, Mr. Macke was employed by KV Pharmaceutical as Senior Director
of Project Management and at Mallinckrodt Pharmaceuticals in various technical and operational positions. Mr. Macke holds undergraduate
degrees in Biology and Chemistry from Missouri State University and a Master of Business Administration from the John E. Simon
School of Business at Maryville University.
Steven G. Sullivan – Vice President
of Strategic Marketing
Steven G. Sullivan, age 51, was appointed
Vice President, Strategic Marketing of Flamel in October 2015. Prior to joining Flamel, Mr. Sullivan was employed from September
2014 to October 2015 by Sunovion Pharmaceuticals Inc. a Sumitomo Dainippon Pharma company, where he served as Director of Managed
Markets Marketing from September 2014 to October 2015. From November 2009 until September 2014, Mr. Sullivan was employed at Daaichi
Sankyo Pharmaceuticals, a Daiichi Sankyo company, as an Area Business Manager, Senior Brand Manager and Senior Manager Payer Marketing.
Mr. Sullivan holds a Bachelor of Arts degree in Management from Washington State University.
David P. Gusky
–
Corporate
Controller and Chief Accounting Officer
David P. Gusky, age 39, was appointed
Corporate Controller and Chief Accounting Officer of Flamel in December 2015. Prior to joining Flamel, Mr. Gusky was employed
by Sigma-Aldrich Corp. from May 2006 until November 2015, where he served as Director of Financial Planning & Analysis of
Sigma-Aldrich from November 2013 until November 2015. Sigma-Aldrich is a life science and high technology company which was acquired
by Merck KGaA, a health care, life science and performance materials company based in Germany, in November 2015. Mr. Gusky began
his career at the international accounting firm Deloitte & Touche, and also held finance management positions with Solutia,
Inc., a global manufacturer of performance materials and specialty chemicals. Mr. Gusky holds Bachelors of Science degrees in
Accountancy and Finance and a Masters of Accountancy from the University of Missouri-Columbia.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table
sets forth certain information regarding the beneficial ownership of our issued and outstanding ordinary shares by (i) each person
who is known by the Company to own beneficially more than five percent of the outstanding ordinary shares, (ii) each Named Executive
Officer of the Company, (iii) each director and director nominee of the Company and (iv) all directors and executive officers
as a group Except as otherwise indicated in the footnotes below, such information is provided as of the most recent practicable
date, May 27, 2016. According to SEC rules, a person is the "beneficial owner" of securities if he, she or it has or
shares the power to vote them or to direct their investment or has the right to acquire beneficial ownership of such securities
within 60 days through the exercise of an option, warrant or right, the conversion of a security or otherwise.
Name and Address of Beneficial Owners
(1)
|
|
Amount
of
Beneficial
Ownership
(2)
|
|
|
Percentage
of
Class
(2)
|
|
|
|
|
|
|
|
|
>5% Shareholders:
|
|
|
|
|
|
|
|
|
Deerfield
Mgmt, L.P.
(3)
780
Third Avenue
New
York, New York 10017
|
|
|
7,372,809
|
|
|
|
17.88
|
%
|
|
|
|
|
|
|
|
|
|
Broadfin
Capital, LLC
(4)
300
Park Avenue, 25th Floor
New
York, New York 10022
|
|
|
4,394,464
|
|
|
|
10.66
|
%
|
|
|
|
|
|
|
|
|
|
Bank
of New York Mellon Corp.
(6)
225
Liberty Street
New
York, New York 10286
|
|
|
2,619,872
|
|
|
|
6.35
|
%
|
|
|
|
|
|
|
|
|
|
Directors, Director Nominees and Named Executive Officers:
|
|
|
|
|
|
|
|
|
Craig R. Stapleton
(7)
|
|
|
727,127
|
|
|
|
1.75
|
%
|
Michael S. Anderson
(8)
|
|
|
469,625
|
|
|
|
1.13
|
%
|
Guillaume Cerutti
(9)
|
|
|
180,000
|
|
|
|
*
|
|
Francis J.T. Fildes
(10)
|
|
|
130,026
|
|
|
|
*
|
|
Christophe Navarre
(11)
|
|
|
100,026
|
|
|
|
*
|
|
Benoit Van Assche
(12)
|
|
|
100,026
|
|
|
|
*
|
|
Phillandas T. Thompson
(13)
|
|
|
83,750
|
|
|
|
*
|
|
Michael F. Kanan
|
|
|
-
|
|
|
|
*
|
|
David Monteith
(14)
|
|
|
27,500
|
|
|
|
*
|
|
Scott A. Macke
|
|
|
28,125
|
|
|
|
*
|
|
Steven A. Lisi
|
|
|
-
|
|
|
|
*
|
|
Siân Crouzet
|
|
|
-
|
|
|
|
*
|
|
All directors and executive officers as a group (14 persons)
|
|
|
1,886,705
|
|
|
|
4.45
|
%
|
* Represents beneficial ownership of
less than 1% of our outstanding ordinary shares.
|
1.
|
Except as stated in the table
above or the footnotes below, the address of the named person is c/o Flamel Technologies
S.A., Parc Club du Moulin à Vent, 33, avenue du Docteur Georges Levy, Vénissieux,
France 69200.
|
|
2.
|
Unless otherwise stated in the
footnotes to this table, we believe that each of the shareholders named in this table
has sole voting and investment power with respect to the ordinary shares indicated as
beneficially owned. Ownership percentages are based on 41,241,254
ordinary shares outstanding on May 15, 2016. The number of shares beneficially
owned includes ordinary shares issuable pursuant to the exercise of stock options or
warrants that are exercisable and “free shares,” if any, that will vest within
60 days of May 15, 2016. Ordinary shares issuable pursuant to the exercise of stock options
or warrants that are exercisable and “free shares,” if any, that will vest
within 60 days of May 15, 2016 are deemed to be outstanding and beneficially owned by
the person to whom such shares are issuable for the purpose of computing the percentage
ownership of that person, but they are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
|
|
3.
|
This information in the table
and in this footnote is based on a Schedule 13G/A filed with the SEC on March 22, 2016
by Deerfield Mgmt, L.P., Deerfield Special Situations Fund, L.P., Deerfield Private Design
Fund II, L.P., Deerfield Private Design International II, L.P., Deerfield Management
Company, L.P., Breaking Stick Holdings, LLC and James E. Flynn. According to the Schedule
13G/A, Deerfield Mgmt, L.P. and James E. Flynn share voting and dispositive power with
respect to (i) an aggregate of 4,072,809 ordinary shares, consisting of (A) 1,183,614
ordinary shares held by Deerfield Special Situations Fund, L.P., of which Deerfield Mgmt,
L.P. is general partner, (B) 1,346,365 ordinary shares held by Deerfield Private Design
Fund II, L.P., of which Deerfield Mgmt, L.P. is general partner, and (C) 1,542,830 shares
held by Deerfield Private Design International II, L.P., of which Deerfield Mgmt, L.P.
is general partner, and (ii) ordinary shares underlying warrants to purchase an aggregate
of 3,300,000 ADSs held by Breaking Stick Holdings, LLC, of which is Deerfield Management
Company, L.P. is the manager and Deerfield Private Design Fund II, L.P. and Deerfield
Private Design International II, L.P. are members. The provisions of the warrants restrict
the exercise of such warrants to the extent that, upon such exercise, the number of shares
then beneficially owned by the holder and its affiliates and any other person or entities
with which such holder would constitute a Section 13(D) “group” would exceed
9.985% of the total number of shares of the Company then outstanding (the “Ownership
Cap”). Notwithstanding the number of shares reported, each of Deerfield Mgmt, L.P.,
Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P.,
Deerfield Management Company, L.P., Breaking Stick Holdings, LLC and James E. Flynn disclaims
beneficial ownership of the ordinary shares underlying such warrants to the extent beneficial
ownership of such ordinary shares would cause all reporting persons filing such Schedule
13G/A, in the aggregate, to exceed the Ownership Cap. Deerfield Management Company, L.P.
is the investment advisor to Deerfield Special Situations Fund, L.P., Deerfield Private
Design Fund II, L.P. and Deerfield Private Design International II, L.P.
|
|
4.
|
The information in the table and
in this footnote is based on a Schedule 13G/A filed with the SEC on February 2, 2016
by Broadfin Capital, LLC, Broadfin Healthcare Master Fund, Ltd. and Kevin Kotler, each
of whom shares voting and dispositive power with respect to an aggregate of 4,394,464
of the Company’s ordinary shares. Broadfin Capital, LLC and Kevin Kotler each disclaims
beneficial ownership of such ordinary shares except to the extent of their pecuniary
interest therein.
|
|
5.
|
The information in the table and
in this footnote is based on a Schedule 13G filed with the SEC on January 1, 2016 by
Janus Capital Management LLC. Janus Capital Management LLC has a direct 96.81% ownership
stake in INTECH Investment Management (“INTECH”) and a direct 100% ownership
stake in Perkins Investment Management LLC (“Perkins”), and as a result of
their ownership structure, holdings for Janus Capital Management LLC, Perkins and INTECH
are aggregated for purposes of such Schedule 13G/A. Janus Capital Management LLC, Perkins
and INTECH are registered investment advisers, each furnishing investment advice to various
investment companies registered under Section 8 of the Investment Company Act of 1940
and to individual and institutional clients (“Managed Portfolios”). As a
result of its role as investment adviser or sub-adviser to the Managed Portfolios, Janus
Capital Management LLC may be deemed to be the beneficial owner of 4,318,315 ordinary
shares of the Company held by such Managed Portfolios. However, Janus Capital Management
LLC does not have the right to receive any dividends from, or the proceeds from the sale
of, the securities held in the Managed Portfolios and disclaims any ownership associated
with such rights. The Managed Portfolios have the right to receive all dividends from,
and the proceeds from the sale of, the securities held in their respective accounts.
The interest of any one such person does not exceed 5% of the Company’s outstanding
ordinary shares.
|
|
6.
|
The information in the table and
in this footnote is based on a Schedule 13G filed with the SEC on January 1, 2016 by
The Bank of New York Mellon Corp (“BNY Mellon”). BNY Mellon shares beneficial
ownership with the following subsidiaries: The Bank of New York Mellon, BNY Mellon, National
Association, The Boston Company Asset Management LLC, The Dreyfus Corporation (parent
holding company of MBSC Securities Corporation), and MAM (MA) Holding Trust (parent holding
company of Standish Mellon Asset Management Company LLC; The Boston Company Asset Management
LLC). All of the ordinary shares are beneficially owned by BNY Mellon and such subsidiaries
in their various fiduciary capacities. As a result, another entity in every instance
is entitled to dividends or proceeds of sale.
|
|
7.
|
Includes warrants to purchase
ADSs with respect to 217,449 ordinary shares.
|
|
8.
|
Includes options to purchase ADSs
with respect to 385,375 ordinary shares.
|
|
9.
|
Includes warrant to purchase ADSs
with respect to 130,000 ordinary shares.
|
|
10.
|
Includes warrant to purchase
ADSs with respect to 100,026 ordinary shares.
|
|
11.
|
Represents warrant to purchase
ADSs with respect to 100,026 ordinary shares.
|
|
12.
|
Represents warrant to purchase
ADSs with respect to 100,026 ordinary shares.
|
|
13.
|
Includes options to purchase
ADSs with respect to 73,750 ordinary shares.
|
|
14.
|
Includes options to purchase
ADSs with respect to 27,500 ordinary shares.
|
EXECUTIVE
COMPENSATION
Compensation Discussion
and Analysis
In this Compensation
Discussion and Analysis, we give an overview and analysis of our compensation philosophy, our compensation program, the decisions
we made in 2015 under those programs with respect to our named executive officers. Included in this discussion is specific information
about the compensation earned or paid in 2014 and 2015 to the following named executive officers: (i) the individuals who
served as Chief Executive Officer of the Company during 2015, (ii) the individual who served as Chief Financial Officer during
2015, (iii) the next two most highly compensated executive officers of the Company who received total compensation of $100,000
or more during the fiscal year ended December 31, 2015, and (iv) one former executive officer who would have been included
in (iii) if he had been employed by the Company at the end of the fiscal year (the “Named Executive Officers”).
Our Named Executive Officers for 2015 are:
Michael S. Anderson
|
Chief Executive Officer
|
Michael F. Kanan
|
Senior Vice President and Chief Financial Officer
|
Siân Crouzet
|
Former Principal Financial Officer
|
Phillandas T. Thompson
|
Senior Vice President, General Counsel and Corporate Secretary
|
David Monteith
|
Vice President, Research and Development
|
Scott A. Macke
|
Vice President, Supply Chain and Operations
|
Steven A. Lisi
|
Former Senior Vice President, Corporate and Business Development
|
Compensation Philosophy and Objectives
The Compensation Committee’s
executive compensation programs are designed to: (i) attract, retain and motivate executives with significant industry knowledge
and the experience and leadership capability necessary for us to achieve success; and (ii) align incentives for our named executive
officers with our corporate strategies and business objectives and goals; and (iii) achieve key strategic performance measures
aligned with the long-term interests of our shareholders.
Compensation Components
Our executive compensation
program has three primary components: base salary, annual cash incentive awards and equity awards. Compensation amounts denominated
in Euros have been translated to U.S. dollars using the average exchange rates of 1.11006, 1.32853, and 1.32813 U.S. dollar per
Euro for each of the fiscal years 2015, 2014, and 2013, respectively.
|
·
|
Base
Salary
. We fix the base salary of each of our executive officers at a level we believe
enables us to hire and retain individuals in a competitive environment and rewards satisfactory
individual performance and a satisfactory level of contribution to our overall business
goals. We take into account the base salaries paid by similarly-situated companies in
our peer group and, to the extent practicable, we set base salary levels for similarly-situated
executives within the Company at comparable levels to avoid divisiveness and encourage
teamwork, collaboration, and a cooperative working environment.
|
|
·
|
Cash
Incentive Awards
. We provide annual cash incentive awards that are based upon the
achievement of corporate and individual objectives established by the Compensation Committee
and the Board of Directors. These cash incentive awards are designed to focus our executive
officers on achieving key clinical, regulatory, commercial, operational, strategic and
financial objectives.
|
|
·
|
Equity
Awards
. We use stock options and “free shares” to reward long-term performance.
These equity awards are intended to provide significant incentive value for each executive
officer if the Company performance is outstanding and the Company achieves its long-term
goals to align executive compensation with long-term shareholder interests.
|
In addition to the
primary components of compensation described above, we provide our Named Executive Officers with employee benefits that are generally
available to our salaried employees. These benefits include health and medical benefits, flexible spending plans, matching 401(k)
contributions and group life insurance.
We have also entered
into agreements with our Named Executive Officers under which they are provided certain benefits in the event their employment
with the Company is terminated without cause or by the Named Executive Officer for good reason, following a change in control
of the Company.
Compensation Policies and Process
The Compensation Committee
has oversight of our compensation philosophy and programs and annually reviews and recommends all compensation decisions relating
to our Chief Executive Officer, our Named Executive Officers and all other executive officers of the Company. The Chief Executive
Officer provides specific information to the committee relative to the performance of the other members of the executive management
team. However, the Chief Executive Officer is always excused from the Compensation Committee meetings when his compensation or
employment is discussed. The Compensation Committee considers any recommendations by the Chief Executive Officer; however, the
committee recommends final compensation for all executives. All compensation decisions are assessed within the framework of the
Company’s financial position and general economic conditions. Our Board of Directors typically reviews and approves the
compensation decisions made by the Compensation Committee.
Our Compensation Committee
has engaged the Radford Consulting (“Radford”), an AonHewitt company specializing in executive compensation, as its
independent compensation consultant. In connection with the Compensation Committee’s executive compensation decisions for
2015, Radford reviewed and advised on principal aspects of our executive compensation program and performed the following services:
|
·
|
conducted
a competitive assessment of the Company’s then current executive compensation arrangements,
including analyzing peer group proxy statements, compensation survey data, and other
publicly available data;
|
|
·
|
provided
recommendations on the composition of the Company’s peer group; and
|
|
·
|
reviewed
and advised on equity compensation and on industry best practices.
|
The Compensation Committee
has determined that the work of Radford and the individual compensation advisors employed by Radford does not create any conflict
of interest. In making that determination, the Compensation Committee took into consideration the following factors: (i) the provision
of other services to the Company by the consultant; (ii) the amount of fees the Company paid the consultant as a percentage of
the consultant’s total revenue; (iii) the consultant’s policies and procedures that are designed to prevent conflicts
of interest; (iv) any business or personal relationship of the consultant or the individual compensation advisors employed by
the consultant with any Company executive officer; (v) any business or personal relationship of the individual compensation advisors
with any member of the Compensation Committee; and (vi) any Company stock owned by the consultant or the individual compensation
advisors employed by the consultant.
Peer Group
In an effort to provide
competitive total compensation to our executive officers, the Compensation Committee approved a group of comparable companies
as our peer group as recommended by Radford. The peer group was selected on the basis of similarity to the Company on the following
criteria: business comparability, stage of product development and commercialization, number of employees, market capitalization
and revenue. The following companies were identified as our “peer group” for 2015:
Aegerion Pharmaceuticals, Inc.
|
Infinity Pharmaceuticals, Inc.
|
AMAG Pharmaceuticals, Inc.
|
Merrimack Pharmaceuticals, Inc.
|
Arena Pharmaceuticals, Inc.
|
Momenta Pharmaceuticals, Inc.
|
Ariad Pharmaceuticals, Inc.
|
PTC Therapeutics, Inc.
|
BioCryst Pharmaceuticals, Inc.
|
Raptor Pharmaceuticals, Inc.
|
Corcept Therapeutics
|
Rigel Pharmaceuticals, Inc.
|
DepoMed Inc.
|
Sarepta Pharmaceuticals, Inc.
|
Dynavax Technologies Corporation
|
Spectrum Pharmaceuticals, Inc.
|
Enanta Pharmaceuticals, Inc.
|
Supernus Pharmaceuticals, Inc.
|
Halozyme Therapeutics, Inc.
|
Vanda Pharmaceuticals, Inc.
|
ImmunoGen, Inc.
|
|
Base Salary
The Company provides
base salaries to attract and retain executives with the proper experiences and skill sets required to assist us in achieving our
specific business objectives, as well as our future growth and success. Base salaries provide a guaranteed base level of compensation
that reflects a belief that base salary for senior executive officers should be targeted at market-competitive levels. Base salaries
for a particular fiscal year are generally established at the end of the prior year. In establishing the base salaries for 2015,
the Compensation Committee considered each Named Executive Officer’s role and level of responsibility at the Company, recent
individual performance, perceived impact on Company results and overall Company performance. Based on the peer group and other
market data presented by Radford, the Compensation Committee noted that the base salaries of our Named Executive Officers are
currently positioned at the market 25
th
percentile in the aggregate. However, given our transition from a non-commercial
to a commercial company, the Compensation Committee desires to implement a revised compensation program in the future designed
to gradually migrate our Named Executive Officers base salaries to the 50
th
percentile of the base salaries paid to
similarly situated officers at our peer group companies. The base salaries of our Named Executive Officers during 2014 and 2015
were as follows: Michael S. Anderson – $528,991 in 2014 and $550,000 in 2015, an increase of 4.0%; Michael F. Kanan (who
joined the Company in November 2015 at a salary rate of $325,000) – $325,000 (annualized) in 2015; Siân Crouzet –
$138,098 in 2014 and $132,691 in 2015, a decrease of 4.0% as a result of the exchange rate differences; Phillandas T. Thompson
– $280,000 in 2014 and $288,400 in 2015, an increase of 3.0%; David Monteith (who joined the Company in October 2014) –
$275,000 (annualized) in 2014 and $275,000 in 2015, an increase of 0.0%; Scott A. Macke – $196,100 in 2014 and $205,905
in 2015, an increase of 5.0%; and Steven A. Lisi (whose employment with the Company ended in April 2015) – $412,000 in 2014
and $412,000 (annualized) in 2015, an increase of 0.0%.
Annual Cash
Incentive
The goal of the annual
cash incentive program in 2015 was to align a meaningful portion of the total compensation potential for the Named Executive Officers
to the achievement of specified quantitative and qualitative Company performance targets, as well as individual performance targets.
The achievement of these targets advances the Company’s specific business objectives and result in long-term shareholder
value. The target levels of the annual cash incentive awards were established as part of the Named Executive Officer’s individual
employment agreements. Each of these employment agreements provide that the Named Executive Officer will receive an annual cash
incentive award determined at the discretion of the Compensation Committee and the Board of Directors based on the Company’s
performance against its objectives and individualized objective and subjective criteria, with a target award amount equal to a
percentage of the Named Executive Officer’s base salary. The award criteria include specific objectives, relating to the
achievement of clinical, regulatory, commercial, business and/or financial milestones.
Our approved 2015
corporate goals consisted of:
|
·
|
generate
$183.3 million in revenues and $63.4 million of adjusted operating profit;
|
|
·
|
restructure
the Company to among other things improve its long term worldwide tax situation;
|
|
·
|
recruit
and staff key functions, necessary to prepare the Company for 2016 and beyond;
|
|
·
|
file,
or be within six months of filing one NDA from the five internal products then currently
under development;
|
|
·
|
move
no less than three internal products into pre-clinical/clinical trials; and
|
|
·
|
establish
a process for enhancing drug delivery capabilities including the potential acquisition
of a new drug delivery platform during the year.
|
The Compensation Committee determined
that the Company’s corporate performance score was 75% for 2015 based solely on the Compensation Committee’s assessment
of the Company’s level of achievement against the approved 2015 corporate performance goals set forth above.
Chief Executive
Officer
. The Compensation Committee awarded an annual cash incentive with respect to 2015 for our Chief Executive Officer
in the amount of $250,000. Such amount was determined by the Committee in December 2015 based on an assessment of the factors
listed above and other factors including:
|
·
|
the
Company’s achievement with respect to pre-established Company financial and strategic
objectives, which included: (i) achievement of a revenue target, (ii) opportunistic in-
and out-licensing of clinical and commercial products, (iii) appropriate advancement
of our research and development program and clinical studies, and (iv) expense management;
and
|
|
·
|
achievement
of individual performance targets that were pre-established, which included recruitment
of key members of our management team, as well as providing overall leadership and vision
for our management team to execute upon.
|
Other Named Executive
Officers
. The process for determining the annual cash incentive for our other Named Executive Officers, is generally similar
to what is described above with respect to our Chief Executive Officer. For 2015, the Compensation Committee took into account
the Company’s performance with respect to the financial and strategic performance goals discussed above. The Compensation
Committee assessed the individual performance of the other Named Executive Officers and also considered the recommendations of
our Chief Executive Officer. The other Named Executive Officers reported directly to our Chief Executive Officer and so, the Compensation
Committee believes, the Chief Executive Officer was in a position to provide a meaningful assessment of their capabilities and
contributions to the Company.
The Compensation Committee
determined 2015 annual cash incentives for the other Named Executive Officers in the following amounts: Michael F. Kanan (who
joined the Company in November 2015) - $0.00; Siân Crouzet – $49,953; Phillandas T. Thompson – $86,520; David
Monteith – $84,915; Scott A. Macke – $55,671; Steven A. Lisi (whose employment with the Company ended in April 2015)
- $0.00.
Equity Compensation
The Compensation Committee
believes that equity compensation awards help to align the interests of our executive officers with those of shareholders because
the value of the equity awards to the recipient increases only with the appreciation of the price of our ordinary shares. Furthermore,
the Compensation Committee believes granting equity awards that vest over time encourages executives to remain with the Company.
The authority to grant equity awards to our executive officers lies with the Compensation Committee and Board of Directors. The
Compensation Committee takes into consideration the peer group data provided by Radford and the recommendations of our Chief Executive
Officer (other than for himself). Generally, the Compensation Committee has granted stock options to our executive officers upon
commencement of their employment with the Company. These initial stock options vest over a four year period and are in connection
with the executive officer’s employment agreement. At least annually, typically in December, the Compensation Committee
considers annual equity awards for our executive officers. These awards consist of both stock options and free shares.
In determining the
number of stock options and free shares to grant to a particular Named Executive Officer, the Compensation Committee takes into
account numerous factors, including: the executive’s role and level of responsibility within the Company, the Company’s
performance with respect to the financial and strategic goals and objectives for that year, and comparative peer group data as
presented by Radford. The Compensation Committee has not adopted any formal policies or guidelines for determining the allocation
of stock options versus free shares. However, in general, the Compensation Committee will recommend a mix of equity awards more
weighted towards stock options than free shares principally because the Compensation Committee recognizes that free shares provide
immediate value to recipients upon vesting and therefore involve less risk than stock options. In 2015, the Compensation Committee
decided to defer the award of free shares to the Chief Executive Officer and the other Named Executives until 2016.
In 2015, the Compensation
Committee awarded the Chief Executive Officer stock options to purchase 200,000 ordinary shares at an exercise price of $14.35,
and the stock options to the other Named Executive Officers to purchase the following numbers of ordinary shares: Michael F. Kanan
– stock options to purchase 100,000 ordinary shares at an exercise price of $16.21; Siân Crouzet – stock options
to purchase 30,000 ordinary shares at an exercise price of $14.35; Phillandas T. Thompson – stock options to purchase 100,000
ordinary shares at an exercise price of $14.35; David Monteith – stock options to purchase 35,000 ordinary shares at an
exercise price of $14.35; Scott A. Macke – stock options to purchase 35,000 ordinary shares at an exercise price of $14.35;
and Steven A. Lisi (whose employment with the Company terminated in April 2015) – stock options to purchase zero ordinary
shares. All of the foregoing stock options will vest in equal amounts over a four-year period following the award date.
Compensation Risk Assessment
The Company regularly
reviews compensation plans and practices to ensure they are appropriately structured and aligned with business objectives, and
not designed to encourage executives to take unwarranted risks. Specifically, the overall design of the compensation philosophy
and plans mitigate risks because: (1) the financial performance objectives of the short and long-term incentive plans are
reviewed and approved annually by the Board; (2) the plans consist of multiple performance objectives, thus lessening the
focus on any one in particular; and (3) short and long-term incentive payouts are capped for all participants.
General Employee Benefits
Flamel offers competitive
health, dental and life insurance and vacation pay, generally for all employees. The senior executives are eligible to participate
in all of the above programs. In addition, the senior executives are eligible to receive matching 401(k) plan contributions on
the same basis as other employees.
Severance and Change-in-Control Benefits
Pursuant to employment
agreements, each of our Named Executive Officers has a provision in his employment agreement with the Company that entitles such
Named Executive Officer to certain specified benefits in the event of termination of their employment under specified circumstances,
including termination following a change in control of the Company. These benefits are described in the “Employment Agreement”
section below, and certain estimates of these severance and change-in-control benefits are provided in “Estimated Payments
Upon Termination or Change in Control” below.
Retirement Benefits
The Company believes
that offering competitive retirement benefits is important to attract and retain top executives. The Company’s U.S.-based
executives participate in a traditional defined contribution 401(k) plan. For our Company’s 401(k) plan, the Company generally
contributed approximately $10,600 to each eligible executive’s 401(k) account during 2015, which was the maximum contribution
match allowable under the Company’s 401(k) Plan, provided the participant contributed the maximum in order to receive the
maximum match and contributed based off of $265,000 of wages, the maximum allowable under the IRS limits.
For executives not
based in the U.S., the Company has taken steps in recent years to align certain features of its pension or retirement plans, recognizing
that benefit formulas are driven by local market competition and trends. Additional details regarding retirement benefits are
provided in the tables below entitled “Summary Compensation Table.”
Tax Considerations
Section 162(m) of
the Internal Revenue Code generally limits to $1 million the U.S. federal tax deductibility of compensation paid in one year to
any employee. Performance-based compensation is not subject to the limits on deductibility of Section 162(m), provided that such
compensation meets certain requirements, including shareholder approval of material terms of compensation.
The Compensation Committee
attempts to provide the Named Executive Officers with incentive compensation programs that will preserve the tax deductibility
of compensation paid by the Company, to the extent reasonably practicable and to the extent consistent with the Company’s
other compensation objectives. The Compensation Committee believes, however, that shareholder interests are best served by not
restricting the Compensation Committee’s discretion and flexibility in structuring compensation programs, even though such
programs may result in certain non-deductible compensation expenses.
Securities Trading Policy
The Company has a
policy that prohibits executive officers and directors from trading in the Company’s securities while aware of material
non-public information, or engaging in hedging transactions or short sales and trading in “puts” and “calls”
involving the Company’s securities. This policy is described in our Standards of Business Conduct, which may be viewed on
our website at http://www.flamel.com/about-flamel/governance/. In addition, executive officers and directors are prohibited from
pledging the Company’s securities.
Tax Gross-Ups
The Company does not
provide tax gross-ups.
Report of the Compensation
Committee
The Compensation Committee
has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and, based on such review and discussion,
the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be including
in this proxy statement.
Submitted by the following
members of the Compensation Committee:
|
Francis J.T. Fildes, Chairman
|
|
Christophe Navarre
|
|
Craig Stapleton
|
|
Benoit C. Van Assche
|
The Compensation
Committee Report does not constitute solicitation material and should not be deemed filed or incorporated by reference into any
of our other filings under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent that we specifically
incorporate this report by reference therein.
Summary Compensation Table
The following table
sets forth the compensation paid or accrued during the fiscal years ended December 31, 2015, 2014 and 2013 to our Named Executive
Officers.
|
|
|
|
|
|
|
|
|
|
Equity-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
Non-Equity
|
|
|
All
|
|
|
|
|
Name
and
Principal
Position
|
|
Year
|
|
Base
Salary
($)
(1)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(2)
|
|
|
Option
Awards
($)
(3)
|
|
|
Incentive
Plan
Compensation
($)
(4)
|
|
|
Other
Compensation
($)
(5)
|
|
|
Total
Compensation
($)
|
|
Michael
S. Anderson
|
|
2015
|
|
|
550,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,664,000
|
|
|
|
250,000
|
|
|
|
20,627
|
|
|
|
2,484,627
|
|
Chief Executive Officer
|
|
2014
|
|
|
528,991
|
|
|
|
-
|
|
|
|
815,000
|
|
|
|
1,838,000
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
3,231,991
|
|
|
|
2013
|
|
|
528,907
|
|
|
|
-
|
|
|
|
-
|
|
|
|
177,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
706,007
|
|
Michael F. Kanan
|
|
2015
|
|
|
33,854
|
|
|
|
-
|
|
|
|
-
|
|
|
|
935,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
968,854
|
|
Senior Vice President
and
|
|
2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Chief
Financial
Officer
|
|
2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Siân Crouzet(6)
|
|
2015
|
|
|
132,691
|
|
|
|
-
|
|
|
|
-
|
|
|
|
249,600
|
|
|
|
49,953
|
|
|
|
-
|
|
|
|
432,244
|
|
Principal Financial
Officer
|
|
2014
|
|
|
138,098
|
|
|
|
-
|
|
|
|
163,000
|
|
|
|
459,500
|
|
|
|
33,213
|
|
|
|
-
|
|
|
|
793,811
|
|
|
|
2013
|
|
|
130,899
|
|
|
|
-
|
|
|
|
73,600
|
|
|
|
105,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
309,899
|
|
Phillandas T. Thompson
|
|
2015
|
|
|
288,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
832,000
|
|
|
|
86,520
|
|
|
|
19,600
|
|
|
|
1,226,520
|
|
General Counsel &
|
|
2014
|
|
|
280,000
|
|
|
|
-
|
|
|
|
163,000
|
|
|
|
873,050
|
|
|
|
48,000
|
|
|
|
-
|
|
|
|
1,364,050
|
|
Corporate Secretary
|
|
2013
|
|
|
29,167
|
|
|
|
-
|
|
|
|
-
|
|
|
|
417,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
446,167
|
|
Steven A. Lisi(7)
|
|
2015
|
|
|
150,520
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,132,493
|
(8)
|
|
|
3,283,013
|
|
Senior Vice President
of
|
|
2014
|
|
|
412,000
|
|
|
|
-
|
|
|
|
81,500
|
|
|
|
919,000
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
1,424,500
|
|
Corporate & Business
Dev.
|
|
2013
|
|
|
412,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
451,150
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
875,150
|
|
Scott A. Macke
|
|
2015
|
|
|
205,905
|
|
|
|
-
|
|
|
|
-
|
|
|
|
291,200
|
|
|
|
55,671
|
|
|
|
-
|
|
|
|
552,776
|
|
Vice President of
|
|
2014
|
|
|
196,100
|
|
|
|
-
|
|
|
|
163,000
|
|
|
|
459,500
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
843,600
|
|
Supply Chain & Operations
|
|
2013
|
|
|
155,833
|
|
|
|
50,000
|
(9)
|
|
|
73,600
|
|
|
|
99,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
379,333
|
|
David Monteith
|
|
2015
|
|
|
275,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
291,200
|
|
|
|
84,915
|
|
|
|
-
|
|
|
|
651,115
|
|
Vice President of
|
|
2014
|
|
|
52,885
|
|
|
|
-
|
|
|
|
40,750
|
|
|
|
1,010,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,104,535
|
|
Research & Dev.
|
|
2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Represents salaries before any
employee contributions under our 401(k) Plan
|
|
(2)
|
Stock
awards represent equity compensation for meeting Company and personal performance targets
or for having signed an employment contract with the Company. Represents the grant date
fair value computed by us for financial reporting purposes, computed in accordance with
FASB ASC Topic 718. For a full description of the assumptions we use in computing these
amounts, see Note 13 to our consolidated financial statements for the year ended December 31,
2015 which are included in our annual report on Form 10-K filed with the SEC on March
15, 2016.
|
|
(3)
|
Option
awards represent equity compensation for meeting Company and personal performance targets
or for having signed an employment contract with the Company. Represents the grant date
fair value computed by us for financial reporting purposes, computed in accordance with
FASB ASC Topic 718. For a full description of the assumptions we use in computing these
amounts, see Note 13 to our consolidated financial statements for the year ended December 31,
2015 which are included in our annual report on Form 10-K filed with the SEC on March
15, 2016. The actual value a Named Executive Officer may receive depends on market prices
and there can be no assurance that the amounts reflected in the Option Awards column
will actually be realized. No gain to a named executive officer is possible without an
appreciation in stock value after the date of grant.
|
|
(4)
|
Non-equity incentive plan compensation
represents cash bonuses for meeting Company and personal performance targets.
|
|
(5)
|
See the All Other Compensation
Table below.
|
|
(6)
|
Siân Crouzet was the Principal
Financial Officer from January 1, 2015 until October 27, 2015.
|
|
(7)
|
Steven A. Lisi was the Senior
Vice President of Corporate & Business Development from January 1, 2015 until April
7, 2015.
|
|
(8)
|
As shown in the All Other Compensation
Table below, the amount consists principally of the value of stock options that were
accelerated in connection with Mr. Lisi’s employment termination in April 2015.
|
|
(9)
|
The cash bonus for Scott Macke
was awarded in respect of having filed and received regulatory approval on our Bloxiverz
product under the FDA’s unapproved marketed drug program.
|
All Other Compensation Table
The table below reflects
the types and dollar amounts of perquisites, additional compensation and other personal benefits provided to the named executive
officers during fiscal year 2015. For purposes of computing the dollar amounts of the items listed below, we used the actual out-of-pocket
costs to us of providing the perquisite or other personal benefit to the named executive officer.
Name
and Principal Position
|
|
Year
|
|
Accelerated
Stock
Options
|
|
|
Cash
Severance
Payment
|
|
|
Medical
Benefits
(COBRA
payments)
|
|
|
401K
Match
|
|
|
Car
Allowance
|
|
|
Personal
Tax
Preparation
Fees
|
|
|
Total
All
Other
Compensation
($)
|
|
Michael S. Anderson
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,600
|
|
|
|
6,960
|
|
|
|
3,067
|
|
|
|
20,627
|
|
|
|
2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Phillandas T. Thompson
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,600
|
|
|
|
9,000
|
|
|
|
-
|
|
|
|
19,600
|
|
|
|
2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Steven A. Lisi
|
|
2015
|
|
|
2,312,186
|
(1)
|
|
|
788,750
|
|
|
|
20,672
|
|
|
|
5,885
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
3,132,493
|
|
|
|
2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,000
|
|
|
|
-
|
|
|
|
12,000
|
|
|
(1)
|
Represents the excess of the
share price at the date of exercise over the exercise price with respect to Mr. Lisi’s
stock options as to which the Company accelerated the exercise dates in connection with
his termination of employment in April 2015.
|
Grants of Plan-Based Awards 2015
The following table
presents information regarding grants of plan-based awards to the named executive officers during the year ended December 31,
2015
|
|
|
|
Estimated
Possible Payouts Under
Non-Equity
Incentive Plan
Awards
(1)
|
|
|
Estimated
Future Payouts Under
Equity
Incentive
Plan Awards
(3)
|
|
|
All
Other
Stock
Awards:
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
Number
of
Shares
of
Stock
or
Units
(#)
|
|
|
Exercise
or
Base
Price
of
Option
Awards
|
|
|
Grant
Date
Fair
Value
of
Award
($)
|
|
Michael S. Anderson
|
|
12/10/2015
|
|
|
-
|
|
|
|
200,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200,000
|
|
|
|
14.35
|
|
|
|
1,664,000
|
|
Michael F. Kanan
|
|
10/28/2015
|
|
|
-
|
|
|
|
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
16.21
|
|
|
|
935,000
|
|
Siân Crouzet
|
|
12/10/2015
|
|
|
-
|
|
|
|
26,538
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
14.35
|
|
|
|
249,600
|
|
Phillandas T. Thompson
|
|
12/10/2015
|
|
|
-
|
|
|
|
115,360
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
14.35
|
|
|
|
832,000
|
|
Steven A. Lisi
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Scott A. Macke
|
|
12/10/2015
|
|
|
-
|
|
|
|
72,067
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,000
|
|
|
|
14.35
|
|
|
|
291,200
|
|
David Monteith
|
|
12/10/2015
|
|
|
-
|
|
|
|
110,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,000
|
|
|
|
14.35
|
|
|
|
291,200
|
|
|
(1)
|
The Compensation Committee has
not established thresholds or maximum levels associated with non-equity incentive plan
awards.
|
|
(2)
|
Mr. Kanan joined the Company
in November 2015 and was not entitled to a non-equity incentive plan award for 2015.
|
|
(3)
|
The Company did not grant any
free shares in 2015
|
The following table
sets forth specified information concerning stock options stock awards for each of the named executive officers outstanding as
of December 31, 2015
Outstanding Equity Awards at Fiscal Year-End 2015
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of Shares
or Units
of Stock
That
Have Not
Vested (#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested ($)
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
(2)
|
|
|
(2)
|
|
Michael S. Anderson
|
|
3/12/2012
|
|
|
275,000
|
|
|
|
0
|
|
|
|
6.93
|
|
|
|
3/12/2022
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2/1/2013
|
|
|
40,250
|
|
|
|
40,250
|
|
|
|
4.07
|
|
|
|
2/1/2023
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
50,000
|
|
|
|
150,000
|
|
|
|
16.30
|
|
|
|
12/11/2024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
610,500
|
|
|
|
12/10/2015
|
|
|
-
|
|
|
|
200,000
|
|
|
|
14.35
|
|
|
|
12/10/2025
|
|
|
|
-
|
|
|
|
-
|
|
Michael F. Kanan
|
|
10/28/2015
|
|
|
-
|
|
|
|
100,000
|
|
|
|
16.21
|
|
|
|
10/28/2025
|
|
|
|
-
|
|
|
|
-
|
|
Siân Crouzet
|
|
2/1/2013
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
4.07
|
|
|
|
2/1/2023
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/12/2013
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
7.36
|
|
|
|
12/12/2023
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
16.3
|
|
|
|
12/11/2024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
(3)
|
|
|
122,100
|
|
|
|
12/10/2015
|
|
|
-
|
|
|
|
30,000
|
|
|
|
14.35
|
|
|
|
12/10/2025
|
|
|
|
-
|
|
|
|
-
|
|
Phillandas T. Thompson
|
|
12/12/2013
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
7.36
|
|
|
|
12/12/2023
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
23,750
|
|
|
|
71,250
|
|
|
|
16.30
|
|
|
|
12/11/2024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
122,100
|
|
|
|
12/10/2015
|
|
|
-
|
|
|
|
100,000
|
|
|
|
14.35
|
|
|
|
12/10/2025
|
|
|
|
-
|
|
|
|
-
|
|
Steven A. Lisi
|
|
12/10/2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500
|
|
|
|
30,525
|
|
Scott A. Macke
|
|
12/10/2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,000
|
|
|
|
85,470
|
|
|
|
2/1/2013
|
|
|
3,750
|
|
|
|
3,750
|
|
|
|
4.07
|
|
|
|
2/1/2023
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/12/2013
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
7.36
|
|
|
|
12/12/2023
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/12/2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
122,100
|
|
|
|
12/11/2014
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
16.30
|
|
|
|
12/11/2024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2024
|
|
|
|
10,000
|
|
|
|
122,100
|
|
|
|
12/10/2015
|
|
|
-
|
|
|
|
35,000
|
|
|
|
14.35
|
|
|
|
12/10/2025
|
|
|
|
-
|
|
|
|
-
|
|
David Monteith
|
|
12/11/2014
|
|
|
27,500
|
|
|
|
82,500
|
|
|
|
16.30
|
|
|
|
12/11/2024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12/11/2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500
|
|
|
|
30,525
|
|
|
|
12/10/2015
|
|
|
-
|
|
|
|
35,000
|
|
|
|
14.35
|
|
|
|
12/10/2025
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Options become exercisable as
to 25% of the ADSs on each of the first four anniversaries after the applicable grant
date
|
|
(2)
|
Stock awards become vested on
the fourth anniversary of the grant date for U.S. residents. In addition, if the beneficiary
remains an employee of the Company at the second anniversary of the grant date, the beneficiary
may take claim to the shares on the fourth anniversary period even if the beneficiary
is not employed with the Company after the second anniversary.
|
|
(3)
|
Because Siân Crouzet is
a resident of France, her stock awards become vested on the second anniversary of the
grant date.
|
The following table
sets forth specified information concerning exercises of stock options and stock awards vesting for each of the named executive
officers outstanding as of December 31, 2015.
Options Exercised and
Stock Vested During Fiscal Year 2015
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
|
Number
of shares
acquired
on
exercise
(#)
|
|
|
Value
realized on
exercise
($)
|
|
|
Number
of shares
acquired
on
vesting
(#)
|
|
|
Value
realized on
vesting
($)
|
|
Michael S. Anderson
|
|
|
12/10/2012
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,250
|
|
|
|
573,517
|
|
Michael F. Kanan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Siân Crouzet
|
|
|
9/15/2015
|
|
|
|
49,990
|
|
|
|
378,867
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/12/2013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
139,000
|
|
Phillandas T. Thompson
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Steven A. Lisi
|
|
|
7/27/2012
|
|
|
|
275,000
|
|
|
|
5,336,720
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2/1/2013
|
|
|
|
25,000
|
|
|
|
515,963
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/12/2013
|
|
|
|
95,000
|
|
|
|
1,708,273
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/11/2014
|
|
|
|
100,000
|
|
|
|
773,000
|
|
|
|
-
|
|
|
|
-
|
|
Scott A. Macke
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
David Monteith
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Employment Agreements
We have written employment
agreements with each of our Named Executive Officers other than Siân Crouzet and Steven A. Lisi. Each employment agreement
provides that the individual’s employment will continue until either we or the Named Executive Officer provides written
notice of termination in accordance with the terms of the agreement. In addition, each of these agreements prohibit the Named
Executive Officer from disclosing confidential information and competing with us during the term of their employment with the
Company and for a specified time period thereafter. The employment agreement also contains customary non-solicitation and non-disparagement
provisions. Under the terms of their respective employment agreements, each of the Named Executive Officers is entitled to receive
an annual base salary, subject to annual review, an annual cash incentive and an annual equity award, each component of which
is subject to the discretion of our board.
Payments upon Termination of Employment
or Change in Control
Michael S. Anderson
.
The employment agreement with Mr. Anderson provides for the payment of certain benefits upon separation of employment from the
Company for any reason other than for cause. In the event of such a termination, Mr. Anderson will be entitled to a severance
indemnity of $550,030 upon execution and effectiveness of a release of claims.
Other Named Executive
Officers
. In employment agreements with Mr. Thompson and Mr. Kanan, they are entitled to certain benefits in the event that
their employment with the Company is terminated in a change-in-control of the Company, or for “Good Reason” or for
any other reason other than for cause. In the employment agreements, “Good Reason” means: (i) the failure of the Company
to timely pay to the Executive any compensation owed to him under this Agreement; (ii) the Company’s diminution in the Executive’s
duties in any material respect or the Company’s assignment to the Executive of duties that are materially inconsistent with
the duties stated in this Agreement; (iii) the relocation of the Company’s offices of the Executive’s employment more
than sixty (60) miles outside the greater St. Louis metropolitan area; (iv) a material breach by the Company of this Agreement;
(v) the failure of the Company to have this Agreement assumed in full by any successor in the case of any merger, consolidation,
or sale of all or substantially all of the assets of the Company. Upon such a termination, Mr. Thompson and Mr. Kanan are entitled
to receive: (1) base salary for a period of 12 months; (2) payment of monthly COBRA health insurance premiums for up to 12 months;
and in the case of a termination in connection with a change-in-control of the Company; (3) a lump-sum payment equal to one hundred
percent (100%) of the higher of: (A) the greater of (x) their target bonus as in effect for the fiscal year in which the change
in control occurs or (y) s their target bonus as in effect for the fiscal year in which their termination of employment occurs;
or (B) their actual bonus for performance during the calendar year prior to the calendar year during which the termination of
employment occurs; and (4) the immediate vesting of 100% of their outstanding and unvested stock options.
In the employment
agreements with Mr. Macke, in the event his employment with the Company is terminated for any reason other than for cause, he
is entitled to severance benefits equal to (1) base salary for a period of 6 months and (2) payment of monthly COBRA health insurance
premiums for up to 6 months.
In the employment
agreement with Mr. Monteith, in the event his employment with the Company is terminated for any reason other than for cause, he
is entitled to severance benefits equal to (1) base salary for a period of 12 months and (2) payment of monthly COBRA health insurance
premiums for up to 12 months.
The benefits provided
are designed to protect earned benefits in the case that one or more of our Named Executive Officer is terminated without cause
or as a result of a change in control of the Company, in order to encourage our Named Executive Officers to act in the best interests
of the shareholders at all times during the course of a change in control transaction or other significant event involving our
Company.
The following tables
set forth information regarding potential payments that each Named Executive Officer would have received if the Named Executive
Officer’s employment had terminated as of December 31, 2015 under the circumstances set forth below.
Termination Without Cause
(1)
Name
|
|
Cash Payment
|
|
|
Value
of
Benefits
|
|
Michael S. Anderson
|
|
$
|
555,030
|
|
|
|
-
|
|
Michael F. Kanan
|
|
$
|
325,000
|
|
|
|
22,602
|
|
Phillandas T. Thompson
|
|
$
|
288,400
|
|
|
|
5,886
|
|
David Monteith
|
|
$
|
275,000
|
|
|
|
22,602
|
|
Scott A. Macke
|
|
$
|
102,953
|
|
|
|
10,638
|
|
Steve A Lisi
|
|
$
|
-
|
|
|
|
-
|
|
Siân Crouzet
|
|
$
|
-
|
|
|
|
-
|
|
Termination Without Cause in connection
With a Change-in-Control of the Company
(2)
Name
|
|
Cash
Payment
|
|
|
Value
of
Benefits
|
|
|
Acceleration
of
Option
Awards
(3)
|
|
Michael S. Anderson
|
|
$
|
555,030
|
|
|
|
-
|
|
|
|
-
|
|
Michael F. Kanan
|
|
$
|
455,000
|
|
|
|
22,602
|
|
|
|
-
|
|
Phillandas T. Thompson
|
|
$
|
403,760
|
|
|
|
5,886
|
|
|
|
242,500
|
|
David Monteith
|
|
$
|
275,000
|
|
|
|
22,602
|
|
|
|
-
|
|
Scott A. Macke
|
|
$
|
102,953
|
|
|
|
10,638
|
|
|
|
-
|
|
Steve A Lisi
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Siân Crouzet
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Based on the compensation arrangements
with the Named Executive Officers in effect for 2016, the amounts payable in respect
of Termination Without Cause during 2016 would be as follows: Michael Anderson - $1,187,550
cash payment and $42,037 value of benefits; Michael F. Kanan - $325,000 cash payment
and $22,602 value of benefits; Phillandas T. Thompson - $297,052 cash payment and $5,886
value of benefits; David Monteith - $283,250 cash payment and $22,602 value of benefits;
Scott A. Macke - $106,041 cash payment and $10,638 value of benefits.
|
|
(2)
|
Based on the compensation arrangements
with the Named Executive Officers in effect for 2016, the amounts payable in respect
of Termination Without Cause With a Change-in-Control of the Company during 2016 would
be as follows: Michael Anderson - $1,187,550 cash payment, $42,037 value of benefits
and $130,410 Acceleration of Option Awards; Michael F. Kanan - $455,000 cash payment
and $22,602 value of benefits; Phillandas T. Thompson - $415,873 cash payment, $5,886
value of benefits and $159,500 Acceleration of Option Awards; David Monteith - $283,250
cash payment and $22,602 value of benefits; Scott A. Macke - $106,041 cash payment and
$10,638 value of benefits.
|
|
(3)
|
Option awards for which the exercise
price is higher than the market value of the underlying shares as of December 31, 2015
are not included as part of the acceleration value.
|
Director Compensation
We compensate our
non-executive directors with a basic cash fee plus supplementary fees to chairpersons and for meeting attendance. The amount of
each component of such director cash compensation may change from year to year, and is generally established by the Board of Directors
in conjunction with our annual general meeting of shareholders for the period until the next annual general meeting. The cash
fees we pay under these policies must stay within an aggregate maximum limit on cash fees paid to our directors during any calendar
year which is approved by our shareholders at each annual general meeting. In June 2015, the director cash fees were established
as follows for the period until our annual general shareholders meeting in 2016: €32,750 per each non-executive director;
supplementary fees of €40,000 to Ambassador Craig Stapleton as the Chairman of the Board of Directors, €20,000 to Mr.
Guillaume Cerutti as the Chair of the Audit Committee, €10,000 to Dr. Francis Fildes as the Chair of the Compensation Committee,
and €10,000 to Mr. Ben Van Assche as the Chair of the Nomination and Corporate Governance Committee; and meeting attendance
fees of €2,000 per meeting attended in person or telephonically up to a limit of €16,000. In addition, at our extraordinary
general meeting of shareholders during 2015, our shareholders approved the allocation and issuance of warrants to purchase 349,996
of our ADSs to our directors, which were distributed as described in footnote (1) to the “Director Compensation” table
below.
The following table
presents information relating to total compensation of our directors for the year ended December 31, 2015. The following
table does not present information for Mr. Anderson, our Chief Executive Officer and President, who did not receive additional
compensation as a director in 2015 and whose compensation is included in the Summary Compensation Table elsewhere in this Amendment.
Director Compensation
Name
(1)
|
|
Fees
Earned or
Paid
in Cash($)
(1)(2)
|
|
|
Stock
Awards ($)
(1)
|
|
|
Total
Compensation
($)
|
|
Ambassador Craig R. Stapleton
|
|
$
|
96,298
|
|
|
$
|
785,734
|
|
|
$
|
882,032
|
|
Guillaume Cerutti
|
|
$
|
74,097
|
|
|
$
|
162,000
|
|
|
$
|
236,097
|
|
Francis J.T. Fildes
|
|
$
|
62,996
|
|
|
$
|
285,798
|
|
|
$
|
348,793
|
|
Christophe Navarre
|
|
$
|
51,895
|
|
|
$
|
296,603
|
|
|
$
|
348,498
|
|
Benoit Van Assche
|
|
$
|
62,996
|
|
|
$
|
271,751
|
|
|
$
|
334,747
|
|
|
(1)
|
During 2015, each of the non-employee
directors with the exception of Mr. Cerutti opted to use their fees earned or paid in
cash to acquire all of the warrants allocated to them as detailed below; Mr. Cerutti
elected to acquire warrants to purchase 25,000 ADSs instead of the full amount of 70,469
ADSs allocated to him for this purpose. The subscription price per warrant was equal
to 10% of the 20-day average of the closing prices of Flamel ADSs prior to June 26, 2015
and amounted to €1.80 per warrant. These warrants allow each director to purchase
ADSs at an exercise price of $21.67 per ADS during the period from June 26, 2016 through
June 26, 2019. The total numbers of ADSs that were purchased pursuant to such warrants
are as follows: 117,449 for Mr. Stapleton, 25,000 for Mr. Cerutti, 54,026 Dr. Fildes,
54,026 for Mr. Navarre and 54,026 for Mr. Van Assche. The values of these warrants
were computed as of the applicable grant dates using the Black-Scholes option pricing
model in accordance with FASB Topic ASC 718.
|
|
(2)
|
Fees earned or paid in cash were
translated to U.S. Dollars at the rate of 1.11006 U.S. Dollars per Euro.
|
PROPOSALS
WITH RESPECT TO DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
(Resolutions 11, 12,
13, 14 and 15)
The ordinary general
shareholders’ meeting is requested to allocate to the Board of Directors, subject to each director’s re-appointment
as a member of the Board of Directors upon approval of Resolutions 5-10, respectively, a maximum aggregate amount of €325,000
as annual attendance fees for the fiscal year ending December 31, 2016. The Board of Directors will determine the allocation and
payment date of said attendance fees. Resolution 11 approves such annual amount of director’s fees to be paid to the Board
of Directors in 2016.
The Board of Directors
recognizes the significant interest of shareholders in executive compensation matters. We are seeking shareholders’ views
on our executive compensation philosophy and practices through an advisory vote on the resolution described below.
A discussion of our
compensation appears above under “Executive Compensation – Compensation Discussion and Analysis.”
As discussed in the
Compensation Discussion and Analysis, the Board of Directors believes that the Company’s executive compensation program
attracts and retains highly qualified executives while linking executive compensation directly to Company-wide performance. Further,
our executive compensation program aligns the interests of our executive officers with those of our shareholders by emphasizing
the achievement of financial and non-financial outcomes that either influence or contribute to shareholder value creation. The
Compensation Discussion and Analysis section of this proxy statement and the accompanying tables and narrative provide a comprehensive
review of our named executive officer compensation objectives, program and rationale. We urge you to read this disclosure before
voting on this proposal
For these reasons,
the Board of Directors recommends that shareholders vote FOR the approval of the compensation of our named executive officers
as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion
and Analysis, the compensation tables and the related narrative disclosures.
Although this vote
on the compensation of our named executive officers is advisory and is not binding on the Board of Directors, the Compensation
Committee will take into account the outcome of the vote when considering and recommending to the Board of Directors future executive
compensation decisions and arrangements. Resolution 12 approves the compensation of our Named Executive Officers.
As part of the Board
of Directors’ commitment to understanding shareholder sentiment on the Company’s executive compensation philosophy
and practices, we are seeking the views of shareholders on how frequently the Company should submit executive compensation for
consideration by shareholders.
Shareholders may vote
to hold an advisory vote on executive compensation every one, two or three years or abstain, and for this purpose we are presenting
three separate non-binding resolutions asking shareholders to decide whether they desire that we hold shareholder advisory votes
on our Named Executive Officers’ compensation every year, every two years or every three years, respectively. You
may vote “FOR,” “AGAINST” or abstain with respect to each of the three resolutions. However, to
communicate your desire as to the frequency of these say-on-pay advisory votes, we encourage shareholders to vote “FOR”
one (and only one) of Resolutions 13 through 15 and voting “AGAINST” the other two resolutions.
After careful consideration,
the Board of Directors is recommending that shareholders approve holding the Say-on-Pay vote EVERY TWO YEARS. Our Compensation
Committee and our Board of Directors believe that a biennial advisory vote on executive compensation aligns with Flamel’s
policy of seeking regular input from shareholders on matters pertaining to our governance and executive compensation philosophy
and practices. This vote is not binding but rather will provide the Compensation Committee with the view of our shareholders as
to how frequently they wish to consider executive compensation and make recommendations to our Board of Directors. Although
the vote is advisory, the Compensation Committee will take into account the outcome of the vote when considering their recommendation
to the Board of Directors as to how frequently we submit executive compensation to a shareholder vote.
Our Board of Directors
will give careful consideration to the views of our shareholders as to the frequency of future say-on-pay votes. However, the
Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors
such as discussions with shareholders and the adoption of material changes to compensation programs. The full texts of Resolutions
13 to 15 are set forth on Annex A.
The Board of Directors
unanimously recommends that shareholders vote “FOR” Resolutions 11, 12, and 14, and “AGAINST” 13 and 15.
PROPOSAL
TO APPROVE AGREEMENTS WITH RELATED PARTIES
(Resolution 16)
The ordinary general
shareholders’ meeting is requested to approve the statutory auditor’s Special Report on the related-party agreements
and commitments set out in Articles L. 225-38 et. seq. of the French Commercial Code. Under French law, we are subject to a specific
disclosure and review procedure with respect to any direct or indirect agreements between a corporation and our CEO, chairman,
directors, supervisory or management board members, or any shareholder owning more than 10% of the voting rights, or with another
corporation having the same legal representatives. Among other things, French law requires that our shareholders approve our statutory
auditor’s Special Report as to such agreements. This Special Report is required to be made available to our shareholders
at least 15 days before the Meeting. For these purposes, we will post the Special Report on our website not later than July 15,
2016.
There are three categories
of related-party agreements:
|
-
|
Prohibited agreements. The directors
are prevented from (i) contracting any form of loans from the corporation, (ii) obtaining
from the corporation an overdraft through a current account or otherwise and/or (iii)
having any of their commitments to third parties guaranteed or secured by the corporation.
|
|
-
|
Unrestricted agreements (“
conventions
libres
”) include current operations concluded at normal conditions.
|
|
-
|
Regulated agreements. Regulated
agreements are agreements entered into, directly or indirectly, between the corporation
and (i) its legal representatives, (ii) shareholders owning at least 10% of the corporation’s
share capital or (iii) another corporation having the same legal representatives. Such
regulated agreements are subject to a prior approval process, which includes the following
steps: first, an information of the board of directors on such agreements, secondly,
an authorization granted by the board of directors, third, notice to the statutory auditors
on such agreements, fourth, the statutory auditors’ special report on such agreements
and fifth, the vote of the shareholders ordinary meeting on such agreements. Any member
of the Board of Directors and/or shareholder concerned by such an agreement is prevented
from exercising its voting right in relation to any related decision and therefore is
not counted for purposes of calculating the quorum and majority. Agreements approved
by the meeting shall be effective against third parties, as shall those which it refuses,
unless they are cancelled in the event of fraud. Even where there is no fraud, the interested
party, and other members of the Board of Directors if appropriate, may be held liable
for any consequences of unapproved agreements that are damaging to the Company.
|
Resolution 16 acknowledges
that no related parties agreement was entered into or remained in force during the fiscal year ended December 31, 2015, together
with any transactions mentioned therein, as described in article L.225-38 et seq. of the French Commercial Code and approves the
special report issued by the statutory report, which is made available on the Company’s website and at the Company’s
headquarters.
The Board of Directors
unanimously recommends that shareholders vote “FOR” Resolution 16.
Resolutions within the competence
of the Extraordinary General Shareholders Meeting
PROPOSALS WITH RESPECT
TO REINCORPORATING THE COMPANY TO IRELAND
(Resolutions 17, 18, 19 and 20)
The Board of Directors
has approved and unanimously recommends that our shareholders approve a proposal to change our jurisdiction of incorporation from
France to Ireland. If this proposal is approved, we intend to give effect to this reincorporation on December 31, 2016 by merging
with and into our wholly owned Irish corporate subsidiary, Avadel Pharmaceuticals Limited (the “Merger”). The Merger
will be effected pursuant to an agreement between the Company and Avadel Pharmaceuticals Limited entitled Common Draft Terms of
Cross-Border Merger (the “Merger Agreement”), a copy of which is attached to this proxy statement as Annex C. Prior
to completing the Merger, Avadel Pharmaceuticals Limited will re-register as an Irish public limited company, or plc, and at the
time of the Merger and thereafter you will own shares (or ADSs, as applicable) in a company known as Avadel Pharmaceuticals plc
(“Avadel plc”). In the following discussion of the Merger, we sometimes refer to the Company as a French
société
anonyme
before the consummation of the Merger as “Flamel,” and as an Irish public limited company after the consummation
of the Merger as “Avadel plc”; and we sometimes refer to Avadel Pharmaceuticals Limited before the consummation of
the Merger as “Avadel Limited.” The proposal relating to the Merger will be voted upon by our shareholders at the
Meeting in four separate resolutions, but only three of which (17, 18 and 19) must be approved in order for us to be authorized
to complete the Merger. The four resolutions are:
|
17.
|
To review and approve the “Common
Draft Terms of Cross-Border Merger” (the “Merger Agreement”) providing
for a merger (the “Merger”) by way of acquisition (
absorption
) of
the Company by its wholly owned subsidiary Avadel Pharmaceuticals Limited;
|
|
18.
|
To grant powers to the Board of
Directors to take such further actions as may be necessary to complete the Merger and
the other transactions contemplated by the Merger Agreement, including the powers to
file, negotiate, sign, amend and publish any document, agreement or instrument necessary
for such purposes, and in particular, to draft, sign and file the certificate of compliance
in relation to the Merger in compliance with the French commercial code;
|
|
19.
|
To approve the dissolution without
liquidation of the Company under the condition precedent of the completion of the Merger;
|
|
|
|
|
20.
|
To approve the reduction of capital of Avadel plc to allow the creation
of distributable reserves of Avadel plc which are required under Irish law in order to allow Avadel
plc to make distributions and to pay dividends and repurchase or redeem shares following completion
of the Merger;
|
Summary
of the Merger
The following summary
describes certain material aspects of the Merger. We encourage you to review the entire discussion of the Merger set forth on
the pages following the information under the caption “Proposals to Reincorporate the Company as an Irish Public Limited
Company – Questions and Answers about the Merger,” which follows this summary.
Key Aspects of
the Merger
:
|
·
|
The
Company will change its jurisdiction of incorporation from France to Ireland, and as
a result we will no longer be a French
société anonyme
but will
instead become an Irish public limited company, known as “Avadel Pharmaceuticals
plc.”
|
|
·
|
Flamel
will merge with and into its wholly owned subsidiary, Avadel Limited. In connection with
the Merger, Avadel Limited will re-register as an Irish public limited company and will
be known as “Avadel Pharmaceuticals plc,” which will be the name under which
the Company will conduct its business from and after the Merger.
|
|
·
|
All
of the assets and liabilities of Flamel will be transferred from Flamel to Avadel plc,
and Flamel will be dissolved without liquidation and cease to exist as a separate legal
entity.
|
|
·
|
Each
outstanding ordinary share of Flamel will be cancelled and exchanged for one outstanding
ordinary share of Avadel plc, and each outstanding free share, stock option, stock warrant
or other right to acquire ordinary shares of Flamel will be assumed by Avadel plc and
will thereby become an outstanding free share, stock option, stock warrant or other right
to acquire ordinary shares of Avadel plc. Each ADS representing one ordinary share of
Flamel would be replaced by an ADS representing one ordinary share of Avadel plc. Immediately
upon consummation of the Merger, the ADSs of Avadel plc issued to you will be listed
and traded on the Nasdaq Global Market under the trading symbol “AVDL.”
|
|
·
|
Each
employee benefit plan, incentive compensation plan or other similar plan of Flamel will
continue as an employee benefit plan, incentive compensation plan or other similar plan
of Avadel plc; and
|
|
·
|
The
term of office of the directors and officers of Flamel will terminate automatically as
a result of the dissolution without liquidation of Flamel and immediately prior to the
Merger, Flamel, as the sole shareholder of Avadel plc, will appoint such directors and
officers as the directors and officers of Avadel plc through a shareholder’s resolution
of Avadel plc.
|
Effects on Shareholders
.
The number of ordinary shares you own, and your proportional percentage ownership of the Company, will remain unchanged and will
not be affected by the Merger. Shareholders will receive a number of ordinary shares of Avadel plc (either directly or in the
form of ADSs, as applicable) equal to the number of ordinary shares they own in Flamel. You will not be required to exchange any
physical certificates you hold representing ADSs for new certificates. There will be no U.S. federal income tax impact to U.S.
persons who hold Flamel ordinary shares or ADSs as a result of the Merger. For such U.S. persons, the basis and holding period
applicable to the Avadel plc ordinary shares (and ADSs) that they acquire as a result of the Merger will be the same as the basis
and holding period applicable to their Flamel ordinary shares (and ADSs) that they held prior to the Merger.
Impact of the Merger
on Key Corporate Governance Provisions.
The following table briefly summarizes certain key corporate governance provisions
or shareholder rights applicable to Flamel before the Merger and to Avadel plc after the Merger. Please see the discussion below
under the caption “Proposals to Reincorporate the Company as an Irish Public Limited Company – Comparison of Shareholder
Rights Before and After the Merger” for a more complete discussion.
Governance
or Shareholder
Rights Provision
|
|
Flamel
|
|
Avadel
plc
|
|
|
|
|
|
Preemptive Rights
|
|
Shareholders have preferential subscription rights on a pro
rata basis, which can be waived globally by a shareholders’ vote or individually by each shareholder.
|
|
Shareholders have preemption rights as to issuances of shares
for cash. Avadel plc will opt out of these preemption rights in the Avadel Constitution as permitted under Irish law for a
period of five years.
|
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Preferred Shares
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To issue preferred shares, a corporation must obtain shareholder
approval at an extraordinary meeting, a special report of an independent appraiser as to the benefits of the preferred shares
and a special report of the statutory auditor.
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Our Board will have the authority, in its sole discretion, to
issue preferred shares having such terms and provisions as it may determine.
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Delegation of Board of Directors’ Authority
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Committees of the Board may only have an advisory role and can
only make recommendations to our full Board of Directors.
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Our Board may delegate its authority to committees of directors
as it may determine in its discretion.
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Frequency of General Shareholder Meetings
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Annual general meetings of shareholders are held within six
months after each fiscal year unless extended by court order.
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A public limited company must hold its first annual general
meeting within 18 months of the date of incorporation. Thereafter, at intervals of no more than 15 months, provided that the
annual general meeting is held in each calendar year and no more than nine months after the Company’s fiscal year-end.
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Quorum for Shareholder Meetings
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Ordinary shareholders’ meetings require a quorum of 20%
of outstanding shares, with no quorum required for an adjournment. Extraordinary shareholders’ meetings require a quorum
of 25% of the ordinary shares, and 20% of the outstanding shares for an adjournment.
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Unless otherwise provided in a company’s constitution,
two shareholders of a company present in person or by proxy at a general meeting shall be a quorum. The Avadel Constitution
provides that no business shall be transacted at any general meeting unless a quorum is present. A quorum shall
be five shareholders present in person or proxy holding no less than a majority of the issued outstanding shares of Avadel
plc. Abstentions and broker non-votes will be regarded as present for the purposes of establishing a quorum.
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Shareholder
Proposals
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A shareholder
representing (i) 4% of the first €750,000 of the share capital and (ii) 2.5% of the share capital ranging from €750,000
to €7,500,000, may file a request to add an item to the agenda of the next shareholders’ meeting.
Such a request
must be sent at least 25 days prior to the shareholders meeting. The request must contain the draft of the suggested resolution,
a brief summary explaining resolution and a registration certificate proving the shareholder’s shareholding.
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Under Irish
law, there is no general right for a shareholder of a company listed on NASDAQ to put items on the agenda of an annual
general meeting other than as set out in a company's constitution. The Avadel Constitution permit shareholders to nominate
persons to be elected as directors both at an annual general meeting or an extraordinary general meeting requisitioned
by shareholders, provided that notice is given in accordance with the terms of the Avadel Constitution.
Irish law currently
provides that shareholders holding 10% or more of the total voting rights may request that the directors call an extraordinary
general meeting at any time. The shareholders who wish to request an extraordinary general meeting must deliver to the
company’s registered office a written notice, signed by the shareholders requesting the meeting and stating the
purposes of the meeting. If the directors do not, within 21 days of the date of delivery of the request, proceed to convene
a meeting to be held within two months of that date, those shareholders (or any of them representing more than half of
the total voting rights of all of them) may themselves convene a meeting, but any meeting so convened cannot be held after
the expiration of three months from the date of delivery of the request.
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Indemnification
of Officers and Directors
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Directors’
liability cannot be limited by the by-laws or by any board or shareholder's decision. However, a corporation may procure director
and officer liability insurance for their directors and officers, employees and agents.
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Indemnification
of officers and directors is permitted to the maximum extent permitted under Irish law; the Company may procure director and
officer liability insurance for their directors, officers, employees and agents.
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Questions
and Answers about the Merger
The following questions
and answers address certain key aspects of the Merger. We encourage you to review the entire discussion of the Merger set forth
on the pages immediately following these questions and answers.
1. What are the
reasons for the Merger?
Our Board believes
that the Merger will be in the best interests of Flamel, and will enhance shareholder value. In arriving at this determination,
our Board consulted with Flamel’s management and financial, tax and legal advisors, and considered various factors in its
deliberations, and concluded that the Merger is likely to result in significant benefits to Flamel and its shareholders, including:
(1) we will be more directly situated within the fast-growing community of global health-care companies domiciled in Ireland,
(2) certain aspects of our corporate governance procedures will be more efficient, (3) the laws that apply to our shares and corporate
governance will be more accessible to and understandable by our shareholders, (4) our ability to attract and retain qualified
directors and officers will be enhanced, and (5) we will have greater certainty of our continued ability to comply with certain
SEC rules and regulations and Nasdaq listing standards.
2. How will the
Merger be accomplished, and what will the effects be on the Company?
The Company is currently
incorporated in France and governed by French law. We have determined that it is in our best interest to reincorporate to Ireland
and be governed by Irish law. This reincorporation will be effected by the Merger in accordance with the terms of the Merger Agreement.
On consummation of the Merger, Flamel will merge with and into Avadel plc, with Avadel plc surviving the merger; all of the assets
and liabilities of Flamel will be transferred to Avadel plc; and Flamel will be dissolved without liquidation and cease to exist
as a separate legal entity.
3. What effect will
the Merger have on my ownership interest in the Company?
Each outstanding ordinary
share of Flamel will be cancelled and exchanged for one outstanding ordinary share of Avadel plc, and each outstanding free share,
stock option, stock warrant or other right to acquire ordinary shares of Flamel will be assumed by Avadel plc and will thereby
become an outstanding free share, stock option, stock warrant or other right to acquire ordinary shares of Avadel plc. Each ADS
representing one ordinary share of Flamel would be replaced by an ADS representing one ordinary share of Avadel plc. Immediately
upon the consummation of the Merger, the ADSs of Avadel plc will be listed and traded on the Nasdaq Global Market under the trading
symbol “AVDL.” Thus, the number of ordinary shares (either held directly or represented by ADSs) that you own and
your proportional percentage ownership of the Company will remain unchanged and will not be affected in any way by the Merger
(subject to the issuance of “deferred ordinary shares” required under Irish law and described elsewhere in this proxy
statement, which will not have any economic impact on your proportional rights as a shareholder).
4
. What effect will
the Merger have on Company management?
The Merger will not
change our management, because, as provided by the Merger Agreement, the directors and officers of Flamel immediately prior to
the Merger will be appointed as the directors and officers of Avadel plc.
5. Who must approve
the Merger?
The affirmative vote
of the holders of two-thirds of our outstanding ordinary shares represented at the Meeting, in person or by proxy, is required
to approve the Merger.
6. How will the
Merger affect my rights as a shareholder?
Your rights as a shareholder
currently are governed by French law and the provisions of our bylaws, or
statuts
. As a result of the Merger, you will
become a shareholder of Avadel plc with rights governed by Irish law and the provisions of the Avadel plc’s constitution
to become effective as of the completion of the Merger, which consists of its memorandum of association and articles of association
(the “Avadel Constitution”), a copy of which is attached to this proxy statement as Annex D. Your rights under the
Avadel Constitution will differ in certain respects from your current rights under the Flamel’s
statuts
. These important
differences are discussed and summarized in this proxy statement under “Comparison of Shareholder Rights Before and After
the Merger.”
7. Should I send
in my share certificates?
No. Please do not
send us any certificates you may hold that represent ADSs or ordinary shares of Flamel. It will not be necessary for you to exchange
your existing certificates (if any), or take any other action, in order to receive ordinary shares of Avadel plc to be issued
pursuant to the Merger; and if you send us any such certificates or take other action, it will be at your own cost. If you hold
ADSs through a broker or other securities intermediary, your account will automatically be credited with new ADSs representing
Avadel plc ordinary shares and you do not need to take any action. If you are a registered holder of ADSs that are uncertificated,
new ADSs representing Avadel ordinary shares will automatically be registered in your name and you do not need to take any action.
If you hold American Depositary Receipts (“ADRs”) evidencing ADSs, the Depositary will send you a letter of transmittal
after the merger becomes effective and new ADSs representing Avadel ordinary shares will be registered in your name when the Depositary
receives your signed letter of transmittal, accompanied by your old ADRs. If you cannot locate your old ADRs, you should call
the Depositary at for
instructions.
8. What are the
U.S. tax consequences of the Merger to me?
There will be no U.S.
federal income tax impact to U.S. persons who hold Flamel ordinary shares or ADSs representing Flamel ordinary shares as a result
of the Merger. For such U.S. persons, the basis and holding period applicable to the Avadel plc ordinary shares (and ADSs) that
they acquire as a result of the Merger will be the same as the basis and holding period applicable to their Flamel ordinary shares
(and ADSs) that they held prior to the Merger.
9. Are there dissenters’
or appraisal rights?
Flamel shareholders
are not entitled to dissenters’ or appraisal rights under French law in connection with the Merger.
10. Why am I being asked to approve resolution 20, the
proposal about Avadel plc’s distributable reserves?
Under Irish law, dividends
may only be paid (and share repurchases and redemptions must generally be funded) out of “distributable reserves,”
which Avadel plc will not have immediately following the completion of the Merger. Please see the discussion under the caption
“Proposals to Reincorporate the Company as an Irish Public Limited Company – Proposal to Create Distributable Reserves
of Avadel plc.” Shareholders of Flamel are being asked to approve the creation of distributable reserves of Avadel plc (through
the reduction of the share premium account of Avadel plc), in order to permit Avadel plc to be able to pay dividends (and repurchase
or redeem shares) after the Merger.
The approval of the
distributable reserves proposal is not a condition to the consummation of the Merger. Accordingly, if shareholders of Flamel approve
the Merger at the Meeting, but do not approve the distributable reserves proposal set forth in resolution 20, and the Merger is
consummated, Avadel plc may not have sufficient distributable reserves to pay dividends (or to repurchase or redeem shares) following
the Merger. In addition, the creation of distributable reserves of Avadel plc requires the approval of the Irish High Court. Although
we are not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, the issuance
of the required order is a matter for the discretion of the Irish High Court. See the discussions under the caption “Proposals
to Reincorporate the Company as an Irish Public Limited Company – Risk Factors – Avadel plc will seek Irish High Court
approval of the creation of distributable reserves; Avadel plc expects this will be forthcoming but cannot guarantee this”
and “Proposals to Reincorporate the Company as an Irish Public Limited Company – Proposal to Create Distributable
Reserves of Avadel plc.”
General
Information about the Merger
The Merger Agreement.
Our Board of Directors has unanimously approved the Merger Agreement, and unanimously recommends that the shareholders APPROVE
the Merger at the Meeting by voting in favor of Resolutions 17, 18, 19 and 20 which would approve the Merger Agreement and certain
related matters.
The Merger Agreement
will result in the change of the Company’s place of incorporation from France to Ireland, by way of a cross-border merger.
The parties to the Merger Agreement are:
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Flamel
Technologies S.A., a French
société anonyme
which is a specialty
pharmaceutical company with operations in France and, through wholly owned subsidiaries,
in the United States and Ireland.
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Avadel
Pharmaceuticals Limited, an Irish private limited company and a direct, wholly owned
subsidiary of Flamel Technologies S.A. Prior to completing the Merger, Avadel Limited
will re-register as an Irish public limited company, or plc, and at the time of the Merger
and thereafter would be known as Avadel Pharmaceuticals plc. As a result of the Merger,
Avadel Pharmaceuticals plc will become our new public holding company with a Nasdaq Global
Market Trading symbol of “AVDL” and the parent of our group of companies.
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Avadel Limited.
Avadel Limited is the directly owned subsidiary of Flamel. Avadel Limited was formed on December 1, 2015 and had no assets
and no activity until February 2016 when it was acquired by Flamel Irish Holdings Limited (“FIHL”); at that time FIHL
was Flamel’s directly owned Irish holding company and FIHL’s principal assets were 100% of the shares of Flamel Ireland
Limited, which is Flamel’s second-tier Irish subsidiary and which owns a substantial part of Flamel’s worldwide intellectual
property rights, consisting primarily of patents (both registered and being applied for). In March 2016, FIHL merged into its
subsidiary, Avadel Limited, with Avadel Limited surviving the merger and thereby acquiring ownership of the shares of Flamel Ireland
Limited, which are the only assets of Avadel Limited. Until Flamel reorganized its Irish subsidiaries in February and March 2016
as described above, Avadel Limited had only nominal assets and had not engaged in any business or other activities other than
in connection with its formation. Since Avadel Limited became Flamel’s holding company in Ireland as a result of its merger
with FIHL, Avadel Limited’s only activity has been to hold the shares of Flamel’s Irish operating subsidiary, Flamel
Ireland Limited and such other activity ancillary to the transactions contemplated by the Merger Agreement.
Results of the
Merger.
As a result of the Merger, each outstanding ordinary share of Flamel will be cancelled and exchanged for one outstanding
ordinary share of Avadel plc, and each outstanding free share, stock option, stock warrant or other right to acquire ordinary
shares of Flamel will be assumed by Avadel plc and will thereby become an outstanding free share, stock option, stock warrant
or other right to acquire ordinary shares of Avadel plc. Each ADS representing one ordinary share of Flamel would be replaced
by an ADS representing one ordinary share of Avadel plc. Immediately upon consummation of the Merger, the ADSs of Avadel plc issued
to you will be listed and traded on the Nasdaq Global Market under the trading symbol “AVDL.” Each employee benefit
plan, incentive compensation plan or other similar plan of Flamel will continue as an employee benefit plan, incentive compensation
plan or other similar plan of Avadel plc. The directors and officers of Flamel S.A. immediately prior to the Merger will be appointed
as the directors and officers of Avadel plc.
Following the consummation
of the Merger, through Avadel plc you will continue to own an interest in a company that conducts, directly and through its wholly-owned
subsidiaries, the same businesses as conducted by Flamel and its subsidiaries before the Merger.
The Merger will not
dilute your economic ownership. The number of shares you will own in Avadel plc immediately after the Merger will be the same
as the number of shares (including shares represented by ADSs) you owned in Flamel immediately prior to the Merger. The number
of outstanding ordinary shares of Avadel plc immediately following the Merger will be the same as the number of outstanding ordinary
shares of Flamel immediately before consummation of the Merger, except for an additional 25,000 deferred ordinary shares of €1.00
nominal value, to be issued prior to the Merger to meet, in part, the Irish statutory minimum capital requirements of an Irish
public limited company. These deferred shares will be issued prior to consummation of the Merger to Flamel U.S. Holdings, Inc.,
a wholly owned subsidiary of Flamel. The deferred ordinary shares will remain outstanding following the consummation of the Merger
and will continue to be held thereafter by Flamel U.S. Holdings, Inc., which will become a wholly owned subsidiary of Avadel plc.
These deferred ordinary shares (i) will not have any voting rights, (ii) will not entitle the holders thereof to any dividends
or other distributions of Avadel plc, and (iii) will not entitle the holders thereof to participate in the surplus assets of Avadel
plc on a winding-up beyond, in total, the nominal value of such deferred ordinary shares held (subject to the prior repayment
of the amount paid-up on each of the ordinary shares of Avadel plus an additional amount of $100,000,000 in cash per ordinary
share). Accordingly, these deferred shares will not dilute your economic ownership. As of May 15, 2016, the last practicable date
before the date of this proxy statement, there were approximately 41,241,254 ordinary shares of Flamel outstanding.
Immediately prior
to the effective time of the Merger, the officers and directors of Flamel will be appointed as the officers and directors of Avadel
plc.
The Merger will change
the form of our company and the governing law that applies to us from French law to Irish law. Although many of the principal
attributes of the ordinary shares of Flamel and the ordinary shares of Avadel plc will be similar, there are differences between
what your rights currently are as a shareholder under French law and what they will be as a shareholder under Irish law. In addition,
there are differences between the organizational documents of Flamel and Avadel plc. We discuss these differences in detail under
the caption “Proposals to Reincorporate the Company as an Irish Public Limited Company – Comparison of Shareholder
Rights Before and After the Merger.”
In connection with
the Merger, the following results will occur by operation of law:
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Flamel
will be merged with and into Avadel plc, with Avadel plc as the surviving entity (Flamel
will be dissolved without going into liquidation as a result);
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all
of the assets and liabilities of Flamel will be transferred to Avadel plc;
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each
holder of an ordinary share of Flamel will receive one ordinary share of Avadel plc for
every ordinary share of Flamel held by such shareholder (and each holder of a Flamel
ADS will receive one new ADS representing one ordinary share of Avadel plc);
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all
legal proceedings pending by or against Flamel will be continued with the substitution,
for Flamel, of Avadel plc as a party; and
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contracts,
agreements or instruments to which Flamel is a party will be construed and have effect
as if Avadel plc had been a party thereto instead of Flamel, and Avadel plc will have
the same rights and be subject to the same obligations to which Flamel is subject to
under such contracts, agreements or instruments.
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Effectiveness
.
If all of the conditions to the Merger as set forth in the Merger Agreement are satisfied (and we do not abandon the Merger prior
to obtaining the order of the High Court of Ireland (the “High Court”) as described below), the Merger will take effect
on the effective date prescribed in the order. We expect to propose that the High Court set the effective date as of December
31, 2016; although the determination of the effective date is entirely within the High Court’s discretion; however, we are
not aware of any reason why it would not grant such proposed effective date.
Legal regime and
procedures for the Merger.
Because the parties to the Merger are two companies incorporated in different members states of
the European Union, the Merger will be effected in accordance with (i) “Directive 2005/56/EC of the European Parliament
and of the Council of 26 October 2005 on cross-border mergers of limited liability companies” (“Directive 56”),
(ii) the French law no 2008-649 dated 3 July 2008 and the French decree no 2009-11 dated 5 January 2009 which have implemented
the Directive 56 into French law under articles L.236-25
et seq.
and R.236-13
et seq
. of the French Commercial Code,
and (iii) Irish regulations comprising the European Communities (Cross-Border Mergers) Regulations 2008 as amended by the European
Communities (Mergers and Divisions of Companies) (Amendment) Regulations 2011 which have implemented the Directive 56 into Irish
law.
Expert Report
.
As required by Directive 56, Flamel and Avadel Limited have obtained a joint report from an independent third party expert addressing
certain matters as required by Directive 56, including the expert’s view as to whether the securities exchange ratio in
the Merger is fair and reasonable. This expert’s report must be made available to the shareholders of each merging company
at least one month prior to the meeting at which they will vote upon the Merger. For this purpose, as permitted by Directive 56,
Flamel and Avadel Limited have jointly retained Ernst & Young as the expert. A copy of the expert’s report is available
on Flamel’s website at www/flamel.com/ ,
and was filed with the SEC by Flamel on May , 2016 as Exhibit 99. to a current report
on Form 8-K.
Pre-Merger Certificates.
If the Merger is approved by the requisite vote of our shareholders, and by the vote of Flamel as the sole shareholder of
Avadel Limited, pursuant to Directive 56 each of Flamel and Avadel Limited will apply to the proper authority in their respective
countries for the issuance of a pre-merger certificate “conclusively attesting to the proper completion of the pre-merger
acts and formalities.” In the case of Flamel such proper authority is the clerk of the Commercial Court of Lyon, and in
the case of Avadel Limited, such proper authority is the High Court.
Hearing.
After
the pre-merger certificates have been issued, if we do not abandon the Merger, such certificates will be submitted to the High
Court, which will hold a hearing (the “Hearing”) pursuant to Directive 56 to “scrutinize the legality of the
cross-border merger” and “ensure that the merging companies have approved the cross-border merger.” At the Hearing,
the High Court will set the Merger effective date and time as part of its order approving the Merger. In accordance with the Merger
Agreement, prior to issuing its order approving the Merger, the High Court shall make a determination as to whether the terms
and conditions of the Merger are fair (both procedurally and substantively) to the shareholders of each of the merging companies
(including Flamel), and that such fairness determination shall be set forth in the order. The High Court shall make its fairness
determination and issue such order after holding the Hearing, and the Hearing shall be held in open court and all shareholders
of each of the merging companies will have an opportunity to attend and be heard at the Hearing. Shareholders of the merging companies,
including Flamel, will be given public notice of the Hearing by means of newspaper advertisements in the Irish Companies Registration
Office Gazette and the international edition of The Financial Times or The Wall Street Journal. The High Court will be advised,
prior to the Hearing, that its approval and finding of fairness as to the Merger will be the basis for qualifying for the exemption
from the registration requirements of the Securities Act provided by section 3(a)(10) with respect to the shares of Avadel plc
to be issued pursuant to the Merger Agreement upon consummation of the Merger. See the discussion below under the caption “Proposals
to Reincorporate the Company as an Irish Public Limited Company – Certain U.S. Federal Securities Law Matters.”
The creation of distributable
reserves of Avadel plc, which involves a reduction of Avadel plc’s share premium, also requires the approval of the Irish
High Court. See the discussion under the caption “Proposals to Reincorporate the Company as an Irish Public Limited Company
– Proposal to Create Distributable Reserves of Avadel plc.”
Reasons
for the Merger
Our Board believes
that giving effect to the Merger will be in the best interests of Flamel, and will enhance shareholder value. In arriving at this
determination, our Board consulted with Flamel’s management and financial, tax and legal advisors, and considered various
factors in its deliberations, and concluded that the Merger is likely to result in benefits to Flamel and its shareholders. If
our shareholders approve this proposal, the Merger will change Flamel’s legal domicile from France to Ireland and will result
in other changes of a legal nature, the most significant of which are described below under the caption “Proposals to Reincorporate
the Company as an Irish Public Limited Company – Comparison of Shareholder Rights Before and After the Merger.”
The Merger will not
change our business, physical locations, current employees, or our day-to-day operations. In addition, the Merger will not alter
the composition of management (including our executive officers) or our Board of Directors. After the Merger, the Company’s
principal executive offices will be relocated to Block 10-1 Blanchardstown, Corporate Park, Ballycoolin, Dublin 15, Ireland.
Below is a brief description
of the principal factors our Board considered in determining to pursue the Merger.
We will be more directly
situated within the fast-growing community of global health-care companies domiciled in Ireland.
In pursuing our strategy
to become a premier and diversified specialty pharmaceutical company, we have continued to develop our global corporate presence,
including by transferring certain of our intellectual property rights to our Irish subsidiary in 2014. Our Board believes that
the specialty pharmaceutical industry in which we compete is becoming increasingly global, and that an increasing number of major
companies in our industry and related industries have chosen to establish their corporate domicile in Ireland. Our Board also
believes that, as the presence of industry participants in Ireland has intensified, certain ancillary benefits have become increasingly
available, including: a skilled and highly educated work force with pharmaceutical industry experience; increased proximity and
access to management of other industry participants who may be potential joint venture or licensing partners for our products;
and a greater acceptance of companies with an Irish corporate domicile by potential investors and joint venture partners. After
the Merger, with our holding company having its legal domicile in Ireland, we will be more directly situated within this fast-growing
community of global health-care companies domiciled in Ireland and may realize certain of these ancillary benefits.
Certain aspects of our
corporate governance procedures will be more efficient, including:
Our management
will have greater flexibility in completing transactions that involve the issuance of our ordinary shares
.
French law
grants our shareholders preferential subscription rights on a
pro rata
basis when we issue ordinary shares for consideration
consisting of cash or the offset of cash obligations. Such rights may be waived by a two-thirds majority of the shares present
at the extraordinary general meeting deciding or authorizing the capital increase, voting in person or represented by proxy or
voting by mail. Such a waiver of preferential rights is valid only within certain parameters (pertaining to such things as minimum
prices and maximum numbers of shares) expressly adopted in the shareholder resolution. If such rights are not waived in this manner,
each shareholder may individually decide to either exercise, assign or not exercise its preferential rights.
Under Irish law, shareholders
have certain statutory preemption rights where a plc proposes to issue shares for cash. However, Avadel plc has opted out of these
preemption rights in the Avadel Constitution as permitted under Irish law for a period of five years. This waiver may be renewed
after five year by a special shareholder resolution requiring the vote of holders of not less than 75% of the shares entitled
to vote on the matter who cast votes as to such matter. Thus, for a period of five years after the Merger, our Board will have
greater flexibility in issuing ordinary shares and other equity-based securities because we will not need to seek a waiver of
statutory preferential purchase rights for such transactions during that period.
Our Board will
have the ability to delegate its authority to committees of directors
.
Under French law committees of our Board of Directors
may only have an advisory role and can only make recommendations to our full Board of Directors. As a result, our Board of Directors
may not delegate its authority to committees of directors. Irish law, on the other hand, permits a board of directors to delegate
its authority to committees of directors as it may determine in its discretion. Thus, after the Merger our Board of Directors
will have greater flexibility in allocating the work of managing the Company for greater efficiency and effectiveness.
Our Board will
have the authority to issue preferred shares
.
To issue preferred shares under French law, a corporation must obtain shareholder
approval at an extraordinary meeting (i.e., requiring a vote of two-thirds of the shares present at such meeting, voting in person
or represented by proxy or voting by mail), a special report of an independent appraiser as to the benefits of the preferred shares
and a special report of the corporation’s statutory auditor. After the Merger, under the Avadel Constitution, our Board
of Directors will have the authority, in its sole discretion, to issue preferred shares having such terms and provisions as it
may determine. Thus, after the Merger our Board of Directors will have greater flexibility in determining the terms and provisions
on which we may decide to obtain equity financing, in the event the Board of Directors should determine such financing is in the
best interest of the Company.
The laws that apply to
our shares and corporate governance will be more readily understood by our shareholders, most of whom are U.S. persons.
The Irish legal system
that will apply to us after the Merger is, like the U.S. legal system, based on common law, which generally means that that there
is no comprehensive set of rules and statutes. Common law systems such as those of Ireland and the U.S. have statutes that address
certain specific legislative goals, but to a large extent these legal systems rely on “precedent,” or judicial decisions
that have future applicability to similar factual situations. On the other hand, civil law systems such as that of France generally
have
comprehensive legal codes with statutes that seek to address all matters that may be brought before a court; the doctrine
of precedent generally does not apply within such civil law systems.
Our Board believes
that the similarities between Irish law and U.S. law – and the fact that the Irish legal system uses the English language
– will make our corporate governance regime generally more familiar to and understandable by our investors, most of whom
are U.S. persons who currently hold ADSs representing our ordinary shares. For this reason, our Board believes that our shares
may be more attractive after the Merger to U.S. persons, which may be a benefit to our investors as our shares are listed only
on the Nasdaq Global Market.
Our ability
to attract and retain qualified directors and officers will be enhanced.
We compete in the
highly competitive biopharmaceutical industry. Within that industry and in the broader economy we seek to recruit and retain talented
individuals to serve on our management team and on our Board. Our Board believes that certain aspects of Irish law will enable
us to compete more effectively with other public companies in the recruitment and retention of talented and experienced directors
and officers.
French law prohibits
us from including provisions that limit the liability of directors in our by-laws, which is the primary governing document for
a French
société anonyme
. However, as permitted by French law we contract for liability insurance to protect
our directors and officers generally against civil liabilities incurred by any of them from a third-party action related to their
good faith actions as directors or officers of Flamel, including liabilities under the Securities Act. Criminal liability cannot
be indemnified under French law, whether directly by a
société anonyme
or through liability insurance.
By contrast, Irish
law permits, and the Avadel Constitution after the Merger will include, provisions for the indemnification of our officers and
directors to the extent permissible under the Companies Act 2014. In addition, we will continue to contract for liability insurance
for the benefit of our officers and directors similar to the insurance we presently obtain. We believe that the indemnity provisions
in the Avadel Constitution and the insurance policies are important to our ability to attract and retain qualified directors and
executive officers.
Moreover, an increasing
number of major companies in our industry and related industries have chosen to establish their corporate domicile in Ireland.
As a result, our Board believes that Irish law, and in particular Irish corporate law, will be more familiar than French law to
a greater number of potential candidates to become our directors or members of our management, and that such familiarity offers
such persons greater certainty and confidence in their good faith actions in managing our business and affairs.
For the reasons described
above, our Board believes that the Merger will enhance the Company’s ability to attract and retain qualified directors and
officers, and will encourage the Company’s directors and officers to continue to make independent decisions in good faith
and in the best interest of the Company and its shareholders.
We will have
greater certainty of our continued compliance with certain securities laws and Nasdaq listing standards.
Because French law
prevents our Board from delegating certain powers and responsibilities to its committees, there may be uncertainty as to our continued
ability to maintain compliance with certain Nasdaq listing standards.
Pursuant to Section
952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC adopted rule 10C, requiring all U.S. national
securities exchanges, including the Nasdaq Global Market where our ADSs are listed, to prohibit the listing of any issuer’s
securities unless the Board of such issuer has delegated certain powers and responsibilities to its compensation committee. In
accordance with these requirements, Nasdaq adopted Listing Rule 5605(d), which implements SEC Rule 10C and provides that a listed
company’s compensation committee must have the power and responsibility to retain and compensate consultants, independent
legal counsel and other compensation advisors.
As a French
société
anonyme,
the structure and practices of our Board and its committees are subject to French law, including certain provisions
thereof under which committees of the board of directors of a French
société anonyme
, such as us, can have
only an advisory role and can only make recommendations to the board of directors. As a result, certain powers and responsibilities
of a compensation committee under Nasdaq Rule 5605(d), respectively, must be made by our Board, which may take into account the
non-binding recommendations of the relevant board committees.
The policies, practices
and procedures of our Board of Directors are such that it has given, and intends to continue to give, substantial deference to
the recommendations of our Compensation Committee and that it will follow the Compensation Committee’s recommendations as
to all matters within the scope of management and employee compensation. In addition, we have confirmed to Nasdaq that our Board
of Directors board intends to follow the recommendations of our compensation committee as to all matters which would otherwise
be within the power and responsibility of a compensation committee under Listing Rule 5605(d), and we have our undertaking to
immediately notify Nasdaq in the event our Board fails to follow any such recommendation. Based on such assurance and undertaking,
we believe that we are not in violation of Listing Rule 5605(d). However, if our Board of Directors ever fails to follow the recommendation
of our Compensation Committee, or if Nasdaq ever takes the position that our advice and undertaking to it are insufficient to
establish compliance with Listing Rule 5605(d), we could be in violation of Nasdaq’s listing rules and the listing of our
ADSs or other securities with Nasdaq could be jeopardized.
After the Merger,
our holding company Avadel plc will be subject to Irish law, including the legal requirements thereunder which apply to the board
of directors and committees of an Irish public limited company. Under such Irish law, our Board may delegate its authority to
an audit committee or a compensation committee fully as may be required under Nasdaq’s applicable listing rules. As a result,
we believe that after the Merger we will have a greater degree of certainty that we will continue to comply with applicable Nasdaq
Listing Rules.
Our Board also
considered risks associated with the Merger.
In determining that
the Merger was in the best interests of Flamel, and will enhance shareholder value, our Board also considered a variety of risks
and other countervailing factors associated with the Merger, including:
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The
risk that the potential benefits described above sought in the Merger may not be realized.
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The
risk that our reputation could suffer negative effects among various stakeholders based
on the fact that Avadel plc would be an Irish-domiciled company.
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The
risk that failure to complete the Merger could cause us to incur significant fees and
expenses and could lead to negative perceptions among investors, potential investors
and customers.
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The
fact that Irish corporate law imposes different obligations on us and our shareholders.
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The
fact that we expect to incur costs to complete the Merger.
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The
diversion of management’s time and attention.
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Our Board concluded
that the uncertainties, risks and potentially negative factors relevant to the Merger were outweighed by the potential benefits
that it expected Flamel and our shareholders to achieve as a result of the Merger. See also the discussion set forth under the
caption “Proposals to Reincorporate the Company as an Irish Public Limited Company – Risk Factors.”
This discussion of
the information and factors considered by our Board includes the principal positive and negative factors considered by our Board
with respect to the Merger, but is not intended to be exhaustive and may not include all of the factors considered by our Board.
In view of the wide variety of factors considered in connection with its evaluation of the Merger, and the complexity of these
matters, our Board did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various
factors that it considered in reaching its determination to approve the Merger and to make its recommendations to our shareholders.
Rather, our Board viewed its decisions as being based on the totality of the information presented to it and the factors it considered.
Risk Factors
Before deciding how
to vote on the proposals relating to the Merger, you should carefully consider the following risk factors, in addition to the
other information contained in this proxy statement and the documents incorporated by reference, including the information set
forth in Part I, Item 1A, “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2015.
The anticipated
benefits of the Merger may not be realized.
We may not realize the benefits we anticipate from the Merger. Our failure
to realize those benefits could have an adverse effect on our business, results of operations and financial condition.
Your rights
as a shareholder will change as a result of the Merger.
Your rights as a shareholder of Flamel are governed by French
law and Flamel’s bylaws (
statuts
). After the Merger, you will become a shareholder of Avadel plc and your rights
will be governed by Irish law and Avadel plc’s Constitution (which comprises its memorandum of association and its articles
of association) as in effect after the Merger. The legal system governing corporations organized under Irish law differs from
the legal system governing corporations organized under French. As a result, while some of the principal attributes of Flamel’s
ordinary shares and Avadel plc ordinary shares will be similar under French and Irish corporate law, differences will exist. We
summarize your rights as a shareholder under French law and under Irish law following the Merger and the material differences
between the governing documents for Flamel and Avadel plc under the caption “Proposals to Reincorporate the Company as an
Irish Public Limited Company – Comparison of Shareholder Rights Before and After the Merger.”
Legislative
and regulatory action or any change in applicable law could materially and adversely affect us and our shareholders.
As
an Irish company following the Merger, Avadel plc will be required to comply with numerous Irish legal requirements. Any changes
in Irish laws (including laws relating to employment, antitrust, intellectual property, taxation and other relevant matters) may
require Avadel plc to incur additional costs and could have a material and adverse effect on its business, results of operations
and financial condition.
The Merger will
result in additional direct and indirect costs, even if it is not completed.
We have incurred and will incur certain additional
costs as a result of the Merger, although we do not expect these costs to be material. Avadel plc has been incorporated in Ireland
and is subject to Irish corporate law. Avadel plc intends to establish its headquarters in Ireland, and a French branch with respect
to its operations in France. We expect to incur costs and expenses, including professional fees, to comply with U.S. and Irish
reporting and governance requirements and U.S., Irish and French employment and tax laws. In addition, we expect to incur attorneys’
fees, accountants’ fees, filing fees, mailing expenses and financial printing expenses in connection with the Merger, even
if the Merger Agreement is not approved by our shareholders or the Merger is not completed. The Merger also may adversely affect
us by diverting attention of our management and employees from our operating business during the period of implementation and
by increasing other administrative costs and expenses.
We may choose
to postpone or abandon the Merger.
We may postpone or abandon the Merger at any time prior to the effective time of the
Merger, even after the shareholders have adopted the Merger Agreement at the General Meeting and Extraordinary General Meeting.
While we currently expect to complete the Merger by December 31, 2016, our board of directors may delay the Merger for a significant
time or may abandon the Merger altogether after the General Meeting and Extraordinary General Meeting because, among other reasons,
the Merger is no longer in our best interest or the best interests of our shareholders or may not result in the benefits we expect,
or our estimated cost of the Merger increases. Additionally, we may not be able to satisfy all of the other conditions to the
completion of the Merger, including obtaining all consents necessary, desirable or appropriate in connection with the Merger and
related transactions.
After the Merger,
attempted takeovers of Avadel plc will be subject to the Irish Takeover Rules and the supervisory jurisdiction of the Irish Takeover
Panel.
Following the completion of the Merger, Avadel plc will be subject to the Irish Takeover Act 1997, as amended,
and the Irish Takeover Rules promulgated thereunder, which regulate the conduct of takeovers of, and certain other relevant transactions
affecting, Irish public limited companies listed on certain stock exchanges, including the Nasdaq Stock Market. The Irish Takeover
Rules are administered by the Irish Takeover Panel, which has supervisory jurisdiction over such transactions. Among other matters,
the Irish Takeover Rules operate to ensure that no offer is frustrated or unfairly prejudiced and, in the case of multiple bidders,
that there is a level playing field. For example, pursuant to the Irish Takeover Rules, the board of directors of Avadel plc will
not be permitted, without shareholder approval, to take certain actions which might frustrate an offer for Avadel plc ordinary
shares once the board of directors has received an approach which may lead to an offer or has reason to believe an offer is, or
may be, imminent. See “Proposals to Reincorporate the Company as an Irish Public Limited Company – Description of
the Avadel plc Ordinary Shares – Anti-Takeover Provisions.”
Avadel plc
will seek Irish High Court approval of the creation of distributable reserves; Avadel plc expects this will be forthcoming but
cannot guarantee this.
Under Irish law,
dividends may only be paid and share repurchases and redemptions must generally be funded only out of “distributable reserves,”
which Avadel plc will not have immediately following the closing. The creation of distributable reserves of Avadel plc requires
the approval of the Irish High Court and, in connection with seeking such court approval, we are seeking the approval of Flamel
shareholders. The approval of the Irish High Court is expected within 15 weeks following the closing. Flamel is not aware of any
reason why the Irish High Court would not approve the creation of distributable reserves, however, the issuance of the required
order is a matter for the discretion of the Irish High Court. In the event that distributable reserves of Avadel plc are not created,
no distributions by way of dividends, share repurchases or otherwise by Avadel plc will be permitted under Irish law until such
time as Avadel plc has created sufficient distributable reserves from its operations.
The market for
the Avadel plc
ordinary shares may differ from the market for the Flamel shares.
We intend to make application
so that, immediately following the Merger, ADSs representing Avadel plc ordinary shares will be listed on the Nasdaq Global Market
under the symbol “AVDL.” Currently, there is no established public trading market for these Avadel plc ADSs. The market
price, trading volume or volatility of such Avadel plc ADSs could be different than those of the Flamel ADSs.
Conditions
to the Consummation of the Merger
Under the terms of
the Merger Agreement, The Merger will not be completed unless, among other things, the following conditions are satisfied or,
if allowed by law, waived:
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Flamel
shall have submitted a copy of this proxy statement to the High Court;
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Avadel
Limited’s shareholder shall have approved the Merger and the Merger Agreement;
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Avadel
Limited’s shareholder shall have approved the Avadel Constitution;
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Flamel’s
shareholders shall have approved the Merger and the Merger Agreement;
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the
clerk of the commercial court of Lyon shall have duly issued a legality certificate in
respect of Flamel’s participation in the Merger after our shareholders approve
the Merger;
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Avadel
Limited shall have advised the High Court that, based on the final order to be issued
approving the Merger, Avadel plc will rely upon the exemption from U.S. securities law
registration available under Section 3(a)(10) under the Securities Act and it will not
register the ordinary shares of Avadel plc to be issued under that Securities Act;
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by
placing advertisements in the CRO Gazette and the international editions of The Financial
Times and The Wall Street Journal, and/or such other publications as the High Court shall
order, Flamel shall have given its shareholders prior notice of the hearing of the High
Court at which such Court will consider the Merger for purposes of approval thereof,
and such notice shall state that the Flamel shareholders may attend the hearing and may
have an opportunity to be heard at such hearing;
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the
High Court shall have issued the final order approving the merger and containing the
other matters required by the Merger Agreement to be set forth therein (including a determination
that the Merger is fair (both procedurally and substantively to the shareholders of the
merging companies);
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Avadel
Limited shall have given full effect to the Avadel Legal Capital Changes (as defined
in the Merger Agreement); and
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Avadel
Limited’s shareholder shall have granted the Avadel Shareholder Equity-Linked Securities
Issuance Authority (as defined in the Merger Agreement); and
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the
directors and officers of Flamel immediately prior to the Effective Time shall have been
appointed, at the Effective Time, as the only directors and officers of Avadel plc.
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Proposal to Create
Distributable Reserves of Avadel plc
Flamel shareholders
are being asked to consider and vote upon a proposal to reduce the share premium of Avadel plc resulting from the issuance of
Avadel plc shares pursuant to the Merger, in order to create distributable reserves of Avadel plc. You should carefully read this
proxy statement/prospectus in its entirety for additional information concerning about distributable reserves, including “Proposals
to Reincorporate the Company as an Irish Public Limited Company – Description of Avadel plc Ordinary Shares – Dividends.”
Approval of the proposal
to reduce the share premium of Avadel plc to allow the creation of distributable reserves requires the affirmative vote of two-thirds
of the Flamel ordinary shares represented at the Meeting. Approval of this proposal is not a condition to the completion of the
Merger and whether or not this proposal is approved will have no impact on the completion of the transaction.
Under Irish law, dividends
and distributions and, generally, share repurchases or redemptions may only be made from distributable reserves in Avadel plc’s
unconsolidated balance sheet prepared in accordance with the Irish Companies Act 2014. Distributable reserves generally means
the accumulated realized profits of Avadel plc less accumulated realized losses of Avadel plc and includes reserves created by
way of capital reductions. In addition, no distribution or dividend may be made unless the net assets of Avadel plc are equal
to, or in excess of, the aggregate of Avadel plc’s called up share capital plus undistributable reserves and the distribution
does not reduce Avadel plc ’s net assets below such aggregate. Undistributable reserves include the share premium account,
the capital redemption reserve fund and the amount by which Avadel plc’s accumulated unrealized profits, so far as not previously
utilized by any capitalization, exceed Avadel plc’s accumulated unrealized losses, so far as not previously written off
in a reduction or reorganization of capital. Please see “Proposals to Reincorporate the Company as an Irish Public Limited
Company – Description of Avadel plc Ordinary Shares – Dividends.”
Immediately following
the transaction, the unconsolidated balance sheet of Avadel plc will not contain any distributable reserves, and “shareholders’
equity” in such balance sheet will be comprised entirely of “share capital” (equal to the aggregate par value
of the Avadel plc shares issued pursuant to the transaction) and “share premium” resulting from (i) the issuance of
Avadel plc shares in the Merger. The share premium arising shall be equal to the aggregate market value of the Flamel ordinary
shares, based on the closing price of the Flamel ADSs at the close of trading on Nasdaq on the day the Merger is completed, less
the nominal value of Avadel plc’s ordinary share capital.
If the Flamel shareholders
approve the creation of distributable reserves and the Merger is completed, such approval will facilitate Avadel plc seeking to
obtain the approval of the Irish High Court, which is required for the creation of distributable reserves to be effective, as
soon as practicable following the completion of the Merger. Avadel plc is expected to obtain the approval of the Irish High Court
within 15 weeks after completion of the transaction.
Prior to completion
of the Merger, Flamel, as the current shareholder of Avadel plc, will have approved a resolution that would create distributable
reserves following completion of the transaction and obtaining the required approval of the Irish High Court by converting to
distributable reserves all or substantially all of the share premium of Avadel plc.
The approval of the
distributable reserves proposal is not a condition to the completion of the Merger and whether or not it is approved will have
no impact on the completion of the Merger. Accordingly, if the Flamel shareholders approve the Merger but do not approve the distributable
reserves proposal set forth in resolution 20, the Merger may still be completed. Until the Irish High Court approval is obtained
or distributable reserves are created as a result of the profitable operation of Avadel plc, Avadel plc will not have sufficient
distributable reserves to pay dividends or to repurchase or redeem shares following the transaction until such time as Avadel
plc has created distributable reserves through the generation of future profits from its operations. In addition, although Avadel
plc is not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, the issuance
of the required order is a matter for the discretion of the Irish High Court.
Certain U.S. Federal
Securities Law Matters
Avadel plc will not
register the issuance of its ordinary shares in the Merger under the Securities Act in reliance upon the exemption from registration
provided under Section 3(a)(10) of the Securities Act. Under Section 3(a)(10), securities issued in exchange for one or more outstanding
securities are exempt from the registration requirement of the Securities Act if the terms and conditions of the issuance and
exchange of such securities have been approved by any court of competent jurisdiction, after a hearing upon the fairness of the
terms and conditions of the issuance and exchange at which all persons to whom such securities will be issued have a right to
appear and to whom adequate notice of the hearing has been given. As previously stated, at the Hearing, the High Court will consider
whether to issue its order confirming the scrutiny of the legality of the Merger, set the Merger effective date and time, and
determine whether the Merger is fair (both procedurally and substantively) to the shareholders of the merging companies, and such
hearing will be held in open court. Shareholders of the merging companies, including Flamel, will be given public notice of the
Hearing by means of newspaper advertisements in the Irish Companies Registration Office Gazette and the international edition
of The Financial Times or The Wall Street Journal. The Court will be advised, prior to the Hearing, that its approval and finding
of fairness as to the Merger will be the basis for qualifying for the exemption from the registration requirements of the Securities
Act provided by section 3(a)(10) with respect to the shares of Avadel plc to be issued pursuant to the Merger Agreement upon consummation
of the Merger.
Upon consummation
of the Merger, the ordinary shares of Avadel plc will be deemed to be registered under Section 12(g) of the Exchange Act, by virtue
of Rule 12g-3 under the Exchange Act, without the filing of any Exchange Act registration statement. Upon consummation of the
Merger, as Avadel plc we will remain subject to SEC reporting requirements. Avadel plc intends to file new registration statements
and/or post-effective amendments to certain existing effective registration statements of Flamel currently in effect, with respect
to equity compensation plans and any other arrangements. Immediately upon consummation of the Merger, the ADSs of Avadel plc issued
to you will be listed and traded on the Nasdaq Global Market under the trading symbol “AVDL.”
Restrictions on
Sale of Avadel plc Shares.
The Avadel plc ordinary shares issued to our shareholders in connection with the Merger will be
subject to the same restrictions that currently apply to the Flamel ordinary shares (or ADSs, as applicable). The Avadel plc ordinary
shares issued to our shareholders in connection with the Merger will be freely transferable, except as follows:
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Persons
who are affiliates of Flamel or have been affiliates within 90 days prior to reselling
any Avadel plc shares may resell any Avadel plc shares, in the United States only, in
the manner permitted by Rule 144 under the Securities Act.
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Persons
whose Flamel ordinary shares (or ADSs) bear a legend restricting transfer will receive
Avadel plc ordinary shares (or ADSs) that are subject to the same restrictions. In computing
the holding period of the Avadel plc shares for the purposes of Rule 144(d), such persons
will be permitted to “tack” the holding period of their Flamel Ltd shares
held prior to the time of the Merger.
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Persons
who may be deemed to be affiliates of Flamel and Avadel plc for these purposes generally
include individuals or entities that control, are controlled by, or are under common
control with, Flamel and Avadel plc, and would generally not be expected to include shareholders
who are not executive officers, directors or significant shareholders of Flamel and Avadel
plc.
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Management
of Avadel plc
Management of Avadel
plc will be vested in its board of directors. The board of directors may further delegate management of certain aspects of Avadel
plc’s business to committees of the board of directors or to members of management. However, the directors will remain responsible,
as a matter of Irish law, for the proper management of the business and affairs of Avadel plc.
Interests
of Certain Persons in the Merger
No person who has
been a director or executive officer of Avadel plc or Flamel, at any time since the beginning of the last fiscal year, or any
associate of any such person, has any substantial interest in the Merger, except for any interest arising from his or her ownership
of securities of Flamel, as the case may be. No such person is receiving any extra or special benefit not shared on a
pro rata
basis by all other holders of ordinary shares. The Merger will not give rise to any change-of-control payments under employment
agreements with any of our employees.
Accounting
Treatment of the Merger
Under U.S. GAAP, the
Merger represents a transaction between entities under common control. Assets and liabilities transferred between entities under
common control are accounted for at historical cost. The carrying values of Flamel’s assets and liabilities immediately
prior to the Merger will be the same carrying values for Avadel plc at the effective time of the Merger.
Required
Vote; Recommendation
The proposals pertaining
to the Merger and set forth in Resolutions 17, 18, 19 and 20 shall be approved by a vote of ordinary shareholders representing
two-thirds of the ordinary shares represented and voting at the Extraordinary Meeting, with each holder of ordinary shares of
record being entitled to one vote per share, and with a quorum requirement of at least 25% of the outstanding ordinary shares
issued and outstanding and entitled to vote. Abstentions and null votes will be counted for the determination of such threshold.
Description of
the Avadel plc Ordinary Shares
The following information
is a summary of the material terms of the Avadel plc ordinary shares, nominal (
i.e.,
par) value $0.01 per share, as specified
in the Avadel Constitution, to become effective as of the completion of the Merger.
Authorized
Share Capital
On consummation of
the Merger, our authorized share capital will be $5,500,000 divided into 500,000,000 ordinary shares with a nominal value of $0.01
each and 50,000,000 preferred shares with a nominal value of $0.01 each, plus €25,000 divided into 25,000 deferred ordinary
shares with a nominal value of €1.00 each.
The authorized and
issued share capital in the Avadel Constitution includes 25,000 deferred ordinary shares, which are required in order to satisfy
statutory minimum capital requirements of an Irish public limited company. The holder of the deferred ordinary shares is not entitled
to receive any dividend or distribution, to attend, speak or vote at any general meeting, and has no effective rights to participate
in the assets of Avadel plc.
Under the Avadel Constitution,
we may issue shares subject to the maximum authorized share capital contained in the Avadel Constitution. The authorized share
capital may be increased or reduced by a resolution approved by a simple majority of the votes cast at a general meeting of our
shareholders, referred to under Irish law as an “ordinary resolution.” Our authorized share capital may be divided
into shares of such nominal value as the resolution shall prescribe. As a matter of Irish law, the directors of a company may
issue new ordinary or preferred shares without shareholder approval once authorized to do so by its constitution or by an ordinary
resolution adopted by our shareholders at a general meeting. The authorization may be granted for a maximum period of five years,
at which point it may be renewed by shareholders by an ordinary resolution. Accordingly, the Avadel Constitution authorizes our
board of directors to issue new ordinary or preferred shares without shareholder approval for a period of five years from the
date of the adoption of the Avadel Constitution. The authority to issue preferred shares provides us with the flexibility to consider
and respond to future business needs and opportunities as they arise from time to time, including in connection with capital raising,
financing and acquisition transactions or opportunities.
Under the Avadel Constitution,
our board of directors will be authorized to issue preferred shares on a non-pre-emptive basis, with discretion as to the terms
attaching to the preferred shares, including as to voting, dividend and conversion rights and priority relative to other classes
of shares with respect to dividends and upon a liquidation. As described in the preceding paragraph, this authority extends until
five years from the date of the adoption of the Avadel Constitution, at which time it will expire unless renewed by our shareholders.
Notwithstanding this
authority, under the Irish Takeover Rules (as defined below) our board of directors would not be permitted to issue any of our
shares, including preferred shares, during a period when an offer has been made for us or is believed to be imminent unless the
issue is (i) approved by our shareholders at a general meeting; (ii) consented to by the Irish Takeover Panel on the
basis it would not constitute action frustrating the offer; (iii) consented to by the Irish Takeover Panel and approved by
the holders of more than 50% of our shares carrying voting rights; (iv) consented to by the Irish Takeover Panel in circumstances
where a contract for the issue of the shares had been entered into prior to that period; or (v) consented to by the Irish
Takeover Panel in circumstances where the issue of the shares was decided by our directors prior to that period and either action
has been taken to implement the issuance (whether in part or in full) prior to such period or the issuance was otherwise in the
ordinary course of business.
While we do not have
any current specific plans, arrangements or understandings, written or oral, to issue any preferred shares for any purpose, we
are continually evaluating our financial position and analyzing the possible benefits of issuing additional debt securities, equity
securities, convertible securities or a combination thereof in connection with, among other things: (i) repaying indebtedness;
(ii) financing acquisitions; or (iii) strengthening our balance sheet. The availability of preferred shares gives us
flexibility to respond to future capital raising, financing and acquisition needs and opportunities without the delay and expense
associated with holding an extraordinary general meeting of our shareholders to obtain further shareholder approval.
The rights and restrictions
to which the ordinary shares will be subject are prescribed in the Avadel Constitution. The Avadel Constitution will permit our
board of directors, without shareholder approval, to determine the terms of any preferred shares that we may issue. Our board
of directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares, unless expressly
provided by the terms of that class or series of shares, to provide from time to time for the issuance of other classes or series
of shares and to establish the characteristics of each class or series, including the number of shares, designations, relative
voting rights, dividend rights, liquidation and other rights, redemption, repurchase or exchange rights and any other preferences
and relative, participating, optional or other rights and limitations not inconsistent with applicable law.
Irish law does not
recognize fractional shares held of record. Accordingly, the Avadel Constitution does not provide for the issuance of fractional
ordinary shares, and our official Irish share register will not reflect any fractional shares.
Preemption
Rights, Share Warrants and Share Options
Under Irish law, unless
otherwise authorized, when an Irish public limited company issues shares for cash to new shareholders, it is required first to
offer those shares on the same or more favorable terms to existing shareholders of the company on a
pro rata
basis, commonly
referred to as the statutory preemption right. However, we have opted out of these preemption rights in the Avadel Constitution
as permitted under Irish law. Because Irish law permits this opt-out to last for a maximum of five years, the Avadel Constitution
provides that this opt-out will lapse five years after the adoption of the Avadel Constitution. Such opt-out may be renewed by
a special resolution of the shareholders. A special resolution requires not less than 75% of the votes cast at a general meeting
of our shareholders. If the opt-out is not renewed, shares issued for cash must be offered to pre-existing shareholders of Avadel
plc
pro rata
to their existing shareholding before the shares can be issued to any new shareholders. The statutory preemption
rights do not apply where shares are issued for non-cash consideration and do not apply to the issue of non-equity shares (that
is, shares that have the right to participate only up to a specified amount in any income or capital distribution).
Issuance
of Warrants and Options
The Avadel Constitution
provides that, subject to any shareholder approval requirement under any laws, regulations or the rules of any stock exchange
to which we are subject, our board of directors is authorized, from time to time, in its discretion, to grant such persons, for
such periods and upon such terms as it deems advisable, options to purchase such number of shares of any class or classes or of
any series of any class as our board of directors may deem advisable, and to cause warrants or other appropriate instruments evidencing
such options to be issued. The Irish Companies Act provides that directors may issue share warrants or options without shareholder
approval once authorized to do so by the articles of association or an ordinary resolution of shareholders. We will be subject
to the rules of Nasdaq and the Irish Companies Act, which require shareholder approval of certain equity plan and share issuances.
Our board of directors may issue shares upon exercise of warrants or options without shareholder approval or authorization, up
to the relevant authorized share capital limit.
Dividends
Under Irish law, dividends
and distributions may only be made from distributable reserves. Distributable reserves generally means accumulated realized profits
less accumulated realized losses and includes reserves created by way of capital reduction. In addition, no distribution or dividend
may be made unless our net assets are equal to, or in excess of, the aggregate of our called up share capital plus undistributable
reserves and the distribution does not reduce our net assets below such aggregate. Undistributable reserves include undenominated
capital and the amount by which our accumulated unrealized profits, so far as not previously utilized by any capitalization, exceed
our accumulated unrealized losses, so far as not previously written off in a reduction of capital approved by the Irish High Court
without restriction, or a reorganization of capital.
The determination
as to whether or not we have sufficient distributable reserves to fund a dividend must be made by reference to our “relevant
financial statements.” The “relevant financial statements” will be either the last set of unconsolidated annual
audited financial statements or other financial statements properly prepared in accordance with the Irish Companies Act, which
give a “true and fair view” of our unconsolidated financial position and accord with accepted accounting practice.
The mechanism as to
who declares a dividend and when a dividend shall become payable is governed by the Avadel Constitution. The Avadel Constitution
will authorize our board of directors to declare dividends without shareholder approval to the extent they appear justified by
profits lawfully available for distribution. Our board of directors may also recommend a dividend to be approved and declared
by the shareholders at a general meeting. Our board of directors may direct that the payment be made by distribution of assets,
shares or cash, and no dividend issued may exceed the amount recommended by our board of directors. Dividends may be declared
and paid in the form of cash or non-cash assets and may be paid in dollars or any other currency.
Our board of directors
may deduct from any dividend payable to any shareholder any amounts payable by such shareholder to us in relation to our ordinary
shares.
Our board of directors
may also authorize us to issue shares with preferred rights to participate in dividends we declare. The holders of preferred shares
may, depending on their terms, rank senior to the ordinary shares in terms of dividend rights or be entitled to claim arrears
of a declared dividend out of subsequently declared dividends in priority to ordinary shareholders.
For information about
the Irish tax issues relating to dividend payments, please see the section of this proxy statement titled “Material Tax
Considerations Relating to the Merger—Irish Tax Considerations—Irish Withholding Tax on Dividends.”
Bonus Shares
Under the Avadel Constitution,
our board of directors may resolve to capitalize any amount credited to any reserve, including our undenominated capital, or credited
to the profit and loss account, and use such amount for the issuance to shareholders of shares as fully paid bonus shares on the
same basis of entitlement as would apply in respect of a dividend distribution.
Share Repurchases
and Redemptions
Overview
The Avadel Constitution
provides that any ordinary share that we have agreed to acquire shall be deemed to be a redeemable share. Accordingly, for Irish
law purposes, the repurchase of ordinary shares by us may technically be effected as a redemption of those shares as described
under “—Repurchases and Redemptions”. If the Avadel Constitution did not contain such provision, repurchases
by us would be subject to many of the same rules that apply to purchases of ordinary shares by subsidiaries described under “—Purchases
by Subsidiaries”, including the shareholder approval requirements described below, and the requirement that any purchases
on market be effected on a “recognized stock exchange” which, for purposes of the Irish Companies Act, includes NASDAQ.
Except where otherwise
noted, when we refer elsewhere in this proxy statement to repurchasing or buying back our ordinary shares, we are referring to
the redemption of our ordinary shares or the purchase of our ordinary shares by a subsidiary of us, in each case in accordance
with the Avadel Constitution and Irish law as described below.
Repurchases
and Redemptions
Under Irish law, subject
to the conditions summarized below, a company may issue redeemable shares and may only redeem them out of distributable reserves
or the proceeds of a new issue of ordinary shares for that purpose. As described in “Dividend Policy”, we do not expect
to have any distributable reserves for the foreseeable future, subject to the results of our efforts, after the Merger, to reduce
the share premium of Avadel plc in order to create distributable reserves. See “Proposal to Reincorporate the Company
as an Irish Public Limited Company – Proposal to Create Distributable Reserves of Avadel plc.” We may only issue redeemable
shares if the nominal value of the issued share capital that is not redeemable is not less than 10% of the nominal value of our
total issued share capital. All redeemable shares must also be fully paid and the terms of redemption of the shares must provide
for payment on redemption. Redeemable shares may, upon redemption, be cancelled or held in treasury. Based on the provision of
the Avadel Constitution described above, shareholder approval will not be required to redeem our ordinary shares.
We may also be given
an additional general authority to purchase our own shares on market, which would take effect on the same terms and be subject
to the same conditions as applicable to purchases by our subsidiaries as described below.
Our board of directors
may also issue preferred shares, which may be redeemed at the option of either us or the shareholder, depending on the terms of
such preferred shares. Please see “—Authorized Share Capital” above for additional information on preferred
shares.
Repurchased and redeemed
shares may be cancelled or held as treasury shares. The nominal value of treasury shares held by us at any time must not exceed
10% of the nominal value of our issued share capital. We may not exercise any voting rights in respect of any shares held as treasury
shares. Treasury shares may be cancelled by us or re-issued subject to certain conditions.
Purchases
by Subsidiaries
Under Irish law, an
Irish or non-Irish subsidiary may purchase our ordinary shares either on market or off market. For one of our subsidiaries to
make purchases on market of our ordinary shares, the shareholders must provide general authorization for such purchase by way
of ordinary resolution. However, as long as this general authority has been granted, no specific shareholder authority for a particular
on market purchase by a subsidiary of our ordinary shares is required. For a purchase by a subsidiary off market, the proposed
purchase contract must be authorized by special resolution of our shareholders before the contract is entered into. The person
whose ordinary shares are to be bought back cannot vote in favor of the special resolution and the purchase contract must be on
display or must be available for inspection by our shareholders at our registered office from the date of the notice of the meeting
at which the resolution approving the contract is to be proposed.
In order for one of
our subsidiaries to make an on market purchase of our ordinary shares, such shares must be purchased on a “recognized stock
exchange”. Nasdaq is specified as a recognized stock exchange for this purpose by Irish law.
The number of ordinary
shares held by our subsidiaries at any time will count as treasury shares and will be included in any calculation of the permitted
treasury share threshold of 10% of the nominal value of our issued share capital. While a subsidiary holds any of our shares,
it cannot exercise any voting rights in respect of those shares. The acquisition of our ordinary shares by a subsidiary must be
funded out of distributable reserves of the subsidiary.
Lien on
Shares, Calls on Shares and Forfeiture of Shares
The Avadel Constitution
provides that we will have a first and paramount lien on every share that is not a fully paid share for all amounts payable at
a fixed time or called in respect of that share. Subject to the terms of their allotment, directors may call for any unpaid amounts
in respect of any shares to be paid, and if payment is not made, the shares may be forfeited. These provisions are customary in
the constitution of an Irish public company limited by shares such as our company and will only be applicable to shares that have
not been fully paid.
Consolidation
and Division; Subdivision
Under the Avadel Constitution,
we may, by ordinary resolution, consolidate and divide all or any of our share capital into shares of larger nominal value than
our existing shares or subdivide our shares into smaller amounts than are fixed by the Avadel Constitution.
Reduction
of Share Capital
We may, by ordinary
resolution, reduce our authorized share capital in any way. We also may, by special resolution and subject to confirmation by
the Irish High Court, reduce or cancel our issued share capital in any manner permitted by the Irish Companies Act.
General
Meetings of Shareholders
We are required to
hold an annual general meeting within eighteen months of incorporation and at intervals of no more than fifteen months thereafter,
provided that an annual general meeting is held in each calendar year following our first annual general meeting, no more than
nine months after our fiscal year-end.
Our extraordinary
general meetings may be convened by (i) our board of directors, (ii) on requisition of shareholders holding not less
than 10% of our paid up share capital carrying voting rights or (iii) on requisition of our auditors. Extraordinary general
meetings are generally held for the purposes of approving shareholder resolutions as may be required from time to time.
Notice of a general
meeting must be given to all our shareholders and to our auditors. The Avadel Constitution provides that the maximum notice period
is 60 days. The minimum notice periods are 21 days’ notice in writing for an annual general meeting or an extraordinary
general meeting to approve a special resolution and 14 days’ notice in writing for any other extraordinary general
meeting. General meetings may be called by shorter notice, but only with the consent of our auditors and all of our shareholders
entitled to attend and vote thereat. Because of the 21-day and 14-day requirements described in this paragraph, the Avadel Constitution
includes provisions reflecting these requirements of Irish law.
In the case of an
extraordinary general meeting convened by our shareholders, the proposed purpose of the meeting must be set out in the requisition
notice. Upon receipt of this requisition notice, our board of directors has 21 days to convene a meeting of our shareholders
to vote on the matters set out in the requisition notice. This meeting must be held within two months of the receipt of the requisition
notice. If our board of directors does not convene the meeting within such 21-day period, the requisitioning shareholders, or
any of them representing more than one half of the total voting rights of all of them, may themselves convene a meeting, which
meeting must be held within three months of the receipt of the requisition notice.
The only matters which
must, as a matter of Irish company law, be transacted at an annual general meeting are the consideration of the Irish statutory
financial statements, the report of the directors, the report of the auditors on those statements and that report and a review
by the members of our affairs. If no resolution is made in respect of the reappointment of an auditor at an annual general meeting,
the previous auditor will be deemed to have continued in office.
If our directors become
aware that our net assets are half or less of the amount of our called-up share capital, our directors must convene an extraordinary
general meeting of our shareholders not later than 28 days from the date that they learn of this fact. This meeting must
be convened for the purposes of considering whether any, and if so what, measures should be taken to address the situation.
Quorum
for General Meetings
The presence, in person
or by proxy, of five or more persons holding or representing by proxy at least a majority in nominal value of the class or, at
any adjourned meeting of such holders, one holder holding or representing by proxy at least a majority in nominal value of the
issued shares of the class constitutes a quorum for the conduct of business. No business may take place at a general meeting if
a quorum is not present in person or by proxy. Our board of directors has no authority to waive quorum requirements stipulated
in the Avadel Constitution. Abstentions and broker non-votes will be counted as present for purposes of determining whether there
is a quorum in respect of the proposals.
Adjournment
of Shareholder Meetings
The Avadel Constitution
provides that if a quorum is not present, the meeting shall be adjourned and we shall notify shareholders in accordance with the
usual notice requirements in the event that such meeting is to be reconvened.
Voting
Under the Avadel Constitution,
each holder of our ordinary shares is entitled to one vote for each ordinary share that he or she holds as of the record date
for the meeting. The holder of our deferred ordinary shares is not entitled to a vote. We may not exercise any voting rights in
respect of any shares held as treasury shares. Any shares held by our subsidiaries will count as treasury shares for this purpose,
and such subsidiaries cannot therefore exercise any voting rights in respect of those shares.
Irish law distinguishes
between “ordinary business” and “special business”. Most business that is transacted at a general meeting
is deemed "special" with the exception of declaring a dividend, the consideration of the statutory financial statements
and the reports of the directors and auditors thereon, the review by the shareholders of the company's affairs, the fixing of
the remuneration of auditors and the election of directors, all of which are deemed to be “ordinary business.”
All resolutions proposed
at our general meetings will be decided on a poll. Every shareholder entitled to vote has one vote for each share held unless
otherwise provided in the Avadel Constitution. Voting rights may be exercised by shareholders registered in the share register
as of the record date for the meeting or by a duly appointed proxy of such a registered shareholder, which proxy need not be a
shareholder. Where interests in shares are held by a nominee trust company, this company may exercise the rights of the beneficial
holders on their behalf as their proxy. All proxies must be appointed in accordance with the Avadel Constitution. The Avadel Constitution
permits the appointment of proxies by our shareholders to be notified to us electronically, when permitted by our directors.
In accordance with
the Avadel Constitution, our board of directors may from time to time authorize us to issue preference shares. These preferred
shares may have such voting rights as may be specified in the terms of such preferred share. For example, they may carry more
votes per share than ordinary shares or may entitle their holders to a class vote on such matters as may be specified in the terms
of the preferred shares. Treasury shares or our shares held by our subsidiaries will not be entitled to be voted at general meetings
of shareholders.
Irish law requires
special resolutions of our shareholders at a general meeting to approve certain matters. Examples of matters requiring special
resolutions include:
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amending our objects or memorandum
of association;
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amending our articles of association;
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approving a change of our name;
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authorizing the entering into
of a guarantee or provision of security in connection with a loan, quasi-loan or credit
transaction to a director or connected person;
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opting out of preemption rights
on the issuance of new shares;
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re-registering us from a public
limited company to a private company;
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variation of class rights attaching
to classes of shares (where our memorandum and articles of association do not provide
otherwise);
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purchase of our ordinary shares
off market;
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reduction of issued share capital;
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sanctioning a compromise or scheme
of arrangement with creditors or shareholders;
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resolving that we be wound up
by the Irish courts;
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resolving in favor of a shareholders’
voluntary winding-up; and
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setting the re-issue price of
treasury shares.
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Action
by Written Consent
The Avadel Constitution
provides that shareholder resolutions are to be adopted by way of poll at meetings and shareholders are permitted to pass resolutions
by unanimous written consent.
Variation
of Rights Attaching to a Class or Series of Shares
Under the Avadel Constitution
and the Irish Companies Act, any variation of class rights attaching to our issued shares must be approved by a special resolution
of our shareholders of the affected class or with the consent in writing of the holders of 75% of all the votes of that class
of shares.
Inspection
of Books and Records
Under Irish law, shareholders
have the right to (1) receive a copy of the Avadel Constitution, (2) inspect and obtain copies of the minutes of general
meetings and resolutions, (3) inspect and receive a copy of the register of shareholders, register of directors and secretaries,
register of directors' interests and other statutory registers maintained by us, (4) receive copies of statutory financial
statements (or summary financial statements, where applicable) and directors’ and auditors’ reports that have previously
been sent to shareholders prior to an annual general meeting and (5) receive financial statements of any our subsidiaries
that have previously been sent to shareholders prior to an annual general meeting for the preceding ten years. The auditors’
report must be circulated to the shareholders with our financial statements prepared in accordance with Irish law 21 days before
the annual general meeting and must be read to the shareholders at our annual general meeting.
Acquisitions
An Irish public limited
company may be acquired in a number of ways, including:
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a court-approved scheme of arrangement
under the Irish Companies Act. A scheme of arrangement with shareholders requires a court
order from the Irish High Court and the approval of a majority in number representing
75% in value of the shareholders present and voting in person or by proxy at a meeting
called to approve the scheme;
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through a tender or takeover offer
by a third party for all of our shares. Where the holders of 80% or more of our ordinary
shares have accepted an offer for their shares in our company, the remaining shareholders
may also be statutorily required to transfer their shares. If the bidder does not exercise
this “squeeze out” right, then the non-accepting shareholders also have a
statutory right to require the bidder to acquire their shares on the same terms. If our
shares were to be listed on the main securities market of the Irish Stock Exchange or
another regulated stock exchange in the European Union, or EU, this threshold would be
increased to 90%; and
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it is also possible for us to
be acquired by way of a merger with an EU-incorporated company under the EU Cross-Border
Mergers Directive 2005/56/EC. Such a merger must be approved by a special resolution.
If we are being merged with another EU company under the EU Cross-Border Mergers Directive
2005/56/EC and the consideration payable to our shareholders is not all in the form of
cash, our shareholders may be entitled to require their shares to be acquired at fair
value.
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Irish law does not
generally require shareholder approval for a sale, lease or exchange of all or substantially all of a company's property and assets.
Appraisal
Rights
Generally, under Irish
law, shareholders of an Irish company do not have dissenters’ or appraisal rights. Under the European Communities (Cross-Border
Mergers) Regulations 2008, as amended, governing the merger of an Irish company limited by shares such as our company and
a company incorporated in the European Economic Area, a shareholder (1) who voted against the special resolution approving
the merger or (2) of a company in which 90% of the shares are held by the other party to the merger has the right to request
in certain circumstances that the successor company acquire its shares for cash at a price determined in accordance with the share
exchange ratio set out in the Merger Agreement.
Corporate
Governance
The Avadel Constitution
allocates authority over our day-to-day management to our board of directors. Our board of directors may then delegate our management
to committees of our board of directors, consisting of one or more members of our board of directors, or to our executive officers,
although our board of directors will remain responsible, as a matter of Irish law, for the proper management of our affairs. The
proceedings of committees are governed by the Avadel Constitution regulating the proceedings of directors. A vote at any committee
meeting will be determined by a majority of votes of the members present.
Our board of directors
will have a standing audit committee, a compensation committee and a nominating and corporate governance committee. It is also
the intention of Avadel plc to adopt corporate governance policies, including a code of conduct and an insider trading policy.
Directors
Number
of Directors
The Irish Companies
Act provides for a minimum of two directors. The Avadel Constitution provides for a minimum of two directors and a maximum of
13. Our shareholders may from time to time increase or reduce the maximum number, or increase the minimum number, of directors
by ordinary resolution. Our board of directors determines the number of directors within the range of two to 13.
Election
and Term of Office of Directors
At every annual general
meeting of the Company, all of the directors shall retire from office unless re-elected by ordinary resolution at the annual general
meeting. A director retiring at a meeting shall retain office until the close or adjournment of the meeting.
Irish
law requires majority voting for the election of directors, which could result in the number of directors falling below the authorized
number of directors due to the failure of nominees to be elected. The Avadel Constitution provide that if the number of directors
is reduced below the prescribed minimum number of directors, the remaining director or directors shall appoint as soon as practicable
an additional director or additional directors to make up such prescribed minimum or shall convene a general meeting of Avadel
plc for the purpose of making such appointment. The Avadel Constitution provides that if, at any meeting of shareholders,
the chairman determines that the number of persons properly nominated to serve as directors exceeds the authorized number of directors
to be elected and the number of directors is reduced below such authorized number due to the failure of one or more directors
to be elected or re-elected by a majority of the votes cast at such meeting, then of the persons properly nominated to be elected
as directors, those receiving the highest number of votes in favor of election or re-election will be elected or re-elected as
directors until the next annual general meeting. The Avadel Constitution provides that if, at any meeting of shareholders,
resolutions are passed by a majority of the votes cast at such meeting in respect of the election or re-election of directors
which would result in the authorized number of directors being exceeded, then those number of directors, as exceeds such authorized
number, receiving at that meeting the lowest number of votes in favor of election or re-election shall not be elected or re-elected
as a director.
Holders of our ordinary
shares are entitled to one vote for each share at all meetings at which directors are elected.
Board
Vacancies
Any vacancy on our
board of directors, including a vacancy resulting from an increase in the number of directors or from the death, resignation,
retirement, disqualification or removal of a director, shall be deemed a casual vacancy. Subject to the terms of any one or more
classes or series of preferred shares, any casual vacancy shall only be filled by the decision of a majority of our board of directors
then in office, provided that a quorum is present and provided that the appointment does not cause the number of directors to
exceed any number fixed by or in accordance with the Avadel Constitution as the maximum number of directors.
Any director of a
class of directors elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office
for the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors
shall have the same remaining term as that of his predecessor. A director retiring at a meeting shall retain office until the
close or adjournment of the meeting.
Resignation,
Removal and Disqualification of Directors
The Irish Companies
Act provides that, notwithstanding anything contained in the constitution of a company or in any agreement between that company
and a director, the shareholders may by an ordinary resolution remove a director from office before the expiration of his or her
term. The power of removal is without prejudice to any claim for damages for breach of contract (e.g., employment contract)
which the director may have against us in respect of his or her removal.
The Avadel Constitution
also provides that the office of a director will also be vacated if the director is restricted or disqualified to act as a director
under the Irish Companies Act; resigns his or her office by notice in writing to us or in writing offers to resign and the directors
resolve to accept such offer; or is requested to resign in writing by not less than 75% of the other directors.
Indemnification Agreements
To the fullest extent
permitted by Irish law, the Avadel Constitution contains indemnification for the benefit of our directors, company secretary and
executive officers. However, as to our directors and company secretary, this indemnity is limited by the Irish Companies Act,
which prescribes that an advance commitment to indemnify only permits a company to pay the costs or discharge the liability of
a director or company secretary where judgment is given in favor of the director or company secretary in any civil or criminal
action in respect of such costs or liability, or where an Irish court grants relief because the director or company secretary
acted honestly and reasonably and ought fairly to be excused. Any provision whereby an Irish company seeks to commit in advance
to indemnify its directors or company secretary over and above the limitations imposed by the Irish Companies Act will be void,
whether contained in its articles of association or any contract between the company and the director or company secretary. This
restriction does not apply to our executive officers who are not directors, our company secretary or other persons who would be
considered “officers” within the meaning of the Irish Companies Act.
We are permitted under
the Avadel Constitution and the Irish Companies Act to take out directors' and officers’ liability insurance, as well as
other types of insurance, for our directors, officers, employees and agents. In order to attract and retain qualified directors
and officers, we expect to purchase and maintain customary directors' and officers’ liability insurance and other types
of comparable insurance.
Each of the employment
agreements between Flamel and its executive officers includes a provision obligating Flamel to indemnify
the
employee from liability arising from his or her services to us, except to the extent such liability was the result
of his or her fraud, gross negligence, or reckless or intentional misconduct. These indemnity obligations will become binding
obligations of Avadel plc as a result of the Merger.
At present, there is no pending litigation or proceeding involving
any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened
litigation or proceeding that may result in a claim for indemnification.
The indemnification
provisions in the Avadel Constitution may discourage shareholders from bringing a lawsuit against directors for breach of their
fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an
action, if successful, might benefit us and our shareholders. A shareholder’s investment may be harmed to the extent we
pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar
as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. There is no pending litigation or proceeding naming
any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation
that may result in claims for indemnification by any director or officer.
Legal Name;
Formation; Fiscal Year; Registered Office
The current legal
and commercial name of Avadel is Avadel Pharmaceuticals Limited. Avadel was incorporated in Ireland on December 1, 2015 as a private
limited company, under the name Fccml Limited (registration number 572535). Avadel’s fiscal year ends on December 31 and
its registered address is Block 10-1 Blanchardstown, Corporate Park, Ballycoolin, Dublin 15, Ireland.
Duration;
Dissolution; Rights Upon Liquidation
The duration of our
company as Avadel plc will be unlimited. We may be dissolved and wound up at any time by way of a shareholders’ voluntary
winding up or a creditors’ winding up. In the case of a shareholders’ voluntary winding up, a special resolution of
shareholders is required. Our company may also be dissolved by way of court order on the application of a creditor, or by the
Companies Registration Office as an enforcement measure if we have failed to file certain returns. We may also be dissolved by
the Director of Corporate Enforcement in Ireland where our affairs have been investigated by an inspector and it appears from
the report or any information obtained by the Director of Corporate Enforcement that we should be wound up.
If the Avadel Constitution
contains no specific provisions in respect of a dissolution or winding up, then, subject to the priorities of any creditors, the
assets will be distributed to our shareholders in proportion to the paid-up nominal value of the shares held. The Avadel Constitution
provides that our ordinary shareholders are entitled to participate pro rata in a winding up, but their right to do so may be
subject to the rights of any preference shareholders to participate under the terms of any series or class of preferred shares.
Uncertificated
Shares
Holders of our ordinary
shares have the right upon request to require Avadel plc to issue share certificates for their shares subject to payment of a
nominal fee. Subject to any such requests, Avadel plc intends only to issue uncertificated shares.
No Sinking
Fund
Our ordinary shares
do not have sinking fund provisions.
No
Liability for Further Calls or Assessments
The
shares to be issued in the Merger will be duly and validly issued and fully paid.
Transfer and Registration
of Shares
A substantial majority
of the ordinary shares of Avadel plc will be represented by ADSs which will be listed for trading on the Nasdaq Global Market,
and therefore the procedures applicable to the trades of Avadel plc ADSs will be subject to the same procedures currently applicable
to trading in Flamel ADSs. For shareholders who will own Avadel plc ordinary shares directly, the transfer agent for Avadel plc
will maintain a share register which will reflect such ownership and the resulting membership in Avadel plc. Persons who own Avadel
plc ordinary shares beneficially (either in the form of ADSs or as shares that are held by a broker or other third party nominee)
will not be the holder of record of such shares. Instead, the depository or other nominee will be the holder of record of those
shares. Accordingly, a transfer of shares from a person who holds such shares beneficially to a person who also holds such shares
beneficially through a depository or other nominee will not be registered in Avadel plc’s official share register, as the
depository or other nominee will remain the record holder of any such shares.
A written instrument
of transfer is required under Irish law in order to register on our official share register any transfer of shares (1) from
a person who holds such shares directly to any other person, (2) from a person who holds such shares beneficially but not
directly to a person who holds such shares directly, or (3) from a person who holds such shares beneficially to another person
who holds such shares beneficially where the transfer involves a change in the depository or other nominee that is the record
owner of the transferred shares. An instrument of transfer is also required for a shareholder who directly holds shares to transfer
those shares into or out of his or her own broker account. Such instruments of transfer may give rise to Irish stamp duty, which
must be paid prior to registration of the transfer on our official Irish share register. However, a shareholder who directly holds
shares outside of DTC may transfer those shares into DTC without giving rise to Irish stamp duty provided that (a) there
is no change in beneficial ownership of the shares and (b) at the time of the transfer into or out of DTC there is no agreement
in place for the sale of the shares by the beneficial owner to a third party.
Any transfer of our
ordinary shares that is subject to Irish stamp duty will not be registered in the name of the buyer unless an instrument of transfer
is duly stamped, the stamp duty thereon is paid by one of the parties and the instrument is provided to the transfer agent. We,
in our absolute discretion and insofar as the Irish Companies Act or any other applicable law permits, may, or may procure that
we or a subsidiary of our company shall, pay Irish stamp duty arising on a transfer of our ordinary shares on behalf of the transferee
of such ordinary shares. If stamp duty resulting from the transfer of such ordinary shares which would otherwise be payable by
the transferee is paid by our company or any subsidiary of our company on behalf of the transferee, then in those circumstances,
we intend to, on our behalf or on behalf of our subsidiary, take one or a combination of the following actions: (1) require
the transferee to pay to us or a subsidiary of our company the amount of such stamp duty and refuse to register such transfer
until that amount is paid, (2) seek reimbursement of the stamp duty from the transferee, (3) set-off the stamp duty
against any dividends payable to the transferee of those ordinary shares and (4) claim a first and permanent lien on the
ordinary shares on which stamp duty has been paid by us or our subsidiary for the amount of stamp duty paid. Our lien shall extend
to all dividends paid on those ordinary shares. The Avadel Constitution delegates authority to our company secretary (or his or
her nominee) to execute an instrument of transfer on behalf of a transferring party.
In order to help ensure
that the official share register is regularly updated to reflect trading of our ordinary shares occurring through normal electronic
systems, we intend to regularly produce any required instruments of transfer in connection with any transactions for which we
pay stamp duty, subject to the reimbursement and set-off rights described above. In the event that we notify one or both of the
parties to a share transfer that we believe stamp duty is required to be paid in connection with the transfer and that we will
not pay the stamp duty, the parties may either themselves arrange for the execution of the required instrument of transfer (and
may request a form of instrument of transfer from us for this purpose) or request that we execute an instrument of transfer on
behalf of the transferring party in a form determined by us. In either event, if the parties to the share transfer have the instrument
of transfer duly stamped to the extent required and then provide it to our transfer agent, the buyer will be registered as the
legal owner of the relevant shares on our official Irish share register, subject to the suspension right described below.
Our directors have
general discretion to decline to register an instrument of transfer unless the transfer is in respect of one class of shares only.
Our directors may suspend registration of transfers from time to time, not exceeding 30 days in aggregate each year.
Anti-Takeover
Provisions
Business
Combinations with Interested Shareholders
The Avadel Constitution
includes a provision similar to Section 203 of the Delaware General Corporation Law, which generally prohibits us from engaging
in a business combination with an interested shareholder for a period of three years following the date the person became an interested
shareholder, unless, in general:
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our board of directors approved
the transaction which resulted in the shareholder becoming an interested shareholder;
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upon consummation of the transaction
which resulted in the shareholder becoming an interested shareholder, the shareholder
owned at least 85% of the voting shares outstanding at the time of commencement of such
transaction, excluding for purposes of determining the number of voting shares outstanding
(but not the outstanding voting shares owned by the interested shareholder), voting shares
owned by persons who are directors and also officers and by certain employee share plans;
or
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the business combination is approved
by our board of directors and authorized at an annual or extraordinary general meeting
of shareholders by the affirmative vote of the holders of at least 75% of the outstanding
voting shares that are not owned by the interested shareholder.
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A “business
combination” is generally defined as a merger, asset or stock sale or other transaction resulting in a financial benefit
to the interested shareholder. An “interested shareholder” is generally defined as a person who, together with affiliates
and associates, owns or, within three years prior to the date in question, owned 15% or more of our outstanding voting shares.
Irish
Takeover Rules and Substantial Acquisition Rules
A transaction in which
a third party seeks to acquire 30% or more of our voting rights and any other acquisitions of our securities will be governed
by the Irish Takeover Panel Act 1997 and the Irish Takeover Rules made thereunder, or the Irish Takeover Rules, and will be regulated
by the Irish Takeover Panel. The “General Principles” of the Irish Takeover Rules and certain important aspects of
the Irish Takeover Rules are described below.
General
Principles
The Irish Takeover
Rules are built on the following General Principles which will apply to any transaction regulated by the Irish Takeover Panel:
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in the event of an offer, all
holders of securities of the target company must be afforded equivalent treatment and,
if a person acquires control of a company, the other holders of securities must be protected;
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the holders of securities in the
target company must have sufficient time and information to enable them to reach a properly
informed decision on the offer; where it advises the holders of securities, the board
of directors of the target company must give its views on the effects of the implementation
of the offer on employment, employment conditions and the locations of the target company’s
place of business;
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a target company’s board
of directors must act in the interests of that company as a whole and must not deny the
holders of securities the opportunity to decide on the merits of the offer;
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false markets must not be created
in the securities of the target company, the bidder or any other company concerned by
the offer in such a way that the rise or fall of the prices of the securities becomes
artificial and the normal functioning of the markets is distorted;
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a bidder can only announce an
offer after ensuring that he or she can fulfill in full the consideration offered, if
such is offered, and after taking all reasonable measures to secure the implementation
of any other type of consideration;
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a target company may not be hindered
in the conduct of its affairs longer than is reasonable by an offer for its securities;
and
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a “substantial acquisition”
of securities, whether such acquisition is to be effected by one transaction or a series
of transactions, shall take place only at an acceptable speed and shall be subject to
adequate and timely disclosure.
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Mandatory
Bid
Under certain circumstances,
a person who acquires shares, or other voting securities, of a company may be required under the Irish Takeover Rules to make
a mandatory cash offer for the remaining outstanding voting securities in that company at a price not less than the highest price
paid for the securities by the acquiror, or any parties acting in concert with the acquiror, during the previous 12 months.
This mandatory bid requirement is triggered if an acquisition of securities would increase the aggregate holding of an acquiror,
including the holdings of any parties acting in concert with the acquiror, to securities representing 30% or more of the voting
rights in a company, unless the Irish Takeover Panel otherwise consents. An acquisition of securities by a person holding, together
with its concert parties, securities representing between 30% and 50% of the voting rights in a company would also trigger the
mandatory bid requirement if, after giving effect to the acquisition, the percentage of the voting rights held by that person,
together with its concert parties, would increase by 0.05% within a 12-month period. Any person, excluding any parties acting
in concert with the holder, holding securities representing more than 50% of the voting rights of a company is not subject to
these mandatory offer requirements in purchasing additional securities.
Voluntary
Bid; Requirements to Make a Cash Offer and Minimum Price Requirements
If a person makes
a voluntary offer to acquire our outstanding ordinary shares, the offer price must not be less than the highest price paid for
our ordinary shares by the bidder or its concert parties during the three-month period prior to the commencement of the offer
period. The Irish Takeover Panel has the power to extend the “look back” period to 12 months if the Irish Takeover
Panel, taking into account the General Principles, believes it is appropriate to do so.
If the bidder or any
of its concert parties has acquired our ordinary shares (1) during the 12-month period prior to the commencement of the offer
period that represent more than 10% of our total ordinary shares or (2) at any time after the commencement of the offer period,
the offer must be in cash or accompanied by a full cash alternative and the price per ordinary share must not be less than the
highest price paid by the bidder or its concert parties during, in the case of clause (1), the 12-month period prior to the
commencement of the offer period or, in the case of (2), the offer period. The Irish Takeover Panel may apply this Rule to a bidder
who, together with its concert parties, has acquired less than 10% of our total ordinary shares in the 12-month period prior to
the commencement of the offer period if the Irish Takeover Panel, taking into account the General Principles, considers it just
and proper to do so.
An offer period will
generally commence from the date of the first announcement of the offer or proposed offer.
Substantial
Acquisition Rules
The Irish Takeover
Rules also contain rules governing substantial acquisitions of shares and other voting securities which restrict the speed at
which a person may increase his or her holding of shares and rights over shares to an aggregate of between 15% and 30% of the
voting rights of the company. Except in certain circumstances, an acquisition or series of acquisitions of shares or rights over
shares representing 10% or more of the voting rights of the company is prohibited, if such acquisition(s), when aggregated with
shares or rights already held, would result in the acquirer holding 15% or more but less than 30% of the voting rights of the
company and such acquisitions are made within a period of seven days. These rules also require accelerated disclosure of acquisitions
of shares or rights over shares relating to such holdings.
Frustrating
Action
Under the Irish Takeover
Rules, our board of directors is not permitted to take any action that might frustrate an offer for our shares once our board
of directors has received an approach that may lead to an offer or has reason to believe that such an offer is or may be imminent,
subject to certain exceptions. Potentially frustrating actions such as 1) the issue of shares, options, restricted share
units or convertible securities, (2) material acquisitions or disposals, (3) entering into contracts other than in the
ordinary course of business or (4) any action, other than seeking alternative offers, which may result in frustration of
an offer, are prohibited during the course of an offer or at any earlier time during which our board of directors has reason to
believe an offer is or may be imminent. Exceptions to this prohibition are available where:
(a)
the action is approved
by our shareholders at a general meeting; or
(b)
the Irish Takeover
Panel has given its consent, where:
(i)
it is satisfied the
action would not constitute frustrating action;
(ii) our shareholders holding
more than 50% of the voting rights state in writing that they approve the proposed action and would vote in favor of it at a general
meeting;
(iii) the action is taken in accordance
with a contract entered into prior to the announcement of the offer, or any earlier time at which our board of directors considered
the offer to be imminent; or
(iv)
the decision to take
such action was made before the announcement of the offer and either has been at least partially implemented or is in the ordinary
course of business.
Shareholders’
Rights Plan
Irish law does not
expressly authorize or prohibit companies from issuing share purchase rights or adopting a shareholder rights plan as an anti-takeover
measure. However, there is no directly relevant case law on the validity of such plans under Irish law. In addition, such a plan
would be subject to the Irish Takeover Rules and the General Principles underlying the Irish Takeover Rules. The Avadel Constitution
allows our board of directors to adopt a shareholder rights plan upon such terms and conditions as our board of directors deems
expedient and in the best interests of us, subject to applicable law.
Subject to the Irish
Takeover Rules, our board of directors also has power to issue any of our authorized and unissued shares on such terms and conditions
as it may determine and any such action should be taken in our best interests. It is possible, however, that the terms and conditions
of any issue of preference shares could discourage a takeover or other transaction that holders of some or a majority of the ordinary
shares believe to be in their best interests or in which holders might receive a premium for their shares over the then-market
price of the shares.
Disclosure
of Interests in Shares
Under the Irish Companies
Act, our shareholders must notify us if, as a result of a transaction, the shareholder will become interested in three percent
or more of our voting shares, or if as a result of a transaction a shareholder who was interested in three percent or more of
our voting shares ceases to be so interested. Where a shareholder is interested in three percent or more of our voting shares,
the shareholder must notify us of any alteration of his or her interest that brings his or her total holding through the nearest
whole percentage number, whether an increase or a reduction. The relevant percentage figure is calculated by reference to the
aggregate nominal value of the voting shares in which the shareholder is interested as a proportion of the entire nominal value
of our issued share capital (or any such class of share capital in issue). Where the percentage level of the shareholder’s
interest does not amount to a whole percentage, this figure may be rounded down to the next whole number. We must be notified
within five business days of the transaction or alteration of the shareholder’s interests that gave rise to the notification
requirement. If a shareholder fails to comply with these notification requirements, the shareholder's rights in respect of any
of our shares it holds will not be enforceable, either directly or indirectly. However, such person may apply to the court to
have the rights attaching to such shares reinstated.
In addition to these
disclosure requirements, we, under the Irish Companies Act, may, by notice in writing, require a person whom we know or have reasonable
cause to believe to be, or at any time during the three years immediately preceding the date on which such notice is issued to
have been, interested in shares comprised in our relevant share capital to (i) indicate whether or not it is the case and
(ii) where such person holds or has during that time held an interest in our shares, to provide additional information, including
the person's own past or present interests in our shares. If the recipient of the notice fails to respond within the reasonable
time period specified in the notice, we may apply to the Irish court for an order directing that the affected shares be subject
to certain restrictions, as prescribed by the Irish Companies Act, as follows:
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any transfer of those shares or,
in the case of unissued shares, any transfer of the right to be issued with shares and
any issue of shares, shall be void;
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no voting rights shall be exercisable
in respect of those shares;
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no further shares shall be issued
in right of those shares or in pursuance of any offer made to the holder of those shares;
and
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no payment shall be made of any
sums due from us on those shares, whether in respect of capital or otherwise.
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The court may also
order that shares subject to any of these restrictions be sold with the restrictions terminating upon the completion of the sale.
In the event we are
in an offer period pursuant to the Irish Takeover Rules, accelerated disclosure provisions apply for persons holding an interest
in our securities of one percent or more.
Description
of ADSs Representing Avadel plc Ordinary Shares
American
Depositary Shares
The Bank of New York
Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent
one Avadel ordinary shares (or a right to receive one share) deposited with
, as custodian for the depositary in .
Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The depositary’s
office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York
Mellon’s principal executive office is located at 225 Liberty Street, New York, New York 10286.
You may hold ADSs
either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing
a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly
by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant
in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to
as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures
of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult
with your broker or financial institution to find out what those procedures are.
Registered holders
of uncertificated ADSs will receive statements from the depositary confirming their holdings. As an ADS holder, Avadel will not
treat you as one of our shareholders and you will not have shareholder rights. Irish law governs shareholder rights. The depositary
will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit
agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder
rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
The following is a
summary of the material provisions of the deposit agreement, which we anticipate Avadel plc will enter into with The Bank of New
York prior to the Merger.
Dividends
and Other Distributions
How
will you receive dividends and other distributions on the shares?
The depositary for
Avadel plc will agree to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives
on shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions
in proportion to the number of shares your ADSs represent.
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Cash
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The
depositary will convert any cash dividend or other cash distribution Avadel pays on the
shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the
U.S. dollars to the United States. If that is not possible or if any government approval
is needed and cannot be obtained, the deposit agreement allows the depositary to distribute
the foreign currency only to those ADS holders to whom it is possible to do so. It will
hold the foreign currency it cannot convert for the account of the ADS holders who have
not been paid. It will not invest the foreign currency and it will not be liable for
any interest.
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Before making a distribution,
any withholding taxes, or other governmental charges that must be paid will be deducted. See “
Material Tax Considerations
Relating to the Merger
.” It will distribute only whole U.S. dollars and cents and will round fractional cents to the
nearest whole cent.
If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency,
you may lose some of the value of the distribution.
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Shares
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The
depositary may distribute additional ADSs representing any shares Avadel plc distributes
as a dividend or free distribution. The depositary will only distribute whole ADSs. It
will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing
those shares) and distribute the net proceeds in the same way as it does with cash. If
the depositary does not distribute additional ADSs, the outstanding ADSs will also represent
the new shares. The depositary may sell a portion of the distributed shares (or ADSs
representing those shares) sufficient to pay its fees and expenses in connection with
that distribution.
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Rights
to purchase additional shares
.
If Avadel plc offers holders of our securities any rights to subscribe
for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute
those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction
or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights
to lapse.
In that case, you will receive no value for them.
The depositary will exercise or distribute rights only if Avadel
ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise rights,
it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs
representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary.
U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise
of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
Other
Distributions
.
The depositary will send to ADS holders anything else Avadel plc distributes on deposited
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary
has a choice. It may decide to sell what Avadel plc distributed and distribute the net proceeds, in the same way as it does with
cash. Or, it may decide to hold what Avadel plc distributed, in which case ADSs will also represent the newly distributed property.
However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory
evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or
property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability
of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions
on transfer.
The depositary
is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. Avadel
has no obligation to register ADSs, shares, rights or other securities under the Securities Act. Avadel plc also has no obligation
to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders.
This means
that you may not receive the distributions Avadel makes on its shares or any value for them if it is illegal or impractical for
Avadel to make them available to you
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Deposit, Withdrawal
and Cancellation
How are ADSs issued?
The depositary
will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment
of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will
register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person
or persons that made the deposit.
How can ADS holders withdraw
the deposited securities?
You may
surrender your ADSs for the purpose of withdrawal at the depositary’s office. Upon payment of its fees and expenses and
of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and
any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the
custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible.
The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.
How do ADS holders interchange
between certificated ADSs and uncertificated ADSs?
You may
surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel
that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated
ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange
of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those
ADSs.
Voting Rights
How do you vote?
ADS holders
may instruct the depositary how to vote the number of deposited shares their ADSs represent. If Avadel plc requests the depositary
to solicit your voting instructions (and Avadel plc is not required to do so), the depositary will notify you of a shareholders’
meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain
how ADS holders may instruct the depositary how to vote. For instructions to be valid, they much reach the depositary by a date
set by the depositary. or as described in the following sentence.
The depositary
will try, as far as practical, subject to the laws of Ireland and the provisions of our articles of association or similar documents,
to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If Avadel plc does not
request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary
may try to vote as you instruct, but it is not required to do so. If Avadel plc asked the depositary to solicit your instructions
at least 30 days before the meeting date but the depositary does not receive voting instructions from you by the specified date,
it will consider you to have authorized and directed it to give a discretionary proxy to a person designated by us to vote the
number of deposited securities represented by your ADSs. The depositary will give a discretionary proxy in those circumstances
to vote on all questions at to be voted upon unless Avadel notifies the depositary that:
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Avadel
does not wish to receive a discretionary proxy;
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there
is substantial shareholder opposition to the particular question; or
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the
particular question would have an adverse impact on our shareholders.
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Avadel plc
is required to notify the depositary if one of the conditions specified above exists.
Except
by instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your
ADSs and withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares.
In any
event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote
as instructed.
Avadel plc
cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your
shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the
manner of carrying out voting instructions.
This means that you may not be able to exercise voting rights and there may be
nothing you can do if your shares are not voted as you requested.
In order
to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to Deposited Securities,
if Avadel requests the depositary to act, Avadel plc agrees to give the depositary notice of any such meeting and details concerning
the matters to be voted upon at least 45 days in advance of the meeting date.
Fees
and Expenses
Persons depositing or withdrawing shares or
ADS holders must pay
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For
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$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
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Issuance of ADSs, including issuances
resulting from a distribution of shares or rights or other property
Cancellation of ADSs for the purpose
of withdrawal, including if the deposit agreement terminates
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$.05 (or less) per ADS
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Any cash distribution to ADS holders
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A fee equivalent to the fee that would be payable if securities distributed to you had been shares
and the shares had been deposited for issuance of ADSs
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Distribution of securities distributed to holders of deposited securities (including rights)
that are distributed by the depositary to ADS holders
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$.05 (or less) per ADS per calendar year
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Depositary services
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Registration or transfer fees
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Transfer and registration of shares on our share register to or from the name of the depositary
or its agent when you deposit or withdraw shares
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Expenses of the depositary
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Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
converting foreign currency to U.S. dollars
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Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or
shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes
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As necessary
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Any charges incurred by the depositary or its agents for servicing the deposited securities
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As necessary
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The depositary collects
its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of
withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting
those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may
collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging
the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any
cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated
to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are
paid.
From time to time,
the depositary may make payments to Avadel plc to reimburse it for costs and expenses generally arising out of establishment and
maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the
fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers,
foreign currency dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share
fees, spreads or commissions.
The depositary may
convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as
agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction
spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the
exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate
receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange
rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained
at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the
depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency
conversions is available upon request.
Payment of Taxes
You will be responsible
for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs.
The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented
by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented
by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells
deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds,
or send to ADS holders any property, remaining after it has paid the taxes.
Tender and Exchange
Offers; Redemption, Replacement or Cancellation of Deposited Securities
The depositary will
not tender deposited securities in any voluntary tender or exchange offer unless instructed to do by an ADS holder surrendering
ADSs and subject to any conditions or procedures the depositary may establish.
If deposited securities
are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary
will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs
upon surrender of those ADSs.
If there is any change
in the deposited securities such as a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization
or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for
or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited securities under
the deposit agreement. However, if the depositary decides it would not be lawful and to hold the replacement securities because
those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement
securities and distribute the net proceeds upon surrender of the ADSs.
If there is a replacement
of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute
new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying
the new deposited securities.
If there are no deposited
securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs
have become apparently worthless, the depositary may call for surrender or of those ADSs or cancel those ADSs upon notice to the
ADS holders.
Amendment and Termination
How may the
deposit agreement be amended?
Avadel plc may agree
with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases
fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile
costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding
ADSs until 30 days after the depositary notifies ADS holders of the amendment.
At the time an amendment becomes effective,
you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement
as amended
.
How may the
deposit agreement be terminated?
The depositary will
initiate termination of the deposit agreement if Avadel plc instructs it to do so. The depositary may initiate termination of
the deposit agreement if
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60
days have passed since the depositary told Avadel plc it wants to resign but a successor
depositary has not been appointed and accepted its appointment;
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Avadel
plc delists its shares from an exchange on which they were listed and does not list the
shares on another exchange;
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Avadel
plc appears to be insolvent or enters insolvency proceedings
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all
or substantially all the value of the deposited securities has been distributed either
in cash or in the form of securities;
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there
are no deposited securities underlying the ADSs or the underlying deposited securities
have become apparently worthless; or
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there
has been a replacement of deposited securities.
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If the deposit agreement
terminates, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination
date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale,
as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the
pro
rata
benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as
soon as practicable after the termination date.
After the termination
date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities,
except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if it would interfere
with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all
the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities,
but
,
after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other
distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any
other duties under the deposit agreement except as described in this paragraph.
Limitations on
Obligations and Liability
Limits on Avadel
plc’s Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement
expressly limits the obligations of Avadel plc and the depositary. It also limits Avadel’s liability and the liability of
the depositary. Avadel and the depositary:
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are
only obligated to take the actions specifically set forth in the deposit agreement without
negligence or bad faith;
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are
not liable if Avadel plc or it is prevented or delayed by law or circumstances beyond
Avadel plc’s or the depositary’s control from performing Avadel plc’s
or its obligations under the deposit agreement;
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are
not liable if Avadel plc or it exercises discretion permitted under the deposit agreement;
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are
not liable for the inability of any holder of ADSs to benefit from any distribution on
deposited securities that is not made available to holders of ADSs under the terms of
the deposit agreement, or for any special, consequential or punitive damages for any
breach of the terms of the deposit agreement;
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have
no obligation to become involved in a lawsuit or other proceeding related to the ADSs
or the deposit agreement on your behalf or on behalf of any other person;
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are
not liable for the acts or omissions of any securities depository, clearing agency or
settlement system; and
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may
rely upon any documents Avadel plc believes or it believes in good faith to be genuine
and to have been signed or presented by the proper person.
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In the deposit agreement,
Avadel plc and the depositary agree to indemnify each other under certain circumstances.
Requirements for
Depositary Actions
Before the depositary
will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:
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payment
of stock transfer or other taxes or other governmental charges and transfer or registration
fees charged by third parties for the transfer of any shares or other deposited securities;
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satisfactory
proof of the identity and genuineness of any signature or other information it deems
necessary; and
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compliance
with regulations it may establish, from time to time, consistent with the deposit agreement,
including presentation of transfer documents.
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The depositary may
refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed
or at any time if the depositary or Avadel plc thinks it advisable to do so.
Your Right to Receive
the Shares Underlying your ADSs
ADS holders have the
right to cancel their ADSs and withdraw the underlying shares at any time except:
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when
temporary delays arise because: (i) the depositary has closed its transfer books or Avadel
plc has closed our transfer books; (ii) the transfer of shares is blocked to permit voting
at a shareholders' meeting; or (iii) Avadel plc is paying a dividend on its shares;
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when
you owe money to pay fees, taxes and similar charges; or
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when
it is necessary to prohibit withdrawals in order to comply with any laws or governmental
regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.
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This right of withdrawal
may not be limited by any other provision of the deposit agreement.
Pre-release of
ADSs
The deposit agreement
permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The
depositary may also deliver shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release
transaction has been closed out). A pre-release is closed out as soon as the underlying shares are delivered to the depositary.
The depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the
following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents
to the depositary in writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized
with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the
pre-release on not more than five business days' notice. In addition, the depositary will limit the number of ADSs that may be
outstanding at any time as a result of pre-release, although the depositary may disregard the limit from time to time if it thinks
it is appropriate to do so.
Direct Registration
System
In the deposit
agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and
Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates
interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC
participant. Profile is feature of DRSs that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated
ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC
account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that
transfer.
In connection with
and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand
that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in
requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf
of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties
agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile
system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
Shareholder communications;
inspection of register of holders of ADSs
The depositary will
make available for your inspection at its office all communications that it receives from us as a holder of deposited securities
that Avadel makes generally available to holders of deposited securities. The depositary will send you copies of those communications
or otherwise make those communications available to you if Avadel plc asks it to. You have a right to inspect the register of
holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to Avadel plc’s business or
the ADSs.
Comparison
of Shareholder Rights Before and After the Merger
Flamel is currently
a
société anonyme
, or S.A., incorporated under the laws of France. As a result of the Merger, Flamel will
merge with and into Avadel plc, Flamel will cease to exist as a separate entity, and you will own a number of shares (or, as applicable
ADSs) of Avadel plc equal to the number of shares you owned in Flamel immediately prior to the Merger. Avadel plc will be a public
limited company incorporated under the laws of Ireland, and your rights as a shareholder of Avadel plc will be governed by applicable
Irish law, including the Irish Companies Act 2014 (the “Irish Companies Act”).
The laws applicable
to French
sociétés anonymes
differ from the laws applicable to Irish companies and their shareholders and
a
s a result, our directors and shareholders will be subject to different
responsibilities, rights and privileges after the Merger. Set forth below is a summary of the differences between the provisions
of the laws of France applicable to your shares of Flamel as
a
société anonyme
before the Merger, and the provisions of the Irish Companies Act that will be applicable to your shares of Avadel plc after the
Merger. This summary is not intended to be a complete discussion of the respective rights and it is qualified in its entirety
by reference to Irish law, French law and the Flamel bylaws (
statuts
), which we have filed with the SEC, and the Avadel
Constitution, which is attached hereto as Annex D. The summary below does not include a description of rights or obligations under
the U.S. federal securities laws or Nasdaq listing requirements. You should also carefully read the relevant provisions of French
Law and the Irish Companies Act for a more complete understanding of the differences between French and Irish law.
French
Law
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Irish
Law
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Authorized
Capital; Procedure for Changes
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Authorized
Capital; Procedure for Changes
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Flamel’s issued share capital
is five million twenty-nine thousand seven hundred and eighty three Euros (5,029,783€), divided into 41,241,254 shares
each with a value of €0.12196.
Under French law, the issued share
capital may be increased or reduced by shareholders’ action at an extraordinary meeting, under the quorum and majority
vote requirements applicable to such shareholders extraordinary meetings. However, an increase in share capital effected
by increasing the par value of shares requires unanimous approval of the shareholders, unless effected by capitalization
of reserves, profits or share premium.
If the number of outstanding shares
is reduced by repurchasing shares, holders of each class of shares must be treated equally unless each affected shareholder
agrees otherwise.
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Avadel plc’s authorized
share capital after the Merger will be $5,500,000 comprising 500,000,000 ordinary shares of $0.01 each and 50,000,000
preferred shares of $0.01 each, plus €25,000 comprising 25,000 deferred ordinary shares of €1.00 each.
Under Irish law, authorized share
capital may be increased or reduced, but not below the number of issued ordinary shares or preferred shares, as applicable,
by a simple majority of the votes cast at a shareholders’ meeting by shareholder entitled to vote at that meeting,
referred to under Irish law as an “ordinary resolution.”
A company may, by ordinary resolution,
reduce its authorized share capital in accordance with the Irish Companies Act. A company also may, by special resolution
and subject to confirmation by the Irish High Court, reduce or cancel its issued share capital in any way permitted by
the Irish Companies Act.
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Preemptive
Rights; Consideration for Shares
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Preemptive
Rights; Consideration for Shares
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In an issuance of additional shares
or other securities for cash or set-off against cash debts, existing shareholders have
pro rata
preferential subscription
rights unless waived by a two-thirds majority of the votes held by the shareholders present or represented at the extraordinary
general meeting approving the capital increase. If such rights are not waived, each shareholder individually may exercise,
assign or not exercise its preferential rights.
Under French law, a corporation
may issue free shares, amounting to up to 10% of its share capital (which percentage may be increased to 15% under certain
conditions), to the benefit of its employees and/or officers. The grant is authorized by a shareholders’ extraordinary
meeting and the board of directors then decides to grant the free shares. The actual issuance of the shares to their beneficiaries
only occurs at the end of a vesting period determined by the shareholders’ extraordinary meeting. During the vesting
period, the beneficiaries only hold a mere “individual receivable”. Flamel has granted free shares, parts
of which are still unvested.
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Shares
issued for cash to new shareholders must first be offered on the same or more favorable terms to existing shareholders on
a
pro rata
basis, unless a company has opted out of such preemption rights in its constitution. The Avadel
Constitution will include such an opt-out provision. An opt-out must be renewed every five years by a special resolution
of the shareholders, and therefore the opt-out in the Avadel Constitution will lapse on the fifth anniversary of the Merger. A
special resolution requires not less than 75% of the votes of shareholders cast at a general meeting. Statutory
preemption rights do not apply to (1) shares issued for non-cash consideration, such as in a share-for-share acquisition,
(2) the issuance of non-equity shares (that is, shares that have the right to participate only up to a specified amount in
any income or capital distribution, which are sometimes referred to as non-participating shares), or (3) shares issued pursuant
to an employee share option or similar equity plan.
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French Law
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Irish Law
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Under French law, a corporation
may issue preferred shares which are shares with or without voting rights, with all kinds of particulars rights, either
permanent or temporary. The corporation’s bylaws define such preferred shares rights and their issuance is subject
to a specific procedure including a contribution appraiser’s report on the specific advantage being attached to
the preferred shares and a special report by the statutory auditor. The issuance of preferred shares and consequently,
the increase of the corporation’s share capital and modification of its bylaws, are authorized by a shareholders’
extraordinary meeting.
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A company is prohibited from allotting
shares for “nil” or no consideration. Accordingly, at least the nominal value of the shares issued underlying
any restricted share award, restricted share unit, performance share awards, bonus shares or any other share-based grants
must be paid pursuant to the Irish Companies Act.
The Avadel Constitution will permit
our board of directors, without shareholder approval, to determine the terms of any preferred shares issued. Preferred
shares may be (i) preferred as to dividends, rights on a winding up or voting in such manner as our directors may resolve,
(ii) redeemable at the option of the holder of the preferred shares or at our option, and (iii) convertible into or exchangeable
for shares of any other class or classes.
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Dividends, Distributions, Repurchases and Redemptions
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Dividends, Distributions, Repurchases and Redemptions
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Dividends and Distributions
Dividends may only be paid out
of “distributable profits,” or “distributable reserves” that the shareholders decide to make available
for distribution. In any case, dividends should be taken, in priority, from the distributable profits of the fiscal year.
“Distributable profits”
are the net profits for each fiscal year, reduced by losses carried forward from prior years and amounts to be allocated
to reserves (either by law or in accordance with the bylaws) and/or increased by the carried forward profits from prior
years.
“Distributable reserves”
include the contribution paid by shareholders over the nominal value of their shares for their subscription that the shareholders
decide to make available for distribution; they exclude the legal reserve (which must amount to 10% of the share capital),
any statutory reserves as well as revaluation surplus (equity account recording the excess of restated assets over historical
cost), which may not be distributed.
Except in case of a share capital
reduction, no distribution can be made to the shareholders when the net equity is, or would become, lower than the amount
of the share capital plus the reserves which cannot be distributed in accordance with the law or the bylaws.
After acknowledging the existence
of reserves, the general shareholders meeting may decide the distribution of the amounts taken from the reserves. In this
case, the decision expressly mentions the reserve accounts from which the amounts are taken. The general shareholders
meeting may also grant to each shareholder, an option between the payment in cash or in shares of all or part of the paid
dividend.
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Dividends and Distributions
Dividends and distributions may
only be made from “distributable reserves,” which generally means accumulated realized profits of the company
less accumulated realized losses, plus any reserves created by way of capital reduction. Dividends or distributions may
only be made to the extent the company’s net assets exceed the aggregate of the company’s called up share
capital plus undistributable reserves and the distribution does not reduce the company’s net assets below such aggregate.
Undistributable reserves include undenominated capital and the amount by which a company’s accumulated unrealized
profits, so far as not previously utilized by any capitalization, exceed the company’s accumulated unrealized losses,
so far as not previously written off in a reduction of capital approved by the Irish High Court without restriction, or
a reorganization of capital.
The determination as to whether
or not a company has sufficient distributable reserves to fund a dividend must be made by reference to the company’s
“relevant financial statements,” which are either the last set of unconsolidated annual audited financial
statements or unaudited financial statements properly prepared in accordance with the Irish Companies Act, which give
a “true and fair view” of a company’s unconsolidated financial position and accord with accepted accounting
practice. The relevant financial statements must be filed in the Companies Registration Office (the official public registry
for companies in Ireland).
Dividends may be declared and
paid in cash or non-cash assets, subject to applicable law, and may be paid in dollars or any other currency.
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French Law
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Irish Law
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Dividends may be declared and
paid in cash or property and are declared in Euros and may be paid in any currency within nine months maximum of the end
of the fiscal year.
Before the approval of the annual
accounts and the setting of a dividend by the annual shareholders’ meeting, an interim dividend may be distributed
by the board of directors. In such a case, the board of directors decides upon financial accounts certified by the statutory
auditor that show a profit since the end of the last fiscal year.
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Share Repurchases and Redemptions
The ordinary general meeting of
a private corporation (Flamel is a private corporation under French law because its shares are listed only in the United
States) may authorize the board of directors, to acquire a number of its own shares for the following purposes only:
a) with
a view to distributing within one year of their repurchase the relevant shares to employees or managers under a profit
sharing, restricted (free) share or share option plan;
b)
to
sell relevant shares to any shareholders willing to purchase them on the occasion of a sale organized by the corporation
itself within three months of each annual ordinary general meeting, within five years of their repurchase; or
c) in
payment or in exchange for assets acquired by the corporation, in the context of an operation for external growth, merger,
de-merger or contribution, within two years of their repurchase.
The number of shares purchased
by the corporation may not exceed (i) 10% of the corporation’s capital where the repurchase is authorized for the
purpose of a transaction specified in paragraph a) or b) above, (ii) 5% of the corporation’s capital where the repurchase
is authorized for the purpose of a transaction specified in the paragraph c) above.
The ordinary general meeting shall
specify the purpose of the transaction. It must state the maximum number of shares for which it must authorize the acquisition,
the price or the procedures for setting the price as well as the duration of the authorization which cannot exceed twelve
months.
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Share Repurchases and Redemptions
The Avadel Constitution will provide
that any ordinary share that we acquire shall be deemed to be a redeemable share. Accordingly, for purposes of Irish law,
the repurchase of ordinary shares by us may technically be effected as a redemption.
A company may issue redeemable
shares and redeem them out of distributable reserves or the proceeds of a new issue of shares for that purpose. A company
may only issue redeemable shares if the nominal value of the issued share capital that is not redeemable is not less than
10% of the nominal value of our total issued share capital. All redeemable shares must also be fully-paid and the terms
of redemption of the shares must provide for payment on redemption.
Shareholders may, at a general
meeting, authorize a company to purchase its shares on a recognized stock exchange such as Nasdaq or off market purchases.
A board of directors may also
issue preferred shares, which may be redeemed at the option of either the company or the shareholder, depending on the
terms of such preferred shares.
Repurchased and redeemed shares
may be cancelled or held as treasury shares. The nominal value of treasury shares held by a company at any time must not
exceed 10% of the nominal value of its issued share capital. A company may not exercise any voting rights in respect of
any shares held as treasury shares. Treasury shares may be canceled by us or re-issued subject to certain conditions.
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French Law
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Irish Law
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The price of the purchased shares
is paid for by way of a debit from the reserves of which the general meeting is entitled to dispose.
The purchased shares shall be
automatically cancelled if they are not used for the purposes and within the time frames stated in paragraphs a) and c)
above.
The ordinary general meeting shall
review the conditions under which the purchase price was set in light of a report drafted by an independent expert, and
of an auditors' special report stating their assessment.
In order to be valid, the share
price may not be greater than the highest value or lower than the lower value stated in the valuation report of the independent
expert disclosed to the general meeting. The board of directors may delegate to the managing director or, with his agreement,
to one or more deputy managing directors, the powers required to execute these transactions. The designated persons shall
report to the board of directors on the use made of that power in the manner stipulated by the latter.
The auditors shall present to
the annual ordinary general meeting a special report on the conditions under which the shares were purchased and used
during the fiscal year ended.
The purchased shares may be cancelled
every twenty-four months within the limit of 10% of the corporation’s share capital. In the event of shares purchased
being cancelled, the capital reduction shall be authorized or decided by an extraordinary general meeting, which may delegate
full powers to effect such cancellation to the board of directors.
By way of exception to the automatic
cancellation, the unused purchased shares may, on decision of the ordinary general meeting, be used for another of the
final purposes described herein.
Under no circumstances shall it
jeopardize equality among the shareholders.
In addition, a corporation may
decide to decrease its share capital, provided that such decision is not driven by losses and that a purchase offer is
made to all shareholders on a
pro rata
basis, with the approval of the shareholders at the extraordinary general
meeting deciding the capital reduction.
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Directors: Number, Qualifications, Vacancies, Removal
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Directors: Number, Qualifications, Vacancies, Removal
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A corporation must have at least
three and may have up to 18 directors. The number of directors is fixed by or in the manner provided in the bylaws.
The members of the board of directors
are appointed by the shareholders ordinary meeting.
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An Irish public limited company
must have at least two directors. The number of directors is fixed by or in the manner provided in the constitution.
An Irish company may prescribe
qualifications for directors under its constitution. A director may not be an undischarged bankrupt.
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French Law
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Irish Law
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The bylaws of the company may
provide that each member of the board of directors must own at least one share during the whole term of his/her office.
Flamel’s bylaws contain such a provision.
According to the bylaws of Flamel,
the term of office of the members of the board of directors is one year. It expires at the end of the shareholders' meeting
called on to rule on the financial statements for the last fiscal year.
The number of members of the board
of directors being over the age of 75 years may not, at any time, exceed one third of the total number of members of the
board of directors in office according to the bylaws.
A corporation may prescribe qualifications
for directors under its bylaws. Members of a board of directors may be legal entities, and such legal entities must designate
an individual to represent them and to act on their behalf at meetings of the board of directors.
Vacancies on the board of directors
resulting from death or a resignation may be filled by a majority of the remaining directors (provided that at least three
directors remain in office) pending ratification by the shareholders by the next shareholders meeting.
A director may be removed from
office before the expiration of his or her term, with or without cause, at any shareholders meeting without notice, pursuant
to an ordinary resolution passed by a simple majority vote of the shareholders present and voting at the meeting in person
or by proxy.
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The Avadel Constitution provides
that the directors shall have the authority to appoint directors to the board, subject to the maximum number in the constitution.
A vacancy caused by the removal of a director may be filled at the meeting of which the director is removed by resolution
of Avadel plc’s shareholders. If not, it may be filled by the board of directors.
A director may be removed from
office before the expiration of his or her term, with or without cause, at any shareholders meeting without notice, pursuant
to an ordinary resolution passed by a simple majority vote of the shareholders present and voting at the meeting in person
or by proxy. The meeting must be held after not less than 28 days’ notice and the director shall be entitled to
be heard at the meeting.
A nominee is elected to the board
of directors by a plurality of the votes cast by shareholders.
The Avadel Constitution will provide
for a minimum of two and a maximum of thirteen directors.
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Board of Directors Actions
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Board of Directors Actions
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The quorum necessary for a board
of directors to transact any business is a majority of the directors in office at the time when the meeting is held.
Except in certain circumstances
(for example, the approval of the company’s accounts) or unless prohibited in the by-laws, directors may attend
board meetings via video or telephone conferencing.
Procedures for convening board
meetings are specified in the bylaws and the frequency of board meetings is not determined by law. Directors may determine
their meeting dates or may allow the chairman to call meetings.
Flamel’s bylaws provide
that the Board Meetings are convened by the Chairman, as frequently as the interests of the corporation so require, either
at the registered office, or in any other place indicated in the convening notice.
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The quorum necessary for the transaction
of business of the directors under Irish law may be fixed by the directors, and unless so fixed shall be two. The Avadel
Constitution provides that the quorum necessary for the board of directors to transact any business is a majority of the
directors in office at the time when the meeting is convened.
A meeting of the board of directors
or a committee thereof may consist of a conference of some or all of the directors (provided there is a quorum), each
of whom may participate directly or by means of telephonic, video or other electronic communication.
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French Law
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Irish Law
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The members of the board are convened
to meetings by any means, even verbally.
When the board of directors have
not met for more than two months, at least one third of the members of the board may request the Chairman to convene a
meeting for a defined agenda.
The managing director may also
request the chairman to convene a meeting for a defined agenda.
The chairman is bound by the requests
that are addressed to him pursuant to these last two paragraphs.
Decisions of the board are made
with the majority of members present or duly represented: each member holds one vote, and each member may only hold one
proxy. According to Flamel’s bylaws, the Chairman has no tie-breaking vote.
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Delegation of Board Authority
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Delegation of Board Authority
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Under French law committees of
the board of directors of a
société anonyme
may only have an advisory role and can only make recommendations
to our full Board of Directors.
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Irish law permits a board of directors
to delegate its authority to such committee as it may determine in its discretion.
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Duties of Directors
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Duties of Directors
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French law does not contain specific
provisions setting forth the standard of conduct of a director. However, directors have a duty to act without self-interest
and on a well-informed basis, and are prohibited from making any decision against a corporation’s interest (
intérêt
social
) and must act within the limit of the corporation’s corporate purpose (
objet social
).
The board determines the orientation
of the corporation's activity and ensures that they are implemented. Subject to the powers expressly granted to the shareholders
meetings and within the corporate purpose, the board may address any issue relating to the good operation of the corporation
and settles corporation business through its deliberations.
In its relations to third parties,
the corporation is bound even by the actions of the board of directors that are unrelated to the corporate purpose, unless
it can prove that the third party knew that the action exceeded the purpose or could not ignore it under the circumstances,
it being excluded that the publication of the by-laws alone is sufficient to constitute such proof.
The board of directors undertakes
the audits and verifications that it considers to be appropriate. Each director receives all the information necessary
to accomplish his mission and has access to all documents that he considers useful.
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Directors are responsible for
the management of the company, and directors who are also employees may have additional responsibilities and duties under
their employment agreements or under applicable law. Section 228 of the Irish Companies Act imposes certain statutory
duties on directors, including the duties to act in good faith, honestly and responsibly, and without conflicts of interest.
Other statutory duties of directors include ensuring the maintenance of proper books of account, having annual accounts
prepared, having an annual audit performed, maintaining certain registers, making certain filings and disclosing personal
interests. Directors of public limited companies such as Avadel plc will have a specific duty to ensure that the company
secretary is a person with the requisite knowledge and experience to discharge the role.
Directors may rely on information,
opinions, reports or statements, including financial statements and other financial data, prepared or presented by (1)
other directors, officers or employees of the company whom the director reasonably believes to be reliable and competent
in the matters prepared or presented, (2) legal counsel, public accountants or other persons as to matters the director
reasonably believes to be within their professional or expert competence, or (3) a committee of the board of which the
director does not serve as to matters within its designated authority, which committee the director reasonably believed
to merit confidence.
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French Law
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Irish Law
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Conflicts of Interest of Directors
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Conflicts of Interest of Directors
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Directors’ decisions must
comply with the corporation’s interests. The directors have individual or joint liability towards the company either
for violation of corporate law provisions (for example in case of non-compliance with rules relating to the holding of
meetings, failure to convene the annual meeting relating to the annual accounts, failure to complete the legal formalities),
for breach of the bylaws, and/or for mismanagement.
Any direct or indirect agreements
between a corporation and its CEO, chairman, directors, supervisory or management board members, or any shareholder owning
more than 10% of the voting rights, or with another corporation having the same legal representatives, are governed by
a specific disclosure and review procedure.
There are three categories of
related-party agreements:
- Prohibited
agreements. The directors are prevented from (i) contracting any form of loans from the corporation, (ii) obtaining from
the corporation an overdraft through a current account or otherwise and/or (iii) having any of their commitments to third
parties guaranteed or secured by the corporation.
- Unrestricted
agreements (“
conventions libres
”) including current operations concluded at normal conditions.
- Regulated
agreements. Regulated agreements are agreements entered into, directly or indirectly, between the corporation and (i)
its legal representatives, (ii) shareholders owning at least 10% of the corporation’s share capital or (iii) another
corporation having the same legal representatives. Such regulated agreements are subject to a prior approval process,
which includes the following steps: first, an information of the board of directors on such agreements, secondly, an authorization
granted by the board of directors, third, notice to the statutory auditors on such agreements, fourth, the statutory auditors’
special report on such agreements and fifth, the vote of the shareholders ordinary meeting on such agreements. Any member
of the board of directors and/or shareholder concerned by such an agreement is prevented from exercising its voting right
in relation to any related decision and therefore is not counted for purposes of calculating the quorum and majority.
Agreements approved by the meeting shall be effective against third parties, as shall those which it refuses, unless they
are cancelled in the event of fraud. Even where there is no fraud, the interested party, and other members of the board
of directors if appropriate, may be held liable for any consequences of unapproved agreements that are damaging to the
company.
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Directors have a general fiduciary
duty to avoid conflicts of interest. Directors who have a personal interest in an actual or proposed contract with us
must declare the nature of the interest at a meeting of the directors. A company is required to maintain a register of
declared interests, which must be available for shareholder inspection.
The Avadel Constitution will provide
that (i) a director may vote in respect of any contract, appointment or arrangement in which he or she is interested,
and he or she shall be counted in the quorum present at the meeting; (ii) a director may be a director of, other officer
of, or otherwise interested in, any company promoted by us or in which we are interested, and such director will not be
accountable to us for any compensation or other benefit received from such employment or other interest, (iii) no director
will be prevented from contracting with us because of his or her position as a director, (iv) any contract entered into
between a director and us will not be subject to avoidance, and (v) no director will be liable to account to us for any
profits realized by virtue of any contract between such director and us because the director holds such office or the
fiduciary relationship established thereby.
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French Law
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Irish Law
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Indemnification of Officers and Directors
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Indemnification of Officers and Directors
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Directors’ liability cannot
be limited by the bylaws of a French corporation or by any board or shareholders action.
Under certain circumstances, officers
can be exempted from criminal liability in cases of valid power delegation with identified employees of the corporation
having the necessary qualification, sufficient authority and means to perform the delegated tasks and act under such delegation
of powers and to effectively ensure all legal rules in the areas referred to in the delegation of powers.
A corporation may procure director
and officer liability insurance, as well as other types of insurance, for their directors, officers, employees and agents.
Insurance generally covers representatives against claims related to breach of duty, negligence, error, omission or commission,
or misstatements. French market practice is to have liability insurance policy contracts for directors, the purpose of
which is to guarantee said directors against all financial consequences of any liability (excluding criminal liability)
with respect to the performance of their office.
In addition, it is possible to
conclude a direct guarantee by the corporation for civil liabilities.
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A company may not exempt its directors
from liability for negligence or a breach of duty. However, where a breach of duty has been established, directors may
be statutorily exempted by an Irish court from personal liability for negligence or breach of duty if, among other things,
the court determines that they have acted honestly and reasonably, and that they may fairly be excused as a result.
Shareholders may not agree to
exempt a director or officer from any claim or right of action the shareholder may have, whether individually or in the
right of a company, on account of any action taken or the failure to take any action in the performance of his or her
duties to that company.
Indemnification is permitted for
the benefit of a company’s directors and executive officers. However, as to directors and company secretary, an
agreement (whether in the constitution or by contract) to indemnify only permits a company to pay the costs or discharge
the liability of a director or company secretary where judgment is given in favor of the director or company secretary
in any civil or criminal action in respect of such costs or liability, or where an Irish court grants relief because the
director or company secretary acted honestly and reasonably and ought fairly to be excused.
The Avadel Constitution will contain
indemnification and expense advancement provisions for current or former executives who are not directors or the company
secretary.
A company may procure directors’
and officers’ liability insurance, as well as other types of insurance, for our directors, officers, employees and
agents. The Avadel Constitution will permit us to, and we intend to, purchase and maintain customary directors’
and officers’ insurance and other types of comparable insurance, in order to attract and retain
qualified directors and officers. In addition, upon or after the Merger we may enter into separate indemnification agreements
with our directors and executive officers, in addition to the indemnification to be provided for in the Avadel Constitution.
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French Law
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Irish Law
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General Meetings of Shareholders
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General Meetings of Shareholders
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Annual general meetings of shareholders
are held at a place, on a date and at a time decided by the board of directors with notice to the shareholders within
6 months after the end of each fiscal year unless such period is extended by court order.
General meetings of the shareholders
may be called (i) by the board of directors, (ii) by the statutory auditors, (iii) by a court appointed agent upon request
of any interested party, the Works Council or one or more shareholders representing at least 5 % of the share capital,
(iv) by a temporary administrator, (v) by a liquidator in certain circumstances, or (vi) by the majority shareholder in
capital or voting rights following a public tender offer or exchange offer or the transfer of a controlling block, on
the date decided by the board of directors or the relevant person. Only the items mentioned on the agenda of the calling
notice may be debated and voted upon at shareholders general meeting.
Notice of all shareholders’
meetings must be given to all of the shareholders, to the statutory auditors and to the representatives of the Works Council.
Such notice must be sent by post or electronically (if the shareholder has chosen such a mean of communication) at least
fifteen days prior to the meeting upon first call and ten days prior to the meeting upon second call.
Meetings take place at the registered
office or at any other place indicated in the calling notice.
Matters required to be transacted
at an annual general meeting are (i) the approval of the statutory financial accounts for the past fiscal year, (ii) the
approval of the consolidated financial statements for the past fiscal year, if applicable; (iii) the approval of the allocation
of the results for the past fiscal year; (iv) the renewal of the members of the board of directors, (v) the annual amount
of members of the board of directors attendance fees (
jetons de presence
) and (vi) the approval of the agreements
with related parties. The minutes of the annual general meetings related to the allocation of results are filed with the
clerk of the Commercial Court within one month of the annual shareholders’ meeting.
Under French law, a company is
said to be thinly capitalized when the net equity is less than half of the issued and paid up share capital. When the
balance sheet of the closed fiscal year shows that the total equity is less than half of the share capital, an extraordinary
general meeting must be convened, by the board of directors, within 4 months of the approval of the annual accounts showing
that net equity stands at less than half of the outstanding share capital, for the shareholders to rule on the dissolution
of the corporation or the continuation of its activity.
If the shareholders decide to
pursue the corporation’s activity, the corporation is required to regularize the situation, no later than the close
of the second fiscal year following that in which the losses had occurred, (i) by reducing its share capital by an amount
at least equal to the losses which could not be charged to reserves, or (ii) by reconstituting the equity to a value at
least equal to half of the share capital.
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Under the Irish Companies Act,
a public limited company must hold its first annual general meeting within 18 months of the date of incorporation. Thereafter,
we are required under Irish law to hold an annual general meeting at intervals of no more than 15 months, provided that
an annual general meeting is held in each calendar year and no more than nine months after our fiscal year-end. Subject
to ensuring that any shareholders in Ireland can participate in an annual general meeting by technological means, any
annual general meeting may be held outside Ireland.
Extraordinary general meetings
may be convened (i) by the board of directors, (ii) on requisition of the shareholders holding the number of our shares
prescribed by the Irish Companies Act (at least 10% of the paid-up share capital of Avadel plc carrying voting rights),
(iii) in certain circumstances, on requisition of our auditors; or (iv) in exceptional cases, by order of the Irish High
Court.
Notice of a general meeting must
be given to a company’s shareholders and auditors. In accordance with Irish law, the Avadel Constitution will provide
for minimum written notice periods of 21 days for an annual general meeting or an extraordinary general meeting to approve
a special resolution and 14 days for any other extraordinary general meeting; with a maximum notice period of 60 days.
For any extraordinary general
meeting called by shareholders, the proposed purpose of the meeting must be set out in the notice of meeting. The notice
can contain any resolution. Upon receipt of such a notice, the board of directors has 21 days to convene a meeting of
shareholders to vote on the matters set out in the notice. This meeting must be held within two months of the receipt
of the notice. If the board of directors fails to convene the meeting within such 21-day period, the shareholders who
called the meeting, or any of them representing more than one half of the total voting rights of all of them, may themselves
convene the meeting, which meeting must be held within three months of the receipt of the notice.
Matters required to be transacted
at an annual general meeting are the consideration of the Irish statutory financial statements and the reports of the
directors and auditors, the review by the members of our affairs, the appointment of auditors and the fixing of the auditors’
remuneration (or delegation of that issue). If no resolution is made in respect of the reappointment of an auditor at
an annual general meeting, the previous auditor will be deemed to have continued in office.
If directors become aware that
the company’s net assets are half or less of the amount of its called-up share capital, the directors must convene
an extraordinary general meeting of shareholders not later than 28 days from the date that they learn of this fact. This
meeting must be convened for the purposes of considering whether any, and if so what, measures should be taken to address
the situation.
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French Law
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Irish Law
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The shareholders’ decisions on the thin capitalisation of the corporation must be published
in a legal gazette and filed with the Commercial Court (a specific mention regarding the thin capitalisation situation will
be registered on the registration certificate of the Company).
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Advance Notice Provisions
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Advance Notice Provisions
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For corporations all the shares
of which are in registered form, written notice (
avis de convocation
) of any meeting of the shareholders must be
given at least 15 calendar days before the date of the meeting. If a meeting does not have required quorum of shareholders
present, an adjournment of such meeting must be called at least ten calendar days in advance in the same manner used for
the notice of the original meeting.
Notices of shareholders meeting
must specify the name of the corporation, its legal form, share capital, registered office address, registration number
with the French Registry of Commerce and Companies, the place, date, hour and agenda of the meeting and its nature (ordinary
or extraordinary meeting), and must indicate the conditions under which the shareholders may vote by correspondence and
the places and conditions in which they can obtain voting forms by mail.
The possibility for a shareholder
to file a request to add an item to the agenda of the next shareholders’ meeting is subject to that shareholder
holding a certain fraction of the share capital. Generally, in companies having a share capital amounting to a maximum
of €750,000, a shareholder must hold at least 5% of the share capital. In companies having a higher share capital,
such as Flamel, a shareholder representing (i) 4% of the first €750,000 of the share capital and (ii) 2.5% of the
share capital ranging from €750,000 to €7,500,000, may file a request to add an item to the agenda of the next
shareholders’ meeting.
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With respect to an annual general
meeting of shareholders, nominations of persons for election to the board of directors and the proposal of business to
be considered by shareholders may be made only pursuant to a notice of meeting: by the board of directors; or by a shareholder
who is entitled to vote at the meeting and who has complied with the advance notice procedures provided for in the company’s
constitution. With respect to an extraordinary general meeting of shareholders, nominations of persons for election to
the board of directors and the proposal of business to be considered by shareholders may be made only pursuant to a notice
of meeting: by the board of directors; by any shareholders pursuant to the valid exercise of the power granted under the
Irish Companies Act; or by a shareholder who is entitled to vote at the meeting and who has complied with the advance
notice procedures provided for in the company’s constitution.
The Avadel Constitution will require
that shareholders must give our Secretary timely advance notice of matters proposed to be considered at shareholders meetings
as follows: (a) for an annual general meeting, notice must be delivered, or mailed and received, at least 120 days in
advance of the first anniversary of the date we release our proxy statement for the preceding year’s annual general
meeting, subject to certain exceptions; and (b) for an extraordinary general meeting, notice must be delivered, or mailed
and received, by the later of (1) 120 days in advance of the meeting or (2) the date that is 10 days after the date of
the first public announcement of the date of the meeting. For nominations to our board of directors, the notice must include
all information about the director nominee that is required to be disclosed by SEC rules regarding the solicitation of
proxies for the election of directors and such other information as we may reasonably require to determine the eligibility
of the proposed nominee.
For other business that a shareholder
proposes to bring before the meeting, the notice must include a brief description of the business, the reasons for proposing
the business at the meeting and a discussion of any material interest of the shareholder in the business. Whether the
notice relates to a nomination to the board of directors or to other business to be proposed at the meeting, the notice
also must include information about the shareholder and the shareholder’s holdings of our shares.
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French Law
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Irish Law
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Such a request must be sent to
the registered office of the corporation by registered letter with acknowledgement of receipt or by an electronic telecommunications
mean and must be sent at least 25 days prior to the shareholders meeting. The request must contain the draft of the suggested
resolution, as the case may be, a brief summary explaining the grounds of such resolution and the registration certificate
proving the shareholder’s shareholding. The Chairman of the board of directors acknowledges receipt of such request,
within five days, by registered letter with acknowledgement of receipt or by an electronic telecommunications mean. The
suggested resolution must be added to the agenda, the shareholders must be informed of this new resolution which shall
be submitted to their vote at the shareholders meeting.
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Shareholders holding not less than 10% of the total voting rights may
call an extraordinary general meeting for the purpose of considering director nominations or other proposals, as described
below under “ – Special/Extraordinary General Meetings.” The chairman of the meeting may refuse to transact
any business or may disregard nomination of any person if a shareholder fails to comply with the foregoing procedures.
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Proxy
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Proxy
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Each shareholder has the right
to attend the meetings and participate in the discussions (i) personally, or (ii) by granting proxy to any individual
or legal entity of his choosing; or (iii) by sending a proxy to the company without indication of the mandate, or (iv)
by voting by correspondence, or (v) by videoconference or another means of telecommunication in accordance with applicable
laws that allow identification.
Proxies are only valid for a single
meeting, for successive meetings convened with the same agenda, or for two meetings, one ordinary the other extraordinary,
held on the same day or within a period of fifteen days.
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A shareholder may designate another
person (who need not be a shareholder) to attend, speak and vote on their behalf at any shareholders meeting by proxy,
but no such proxy shall be voted or acted upon at any subsequent meeting, unless the proxy expressly so provides.
The Avadel Constitution provides
that the board of directors may permit the appointment of proxies by the shareholders to be notified to us electronically.
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Special/Extraordinary General Meetings
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Special/Extraordinary General Meetings
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General meetings of the shareholders
may be called (i) by the board of directors or, failing that, (ii) by the statutory auditors, (iii) by a court appointed
agent upon request of any interested party, the Works Council or one or more shareholders representing at least 5 % of
the share capital, (iv) by a temporary administrator, (v) by a liquidator in certain circumstances, or (vi) by the majority
shareholder in capital or voting rights following a public tender offer or exchange offer or the transfer of a controlling
block on the date decided by the board of directors or the relevant person. Only the items mentioned on the agenda of
the calling notice may be debated and voted upon at shareholders general meeting.
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Extraordinary general meetings
may be convened (i) by the board of directors, (ii) on requisition of the shareholders holding the number of our shares
prescribed by the Irish Companies Act (at least 10% of the paid-up share capital of Avadel Limited carrying voting rights),
(iii) in certain circumstances, on requisition of our auditors; or (iv) in exceptional cases, by order of the Irish High
Court. Extraordinary general meetings are generally held for the purpose of approving shareholder resolutions. At any
extraordinary general meeting only such business shall be conducted as is set forth in the notice thereof.
Upon receipt of a valid requisition
notice for an extraordinary meeting, the board of directors has 21 days to convene the meeting, and the meeting must be
held within two months of the receipt of the requisition notice. If our board of directors does not convene the meeting
within such 21-day period, the requisitioning shareholders, or any of them representing more than one half of the total
voting rights of all of them, may themselves convene a meeting, which meeting must be held within three months of the
receipt of the requisition notice.
Under Irish law, if the board
of directors of an Irish company becomes aware that the company’s net assets are not greater than half of the amount
of its called-up share capital, it must convene an extraordinary general meeting of shareholders not later than 28 days
from the date that the directors learn of this fact to consider how to address the situation.
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French Law
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Irish Law
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Record Date; Notice Provisions for Meetings of Shareholders
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Record Date; Notice Provisions for Meetings of Shareholders
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The right to participate in shareholders'
meetings is subject to (i) the registration of the shareholder in the corporation's share accounts for owners of registered
shares or (ii) the deposit, at the place indicated in the calling notice, of a certificate of account registration issued
by the bank, the financial establishment or the stockbroker, depositary of the shares, as the case may be, for the owners
of bearer shares.
The time period during which these
formalities must be completed expires a day before the date of the meeting.
Notice of all shareholders’
meetings must be given to all of the shareholders, to the statutory auditors and to the representatives of the Works Council.
Such notice must be sent by post or electronically (if the shareholder has chosen such a mean of communication) at least
fifteen days prior to the meeting upon first call and ten days prior to the meeting upon second call.
Meetings take place at the registered
office or at any other place indicated in the calling notice.
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The Avadel Constitution will provide
that (i) our directors may, from time to time, fix a record date for the purposes of determining the rights of members
to notice of and/or to vote at any general meeting, but that such record date shall be not more than 80 nor less than
10 days before the date of such meeting, and (ii) if no record date is fixed by our directors, the record date for determining
members entitled to notice of or to vote at a meeting of the members shall be the close of business on the day next preceding
the day on which notice is given.
Notice of an annual general meeting
must be given to all of our shareholders and to our auditors. The Avadel Constitution provides that the maximum notice
period is 60 days. The minimum notice period is 21 days’ notice in writing for an annual general meeting.
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Shareholder Quorum Voting Rights
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Shareholder Quorum Voting Rights
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Unless otherwise provided in the
bylaws, each shareholder is entitled to one vote for each share of capital stock held by such shareholder.
French law distinguishes between
ordinary and extraordinary shareholders decisions.
Ordinary shareholders decisions
are related to the approval of the annual accounts, the appointment or replacement of the members of the board of directors
and decisions relating to a number of operations, either by law or in accordance with the bylaws (i.e. regulated agreements,
ratification of the transfer of the registered office in the same
département
or an adjoining
département,
etc.).
Extraordinary shareholders decisions
are related to a modification of the bylaws of the corporation (i.e. modification of the corporate purpose or corporate
name, share capital increase or decrease, transfer of the registered office outside of the same
département
or to a non-adjoining
département,
early dissolution, extension of the corporate term, modification
of the terms and conditions related to the transfer of shares or their nominal value, modification of the management of
the company, modification of the dividends distribution process.
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Holders of ordinary shares are
entitled to one vote for each such share held as of the record date of a shareholders meeting, unless otherwise provided
in our constitution.
An Irish company may not exercise
voting rights in respect of treasury shares, which include shares held by our subsidiaries.
Irish law distinguishes between
“ordinary business” and “special business.” All business transacted at a general meeting of shareholders
is deemed “special business” other than declaring dividends, considering the statutory financial statements
and the reports of the directors and auditors thereon, setting auditors remuneration, electing directors and shareholder
review of the company’s affairs.
The Avadel Constitution will provide
that, except where a greater majority is required by the Irish Companies Act (such as any matters that require special
resolutions of the shareholders), any action proposed at a general meeting of shareholders shall be decided by a simple
majority of the votes cast.
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French Law
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Irish Law
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Shareholders’ quorum differs
depending on the type of decisions. Ordinary shareholders’ meetings require a quorum of one-fifth of the capital
on first call and no minimum on second call. Extraordinary shareholders’ meetings require a quorum of one-fourth
of the capital on first call and one-fifth on second call.
As for majorities, an ordinary
shareholders’ meeting requires a majority of votes of the present and represented shareholders and an extraordinary
shareholders’ meeting requires a majority of two-thirds of votes of the present and represented shareholders except
for a decision on the change of nationality of the corporation or a decisions which increases the shareholders’
liabilities which require a unanimous decision of the present and represented shareholders.
Shareholders who participate in
the meeting by videoconference or by means of telecommunication are deemed to be present for purposes of calculating the
quorum and majority.
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Interests in shares held by a nominee trust company may be exercised by
such nominee on behalf of the beneficial holders. Abstentions, including persons indicating a vote to be withheld,
blank votes and broker non-votes will not be counted for the purposes of establishing the number of votes cast for the purposes
of determining whether an ordinary resolution (requiring a simple majority of votes cast) or a special resolution (requiring
the support of 75%) has been approved.
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Action by Written Consent
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Action by Written Consent
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Shareholders’ action by
written consent is not permitted in a
société anonyme
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The Avadel Constitution will not
permit shareholders to pass resolutions by written consent.
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Derivative or Other Suits
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Derivative or Other Suits
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The directors have individual
or joint liability towards the company either for violation of corporate law provisions, for breach of the bylaws, and/or
for mismanagement.
The action for damages (“
action
sociale
”) may be performed either by the corporation itself, through its legal representatives or by a shareholder
(“
action sociale ut singuli”).
A shareholder may individually,
regardless of his/her shareholding, initiate a legal action against directors of a corporation to seek full indemnification
in the corporation’s interest if the corporation fails to bring such legal action itself. Any damages awarded by
the court are paid to the corporation and any related legal fees are borne by the shareholder(s) bringing the action.
The plaintiff must remain a shareholder through the duration of the legal action.
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In Ireland, the decision to institute
proceedings is generally taken by a company's board of directors, who will usually be empowered to manage the company's
business. In certain limited circumstances, a shareholder may be entitled to bring a derivative action on behalf of the
company. The central question at issue in deciding whether a minority shareholder may be permitted to bring a derivative
action is whether, unless the action is brought, a wrong committed against the company would otherwise go unredressed.
The principal case law in Ireland
indicates that to bring a derivative action, a person must first establish a prima facie case (a) that the company is
entitled to the relief claimed and (b) that the action falls within one of the five exceptions derived from case law,
as follows:
(i) where
an ultra vires or illegal act is perpetrated;
(ii)
where more than a bare majority is required to ratify the “wrong” complained of;
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French Law
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Irish Law
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A group of shareholders representing
(i) 4% of the first €750,000 of the share capital and (ii) 2.5% of the share capital ranging from €750,000 to
€7.500,000 and having one representative may also initiate a legal action against directors of a corporation to seek
full indemnification in the corporation’s interest if the corporation fails to bring such legal action itself. Any
damages awarded by the court are paid to the corporation and any related legal fees are borne and shared amongst the group
of shareholders bringing the action. The plaintiffs must remain shareholders through the duration of the legal action.
A shareholder may alternatively
or cumulatively bring individual legal action against the directors, provided he has suffered distinct damages from those
suffered by the corporation. In this case, any damages awarded by the court are paid to the relevant shareholder.
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(iii) where
the shareholders' personal rights are infringed;
(iv)
where a fraud has been perpetrated upon a minority by those in control; or
(v)
where the justice of the case requires a minority to be permitted to institute proceedings.
Shareholders may also bring proceedings
against the company where the affairs of the company are being conducted, or the powers of the directors are being exercised,
in a manner oppressive to the shareholders or in disregard of their interests. Oppression connotes conduct that is burdensome,
harsh or wrong.
Conduct must relate to the internal
management of the company. This is an Irish statutory remedy, and the court can grant any order it sees fit, usually providing
for the disposition or transfer of the shares of the relevant shareholder.
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Business Combinations with Interested Shareholders
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Business Combinations with Interested Shareholders
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In a French
société
anonyme
, the board of directors is competent for all matters which are not subject to a shareholders’ meeting
and which fall within the limits of the corporate purpose of the corporation.
A specific procedure exists for
controlling certain related-party agreements which are divided into three categories, as noted above:
- Prohibited
agreements. The directors are prevented from (i) contracting any form of loans from the corporation, (ii) obtaining from
the corporation an overdraft through a current account or otherwise and/or (iii) having any of their commitments to third
parties guaranteed or secured by the corporation.
- Unrestricted
agreements (“
conventions libres
”) include current operations concluded at normal conditions.
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The Avadel Constitution will provide
that the affirmative vote of the holders of a majority of our outstanding voting shares on the relevant record date will
be required to approve a sale, lease or exchange of all or substantially all of our property or assets. However, Irish
law does not generally require that shareholders be given such approval rights.
The Avadel Constitution will also
include a provision similar to Section 203 of the Delaware General Corporation Law, which generally prohibits us from
engaging in a business combination with an interested shareholder for a period of three years following the date the person
became an interested shareholder, unless, in general
• our board of
directors approved the transaction by which the shareholder became an interested shareholder;
• upon consummation
of the transaction by which the shareholder became an interested shareholder, the shareholder owned at least 85% of the
voting shares outstanding at the time of commencement of such transaction, excluding for purposes of determining the number
of voting shares outstanding (but not the outstanding voting shares owned by the interested shareholder), voting shares
owned by persons who are directors and also officers and by certain employee share plans; or
• the business
combination is approved by our board of directors and authorized at an annual or extraordinary general meeting of shareholders
by the affirmative vote of the holders of at least 75% of the outstanding voting shares that are not owned by the interested
shareholder.
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French Law
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Irish Law
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- Regulated
agreements. Regulated agreements are agreements entered into, directly or indirectly, between the corporation and (i)
its legal representatives, (ii) shareholders owning at least 10% of the corporation’s share capital or (iii) another
corporation having the same legal representatives. Such regulated agreements are subject to a prior approval process,
which includes the following steps: first, an information of the board of directors on such agreements, secondly, an authorization
granted by the board of directors, third, notice to the statutory auditors on such agreements, fourth, the statutory auditors’
special report on such agreements and fifth, the vote of the shareholders ordinary meeting on such agreements. Any member
of the board of directors and/or shareholder concerned by such an agreement is prevented from exercising its voting right
in relation to any related decision and therefore is not counted for purposes of calculating the quorum and majority.
Agreements approved by the meeting shall be effective against third parties, as shall those which it refuses, unless they
are cancelled in the event of fraud. Even where there is no fraud, the interested party, and other members of the board
of directors if appropriate, may be held liable for any consequences of unapproved agreements that are damaging to the
company.
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A “business combination” is generally defined as a merger,
asset or stock sale or other transaction resulting in a financial benefit to the interested shareholder. An “interested
shareholder” is generally defined as a person who, together with affiliates and associates, owns or, within three years
prior to the date in question, owned 15% or more of our outstanding voting shares.
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Appraisal Rights
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Appraisal Rights
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French law does not provide for
appraisal rights but provides that a merger is subject to shareholders’ approval by a two-thirds majority vote as
stated above.
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Shareholders of an Irish company
generally do not have dissenters’ or appraisal rights. Under the European Communities (Cross-Border Mergers) Regulations
2008, as amended, governing the merger of an Irish company limited by shares such as the company and a company incorporated
in another jurisdiction of the EEA, a shareholder (1) who voted against the special resolution approving the merger or
(2) of a company in which 90% of the shares are held by the other party to the merger, has the right in certain circumstances
to request that the successor company acquire its shares for cash at a price determined in accordance with the share exchange
ratio set out in the merger agreement. In the event of a takeover of our company by a third party in accordance with the
Irish Takeover Rules and the Irish Companies Act where the holders of 80% or more in value of a class of our shares (excluding
any shares already beneficially owned by the bidder) have accepted an offer for their shares, the remaining shareholders
in that class may be statutorily required to transfer their shares, unless, within one month, the non-tendering shareholders
can obtain an Irish court order otherwise providing. If the bidder does not exercise this “squeeze out” right,
the non-accepting shareholders also have a statutory right to require the bidder to acquire their shares on the same terms
as the original offer, or such other terms as the bidder and the non-tendering shareholders may agree or on such terms
as an Irish court, on application of the bidder or non-tendering shareholder, may order.
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Amendments of Governing Documents
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Amendments of Governing Documents
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Companies only have bylaws (
statuts
)
as organizational documents. Only the extraordinary shareholders’ meeting is authorized to adopt or amend the bylaws
under French law.
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Irish companies may only alter
their constitutions by a resolution of shareholders approved by 75% of the votes cast at a general meeting. An Irish company
is not permitted to opt out of this requirement.
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French Law
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Irish Law
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Dissolution and Winding Up
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Dissolution and Winding Up
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Under French law, unless provided
for otherwise in the bylaws, the shareholders participate
pro rata
in a winding up, subject to any rights of the
holders of any preferred shares.
A French
société
anonyme
may be dissolved and wound up at any time by way of (i) a shareholders’ extraordinary meeting deciding
the early dissolution of the corporation, (ii) expiration of the term of the corporation (which may be extended prior
to such date), (iii) completion of the corporation’s purpose, (iv) the meeting of all the shares in the hands of
a sole shareholder, (v) an insolvency procedure, (vi) a provision of the bylaws, or (vii) a legal winding-up for fair
grounds.
Upon dissolution of a corporation
decided by the shareholders (except for case (v) and (vii) above), the shareholders’ extraordinary meeting determines
the method of liquidation and appoints one or several liquidators, of whom it determines their powers, and who exercise
their duties in accordance with applicable laws and regulations. In all other case, the French commercial court determines
the winding-up process.
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The Avadel Constitution will provide
that our ordinary shareholders participate
pro rata
in a winding up, subject to any rights of the holders of any
preferred shares we may issue.
We may be dissolved and wound
up at any time by way of (i) a shareholders’ voluntary winding up (which requires a special resolution of shareholders),
(ii) a court order on the application of a creditor, (iii) an act of the Companies Registration Office as an enforcement
measure if we file to file certain returns, or (iv) by act of the Director of Corporate Enforcement in Ireland where our
affairs have been investigated by an inspector and it appears from the report or any information obtained by the Director
of Corporate Enforcement that we should be wound up.
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Enforcement of Judgment Rendered by U.S. Court
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Enforcement of Judgment Rendered by U.S. Court
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A judgment for the payment of
money rendered by a court in the United States based on civil liability would not be automatically enforceable in France.
There is no treaty between France and the United States providing for the reciprocal enforcement of foreign judgments,
therefore the recognition and enforcement of U.S. court judgments in France is subject to the ordinary French recognition
regime (Article 509 of the French Civil Code). The US judgment must comply with the following conditions
,
laid down by the French Supreme Court case (Cour de cassation February 20
th
, 2007 n°05-14082), to
be verified by the French judge :
·
the
indirect jurisdiction of the foreign judge, based on the connection between the litigation and the judge (A), the conformity
to the procedural and substantial French international public policy (B), the absence of fraud (C).
If the U.S. judgment meets these
conditions, it will be possible to enforce it on French territory. It is mandatory to hire a French attorney for the recognition
and enforcement procedure since the proceedings will take place before the Tribunal de Grande Instance.
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A judgment for the payment of
money rendered by a court in the United States based on civil liability would not be automatically enforceable in Ireland.
There is no treaty between Ireland and the United States providing for the reciprocal enforcement of foreign judgments.
The following requirements must be met before the U.S. judgment will be deemed to be enforceable in Ireland:
• the U.S. judgment (A) must
be for a definite sum, (B) is not directly or indirectly for the payment of taxes or other charges of a like nature or
a fine or other penalty, for example, punitive or exemplary damages, (C) must be final and conclusive, (D) must be provided
by a court of competent jurisdiction, as determined by Irish law, and (E) must remain valid and enforceable in the U.S.
court in which it was obtained. In addition, the Irish proceeding must be commenced within the relevant limitation period.
An Irish court will also exercise
its right to refuse judgment if the U.S. judgment was obtained by fraud, violated Irish public policy, is in breach of
natural justice or is irreconcilable with an earlier foreign judgment.
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Material
Tax Considerations Relating to the Merger
The information presented
under the caption “Proposals to Reincorporate the Company as an Irish Public Limited Company – Material Tax Considerations
Relating to the Merger – U.S. Federal Income Tax Considerations” below is a summary of the material U.S. federal income
tax consequences of the Merger to Flamel shareholders who are U.S. holders and other holders (as defined below). The information
presented under the caption “Proposals to Reincorporate the Company as an Irish Public Limited Company – Material
Tax Considerations Relating to the Merger – Irish Tax Considerations” is a summary of the material Irish tax consequences
of the Merger and of investing in the Avadel plc shares. The information presented under the caption “Proposals to Reincorporate
the Company as an Irish Public Limited Company – Material Tax Considerations Relating to the Merger – French Tax Considerations”
is a summary of the material French tax consequences of the Merger. Certain information related to tax consequences to shareholders
resident in various other jurisdictions is presented under the caption “Proposals to Reincorporate the Company as an Irish
Public Limited Company – Tax Considerations in Other Jurisdictions.”
You should consult
your tax advisor regarding the applicable tax consequences to you of the Merger and investing in the Avadel plc shares under the
laws of the United States (federal, state and local), Ireland, France and any other jurisdiction applicable to you.
U.S.
Federal Income Tax Considerations
The following is a
general discussion of the material U.S. federal income tax consequences of the Merger to U.S. Holders (as defined below) of Flamel
shares, and of the subsequent ownership and disposition of Avadel plc shares received by such U.S. Holders in the Merger.
This discussion is
based on provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations promulgated
thereunder (whether final, temporary, or proposed), administrative rulings of the U.S. Internal Revenue Service (the “IRS”),
judicial decisions, and the Ireland-United States Tax Treaty (the “Tax Treaty”), all as in effect on the date hereof,
and all of which are subject to differing interpretations or change, possibly with retroactive effect. This discussion does not
purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a holder
as a result of the Merger or as a result of the ownership and disposition of Avadel plc shares. In addition, this discussion does
not address all aspects of U.S. federal income taxation that may be relevant to particular holders nor does it take into account
the individual facts and circumstances of any particular holder that may affect the U.S. federal income tax consequences to such
holder, and accordingly, is not intended to be, and should not be construed as, tax advice. This discussion does not address the
U.S. federal 3.8% Medicare tax imposed on certain net investment income or any aspects of U.S. federal taxation other than those
pertaining to the income tax, nor does it address any tax consequences arising under any U.S. state and local tax laws. Holders
should consult their own tax advisors regarding such tax consequences in light of their particular circumstances.
No ruling has been
requested or will be obtained from the IRS regarding the U.S. federal income tax consequences of the Merger or any other related
matter; thus, there can be no assurance that the IRS will not challenge the U.S. federal income tax treatment described below
or that, if challenged, such treatment will be sustained by a court.
This summary is limited
to considerations relevant to U.S. Holders that hold Flamel shares, and, following consummation of the Merger, Avadel plc shares,
as “capital assets” within the meaning of section 1221 of the Code (generally, property held for investment). This
discussion does not address all aspects of U.S. federal income taxation that may be important to holders in light of their individual
circumstances, including holders subject to special treatment under the U.S. tax laws, such as, for example:
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·
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banks
or other financial institutions, underwriters, or insurance companies;
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·
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traders
in securities who elect to apply a mark-to-market method of accounting;
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·
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real
estate investment trusts and regulated investment companies;
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·
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tax-exempt
organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred
accounts;
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·
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expatriates
or former long-term residents of the United States;
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·
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partnerships
or other pass-through entities or investors in such entities;
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·
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dealers
or traders in securities, commodities or currencies;
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·
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persons
subject to the alternative minimum tax;
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·
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U.S.
persons whose “functional currency” is not the U.S. dollar;
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·
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persons
who received Flamel shares through the issuance of restricted stock under an equity incentive
plan or through a tax-qualified retirement plan or otherwise as compensation;
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·
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persons
who own (directly or through attribution) 5% or more (by vote or value) of the outstanding
Flamel shares, or, after the Merger, the outstanding Avadel plc shares; or
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·
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holders
holding Flamel shares, or, after the Merger, Avadel plc shares, as a position in a “straddle,”
as part of a “synthetic security” or “hedge,” as part of a “conversion
transaction,” or other integrated investment or risk reduction transaction.
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As used in this proxy
statement, the term “U.S. Holder” means a beneficial owner of Flamel shares, and, after the Merger, Avadel plc shares
received in the Merger, that is, for U.S. federal income tax purposes:
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·
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an
individual who is a citizen or resident of the United States;
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·
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a
corporation (or other entity that is classified as a corporation for U.S. federal income
tax purposes) that is created or organized in or under the laws of the United States
or any State thereof or the District of Columbia;
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·
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an
estate the income of which is subject to U.S. federal income tax regardless of its source;
or
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·
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a
trust (i) if a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust, or (ii) that has a valid election
in effect under applicable Treasury Regulations to be treated as a U.S. person for U.S.
federal income tax purposes.
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If a partnership,
including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds
Flamel shares, and, following consummation of the Merger, Avadel plc shares received in the Merger, the U.S. federal income tax
treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership.
A holder that is a partnership and the partners in such partnership should consult their own tax advisors with regard to the U.S.
federal income tax consequences of the Merger and the subsequent ownership and disposition of Avadel plc shares received in the
Merger.
THIS SUMMARY DOES NOT PURPORT TO BE A
COMPREHENSIVE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. FLAMEL SHAREHOLDERS
SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER AND OF THE OWNERSHIP AND
DISPOSITION OF AVADEL PLC SHARES AFTER THE MERGER, INCLUDING THE APPLICABILITY AND EFFECTS OF U.S. FEDERAL, STATE, LOCAL, AND
OTHER TAX LAWS.
U.S. Federal Income Tax Consequences
of the Merger to Flamel and Avadel plc
Neither Flamel nor
Avadel plc will recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger.
U.S. Federal Income Tax Consequences
of the Merger to Flamel Stockholders
The Merger is intended
to, and is structured so that it will, qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
As such, a U.S. Holder will not recognize any gain or loss as a result of the Merger. A holder’s adjusted tax basis in the
Avadel plc shares received will be equal to the adjusted tax basis of the Flamel shares exchanged therefor. The holding period
of the Avadel plc shares received as a result of the exchange will include the holding period of Flamel shares surrendered in
the Merger.
U.S. Federal Income Tax Consequences
to U.S. Holders of the Ownership and Disposition of Avadel plc Shares
The following discussion
is a summary of certain material U.S. federal income tax consequences of the ownership and disposition of Avadel plc shares to
Flamel shareholders who receive such Avadel plc shares pursuant to the Merger.
Distributions on Avadel plc Shares
The gross amount of
any distribution on Avadel plc shares that is made out of Avadel plc’s current or accumulated earnings and profits (as determined
for U.S. federal income tax purposes) generally will be taxable to a U.S. Holder as ordinary dividend income on the date such
distribution is actually or constructively received by such U.S. Holder. Any such dividends paid to corporate U.S. Holders generally
will not qualify for the dividends-received deduction that may otherwise be allowed under the Code. In general, the dividend income
would be treated as foreign source, passive income for U.S. federal foreign tax credit limitation purposes.
Dividends received
by non-corporate U.S. Holders (including individuals), subject to the discussion below under “— Passive Foreign
Investment Company Status,” from a “qualified foreign corporation” may be eligible for reduced rates of taxation,
provided that certain holding period requirements and other conditions are satisfied. For these purposes, a non-U.S. corporation
will be treated as a qualified foreign corporation if it is eligible for the benefits of a comprehensive income tax treaty with
the United States which is determined by the U.S. Treasury to be satisfactory for purposes of these rules and which includes an
exchange of information provision. The U.S. Treasury has determined that the Tax Treaty meets these requirements. A non-U.S. corporation
is also treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares that are readily
tradable on an established securities market in the United States. U.S. Treasury guidance indicates that shares listed on the
NASDAQ (which the Avadel plc shares are expected to be) will be considered readily tradable on an established securities market
in the United States. There can be no assurance that the Avadel plc shares will be considered readily tradable on an established
securities market in future years. Non-corporate U.S. Holders that do not meet a minimum holding period requirement during which
they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant
to Section 163(d)(4) of the Code (dealing with the deduction for investment interest expense) will not be eligible for the reduced
rates of taxation regardless of Avadel plc’s status as a qualified foreign corporation. In addition, the rate reduction
will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in
substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Finally,
Avadel plc will not constitute a qualified foreign corporation for purposes of these rules if it is a passive foreign investment
company, or “PFIC,” for the taxable year in which it pays a dividend or for the preceding taxable year. See the discussion
below under “— Passive Foreign Investment Company Status.”
The amount of any
dividend paid in foreign currency will be the U.S. dollar value of the foreign currency distributed by Avadel plc, calculated
by reference to the exchange rate in effect on the date the dividend is includible in the U.S. Holder’s income, regardless
of whether the payment is in fact converted into U.S. dollars on the date of receipt. Generally, a U.S. Holder should not recognize
any foreign currency gain or loss if the foreign currency is converted into U.S. dollars on the date the payment is received.
However, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. Holder includes
the dividend payment in income to the date such U.S. Holder actually converts the payment into U.S. dollars will be treated as
ordinary income or loss. That currency exchange income or loss (if any) generally will be income or loss from U.S. sources for
foreign tax credit limitation purposes.
To the extent that
the amount of any distribution made by Avadel plc on the Avadel plc shares exceeds Avadel plc’s current and accumulated
earnings and profits for a taxable year (as determined under U.S. federal income tax principles), the distribution will first
be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the U.S. Holder’s Avadel plc shares,
and to the extent the amount of the distribution exceeds the U.S. Holder’s tax basis, the excess will be taxed as capital
gain recognized on a sale or exchange as described below under “— Sale, Exchange, Redemption or Other Taxable
Disposition of Avadel plc Shares.”
It is possible that
Avadel plc is, or at some future time will be, at least 50% owned by U.S. persons. Dividends paid by a foreign corporation that
is at least 50% owned by U.S. persons may be treated as U.S. source income (rather than foreign source income) for foreign tax
credit purposes to the extent the foreign corporation has more than an insignificant amount of U.S. source income. The effect
of this rule may be to treat a portion of any dividends paid by Avadel plc as U.S. source income. Treatment of the dividends as
U.S. source income in whole or in part may limit a U.S. holder’s ability to claim a foreign tax credit with respect to foreign
taxes payable or deemed payable in respect of the dividends paid by Avadel plc or on other items of foreign source, passive income
for U.S. federal foreign tax credit limitation purposes. The Code permits a U.S. Holder entitled to benefits under the Tax Treaty
to elect to treat dividends paid by Avadel plc as foreign source income for foreign tax credit purposes if that dividend income
is separated from other income items for purposes of calculating the U.S. holder’s foreign tax credit. U.S. Holders should
consult their own tax advisors about the desirability and method of making such an election.
Sale, Exchange, Redemption or Other
Taxable Disposition of Avadel plc Shares
Subject to the discussion
below under “— Passive Foreign Investment Company Status,” a U.S. Holder generally will recognize gain
or loss on any sale, exchange, redemption, or other taxable disposition of Avadel plc shares in an amount equal to the difference
between the amount realized on the disposition and such U.S. Holder’s adjusted tax basis in such shares. Any gain or loss
recognized by a U.S. Holder on a taxable disposition of Avadel plc shares generally will be capital gain or loss and will be long-term
capital gain or loss if the holder’s holding period in such shares exceeds one year at the time of the disposition. Preferential
tax rates may apply to long-term capital gains of non-corporate U.S. Holders (including individuals). The deductibility of capital
losses is subject to limitations. Any gain or loss recognized by a U.S. Holder on the sale or exchange of Avadel plc shares generally
will be treated as a U.S. source gain or loss.
Passive Foreign Investment Company
Status
Notwithstanding the
foregoing, certain adverse U.S. federal income tax consequences could apply to a U.S. Holder if Avadel plc is treated as a PFIC
for any taxable year during which such U.S. Holder holds Avadel plc shares. A non-U.S. corporation, such as Avadel plc, will be
classified as a PFIC for U.S. federal income tax purposes for any taxable year in which, after the application of certain look-through
rules, either (i) 75% or more of its gross income for such year is “passive income” (as defined in the relevant provisions
of the Code) or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year
produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents,
annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains.
Avadel plc is not
currently expected to be treated as a PFIC for U.S. federal income tax purposes, but this conclusion is a factual determination
made annually and, thus, is subject to change. With certain exceptions, the Avadel plc ordinary shares would be treated as stock
in a PFIC if Avadel plc were a PFIC at any time during a U.S. Holder’s holding period in such U.S. Holder’s Avadel
plc shares. There can be no assurance that Avadel plc will not be treated as a PFIC for any taxable year or at any time during
a U.S. Holder’s holding period.
If Avadel plc were
to be treated as a PFIC, unless a U.S. Holder elects to be taxed annually on a mark-to-market basis with respect to its Avadel
plc shares, gain realized on any sale or exchange of such Avadel plc shares and certain distributions received with respect to
such shares could be subject to additional U.S. federal income taxes, plus an interest charge on certain taxes treated as having
been deferred under the PFIC rules. In addition, dividends received with respect to Avadel plc shares would not constitute qualified
dividend income eligible for preferential tax rates if Avadel plc is treated as a PFIC for the taxable year of the distribution
or for its preceding taxable year. U.S. Holders should consult their own tax advisors regarding the application of the PFIC rules
to their investment in the Avadel plc shares.
Information Reporting and Backup Withholding
In general, information
reporting requirements will apply to dividends received by U.S. Holders of Avadel plc shares, and the proceeds received on the
disposition of Avadel plc shares effected within the United States (and, in certain cases, outside the United States), in each
case, other than U.S. Holders that are exempt recipients (such as corporations). Backup withholding (currently at a rate of 28%)
may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (generally on an IRS
Form W-9 provided to the paying agent or the U.S. Holder’s broker) or is otherwise subject to backup withholding.
Certain U.S. Holders
holding specified foreign financial assets with an aggregate value in excess of the applicable dollar threshold are required to
report information to the IRS relating to Avadel plc shares, subject to certain exceptions (including an exception for Avadel
plc shares held in accounts maintained by U.S. financial institutions), by attaching a complete IRS Form 8938, Statement of Specified
Foreign Financial Assets, with their tax return, for each year in which they hold Avadel plc shares. Such U.S. Holders should
consult their own tax advisors regarding information reporting requirements relating to their ownership of Avadel plc shares.
Backup withholding
is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or credit against
a holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS.
Irish
Tax Considerations
The following is a
summary of the material Irish tax consequences of the Merger for certain beneficial owners of Flamel shares and the ownership
and disposal of Avadel plc shares received by such holders pursuant to the Merger and who are the beneficial owners of such Avadel
plc shares (either directly as record holders, through a broker or other securities intermediary, or by holding ADSs representing
those shares). This discussion is based on Irish tax laws and the practice of the Irish Revenue Commissioners, in effect on the
date of this proxy statement, and all of which are subject to differing interpretations or change, possibly with retroactive effect.
This summary does not purport to be a complete analysis or listing of all potential Irish tax considerations that may apply to
a holder as a result of the Merger or as a result of the ownership and disposition of Avadel plc shares by a holder. In addition,
this discussion does not address all aspects of Irish taxation that may be relevant to particular holders nor does it take into
account the individual facts and circumstances of any particular holder that may affect the Irish tax consequences to such holder,
and accordingly, is not intended to be, and should not be construed as, tax advice. This discussion does not address Irish pay
related social insurance, nor does it address any tax consequences specific to stock options, free shares or warrants. The summary
is not exhaustive and shareholders should consult their tax advisors about the Irish tax consequences (and tax consequences under
the laws of other relevant jurisdictions) of the transactions and of the acquisition, ownership and disposal of Avadel plc shares.
There can be no assurance
that the Irish tax authorities will not challenge the Irish income tax treatment described below or that, if challenged, such
treatment will be sustained by a court.
The summary applies
only to shareholders who will own Avadel plc shares as capital assets and does not apply to other categories of shareholders,
such as dealers in securities, trustees, insurance companies, collective investment schemes, pension funds and shareholders who
have, or who are deemed to have, acquired their Avadel plc shares by virtue of an Irish office or employment (performed or carried
on in Ireland).
Irish Tax on Chargeable Gains (“CGT”)
The rate of tax on
chargeable gains (where applicable) in Ireland is 33%.
Non-resident shareholders
Avadel plc shareholders who
are neither resident nor ordinarily resident in Ireland for Irish tax purposes and do not hold their shares in connection with
a trade carried on by such shareholders through an Irish branch or agency will not be liable for Irish tax on chargeable gains
realized on a subsequent disposal of their Avadel plc shares.
Flamel shareholders who are
neither resident nor ordinarily resident in Ireland for Irish tax purposes and do not hold their shares in connection with a trade
carried on by such shareholders through an Irish branch or agency will not be liable for Irish tax on chargeable gains on the
cancellation of their Flamel shares, or on receipt of Avadel plc shares pursuant to the Merger.
Irish resident
shareholders
The receipt by a holder of Flamel
shares who is either resident or ordinarily resident in Ireland for Irish tax purposes or who holds their Flamel shares in connection
with a trade carried on in Ireland through a branch or agency of Avadel plc shares pursuant to the Merger will generally have
the following consequences for such holders.
The receipt of Avadel plc shares
should be treated as a reconstruction for the purposes of Irish CGT. Accordingly such Flamel shareholders should not be treated
as having made a disposal of their Flamel shares for the purposes of Irish CGT to the extent that they receive Avadel plc shares.
Instead, the Avadel plc shares should be treated as the same asset as the Flamel shares in respect of which they are issued and
treated as acquired at the same time and for the same acquisition cost as those Flamel shares. A chargeable gain or allowable
loss should therefore only arise on a subsequent disposal of the Avadel plc shares.
A subsequent disposal of Avadel
plc shares by a shareholder who is resident or ordinarily resident in Ireland for Irish tax purposes or who holds his or her shares
in connection with a trade carried on by such person through an Irish branch or agency will, subject to the availability of any
exemptions and reliefs, generally be within the charge to Irish CGT.
A shareholder of Avadel plc
who is an individual and who is temporarily not resident in Ireland may, under Irish anti-avoidance legislation, still be liable
to Irish tax on any chargeable gain realized upon a subsequent disposal of Avadel plc during the period in which such individual
is a non-resident.
Stamp Duty
The rate of stamp
duty (where applicable) on transfers of shares of Irish incorporated companies is 1% of the price paid or the market value of
the shares acquired, whichever is greater. Where Irish stamp duty arises it is generally a liability of the transferee.
The Merger will not
be within the charge to Irish stamp duty.
Irish stamp duty may,
depending on the manner in which the shares in Avadel plc are held, be payable in respect of transfers of Avadel plc shares after
the effective time of the Merger.
ADSs / ADRs / Shares
held through DTC
A transfer
of ADSs, ADRs and/or of Avadel plc shares effected by means of book-entry interests in DTC will not be subject to Irish stamp
duty (subject to confirmation from Irish Revenue). On the basis that most shareholders in Avadel plc are expected to hold ADSs
or ADRs and/or to hold their Avadel plc shares through DTC, it is anticipated that most transfers of ordinary shares will be exempt
from Irish stamp duty.
Shares Held Directly (not
evidenced by ADSs or ADRs) and Shares Held Outside of DTC or Transferred Into or Out of DTC
A transfer
of Avadel plc shares where any party to the transfer holds such shares directly (i.e., not evidenced by ADSs outside of DTC) may
be subject to Irish stamp duty. Shareholders wishing to exchange their shares for ADSs or ADRs or to transfer their shares into
(or out of) DTC may do so without giving rise to Irish stamp duty provided:
|
·
|
there
is no change in the beneficial ownership of such shares as a result of the exchange;
and
|
|
·
|
the
exchange or transfer into (or out of) DTC or ADS or ADR form is not effected in contemplation
of a sale of such shares by a beneficial owner to a third party.
|
Due to the potential Irish stamp
charge on transfers of Avadel plc shares, it is strongly recommended that those shareholders who do not hold their Flamel shares
directly should arrange for the exchange or transfer of their Flamel shares for ADSs or ADRs or into DTC as soon as possible and
before the Merger is effected. It is also strongly recommended that any person who wishes to acquire Avadel plc shares after the
effective time of the Merger acquires such shares through the ADS program or DTC.
Withholding Tax on Dividends
Distributions made
by Avadel plc will, in the absence of one of many exemptions, be subject to Irish dividend withholding tax (“DWT”)
currently at a rate of 20%.
For DWT purposes,
a distribution includes any distribution that may be made by Avadel plc to its shareholders, including cash dividends, non-cash
dividends and additional stock taken in lieu of a cash dividend. Where an exemption does not apply in respect of a distribution
made to a particular shareholder, Avadel plc is responsible for withholding DWT prior to making such distribution.
General Exemptions
Irish domestic law provides
that a non-Irish resident shareholder is not subject to DWT on dividends received from Avadel plc if such shareholder is beneficially
entitled to the dividend and is either:
|
·
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a
person (not being a company) resident for tax purposes in a “relevant territory”
(including the U.S.) and is neither resident nor ordinarily resident in Ireland (for
a list of “relevant territories” for DWT purposes, please see Annex E to
this proxy statement);
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|
·
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a
company resident for tax purposes in a “relevant territory”, provided such
company is not under the control, whether directly or indirectly, of a person or persons
who is or are resident in Ireland;
|
|
·
|
a
company, wherever resident, that is controlled, directly or indirectly, by persons resident
in a “relevant territory” and who is or are (as the case may be) not controlled
by, directly or indirectly, persons who are not resident in a “relevant territory”;
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·
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a
company, wherever resident, whose principal class of shares (or those of its 75% direct
or indirect parent) is substantially and regularly traded on a stock exchange in Ireland,
on a recognized stock exchange in a “relevant territory” or on such other
stock exchange approved by the Irish Minister for Finance; or
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|
·
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a
company, wherever resident, that is wholly owned, directly or indirectly, by two or more
companies where the principal class of shares of each of such companies is substantially
and regularly traded on a stock exchange in Ireland, on a recognized stock exchange in
a “relevant territory” or on such other stock exchange approved by the Irish
Minister for Finance;
|
and provided, in all cases noted
above (but subject to “Shares Held by U.S. Resident Shareholders” below), Avadel plc or, in respect of ADRs or Avadel
plc shares held through DTC, any qualifying intermediary appointed by Avadel plc, has received from the shareholder, where required,
the relevant Irish Revenue Commissioners DWT forms (the “DWT Forms”) prior to the payment of the dividend. In practice,
in order to ensure sufficient time to process the receipt of relevant DWT Forms, the shareholder where required should furnish
the relevant DWT Forms to:
|
·
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its
broker (and the relevant information is further transmitted to any qualifying intermediary
appointed by Avadel plc) before the record date for the dividend (or such later date
before the dividend payment date as may be notified to the shareholder by the broker)
if the shareholder holds ADRs, or
|
|
·
|
Avadel
plc transfer agent at least seven business days before the record date for the dividend
if shares are held directly.
|
Links to the various
DWT Forms are available at:
http://www.revenue.ie/en/tax/dwt/forms/index.html
The information on such website
does not constitute a part of, and is not incorporated by reference into, this proxy statement.
Such forms are generally valid,
subject to a change in circumstances, until December 31 of the fifth year after the year in which such forms were completed.
For non-Irish resident Avadel
plc shareholders who cannot avail themselves of one of Ireland’s domestic law exemptions from DWT, it may be possible for
such shareholders to rely on the provisions of a double tax treaty to which Ireland is party to reduce the rate of DWT.
Shares Held by
U.S. Resident Shareholders
Dividends paid in respect of
Avadel plc shares that are owned by U.S. residents and evidenced by the holding of ADRs and/or held through DTC will not be subject
to DWT provided the addresses of the beneficial owners of such shares in the records of the broker holding such shares are in
the U.S. It is strongly recommended that such shareholders, including the Flamel shareholders who are U.S. residents and who receive
Avadel plc shares pursuant to the Merger, ensure that their information is properly recorded by their brokers (so that such brokers
can further transmit the relevant information to a qualifying intermediary appointed by Avadel plc).
Dividends paid in respect of
Avadel plc shares that are held directly and are owned by residents of the U.S., will not be subject to DWT if such shareholders
satisfy the conditions of one of the exemptions referred to above under the heading “General Exemptions,” and provide
a completed IRS Form 6166 or a valid DWT Form to Avadel plc’s transfer agent to confirm their U.S. residence at least seven
business days before the record date for the dividend. It is strongly recommended that such shareholders complete the appropriate
IRS Form 6166 or DWT Form and provide them to Avadel plc’s transfer agent as soon as possible after acquiring their Avadel
plc shares.
If any shareholder who is resident
in the U.S. receives a dividend from which DWT has been withheld, the shareholder should generally be entitled to apply for a
refund of such DWT from the Irish Revenue Commissioners, provided the shareholder is beneficially entitled to the dividend.
Shares Held by
Residents of “Relevant Territories” Other Than the U.S.
Shareholders who are residents
of “relevant territories,” other than the U.S., must satisfy the conditions of one of the exemptions referred to above
under the heading “—General Exemptions”, including the requirement to furnish valid DWT forms, in order to receive
dividends without suffering DWT. If such shareholders hold ADRs or their shares through DTC, they must provide the appropriate
DWT forms to their brokers (so that such brokers can further transmit the relevant information to a qualifying intermediary appointed
by Avadel plc) before the record date for the dividend (or such later date before the dividend payment date as may be notified
to the shareholder by the broker). If such shareholders hold their shares directly, they must provide the appropriate DWT forms
to Avadel plc’s transfer agent at least seven business days before the record date for the dividend. It is strongly recommended
that such shareholders complete the appropriate DWT Forms and provide them to their brokers or Avadel plc’s transfer agent,
as the case may be, as soon as possible after receiving their shares.
If any shareholder who is resident
in a “relevant territory” receives a dividend from which DWT has been withheld, the shareholder may be entitled to
a refund of DWT from the Irish Revenue Commissioners provided the shareholder is beneficially entitled to the dividend.
Shares Held by
Residents of Ireland
Most Irish tax resident or ordinarily
resident shareholders (other than Irish resident companies that have completed the appropriate DWT forms) will be subject to DWT
in respect of dividends paid on their Avadel plc shares.
Shareholders that are residents
of Ireland, but are entitled to receive dividends without DWT, must complete the appropriate DWT Forms and provide them to their
brokers (so that such brokers can further transmit the relevant information to a qualifying intermediary appointed by Avadel plc)
before the record date for the dividend (or such later date before the dividend payment date as may be notified to the shareholder
by the broker) (in the case of ADRs), or to Avadel plc’s transfer agent at least seven business days before the record date
for the dividend (in the case of shares held directly).
Shares Held by
Other Persons
Avadel plc shareholders that
do not fall within any of the categories specifically referred to above may nonetheless fall within other exemptions from DWT.
If any shareholders are exempt from DWT, but receive dividends subject to DWT, such shareholders may apply for refunds of such
DWT from the Irish Revenue Commissioners.
Dividends paid in respect of
ADRs or Avadel plc shares that are held through DTC and that are owned by a partnership formed under the laws of a “relevant
territory” will be entitled to exemption from DWT if all of the partners complete the appropriate DWT Forms and provide
them to their brokers (so that such brokers can further transmit the relevant information to a qualifying intermediary appointed
by Avadel plc) before the record date for the dividend (or such later date before the dividend payment date as may be notified
to the shareholder by the broker). If any partner is not a resident of a relevant territory, no partnership's interest in the
Avadel plc shares is entitled to exemption from DWT.
Avadel plc will rely on information
received directly or indirectly from brokers and its transfer agent in determining where Avadel plc shareholders reside, whether
they have provided the required U.S. tax information and whether they have provided the required DWT Forms.
Income Tax on Dividends Paid on
Avadel plc Shares
Irish income tax may
arise for certain persons in respect of dividends received from Irish resident companies.
A shareholder that
is not resident or ordinarily resident in Ireland and that is entitled to an exemption from DWT generally has no liability to
Irish income tax or the universal social charge on a dividend from Avadel plc. An exception to this position may apply where such
shareholder holds Avadel plc shares through a branch or agency in Ireland through which a trade is carried on.
A shareholder that
is not resident or ordinarily resident in Ireland and that is not entitled to an exemption from DWT generally has no additional
liability to Irish income tax or the universal social charge. An exception to this position may apply where the shareholder holds
Avadel plc shares through a branch or agency in Ireland through which a trade is carried on. The DWT deducted by Avadel plc discharges
the liability to Irish income tax.
Irish resident or
ordinarily resident shareholders may be subject to Irish tax and/or the universal social charge on dividends received from Avadel
plc. Credit should be available against this Irish tax for any DWT declared by Avadel plc. Such Avadel plc shareholders should
consult their own tax advisors.
Capital Acquisitions
Tax
Irish capital acquisitions tax
(“CAT”) comprises principally gift tax and inheritance tax. CAT could apply to a gift or inheritance of Avadel plc
shares irrespective of the place of residence, ordinary residence or domicile of the parties. This is because Avadel plc shares
are regarded as property situated in Ireland as the share register of Avadel plc must be held in Ireland. The person who receives
the gift or inheritance has primary liability for CAT.
CAT is currently levied at a
rate of 33% above certain tax-free thresholds. The appropriate tax-free threshold is dependent upon (i) the relationship between
the donor and the donee and (ii) the aggregation of the values of previous gifts and inheritances received by the donee from persons
within the same group threshold. Gifts and inheritances passing between spouses are exempt from CAT. Avadel plc shareholders should
consult their own tax advisors as to whether CAT is creditable or deductible in computing any domestic tax liabilities.
French
Tax Considerations
The following is a
general discussion of the material French corporate and individual income tax consequences of the Merger to Flamel and holders
of Flamel shares.
This discussion is
based on provisions of the French tax code (the “French Code”), the French tax authorities guidelines, and judicial
decisions, all as in effect on the date hereof, and all of which are subject to differing interpretations or change, possibly
with retroactive effect. This discussion does not purport to be a complete analysis or listing of all potential French income
tax considerations that may apply to Flamel or a holder as a result of the Merger or as a result of the ownership and disposition
of Avadel plc shares by a holder. In addition, this discussion does not address all aspects of French income taxation that may
be relevant to particular holders nor does it take into account the individual facts and circumstances of any particular holder
that may affect the French income tax consequences to such holder, and accordingly, is not intended to be, and should not be construed
as, tax advice. In particular, this discussion does not address the French income tax consequences for holders that are resident
or established in a “non-cooperative jurisdiction” as defined under the French Code, which for calendar year 2016
includes the following: Botswana, Brunei, Guatemala, Marshall Islands, Nauru, Niue. This discussion does not address French social
security contributions or any aspects of French taxation other than those pertaining to the income tax, nor does it address any
tax consequences specific to stock options, free shares or warrants. Holders should consult their own tax advisors regarding such
tax consequences in light of their particular circumstances.
There can be no assurance
that the French Tax Authorities will not challenge the French income tax treatment described below or that, if challenged, such
treatment will be sustained by a court.
French income tax consequences for
holders of Flamel shares
The exchange of Flamel shares for Avadel
plc shares benefits from a tax neutrality regime for French income tax purposes such that no French income tax is triggered for
French or foreign resident shareholders as a consequence of the Merger.
French income tax consequences at the
level of Flamel
In principle the Merger triggers the immediate
taxation of any deferred profits and built-in gains in Flamel under standard French corporate income tax rules.
Under these rules, in principle:
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·
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Capital
gains on shares held by Flamel representing a “participating interest” in
subsidiaries held for a period of at least two years are taxable but only on 12% of the
capital gain;
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|
·
|
Other
capital gains and profits in Flamel are fully taxable.
|
The taxable basis as determined above
should be partly reduced by Flamel’s French net operating loss carryforwards subject to the following limitation: net operating
losses are utilizable in a given fiscal year against €1,000,000 plus fifty per cent (50%) of any taxable income in excess
of €1,000,000.
The net taxable income after utilization
of net operating loss carryforwards is taxed at a rate of 33.1/3%, increased by a 3.3% surtax on the tax liability in excess of
€763,000 resulting in a marginal combined tax rate of 34.43%.
However, Avadel Limited has submitted
a request to the French tax authorities seeking to benefit from the special regime for mergers and demergers, which the French
Code makes conditional upon a formal consent of the French tax authorities. If granted, such regime would allow a rollover of
some of the gains mentioned above as long as the relevant assets remain held through a French branch of Avadel Plc. However, to
date, there is no certainty that Flamel will receive consent from the French tax authorities.
Flamel’s net operating loss carryforwards
will not carry over to Avadel Plc and therefore cannot be utilized against profits and gains recognized by Avadel Plc in France
after the Merger, unless a separate ruling is obtained from the French tax authorities.
Tax Considerations
in Other Jurisdictions
Depending on the country
in which a Flamel Technologies shareholder is resident, the Merger may be a taxable event to such shareholder under such country’s
tax laws. We encourage all shareholders to consult their tax advisors regarding the applicable tax consequences of the Merger.
The Board of Directors
unanimously recommends that shareholders vote “FOR” Resolutions 17, 18, 19 and 20.
PROPOSALS
WITH RESPECT TO CERTAIN INCREASES IN SHARE CAPITAL
(Resolutions 21,
22, 23 and 24)
Flamel’s equity
compensation plans and arrangements are intended to enhance our ability to attract and retain highly qualified and talented executives
and key employees, provide long-term incentives as motivation to persons to whom we award benefits under such plans and arrangements,
and promote the long-term growth and success of our business. Additional discussion of our compensation policies is set forth
in this proxy statement under the caption “Executive Compensation – Compensation Discussion and Analysis.”
Our existing equity
compensation plans and arrangements (the “Existing Plans”) consist of: (i) the 2015 Free Share Plan, under which we
are authorized to issue up to 250,000 time-vesting ordinary shares to employees during a period of 38 months from June 26, 2015,
the date such plan was approved by our shareholders; (ii) the 2015 Stock Warrant Plan, under which we are authorized to issue
to non-employee directors warrants to purchase up to 350,000 ordinary shares during a period of 18 months from June 26, 2015,
the date such plan was approved by our shareholders, and (iii) the 2014 Stock Option Plan, under which we are authorized to issue
to employees stock options to purchase up to 1,700,000 shares during a period of 38 months from June 24, 2014, the date such plan
was approved by our shareholders.
If resolutions 21,
22 and 23 are approved, we will no longer be authorized to issue free shares, warrants or stock options under the Existing Plans
and, instead, our Board of Directors will be authorized to issue (i) to employees and to corporate officers (“
mandataires
sociaux
”) of the Company, free share awards of up to 750,000 ordinary shares, with such authorization effective for
a period of 38 months from the date of the Meeting (the “2016 Free Shares Authorization”), (ii) to employees and to
corporate officers (“
mandataires sociaux
”) of the Company, stock options to purchase up to 1,500,000 ordinary
shares, with such authorization effective for a period of 38 months from the date of the Meeting (the “2016 Stock Option
Authorization”), and (iii) to non-employee directors, share purchase warrants to purchase up to 350,000 ordinary shares,
with such authorization effective for a period of 18 months from the date of the Meeting (the “2016 Director Warrants Authorization”).
The number of ordinary shares subject to the 2016 Free Shares Authorization, the 2016 Stock Option Authorization and the 2016
Director Warrants Authorization (collectively, the “2016 Equity Award Authorizations”) shall be adjusted to preserve
the rights of the beneficiaries of the applicable awards, it being intended that the shares issuable under the 2016 Equity Awards
Authorizations will be adjusted to protect the award recipients against dilution that may result from stock splits, stock dividends
and similar capital reorganization transactions.
The 2016 Equity Award
Authorizations will authorize our Board of Directors to award free shares, stock options and share purchase warrants upon such
terms and conditions as the Board of Directors may determine in its discretion, within the parameters set forth in the respective
resolutions, as summarized below.
Share Usage in
Equity Compensation
As
described under the caption “Executive Compensation – Compensation Components,” the use of
equity awards
in our compensation programs is intended to provide significant incentive value to help ensure that the Company achieves its long-term
goals and align such compensation with long-term shareholder interests. We consider the amount of share usage in these programs
in terms of
the potential impact on our shareholders.
Overhang
. As
of December 31, 2015, there were 3,219,303 ordinary shares subject to outstanding equity awards, consisting of (i) 2,325,726 shares
issuable to employees pursuant to stock options; (ii) 667,527 shares issuable pursuant warrants issued to directors; and (iii)
226,050 shares issuable under time-based free-share awards to employees.
In addition, as of
December 31, 2015, there were
391,973 ordinary shares available for future
awards under our June 2015
Stock Warrant Rules
, December 2015
Stock Option Plan and December 2014 Free Share Plan (the “Authorized Equity Plans”). The 8.8% “overhang percentage”
reflects the shares issuable under equity awards that are either outstanding or available for award, divided by 41,241,254 ordinary
shares outstanding as of December 31, 2015. However, 430,266 of the outstanding stock options (representing 18.5% of the outstanding
options and 1.0% of the overhang) and 304,527 of the outstanding warrants (representing 45.6% of the outstanding warrants and
0.8% of the overhang), had exercise prices that were more than 125% of the closing price of our ADSs on Nasdaq on December 31,
2015. Excluding such stock options and warrants, the overhang percentage would be reduced from 8.8% to 7.0% of our outstanding
ordinary shares outstanding as of December 31, 2015.
If shareholders approve
the proposals in this proxy statement with respect to the new authorizations for equity award programs, we will no longer be able
to grant any equity awards under the Authorized Equity Plans. As a result, our overhang percentage would increase to approximately
14.1%, based on the number of equity awards and ordinary shares outstanding as of December 31, 2015.
Annual Share Usage
.
The annual share usage, or burn rate, under our equity compensation program for the fiscal year 2015 was as follows:
Grants of Share-Based Awards (2015)
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Fiscal Year 2015
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A: Stock Options Granted
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934,000
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B: Free-Shares Granted
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0
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C: Director Warrants Granted
|
|
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304,527
|
|
D: Total Options and Shares Granted (A+B+C)
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1,238,527
|
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E: Basic Weighted Average Ordinary Shares Outstanding
|
|
|
40,580,345
|
|
F: Annual Share Usage (D/E)
|
|
|
3.1
|
%
|
Although our future
annual share usage will depend upon a number of factors, such as the number of plan participants and the price per share of our
ordinary shares, the 2,600,000 ordinary shares we seek to have authorized for equity compensation programs for which we are seeking
approval in this proxy statement (pursuant to resolutions 21 to 23) will enable us to continue to utilize equity awards as an
important component of our compensation program and help meet our objectives to attract, retain and motivate highly skilled and
capable personnel. In determining the amount of equity to allocate in these new equity programs, we considered, among other things,
our share price and volatility, our share burn rate and overhang, and the existing terms of our outstanding awards. Based on these
factors, we estimate that the pool of shares available under these new equity compensation programs will last for approximately
one year.
New Plan Benefits
. Any
future awards under
the proposals in this proxy statement with respect
to the new authorizations for equity award programs,
will be made at the discretion of the Board. Therefore we cannot determine,
with respect to any particular person or group, the number or value of the awards that will be granted in the future pursuant
to these programs. However, the awards that have been made under the Authorized Equity Plans, which would have been issued under
the
new equity award programs
had they been in effect, are reflected
in the Grants of Share-Based Awards (2015) table above.
Shares Authorized
for Issuance under equity compensation plans
Information regarding
our equity compensation plans is presented below as of December 31, 2015 (in thousands, except per share data).
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|
Number of securities to be issued
upon exercise of outstanding options,
warrants and rights
|
|
|
Weighted-average exercise price per
share of outstanding options,
warrants
and rights
|
|
|
Number of securities remaining
available for future issuance under
equity
compensation plans
(excluding
securities reflected in column (a))
|
|
|
|
(a)
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(b)
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(c)
|
|
Stock options
|
|
|
2,325,726
|
|
|
$
|
13.84
|
|
|
|
96,500
|
|
Warrants
|
|
|
667,527
|
|
|
$
|
16.97
|
|
|
|
45,473
|
|
Free share awards
|
|
|
226,050
|
|
|
|
n/a
|
|
|
|
250,000
|
|
Descriptions of
Equity Authorizations
Summary of the
2016 Free Shares Authorization.
Resolution 21 will authorize the Board to award up to 750,000 ordinary shares, subject to
time-based vesting (“free shares”), to employees of Flamel or companies or organizations in which Flamel holds, directly
or indirectly, at least 10% of the share capital and voting rights as of the date of grant and corporate officers (“
mandataires
sociaux
”) of Flamel (in accordance with Articles L.225-197-2, 1° and L.225-197-1, II of the French Commercial Code)
(the “Group”). Notwithstanding the authorization of 750,000 ordinary shares for this purpose, the number of free shares
that can be awarded by the Board under such authorization may not exceed ten percent (10%) of the registered capital existing
on the day of the first award. Free shares cannot be granted to an employee or corporate officer who holds more than 10% of the
Company’s registered capital. Any free share award that does not vest for any reason, or any portion thereof, will be available
for future awards while the authorization is in effect (
i.e.,
38 months from the date of the Meeting unless such authorization
is superseded by a subsequent free share authorization by our shareholders or any other shareholders’ decision in this respect).
Resolution 21 will waive shareholder preferential rights with respect to any free share awards under this authorization.
Administered by
the Board.
The Board of Directors will have the authority to administer the awards of free shares and to adopt written rules
governing the free share program under the present authorization (the “2016 Free Share Plan”). Under the scope of
the Board’s discretion, the Board may determine the recipients of free share awards, the vesting period and the other terms,
conditions and restrictions of the awards, which need not be identical for each award recipient, and the form and content of any
free share award agreements with award recipients.
Vesting and Retention
.
Free share awards will vest solely on the basis of the recipient’s continued employment through the end of the vesting period,
with a minimum vesting period of one year required for each award. Free shares may be subject to a minimum holding, or “retention,”
period, prior to sale or disposal by the recipient; provided that where a vesting period is at least two years, in the Board’s
discretion there may be no retention period for a particular free share award. In the event of the recipient’s disability,
a free share award may be deemed fully vested and no longer subject to any retention period.
Preservation of
Free Shares Upon a Change in Control
. The 2016 Free Share Rules will provide that, upon a change in control
(as such term may be defined), free shares must be assumed by the surviving entity in a change of control transaction, or a parent
or subsidiary thereof.
Summary of the
2016 Stock Option Authorization.
Resolution 22 will authorize the Board to award stock purchase options to purchase up to
1,500,000 ordinary shares to employees and corporate officers (“
mandataires sociaux
”) of the Group. Shares
subject to any stock option that expires unexercised or otherwise terminates will be available for future awards of stock options
while the authorization is in effect (
i.e.,
38 months from the date of the Meeting unless such authorization is superseded
by a subsequent free share authorization by our shareholders or any other shareholders’ decision in this respect). The total
number of stock purchase options opened and not yet exercised shall not constitute entitlement to subscribe to a number of shares
in excess of one third of the share capital. Stock purchase options shall not be granted to employees and executives holding more
than 10% of the share capital. Resolution 22 will waive shareholder preferential rights with respect to any options granted under
this authorization and any shares issued upon exercise of such options.
Administered by
the Board.
The Board of Directors will have the authority to administer the allocation of stock options and to adopt written
rules governing the stock option program under the present authorization (the “2016 Stock Option Plan”). Under the
scope of the Board’s discretion, the Board may determine the recipients of such stock options, any vesting periods and other
terms, conditions and restrictions of the awards, which need not be identical for each award recipient, and the form and content
of any stock option agreements with award recipients.
Option Exercise
Price.
The exercise price of any option granted under this authorization shall be equal to the closing price of a Flamel ADS
on Nasdaq on the trading day preceding the date of the award, but not less than 80% of the average of the trading prices of the
ADSs on Nasdaq during the 20 trading days before the date of the award. The Board of Directors may not subsequently change the
exercise price of a stock option granted under this authorization unless otherwise permitted by French law.
Term
. Stock
options granted under this authorization may be exercisable during a maximum period of ten-years from the date of grant, and the
Board of Directors may provide for shorter exercise periods for any particular stock options.
Preservation of
Stock Options Upon a Change in Control
. The Board may provide in the 2016 Stock Option Plan or in any particular
award agreement that, upon a change in control (as such term may be defined), stock options will immediately vest unless the successor
entity or a parent or subsidiary thereof assumes or substitutes the outstanding stock options.
Summary of the
2016 Director Warrants Authorization.
Resolution 23 will authorize the Board to award stock purchase warrants to purchase
up to 350,000 ordinary shares, to be represented by ADSs, to non-employees directors of Flamel who are not legal representatives
of the Company, but including the Chairman of the Board of Directors. Shares subject to stock purchase warrants for which the
recipient fails to subscribe or that expire unexercised or otherwise terminate may not be re-allocated for future awards of stock
purchase warrants. Resolution 23 will waive shareholder preferential rights with respect to any warrants granted under this authorization
and any shares issued upon exercise of such warrants.
Administered by
the Board.
The Board of Directors will have the authority to administer the allocation of stock purchase warrants and to adopt
written rules governing the director stock purchase warrant program under the present authorization (the “2016 Stock Warrant
Rules”). Under the scope of the Board’s discretion, the Board may determine the recipients of such warrants, whether
the warrants shall be subject to subscription or shall be granted to the recipients, any vesting periods and other terms, conditions
and restrictions of the awards, which need not be identical for each award recipient, and the form and content of any warrant
instrument to be issued to award recipients, all subject to the other provisions of resolution 23, including those matters summarized
below.
Warrant Subscription
Price.
Any subscription price for a warrant granted under this authorization shall be ten percent of the average of the trading
prices of the ADSs on Nasdaq during the 20 trading days before the date such warrant is granted. The subscription price, if any,
must be paid in cash or by offset of liability owed by the Company to the subscriber.
Warrant Exercise
Price.
The exercise price of each warrant shall be set by the Board of Directors, provided that the exercise price shall not
be less than 80% of the average of the trading prices of the ADSs on Nasdaq during the 20 trading days before the date of the
award.
Term
. Each
warrant shall be exercised during the period commencing one year from the issue date through the fourth anniversary of the issue
date. The holder must be a director of Flamel on the day of exercise, unless, within three months after ceasing to be a director,
such holder notifies the Company of his or her intent to continue to have the right to exercise such warrant, and pays an additional
subscription price of €0.01 for each share underlying the warrant.
Proposal
to Issue Shares to a Company Savings Plan
Resolution 24 authorizes
the Board of Directors to increase the share capital by issuing shares reserved for the members of a company savings plan (even
in the absence of such a plan with the Company) established in application of Articles L.3332-18 et seq. of the French Labor Code,
and revokes and waives shareholders’ preemptive subscription rights with respect to such shares.
As a result of the
proposals regarding a capital increase listed above, we therefore invite you to make a decision on the proposed capital increase
reserved for the Company’s employees.
Such a resolution
implies the suppression of the preferential application right granted to the shareholders pursuant to the applicable legal and
regulatory provisions.
The Board of Directors
is required by Articles L. 225-129
et seq.
and L. 225-138-1 of the French Commercial Code, Articles L. 3332-1
et seq.
of the French Labor Code, to submit for approval at the Meeting a resolution to authorize and delegating to the Board of Directors,
the power to increase our share capital by issuing shares, in a nominal amount equal at most to 1% of the share capital on the
date of the present Meeting, for a period of twenty-six (26) months, for the benefit of employees who are members of a company
savings plan (
plan épargne entreprise
) (even in the absence of such a plan within the Company) and to set the issue
price under the conditions laid down in the said provisions of the French Labor Code, subject to supervision by the Auditor, and
to determine the number of shares allocated to each beneficiary pursuant to the said provisions of the French Commercial Code.
We draw your attention
to the fact that the Company shares are not eligible to the current company savings plan.
The Board of Directors
believes that the use of a Company savings plan is unnecessary as an additional incentive for compensation in view of the Company’s
situation and its other equity-based compensation plans, which are described in detail herein in the Compensation Disclosure and
Analysis.
The Board of Directors
unanimously recommends that the shareholders vote
“FOR”
Resolutions 21, 22 and 23 and “AGAINST” Resolution 24.
PROPOSAL
WITH RESPECT TO POWER FOR FORMALITIES
(Resolution 25)
Resolution
25 is a usual one granting the required powers for carrying out any formalities required by law to give effect to the resolutions
approved at the Meeting
.
The Board of
Directors unanimously recommends that shareholders vote “FOR” Resolution 25.
OTHER
MATTERS
The board of directors
knows of no other matters that have been submitted for consideration at the Meeting other than those referred to in this proxy
statement and the possible submission of shareholder resolutions as permitted under French law, which are not included in this
proxy statement but may be presented by a shareholder proponent at the Meeting if submitted by the deadline for such submissions.
Holders of ordinary shares who choose to vote by mail may use their proxy card to (i) grant a proxy to the chairman of the Meeting
to vote on any new matters that are proposed during the meeting, (ii) abstain from voting on such matters (which will be treated
as a vote “AGAINST”), or (iii) grant a proxy to another shareholder, a spouse or a partner with whom the holder of
ordinary shares is in a civil union to vote on such matters. If a holder of ordinary shares chooses to grant a proxy to the chairman
of the Meeting, with respect to either all matters or only any additional matters not disclosed in this proxy statement, the chairman
of the Meeting shall have discretionary authority pursuant to Rule 14a-4(c) under the Exchange Act and shall issue a vote
in favor of adopting such undisclosed resolutions submitted or approved by the board of directors or the management, as the case
may be, and a vote against adopting any other such undisclosed resolutions.
SOLICITATION
OF PROXIES
The cost of the solicitation
of proxies on behalf of Flamel Technologies will be borne by the Company. In addition, the Company’s directors, officers
and other employees may, without additional compensation except reimbursement for actual expenses, solicit proxies by mail, in
person or by telecommunication. We will reimburse brokers, fiduciaries, custodians and other nominees for out-of-pocket expenses
incurred in sending Company proxy materials to, and obtaining instructions relating to such materials from, beneficial owners.
SHAREHOLDER
PROPOSALS FOR 2017 MEETING
Shareholders who wish
to present a proposal to be included in our proxy statement for our 2017 combined ordinary general meeting and extraordinary general
meeting of shareholders (the “2017 Meeting”) must submit the proposal to us no later than
and must otherwise comply with the requirements of Rule 14a-8 of the Exchange Act. The Board, at the recommendation of the Nominating
and Corporate Governance Committee, has established the same date ( )
for shareholders to submit nominees for directors for inclusion in our proxy statement for our 2017 Meeting, and ,
2017 as the date for Shareholders to present other business at our Annual Meeting of Shareholders without inclusion in our proxy
statement for such meeting. All such proposals must be sent in writing to our Corporate Secretary at 33, Avenue du Docteur Georges
Levy, 69200 Vénissieux, France.
All proposals submitted
by holders of ordinary shares are reviewed by the Corporate Governance Committee or the Nominating Committee and by the Board
of Directors.
An ADS holder does
not have a right to present proposals for shareholders approval at the Meeting. To submit proposals at the Meeting, an ADS holder
must convert the ADSs into ordinary shares by contacting the Depositary and complying with the rules describe above.
Eligibility to
Submit a Proposal
. Under Rule 14a-8 promulgated under the Securities Exchange Act of 1934, in order to be eligible to submit
a proposal, you must have continuously held at least $2,000 in market value, or 1%, of the Company’s securities entitled
to be voted on the proposal at the meeting for at least one year by the date you submit the proposal. You must continue to hold
those securities through the date of the meeting.
ANNUAL
REPORT ON FORM 10-K AND 10-K/A
We will provide without
charge to each shareholder, on the written request of any such person, a copy of our Annual Report on Form 10-K and 10-K/A
for the year ended December 31, 2015. Requests should be directed to Flamel Technologies S.A., Parc Club du Moulin à
Vent, 33, avenue du Docteur Georges Levy 69200 Vénissieux France, Attention: Investor Relations. Our Annual Report on Form 10-K
and 10-K/A also may be accessed through our website at
www.flamel
.
com.
A list of exhibits to the Annual Report on
Form 10-K and 10-K/A will be included in the copy of the Annual Report on Form 10-K and 10-K/A. Any of the exhibits
may be obtained at the SEC’s website,
www.sec.gov
, or by written request to the above address.
BENEFICIAL
OWNERS
Unless we have received
contrary instructions, we may send a single copy of our proxy materials to any household at which two or more shareholders reside
if we believe the shareholders are members of the same family. Each shareholder in the household will continue to receive a separate
proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household
and helps to reduce our expenses.
If you would like
to receive your own set of our annual disclosure documents this year or in future years, follow the instructions described below.
Similarly, if you share an address with another shareholder and together both of you would like to receive only a single set of
our annual disclosure documents, follow these instructions.
If your shares are
registered in your own name, please contact the Company at our executive offices at Parc Club du Moulin à Vent, 33, avenue
du Docteur Georges Levy 69200 Vénissieux France, Attention: Investor Relations, to inform the Company of your request.
If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.
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By order of the Board of Directors
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[GRAPHIC]
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Phillandas T. Thompson
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Senior Vice President, General Counsel and Corporate Secretary
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ANNEX A
Text of Resolutions to be Voted on at the
Ordinary General Meeting and the Extraordinary General Meeting of Flamel Technologies S.A.
Resolutions Within The Competence
of the Ordinary General Shareholders’ Meeting
First Resolution
:
The ordinary general shareholders’
meeting, voting under the quorum and majority conditions for ordinary general meetings, after having taken cognizance of the financial
statements for the fiscal year ended on December 31, 2015, and having heard a reading of the Board of Directors’ management
report and of the general report of the Statutory Auditor pertaining to said fiscal year, hereby:
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Approves, in their entirety, such
statutory financial statements as they have been presented to the Meeting, which show
a net profit in the amount of €16,000,628, as well as the transactions recorded
in such statutory financial statements and summarized in such report;
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Grants the Directors full discharge
from their duties relative to such fiscal year; and specifically;
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Approves, in accordance with Section
“223
quater
” of the French General Tax Code, the global amount of
expenses as set forth at Section 39-4 of the French General Tax Code which comes to a
total of € 12,900 in excess depreciation that is not tax-deductible and (€
98,000) tax not deductible in 2014 but deductible in 2015.
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Second Resolution
:
The ordinary general shareholders’
meeting, voting under the quorum and majority conditions for ordinary general meetings, after having heard a reading of the Board
of Directors’ management report, hereby:
Decides
to allocate the
earnings for the fiscal year ended on December 31, 2015, amounting to €16,000,628, to the carry forward account, which will
then amount to €(54,929,333).
It is recalled, pursuant to
article “243 bis” of the French General Tax Code, that no dividend was distributed for the past three fiscal years.
Third Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, hereby:
Approves and
ratifies, on an advisory basis, the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting
firm for U.S. financial reporting purposes for the year ending December 31, 2016;
It is recalled
that at the Combined Shareholders’ Meeting on 24 June 2014 appointed Price Waterhouse Coopers Audit as French statutory
auditor of the Company for France (“
commissaire aux comptes
”) for the purpose of auditing the French accounts
in accordance with French law and Price Waterhouse Coopers Audit term of office will remain unchanged and shall terminate at the
shareholders’ meeting called to approved the financial statements for the financial year ending on n December 31, 2019
Fourth Resolution:
The ordinary general shareholders’
meeting, voting under the quorum and majority conditions for ordinary general meetings, after having heard a reading of the Board
of Directors’ management report acknowledging that the Company must appoint a second lead statutory auditor and a second
deputy statutory auditor, hereby:
Decides,
to appoint _____________________ as lead auditor and _____________ as deputy statutory auditor for six years, expiring at the
end of the Ordinary Shareholders’ Meeting to be held to approve the financial statements for the financial year ending on
December 31, 2021.
The auditors
have declared that they comply with all the conditions required by applicable laws and regulations in order to hold such office
and have already indicated to the company their willingness to accept their appointment.
Fifth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, and after acknowledging that the term of the Director’s
office of Mr. Michael S. Anderson expires at the end of this Meeting, hereby:
Decides to
renew the appointment of Mr. Michael S. Anderson as a member of the Company’s Board of Directors for a period of one (1)
year, to expire at the end of the Company’s next ordinary general shareholders’ meeting called on to approve the financial
statements for the fiscal year ending December 31, 2016.
Michael S.
Anderson has declared his readiness to accept this mandate and that he does not exercise, in France, mandates in other companies
which can prevent him to accept such functions.
Sixth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, and after acknowledging that the term of the Director’s
office of Mr. Guillaume Cerutti expires at the end of this Meeting, hereby:
Decides to
renew the appointment of Mr. Guillaume Cerutti as a member of the Company’s Board of Directors for a period of one (1) year,
to expire at the end of the Company’s next ordinary general shareholders’ meeting called on to approve the financial
statements for the fiscal year ending December 31, 2016.
Guillaume
Cerutti has declared his readiness to accept this mandate and that he does not exercise, in France, mandates in other companies
which can prevent him to accept such functions.
Seventh Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, and after acknowledging that the term of the Director’s
office of Dr. Francis J.T. Fildes expires at the end of this Meeting, hereby:
Decides to
renew the appointment of Dr. Francis J.T. Fildes as a member of the Company’s Board of Directors for a period of one (1)
year, to expire at the end of the Company’s next ordinary general shareholders’ meeting called on to approve the financial
statements for the fiscal year ending December 31, 2016.
Francis J.T.
Fildes has declared his readiness to accept this mandate and that he does not exercise, in France, mandates in other companies
which can prevent him to accept such functions.
Eigth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, and after acknowledging that the term of the Director’s
office of Mr. Christophe Navarre expires at the end of this Meeting, hereby:
Decides to
renew the appointment of Mr. Christophe Navarre as a member of the Company’s Board of Directors for a period of one (1)
year, to expire at the end of the Company’s next ordinary general shareholders’ meeting called on to approve the financial
statements for the fiscal year ending December 31, 2016.
Christophe
Navarre has declared his readiness to accept this mandate and that he does not exercise, in France, mandates in other companies
which can prevent him to accept such functions.
Ninth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, and after acknowledging that the term of the Director’s
office of Mr. Craig Stapleton expires at the end of this Meeting, hereby:
Decides to
renew the appointment of Mr. Craig Stapleton as a member of the Company’s Board of Directors for a period of one (1) year,
to expire at the end of the Company’s next ordinary general shareholders’ meeting called on to approve the financial
statements for the fiscal year ending December 31, 2016.
Craig Stapleton
has declared his readiness to accept this mandate and that he does not exercise, in France, mandates in other companies which
can prevent him to accept such functions.
Tenth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, and after acknowledging that the term of the Director’s
office of Mr. Benoit Van Assche expires at the end of this Meeting, hereby:
Decides to
renew the appointment of Mr. Benoit Van Assche as a member of the Company’s Board of Directors for a period of one (1) year,
to expire at the end of the Company’s next ordinary general shareholders’ meeting called on to approve the financial
statements for the fiscal year ending December 31, 2016.
Benoit Van Assche has declared
his readiness to accept this mandate and that he does not exercise, in France, mandates in other companies which can prevent him
to accept such functions.
Eleventh Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, hereby:
Decides to
allocate to the Board of Directors, under condition of adoption of resolutions four through nine, a maximum aggregate amount of
Three Hundred Twenty Five Thousand Euros (€325,000) as annual attendance fees for the fiscal year ending December 31, 2016.
The ordinary
general shareholders’ meeting acknowledges that the Board will determine the allocation and payment date of said attendance
fees.
Twelfth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, hereby:
Approves,
on an advisory basis, the compensation of the Named Executive Officers as disclosed in this proxy statement pursuant to the compensation
disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and the related narrative
disclosures.
Thirteenth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, hereby:
Decides, on
an advisory basis, that the shareholders of the Company will vote, on an advisory basis, on the executive compensation of the
Company’s Named Executive Officers at each annual shareholders’ meeting.
Fourteenth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, hereby:
Decides, on
an advisory basis, that the shareholders of the Company will vote, on an advisory basis, on the executive compensation of the
Company’s Named Executive Officers every two years at the shareholders’ meeting.
Fifteenth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of the Board of Directors’ management report, hereby:
Decides, on
an advisory basis, that the shareholders of the Company will vote, on an advisory basis, on the executive compensation of the
Company’s Named Executive Officers every three years at the shareholders’ meeting.
Sixteenth Resolution:
The ordinary
general shareholders’ meeting, voting under the quorum and majority conditions for ordinary general meetings, after having
heard a reading of statutory auditor’s special report regarding the agreements referred to in article L.225-38 et seq. of
the French Commercial Code, hereby:
Approves and
ratifies, as applicable, the agreements entered into or previously authorized and which remained into force during the fiscal
year ended December 31, 2015, together with the transactions mentioned therein.
Resolutions Within The Competence
of the Extraordinary General Shareholders’ Meeting
Seventeenth Resolution:
Therefore,
the extraordinary general meeting, voting under the quorum and majority conditions for extraordinary general meetings,
After having
considered:
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the Board of Directors’ report
drawn up in accordance with articles L.236-27 and R.236-16 of the French Commercial Code,
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the Works Council opinion on the
Merger,
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the independent expert’s report
dated May 31, 2016,
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the Merger Agreement and its appendixes
executed on May 27, 2016, pursuant to which the Company, is to transfer by way of merger
by absorption all of its assets and liabilities to its subsidiary, Avadel,
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hereby:
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Decides to approve all the provisions
of the considered Merger Agreement by way of absorption of the Company by Avadel and
hereby decides the merger of the Company by the Avadel;
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2.
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Approves especially, subject to
the satisfaction of the conditions precedent mentioned in the Merger Agreement, the issuance
by Avadel of _____________ new shares having a nominal value of $0.01, considered as
credited and fully paid to the Company’s shareholders on the Effective Date of
the Merger, which is to intervene on the Effective Date at the Effective Time subject
to the final order made by the Irish High Court under regulation 14 of the European Communities
(Cross-Border Mergers) Regulations 2008 as amended by the European Communities (Mergers
and Divisions of Companies) (Amendment) Regulations 2011 pursuant to which the Irish
High Court approves the completion of the Merger, confirms that the terms and conditions
of the Merger are fair (both procedurally and substantively) to the Company’s shareholders,
and fixes the Effective Date;Acknowledges that these new shares are issued on the basis
of a share exchange ratio of one share of Avadel against one share of the Company and
otherwise on the terms and conditions set out in the Agreement;
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3.
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Approves the transfer of all assets
and liabilities of the Company and the valuation of the assets and liabilities to be
transferred which provisionally amounts to EUR ______________;
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4.
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Decides that, in the event the
final order made by the Irish High Court is not issued by 31 December 2016, at the latest,
the above-mentioned Merger decision shall be deemed null and void.
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Eighteenth Resolution:
Therefore,
the extraordinary general meeting, voting under the quorum and majority conditions for extraordinary general meetings and as a
consequence of the previous resolution, hereby:
Resolves to
grant full powers to the Board of Directors, or any person that it will name to substitute to it, with the ability to act alone
or jointly:
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to negotiate, sign and amend any
acts, statements and deeds which would be required in order to complete the Merger by
way of absorption of the Company by Avadel;
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to perform all the subsequent formalities
and publication.
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to draft and sign the declaration
of compliance provided for in Article L. 236-6 of the French commercial code and,
more generally, do all the necessary thereof.
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Nineteenth Resolution:
Therefore,
the extraordinary general meeting, voting under the quorum and majority conditions for extraordinary general meetings, subject
to the satisfaction of the conditions precedents of the Merger Agreement, hereby:
Approves
the Company’s automatic dissolution without going into liquidation following consummation of the Merger, on the Effective
Date, the transfer of the Company’s activities to the French branch of Avadel and the assignment of all assets and liabilities
of the Company to Avadel on such date.
Twentieth Resolution:
Therefore, the extraordinary
general meeting, voting under the quorum and majority conditions for extraordinary general meetings, hereby:
Approves the reduction of capital
of Avadel plc to allow the creation of distributable reserves of Avadel plc which are required under Irish law in order to allow
Avadel plc to make distributions and to pay dividends and repurchase or redeem shares following completion of the Merger;
Twenty-First Resolution:
Therefore,
the extraordinary general meeting, voting under the quorum and majority conditions for extraordinary general meetings, after having
heard a reading of the Board of Directors’ management report acknowledging that the share capital of the Company is fully
paid up, and in accordance with the provisions of the French Commercial Code, in particular Article L.225-197-1 et seq. thereof,
hereby:
1. Authorizes
the Board of Directors to undertake, on one or more occasions, in the proportions and at the times it considers appropriate, the
free allocation (
i.e.,
award) of the Company’s shares, existing or to be issued, for the benefit of the employees,
or certain categories of them, of the Company or of the companies or organizations affiliated with it under the conditions set
forth in Article L.225-197-2, 1° of the French Commercial Code and corporate officers of the Company or organizations affiliated
with it under the conditions set forth in Article L.225-197-1, II of the French Commercial Code (the “Group”) under
the conditions set forth below;
2. Resolves
that the total number of free shares that may be awarded under the 2016 Free Share Plan under this authorization shall not exceed
seven hundred and fifty thousand (750,000) shares, excluding adjustment of this number in order to take account of the operations
necessary for preserving the rights of the beneficiaries. In any event, the number of free shares that can be awarded by the Board
by virtue of the present resolution cannot exceed ten percent (10%) of the registered capital existing on the day of the first
award;
3. Resolves
that the vesting of shares of the Company to the recipients of free share awards will be final after a vesting period of a minimum
of one year; with the mandatory holding retention period of Company shares by beneficiaries to be set at a minimum of one year
as of the date of the definitive award of shares, and for awarded shares for which the vesting period is set at two years, the
mandatory minimum retention period of shares may be eliminated;
4. Resolves
that, in the event of the incapacity of a beneficiary corresponding to the classification under Category 2 or 3 as set forth in
Article L.341-4 of the French Social Security Code, the final vesting of shares awarded shall occur immediately, and no retention
period will apply. In addition, that in the event of the death of the beneficiary of an award his or her heirs may request the
final vesting of shares within six months of the said death;
5. Acknowledges
that, in the event of an award of new free shares, this authorization will imply, as and when the award of such shares is finalized,
a share capital increase by incorporating reserves, profits or share premiums for the beneficiaries of the said shares and the
corresponding waiving of preferential subscription rights of the said shares by shareholders in favor of the beneficiaries of
the said shares as well as rights to reserves, profits or premiums incorporated, in accordance with article L.225-197 paragraph
4 of the French Commercial code;
6. Authorizes
the Board of Directors and grants it all necessary powers for the purpose of issuing a maximum of 750,000 shares pursuant to free
share awards under the 2016 Free Share Plan, with such shares having a nominal value of EUR 0.12196, and accordingly, increasing
the share capital in a maximum nominal amount of EUR 91,470; provided that such maximum nominal amount may be increased, if applicable,
by the nominal amount of ordinary shares of the Company which may be issued to preserve, pursuant to applicable legislation and
regulations and, where applicable, to contractual provisions allowing other adjustment cases, the rights of the beneficiaries
of free shares so awarded;
7. Specifies,
as necessary, that free share awards by the Board of Directors that expire without vesting for any reason, including the departure
of the award recipients, may be re-awarded by the Board of Directors within the terms and conditions of this resolution; in particular,
any such re-award may be undertaken only insofar as this authorization has not expired and in compliance with the global cap set
forth by this resolution;
8. Grants
the Board of Directors all powers within the limitations set forth above to implement this authorization, with the power to delegate
or subdelegate as permitted by law, to implement this authorization, and specifically to:
(i) Determine
the identity of the award recipients, who can be employees of the Company or of subsidiaries of the Company or other companies
or organizations affiliated with the Company as provided under applicable law, or certain categories thereof of them as well as
the number of shares allocated to each recipient;
(ii) Determine
and approve the general terms and conditions of free share awards, specifically the minimum vesting period and the minimum holding
period and, where appropriate, the criteria for award of the shares (including condition of continued employment and performance
criteria, if any) (the “2016 Free Share Plan”).
(iii) Take
all necessary measures of information, and notably establish, and if necessary amend, the rules governing the 2016 Free Share
Plan and ensure its delivery to each of the recipients of free shares;
(iv) If
necessary, provide for the option to postpone the dates of the final award of free shares and, for the same period, the mandatory
term for holding the free shares (such that the minimum holding period remains unchanged).
(v) Determine
whether the free shares are to be newly-issued shares or existing shares.
(vi) Award
free shares to the persons mentioned in paragraph 4 of Article L.225- 197-1,II of the French Commercial Code, and, with regard
to the shares thus allocated, either (i) decide that the free shares awarded shall not be sold by the interested beneficiaries
before they resign from their duties, or (ii) set the quantity of free shares awarded that they must hold as registered shares
during their offices;
(vii) If
necessary, adjust the number of free shares awarded needed to preserve the rights of recipients, based on potential operations
on the Company’s share capital under the circumstances provided for in Article L. 225-181 of the French Commercial Code.
It is specified that the shares allocated after such adjustments will be deemed to have been allocated on the same day as shares
allocated initially; and
(viii)
Determine the dates and terms of the awards, and generally undertake all necessary provisions and enter into any agreements to
bring the awards considered to their proper conclusion, carry out the required acts and formalities for purposes of finalizing
and duly reporting capital increases that may be made pursuant to the authorization granted in this resolution; make the corresponding
modifications to the bylaws and undertake all formalities requested to register the shares under applicable securities laws and
for listing on Nasdaq;
9. Decides
that this authorization supersedes, as of today, all previous authorizations with respect to prior free share plans, and therefore
any unused portion of the previous authorization granted to the Board of Directors by the Combined Ordinary and Extraordinary
Shareholders’ Meeting of June 26, 2015 in its Eleventh (11th) Resolution;
10. Grants
to the Board of Directors the power and authority to implement any other new legal provisions that may arise during the period
of validity of this authorization, the application of which does not require an express decision of the General Meeting; and
11. Decides
that this authorization is granted for a period of thirty-eight (38) months from the date of this Meeting.
Twenty-Second Resolution:
Therefore,
the extraordinary general meeting, voting under the quorum and majority conditions for extraordinary general meetings, after having
heard a reading of the Board of Directors’ management report acknowledging that the share capital of the Company is fully
paid up, and in accordance, in particular, with the provisions of Article L.225-177 et seq. the French Commercial Code, hereby:
1. Authorizes
the Board of Directors to issue, on one or more occasions, in the proportions and at the times it considers appropriate, subscription
or purchase stock options giving the right to subscribe for new shares of the Company to be issued in the form of a capital increase
or to purchase existing shares of the Company resulting from a buyback of shares carried out by the Company in accordance with
conditions defined by law, for the benefit of the employees of the Company or of the companies or organizations affiliated with
it under the conditions set forth in Article L.225-180, 1° of the French Commercial Code and the corporate officers of the
Company or organizations affiliated with it and that satisfy the conditions set forth in in Article L.225-185 paragraph 4 of the
French Commercial Code, under the conditions set forth below.
2. Resolves
that the total number of options that may be allocated under this authorization must not exceed one million five hundred thousand
(1,500,000) options, excluding adjustment of this number in order to take account of the operations necessary for preserving the
rights of the beneficiaries. In any event, the total number of options which may be awarded each year to all beneficiaries shall
not give the right to purchase and/or subscribe for a number of shares greater than one third of the number of shares making up
the current share capital on the day of the allocation.
3. Decides
that each option shall entitle to the subscription of one (1) ordinary share of the Company with a nominal value of EUR 0.12196
and that the subscription price of each share under option will be valued by the Board of Directors based on the Company’s
share price. This subscription price shall be equal to the closing trading price of a share, on the NASDAQ Global Market, on the
trading days preceding the date of the Board of Directors’ decision relating to the issue of stock options, provided such
trading price is no less than 80% of the average trading prices of the share on the NASDAQ Global Market, in the form of ADS,
during the last twenty trading days preceding the date of such Board of Directors’ decision. In that case, the price of
the share shall be equal to 80% of the average trading prices of the share on the NASDAQ, in the form of ADS, during the last
twenty trading days preceding the date of such Board of Directors’ decision. The price of the shares, as determined by the
Board of Directors, may not subsequently be modified during the option period, except otherwise provided by law or by statutes.
4. Decides
that the options shall be exercised within a maximum ten-year term as from the date they were granted by the Board of Directors,
the Board of Directors will have full authority to set a shorter period.
5. Specifies,
as necessary, that the subscription or purchase stock options allocated by the Board of Directors that would normally void because,
inter alia, the departure of the beneficiaries, may be re-allocated by the Board of directors within the terms and conditions
of this resolution. In particular, this new allocation may be undertaken only insofar as this authorization has not expired and
in compliance with the global cap lay down by this resolution. The subscription or acquisition price of the shares will be valued
by the Board of Directors when allocating the new options, with respects to the terms and conditions of the present resolution.
6. Decides
to authorize the Board of Directors and to grant it all powers in order to:
|
(i)
|
set the terms
and conditions of grant of the options, freely determine the beneficiaries of such options,
subject to the provisions of applicable laws and regulations, and, within such framework,
if it considers it appropriate, set the obligation for each beneficiary to be an employee
of the Company and/or of the companies referred to in Article L.225- 180-I of the French
Commercial Code, and/or to be an officer of the Company within the meaning of Article
L.225-185 paragraph 4 of the French Commercial Code, at the time of the exercise of the
options;
|
|
(ii)
|
set, if it considers it appropriate,
a period of untransferability of the subscribed shares, in accordance with the conditions
provided by applicable laws and regulations,
|
|
(iii)
|
set the subscription price of
the shares to which the options thus granted give right, in accordance with the terms
and conditions determined by the present resolution,
|
|
(iv)
|
set the exercise period(s) of
the options thus granted, subject to the prohibitions and/or limitations provided by
applicable laws and regulations and the by-laws in this regard, at the times that it
will deem to be appropriate.
|
7. Authorizes the Board of
Directors and grants it all powers for the purpose of issuing a maximum of 1,500,000 shares with a nominal value of EUR 0.12196,
and accordingly, increasing the share capital in a maximum nominal amount of EUR 207,332.00, being specified that may be added
to this global amount, as the case may be, the nominal amount of the of the ordinary shares of the Company which may be issued
to preserve, pursuant to applicable legislation and regulations and, where applicable, to contractual provisions allowing other
adjustment cases, the rights of the beneficiaries of stock options.
8. Acknowledges that, in accordance
with Article L.225-178 paragraph 1 of the French Commercial Code, the authorization thus granted to the Board of Directors entails,
for the benefit of options’ beneficiaries, express waiver, by the shareholders, of the preferential right to subscribe for
the shares that will be issued subsequently to the exercise of options; the increase in the share capital resulting from the exercise
of the options to subscribe for shares will be definitively completed by a mere declaration that the option is exercised accompanied
by the subscription form and full payment, which may be made in cash or by offset of debts of the Company.
9. Decides, accordingly to
authorize the Board and to grant it all powers in order to:
|
(i)
|
Determine if the options are
subscription or purchase stock options.
|
|
(ii)
|
Set the general terms and conditions
of the options, including conditions under which the options will be granted, such conditions
may contain or not unavailability clauses and/or clauses prohibiting immediate resale
of some or all of the shares, establish a list of beneficiaries of options, including
the number of options granted to each of them, set the allocation date(s) in compliance
with the legal provisions.
|
|
(iii)
|
Take all necessary measures
of information, and notably establish, and if necessary amend, the rules governing the
free shares’ allocation plan and ensure its delivery to each of the beneficiaries
of free shares;
|
|
(iv)
|
Set the period of temporary
suspension of the exercise of options in the event that financial transactions involving
Company shareholders' equity
|
|
(v)
|
Receive the subscriptions and
related payments,
|
|
(vi)
|
Deposit the funds in a bank
account in accordance with the law,
|
|
(vii)
|
Acknowledge the number of shares
issued as a consequence of the exercises of the options granted, in accordance with the
provisions of Article L.225-178 paragraph 3 of the French Commercial Code, to amend the
by-laws accordingly and, more generally,
|
|
(viii)
|
Take all necessary measures
to protect the interests of the options beneficiaries, based on potential transactions
impacting the Company’s share capital, in accordance with the legal provisions.
|
|
(ix)
|
Undertake all necessary provisions
and enter into any agreements to bring the allocations considered to their proper conclusion,
carry out the required acts and formalities for purposes of finalizing and duly reporting
capital increases that may be made pursuant to the authorization granted in this resolution;
make the corresponding modifications to the bylaws and undertake all formalities requested
to register the shares of the NASDAQ.
|
|
(x)
|
At its sole discretion and if
it deems it appropriate, charge the costs of the capital increases against the premium
arising thereon, and deduct from this premium the sums necessary to increase the legal
reserve to one tenth of the new share capital after each capital increase.
|
10. Decides that this authorization
supersedes, as of today, all previous authorizations having the same purpose, and therefore any unused portion of the previous
authorization granted to the Board of Directors by the Combined Ordinary and Extraordinary Shareholders’ Meeting of June
24, 2014 in its Resolutions 13.
This authorization is granted for a period
of thirty-eight (38) months from the date of this meeting.
Twenty-Third Resolution:
Therefore,
the Meeting, voting under the quorum and majority requirements for extraordinary general meetings, after having heard a reading
of the Board of Directors’ report and Statutory Auditor’s special report, acknowledging that the share capital of
the Company is fully paid up, in accordance with the provisions of Articles L.225-138 and L.228-91 et seq. of the French Commercial
Code, hereby:
1. Authorizes the Board to issue,
on one or more occasions, in the proportion and at the time of its choice, a maximum of three hundred and fifty thousand, (350,000)
stock warrants representing three hundred and fifty thousand (350,000) new ordinary shares, in the form of American Depositary
Shares (ADS);
2. Grants the Board of Directors
all necessary powers to determine the beneficiaries amongst the category defined by this resolution and the exact number of stock
warrants to be issued, up to a limit of a nominal amount of EUR 42,700.
3. Decides to reserve the subscription
of the stock warrants issued under this resolution and subsequently to cancel the preferential right of subscription attributed
to the shareholders to the shares which could be issued upon exercise of such stock warrants for the benefit of the category of
persons consisting of the Company’s directors who are neither officers nor Company employees, but including the Chairman
of the Board of Directors;
4. Decides that the subscription
price of each stock warrants will be valued by the Board of Directors at the time of warrants’ issue based on the Company’s
share price. This subscription price shall be equal to, per one stock warrant, one tenth (1/10th) of the average market price
of the share, in the form of ADS, on the NASDAQ, on the closing of the trades on the twenty (20) days preceding the decision of
the Board to grant such stock warrants;
5. Decides that the subscription
price of stock warrants must be fully paid up on the date of their subscription in cash or by off-set against outstanding liabilities
owed by the Company to the subscriber, as provided by law and as determined by the Board. The subscription amount of these stock
warrants, if any, will be registered in a special reserve account labeled “issue premium” which will carry rights
for all shareholders;
6. Decides that each stock warrant
will give its holder, subject to the terms and conditions set forth hereafter and in the Board’s decision to grant the stock
warrants, the right to subscribe to one (1) ordinary share of the Company, in the form of an ADS, for an exercise price which
shall be valued by the Board of Directors based on the Company’s share price. This exercise price shall be equal to the
closing trading price of a share, on the Nasdaq Global Market, on the trading days preceding the date of the Board of Directors’
meeting, provided that such price shall not be less than 80% of the average closing trading prices of the share on the NASDAQ
Global Market, in the form of an ADS, during the last 20 trading days preceding the date of the decision of the Board of Directors
to issue such warrant. In that case, the price of the share shall be equal to 80% of the average closing trading prices of the
share on the NASDAQ, in the form of ADS, during the last 20 trading days preceding the date of such Board of Directors’
decision;
7. Decides that each warrant
shall be exercised by its holder in accordance with the conditions set forth herein as well as thus defined by the Board’s
decision with respects to the issue of the stock warrants. Each stock warrant will be exercised within four (4) years from the
issuance date. The holders of each stock warrants may exercise such warrants provided such holder remains a Director of the Company
on the day of such exercise; provided that the BSA holders will have the right to retain the possibility to exercise their BSA
even if they are no longer a Director of the Company, provided they notify the Company within three (3) months of having left
their position as a Director and in paying simultaneously to the Company an additional subscription price of EUR 0.01 per BSA.
If an holder fails to exercise the warrant in whole or in part at the expiry of the above mentioned four-year period in compliance
with the conditions set forth by the present resolution and the Board of Directors, the stock warrants and the attached right
to subscribe will automatically be void and null and accordingly, cannot be re-allocated;
8. Decides that, upon issuance
of the stock warrants, the Company shall be entitled to modify its form or its business purpose, modify the rules regarding the
distribution of its profits, redeem its capital, create preferred shares resulting in such a change or redemption, subject to
meeting the obligations of Article L.228-99 of the French Commercial Code;
9. Decides that, in the case
of a capital reduction, whether or not motivated by losses, and conducted through either a decrease of the shares’ value
of or a decrease of the shares’ number, the rights of the holders of the stock warrants will be decreased accordingly as
if they had been exercised before the date on which the capital decrease has become final;
10. Acknowledges that, pursuant
to the provisions of Article L.228-103 et seq. of the Commercial Code, the warrants holders will all be grouped together in order
to defend their common interests, in an assembly (a “masse”) with a civil personality; and general warrants holders
meetings will be convened to authorize any changes in the issuance terms and conditions and to decide on any decision regarding
the conditions of subscription or allocation of the shares as set forth at the time issuance took place, with each warrant giving
access to one voting right at such meetings, the conditions regarding the quorum and the majority to be those determined in the
second and third paragraph of Article L.225-96 of the Commercial Code, and the expenses incurred in connection with such meetings,
as well as, generally, any expenses in connection with the assembly (“masse”) to be borne by the Company;
11. Decides that the new shares
issued to a warrants holder on exercise of the stock warrants will be subject to all the provisions of the bylaws of the Company
and will carry distribution rights from the date of their issuance;
12. Authorizes the Board of
Directors and grants it all powers for the purpose of issuing a maximum of 350,000 ordinary shares with a nominal value of EUR
0.12196, upon exercise of the stock warrants, and accordingly, increasing the share capital in a maximum nominal amount of EUR
42,700, without taking into account, as the case may be, any additional shares that may be issued to protect the interests of
the warrants’ holders pursuant to the provisions of Article L.228-99 of the French Commercial Code;
13. Decides that the stock warrants
will be issued on a registered form, will not be the object of an application for admission to trading on any market and will
be not transferable;
14. Decides to grant the Board
of Directors all necessary powers to implement this decision under the terms and conditions set forth in the present resolution
and by law, and in particular:
(i)
Issue and determine the subscription price of the stock warrants;
(ii)
Determine the beneficiaries amongst the category defined above;
(iii)
Determine the exercise price of the shares to be issued upon exercise of the stock warrants in accordance with terms and conditions
set by the present resolution, the dates, periods and conditions of exercise and final details of the issuance within the limits
laid down by this general meeting of shareholders and to allocate the issue premium, as the case may be,
(iv)
Take all necessary measures of information, and notably establish, and if necessary amend, the rules governing the stock warrants’
allocation plan and ensure its delivery to each of the beneficiaries of stock warrants;
(v)
Close the subscription period early or extends its date, if required;
(vi)
Gather the subscriptions to the stock warrants by the stock warrant’s holder(s) and payments in respect of the subscription
for the aforementioned stock warrants;
(vii)
Record the number of shares issued due to exercise of the stock warrants, to carry out the formalities resulting from the corresponding
capital increases, to make the related modifications of the by-laws and to undertake all formalities requested to register the
shares underlying the warrants for public sale and listing on Nasdaq;
(viii)
Take any steps to ensure protection of the holder(s) of stock warrants in case of a financial operation concerning the Company,
this pursuant to the legal and regulatory provisions in effect, and generally;
(ix)
Take all steps and to carry out all formalities that are useful in connection with the present issuance;
(x)
Decide a temporary suspension of the exercise of warrants during a maximum period of 3 months, in accordance with applicable law;
(xi)
At its sole discretion and if it deems it appropriate, charge the costs of the capital increases against the premium arising thereon,
and deduct from this premium the sums necessary to increase the legal reserve to one tenth of the new share capital after each
capital increase; and
(xii)
Issue a supplementary report individuating the final terms and conditions of the operation;
15. Decides that this authorization
supersedes, as of today, all previous authorizations having the same purpose, and therefore any unused portion of the previous
authorization granted to the Board of Directors by the Combined Ordinary and Extraordinary Shareholders’ Meeting of June
26, 2015 in its Twelfth (12th) and Thirteenth (13th) Resolutions.
16. Decides that this delegation
is granted for a term of eighteen (18) months from the date of this Meeting.
Twenty-Fourth Resolution:
Therefore,
the Meeting, voting under the quorum and majority requirements for extraordinary general meetings, after having heard a reading
of the Board of Directors’ report and Statutory Auditor’s special report, acknowledging that the share capital of
the Company is fully paid up, in accordance with the provisions of Articles L.225-129-6 and L.225-138-1 of the French Commercial
Code and Article L.3332-18 et seq. of the French Labor Code, hereby
|
1.
|
Authorizes the Board of Directors
to carry out, on one or more occasions, on its own resolution, an increase of the share
capital, through the issuance of shares reserved, directly or through an Employee Profit
Sharing FCP (“
Plan Epargne Entreprise
”), to members of a company sponsored
saving plan, as provided for in Article L.3332-1 et seq. Of the French Labor Code, for
employees of the Company or its affiliates, as defined under Article L.225.180 of the
French Commercial Code, who shall meet additional criteria to be defined by the Board,
if any (the “Group Employees”);
|
|
2.
|
Decides to set at one percent (1%)
of the share capital as of the date of this meeting, as the maximum number of shares
that the Board may issue from the use of this authorization;
|
|
3.
|
Decides that the subscription price
per share for the shares to be issued in accordance with this authorization shall be
determined by the Board in accordance with Article L.3332-20 of the French Labor Code;
|
|
4.
|
Decides to grant the Board all powers
necessary to implement this resolution in accordance with applicable laws and regulations,
and subject to the limitations and conditions specified above;
|
|
5.
|
Acknowledges that, in the event
the Board uses this authorization, it shall so inform the next ordinary general meeting
of shareholders of the operations in accordance with applicable laws and regulations;
|
|
6.
|
Decides to not waive and/or cancel,
to the benefit of those Group Employees (as defined above), the preferential subscription
rights of the shareholders to the shares to be issued under the authorization to be granted
hereby; and
|
|
7.
|
Specifies that this delegation and
authorization is granted to the Board of Directors for a period of twenty-six (26) months
from the date of this Meeting.
|
Twenty-Fifth Resolution:
Therefore,
the extraordinary general meeting, voting under the quorum and majority conditions for extraordinary general meetings, hereby:
Grants a
power of attorney to the bearer of an original, an extract or a copy hereof, in order to effect all publication, filing and other
formalities required by law to give effect to the resolutions approved at the Meeting.
ANNEX B
FLAMEL TECHNOLOGIES - December 31,
2015
FINANCIAL RESULTS OF LAST FIVE YEARS
(In euros)
|
|
|
|
12/31/2011
|
|
|
12/31/2012
|
|
|
12/31/2013
|
|
|
12/31/2014
|
|
|
12/31/2015
|
|
a)
|
|
Share Capital
|
|
|
3,044,396
|
|
|
|
3,099,662
|
|
|
|
3,123,707
|
|
|
|
4,901,727
|
|
|
|
5,029,783
|
|
b)
|
|
Number of Ordinary Shares
|
|
|
24,962,250
|
|
|
|
25,415,400
|
|
|
|
25,612,550
|
|
|
|
40,191,264
|
|
|
|
41,241,254
|
|
c)
|
|
Number of Preference Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d)
|
|
Maximum number of shares to be issued by :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Bond Issue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Exercise of Stock Options
and Warrants and issue of Free Shares
|
|
|
4,481,640
|
|
|
|
7,723,140
|
|
|
|
7,384,990
|
|
|
|
6,351,240
|
|
|
|
6,293,027
|
|
SHARE CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
|
Revenues
|
|
|
22,503,580.78
|
|
|
|
17,183,940.00
|
|
|
|
22,145,947.00
|
|
|
|
80,731,185.00
|
|
|
|
19,666,552.00
|
|
b)
|
|
Income before taxes, depreciation and provisions
|
|
|
(7,856,268.36
|
)
|
|
|
(14,124,502.34
|
)
|
|
|
(3,804,496.47
|
)
|
|
|
60,091,076.00
|
|
|
|
14,319,873.00
|
|
c)
|
|
Income Tax (Tax Credit)
|
|
|
(4,931,445.00
|
)
|
|
|
(5,067,856.00
|
)
|
|
|
(4,303,328.00
|
)
|
|
|
7,045,175.00
|
|
|
|
(2,210,611.00
|
)
|
d)
|
|
Employee's Profit-Sharing
|
|
|
940,459.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
e)
|
|
Income after taxes, profit sharing, depreciation and provisions
|
|
|
(6,647,651.00
|
)
|
|
|
(12,315,766.04
|
)
|
|
|
(117,738.65
|
)
|
|
|
51,264,590.00
|
|
|
|
16,000,628.00
|
|
f)
|
|
Profit Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ANNUAL OPERATIONS AND EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
|
Income after tax and profit sharing and before depreciation and provisions
|
|
|
(0.12
|
)
|
|
|
(0.36
|
)
|
|
|
0.02
|
|
|
|
1.30
|
|
|
|
0.40
|
|
b)
|
|
Income after tax, profit-sharing, depreciation and provisions
|
|
|
(0.27
|
)
|
|
|
(0.48
|
)
|
|
|
0,00
|
|
|
|
1.28
|
|
|
|
0.39
|
|
c)
|
|
Dividend per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
|
Average number of employees
|
|
|
278
|
|
|
|
243
|
|
|
|
242
|
|
|
|
226
|
|
|
|
97
|
|
b)
|
|
Payroll Costs
|
|
|
11,817,905.34
|
|
|
|
12,037,122.88
|
|
|
|
10,796,957.78
|
|
|
|
10,107,395.00
|
|
|
|
5,414,031.00
|
|
c)
|
|
Social tax costs
|
|
|
5,398,852.98
|
|
|
|
5,400,517.43
|
|
|
|
4,983,511.01
|
|
|
|
5,140,115.00
|
|
|
|
2,567,803.00
|
|
PERSONNEL COSTS
|
|
|
|
|
|
|
ANNEX C
AVADEL PHARMACEUTICALS
LIMITED
The Acquiring
Company
FLAMEL TECHNOLOGIES
S.A.
The Acquired Company
COMMON DRAFT TERMS
OF CROSS-BORDER MERGER
Dated 27 May 2016
COMMON DRAFT TERMS OF CROSS-BORDER MERGER
Dated 27 May 2016
ENTERED INTO BETWEEN
AVADEL PHARMACEUTICALS LIMITED
,
a private company limited by shares incorporated under and governed by the laws of Ireland with issued share capital of EUR 100,
comprising 100 ordinary shares of EUR 1.00 each and registered office located at Block 10-1, Blanchardstown Corporate Park, Ballycoolin,
Dublin 15, Ireland and registered under number 572535 in the Companies Registration Office,
Represented by Mr. Dhiren D’Silva,
who is duly authorised for the purpose hereof by a decision made by Avadel’s board of directors on 25 April 2016.
Hereinafter the “
Acquiring Company
”
or “
Avadel
”.
AND,
FLAMEL TECHNOLOGIES S.A.
, a French
joint-stock company (
société anonyme
) with a share capital of EUR5,029,783 comprising 41,241,254 shares having
a nominal value of EUR0.12196, all fully paid and registered office located at Parc Club du Moulin à Vent, 33, avenue du
Dr Georges Levy, 69200 Vénissieux, France, registered with the Lyon Trade and Companies Register (RCS) under no. 379 001 530,
Represented by Mr. Michael S. Anderson,
Directeur Général
of Flamel, who is duly authorised for the purpose hereof by a decision made by Flamel’s
Board of Directors on 12 May 2016.
Hereinafter the “
Acquired Company
”
or “
Flamel
”.
Avadel and Flamel are hereinafter referred
to, individually, as a “
Party
”
and, collectively, as the “
Parties
”.
|
1.1.
|
In addition to the other terms
and expressions expressly defined above and/or in the Preamble below or in certain clauses
of this Merger Agreement, for the purposes of enforcing this Merger Agreement, the words
and phrases listed below beginning with a capital letter shall have the following meaning:
|
“
Acquired Company
”
means Flamel;
“
Acquired Company Shares
”
means the number of shares of the Acquired Company immediately prior to completion of the Merger;
“
Acquiring Company
”
means Avadel;
“
Acquiring Company New Shares
”
means ordinary shares of the Acquiring Company to be issued to the shareholders of the Acquired Company on consummation of the
Merger in accordance with the share exchange ratio for the Merger as described in Clause 6.1;
“
ADS
” means an American
Depositary Share, which represents one ordinary share of Flamel; each ADS is issued pursuant to a program sponsored by the Acquired
Company under which the Bank of New York Mellon is the “Depositary”;
“
Avadel Legal Capital Changes
”
has the meaning given to it in Clause 2;
“
Avadel Shareholder Equity-Linked
Securities Issuance Authority
” has the meaning given to it in Clause 8.1.4;
“Breaking Stick Holdings Warrants”
has the meaning given to it Clause 8.1.3.c);
“
Business Day
” means
any day (other than a Saturday or Sunday) on which banks are generally open for business in Paris and in Dublin;
“
CGI
” means the Code
Général des Impôts, i.e., the French general tax code;
“
Companies Act
” means
the Irish Companies Act 2014;
“
CRO
” means the Irish
Companies Registration Office;
“
Directive
” means the
Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005, on cross-border mergers of limited-liability
companies;
“Directors Warrants”
has the meaning given to it Clause 8.1.3.a);
“
Domestic Merger
” means
the prior merger by acquisition of Avadel and FIHL under Chapter 3 of Part 9 of the Companies Act;
“
Effective Date
” means
the date specified in the Final Order on which the consequences of the Merger as set out in regulation 19(1) of the Irish Regulations
and article L. 236-31 of the French Regulations are to have effect; as stated in Clause 11, the parties contemplate that the Effective
Date is to be December 31, 2016;
“
Effective Time
” has
the meaning given to it Clause 11;
“Equity-Linked Securities
”
means, with respect to any company, securities conferring access to the share capital of such company in the form of stock options,
unvested free shares, warrants or other rights to acquire ordinary shares (or the equivalent);
“
FIHL
” means FLAMEL
IRISH HOLDINGS LTD, an Irish private company limited by shares incorporated under and governed by the laws of Ireland with issued
share capital of EUR100 comprising 100 ordinary shares of EUR1.00 each, all fully paid, and registered office located at Block
10-1, Blanchardstown Corporate Park, Ballycoolin, Dublin 15 and registered under number 542076 in the CRO;
“
Final Order”
means
the order made by the Irish High Court under regulation 14 of the Irish Regulations pursuant to which the Irish High Court approves
the completion of the Merger, confirms that the terms and conditions of the Merger are fair (both procedurally and substantively)
to the Flamel shareholders, and fixes the Effective Date;
“
Free Share Rights
”
has the meaning given to it in Clause 8.1;
“
French Commercial Code
”
means the French
Code de commerce
;
“
French Regulations
”
means the French law
no 2008-649
dated 3 July 2008 and the French decree
no
2009-11
dated
5 January 2009
which have implemented the Directive into
French law under articles L.236-25
et seq.
and R.236-13
et seq
. of the French Commercial Code;
“
Group
” means the group
of companies to which Flamel and Avadel belong as described prior to the Effective Date in the chart on page 1 of
Appendix
A
;
“
Independent Expert
”
has the meaning given to it in Clause 13;
“
Irish Regulations
”
means the European Communities (Cross-Border Mergers) Regulations 2008 as amended by the European Communities (Mergers and Divisions
of Companies) (Amendment) Regulations 2011;
“
Merger
” means the
cross-border merger by acquisition (
absorption
under French regulations) of the Acquired Company by the Acquiring Company
pursuant to the Irish Regulations and the French Regulations;
“
Merger Agreement
”
means this common draft terms of the Merger;
“
Merger Proxy Statement
”
means the proxy statement to be furnished to Flamel’s shareholders in connection with the meeting of Flamel shareholders
at which such shareholders will be asked to consider the Merger;
“
NASDAQ
” means the
Nasdaq Global Stock Market;
“
Outstanding
Stock Options
”
has the meaning given to it in Clause 8.1.2;
“
Revised Constitution
”
means the constitution of Avadel to be in effect as of the Effective Date, substantially in the form of
Appendix 15
hereto;
“
Scientific Committee’s
Stock Warrants
” has the meaning given to it Clause 8.1.3.b);
“
SEC
” means the United
States Securities and Exchange Commission;
“
Share Exchange Ratio
”
means the share exchange ratio for the Merger as described in Clause 6.1;
“
Share Issue
” means
the issue of the Acquiring Company New Shares; and
“
Stock
Warrants
”
means the Directors’ Stock Warrants, the Scientific Committee’s Stock Warrants and the Breaking Stick Holdings Stock
Warrants.
|
a.
|
Unless
indicated otherwise in the Merger Agreement:
|
|
(i)
|
words in any given gender also
imply the other gender;
|
|
(ii)
|
words in the singular also imply
words in the plural, and vice versa;
|
|
(iii)
|
the expressions
“to this
Merger Agreement”, “in this Merger Agreement”, “hereto”
or “
herein”,
and their derivative forms or similar expressions,
relate to the Merger Agreement in its entirety.
|
|
b.
|
References
to this Merger Agreement and other documents shall be deemed as including all written
amendments and other written modifications made subsequently hereto.
|
|
c.
|
References
to Clauses and Appendices shall be interpreted as references to the Clauses and Appendices
of this Merger Agreement, unless indicated otherwise.
|
|
d.
|
The
headings of the Clauses and Appendices of this Merger Agreement are for ease of reference
only and are not intended to form part of or influence the meaning or interpretation
of the Merger Agreement.
|
|
e.
|
Any
term defined with reference to another document shall have the meaning prescribed to
it in such other document, save to the extent it is inconsistent with this Merger Agreement,
and any reference to another document shall be interpreted as meaning that document as
it may be amended or replaced after the date of signature of this Merger Agreement.
|
It has been proposed by the boards of
directors of each of Flamel and Avadel that the Merger be effected.
The Parties have agreed to enter into
this Merger Agreement to govern the proposed Merger pursuant to the French Regulations and the Irish Regulations.
This Merger Agreement comprises the common
draft terms of the Merger which have been drawn up and adopted by the boards of directors of each of Flamel and Avadel for the
purposes of article R.236-14 of the French Regulations and regulation 5 of the Irish Regulations.
The Parties have noted that:
|
-
|
French Regulations and the French
Commercial Code provide for no procedure for compensating minority shareholders but provide
that the shareholders decide, by a special resolution, on the possibility of implementing
a compensation procedure for minority shareholders where this possibility is offered
to shareholders of one of the companies involved in the cross-border merger through its
applicable law;
|
|
-
|
Irish Regulations provide for a
compensation procedure for minority shareholders but, in the absence of minority shareholder
this procedure is inapplicable;
|
|
-
|
Consequently, the Parties have
agreed that there is no need to have the shareholders rule upon a special resolution
on the possibility of implementing procedures for compensating minority shareholders;
as such procedure is not applicable to the Merger between Flamel and Avadel.
|
Prior to the date of this Merger Agreement,
Avadel effected the Domestic Merger to acquire FIHL
.
As a result of the Domestic Merger, Avadel became a wholly owned subsidiary
of Flamel.
Prior to the Effective Date, Avadel will
(A) re-register as an Irish public limited company pursuant to Part 20 of the Companies Act, and (B) (i) adopt an authorised share
capital of $5,500,000 comprising 500,000,000 ordinary shares of $0.01 each and 50,000,000 preferred shares of $0.01 each, plus
EUR25,000 comprising 25,000 deferred ordinary shares of EUR1.00 each; (ii) issue 100 ordinary shares of $0.01 each to Flamel,
(iii) acquire and cancel by surrender the existing 100 ordinary shares of EUR1.00 currently in issue; and (iv) issue 25,000 deferred
ordinary shares of EUR1.00 each (the changes described in the foregoing items (A) and (B) are referred to hereinafter as the “
Avadel
Legal Capital Changes
”).
|
3.
|
PARTIES: LEGAL FORM, CORPORATE
NAME, REGISTERED OFFICE
(article 5(a) of the Directive, article R.236-14 1°
of the French Commercial Code and regulation 5(2) of the Irish Regulations)
|
Avadel is a private company limited by
shares incorporated under and governed by the laws of Ireland with issued share capital of EUR100 comprising 100 ordinary shares
of EUR1.00 each, all fully paid and all owned directly by Flamel, and registered office located at Block 10-1, Blanchardstown
Corporate Park, Ballycoolin, Dublin 15 and registered under number 572535 in the CRO.
Avadel’s current fiscal year ends
on 31 December and Avadel’s next fiscal year starts on 1 January.
Avadel’s shares are not listed on
a regulated market and it has not previously offered financial securities to the public.
Save as otherwise set out in this Merger
Agreement, Avadel has not created or issued any founder shares, bonds, non-voting preference shares, share options, free shares
or other securities representing rights to acquire any of its share capital.
On the Effective Date, Avadel’s
authorised share capital shall amount to $5,500,000 and EUR25,000.
Flamel is a French joint-stock company
(
société anonyme
) with a share capital of EUR5,029,783 comprising 41,241,254 shares having a nominal value
of EUR0.12196, all fully paid and registered office located at Parc Club du Moulin à Vent, 33, avenue du Dr Georges Levy,
69200 Vénissieux, France, registered with the Lyon Trade and Companies Register (RCS) under no. 379 001 530.
Flamel’s fiscal year runs from 1
January to 31 December.
In excess of ninety percent (90%) Flamel’s
issued share capital is listed on the NASDAQ in the form of American Depositary Shares (ADSs), through the Bank of New York Mellon,
Flamel’s depositary agent.
As defined in
Appendix 3.2
and in Clause 8, as of the date of this Merger Agreement, there were outstanding Equity-Linked Securities of Flamel under which
the holders thereof have rights to acquire an aggregate of 6,844,953 ordinary shares of Flamel (either directly or in the form
of ADSs), which represents approximately 16.6% of the number of ordinary shares of Flamel issued and outstanding as of the date
of this Merger Agreement; such Equity-Linked Securities have been granted to different categories of beneficiaries by Flamel’s
Board of Directors pursuant to extraordinary meetings of Flamel shareholders and the ordinary shares underlying such Equity-Linked
Securities are unissued as of the date of this Merger Agreement and so are not recorded in Flamel’s current issued share
capital.
The Acquiring Company and the Acquired
Company are companies in the Group.
All of the Acquiring Company’s shares
are currently held by the Acquired Company.
|
4.
|
REASONS FOR AND PURPOSE OF
THE MERGER
|
The Group plans to merge Flamel and Avadel
to restructure the economic and legal organisation of its business.
Following consummation of the Merger,
Flamel will be dissolved without going into liquidation and the French operational activities will be performed through a French
branch of Avadel. All assets and liabilities of Flamel will be assigned to Avadel.
The Group plans to effect the Merger for
the following reasons:
|
-
|
To
ensure compliance with SEC and NASDAQ listing requirements
:
|
Prior to 1 January 2016, Flamel
relied on a foreign private issuer exemption to certain NASDAQ and SEC requirements applicable to the registration of its ADSs
for public sale in the U.S. and for listing on NASDAQ. However, upon becoming a “domestic issuer” for SEC reporting
purposes on 1 January 2016, Flamel must now comply with these requirements. In certain cases, in particular with respect to corporate
governance matters, these requirements are not fully consistent with principles of French law applicable to
sociétés
anonymes
such as Flamel, which limit the ability of a board of directors of a French
sociétés anonymes
to delegate certain authority to committees and other persons in the manner contemplated by certain of such requirements. Therefore,
to avoid any possible concerns in this regard about the continued and long-term compliance with these NASDAQ and SEC requirements,
and therefore the continued and long-term listing of Flamel’s equity securities on NASDAQ so that its shareholders can continue
to participate in a liquid market, Flamel has determined that it is desirable to change its nationality, from a French company
to an Irish company.
|
-
|
Corporate
governance issues
:
|
The overall legal system applicable
to companies incorporated under the laws of Ireland is more similar to the legal system of the United States than to the legal
system of France. The Irish legal system which will apply to Avadel as a public company following consummation of the Merger,
like the U.S. legal system, is a common law system rather than civil law system. Therefore, the Group’s management have
determined that, if Flamel changes its nationality to Ireland, its shareholders (the majority of whom are U.S. persons) will be
more likely to understand the new legal system (i.e., that of Ireland) that will govern the company in which they have invested
as compared to the legal system of France.
Certain aspects of Flamel’s
corporate governance procedures will provide Flamel’s management with increased flexibility in completing transactions that
involve the issuing or redemption of Avadel’s ordinary shares.
|
-
|
Operational
effectiveness:
|
In 2014, the Board of Directors
of Flamel approved the sale of all of the Group’s intellectual property to Flamel Ireland Limited, Flamel’s wholly-owned
operational subsidiary, which is now a 100% subsidiary of Avadel by virtue of the Domestic Merger. Given the attractive nature
of the business environment in Ireland and given that the Group’s IP and related functions are located in Ireland, the Group’s
management believes that this supports the Group’s business case to complete the Merger as it will allow for synergies within
the Group and improve the efficiency of its management and supporting services. These centralised functions will help to unify
the Group wide decision-making process, thereby helping to ensure its customers receive safe and effective products.
|
5.
|
TRANSFER OF ALL FLAMEL’S
ASSETS AND LIABILITIES (article 2.2. of the Directive)
|
On the Effective Date, as specified in
Clause 11, Flamel, on being dissolved without going into liquidation, will transfer all of its assets and liabilities to Avadel
pursuant to article L.236-3 I of the French Commercial Code and regulation 19(1) of the Irish Regulations.
|
6.
|
EXCHANGE RATIO AND TERMS OF
ACQUIRING COMPANY NEW SHARES (articles 5 (b), (c) and (e) of the Directive)
|
|
6.1.
|
Share exchange ratio
|
The Share Exchange Ratio agreed by each
of the boards of directors of Flamel and Avadel corresponds to one
Acquiring Company New Share for one Acquired
Company Share.
The Share Exchange Ratio has been calculated
based on the number of Acquired Company Shares in issue as of the date hereof.
The ordinary shares in Avadel that Flamel
holds immediately prior to consummation of the Merger will vest in Avadel by operation of law and will be subsequently cancelled.
|
6.2.
|
No cash payment to Acquired
Company shareholders
|
No cash payment shall be made by the Acquiring
Company to the Acquired Company shareholders in respect of their Acquired Company Shares or the transfer of the Acquired Company’s
assets and liabilities to the Acquiring Company pursuant to the Merger.
Article 11 of the Acquired Company’s
bylaws states, among other things, that:
“Each time it is
necessary to hold several shares to exercise any right, the isolated shares or shares in a number less than the one required number,
shall give no right to their holders against the Company [i.e. Flamel]; the shareholders shall, in this case, be personally responsible
for the gathering of the necessary number of shares.”
For avoidance of doubt, such Article 11
shall apply to any isolated shares to the extent relevant under applicable law.
|
6.3.
|
Valuations of the Acquiring
Company and the Acquired Company used for the determination of the Share Exchange Ratio
|
The Share Exchange Ratio is based on the
fair market value of the Acquiring Company and on the fair market value of the Acquired Company. In evaluating these components
in the determination of the Share Exchange Ratio and in establishing the conditions of the Merger generally, as noted in Clause
9, the Acquiring Company and the Acquired Company used the Parties’ financial statements as of 31 December 2015 (in the
case of the Acquired Company) and 29 February 2016 (in the case of the Acquiring Company). Accordingly, the Parties took into
consideration that, as of 29 February 2016, Avadel had no retained profits or losses. Moreover, the Parties have also noted that
(i) as of the date of this Agreement and as of the Effective Time, any and all assets and liabilities that may be owned or owed
(as applicable) by Avadel will be indirectly the assets and liabilities of Flamel, because Avadel is a wholly owned subsidiary
of Flamel, and (ii) in view of the economic reality described in the foregoing item (i), the beneficial interest of the shareholders
of Avadel after the Merger in the assets and liabilities of Flamel and in the assets and liabilities of Avadel will not change
as a result of the Merger.
|
6.4.
|
Terms relating to the
allotment and issue of Acquiring Company New Shares
|
|
6.4.1.
|
On the Effective Date,
the Acquiring Company shall allot and issue Acquiring Company New Shares credited as
fully paid to the Acquired Company shareholders on the basis of the Share Exchange Ratio
and otherwise on the terms and conditions set out in this Merger Agreement.
|
|
6.4.2.
|
The Acquiring Company
New Shares will rank
pari passu
in all respects with all other Acquiring Company
Shares in issue on the Effective Date, including, where the record date for determining
entitlements is on or after the Effective Date, the right to all dividends and other
distributions (if any) declared, made or paid by the Acquiring Company on the Acquiring
Company Shares. No special rights or conditions will affect this entitlement of the Acquiring
Company New Shares (or the holders thereof) in respect of dividends or distributions
declared, made or paid on the ordinary share capital of the Acquiring Company where the
record date for determining entitlement to such dividends or distributions is on or after
the Effective Date.
|
|
6.4.3.
|
An application will be made
to have the Acquiring Company New Shares admitted to trading on the NASDAQ as from the
Effective Date.
|
|
6.5.
|
Increase in Avadel’s
issued share capital
|
As a consequence of the Merger, Avadel
will increase its issued share capital (which, immediately prior to the Merger, will consist, as a result of the Avadel Legal
Capital Changes, of 100 ordinary shares of $0.01 each and 25,000 deferred ordinary shares of EUR1.00 each) by allotting and issuing
the Acquiring Company New Shares. The Acquiring Company New Shares will be issued at a premium to their nominal value equal in
aggregate to the difference between the net book value of the transferred assets and liabilities and the nominal value of the
Acquiring Company New Shares at the Effective Date.
|
7.
|
SHARES OR OTHER SECURITIES
IN THE ACQUIRED COMPANY TO WHICH SPECIAL RIGHTS OR RESTRICTIONS ATTACH
|
|
7.1.
|
All of the Acquired Company
Shares rank
pari passu
with each other and accordingly:
|
|
(a)
|
no Acquired Company Shares, and
no Acquired Company shareholder, is subject to special rights or restrictions; and
|
|
(b)
|
no measures are proposed under
the Merger by which any Acquired Company Shares or any Acquired Company shareholder would
be subject to any special rights or restrictions.
|
|
7.2.
|
Save as disclosed in Clause
8 with respect to the Outstanding Stock Options, Stock Warrants and Free Share Rights,
the Acquired Company has not issued any equity securities or Equity-Linked Securities
other than Acquired Company Shares and accordingly no measures are required or proposed
under the Merger concerning holders of any such securities.
|
|
7.3.
|
No shares or securities will
be issued by the Acquiring Company under the Merger other than the Acquiring Company
New Shares. All of the Acquiring Company New Shares will rank
pari passu
with
each other and no special rights or restrictions will apply to any of the Acquiring Company
New Shares to be issued pursuant to the Merger.
|
|
8.
|
PROPOSAL IN RELATION TO OUTSTANDING
STOCK OPTIONS, WARRANTS, FREE SHARE RIGHTS AND OTHER OUTSTANDING AUTHORITIES TO ISSUE
SECURITIES
|
|
8.1.
|
Equity-Linked Securities
|
Flamel has approved various free share
plans (
plans d’actions gratuites
) pursuant to articles L 225-197-1 and seq. of the French Commercial Code, under
which certain employees and corporate officers of Flamel and its subsidiaries were granted the right to be awarded shares for
no consideration after the expiry of the relevant vesting period.
The shareholders of Flamel will be requested,
at the next general meeting, to authorise the Board of Directors to grant up to 750,000 shares under the 2016 free share plan
to employees and corporate officers of Flamel and its subsidiaries.
Appendix 3.2
details the
outstanding rights to free allocation of shares under the existing free share plans, which correspond to the free shares that
have not yet vested as at the date hereof together with the free shares to be granted under the Flamel 2016 free share plan (such
outstanding rights being together referred to as the “
Free Shares Rights
”).
The Acquiring Company will be substituted
for the Acquired Company with regard to its obligations towards the beneficiaries of Free Share Rights. The rights of the beneficiaries
of the Free Share Rights to receive free shares of the Acquired Company will be converted into rights to receive ordinary shares
of the Acquiring Company, on the same terms and conditions.
Considering the Share Exchange Ratio,
the number of ordinary shares of the Acquiring Company to which each beneficiary will be entitled pursuant to a given allocation
plan will correspond to the number of ordinary shares of the Acquired Company to which such beneficiary would have been entitled
pursuant to the relevant plan.
|
8.1.2.
|
Stock Option Plans
|
Flamel has approved various stock option
plans (
plans d’options de souscription d’actions
) pursuant to articles Articles L.225-177 et seq. of the French
Commercial Code, under which certain employees and corporate officers of Flamel and its subsidiaries were granted the right to
subscribe for new shares of Flamel to be issued in the form of a share capital increase or to purchase existing shares of Flamel
resulting from a buyback of shares after the expiry of the relevant vesting period.
The shareholders of Flamel will be requested,
at the next general meeting, to authorise the Board of Directors to grant stock options to purchase up to 1,500,000 shares under
the Flamel 2016 stock option plan to employees and corporate officers of Flamel and its subsidiaries.
Appendix 3.2
details the
outstanding stock options under the existing stock option plans, which correspond to the stock options that have not vested as
at the date hereof (such outstanding stock options, together with the stock options to be granted under the Flamel 2016 stock
option plan, are referred to as the “
Outstanding Stock Options
”).
The Outstanding Stock Options shall be
converted into options to purchase ordinary shares of the Acquiring Company, on the same terms and conditions. Considering the
Share Exchange Ratio:
|
·
|
the
number of ordinary shares of the Acquiring Company to which each Outstanding Stock Option
holder will be entitled to subscribe pursuant to a given stock option plan will correspond
to the number of ordinary shares of the Acquired Company to which such holder would have
been entitled to subscribe under the relevant plan;
|
|
·
|
the
subscription price per ordinary share of the Acquiring Company will be equal to the subscription
price per ordinary share of the Acquired Company.
|
|
a.
|
Directors’ Stock
Warrants (“
BSA administrateurs
”)
|
Flamel has granted stock warrants (
bons
de souscription d’actions
) conferring the right after the expiry of the relevant vesting period to subscribe to newly
issued ordinary shares of Flamel in the form of ADSs at a determined price (the exercise price) before the defined expiration
date to some of its current and former directors.
The shareholders of Flamel will be requested,
at the next general meeting, to authorise the Board of Directors to issue warrants to purchase up to 350,000 shares to non-employee
directors of Flamel and its subsidiaries.
Appendix 3.2
details the
outstanding directors stock warrants, which, together with the directors stock warrants to be issued pursuant to the next general
meeting’s authorisation, are referred to as the “
Directors’ Stock Warrants
”).
The Directors’ Stock Warrants shall,
on the Effective Date, be converted into warrants to purchase ordinary shares of the Acquiring Company, on the same terms and
conditions. Considering the Share Exchange Ratio:
|
·
|
the
number of ordinary shares of the Acquiring Company to which each Directors’ Stock
Warrant holder will be entitled to subscribe pursuant to a given Directors’ Stock
Warrant plan will correspond to the number of ordinary shares of the Acquired Company
to which such bearer would have been entitled to subscribe under the relevant plan;
|
|
·
|
the
subscription price per ordinary share of the Acquiring Company will be equal to the subscription
price per ordinary share of the Acquired Company.
|
|
b.
|
Scientific Committee’s
Stock Warrants
|
Flamel has granted stock warrants (
bons
de souscription d’actions
) conferring the right after the expiry of the relevant vesting period to subscribe to newly
issued ordinary shares of Flamel in the form of ADSs at a determined price (the exercise price) before the defined expiration
date to some former members of its Scientific Committee, as detailed in
Appendix 3.2
(the “
Scientific Committee’s
Stock Warrants
”).
The Scientific Committee’s
Stock
Warrants shall, on the Effective Date, be converted into warrants to purchase ordinary shares of the Acquiring Company, on the
same terms and conditions. Considering the Share Exchange Ratio:
|
·
|
the
number of ordinary shares of the Acquiring Company to which each Scientific Committee’s
Stock Warrant holder will be entitled to subscribe pursuant to a given Scientific Committee’s
Stock Warrant plan will correspond to the number of ordinary shares of the Acquired Company
to which such bearer would have been entitled to subscribe under the relevant plan;
|
|
·
|
the
subscription price per ordinary share of the Acquiring Company will be equal to the subscription
price per ordinary share of the Acquired Company.
|
|
c.
|
Breaking Stick Holdings
(formerly known as Eclat Holdings) Warrants (
Deerfield) (“BSA Eclat”)
|
Flamel has granted to Eclat Holding LLC
stock warrants (
bons de souscription d’actions
) conferring the right to purchase from Flamel ADSs or restricted ADS,
as the case may be, each representing an ordinary share at a determined price (the exercise price) before the defined expiration
date, as detailed in
Appendix 3.2
(the “
Breaking Stick Holdings Warrants
”).
The Breaking Stick Holdings Warrants shall,
on the Effective Date, be converted into warrants to purchase ordinary shares of the Acquiring Company, on the same terms and
conditions. Considering the Share Exchange Ratio:
|
·
|
the
number of ordinary shares of the Acquiring Company to which each Breaking Stick Holdings
Warrant holder will be entitled to subscribe pursuant to a given Breaking Stick Holdings
Warrant plan will correspond to the number of shares of the Acquired Company to which
such holder would have been entitled to subscribe under the relevant plan;
|
|
·
|
the
subscription price per ordinary share of the Acquiring Company will be equal to the subscription
price per share of the Acquired Company.
|
Prior to the Effective Date, Avadel shareholder
authority will be sought to enable the issuance of its ordinary shares in respect of the outstanding Free Share Rights, the outstanding
Stock Options, the outstanding Directors’ Stock Warrants, the Scientific Committee’s Stock Warrants and the Breaking
Stick Holdings Warrants. Such Avadel shareholder authority is referred to as the “
Avadel Shareholder Equity-Linked Securities
Issuance Authority
”.
|
8.2.
|
Other outstanding authorities
to issue securities
|
The shareholders of Flamel authorised
the Board of Directors:
|
a)
|
on 26 June 2015, to issue
350,000 stock warrants, for a 18 months period (i.e. expiring on 26 December 2016); this
authorisation was partially utilised and remains valid for the issuance of up to four
warrants as of the date hereof;
|
|
b)
|
on 26 June 2015, to issue
250,000 free shares, for a 38 months period (i.e. expiring on 26 August 2018) this authorisation
has not been used as of the date hereof and is therefore still in force.
|
|
c)
|
the shareholders of Flamel
authorised the Board of Directors, on 26 June 2015, to issue 2,000,000 new ordinary shares
in the form of ADSs, for a 18 months period (i.e. expiring on 26 December 2016); this
authorisation has not been used as of the date hereof and is therefore still in force.
|
All outstanding authorities as described
in Clauses 8.2 are expected to be superseded and replaced by the authorities to be granted by the next general meeting expected
to be held during the second half of 2016. Any new authorities that may thus be granted by the next general meeting shall be transferred
to the Acquiring Company which shall enforce such authorities subject to its applicable laws and Revised Constitution.
|
9.
|
DATE OF THE PARTIES’
FINANCIAL STATEMENTS USED TO ESTABLISH THE CONDITIONS OF THE MERGER (article 5(l) of
the Directive, article R.236-14 8° of the French Commercial Code and regulation 5(k)
of the Irish Regulations)
|
The Parties’ financial statements
used to establish the conditions of the Merger are:
|
-
|
in
the case of the Acquired Company, the annual financial statements for the period ended
31 December 2015, which have been approved by Flamel’s Board of Directors and filed
with the SEC on 15 March 2016; and;
|
|
-
|
in
the case of the Acquiring Company, the unaudited interim accounts as at and for the period
ended 29 February 2016.
|
The Merger shall not be completed unless
each of the following conditions precedent shall have been satisfied:
|
‒
|
Flamel shall have submitted
the Merger Proxy Statement to the Irish High Court;
|
|
‒
|
Avadel’s shareholder
shall have approved the Merger and this Merger Agreement;
|
|
‒
|
Avadel’s shareholder
shall have approved the Revised Constitution;
|
|
‒
|
Flamel’s shareholders
shall have approved the Merger and the Merger Agreement;
|
|
‒
|
the clerk of the commercial
court of Lyon shall have duly issued a legality certificate in respect of Flamel’s
participation in the Merger after the Flamel shareholders approve the Merger;
|
|
‒
|
Avadel shall have advised
the Irish High Court that, based on the Final Order, Avadel will rely upon the exemption
from U.S. securities law registration available under Section 3(a)(10) under the U.S.
Securities Act of 1933 and it will not register the Acquiring Company New Shares under
that Act;
|
|
‒
|
by placing advertisements
in the CRO gazette and the international editions of The Financial Times and The Wall
Street Journal, and/or such other publications as the Irish High Court shall order, Flamel
shall have given its shareholders prior notice of the hearing of the Irish High Court
at which such Court will consider the Merger for purposes of approval thereof, and such
notice shall state that the Flamel shareholders may attend the hearing and may have an
opportunity to be heard at such hearing;
|
|
‒
|
the Irish High Court shall
have issued the Final Order;
|
|
‒
|
Avadel shall have given full
effect to the Avadel Legal Capital Changes;
|
|
‒
|
Avadel’s shareholder
shall have granted the Avadel Shareholder Equity-Linked Securities Issuance Authority;
and
|
|
‒
|
as contemplated by Clause
11, the persons who are the directors and officer of Flamel immediately prior to and
at the Effective Time shall have been appointed, immediately prior to and at the Effective
Time, as the only directors and officers, of Avadel.
|
|
11.
|
MERGER AND EFFECTIVE DATE
(articles 5(f) and 12 of the Directive, article L.236-31° of the French Commercial
Code and regulation 14(4) of the Irish Regulations)
|
The Parties contemplate that the Effective
Date will be 31 December 2016, subject to any modification due to the approval of the Irish High Court and the satisfaction of
the conditions precedent, as outlined in clause 10. The Parties expressly agree that from an accounting and tax perspective, the
Merger shall take effect on the Effective Date.
The Merger will become effective at 11:59:59
pm Central European Time on the Effective Date (the “
Effective Time
”), unless the Parties otherwise agree,
when the consequences of the Merger as set out in regulation 19 of the Irish Regulations and/or article L.236-31 of the French
Regulations when the following consequences will take effect:
|
-
|
the
assets and liabilities of Flamel will be transferred to Avadel;
|
|
-
|
Flamel
will be dissolved without going into liquidation;
|
|
-
|
all
legal proceedings pending by or against Flamel shall be continued with the substitution
for Flamel of Avadel as a party;
|
|
-
|
the
rights and obligations arising from the contracts of employment of Flamel employees will
be transferred to Avadel;
|
|
-
|
every
contract, agreement or instrument to which Flamel is a party shall, notwithstanding anything
to the contrary contained in such contract, agreement or instrument, be construed and
have effect as of:
|
|
o
|
Avadel
had been a party thereto instead of Flamel;
|
|
o
|
for
any reference (however worded and whether implied) to Flamel there be substituted a reference
to Avadel; and,
|
|
o
|
any
reference (however worded and whether implied) to the directors, officers, representatives
or employees of Flamel, or any of them, were respectively, a reference to the directors,
officers, representatives or employees of Avadel or to such directors, officers, representatives
or employees of Avadel as Avadel nominates for that purpose or, in default of nomination,
to the director, officer, representative or employee of Avadel who corresponds as nearly
may be to the first-mentioned director, officer, representative or employee;
|
|
-
|
every
contract, agreement, or instrument to which Flamel is a party becomes a contract, agreement
or instrument between Avadel and the counterparty with the same rights, and subject to
the same obligations, liabilities and incidents (including rights of set-off), as would
have been applicable thereto if such contract, agreement or instrument had continued
in force between Flamel and the counterparty, and any money due or owing (or payable)
by or to Flamel under or by virtue of any such contract, agreement or instrument shall
become due and owing (or payable) by or to Avadel instead of Flamel;
|
|
-
|
an
offer or invitation to treat made to or by Flamel before the Effective Date shall be
construed and have effect, respectively, as an offer or invitation to treat made to or
by Avadel;
|
|
-
|
the
shares in Avadel owned by Flamel immediately prior to the consummation of the Merger
will be surrendered for nil consideration and cancelled; and
|
|
-
|
prior
to the Effective Time, Flamel and Avadel shall jointly take all such action as may be
necessary to cause the persons who are the directors and officer of Flamel immediately
prior to the Effective Time, (a) to be appointed, immediately prior to and at the Effective
Time, as the only directors and officers, respectively, of Avadel, and (b) to continue
to be the only directors and officers, respectively, of Avadel from and immediately after
the Effective Time, in each case until their respective successors shall thereafter have
been duly elected, designated or qualified, or until their earlier death, resignation
or removal in accordance with the Revised Constitution (as it may be amended from time
to time) and Irish law.
|
In any case, as of the Effective Date,
from legal, accounting and tax standpoints, the Parties acknowledge that all the Acquired Company’s assets and liabilities
will be acquired and assumed by the Acquiring Company. A diagram of the structure of the Group after the Effective Date is set
forth in the chart on page 2 of
Appendix
A
.
|
12.
|
SPECIFIC RIGHTS AND MEASURES
(article 5(g) of the Directive, article R.236-14 5° of the French Commercial Code
and regulation 5(2)(f) of the Irish Regulations)
|
In compliance with article R.236-14 5°
of the French Commercial Code and regulation 5(2)(f) of the Irish Regulations, no special rights are granted to the Parties’
individual shareholders or holders of either securities other than shares or other rights that could be the object of special
remuneration. In addition, no particular measures for such persons are either proposed or provided for.
|
13.
|
SPECIAL ADVANTAGES (articles
5(h) and 8 with reference to article 15 of the Directive)
|
In compliance with article R.236-14 6°
of the French Commercial Code and regulation 5(2)(g) of the Irish Regulations, no special advantages were or are granted to the
members of the administrative, management, supervisory or controlling bodies of the Parties on the occurrence of the Merger. In
addition, no particular measures were either proposed or provided for with respect to said persons.
In accordance with the combined provisions
of articles L. 236-25, L. 236-10 and L. 225-147 of the French Commercial Code and regulation 7 of the Irish Regulations, upon
joint request of the Parties, EY
has been appointed on 25 April 2016 as merger appraiser (the “
Independent Expert
”)
for the purposes of preparing a report on the terms and conditions of the Merger.
Accordingly, no advantage is granted and
no amount or benefit has been or will be paid or given to the Independent Expert except for its fees which amount to EUR 55,000.
|
14.
|
FORESEEABLE IMPACTS ON EMPLOYEES
(article 5(d) of the Directive, article R.236-14 11° of the French Commercial Code
and Part 3 of the Irish Regulations)
|
Flamel’s Works Council has been
informed and consulted on the planned Merger on a meeting that took place on 29 February 2016, and rendered a positive opinion
on 8 March 2016. The opinion of the Works Council is set out in
Appendix 14
.
|
14.1.
|
Employment contracts
|
Pursuant to article 14.4 of the Directive
and the provisions of article L. 1224-1 of the French Labour Code all employment contracts binding Flamel will, at the Effective
Date of the Merger, be transferred to the French branch of Avadel, including all the rights and obligations attached thereto and
the French branch shall own all legal certificates issued by French authorities, required for the occupation of employees in France.
From a legal standpoint, the Merger has
no effect on the individual status of Flamel’s employees; the employment contracts of Flamel’s employees will continue
to exist on the basis of the agreed terms and conditions.
The employment contracts of Flamel’s
employees will be automatically transferred to Avadel, which will become their new employer by operation of law. The employment
relationship between Avadel and the transferred employees will continue to be governed by French law. The Merger shall not have
any impact on the existing jobs of Flamel’s employees in France.
In the framework of this Merger, the seniority
acquired by the employees within Flamel will be carried over to Avadel. Moreover, they will keep the rights and obligations of
their employment contract, including their position, qualification and compensation.
Likewise, there will be no effect on working
conditions for the French staff.
|
14.2.
|
Collective bargaining
agreements
|
In accordance with its activity, Flamel
currently applies the national collective bargaining agreement for chemicals industries (the “
CBA
”). This CBA
will remain effective after the completion of the Merger for employees subject to French law.
The Merger will have no impact on the
CBA, which will remain the same as the one currently in force, insofar as the employees will continue to carry on the same activity
in France within the French branch.
As from the Effective Date, the CBA will
therefore continue to apply, by operation of law, to the employees of Avadel’s French branch.
Avadel does not have a CBA with its employees.
|
14.3.
|
Collective company-wide
agreements
|
Flamel currently applies a collective
company-wide agreement the “Work-time adjustment & reduction (ARTT) agreement of 28 July 2000”.
As from the Effective Date, the collective
company-wide agreement applicable to Flamel will be automatically called into question due to the Merger, meaning that said agreement
shall remain in effect until the entry into force of an agreement replacing it or, failing which, for a maximum duration of 15
months. Where the agreement thus called into question has not been replaced by a new agreement within the period of 15 months,
the employees shall keep the individual benefits they have acquired under the agreement, upon the expiration of said period..
Until the Effective Date, Flamel’s
employees will continue to benefit from the provisions of the agreement currently in force for a period of up to 15 months.
|
14.4.
|
Customs, atypical agreements,
and unilateral commitments aside from supplementary pension, health and benefits plans
|
Appendix 14.4
sets out the
list of customs and unilateral commitments in force within Flamel as of the date hereof.
Flamel’s customs, atypical agreements
and unilateral commitments do not fall within the scope of article L. 2261-14 of the French Labour Code.
Consequently, as from the Effective Date,
they are transferred to Avadel by operation of law and are enforceable against Avadel. The customs, atypical agreements and unilateral
commitments in force within Flamel are maintained for the French employees of Avadel’s French branch.
|
14.5.
|
Employee profit sharing
and company saving plans
|
Flamel entered into an employee profit-sharing
agreement dated 9 April 2015, effective as from 1 January 2015. The amount of the profit-sharing reserve is calculated according
to the statutory formula.
As from the Effective Date, the profit
sharing agreement shall continue to apply for the French employees of Avadel’s French branch.
|
14.5.2.
|
Company savings
plans
|
Flamel set up a company savings plan (
plan
d’épargne d’entreprise
or “PEE”) on 9 April 2015 and a collective pension savings plan (
plan
d’épargne pour la retraite collectif
or “PERCO”) on 9 April 2015.
As from the Effective Date, these savings
plans in favour of Flamel’s employees will continue to apply after the Merger insofar as Avadel will have neither a PEE
nor a PERCO.
|
14.6.
|
Staff representative
bodies and/or works councils
|
Avadel has no works council.
Flamel has the following staff representative
bodies:
|
-
|
A
Single Staff Delegation (“SSD”) elected on 9 July 2015 ;
|
|
-
|
An
Occupational Health & Safety Committee.
|
As from the Effective Date, Avadel’s
French branch will become an establishment distinct from the Acquiring Company within the meaning of the staff representation
rules. Consequently, the Merger will not have any impact on the current structure of the staff representative bodies.
The staff representation after the Merger
will therefore be as follows:
|
-
|
The
offices of the staff delegates within the SSD will continue within Avadel’s French
branch.
|
|
-
|
The
offices of the works council members within the SSD will continue within Avadel’s
French branch.
|
|
-
|
The
offices of the appointed members of the Occupational Health & Safety Committee will
continue within Avadel’s French branch.
|
However, as the Acquiring Company is not
a French company, there will be Staff Delegation representatives within the Acquiring Company’s governing body.
|
14.7.
|
Supplementary pension,
health and benefits schemes
|
Flamel put in place a health and benefits
scheme with HUMANIS dated 22 December 1999, a benefits scheme with the insurer ALLIANZ dated 22 December 1997, and a CGRCG pension
scheme with the insurer HUMANIS dated 3 October 1990.
As from the Effective Date, the effects
of the supplementary pension, health and benefits schemes currently applying to Flamel’s employees shall continue and apply
to the employees of Avadel’s French branch.
|
15.
|
ACQUIRING COMPANY’S
ARTICLES OF ASSOCIATION (article 5(i) of the Directive, article R.236-14 9° of the
French Commercial Code and regulation 5(2)(h) of the Irish Regulations)
|
On the Merger becoming effective, the
Acquiring Company’s articles of association will be amended.
The Acquiring Company’s Revised
Constitution which will be in place as of the Effective Time is attached hereto at
Appendix 15
.
|
16.
|
PROCEDURE REGARDING EMPLOYEES’
PARTICIPATION RIGHTS (article 5(j) of the Directive, article R.236-14 10° of the
French Commercial Code, article L.2371-2 of the French Labour Code and Part 3 of the
Irish Regulations)
|
According to article L.2371-2 of the French
Labour Code, as there is no employee’s participation (i.e., employee representatives on the company management or supervisory
board) in both Flamel and Avadel, a Special Negotiation Body, normally required to negotiate an agreement with the representatives
on the means of employees’ involvement after the Merger, need not be implemented.
|
17.
|
INDICATIONS IN VIEW OF VALUING
THE ASSETS AND LIABILITIES AND REPRESENTATIONS RELATING THERETO (article 5(k) of the
Directive, article R.236-14 7° of the French Commercial Code and regulation 2(j)
of the Irish Regulations)
|
|
17.1.
|
Representations with
respect to the valuation of the assets and liabilities that are being transferred to
Avadel
|
Avadel shall adopt and continue the book
values of the assets and liabilities of Flamel as recorded in Flamel’s annual financial statements at the Effective Date.
Avadel shall allocate and record all the
assets and liabilities transferred by Flamel in accordance with applicable accounting standards.
|
17.2.
|
Representations relating
to the business (
fonds de commerce
)
|
The Acquired Company is the owner of its
business having created it on 21 July 1990.
|
17.3.
|
Representations relating
to the lease
|
The Acquired Company rents premises at
Parc Club du Moulin à Vent, 33, avenue du Dr Georges Levy, 69200 Vénissieux (France) pursuant to commercial lease
(“
bail commercial
”) agreements as follows:
|
-
|
Building
20 (2400m²) - commercial lease agreement dated 1 January 2016 and signed with SCI
Paris Provinces Properties (433 741 188 RCS Paris). The annual rent is EUR145,000
excluding VAT and rental costs.
|
|
-
|
Building
30 (1188m²) - commercial lease agreement dated 16 April 2004, renewed as of 1 April
2013 and signed with SCI Parc du Moulin à Vent (795 175 330 RCS Paris). The
annual rent is EUR133,674.76 excluding VAT and rental costs.
|
|
-
|
Building
32 (1188m²) - commercial lease agreement dated December 1, 2006, renewed as of 1
April 2016 and signed with SCI Parc du Moulin à Vent (795 175 330 RCS Paris).
The annual rent is EUR151,675.60 excluding VAT and rental costs.
|
|
-
|
Building
54 (636m²) - commercial lease agreement dated 29 March 2004 and signed with SCI
Parc du Moulin à Vent (795 175 330 RCS Paris). The annual rent is EUR69,249.72
excluding VAT and rental costs.
|
The Acquired Company operates its business
and has its registered office at the premises rented through the commercial lease agreements.
The Acquiring Company declares that it
will have registered its French branch with the clerk of the competent French commercial court prior to the Effective Date. Consequently,
at the Effective Date, the commercial lease agreement shall be automatically transferred to the Acquiring Company and it shall
operate the business of its French branch at such address and have its French branch’s registered office at such address.
|
17.4.
|
Representations relating
to intellectual property rights
|
The Acquired Company owns no intellectual
property rights.
|
17.5.
|
Representations relating
to cases of litigation
|
As a result of the Merger, both pending
cases of litigation and possible future cases of litigation involving Flamel will be transferred to Avadel.
There are no current proceedings or litigation
involving Flamel;
|
18.
|
REPRESENTATIONS AND PROVISIONS
AS REGARDS THE INTERIM PERIOD
|
Since 1 January 2016, no material events,
other than those publicly disclosed by Flamel, have occurred.
|
19.1.
|
Registration duties in
France
|
The Merger, involving a French legal entity
that is liable to corporate income tax and an Irish limited company will automatically benefit from the provisions of article
816 of the CGI. The cost of registration is EUR 500.
|
19.2.
|
Value Added Tax (hereinafter
referred to as “VAT”) and Irish registration duties
|
Pursuant to the provisions of article
257 bis of the French tax code, the Acquiring Company is deemed to continue the Acquired Company’s legal personality and
will henceforth be subrogated in the Acquired Company’s rights and obligations.
The Acquired Company will transfer to
the Acquiring Company any and all of its VAT credits at the Effective Date.
Moreover, the legal representative of
the Acquiring Company undertakes that the Acquiring Company will make any VAT recaptures which would have been made by the Acquired
Company if it had continued to perform its activity.
Finally, in accordance with article 257
bis of the French tax code, the supply of goods and services undertaken within the framework of the Merger are not subject to
VAT.
To this end, pursuant to the French administrative
guidelines published under the reference BOFIP, BOI-TVA-DECLA-20-30-20, section n°20 dated 12 September 2012, the representative
of the Acquiring Company and the Acquired Company hereby undertake to ensure that both companies mention on the line “Other
non-taxable transactions” (“
Autres opérations non-imposables
”) of their respective VAT return
filed for the period encompassing the Effective Date, the total amount, VAT excluded, related to the transfer.
|
19.3.
|
Corporate income tax
|
The Parties’ intention is for the
Merger to benefit from the exemption from corporate income tax as provided for in article 210 A of the French tax code.
Subject to the condition that a tax ruling
is granted by the French tax authorities in accordance with article 210 C of the French tax code allowing to apply the tax regime
provided under article 210 A of that code,, and unless provided otherwise under the terms of such ruling, the Parties undertake
the following:
|
·
|
The
Acquiring Company expressly undertakes to respect the following commitments, through
its French permanent establishment and for the Assets and Liabilities received from the
Acquired Company:
|
|
o
|
To
take over in its liabilities the provisions of the Acquired Company which were subject
to deferred taxation and which do not become without purpose because of the Merger;
|
|
o
|
To
replace the Acquired Company for the reinstatement of the results which taxation has
been deferred to the latter;
|
|
o
|
To
calculate the capital gains arising subsequently upon the sale of non-depreciable fixed
assets contributed to it on the basis of the value which such assets had, from a tax
standpoint, in the books of the Acquired Company;
|
|
o
|
To
reinstate in its taxable profits the capital gains possibly generated on the depreciable
assets transferred, according to the terms and conditions of paragraph 3 of article 210
A of the French tax code;
|
|
o
|
To
include in its balance sheet the items other than fixed assets for the value they had,
from a tax standpoint, in the books of the Acquired Company. Failing this, it will include
in its income for the fiscal year of the Merger, the profit corresponding to the difference
between the new value of such items and the value they had, from a tax standpoint, in
the books of the Acquired Company;
|
|
o
|
To
respect any commitments taken by the Acquired Company for tax purposes upon prior transactions.
|
|
·
|
Considering
that the Merger is performed on the basis of the net book value, the Acquiring Company
also undertakes to respect the following commitments, through its French permanent establishment
and under the conditions abovementioned:
|
|
o
|
To
take over in the balance sheet of its French permanent establishment, for the fixed assets,
the accounting records of the Acquired Company, making a breakdown between their initial
value, the depreciation charges and the provisions for impairment;
|
|
o
|
To
continue to calculate the depreciation charges on the basis of the initial value of the
assets in question in the books of the Acquired company;
|
|
o
|
To
reinstate the depreciation for tax purposes in the same conditions as would have done
the Acquired Company.
|
|
·
|
The
Acquiring Company undertakes to respect, through its French permanent establishment and
under the conditions abovementioned, the commitments provided for by article 54 septies
of the French tax code, and in particular:
|
|
o
|
To
attach to its annual corporate income tax return, a statement complying with the model
provided by the French tax authorities and outlining for each transferred type of items,
the information required to calculate the taxable result upon subsequent sale of the
transferred elements. This statement will be also attached to the French corporate income
tax return of cessation of activity of the Acquired Company;
|
|
o
|
To
hold at the French tax authorities disposition a register of capital gains on non-depreciable
fixed assets subject to a tax deferral, outlining the date of the Merger, the nature
of the transferred assets, their original book value, their tax value for the calculation
of capital gains and their transfer value.
|
|
·
|
Finally,
the Acquiring Company shall file on behalf of the Acquired Company with the French tax
authorities, within forty five days of completion of the Merger, a copy of the declaration
of discontinuance of its activity in France, and within sixty days of completion of the
Merger, a corporate income tax return for the current fiscal year.
|
|
19.4.
|
U.S. Federal Income Tax
Considerations.
|
Each of Flamel and Avadel intend (i) for
U.S. federal income tax purposes, that the Merger qualifies as a “reorganization” described in Section 368(a) of the
Internal Revenue Code of 1986, as amended (the “
Code
”); (ii) that this Merger Agreement constitute a “plan
of reorganization” within the meaning of Section 1.368-2(g) of the regulations promulgated under the Code; and (iii) that
Flamel and Avadel will each be a “party to the reorganization” within the meaning of Section 368(a) of the Code.
|
20.
|
MISCELLANEOUS/FINAL PROVISIONS
|
The competent jurisdiction for any and
all disputes resulting from this Merger or in connection therewith will be the Irish High Court.
If certain provisions of this Merger Agreement
were to either be or become partially or fully invalid or inapplicable or if the Merger Agreement were to be incomplete, that
would not infringe on the validity of the other provisions.
The Parties undertake to replace the invalid
or inapplicable provision or complete the agreement with an appropriate provision that, insofar as legally acceptable, is the
closest to what the Parties wanted or would have wanted according to the meaning and the purpose of the Merger Agreement if they
had taken the point in question into account.
The appendixes referred to herein form
an integral part of the Merger Agreement. The followings are the appendixes to the Merger Agreement:
Appendix A
|
Group Structure Chart prior to consummation of the Merger
|
|
|
Appendix 3.2
|
Flamel Technologies S.A. ordinary shares outstanding and ordinary shares issuable pursuant
to Equity-Linked Securities (as of the date of signing the Common Draft Terms of the Merger);
|
|
|
Appendix 6.3
|
Methods used to determine the Share Exchange Ratio (including the valuation methods used for
the evaluation of the assets and liabilities of the Acquired Company and of the Acquiring Company)
|
|
|
Appendix 14
|
Flamel’s Works Council opinion
|
|
|
Appendix 14.4
|
List of customs and unilateral commitments in force within Flamel as of the date hereof
|
|
|
Appendix 15
|
Revised Constitution of Avadel
|
[The signature page follows]
At Dublin, Ireland,
On the Twenty-Seventh (27) day of May
2016
Seven (7) original copies.
/s/ Dhiren D’Silva
AVADEL PHARMACEUTICALS LIMITED
Represented by
Mr. Dhiren D’Silva,
Duly empowered
|
|
/s/ Michael S. Anderson
FLAMEL TECHNOLOGIES S.A.
Represented by
Mr. Michael S. Anderson,
Directeur Général
|
Group Structure Chart prior to the Consummation
of the Merger
*
Entities
in the Scope of the Merger
All
subsidiary companies are owned 100%
**
Flamel
US Holdings, Inc may become a subsidiary of Avadel Pharmaceuticals Limited prior to the consummation of the Merger.
Group Structure Chart after the Consummation
of the Merger
*
Irish corporate law requires that the share capital of a plc must be at least EUR25,000. Thus, in order to re-register as
a plc, Avadel will issue 25,000 “deferred shares” each having a EUR1.00 nominal value. These deferred share
will be non-voting and will have no economic value, because they will not participate in distributions from Avadel until each
other share receives distributions of EUR100,000,000.
Appendix 3.2
Flamel Technologies S.A.
Ordinary Shares Outstanding and
Ordinary Shares Issuable Pursuant to
Equity-Linked Securities
(As of the date of signing the Common Draft
Terms of the Merger)
Shares
/ Security
|
|
Issuance
date
|
|
Beneficiary
|
|
Number
|
|
Nb
subject to
holding
period /
expiry date
|
|
Outstanding
authorities in
force on the
date
hereof
|
Ordinary shares outstanding
|
|
N/A
|
|
N/A
|
|
41,241,254
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
2012 Free Shares
(unvested – 6 beneficiaries – all US employees)
|
|
10 December 2016
|
|
6 beneficiaries – US employees
|
|
24,500 unvested
|
|
150,600 / 12 December 2016
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
2013 Free Shares
(unvested – 5 beneficiaries)
|
|
12 December 2017
|
|
5 beneficiaries – US employees
|
|
23,000 unvested
|
|
151,250 / 31 December 2017
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
2014 Free Shares
(unvested – 65 beneficiaries)
|
|
11
December 2016
11 December
2018
11 December
2018
|
|
54
beneficiaries – FR employees
8 beneficiaries
– US employees
1 beneficiary
– IR employees
|
|
141,550
unvested
(will
be vested on 12 December 2016)
36,500
unvested
1,500
unvested
|
|
141,550
/ 12 December 2018
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
2015 Free Shares
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
The authorisation granted to the Board of Directors on 26 June
2015 (expiring on 26 August 2018), still allows the Board of Directors to issue 250,000 free shares
|
|
|
|
|
|
|
|
|
|
|
|
2016 Free shares
(non-allocated)
|
|
2016 EGM
|
|
59
beneficiaries – FR employees
15 beneficiaries
– US employees
6 beneficiaries
– IR employees
|
|
89,500
non-allocated
152,000
non-allocated
6,700
non-allocated
|
|
N/A
|
|
Authorisation to be granted at the 2016 EGM
|
Shares
/ Security
|
|
Issuance
date
|
|
Beneficiary
|
|
Number
|
|
Nb
subject to
holding
period /
expiry date
|
|
Outstanding
authorities in
force on the
date hereof
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
(outstanding shares, 45 beneficiaries - including grants made in December
2015 and early 2016)
|
|
Since
2006
|
|
45 beneficiaries
|
|
2,401,726
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Directors’ Stock Warrants (“
BSA administrateurs
”)
|
|
26 June 2015
|
|
Mr. Stapleton, Mr. Cerutti, Mr. Fildes, Mr. Navarre and Mr. Van
Assche
|
|
647,527
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Scientific committee’s Stock Warrants
|
|
12 August 2013
|
|
Mr. Couvreur and Mr. Trepo
|
|
20,000
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Breaking Stick Holdings (formerly known as Eclat Holdings) Warrants (
Deerfield) (“BSA
Eclat”)
|
|
13 March 2012
|
|
ECLAT HOLDING LLC
|
|
3,300,000
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrants
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
The
authorisation granted to the Board of Directors on 26 June 2015 (expiring on 26 December 2016) still allows the Board
of Directors to issue 4 stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
Total of Shares Issuable pursuant to Equity-Linked Securities:
|
|
6,844,953
|
|
N/A
|
|
N/A
|
Appendix 14
Opinion of the Works Council
Information – Consultation on the planned merger of
FLAMEL TECHNOLOGIES SA into an Irish company and
possible future spin-off of the French business
The documents necessary for this consultation
were communicated to the Works Council members by email on 17 February 2016. The staff representatives of the Works Council
provided a list of questions to management on 24 February 2016. Management made a presentation on this project and addressed
the questions of the staff representatives at an extraordinary meeting held on 29 February 2016.
This opinion will be remitted to management
within the legal period of one (1) month of the date of the remittance of the documents, before 17 March 2016.
Staff Representatives’
opinion and recommendations
The staff representatives understand the
benefits of this operation for the Company. The goals pursued are rational and enable to legally formalise a reorganisation begun
several months ago.
However, many employees expressed their
concern about this project and, more generally, about the future of the French R&D site. The French staff is very proud to
work for a French company and this change of head office impacts on their morale. Since the transfer of IP, they feel they could
no longer be able to reap the full benefit from their work, which is exacerbated by this operation (profit-sharing). They fear
that, in the end, R&D activities and/or support functions be outsourced. They feel a mismatch between the speech held by the
management (keeping corporate headquarter in France) and the tangible actions taken (UNITY project put on hold, move of Building
n°54, transfer of Corporate headquarter, etc.). Therefore, the French staff is waiting for a strong signal, such as restarting
the UNITY project.
Unanimously, the staff representatives
issue a positive opinion
on the planned merger of FLAMEL SA into an Irish Company, but they still wish to make the following
reservations:
a. Employment.
The staff representatives asked for guarantees in terms of employment safeguarding at the French site, as regards both R&D
and support services. At the meeting held on 29 February, management assured the staff representatives that this restructuring
operation wouldn't have any impact on the existing jobs.
b. Profit-sharing
– Incentive plan. The staff representatives requested that an « extraordinary bonus » in the form of free
shares be implemented in the event of the success of some Corporate projects (
e.g.,
application for marketing authorisations).
This bonus should be homogeneously distributed within the Group's staff.
c.
Spin-off of the French activity – In that scenario, a second consultation shall be organised.
For the Works Council,
/s/ Lucie Roumanet
|
|
Lucie Roumanet, Secretary
|
|
Date: 8 March 2016
|
|
Appendix 14.4
List of customs and unilateral commitments
in force within Flamel as of the date hereof
|
-
|
Internal
rules and regulations of 28 April 2015
|
|
|
|
|
-
|
IT
Charger of 15 March 2006
|
|
|
|
|
-
|
Travel
Policy (April 2014)
|
|
|
|
|
-
|
Vénissieux
personnel handbook (October 2013)
|
|
|
|
|
-
|
Performance
Bonus (October 2013)
|
|
|
|
|
-
|
Inventors
remuneration policy of 1 January 2016
|
|
|
|
|
-
|
2
bridging days offered by Management (a “bridging day” is a day off between
a public holiday and a weekend)
|
|
|
|
|
-
|
School
internship stipends
|
|
|
|
|
-
|
Classification
grid – Flamel skills
|
|
|
|
|
-
|
“Project
Management” function classification grid
|
Appendix 15
Revised Constitution of Avadel
[The Revised Constitution of Avadel plc is set forth as Annex
D to this proxy statement.]
ANNEX D
Companies Act 2014
A PUBLIC COMPANY LIMITED BY SHARES
CONSTITUTION
of
AVADEL PHARMACEUTICALS PUBLIC LIMITED
COMPANY
Incorporated on 1 December 2015
Cert. No.: 572535
Companies Act 2014
A PUBLIC COMPANY LIMITED BY SHARES
CONSTITUTION
of
AVADEL PHARMACEUTICALS PUBLIC LIMITED
COMPANY
MEMORANDUM OF ASSOCIATION
(As adopted by
special resolution on 2016)
|
1.
|
The name of the Company is Avadel Pharmaceuticals
public limited company.
|
|
2.
|
The Company is to be a public limited
company for the purposes of Part 17 of the Companies Act 2014.
|
|
3.
|
The objects for which the Company is
established are:
|
3.1
|
(a)
|
To carry on the business of a pharmaceuticals
company, and to research, develop, design, manufacture, produce, supply, buy, sell, distribute,
import, export, provide, promote and otherwise deal in pharmaceuticals, active pharmaceutical
ingredients and dosage pharmaceuticals and other devices or products of a pharmaceutical
or healthcare character and to hold intellectual property rights and to do all things
usually dealt in by persons carrying on the above mentioned businesses or any of them
or likely to be required in connection with any of the said businesses.
|
|
(b)
|
To carry on the business of a holding
company and to co-ordinate the administration, finances and activities of any subsidiary
companies or associated companies, to do all lawful acts and things whatever that are
necessary or convenient in carrying on the business of such a holding company and in
particular to carry on the business of a management services company, to act as managers
and to direct or coordinate the management of other companies or of the business, property
and estates of any company or person and to undertake and carry out all such services
in connection therewith as may be deemed expedient by the Company’s board of directors
and to exercise its powers as a shareholder of other companies.
|
|
3.2
|
To acquire shares, stocks, debentures,
debenture stock, bonds, obligations and securities by original subscription, tender,
purchase, exchange or otherwise and to subscribe for the same either conditionally or
otherwise, and to guarantee the subscription thereof and to exercise and enforce all
rights and powers conferred by or incidental to the ownership thereof.
|
|
3.3
|
To facilitate and encourage the
creation, issue or conversion of and to offer for public subscription debentures, debenture
stocks, bonds, obligations, shares, stocks, and securities and to act as trustees in
connection with any such securities and to take part in the conversion of business concerns
and undertakings into companies.
|
|
3.4
|
To purchase or by any other means
acquire any freehold, leasehold or other property and in particular lands, tenements
and hereditaments of any tenure, whether subject or not to any charges or encumbrances,
for any estate or interest whatever, and any rights, privileges or easements over or
in respect of any property, and any buildings, factories, mills, works, wharves, roads,
machinery, engines, plant, live and dead stock, barges, vessels or things, and any real
or personal property or rights whatsoever which may be necessary for, or may conveniently
be used with, or may enhance the value or property of the Company, and to hold or to
sell, let, alienate, mortgage, charge or otherwise deal with all or any such freehold,
leasehold, or other property, lands, tenements or hereditaments, rights, privileges or
easements.
|
|
3.5
|
To sell or otherwise dispose of
any of the property or investments of the Company.
|
|
3.6
|
To establish and contribute to
any scheme for the purchase of shares in the Company to be held for the benefit of the
Company’s employees and to lend or otherwise provide money to such schemes or the
Company’s employees or the employees of any of its subsidiary or associated companies
to enable them to purchase shares of the Company.
|
|
3.7
|
To grant, convey, transfer or otherwise
dispose of any property or asset of the Company of whatever nature or tenure for such
price, consideration, sum or other return whether equal to or less than the market value
thereof and whether by way of gift or otherwise as the Directors shall deem fit and to
grant any fee, farm grant or lease or to enter into any agreement for letting or hire
of any such property or asset for a rent or return equal to or less than the market or
rack rent therefor or at no rent and subject to or free from covenants and restrictions
as the Directors shall deem appropriate.
|
|
3.8
|
To acquire and undertake the whole
or any part of the business, good-will and assets of any person, firm or company carrying
on or proposing to carry on any of the businesses which this Company is authorised to
carry on, and as part of the consideration for such acquisition to undertake all or any
of the liabilities of such person, firm or company, or to acquire an interest in, amalgamate
with, or enter into any arrangement for sharing profits, or for co-operation, or for
limiting competition or for mutual assistance with any such person, firm or company and
to give or accept by way of consideration for any of the acts or things aforesaid or
property acquired, any shares, debentures, debenture stock or securities that may be
agreed upon, and to hold and retain or sell, mortgage or deal with any shares, debentures,
debenture stock or securities so received.
|
|
3.9
|
To apply for, register, purchase,
lease, hold, use, control, licence or otherwise acquire any patents, brevets d’invention,
copyrights, trademarks, licences, concessions and the like conferring any exclusive or
non-exclusive or limited rights to use or any secret or other information as to any invention
which may seem capable of being used for any of the purposes of the Company or the acquisition
of which may seem calculated directly or indirectly to benefit the Company, and to use,
exercise, develop or grant licences in respect of or otherwise turn to account the property,
rights or information so acquired.
|
|
3.10
|
To enter into partnership or into
any arrangement for sharing profits, union of interests, co-operation, joint venture,
reciprocal concession or otherwise with any person or company carrying on or engaged
in or about to carry on or engage in any business or transaction which the Company is
authorised to carry on or engage in or any business or transaction capable of being conducted
so as directly to benefit this Company.
|
|
3.11
|
To invest and deal with the moneys
of the Company not immediately required upon such securities and in such manner as may
from time to time be determined.
|
|
3.12
|
To lend money to and guarantee
the performance of the contracts or obligations of any company, firm or person, and the
repayment of the capital and principal of, and dividends, interest or premiums payable
on, any stock, shares and securities of any company, whether having objects similar to
those of this Company or not, and to give all kinds of indemnities.
|
|
3.13
|
To engage in currency exchange
and interest rate transactions including, but not limited to, dealings in foreign currency,
spot and forward rate exchange contracts, futures, options, forward rate agreements,
swaps, caps, floors, collars and any other foreign exchange or interest rate hedging
arrangements and such other instruments as are similar to, or derived from, any of the
foregoing whether for the purpose of making a profit or avoiding a loss or managing a
currency or interest rate exposure or any other exposure or for any other purpose.
|
|
3.14
|
To guarantee, support or secure,
whether by personal covenant or by mortgaging or charging all or any part of the undertaking,
property and assets (both present and future) and uncalled capital of the Company, or
by both such methods, the performance of the obligations of, and the repayment or payment
of the principal amounts of and premiums, interest and dividends on any securities of,
any person, firm or company including (without prejudice to the generality of the foregoing)
any company which is for the time being the Company’s holding company as defined
by the Companies Act 2014 or a subsidiary as therein defined of any such holding company
or otherwise associated with the Company in business.
|
|
3.15
|
To borrow or secure the payment
of money in such manner as the Company shall think fit, and in particular by the issue
of debentures, debenture stocks, bonds, obligations and securities of all kinds, either
perpetual or terminable and either redeemable or otherwise and to secure the repayment
of any money borrowed, raised or owing by trust deed, mortgage, charge, or lien upon
the whole or any part of the Company’s property or assets (whether present or future)
including its uncalled capital, and also by a similar trust deed, mortgage, charge or
lien to secure and guarantee the performance by the Company of any obligation or liability
it may undertake.
|
|
3.16
|
To draw, make, accept, endorse,
discount, execute, negotiate and issue promissory notes, bills of exchange, bills of
lading, warrants, debentures and other negotiable or transferable instruments.
|
|
3.17
|
To subscribe for, take, purchase
or otherwise acquire and hold shares or other interests in, or securities of any other
company having objects altogether or in part similar to those of this Company, or carrying
on any business capable of being conducted so as directly or indirectly to benefit this
Company.
|
|
3.18
|
To hold in trust as trustees or
as nominees and to deal with, manage and turn to account, any real or personal property
of any kind, and in particular shares, stocks, debentures, securities, policies, book
debts, claims and chases in actions, lands, buildings, hereditaments, business concerns
and undertakings, mortgages, charges, annuities, patents, licences, and any interest
in real or personal property, and any claims against such property or against any person
or company.
|
|
3.19
|
To constitute any trusts with
a view to the issue of preferred and deferred or other special stocks or securities based
on or representing any shares, stocks and other assets specifically appropriated for
the purpose of any such trust and to settle and regulate and if thought fit to undertake
and execute any such trusts and to issue, dispose of or hold any such preferred, deferred
or other special stocks or securities.
|
|
3.20
|
To give any guarantee in relation
to the payment of any debentures, debenture stock, bonds, obligations or securities and
to guarantee the payment of interest thereon or of dividends on any stocks or shares
of any company.
|
|
3.21
|
To construct, erect and maintain
buildings, houses, flats, shops and all other works, erections, and things of any description
whatsoever either upon the lands acquired by the Company or upon other lands and to hold,
retain as investments or to sell, let, alienate, mortgage, charge or deal with all or
any of the same and generally to alter, develop and improve the lands and other property
of the Company.
|
|
3.22
|
To provide for the welfare of
persons in the employment of or holding office under or formerly in the employment of
or holding office under the Company including Directors and ex-Directors of the Company
or any of its subsidiary or associated companies and the spouses, civil partners, widows,
widowers, families, dependants or connections of such persons by grants of money, pensions
or other payments and by forming and contributing to pension, provident or benefit funds
or profit sharing or co-partnership schemes for the benefit of such persons and to form,
subscribe to or otherwise aid charitable, benevolent, religious, scientific, national
or other institutions, exhibitions or objects which shall have any moral or other claims
to support or aid by the Company by reason of the locality of its operation or otherwise.
|
|
3.23
|
To remunerate by cash payments
or allotment of shares or securities of the Company credited as fully paid up or otherwise
any person or company for services rendered or to be rendered to the Company whether
in the conduct or management of its business, or in placing or assisting to place or
guaranteeing the placing of any of the shares of the Company’s capital, or any
debentures or other securities of the Company or in or about the formation or promotion
of the Company.
|
|
3.24
|
To enter into and carry into effect
any arrangement for joint working in business or for sharing of profits or for amalgamation
with any other company or association or any partnership or person carrying on any business
within the objects of the Company.
|
|
3.25
|
To distribute in specie or otherwise
as may be resolved, any assets of the Company among its members and in particular the
shares, debentures or other securities of any other company belonging to this Company
or of which this Company may have the power of disposing.
|
|
3.26
|
To vest any real or personal property,
rights or interest acquired or belonging to the Company in any person or company on behalf
of or for the benefit of the Company, and with or without any declared trust in favour
of the Company.
|
|
3.27
|
To transact or carry on any business
which may seem to be capable of being conveniently carried on in connection with any
of these objects or calculated directly or indirectly to enhance the value of or facilitate
the realisation of or render profitable any of the Company’s property or rights.
|
|
3.28
|
To accept stock or shares in or
debentures, mortgages or securities of any other company in payment or part payment for
any services rendered or for any sale made to or debt owing from any such company, whether
such shares shall be wholly or partly paid up.
|
|
3.29
|
To pay all costs, charges and
expenses incurred or sustained in or about the promotion and establishment of the Company
or which the Company shall consider to be preliminary thereto and to issue shares as
fully or in part paid up, and to pay out of the funds of the Company all brokerage and
charges incidental thereto.
|
|
3.30
|
To procure the Company to be registered
or recognised in any part of the world.
|
|
3.31
|
To do all or any of the matters
hereby authorised in any part of the world or in conjunction with or as trustee or agent
for any other company or person or by or through any factors, trustees or agents.
|
|
3.32
|
To make gifts, pay gratuities
or grant bonuses to current and former Directors (including substitute directors), officers
or employees of the Company or to make gifts or pay gratuities to any person on their
behalf or to charitable organisations, trusts or other bodies corporate nominated by
any such person.
|
|
3.33
|
To do all such other things that
the Company may consider incidental or conducive to the attainment of the above objects
or as are usually carried on in connection therewith.
|
|
3.34
|
To carry on any business which
the Company may lawfully engage in and to do all such things incidental or conducive
to the business or activity of the Company.
|
|
3.35
|
To make or receive gifts by way
of capital contribution or otherwise.
|
The objects set forth in any
sub-clause of this clause shall be regarded as independent objects and shall not, except where the context expressly so requires,
be in any way limited or restricted by reference to or inference from the terms of any other sub-clause, or by the name of the
Company. None of such sub-clauses or the objects therein specified or the powers thereby conferred shall be deemed subsidiary
or auxiliary merely to the objects mentioned in the first sub-clause of this clause, but the Company shall have full power to
exercise all or any of the powers conferred by any part of this clause in any part of the world notwithstanding that the business,
property or acts proposed to be transacted, acquired or performed do not fall within the objects of the first sub-clause of this
clause.
|
NOTE:
|
It is hereby declared that the
word “company” in this clause, except where used in reference to this Company
shall be deemed to include any partnership or other body of persons whether incorporated
or not incorporated and whether domiciled in Ireland or elsewhere and the intention is
that the objects specified in each paragraph of this clause shall except where otherwise
expressed in such paragraph be in no way limited or restricted by reference to or inference
from the terms of any other paragraph.
|
|
4.
|
The liability of the members is limited.
|
|
5.
|
The share capital of the Company is
US$5,500,000 divided into 500,000,000 ordinary shares with a nominal value of US$0.01
each, 50,000,000 preferred shares with a nominal value of US$0.01 each and €25,000
divided into 25,000 deferred ordinary shares with a nominal value of €1.00 each.
|
|
6.
|
The shares forming the capital, increased
or reduced, may be increased or reduced and be divided into such classes and issued with
any special rights, privileges and conditions or with such qualifications as regards
preference, dividend, capital, voting or other special incidents, and be held upon such
terms as may be attached thereto or as may from time to time be provided by the original
or any substituted or amended articles of association and regulations of the Company
for the time being, but so that where shares are issued with any preferential or special
rights attached thereto such rights shall not be alterable otherwise than pursuant to
the provisions of the Company’s articles of association for the time being.
|
COMPANIES ACT 2014
A PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
-of-
AVADEL PHARMACEUTICALS PUBLIC LIMITED
COMPANY
(As adopted by special resolution on
2016)
PRELIMINARY
|
1.
|
The provisions set out in these Articles
of Association shall constitute the whole of the regulations applicable to the Company
and no “optional provision” as defined by section 1007(2) of the Companies
Act 2014 (with the exception of sections 83 and 84 of the Companies Act 2014) shall apply
to the Company.
|
“
Act
” means
the Companies Act 2014 and every statutory modification and re-enactment thereof for the time being in force.
“
Acts
” means
the Act and all statutes and statutory instruments which are to be read as one with, or construed or read together with or as
one with, the Act and every statutory modification and re-enactment thereof for the time being in force.
“
address
” includes
any number or address used for the purposes of communication by way of electronic mail or other electronic communication.
“
Approved Nominee
”
means a person appointed under contractual arrangements with the Company to hold shares or rights or interests in shares of the
Company on a nominee basis;
“
articles
”
means the articles of association of which this article 2 forms part, as the same may be amended and may be from time to time
and for the time being in force.
“
Assistant Secretary
”
means any person appointed by the Secretary from time to time to assist the Secretary.
“
Clear Days
”
in relation to the period of notice, means that period excluding the day when the notice is given or deemed to be given and the
day for which it is given or on which it is to take effect.
“
Chairman
”
means the Director who is elected by the Directors from time to time to preside as chairman at all meetings of the Board and at
general meetings of the Company.
“
Company
” means
the company whose name appears in the heading to these articles.
“
Directors
”
or “
Board
” means the directors from time to time and for the time being of the Company or the directors present
at a meeting of the board of directors and includes any person occupying the position of director by whatever name called.
“
electronic communication
”
has the meaning given to those words in the Electronic Commerce Act 2000.
“
electronic signature
”
has the meaning given to those words in the Electronic Commerce Act 2000.
“
Group
” means
the Company and its subsidiaries from time to time and for the time being.
“
Holder
” in
relation to any share, means the member whose name is entered in the Register as the holder of the share or, where the context
permits, the members whose names are entered in the Register as the joint holders of shares.
“
Office
” means
the registered office from time to time and for the time being of the Company.
“
Ordinary Resolution
”
means a resolution passed by a simple majority of the votes cast by members of the Company as, being entitled to do so, vote in
person or by proxy at a general meeting of the Company, subject to any alternative definition in the Acts.
“
public announcement
”
means disclosure in a press release reported by a national news service or in a document publicly filed by the Company in accordance
with the applicable rules of any stock exchange to which the Company’s shares are admitted to trading and the rules and
regulations promulgated thereunder.
“
Redeemable Shares
”
means redeemable shares in accordance with the Act.
“
Register
”
means the register of members to be kept as required in accordance the Act.
“
seal
” means
the common seal of the Company.
“
Secretary
”
means any person appointed to perform the duties of the secretary of the Company.
“
Special Resolution
”
means a special resolution of the Company’s members within the meaning of the Act.
|
(b)
|
Expressions in these articles referring
to writing shall be construed, unless the contrary intention appears, as including references
to printing, lithography, photography and any other modes of representing or reproducing
words in a visible form except as provided in these articles and/or where it constitutes
writing in electronic form sent to the Company, and the Company has agreed to its receipt
in such form. Expressions in these articles referring to execution of any document shall
include any mode of execution whether under seal or under hand or any mode of electronic
signature as shall be approved by the Directors. Expressions in these articles referring
to receipt of any electronic communications shall, unless the contrary intention appears,
be limited to receipt in such manner as the Company has approved.
|
|
(c)
|
Unless the contrary intention appears,
words or expressions contained in these articles shall bear the same meaning as in the
Acts or in any statutory modification thereof in force at the date at which these articles
become binding on the Company.
|
|
(d)
|
A reference to a statute or statutory
provision shall be construed as a reference to the laws of Ireland unless otherwise specified
and includes:
|
|
(i)
|
any subordinate legislation made
under it including all regulations, by-laws, orders and codes made thereunder;
|
|
(ii)
|
any repealed statute or statutory
provision which it re-enacts (with or without modification); and
|
|
(iii)
|
any statute or statutory provision
which modifies, consolidates, re-enacts or supersedes it.
|
|
(e)
|
The masculine gender shall include
the feminine and neuter, and vice versa, and the singular number shall include the plural,
and vice versa, and words importing persons shall include firms or companies.
|
|
(f)
|
Reference to US$, USD, or dollars
shall mean the currency of the United States of America and reference to €, euro,
EUR or cent shall mean the currency of Ireland.
|
SHARE CAPITAL AND VARIATION OF RIGHTS
|
(a)
|
The share capital of the Company
is US$5,500,000 divided into 500,000,000 ordinary shares with a nominal value of US$0.01
each, 50,000,000 preferred shares with a nominal value of US$0.01 each and €25,000
divided into 25,000 deferred ordinary shares with a nominal value of €1.00 each.
|
|
(b)
|
The rights and restrictions attaching
to the ordinary shares shall be as follows:
|
|
(i)
|
subject to the right of the Company
to set record dates for the purposes of determining the identity of members entitled
to notice of and/or to vote at a general meeting, the right to attend and speak at any
general meeting of the Company and to exercise one vote per ordinary share held at any
general meeting of the Company;
|
|
(ii)
|
the right to participate pro rata
in all dividends and interim dividends declared in relation to the ordinary shares; and
|
|
(iii)
|
the right, in the event of the
Company’s winding up, to participate pro rata in the total assets of the Company.
|
The rights attaching to the ordinary
shares may be subject to the terms of issue of any series or class of preferred shares allotted by the Directors from time to
time in accordance with article 3(d).
|
(c)
|
Directors may issue and allot deferred
ordinary shares subject to the rights, privileges, limitations and restrictions set out
in this article 3(c):
|
The holder
of a deferred ordinary share shall not be entitled to receive any dividend or distribution declared, made or paid or any return
of capital (save as provided for in this article) and shall not entitle its holder to any further or other right of participation
in the assets of the Company.
On a winding
up of, or other return of capital (other than on a redemption of any class of shares in the capital of the Company) by the Company,
the holders of deferred ordinary shares shall be entitled to participate in such return of capital or winding up of the Company,
such entitlement to be limited to the repayment of the amount paid up or credited as paid up on such deferred ordinary shares
and shall be paid only after the holders of ordinary shares shall have received payment in respect of such amount as is paid up
or credited as paid up on those ordinary shares held by them at that time, plus the payment in cash of €100,000,000 on each
such ordinary share.
|
(iii)
|
Acquisition of Deferred Ordinary
Shares
|
The Company
as agent for the holders of deferred ordinary shares shall have the irrevocable authority to authorise and instruct the Secretary
(or any other person appointed for the purpose by the Directors) to acquire, or to accept the surrender of, the deferred ordinary
shares for no consideration and to execute on behalf of such holders such documents as are necessary in connection with such acquisition
or surrender, and pending such acquisition or surrender to retain the certificates, to the extent issued, for such deferred ordinary
shares. Any request by the Company to acquire, or for the surrender of, any deferred ordinary shares may be made by the Directors
depositing at the Office a notice addressed to such person as the Directors shall have nominated on behalf of the holders of deferred
ordinary shares. A person whose shares have been acquired or surrendered in accordance with this article shall cease to be a member
in respect of such deferred ordinary shares but shall notwithstanding remain liable to pay the Company all monies which, at the
date of acquisition or surrender, were payable by him or her to the Company in respect of such shares, but his or her liability
shall cease if and when the Company has received payment in full of all such monies in respect of such shares. A notice issued
pursuant to this paragraph shall be deemed to be validly issued notwithstanding the provisions of articles 132 to 137 inclusive.
The holders
of deferred ordinary shares shall not be entitled to receive notice of, nor attend, speak or vote at, any general meeting.
The rights attaching
to the deferred ordinary shares may be subject to the terms of issue of any series or class of preferred shares allotted by the
Directors from time to time in accordance with article 3(d).
|
(d)
|
The Directors are authorised to
issue preferred shares from time to time in one or more classes or series, and to fix
for each such class or series such voting power, full or limited, or no voting power,
and such designations, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions adopted by the Board providing for the
issuance of such class or series, including, without limitation, the authority to provide
that any such class or series may be:
|
|
(i)
|
redeemable at the option of the Company,
or the Holders, or both, with the manner of the redemption to be set by the Board, and
redeemable at such time or times, including upon a fixed date, and at such price or prices;
|
|
(ii)
|
entitled to receive dividends (which
may be cumulative or non-cumulative) at such rates, on such conditions and at such times,
and payable in preference to, or in such relation to, the dividends payable on any other
class or classes of shares or any other series;
|
|
(iii)
|
entitled to such rights upon the
dissolution of, or upon any distribution of the assets of, the Company; or
|
|
(iv)
|
convertible into, or exchangeable
for, shares of any other class or classes of shares, or of any other series of the same
or any other class or classes of shares, of the Company at such price or prices or at
such rates of exchange and with such adjustments as the Directors determine,
|
which rights and restrictions
may be as stated in such resolution or resolutions of the Directors as determined by them in accordance with this article 3(d).
The Board may at any time before the allotment of any preferred share by further resolution in any way amend the designations,
preferences, rights, qualifications, limitations or restrictions, or vary or revoke the designations of such preferred shares.
The rights conferred upon the
Holder of any pre-existing shares in the share capital of the Company shall be deemed not to be varied by the creation, issue
and allotment of preferred shares in accordance with this article 3(d).
|
(e)
|
Unless the Directors specifically
elect to treat such acquisition as a purchase for the purposes of the Acts, an ordinary
share shall be deemed to be a Redeemable Share on, and from the time of, the existence
or creation of an agreement, transaction or trade between the Company and any third party
pursuant to which the Company acquires or will acquire ordinary shares, or an interest
in ordinary shares, from such third party. In these circumstances, the acquisition of
such shares or interest in shares by the Company, save where acquired otherwise than
for valuable consideration in accordance with the Act, shall constitute the redemption
of a Redeemable Share in accordance with the Acts. No resolution, whether special or
otherwise, shall be required to be passed to deem any ordinary share a Redeemable Share.
|
|
4.
|
Subject to the provisions of the Acts
and the other provisions of this article, the Company may:
|
|
(a)
|
pursuant to the Acts, issue any
shares of the Company which are to be redeemed or are liable to be redeemed at the option
of the Company or the member on such terms and in such manner as may be determined by
the Company in general meeting (by Special Resolution) on the recommendation of the Directors;
or
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|
(b)
|
subject to and in accordance with
the provisions of the Acts and without prejudice to any relevant special rights attached
to any class of shares, pursuant to the Acts, purchase any of its own shares (including
any Redeemable Shares and without any obligation to purchase on any pro rata basis as
between members or members of the same class) and may cancel any shares so purchased
or hold them as treasury shares (as defined by the Acts) and may reissue any such shares
as shares of any class or classes.
|
|
5.
|
Without prejudice to any special rights
previously conferred on the Holders of any existing shares or class of shares, any share
in the Company may be issued with such preferred or deferred or other special rights
or such restrictions, whether in regard to dividend, voting, return of capital or otherwise,
as the Company may from time to time by Ordinary Resolution determine.
|
6.
|
(a)
|
Without prejudice to the authority
conferred on the Directors pursuant to article 3 to issue preferred shares in the capital
of the Company, if at any time the share capital is divided into different classes of
shares, the rights attached to any class may, whether or not the Company is being wound
up, be varied or abrogated with the consent in writing of the Holders of three-quarters
of all the votes of the issued share of that class, or with the sanction of a Special
Resolution passed at a separate general meeting of the Holders of the shares of that
class, provided that, if the relevant class of Holders has only one Holder, that person
present in person or by proxy, shall constitute the necessary quorum for such a meeting.
To every such meeting the provisions of article 35 shall apply.
|
|
(b)
|
The redemption or purchase of preferred
shares or any class of preferred shares shall not constitute a variation of rights of
the preferred Holders where the redemption or purchase of the preferred shares has been
authorised solely by a resolution of the ordinary Holders.
|
|
(c)
|
The issue, redemption or purchase
of any preferred shares shall not constitute a variation of the rights of the Holders
of ordinary shares.
|
|
(d)
|
The issue of preferred shares or
any class of preferred shares which rank
pari passu
with, or junior to, any existing
preferred shares or class of preferred shares shall not constitute a variation of the
existing preferred shares or class of preferred shares.
|
|
7.
|
The rights conferred upon the Holders
of the shares of any class issued with preferred or other rights shall not, unless otherwise
expressly provided by the terms of issue of the shares of that class, be deemed to be
varied by the creation or issue of further shares ranking
pari passu
therewith.
|
8.
|
(a)
|
Subject to the provisions of these
articles relating to new shares, the shares shall be at the disposal of the Directors,
and they may (subject to the provisions of the Acts) allot, grant options over or otherwise
dispose of them to such persons, on such terms and conditions and at such times as they
may consider to be in the best interests of the Company and its members, but so that
no share shall be issued at a discount save in accordance with the Acts, and so that
the amount payable on application on each share shall not be less than one-quarter of
the nominal amount of the share and the whole of any premium thereon. To the extent permitted
by the Acts, shares may also be allotted by a committee of the Directors or by any other
person where such committee or person is so authorised by the Directors.
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|
(b)
|
Subject to any requirement to obtain
the approval of members under any laws, regulations or the rules of any stock exchange
to which the Company is subject, the Board is authorised, from time to time, in its discretion,
to grant such persons, for such periods and upon such terms as the Board deems advisable,
options to purchase or subscribe for such number of shares of any class or classes or
of any series of any class as the Board may deem advisable, and to cause warrants or
other appropriate instruments evidencing such options to be issued.
|
|
(c)
|
The Directors are, for the purposes
of the Acts, generally and unconditionally authorised to exercise all powers of the Company
to allot and issue relevant securities (as defined by the section 1021 of the Act) up
to the amount of Company’s authorised share capital as of the date of adoption
of this article 8, and to allot and issue any shares purchased by the Company pursuant
to the provisions of the Acts and held as treasury shares, and this authority shall expire
five years from the date of adoption of these articles.
The Company may before
the expiry of such authority make an offer or agreement which would or might require
relevant securities to be allotted after such expiry and the Directors may allot relevant
securities in pursuance of such an offer or agreement notwithstanding that the authority
hereby conferred has expired.
|
|
(d)
|
The Directors are hereby empowered
pursuant to section 1021 of the Act to allot equity securities within the meaning of
section 1023 of the Act for cash pursuant to the authority conferred by paragraph (c)
of this article 8 as if section 1022(1) of the Act did not apply to any such allotment.
The Company may before the expiry of such authority make an offer or agreement which
would or might require equity securities to be allotted after such expiry and the Directors
may allot equity securities in pursuance of such an offer or agreement as if the power
conferred by this paragraph (d) had not expired.
|
|
(e)
|
Nothing in these articles shall
preclude the Directors from recognising a renunciation of the allotment of any shares
by any allottee in favour of some other person.
|
|
9.
|
If by the conditions of allotment of
any share the whole or part of the amount or issue price thereof shall be payable by
instalments, every such instalment when due shall be paid to the Company by the person
who for the time being shall be the Holder of the share.
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|
10.
|
The Company may pay commission to any
person in consideration of a person subscribing or agreeing to subscribe, whether absolutely
or conditionally, for any shares in the Company or procuring or agreeing to procure subscriptions,
whether absolute or conditional, for any shares in the Company on such terms and subject
to such conditions as the Directors may determine, including, without limitation, by
paying cash or allotting and issuing fully or partly paid shares or any combination of
the two. The Company may also, on any issue of shares, pay such brokerage as may be lawful.
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|
11.
|
Except as required by law, no person
shall be recognised by the Company as holding any share upon any trust, and the Company
shall not be bound by or be compelled in any way to recognise (even when having notice
thereof) any equitable, contingent, future or partial interest in any share or any interest
in any fractional part of a share or (except only as by these articles or by law otherwise
provided) any other rights in respect of any share except an absolute right to the entirety
thereof in the Holder.
|
|
12.
|
No person shall receive a share certificate
in respect of any ordinary share held by them in the share capital of the Company, whether
such ordinary share was allotted or transferred to them, unless so requested in accordance
with the Acts.
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|
13.
|
The Company shall not give, whether
directly or indirectly and whether by means of a loan, guarantee, the provision of security
or otherwise, any financial assistance for the purpose of or in connection with a purchase
or subscription made or to be made by any person of or for any shares in the Company
or in its holding company, except as permitted by the Acts.
|
LIEN
14.
|
(a)
|
The Company shall have a first
and paramount lien on every share (not being a fully paid share) for all moneys (whether
presently payable or not) payable at a fixed time or called in respect of that share.
The Directors, at any time, may declare any share to be wholly or in part exempt from
the provisions of this article. The Company’s lien on a share shall extend to all
moneys payable in respect of it.
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|
(b)
|
The Company may sell in such manner
as the Directors determine any share on which the Company has a lien if a sum in respect
of which the lien exists is presently payable and is not paid within fourteen Clear Days
after notice demanding payment, and stating that if the notice is not complied with the
share may be sold, has been given to the Holder of the share or to the person entitled
to it by reason of the death or bankruptcy of the Holder.
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|
(c)
|
To give effect to a sale, the Directors
may authorise some person to execute an instrument of transfer of the share sold to,
or in accordance with the directions of, the purchaser. The transferee shall be entered
in the Register as the Holder of the share comprised in any such transfer and he shall
not be bound to see to the application of the purchase moneys nor shall his title to
the share be affected by any irregularity in or invalidity of the proceedings in reference
to the sale, and after the name of the transferee has been entered in the Register, the
remedy of any person aggrieved by the sale shall be in damages only and against the Company
exclusively.
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|
(d)
|
The net proceeds of the sale, after
payment of the costs, shall be applied in payment of so much of the sum for which the
lien exists as is presently payable and any residue (upon surrender to the Company for
cancellation of the certificate for the shares sold and subject to a like lien for any
moneys not presently payable as existed upon the shares before the sale) shall be paid
to the person entitled to the shares at the date of the sale.
|
CALLS
ON SHARES
|
(a)
|
Subject to the terms of allotment,
the Directors may make calls upon the members in respect of any moneys unpaid on their
shares, including shares where the conditions of allotment provide for payment at fixed
times, and each member (subject to receiving at least fourteen Clear Days’ notice
specifying when and where payment is to be made) shall pay to the Company as required
by the notice the amount called on his shares. A call may be required to be paid by instalments.
A call may be revoked before receipt by the Company of a sum due thereunder, in whole
or in part and payment of a call may be postponed in whole or in part. A person upon
whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent
transfer of the shares in respect of which the call was made.
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|
(b)
|
A call shall be deemed to have
been made at the time when the resolution of the Directors authorising the call was passed.
|
|
(c)
|
The joint Holders of a share shall
be jointly and severally liable to pay all calls in respect thereof.
|
|
(d)
|
If a call remains unpaid after
it has become due and payable the person from whom it is due and payable shall pay interest
on the amount unpaid from the day it became due until it is paid at the rate fixed by
the terms of allotment of the share or in the notice of the call or, if no rate is fixed,
at the appropriate rate (as defined by the Acts) but the Directors may waive payment
of the interest wholly or in part.
|
|
(e)
|
An amount payable in respect of
a share on allotment or at any fixed date, whether in respect of nominal value or as
an instalment of a call, shall be deemed to be a call and if it is not paid the provisions
of these articles shall apply as if that amount had become due and payable by virtue
of a call.
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|
(f)
|
Subject to the terms of allotment,
the Directors may make arrangements on the issue of shares for a difference between the
Holders in the amounts and times of payment of calls on their shares.
|
|
(g)
|
The Directors, if they think fit,
may receive from any member willing to advance the same all or any part of the moneys
uncalled and unpaid upon any shares held by him, and upon all or any of the moneys so
advanced may pay (until the same would, but for such advance, become payable) interest
at such rate, not exceeding (unless the Company in general meeting otherwise directs)
fifteen percent per annum, as may be agreed upon between the Directors and the member
paying such sum in advance.
|
(h)
|
(i)
|
If
a member fails to pay any call or instalment of a call on the day appointed for payment
thereof, the Directors, at any time thereafter and during such times as any part of the
call or instalment remains unpaid, may serve a notice on him requiring payment of so
much of the call or instalment as is unpaid together with any interest which may have
accrued.
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|
(ii)
|
The notice shall name a further
day (not earlier than the expiration of fourteen Clear Days from the date of service
of the notice) on or before which the payment required by the notice is to be made, and
shall state that in the event of non-payment at or before the time appointed the shares
in respect of which the call was made will be liable to be forfeited.
|
|
(iii)
|
If the requirements of any
such notice as aforesaid are not complied with then, at any time thereafter before the
payment required by the notice has been made, any shares in respect of which the notice
has been given may be forfeited by a resolution of the Directors to that effect. The
forfeiture shall include all dividends or other moneys payable in respect of the forfeited
shares and not paid before forfeiture. The Directors may accept a surrender of any share
liable to be forfeited hereunder.
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|
(iv)
|
On the trial or hearing of
any action for the recovery of any money due for any call it shall be sufficient to prove
that the name of the member sued is entered in the Register as the Holder, or one of
the Holders, of the shares in respect of which such debt accrued, that the resolution
making the call is duly recorded in the minute book and that notice of such call was
duly given to the member sued, in pursuance of these articles, and it shall not be necessary
to prove the appointment of the Directors who made such call nor any other matters whatsoever,
but the proof of the matters aforesaid shall be conclusive evidence of the debt.
|
|
(i)
|
A forfeited share may be sold
or otherwise disposed of on such terms and in such manner as the Directors think fit
and at any time before a sale or disposition the forfeiture may be cancelled on such
terms as the Directors think fit. Where for the purposes of its disposal such a share
is to be transferred to any person, the Directors may authorise some person to execute
an instrument of transfer of the share to that person. The Company may receive the consideration,
if any, given for the share on any sale or disposition thereof and may execute a transfer
of the share in favour of the person to whom the share is sold or disposed of and thereupon
he shall be registered as the Holder of the share and shall not be bound to see to the
application of the purchase money, if any, nor shall his title to the share be affected
by any irregularity or invalidity in the proceedings in reference to the forfeiture,
sale or disposal of the share.
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|
(j)
|
A person whose shares have
been forfeited shall cease to be a member in respect of the forfeited shares, but nevertheless
shall remain liable to pay to the Company all moneys which, at the date of forfeiture,
were payable by him to the Company in respect of the shares, without any deduction or
allowance for the value of the shares at the time of forfeiture but his liability shall
cease if and when the Company shall have received payment in full of all such moneys
in respect of the shares.
|
|
(k)
|
A statutory declaration that
the declarant is a Director or the Secretary of the Company, and that a share in the
Company has been duly forfeited on the date stated in the declaration, shall be conclusive
evidence of the facts therein stated as against all persons claiming to be entitled to
the share.
|
|
(l)
|
The provisions of these articles
as to forfeiture shall apply in the case of non-payment of any sum which, by the terms
of issue of a share, becomes payable at a fixed time, whether on account of the nominal
value of the share or by way of premium, as if the same had been payable by virtue of
a call duly made and notified.
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|
(m)
|
The Directors may accept the
surrender of any share which the Directors have resolved to have been forfeited upon
such terms and conditions as may be agreed and, subject to any such terms and conditions,
a surrendered share shall be treated as if it has been forfeited.
|
TRANSFER OF SHARES
16.
|
(a)
|
The instrument of transfer of any
share may be executed for and on behalf of the transferor by the Secretary, an Assistant
Secretary or any such person that the Secretary or an Assistant Secretary nominates for
that purpose (whether in respect of specific transfers or pursuant to a general standing
authorisation), and the Secretary, Assistant Secretary or the relevant nominee shall
be deemed to have been irrevocably appointed agent for the transferor of such share or
shares with full power to execute, complete and deliver in the name of and on behalf
of the transferor of such share or shares all such transfers of shares held by the members
in the share capital of the Company. Any document which records the name of the transferor,
the name of the transferee, the class and number of shares agreed to be transferred,
the date of the agreement to transfer shares and the price per share, shall, once executed
by the transferor or the Secretary, Assistant Secretary or the relevant nominee as agent
for the transferor, and by the transferee where required by the Act, be deemed to be
a proper instrument of transfer for the purposes of the Act. The transferor shall be
deemed to remain the Holder of the share until the name of the transferee is entered
on the Register in respect thereof, and neither the title of the transferee nor the title
of the transferor shall be affected by any irregularity or invalidity in the proceedings
in reference to the sale should the Directors so determine.
|
|
(b)
|
The Company, at its absolute discretion,
may, or may procure that a subsidiary of the Company shall, pay Irish stamp duty arising
on a transfer of shares on behalf of the transferee of such shares of the Company. If
stamp duty resulting from the transfer of shares in the Company which would otherwise
be payable by the transferee is paid by the Company or any subsidiary of the Company
on behalf of the transferee, then in those circumstances, the Company shall, on its behalf
or on behalf of its subsidiary (as the case may be), be entitled to (i) seek reimbursement
of the stamp duty from the transferee, (ii) set-off the stamp duty against any dividends
payable to the transferee of those shares and (iii) claim a first and permanent lien
on the shares on which stamp duty has been paid by the Company or its subsidiary for
the amount of stamp duty paid. The Company’s lien shall extend to all dividends
paid on those shares.
|
|
(c)
|
Notwithstanding the provisions
of these articles and subject to any provision of the Acts, title to any shares in the
Company may also be evidenced and transferred without a written instrument in accordance
with the Acts or any regulations made thereunder. The Directors shall have power to permit
any class of shares to be held in uncertificated form and to implement any arrangements
they think fit for such evidencing and transfer which accord with such regulations and
in particular shall, where appropriate, be entitled to disapply or modify all or part
of the provisions in these articles with respect to the requirement for written instruments
of transfer and share certificates (if any), in order to give effect to such regulations.
|
|
17.
|
Subject to such of the restrictions
of these articles and to such of the conditions of issue of any share warrants as may
be applicable, the shares of any member and any share warrant may be transferred by instrument
in writing in any usual or common form or any other form which the Directors may approve.
|
18.
|
(a)
|
The Directors in their absolute
discretion and without assigning any reason therefor may decline to register:
|
|
(i)
|
any transfer of a share which is
not fully paid; or
|
|
(ii)
|
any transfer to or by a minor or
person of unsound mind;
|
|
|
but this shall not apply to a transfer
of such a share resulting from a sale of the share through a stock exchange on which
the share is listed.
|
|
(b)
|
The Directors may decline to recognise
any instrument of transfer unless:
|
|
(i)
|
the instrument of transfer is accompanied
by the certificate of the shares to which it relates and such other evidence as the Directors
may reasonably require to show the right of the transferor to make the transfer;
|
|
(ii)
|
the instrument of transfer is in
respect of one class of share only;
|
|
(iii)
|
a fee of €10 or such lesser
sum as the Directors may from time to time require, is paid to the Company;
|
|
(iv)
|
the instrument of transfer is in
favour of four transferees or fewer; and
|
|
(v)
|
it is lodged at the Office or at
such other place as the Directors may appoint.
|
|
19.
|
If the Directors refuse to register
a transfer, they shall, within two months after the date on which the transfer was lodged
with the Company, send to the transferee notice of the refusal.
|
|
(a)
|
The Directors may from time to
time fix a record date for the purposes of determining the rights of members to notice
of and/or to vote at any general meeting of the Company. The record date shall not precede
the date upon which the resolution fixing the record date is adopted by the Directors,
and the record date shall be not more than eighty nor less than ten days before the date
of such meeting. If no record date is fixed by the Directors, the record date for determining
members entitled to notice of or to vote at a meeting of the members shall be the close
of business on the day next preceding the day on which notice is given. Unless the Directors
determine otherwise, the determination of those members of record entitled to notice
of or to vote at a meeting of members shall apply also to any adjournment or postponement
of the meeting.
|
|
(b)
|
In order that the Directors may
determine the members entitled to receive payment of any dividend or other distribution
or allotment of any rights or the members entitled to exercise any rights in respect
of any change, conversion or exchange of shares, or for the purpose of any other lawful
action, the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record date shall
be not more than 60 nor less than ten days prior to such action. If no record date is
fixed, the record date for determining members for such purpose shall be at the close
of business on the day on which the Directors adopt the resolution relating thereto.
|
|
21.
|
Registration of transfers may be suspended
at such times and for such period, not exceeding in the whole 30 days in each year, as
the Directors may from time to time determine subject to the requirements of the Acts.
|
|
22.
|
All instruments of transfer shall upon
their being lodged with the Company remain the property of the Company and the Company
shall be entitled to retain them.
|
|
23.
|
Subject to the provisions of these
articles, whenever as a result of a consolidation of shares or otherwise any members
would become entitled to fractions of a share, the Directors may sell or cause to be
sold, on behalf of those members, the shares representing the fractions for the best
price reasonably obtainable to any person and distribute the proceeds of sale (subject
to any applicable tax, abandoned property laws and the reasonable expenses of sale) in
due proportion among those members, except that any proceeds in respect of any holding
which is less than a sum fixed by the Board may be retained for the benefit of the Company.
The Directors may authorise some person to execute an instrument of transfer of the shares
to, or in accordance with the directions of, the purchaser. The transferee shall not
be bound to see to the application of the purchase money nor shall his title to the shares
be affected by any irregularity in or invalidity of the proceedings in reference to the
sale.
|
TRANSMISSION OF SHARES
|
24.
|
In the case of the death of a member,
the survivor or survivors where the deceased was a joint Holder, and the personal representatives
of the deceased where he was a sole Holder, shall be the only persons recognised by the
Company as having any title to his interest in the shares; but nothing herein contained
shall release the estate of a deceased joint Holder from any liability in respect of
any share which had been jointly held by him with other persons.
|
|
25.
|
Any person becoming entitled to a share
in consequence of the death or bankruptcy of a member may, upon such evidence being produced
as may from time to time properly be required by the Directors and subject as herein
provided, elect either to be registered himself as Holder of the share or to have some
person nominated by him registered as the transferee thereof, but the Directors shall,
in either case, have the same right to decline or suspend registration as they would
have had in the case of a transfer of the shares by that member before his death or bankruptcy,
as the case may be.
|
|
26.
|
If the person so becoming entitled
elects to be registered himself, he shall deliver or send to the Company a notice in
writing signed by him stating that he so elects. If he elects to have another person
registered, he shall testify his election by executing to that person a transfer of the
share. All the limitations, restrictions and provisions of these articles relating to
the right to transfer and the registration of transfers of shares shall be applicable
to any such notice or transfer as aforesaid as if the death or bankruptcy of the member
had not occurred and the notice of transfer were a transfer signed by that member.
|
|
27.
|
A person becoming entitled to a share
by reason of the death or bankruptcy of the Holder shall be entitled to the same dividends
and other advantages to which he would be entitled if he were the registered Holder of
the share, except that he shall not, before being registered as a member in respect of
the share, be entitled in respect of it to exercise any right conferred by membership
in relation to the meetings of the Company, so, however, that the Directors may at any
time give notice requiring such person to elect either to be registered himself or to
transfer the share, and if the notice is not complied with within 90 days, the Directors
may thereupon withhold payment of all dividends, bonuses or other moneys payable in respect
of the share until the requirements of the notice have been complied with.
|
AMENDMENT OF MEMORANDUM OF ASSOCATION;
CHANGE OF LOCATION OF REGISTERED OFFICE; AND ALTERATION OF CAPITAL
|
28.
|
The Company may from time to time by
Ordinary Resolution increase the authorised share capital by such sum, to be divided
into shares of such amount, as the resolution shall prescribe.
|
|
29.
|
The Company may by Ordinary Resolution:
|
|
(a)
|
divide its share capital into several
classes and attach to them respectively any preferential, deferred, qualified or special
rights, privileges or conditions;
|
|
(b)
|
increase the authorised share capital
by such sum to be divided into shares of such nominal value, as such Ordinary Resolution
shall prescribe;
|
|
(c)
|
consolidate and divide all or any
of its share capital into shares of larger amount than its existing shares;
|
|
(d)
|
by subdivision of its existing
shares or any of them divide the whole or any part of its share capital into shares of
smaller nominal value than is fixed by the memorandum of association subject to the Acts,
so, however, that in the sub-division the proportion between the amount paid and the
amount, if any, unpaid on each reduced share shall be the same as it was in the case
of the Share from which the reduced share is derived;
|
|
(e)
|
cancel any shares that at the date
of the passing of the relevant Ordinary Resolution have not been taken or agreed to be
taken by any person; and
|
|
(f)
|
subject to applicable law, change
the currency denomination of its share capital.
|
|
30.
|
Subject to the provisions of the Acts,
the Company may:
|
|
(a)
|
by Special Resolution change its
name, alter or add to the memorandum of association with respect to any objects, powers
or other matters specified therein or alter or add to these Articles;
|
|
(b)
|
by Special Resolution reduce its
company capital (including its share capital and any capital redemption reserve or share
premium account) in any way it thinks expedient and, without prejudice to the generality
of the foregoing, may
|
|
(i)
|
extinguish or reduce the liability
on any of its shares in respect of share capital not paid up;
|
|
(ii)
|
either with or without extinguishing
or reducing liability on any of its shares, cancel any paid up company capital which
is lost or unrepresented by available assets; and
|
|
(iii)
|
either with or without extinguishing
or reducing liability on any of its shares, pay off any paid up company capital which
is in excess of the wants of the Company,
|
and in relation
to such reductions, the Company may by Special Resolution determine the terms upon which the reduction is to be effected, including
in the case of a reduction of part only of any class of shares, those shares to be affected; and
|
(c)
|
by resolution of the Directors
change the location of its Office.
|
GENERAL MEETINGS
|
31.
|
The Company shall in each year hold
a general meeting as its annual general meeting in addition to any other meeting in that
year, and shall specify the meeting as such in the notices calling it. Not more than
fifteen months shall elapse between the date of one annual general meeting of the Company
and that of the next. This article shall not apply in the case of the first general meeting,
in respect of which the Company shall convene the meeting within the time periods required
by the Act.
|
|
32.
|
Subject to the Acts, all general meetings
of the Company may be held outside of Ireland.
|
|
33.
|
All general meetings other than annual
general meetings shall be called extraordinary general meetings.
|
|
34.
|
The Directors may, whenever they think
fit, convene an extraordinary general meeting, and extraordinary general meetings shall
also be convened on such requisition, or in default may be convened by such requisitionists,
as provided in the Acts. Where any enactment confers rights on the members of a company
to convene a general meeting and expresses such rights to apply save where a company’s
articles of association or constitution provides otherwise, including, but not limited
to, section 178(2) of the Act, such rights shall not apply to the members of the Company.
|
|
35.
|
All provisions of these articles relating
to general meetings of the Company shall, mutatis mutandis, apply to every separate general
meeting of the Holders of any class of shares in the capital of the Company, except that
the necessary quorum shall be two or more persons holding or representing by proxy (whether
or not such Holder actually exercises his voting rights in whole, in part or at all at
the relevant general meeting) at least a majority in nominal value of the issued shares
of the class or, at any adjourned meeting of such Holders, one Holder holding or representing
by proxy (whether or not such Holder actually exercises his voting rights in whole, in
part or at all at the relevant general meeting) at least a majority in nominal value
of the issued shares of the class, shall be deemed to constitute a meeting.
|
|
36.
|
A Director shall be entitled, notwithstanding
that he is not a member, to attend and speak at any general meeting and at any separate
meeting of the Holders of any class of shares in the Company.
|
NOTICE OF GENERAL MEETINGS
|
(a)
|
Subject to the provisions of the
Acts allowing a general meeting to be called by shorter notice, an annual general meeting
and an extraordinary general meeting for the passing of a Special Resolution shall be
called by not more than 60 Clear Days’ notice and not less than 21 Clear Days’
notice and all other extraordinary general meetings shall be called by not less than
14 Clear Days’ notice.
|
|
(b)
|
Any notice convening a general
meeting shall specify the time and place of the meeting and, in the case of special business,
the general nature of that business and, in reasonable prominence, that a member entitled
to attend and vote is entitled to appoint a proxy to attend, speak and vote in his place
and that a proxy need not be a member of the Company. It shall also give particulars
of any Directors who are to retire at the meeting and of any persons who are recommended
by the Directors for appointment or re-appointment as Directors at the meeting or in
respect of whom notice has been duly given to the Company of the intention to propose
them for appointment or re-appointment as Directors at the meeting. Provided that the
latter requirement shall only apply where the intention to propose the person has been
received by the Company in accordance with the provisions of these articles. Subject
to any restrictions imposed on any shares, the notice of the meeting shall be given to
all the members of the Company as of the record date set by the Directors and to the
Directors and the statutory auditors.
|
|
(c)
|
The accidental omission to give
notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled
to receive notice shall not invalidate the proceedings at the meeting.
|
|
38.
|
Where, by any provision contained in
the Acts, notice of a greater length than that required by article 37(a) is required
of a resolution, the resolution shall not be effective (except where the Directors of
the Company have resolved to submit it) unless notice of the intention to move it has
been given to the Company not less than 28 days (or such period as the Acts permit) before
the meeting at which it is moved, and the Company shall give to the members notice of
any such resolution as required by and in accordance with the provisions of the Acts.
|
PROCEEDINGS AT GENERAL MEETINGS
|
39.
|
All business shall be deemed special
that is transacted at an extraordinary general meeting, and also that is transacted at
an annual general meeting, with the exception of:
|
|
(i)
|
the consideration of the Company’s
statutory financial statements and the report of the directors and the report of the
statutory auditors on those statements and that report;
|
|
(ii)
|
the review by the members of the
Company’s affairs;
|
|
(iii)
|
the declaration of a dividend (if
any) of an amount not exceeding the amount recommended by the directors;
|
|
(iv)
|
the authorisation of the directors
to approve the remuneration of the statutory auditors; and
|
|
(v)
|
the election and re-election of directors.
|
|
40.
|
At any annual general meeting of the
members, only such nominations of persons for election to the Board shall be made, and
only such other business shall be conducted or considered, as shall have been properly
brought before the meeting. For nominations to be properly made at an annual general
meeting, and proposals of other business to be properly brought before an annual meeting,
nominations and proposals of other business must be: (a) specified in the Company’s
notice of meeting (or any supplement thereto) given by or at the direction of the Board,
(b) otherwise properly made at the annual general meeting, by or at the direction of
the Board or (c) otherwise properly requested to be brought before the annual general
meeting by a member of the Company in accordance with these articles. For nominations
of persons for election to the Board or proposals of other business to be properly requested
by a member to be made at an annual general meeting, a member must (i) be a member at
the time of giving of notice of such annual general meeting by or at the direction of
the Board and at the time of the annual general meeting, (ii) be entitled to vote at
such annual general meeting and (iii) comply with the procedures set forth in these articles
as to such business or nomination. The immediately preceding sentence shall be the exclusive
means for a member to make nominations or other business proposals (other than matters
properly brought under the applicable rules of any stock exchange to which the Company’s
shares are admitted to trading and included in the Company’s notice of meeting)
before an annual general meeting of members.
|
|
41.
|
At any extraordinary general meeting
of the members, only such business shall be conducted or considered, as shall have been
properly brought before the meeting pursuant to the Company’s notice of meeting.
To be properly brought before an extraordinary general meeting, proposals of business
must be (a) specified in the Company’s notice of meeting (or any supplement thereto)
given by or at the direction of the Board, (b) otherwise properly brought before the
extraordinary general meeting, by or at the direction of the Board, or (c) otherwise
properly brought before the meeting by any members of the Company pursuant to the valid
exercise of power granted to them under the Acts.
|
|
42.
|
No shareholder shall be entitled to
propose any person to be appointed, elected or re-elected as Director at any extraordinary
general meeting.
|
|
43.
|
Except as otherwise provided by the
Acts, the memorandum of association or these articles, the Chairman of any general meeting
shall have the power to determine whether a nomination or any other business proposed
to be brought before the general meeting was made or proposed, as the case may be, in
accordance with these articles and, if any proposed nomination or other business is not
in compliance with these articles, to declare that no action shall be taken on such nomination
or other proposal and such nomination or other proposal shall be disregarded.
|
|
44.
|
No business shall be transacted at
any general meeting unless a quorum is present at the time when the meeting proceeds
to business. Five or more Holders of shares, present in person or by proxy (whether or
not such Holder actually exercises his voting rights in whole, in part or at all at the
relevant general meeting), entitling them to exercise a majority of the voting power
of the Company on the relevant record date shall constitute a quorum. Abstentions and
broker non-votes will be regarded as present for the purposes of establishing the presence
of a quorum.
|
|
45.
|
Any general meeting duly called at
which a quorum is not present shall be adjourned and the Company shall provide notice
pursuant to article 38 in the event that such meeting is to be reconvened.
|
|
46.
|
The Chairman, if any, of the Board
shall preside as Chairman at every general meeting of the Company, or if there is no
such Chairman, or if he is not present within fifteen minutes after the time appointed
for the holding of the meeting or is unwilling to act, the Directors present shall elect
one of their number to be Chairman of the meeting.
|
|
47.
|
If at any meeting no Director is willing
to act as Chairman or if no Director is present within fifteen minutes after the time
appointed for holding the meeting, the members present shall choose one of their number
to be Chairman of the meeting.
|
|
48.
|
The Chairman may, with the consent
of any meeting at which a quorum is present, and shall if so directed by the meeting,
adjourn the meeting from time to time and from place to place without notice other than
by announcement of the time and place of the adjourned meeting by the Chairman of the
meeting. The Chairman of the meeting may at any time without the consent of the meeting
adjourn the meeting to another time and/or place if, in his opinion, it would facilitate
the conduct of the business of the meeting to do so or if he is so directed by the Board.
Save as aforesaid, it shall not be necessary to give any notice of an adjournment or
of the business to be transacted at an adjourned meeting.
|
|
49.
|
At any general meeting a resolution
put to the vote of the meeting shall be decided by poll.
|
|
50.
|
A poll shall be taken in such manner
as the Chairman directs, and the result of the poll shall be deemed to be the resolution
of the meeting at which the poll was taken.
|
|
51.
|
Unless the Directors otherwise determine,
no member shall be entitled to vote at any general meeting or any separate meeting of
the Holders of any class of shares in the Company, either in person or by proxy, or to
exercise any privilege as a member in respect of any share held by him unless all monies
then payable by him in respect of that share have been paid.
|
ADVANCE NOTICE OF MEMBER BUSINESS AND
NOMINATIONS
|
52.
|
Without qualification or limitation,
subject to article 62, for any nominations or any other business to be properly brought
before an annual general meeting by a member pursuant to article 40, the member must
have given timely notice thereof (including, in the case of nominations, the completed
and signed questionnaire, representation and agreement required by article 63), and timely
updates and supplements thereof, in writing to the Secretary, and such other business
must otherwise be a proper matter for member action.
|
|
53.
|
To be timely, a member’s notice
for any nominations or any other business to be properly brought before an annual general
meeting by a member pursuant to article 40 shall be delivered to the Secretary at the
Office by close of business on that day that is not less than 120 days prior to the first
anniversary of the day of release to shareholders of the Company’s proxy statement,
issued pursuant to the applicable rules of any stock exchange to which the Company’s
shares are admitted to trading, in respect of the preceding year’s annual general
meeting; provided, however, that in the event that the date of the annual general meeting
is changed by more than 30 days from the date contemplated at the time of the previous
year’s proxy statement, notice by the member must be so delivered by close of business
on the day that is not less than the later of (a) 150 days prior to the day of the contemplated
annual general meeting or (b) ten days after the day on which public announcement of
the date of the contemplated annual general meeting is first made by the Company; provided,
further, that with respect to the first annual general meeting of the Company, notice
by the member must be so delivered by close of business on the day that is not less than
ten days after the day on which public announcement of the date of such meeting is first
made by the Company. In no event shall any adjournment or postponement of an annual general
meeting, or the public announcement thereof, commence a new time period for the giving
of a member’s notice as described above.
|
|
54.
|
Notwithstanding anything in article
53 to the contrary, in the event that the number of directors to be elected to the Board
is increased by the Board, and there is no public announcement by the Company naming
all of the nominees for director or specifying the size of the increased Board at least
130 days prior to the first anniversary of the day of release to shareholders of the
Company’s proxy statement issued pursuant to the applicable rules of any stock
exchange to which the Company’s shares are admitted to trading in respect of the
preceding year’s annual general meeting, a member’s notice required by articles
52-55 shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at the
Office not later than the close of business on the day that is ten days after the day
on which such public announcement is first made by the Company.
|
|
55.
|
In addition, to be considered timely,
a member’s notice shall further be updated and supplemented, if necessary, so that
the information provided or required to be provided in such notice shall be true and
correct as of the record date for the meeting and as of the date that is ten business
days prior to the meeting or any adjournment or postponement thereof, and such update
and supplement shall be delivered to the Secretary at the Office not later than five
business days after the record date for the meeting in the case of the update and supplement
required to be made as of the record date, and not later than eight business days prior
to the date for the meeting or any adjournment or postponement thereof in the case of
the update and supplement required to be made as of ten business days prior to the meeting
or any adjournment or postponement thereof.
|
|
56.
|
Subject to article 62, in the event
the Company calls an extraordinary general meeting of members for the purpose of electing
one or more directors to the Board, any member may nominate a person or persons (as the
case may be) for election to such position(s) as specified in the Company’s notice
of meeting, provided that the member gives timely notice thereof (including the completed
and signed questionnaire, representation and agreement required by article 63), and timely
updates and supplements thereof, in writing, to the Secretary.
|
|
57.
|
To be timely, a member’s notice
for any nomination to be properly brought before such an extraordinary general meeting
shall be delivered to the Secretary at the Office by close of business on the day that
is not less than 120 days prior to the date of such extraordinary general meeting or,
if the first public announcement of the date of such extraordinary general meeting is
less than 130 days prior to the date of such extraordinary general meeting, by close
of business on the day that is ten days after the day on which public announcement of
the date of the extraordinary general meeting and of the nominees proposed by the Board
to be elected at such meeting is first made by the Company. In no event shall any adjournment
or postponement of an extraordinary general meeting, or the public announcement thereof,
commence a new time period for the giving of a member’s notice as described above.
|
|
58.
|
In addition, to be considered timely,
a member’s notice shall further be updated and supplemented, if necessary, so that
the information provided or required to be provided in such notice shall be true and
correct as of the record date for the meeting and as of the date that is ten business
days prior to the meeting or any adjournment or postponement thereof, and such update
and supplement shall be delivered to the Secretary at the Office not later than five
business days after the record date for the meeting in the case of the update and supplement
required to be made as of the record date, and not later than eight business days prior
to the date for the meeting, any adjournment or postponement thereof in the case of the
update and supplement required to be made as of ten business days prior to the meeting
or any adjournment or postponement thereof.
|
|
59.
|
To be in proper form, a member’s
notice (whether given pursuant to articles 52-55 or articles 56-58) to the Secretary
must include the following, as applicable:
|
|
(a)
|
As to the member giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is made,
a member’s notice must set forth: (i) the name and address of such member, as they
appear on the Company’s books, of such beneficial owner, if any, and of their respective
affiliates or associates or others acting in concert therewith, (ii) (A) the class or
series and number of shares of the Company which are, directly or indirectly, owned beneficially
and of record by such member, such beneficial owner and their respective affiliates or
associates or others acting in concert therewith, (B) any option, warrant, convertible
security, share appreciation right, or similar right with an exercise or conversion privilege
or a settlement payment or mechanism at a price related to any class or series of shares
of the Company or with a value derived in whole or in part from the value of any class
or series of shares of the Company, or any derivative or synthetic arrangement having
the characteristics of a long position in any class or series of shares of the Company,
or any contract, derivative, swap or other transaction or series of transactions designed
to produce economic benefits and risks that correspond substantially to the ownership
of any class or series of shares of the Company, including due to the fact that the value
of such contract, derivative, swap or other transaction or series of transactions is
determined by reference to the price, value or volatility of any class or series of shares
of the Company, whether or not such instrument, contract or right shall be subject to
settlement in the underlying class or series of shares of the Company, through the delivery
of cash or other property, or otherwise, and without regard to whether the member, the
beneficial owner, if any, or any affiliates or associates or others acting in concert
therewith, may have entered into transactions that hedge or mitigate the economic effect
of such instrument, contract or right, or any other direct or indirect opportunity to
profit or share in any profit derived from any increase or decrease in the value of shares
of the Company (any of the foregoing, a “
Derivative Instrument
”) directly
or indirectly owned beneficially by such member, the beneficial owner, if any, or any
affiliates or associates or others acting in concert therewith, (C) any proxy, contract,
arrangement, understanding, or relationship pursuant to which such member has a right
to vote any class or series of shares of the Company, (D) any agreement, arrangement,
understanding, relationship or otherwise, including any repurchase or similar so-called
“stock borrowing” agreement or arrangement, involving such member, directly
or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic
risk (of ownership or otherwise) of any class or series of the shares of the Company
by, manage the risk of share price changes for, or increase or decrease the voting power
of, such member with respect to any class or series of the shares of the Company, or
which provides, directly or indirectly, the opportunity to profit or share in any profit
derived from any decrease in the price or value of any class or series of the shares
of the Company (any of the foregoing, a “
Short Interest
”), (E) any
rights to dividends on the shares of the Company owned beneficially by such member that
are separated or separable from the underlying shares of the Company, (F) any proportionate
interest in shares of the Company or Derivative Instruments held, directly or indirectly,
by a general or limited partnership in which such member is a general partner or, directly
or indirectly, beneficially owns an interest in a general partner of such general or
limited partnership, (G) any performance-related fees (other than an asset-based fee)
that such member is entitled to base on any increase or decrease in the value of shares
of the Company or Derivative Instruments, if any, including without limitation any such
interests held by members of such member’s immediate family sharing the same household,
(H) any significant equity interests or any Derivative Instruments or Short Interests
in any principal competitor of the Company held by such member, and (I) any direct or
indirect interest of such member in any contract with the Company, any affiliate of the
Company or any principal competitor of the Company (including, in any such case, any
employment agreement, collective bargaining agreement or consulting agreement), and (iii)
any other information relating to such member and beneficial owner, if any, that would
be required to be disclosed in a proxy statement and form or proxy or other filings required
to be made in connection with solicitations of proxies for, as applicable, the proposal
and/or for the election of directors in a contested election pursuant to the applicable
rules of any stock exchange to which the Company’s shares are admitted to trading
and the regulations promulgated thereunder.
|
|
(b)
|
If the notice relates to any business
other than a nomination of a director or directors that the member proposes to bring
before the meeting, a member’s notice must, in addition to the matters set forth
in article 59(a) above, also set forth: (i) a brief description of the business desired
to be brought before the meeting, the reasons for conducting such business at the meeting
and any material interest of such member and beneficial owner, if any, in such business,
(ii) the text of the proposal or business (including the text of any resolutions proposed
for consideration and, in the event that such proposal or business includes a proposal
to amend these articles, the text of the proposed amendment), and (iii) a description
of all agreements, arrangements and understandings between such member and beneficial
owner, if any, and any other person or persons (including their names) in connection
with the proposal of such business by such member.
|
|
(c)
|
As to each person, if any, whom
the member proposes to nominate for election or re-election to the Board, a member’s
notice must, in addition to the matters set forth in article 59(a) above, also set forth:
(i) all information relating to such person that would be required to be disclosed in
a proxy statement or other filings required to be made in connection with solicitations
of proxies for election of directors in a contested election pursuant to the applicable
rules of any stock exchange to which the Company’s shares are admitted to trading
and the rules and regulations promulgated thereunder (including such person’s written
consent to being named in the proxy statement as a nominee and to serving as a director
if elected) and (ii) a description of all direct and indirect compensation and other
material monetary agreements, arrangements and understandings during the past three years,
and any other material relationships, between or among such member and beneficial owner,
if any, and their respective affiliates and associates, or others acting in concert therewith,
on the one hand, and each proposed nominee, and his or her respective affiliates and
associates, or others acting in concert therewith, on the other hand, including, without
limitation all information that would be required to be disclosed pursuant to the applicable
rules of any stock exchange to which the Company’s shares are admitted to trading
if the member making the nomination and any beneficial owner on whose behalf the nomination
is made, if any, or any affiliate or associate thereof or person acting in concert therewith,
were the “registrant” for purposes of such rule and the nominee were a director
or executive officer of such registrant.
|
|
60.
|
With respect to each person, if any,
whom the member proposes to nominate for election or re-election to the Board, a member’s
notice must, in addition to the matters set forth in articles 59(a) and 59(c) above,
also include a completed and signed questionnaire, representation and agreement required
by article 63 of these articles. The Company may require any proposed nominee to furnish
such other information as may reasonably be required by the Company to determine the
eligibility of such proposed nominee to serve as an independent director of the Company
or that could be material to a reasonable member’s understanding of the independence,
or lack thereof, of such nominee.
|
|
61.
|
Notwithstanding the provisions of these
articles, a member shall also comply with all applicable requirements of the applicable
rules of any stock exchange to which the Company’s shares are admitted to trading
and the rules and regulations thereunder with respect to the matters set forth in articles
52-63.
|
|
62.
|
Nothing in these articles shall be
deemed to affect any rights (i) of members to request inclusion of proposals in the Company’s
proxy statement pursuant to the applicable rules of any stock exchange to which the Company’s
shares are admitted to trading, (ii) of the holders of any series of preferred shares
if and to the extent provided for under law, the memorandum of association or these articles
or (iii) of members of the Company to bring business before an extraordinary general
meeting pursuant to the valid exercise of power granted to them under the Acts. Subject
to the applicable rules of any stock exchange to which the Company’s shares are
admitted to trading, nothing in these articles shall be construed to permit any member,
or give any member the right, to include or have disseminated or described in the Company’s
proxy statement any nomination of director or directors or any other business proposal.
|
|
63.
|
Subject to the rights of members of
the Company to propose nominations at an extraordinary general meeting pursuant to the
valid exercise of power granted to them under the Acts, to be eligible to be a nominee
for election or re-election as a director of the Company, a person must deliver (in accordance
with the time periods prescribed for delivery of notice under articles 52-62) to the
Secretary at the Office a written questionnaire with respect to the background and qualification
of such person and the background of any other person or entity on whose behalf the nomination
is being made (which questionnaire shall be provided by the Secretary upon written request),
and a written representation and agreement (in the form provided by the Secretary upon
written request) that such person (A) is not and will not become a party to (1) any agreement,
arrangement or understanding with, and has not given any commitment or assurance to,
any person or entity as to how such person, if elected as a director of the Company,
will act or vote on any issue or question (a “
Voting Commitment
”)
that has not been disclosed to the Company or (2) any Voting Commitment that could limit
or interfere with such person’s ability to comply, if elected as a director of
the Company, with such person’s fiduciary duties under applicable law, (B) is not
and will not become a party to any agreement, arrangement or understanding with any person
or entity other than the Company with respect to any direct or indirect compensation,
reimbursement or indemnification in connection with service or action as a director that
has not been disclosed therein, and (C) in such person’s individual capacity and
on behalf of any person or entity on whose behalf the nomination is being made, would
be in compliance, if elected as a director of the Company, and will comply with all applicable
corporate governance, conflict of interest, confidentiality and share ownership and trading
policies and guidelines of the Company publicly disclosed from time to time.
|
VOTES OF MEMBERS
|
64.
|
Subject to any special rights or restrictions
as to voting for the time being attached by or in accordance with these articles to any
class of shares, on a poll every member who is present in person or by proxy shall have
one vote for each share of which he is the Holder.
|
|
65.
|
When there are joint Holders, the vote
of the senior who tenders a vote, whether in person or by proxy, shall be accepted to
the exclusion of the votes of the other joint Holders; and for this purpose, seniority
shall be determined by the order in which the names stand in the Register.
|
|
66.
|
A member of unsound mind, or in respect
of whom an order has been made by any court having jurisdiction (whether in Ireland or
elsewhere) in matters concerning mental disorder, may vote by his committee, receiver,
guardian or other person appointed by that court and any such committee, receiver, guardian
or other person may vote by proxy on a poll. Evidence to the satisfaction of the Directors
of the authority of the person claiming to exercise the right to vote shall be received
at the Office or at such other address as is specified in accordance with these articles
for the receipt of appointments of proxy, not less than forty-eight hours before the
time appointed for holding the meeting or adjourned meeting at which the right to vote
is to be exercised and in default the right to vote shall not be exercisable.
|
|
67.
|
No objection shall be raised to the
qualification of any voter except at the meeting or adjourned meeting at which the vote
objected to is given or tendered, and every vote not disallowed at such meeting shall
be valid for all purposes. Any such objection made in due time shall be referred to the
Chairman of the meeting, whose decision shall be final and conclusive.
|
|
68.
|
Votes may be given either personally
or by proxy.
|
|
(a)
|
Every member entitled to attend
and vote at a general meeting may appoint a proxy to attend, speak and vote on his behalf
and may appoint more than one proxy to attend, speak and vote at the same meeting. The
appointment of a proxy shall be in any form which the Directors may approve, subject
to compliance with any requirements as to form under the Acts, and shall be signed by
or on behalf of the appointer. A body corporate must sign a form of proxy under its common
seal (if applicable) or under the hand of a duly authorised officer thereof. A proxy
need not be a member of the Company. The appointment of a proxy in electronic or other
form shall only be effective in such manner as the Directors may approve, subject to
any requirements of the Acts.
|
|
(b)
|
Without limiting the foregoing,
the Directors may from time to time permit appointments of a proxy to be made by means
of an electronic or internet communication or facility and may in a similar manner permit
supplements to, or amendments or revocations of, any such electronic or internet communication
or facility to be made. For the avoidance of doubt, such appointments of proxy as made
by electronic or internet communication or facility as permitted by the Directors will
be deemed to be deposited at the place specified for such purpose once received by the
Company. The Directors may in addition prescribe the method of determining the time at
which any such electronic or internet communication or facility is to be treated as deposited
at the place specified for such purpose. The Directors may treat any such electronic
or internet communication or facility which purports to be or is expressed to be sent
on behalf of a Holder of a share as sufficient evidence of the authority of the person
sending that instruction to send it on behalf of that Holder.
|
|
70.
|
A body corporate which is a member
of the Company may authorise such person as it thinks fit to act as its representative
at any meeting of the Company or of any class of members of the Company and the person
so authorised shall be entitled to exercise the same powers on behalf of the body corporate
which he represents as that body corporate could exercise if it were an individual member
of the Company. The Company may require evidence from the body corporate of the due authorisation
of such person to act as the representative of the relevant body corporate.
|
|
71.
|
An appointment of proxy relating to
more than one meeting (including any adjournment thereof) having once been received by
the Company for the purposes of any meeting shall not require to be delivered, deposited
or received again by the Company for the purposes of any subsequent meeting to which
it relates.
|
|
72.
|
Receipt by the Company of an appointment
of proxy in respect of a meeting shall not preclude a member from attending and voting
at the meeting or at any adjournment thereof. An appointment proxy shall be valid, unless
the contrary is stated therein, as well for any adjournment of the meeting as for the
meeting to which it relates.
|
73.
|
(a)
|
A vote given or poll demanded in
accordance with the terms of an appointment of proxy or a resolution authorising a representative
to act on behalf of a body corporate shall be valid notwithstanding the death or insanity
of the principal, or the revocation of the appointment of proxy or of the authority under
which the proxy was appointed or of the resolution authorising the representative to
act or transfer of the share in respect of which the proxy was appointed or the authorisation
of the representative to act was given, provided that no intimation in writing (whether
in electronic form or otherwise) of such death, insanity, revocation or transfer shall
have been received by the Company at the Office, before the commencement of the meeting
or adjourned meeting at which the appointment of proxy is used or at which the representative
acts, provided, however, that where such intimation is given in electronic form it shall
have been received by the Company before the commencement of the meeting
|
|
(b)
|
The Directors may send, at the
expense of the Company, by post, electronic mail or otherwise, to the members forms for
the appointment of a proxy (with or without stamped envelopes for their return) for use
at any general meeting or at any class meeting, either in blank or nominating any one
or more of the Directors or any other persons in the alternative.
|
|
(a)
|
Except in the case of the removal
of statutory auditors or Directors and subject to the Acts, anything which may be done
by resolution in general meeting of all or any class or resolution in writing, signed
by all of the holders or any class thereof or their proxies (or in the case of a holder
that is a corporation (whether or not a company within the meaning of the Acts) on behalf
of such holder) being all of the holders of the Company or any class thereof, who at
the date of the resolution in writing would be entitled to attend a meeting and vote
on the resolution and if described as a Special Resolution shall be deemed to be a Special
Resolution and vote on the resolution and if described as a Special Resolution shall
be deemed to be a Special Resolution within the meaning of the Acts. Such resolution
in writing may be signed in as many counterparts as may be necessary.
|
|
(b)
|
For the purposes of any written
resolution under article 74(a), the date of the resolution in writing is the date when
the resolution is signed by, or on behalf of, the last holder to sign and any reference
in any enactment to the date of passing of a resolution is, in relation to a resolution
in writing made in accordance with this section, a reference to such date.
|
|
(c)
|
A resolution in writing made in
accordance with article 74(a) is valid as if it had been passed by the Company in general
meeting or, if applicable, by a meeting of the relevant class of holders of the Company,
as the case may be. A resolution in writing made in accordance with this section shall
constitute minutes for the purposes of the Acts and these articles.
|
DIRECTORS
|
75.
|
Subject to article 94, the number of
Directors shall not be less than two (the “
prescribed minimum
”) nor
more than thirteen and shall be determined by the Board (the “
Authorised Number
”).
The continuing Directors may act notwithstanding any vacancy in their body provided that,
if the number of the Directors is reduced below the prescribed minimum, the remaining
Director or Directors shall appoint forthwith an additional Director or additional Directors
so that the Board comprises such minimum or shall convene a general meeting of the Company
for the purpose of making such appointment. If, at any general meeting of the Company,
(a) the Chairman determines that the number of persons properly nominated to serve as
Directors exceeds the Authorised Number and (b) the number of Directors is reduced below
the Authorised Number due to the failure of one or more Directors to be elected or re-elected
(as the case may be) by way of a majority of the votes cast at that meeting or any adjournment
thereof, then from the persons properly nominated to serve as Directors those receiving
the highest number of votes in favour of election or re-election (as the case may be)
shall be elected or re-elected (as the case may be) to the Board so that the number of
Directors equals the Authorised Number and shall be Directors until the next annual general
meeting. Where the number of Directors falls to less than the Authorised Number and there
are no Director or Directors capable of acting then any two members may summon a general
meeting for the purpose of appointing Directors. Any additional Director so appointed
shall hold office (subject to the provisions of the Acts and these articles) only until
the conclusion of the annual general meeting of the Company next following such appointment.
If, at any meeting of the Company, resolutions are passed by a majority of the votes
cast at that meeting or any adjournment thereof in respect of the election or re-election
(as the case may be) of Directors which would result in the Authorised Number being exceeded,
then those Director(s), in such number as exceeds such Authorised Number, receiving at
that meeting the lowest number of votes in favour of election or re-election (as the
case may be) shall, notwithstanding the passing of any resolution by a majority of the
votes cast at that meeting or any adjournment thereof in their favour, not be elected
or re-elected (as the case may be) to the Board; provided, that nothing in this provision
will require or result in the removal of a Director whose election or re-election to
the Board was not voted on at such meeting.
|
|
(a)
|
Each Director, not being an employee,
shall be paid a fee for their services and each Director who is an employee of the Company
or the Group shall be paid remuneration (to include benefits in kind) for their employment.
The fee or remuneration paid to each Director shall be at such rate and on such basis
as may from time to time be determined by the Board. The Directors may also be paid all
travelling, hotel and other expenses properly incurred by them in attending and returning
from meetings of the Directors or any committee of the Directors or general meetings
of the Company or in connection with the business of the Company. The amount, rate or
basis of the fees, remuneration or expenses paid to the Directors shall not require approval
or ratification by the Company in general meeting.
|
|
(b)
|
Each Director may use the property
of the Company pursuant to or in connection with: the exercise or performance of his
or her duties, functions and powers as Director or employee; the terms of any contract
of service or employment or letter of appointment; and, or in the alternative, any other
usage authorised by the Directors (or a person authorised by the Directors) from time
to time; and including in each case for a Director’s own benefit or for the benefit
of another person.
|
|
77.
|
If any Director shall be called upon
to perform extra services which in the opinion of the Directors are outside the scope
of the ordinary duties of a Director, the Company may remunerate such Director either
by a fixed sum or by a percentage of profits or otherwise as may be determined by a resolution
passed at a meeting of the Directors and such remuneration may be either in addition
to or in substitution for any other remuneration to which he may be entitled as a Director.
|
|
78.
|
No shareholding qualification for Directors
shall be required. A Director (whether or not a member of the Company) shall be entitled
to attend and speak at general meetings.
|
|
79.
|
Unless the Company otherwise directs,
a Director of the Company may be or become a Director or other officer of, or otherwise
interested in, any company promoted by the Company or in which the Company may be interested
as Holder or otherwise, and no such Director shall be accountable to the Company for
any remuneration or other benefits received by him as a Director or officer of, or from
his interest in, such other company.
|
BORROWING POWERS
|
80.
|
Subject to the Acts, the Directors
may exercise all the powers of the Company to borrow or raise money, and to mortgage
or charge its undertaking, property, assets and uncalled capital or any part thereof
and to issue debentures, debenture stock and other securities whether outright or as
collateral security for any debt, liability or obligation of the Company or of any third
party, without any limitation as to amount.
|
POWERS AND DUTIES OF THE DIRECTORS
|
81.
|
The business of the Company shall be
managed by the Directors, who may pay all expenses incurred in promoting and registering
the Company and may exercise all such powers of the Company as are not, by the Acts or
by these articles, required to be exercised by the Company in general meeting, subject,
nevertheless, to any of these articles and to the provisions of the Acts.
|
|
82.
|
The Directors may from time to time
and at any time by power of attorney appoint any company, firm or person or body of persons,
whether nominated directly or indirectly by the Directors, to be the attorney or attorneys
of the Company for such purposes and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Directors under these articles) and for
such period and subject to such conditions as they may think fit, and any such power
of attorney may contain such provisions for the protection of persons dealing with any
such attorney as the Directors may think fit, and may also authorise any such attorney
to delegate all or any of the powers, authorities and discretions vested in him.
|
|
(a)
|
A Director who is in any way, whether
directly or indirectly, interested in a contract or proposed contract with the Company
shall declare the nature of his interest at a meeting of the Directors in accordance
with the Acts.
|
|
(b)
|
A Director may vote in respect
of any contract, appointment or arrangement in which he is interested, and he shall be
counted in the quorum present at the meeting.
|
|
84.
|
As recognised by section 228(1)(e)
of the Act, the Directors may agree to restrict their power to exercise an independent
judgement but only where this has been approved by a resolution of the board of directors
of the Company.
|
|
85.
|
A Director may hold and be remunerated
in respect of any other office or place of profit under the Company or any other company
in which the Company may be interested (other than the office of auditor of the Company
or any subsidiary thereof) in conjunction with his office of Director for such period
and on such terms as to remuneration and otherwise as the Directors may determine, and
no Director or intending Director shall be disqualified by his office from contracting
or being interested, directly or indirectly, in any contract or arrangement with the
Company or any such other company either with regard to his tenure of any such other
office or place of profit or as vendor, purchaser or otherwise nor shall any Director
so contracting or being so interested be liable to account to the Company for any profits
and advantages accruing to him from any such contract or arrangement by reason of such
Director holding that office or of the fiduciary relationship thereby established.
|
|
86.
|
The Directors may exercise the voting
powers conferred by shares of any other company held or owned by the Company in such
manner in all respects as they think fit and in particular they may exercise their voting
powers in favour of any resolution appointing the Directors or any of them as Directors
or officers of such other company or providing for the payment of remuneration or pensions
to the Directors or officers of such other company.
|
|
87.
|
Any Director may act by himself or
his firm in a professional capacity for the Company, and he or his firm shall be entitled
to remuneration for professional services as if he were not a Director, but nothing herein
contained shall authorise a Director or his firm to act as auditor to the Company.
|
|
88.
|
All cheques, promissory notes, drafts,
bills of exchange and other negotiable instruments and all receipts for money paid to
the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the
case may be, by such person or persons and in such manner as the Directors shall from
time to time by resolution determine.
|
|
89.
|
The Directors shall cause minutes to
be made in books provided for the purpose of:
|
|
(a)
|
all appointments of officers made
by the Directors;
|
|
(b)
|
the names of the Directors present
at each meeting of the Directors and of any committee of the Directors; and
|
|
(c)
|
all resolutions and proceedings
at all meetings of the Company and of the Directors and of committees of Directors.
|
|
90.
|
The Directors may procure the establishment
and maintenance of or participate in, or contribute to any non-contributory or contributory
pension or superannuation fund, scheme or arrangement or life assurance scheme or arrangement
for the benefit of, and pay, provide for or procure the grant of donations, gratuities,
pensions, allowances, benefits or emoluments to any persons (including Directors or other
officers) who are or shall have been at any time in the employment or service of the
Company or of any company which is or was a subsidiary of the Company or of the predecessor
in business of the Company or any such subsidiary or holding Company and the spouses,
civil partners, widows, widowers, families, relatives or dependants of any such persons.
The Directors may also procure the establishment and subsidy of or subscription to and
support of any institutions, associations, clubs, funds or trusts calculated to be for
the benefit of any such persons as aforesaid or otherwise to advance the interests and
wellbeing of the Company or of any such other Company as aforesaid, or its members, and
payments for or towards the insurance of any such persons as aforesaid and subscriptions
or guarantees of money for charitable or benevolent objects or for any exhibition or
for any public, general or useful object. Provided that any Director shall be entitled
to retain any benefit received by him under this article, subject only, where the Acts
require, to disclosure to the members and the approval of the Company in general meeting.
|
DISQUALIFICATION OF DIRECTORS
|
91.
|
The office of a Director shall be vacated
ipso facto if the Director:
|
|
(a)
|
is restricted or disqualified to
act as a Director under the Acts; or
|
|
(b)
|
resigns his office by notice in
writing to the Company or in writing offers to resign and the Directors resolve to accept
such offer; or
|
|
(c)
|
is requested to resign in writing
by not less than three quarters of the other Directors; or
|
|
(d)
|
is removed from office under article
95.
|
APPOINTMENT, ROTATION AND REMOVAL OF
DIRECTORS
|
92.
|
At every annual general meeting of
the Company, all of the Directors shall retire from office unless re-elected by Ordinary
Resolution at the annual general meeting. A Director retiring at a meeting shall retain
office until the close or adjournment of the meeting.
|
|
93.
|
If, before the expiration of his or
her term of office, a Director should be replaced for whatever reason, the term of office
of the newly elected member of the Board shall expire at the end of the term of office
of his or her predecessor.
|
|
94.
|
The Company may from time to time by
Special Resolution increase or reduce the minimum or maximum number of Directors as set
out in article 75, provided however that if a majority of the Board makes a recommendation
to the members to change the minimum or maximum number of Directors, then an Ordinary
Resolution to increase or reduce such minimum or maximum number shall be required.
|
|
95.
|
The Company may, by Ordinary Resolution,
of which notice has been given in accordance with the Acts, remove any Director before
the expiration of his period of office notwithstanding anything in these articles or
in any agreement between the Company and such Director. Such removal shall be without
prejudice to any claim such Director may have for damages for breach of any contract
of service between him and the Company.
|
|
96.
|
The Company may, by Ordinary Resolution,
appoint another person in place of a Director removed from office under article 95 and
without prejudice to the powers of the Directors under article 75 the Company in general
meeting by Ordinary Resolution may appoint any person to be a Director either to fill
a casual vacancy or as an additional Director, subject to the maximum number of Directors
set out in article 75.
|
|
97.
|
The Directors may appoint a person
who is willing to act to be a Director, either to fill a vacancy or as an additional
Director, provided that the appointment does not cause the number of Directors to exceed
any number fixed by or in accordance with these articles as the maximum number of Directors.
|
|
98.
|
The Directors are not entitled to appoint
alternate directors.
|
|
99.
|
The Directors may appoint any person
to fill the following positions:
|
|
(a)
|
Chairman of the Board:
|
If the Directors have elected
a Director to be the Chairman, the Chairman shall preside at all meetings of the Board and at general meetings of the Company.
It shall be the duty of the Secretary
to make and keep records of the votes, doings and proceedings of all meetings of the members and Board of the Company, and of
its Committees, and to authenticate records of the Company. The Secretary shall be appointed by the Directors for such term, at
such remuneration and upon such conditions as they may think fit; and any Secretary so appointed may be removed by them. A provision
of the Acts or these articles requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied
by its being done by or to the same person acting both as Director and as, or in place of, the Secretary.
|
(c)
|
Such other officers as the Directors
may, from time to time, determine, including but not limited to, chief executive officer,
president, vice president, vice chairman, assistant secretary, Treasurer, controller
and assistant treasurer.
|
The powers and duties of all other
officers are at all times subject to the control of the Directors, and any other officer may be removed from that office at any
time at the pleasure of the Board.
In addition to the Board’s
power to delegate to committees pursuant to article 104, the Board may delegate any of its powers to any individual Director or
member of the management of the Company or any of its subsidiaries as it sees fit; any such individual shall, in the exercise
of the powers so delegated, conform to any regulations that may be imposed on them by the Board.
PROCEEDINGS OF DIRECTORS
100.
|
(a)
|
The Directors may meet together
for the dispatch of business, adjourn and otherwise regulate their meetings as they may
think fit. The quorum necessary for the transaction of the business of the Directors
shall be a majority of the Directors in office at the time when the meeting is convened.
Questions arising at any meeting shall be decided by a majority of votes. Each director
present and voting shall have one vote.
|
|
(b)
|
Any Director may participate in
a meeting of the Directors by means of telephonic or other such communication whereby
all persons participating in the meeting can hear each other speak, and participation
in a meeting in this manner shall be deemed to constitute presence in person at such
meeting and any director may be situated in any part of the world for any such meeting.
|
|
101.
|
The Chairman or a majority of the
Directors may, and the Secretary on the requisition of the Chairman or a majority of
the Directors shall, at any time summon a meeting of the Directors. Any provision of
an enactment permitting the Secretary to summon a meeting of the Directors on the requisition
of a Director acting alone shall not apply to the Company.
|
|
102.
|
The continuing Directors may act notwithstanding
any vacancy in their number but, if and so long as their number is reduced below the
number fixed by or pursuant to these articles as the minimum number of Directors, the
continuing Directors or Director may act for the purpose of increasing the number of
Directors to that number or of summoning a general meeting of the Company but for no
other purpose.
|
|
103.
|
The Directors may elect a Chairman
of their meetings and determine the period for which he is to hold office. Any Director
may be elected no matter by whom he was appointed but if no such Chairman is elected,
or if at any meeting the Chairman is not present within five minutes after the time appointed
for holding the same, the Directors present may choose one of their number to be Chairman
of the meeting.
|
|
104.
|
The Board may from time to time designate
committees of the Board, with such powers and duties as the Board may decide to confer
on such committees (including the power to sub-delegate), and shall, for those committees
and any others provided for herein, elect a director or directors to serve as the member
or members, designating, if it desires, other directors as alternate members who may
replace any absent or disqualified member at any meeting of the committee. Adequate provision
shall be made for notice to members of all meetings; a majority of the members shall
constitute a quorum unless the committee shall consist of one or two members, in which
event one member shall constitute a quorum; and all matters shall be determined by a
majority vote of the members present. Action may be taken by any committee without a
meeting if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of the proceedings of such committees.
|
|
105.
|
A committee may elect a chairman of
its meeting. If no such chairman is elected, or if at any meeting the chairman is not
present within five minutes after the time appointed for holding the same, the members
present may choose one of their number to be chairman of the meeting.
|
|
106.
|
All acts done by any meeting of the
Directors or of a committee of Directors or by any person acting as a Director shall,
notwithstanding that it be afterwards discovered that there was some defect in the appointment
of any such Director or person acting as aforesaid, or that they or any of them were
disqualified, be as valid as if every such person had been duly appointed and was qualified
to be a Director.
|
|
107.
|
Notwithstanding anything in these
articles or in the Acts which might be construed as providing to the contrary, notice
of every meeting of the Directors shall be given to all Directors either by mail not
less than 48 hours before the date of the meeting, by telephone, email, or any other
electronic means on not less than 24 hours’ notice, or on such shorter notice as
person or persons calling such meeting may deem necessary or appropriate and which is
reasonable in the circumstances. Any director may waive any notice required to be given
under these articles, and the attendance of a director at a meeting shall be deemed to
be a waiver by such Director.
|
|
108.
|
A resolution or other document in
writing (in electronic form or otherwise) signed (whether by electronic signature, advanced
electronic signature or otherwise as approved by the Directors) by (a) all of the Directors
entitled to receive notice of a meeting of Directors or of a committee of Directors or
(b) a majority of the Directors where notice in accordance with article 107 of the resolution
or other document in writing has been given to all Directors entitled to receive notice
of a meeting of Directors or of a committee of Directors, shall be as valid as if it
had been passed at a meeting of Directors or (as the case may be) a committee of Directors
duly convened and held, and may consist of several documents in the like form each signed
by one or more Directors, and such resolution or other document or documents when duly
signed may be delivered or transmitted (unless the Directors shall otherwise determine
either generally or in any specific case) by facsimile transmission, electronic mail
or some other similar means of transmitting the contents of documents.
|
THE SEAL
|
(a)
|
The Directors shall ensure that
the Seal (including any official securities seal kept pursuant to the Acts) shall be
used only by the authority of the Directors or of a committee authorised by the Directors
and that every instrument to which the seal shall be affixed shall be signed by a Director
or some other person appointed by the Directors for that purpose.
|
|
(b)
|
The Company may have an official
seal for use in any place abroad.
|
DIVIDENDS AND RESERVES
|
110.
|
The Company in general meeting may
declare dividends, but no dividends shall exceed the amount recommended by the Directors.
|
|
111.
|
The Directors may from time to time
pay to the members such interim dividends as appear to the Directors to be justified
by the profits of the Company.
|
|
112.
|
No dividend or interim dividend shall
be paid otherwise than in accordance with the provisions of the Acts.
|
|
113.
|
The Directors may, before recommending
any dividend, set aside out of the profits of the Company such sums as they think proper
as a reserve or reserves which shall, at the discretion of the Directors, be applicable
for any purpose to which the profits of the Company may be properly applied and pending
such application may at the like discretion either be employed in the business of the
Company or be invested in such investments as the Directors may lawfully determine. The
Directors may also, without placing the same to reserve, carry forward any profits which
they may think it prudent not to distribute.
|
|
114.
|
Subject to the rights of persons,
if any, entitled to shares with special rights as to dividend, all dividends shall be
declared and paid according to the amounts paid or credited as paid on the shares in
respect whereof the dividend is paid. All dividends shall be apportioned and paid proportionately
to the amounts paid or credited as paid on the shares during any portion or portions
of the period in respect of which the dividend is paid; but if any share is issued on
terms providing that it shall rank for dividend as from a particular date, such share
shall rank for dividend accordingly.
|
|
115.
|
The Directors may deduct from any
dividend payable to any member all sums of money (if any) immediately payable by him
to the Company in relation to the shares of the Company.
|
|
116.
|
Any general meeting declaring a dividend
or bonus and any resolution of the Directors declaring an interim dividend may direct
payment of such dividend or bonus or interim dividend wholly or partly by the distribution
of specific assets and in particular of paid up shares, debentures or debenture stocks
of any other company or in any one or more of such ways, and the Directors shall give
effect to such resolution, and where any difficulty arises in regard to such distribution,
the Directors may settle the same as they think expedient, and in particular may fix
the value for distribution of such specific assets or any part thereof and may determine
that cash payments shall be made to any members upon the footing of the value so fixed,
in order to adjust the rights of all the parties, and may vest any such specific assets
in trustees as may seem expedient to the Directors.
|
|
117.
|
Any dividend or other moneys payable
in respect of any share may be paid by cheque or warrant sent by post, at the risk of
the person or persons entitled thereto, to the registered address of the Holder or, where
there are joint Holders, to the registered address of that one of the joint Holders who
is first named on the members Register or to such person and to such address as the Holder
or joint Holders may in writing direct. Every such cheque or warrant shall be made payable
to the order of the person to whom it is sent and payment of the cheque or warrant shall
be a good discharge to the Company. Any joint Holder or other person jointly entitled
to a share as aforesaid may give receipts for any dividend or other moneys payable in
respect of the share. Any such dividend or other distribution may also be paid by any
other method (including payment in a currency other than €, electronic funds transfer,
direct debit, bank transfer or by means of a relevant system) which the Directors consider
appropriate and any member who elects for such method of payment shall be deemed to have
accepted all of the risks inherent therein. The debiting of the Company’s account
in respect of the relevant amount shall be evidence of good discharge of the Company’s
obligations in respect of any payment made by any such methods.
|
|
118.
|
No dividend shall bear interest against
the Company.
|
|
119.
|
If the Directors so resolve, any dividend
which has remained unclaimed for twelve years from the date of its declaration shall
be forfeited and cease to remain owing by the Company. The payment by the Directors of
any unclaimed dividend or other moneys payable in respect of a share into a separate
account shall not constitute the Company a trustee in respect thereof.
|
SHAREHOLDER RIGHTS PLAN
|
120.
|
Subject to applicable law, the Directors
are hereby expressly authorised to adopt any shareholder rights plan (a “
Rights
Plan
”), upon such terms and conditions as the Directors deem expedient and
in the best interests of the Company, including, without limitation, where the Directors
are of the opinion that a Rights Plan could grant them additional time to gather relevant
information or pursue strategies in response to or anticipation of, or could prevent,
a potential change of control of the Company or accumulation of shares in the Company
or interests therein.
|
|
121.
|
The Directors may exercise any power
of the Company to grant rights (including approving the execution of any documents relating
to the grant of such rights) to subscribe for ordinary shares or preferred shares in
the share capital of the Company (“
Rights
”) in accordance with the
terms of a Rights Plan.
|
|
122.
|
For the purposes of effecting an exchange
of Rights for ordinary shares or preferred shares in the share capital of the Company
(an “
Exchange
”), the Directors may:
|
|
(a)
|
resolve to capitalise an amount
standing to the credit of the reserves of the Company (including, but not limited to,
the share premium account, capital redemption reserve, any undenominated capital and
profit and loss account), whether or not available for distribution, being an amount
equal to the nominal value of the ordinary shares or preferred shares which are to be
exchanged for the Rights; and
|
|
(b)
|
apply that sum in paying up in
full ordinary shares or preferred shares and allot such shares, credited as fully paid,
to those holders of Rights who are entitled to them under an Exchange effected pursuant
to the terms of a Rights Plan.
|
|
123.
|
The duties of the Directors to the
Company under applicable law, including, but not limited to, the Acts and common law,
are hereby deemed amended and modified such that the adoption of a Rights Plan and any
actions taken thereunder by the Directors (if so approved by the Directors) shall be
deemed to constitute an action in the best interests of the Company in all circumstances,
and any such action shall be deemed to be immediately confirmed, approved and ratified.
|
ACCOUNTING
RECORDS
124.
|
(a)
|
The Company shall cause to be kept
adequate accounting records, whether in the form of documents, electronic form or otherwise,
that:
|
|
(i)
|
correctly record and explain the
transactions of the Company;
|
|
(ii)
|
will at any time enable the assets,
liabilities, financial position and profit or loss of the Company to be determined with
reasonable accuracy;
|
|
(iii)
|
will enable the Directors to ensure
that any financial statements of the Company complies with the requirements of the Acts;
and
|
|
(iv)
|
will enable those financial statements
of the Company to be readily and properly audited.
|
The accounting records shall be
kept on a continuous and consistent basis and entries therein shall be made in a timely manner and be consistent from year to
year. Adequate accounting records shall be deemed to have been maintained if they comply with the provisions of the Act and explain
the Company’s transactions and facilitate the preparation of financial statements that give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Company and, if relevant, the Group and include any information
and returns referred to in section 283(2) of the Act.
|
(b)
|
The accounting records shall be
kept at the Office or, subject to the provisions of the Acts, at such other place as
the Directors think fit and shall be open at all reasonable times to the inspection of
the Directors.
|
|
(c)
|
In accordance with the provisions
of the Acts, the Directors shall cause to be prepared and to be laid before the annual
general meeting of the Company from time to time such statutory financial statements
of the Company and reports as are required by the Acts to be prepared and laid before
such meeting.
|
|
(a)
|
The Company may send by post, electronic
mail or any other means of electronic communication:
|
|
(i)
|
the Company’s statutory financial
statements,
|
|
(ii)
|
the directors’ report, and
|
|
(iii)
|
the statutory auditors’ report
and copies of those documents shall also be treated for the purposes of the Acts, as
sent to a person where:
|
|
(A)
|
the Company and that person have
agreed to his or her having access to the documents on a website (instead of their being
sent to him or her);
|
|
(B)
|
the documents are documents to
which that agreement applies; and
|
|
(C)
|
that person is notified, in a manner
for the time being agreed for the purpose between that person and the company, of –
|
|
(I)
|
the publication of the documents
on a website,
|
|
(II)
|
the address of that website, and
|
|
(III)
|
the place on that website where
the documents may be accessed and how they may be accessed.
|
|
(b)
|
The documents listed at articles
130 (a)(i) to 130(a)(iii) shall be treated as sent to a person not less than 21 days
before the date of a meeting if, and only if –
|
|
(i)
|
the documents are published on the
website throughout a period beginning at least 21 days before the date of the meeting
and ending with the conclusion of the meeting; and
|
|
(ii)
|
the notification given for the purposes
of paragraph (c) is given not less than 21 days before the date of the meeting.
|
|
(c)
|
Nothing shall invalidate the proceedings
of a meeting where—
|
|
(i)
|
any documents that are required to
be published are published for a part, but not all, of the 21 day period mentioned above;
and
|
|
(ii)
|
the failure to publish those documents
throughout that period is wholly attributable to circumstances which it would not be
reasonable to have expected the company to prevent or avoid.
|
|
(d)
|
Where copies of documents are sent
out pursuant to this article over a period of days, references elsewhere in the Acts
to the day on which those copies are sent out shall be read as references to the last
day of that period.
|
|
126.
|
The Directors shall determine from
time to time whether and to what extent and at what times and places and under what conditions
or regulations the accounts and books of the Company or any of them shall be open to
the inspection of members, not being Directors, and no member (not being a Director)
shall have any right of inspecting any account or book or document of the Company except
as conferred by the Acts or authorised by the Directors or by the Company in general
meeting. No member shall be entitled to require discovery of or any information respecting
any detail of the Company’s trading, or any matter which is or may be in the nature
of a trade secret, mystery of trade, or secret process which may relate to the conduct
of the business of the Company and which in the opinion of the Directors it would be
inexpedient in the interests of the members of the Company to communicate to the public.
|
CAPITALISATION OF PROFITS
|
127.
|
Without prejudice to any powers conferred
on the Directors as aforesaid and subject to the Directors’ authority to issue
and allot shares under articles 8(c) and 8(d), the Directors or any duly appointed committee
thereof may resolve to capitalise any part of the amount for the time being standing
to the credit of any of the Company’s reserve accounts (including, but not limited
to, the capital redemption reserve, capital conversion reserve, profit and loss account,
share premium account, any undenominated capital or other reserve account not available
for distribution) or to the credit of the profit and loss account which is not available
for distribution by applying such sum in paying up in full unissued shares to be allotted
as fully paid bonus shares to those members of the Company who would have been entitled
to that sum if it were distributable and had been distributed by way of dividend (and
in the same proportions). Whenever such a resolution is passed in pursuance of this article,
the Directors shall make all appropriations and applications of the amounts resolved
to be capitalised thereby and all allotments and issues of fully paid shares or debentures,
if any. Any such capitalisation will not require approval or ratification by the members
of the Company.
|
|
128.
|
Without prejudice to any powers conferred
on the Directors by these articles, and subject to the Directors’ authority to
issue and allot shares under articles 8(c) and 8(d), the Directors or any duly appointed
committee thereof may resolve that any sum for the time being standing to the credit
of any of the Company’s reserve accounts (including any reserve account available
for distribution) or to the credit of the profit and loss account be capitalised and
applied on behalf of the members who would have been entitled to receive that sum if
it had been distributed by way of dividend (and in the same proportions) either in or
towards paying up amounts for the time being unpaid on any shares held by them respectively,
or in paying up in full unissued shares or debentures of the Company of a nominal amount
equal to the sum capitalised (such shares or debentures to be allotted and distributed
and credited as fully paid up to and amongst such Holders in the proportions aforesaid)
or partly in one way and partly in another, so, however, that the only purposes for which
sums standing to the credit of the capital redemption reserve, the capital conversion
reserve or the share premium account or any undenominated capital shall be applied shall
be those permitted by the Acts.
|
|
129.
|
The Directors may from time to time
at their discretion, subject to the provisions of the Acts and, in particular, to their
being duly authorised pursuant to the Acts, to allot the relevant shares, offer to the
Holders of ordinary shares the right to elect to receive in lieu of any dividend or proposed
dividend or part thereof an allotment of additional ordinary shares credited as fully
paid. In any such case the following provisions shall apply.
|
|
(i)
|
The basis of allotment shall be determined
by the Directors so that, as nearly as may be considered convenient in the Directors’
absolute discretion, the value (calculated by reference to the average quotation) of
the additional ordinary shares (excluding any fractional entitlement) to be allotted
in lieu of any amount of dividend shall equal such amount. For such purpose the “average
quotation” of an ordinary share shall be the average of the five amounts resulting
from determining whichever of the following ((A), (B) or (C) specified below) in respect
of ordinary shares shall be appropriate for each of the first five business days on which
ordinary shares are quoted “ex” the relevant dividend and as determined from
the information published by the stock exchange (if any) to which the Company’s
ordinary shares are admitted to trading reporting the business done on each of these
five business days:
|
|
(A)
|
if there shall be more than one
dealing reported for the day, the average of the prices at which such dealings took place;
or
|
|
(B)
|
if there shall be only one dealing
reported for the day, the price at which such dealing took place; or
|
|
(C)
|
if there shall not be any dealing
reported for the day, the average of the closing bid and offer prices for the day;
|
and if there shall be only
a bid (but not an offer) or an offer (but not a bid) price reported, or if there shall not be any bid or offer price reported,
for any particular day then that day shall not count as one of the said five business days for the purposes of determining the
average quotation. If the means of providing the foregoing information as to dealings and prices by reference to which the average
quotation is to be determined is altered or is replaced by some other means, then the average quotation shall be determined on
the basis of the equivalent information published by the relevant authority in relation to dealings on the stock exchange (if
any) to which the Company’s ordinary shares are admitted to trading.
|
(ii)
|
The Directors shall give notice
in writing (whether in electronic form or otherwise) to the Holders of ordinary shares
of the right of election offered to them and shall send with or following such notice
forms of election and specify the procedure to be followed and the place at which, and
the latest date and time by which, duly completed forms of election must be lodged in
order to be effective. The Directors may also issue forms under which Holders may elect
in advance to receive new ordinary shares instead of dividends in respect of future dividends
not yet declared (and, therefore, in respect of which the basis of allotment shall not
yet have been determined).
|
|
(iii)
|
The dividend (or that part of the
dividend in respect of which a right of election has been offered) shall not be payable
on ordinary shares in respect of which the right of election as aforesaid has been duly
exercised (the “
Subject Ordinary Shares
”) and in lieu thereof additional
ordinary shares (but not any fraction of a share) shall be allotted to the Holders of
the Subject Ordinary Shares on the basis of allotment determined aforesaid and for such
purpose the Directors shall capitalise, out of such of the sums standing to the credit
of any of the Company’s reserves (including any capital redemption reserve fund
or share premium account) or to the credit of the profit and loss account as the Directors
may determine, a sum equal to the aggregate nominal amount of additional ordinary shares
to be allotted on such basis and apply the same in paying up in full the appropriate
number of unissued ordinary shares for allotment and distribution to and amongst the
holders of the Subject Ordinary Shares on such basis.
|
|
(a)
|
The additional ordinary shares
allotted pursuant to articles 127, 128 or 129 shall rank pari passu in all respects with
the fully paid ordinary shares then in issue save only as regards participation in the
relevant dividend or share election in lieu.
|
|
(b)
|
The Directors may do all acts and
things considered necessary or expedient to give effect to any capitalisation pursuant
to articles 127, 128 or 129 with full power to the Directors to make such provisions
as they think fit where shares would otherwise have been distributable in fractions (including
provisions whereby, in whole or in part, fractional entitlements are disregarded and
the benefit of fractional entitlements accrues to the Company rather than to the holders
concerned). The Directors may authorise any person to enter on behalf of all the Holders
interested into an agreement with the Company providing for such capitalisation and matters
incidental thereto and any agreement made under such authority shall be effective and
binding on all concerned.
|
|
(c)
|
The Directors may on any occasion
determine that rights of election shall not be offered to any Holders of ordinary shares
who are citizens or residents of any territory where the making or publication of an
offer of rights of election or any exercise of rights of election or any purported acceptance
of the same would or might be unlawful, and in such event the provisions aforesaid shall
be read and construed subject to such determination.
|
AUDIT
|
131.
|
Statutory auditors shall be appointed
and their duties regulated in accordance with the Acts.
|
NOTICES
|
132.
|
Any notice to be given, served, sent
or delivered pursuant to these articles shall be in writing (whether in electronic form
or otherwise).
|
|
(a)
|
A notice or document to be given,
served, sent or delivered in pursuance of these articles may be given to, served on or
delivered to any member by the Company;
|
|
(i)
|
by handing same to him or his authorised
agent;
|
|
(ii)
|
by leaving the same at his registered
address;
|
|
(iii)
|
by sending the same by the post
in a pre-paid cover addressed to him at his registered address;
|
|
(iv)
|
by sending the same to the member
by electronic means, to the maximum extent permitted by any optional provisions of the
Acts notwithstanding article 1 to the address of the member notified to the Company by
the member for such purpose (or if not so notified, then to the address of the member
last known to the Company); or
|
|
(v)
|
by sending, with the consent of the
member, the same by means of electronic mail or other means of electronic communication
approved by the Directors, with the consent of the member, to the address of the member
notified to the Company by the member for such purpose (or if not so notified, then to
the address of the member last known to the Company).
|
|
(b)
|
For the purposes of these articles
and the Act, a document shall be deemed to have been sent to a member if a notice is
given, served, sent or delivered to the member and the notice specifies the website or
hotlink or other electronic link at or through which the member may obtain a copy of
the relevant document.
|
|
(c)
|
Where a notice or document is given,
served or delivered pursuant to sub-paragraph (a)(i) or (ii) of this article, the giving,
service or delivery thereof shall be deemed to have been effected at the time the same
was handed to the member or his authorised agent, or left at his registered address (as
the case may be).
|
|
(d)
|
Where a notice or document is given,
served or delivered pursuant to sub-paragraph (a)(iii) of this article, the giving, service
or delivery thereof shall be deemed to have been effected at the expiration of twenty-four
hours after the cover containing it was posted. In proving service or delivery it shall
be sufficient to prove that such cover was properly addressed, stamped and posted.
|
|
(e)
|
Where a notice or document is given,
served or delivered pursuant to sub-paragraph (a)(iv) or (a)(v) of this article, the
giving, service or delivery thereof shall be deemed to have been effected at the expiration
of 48 hours after despatch.
|
|
(f)
|
Every legal personal representative,
committee, receiver, curator bonis or other legal curator, assignee in bankruptcy, examiner
or liquidator of a member shall be bound by a notice given as aforesaid if sent to the
last registered address of such member, or, in the event of notice given or delivered
pursuant to sub-paragraph (a)(iv) or (a)(v) of this article, if sent to the address notified
by the Company by the member for such purpose notwithstanding that the Company may have
notice of the death, lunacy, bankruptcy, liquidation or disability of such member.
|
|
(g)
|
Notwithstanding anything contained
in this article the Company shall not be obliged to take account of or make any investigations
as to the existence of any suspension or curtailment of postal services within or in
relation to all or any part of any jurisdiction or other area other than Ireland.
|
|
(h)
|
Any requirement in these articles
for the consent of a member in regard to the receipt by such member of electronic mail
or other means of electronic communications approved by the Directors, including the
receipt of the Company’s audited accounts and the directors’ and auditor’s
reports thereon, shall be deemed to have been satisfied where the Company has written
to the member informing him/her of its intention to use electronic communications for
such purposes and the member has not, within four weeks of the issue of such notice,
served an objection in writing on the Company to such proposal. Where a member has given,
or is deemed to have given, his/her consent to the receipt by such member of electronic
mail or other means of electronic communications approved by the Directors, he/she may
revoke such consent at any time by requesting the Company to communicate with him/her
in documented form; provided, however, that such revocation shall not take effect until
five days after written notice of the revocation is received by the Company.
|
|
(i)
|
Without prejudice to the provisions
of sub-paragraphs (a)(i) and (a)(ii) of this article, if at any time by reason of the
suspension or curtailment of postal services in any territory, the Company is unable
effectively to convene a general meeting by notices sent through the post, a general
meeting may be convened by a public announcement and such notice shall be deemed to have
been duly served on all members entitled thereto at noon on the day on which the said
public announcement is made. In any such case the Company shall put a full copy of the
notice of the general meeting on its website.
|
|
134.
|
A notice may be given by the Company
to the joint Holders of a share by giving the notice to the joint Holder whose name stands
first in the Register in respect of the share and notice so given shall be sufficient
notice to all the joint Holders.
|
|
(a)
|
Every person who becomes entitled
to a share shall before his name is entered in the Register in respect of the share,
be bound by any notice in respect of that share which has been duly given to a person
from whom he derives his title.
|
|
(b)
|
A notice may be given by the Company
to the persons entitled to a share in consequence of the death or bankruptcy of a member
by sending or delivering it, in any manner authorised by these articles for the giving
of notice to a member, addressed to them at the address, if any, supplied by them for
that purpose. Until such an address has been supplied, a notice may be given in any manner
in which it might have been given if the death or bankruptcy had not occurred.
|
|
136.
|
The signature (whether electronic
signature, an advanced electronic signature or otherwise) to any notice to be given by
the Company may be written (in electronic form or otherwise) or printed.
|
|
137.
|
A member present, either in person
or by proxy, at any meeting of the Company or the Holders of any class of shares in the
Company shall be deemed to have received notice of the meeting and, where requisite,
of the purposes for which it was called.
|
WINDING UP
|
138.
|
If the Company shall be wound up and
the assets available for distribution among the members as such shall be insufficient
to repay the whole of the paid up or credited as paid up share capital, such assets shall
be distributed so that, as nearly as may be, the losses shall be borne by the members
in proportion to the capital paid up or credited as paid up at the commencement of the
winding up on the shares held by them respectively. And if in a winding up the assets
available for distribution among the members shall be more than sufficient to repay the
whole of the share capital paid up or credited as paid up at the commencement of the
winding up, the excess shall be distributed among the members in proportion to the capital
at the commencement of the winding up paid up or credited as paid up on the said shares
held by them respectively. Provided that this article shall not affect the rights of
the Holders of shares issued upon special terms and conditions.
|
|
(a)
|
In case of a sale by the liquidator
under the Act, the liquidator may by the contract of sale agree so as to bind all the
members for the allotment to the members directly of the proceeds of sale in proportion
to their respective interests in the Company and may further by the contract limit a
time at the expiration of which obligations or shares not accepted or required to be
sold shall be deemed to have been irrevocably refused and be at the disposal of the Company,
but so that nothing herein contained shall be taken to diminish, prejudice or affect
the rights of dissenting members conferred by the said section.
|
|
(b)
|
The power of sale of the liquidator
shall include a power to sell wholly or partially for debentures, debenture stock, or
other obligations of another company, either then already constituted or about to be
constituted for the purpose of carrying out the sale.
|
|
140.
|
If the Company is wound up, the liquidator,
with the sanction of a Special Resolution and any other sanction required by the Acts,
may divide among the members in specie or kind the whole or any part of the assets of
the Company (whether they shall consist of property of the same kind or not), and, for
such purpose, may value any assets and determine how the division shall be carried out
as between the members or different classes of members. The liquidator, with the like
sanction, may vest the whole or any part of such assets in trustees upon such trusts
for the benefit of the contributories as, with the like sanction, he determines, but
so that no member shall be compelled to accept any assets upon which there is a liability.
|
INDEMNITY
141.
|
(a)
|
Subject to the provisions of and
so far as may be admitted by the Acts, every Director and the Secretary of the Company
shall be entitled to be indemnified by the Company against all costs, charges, losses,
expenses and liabilities incurred by him in the execution and discharge of his duties
or in relation thereto including any liability incurred by him in defending any proceedings,
civil or criminal, which relate to anything done or omitted or alleged to have been done
or omitted by him as an officer or employee of the Company and in which judgement is
given in his favour (or the proceedings are otherwise disposed of without any finding
or admission of any material breach of duty on his part) or in which he is acquitted
or in connection with any application under any statute for relief from liability in
respect of any such act or omission in which relief is granted to him by the Court.
|
|
(b)
|
The Directors shall have power
to purchase and maintain for any Director, the Secretary or any employees of the Company
or its subsidiaries insurance against any such liability as referred to in the Acts.
|
|
(c)
|
As far as is permissible under
the Acts, the Company shall indemnify any current or former executive officer of the
Company (excluding any present or former Directors of the Company or Secretary of the
Company), or any person who is serving or has served at the request of the Company as
a director or executive officer of another company, joint venture, trust or other enterprise,
including any Company subsidiary (each individually, a “
Covered Person
”),
against any expenses, including attorney’s fees, judgements, fines, and amounts
paid in settlement actually and reasonably incurred by him or her in connection with
any threatened, pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which he or she was or is threatened to be made a
party, or is otherwise involved (a “
proceeding
”), by reason of the
fact that he or she is or was a Covered Person; provided, however, that this provision
shall not indemnify any Covered Person against any liability arising out of (a) any fraud
or dishonesty in the performance of such Covered Person’s duty to the Company,
or (b) such Covered Party’s conscious, intentional or wilful breach of the obligation
to act honestly and in good faith with a view to the best interests of the Company. Notwithstanding
the preceding sentence, this section shall not extend to any matter which would render
it void pursuant to the Acts or to any person holding the office of auditor in relation
to the Company.
|
|
(d)
|
In the case of any threatened,
pending or completed action, suit or proceeding by or in the name of the Company, the
Company shall indemnify each Covered Person against expenses, including attorneys’
fees, actually and reasonably incurred in connection with the defence or the settlement
thereof, except no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for fraud or dishonesty
in the performance of his or her duty to the Company, or for conscious, intentional or
wilful breach of his or her obligation to act honestly and in good faith with a view
to the best interests of the Company, unless and only to the extent that the High Court
of Ireland or the court in which such action or suit was brought shall determine upon
application that despite the adjudication of liability, but in view of all the circumstances
of the case, such Covered Person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. Notwithstanding the preceding sentence, this
section shall not extend to any matter which would render it void pursuant to the Acts
or to any person holding the office of auditor in relation to the Company.
|
|
(e)
|
Any indemnification under this
article (unless ordered by a court) shall be made by the Company only as authorised in
the specific case upon a determination that indemnification of the Covered Person is
proper in the circumstances because such person has met the applicable standard of conduct
set forth in this article. Such determination shall be made by any person or persons
having the authority to act on the matter on behalf of the Company. To the extent, however,
that any Covered Person has been successful on the merits or otherwise in defence of
any proceeding, or in defence of any claim, issue or matter therein, such Covered Person
shall be indemnified against expenses (including attorneys’ fees) actually and
reasonably incurred by such person in connection therewith, without necessity of authorisation
in the specific case.
|
|
(f)
|
As far as permissible under the
Acts, expenses, including attorneys’ fees, incurred in defending any proceeding
for which indemnification is permitted pursuant to this article shall be paid by the
Company in advance of the final disposition of such proceeding upon receipt by the Board
of an undertaking by the particular indemnitee to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the Company pursuant
to these articles.
|
|
(g)
|
It being the policy of the Company
that indemnification of the persons specified in this article shall be made to the fullest
extent permitted by law, the indemnification provided by this article shall not be deemed
exclusive (a) of any other rights to which those seeking indemnification or advancement
of expenses may be entitled under these articles, any agreement, any insurance purchased
by the Company, vote of members or disinterested directors, or pursuant to the direction
(however embodied) of any court of competent jurisdiction, or otherwise, both as to action
in his or her official capacity and as to action in another capacity while holding such
office, or (b) of the power of the Company to indemnify any person who is or was an employee
or agent of the Company or of another company, joint venture, trust or other enterprise
which he or she is serving or has served at the request of the Company, to the same extent
and in the same situations and subject to the same determinations as are hereinabove
set forth. As used in this article, references to the “Company” include all
constituent companies in a scheme of arrangement, consolidation or merger in which the
Company or a predecessor to the Company by scheme of arrangement, consolidation or merger
was involved. The indemnification provided by this article shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of their heirs,
executors, and administrators.
|
UNTRACED HOLDERS
142.
|
(a)
|
The Company shall be entitled to
sell at the best price reasonably obtainable any share or stock of a member or any share
or stock to which a person is entitled by transmission if and provided that:
|
|
(i)
|
for a period of twelve years (not
less than three dividends having been declared and paid) no cheque or warrant sent by
the Company through the post in a prepaid letter addressed to the member or to the person
entitled by transmission to the share or stock at his address on the Register or other
last known address given by the member or the person entitled by transmission to which
cheques and warrants are to be sent has been cashed and no communication has been received
by the Company from the member or the person entitled by transmission; and
|
|
(ii)
|
at the expiration of the said period
of twelve years the Company has given notice by advertisement in a leading Dublin newspaper
and a newspaper circulating in the area in which the address referred to in paragraph
(a)(i) of this article is located of its intention to sell such share or stock; and
|
|
(iii)
|
the Company has not during the
further period of three months after the date of the advertisement and prior to the exercise
of the power of sale received any communication from the member or person entitled by
transmission.
|
|
(b)
|
To give effect to any such sale
the Company may appoint any person to execute as transferor an instrument of transfer
of such share or stock and such instrument of transfer shall be as effective as if it
had been executed by the registered Holder of or person entitled by transmission to such
share or stock. The Company shall account to the member or other person entitled to such
share or stock for the net proceeds of such sale by carrying all monies in respect thereof
to a separate account which shall be a permanent debt of the Company and the Company
shall be deemed to be a debtor and not a trustee in respect thereof for such member or
other person. Monies carried to such separate account may either be employed in the business
of the Company or invested in such investments (other than shares of the Company or its
holding company if any) as the Directors may from time to time think fit.
|
|
(c)
|
To the extent necessary in order
to comply with any laws or regulations to which the Company is subject in relation to
escheatment, abandonment of property or other similar or analogous laws or regulations
(“
Applicable Escheatment Laws
”), the Company may deal with any share
of any member and any unclaimed cash payments relating to such share in any manner which
it sees fit, including (but not limited to) transferring or selling such share and transferring
to third parties any unclaimed cash payments relating to such share.
|
|
(d)
|
The Company may only exercise the
powers granted to it in sub-paragraph (a) above in circumstances where it has complied
with, or procured compliance with, the required procedures (as set out in the Applicable
Escheatment Laws) with respect to attempting to identify and locate the relevant member
of the Company.
|
|
(e)
|
Any stock transfer form to be executed
by the Company in order to sell or transfer a share pursuant to sub-paragraph (a) may
be executed in accordance with article 16(a).
|
DESTRUCTION OF DOCUMENTS
|
143.
|
The Company may implement such document
destruction policies as it so chooses in relation to any type of documents (whether in
paper, electronic or other formats), and in particular (without limitation to the foregoing)
may destroy:
|
|
(a)
|
any dividend mandate or any variation
or cancellation thereof or any notification of change of name or address, at any time
after the expiry of two years from the date such mandate variation, cancellation or notification
was recorded by the Company;
|
|
(b)
|
any instrument of transfer of shares
which has been registered, at any time after the expiry of six years from the date of
registration; and
|
|
(c)
|
any other document on the basis
of which any entry in the Register was made, at any time after the expiry of six years
from the date an entry in the Register was first made in respect of it,
|
and it shall be presumed conclusively
in favour of the Company that every share certificate (if any) so destroyed was a valid certificate duly and properly sealed and
that every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and that every
other document destroyed hereunder was a valid and effective document in accordance with the recorded particulars thereof in the
books or records of the Company provided always that:
|
(i)
|
the foregoing provisions of this
article shall apply only to the destruction of a document in good faith and without express
notice to the Company that the preservation of such document was relevant to a claim;
|
|
(ii)
|
nothing contained in this article
shall be construed as imposing upon the Company any liability in respect of the destruction
of any such document earlier than as aforesaid or in any case where the conditions of
proviso (a) above are not fulfilled; and
|
|
(iii)
|
references in this article to the
destruction of any document include references to its disposal in any manner.
|
BUSINESS COMBINATION
144.
|
(a)
|
Notwithstanding anything to the
contrary contained in these articles, the Company shall not engage in any Business Combination
with any Interested Holder for a period of three years following the time that such Holder
became an Interested Holder, unless:
|
|
(i)
|
prior to such time the Directors
approved either the Business Combination or the transaction which resulted in the member
becoming an Interested Holder;
|
|
(ii)
|
upon consummation of the transaction
which resulted in the member becoming an Interested Holder, the Interested Holder owned
at least 85% of the voting shares of the Company outstanding at the time the transaction
commenced, excluding for purposes of determining the voting shares outstanding (but not
the outstanding voting shares owned by the Interested Holder) those shares owned (A)
by persons who are directors and also officers and (B) employee shares plans in which
employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
|
|
(iii)
|
at or subsequent to such time the
Business Combination is approved by the Directors and authorised by way of Special Resolution
without the Interested Holder.
|
|
(b)
|
The Directors shall have the power
and duty to determine, on the basis of information known to them after reasonable inquiry,
all facts necessary to determine compliance with this article, including, without limitation,
(i) whether a Person is an Interested Holder, (ii) the number of shares or other securities
beneficially owned by any Person, (iii) whether a Person is an Affiliate or Associate
of another, and (iv) the fair market value of the Company’s securities or securities
of any subsidiary of the Company, and the good faith determination of the Directors on
such matters shall be conclusive and binding for all the purposes of this article.
|
|
(c)
|
As used in this article only, the
term:
|
|
(i)
|
“
Affiliate
” means
a person that directly, or indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with, another person.
|
|
(ii)
|
“
Associate
”,
when used to indicate a relationship with any person, means: (A) any company, partnership,
unincorporated association or other entity of which such person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class of voting
shares; (B) any trust or other estate in which such person has at least a 20% beneficial
interest or as to which such person serves as trustee or in a similar fiduciary capacity;
and (C) any relative or spouse of such person, or any relative of such spouse, who has
the same residence as such person.
|
|
(iii)
|
“
Business Combination
”,
when used in reference to any company and any Interested Holder of such company, means:
|
|
(A)
|
any scheme of arrangement, merger
or consolidation of the Company or any direct or indirect majority-owned subsidiary of
the Company with (1) the Interested Holder, or (2) any other company, partnership, unincorporated
association or other entity if the scheme of arrangement, merger or consolidation is
caused by the Interested Holder;
|
|
(B)
|
any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one transaction or a series of transactions),
except proportionately as a member of such company, to or with the Interested Holder,
whether as part of a dissolution or otherwise, of assets of the Company or of any direct
or indirect majority-owned subsidiary of the Company which assets have an aggregate market
value equal to 10% or more of either the aggregate market value of all the assets of
the Company determined on a consolidated basis or the aggregate market value of all the
outstanding shares of the Company;
|
|
(C)
|
any transaction which results in
the issuance or transfer by the Company or by any direct or indirect majority-owned subsidiary
of the Company of any shares of the Company or of such subsidiary to the Interested Holder,
except: (1) pursuant to the exercise, exchange or conversion of securities exercisable
for, exchangeable for or convertible into shares of such company or any such subsidiary
which securities were outstanding prior to the time that the Interested Holder became
such; (2) pursuant to a dividend or distribution paid or made, or the exercise, exchange
or conversion of securities exercisable for, exchangeable for or convertible into shares
of such company or any such subsidiary which security is distributed, pro rata to all
holders of a class or series of shares of such company subsequent to the time the Interested
Holder became such; (3) pursuant to an exchange offer by the Company to purchase shares
made on the same terms to all holders of said shares; or (4) any issuance or transfer
of shares by the Company; provided however, that in no case under items (3) and (4) of
this subparagraph shall there be an increase in the Interested Holder’s proportionate
share of the shares of any class or series of the Company or of the voting shares of
the Company;
|
|
(D)
|
any transaction involving the Company
or any direct or indirect majority-owned subsidiary of the Company which has the effect,
directly or indirectly, of increasing the proportionate share of the shares of any class
or series, or securities convertible into the shares of any class or series, of the Company
or of any such subsidiary which is owned by the Interested Holder, except as a result
of immaterial changes due to fractional share adjustments or as a result of any purchase
or redemption of any shares of shares not caused, directly or indirectly, by the Interested
Holder; or
|
|
(E)
|
any receipt by the Interested Holder
of the benefit, directly or indirectly (except proportionately as a member of such company),
of any loans, advances, guarantees, pledges or other financial benefits (other than those
expressly permitted in subparagraphs (A)-(D) of this paragraph) provided by or through
the Company or any direct or indirect majority-owned subsidiary.
|
|
(iv)
|
“
Control
”, including
the terms “controlling”, “controlled by” and “under common
control with”, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a person, whether through the
ownership of voting shares, by contract or otherwise. A person who is the owner of 20%
or more of the outstanding voting shares of any company, partnership, unincorporated
association or other entity shall be presumed to have control of such entity, in the
absence of proof by a preponderance of the evidence to the contrary. Notwithstanding
the foregoing, a presumption of control shall not apply where such person holds voting
shares, in good faith and not for the purpose of circumventing this article, as an agent,
bank, broker, nominee, custodian or trustee for one or more owners who do not individually
or as a group have control of such entity.
|
|
(v)
|
“
Interested Holder
”
means any Person, including its Affiliates and Associates (other than the Company and
any direct or indirect majority-owned subsidiary of the Company), that is, or was at
any time within the three-year period immediately prior to the date in question, the
Owner of 15% or more of the outstanding voting shares of the Company; provided, however,
that the term “Interested Holder” shall not include any person whose ownership
of shares in excess of the 15% limitation set forth herein is the result of action taken
solely by the Company; provided that such person shall be an Interested Holder if thereafter
such person acquires additional voting shares of the Company, except as a result of further
corporate action not caused, directly or indirectly, by such person. For the purpose
of determining whether a person is an Interested Holder, the voting shares of the Company
deemed to be outstanding shall include shares deemed to be owned by the person through
application of (viii) of this subsection but shall not include any other unissued shares
of such company which may be issuable pursuant to any agreement, arrangement or understanding,
or upon exercise of conversion rights, warrants or options, or otherwise.
|
|
(vi)
|
“
Person
” means
any individual, company, partnership, unincorporated association or other entity.
|
|
(vii)
|
“
Shares
” means,
with respect to any company, capital shares and, with respect to any other entity, any
equity interest.
|
|
(viii)
|
“
Voting shares
”
means, with respect to any company, shares of any class or series entitled to vote generally
in the election of directors and, with respect to any entity that is not a company, any
equity interest entitled to vote generally in the election of the governing body of such
entity. Every reference to a percentage of voting shares shall refer to such percentage
of the votes of such voting shares.
|
|
(ix)
|
“
Owner
”, including
the terms “own” and “owned”, when used with respect to any Shares,
means a person that individually or with or through any of its Affiliates or Associates:
|
|
(A)
|
beneficially owns such Shares,
directly or indirectly; or
|
|
(B)
|
has (1) the right to acquire such
Shares (whether such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise; provided, however, that a
person shall not be deemed the Owner of Shares tendered pursuant to a tender or exchange
offer made by such person or any of such person’s affiliates or associates until
such tendered Shares are accepted for purchase or exchange; or (2) the right to vote
such shares pursuant to any agreement, arrangement or understanding; provided, however,
that a person shall not be deemed the Owner of any Shares because of such person’s
right to vote such Shares if the agreement, arrangement or understanding to vote such
shares arises solely from a revocable proxy or consent given in response to a proxy or
consent solicitation made to 10 or more persons; or
|
|
(C)
|
has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting (except voting pursuant
to a revocable proxy or consent as described in item (2) of subparagraph (B) of this
paragraph), or disposing of such Shares with any other person that beneficially owns,
or whose Affiliates or Associates beneficially own, directly or indirectly, such Shares.
|
We, the persons whose names and addresses
are subscribed, wish to be formed into a company in pursuance of this constitution, and we agree to take the number of shares
in the capital of the Company set opposite our names.
Names, address and description
|
|
Number of shares taken
|
of subscriber
|
|
by subscriber
|
|
|
|
Fintan Mark Clancy
|
|
|
8 Haddon Road
|
|
|
Clontarf
|
|
|
Dublin 3
|
|
|
D03 NH67
|
|
|
|
|
|
Solicitor
|
|
One Ordinary Share only
|
|
|
|
Christopher Paul Joseph McLaughlin
|
|
|
31 Castle Court
|
|
|
Booterstown
|
|
|
Co. Dublin
|
|
|
|
|
|
Solicitor
|
|
One Ordinary Share only
|
Dated the 24
th
day of November
2015
Witness to the above signature:
|
BRIAN DOHERTY
|
|
|
|
Brian Doherty
|
|
Arthur Cox Building
|
|
Earlsfort Terrace,
|
|
Dublin 2
|
ANNEX E
List of Relevant Territories for DWT
Purposes
1. Albania
|
|
35. Latvia
|
2. Armenia
|
|
36. Lithuania
|
3. Australia
|
|
37. Luxembourg
|
4. Austria
|
|
38. Macedonia
|
5. Bahrain
|
|
39. Malaysia
|
6. Belarus
|
|
40. Malta
|
7. Belgium
|
|
41. Mexico
|
8. Bosnia & Herzegovina
|
|
42. Moldova
|
9. Botswana
|
|
43. Montenegro
|
10. Bulgaria
|
|
44. Morocco
|
11. Canada
|
|
45. Netherlands
|
12. Chile
|
|
46. New Zealand
|
13. China
|
|
47. Norway
|
14. Croatia
|
|
48. Pakistan
|
15. Cyprus
|
|
49. Panama
|
16. Czech Republic
|
|
50. Poland
|
17. Denmark
|
|
51. Portugal
|
18. Egypt
|
|
52. Qatar
|
19. Estonia
|
|
53. Romania
|
20. Ethiopia
|
|
54. Russia
|
21. Finland
|
|
55. Saudi Arabia
|
22. France
|
|
56. Serbia
|
23. Georgia
|
|
57. Singapore
|
24. Germany
|
|
58. Slovak Republic
|
25. Greece
|
|
59. Slovenia
|
26. Hong Kong
|
|
60. South Africa
|
27. Hungary
|
|
61. Spain
|
28. Iceland
|
|
62. Sweden
|
29. India
|
|
63. Switzerland
|
30. Israel
|
|
64. Thailand
|
31. Italy
|
|
65. Turkey
|
32. Japan
|
|
66. Ukraine
|
33. Korea
|
|
67. United Arab Emirates
|
34. Kuwait
|
|
68. United Kingdom
|
|
|
69. USA
|
|
|
70. Uzbekistan
|
|
|
71. Vietnam
|
|
|
72. Zambia
|
Avadel Pharmaceuticals (NASDAQ:AVDL)
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Avadel Pharmaceuticals (NASDAQ:AVDL)
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