SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
Forest Laboratories, Inc.
(Name of Registrant as Specified In Its Charter)
Carl C. Icahn
Dr. Alexander J. Denner
Dr. Richard Mulligan
Professor Lucian A. Bebchuk
Dr. Eric J. Ende
Mayu Sris
Icahn Partners LP
Icahn Partners Master Fund LP
Icahn Partners Master Fund II L.P.
Icahn Partners Master Fund III L.P.
High River Limited Partnership
Hopper Investments LLC
Barberry Corp.
Icahn Onshore LP
Icahn Offshore LP
Icahn Capital L.P.
IPH GP LLC
Icahn Enterprises Holdings L.P.
Icahn Enterprises G.P. Inc.
Beckton Corp.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) 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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
ON JULY 19, 2011, THE PARTICIPANTS (AS DEFINED BELOW) FILED A DEFINITIVE PROXY
STATEMENT WITH THE SECURITIES AND EXCHANGE COMMISSION. SECURITY HOLDERS ARE
ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO
THE SOLICITATION OF PROXIES BY CARL C. ICAHN, DR. ALEXANDER J. DENNER, DR.
RICHARD MULLIGAN, PROFESSOR LUCIAN A. BEBCHUK, DR. ERIC J. ENDE, MAYU SRIS,
ICAHN PARTNERS LP, ICAHN PARTNERS MASTER FUND LP, ICAHN PARTNERS MASTER FUND II
L.P., ICAHN PARTNERS MASTER FUND III L.P., HIGH RIVER LIMITED PARTNERSHIP,
HOPPER INVESTMENTS LLC, BARBERRY CORP., ICAHN ENTERPRISES G.P. INC., ICAHN
ENTERPRISES HOLDINGS L.P., IPH GP LLC, ICAHN CAPITAL L.P., ICAHN ONSHORE LP,
ICAHN OFFSHORE LP, AND BECKTON CORP. (COLLECTIVELY, THE "PARTICIPANTS") FROM THE
STOCKHOLDERS OF FOREST LABORATORIES, INC. FOR USE AT ITS 2011 ANNUAL MEETING OF
STOCKHOLDERS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION
RELATING TO THE PARTICIPANTS. THE DEFINITIVE PROXY STATEMENT AND A FORM OF PROXY
IS AVAILABLE TO STOCKHOLDERS OF FOREST LABORATORIES, INC. FROM THE PARTICIPANTS
AT NO CHARGE AND IS ALSO AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE
COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV OR BY CONTACTING D.F. KING & CO.,
INC. BY TELEPHONE AT THE FOLLOWING NUMBERS: STOCKHOLDERS CALL TOLLFREE: (800)
697-6975 AND BANKS AND BROKERAGE FIRMS CALL: (212) 269-5550.
The consents of the applicable law firms have been obtained to file their
respective opinion letters as proxy soliciting material. There have been no
findings of fact or law made by a court of competition jurisdiction on any of
the issues addressed in the opinion letters as they apply to Forest Labs or the
Participants.
[LETTERHEAD]
ASHBY & GEDDES
ATTORNEYS AND COUNSELLORS AT LAW
500 DELAWARE AVENUE
P.O. BOX 1150
WILMINGTON, DELAWARE 19899
August 7, 2011
Icahn Capital L.P.
767 Fifth Avenue
47th Floor
New York, NY 10153
Re: Corporate Governance Standards for Dealing with Potential Conflicts of
Interest
Gentlemen:
You have asked us whether the potential "conflicts of interest" outlined by
the management of Forest Laboratories, Inc. ("Forest" or the "Company"), in its
proxy solicitation material raises issues of director qualification for board
service that are inconsistent with Delaware corporation and fiduciary duty law.
It is our belief that, to the extent these potential conflicts of interest
actually exist, they are routine matters with which corporate boards of
directors normally deal and pose no significant issues.
Specifically at issue is proxy solicitation material issued by Forest that
contends that Dr. Alexander J. Denner and Dr. Richard Mulligan, two of the
nominees of the Icahn Parties for seats on Forest's board of directors, should
not be elected to Forest's board because their service on the boards of Biogen
Idec and Amylin means that they are or could be "conflicted and should not be on
[the] Board." According to Forest, while it, Biogen Idec and Amylin do not
currently compete with Forest, "business development, product acquisition and
licensing are the life blood of our Company" and since these are also important
to Biogen Idec and Amylin, and since all three are or might become involved in
Icahn Capital LP
August 7, 2011
Page 2
"therapeutic areas," that means that Biogen Idec and Amylin "will likely compete
with Forest for the same product opportunities in the market."
We initially note that the logic of that assertion is not evident from the
facts presented. If there is really a likelihood of material competition, it
might normally be expected that some evidence of that would already be present
and Forest's proxy solicitation materials gives no hint that any such
competition has taken place to date. Nevertheless, you have asked us to assume
for argument sake that some form of competitive overlap might take place at some
point in the future and consider whether such possible overlap could be
accommodated by normal board procedures.
To this end, it is useful to briefly discuss Delaware law regarding
directors and their potential disqualification in conflict of interest
situations. Delaware law specifically contemplates that directors might serve on
the boards of two entities that actually compete with each other. See Bragger v.
Budacz, 1994 WL 698609, at *4-5 ( Del. Ch. Dec. 7, 1994) (noting that "directors
are presumed to act in good faith and in the best interests of the corporation,"
and hence, "interlocking boards do not constitute a violation of [Delaware
law]"). The Delaware General Corporation Law (the "DGCL"), does not require
directors to ever recuse themselves from discussion or voting, but both it and
Delaware case law deal with cases of conflicted directors and provide "safe
harbors" from legal complications from such conflicts. See 8 Del. C. 144; see
also Benihana of Toykyo, Inc. v. Benihana, Inc., 906 A.2d 114, 120 (Del. 2006)
(noting that under the "safe harbor" provisions of 144, a conflict transaction
approved by the disinterested directors will be reviewed under the business
judgment standard of review); In re Digex, Inc. Shareholders Litig., 789 A.2d
1176, 1206 (Del. Ch. 2000) (noting the preference that conflicted directors
Icahn Capital LP
August 7, 2011
Page 3
abstain from any participation in the discussion or voting in respect to
conflict transactions).
Conflicts of interest can raise a problem because directors have a duty of
loyalty towards the corporation and its stockholders. That duty generally
requires them to put the interests of that corporation and its stockholders
above all others. See, e.g. Broz v. Cellular Information Sys., Inc., 673 A.2d
148, 153 (Del. 1996) (noting that a "corporate fiduciary agrees to place the
interests of the corporation before his or her own"). That means that directors
who are also directors of a different corporation might in certain instances of
board decision making owe conflicting duties to both corporations if those
corporations, for example, go into competition with each other. See, e.g.
Bragger, 1994 WL 698609, at *4-7 (recognizing that service by a director on
boards of two competing companies is a matter of choice for the stockholders and
that such service could place the director in a "delicate position"). See also,
Broz, 673 A.2d 148 (for an example of where a director sitting on the boards of
competing companies successfully navigated such a "delicate position" with
regard to a potential corporate opportunity of both companies); In re Digex, 789
A.2d at 1206 (noting that "individuals who act in a dual capacity as directors
of two corporations owe the same duty of good management to both corporations,
and in the absence of an independent negotiating structure, or the directors'
total abstention from any participation in the matter, this duty is to be
exercised in light of what is best for both companies").
Such potential conflicts of interest are by no means rare, though, and seem
to be especially frequent among technology and biotech companies. Each of those
fields tends to be intensely technical by nature, and corporations involved in
Icahn Capital LP
August 7, 2011
Page 4
those areas often find that it is useful to have a board of directors with
significant experience in those areas, which means that at least minor conflicts
of interest often arise. In addition, these firms are frequently funded by
venture capital; the venture capital firms invariably put their own directors on
the boards; and those directors or their firms often have direct and material
conflicts of interest because they usually fund/control potentially competitive
corporations as well.
Given the ubiquity of such conflicts, as well as similar situations in
which directors or senior management might have conflicting interests, a general
set of "best practices" has evolved for dealing with them. The first, and
perhaps most important measure is that the existence of the potential conflict
needs to be disclosed by the director to the board. Here, of course, that has
already been done. Second, the directors should determine, on a case by case
basis, whether they should wall themselves off from conflicted directors when
making a decision with respect to a conflicted transaction. For example, if
Forest and Biogen Idec both bid for licensing rights for a drug and a person who
is a director of both corporations is aware of the situation (which, of course,
would normally only be the case for substantial acquisitions), he should not be
involved in the situation, and should not participate in any discussion or vote
held by either corporation. In addition, he would be under a duty to not
disclose either side's information to the other side.
As mentioned above, this is a very common situation and corporate boards
routinely deal with various conflict situations by walling off the conflicted
party and corporate lawyers routinely suggest that their clients create various
types of special committees of the board to deal with a conflict.
An excellent example of a situation in which best corporate practices could
have been followed, but were not, came at Forest's own April 5, 2011 board
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August 7, 2011
Page 5
meeting. The purpose of that meeting was to decide whether the corporation would
support Mr. Solomon, the Company's CEO, in his battle against the Office of
Inspector General of the Department of Health and Human Services ("HHS-OIG").
Mr. Solomon, of course, had a strong personal interest in gaining such support,
but the board needed to decide whether it was in the Company's best interest to
provide it. That presented a conflict, and under best corporate practices-indeed
under normal corporate governance standards-the non-inside directors would have
been delegated to consider and decide the issue. Instead, of course, the full
board met with Mr. Solomon present, and his direct reports explained to the
board why he was essential to the Company's future. The directors then approved
apparently pre-drafted resolutions with almost no discussion.
Such corporate governance is indeed a problem, but it could easily have
been improved. The non-affiliated directors should have been asked to make the
decision, and independent counsel should have been hired by those directors to
advise them. Management still could have made its presentation, but at that
point should have been recused to allow the independent directors to discuss and
decide the matter with legal guidance from their counsel. The outcome might have
been the same-but the governance would have been far better and the stockholders
would be able to have more confidence in the outcome.
That example points to the underlying issue, which is that conflicts of
interest do not just arise in potentially competitive situations, but in many
dealings with senior management as well. That is an inevitable part of corporate
life, but even adequate corporate governance-much less best practices-allows
such situations to be navigated with little problem. What is needed are
directors and legal advisors who understand and are committed to proper
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August 7, 2011
Page 6
corporate governance. When directors do not have such a commitment, or when a
corporation is tightly controlled by managers who are resistant to proper
governance, then problems certainly can happen. The case books are full of such
examples. There are many more examples, though, of corporations that
successfully deal with potential and actual conflicts of interest like those
that Forest asserts here, and which do so with professionalism and very little
fuss and bother.
In conclusion, we see no reason to believe that the potential conflicts of
interest asserted by Forest in its proxy solicitation materials cannot be dealt
with by the methods used by thousands of other public and private corporations.
Very truly yours,
/s/ Stephen E. Jenkins for
----------------------
Ashby & Geddes
[LETTERHEAD]
ARNOLD & PORTER LLP
WILLIAM J. BAER
William.Baer@aporter.com
+1 202.942.5936
+1 202.942.5999 Fax
555 Twelfth Street, NW
Washington, DC 20004-1206
August 7, 2011
VIA E-MAIL
----------
Icahn Capital LP
767 Fifth Avenue
New York, New York 10153
Proposed Board Members for Forest Laboratories
To Whom it May Concern:
You have asked for our views regarding an issue that has been raised with
respect to the eligibility of two individuals - Dr. Alexander J. Denner and Dr.
Richard Mulligan - to serve as board members for Forest Laboratories, Inc.
("Forest"). Specifically, both Dr. Denner and Dr. Mulligan currently sit as
board members for Biogen Idec ("Biogen"), and Dr. Denner is also a board member
for Amylin Pharmaceuticals ("Amylin"). Forest contends that there is current or
likely future competition between Biogen and/or Amylin and Forest that would
preclude these individuals' simultaneous service on the boards of both Forest
and Biogen and/or Amylin. Based on the facts that you have provided to us, we
believe that Forest's contention is without merit. Because Forest is not a
current competitor of either Biogen or Amylin, we do not believe that either Dr.
Mulligan or Dr. Denner would be disqualified from serving as a board member for
Forest under applicable U.S. antitrust law, including Section 8 of the Clayton
Act. Any speculative issue of future competition is easily addressed through
appropriate corporate conflict of interest policies.
BACKGROUND
----------
For purposes of the conclusions in this letter, we understand from our
discussions with you and our review of available information:
- Forest does not currently market any products that compete with
products currently marketed by either Biogen or Amylin.
- There are no competitive sales between Forest on the one hand and
either Amylin or Biogen on the other.
Icahn Capital LP
August 7, 2011
Page 2
- Forest has no late stage pipeline drugs that are anticipated to
compete with Amylin or Biogen products.
- Although Forest has a Phase I diabetes drug that could at some future
point several years from now potentially compete with an Amylin
diabetes drug, it is not clear that - even if approved - it would
actually compete with the Amylin drug. Moreover, there are already
many other competitors for the Amylin diabetes drug on the market.
ANALYSIS
--------
Forest appears to contend that the conflict issue with Drs. Denner and
Mulligan involves the potential for future competition between Forest, on the
one hand, and Biogen and/or Amylin on the other. Based on the facts provided,
future competition between these companies is extremely speculative at best.
Though Forest has raised the spectre of potential future competition for
business development opportunities, Forest has not identified any specific
history of such competition nor any concrete suggestion of such competition in
the future. As noted above, the only potential future competition that might
conceivably arise relates to a Phase I diabetes drug that is in development at
Forest. If approved at some distant future point, this drug could potentially
compete with an existing Amylin diabetes drug. It is our understanding, however,
that there are "many" competitors to the Amylin diabetes drug already on the
market.
The U.S. antitrust laws expressly address the concern Forest raises
regarding directors serving simultaneously on multiple boards. Section 8 of the
Clayton Act forbids interlocking directorates between two corporations, but only
as to those that are currently "competitors" -- where "the elimination of
competition by agreement between them would constitute a violation of any of the
antitrust laws." 15 U.S.C. 19(a)(a)(1)(B). The purpose of Section 8 is to "nip
in the bud incipient violations of the antitrust laws by removing the
opportunity or temptation to such violations through interlocking directorates."
United States v. Sears, Roebuck & Co., 111 F. Supp. 614, 616 (S.D.N.Y. 1953).
However, the statute applies only in situations in which there currently exist
competitive sales between the corporations in question. Even where there is some
present day competition, the statute provides an exception for competition that
does not exceed certain specified levels. For example, the ban on interlocking
directorates does not apply in cases where the competitive sales of either
corporation are less than $2.7 million. Id. at 19(a)(2). Section 8 similarly
Icahn Capital LP
August 7, 2011
Page 3
does not apply where the competitive sales of either corporation are less than
2% of that corporation's total sales, or where the competitive sales of both
corporations are less than 4% of total sales. Id.
Our understanding is that Forest does not sell any products that are in
competition with products sold by either Amylin or Biogen. If Forest does not
have any competitive sales with Amylin or Biogen, then Section 8 of the Clayton
Act does not prohibit interlocking directorates between Forest and either Amylin
or Biogen. Even if Amylin and Biogen could be viewed as "potential" competitors
of Forest (e.g., based on products under development that might theoretically be
sold in competition in the future), the statutory exception described above (for
de minimis competitive sales) still applies.
Accordingly, we do not believe that the relevant legal precedent would support
an argument by Forest that the theoretical potential for future sales from a
Phase I pipeline drug could trigger the application of Section 8 to an overlap
in board membership between the companies at the present time. Based on the
existing precedent, Section 8 does not apply where there is no current
competition between the corporations at issue. See Paramount Pictures Corp. v.
Baldwin-Montrose Chemical Co., 1966 U.S. Dist. LEXIS 10596, *26 (S.D.N.Y. Jan.
24, 1966) ("Section 8 has no application to corporations which are not or have
not been competitors, but may be competitors in the future.").(1)
Finally, Forest also appears to be concerned with the potential for
information-sharing that could arise where the same board member sits on the
_________________________
(1) See also In the Matter of TRW, Inc., et al., 93 F.T.C. 325, 379 (1979)
("If [complaint counsel] mean that any competitive relationship may be
reached by the statute - whether horizontal, vertical or potential - it
seems fairly well settled that Section 8 applies only to firms which are
horizontal competitors."). In an opinion generally affirming the FTC's
decision in TRW, the Ninth Circuit declined to address the issue. TRW, Inc.
v. FTC, 647 F.2d 942 (9th Cir. 1981) (expressing "no opinion about whether
section 8 encompasses inter-locking directorates between corporations that
are merely potential competitors."). In a 2009 speech, Commission J. Thomas
Rosch of the Federal Trade Commission clearly explained that the Act does
not cover "interlocks between potential competitors." Terra Incognita:
Vertical and Conglomerate merger and Interlocking Directorate Law
Enforcement in the United States at 18 (Sept. 11, 2009). While Commissioner
Rosch and the Federal Trade Commission have, on occasion, raised the theory
that Section 5 of the FTC Act could be used to reach interlocking
directorates that are not otherwise prohibited by Section 8, no court has
adopted that view.
Icahn Capital LP
August 7, 2011
Page 4
boards of Company A and Company B, where Company A is in the early stages of
development for a product that could eventually compete with a Company B
product. This kind of speculative potential conflict, however exists for board
members at many corporations. Our understanding is that Delaware corporate
counsel has advised you that any potential conflicts or concerns of this nature
can be addressed by the implementation of standard conflicts and recusal
policies. We agree that an appropriate conflicts and recusal policy similarly
could ameliorate any information-sharing concerns that might theoretically arise
from interlocking board members here.
Sincerely,
/s/ William J. Baer
-------------------
William J. Baer