SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
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)
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[X] No fee required.
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On August 7, 2011, Icahn Capital LP received a letter from Delaware counsel (the
"Conflicts Letter") regarding corporate governance standards for dealing with
potential conflicts of interest. In the Conflicts Letter, Delaware counsel
concludes that there is "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."
The foregoing description of the Conflicts Letter is qualified in its entirety
by the copy of the Conflicts Letter which is filed herewith.
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 PARTNERHIP, 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.
[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
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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
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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
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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
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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