HUENENBERG, Switzerland—The Alcon Independent Director Committee (IDC) said last week it had established the creation and funding of the Alcon Litigation Trust an irrevocable trust established under New York law pursuant to a resolution of the Alcon board of directors. The current members of the IDC are the initial trustees of the Trust.

The Trust, which has been funded with $50 million, is intended to provide the financial means to commence, defend or maintain litigation relating to any transaction between Alcon and a majority shareholder, including the transaction contemplated by the merger proposal announced by Novartis AG on Jan. 4, 2010.

A statement said The Trust was created “to ensure the protection of the interests of Alcon and its minority shareholders in connection with any such transaction.” For example, without the Trust, once Novartis becomes Alcon's majority shareholder, it could attempt to cause Alcon to withhold funds from the IDC and thereby frustrate the IDC's ability to effectively protect the minority shareholders through a litigation strategy.

Thomas G. Plaskett, chairman of the IDC, said "Novartis' merger proposal is not only grossly inadequate to the minority shareholders of Alcon, which include its valuable employees, but also creates considerable legal uncertainty that could very likely result in significant litigation costs and delays in achieving merger synergies for both companies in the absence of a negotiated transaction…we felt that it necessary to take this step now to help ensure that the fair process is observed once Novartis completes the acquisition of Nestlé's stake in Alcon."

The Trust will terminate if a majority of the group comprising the trustees and the other non-conflicted members of the IDC recommend a transaction between Alcon and Novartis in accordance with processes set forth in Alcon's organizational documents. The Trust will also terminate if a court of competent jurisdiction, in a final, non-appealable, binding order or decision, holds either that the transaction contemplated by Novartis' merger proposal is legal, valid and effective or that Novartis' removal of the current IDC members from the Alcon Board of Directors is legal, valid and effective, the statement said.