<PAGE>
Draft
11/12/98
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period Commission File number
ended September 30, 1998 0 - 27698
CHIREX INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3296309
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 Atlantic Street
Suite 402
Stamford, Connecticut 06901
(Address of principle executive office) (Zip Code)
(203) 351-2300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No
---- ---
Number of shares outstanding of the issuer's classes of common stock as of
November 13, 1998.
Class Number of Shares Outstanding
- -------------------------------------- ----------------------------
Common Stock, par value $.01 per share 11,850,461
1
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CHIREX INC.
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1997 and September 30, 1998 3
Consolidated Statements of Operations and Comprehensive Operations
for the nine-month periods ended September 30, 1997 and 1998 4
Consolidated Statements of Cash Flows for the
nine-month periods ended September 30, 1997 and 1998 5
Notes to Consolidated Interim Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 12
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements. Many
important factors could cause actual results to differ materially from those
indicated by forward-looking statements made herein and presented elsewhere by
management from time to time.
2
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PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
CHIREX INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1998
(dollars in thousands except per-share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash $ 5,347 $ 5,172
Trade and other receivables 18,811 22,098
Inventories 23,225 31,112
Other current assets 3,774 5,170
--------- ---------
Total current assets 51,157 63,552
Property, plant and equipment, net 120,755 144,810
Other non-current assets 3,591 2,734
Intangible assets, net 27,564 26,689
--------- ---------
TOTAL ASSETS $ 203,067 $ 237,785
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 8,763 $ 23,925
Accrued expenses 11,587 11,046
Income taxes payable 348 -
Current portion of long-term debt 7,311 15,111
--------- ---------
Total current liabilities 28,009 50,082
Long-term debt 69,675 78,389
Deferred income taxes 7,955 10,078
Deferred income 4,333 5,661
Contingencies - -
--------- ---------
Total liabilities 109,972 144,210
--------- ---------
Stockholders' equity:
Common stock ($.01 par value, 30,000,000 shares authorized,
11,792,990 and 11,833,711 shares issued and outstanding on
December 31, 1997 and September 30, 1998, respectively) 118 118
Additional paid-in capital 100,788 101,731
Retained earnings (11,411) (12,642)
Cumulative translation adjustment 3,600 4,368
--------- ---------
Total stockholders' equity 93,095 93,575
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 203,067 $ 237,785
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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CHIREX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998
(unaudited)
(in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------------- ---------------------------------
1997 1998 1997 1998
-------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues:
Product sales $ 21,411 $ 31,640 $ 67,691 $ 83,600
License fee and royalty income 194 75 577 327
-------------- -------------- ------------- --------------
Total revenues 21,605 31,715 68,268 83,927
-------------- -------------- ------------- --------------
Costs and expenses:
Cost of goods sold 16,319 24,866 51,097 65,624
Selling, general and administrative 1,885 2,844 6,451 9,121
Research and development 912 953 2,993 3,239
Restructuring and other expenses net
of proceeds from disposition in 1997 - 2,802 6,593 3,023
-------------- -------------- ------------- --------------
Total costs and expenses 19,116 31,465 67,134 81,007
-------------- -------------- ------------- --------------
Operating profit 2,489 250 1,134 2,920
Interest expense - net 11 (1,054) (64) (3,883)
Amortization of goodwill (291) (291) (873) (873)
-------------- -------------- ------------- --------------
Income (loss) before income taxes 2,209 (1,095) 197 (1,836)
Benefit (provision) for income taxes (609) 351 (93) 605
-------------- -------------- ------------- --------------
Net income (loss) $ 1,600 $ (744) $ 104 $ (1,231)
============== ============== ============= ==============
Weighted average number of common shares outstanding 11,534 11,817 11,279 11,808
============== ============== ============= ==============
Weighted average number of common shares
and common stock equivalents outstanding 11,803 11,817 11,548 11,808
============== ============== ============= ==============
Net income (loss) per common share:
Basic $ 0.14 $ (0.06) $ 0.01 $ (0.10)
============== ============== ============= ==============
Diluted $ 0.13 $ (0.06) $ 0.01 $ (0.10)
============== ============== ============= ==============
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
Net income (loss) $ 1,600 $ (744) $ 104 $ (1,231)
Change in cumulative translation adjustment (1,219) 818 (2,591) 768
============== ============== ============= ==============
Comprehensive net income (loss) $ 381 $ 74 $ (2,487) $ (463)
============== ============== ============= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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CHIREX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
--------------------------------------------
1997 1998
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 104 $ (1,231)
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation & amortization 7,054 9,250
Deferred tax provision 294 1,864
Restructuring and impairment charge 8,391 3,023
Proceeds from sale of acetaminophen business (6,308) -
Changes in assets and liabilities:
Receivables (1,812) (2,572)
Inventories (2,564) (7,693)
Other current assets (936) 1,391
Accounts payable and accrued expenses (5,973) 10,851
Income taxes payable 1,893 (2,010)
Deferred income (298) 1,161
Other non-current assets and liabilities (33) -
------------------ -----------------
Net cash provided from operating activities (188) 14,034
------------------ -----------------
Cash flows from investing activities:
Proceeds from disposition of acetaminophin business 4,100 -
Capital expenditures (6,767) (28,277)
------------------ -----------------
Net cash used in investing activities (2,667) (28,277)
------------------ -----------------
Cash flows from financing activities:
Borrowings on line of credit and revolving credit facility, net (839) 13,435
Proceeds from issuance of stock 4,180 -
Proceeds from exercise of stock options 914 530
------------------ -----------------
Net cash provided from financing activities 4,255 13,965
------------------ -----------------
Effect of exchange rate changes on cash 254 103
------------------ -----------------
Net increase (decrease) in cash 1,654 (175)
Cash at beginning of period 291 5,347
------------------ -----------------
Cash at end of period $ 1,945 $ 5,172
================== =================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
CHIREX INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION
NATURE OF OPERATIONS
ChiRex Inc. (the "Company" or "ChiRex") serves the outsourcing needs of some
of the largest pharmaceutical and life science companies in the world by
providing pharmaceutical fine chemical manufacturing and process development
services and offering its customers access to the Company's extensive portfolio
of proprietary technologies. The Company's contract manufacturing services
developed over the past thirty years, include process research and development,
hazard evaluation, clinical quantity production and pilot-scale and commercial-
scale manufacturing at its world-class, current Good Manufacturing Practices
("cGMP") facilities in Dudley, England and Annan, Scotland. The Company's
common stock is publicly traded in the United States on the Nasdaq Stock
Market's National Market ("NASDAQ") under the symbol "CHRX".
PRINCIPLES OF CONSOLIDATION
The financial statements of the Company include the historical results of
its subsidiaries for the entire period presented or from the date of
acquisition.
The interim financial statements, in the opinion of management, reflect all
adjustments (including normal recurring adjustments) necessary for a fair
presentation of the results for the interim period ended September 30, 1998.
The results of operations for the interim period are not necessarily indicative
of the results of operations expected for the fiscal year.
See Form 10-K filed as of and for the year ended December 31, 1997 for
additional information.
2. RECENT ACCOUNTING DEVELOPMENTS:
Net Loss per Common Share
Basic income (loss) per common share for the third quarter and nine-month
periods ended September 30, 1997 and 1998 were computed by dividing the net
income (loss) by the weighted average shares outstanding during the period in
accordance with Statement of Financial Accounting Standards No. 128, Earnings
per Share ("SFAS 128"). Since the effect of the assumed exercise of stock
options of 503,000 shares and 530,000 shares for the third quarter and first
nine months of 1998, respectively, were anti-dilutive, basic and diluted
loss per common share as presented on the statement of operations are the
same. Upon adoption of SFAS 128 at year-end 1997, the Company's reported
earnings per common share for the third quarter and first nine months of 1997
were required to be restated. There was no effect on net income (loss) per
common share for the third quarter and first nine months of 1997 from the
adoption of SFAS 128.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). This statement establishes standards for reporting and display of
comprehensive income and its components. Components of comprehensive income are
net income and all other non-owner changes in equity such as the change in the
cumulative translation adjustment. This statement requires that an enterprise:
(a) classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a balance sheet. SFAS 130 is effective for financial statements
issued for periods beginning after December 15, 1997. Presentation of
comprehensive income for earlier periods provided for comparative purposes is
required and has been presented in these financial statements.
6
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3.
As of September 30, 1998, the Company was not in compliance with certain
financial covenants of its revolving-credit and term-loan credit facilities (the
"Facilities Agreement"). The lenders have permanently waived these defaults and
the Company has agreed to certain modifications to the Facilities Agreement.
After taking into consideration the waivers and modifications to the Facilities
Agreement, the Company is in compliance with all of the terms of the Facilities
Agreement at September 30, 1998. Under the Company's current business plan,
management expects the Company will be unable to satisfy certain financial
covenants in the future, however the Company has received an unconditional
letter from its lenders expressing their intent to continue their support of the
Company and to negotiate in good faith, further modifications to the Facilities
Agreement as necessary.
4.
The Company announced in July 1998, a restructuring including management
changes and the transition to a product management structure. The Company
expects to record a total pre-tax restructuring charge of $4.9 million in
fiscal-year 1998 related to severance and other costs of this restructuring, of
which $2.8 million has been recognized for expenses incurred in the quarter
ended September 30, 1998 with the balance expected to be recognized in the
fourth quarter. Third quarter 1998 restructuring expenses include severance
costs related to management changes made to implement the product management
structure. As of September 30, 1998 approximately $1.8 million of this
restructuring charge is reflected in accrued expenses on the balance sheet.
5. RECLASSIFICATION
Certain amounts in the prior period's financial statements have been
reclassified to be consistent with the current period presentation.
7
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
historical consolidated financial statements and the notes thereto included
elsewhere herein.
INTRODUCTION
ChiRex Inc. (the "Company" or "ChiRex") serves the outsourcing needs of some
of the largest pharmaceutical and life science companies in the world by
providing pharmaceutical fine chemical manufacturing and process development
services and offering its customers access to the Company's extensive portfolio
of proprietary technologies. The Company's contract manufacturing services
developed over the past thirty years, include process research and development,
hazard evaluation, clinical quantity production and pilot-scale and commercial-
scale manufacturing at its world-class, current Good Manufacturing Practices
("cGMP") facilities in Dudley, England and Annan, Scotland.
In April 1997, the Company disposed of its acetaminophen (paracetamol, an
over-the-counter analgesic) business and in September 1997, the Company ceased
production of acetaminophen. At the time of the disposition, acetaminophen was
the largest volume product manufactured by the Company, representing
approximately 31% of the Company's 1996 pro-forma revenues, but was not highly
profitable at the gross margin level. In connection with the disposition of the
business, the Company recorded a $6.6 million pre-tax restructuring charge net
of proceeds on disposition in the second quarter of 1997, and implemented
measures designed to offset the effect of the disposal on operating performance.
The Company's decision to dispose of its acetaminophen business followed a
strategic review of several alternatives and was based on a number of factors,
including the continued domination of the acetaminophen business by high volume,
low cost manufacturers and the Company's expectation that the market price of
acetaminophen would continue to erode.
On October 31, 1997, the Company completed the purchase of a Glaxo Wellcome
FDA cGMP pharmaceutical production facility located in Annan, Scotland. The
Company paid approximately $66.8 million (40.0 million) for the facility plus an
additional payment for certain working capital of approximately $1.7 million
((Pounds)1.0 million). As part of the transaction, Glaxo Wellcome awarded the
Company a five-year contract to supply certain pharmaceutical intermediates and
active ingredients with an aggregate sales value of approximately $450 million.
Under the Asset Purchase Agreement, ChiRex purchased all of the buildings, land
and equipment at the 154-acre Annan, Scotland property, encompassing three main
production facilities plus certain working capital. The Company plans to invest
approximately $25 million over two years to accommodate newly contracted
products and to modify the facility for multi-product pharmaceutical fine
chemical manufacturing. Under the Supply Agreement, ChiRex will manufacture up
to ten products at Annan and Dudley. The acquisition has been accounted for as
a purchase and, accordingly, the operating results of the Annan facility have
been included in the Company's consolidated financial statements from the date
of acquisition.
Substantially all of the Company's revenues and expenses are denominated in
Great Britain pounds sterling, and to prepare the Company's financial statements
such amounts are translated into U. S. dollars at average exchange rates in
accordance with generally accepted accounting principles.
8
<PAGE>
RESULTS OF OPERATIONS
Three-month period ended September 30, 1997 and 1998
Total revenues increased $10.1 million, or 46.8% to $31.7 million in the
third quarter of 1998, from $21.6 million in the comparable period in 1997, as
new products came on stream and shipments under the Glaxo Wellcome supply
contract expanded, partly offset by the unfavorable effect on revenues from the
sale of the acetaminophen business which contributed $4.9 million in revenues in
the third quarter of 1997.
Cost of goods sold increased $8.5 million, or 52.4% to $24.9 million in the
three-month period ended September 30, 1998 from $16.3 million in last year's
third quarter. This increase is due to the higher volume of new product sales
partly offset by lower acetaminophen sales, expenses associated with new product
introductions and the under-utilization of the Annan facility acquired in the
fourth quarter of 1997 during its re-conditioning into a multi-product
pharmaceutical fine chemical manufacturing facility. As a result of the above
factors, gross margin percentage in the third quarter of 1998 decreased to 21.6%
from 24.5% in 1997.
Research and development expenses increased $41 thousand, or 4.5% to $1.0
million in the third quarter of 1998. This increase was due mainly to the cost
of additional research chemists and pilot plant costs to support the new product
pipeline.
Selling, general and administrative expenses increased $1.0 million or
50.9%, to $2.8 million in the three-month period ended September 30, 1998 from
$1.9 million last year. This increase is due primarily to additional expenses
associated with the Annan facility acquired in the fourth quarter of 1997.
Interest expense was $1.1 million in the third quarter of 1998 compared to
interest income of $11 thousand in last year's third quarter. This is a result
of higher borrowing levels resulting from the acquisition of the Annan facility
in the fourth quarter of 1997 and significant capital improvement projects in
1998.
The Company announced in July 1998, a restructuring including management
changes and the transition to a product management structure. The Company
expects to record a total pre-tax restructuring charge of $4.9 million in
fiscal-year 1998 related to severance and other costs of this restructuring,
of which $2.8 million has been recognized for expenses incurred in the quarter
ended September 30, 1998 with the balance expected to be recognized in the
fourth quarter. Third quarter 1998 restructuring expenses include severance
costs related to management changes made to implement the product management
structure. As of September 30, 1998, approximately $1.8 million of this
restructuring charge is reflected in accrued expenses on the balance sheet.
The benefit for income taxes was $0.4 million in the three-month period
ended September 30, 1998, versus a $0.6 million provision for income taxes in
the comparable prior-year period. This represents an effective rate of 32.1% in
1998 compared to an effective rate of 27.6% in the same period in 1997. The
higher effective tax rate in 1998 is the result of profitability expectations
for 1998.
As a result of the factors described above, the Company reported a net loss
of $0.7 million in the third quarter of 1998 compared to net income of $1.6
million for the comparable prior-year period.
Nine-month period ended September 30, 1997 and 1998
Total revenues increased $15.7 million, or 22.9% to $83.9 million in the
first nine months of 1998, from $68.3 million in the comparable period in 1997,
as new products came on stream and shipments under the Glaxo Wellcome supply
contract expanded, partly offset by the unfavorable effect on revenues from the
sale of the acetaminophen business which contributed $17.0 million in revenues
to the first nine months of 1997.
Cost of goods sold increased $14.5 million, or 28.4% to $65.6 million in the
nine-month period ended September 30, 1998 from $51.1 million in last year's
first nine months. This increase is due to the higher volume of new product
sales
9
<PAGE>
partly offset by lower acetaminophen sales, expenses associated with new product
introductions, and the under-utilization of the Annan facility acquired in the
fourth quarter of 1997 during its re-conditioning into a general-purpose
pharmaceutical fine chemical manufacturing facility. The Company also
experienced production interruptions for one product during the second quarter
that resulted in unfavorable manufacturing variances. The production
difficulties for this product were resolved and full-scale production resumed in
mid-July 1998. As a result of the above factors, gross margin percentage in the
first nine months of 1998 decreased to 21.8% from 25.2% in 1997.
Research and development expenses increased $0.2 million, or 8.2% to $3.2
million in the first nine months of 1998. This increase was due mainly to the
cost of additional research chemists and pilot plant costs to support the new
product pipeline.
Selling, general and administrative expenses increased $2.7 million or
41.4%, to $9.1 million in the nine-month period ended September 30, 1998 from
$6.5 million last year. This increase is due primarily to additional expenses
associated with the Annan facility acquired in the fourth quarter of 1997 and
expenses incurred related to the search for a Chief Operating Officer.
The Company expects to record a total pre-tax restructuring charge of $4.9
million in fiscal-year 1998 associated with the restructuring announced in July
1998, of which $2.8 million has been recognized for expenses incurred in the
third quarter with the balance expected to be recognized in the fourth quarter.
Other expenses were $3.0 million in the nine-month period ended September 30,
1998 versus $6.6 million in the comparable prior-year period. The 1998
restructuring charge and other expenses includes $2.8 million incurred in the
third quarter 1998 for the aforementioned restructuring and $0.2 million of
other costs incurred in the second quarter 1998 by a special committee of the
Company's board of directors whose work culminated in the restructuring
announced in July 1998. The 1997 restructuring charge represented expenses
associated with the disposition of the acetaminophen business.
Interest expense was $3.9 million in the first nine months of 1998 compared
to $0.1 million last year. This is a result of higher borrowing levels resulting
from the acquisition of the Annan facility in the fourth quarter of 1997 and
significant capital improvement projects in 1998.
The benefit for income taxes was $0.6 million in the nine-month period ended
September 30, 1998, versus a $0.1 million provision for income taxes in the
comparable prior-year period. This represents an effective rate of 33.0% in
1998 compared to an effective rate of 47.2% in the same period in 1997.
As a result of the factors described above, the Company reported net loss of
$1.2 million in the first nine months of 1998 compared to net income of $0.1
million for the comparable prior-year period.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations for the first nine months of 1998 of $14.0
million is $14.2 million higher than the $0.2 million used in the same period in
1997 and reflects a $1.1 million reduction in the Company's net investment in
operating assets.
Net cash used in investing activities in the first nine months of 1998 was
$28.3 million compared to $2.7 million in the same period of 1997. Capital
spending in 1998 includes expenditures for plant maintenance, alteration of
equipment at Dudley to accommodate new products, and modification of the Annan
facility. The majority of these expenditures are to accommodate newly contracted
products at Dudley and Annan, and to convert the Annan facility to a multi-
product pharmaceutical fine chemical manufacturing facility.
Net cash provided from financing activities for the first nine months of
1998 of $13.9 million is the result of $13.4 million in borrowings under the
company's revolving credit facility and $0.5 million in proceeds received from
the exercise of stock options.
10
<PAGE>
As of September 30, 1998, the Company was not in compliance with certain
financial covenants of its revolving-credit and term-loan credit facilities (the
"Facilities Agreement"). The lenders have permanently waived these defaults and
the Company has agreed to certain modifications to the Facilities Agreement.
After taking into consideration the waivers and modifications to the Facilities
Agreement, the Company is in compliance with all of the terms of the Facilities
Agreement at September 30, 1998. Under the Company's current business plan,
management expects the Company will be unable to satisfy certain financial
covenants in the future, however, the Company has received an unconditional
letter from its lenders expressing their intent to continue their support of the
Company and to negotiate in good faith, further modifications to the Facilities
Agreement as necessary.
The Company expects to satisfy its cash requirements, including the
requirements of its subsidiaries, through internally generated cash and
borrowings.
YEAR 2000 DISCLOSURE
The Company has dedicated internal resources to identify and resolve "year
2000" compliance issues with respect to computer systems and applications
utilized by the Company. The Company has also engaged external resources,
including hiring an independent consulting firm, and will purchase necessary
computer software and upgrades to become year 2000 compliant. The Company will
develop comprehensive testing procedures once necessary software and equipment
have been installed to validate year 2000 compliance. The Company is
implementing a year 2000 compliant management information system at its Annan
facility in connection with its business plans for this location. The Company's
plan is to implement these systems at the Company's other locations, including
the Dudley facility, in 1999. The Company expects to spend approximately $3.0
million on systems and equipment which are year 2000 compliant.
The Company believes that the systems at two of the three production
facilities at Annan are year 2000 compliant. At present, the Company is not
utilizing the third production facility at Annan. In the event that the Company
commences operations at this third facility, it expects to spend $1.0 million
upgrading the facility's computer systems and applications and will expense
these costs in accordance with current accounting guidance.
No assurance can be given that the year 2000 compliance issues will be
resolved without any future disruption or that the Company will not incur
significant additional expense in resolving the issue. In addition, the failure
of certain of the Company's significant suppliers and customers to address the
year 2000 compliance issues could have a material adverse effect on the company.
Contingency plans have been addressed for all major computer systems and
applications, and they include manual capability of certain business areas if
necessary, and the controlled shutdown and start up of the manufacturing plant
for a minimum period of days during the date change. The approach, methodology,
plans, and contingencies for internal processes have been reviewed by our
independent computer consultant and are subject to further development and
testing. With regards to external factors such as supply of raw materials,
access to funds and potential utility disruption, the Company's contingency
plans are at a preliminary stage and require further development.
FOREIGN CURRENCY
The Company currently expects that sales of its products outside the United
States will continue to be a substantial percentage of its net sales. The
Company currently intends to hedge its foreign exchange exposure to a certain
extent by entering into forward contracts with banks to the extent that the
timing of the currency flows can reasonably be anticipated. The Company
believes it has a natural currency hedge because its operating expenses tend to
be denominated in matched currencies. Also the Company has partly offset
foreign currency-denominated assets with foreign currency-denominated
liabilities.
Financial results of the Company could be adversely or beneficially affected
by fluctuations in foreign exchange rates. Fluctuations in the value of foreign
currencies will affect the U. S. dollar value of the Company's net investment in
its foreign subsidiaries, with related effects included in a separate component
of stockholders' equity titled Cumulative Translation Adjustments. Operating
results of foreign subsidiaries are translated into U. S. dollars at average
monthly exchange rates and balance sheet amounts are translated at period-end
exchange rates. In addition, the U. S. dollar value of transactions based in
foreign currency also fluctuates with exchange rates. The Company expects that
the largest foreign currency exposure will result from activity in Great Britain
pounds sterling, German marks and Dutch guilders.
11
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PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a vote of Security Holders.
----------------------------------------------------
-NONE-
ITEM 5. Other Information
-----------------
-NONE-
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits. The exhibits listed on the accompanying Exhibit Index
are filed as part of this Quarterly Report on Form 10-Q.
(b) Current Reports on Form 8-K:
On September 1, 1998, the Company filed a Current Report on
Form 8-K reporting management changes and restructuring.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHIREX INC.
Date: November 16, 1998 By: /s/ Jon E. Tropsa
-----------------
Jon E. Tropsa
Vice President, Finance
12
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EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
4.5 Second Amendment dated 16 November 1998
to Facilities Agreement dated 30 October 1997
27 Financial Data Schedule.
13
<PAGE>
SECOND AMENDMENT DATED . NOVEMBER 1998
TO
FACILITIES AGREEMENT DATED 30 OCTOBER 1997
THIS SECOND AMENDMENT (this "AMENDMENT") is dated . November 1998 and entered
into by and among:
(1) CHIREX (HOLDINGS) LIMITED, a limited company organised under the laws of
England with registered number 3080257 with its registered office at Dudley,
Cramlington, Northumberland NE23 7QG (the "BORROWER")
(2) BANKERS TRUST INTERNATIONAL PLC and MIDLAND BANK PLC, as Joint Arrangers
("JOINT ARRANGERS")
(3) BANKERS TRUST COMPANY, as Agent ("AGENT")
(4) BANKERS TRUST COMPANY, as Security Agent ("SECURITY AGENT")
(5) the Lenders referred to in the Facilities Agreement, as defined below (the
"LENDERS"); and
(6) for purposes of Section 5 hereof, CHIREX INC., a corporation organised under
the laws of the State of Delaware with its principal office at 300 Atlantic
Street, Suite 402, Stamford, CT 06901, U.S.A., CHIREX (DUDLEY) LIMITED, a
limited company organised under the laws of England with registered number
857670 with its registered office at Dudley, Cramlington, Northumberland
NE23 7QG, and CHIREX (ANNAN) LIMITED, a limited company organised under the
laws of England with registered number 3417229 with its registered office at
Dudley, Cramlington, Northumberland NE23 7QG, each as Guarantors
("GUARANTORS").
RECITALS
WHEREAS, the parties listed above, among others, are parties to that certain
GBP 62,000,000 Facilities Agreement dated 30 October 1997 as amended by the
First Amendment dated 30 July, 1998 (as such Facilities Agreement may be
amended, novated or supplemented from time to time, the "FACILITIES
AGREEMENT"). Capitalised terms used in this Amendment without definition
shall have the same meanings herein as set forth in the Facilities
Agreement;
WHEREAS, the Borrower has requested that the Lenders amend certain
provisions of the Facilities Agreement;
NOW THEREFORE, in consideration of the premises and the agreements,
provisions and covenants contained herein and the receipt of (Pounds)1, the
adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
- -1
<PAGE>
1 AMENDMENTS
1.1 Clause 1.1 of the Facilities Agreement is hereby amended by adding the
following proviso at the end of the definition of "Margin" therein:
"Provided that, notwithstanding the above, the Margin shall be 2.00% from
the Second Amendment Effective Date until 31st December 1999, subject to the
Agent and NatWest, acting on the instructions of the Majority Banks
reviewing the level of the Margin (with a view to maintaining the Margin or
reducing it but without prejudice to the Lender's rights under the
Facilities Agreement) on a quarterly basis prior to 31 December 1999 and
subject to this proviso having no further force and effect after 31 December
1999".
1.2 Clause 13.4.1(b) of the Facilities Agreement is hereby amended by
deleting the clause in its entirety and substituting the following
therefor:
"(b) MINIMUM INTEREST COVERAGE RATIO
----
ChiRex Inc. shall maintain, as of the end of each Accounting
Quarter to occur during the periods shown below, an Interest
Coverage Ratio of not less than the minimum Interest Coverage
Ratio shown below:
---------------------------------------------------------------
PERIOD MINIMUM INTEREST COVERAGE
RATIO
===============================================================
1 October 1998 to 31 December 1998 3.0:1
Thereafter 3.5:1
---------------------------------------------------------------
1.3 Clause 13.4.1(c) of the Facilities Agreement is hereby amended by the
addition of the following paragraph (iii) at the end of the existing
paragraph (ii):
(iii) when testing Total Debt for the purposes of testing the
covenants in Clauses 13.4.1(a) and (b) of the Facilities
Agreement, any sum standing to the credit of any account of any
Obligor on any date of determination will be taken into account
to reduce the calculation of the Financial Indebtedness of that
Obligor, subject to the Borrower complying with the provisions
of Clause 9.2 below.
2 REPRESENTATIONS AND WARRANTIES
Each of the Borrower and the Guarantors hereby represents and warrants
to the Agent and the Lenders that:
2.1 as of the date hereof, assuming that the amendments contained
herein have been effected there exists no Event of Default or
Potential Event of Default under the Facilities Agreement, and
after giving effect to this Amendment, there will exist no Event
of Default or Potential Event of Default under the Facilities
Agreement;
2.2 all representations and warranties contained in the Facilities
Agreement and the other Finance Documents are true, correct and
complete in all material respects on and as of the date hereof
except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of
such earlier date;
- -2
<PAGE>
2.3 as of the date hereof, the Borrower has performed all agreements
to be performed on its part as set forth in the Facilities
Agreement;
2.4 it is duly organised and validly existing under the laws of the
jurisdiction of its organisation, and has all necessary power
and authority to execute and deliver this Amendment and to
consummate the transactions contemplated hereby;
2.5 neither the execution and delivery of this Amendment, nor the
consummation of the transactions contemplated hereby, violates
(i) any law, regulation, decree or other legal restriction
applicable to it, (ii) its charter, by-laws or other
constitutional documents or (iii) any instrument or agreement to
which it or any of its assets is subject or by which it is
bound;
2.6 there is no legal requirement of any governmental authority
(including any requirement to make any declaration, filing or
registration or to obtain any consent, approval, license or
order) which is necessary to be met by it in connection with its
execution, delivery or performance of this Amendment; and
2.7 this Amendment has been duly authorised, executed and delivered
on its behalf and this Amendment, the Facilities Agreement, as
amended by this Amendment, and the other Finance Documents to
which it is a party constitute its legal, valid and binding
obligation, enforceable against it in accordance with their
terms, except as limited by the Reservations.
3 COUNTERPARTS; EFFECTIVENESS
3.1 This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute
but one and the same instrument; signature pages may be detached
from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached
to the same document.
3.2 This Amendment shall become effective on the date (the "SECOND
AMENDMENT EFFECTIVE DATE") when the conditions have been
satisfied that (i) each of the Borrower, the Guarantors, the
Agent, the Security Agent and the Lenders shall have signed a
counterpart hereof (whether the same or different counterparts)
and shall have delivered (including by way of facsimile
transmission) the same to the Agent, (ii) the Borrower shall
have delivered to the Agent favourable opinions of Cravath,
Swaine & Moore, U.S. legal advisers to the ChiRex Group, and
Dibb Lupton Alsop, English legal advisers to the ChiRex Group,
in each case addressed to the Agent and the Lenders, dated the
effective date of this Amendment and in form and substance
satisfactory to the Agent.
3.3 On and after the Second Amendment Effective Date, each reference
in the Facilities Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the
Facilities Agreement, and each reference in the other Finance
Documents to the "Facilities Agreement", "thereunder", "thereof"
or words of like import referring to the Facilities Agreement
shall mean and be a reference to the Facilities Agreement as
amended by the first Amendment Agreement, and by this Amendment.
3.4 This Amendment is limited as specified and shall not constitute
a modification, acceptance or waiver of any other provision of
the Facilities Agreement, any provision of
- -3
<PAGE>
any other Finance Document or any right, power or remedy of the
Agent or any Lender under the Facilities Agreement shall remain
in full force and effect and is hereby ratified and confirmed.
3.5 Clause headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of
this Amendment for any other purposes or be given any
substantive effect.
4 GOVERNING LAW; JURISDICTION
4.1 This Amendment and the rights and obligations of the parties
hereunder shall be governed by, and shall be construed and
enforced in accordance with, the laws of England.
4.2 Each Guarantor and Borrower hereby ratifies and confirms the
application of the provisions of Clause 30 of the Facilities
Agreement to this Amendment.
5 ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS
Each of the Guarantors hereby acknowledges that it has read this
Amendment and consents to the terms thereof and further hereby confirms
and agrees that, notwithstanding the effectiveness of this Amendment, the
obligations of such Guarantor under its respective Guarantee shall not be
impaired or affected and such Guarantee is, and shall continue to be, in
full force and effect and is hereby confirmed and ratified in all
respects.
6 WAIVER
6.1 PERMANENT WAIVER
6.1.1 This waiver contained in this Clause 6 shall supersede the
Limited Waiver dated 23 October 1998, by which the Lenders
waived compliance with certain provisions of the Facilities
Agreement during the period beginning 23 October 1998 and
ending on 8 December 1998 (the "OCTOBER LIMITED WAIVER") in
its entirety and the October Limited Waiver shall have no
further force or effect from and after the Second Amendment
Effective Date.
6.1.2 Subject to the other terms and conditions set forth herein
and in reliance on the representations and warranties of the
Borrower herein contained, Lenders hereby waive, with effect
solely from the Second Amendment Effective Date and in
perpetuity thereafter, any Event of Default under Clause
14.1.2 of the Facilities Agreement to the extent, and only
the extent, resulting from ChiRex Inc.'s failure to maintain
(a) a Total Debt/EBITDA Ratio for the respective periods from
1 July 1998 to 30 September 1998 and 1 August 1998 to 31
October 1998 not exceeding 4.75:1 in each case; and (b) an
Interest Coverage Ratio as of the end of the Accounting
Quarter ending 30 September 1998 not less than 3.0:1.
6.1.3 The Borrower hereby agrees (i) to deliver the consolidated
monthly management accounts for each successive fiscal month
ending during the period from the Second Amendment Effective
Date until 31 December 1999 (the "MONITORING PERIOD") and
referred to in Clause 13.3.4 (c) (including the information
required by the proviso to Clause 13.3.4 as it relates to
paragraph (c) of such clause) of the Facilities Agreement,
together with the certificate
- -4
<PAGE>
required in respect thereof under Clause 13.3.5 of the
Facilities Agreement, not later than the 21st day of the
following month, and (ii) during each successive week
beginning during the Monitoring Period, a forecast of
consolidated cash flow for the ChiRex Group to include for
weeks 1 and 2 an analysis of all material receipts and
payments with appropriate commentary as to the timing and
nature of such receipts and payments and an analysis of the
timing of and likely amounts of Drawdowns to be made and for
each of the succeeding 3 weeks in form and substance
satisfactory to the Agent and National Westminster Bank plc
("NATWEST"). Time is of the essence in the Borrower's
obligations under this Clause 6.1.3 and any failure by the
Borrower to comply with this Clause 6.1.3 in a full and
timely basis shall be an Event of Default under the
Facilities Agreement.
6.1.4 Subject to the other terms and conditions set forth herein
and in reliance on the representation and warranties of the
Borrower herein contained, the Lenders hereby agree with
effect solely from the Second Amendment Effective Date that
the obligation of the Borrower under Clause 6.1.1 of the
Facilities Agreement to make a repayment of
(Pounds)4,444,444.44 on the 31 December 1998 Repayment Date
(the "DECEMBER AMORTISATION") in respect of the Tranche A
Term Loan shall be deferred to the date which is eighteen
months after the Second Amendment Effective Date (the
"REVISED PAYMENT DATE") subject to the provisions of Clause
9.1 below, and the operation of the cash sweep mechanism.
6.2 LIMITATION OF WAIVER
Without limiting the generality of the provisions of Clauses 22 or 26
of the Facilities Agreement, the waiver set forth above shall be
limited precisely as written, and nothing in this Clause 6 shall be
deemed to:
6.2.1 constitute a waiver of any other term, provision or condition
of the Facilities Agreement or any other instrument or
agreement referred to therein or otherwise; or
6.2.2 prejudice any right or remedy that Agent or any Lender may
now have or may have in the future under or in connection
with the Facilities Agreement or any other instrument or
agreement referred to therein.
Except as expressly set forth therein, the terms, provisions
and conditions of the Facilities Agreement and the other
Finance Documents shall remain in full force and effect and
in all other respects are hereby ratified and confirmed.
6.3 FINANCE PARTY EXPENSES; CERTAIN AGENCY MATTERS
6.3.1 Without limitation to Clauses 11 (Fees, Expenses and Stamp
Duties) and 27 (Indemnities) of the Facilities Agreement but
without duplication, the Borrower hereby agrees that it will
on demand pay and reimburse, on the basis of a full
indemnity, all reasonable costs and expenses (including
reasonable accounting, legal and engineering consultancy fees
and expenses, recordation fees and other out-of-pocket
expenses, including for the avoidance of doubt the
professional fees of Ernst & Young and Linklaters & Paines,
and any VAT or
- -5
<PAGE>
other similar Tax on any of the foregoing) incurred by the
Agent, the Security Agent or NatWest in connection with:
(a) this Amendment and any subsequent variation, recordation,
amendment, supplement, restatement, waiver, consent or
suspension of rights (or any proposal for any of the same or
negotiations in connection with the same) relating to any of
the Finance Documents (and documents, matters or things
referred to therein); and
(b) the investigation of the prospects, financial condition,
business, assets and/or revenues of the Borrower, its
subsidiaries and its affiliates.
6.3.2 Each Lender reaffirms the appointment of NatWest to act as
its representative in assisting the Agent and otherwise in
investigating the prospects, financial condition, business,
assets and revenues of the Borrower, its subsidiaries and its
affiliates, and agrees that NatWest shall be entitled in such
capacity to the benefits of Clause 16 (including without
limitation the indemnities therein and exculpatory provisions
thereof) of the Facilities Agreement as if references to the
Agent therein were also to NatWest, mutatis mutandis.
7 KEY PERFORMANCE INDICATORS
The parties to this Amendment hereby agree as follows:
7.1 Ernst & Young, in consultation with the Borrower will establish
criteria ("KEY PERFORMANCE INDICATORS") within 7 days from the
Second Amendment Effective Date, which the Agent will use to
monitor the performance of the Borrower in meeting its
obligations under the Facilities Agreement.
7.2 For the purposes of this sub-clause the Agent and NatWest act at
all times on the instructions of the Majority Lenders and after
receiving the advice of Ernst & Young. If the Agent and NatWest
determine, save in the case of manifest error, that the Borrower
has breached Key Performance Indicators, and in the reasonable
opinion of the Agent and NatWest, the breaches of those Key
Performance Indicators indicate that the Borrower is likely to
breach the terms and conditions of the Facilities Agreement, in
any material way then the Agent and NatWest, will request that
the Borrower provide an explanation as to either why it believes
the terms and conditions of the Facilities Agreement will not be
materially breached and/or or what steps the Borrower is taking
to avoid such material breach and the Agent and NatWest will
agree to consider any such explanation in good faith but if the
Agent and NatWest are not satisfied with such explanation or no
such explanation is provided within a reasonable period of being
requested, the Agent and NatWest may take such action as they
think fit to enforce their rights under the Facilities Agreement.
7.3 No amendment will be made to the Key Performance Indicators
except as agreed by NatWest and the Agent, acting on the
instructions of the Majority Banks.
8 FEES
In consideration of the amendments to the Facilities Agreement made
pursuant to Clause 1 above and the waiver and modification agreed by
the Lenders pursuant to Clauses 6.1.2 and
- -6
<PAGE>
6.1.4 above, the Borrower agrees to pay to the Agent for the account
of each Lender, the following (together the "SECOND AMENDMENT FEES"):
8.1 an amendment fee of (Pounds)810,000 to be paid on 30 June 1999;
and
8.2 an additional monitoring fee of (Pounds)240,000 in total;
the first payment of (Pounds)120,000 to be due on the Second
Amendment Effective Date but payment to be deferred until the earlier
of (i) the date upon which a restructuring or refinancing as
described in Clause 9.3 below is effected by the Borrower in which
case the second payment of (Pounds)120,000 shall never become payable
or (ii) 31 March 1999;
and the second payment of (Pounds)120,000 to be due on 1 April 1999
but payment to be deferred until the earlier of (i) the date upon
which a restructuring or refinancing as described in Clause 9.3 below
is effected by the Borrower or (ii) 30 June 1999;
with each payment of (Pounds)120,000 being apportioned as follows:
and
APPOINTMENT OF MONITORING FEE PER QUARTER
(Pounds) 30,000 to The Agent
(Pounds) 30,000 to NatWest
(Pounds) 60,000 ((Pounds)6,000 to each Lender)
(Pounds)120,000 TOTAL
8.3 the fees payable pursuant to Clause 9.4 below.
Notwithstanding the above, the Borrower hereby confirms that the
Fees Letter from the Agent to the Borrower dated 23 October 1998
(the "WAIVER FEES LETTER"), remains in full force and effect,
notwithstanding the supersession of the October Limited Waiver
by Clause 6 of this Amendment, except that for the purposes of
the Waiver Fees Letter and from the Second Amendment Effective
Date, the references to
(i) "Limited Waiver" therein shall refer to this
Amendment and
(ii) the Facility Agreement dated 30 October 1997 as
amended by the First Amendment dated 30 July 1998
shall refer to the Facilities Agreement as further
amended by this Amendment.
9 CASH SWEEP AND UNDERTAKINGS
9.1 The Borrower undertakes
(i) to put into effect by 1 January 1999 a cash sweep
mechanism (on terms to be agreed between the Borrower
and Ernst & Young within 7 days of the Second
Amendment Effective Date which are satisfactory to
NatWest and the Agent acting on the instructions of
the Majority Lenders) to the intent that any cash
generated as a result of such mechanism and received
by the Agent shall be applied by the Agent
- -7
<PAGE>
against the December Amortisation prior to the
Revised Payment Date; and
(ii) to repay in full the December Amortisation, including
all principal, interest and any other sums then due
or owing in respect of the December Amortisation
whether by cash sweep mechanism or otherwise, by the
Revised Payment Date; and
(iii) to pay any sums due owing or incurred pursuant to
this agreement, including but not limited to those
sums becoming due under Clauses 6.3 and 8 above, on
the due date for payment.
9.2 If on a Repayment Date relating to repayment of Advances under
the Tranche B Multicurrency Revolving Facility, which is also a
date of determination for the purposes of calculating Total Debt
in accordance with the financial covenants at Clauses 13.4.1(a)
and (b), there are sums standing to the credit of the Borrower's
account which are taken into account in reducing the Borrower's
Financial Indebtedness as part of the testing of Total Debt but
which have not been paid to the Agent on that Repayment Date, the
Borrower undertakes to pay such sums to the Agent, on the next
Business Day following the relevant Repayment Date.
9.3 The Borrower undertakes that by 31 December 1999 it will use its
reasonable endeavours to either:
9.3.1 enter into an agreement providing for the effective
restructuring of the Facilities on terms acceptable to
NatWest and the Agent acting on the instructions of the
Majority Banks; or
9.3.2 refinance all sums outstanding pursuant to the Facilities
(including any sums, costs, expenses and fees payable
pursuant to the Facilities Agreement in particular but not
limited to the Second Amendment Fees and fees payable
under the Waiver Fees Letter);
9.4 Furthermore, in any event (i) if such restructuring or
refinancing has not been effected by the Borrower by 30 June
1999, the Borrower shall pay a further fee of (Pounds)250,000 to
the Agent for the account of each Lender such sum to become due
and immediately payable on 30 September 1999 and (ii) if such
restructuring or refinancing has not been effected by the
Borrower by 30 September 1999, the Borrower shall pay a further
fee of (Pounds)250,000 to the Agent for the account of each
Lender such sum to become due and immediately payable on 31
December 1999 and (iii) if such restructuring or refinancing has
not been effected by the Borrower by 31 December 1999 the
Borrower agrees that it will discuss with the Agent and NatWest
acting on the instructions of the Majority Lenders the level of
further fees payable thereafter.
9.5 Any failure by the Borrower to fulfil its undertakings under
Clauses 9.1, 9.2 and 9.4 (i) and (ii) above (including
undertakings to make payments) in full and at or by the times
indicated above shall constitute an Event of Default.
10 SECURITY ISSUES
Each of the Borrower and the Guarantors undertake that within 21 days
of the Second Amendment Effective Date:
- -8
<PAGE>
10.1 they will execute an agreement subordinating all indebtedness
between companies forming part of the ChiRex Group to the sums
owing pursuant to the Facilities Agreement; and
10.2 (unless they are able to satisfy the Agent and NatWest acting
reasonably on the instructions of the Majority Banks that there
are valid legal and/or commercial reasons for not doing so; the
Agent and NatWest to notify the Borrower and the Guarantors of
the decision in writing) they will procure that ChiRex America
Inc. and ChiRex Technology Center Inc. become Guarantors
pursuant to the Facilities Agreement and that ChiRex America
Inc. will provide security in respect of any Intellectual
Property owned by it, in form and substance acceptable to the
Security Trustee and NatWest; and
10.3 they will procure that the relevant companies forms 403a are
filed at Companies House in relation to the following charges
granted in favour of Midland Bank plc by the Borrower:
---------------------------------------------------------------
DATE OF CHARGE TYPE OF CHARGE
===============================================================
10/8/95 Fixed and Floating Charge
30/11/95 Pledge Agreement over
Share Capital in Alice
Dudley Limited ("Dudley")
---------------------------------------------------------------
10.4 they will procure that the Articles of Association of ChiRex
(Dudley) Limited and ChiRex (Annan) Limited will be amended to
remove the provision that grants their Directors an absolute
discretion to refuse to register transfers of shares.
10.5 Any failure by the Borrower and the Guarantors to fulfil their
undertakings under this Clause 10 in full and at or by the times
indicated above shall constitute an Event of Default.
11 AGENTS APPLICATION OF FEES
If any fees are paid to the Agent by the Borrower in accordance with
Clauses 8 and 9.3 above, the Agent agrees to pay such sums as are for
the account of each Lender to that Lender within 2 business days of
receipt by the Agent of such fees.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto
duly authorised as of the date first written above.
CHIREX (HOLDINGS) LIMITED, in its capacity as the Borrower
By: (s)
Print Name:
Title:
- -9
<PAGE>
CHIREX INC., in its capacity as a Guarantor
By: (s)
Print Name:
Title:
CHIREX (DUDLEY) LIMITED, in its capacity as a Guarantor
By: (s)
Print Name:
Title:
CHIREX (ANNAN) LIMITED, in its capacity as a Guarantor
By: (s)
Print Name:
Title:
BANKERS TRUST INTERNATIONAL PLC, in its capacity as a Joint Arranger
By: (s)
Print Name:
Title:
MIDLAND BANK PLC, in its capacity as a Joint Arranger and a Lender
By: (s)
Print Name:
Title:
- -10
<PAGE>
BANKERS TRUST COMPANY, in its capacities as a Lender, Agent and Security Agent
By: (s)
Print Name:
Title:
THE GOVERNOR AND COMPANY OF
BANK OF IRELAND, in its capacity as a Lender
By: (s)
Print Name:
Title:
BANQUE ET CAISSE D'EPARGNE DE L'ETAT, in its capacity as a Lender
By: (s)
Print Name:
Title:
By: (s)
Print Name:
Title:
DE NATIONALE INVESTERINGSBANK N.V., in its capacity as a Lender
By: (s)
Print Name:
Title:
By: (s)
Print Name:
Title:
- -11
<PAGE>
IKB DEUTSCHE INDUSTRIEBANK AG, in its capacity as a Lender
By: (s)
Print Name:
Title:
By: (s)
Print Name:
Title:
AIB CAPITAL MARKETS PLC, in its capacity as a Lender
By: (s)
Print Name:
Title:
MITSUBISHI TRUST & BANKING CORPORATION, in its capacity as a Lender
By: (s)
Print Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, in its capacity as a
Lender
By: (s)
Print Name:
Title:
- -12
<PAGE>
By: (s)
Print Name:
Title:
NATIONAL WESTMINSTER BANK PLC, in its capacity as a Lender
By: (s)
Print Name:
Title:
- -13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM ChiRex Inc.'s third
quarter 1998 Form 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
Form 10-Q
</LEGEND>
<CIK> 0001005407
<NAME> CHIREX INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,172
<SECURITIES> 0
<RECEIVABLES> 22,098
<ALLOWANCES> 0
<INVENTORY> 31,112
<CURRENT-ASSETS> 5,170
<PP&E> 170,369
<DEPRECIATION> 25,559
<TOTAL-ASSETS> 237,785
<CURRENT-LIABILITIES> 50,082
<BONDS> 78,389
0
0
<COMMON> 118
<OTHER-SE> 93,457
<TOTAL-LIABILITY-AND-EQUITY> 237,785
<SALES> 83,600
<TOTAL-REVENUES> 83,927
<CGS> 65,624
<TOTAL-COSTS> 81,007
<OTHER-EXPENSES> 873
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,883
<INCOME-PRETAX> (1,836)
<INCOME-TAX> 605
<INCOME-CONTINUING> (1,231)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,231)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
