UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1997 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-9860
BARR LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
New York 22-1927534
(State or Other Jurisdiction of (I.R.S. -
Employer
Incorporation or Organization) Identification
No.)
Two Quaker Road, P. O. Box 2900, Pomona, New York 10970-0519
(Address of principal executive offices)
914-362-1100
(Registrant's telephone number)
(Former name, former address and former fiscal year, if changed
since last report)
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 such filing
requirements for the past 90 days.
Yes X NO
Number of shares of Common Stock, Par Value $.01, outstanding as
of March 31, 1997:
21,200,956.
<PAGE 1>
BARR LABORATORIES, INC.
INDEX PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 and June 30, 1996 3
Consolidated Statements of Earnings
for the three and nine-months ended
March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the nine-months ended
March 31, 1997 and 1996 5
Notes to Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 9-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars, except per share amounts)
(unaudited)
<CAPTION>
March 31, June 30,
1997 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 54,650 $ 44,893
Accounts receivable, less allowances
of $ 1,651 and $1,799 respectively 31,607 32,065
Inventories 49,270 42,396
Deferred income taxes 2,842 2,771
Prepaid expenses 834 648
Total current assets 139,203 122,773
Property, plant and equipment, net 60,723 45,739
Other assets 824 708
Total assets $ 200,750 $169,220
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 64,206 $ 58,537
Accrued liabilities 6,072 6,332
Current portion of long-term debt 4,117 3,815
Income tax payable 5,609 1,104
Total current liabilities 80,004 69,788
Long-term debt 18,675 17,709
Other liabilities 222 238
Deferred income taxes 1,306 1,324
Commitments & Contingencies
Shareholders' Equity:
Common Stock $.01 par value per share
Authorized 30,000,000; issued 21,318,912
and 14,115,664, respectively 142 141
Common stock distributable 71 -
Additional paid-in capital 44,987 43,526
Retained earnings 55,356 36,507
100,556 80,174
Treasury stock at cost; 117,955 and
78,637 shares in 1997 and 1996,
respectively (13) (13)
Total shareholders' equity 100,543 80,161
Total liabilities and shareholders'
equity $ 200,750 $169,220
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(thousands of dollars, except per share amounts)
(unaudited)
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Net product sales $60,164 $60,088 $191,730 $171,729
Proceeds from supply
agreement 24,550 - 24,550 -
Total revenues 84,714 60,088 216,280 171,729
Costs and expenses:
Cost of sales 50,959 49,405 162,120 139,405
Selling, general and
administrative 6,520 5,714 15,119 16,207
Research and development 3,409 3,552 9,356 8,325
Earnings from operations 23,826 1,417 29,685 7,792
Interest income 641 1,003 1,805 2,288
Interest expense (203) (457) (842) (1,361)
Other (expense) income, net 51 - 58 (12)
Earnings before income taxes
and extraordinary loss 24,315 1,963 30,706 8,707
Income tax expense 9,390 694 11,786 3,248
Earnings before extraordinary
loss 14,925 1,269 18,920 5,459
Extraordinary loss on early
extinguishment of debt, net
of taxes - (125) - (125)
Net earnings $14,925 $1,144 $18,920 $5,334
PER COMMON SHARE:
Earnings before extraordinary
loss $ 0.66 $ 0.06 $ 0.85 $ 1.00
Extraordinary loss on early
extinguishment of debt,
net of taxes - (0.01) - (0.01)
Net earnings per common and
common equivalent
shares $ 0.66 $ 0.05 $ 0.85 $ 0.25
Net earnings per common share
assuming full dilution $ 0.66 $ 0.05 $ 0.84 $ 0.24
Weighted average number of
common shares 22,495 20,982 22,279 20,943
Weighted average number of
shares assuming full dilution 22,609 22,056 22,572 22,017
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, 1997 and 1996
(thousands of dollars; unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net earnings $ 18,920 $ 5,334
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,723 3,681
Deferred income tax benefit (89) (230)
Write-off of deferred financing fees
associated with
early extinguishment of debt - 31
Loss (gain) on disposal of equipment (50) 19
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 458 (2,629)
Inventories (6,874) (5,953)
Prepaid expenses (186) (139)
Other assets (210) (620)
Increase (decrease) in:
Accounts payable and accrued
liabilities 5,393 2,165
Income taxes payable 4,505 991
Net cash provided by operating activities 25,590 2,650
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES:
Purchases of property, plant and equipment (18,612) (9,843)
Proceeds from sale of property, plant and
equipment 50 179
Net cash used in investing activities (18,562) (9,664)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Principal payments on long-term debt (118) (2,032)
Proceeds from borrowings 1,386 -
Costs associated with stock split - (20)
Proceeds from exercise of stock options
and employee stock purchases 1,461 1,153
Net cash provided by (used in) financing
activities 2,729 (899)
Increase (decrease) in cash 9,757 (7,913)
Cash and cash equivalents, beginning of period 44,893 52,987
Cash and cash equivalents, end of period $ 54,650 $ 45,074
Supplemental cash flow data-Cash paid during
the period:
Interest, net of portion capitalized $ 361 $ 906
Income taxes $ 7,370 $ 2,681
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
BARR LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (in thousands, except share information)
1. Basis of Presentation
The consolidated financial statements include the accounts
of Barr Laboratories, Inc. and its wholly-owned subsidiaries
(the "Company" or "Barr").
In the opinion of the Management of the Company, the interim
consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary
for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. Interim
results are not necessarily indicative of the results that
may be expected for a full year. These financial statements
should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended June 30, 1996, and
quarterly reports on Form 10-Q for the periods ended
September 30, and December 31, 1996.
2. Proceeds from Supply Agreement
In January 1997, Bayer AG and Bayer Corporation ("Bayer") and
the Company reached an agreement to settle the then pending
litigation regarding Bayer's patent protecting ciprofloxacin
hydrochloride ("Settlement Agreement"). As a result, the U.
S. Federal Court for the Southern District of New York
entered a Consent Judgment ending the litigation. In
connection with the Settlement Agreement, the Company
acknowledged the validity and enforceability of Bayer's world-
wide ciprofloxacin patent, received an initial cash payment
of $24.6 million, and signed a contingent, non-exclusive
Supply Agreement ("Supply Agreement") which becomes effective
in January, 1998 and ends at patent expiry in December, 2003.
During the term of the Supply Agreement, Bayer has the option
of supplying Barr and an unrelated third party with
ciprofloxacin hydrochloride to market and distribute pursuant
to a license from Bayer or making quarterly cash payments to
Barr beginning in March, 1998.
3. Inventories
Inventories consisted of the following:
March 31, June 30,
1997 1996
Raw materials and supplies $20,471 $19,648
Work-in-process 7,181 4,920
Finished goods 21,618 17,828
$49,270 $42,396
Tamoxifen Citrate, purchased as a finished product, accounted
for approximately $16,085 and $12,590 of finished goods as of
March 31, 1997 and June 30, 1996, respectively.
<PAGE>
4. Earnings Per Common Share and Common Share Equivalents
For the three and nine-month periods ended March 31, 1997,
earnings per primary common and common equivalent shares was
computed by dividing the earnings applicable to common stock
by the weighted average number of common and dilutive common
equivalent shares outstanding during the period.
For the three and nine-month periods ended March 31, 1996,
earnings per primary common and common equivalent shares was
computed by dividing the earnings applicable to common stock
by the weighted average number of common shares outstanding
during the period. Fully diluted earnings per share was
calculated including dilutive stock options.
The shares and per share amounts reflected in the accompanying
Consoldated Balance Sheet as of March 31, 1997 and Statements
of Earnings are calculated after giving effect to the Company's
3-for-2 stock split effected in the form of a 50% stock dividend
which was declared on April 11, 1997 and distributed on May 7,1997.
5. Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid
investments (primarily market auction securities with
interest rates that are re-set in intervals of 7 to 49 days)
which are readily convertible into cash at par value (cost).
As of March 31, 1997 and June 30, 1996 approximately $24,947
and $20,924, respectively, of the Company's cash was held in
an escrow account. Such amounts represent the portion of
the Company's payable balance to the Innovator of
Tamoxifen, which the Company has decided to secure in
connection with its cash management policy. The Company pays
the Innovator monthly interest based on the average
unsecured monthly Tamoxifen payable balance.
6. Other
Included within selling, general and administrative expenses
("SG&A") for the three- and nine-months ended March 31, 1996
are certain non-recurring charges of approximately $700 in
connection with a voluntary early retirement program and a
legal settlement. SG&A expenses also include a credit of
$700 in legal costs reimbursed by another company. See
Management's Discussion and Analysis. Interest income for
the three- and nine-months ended March 31, 1996 includes
$485 of interest received in February 1996 in connection
with an income tax refund from the Internal Revenue Service.
7. Extraordinary Item
In the quarter ended March 31, 1996, the Company negotiated
the prepayment of $2 million in principal of its $20 million
10.15% Senior Secured Notes. This prepayment allowed the
Company to complete an equipment financing to support its
ongoing expansion efforts under more favorable terms. The
cash payment of $2,213 included a prepayment penalty of $169
and accrued interest through March 15, 1996 of $44. The
Company successfully negotiated a lower prepayment penalty
than the amount required by the Note Agreement. The
prepayment penalty of $169 and the related write-off of
approximately $31 in previously deferred financing costs
resulted in an extraordinary loss for the three- and nine-
months ended March 31, 1996. This extraordinary loss from
early extinguishment of debt, net of taxes of $76, was $125
or $0.01 per share.
<PAGE>
8. Commitments and Contingencies
At March 31, 1997, the Company was involved in lawsuits
normal and incidental to its business, including patent
infringement actions. Management, based on the advice of
legal counsel, believes that the ultimate disposition of
these lawsuits will not have a significant adverse effect on
the Company's consolidated financial statements.
9. Subsequent Events
On April 11, 1997, the Company's Board of Directors declared
a 3-for-2 stock split effected in the form of a 50% stock
dividend. Approximately 7.1 million additional shares of
common stock were distributed on May 7, 1997 to shareholders
of record as of April 24, 1997. All current and prior year
share and per share amounts have been adjusted for the stock
split.
In December 1995, the Company received a "30-day" letter from
the IRS disallowing approximately $750 in research and
development tax credits, originating from the fiscal years
ended June 30, 1987 through June 30, 1992, on the grounds
that research and development tax credits taken in developing
generic drugs for approval under the ANDA procedure are
excluded from the definition of the term "qualified research"
by the duplication exclusion contained in section 41(d)(4)(C)
of the IRS Code, and other grounds. On May 12, 1997 the
Company settled the claim with the IRS, without agreeing that
the Company's activities do not qualify for credit, for
approximately $822 including interest. A provision for an
estimate of the settlement amount had been previously
included in the Company's 1996 consolidated financial
statements, and therefore the payment will not have any signif-
icant adverse effect on the Company's consolidated financial
statements.
<PAGE>
BARR LABORATORIES, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations: Comparison of the Quarter Ended March 31,
1997
to the Quarter Ended March 31, 1996 - (thousands of dollars)
Total revenues increased to $84,714 from $60,088. This increase
is primarily the result of $24,550 in proceeds from supply
agreement (See Note 3 to consolidated financial statements).
Net product sales increased to $60,164 from $60,088. The
increase is attributable to slight increases in Tamoxifen Citrate
("Tamoxifen"), the breast cancer treatment distributed by the
Company, offset by a slight decrease in Barr-manufactured
products.
Third quarter sales of Tamoxifen totaled $44,846 and were
consistent with the prior year, the result of heavy buying by
several customers during the end of the second quarter in
anticipation of a price increase that did not occur at the
beginning of the third quarter, even though the Company's market
share continued to increase during the quarter. Tamoxifen
represented approximately 75% of total net product sales in the
current quarter compared to 74% in the prior year. Tamoxifen is
a patent protected product manufactured for the Company by the
Innovator, and is distributed by the Company under a non-
exclusive license agreement with the Innovator. Currently
Tamoxifen only competes against the Innovators products, which
are sold under the brand name.
Net sales of Barr-manufactured products remained consistent with
prior years. Barr-manufactured net sales include revenues from
five new products compared to two new products in the same period
last year. Revenues from new products and volume increases on
the Company's existing product line offset price declines and
higher discounts on certain existing products. Revenues from new
products represented approximately 13% of total Barr-manufactured
sales for the quarter ended March 31, 1997.
Cost of sales increased to $50,959 or 85% of net product sales
from $49,405 or 82%. The increase in cost of sales as a
percentage of net product sales is primarily the result of two
factors. First, an increase in Tamoxifen's share of the total
Company revenues and second, lower net product sales due to
increases in sales discounts and allowances, the result of
increased competition. The increase in Tamoxifen's portion of
total revenues negatively impacts the cost of sales percentage
because the cost of distributed products is generally greater
than that of manufactured products. Increased sales discounts
and allowances are offered by the Company to maintain and
increase market share in light of increased competition.
New products such as Megestrol Acetate and Danazol, which were
introduced in November 1995 and August 1996, respectively, as
well as Medroxyprogesterone and Meperidine which were introduced
in the quarter ended December 31, 1996, are currently subject to
less competition and therefore, generate margins which help
offset the declining margins on the Company's more established
products. The Company continues to experience competition on
sales of its other products, and it is impossible to predict
whether further price erosion will occur. If further price
erosion were to occur, this could have a material adverse effect
on the Company's gross margins and gross profits.
<PAGE>
Selling, general and administrative expenses increased from
$5,714 to $6,520 and increased as a percentage of net product
sales from 10% to 11%. The majority of the increase in both
dollars and percentage is attributable to costs associated with
the Company's pre-launch activities for Warfarin Sodium
and increased legal expenses. The prior year quarter also
included approximately $700 in non-recurring charges in
connection with a voluntary early retirement program and a legal
settlement. These non-recurring charges were offset by a
reduction in legal fees of approximately $700. During the
quarter ended March 31, 1996, Barr entered into an agreement with
another company to share in the development and litigation costs
associated with one of its patent challenges. This agreement
resulted in the above mentioned reduction of $700 in legal fees
which were reimbursed by the other company.
Research and development expenses decreased from $3,552 to
$3,409. This decrease is primarily the result of lower outside
testing, due to the cyclical nature of the research and
development program, partially offset by increases in salaries
and related costs associated with the addition of scientists and
higher outside consulting costs necessary to support the number
of products in development.
Interest income decreased by $362 in comparison to the prior
year. The decrease is primarily the result of $485 in interest
income included in the prior year amounts in connection with
interest earned on an income tax refund from the Internal Revenue
Service. This was offset by a 27% increase in the average cash
and cash equivalent balance in comparison to the same period in
the prior year.
Interest expense decreased $254 primarily due to an increase in
capitalized interest associated with an increase in capital
improvements as compared to the prior year. The increase in
capitalized interest was partially offset by interest on the
Company's equipment financing agreement entered in April 1996 and
interest on the unsecured Tamoxifen balance.
In the quarter ended March 31, 1996, the Company incurred an
extraordinary loss on the early extinguishment of debt. In March
1996, the Company negotiated the prepayment of $2 million in
principal of its $20 million 10.15% Senior Secured Notes. The
Company recorded an extraordinary loss for the related prepayment
penalty and write-off of deferred financing costs.
Results of Operations: Comparison of the Nine Months Ended March
31, 1997
to the Nine Months Ended March 31, 1996 (thousands of dollars)
Total revenues increased to $216,280 from $171,729. This
increase is attributable to $24,550 in proceeds from supply
agreement (see Note 3 to consolidated financial statements); a
continued increase in demand for Tamoxifen Citrate ("Tamoxifen"),
the breast cancer treatment distributed by the Company; as well
as increased sales for the balance of the Company's product
lines.
Tamoxifen sales increased 15% to $144,531 or 75% of net product
sales from $126,038 or 73% of net product sales in the prior
year. The growth primarily resulted from increases in the
Company's market share.
Net sales of Barr-manufactured products increased approximately
3%. Barr-manufactured products included revenues from five new
products in fiscal 1997 compared to two new products in fiscal
1996. These products represent approximately 11% and 2% of total
Barr-manufactured
<PAGE>
sales in 1997 and 1996, respectively. Revenues
from these products and volume increases on the Company's
existing product line more than offset price declines on certain
existing products.
Cost of sales increased to $162,120 or 85% of net product sales
from $139,405 or 81%. The increase is primarily attributable to
higher product costs associated with an increase in Tamoxifen's
share of total Company revenues and an increase in sales
discounts and allowances due to increased competition. The
resulting lower margins were partially offset by higher margins
earned on new products which are currently subject to less
competition.
Research and development expenses increased 12% to $9,356. The
increase is primarily the result of increases in salaries and
related costs associated with the addition of scientists and
higher outside consulting costs necessary to support the number
of products in development.
Selling, general and administrative expenses decreased to $15,119
from $16,207 primarily as a result of approximately $3,400
of reimbursed legal fees related to the ciprofloxacin patent
challenge. The reduction in legal fees was partially offset by
increased personnel and marketing costs.
Interest income decreased $483 to $1,805. The decrease is
primarily the result of $485 in interest income included in the
prior year's amount in connection with interest earned on an
income tax refund from the Internal Revenue Service.
Interest expense decreased $519 due to an increase in capitalized
interest associated with an increase in capital improvements as
compared to the prior year. The increase in capitalized interest
was partially offset by interest on the Company's equipment
financing agreement entered in April 1996 and interest on the
unsecured Tamoxifen balance.
Liquidity and Capital Resources
The Company's cash and cash equivalents increased to $54,650 at
March 31, 1997 from $44,893 at June 30, 1996. The Company's
unrestricted portion of this balance increased from $20,924 at
June 30, 1996 to $24,947 at March 31, 1997.
Cash provided from operating activities was $25,590 for the nine
months ended March 31, 1997, which included net earnings of
$18,920. The increase in inventory is offset by increases in
accounts payable and income taxes payable. The inventory
increase is primarily the result of an increase in Tamoxifen and
other new product inventory. Accounts payable increased
primarily as a result of increased purchases of Tamoxifen and
income taxes payable increased due to increased earnings.
The Company invested $18,612 in capital assets during the nine
months ended March 31, 1997 primarily in connection with the
Company's expansion of its manufacturing capacity in its Virginia
and New York facilities. During the remainder of fiscal 1997,
the Company estimates that it will invest an additional $10
million in construction and new equipment for these facilities.
During the nine months ended March 31, 1997 the company utilized
$1,386 under its $18,750 equipment financing agreement with
BankAmerica Leasing and Capital Group. As of March 31, 1997,
$14,210 of this facility remains available for use through
October, 1997. The Company has not drawn upon its 3-year $10
million revolving credit facility with Bank of America Illinois.
Management believes that existing capital resources will be
adequate to meet its needs for the foreseeable future.
<PAGE>
As indicated in Part II, Item 1. Legal Proceedings, in January
1997, Bayer and the Company reached an agreement to settle the
then pending litigation regarding Bayer's patent protecting
ciprofloxacin hydrochloride ("Settlement Agreement"). In
connection with the Settlement Agreement, the Company
acknowledged the validity and enforceability of Bayer's world-
wide ciprofloxacin patent, received an initial cash payment of
$24.6 million, and signed a contingent, non-exclusive Supply
Agreement ("Supply Agreement") which becomes effective in
January, 1998 and ends at patent expiry in December, 2003.
During the term of the Supply Agreement, Bayer has the option of
supplying Barr and an unrelated third party with ciprofloxacin
hydrochloride to market and distribute pursuant to a license from
Bayer or making quarterly cash payments to Barr beginning in
March, 1998. If Bayer elects to continue making cash payments,
the annual value to Barr would be approximately $25 million. If
Bayer provides Barr with product, the amount Barr could earn
would be dependent on market conditions.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously disclosed in the Company's annual report on Form 10-
K for the year ended June 30, 1996, the Company is involved in
certain legal proceedings. The following summarizes significant
developments in previously reported matters.
Ciprofloxacin Patent Challenge
In January 1997, Bayer and the Company reached an agreement to
settle the then pending litigation regarding Bayer's patent
protecting ciprofloxacin hydrochloride ("Settlement Agreement").
As a result, the U.S. Federal Court for the Southern District of
New York entered a Consent Judgment ending the litigation. In
connection with the Settlement Agreement, the Company
acknowledged the validity and enforceability of Bayer's world-
wide ciprofloxacin patent, received an initial cash payment of
$24.6 million, and signed a contingent non-exclusive Supply
Agreement ("Supply Agreement") which becomes effective in
January, 1998 and ends at patent expiry in December, 2003.
During the term of the Supply Agreement, Bayer has the option of
supplying Barr and an unrelated third party with ciprofloxacin
hydrochloride to market and distribute pursuant to a license from
Bayer or making quarterly cash payments to Barr beginning in
March, 1998.
Item 6. Exhibits
(a) Exhibit
Number Exhibit
11 Computation of per share earnings
27 Financial data schedule
10.14 Supply Agreement for ciprofloxacin
hydrochloride dated January, 1997
(portions of this exhibit
have been omitted pursuant to a request
for confidential treatment.)
(b) There were no reports filed on Form 8-K in the
quarter ended March 31, 1997.
SIGNATURES
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.
BARR LABORATORIES, INC.
Dated: May 14, 1997 /s/ William T. McKee
Chief Financial Officer and Treasurer
[TYPE]EX-11
[DESCRIPTION]Article 5 Per Share Earnings for 03/31/97
[ARTICLE]5
[MULTIPLIER]1000
<TABLE>
BARR LABORATORIES, INC.
COMPUTATION OF PER SHARE EARNINGS
QUARTER AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996
(Amounts in thousands, except per share amounts)
<CAPTION>
1997 1996 1997 1996
QUARTER QUARTER Y-T-D Y-T-D
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 21,127 20,982 21,090 20,943
Net effect of dilutive stock options -
based on the treasury stock method using
average market price 1,369 - i 1,189 - ii
Total 22,495 20,982 22,279 20,943
Net earnings $14,925 $1,144 $18,920 $5,334
Net earnings per share $0.66 $0.05 $0.85 $0.25
FULLY DILUTED
Average shares outstanding 21,127 20,982 21,090 20,943
Net effect of dilutive stock options -
based on the treasury stock method using:
quarter-end market price 1,482 1,074 1,482 1,074
Total 22,609 22,056 22,572 22,017
Net earnings per share $0.66 $0.05 $0.84 $0.24
<FN>
i) Stock options of 980 in 1996 are not included because
their inclusion results in less than 3% dilution.
ii) Stock options of 662 in 1996 are not included because
their inclusion results in less than 3% dilution.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 54650
<SECURITIES> 0
<RECEIVABLES> 31607
<ALLOWANCES> 0
<INVENTORY> 49270
<CURRENT-ASSETS> 139203
<PP&E> 60723
<DEPRECIATION> 0
<TOTAL-ASSETS> 200750
<CURRENT-LIABILITIES> 80004
<BONDS> 18675
0
0
<COMMON> 213
<OTHER-SE> 100343
<TOTAL-LIABILITY-AND-EQUITY> 200750
<SALES> 216280
<TOTAL-REVENUES> 216280
<CGS> 162120
<TOTAL-COSTS> 162120
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 842
<INCOME-PRETAX> 30706
<INCOME-TAX> 11786
<INCOME-CONTINUING> 18920
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18920
<EPS-PRIMARY> .85
<EPS-DILUTED> .84
</TABLE>
EXHIBIT 10.14
The Company has filed with the Commission a written objection to
the public disclosure of certain information contained in this
document. The Company has omitted material from this document at
the places marked with three asterisks (***), both at the
beginning and the end of the material. The omitted material has
been filed separately with the Commission.
EXECUTION COPY
SUPPLY AGREEMENT dated as of
January 8, 1997 (this "Agreement"), by and
between BAYER AG, BAYER CORPORATION
("Bayer US" and together with Bayer AG,
"Bayer"), BARR LABORATORIES, INC. ("Barr")
and HOECHST MARION ROUSSEL, INC. ("HMR").
WHEREAS Bayer AG, Bayer US and Barr entered into a
Settlement Agreement and Mutual Release dated as of the date
hereof (the "Barr Settlement Agreement"), in the matter of
litigation relating to United States Patent No. 4,670,444
(the "`444 Patent"), which claims, inter alia, the novel
compound commonly known as ciprofloxacin ("ciprofloxacin"),
then pending in the United States District Court for the
Southern District of New York (the "District Court"), in
which litigation Bayer AG and Bayer US were the plaintiffs
and Barr was the defendant;
WHEREAS HMR and Rugby Laboratories, Inc. have
maintained co-control with Barr of the defense against
Bayer's claims in the litigation and have paid or reimbursed
Barr for a portion of its cost of defending against Bayer's
claims in the litigation;
WHEREAS Bayer AG, Bayer US, HMR and Rugby
Laboratories, Inc. entered into a Settlement Agreement and
<PAGE>
Mutual Release dated as of the date hereof (the "HMR
Settlement Agreement");
***
***
WHEREAS the parties are entering into this
Agreement as required by the Barr Settlement Agreement and
the HMR Settlement Agreement;
WHEREAS, in certain circumstances more fully
described herein, Bayer will manufacture and supply Barr and
HMR (the "Purchasers") with the Product (as defined below)
as finished product for sale by Purchasers; and
WHEREAS Purchasers wish Bayer to make Product
available to them for purchase according to the provisions
of this Agreement.
<PAGE>
NOW, THEREFORE, Bayer AG, Bayer US and Barr and
HMR agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. The following terms
shall have the following meanings:
"Adjustment Date" shall mean the date that is six
months prior to the Final Expiration Date.
"*** Settlement Agreement" shall have the
meaning set forth in the recitals.
"Barr" shall mean Barr Laboratories, Inc.
"Barr Escrow Account" shall mean the escrow
account of Barr at Citibank N.A., or any other responsible
institution, established to receive payments due to Barr
under the Barr Settlement Agreement and this Agreement.
"Barr Settlement Agreement" shall have the meaning
set forth in the recitals.
"Barr's Aggregate Costs" shall have the meaning
set forth in Section 3.06(d).
"Barr's Costs" shall have the meaning set forth in
Section 3.06(d).
"Bayer" shall mean Bayer AG and Bayer US.
"Bayer Option" shall have the meaning set forth in
Section 4.02.
<PAGE>
"Bayer US" shall mean Bayer Corporation.
"Breaching Party" shall have the meaning set forth
in Section 16.02(b).
"Calendar Quarter" shall mean each consecutive
three-month period beginning on either January 1, April 1,
July 1 or October 1 of any given year.
"Determination Date" shall mean the earlier of
(i) the Invalidity Date and (ii) the Generic Date.
"District Court" shall have the meaning set forth
in the recitals.
"Final Expiration Date" shall have the meaning set
forth in Section 7.01.
"Generic Date" shall mean the date of launch of a
generic product in the United States containing
ciprofloxacin by a third party that is not licensed by Bayer
after the '444 Patent becomes invalid or unenforceable on a
final and nonappealable basis as to such third party other
than due to the Invalidity Date.
"HMR" shall have the meaning set forth in the
recitals.
"HMR Settlement Agreement" shall have the meaning
set forth in the recitals.
"Invalidity Date" shall mean the date of a final
and nonappealable judgment or a final and nonappealable
<PAGE>
declaration that the `444 Patent is invalid or unenforceable
as to all persons in the United States.
"Net Revenues" shall have the meaning set forth in
Section 3.06(d).
"Net Sales" shall have the meaning set forth in
Section 3.06(d).
"Net Selling Price" shall mean, ***
*** during such relevant period.
"Option Date" shall mean the date specified in the
Option Notice as the date on which Bayer's obligation to
supply Product to Purchasers shall commence, unless Bayer
revokes the Option Notice in accordance with Section 4.02.
"Option Notice" shall mean the notice delivered by
Bayer to Representative pursuant to Section 4.02 of this
Agreement informing Representative of Bayer's intention to
exercise the Bayer Option.
<PAGE>
"'444 Patent" shall have the meaning set forth in
the recitals.
"Patents" shall mean the '444 Patent and all the
other patents and patent applications and any divisions,
continuations, continuations-in-part, reissues or extensions
derived therefrom, related to the synthesis, manufacture,
compound or precursors to ciprofloxacin and any
pharmaceutical formulation containing ciprofloxacin existing
in the United States as of the date of this Agreement that
are owned by Bayer or any of its subsidiaries.
"Product" shall have the meaning set forth in
Article II.
"Product Specifications" shall have the meaning
set forth in Article II.
"Put Price" shall have the meaning set forth in
Section 3.06(a)(i).
"Quality Assurance Specifications" shall have the
meaning set forth in Section 3.05(b).
"Representative" shall have the meaning set forth
in Section 9.02.
"Settlement Agreement" shall have the meaning set
forth in the recitals.
"Settlement Agreements" shall have the meaning set
forth in the recitals.
<PAGE>
A "SKU" shall mean a given package size of a given
strength of Product.
"Stub Period" shall mean the period from the
earlier of the Option Date and the Adjustment Date until the
earliest of the next March 31, June 30, September 30 or
December 31.
A "subsidiary", with respect to a party, shall
mean any corporation, partnership, limited liability company
or other entity the voting interests in which are owned 50%
or more by that party.
"Supply Period" shall mean the period that
(i) commences with the earlier of ***
***
<PAGE>
"Termination Date" shall have the meaning set
forth in Section 7.01.
"Trade Discounts" shall mean prompt payment
discounts given by Bayer to encourage payment of trade
receivables prior to the net payment date.
"Trade Discount Percentage" shall mean, for a
particular Calendar Quarter, the percentage that is ***
***
ARTICLE II
Product
For purposes of this Agreement, the term "Product"
shall mean all oral dosage forms of ciprofloxacin presently
or subsequently marketed by Bayer or any of its subsidiaries
in the United States under a New Drug Application or a
Supplemental New Drug Application of Bayer or any of its
subsidiaries and pursuant to or under the authority of
(i) the Patents or (ii) the Patents and other patents owned
by Bayer or any of its subsidiaries, which conform to
<PAGE>
product specifications as approved from time to time by the
Food and Drug Administration (the "FDA"), except that during
any period of market exclusivity for a particular SKU
granted by the FDA pursuant to the Patent Term Restoration
Act of 1984, as amended, the term "Product" shall not
include such SKU. The term "Product" shall not include any
oral dosage forms of ciprofloxacin marketed pursuant to a
New Drug Application or Supplemental New Drug Application
that employs patented technology of a third party. Within
60 days of the date of this Agreement, Bayer will provide to
the Purchasers the current product specifications for the
Product (the "Product Specifications").
ARTICLE III
Manufacture and Supply of Product
SECTION 3.01. Purchase and Sale of Product.
Subject to the terms and conditions of this Agreement, Bayer
shall supply Purchasers with Product. Purchasers shall
purchase and accept all of Purchasers' requirements for
Product from Bayer and shall have the right to sell Product
purchased from Bayer only in the United States and Puerto
Rico and not elsewhere under a single trademark of the
Purchasers; provided, that such trademark shall not be
similar to CIPRO or any other trademark or tradename of
Bayer AG or any of its subsidiaries. Product shall be
<PAGE>
manufactured and packaged in accordance with Bayer's Product
Specifications. Bayer's Product Specifications may be
altered from time to time without the necessity of amending
this Agreement.
***
***
<PAGE>
SECTION 3.02. Product To Be Supplied by Bayer.
(a) Bayer will use its reasonable best efforts to supply
Purchasers with the quantities of Product ordered by
Representative in accordance with the terms of this
Agreement; provided, however, that Bayer may supply
Purchasers with quantities of Product that vary no more than
*** the quantities stipulated in Representative's firm
order; provided, further, that Bayer shall redress *** when
supplying subsequent orders.
(b) Bayer shall offer for sale to Purchasers
Product packed in containers in the standard packaging and
labeling for, and made in the sizes, shapes, and colors and
to the other specifications as, the Product offered at such
time by Bayer to Bayer's other customers except that nothing
herein shall require Bayer to sell the Product or any
packaging to the Purchasers with the trademark CIPRO or
Bayer's NDC number for CIPRO.
(c) ***
***
SECTION 3.03. Estimates, Orders and Delivery
Variances. (a) At least *** before the
<PAGE>
beginning of each Calendar Quarter in which Bayer is
obligated to supply Purchasers with Product pursuant to this
Agreement, Representative shall provide Bayer with a rolling
*** forecast of its requirements of Product broken down by
calendar months. This forecast will specify package size.
The *** calendar months of this forecast shall
represent a firm order, which shall be supplied by Bayer to
Purchasers in accordance with Representative's purchase
orders. Purchase orders must be delivered to Bayer by
Representative at least *** days prior to the shipment date
requested in such purchase order. The requirements of the
Stub Period and the first firm order appear in paragraph (b)
which follows.
(b) At least *** prior to the
anticipated first date of receipt of Product by the
Purchasers hereunder ***, representatives of Bayer and
Representative shall meet pursuant to Section 9.01(a) and
negotiate in good faith the quantities and delivery dates of
Product to be supplied in the Stub Period and the first
Calendar Quarter thereafter. If Product is to be delivered
by Bayer *** or upon occurrence of the Adjustment Date or
pursuant to Section 3.06(c), Bayer shall use its reasonable
best efforts
<PAGE>
to supply the Purchaser with Product that Representative
determines to be the Purchasers' reasonable requirement for
the Stub Period and the first Calendar Quarter thereafter.
In all other cases, Bayer shall use its reasonable best
efforts to supply the Purchasers with the quantities of
Product that Representative and Bayer determine to be the
Purchasers' requirements for the Stub Period and the first
Calendar Quarter thereafter. Representative shall place the
first firm order at least *** in advance of the
anticipated first date of receipt of Product (or as soon as
reasonably practicable if *** is not possible); ***
***.
(c) As soon as is reasonably practicable prior to
the reasonably likely start of the Supply Period,
representatives of Bayer and the Representative shall meet
pursuant to Section 9.01(a) and negotiate in good faith the
quantity and delivery dates of Product to be supplied during
<PAGE>
the first *** of the Supply Period. Bayer shall
use its reasonable best efforts to supply the Purchasers
with the quantities of Product that Bayer and the
Representative determine to be the Purchasers' requirements
for such *** period. ***
***
SECTION 3.04. Government Approvals. (a) Bayer
has and will maintain with the FDA its existing New Drug
Applications, and will maintain with the FDA any
<PAGE>
subsequently approved New Drug Applications, relating to the
Product.
(b) The parties shall promptly and fully advise
each other of any instructions, recommendations or
specifications required by any government regulatory agency
concerning the Product. Bayer shall notify Representative
and Representative shall notify Bayer of any actions that
Bayer or Representative, as the case may be, intends to take
in response to government regulatory agency requirements
concerning the Product. Disclosures by any party to the
other parties may be modified to protect such disclosing
party's proprietary information and technology.
(c) The Purchasers shall immediately notify Bayer
of all contacts with the FDA or other regulatory agencies
concerning Product. If the Purchasers are required by the
FDA to take any action with respect to Product without delay
or without any element of discretionary action or decision,
the Purchasers shall immediately notify Bayer. Purchasers
shall promptly provide Bayer with copies of all material
that it submits to the FDA concerning Product and all other
communications with the FDA concerning Product.
(d) Each Purchaser will utilize an NDC number in
the form of XXXX-YYYY-ZZ for such Purchaser's sales and
distribution of Product. Either Purchaser may change its
<PAGE>
NDC number with the consent of Bayer, which consent shall
not be unreasonably withheld.
SECTION 3.05. Manufacture and Packaging of
Product. (a) Bayer shall manufacture and package the
Product in finished dosage units in conformity with the
Product Specifications. All Product sold by a Purchaser
shall have a label of that Purchaser stating an equivalent
of "Manufactured by Bayer Corporation" and displaying the
trademark of the Purchasers, and not displaying the mark
CIPRO or any other trademark or tradename of Bayer AG or any
of its subsidiaries.
Purchasers may make changes to the Product
Specifications relating to packaging and/or labeling after
meeting with Bayer under Section 9.01 in order to reach
agreement on implementation procedures; provided that any
such changes (i) must comply with all FDA requirements and
(ii) must be approved by Bayer, which approval shall not be
unreasonably withheld. Purchasers shall reimburse Bayer for
all extra costs incurred by Bayer for making any such
changes, including the cost of destroying obsolete
packaging, labeling or related materials.
Nothing contained herein shall prevent Bayer from
modifying its manufacturing or packaging specifications or
the Product labeling, so long as such changes conform to FDA
<PAGE>
requirements and the NDAs relating to the Product. Bayer
shall notify Representative promptly following a final
decision to make or, if FDA approval is required, to seek
approval for such changes, but in no event shall
Representative be given less than forty-five (45) days
advance written notice of the fact and specifics of such
modification, unless a shorter time is required to comply
with FDA requirements.
(b) Bayer's quality assurance procedures and
in-plant quality assurance checks after the manufacture of
Product shall be applied in conformity with the requirements
of the FDA and with the quality assurance specifications for
the Product (which may be modified to the extent necessary
to protect Bayer's proprietary information) (the "Quality
Assurance Specifications") to be supplied by Bayer to the
Purchasers within 60 days of the date of this Agreement, and
which shall thereafter be modified as required by applicable
government regulation.
(c) Representative shall have the right once per
year, upon thirty (30) days' prior written notice, to
arrange for an inspection by an independent mutually
acceptable inspector, during regular business hours, of
Bayer's production facilities used, or to be qualified for
use, in connection with the manufacture of Product for
<PAGE>
Representative. Such inspection shall be limited to Bayer's
compliance with then current GMP regulations in the
production, testing and storage of the Product. The
inspection report contents shall be limited to advising
whether Bayer does, or does not, comply with such
regulations. Any such inspector shall be required to
execute a confidentiality agreement consistent with this
Section 3.05(c) and in the form reasonably requested by
Bayer prior to any such inspection.
(d) Quality assurance and analytical records will
be maintained by Bayer as required by relevant regulatory
agencies, and copies thereof will be made available to
Representative if requested.
(e) Each Product container shall show the lot
number(s), clearly distinct from all other numerical
identifications, and such lot number(s) shall be on the
shipping documents.
SECTION 3.06. Pricing. ***
***
<PAGE>
***
***
<PAGE>
***
***
(c) Bayer reserves the right to enter into
license or supply agreements with other persons for the sale
of Product in the United States. In this connection,
"Private Label Distributor" shall mean a person (other than
the Purchasers) which markets Product in the United States
under a tradename or trademark which is not CIPRO (or such
other tradename or trademark under which Bayer is marketing
the Product). Bayer agrees that the Purchasers shall have
at ***
<PAGE>
*** before Bayer may allow a Private Label Distributor to
enter the market. ***
***
<PAGE>
***
***
<PAGE>
***
***
<PAGE>
***
***
SECTION 3.07. Payment. ***
***
(c) Product shall be made available for shipping
F.O.B., Bayer's designated facility within the continental
United States or Puerto Rico. Bayer shall arrange for
<PAGE>
shipping of Product from the continental United States or
Puerto Rico to each Purchaser's facilities designated in
Representative's weekly shipping schedule, at that
Purchaser's expense, and title and risk of loss shall pass
upon delivery to the carrier.
(d) Notwithstanding anything to the contrary
herein, if any Purchaser is more than 90 days in arrears in
its payments to Bayer for Product, Bayer may suspend future
shipments of Product until such time as such payments are
made current, unless the total amount in arrears is being
disputed in good faith by such Purchaser.
SECTION 3.08. Requirements. Each Purchaser shall
purchase from Bayer 100% of its requirements for the Product
to be sold in the United States and Puerto Rico.
SECTION 3.09. Floor Stock Price Protection.
(a) This Section 3.09(a) shall apply ***
***
<PAGE>
***
***
<PAGE>
***
***
ARTICLE IV
***
***
<PAGE>
***
***
<PAGE>
***
***
SECTION 4.02. Bayer Option. On ***
prior written notice to Representative, Bayer may elect, in
its sole discretion, to cease making the payments to the
*** set forth in Schedule 4.01 (the "Bayer Option").
***
***
ARTICLE V
Labeling and Medical Information
Bayer shall supply to Representative such medical
and labeling information as is reasonably required by a
diligent pharmaceutical company to support the registration
of the Product and to ensure that Purchasers can undertake
and fulfill their legal, regulatory and medical
responsibilities relating to its sale of the Product. For
the same reason, Bayer shall supply copies of its
<PAGE>
promotional materials (but with no element of pricing
information) to Representative to assist Purchasers in
ensuring that their own promotional materials are consistent
and not capable of introducing ambiguities or differences of
interpretation in the marketplace.
Bayer shall ensure that Representative has
reasonable access to Bayer's medical information and
summaries of safety and effectiveness data provided to the
FDA in connection with the Product at the time of Product
approval, as supplemented from time to time. Bayer shall
provide such additional information and materials reasonably
requested by Representative relating to the foregoing,
including labeling, package inserts and product packaging.
Bayer shall arrange meetings to take place between
Representative and Bayer's representatives as soon as
practicable before Purchasers commence sales of Product to
discuss medical and regulatory information concerning the
Product.
ARTICLE VI
Warranties
SECTION 6.01. Bayer agrees that all Product
delivered to Purchasers pursuant to this Agreement shall
not, at the time of delivery, be adulterated or misbranded
within the meaning of the Federal Food, Drug and Cosmetic
<PAGE>
Act of the United States of America, as amended, as such
Act is constituted and effective at the time of delivery,
and the Product will not be an article which may not, under
the provisions of Sections 404 and 505 of such Act, be
introduced into interstate commerce.
SECTION 6.02. Bayer warrants that Product
delivered to Purchasers pursuant to this Agreement shall
conform with the Product Specifications, as amended from
time to time, and the Quality Assurance Specifications, as
amended from time to time, and shall conform to the relevant
FDA requirements. BAYER MAKES NO OTHER WARRANTIES, EXPRESS
OR IMPLIED, WITH RESPECT TO THE PRODUCT. ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY
BAYER. Except for damages which arise out of or are
attributable to any act or omission on the part of Bayer,
Bayer shall not be liable for indirect damages resulting
from Product sold under this Agreement.
SECTION 6.03. Bayer shall indemnify and hold
Purchasers harmless from and against all claims, causes of
action, settlement costs including reasonable attorneys'
<PAGE>
fees, losses or liabilities and expenses of whatever nature
which arise from or are attributable to:
(a) any Product characteristic or any
manufacturing defect or failure to meet the Product
Specifications and Quality Assurance Specifications
during or as a result of manufacture of the Product by
Bayer; or
(b) any negligent act or omission on the part of
Bayer's employees, agents or representatives.
In the event of any such claim against a Purchaser or any
Purchaser affiliate or any agent, director, officer or
employee, that Purchaser shall promptly notify Bayer in
writing of the claim and Bayer shall manage and control, at
its sole expense, the defense of the claim and its
settlement. That Purchaser shall cooperate with Bayer and
may, at its option and expense, participate in any such
action or proceeding.
SECTION 6.04. Each Purchaser shall indemnify and
hold Bayer harmless from and against all claims, causes of
action, settlement costs, including reasonable attorneys'
fees, losses or liabilities and expenses of any kind
asserted by third persons which arise out of or are
attributable to any negligent act or omission on the part of
that Purchaser or its employees, agents or representatives.
<PAGE>
In the event of any such claim against Bayer, or
any Bayer affiliate or any agent, director, officer or
employee, Bayer shall promptly notify the relevant Purchaser
in writing of the claim, and that Purchaser shall manage and
control, at its sole expense, the defense of the claim and
its settlement. Bayer shall cooperate with that Purchaser
and may, at its option and expense, participate in any such
action or proceeding.
SECTION 6.05. In the event that the FDA requires
withdrawal of Product from the market, or as soon as any
party is required to recall or is considering the recall of
the Product, it shall immediately advise the other and, at
the same time, provide the other with all information
leading to the need for such recall or the consideration of
it. Such party will use its reasonable efforts to ensure
that the others are given ample opportunity to participate
in all meetings with the FDA, and to the extent possible,
the parties shall together use their good faith efforts to
remedy the cause of the withdrawal or recall. It is
intended by the parties, by inclusion of this provision,
that there are no arbitrary one-sided decisions to recall
the Product in the United States or Puerto Rico, without
first ensuring well-informed and co-operative discourse
among the parties.
<PAGE>
Reasonable costs (but not including loss of
profits) associated with any recall or withdrawal of Product
hereunder, including the replacement Product manufactured by
Bayer, shall be borne by the party whose acts or omissions
resulted in the need for the recall or withdrawal.
If the recall or withdrawal of Product hereunder
arises from an act or omission of Bayer, Bayer shall
immediately replace, at Bayer's expense, the Product so
recalled or withdrawn, so that the Purchasers' businesses
are interrupted as little as possible.
SECTION 6.06. Each party will advise the others
within five (5) working days of the details of any
significant Product complaint which it may receive as to the
safety or efficacy of the Product, or significant and/or
repetitive adverse reactions to the Product.
ARTICLE VII
Term and Termination
SECTION 7.01. This Agreement shall terminate on
the date (the "Termination Date") that is the earlier of the
date of final expiration of the `444 Patent (the "Final
Expiration Date") and the expiration of the Supply Period;
provided, however, that such date shall be extended if
necessary to permit the Supply Period to have a length of
six months.
<PAGE>
SECTION 7.02. Termination or expiration of this
Agreement by any means and for any reason shall not relieve
the parties of any obligation accruing concurrently
therewith or prior thereto and shall be without prejudice to
the rights and remedies of any party with respect to any
breach of any of the provisions of this Agreement.
ARTICLE VIII
Force Majeure
SECTION 8.01. Any delay in the performance of any
of the duties or obligations of either party hereto (except
the payment of money) shall not be considered a breach of
this Agreement and the time required for performance shall
be extended for a period equal to the period of such delay;
provided that such delay has been caused by or is the result
of any acts of God; acts of the public enemy; insurrections;
riots; embargoes; labor disputes, such as strikes, lockouts
or boycotts; fires; explosions; floods; earthquakes;
mudslides; or other unforeseeable causes beyond the control
and without the fault or negligence of the party so
affected. The party so affected shall give prompt notice to
the other party of such cause, and shall take whatever
reasonable steps are necessary to relieve the effect of such
cause as rapidly as possible.
<PAGE>
SECTION 8.02. Should any event of force majeure
interrupt or reduce the manufacturing capacity of Bayer so
as to limit Bayer's ability to produce sufficient Product
for its and for Purchasers' requirements hereunder, then the
quantity of Product which still can be produced by Bayer (if
any) shall be allocated between the parties in such
proportions as recognizes the share in the volume of Product
manufactured by Bayer during *** represented by Purchasers'
purchases of Product during such period (if Product has been
***, the Purchasers' *** forecast of its requirements (that
was delivered to Bayer pursuant to Section 3.03) shall be
deemed to be the volume of Purchasers' purchases of Product
during *** for purposes of this calculation).
ARTICLE IX
Additional Covenants
SECTION 9.01. Meetings. (a) On a regularly
scheduled basis, representatives of Bayer and Representative
shall meet to confer on the implementation of the
transactions contemplated by this Agreement.
<PAGE>
(b) ***, through meetings held pursuant to
Section 9.01(a), Representative will coordinate with Bayer
to resolve all labeling, tooling, brochure and packaging
issues. The Purchasers shall promptly reimburse Bayer for
all reasonable startup costs including expenses related to
tooling and dies incurred by Bayer to prepare for supplying
Product to the Purchasers.
***
***
SECTION 9.02. Appointment of Representative for
the Purchasers. Barr and HMR hereby appoint Barr as their
representative (the "Representative") to act on behalf of
each of them as set forth herein. Barr and HMR may replace
<PAGE>
the Representative by delivery of notice to Bayer AG and
Bayer US of their replacement of the Representative, which
notice shall contain such replacement Representative's name,
address and fax number. Barr and HMR agree to form a joint
venture partnership no later than July 1, 1997, and to
appoint that partnership to be the Representative promptly
thereafter.
ARTICLE X
Notices
Any certificate, notice or notification to any
party required, permitted or contemplated hereunder will be
in writing, will be addressed to the party or parties to be
notified at the address set forth below, or at such other
address as each party may designate for itself from time to
time by notice hereunder, and will be deemed to have been
validly served, given or delivered (i) the fifth business
day after such notice was delivered to a regularly scheduled
overnight delivery carrier with delivery fees either prepaid
or an arrangement, satisfactory to such carrier, made for
the payment of such fees, or (ii) upon receipt of notice
<PAGE>
given by telecopy, mailgram, telegram, telex, or personal
delivery:
To Bayer AG: Bayer AG
D-51368 Leverkusen
Konzernbereich Recht,
Patente/Lizenzen und
Versicherungen
Germany
Attention: General Counsel
Fax: 49-214-30-50848
To Bayer US: Bayer
Corporation
One Mellon Bank Center
Pittsburgh, PA 15219-2507
Attention: General Counsel
Fax: 412-394-5580
With a copy to: Bayer
Corporation
Pharmaceuticals Division
400 Morgan Lane
West Haven, CT 06516-4175
Attention: General Counsel
Fax: 203-812-2795
To Barr: Barr Laboratories, Inc.
2 Quaker Road
Pomona, NY 10970
Attention: General Counsel
Fax: 914-353-8419
To HMR: Hoechst Marion Roussel, Inc.
10236 Marion Park Drive
Kansas City, MO 64134-0627
Attention: General Counsel
Fax: 816-966-3805
<PAGE>
To Representative: Barr Laboratories, Inc.
2 Quaker Road
Pomona, NY 10970
Attention: General Counsel
Fax: 914-353-8419
With a copy to: Hoechst Marion Roussel, Inc.
10236 Marion Park Drive
Kansas City, MO 64134-0627
Attention: General Counsel
Fax: 816-966-3805
All notices to Bayer must be delivered to Bayer AG and to
Bayer US.
ARTICLE XI
Limited License
SECTION 11.01. (a) The Purchasers are herein
granted a license that is limited to enabling them to
perform those activities permitted hereunder with respect to
Product for sale in the United States or Puerto Rico;
provided, however, that such license shall not be construed
as permitting, explicitly or implicitly, any action or
activity by the Purchasers either (i) outside the United
States or Puerto Rico or (ii) that is not specifically
authorized by this Agreement.
(b) Following the termination of this Agreement,
unless said termination is due to a breach of this Agreement
by a Breaching Party as determined by a court of competent
<PAGE>
jurisdiction or by arbitration as provided herein, the
Purchasers may manufacture and distribute Product in the
same sizes, shapes and colors as Product offered for sale by
Bayer in the United States or Puerto Rico as of the date of
termination (but no license is granted as to the containers
in which Product is sold), subject to any patent rights of
Bayer or its subsidiaries that are in force at such time.
For the avoidance of doubt, the Purchasers shall have no
right to use any trademark (other than trademarks relating
to size, shape or color of the Product), tradename, patents,
proprietary technology or logo used by Bayer or its
subsidiaries.
SECTION 11.02.***
<PAGE>
***
***
***.
ARTICLE XII
Applicable Law
This Agreement will be interpreted and the rights
and liabilities of the parties hereto determined in
accordance with the local law of the State of New York,
excluding any conflicts of law or choice of law, rule or
principle that might otherwise refer construction or
interpretation of this Agreement to the substantive law of
another jurisdiction. The parties expressly exclude the
<PAGE>
application of any provisions of the United Nations
Convention on Contracts for the International Sale of Goods
to this Agreement.
ARTICLE XIII
Confidentiality; Publicity
SECTION 13.01. Confidentiality. With the
intention to keep the terms of this Agreement confidential,
Bayer AG, Bayer US, Barr and HMR, on their own behalf and on
behalf of their respective officers, directors, employees,
agents, affiliates, attorneys and advisors, hereby agree to
use their respective reasonable best efforts not to disclose
the terms of this Agreement, except as required by law,
regulation governmental authority or stock exchange
regulation.
SECTION 13.02. Publicity. Except as the parties
have agreed in the Settlement Agreements or may otherwise
agree in writing, the parties shall not make any disclosures
concerning the terms of this Agreement, except in conformity
with Section 13.01.
ARTICLE XIV
Assignment
***
***
<PAGE>
***
***
<PAGE>
***
***
<PAGE>
ARTICLE XV
Effectiveness
This Agreement shall become effective upon the
entry by the District Court of the Consent Judgment. If
such entry does not occur, this Agreement shall be null and
void and of no force and effect.
ARTICLE XVI
Dispute Resolution
SECTION 16.01. (a) General. The parties
recognize that a bona fide dispute as to certain matters may
arise from time to time during the term of this Agreement
that may relate to the parties' rights and/or obligations
hereunder. The parties agree that they shall use all
reasonable efforts to resolve any dispute that may arise in
an amicable manner.
(b) Management Resolution. If the parties are
unable to resolve such a dispute within thirty (30) days,
any party may, by notice to the other parties, have such
dispute referred to the respective nominees of the parties.
Such nominees shall attempt to resolve the referred dispute
by good faith negotiations within thirty (30) days after
such notice is received. If the designated nominees are not
able to resolve such dispute within such thirty (30) day
<PAGE>
period, then the parties shall select a mediator to aid them
in resolving such dispute through the Center for Public
Resources. If the parties do not agree to pursue mediation
or, pursuant to such mediation the parties do not resolve
their dispute, the parties shall at such time initiate
arbitration under the Rules of the American Arbitration
Association then in effect. The arbitration proceedings
shall be held in New York, New York.
SECTION 16.02. Injunctive Relief and Damages.
(a) Notwithstanding Section 16.01 above, the complaining
party reserves the right to seek injunctive or other legal
or equitable relief, in a court of competent jurisdiction,
if, at its election, the complaining party reasonably
believes that such relief is necessary. In the event of a
breach by any party of any of its obligations under this
Agreement, in addition to being entitled to exercise all
rights granted by law, any other party to this Agreement
will be entitled to specific performance of its rights
hereunder. Each party agrees that monetary damages would
not be adequate compensation for any loss incurred by reason
of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action
for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
<PAGE>
In addition, in the event that any party breaches any of its
obligations under this Agreement, any other party is
entitled to any damages from the breaching party resulting
from that breach that it proves in litigation to enforce or
terminate this Agreement.
(b) A breach of a provision of this Agreement or
a Settlement Agreement by a party to any such agreement
other than Bayer (a "Breaching Party") that results in a
material adverse effect on the value to Bayer of the Patents
taken as a whole either in the United States or worldwide
shall constitute a breach of this Agreement. In such event,
Bayer may pursue its remedies for such breach against the
Purchasers, except that Bayer may not pursue remedies for
money damages against any party other than the Breaching
Party.
(c) Upon a breach of this Agreement, the
Breaching Party (or if the Breaching Party is not a
Purchaser, the Purchaser that is an affiliate of the
Breaching Party) shall reimburse Bayer for Bayer's cost of
all supplies purchased and on hand or on irrevocable order,
if such supplies were ordered by Bayer based on firm
purchase orders and such supplies cannot be reasonably used
by Bayer for other purposes. Bayer shall invoice the
Breaching Party for amounts due hereunder within sixty
(60) days.
<PAGE>
ARTICLE XVII
Waiver--Modification of Agreement
No waiver or modification of any of the terms of
this Agreement shall be valid unless in writing and signed
by authorized representatives of the parties hereto.
Failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of such rights
nor shall a waiver by a party in one or more instances be
construed as constituting a continuing waiver or as a waiver
in other instances.
ARTICLE XVIII
Severability
If any term or provision of this Agreement shall
for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability
shall not affect any other term or provision hereof, and
this Agreement shall be interpreted and construed as if such
term or provision, to the extent the same shall have been
held to be invalid, illegal or unenforceable, had never been
contained herein. ***
***
<PAGE>
***
***
ARTICLE XIX
Headings
The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
ARTICLE XX
VAT
***
***
<PAGE>
The parties intending to be bound by the terms and
conditions hereof have caused this Agreement to be signed by
their duly authorized representatives on the date first
above written.
BARR LABORATORIES, INC.
by
Name:
Title:
HOECHST MARION ROUSSEL, INC.,
by
Name:
Title:
BAYER AG,
by
____________________
Name:
Title:
BAYER CORPORATION,
by
Name:
Title:
Schedule 4.01
***
***
