UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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: 005-52501
WARNER CHILCOTT PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
Ireland N/A
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
Lincoln House, Lincoln Place, Dublin 2, Ireland
(Address of principal executive offices)
353 1 662-4962
(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 such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
American Depositary Shares, representing Ordinary Shares, par value $.05 each;
Ordinary Shares, par value $.05 each; 12,366,808 Ordinary Shares outstanding at
June 30, 1998.
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WARNER CHILCOTT PUBLIC LIMITED COMPANY
Table of contents
PAGE NO.
Part I - Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997 2-3
Consolidated Statements of Operations for the Three Months
and Six Months Ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 5
Notes to the Unaudited Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 8-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Part II - Other Information
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14-15
Item 6. Exhibits and Reports on Form 8-K 15-16
Signatures 17
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Part I - Financial Information
Item 1. Financial Statements
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997
Assets
(in thousands of U.S. dollars)
(UNAUDITED)
June 30, December 31,
1998 1997
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 47,215 $ 52,786
Accounts receivable 12,385 14,599
Inventories 17,818 16,175
Prepaid expense and other assets 7,183 7,399
-------- --------
Total current assets 84,601 90,959
-------- --------
Fixed Assets:
Property, plant and equipment (net) 1,103 1,148
Other Assets:
Intangible assets 76,942 79,630
-------- --------
Total assets $162,646 $171,737
======== ========
See notes to unaudited consolidated financial statements.
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WARNER CHILCOTT PUBLIC LIMITED COMPANY
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997
Liabilities and Shareholders' Equity
(in thousands of U.S. dollars)
(UNAUDITED)
June 30, December 31,
1998 1997
--------- ---------
LIABILITIES
Current Liabilities:
Short-term debt $ 19,712 $ 14,511
Accounts payable 13,735 11,417
Accrued liabilities 4,532 7,994
Due to Elan Corporation, plc and subsidiaries 5,583 5,267
--------- ---------
Total current liabilities 43,562 39,189
--------- ---------
Other Liabilities:
Long-term debt 8,466 7,902
--------- ---------
Total liabilities 52,028 47,091
--------- ---------
SHAREHOLDERS' EQUITY
Ordinary Shares, par value $.05 per share;
50,000,000 shares authorized, 12,366,808 shares
issued and outstanding at June 30, 1998 and
December 31, 1997 618 618
Deferred Shares, par value IR(pound)1 per share;
30,000 shares authorized, 30,000 shares issued
and outstanding at June 30, 1998 and
December 31, 1997 45 45
Additional paid-in capital 208,962 208,962
Shareholders' accumulated deficit:
Accumulated deficit, beginning of period (83,281) (54,907)
Current period loss (14,337) (28,374)
--------- ---------
Accumulated deficit, end of period (97,618) (83,281)
--------- ---------
Deferred compensation (1,389) (1,698)
--------- ---------
Total shareholders' equity 110,618 124,646
--------- ---------
Total liabilities and shareholders' equity $ 162,646 $ 171,737
========= =========
See notes to unaudited consolidated financial statements.
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WARNER CHILCOTT PUBLIC LIMITED COMPANY
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1998 and 1997
(in thousands of U.S. dollars, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Branded product sales $ 4,416 $ 4,193 $ 7,745 $ 4,193
Generic product sales 8,022 16,421 18,560 35,456
----------- ---------- ----------- ----------
Total revenues 12,438 20,614 26,305 39,649
----------- ---------- ----------- ----------
COSTS AND EXPENSES
Cost of goods sold 7,819 16,851 18,200 33,286
Selling, general and administrative 9,393 3,962 18,119 7,215
Depreciation and amortization 1,404 1,598 2,808 2,650
Research and development 721 1,270 1,558 4,571
----------- ---------- ----------- ----------
Total costs and expenses 19,337 23,681 40,685 47,722
----------- ---------- ----------- ----------
OPERATING LOSS (6,899) (3,067) (14,380) (8,073)
----------- ---------- ----------- ----------
Interest income 679 30 1,405 64
Interest expense (722) (2,523) (1,362) (4,972)
----------- ---------- ----------- ----------
LOSS BEFORE INCOME TAXES (6,942) (5,560) (14,337) (12,981)
----------- ---------- ----------- ----------
Income taxes -- -- -- --
----------- ---------- ----------- ----------
NET LOSS $ (6,942) $ (5,560) $ (14,337) $ (12,981)
=========== ========== =========== ==========
Net loss per ordinary share $ (0.56) $ (0.97) $ (1.16) $ (2.48)
----------- ---------- ----------- ----------
Weighted average ordinary shares outstanding 12,366,808 5,706,978 12,366,808 5,235,771
=========== ========== =========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
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WARNER CHILCOTT PUBLIC LIMITED COMPANY
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997
(in thousands of U.S. dollars)
(UNAUDITED)
Six Months Ended June 30,
1998 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(14,337) $(12,981)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization 2,808 2,650
Accretion of loan discount 564 3,934
Stock compensation expense 309 464
Loss on sale of fixed assets -- 98
Changes in assets and liabilities:
Decrease (increase) in accounts receivable and
prepaid expense 2,430 (1,459)
(Increase) decrease in inventories (1,643) 4,157
(Decrease) increase in accounts payable and
accrued liabilities (828) 18,444
-------- --------
Net cash (used) provided by operating activities (10,697) 15,307
-------- --------
CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES:
Purchase of tangible fixed assets (75) (454)
Purchase of intangible fixed assets -- (12,225)
Sale of tangible fixed assets -- 1,168
-------- --------
Net cash used in investing activities (75) (11,511)
-------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Working capital facility proceeds (repayment) 5,201 (3,006)
-------- --------
Net cash provided by (used in) financing activities 5,201 (3,006)
-------- --------
Net (decrease) increase in cash and cash equivalents (5,571) 790
Cash and cash equivalents, beginning of period 52,786 2,663
-------- --------
Cash and cash equivalents, end of period $ 47,215 $ 3,453
-------- --------
See notes to unaudited consolidated financial statements.
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WARNER CHILCOTT PUBLIC LIMITED COMPANY
Notes to the Unaudited Consolidated Financial Statements
June 30, 1998
NOTE 1: BASIS OF PRESENTATION
The unaudited financial statements included herein have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission for
reporting on Form 10-Q. Certain information and footnote disclosure normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The statements should be read in conjunction with the
accounting policies and notes to consolidated financial statements included in
Warner Chilcott Public Limited Company's (the "Company" or "Warner Chilcott")
1997 Annual Report on Form 20-F.
The Company is an Irish public limited company with operations in Dublin,
Ireland and Rockaway, NJ, USA. The Company's financial statements include the
financial statements for Warner Chilcott, plc and all of its subsidiaries and
are prepared in U.S. dollars in conformity with United States generally accepted
accounting principles.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair statement of the operations for the interim periods
presented.
NOTE 2: INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
principally on the basis of first-in, first-out or standards that approximate
average cost.
June 30, 1998 December 31, 1997
------------- -----------------
(in thousands of U.S. dollars)
Raw materials $ 2,960 $ 3,687
Finishing supplies -- 7
Work in process 979 492
Finished goods 14,941 12,460
-------- --------
18,880 16,646
Less: Reserve for obsolescence 1,062 471
-------- --------
Inventories $ 17,818 $ 16,175
======== ========
NOTE 3: EARNINGS PER SHARE
The Company adopted the provisions of SFAS No. 128, Earnings Per Share on
December 31, 1997. This statement requires that all prior-period net income per
ordinary share calculations be restated to conform with the provisions of this
Statement. Basic net income per ordinary share has been computed by dividing net
income available to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period. Diluted net income per ordinary
share is computed by adjusting the weighted average number of ordinary shares
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outstanding during the period for all potentially dilutive ordinary shares
outstanding during the period and adjusting net income for any changes in income
or loss that would result from the conversion of such potential ordinary shares.
The per share amount for the six months ended June 30, 1997 was retroactively
restated to give effect to SFAS No. 128. Net loss and weighted average shares
outstanding used for computing diluted loss per share were the same as that used
for computing basic loss per share for the three and six months ended June 30,
1998 and 1997. Stock options and warrants have not been included in the
calculation since the inclusion of such shares would be antidilutive.
NOTE 4: COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." Comprehensive income is defined as the total change in shareholders'
equity during the period other than from transactions with shareholders. For the
Company, comprehensive income is comprised solely of net income (loss).
NOTE 5: CONTINGENCIES
The Company is involved in various legal proceedings of a nature considered
normal to its business including patent litigation, product liability and other
matters. In the event of the adverse outcome of these proceedings, resulting
liabilities are either covered by insurance, established reserves or, in the
opinion of management, would not have a material adverse effect on the financial
condition or results of operations of the Company.
NOTE 6: UNITED STATES FEDERAL INCOME TAXES
The Company operates in Ireland and the United States and is subject to various
taxes on income in both jurisdictions. Warner Chilcott's wholly owned United
States subsidiary, Warner Chilcott, Inc., is a United States corporation and, as
such, is subject to United States taxation. The Company expects that some or all
of the net operating loss carryforward which Warner Chilcott, Inc. has
accumulated could be used to offset future taxable earnings.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, and is subject to the safe harbors created
by those sections. These forward-looking statements are subject to significant
risks and uncertainties, including those identified in the section of this Form
10-Q entitled "Factors That May Affect Future Operating Results", in the
Company's 1997 Annual Report on Form 20-F filed with the Securities and Exchange
Commission on May 15, 1998 and in the Company's Final Prospectus for its initial
public offering filed with the Securities and Exchange Commission on August 8,
1997, which may cause actual results to differ materially from those discussed
in such forward-looking statements. The forward-looking statements within this
Form 10-Q are identified by words such as "believes", "anticipates", "expects",
"intends", "may", "will" and other similar expressions. However theses words are
not the exclusive means of identifying such statements. In addition, any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements. The Company
undertakes no obligation to release publicly the results of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances occurring subsequent to the filing of this Form 10-Q with the
Securities and Exchange Commission. Readers are urged to review and consider
carefully the various disclosures made by the Company in this report and in the
Company's other reports filed with the Securities and Exchange Commission that
attempt to advise interested parties of the risks and factors that may affect
the Company's business.
Set forth below is the discussion of the financial condition and results of
operations of the Company for the three and six months ended June 30, 1998. This
discussion should be read in conjunction with the consolidated unaudited
financial statements and the related notes, appearing in Item 1.
OVERVIEW
Warner Chilcott is engaged in the development, marketing, sale and distribution
of prescription pharmaceutical products in the United States. The Company's
current focus is on branded products targeted for three specialty segments:
dermatology, cardiology, and women's health care. All of the Company's branded
products are promoted by the Company's specialty sales force. Warner Chilcott's
current portfolio of branded products includes Vectrin(R), an antibiotic used
most frequently for the treatment of acne, LoCholest(TM), a lipid regulator for
the reduction of LDL cholesterol levels, and NataFort(R), a prenatal vitamin
designed to improve patient compliance by virtue of its smaller size relative to
competing products. Warner Chilcott plans to add additional products to its
portfolio of branded products through internal development, acquisition,
in-licensing, collaboration with other companies and co-promotion agreements.
Warner Chilcott is also pursuing approval of a number of complex generic
pharmaceutical products.
HISTORY
The Company is an Irish public limited company founded in 1992 as Nale
Laboratories Limited. In March 1996 Nale acquired certain assets and assumed
certain liabilities (the "Acquisition") of Warner Chilcott Laboratories, a
division of Warner-Lambert Company (the "Division"). From 1987 to the date of
the Acquisition, the Division engaged in the sale and distribution of generic
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products for Warner-Lambert Company. Following the Acquisition, Nale changed its
name to Warner Chilcott Public Limited Company.
The principal purpose of the Acquisition was to provide the Company with
channels of distribution in the United States. In addition, the Company gained
an established reputation in the pharmaceutical industry, a portfolio of
existing products, and a functioning organization. The Company's customer base
includes all major national wholesalers and pharmacy chains. In addition, a
telemarketing organization covers almost 5,000 independent pharmacies. The
certain assets and liabilities of the Division acquired in the Acquisition are
now organized in the United States as Warner Chilcott, Inc., a wholly-owned
subsidiary of Warner Chilcott Public Limited Company. The cost of the
Acquisition, approximately $145 million, was financed through the private
placement of senior subordinated debt and equity securities, borrowings under a
working capital facility and cash on hand. Subsequently, 87% of the subordinated
notes were converted into ordinary shares.
The Company's revenues are currently generated in the United States and the U.S.
dollar is the functional currency of the Company. Accordingly the Company's
exposure to currency fluctuation is limited. Product sourcing from vendors and
research and development agreements are normally contracted in U.S. dollars. As
a company operating in multiple jurisdictions, the Company will be subject to
taxation on its earnings in the jurisdictions in which it operates. At present,
such jurisdictions include Ireland and the United States.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 and 1997
Total revenue for the six months ended June 30, 1998 declined 33.7% to $26.3
million from $39.6 million for the same period in 1997. Branded sales in the
period increased 84.7% to $7.7 million from $4.2 million in the prior year.
Branded products sold throughout the 1998 period included: Vectrin(R),
LoCholest(TM), NataFort(R) and several branded products acquired from
Warner-Lambert in June 1997. Branded sales in the 1997 period included only
Vectrin and LoCholest, both of which were launched in the second calendar
quarter of 1997. Sales of non-differentiated generic products during the period
declined $16.9 million to $18.6 million due to the out-licensing of the
Company's generic minocycline product to Barr Laboratories beginning in the
third quarter of 1997 and decreased emphasis on generic products in favor of the
Company's branded offerings.
Despite the decline in total revenue, an improved gross margin on sales produced
a 27.4% increase in gross profit dollars to $8.1 million compared to $6.4
million in 1997. Gross margin percentage increased by 14.8 points to 30.8% from
16.0% for the six months ended June 30, 1997. The improvement in both gross
profit dollars and gross margin percentage reflect the shift in the mix of the
Company's revenues toward higher-margin branded products.
Selling, general and administrative expenses totaled $18.1 million for the
period compared to $7.2 million in 1997, an increase of 151%. The most
significant factors contributing to the increase in the 1998 period versus 1997
were: the expansion and development of the company's sales force from 30
professionals at June 30, 1997 to over 175 at June 30, 1998, increased
promotional spending in support of the launch of NataFort beginning in January
1998 and increased costs associated with the litigation of patent challenges
related to the Company's ANDA filings for nifedipine CC and terazosin
hydrochloride.
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Research and development expense declined from $4.6 million for the six months
ended June 30, 1997 to $1.6 million for the same period in 1998. Research and
development expense includes both internal product development efforts and the
costs of collaborations with development partners. During the 1997 period, the
company made a number of milestone payments to product development partners
related to several complex generic products. In addition, beginning in late
1997, Warner Chilcott shifted its overall product development focus to
concentrate on lower cost internal projects.
The net result of the factors outlined above was that the Company's operating
loss for the six months ended June 30, 1998 increased to $14.4 million from $8.1
million in 1997. The improvement in gross profit dollars and reduction in
research and development costs were more than offset by the increased costs of
building the Company's sales force and promoting its branded products.
Interest income during the period increased to $1.4 million from $0.1 million
due to the infusion of capital in connection with the Company's initial public
offering in August 1997. Interest expense declined to $1.4 million from $5.0
million in 1997 primarily due to the exchange of $49.5 million of senior
subordinated discount notes for ordinary shares in June 1997.
The net loss for the six months ended June 30, 1998 increased by 10.4% to $14.3
million as compared to a net loss of $13.0 million in the same period in 1997.
The loss per ordinary share for the period decreased to ($1.16) on 12.4 million
shares from ($2.48) on 5.2 million shares. The increase in the weighted average
ordinary shares outstanding reflects the issuance of ordinary shares in
connection with the Company's initial public offering in August 1997 and related
financings.
Three months ended June 30, 1998 and 1997
Total revenues for the quarter ended June 30, 1998 declined to $12.4 million
from $20.6 million for the same period in 1997. Sales of branded products for
the 1998 quarter increased $0.2 million or 5.3% to $4.4 million compared with
$4.2 million in 1997. 1998 second quarter revenues include sales of Vectrin,
LoCholest, NataFort and several branded products acquired from Warner-Lambert
Company 1997. Sales of branded products in the second quarter of 1997 included
only Vectrin and LoCholest, but were unusually high as the Company launched both
products during the quarter and benefited from the stocking of the trade. Sales
of non-differentiated generic products during the quarter declined $8.4 million
to $8.0 million due to the out-licensing of the Company's generic minocycline
product to Barr Laboratories beginning in the third quarter of 1997 and
decreased emphasis on generic products in favor of the Company's branded
offerings.
Despite the decline in total revenue, an improved gross margin on sales resulted
in gross profit dollars increasing 22.7% to $4.6 million compared to $3.8
million in 1997. Gross margin percentage increased by 18.8 points from 18.3% in
1997 to 37.1% for the quarter ended June 30, 1998. The improvement in both gross
profit dollars and gross margin percentage reflect the shift in the mix of
revenues toward higher-margin branded products.
Selling, general and administrative expenses during the quarter rose $5.4
million to $9.4 million, an increase of 137%. The increase reflects the
expansion of the Company's sales force, increased promotional costs associated
with NataFort and higher legal costs in connection with the litigation of
various patent challenges.
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Research and development expenses declined $0.5 million due to the Company's
decision to focus on lower-cost internal product development projects during the
period.
The net result of the factors outlined above was that Company's operating loss
for the quarter increased 125% to $6.9 million compared with the second quarter
of 1997. The improvement in gross profit dollars and reduction in research and
development expenses were more than offset by increased costs of building and
maintaining the Company's sales force and other expenses.
Interest income in the quarter increased to $0.7 million due to the availability
of funds for investment following the Company's initial public offering.
Interest expense declined to $0.7 million from $2.5 million in 1997 primarily
due to the exchange of $49.5 million of senior subordinated discount notes for
ordinary shares in June 1997.
The net loss for the quarter ended June 30, 1998 increased by 24.9% to $6.9
million as compared to a net loss of $5.6 million for the second quarter of
1997. The loss per ordinary share for the quarter decreased to ($0.56) on 12.4
million shares from ($0.97) on 5.7 million shares in 1997. The increase in the
weighted average ordinary shares outstanding reflects the issuance of ordinary
shares in connection with the Company's initial public offering in August 1997
and related financings.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS:
Following is a discussion of some the risks and historical facts which should be
considered when evaluating the current and future results of the Company. This
discussion is not intended to include all risks and historical facts that could
produce adverse results.
Warner Chilcott has a history of operating losses. Operating losses have been
posted since the formation of the Company in 1992. As of June 30, 1998, the
Company's accumulated deficit was $97.6 million. The Company has invested in the
corporate infrastructure and sales organization needed to support the marketing
and product development activities that management believes necessary for the
success of the Company. However, there can be no assurance that these efforts
will be sufficient and, thus, future profitability is uncertain.
The future capital needs and additional funding activities of the Company are
uncertain. Warner Chilcott has experienced negative cash flows from operations
and has funded its activities to date from the issuance of equity and debt
securities. The Company has expended, and will continue to be required to
expend, substantial funds for promotional activities for products, to continue
research and development of product candidates, to in-license and acquire
additional products and to undertake sales and marketing efforts of its current
or future products. Although the Company may seek additional funding through the
public or private capital markets, there can be no assurance that any such
funding will be available to the Company.
Intense competition exists within the pharmaceutical industry. Many companies,
some with greater financial, marketing and development capabilities than the
Company, are engaged in developing, marketing and selling products that compete
with the products offered by Warner Chilcott. Other products now in use or under
development by others may be more effective or have fewer side effects than the
Company's current or future products. The industry is characterized by rapid
technological change, and competitors may develop their products more rapidly
than the Company. Competitors may also be able to complete the regulatory
process sooner and, therefore, may begin to market their products in advance of
the Company's products.
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There can be no assurance that developments by others will not render any
product or technology the Company produces to be obsolete or otherwise
noncompetitive.
The clinical development, manufacture, marketing and sale of pharmaceutical
products is subject to extensive federal, state and local regulation in the
United States and similar regulation outside the United States. FDA approval is
required before most drug products can be marketed. FDA filings can be time
consuming and expensive without assurance that the results will be adequate to
justify approval. There can be substantial delays in the process, including the
need to provide additional data. There can be no assurance that approvals for
filings already made by the Company, or to be made in the future, can be
obtained in a timely manner, if at all, or that the regulatory requirements for
any such proposed products can be met. In addition, new regulations may
adversely affect the Company's operations or competitive position in the future.
The distribution network for pharmaceutical products has in recent years been
subject to increasing consolidation. As a result, a few large wholesale
distributors control a significant share of the market. In addition, the number
of independent drug stores and small chains has decreased as retail pharmacy
consolidation has occurred. Continued consolidation of either wholesale
distributors or retail pharmacies may adversely effect the Company's operations.
The Company depends on third parties for the manufacture of its current and
future products. Currently the Company does not possess the facilities or
resources needed for these activities. The Company's strategy for development,
commercialization and manufacturing of certain of its products entails entering
into various arrangements with corporate collaborators, licensors and others. If
any of the Company's corporate collaborators were unable to satisfy their
contractual obligations to the Company, there can be no assurance that the
Company would be able to negotiate similar arrangements with other third
parties.
Many of the principal components of the Company's products are available only
from single source suppliers. There can be no assurance that the Company will
establish or, if established, maintain good relationships with such suppliers or
that such suppliers will continue to exist or be able to supply ingredients in
conformity with regulatory requirements.
Warner Chilcott is engaged in the manufacture and marketing of products that may
give rise to the development of certain legal actions and proceedings. The
Company carries product liability insurance and umbrella liability insurance.
There can be no assurance that this coverage is adequate to cover potential
liability claims or that additional insurance coverage will be available in the
future if the Company manufactures and markets new products. The Company's
financial condition and results of operations could be materially adversely
affected by the unfavorable outcome of legal actions and proceedings.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, cash and cash equivalents amounted to $47.2 million. This
balance is primarily the result of the infusion of capital from the Company's
initial public offering in August 1997 and related financings totaling
approximately $74.6 million. Proceeds from the IPO have been used to fund
ongoing working capital requirements. The Company's working capital, adjusted to
exclude cash and short-term debt balances, remained the same at June 30, 1998 as
compared with December 31, 1997. Adjusted working capital on these dates
amounted to $13.5 million.
On March 30, 1998, the Company entered into a $30 million senior secured working
capital agreement with a syndicate of banks led by PNC Business Credit to fund a
portion of its
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investment in inventories and accounts receivable. At June 30, 1998, the Company
had $19.7 million outstanding under this bank credit agreement, an increase of
$5.2 million over the balance at December 31, 1997 of $14.5 million. Working
capital availability is contingent upon the balances of certain inventory,
accounts receivable and other assets of Warner Chilcott, Inc., the Company's
wholly owned United States operating subsidiary. Prior to March 30, 1998, a
syndicate of banks led by BT Commercial Corporation provided the Company's
working capital facility.
The Company posted a substantial loss for the six months ended June 30, 1998 and
losses may continue throughout 1998 and beyond. In addition, the Company may
invest in additional working capital or make capital expenditures to support its
various business activities. Management believes the combination of the
Company's cash balances ($47.2 million at June 30, 1998) and availability under
its working capital facility provide Warner Chilcott with access to sufficient
capital to meet its requirements for at least the next 12 months. There can be
no assurance, however, that such funds will be sufficient. Beyond such period,
and in the absence of the Company generating cash from operations, the Company
would need to raise additional funds. The Company expects that it would seek
additional funding through public or private equity or debt financings or
through collaborations. To the extent the Company raises additional capital by
issuing equity securities, ownership dilution to existing shareholders will
result and future investors may be granted rights superior to those of existing
shareholders. There can be no assurance that additional funding will be
available on acceptable terms, or at all.
INFLATION
Inflation had no material impact on Warner Chilcott's operations during the six
months ended June 30, 1998.
YEAR 2000
The Company's primary information technology systems are used in the finance,
administration, billing, distribution and selling systems operated in the
Company's U.S. operating subsidiary, Warner Chilcott, Inc.. Since the
acquisition in March 1996, the Company has had to put in place new systems to
replace those systems previously provided by Warner-Lambert Company to the
former Division. As a result, the Company has put in place computer systems,
which have been recently developed by their vendors, and has requested
certification from their vendors that these systems are Year 2000 compliant.
Since April 1, 1998, the Company has been contracting out warehousing,
distribution, billing and prime vendor charge back services to Livingston
Healthcare Services Inc., a specialist provider of distribution and other
services to the pharmaceutical industry. The Company is being kept appraised of
Livingston's efforts to ensure that their systems are Year 2000 compliant. The
Company therefore believes that it has taken steps to minimize any material
adverse consequences of Year 2000 problems, although there can be no assurance
at this time that such problems may not arise. Costs associated with the
exercise are not expected to be material and will be expensed as incurred.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
13
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
The Company is involved in litigation relating to claims arising out of its
operations in the normal course of business, including product liability claims.
During April 1998, Abbott Laboratories filed a lawsuit against the Company for
alleged infringement of certain patents related to Warner Chilcott's ANDA filing
for terazosin hydrochloride. Abbott markets terazosin hydrochloride under the
brand name Hytrin(R). Management of the Company believes that the Abbott action
is without merit and is vigorously contesting it.
Other than outlined above, the Company is not party to any litigation or other
legal proceedings which the Company believes could reasonably be expected to
have a material adverse effect on the Company's business, results of operations,
or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual General Meeting of shareholders was held on April 2, 1998
in Dublin, Ireland. Following are the matters brought to vote and the results:
Broker
Board of Director Elections For Against Abstain Non-votes
--------------------------- --------- ------- ------- ---------
Donald E. Panoz 5,731,972 0 0 0
Thomas G. Lynch 5,731,972 0 0 0
James H. Bloom 5,731,972 0 0 0
Bruce L. Downey 5,731,972 0 0 0
Roger M. Boissonneault 5,731,972 0 0 0
Proposals to authorize the Board of Directors to fix the remuneration of the
Auditors and approve the Directors' Report and Financial Statements for the year
ended December 31, 1997 together with the Auditor's Report were approved with
5,731,972 votes for, no votes against, no abstentions and no broker non-votes.
In addition, each of the following proposals were approved with 5,730,972 votes
for, 1000 votes against, no abstentions and no broker non-votes.
(i) to authorize the Board of Directors to allot and issue shares up to
an aggregate nominal amount equal to the authorized but unissued
share capital of the Company;
(ii) to authorize the Board of Directors to allot equity securities for
cash; and
(iii) to authorize the Board of Directors to capitalize any part of the
amount standing to the credit of the share premium account at the
time of such capitalization, and to apply the capitalized sum in
paying up in full unissued shares for distribution to Ordinary
shareholders pro rata to their existing stockholdings.
Finally, the proposal to adopt the amended 1997 Incentive Share Option Scheme
was approved with 5,579,872 votes for, 152,100 votes against, no abstentions and
no broker non-votes.
Item 5. Other Information
Pursuant to newly adopted rules of the Securities and Exchange Commission, any
company shareholder who intends to present a proposal at the Company's Annual
General Meeting of shareholders in 1999 without requesting the Company to
include such proposal in the Company's
14
<PAGE>
proxy materials should be aware that he must notify the Company not later than
January 25, 1999 of his intention to present the proposal. Otherwise, the
Company may exercise discretionary voting with respect to such shareholder
proposal pursuant to authority conferred on the Company by proxies delivered to
the Company in connection with the meeting.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - The following exhibits are filed with this document:
Exhibit No. Description
- - ----------- -----------
10.1 Employment agreement between the Company and James G. Andress,
dated March 3, 1997
10.2 Employment agreement between the Company and Roger M.
Boissonneault, dated March 3, 1997
10.3 Employment agreement between the Company and Paul S. Herendeen,
dated February 3, 1998
10.4 Warrant Certificate agreement between the Company and James G.
Andress, dated October 31, 1996
10.5 Warrant Certificate agreement between the Company and James G.
Andress, dated October 31, 1996
10.6 Warrant Certificate agreement between the Company and Roger M.
Boissonneault, and dated October 31, 1996
10.7 Warrant Certificate agreement between the Company and Roger M.
Boissonneault, and dated October 31, 1996
10.8 Warrant Certificate agreement between the Company and Paul S.
Herendeen, and dated February 3, 1998
10.9 Revolving Credit and security Agreement, dated March 30, 1998,
among Warner Chilcott, Inc. PNC Bank, National Association and
the Lenders thereto
10.10 Financial Support Undertaking, dated March 30, 1998, made by
Warner Chilcott Public Limited Company and Warner Chilcott
(Bermuda) Limited in favor of PNC Bank, National Association
10.11 Continuing Limited Non-Recourse and Collateralized Guaranty,
dated March 30, 1998, made by Warner Chilcott (Bermuda) Limited
in favor of PNC Bank, National Association
10.12 Trademark Collateral Assignment and Security Agreement, from
Warner Chilcott, Inc. to PNC Bank, National Association, dated
March 30, 1998
15
<PAGE>
10.13 Trademark Collateral Assignment and Security Agreement, from
Warner Chilcott (Bermuda) Limited to PNC Bank, National
Association, dated March 30, 1998
27 Financial Data Schedule
b. Reports on Form 8-K:
No report was filed during the three months ended June 30, 1998.
16
<PAGE>
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.
WARNER CHILCOTT PUBLIC LIMITED COMPANY
(Registrant)
August 14, 1998 /s/ Paul S. Herendeen
---------------------
Paul S. Herendeen
Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
August 14, 1998 /s/ David G. Kelly
------------------
David G. Kelly
Group Vice President, Finance
(Principal Accounting Officer)
17
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 3, 1997 by and
between WARNER CHILCOTT PUBLIC LIMITED COMPANY, a public limited company
organized under the laws of Ireland (the "Company"), and JAMES G. ANDRESS (the
"Executive").
R E C I T A L S :
A. The Executive has been employed as a principal executive of the Company
and has made a unique contribution to the business of the Company.
B. The Board of Directors of the Company believes that the continued
services of Executive would be of great value to the Company and is desirous of
retaining his services as contemplated hereby.
C. The Executive desires to accept employment by the Company and to render
services to the Company, on the terms and subject to the conditions provided in
this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ and retain the
Executive, and the Executive agrees to be employed and retained by the Company,
to render services to the Company for the period, at the rate of compensation
and upon the other terms and conditions set forth herein. The Executive shall
devote his best efforts and his entire working time and attention to his
employment by the Company.
2. Term. The term of the Executive's employment under this Agreement (the
"Employment Term") shall commence on the date hereof (the "Commencement Date"),
and shall continue until terminated as provided herein.
<PAGE>
-2-
3. Position and Duties.
(a) Position. The Executive shall serve the Company as Chief Executive
Officer. During his executive employment hereunder, the Executive shall report
to the Board of Directors of the Company. During the Employment Term, the
Company shall include the Executive in any slate of nominees proposed by the
Company for election or reelection, as the case may be, to the Company's Board
of Directors. Upon termination of the Executive's employment under this
Agreement or the expiration of this Agreement, the Executive shall immediately
submit his resignation from the Board of Directors.
(b) Duties. During the Employment Term, the Executive shall serve the
Company and its subsidiaries in such Chief Executive Officer's capacity with
such duties consistent therewith and shall perform such other services for the
Company and its subsidiaries consistent with the position of Chief Executive
Officer as may be assigned to him from time to time by the Company's Board of
Directors.
4. Compensation and Reimbursement of Expenses.
(a) Salary. For services rendered by the Executive under this Agreement,
the Company shall pay to the Executive as compensation during the Employment
Term a salary (the "Salary") initially equal to $300,000 per annum. The Salary
shall be subject to adjustment by the Board of Directors from time to time;
however, in no case shall the Executive's Salary be reduced below $300,000 per
annum. The Salary shall be payable at least in monthly installments on the
normal payroll cycle of the Company.
(b) Reimbursement of Expenses. Consistent with established policies of the
Company as in effect from time to time, the Company shall pay or reimburse the
Executive for all reasonable travel, hotel, entertainment and other expenses
incurred by the Executive in performing his obligations under this Agreement.
(c) Incentive Compensation. During the Employment Term, the Executive will
be eligible to participate in the Company's Incentive Share Option Scheme
adopted by the Board of Directors on June 28, 1996 (the "Incentive Compensation
Plan").
<PAGE>
-3-
5. Benefits.
(a) Benefit Plans. The Executive shall also be entitled to participate, on
a basis comparable to other key executives of the Company, in any benefit plan
or program of the Company for which key executives are or shall become eligible,
including, without limitation, pension, 401(k), life and disability insurance
and stock benefits and/or plans, subject, in the case of tax-qualified benefit
plans and programs, to restrictions under applicable law. The Executive shall be
entitled, at his own expense, to continue his participation in any group
insurance plans after the termination of his employment with the Company, to the
extent required or permitted under applicable law.
(b) Vacation. The Executive shall be entitled to vacation time with
compensation of 20 days per annum during the Employment Term. The Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
(c) No Reduction. There shall be no material reduction or diminution of
the benefits provided in this Section 5 (i) unless the Executive shall have
given his prior written consent to such reduction or diminution and an equitable
arrangement (embodied in an ongoing substitute or alternative benefit or plan)
has been made with respect to such benefit or plan or (ii) except, in the case
of Section 5(a), for across-the-board benefit reductions similarly affecting all
senior management personnel of the Company.
(d) Warrants. On the Commencement Date, the Executive shall be issued (i)
warrants to purchase an aggregate of 400,000 Ordinary Shares of the Company at
an exercise price of $20.00 per share and (ii) warrants to purchase an aggregate
100,000 Ordinary Shares of the Company at an exercise price of $1.00 per share.
The specific terms of the warrants, including conditions to the Executive's
ability to exercise such warrants, are described in the Warrant Certificates,
each dated as of October 31, 1996, issued by the Company to the Executive.
6. Termination. This Agreement is subject to termination as follows:
(a) Death of the Executive. If the Executive dies, this Agreement shall
terminate effective as of the date of the Executive's death, and thereupon the
Executive's estate shall
<PAGE>
-4-
be entitled solely to the payments and benefits set forth in Section 7(b)
hereof.
(b) Disability. If the Executive has been unable to perform his
obligations hereunder for six consecutive months, or for at least 180 days
during any calendar year, due to Disability, the Company shall thereafter have
the right to terminate the Executive's employment hereunder upon at least 30
days' prior written notice to the Executive of the effective date of such
termination, and thereupon the Executive shall be entitled solely to the
payments and benefits set forth in Section 7(b) hereof.
(c) Termination by the Company for Cause. The Company shall have the right
to terminate the Executive's employment hereunder for Cause (as hereafter
defined), and thereupon the Executive shall be entitled solely to the payments
and benefits set forth in Section 7(a) hereof. For purposes of this Agreement,
the term "Cause" shall mean any of the following: (i) conviction of the
Executive by a court of competent jurisdiction for commission of any felony,
(ii) the Executive's failure or refusal to perform substantially his duties with
the Company which failure or refusal continues for thirty days following the
Executive's receipt of written notice specifying the nature and manner of such
failure or refusal to perform, (iii) the Executive's willful misconduct or gross
negligence which is injurious to the Company or its reputation and goodwill, or
(iv) the Executive's breach of Section 8, 9 or 10 of this Agreement.
(d) Resignation or Retirement. If the Executive resigns or retires, this
Agreement shall terminate as of the date of the Executive's resignation or
retirement, and thereupon the Executive shall be entitled solely to the payments
and benefits set forth in Section 7(a) hereof.
(e) Termination by the Company other than for Cause. The Company shall
have the right, at its sole discretion, to terminate the Executive's employment
hereunder without Cause. Thereupon, the Executive shall be entitled solely to
the payments and benefits set forth in Section 7(b) hereof.
7. Effect of Termination.
(a) Cause or Resignation or Retirement. Upon the termination of this
Agreement by the Company for Cause or upon the resignation or retirement of the
Executive, the Company shall pay to the Executive (i) his Salary accrued through
the
<PAGE>
-5-
effective date of termination, payable at the time such payment is otherwise due
and payable hereunder, and (ii) all other amounts and benefits to which the
Executive is entitled, including, without limitation, vacation pay and expense
reimbursement amounts accrued to the effective date of termination and amounts
and benefits owing under the terms of any benefit plan of the Company in which
the Executive participates (including the Incentive Compensation Plan), and the
Company and the Executive shall have no further obligation to each other under
this Agreement except as provided in Section 15 hereof.
(b) Other Termination. Upon the termination of this Agreement pursuant to
Section 6(a), 6(b) or 6(e) hereof, the Company shall pay to the Executive an
amount equal to the Executive's then current Salary for a period of twelve
months (the "Severance Amount") plus all other amounts and benefits to which the
Executive is entitled, including, without limitation, expense reimbursement
amounts accrued to the effective date of termination and amounts and benefits
owing under the terms of any benefit plan of the Company in which the Executive
participates (including the Incentive Compensation Plan). The Severance Amount
shall be paid in a lump sum equal to the net present value of the Severance
Amount, determined by discounting the aggregate Severance Amount using a
discount rate equal to the yield on the date of such termination of United
States Treasury Securities having a maturity closest to one year from such date.
(c) No Offset. The Company will not be permitted to offset any payment
payable to the Executive pursuant to Section 7(a) or 7(b) hereof against any
monetary obligations owed by the Executive to the Company, except that in the
event that the Executive breaches Section 8, 9 or 10 of this Agreement, the
Company shall have no obligation to make any payment otherwise payable under
Section 7(b) hereof.
8. Non-Solicitation Agreement. The Executive covenants and agrees that
while employed by the Company and during any period for which the Executive
accepted or continues to accept payments under Section 7 above, the Executive
will not in any way, directly or indirectly, on the Executive's own behalf or on
behalf of or in conjunction with any other person, partnership, firm or
corporation, solicit, divert, take away, or attempt to take away any person,
partnership, firm or corporation (or the business or patronage) that has been a
customer of the Company or any of its affiliated entities. The Executive further
agrees that, for such period, the Executive will not in any way, directly or
indirectly, on the Executive's own behalf
<PAGE>
-6-
or on behalf of or in conjunction with any person, partnership, firm or
corporation, solicit, entice, hire, employ or endeavor to employ any employee of
the Company or any of its affiliated entities.
9. Agreement Not To Compete. The Executive covenants and agrees that he
will not, during the term of his employment with the Company, and so long as the
Executive has been paid or continues to accept any payments under Section 7
above, either directly or indirectly, as an employee, director, officer,
shareholder, partner, advisor, consultant or otherwise, engage in any commercial
activity or participate in any venture of any kind that competes with the
Company with respect to the development, marketing, testing, manufacture or
delivery of complex generic pharmaceutical products within the United States.
Nothing stated in this Section 9 shall be deemed to preclude the Executive
from holding less than 5% of the outstanding capital stock of any corporation
required to file periodic reports with the Securities and Exchange Commission
under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
and the securities of which are listed on any securities exchange or quoted on
the Nasdaq National Market or traded on the over-the-counter market.
The Executive acknowledges that the Company has expended substantial time
and expense in the research and development of processes, technology, techniques
and products which are unique to the Company or not generally known to others
and which could be unfairly taken or used by others in competition with the
Company. Accordingly, the Executive agrees that the restrictions contained in
this Agreement are reasonable.
If the scope of the restrictions contained in this Section 9 is too broad
to permit enforcement of such restrictions to their full extent, then such
restrictions shall be construed or re-written (blue-lined) so as to be
enforceable to the maximum extent permitted by law, and the Executive hereby
consents, to the extent he may lawfully do so, to the judicial modification of
the scope of such restrictions in any proceeding brought to enforce such
restrictions. In the event of any breach by the Executive of this Section 9, the
Company may elect to institute and prosecute proceedings in any state or federal
court located in the State of New Jersey, either at law or in equity, to seek to
obtain specific performance of any part of this Agreement, to seek injunctive
relief against the Executive to temporarily or permanently enjoin the violation
of
<PAGE>
-7-
this Section 9 and/or to seek to recover any damages resulting from the breach
of this Section 9, and to recover attorneys' fees and costs in connection with
the institution and prosecution of such proceedings. In any such proceedings,
the Executive shall be entitled to seek to recover his attorneys' fees and costs
in connection with such proceedings. No remedy available to the Company for a
breach of this Section 9 is intended to be exclusive of any other remedy and all
remedies are cumulative. The Executive agrees that damages are not adequate to
compensate the Company for any breach by the Executive of this Agreement and
hereby waives the defense of an adequate remedy at law or any other remedy at
law and admits and concedes that there are none.
10. Confidential Information. The Executive covenants and agrees not to at
any time use, divulge, furnish or make accessible to anyone other than the
Company, its affiliated entities, or its or their directors and officers, any
proprietary or confidential information ("Confidential Information") of the
Company or any of its affiliated entitles, including but not limited to
information regarding the development of the Company's products, or the
provision of the Company's services, or the Company's customer lists.
Upon termination of his employment with the Company, the Executive agrees
to deliver to the Company all written materials that constitute Confidential
Information. Further, upon termination of his employment with the Company, the
Executive agrees to make available to any person designated by the Company all
information concerning pending or preceding transactions which may affect the
operation of the Company or any subsidiary of the Company about which the
Executive has knowledge. The obligations of the Executive contained in this
paragraph are in addition to the obligation of the Executive to return to the
Company, upon the termination of his employment, all property of the Company
then in his possession.
11. Assignment of Intellectual Property Rights. The Executive shall
promptly disclose to the Company all inventions, discoveries, improvements,
designs, processes, techniques, equipment, trademarks or copyrightable matter
conceived or made by the Executive during the Executive's employment and related
to any aspect of the business of the Company, and the Executive hereby assigns
all of the Executive's interest therein, including the goodwill of the business
symbolized by any trademarks, to the Company. The Executive further agrees to
execute any applications, assignments or other instruments which the Company
shall deem necessary to obtain letters patent,
<PAGE>
-8-
trademark registration or copyright registration of the United States or any
foreign country or to otherwise protect the Company's interest therein. Nothing
contained in this provision shall apply to any invention for which no equipment,
supplies, facility or trade secrets information of the Company or any affiliated
entity of the Company was used and which was developed entirely on the
Executive's own time, and (a) which does not relate (1) to any aspect of the
business of the Company or any affiliated entity of the Company or (2) to the
actual or demonstrably anticipated research or development of the Company or any
affiliated entity of the Company, or (b) which does not result from any work
performed by the Executive for the Company or any affiliated entity of the
Company.
12. Assistance in Litigation. During the Employment Term, the Executive
shall, upon reasonable notice, furnish such information and proper assistance to
the Company as may reasonably be required by the Company in connection with any
litigation in which it is, or may become, a party.
13. Federal Income Tax Withholding. The Company shall withhold from any
benefits payable pursuant to this Agreement such Federal, State, City or other
taxes as may be required to be withheld pursuant to any law or governmental
regulations or ruling.
14. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's employment
by the Company and supersedes any prior employment agreement or arrangement
between the Company and the Executive.
15. Indemnification. The Company shall indemnify and hold the Executive
harmless to the fullest extent legally permissible under New Jersey law, against
any and all expenses, liabilities and losses (including attorneys' fees,
judgments, fines and amounts paid in settlement) reasonably incurred or suffered
by him in connection with service as an officer of the Company or any other
service or function served by him on behalf of the Company or at the Company's
request; provided, that, the Executive shall not be entitled to indemnification
hereunder if the expenses, liabilities and losses referred to above resulted
from or relate to willful misconduct or gross negligence by the Executive. The
Company shall advance to the Executive the amount of his expenses incurred in
connection with any proceeding relating to any such service or function to the
fullest extent legally permissible under New Jersey law. The indemnification and
expense reimbursement obligations of the
<PAGE>
-9-
Company in this Section 15 will continue as to the Executive after he ceases to
be an officer of the Company and shall inure to the benefit of his heirs,
executors and adminstrators. The Company shall not, without the Executive's
written consent, cause or permit any amendment to the Company's governing
documents which would affect the Executive's rights to indemnification and
expense reimbursement thereunder.
16. General Provisions.
(a) Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive, his beneficiaries, or legal
representatives without the Company's prior written consent.
(b) Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the Executive and the Company and their respective heirs,
executors, administrators, successors and permitted assigns.
(c) Amendment of Agreement. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto.
(d) Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel.
(e) Severability. If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect.
(f) Notices. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, if to
the Executive, addressed to James G. Andress, 1381 North Elm Tree Road, Lake
Forest, IL 60045; if to the Company, addressed to Warner Chilcott Public Limited
Company, Lincoln House, 4th Floor, Lincoln Place, Dublin 2, Ireland, facsimile:
011-353-1-662-4950 and directed to the attention of the president of the Company
with a copy to the secretary of the Company; or to such other address as either
party may have
<PAGE>
-10-
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
(g) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(h) Indulgences, Etc. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
(i) Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
(j) GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF
NEW JERSEY, AND ITS VALIDITY, INTERPRETATION, PERFORMANCE, AND ENFORCEMENT SHALL
BE GOVERNED BY THE LAWS OF SAID STATE.
<PAGE>
-11-
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and the Executive has signed this Agreement, all
as of the day and year first above written.
WARNER CHILCOTT PUBLIC LIMITED COMPANY
/s/Paul S. Herendeen
--------------------------------------------
Name: Paul S. Herendeen
Title: Director and Member of
The Compensation Committee
/s/James G. Andress
--------------------------------------------
James G. Andress
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 3, 1997 by and
between WARNER CHILCOTT PUBLIC LIMITED COMPANY, a public limited company
organized under the laws of Ireland (the "Company"), and ROGER M. BOISSONNEAULT
(the "Executive").
R E C I T A L S :
A. The Executive has been employed as a principal executive of the Company
and has made a unique contribution to the business of the Company.
B. The Board of Directors of the Company believes that the continued
services of Executive would be of great value to the Company and is desirous of
retaining his services as contemplated hereby.
C.The Executive desires to accept employment by the Company and to render
services to the Company, on the terms and subject to the conditions provided in
this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ and retain the
Executive, and the Executive agrees to be employed and retained by the Company,
to render services to the Company for the period, at the rate of compensation
and upon the other terms and conditions set forth herein. The Executive shall
devote his best efforts and his entire working time and attention to his
employment by the Company.
2. Term. The term of the Executive's employment under this Agreement (the
"Employment Term") shall commence on the date hereof (the "Commencement Date"),
and shall continue until terminated as provided herein.
<PAGE>
-2-
3. Position and Duties.
(a) Position. The Executive shall serve the Company as President and Chief
Operating Officer. During his executive employment hereunder, the Executive
shall report to the Chief Executive Officer of the Company.
(b) Duties. During the Employment Term, the Executive shall serve the
Company and its subsidiaries in such President and Chief Operating Officer
capacity with such duties consistent therewith and shall perform such other
services for the Company and its subsidiaries consistent with the position of a
President and Chief Operating Officer as may be assigned to him from time to
time by the Company.
4. Compensation and Reimbursement of Expenses.
(a) Salary. For services rendered by the Executive under this Agreement,
the Company shall pay to the Executive as compensation during the Employment
Term a salary (the "Salary") initially equal to $200,000 per annum. The Salary
shall be subject to adjustment by the Company from time to time; however, in no
case shall the Executive's Salary be reduced below $200,000 per annum. The
Salary shall be payable at least in monthly installments on the normal payroll
cycle of the Company.
(b) Reimbursement of Expenses. Consistent with established policies of the
Company as in effect from time to time, the Company shall pay or reimburse the
Executive for all reasonable travel, hotel, entertainment and other expenses
incurred by the Executive in performing his obligations under this Agreement.
(c) Incentive Compensation. During the Employment Term, the Executive will
be eligible to participate in the Company's Incentive Share Option Scheme
adopted by the Board of Directors on June 28, 1996 (the "Incentive Compensation
Plan"). For any calendar year during the Employment Term, the mid-point of the
range of possible bonuses for which the Executive would be eligible under the
Company's Incentive Compensation Plan shall be equal to 50% of the Executive's
then current salary.
5. Benefits.
(a) Benefit Plans. The Executive shall also be entitled to participate, on
a basis comparable to other key
<PAGE>
-3-
executives of the Company, in any benefit plan or program of the Company for
which key executives are or shall become eligible, including, without
limitation, pension, 401(k), life and disability insurance and stock benefits
and/or plans, subject, in the case of tax-qualified benefit plans and programs,
to restrictions under applicable law. The Executive shall be entitled, at his
own expense, to continue his participation in any group insurance plans after
the termination of his employment with the Company, to the extent required or
permitted under applicable law.
(b) Vacation. The Executive shall be entitled to vacation time with
compensation of 20 days per annum during the Employment Term. The Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
(c) No Reduction. There shall be no material reduction or diminution of
the benefits provided in this Section 5 (i) unless the Executive shall have
given his prior written consent to such reduction or diminution and an equitable
arrangement (embodied in an ongoing substitute or alternative benefit or plan)
has been made with respect to such benefit or plan or (ii) except, in the case
of Section 5(a), for across-the-board benefit reductions similarly affecting all
senior management personnel of the Company.
(d) Warrants. On the Commencement Date, the Executive shall be issued (i)
warrants to purchase an aggregate 120,000 Ordinary Shares of the Company at an
exercise price of $20.00 per share and (ii) warrants to purchase an aggregate of
30,000 Ordinary Shares of the Company at an excise price of $1.00 per share. The
specific terms of the warrants, including conditions to the Executive's ability
to exercise such warrants, are described in the Warrant Certificates, each dated
as of October 31, 1996, issued by the Company to the Executive.
6. Termination. This Agreement is subject to termination as follows:
(a) Death of the Executive. If the Executive dies, this Agreement shall
terminate effective as of the date of the Executive's death, and thereupon the
Executive's estate shall be entitled solely to the payments and benefits set
forth in Section 7(b) hereof.
(b) Disability. If the Executive has been unable to perform his
obligations hereunder for six consecutive months, or
<PAGE>
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for at least 180 days during any calendar year, due to Disability, the Company
shall thereafter have the right to terminate the Executive's employment
hereunder upon at least 30 days' prior written notice to the Executive of the
effective date of such termination, and thereupon the Executive shall be
entitled solely to the payments and benefits set forth in Section 7(b) hereof.
(c) Termination by the Company for Cause. The Company shall have the right
to terminate the Executive's employment hereunder for Cause (as hereafter
defined), and thereupon the Executive shall be entitled solely to the payments
and benefits set forth in Section 7(a) hereof. For purposes of this Agreement,
the term "Cause" shall mean any of the following: (i) conviction of the
Executive by a court of competent jurisdiction for commission of any felony,
(ii) the Executive's failure or refusal to perform substantially his duties with
the Company which failure or refusal continues for thirty days following the
Executive's receipt of written notice specifying the nature and manner of such
failure or refusal to perform, (iii) the Executive's willful misconduct or gross
negligence which is injurious to the Company or its reputation and goodwill, or
(iv) the Executive's breach of Section 8, 9 or 10 of this Agreement.
(d) Resignation or Retirement. If the Executive resigns or retires, this
Agreement shall terminate as of the date of the Executive's resignation or
retirement, and thereupon the Executive shall be entitled solely to the payments
and benefits set forth in Section 7(a) hereof.
(e) Termination by the Company other than for Cause. The Company shall
have the right, at its sole discretion, to terminate the Executive's employment
hereunder without Cause. Thereupon, the Executive shall be entitled solely to
the payments and benefits set forth in Section 7(b) hereof.
7. Effect of Termination.
(a) Cause or Resignation or Retirement. Upon the termination of this
Agreement by the Company for Cause or upon the resignation or retirement of the
Executive, the Company shall pay to the Executive (i) his Salary accrued through
the effective date of termination, payable at the time such payment is otherwise
due and payable hereunder, and (ii) all other amounts and benefits to which the
Executive is entitled, including, without limitation, vacation pay and expense
reimbursement amounts accrued to the effective date of termination
<PAGE>
-5-
and amounts and benefits owing under the terms of any benefit plan of the
Company in which the Executive participates (including the Incentive
Compensation Plan), and the Company and the Executive shall have no further
obligation to each other under this Agreement except as provided in Section 15
hereof.
(b) Other Termination. Upon the termination of this Agreement pursuant to
Section 6(a), 6(b) or 6(e) hereof, the Company shall pay to the Executive an
amount equal to the Executive's then current Salary for a period of eighteen
months (the "Severance Amount") plus all other amounts and benefits to which the
Executive is entitled, including, without limitation, expense reimbursement
amounts accrued to the effective date of termination and amounts and benefits
owing under the terms of any benefit plan of the Company in which the Executive
participates (including the Incentive Compensation Plan). The Severance Amount
shall be paid in a lump sum equal to the net present value of the Severance
Amount, determined by discounting the aggregate Severance Amount using a
discount rate equal to the yield on the date of such termination of United
States Treasury Securities having a maturity closest to one year from such date.
(c) No Offset. The Company will not be permitted to offset any payment
payable to the Executive pursuant to Section 7(a) or 7(b) hereof against any
monetary obligations owed by the Executive to the Company, except that in the
event that the Executive breaches Section 8, 9 or 10 of this Agreement, the
Company shall have no obligation to make any payment otherwise payable under
Section 7(b) hereof.
8. Non-Solicitation Agreement. The Executive covenants and agrees that
while employed by the Company and during any period for which the Executive
accepted or continues to accept payments under Section 7 above, the Executive
will not in any way, directly or indirectly, on the Executive's own behalf or on
behalf of or in conjunction with any other person, partnership, firm or
corporation, solicit, divert, take away, or attempt to take away any person,
partnership, firm or corporation (or the business or patronage) that has been a
customer of the Company or any of its affiliated entities. The Executive further
agrees that, for such period, the Executive will not in any way, directly or
indirectly, on the Executive's own behalf or on behalf of or in conjunction with
any person, partnership, firm or corporation, solicit, entice, hire, employ or
endeavor to employ any employee of the Company or any of its affiliated
entities.
<PAGE>
-6-
9. Agreement Not To Compete. The Executive covenants and agrees that he
will not, during the term of his employment with the Company, and so long as the
Executive has been paid or continues to accept any payments under Section 7
above, either directly or indirectly, as an employee, director, officer,
shareholder, partner, advisor, consultant or otherwise, engage in any commercial
activity or participate in any venture of any kind that competes with the
Company with respect to the development, marketing, testing, manufacture or
delivery of complex generic pharmaceutical products within the United States.
Nothing stated in this Section 9 shall be deemed to preclude the Executive
from holding less than 5% of the outstanding capital stock of any corporation
required to file periodic reports with the Securities and Exchange Commission
under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
and the securities of which are listed on any securities exchange or quoted on
the Nasdaq National Market or traded on the over-the-counter market.
The Executive acknowledges that the Company has expended substantial time
and expense in the research and development of processes, technology, techniques
and products which are unique to the Company or not generally known to others
and which could be unfairly taken or used by others in competition with the
Company. Accordingly, the Executive agrees that the restrictions contained in
this Agreement are reasonable.
If the scope of the restrictions contained in this Section 9 is too broad
to permit enforcement of such restrictions to their full extent, then such
restrictions shall be construed or re-written (blue-lined) so as to be
enforceable to the maximum extent permitted by law, and the Executive hereby
consents, to the extent he may lawfully do so, to the judicial modification of
the scope of such restrictions in any proceeding brought to enforce such
restrictions. In the event of any breach by the Executive of this Section 9, the
Company may elect to institute and prosecute proceedings in any state or federal
court located in the State of New Jersey, either at law or in equity, to seek to
obtain specific performance of any part of this Agreement, to seek injunctive
relief against the Executive to temporarily or permanently enjoin the violation
of this Section 9 and/or to seek to recover any damages resulting from the
breach of this Section 9, and to recover attorneys' fees and costs in connection
with the institution and prosecution of such proceedings. In any such
proceedings, the Executive shall be entitled to seek to recover his attorneys'
fees
<PAGE>
-7-
and costs in connection with such proceedings. No remedy available to the
Company for a breach of this Section 9 is intended to be exclusive of any other
remedy and all remedies are cumulative. The Executive agrees that damages are
not adequate to compensate the Company for any breach by the Executive of this
Agreement and hereby waives the defense of an adequate remedy at law or any
other remedy at law and admits and concedes that there are none.
10. Confidential Information. The Executive covenants and agrees not to at
any time use, divulge, furnish or make accessible to anyone other than the
Company, its affiliated entities, or its or their directors and officers, any
proprietary or confidential information ("Confidential Information") of the
Company or any of its affiliated entitles, including but not limited to
information regarding the development of the Company's products, or the
provision of the Company's services, or the Company's customer lists.
Upon termination of his employment with the Company, the Executive agrees
to deliver to the Company all written materials that constitute Confidential
Information. Further, upon termination of his employment with the Company, the
Executive agrees to make available to any person designated by the Company all
information concerning pending or preceding transactions which may affect the
operation of the Company or any subsidiary of the Company about which the
Executive has knowledge. The obligations of the Executive contained in this
paragraph are in addition to the obligation of the Executive to return to the
Company, upon the termination of his employment, all property of the Company
then in his possession.
11. Assignment of Intellectual Property Rights. The Executive shall
promptly disclose to the Company all inventions, discoveries, improvements,
designs, processes, techniques, equipment, trademarks or copyrightable matter
conceived or made by the Executive during the Executive's employment and related
to any aspect of the business of the Company, and the Executive hereby assigns
all of the Executive's interest therein, including the goodwill of the business
symbolized by any trademarks, to the Company. The Executive further agrees to
execute any applications, assignments or other instruments which the Company
shall deem necessary to obtain letters patent, trademark registration or
copyright registration of the United States or any foreign country or to
otherwise protect the Company's interest therein. Nothing contained in this
provision shall apply to any invention for which no equipment, supplies,
facility or trade secrets information of the Company or any
<PAGE>
-8-
affiliated entity of the Company was used and which was developed entirely on
the Executive's own time, and (a) which does not relate (1) to any aspect of the
business of the Company or any affiliated entity of the Company or (2) to the
actual or demonstrably anticipated research or development of the Company or any
affiliated entity of the Company, or (b) which does not result from any work
performed by the Executive for the Company or any affiliated entity of the
Company.
12. Assistance in Litigation. During the Employment Term, the Executive
shall, upon reasonable notice, furnish such information and proper assistance to
the Company as may reasonably be required by the Company in connection with any
litigation in which it is, or may become, a party.
13. Federal Income Tax Withholding. The Company shall withhold from any
benefits payable pursuant to this Agreement such Federal, State, City or other
taxes as may be required to be withheld pursuant to any law or governmental
regulations or ruling.
14. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's employment
by the Company and supersedes any prior employment agreement or arrangement
between the Company and the Executive.
15. Indemnification. The Company shall indemnify and hold the Executive
harmless to the fullest extent legally permissible under New Jersey law, against
any and all expenses, liabilities and losses (including attorneys' fees,
judgments, fines and amounts paid in settlement) reasonably incurred or suffered
by him in connection with service as an officer of the Company or any other
service or function served by him on behalf of the Company or at the Company's
request; provided, that, the Executive shall not be entitled to indemnification
hereunder if the expenses, liabilities and losses referred to above resulted
from or relate to willful misconduct or gross negligence by the Executive. The
Company shall advance to the Executive the amount of his expenses incurred in
connection with any proceeding relating to any such service or function to the
fullest extent legally permissible under New Jersey law. The indemnification and
expense reimbursement obligations of the Company in this Section 15 will
continue as to the Executive after he ceases to be an officer of the Company and
shall inure to the benefit of his heirs, executors and adminstrators. The
Company shall not, without the Executive's written consent, cause or permit any
amendment to the Company's governing docu-
<PAGE>
-9-
ments which would affect the Executive's rights to indemnification and expense
reimbursement thereunder.
16. General Provisions.
(a) Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive, his beneficiaries, or legal
representatives without the Company's prior written consent.
(b) Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the Executive and the Company and their respective heirs,
executors, administrators, successors and permitted assigns.
(c) Amendment of Agreement. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto.
(d) Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel.
(e) Severability. If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect.
(f) Notices. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, if to
the Executive, addressed to Roger M. Boissonneault, 38 Jackie Drive, Long
Valley, New Jersey 07853; if to the Company, addressed to Warner Chilcott Public
Limited Company, Lincoln House, 4th Floor, Lincoln Place, Dublin 2, Ireland,
facsimile: 011-353-1-662-4950, and directed to the attention of the chief
executive officer of the Company with a copy to the secretary of the Company; or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
<PAGE>
-10-
(g) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(h) Indulgences, Etc. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
(i) Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
(j) GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF
NEW JERSEY, AND ITS VALIDITY, INTERPRETATION, PERFORMANCE, AND ENFORCEMENT SHALL
BE GOVERNED BY THE LAWS OF SAID STATE.
<PAGE>
-11-
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and the Executive has signed this Agreement, all
as of the day and year first above written.
WARNER CHILCOTT PUBLIC LIMITED COMPANY
By: /s/James G. Andress
--------------------------------------------
Name: James G. Andress
Title: Chief Executive Officer
/s/Roger M. Boissonneault
--------------------------------------------
Roger M. Boissonneault
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of February 3, 1998 by and
between WARNER CHILCOTT PUBLIC LIMITED COMPANY, a public limited company
organized under the laws of Ireland (the "Company"), and PAUL S. HERENDEEN (the
"Executive").
R E C I T A L S :
A. The Board of Directors of the Company believes that the services of the
Executive would be of great value to the Company and is desirous of retaining
his services as contemplated hereby.
B. The Executive desires to accept employment by the Company and to render
services to the Company, on the terms and subject to the conditions provided in
this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ and retain the
Executive, and the Executive agrees to be employed and retained by the Company,
to render services to the Company for the Employment Term (as defined), at the
rate of compensation and upon the other terms and conditions set forth herein.
The Executive shall devote his best efforts and his entire working time and
attention to his employment by the Company.
2. Term. The term of the Executive's employment under this Agreement (the
"Employment Term") shall commence on the date hereof (the "Commencement Date"),
and shall continue until terminated as provided herein.
3. Position and Duties.
(a) Position. The Executive shall serve the Company as Executive Vice
President and Chief Financial Officer. During his executive employment
hereunder, the Executive shall report
<PAGE>
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to the Chief Executive Officer of the Company. During the Employment Term, the
Company shall include the Executive in any slate of nominees proposed by the
Company for election or reelection, as the case may be, to the Company's Board
of Directors.
(b) Duties. During the Employment Term, the Executive shall serve the
Company and its subsidiaries in such Executive Vice President and Chief
Financial Officer capacity with such duties consistent therewith and shall
perform such other services for the Company and its subsidiaries consistent with
the position of Executive Vice President and Chief Financial Officer as may be
assigned to him from time to time by the Company.
4. Compensation and Reimbursement of Expenses.
(a) Salary. For services rendered by the Executive under this Agreement,
the Company shall pay to the Executive as compensation during the Employment
Term a salary (the "Salary") initially equal to $225,000 per annum. The Salary
shall be subject to adjustment by the Company from time to time; however, in no
case shall the Executive's Salary be reduced below $225,000 per annum. The
Salary shall be payable at least in monthly installments on the normal payroll
cycle of the Company.
(b) Reimbursement of Expenses. Consistent with established policies of the
Company as in effect from time to time, the Company shall pay or reimburse the
Executive for all reasonable travel, hotel, entertainment and other expenses
incurred by the Executive in performing his obligations under this Agreement.
(c) Incentive Compensation. During the Employment Term, the Executive will
be eligible to participate in the Company's Incentive Share Option Scheme, as
amended.
(d) Bonus Compensation. During the Employment Term, the Executive will be
eligible to receive an annual bonus (the "Bonus"). The Bonus shall have an
annual target rate of fifty percent (50%) of the Salary. Such Bonus shall be
provided on such terms and in such amounts, if any, as the Company may deem
appropriate in its sole discretion.
(e) Moving Expenses. The Company shall reimburse the Executive for
expenses incurred in connection with the relocation of the Executive's family to
New Jersey including rea-
<PAGE>
-3-
sonable moving expenses, transaction costs and decorating expenses.
5. Benefits.
(a) Benefit Plans. The Executive shall also be entitled to participate, on
a basis comparable to other key executives of the Company, in any benefit plan,
incentive compensation plan or program of the Company for which key executives
are or shall become eligible, including, without limitation, pension, 401(k),
life and disability insurance and stock benefits and/or plans, subject, in the
case of tax-qualified benefit plans and programs, to restrictions under
applicable law. The Executive shall be entitled, at his own expense, to continue
his participation in any group insurance plans after the termination of his
employment with the Company, to the extent required or permitted under
applicable law.
(b) Vacation. The Executive shall be entitled to vacation time with
compensation of 20 days per annum during the Employment Term. The Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
(c) No Reduction. There shall be no material reduction or diminution of
the benefits provided in this Section 5 (i) unless the Executive shall have
given his prior written consent to such reduction or diminution and an equitable
arrangement (embodied in an ongoing substitute or alternative benefit or plan)
has been made with respect to such benefit or plan or (ii) except, in the case
of Section 5(a), for across-the-board benefit reductions similarly affecting all
senior management personnel of the Company.
(d) Warrants. On the Commencement Date, the Executive shall be issued (i)
warrants to purchase an aggregate of 200,000 Ordinary Shares of the Company at
an exercise price of $9.77 per share. The specific terms of the warrants,
including conditions to the Executive's ability to exercise such warrants, are
described in the Warrant Certificate, dated as of February 3, 1998, issued by
the Company to the Executive.
6. Termination. This Agreement is subject to termination as follows:
(a) Death of the Executive. If the Executive dies, this Agreement shall
terminate effective as of the date of the Executive's death, and thereupon the
Executive's estate shall be
<PAGE>
-4-
entitled solely to the payments and benefits set forth in Section 7(b) hereof.
(b) Disability. If the Executive has been unable to perform his
obligations hereunder for six consecutive months, or for at least 180 days
during any calendar year, due to Disability, the Company shall thereafter have
the right to terminate the Executive's employment hereunder upon at least 30
days' prior written notice to the Executive of the effective date of such
termination, and thereupon the Executive shall be entitled solely to the
payments and benefits set forth in Section 7(b) hereof.
(c) Termination by the Company for Cause. The Company shall have the right
to terminate the Executive's employment hereunder for Cause (as hereafter
defined), and thereupon the Executive shall be entitled solely to the payments
and benefits set forth in Section 7(a) hereof. For purposes of this Agreement,
the term "Cause" shall mean any of the following: (i) conviction of the
Executive by a court of competent jurisdiction for commission of any felony,
(ii) the Executive's failure or refusal to perform substantially his duties with
the Company which failure or refusal continues for thirty days following the
Executive's receipt of written notice specifying the nature and manner of such
failure or refusal to perform, (iii) the Executive's willful misconduct or gross
negligence which is injurious to the Company or its reputation and goodwill, or
(iv) the Executive's breach of Section 8, 9 or 10 of this Agreement.
(d) Resignation or Retirement. If the Executive resigns or retires, this
Agreement shall terminate as of the date of the Executive's resignation or
retirement, and thereupon the Executive shall be entitled solely to the payments
and benefits set forth in Section 7(a) hereof.
(e) Termination by the Company other than for Cause. The Company shall
have the right, at its sole discretion, to terminate the Executive's employment
hereunder without Cause. Thereupon, the Executive shall be entitled solely to
the payments and benefits set forth in Section 7(b) hereof.
7. Effect of Termination.
(a) Cause or Resignation or Retirement. Upon the termination of this
Agreement by the Company for Cause or upon the resignation or retirement of the
Executive, the Company shall pay to the Executive (i) his Salary accrued through
the
<PAGE>
-5-
effective date of termination, payable at the time such payment is otherwise due
and payable hereunder, and (ii) all other amounts and benefits to which the
Executive is entitled, including, without limitation, vacation pay and expense
reimbursement amounts accrued to the effective date of termination and amounts
and benefits owing under the terms of any benefit plan of the Company in which
the Executive participates, and the Company and the Executive shall have no
further obligation to each other under this Agreement except as provided in
Section 15 hereof.
(b) Other Termination. Upon the termination of this Agreement pursuant to
Section 6(a), 6(b) or 6(e) hereof, the Company shall pay to the Executive an
amount equal to the Executive's then current Salary for a period of eighteen
months (the "Severance Amount") plus all other amounts and benefits to which the
Executive is entitled, including, without limitation, expense reimbursement
amounts accrued to the effective date of termination and amounts and benefits
owing under the terms of any benefit plan of the Company in which the Executive
participates. The Severance Amount shall be paid in a lump sum equal to the net
present value of the Severance Amount, determined by discounting the aggregate
Severance Amount using a discount rate equal to the yield on the date of such
termination of United States Treasury Securities having a maturity closest to
one year from such date.
(c) No Offset. The Company will not be permitted to offset any payment
payable to the Executive pursuant to Section 7(a) or 7(b) hereof against any
monetary obligations owed by the Executive to the Company, except that in the
event that the Executive breaches Section 8, 9 or 10 of this Agreement, the
Company shall have no obligation to make any payment otherwise payable under
Section 7(b) hereof.
8. Non-Solicitation Agreement. The Executive covenants and agrees that
while employed by the Company and during any period for which the Executive
accepted or continues to accept payments under Section 7 above, the Executive
will not in any way, directly or indirectly, on the Executive's own behalf or on
behalf of or in conjunction with any other person, partnership, firm or
corporation, solicit, divert, take away, or attempt to take away any person,
partnership, firm or corporation (or the business or patronage) that has been a
customer of the Company or any of its affiliated entities. The Executive further
agrees that, for such period, the Executive will not in any way, directly or
indirectly, on the Executive's own behalf or on behalf of or in conjunction with
any person, partnership,
<PAGE>
-6-
firm or corporation, solicit, entice, hire, employ or endeavor to employ any
employee of the Company or any of its affiliated entities.
9. Agreement Not To Compete. The Executive covenants and agrees that he
will not, during the term of his employment with the Company, and so long as the
Executive has been paid or continues to accept any payments under Section 7
above, either directly or indirectly, as an employee, director, officer,
shareholder, partner, advisor, consultant or otherwise, engage in any commercial
activity or participate in any venture of any kind that competes with the
Company with respect to the development, marketing, testing, manufacture or
delivery of complex generic pharmaceutical products within the United States.
Nothing stated in this Section 9 shall be deemed to preclude the Executive
from holding less than 5% of the outstanding capital stock of any corporation
required to file periodic reports with the Securities and Exchange Commission
under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
and the securities of which are listed on any securities exchange or quoted on
the Nasdaq National Market or traded on the over-the-counter market.
The Executive acknowledges that the Company has expended substantial time
and expense in the research and development of processes, technology, techniques
and products which are unique to the Company or not generally known to others
and which could be unfairly taken or used by others in competition with the
Company. Accordingly, the Executive agrees that the restrictions contained in
this Agreement are reasonable.
If the scope of the restrictions contained in this Section 9 is too broad
to permit enforcement of such restrictions to their full extent, then such
restrictions shall be construed or re-written (blue-lined) so as to be
enforceable to the maximum extent permitted by law, and the Executive hereby
consents, to the extent he may lawfully do so, to the judicial modification of
the scope of such restrictions in any proceeding brought to enforce such
restrictions. In the event of any breach by the Executive of this Section 9, the
Company may elect to institute and prosecute proceedings in any state or federal
court located in the State of New Jersey, either at law or in equity, to seek to
obtain specific performance of any part of this Agreement, to seek injunctive
relief against the Executive to temporarily or permanently enjoin the violation
of this Section 9 and/or to seek to recover any damages resulting
<PAGE>
-7-
from the breach of this Section 9, and to recover attorneys' fees and costs in
connection with the institution and prosecution of such proceedings. In any such
proceedings, the Executive shall be entitled to seek to recover his attorneys'
fees and costs in connection with such proceedings. No remedy available to the
Company for a breach of this Section 9 is intended to be exclusive of any other
remedy and all remedies are cumulative. The Executive agrees that damages are
not adequate to compensate the Company for any breach by the Executive of this
Agreement and hereby waives the defense of an adequate remedy at law or any
other remedy at law and admits and concedes that there are none.
10. Confidential Information. The Executive covenants and agrees not to at
any time use, divulge, furnish or make accessible to anyone other than the
Company, its affiliated entities, or its or their directors and officers, any
proprietary or confidential information ("Confidential Information") of the
Company or any of its affiliated entities, including but not limited to
information regarding the development of the Company's products, or the
provision of the Company's services, or the Company's customer lists.
Upon termination of his employment with the Company, the Executive agrees
to deliver to the Company all written materials that constitute Confidential
Information. Further, upon termination of his employment with the Company, the
Executive agrees to make available to any person designated by the Company all
information concerning pending or preceding transactions which may affect the
operation of the Company or any subsidiary of the Company about which the
Executive has knowledge. The obligations of the Executive contained in this
paragraph are in addition to the obligation of the Executive to return to the
Company, upon the termination of his employment, all property of the Company
then in his possession.
11. Assignment of Intellectual Property Rights. The Executive shall
promptly disclose to the Company all inventions, discoveries, improvements,
designs, processes, techniques, equipment, trademarks or copyrightable matter
conceived or made by the Executive during the Executive's employment and related
to any aspect of the business of the Company, and the Executive hereby assigns
all of the Executive's interest therein, including the goodwill of the business
symbolized by any trademarks, to the Company. The Executive further agrees to
execute any applications, assignments or other instruments which the Company
shall deem necessary to obtain letters patent, trademark registration or
copyright registration of the United
<PAGE>
-8-
States or any foreign country or to otherwise protect the Company's interest
therein. Nothing contained in this provision shall apply to any invention for
which no equipment, supplies, facility or trade secrets information of the
Company or any affiliated entity of the Company was used and which was developed
entirely on the Executive's own time, and (a) which does not relate (1) to any
aspect of the business of the Company or any affiliated entity of the Company or
(2) to the actual or demonstrably anticipated research or development of the
Company or any affiliated entity of the Company, or (b) which does not result
from any work performed by the Executive for the Company or any affiliated
entity of the Company.
12. Assistance in Litigation. During the Employment Term, the Executive
shall, upon reasonable notice, furnish such information and proper assistance to
the Company as may reasonably be required by the Company in connection with any
litigation in which it is, or may become, a party.
13. Federal Income Tax Withholding. The Company shall withhold from any
benefits payable pursuant to this Agreement such Federal, State, City or other
taxes as may be required to be withheld pursuant to any law or governmental
regulations or ruling.
14. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto respecting the Executive's employment
by the Company and supersedes any prior employment agreement or arrangement
between the Company and the Executive.
15. Indemnification. The Company shall indemnify and hold the Executive
harmless to the fullest extent legally permissible under New Jersey law, against
any and all expenses, liabilities and losses (including attorneys' fees,
judgments, fines and amounts paid in settlement) reasonably incurred or suffered
by him in connection with service as an officer of the Company or any other
service or function served by him on behalf of the Company or at the Company's
request; provided, that, the Executive shall not be entitled to indemnification
hereunder if the expenses, liabilities and losses referred to above resulted
from or relate to willful misconduct or gross negligence by the Executive. The
Company shall advance to the Executive the amount of his expenses incurred in
connection with any proceeding relating to any such service or function to the
fullest extent legally permissible under New Jersey law. The indemnification and
expense reimbursement obligations of the Company in this Section 15 will
continue as to the Executive
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after he ceases to be an officer of the Company and shall inure to the benefit
of his heirs, executors and administrators. The Company shall not, without the
Executive's written consent, cause or permit any amendment to the Company's
governing documents which would affect the Executive's rights to indemnification
and expense reimbursement thereunder.
16. General Provisions.
(a) Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive, his beneficiaries, or legal
representatives without the Company's prior written consent.
(b) Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the Executive and the Company and their respective heirs,
executors, administrators, successors and permitted assigns.
(c) Amendment of Agreement. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto.
(d) Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel.
(e) Severability. If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect.
(f) Notices. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, if to
the Executive, addressed to Paul S. Herendeen, 7 Maple Road, Chatham Township,
NJ 07928; if to the Company, addressed to Warner Chilcott, Inc., Rockaway
Corporate Center, 100 Enterprise Drive, Suite 280, Rockaway, NJ 07866,
facsimile: (973) 442-3224 and directed to the attention of the Chief Executive
Officer of the Company with a copy to the Secretary of the Company; or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except
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-10-
that notice of change of address shall be effective only upon receipt.
(g) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(h) Indulgences, Etc. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence.
(i) Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
(j) GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF
NEW JERSEY, AND ITS VALIDITY, INTERPRETATION, PERFORMANCE, AND ENFORCEMENT SHALL
BE GOVERNED BY THE LAWS OF SAID STATE.
<PAGE>
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and the Executive has signed this Agreement, all
as of the day and year first above written.
WARNER CHILCOTT PUBLIC LIMITED COMPANY
/S/James G. Andress
--------------------------------------------
Chairman Of The Board and Chief Executive
Officer
/s/Paul S. Herendeen
--------------------------------------------
Paul S. Herendeen
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE RIGHT
OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF OPINIONS OF
<PAGE>
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COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION REASONABLY ACCEPTABLE IN FORM
AND SUBSTANCE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
<PAGE>
-3-
Series C No. W02 100,000 Warrants
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Warrant Certificate
THIS CERTIFIES THAT for value received James G. Andress, or registered
assigns (the "Warrant Holder"), is the owner of the number of Warrants set forth
above, each of which entitles the owner thereof to purchase at any time on or
after the date hereof until the earlier of (i) 5 P.M. (New York time) on October
31, 2006 or (ii) the occurrence of a Termination Event (as defined) (the
"Expiration Date"), at the office of the Company, one fully paid and
nonassessable Ordinary Share, par value $.05 per share ("Ordinary Share"),
represented by one American Depositary Share ("ADS"), evidenced by American
Depository Receipts ("ADRs"), of WARNER CHILCOTT PUBLIC LIMITED COMPANY
(formerly named Nale Laboratories public limited company), a public limited
company organized and existing under the laws of Ireland (the "Company"), at the
purchase price and according to the schedule set forth in Section 2 hereof, upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of Ordinary Shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of October 31, 1996, based on the
Ordinary Shares of the Company as constituted at such date.
Section 1. Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
This Warrant Certificate, with or without other Warrant Certificates, may
be transferred or exchanged for another Warrant Certificate or Warrant
Certificates, entitling the Warrant Holder to purchase a like number of Ordinary
Shares as this Warrant Certificate entitles such Warrant Holder to purchase. In
the event that the Warrant Holder desires to transfer, split up, combine or
exchange this Warrant Certificate, the Warrant Holder shall make such request in
writing delivered to the Company, and shall surrender this Warrant Certificate
to the Company. Thereupon the Company shall deliver to the person entitled
thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental
<PAGE>
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charge that may be imposed in connection with any transfer, split up,
combination or exchange of this Warrant Certificate. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, unless the Warrant Holder shall
furnish to the Company evidence of compliance with the Act, in accordance
with the provisions of Section 14 hereof.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor to the Warrant Holder in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
Section 2. Exercise of Warrants; Purchase Price; Expiration of Warrants.
(a) The Warrant Holder may exercise the Warrants evidenced hereby, in whole or
in part, according to the following schedule:
Exercisable number of Warrants = (N x Q x .0625) minus P
Where:
N = total number of Warrants (subject to adjustment pursuant to
Section 5 hereof),
Q = the number of whole calendar quarters which have elapsed
from September 30, 1996, and
P = the number of Warrants (if any) previously exercised
Notwithstanding the foregoing, the Board of Directors of the Company and/or a
committee thereof may, at its absolute discretion, declare any Warrants to be
exercisable in whole or in part as from any date earlier than the date upon
which it would otherwise become exercisable. Further, as described more
completely in Section 7 hereof, upon a change of control, consolidation, sale or
merger of the Company, all outstanding Warrants shall become exercisable.
(b) Warrants may be exercised in accordance with the foregoing paragraph
(a) upon surrender of this Warrant Certifi-
<PAGE>
-5-
cate with the Form of Election to Purchase, duly executed, to the Company at the
address of the Company, at or prior to the Expiration Date, together with
payment of the Purchase Price (as defined) for each Ordinary Share as to which
the Warrants evidenced hereby are exercised.
(c) The Warrants shall expire prior to October 31, 2006 in the following
cases (each being a "Termination Event"): (1) the death of the Warrant Holder in
which case the personal representative of the deceased Warrant Holder may at any
time or from time to time, but subject to the other provisions of this Warrant
Certificate and in no case later than one year after such death, exercise any
Warrants, but only to the extent that such Warrants were exercisable by the
Warrant Holder at the time of his death, and (2) the Warrant Holder ceases to be
employed by the Company by reason of resignation, dismissal, retirement,
disability or otherwise ("Separation") in which case the Warrant Holder may at
any time, but subject to the other provisions of this Warrant Certificate and in
no case later than thirty days after Separation, exercise any Warrants, but only
to the extent that such Warrants were exercisable by the Warrant Holder at the
date of Separation.
(d) The purchase price for each Ordinary Share pursuant to the exercise of
Warrants evidenced hereby shall initially be $1.00 (the "Purchase Price") but
will be subject to adjustment as provided in Section 5 hereof and shall be
payable as provided in Section 2(e) hereof.
(e) Upon receipt of this Warrant Certificate, with the Form of Election to
Purchase duly executed, accompanied by payment of the Purchase Price for the
Ordinary Shares to be purchased and an amount equal to any applicable transfer
tax in cash, or by certified check, bank draft or postal or express money order
payable to the order of the Company, the Company shall thereupon promptly (i)
requisition from any transfer agent of the Ordinary Shares of the Company,
certificates for the number of whole Ordinary Shares to be purchased and (ii)
promptly after receipt of such certificates cause the same to be delivered to or
upon the order of the Warrant Holder, registered in such name or names as may be
designated by such Warrant Holder, and, when appropriate, promptly deliver cash
to be paid in lieu of issuance of fractional Ordinary Shares to or upon the
order of the Warrant Holder.
(f) In the event that the Warrant Holder shall exercise less than all the
Warrants evidenced hereby, a new Warrant Certificate evidencing Warrants
equivalent to the Warrants re-
<PAGE>
-6-
maining unexercised shall be issued by the Company to the Warrant Holder or to
the Warrant Holder's duly authorized assigns, subject to the provisions of
Section 8 hereof.
Section 3. Reservation and Availability of Ordinary Shares. The Company
covenants and agrees that it will cause to be reserved and kept available at all
times, free from preemptive rights and out of its authorized and available
Ordinary Shares (including treasury shares), the number of Ordinary Shares that
will be sufficient to permit the exercise in full of all outstanding Warrants
evidenced hereby.
The Company further covenants and agrees to reserve sufficient ADSs under
the Deposit Agreement, dated as of October 17, 1994 (the "Deposit Agreement"),
among the Company, The Bank of New York, as Depositary, and holders from time to
time of ADRs issued thereunder to permit the deposit thereunder of Ordinary
Shares represented by all Warrants evidenced hereby and the issuance of ADSs
representing such Ordinary Shares. The Company will, upon request of the holder
of the Ordinary Shares issued upon exercise of the Warrants evidenced hereby,
deposit such Ordinary Shares on behalf of such holder pursuant to the terms of
the Deposit Agreement and deliver to the holder of such shares the appropriate
number of ADSs evidenced by ADRs.
The Company further covenants and agrees that it will take all such action
as may be necessary to insure that all Ordinary Shares delivered upon exercise
of the Warrants evidenced hereby shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price) (i) be
duly and validly authorized and issued and fully paid and nonassessable shares,
and (ii) be issued in compliance with all applicable governmental laws and
regulations.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state taxes and charges which may be payable in
respect of the initial issuance or delivery of any Ordinary Shares, ADSs
representing such Ordinary Shares or ADRs evidencing such ADSs, upon the
exercise of the Warrants evidenced hereby. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the transfer or delivery of this Warrant Certificate or the issuance or
delivery of certificates for Ordinary Shares in a name other than that of the
Warrant Holder or to issue or deliver any certificates for Ordinary Shares upon
the exercise of any Warrant evidenced hereby until any such tax shall have been
paid (any such tax
<PAGE>
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being payable by the Warrant Holder at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 4. Ordinary Shares Record Date. The Warrant Holder shall for all
purposes be deemed to have become the holder of record of any Ordinary Shares
issued upon exercise of Warrants evidenced hereby on, and the certificate
representing any such Ordinary Shares shall be dated, the date upon which this
Warrant Certificate was duly surrendered and payment of the Purchase Price (and
any applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Ordinary Share transfer
books of the Company are closed, the Warrant Holder shall be deemed to have
become the record holder of such Ordinary Shares on, and such certificate shall
be dated, the next succeeding business day on which the Ordinary Share transfer
books of the Company are open. Prior to the exercise of the Warrants evidenced
hereby, the Warrant Holder shall not be entitled to any rights of a shareholder
of the Company with respect to Ordinary Shares for which the Warrants evidenced
hereby are exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein or required by law.
Section 5. Adjustment of Purchase Price, Number of Ordinary Shares and
Shares of Capital Stock Warrants Are Exercisable Into. The number and kind of
securities purchasable upon the exercise of each Warrant evidenced hereby and
the Purchase Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
(a) Adjustment for Change in Capital Stock. In case the Company shall (i)
pay a dividend on its Ordinary Shares, whether of Ordinary Shares or capital
shares of any other class or make any other distribution of Ordinary Shares,
(ii) subdivide its outstanding Ordinary Shares into a greater number of shares
or (iii) combine its outstanding Ordinary Shares into a smaller number of
Ordinary Shares, the number of Ordinary Shares purchasable upon exercise of each
Warrant evidenced hereby immediately prior thereto shall be adjusted so that the
Warrant Holder shall be entitled to receive the number of Ordinary Shares which
the Warrant Holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been exercised
immedi-
<PAGE>
-8-
ately prior to the happening of such event or any record date with respect
thereto.
An adjustment made pursuant to this Section 5(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event. Such adjustment shall be made successively
whenever such a payment, subdivision or combination is made.
(b) Adjustment for Other Distributions. In case the Company shall
distribute to all holders of its Ordinary Shares evidences of its indebtedness
(other than evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for, with or without payment of additional
consideration in cash or property, Ordinary Shares, either upon the occurrence
of a specified date or a specified event (in any case, "Convertible
Securities")), assets (excluding cash dividends or distributions payable out of
consolidated retained earnings and dividends or distributions referred to in
Section 5(a) or in Section 5(c)), shares of capital stock (other than Ordinary
Shares), or rights, options or warrants containing the right to subscribe for or
purchase debt securities, assets or securities of the Company (other than
Convertible Securities or Ordinary Shares) (collectively "Assets"), then in each
case the number of Ordinary Shares thereafter purchasable upon the exercise of
each Warrant evidenced hereby shall be determined by multiplying the number of
Ordinary Shares theretofore purchasable upon the exercise of each Warrant
evidenced hereby by a fraction, of which the numerator shall be the market price
per Ordinary Share (as defined in Section 5(f)) on the date of such
distribution, and the denominator of which shall be such market price per
Ordinary Share less the fair value as of such record date (as determined in good
faith by the Board of Directors of the Company) of the portion of the Assets
applicable to one Ordinary Share. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. A reclassification of the
Ordinary Shares (other than a change in par value, from par value to no par
value or from no par value to par value) into Ordinary Shares and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Ordinary Shares of such shares of such other class of stock
within the meaning of this Section 5(b) and, if the outstanding Ordinary Shares
shall be changed into larger or smaller number of Ordinary Shares as a part of
such reclassification, such change shall be deemed a subdivision or combina-
<PAGE>
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tion, as the case may be, of the outstanding Ordinary Shares within the meaning
of Section 5(a).
No adjustment shall be made pursuant to this Section 5(b) unless, on the
record date for such distribution, the market price per Ordinary Share exceeds
the fair market value of the Assets applicable to each outstanding Ordinary
Share. In the event, and each time, that the Company distributes Assets to all
holders of its Ordinary Shares and the market price per Ordinary Share on the
record date for such distribution is less than or equal to the fair market value
of the Assets applicable to each outstanding Ordinary Share on such date, the
Company shall either (i) distribute Assets to the Warrant Holder on the record
date for such distribution when such Assets are distributed to the holders of
Ordinary Shares as though all Warrants evidenced hereby had been exercised as of
such record date or (ii) deposit such Assets in trust with a trustee. If the
Company elects to distribute Assets to the Warrant Holder, the Company shall, on
the date Assets are distributed to holders of Ordinary Shares, distribute to
such Warrant Holder the Assets that it would have been entitled to receive on
such date if it had exercised the Warrants evidenced hereby immediately prior to
the record date for such distribution. If, however, the Company elects to
deposit the Assets due the Warrant Holder in trust, the Company shall, on the
date Assets are distributed to holders of Ordinary Shares, place in trust the
Assets that the Warrant Holder would have been entitled to receive on such date
if all of the Warrants evidenced hereby had been exercised immediately prior to
the record date for such distribution; and the Warrant Holder shall be entitled
upon exercise of the Warrants evidenced hereby to receive the Ordinary Shares
issuable upon exercise thereof, the Assets placed in trust in respect of such
Warrants, and the interest and dividends paid on such Assets since being placed
in trust. In the event any Warrants evidenced hereby have not been exercised
prior to the termination of the Expiration Date, any assets remaining in such
trust after distributions have been made in respect of Warrants exercised shall
be returned to the Company.
(c) Adjustment for Issuance of Ordinary Shares. If at any time after the
date hereof the Company shall (except as hereinafter provided) issue or sell any
Ordinary Shares for consideration in an amount per Ordinary Share less than the
market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale, then the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby shall be
adjusted to
<PAGE>
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equal the product obtained by multiplying the number of Ordinary Shares for
which such Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of Ordinary Shares
outstanding immediately after such issue or sale, and (B) the denominator of
which shall be the sum of (1) the number of Ordinary Shares outstanding
immediately prior to such issue or sale, and (2) the aggregate consideration
received from the issuance or sale of such additional Ordinary Shares divided by
the market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale; provided, however, that no
adjustment shall be made pursuant to this Section 5(c) upon the issuance of
Ordinary Shares (i) in a bona fide public offering pursuant to a firm commitment
or best efforts underwriting, (ii) upon the issuance of up to 500,000 Ordinary
Shares, or ADSs representing such Ordinary Shares, of the Company pursuant to
any employee stock option, purchase or similar plan which may be established by
the Company from time to time providing for options, warrants or similar rights
to purchase Ordinary Shares, or ADSs representing such Ordinary Shares, of the
Company or (iii) upon the issuance of Ordinary Shares pursuant to (A) the
Agreement among the Company, Nale Laboratories Corporation and Bernard J. Berk,
(B) the warrants issued pursuant to the Warrant Agreement dated as of October
17, 1994 between the Company and Elan Corporation, plc, (C) the warrants issued
pursuant to the Warrant Agreement dated as of October 17, 1994 between the
Company and Montgomery Securities, (D) the warrants issued pursuant to the
Warrant Purchase Agreement dated as of March 28, 1996 by and between the Company
and Warner-Lambert Company or (E) the warrants to purchase in the aggregate
amount 170,000 Ordinary Shares, or ADSs representing such Ordinary Shares,
issued on June 28, 1996 to certain current and former directors of the Company.
(d) Issuance of Warrants or Other Rights. In case the Company shall
distribute to all holders of its Ordinary Shares or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Ordinary Shares or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Ordinary Shares are issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities plus the price paid to the Company to acquire such warrants, other
rights or Convertible Securities shall be less than the market price per
Ordinary Share (as defined in Section 5(f)) in effect immediately prior to the
time
<PAGE>
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of such distribution, issue or sale, then the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby shall be adjusted
as provided in Section 5(c) on the basis that (A) the maximum number of Ordinary
Shares issuable pursuant to all such warrants or other rights or necessary to
give effect to the conversion or exchange of all such Convertible Securities
shall be deemed to be issued and outstanding, (B) the price per share for such
Ordinary Shares shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Ordinary Shares are available to such
holders, and (C) the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such warrants
or other rights; provided, however, that no adjustment shall be made pursuant to
this Section 5(d) upon the issuance of any warrants or options or other rights
to subscribe for up to 500,000 Ordinary Shares, or ADSs representing such
Ordinary Shares, of the Company, pursuant to any employee stock option, purchase
or similar plan which may be established by the Company from time to time. No
further adjustments of the number of Ordinary Shares for which any Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares or of such Convertible Securities upon exercise of such warrants
or other rights or upon the actual issue of such Ordinary Shares upon such
conversion or exchange of such Convertible Securities.
(e) Adjustments for Issuance of Convertible Securities. In case the
Company shall distribute to all holders of its Ordinary Shares or shall in any
manner (whether directly or by assumption in a merger in which the Company is
the surviving corporation) issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Ordinary Shares are issuable upon such
conversion or exchange, plus the price paid to the Company to acquire such
Convertible Security, shall be less than the market price per Ordinary Share (as
defined in Section 5(f)), in effect immediately prior to the time of such
distribution, issue or sale, then the number of Ordinary Shares purchasable upon
the exercise of each Warrant evidenced hereby shall be adjusted as provided in
Section 5(c) on the basis that (i) the maximum number of Ordinary Shares
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to be issued and outstanding, (ii) the price per
share of such Ordinary Shares shall be deemed to be the lowest possible price in
any range of prices at which such Ordinary Shares are available to such holders,
and (iii) the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issu-
<PAGE>
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ance of such Convertible Securities. No adjustment of the number of Ordinary
Shares for which any Warrant evidenced hereby is exercisable shall be made under
this Section 5(e) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 5(d). No
further adjustments of the number of Ordinary Shares for which any such Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares upon conversion or exchange of such Convertible Securities and,
if any issue or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments have been or are to be made pursuant to other
provisions of this Section 5, no further adjustments shall be made by reason of
such issue or sale. For the purposes of this Section 5(e), the date as of which
the current market price of Ordinary Shares shall be computed shall be the
earliest of (a) the date on which the Company shall take a record of the holders
of its Ordinary Shares for the purpose of entitling them to receive any such
Convertible Securities or (b) the date of actual issuance of such Convertible
Securities.
(f) Market Price. For the purpose of any computation under Sections 5(b),
5(c), 5(d), 5(e) and 8(b), the market price per Ordinary Share at any date shall
be the fair value thereof determined in the reasonable good faith judgment of
the Board of Directors of the Company; provided, however, that if the Ordinary
Shares, or ADSs representing such Ordinary Shares, are listed or admitted for
trading on any domestic national securities exchange or quoted in the
over-the-counter market or the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System, the market price per
Ordinary Share shall be the average of the daily closing prices for 20
consecutive trading days preceding the date of such computation. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on the principal
national securities exchange on which the Ordinary Shares or ADSs, as the case
may be, are listed or admitted to trading or, if not listed or admitted to
trading, the average of the last reported sales price or in case no such
reported sales take place on such day, the average of the closing bid and asked
prices of the Ordinary Shares in the over-the-counter market as reported by
NASDAQ or the NASDAQ National Market System or any comparable system or, if the
Ordinary Shares are not
<PAGE>
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included for quotation in the over-the-counter market or the NASDAQ National
Market System or a comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association of Securities
Deals, Inc. selected from time to time by the Board of Directors of the Company
for that purpose.
(g) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Ordinary Shares purchasable upon exercise of the Warrants evidenced
hereby shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Ordinary Shares
purchasable upon the exercise of each such Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.
(h) Adjustment in Purchase Price. Whenever the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby is adjusted as
herein provided, the Purchase Price payable upon exercise of each such Warrant
shall be adjusted by multiplying such Purchase Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of Ordinary
Shares purchasable upon the exercise of each such Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Ordinary
Shares purchasable immediately thereafter.
(i) When No Adjustment Required. No adjustment in the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby need be
made under Sections 5(b), 5(d) and 5(e) if the Company issues or distributes to
the Warrant Holder, the Assets, warrants or other rights or Convertible
Securities referred to in those paragraphs which the Warrant Holder would have
been entitled to receive had the Warrants evidenced hereby been exercised prior
to the happening of such event or the record date with respect thereto. No
adjustment need be made for a change in the par value or to no par value of the
Ordinary Shares; provided, however, that the Purchase Price shall at no time be
less than the par value of the Ordinary Shares of the Company, provided,
further, that the Company shall reduce the par value of its Ordinary Shares from
time to time as necessary so that such par value shall not be more than the
Purchase Price then in effect.
(j) Ordinary Shares. For all purposes of this Warrant Certificate, the
term "Ordinary Shares" shall mean (i) the
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class of stock designated as the Ordinary Shares of the Company on October 31,
1996 or (ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. In the event
that at any time, as a result of an adjustment made pursuant to Section 5(a),
the Warrant Holder shall become entitled to purchase any securities of the
Company other than Ordinary Shares, thereafter the number of such other shares
so purchasable upon exercise of each Warrant evidenced hereby and the Purchase
Price of such shares shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Ordinary Shares contained in Sections 5(a) through 5(i) herein,
inclusive, this Section 5(j) and the provisions of Section 2 and Sections 5(m)
and 5(n) herein, with respect to the Ordinary Shares, shall apply on like terms
to any such other securities.
(k) Expiration of Rights, Warrants or Convertible Securities. Upon the
expiration of any rights, warrants or Convertible Securities, if any thereof
shall not have been exercised, exchanged or converted, the Purchase Price and
the number of Ordinary Shares purchasable upon the exercise of each Warrant
evidenced hereby shall, upon such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (A) the only
Ordinary Shares so issued were the Ordinary Shares, if any, actually issued or
sold upon the exercise of such rights or warrants or conversion or exchange of
Convertible Securities and (B) such Ordinary Shares, if any, were issued or sold
for the consideration actually received by the Company upon such exercise,
conversion or exchange plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all of such rights,
warrants or Convertible Securities whether or not exercised, converted or
exchanged, as the case may be; provided, however, that no such readjustment
shall have the effect of increasing the Purchase Price or decreasing the number
of Ordinary Shares purchasable upon the exercise of each Warrant evidenced
hereby by an amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant or such rights, warrants or Convertible
Securities.
(l) In the event of any issuance of securities by the Company for
consideration in whole or in part in other than cash, the Board of Directors of
the Company shall determine in
<PAGE>
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good faith the value thereof which determination shall be conclusive and
binding.
(m) Voluntary Adjustment by the Company. The Company may at its option, at
any time prior to the Expiration Date, reduce the then current Purchase Price to
any amount deemed appropriate by the Board of Directors of the Company;
provided, however, the Company may not in any case increase the Purchase Price
pursuant to this Section 5(m); provided, further, if the Company elects to
reduce the then current Purchase Price, such reduction shall remain in effect
for at least a 30 day period, after which time the Company may, at its option,
reinstate the Purchase Price in effect immediately prior to such reduction.
(n) Statement on This Warrant Certificate. Irrespective of any adjustments
in the Purchase Price or the number or kind of shares purchasable upon the
exercise of the Warrants evidenced hereby, this Warrant Certificate and Warrant
Certificates hereafter issued may continue to express the same price and number
and kind of shares as are stated hereon.
Section 6. Certification of Adjusted Purchase Price and Number of Shares
Issuable. Whenever the Purchase Price and the number of Ordinary Shares issuable
upon the exercise of each Warrant evidenced hereby are adjusted as provided in
Section 5, the Company shall (a) prepare a certificate signed by its Chief
Executive Officer or a Vice President or other executive officer setting forth
the Purchase Price as so adjusted, the number of Ordinary Shares issuable upon
the exercise of each Warrant evidenced hereby as so adjusted and a brief
statement of the method of calculation of the adjustment and the facts
accounting for the adjustment, (b) promptly file with each transfer agent for
the Ordinary Shares a copy of such certificate, and (c) mail a brief summary
thereof to the Warrant Holder.
Section 7. Acceleration of Exercisability upon Sale of the Company or a
Change of Control. In the event that the Company undergoes a Sale (as defined)
or a Change of Control (as defined) prior to the Exiration Date, all of the
Warrants shall become fully exercisable.
For purposes of this Section 7, "Change of Control" means and shall be
deemed to have occurred if any person (within the meaning of the Securities and
Exchange Act of 1934, as amended), other than the Company or a Related Party (as
defined), is or becomes the beneficial owner, directly or indi-
<PAGE>
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rectly, of voting securities representing 51% or more of the total voting power
of all then outstanding voting securities.
For purposes of this Section 7, "Related Party" means: (a) a majority
owned subsidiary of the Company, (b) an employee or group of employees of the
Company, (c) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (d) a corporation owned by the stockholders of the
Company in substantially the same proportion as their ownership of the voting
securities of the Company, and (e) each of Elan Corporation, plc, Dominion
Income Management Corp., Halisol SA, AIG Global Investment Corp., Goldman Sachs
& Co., Paribas Sante SA, Perrigo Company and Warner-Lambert Company.
For purposes of this Section 7, a "Sale" means and shall be deemed to have
occurred if: (a) the Company completes a merger, consolidation, sale, transfer
or other disposition that effects a Change of Control, or (b) the Company enters
into a transaction or series of transactions to sell, transfer or otherwise
dispose of all or substantially all of its properties or assets.
Section 8. Fractional Warrants and Fractional Shares. (a) The Company
shall not be required to issue fractions of Warrants or to distribute Warrant
Certificates which evidence fractional Warrants. In lieu of such fractional
Warrants, there shall be paid to the Warrant Holders with regard to which such
fractional Warrant would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Warrant. For purposes of
this Section 8(a), the current market value of a Warrant shall be the fair value
thereof determined in the reasonable good faith judgment of the Board of
Directors of the Company for the day immediately prior to the date on which such
fractional Warrant would have been otherwise issuable.
(b) Notwithstanding an adjustment pursuant to Section 5 in the number of
Ordinary Shares covered by any Warrant evidenced hereby, the Company shall not
be required to issue fractions of Ordinary Shares upon exercise of the Warrants
evidenced hereby or to distribute certificates which evidence fractional
Ordinary Shares. In lieu of fractional Ordinary Shares, there shall be paid to
the Warrant Holder at the time this Warrant Certificate is exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of an Ordinary Share. For purposes of this Section 8(b), the current
market value of an Ordinary Share shall be deter-
<PAGE>
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mined in accordance with Section 5(f) as of the day immediately prior to the
date of such exercise.
(c) The Warrant Holder by acceptance hereof, expressly waives such Warrant
Holder's right to receive any fractional Warrant evidenced hereby or any
fractional Ordinary Share upon exercise of a Warrants evidenced hereby.
Section 9. Right of Action. All rights of action in respect of this
Warrant Certificate are vested in the respective Warrant Holders; and any
Warrant Holders may, in its own behalf and for its own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise in respect of, its right to exercise the Warrants
evidenced by this Warrant Certificate in the manner provided in this Warrant
Certificate.
Section 10. Agreement of Warrant Certificate Holders. The Warrant Holder
by accepting same consents and agrees with the Company that:
(a) registration of transfer of this Warrant Certificate may be made
only on the registry books of the Company if surrendered at the address of
the Company, duly endorsed, or accompanied by a proper instrument of
transfer; and
(b) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced hereby (notwithstanding any notations of ownership or
writing on this Warrant Certificates made by anyone other than the
Company) for all purposes whatsoever, and the Company shall not be
affected by any notice to the contrary.
Section 11. Issuance of New Warrant Certificate. Notwithstanding any of
the provisions of this Warrant Certificate, the Company may, at its option,
issue a new Warrant Certificate evidencing the Warrants evidenced hereby in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares of
capital stock or other securities or property purchasable under this Warrant
Certificate made in accordance with the provisions of this Agreement.
Section 12. Notice of Proposed Actions. In case the Company shall propose
(a) to pay any dividend payable in stock
<PAGE>
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of any class to the holders of its Ordinary Shares or to make any other
distribution to the holders of its Ordinary Shares (other than a cash dividend)
or (b) to offer to the holders of its Ordinary Shares rights, options or
warrants to subscribe for or to purchase any additional Ordinary Shares or
shares of capital stock of any class or any other securities, rights or options,
or (c) to effect any reclassification of its Ordinary Shares (other than a
reclassification involving only the subdivision or combination of outstanding
Ordinary Shares), or (d) to effect any capital reorganization, or (e) to effect
any consolidation, merger or sale, transfer or other disposition of all or
substantially all of its property, assets or business, or (f) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to the Warrant Holder, a notice of such proposed action
in accordance with Section 13 hereof, which shall specify the date on which a
record is to be taken for the purposes of such stock dividend, distribution or
rights, options or warrants, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, liquidation,
dissolution, or winding up is to become effective and the date of participation
therein by the holders of Ordinary Shares, if any such date is to be fixed, and
such notice shall be so given at least 20 calendar days (or 10 calendar days in
any case specified in clause (a) or (b) above) prior to the applicable record
date, effective date or participation date described above.
Section 13. Notices. Notices or demands authorized by this Agreement to be
given or made by the Warrant Holder to or on the Company shall be made in
writing by hand-delivery, next-day air courier, certified first-class mail,
return receipt requested, telex or facsimile to:
<PAGE>
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Warner Chilcott Public Limited Company
Lincoln House
Lincoln Place
Dublin 2, Ireland
Facsimile: (353) 1-662-4950
Attention: Corporate Secretary
Notices or demands authorized by this Agreement to be given or made by the
Company to the Warrant Holder shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return receipt requested,
telex or facsimile to such holder at the address of the Warrant Holder as shown
on the registry books of the Company.
Section 14. Registration under the Securities Act of 1933. The Warrant
Holder represents and warrants to the Company that it will not dispose of any
Warrants or Ordinary Shares issuable upon exercise of the Warrants evidenced
hereby except, (i) to a "qualified institutional buyer" as such term is defined
in Rule 144A under the Act, upon receipt by the Company of a transfer letter
certifying as to the prospective transferee's status as a qualified
institutional buyer, (ii) pursuant to an effective registration statement under
the Act and any applicable state or foreign securities laws or (iii) upon
receipt by the Company and, in the event of any disposition of ADRs evidencing
ADSs representing Ordinary Shares issued upon exercise of the Warrants evidenced
hereby, receipt by the depositary who is party to the Deposit Agreement (the
"Depositary"), of an opinion of counsel reasonably acceptable to the Company
and, if applicable, the Depositary, that such registration is not required.
Section 15. Certificates To Bear Legends. Upon original issuance prior to
(i) the date which is three years after the later of the original issue date
thereof and the last date on which the Company or any affiliate of the Company
was the owner of the security (or any predecessor security) and (ii) such later
date, if any, as may be required by any subsequent change in applicable law,
each Ordinary Share or other security issued upon exercise of the Warrants
evidenced hereby shall bear a legend substantially to the following effect:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD,
<PAGE>
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ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR SECURITY) AND (Y) SUCH LATER
DATE, IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE
LAW (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE RIGHT OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION REASONABLY ACCEPTABLE IN FORM AND SUBSTANCE TO EACH OF THEM
THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Section 16. Modification of Agreement. The Company and the Warrant Holder
may amend or supplement any provision of this Warrant Certificate only by a
statement in writing signed by each of the Company and the Warrant Holder.
Section 17. Successors. All provisions of this Warrant Certificate by or
for the benefit of the Company or the
<PAGE>
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Warrant Holder shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 18. Benefits of this Agreement. Nothing in this Warrant
Certificate expressed or nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the Company and the Warrant Holder any right,
remedy or claim under or by reason of this Warrant Certificate or of any
provision hereof; and all provisions in this Warrant Certificate contained shall
be for the sole and exclusive benefit of the Company and its successors and of
the Warrant Holder.
Section 19. New York Contract. This Warrant Certificate shall be governed
in all respects by the laws of the State of New York, without giving effect to
principles of conflict of laws.
Section 20. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant Certificate are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
<PAGE>
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WITNESS the signature of the proper officer of the Company. Dated as of
October 31, 1996.
WARNER CHILCOTT PUBLIC
LIMITED COMPANY
By __________________________________
Name:
Title:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE RIGHT
OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF OPINIONS
<PAGE>
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OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION REASONABLY ACCEPTABLE IN
FORM AND SUBSTANCE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
<PAGE>
-3-
Series C No. W01 400,000 Warrants
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Warrant Certificate
THIS CERTIFIES THAT for value received James G. Andress, or registered
assigns (the "Warrant Holder"), is the owner of the number of Warrants set forth
above, each of which entitles the owner thereof to purchase at any time on or
after the date hereof until the earlier of (i) 5 P.M. (New York time) on October
31, 2006 or (ii) the occurrence of a Termination Event (as defined) (the
"Expiration Date"), at the office of the Company, one fully paid and
nonassessable Ordinary Share, par value $.05 per share ("Ordinary Share"),
represented by one American Depositary Share ("ADS"), evidenced by American
Depository Receipts ("ADRs"), of WARNER CHILCOTT PUBLIC LIMITED COMPANY
(formerly named Nale Laboratories public limited company), a public limited
company organized and existing under the laws of Ireland (the "Company"), at the
purchase price and according to the schedule set forth in Section 2 hereof, upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of Ordinary Shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of October 31, 1996, based on the
Ordinary Shares of the Company as constituted at such date.
Section 1. Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
This Warrant Certificate, with or without other Warrant Certificates, may
be transferred or exchanged for another Warrant Certificate or Warrant
Certificates, entitling the Warrant Holder to purchase a like number of Ordinary
Shares as this Warrant Certificate entitles such Warrant Holder to purchase. In
the event that the Warrant Holder desires to transfer, split up, combine or
exchange this Warrant Certificate, the Warrant Holder shall make such request in
writing delivered to the Company, and shall surrender this Warrant Certificate
to the Company. Thereupon the Company shall deliver to the person entitled
thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental
<PAGE>
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charge that may be imposed in connection with any transfer, split up,
combination or exchange of this Warrant Certificate. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, unless the Warrant Holder shall furnish
to the Company evidence of compliance with the Act, in accordance with the
provisions of Section 14 hereof.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor to the Warrant Holder in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
Section 2. Exercise of Warrants; Purchase Price; Expiration of Warrants.
(a) The Warrant Holder may exercise the Warrants evidenced hereby, in whole or
in part, according to the following schedule:
Exercisable number of Warrants = (N x Q x .0625) minus P
Where:
N = total number of Warrants (subject to adjustment pursuant to
Section 5 hereof),
Q = the number of whole calendar quarters which have elapsed
from September 30, 1996, and
P = the number of Warrants (if any) previously exercised
Notwithstanding the foregoing, the Board of Directors of the Company and/or a
committee thereof may, at its absolute discretion, declare any Warrants to be
exercisable in whole or in part as from any date earlier than the date upon
which it would otherwise become exercisable. Further, as described more
completely in Section 7 hereof, upon a change of control, consolidation, sale or
merger of the Company, all outstanding Warrants shall become exercisable.
(b) Warrants may be exercised in accordance with the foregoing paragraph
(a) upon surrender of this Warrant Certifi-
<PAGE>
-5-
cate with the Form of Election to Purchase, duly executed, to the Company at the
address of the Company, at or prior to the Expiration Date, together with
payment of the Purchase Price (as defined) for each Ordinary Share as to which
the Warrants evidenced hereby are exercised.
(c) The Warrants shall expire prior to October 31, 2006 in the following
cases (each being a "Termination Event"): (1) the death of the Warrant Holder in
which case the personal representative of the deceased Warrant Holder may at any
time or from time to time, but subject to the other provisions of this Warrant
Certificate and in no case later than one year after such death, exercise any
Warrants, but only to the extent that such Warrants were exercisable by the
Warrant Holder at the time of his death, and (2) the Warrant Holder ceases to be
employed by the Company by reason of resignation, dismissal, retirement,
disability or otherwise ("Separation") in which case the Warrant Holder may at
any time, but subject to the other provisions of this Warrant Certificate and in
no case later than thirty days after Separation, exercise any Warrants, but only
to the extent that such Warrants were exercisable by the Warrant Holder at the
date of Separation.
(d) The purchase price for each Ordinary Share pursuant to the exercise of
Warrants evidenced hereby shall initially be $20.00 (the "Purchase Price") but
will be subject to adjustment as provided in Section 5 hereof and shall be
payable as provided in Section 2(e) hereof.
(e) Upon receipt of this Warrant Certificate, with the Form of Election to
Purchase duly executed, accompanied by payment of the Purchase Price for the
Ordinary Shares to be purchased and an amount equal to any applicable transfer
tax in cash, or by certified check, bank draft or postal or express money order
payable to the order of the Company, the Company shall thereupon promptly (i)
requisition from any transfer agent of the Ordinary Shares of the Company,
certificates for the number of whole Ordinary Shares to be purchased and (ii)
promptly after receipt of such certificates cause the same to be delivered to or
upon the order of the Warrant Holder, registered in such name or names as may be
designated by such Warrant Holder, and, when appropriate, promptly deliver cash
to be paid in lieu of issuance of fractional Ordinary Shares to or upon the
order of the Warrant Holder.
(f) In the event that the Warrant Holder shall exercise less than all the
Warrants evidenced hereby, a new Warrant Certificate evidencing Warrants
equivalent to the Warrants re-
<PAGE>
-6-
maining unexercised shall be issued by the Company to the Warrant Holder or to
the Warrant Holder's duly authorized assigns, subject to the provisions of
Section 8 hereof.
Section 3. Reservation and Availability of Ordinary Shares. The Company
covenants and agrees that it will cause to be reserved and kept available at all
times, free from preemptive rights and out of its authorized and available
Ordinary Shares (including treasury shares), the number of Ordinary Shares that
will be sufficient to permit the exercise in full of all outstanding Warrants
evidenced hereby.
The Company further covenants and agrees to reserve sufficient ADSs under
the Deposit Agreement, dated as of October 17, 1994 (the "Deposit Agreement"),
among the Company, The Bank of New York, as Depositary, and holders from time to
time of ADRs issued thereunder to permit the deposit thereunder of Ordinary
Shares represented by all Warrants evidenced hereby and the issuance of ADSs
representing such Ordinary Shares. The Company will, upon request of the holder
of the Ordinary Shares issued upon exercise of the Warrants evidenced hereby,
deposit such Ordinary Shares on behalf of such holder pursuant to the terms of
the Deposit Agreement and deliver to the holder of such shares the appropriate
number of ADSs evidenced by ADRs.
The Company further covenants and agrees that it will take all such action
as may be necessary to insure that all Ordinary Shares delivered upon exercise
of the Warrants evidenced hereby shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price) (i) be
duly and validly authorized and issued and fully paid and nonassessable shares,
and (ii) be issued in compliance with all applicable governmental laws and
regulations.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state taxes and charges which may be payable in
respect of the initial issuance or delivery of any Ordinary Shares, ADSs
representing such Ordinary Shares or ADRs evidencing such ADSs, upon the
exercise of the Warrants evidenced hereby. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the transfer or delivery of this Warrant Certificate or the issuance or
delivery of certificates for Ordinary Shares in a name other than that of the
Warrant Holder or to issue or deliver any certificates for Ordinary Shares upon
the exercise of any Warrant evidenced hereby until any such tax shall have been
paid (any such tax
<PAGE>
-7-
being payable by the Warrant Holder at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 4. Ordinary Shares Record Date. The Warrant Holder shall for all
purposes be deemed to have become the holder of record of any Ordinary Shares
issued upon exercise of Warrants evidenced hereby on, and the certificate
representing any such Ordinary Shares shall be dated, the date upon which this
Warrant Certificate was duly surrendered and payment of the Purchase Price (and
any applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Ordinary Share transfer
books of the Company are closed, the Warrant Holder shall be deemed to have
become the record holder of such Ordinary Shares on, and such certificate shall
be dated, the next succeeding business day on which the Ordinary Share transfer
books of the Company are open. Prior to the exercise of the Warrants evidenced
hereby, the Warrant Holder shall not be entitled to any rights of a shareholder
of the Company with respect to Ordinary Shares for which the Warrants evidenced
hereby are exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein or required by law.
Section 5. Adjustment of Purchase Price, Number of Ordinary Shares and
Shares of Capital Stock Warrants Are Exercisable Into. The number and kind of
securities purchasable upon the exercise of each Warrant evidenced hereby and
the Purchase Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
(a) Adjustment for Change in Capital Stock. In case the Company shall (i)
pay a dividend on its Ordinary Shares, whether of Ordinary Shares or capital
shares of any other class or make any other distribution of Ordinary Shares,
(ii) subdivide its outstanding Ordinary Shares into a greater number of shares
or (iii) combine its outstanding Ordinary Shares into a smaller number of
Ordinary Shares, the number of Ordinary Shares purchasable upon exercise of each
Warrant evidenced hereby immediately prior thereto shall be adjusted so that the
Warrant Holder shall be entitled to receive the number of Ordinary Shares which
the Warrant Holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been exercised
immedi-
<PAGE>
-8-
ately prior to the happening of such event or any record date with respect
thereto.
An adjustment made pursuant to this Section 5(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event. Such adjustment shall be made successively
whenever such a payment, subdivision or combination is made.
(b) Adjustment for Other Distributions. In case the Company shall
distribute to all holders of its Ordinary Shares evidences of its indebtedness
(other than evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for, with or without payment of additional
consideration in cash or property, Ordinary Shares, either upon the occurrence
of a specified date or a specified event (in any case, "Convertible
Securities")), assets (excluding cash dividends or distributions payable out of
consolidated retained earnings and dividends or distributions referred to in
Section 5(a) or in Section 5(c)), shares of capital stock (other than Ordinary
Shares), or rights, options or warrants containing the right to subscribe for or
purchase debt securities, assets or securities of the Company (other than
Convertible Securities or Ordinary Shares) (collectively "Assets"), then in each
case the number of Ordinary Shares thereafter purchasable upon the exercise of
each Warrant evidenced hereby shall be determined by multiplying the number of
Ordinary Shares theretofore purchasable upon the exercise of each Warrant
evidenced hereby by a fraction, of which the numerator shall be the market price
per Ordinary Share (as defined in Section 5(f)) on the date of such
distribution, and the denominator of which shall be such market price per
Ordinary Share less the fair value as of such record date (as determined in good
faith by the Board of Directors of the Company) of the portion of the Assets
applicable to one Ordinary Share. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. A reclassification of the
Ordinary Shares (other than a change in par value, from par value to no par
value or from no par value to par value) into Ordinary Shares and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Ordinary Shares of such shares of such other class of stock
within the meaning of this Section 5(b) and, if the outstanding Ordinary Shares
shall be changed into larger or smaller number of Ordinary Shares as a part of
such reclassification, such change shall be deemed a subdivision or combina-
<PAGE>
-9-
tion, as the case may be, of the outstanding Ordinary Shares within the meaning
of Section 5(a).
No adjustment shall be made pursuant to this Section 5(b) unless, on the
record date for such distribution, the market price per Ordinary Share exceeds
the fair market value of the Assets applicable to each outstanding Ordinary
Share. In the event, and each time, that the Company distributes Assets to all
holders of its Ordinary Shares and the market price per Ordinary Share on the
record date for such distribution is less than or equal to the fair market value
of the Assets applicable to each outstanding Ordinary Share on such date, the
Company shall either (i) distribute Assets to the Warrant Holder on the record
date for such distribution when such Assets are distributed to the holders of
Ordinary Shares as though all Warrants evidenced hereby had been exercised as of
such record date or (ii) deposit such Assets in trust with a trustee. If the
Company elects to distribute Assets to the Warrant Holder, the Company shall, on
the date Assets are distributed to holders of Ordinary Shares, distribute to
such Warrant Holder the Assets that it would have been entitled to receive on
such date if it had exercised the Warrants evidenced hereby immediately prior to
the record date for such distribution. If, however, the Company elects to
deposit the Assets due the Warrant Holder in trust, the Company shall, on the
date Assets are distributed to holders of Ordinary Shares, place in trust the
Assets that the Warrant Holder would have been entitled to receive on such date
if all of the Warrants evidenced hereby had been exercised immediately prior to
the record date for such distribution; and the Warrant Holder shall be entitled
upon exercise of the Warrants evidenced hereby to receive the Ordinary Shares
issuable upon exercise thereof, the Assets placed in trust in respect of such
Warrants, and the interest and dividends paid on such Assets since being placed
in trust. In the event any Warrants evidenced hereby have not been exercised
prior to the termination of the Expiration Date, any assets remaining in such
trust after distributions have been made in respect of Warrants exercised shall
be returned to the Company.
(c) Adjustment for Issuance of Ordinary Shares. If at any time after the
date hereof the Company shall (except as hereinafter provided) issue or sell any
Ordinary Shares for consideration in an amount per Ordinary Share less than the
market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale, then the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby shall be
adjusted to
<PAGE>
-10-
equal the product obtained by multiplying the number of Ordinary Shares for
which such Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of Ordinary Shares
outstanding immediately after such issue or sale, and (B) the denominator of
which shall be the sum of (1) the number of Ordinary Shares outstanding
immediately prior to such issue or sale, and (2) the aggregate consideration
received from the issuance or sale of such additional Ordinary Shares divided by
the market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale; provided, however, that no
adjustment shall be made pursuant to this Section 5(c) upon the issuance of
Ordinary Shares (i) in a bona fide public offering pursuant to a firm commitment
or best efforts underwriting, (ii) upon the issuance of up to 500,000 Ordinary
Shares, or ADSs representing such Ordinary Shares, of the Company pursuant to
any employee stock option, purchase or similar plan which may be established by
the Company from time to time providing for options, warrants or similar rights
to purchase Ordinary Shares, or ADSs representing such Ordinary Shares, of the
Company or (iii) upon the issuance of Ordinary Shares pursuant to (A) the
Agreement among the Company, Nale Laboratories Corporation and Bernard J. Berk,
(B) the warrants issued pursuant to the Warrant Agreement dated as of October
17, 1994 between the Company and Elan Corporation, plc, (C) the warrants issued
pursuant to the Warrant Agreement dated as of October 17, 1994 between the
Company and Montgomery Securities, (D) the warrants issued pursuant to the
Warrant Purchase Agreement dated as of March 28, 1996 by and between the Company
and Warner-Lambert Company or (E) the warrants to purchase in the aggregate
amount 170,000 Ordinary Shares, or ADSs representing such Ordinary Shares,
issued on June 28, 1996 to certain current and former directors of the Company.
(d) Issuance of Warrants or Other Rights. In case the Company shall
distribute to all holders of its Ordinary Shares or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Ordinary Shares or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Ordinary Shares are issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities plus the price paid to the Company to acquire such warrants, other
rights or Convertible Securities shall be less than the market price per
Ordinary Share (as defined in Section 5(f)) in effect immediately prior to the
time
<PAGE>
-11-
of such distribution, issue or sale, then the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby shall be adjusted
as provided in Section 5(c) on the basis that (A) the maximum number of Ordinary
Shares issuable pursuant to all such warrants or other rights or necessary to
give effect to the conversion or exchange of all such Convertible Securities
shall be deemed to be issued and outstanding, (B) the price per share for such
Ordinary Shares shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Ordinary Shares are available to such
holders, and (C) the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such warrants
or other rights; provided, however, that no adjustment shall be made pursuant to
this Section 5(d) upon the issuance of any warrants or options or other rights
to subscribe for up to 500,000 Ordinary Shares, or ADSs representing such
Ordinary Shares, of the Company, pursuant to any employee stock option, purchase
or similar plan which may be established by the Company from time to time. No
further adjustments of the number of Ordinary Shares for which any Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares or of such Convertible Securities upon exercise of such warrants
or other rights or upon the actual issue of such Ordinary Shares upon such
conversion or exchange of such Convertible Securities.
(e) Adjustments for Issuance of Convertible Securities. In case the
Company shall distribute to all holders of its Ordinary Shares or shall in any
manner (whether directly or by assumption in a merger in which the Company is
the surviving corporation) issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Ordinary Shares are issuable upon such
conversion or exchange, plus the price paid to the Company to acquire such
Convertible Security, shall be less than the market price per Ordinary Share (as
defined in Section 5(f)), in effect immediately prior to the time of such
distribution, issue or sale, then the number of Ordinary Shares purchasable upon
the exercise of each Warrant evidenced hereby shall be adjusted as provided in
Section 5(c) on the basis that (i) the maximum number of Ordinary Shares
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to be issued and outstanding, (ii) the price per
share of such Ordinary Shares shall be deemed to be the lowest possible price in
any range of prices at which such Ordinary Shares are available to such holders,
and (iii) the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issu-
<PAGE>
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ance of such Convertible Securities. No adjustment of the number of Ordinary
Shares for which any Warrant evidenced hereby is exercisable shall be made under
this Section 5(e) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 5(d). No
further adjustments of the number of Ordinary Shares for which any such Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares upon conversion or exchange of such Convertible Securities and,
if any issue or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments have been or are to be made pursuant to other
provisions of this Section 5, no further adjustments shall be made by reason of
such issue or sale. For the purposes of this Section 5(e), the date as of which
the current market price of Ordinary Shares shall be computed shall be the
earliest of (a) the date on which the Company shall take a record of the holders
of its Ordinary Shares for the purpose of entitling them to receive any such
Convertible Securities or (b) the date of actual issuance of such Convertible
Securities.
(f) Market Price. For the purpose of any computation under Sections 5(b),
5(c), 5(d), 5(e) and 8(b), the market price per Ordinary Share at any date shall
be the fair value thereof determined in the reasonable good faith judgment of
the Board of Directors of the Company; provided, however, that if the Ordinary
Shares, or ADSs representing such Ordinary Shares, are listed or admitted for
trading on any domestic national securities exchange or quoted in the
over-the-counter market or the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System, the market price per
Ordinary Share shall be the average of the daily closing prices for 20
consecutive trading days preceding the date of such computation. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on the principal
national securities exchange on which the Ordinary Shares or ADSs, as the case
may be, are listed or admitted to trading or, if not listed or admitted to
trading, the average of the last reported sales price or in case no such
reported sales take place on such day, the average of the closing bid and asked
prices of the Ordinary Shares in the over-the-counter market as reported by
NASDAQ or the NASDAQ National Market System or any comparable system or, if the
Ordinary Shares are not
<PAGE>
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included for quotation in the over-the-counter market or the NASDAQ National
Market System or a comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association of Securities
Deals, Inc. selected from time to time by the Board of Directors of the Company
for that purpose.
(g) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Ordinary Shares purchasable upon exercise of the Warrants evidenced
hereby shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Ordinary Shares
purchasable upon the exercise of each such Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.
(h) Adjustment in Purchase Price. Whenever the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby is adjusted as
herein provided, the Purchase Price payable upon exercise of each such Warrant
shall be adjusted by multiplying such Purchase Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of Ordinary
Shares purchasable upon the exercise of each such Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Ordinary
Shares purchasable immediately thereafter.
(i) When No Adjustment Required. No adjustment in the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby need be
made under Sections 5(b), 5(d) and 5(e) if the Company issues or distributes to
the Warrant Holder, the Assets, warrants or other rights or Convertible
Securities referred to in those paragraphs which the Warrant Holder would have
been entitled to receive had the Warrants evidenced hereby been exercised prior
to the happening of such event or the record date with respect thereto. No
adjustment need be made for a change in the par value or to no par value of the
Ordinary Shares; provided, however, that the Purchase Price shall at no time be
less than the par value of the Ordinary Shares of the Company, provided,
further, that the Company shall reduce the par value of its Ordinary Shares from
time to time as necessary so that such par value shall not be more than the
Purchase Price then in effect.
(j) Ordinary Shares. For all purposes of this Warrant Certificate, the
term "Ordinary Shares" shall mean (i) the
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class of stock designated as the Ordinary Shares of the Company on October 31,
1996 or (ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. In the event
that at any time, as a result of an adjustment made pursuant to Section 5(a),
the Warrant Holder shall become entitled to purchase any securities of the
Company other than Ordinary Shares, thereafter the number of such other shares
so purchasable upon exercise of each Warrant evidenced hereby and the Purchase
Price of such shares shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Ordinary Shares contained in Sections 5(a) through 5(i) herein,
inclusive, this Section 5(j) and the provisions of Section 2 and Sections 5(m)
and 5(n) herein, with respect to the Ordinary Shares, shall apply on like terms
to any such other securities.
(k) Expiration of Rights, Warrants or Convertible Securities. Upon the
expiration of any rights, warrants or Convertible Securities, if any thereof
shall not have been exercised, exchanged or converted, the Purchase Price and
the number of Ordinary Shares purchasable upon the exercise of each Warrant
evidenced hereby shall, upon such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (A) the only
Ordinary Shares so issued were the Ordinary Shares, if any, actually issued or
sold upon the exercise of such rights or warrants or conversion or exchange of
Convertible Securities and (B) such Ordinary Shares, if any, were issued or sold
for the consideration actually received by the Company upon such exercise,
conversion or exchange plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all of such rights,
warrants or Convertible Securities whether or not exercised, converted or
exchanged, as the case may be; provided, however, that no such readjustment
shall have the effect of increasing the Purchase Price or decreasing the number
of Ordinary Shares purchasable upon the exercise of each Warrant evidenced
hereby by an amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant or such rights, warrants or Convertible
Securities.
(l) In the event of any issuance of securities by the Company for
consideration in whole or in part in other than cash, the Board of Directors of
the Company shall determine in
<PAGE>
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good faith the value thereof which determination shall be conclusive and
binding.
(m) Voluntary Adjustment by the Company. The Company may at its option, at
any time prior to the Expiration Date, reduce the then current Purchase Price to
any amount deemed appropriate by the Board of Directors of the Company;
provided, however, the Company may not in any case increase the Purchase Price
pursuant to this Section 5(m); provided, further, if the Company elects to
reduce the then current Purchase Price, such reduction shall remain in effect
for at least a 30 day period, after which time the Company may, at its option,
reinstate the Purchase Price in effect immediately prior to such reduction.
(n) Statement on This Warrant Certificate. Irrespective of any adjustments
in the Purchase Price or the number or kind of shares purchasable upon the
exercise of the Warrants evidenced hereby, this Warrant Certificate and Warrant
Certificates hereafter issued may continue to express the same price and number
and kind of shares as are stated hereon.
Section 6. Certification of Adjusted Purchase Price and Number of Shares
Issuable. Whenever the Purchase Price and the number of Ordinary Shares issuable
upon the exercise of each Warrant evidenced hereby are adjusted as provided in
Section 5, the Company shall (a) prepare a certificate signed by its Chief
Executive Officer or a Vice President or other executive officer setting forth
the Purchase Price as so adjusted, the number of Ordinary Shares issuable upon
the exercise of each Warrant evidenced hereby as so adjusted and a brief
statement of the method of calculation of the adjustment and the facts
accounting for the adjustment, (b) promptly file with each transfer agent for
the Ordinary Shares a copy of such certificate, and (c) mail a brief summary
thereof to the Warrant Holder.
Section 7. Acceleration of Exercisability upon Sale of the Company or a
Change of Control. In the event that the Company undergoes a Sale (as defined)
or a Change of Control (as defined) prior to the Exiration Date, all of the
Warrants shall become fully exercisable.
For purposes of this Section 7, "Change of Control" means and shall be
deemed to have occurred if any person (within the meaning of the Securities and
Exchange Act of 1934, as amended), other than the Company or a Related Party (as
defined), is or becomes the beneficial owner, directly or indi-
<PAGE>
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rectly, of voting securities representing 51% or more of the total voting power
of all then outstanding voting securities.
For purposes of this Section 7, "Related Party" means: (a) a majority
owned subsidiary of the Company, (b) an employee or group of employees of the
Company, (c) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (d) a corporation owned by the stockholders of the
Company in substantially the same proportion as their ownership of the voting
securities of the Company, and (e) each of Elan Corporation, plc, Dominion
Income Management Corp., Halisol SA, AIG Global Investment Corp., Goldman Sachs
& Co., Paribas Sante SA, Perrigo Company and Warner-Lambert Company.
For purposes of this Section 7, a "Sale" means and shall be deemed to have
occurred if: (a) the Company completes a merger, consolidation, sale, transfer
or other disposition that effects a Change of Control, or (b) the Company enters
into a transaction or series of transactions to sell, transfer or otherwise
dispose of all or substantially all of its properties or assets.
Section 8. Fractional Warrants and Fractional Shares. (a) The Company
shall not be required to issue fractions of Warrants or to distribute Warrant
Certificates which evidence fractional Warrants. In lieu of such fractional
Warrants, there shall be paid to the Warrant Holders with regard to which such
fractional Warrant would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Warrant. For purposes of
this Section 8(a), the current market value of a Warrant shall be the fair value
thereof determined in the reasonable good faith judgment of the Board of
Directors of the Company for the day immediately prior to the date on which such
fractional Warrant would have been otherwise issuable.
(b) Notwithstanding an adjustment pursuant to Section 5 in the number of
Ordinary Shares covered by any Warrant evidenced hereby, the Company shall not
be required to issue fractions of Ordinary Shares upon exercise of the Warrants
evidenced hereby or to distribute certificates which evidence fractional
Ordinary Shares. In lieu of fractional Ordinary Shares, there shall be paid to
the Warrant Holder at the time this Warrant Certificate is exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of an Ordinary Share. For purposes of this Section 8(b), the current
market value of an Ordinary Share shall be deter-
<PAGE>
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mined in accordance with Section 5(f) as of the day immediately prior to the
date of such exercise.
(c) The Warrant Holder by acceptance hereof, expressly waives such Warrant
Holder's right to receive any fractional Warrant evidenced hereby or any
fractional Ordinary Share upon exercise of a Warrants evidenced hereby.
Section 9. Right of Action. All rights of action in respect of this
Warrant Certificate are vested in the respective Warrant Holders; and any
Warrant Holders may, in its own behalf and for its own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise in respect of, its right to exercise the Warrants
evidenced by this Warrant Certificate in the manner provided in this Warrant
Certificate.
Section 10. Agreement of Warrant Certificate Holders. The Warrant Holder
by accepting same consents and agrees with the Company that:
(a) registration of transfer of this Warrant Certificate may be made
only on the registry books of the Company if surrendered at the address of
the Company, duly endorsed, or accompanied by a proper instrument of
transfer; and
(b) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced hereby (notwithstanding any notations of ownership or
writing on this Warrant Certificates made by anyone other than the
Company) for all purposes whatsoever, and the Company shall not be
affected by any notice to the contrary.
Section 11. Issuance of New Warrant Certificate. Notwithstanding any of
the provisions of this Warrant Certificate, the Company may, at its option,
issue a new Warrant Certificate evidencing the Warrants evidenced hereby in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares of
capital stock or other securities or property purchasable under this Warrant
Certificate made in accordance with the provisions of this Agreement.
Section 12. Notice of Proposed Actions. In case the Company shall propose
(a) to pay any dividend payable in stock
<PAGE>
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of any class to the holders of its Ordinary Shares or to make any other
distribution to the holders of its Ordinary Shares (other than a cash dividend)
or (b) to offer to the holders of its Ordinary Shares rights, options or
warrants to subscribe for or to purchase any additional Ordinary Shares or
shares of capital stock of any class or any other securities, rights or options,
or (c) to effect any reclassification of its Ordinary Shares (other than a
reclassification involving only the subdivision or combination of outstanding
Ordinary Shares), or (d) to effect any capital reorganization, or (e) to effect
any consolidation, merger or sale, transfer or other disposition of all or
substantially all of its property, assets or business, or (f) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to the Warrant Holder, a notice of such proposed action
in accordance with Section 13 hereof, which shall specify the date on which a
record is to be taken for the purposes of such stock dividend, distribution or
rights, options or warrants, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, liquidation,
dissolution, or winding up is to become effective and the date of participation
therein by the holders of Ordinary Shares, if any such date is to be fixed, and
such notice shall be so given at least 20 calendar days (or 10 calendar days in
any case specified in clause (a) or (b) above) prior to the applicable record
date, effective date or participation date described above.
Section 13. Notices. Notices or demands authorized by this Agreement to be
given or made by the Warrant Holder to or on the Company shall be made in
writing by hand-delivery, next-day air courier, certified first-class mail,
return receipt requested, telex or facsimile to:
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Warner Chilcott Public Limited Company
Lincoln House
Lincoln Place
Dublin 2, Ireland
Facsimile: (353) 1-662-4950
Attention: Corporate Secretary
Notices or demands authorized by this Agreement to be given or made by the
Company to the Warrant Holder shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return receipt requested,
telex or facsimile to such holder at the address of the Warrant Holder as shown
on the registry books of the Company.
Section 14. Registration under the Securities Act of 1933. The Warrant
Holder represents and warrants to the Company that it will not dispose of any
Warrants or Ordinary Shares issuable upon exercise of the Warrants evidenced
hereby except, (i) to a "qualified institutional buyer" as such term is defined
in Rule 144A under the Act, upon receipt by the Company of a transfer letter
certifying as to the prospective transferee's status as a qualified
institutional buyer, (ii) pursuant to an effective registration statement under
the Act and any applicable state or foreign securities laws or (iii) upon
receipt by the Company and, in the event of any disposition of ADRs evidencing
ADSs representing Ordinary Shares issued upon exercise of the Warrants evidenced
hereby, receipt by the depositary who is party to the Deposit Agreement (the
"Depositary"), of an opinion of counsel reasonably acceptable to the Company
and, if applicable, the Depositary, that such registration is not required.
Section 15. Certificates To Bear Legends. Upon original issuance prior to
(i) the date which is three years after the later of the original issue date
thereof and the last date on which the Company or any affiliate of the Company
was the owner of the security (or any predecessor security) and (ii) such later
date, if any, as may be required by any subsequent change in applicable law,
each Ordinary Share or other security issued upon exercise of the Warrants
evidenced hereby shall bear a legend substantially to the following effect:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD,
<PAGE>
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ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR SECURITY) AND (Y) SUCH LATER
DATE, IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE
LAW (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE RIGHT OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION REASONABLY ACCEPTABLE IN FORM AND SUBSTANCE TO EACH OF THEM
THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Section 16. Modification of Agreement. The Company and the Warrant Holder
may amend or supplement any provision of this Warrant Certificate only by a
statement in writing signed by each of the Company and the Warrant Holder.
Section 17. Successors. All provisions of this Warrant Certificate by or
for the benefit of the Company or the
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Warrant Holder shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 18. Benefits of this Agreement. Nothing in this Warrant
Certificate expressed or nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the Company and the Warrant Holder any right,
remedy or claim under or by reason of this Warrant Certificate or of any
provision hereof; and all provisions in this Warrant Certificate contained shall
be for the sole and exclusive benefit of the Company and its successors and of
the Warrant Holder.
Section 19. New York Contract. This Warrant Certificate shall be governed
in all respects by the laws of the State of New York, without giving effect to
principles of conflict of laws.
Section 20. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant Certificate are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
<PAGE>
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WITNESS the signature of the proper officer of the Company. Dated as of
October 31, 1996.
WARNER CHILCOTT PUBLIC
LIMITED COMPANY
By _____________________________________
Name:
Title:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE RIGHT
OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF OPINIONS OF
<PAGE>
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COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION REASONABLY ACCEPTABLE IN FORM
AND SUBSTANCE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
<PAGE>
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Series C No. W04 30,000 Warrants
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Warrant Certificate
THIS CERTIFIES THAT for value received Roger M. Boissonneault, or
registered assigns (the "Warrant Holder"), is the owner of the number of
Warrants set forth above, each of which entitles the owner thereof to purchase
at any time on or after the date hereof until the earlier of (i) 5 P.M. (New
York time) on October 31, 2006 or (ii) the occurrence of a Termination Event (as
defined) (the "Expiration Date"), at the office of the Company, one fully paid
and nonassessable Ordinary Share, par value $.05 per share ("Ordinary Share"),
represented by one American Depositary Share ("ADS"), evidenced by American
Depository Receipts ("ADRs"), of WARNER CHILCOTT PUBLIC LIMITED COMPANY
(formerly named Nale Laboratories public limited company), a public limited
company organized and existing under the laws of Ireland (the "Company"), at the
purchase price and according to the schedule set forth in Section 2 hereof, upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of Ordinary Shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of October 31, 1996, based on the
Ordinary Shares of the Company as constituted at such date.
Section 1. Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
This Warrant Certificate, with or without other Warrant Certificates, may
be transferred or exchanged for another Warrant Certificate or Warrant
Certificates, entitling the Warrant Holder to purchase a like number of Ordinary
Shares as this Warrant Certificate entitles such Warrant Holder to purchase. In
the event that the Warrant Holder desires to transfer, split up, combine or
exchange this Warrant Certificate, the Warrant Holder shall make such request in
writing delivered to the Company, and shall surrender this Warrant Certificate
to the Company. Thereupon the Company shall deliver to the person entitled
thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental
<PAGE>
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charge that may be imposed in connection with any transfer, split up,
combination or exchange of this Warrant Certificate. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, unless the Warrant Holder shall furnish
to the Company evidence of compliance with the Act, in accordance with the
provisions of Section 14 hereof.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor to the Warrant Holder in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
Section 2. Exercise of Warrants; Purchase Price; Expiration of Warrants.
(a) The Warrant Holder may exercise the Warrants evidenced hereby, in whole or
in part, according to the following schedule:
Exercisable number of Warrants = (N x Q x .0625) minus P
Where:
N = total number of Warrants (subject to adjustment pursuant to
Section 5 hereof),
Q = the number of whole calendar quarters which have elapsed
from September 30, 1996, and
P = the number of Warrants (if any) previously exercised
Notwithstanding the foregoing, the Board of Directors of the Company and/or a
committee thereof may, at its absolute discretion, declare any Warrants to be
exercisable in whole or in part as from any date earlier than the date upon
which it would otherwise become exercisable. Further, as described more
completely in Section 7 hereof, upon a change of control, consolidation, sale or
merger of the Company, all outstanding Warrants shall become exercisable.
(b) Warrants may be exercised in accordance with the foregoing paragraph
(a) upon surrender of this Warrant Certifi-
<PAGE>
-5-
cate with the Form of Election to Purchase, duly executed, to the Company at the
address of the Company, at or prior to the Expiration Date, together with
payment of the Purchase Price (as defined) for each Ordinary Share as to which
the Warrants evidenced hereby are exercised.
(c) The Warrants shall expire prior to October 31, 2006 in the following
cases (each being a "Termination Event"): (1) the death of the Warrant Holder in
which case the personal representative of the deceased Warrant Holder may at any
time or from time to time, but subject to the other provisions of this Warrant
Certificate and in no case later than one year after such death, exercise any
Warrants, but only to the extent that such Warrants were exercisable by the
Warrant Holder at the time of his death, and (2) the Warrant Holder ceases to be
employed by the Company by reason of resignation, dismissal, retirement,
disability or otherwise ("Separation") in which case the Warrant Holder may at
any time, but subject to the other provisions of this Warrant Certificate and in
no case later than thirty days after Separation, exercise any Warrants, but only
to the extent that such Warrants were exercisable by the Warrant Holder at the
date of Separation.
(d) The purchase price for each Ordinary Share pursuant to the exercise of
Warrants evidenced hereby shall initially be $1.00 (the "Purchase Price") but
will be subject to adjustment as provided in Section 5 hereof and shall be
payable as provided in Section 2(e) hereof.
(e) Upon receipt of this Warrant Certificate, with the Form of Election to
Purchase duly executed, accompanied by payment of the Purchase Price for the
Ordinary Shares to be purchased and an amount equal to any applicable transfer
tax in cash, or by certified check, bank draft or postal or express money order
payable to the order of the Company, the Company shall thereupon promptly (i)
requisition from any transfer agent of the Ordinary Shares of the Company,
certificates for the number of whole Ordinary Shares to be purchased and (ii)
promptly after receipt of such certificates cause the same to be delivered to or
upon the order of the Warrant Holder, registered in such name or names as may be
designated by such Warrant Holder, and, when appropriate, promptly deliver cash
to be paid in lieu of issuance of fractional Ordinary Shares to or upon the
order of the Warrant Holder.
(f) In the event that the Warrant Holder shall exercise less than all the
Warrants evidenced hereby, a new Warrant Certificate evidencing Warrants
equivalent to the Warrants re-
<PAGE>
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maining unexercised shall be issued by the Company to the Warrant Holder or to
the Warrant Holder's duly authorized assigns, subject to the provisions of
Section 8 hereof.
Section 3. Reservation and Availability of Ordinary Shares. The Company
covenants and agrees that it will cause to be reserved and kept available at all
times, free from preemptive rights and out of its authorized and available
Ordinary Shares (including treasury shares), the number of Ordinary Shares that
will be sufficient to permit the exercise in full of all outstanding Warrants
evidenced hereby.
The Company further covenants and agrees to reserve sufficient ADSs under
the Deposit Agreement, dated as of October 17, 1994 (the "Deposit Agreement"),
among the Company, The Bank of New York, as Depositary, and holders from time to
time of ADRs issued thereunder to permit the deposit thereunder of Ordinary
Shares represented by all Warrants evidenced hereby and the issuance of ADSs
representing such Ordinary Shares. The Company will, upon request of the holder
of the Ordinary Shares issued upon exercise of the Warrants evidenced hereby,
deposit such Ordinary Shares on behalf of such holder pursuant to the terms of
the Deposit Agreement and deliver to the holder of such shares the appropriate
number of ADSs evidenced by ADRs.
The Company further covenants and agrees that it will take all such action
as may be necessary to insure that all Ordinary Shares delivered upon exercise
of the Warrants evidenced hereby shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price) (i) be
duly and validly authorized and issued and fully paid and nonassessable shares,
and (ii) be issued in compliance with all applicable governmental laws and
regulations.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state taxes and charges which may be payable in
respect of the initial issuance or delivery of any Ordinary Shares, ADSs
representing such Ordinary Shares or ADRs evidencing such ADSs, upon the
exercise of the Warrants evidenced hereby. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the transfer or delivery of this Warrant Certificate or the issuance or
delivery of certificates for Ordinary Shares in a name other than that of the
Warrant Holder or to issue or deliver any certificates for Ordinary Shares upon
the exercise of any Warrant evidenced hereby until any such tax shall have been
paid (any such tax
<PAGE>
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being payable by the Warrant Holder at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 4. Ordinary Shares Record Date. The Warrant Holder shall for all
purposes be deemed to have become the holder of record of any Ordinary Shares
issued upon exercise of Warrants evidenced hereby on, and the certificate
representing any such Ordinary Shares shall be dated, the date upon which this
Warrant Certificate was duly surrendered and payment of the Purchase Price (and
any applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Ordinary Share transfer
books of the Company are closed, the Warrant Holder shall be deemed to have
become the record holder of such Ordinary Shares on, and such certificate shall
be dated, the next succeeding business day on which the Ordinary Share transfer
books of the Company are open. Prior to the exercise of the Warrants evidenced
hereby, the Warrant Holder shall not be entitled to any rights of a shareholder
of the Company with respect to Ordinary Shares for which the Warrants evidenced
hereby are exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein or required by law.
Section 5. Adjustment of Purchase Price, Number of Ordinary Shares and
Shares of Capital Stock Warrants Are Exercisable Into. The number and kind of
securities purchasable upon the exercise of each Warrant evidenced hereby and
the Purchase Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
(a) Adjustment for Change in Capital Stock. In case the Company shall (i)
pay a dividend on its Ordinary Shares, whether of Ordinary Shares or capital
shares of any other class or make any other distribution of Ordinary Shares,
(ii) subdivide its outstanding Ordinary Shares into a greater number of shares
or (iii) combine its outstanding Ordinary Shares into a smaller number of
Ordinary Shares, the number of Ordinary Shares purchasable upon exercise of each
Warrant evidenced hereby immediately prior thereto shall be adjusted so that the
Warrant Holder shall be entitled to receive the number of Ordinary Shares which
the Warrant Holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been exercised
immedi-
<PAGE>
-8-
ately prior to the happening of such event or any record date with respect
thereto.
An adjustment made pursuant to this Section 5(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event. Such adjustment shall be made successively
whenever such a payment, subdivision or combination is made.
(b) Adjustment for Other Distributions. In case the Company shall
distribute to all holders of its Ordinary Shares evidences of its indebtedness
(other than evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for, with or without payment of additional
consideration in cash or property, Ordinary Shares, either upon the occurrence
of a specified date or a specified event (in any case, "Convertible
Securities")), assets (excluding cash dividends or distributions payable out of
consolidated retained earnings and dividends or distributions referred to in
Section 5(a) or in Section 5(c)), shares of capital stock (other than Ordinary
Shares), or rights, options or warrants containing the right to subscribe for or
purchase debt securities, assets or securities of the Company (other than
Convertible Securities or Ordinary Shares) (collectively "Assets"), then in each
case the number of Ordinary Shares thereafter purchasable upon the exercise of
each Warrant evidenced hereby shall be determined by multiplying the number of
Ordinary Shares theretofore purchasable upon the exercise of each Warrant
evidenced hereby by a fraction, of which the numerator shall be the market price
per Ordinary Share (as defined in Section 5(f)) on the date of such
distribution, and the denominator of which shall be such market price per
Ordinary Share less the fair value as of such record date (as determined in good
faith by the Board of Directors of the Company) of the portion of the Assets
applicable to one Ordinary Share. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. A reclassification of the
Ordinary Shares (other than a change in par value, from par value to no par
value or from no par value to par value) into Ordinary Shares and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Ordinary Shares of such shares of such other class of stock
within the meaning of this Section 5(b) and, if the outstanding Ordinary Shares
shall be changed into larger or smaller number of Ordinary Shares as a part of
such reclassification, such change shall be deemed a subdivision or combina-
<PAGE>
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tion, as the case may be, of the outstanding Ordinary Shares within the meaning
of Section 5(a).
No adjustment shall be made pursuant to this Section 5(b) unless, on the
record date for such distribution, the market price per Ordinary Share exceeds
the fair market value of the Assets applicable to each outstanding Ordinary
Share. In the event, and each time, that the Company distributes Assets to all
holders of its Ordinary Shares and the market price per Ordinary Share on the
record date for such distribution is less than or equal to the fair market value
of the Assets applicable to each outstanding Ordinary Share on such date, the
Company shall either (i) distribute Assets to the Warrant Holder on the record
date for such distribution when such Assets are distributed to the holders of
Ordinary Shares as though all Warrants evidenced hereby had been exercised as of
such record date or (ii) deposit such Assets in trust with a trustee. If the
Company elects to distribute Assets to the Warrant Holder, the Company shall, on
the date Assets are distributed to holders of Ordinary Shares, distribute to
such Warrant Holder the Assets that it would have been entitled to receive on
such date if it had exercised the Warrants evidenced hereby immediately prior to
the record date for such distribution. If, however, the Company elects to
deposit the Assets due the Warrant Holder in trust, the Company shall, on the
date Assets are distributed to holders of Ordinary Shares, place in trust the
Assets that the Warrant Holder would have been entitled to receive on such date
if all of the Warrants evidenced hereby had been exercised immediately prior to
the record date for such distribution; and the Warrant Holder shall be entitled
upon exercise of the Warrants evidenced hereby to receive the Ordinary Shares
issuable upon exercise thereof, the Assets placed in trust in respect of such
Warrants, and the interest and dividends paid on such Assets since being placed
in trust. In the event any Warrants evidenced hereby have not been exercised
prior to the termination of the Expiration Date, any assets remaining in such
trust after distributions have been made in respect of Warrants exercised shall
be returned to the Company.
(c) Adjustment for Issuance of Ordinary Shares. If at any time after the
date hereof the Company shall (except as hereinafter provided) issue or sell any
Ordinary Shares for consideration in an amount per Ordinary Share less than the
market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale, then the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby shall be
adjusted to
<PAGE>
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equal the product obtained by multiplying the number of Ordinary Shares for
which such Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of Ordinary Shares
outstanding immediately after such issue or sale, and (B) the denominator of
which shall be the sum of (1) the number of Ordinary Shares outstanding
immediately prior to such issue or sale, and (2) the aggregate consideration
received from the issuance or sale of such additional Ordinary Shares divided by
the market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale; provided, however, that no
adjustment shall be made pursuant to this Section 5(c) upon the issuance of
Ordinary Shares (i) in a bona fide public offering pursuant to a firm commitment
or best efforts underwriting, (ii) upon the issuance of up to 500,000 Ordinary
Shares, or ADSs representing such Ordinary Shares, of the Company pursuant to
any employee stock option, purchase or similar plan which may be established by
the Company from time to time providing for options, warrants or similar rights
to purchase Ordinary Shares, or ADSs representing such Ordinary Shares, of the
Company or (iii) upon the issuance of Ordinary Shares pursuant to (A) the
Agreement among the Company, Nale Laboratories Corporation and Bernard J. Berk,
(B) the warrants issued pursuant to the Warrant Agreement dated as of October
17, 1994 between the Company and Elan Corporation, plc, (C) the warrants issued
pursuant to the Warrant Agreement dated as of October 17, 1994 between the
Company and Montgomery Securities, (D) the warrants issued pursuant to the
Warrant Purchase Agreement dated as of March 28, 1996 by and between the Company
and Warner-Lambert Company or (E) the warrants to purchase in the aggregate
amount 170,000 Ordinary Shares, or ADSs representing such Ordinary Shares,
issued on June 28, 1996 to certain current and former directors of the Company.
(d) Issuance of Warrants or Other Rights. In case the Company shall
distribute to all holders of its Ordinary Shares or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Ordinary Shares or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Ordinary Shares are issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities plus the price paid to the Company to acquire such warrants, other
rights or Convertible Securities shall be less than the market price per
Ordinary Share (as defined in Section 5(f)) in effect immediately prior to the
time
<PAGE>
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of such distribution, issue or sale, then the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby shall be adjusted
as provided in Section 5(c) on the basis that (A) the maximum number of Ordinary
Shares issuable pursuant to all such warrants or other rights or necessary to
give effect to the conversion or exchange of all such Convertible Securities
shall be deemed to be issued and outstanding, (B) the price per share for such
Ordinary Shares shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Ordinary Shares are available to such
holders, and (C) the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such warrants
or other rights; provided, however, that no adjustment shall be made pursuant to
this Section 5(d) upon the issuance of any warrants or options or other rights
to subscribe for up to 500,000 Ordinary Shares, or ADSs representing such
Ordinary Shares, of the Company, pursuant to any employee stock option, purchase
or similar plan which may be established by the Company from time to time. No
further adjustments of the number of Ordinary Shares for which any Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares or of such Convertible Securities upon exercise of such warrants
or other rights or upon the actual issue of such Ordinary Shares upon such
conversion or exchange of such Convertible Securities.
(e) Adjustments for Issuance of Convertible Securities. In case the
Company shall distribute to all holders of its Ordinary Shares or shall in any
manner (whether directly or by assumption in a merger in which the Company is
the surviving corporation) issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Ordinary Shares are issuable upon such
conversion or exchange, plus the price paid to the Company to acquire such
Convertible Security, shall be less than the market price per Ordinary Share (as
defined in Section 5(f)), in effect immediately prior to the time of such
distribution, issue or sale, then the number of Ordinary Shares purchasable upon
the exercise of each Warrant evidenced hereby shall be adjusted as provided in
Section 5(c) on the basis that (i) the maximum number of Ordinary Shares
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to be issued and outstanding, (ii) the price per
share of such Ordinary Shares shall be deemed to be the lowest possible price in
any range of prices at which such Ordinary Shares are available to such holders,
and (iii) the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issu-
<PAGE>
-12-
ance of such Convertible Securities. No adjustment of the number of Ordinary
Shares for which any Warrant evidenced hereby is exercisable shall be made under
this Section 5(e) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 5(d). No
further adjustments of the number of Ordinary Shares for which any such Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares upon conversion or exchange of such Convertible Securities and,
if any issue or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments have been or are to be made pursuant to other
provisions of this Section 5, no further adjustments shall be made by reason of
such issue or sale. For the purposes of this Section 5(e), the date as of which
the current market price of Ordinary Shares shall be computed shall be the
earliest of (a) the date on which the Company shall take a record of the holders
of its Ordinary Shares for the purpose of entitling them to receive any such
Convertible Securities or (b) the date of actual issuance of such Convertible
Securities.
(f) Market Price. For the purpose of any computation under Sections 5(b),
5(c), 5(d), 5(e) and 8(b), the market price per Ordinary Share at any date shall
be the fair value thereof determined in the reasonable good faith judgment of
the Board of Directors of the Company; provided, however, that if the Ordinary
Shares, or ADSs representing such Ordinary Shares, are listed or admitted for
trading on any domestic national securities exchange or quoted in the
over-the-counter market or the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System, the market price per
Ordinary Share shall be the average of the daily closing prices for 20
consecutive trading days preceding the date of such computation. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on the principal
national securities exchange on which the Ordinary Shares or ADSs, as the case
may be, are listed or admitted to trading or, if not listed or admitted to
trading, the average of the last reported sales price or in case no such
reported sales take place on such day, the average of the closing bid and asked
prices of the Ordinary Shares in the over-the-counter market as reported by
NASDAQ or the NASDAQ National Market System or any comparable system or, if the
Ordinary Shares are not
<PAGE>
-13-
included for quotation in the over-the-counter market or the NASDAQ National
Market System or a comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association of Securities
Deals, Inc. selected from time to time by the Board of Directors of the Company
for that purpose.
(g) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Ordinary Shares purchasable upon exercise of the Warrants evidenced
hereby shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Ordinary Shares
purchasable upon the exercise of each such Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.
(h) Adjustment in Purchase Price. Whenever the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby is adjusted as
herein provided, the Purchase Price payable upon exercise of each such Warrant
shall be adjusted by multiplying such Purchase Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of Ordinary
Shares purchasable upon the exercise of each such Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Ordinary
Shares purchasable immediately thereafter.
(i) When No Adjustment Required. No adjustment in the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby need be
made under Sections 5(b), 5(d) and 5(e) if the Company issues or distributes to
the Warrant Holder, the Assets, warrants or other rights or Convertible
Securities referred to in those paragraphs which the Warrant Holder would have
been entitled to receive had the Warrants evidenced hereby been exercised prior
to the happening of such event or the record date with respect thereto. No
adjustment need be made for a change in the par value or to no par value of the
Ordinary Shares; provided, however, that the Purchase Price shall at no time be
less than the par value of the Ordinary Shares of the Company, provided,
further, that the Company shall reduce the par value of its Ordinary Shares from
time to time as necessary so that such par value shall not be more than the
Purchase Price then in effect.
(j) Ordinary Shares. For all purposes of this Warrant Certificate, the
term "Ordinary Shares" shall mean (i) the
<PAGE>
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class of stock designated as the Ordinary Shares of the Company on October 31,
1996 or (ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. In the event
that at any time, as a result of an adjustment made pursuant to Section 5(a),
the Warrant Holder shall become entitled to purchase any securities of the
Company other than Ordinary Shares, thereafter the number of such other shares
so purchasable upon exercise of each Warrant evidenced hereby and the Purchase
Price of such shares shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Ordinary Shares contained in Sections 5(a) through 5(i) herein,
inclusive, this Section 5(j) and the provisions of Section 2 and Sections 5(m)
and 5(n) herein, with respect to the Ordinary Shares, shall apply on like terms
to any such other securities.
(k) Expiration of Rights, Warrants or Convertible Securities. Upon the
expiration of any rights, warrants or Convertible Securities, if any thereof
shall not have been exercised, exchanged or converted, the Purchase Price and
the number of Ordinary Shares purchasable upon the exercise of each Warrant
evidenced hereby shall, upon such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (A) the only
Ordinary Shares so issued were the Ordinary Shares, if any, actually issued or
sold upon the exercise of such rights or warrants or conversion or exchange of
Convertible Securities and (B) such Ordinary Shares, if any, were issued or sold
for the consideration actually received by the Company upon such exercise,
conversion or exchange plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all of such rights,
warrants or Convertible Securities whether or not exercised, converted or
exchanged, as the case may be; provided, however, that no such readjustment
shall have the effect of increasing the Purchase Price or decreasing the number
of Ordinary Shares purchasable upon the exercise of each Warrant evidenced
hereby by an amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant or such rights, warrants or Convertible
Securities.
(l) In the event of any issuance of securities by the Company for
consideration in whole or in part in other than cash, the Board of Directors of
the Company shall determine in
<PAGE>
-15-
good faith the value thereof which determination shall be conclusive and
binding.
(m) Voluntary Adjustment by the Company. The Company may at its option, at
any time prior to the Expiration Date, reduce the then current Purchase Price to
any amount deemed appropriate by the Board of Directors of the Company;
provided, however, the Company may not in any case increase the Purchase Price
pursuant to this Section 5(m); provided, further, if the Company elects to
reduce the then current Purchase Price, such reduction shall remain in effect
for at least a 30 day period, after which time the Company may, at its option,
reinstate the Purchase Price in effect immediately prior to such reduction.
(n) Statement on This Warrant Certificate. Irrespective of any adjustments
in the Purchase Price or the number or kind of shares purchasable upon the
exercise of the Warrants evidenced hereby, this Warrant Certificate and Warrant
Certificates hereafter issued may continue to express the same price and number
and kind of shares as are stated hereon.
Section 6. Certification of Adjusted Purchase Price and Number of Shares
Issuable. Whenever the Purchase Price and the number of Ordinary Shares issuable
upon the exercise of each Warrant evidenced hereby are adjusted as provided in
Section 5, the Company shall (a) prepare a certificate signed by its Chief
Executive Officer or a Vice President or other executive officer setting forth
the Purchase Price as so adjusted, the number of Ordinary Shares issuable upon
the exercise of each Warrant evidenced hereby as so adjusted and a brief
statement of the method of calculation of the adjustment and the facts
accounting for the adjustment, (b) promptly file with each transfer agent for
the Ordinary Shares a copy of such certificate, and (c) mail a brief summary
thereof to the Warrant Holder.
Section 7. Acceleration of Exercisability upon Sale of the Company or a
Change of Control. In the event that the Company undergoes a Sale (as defined)
or a Change of Control (as defined) prior to the Exiration Date, all of the
Warrants shall become fully exercisable.
For purposes of this Section 7, "Change of Control" means and shall be
deemed to have occurred if any person (within the meaning of the Securities and
Exchange Act of 1934, as amended), other than the Company or a Related Party (as
defined), is or becomes the beneficial owner, directly or in-
<PAGE>
-16-
directly, of voting securities representing 51% or more of the total voting
power of all then outstanding voting securities.
For purposes of this Section 7, "Related Party" means: (a) a majority
owned subsidiary of the Company, (b) an employee or group of employees of the
Company, (c) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (d) a corporation owned by the stockholders of the
Company in substantially the same proportion as their ownership of the voting
securities of the Company, and (e) each of Elan Corporation, plc, Dominion
Income Management Corp., Halisol SA, AIG Global Investment Corp., Goldman Sachs
& Co., Paribas Sante SA, Perrigo Company and Warner-Lambert Company.
For purposes of this Section 7, a "Sale" means and shall be deemed to have
occurred if: (a) the Company completes a merger, consolidation, sale, transfer
or other disposition that effects a Change of Control, or (b) the Company enters
into a transaction or series of transactions to sell, transfer or otherwise
dispose of all or substantially all of its properties or assets.
Section 8. Fractional Warrants and Fractional Shares. (a) The Company
shall not be required to issue fractions of Warrants or to distribute Warrant
Certificates which evidence fractional Warrants. In lieu of such fractional
Warrants, there shall be paid to the Warrant Holders with regard to which such
fractional Warrant would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Warrant. For purposes of
this Section 8(a), the current market value of a Warrant shall be the fair value
thereof determined in the reasonable good faith judgment of the Board of
Directors of the Company for the day immediately prior to the date on which such
fractional Warrant would have been otherwise issuable.
(b) Notwithstanding an adjustment pursuant to Section 5 in the number of
Ordinary Shares covered by any Warrant evidenced hereby, the Company shall not
be required to issue fractions of Ordinary Shares upon exercise of the Warrants
evidenced hereby or to distribute certificates which evidence fractional
Ordinary Shares. In lieu of fractional Ordinary Shares, there shall be paid to
the Warrant Holder at the time this Warrant Certificate is exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of an Ordinary Share. For purposes of this Section 8(b), the current
market value of an Ordinary Share shall be deter-
<PAGE>
-17-
mined in accordance with Section 5(f) as of the day immediately prior to the
date of such exercise.
(c) The Warrant Holder by acceptance hereof, expressly waives such Warrant
Holder's right to receive any fractional Warrant evidenced hereby or any
fractional Ordinary Share upon exercise of a Warrants evidenced hereby.
Section 9. Right of Action. All rights of action in respect of this
Warrant Certificate are vested in the respective Warrant Holders; and any
Warrant Holders may, in its own behalf and for its own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise in respect of, its right to exercise the Warrants
evidenced by this Warrant Certificate in the manner provided in this Warrant
Certificate.
Section 10. Agreement of Warrant Certificate Holders. The Warrant Holder
by accepting same consents and agrees with the Company that:
(a) registration of transfer of this Warrant Certificate may be made
only on the registry books of the Company if surrendered at the address of
the Company, duly endorsed, or accompanied by a proper instrument of
transfer; and
(b) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced hereby (notwithstanding any notations of ownership or
writing on this Warrant Certificates made by anyone other than the
Company) for all purposes whatsoever, and the Company shall not be
affected by any notice to the contrary.
Section 11. Issuance of New Warrant Certificate. Notwithstanding any of
the provisions of this Warrant Certificate, the Company may, at its option,
issue a new Warrant Certificate evidencing the Warrants evidenced hereby in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares of
capital stock or other securities or property purchasable under this Warrant
Certificate made in accordance with the provisions of this Agreement.
<PAGE>
-18-
Section 12. Notice of Proposed Actions. In case the Company shall propose
(a) to pay any dividend payable in stock of any class to the holders of its
Ordinary Shares or to make any other distribution to the holders of its Ordinary
Shares (other than a cash dividend) or (b) to offer to the holders of its
Ordinary Shares rights, options or warrants to subscribe for or to purchase any
additional Ordinary Shares or shares of capital stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Ordinary Shares (other than a reclassification involving only the subdivision or
combination of outstanding Ordinary Shares), or (d) to effect any capital
reorganization, or (e) to effect any consolidation, merger or sale, transfer or
other disposition of all or substantially all of its property, assets or
business, or (f) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to the Warrant Holder,
a notice of such proposed action in accordance with Section 13 hereof, which
shall specify the date on which a record is to be taken for the purposes of such
stock dividend, distribution or rights, options or warrants, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, or winding up is to become
effective and the date of participation therein by the holders of Ordinary
Shares, if any such date is to be fixed, and such notice shall be so given at
least 20 calendar days (or 10 calendar days in any case specified in clause (a)
or (b) above) prior to the applicable record date, effective date or
participation date described above.
Section 13. Notices. Notices or demands authorized by this Agreement to be
given or made by the Warrant Holder to or on the Company shall be made in
writing by hand-delivery, next-day air courier, certified first-class mail,
return receipt requested, telex or facsimile to:
<PAGE>
-19-
Warner Chilcott Public Limited Company
Lincoln House
Lincoln Place
Dublin 2, Ireland
Facsimile: (353) 1-662-4950
Attention: Corporate Secretary
Notices or demands authorized by this Agreement to be given or made by the
Company to the Warrant Holder shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return receipt requested,
telex or facsimile to such holder at the address of the Warrant Holder as shown
on the registry books of the Company.
Section 14. Registration under the Securities Act of 1933. The Warrant
Holder represents and warrants to the Company that it will not dispose of any
Warrants or Ordinary Shares issuable upon exercise of the Warrants evidenced
hereby except, (i) to a "qualified institutional buyer" as such term is defined
in Rule 144A under the Act, upon receipt by the Company of a transfer letter
certifying as to the prospective transferee's status as a qualified
institutional buyer, (ii) pursuant to an effective registration statement under
the Act and any applicable state or foreign securities laws or (iii) upon
receipt by the Company and, in the event of any disposition of ADRs evidencing
ADSs representing Ordinary Shares issued upon exercise of the Warrants evidenced
hereby, receipt by the depositary who is party to the Deposit Agreement (the
"Depositary"), of an opinion of counsel reasonably acceptable to the Company
and, if applicable, the Depositary, that such registration is not required.
Section 15. Certificates To Bear Legends. Upon original issuance prior to
(i) the date which is three years after the later of the original issue date
thereof and the last date on which the Company or any affiliate of the Company
was the owner of the security (or any predecessor security) and (ii) such later
date, if any, as may be required by any subsequent change in applicable law,
each Ordinary Share or other security issued upon exercise of the Warrants
evidenced hereby shall bear a legend substantially to the following effect:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR
<PAGE>
-20-
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR SECURITY) AND (Y) SUCH LATER
DATE, IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE
LAW (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE RIGHT OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION REASONABLY ACCEPTABLE IN FORM AND SUBSTANCE TO EACH OF THEM
THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Section 16. Modification of Agreement. The Company and the Warrant Holder
may amend or supplement any provision of this Warrant Certificate only by a
statement in writing signed by each of the Company and the Warrant Holder.
Section 17. Successors. All provisions of this Warrant Certificate by or
for the benefit of the Company or the
<PAGE>
-21-
Warrant Holder shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 18. Benefits of this Agreement. Nothing in this Warrant
Certificate expressed or nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the Company and the Warrant Holder any right,
remedy or claim under or by reason of this Warrant Certificate or of any
provision hereof; and all provisions in this Warrant Certificate contained shall
be for the sole and exclusive benefit of the Company and its successors and of
the Warrant Holder.
Section 19. New York Contract. This Warrant Certificate shall be governed
in all respects by the laws of the State of New York, without giving effect to
principles of conflict of laws.
Section 20. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant Certificate are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
<PAGE>
-22-
WITNESS the signature of the proper officer of the Company. Dated as of
October 31, 1996.
WARNER CHILCOTT PUBLIC
LIMITED COMPANY
By ____________________________________
Name:
Title:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE RIGHT
OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF OPINIONS OF
<PAGE>
-2-
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION REASONABLY ACCEPTABLE IN FORM
AND SUBSTANCE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
<PAGE>
-3-
Series C No. W03 120,000 Warrants
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Warrant Certificate
THIS CERTIFIES THAT for value received Roger M. Boissonneault, or
registered assigns (the "Warrant Holder"), is the owner of the number of
Warrants set forth above, each of which entitles the owner thereof to purchase
at any time on or after the date hereof until the earlier of (i) 5 P.M. (New
York time) on October 31, 2006 or (ii) the occurrence of a Termination Event (as
defined) (the "Expiration Date"), at the office of the Company, one fully paid
and nonassessable Ordinary Share, par value $.05 per share ("Ordinary Share"),
represented by one American Depositary Share ("ADS"), evidenced by American
Depository Receipts ("ADRs"), of WARNER CHILCOTT PUBLIC LIMITED COMPANY
(formerly named Nale Laboratories public limited company), a public limited
company organized and existing under the laws of Ireland (the "Company"), at the
purchase price and according to the schedule set forth in Section 2 hereof, upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of Ordinary Shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of October 31, 1996, based on the
Ordinary Shares of the Company as constituted at such date.
Section 1. Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
This Warrant Certificate, with or without other Warrant Certificates, may
be transferred or exchanged for another Warrant Certificate or Warrant
Certificates, entitling the Warrant Holder to purchase a like number of Ordinary
Shares as this Warrant Certificate entitles such Warrant Holder to purchase. In
the event that the Warrant Holder desires to transfer, split up, combine or
exchange this Warrant Certificate, the Warrant Holder shall make such request in
writing delivered to the Company, and shall surrender this Warrant Certificate
to the Company. Thereupon the Company shall deliver to the person entitled
thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental
<PAGE>
-4-
charge that may be imposed in connection with any transfer, split up,
combination or exchange of this Warrant Certificate. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, unless the Warrant Holder shall furnish
to the Company evidence of compliance with the Act, in accordance with the
provisions of Section 14 hereof.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor to the Warrant Holder in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
Section 2. Exercise of Warrants; Purchase Price; Expiration of Warrants.
(a) The Warrant Holder may exercise the Warrants evidenced hereby, in whole or
in part, according to the following schedule:
Exercisable number of Warrants = (N x Q x .0625) minus P
Where:
N = total number of Warrants (subject to adjustment pursuant to
Section 5 hereof),
Q = the number of whole calendar quarters which have elapsed
from September 30, 1996, and
P = the number of Warrants (if any) previously exercised
Notwithstanding the foregoing, the Board of Directors of the Company and/or a
committee thereof may, at its absolute discretion, declare any Warrants to be
exercisable in whole or in part as from any date earlier than the date upon
which it would otherwise become exercisable. Further, as described more
completely in Section 7 hereof, upon a change of control, consolidation, sale or
merger of the Company, all outstanding Warrants shall become exercisable.
(b) Warrants may be exercised in accordance with the foregoing paragraph
(a) upon surrender of this Warrant Certifi-
<PAGE>
-5-
cate with the Form of Election to Purchase, duly executed, to the Company at the
address of the Company, at or prior to the Expiration Date, together with
payment of the Purchase Price (as defined) for each Ordinary Share as to which
the Warrants evidenced hereby are exercised.
(c) The Warrants shall expire prior to October 31, 2006 in the following
cases (each being a "Termination Event"): (1) the death of the Warrant Holder in
which case the personal representative of the deceased Warrant Holder may at any
time or from time to time, but subject to the other provisions of this Warrant
Certificate and in no case later than one year after such death, exercise any
Warrants, but only to the extent that such Warrants were exercisable by the
Warrant Holder at the time of his death, and (2) the Warrant Holder ceases to be
employed by the Company by reason of resignation, dismissal, retirement,
disability or otherwise ("Separation") in which case the Warrant Holder may at
any time, but subject to the other provisions of this Warrant Certificate and in
no case later than thirty days after Separation, exercise any Warrants, but only
to the extent that such Warrants were exercisable by the Warrant Holder at the
date of Separation.
(d) The purchase price for each Ordinary Share pursuant to the exercise of
Warrants evidenced hereby shall initially be $20.00 (the "Purchase Price") but
will be subject to adjustment as provided in Section 5 hereof and shall be
payable as provided in Section 2(e) hereof.
(e) Upon receipt of this Warrant Certificate, with the Form of Election to
Purchase duly executed, accompanied by payment of the Purchase Price for the
Ordinary Shares to be purchased and an amount equal to any applicable transfer
tax in cash, or by certified check, bank draft or postal or express money order
payable to the order of the Company, the Company shall thereupon promptly (i)
requisition from any transfer agent of the Ordinary Shares of the Company,
certificates for the number of whole Ordinary Shares to be purchased and (ii)
promptly after receipt of such certificates cause the same to be delivered to or
upon the order of the Warrant Holder, registered in such name or names as may be
designated by such Warrant Holder, and, when appropriate, promptly deliver cash
to be paid in lieu of issuance of fractional Ordinary Shares to or upon the
order of the Warrant Holder.
(f) In the event that the Warrant Holder shall exercise less than all the
Warrants evidenced hereby, a new Warrant Certificate evidencing Warrants
equivalent to the Warrants re-
<PAGE>
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maining unexercised shall be issued by the Company to the Warrant Holder or to
the Warrant Holder's duly authorized assigns, subject to the provisions of
Section 8 hereof.
Section 3. Reservation and Availability of Ordinary Shares. The Company
covenants and agrees that it will cause to be reserved and kept available at all
times, free from preemptive rights and out of its authorized and available
Ordinary Shares (including treasury shares), the number of Ordinary Shares that
will be sufficient to permit the exercise in full of all outstanding Warrants
evidenced hereby.
The Company further covenants and agrees to reserve sufficient ADSs under
the Deposit Agreement, dated as of October 17, 1994 (the "Deposit Agreement"),
among the Company, The Bank of New York, as Depositary, and holders from time to
time of ADRs issued thereunder to permit the deposit thereunder of Ordinary
Shares represented by all Warrants evidenced hereby and the issuance of ADSs
representing such Ordinary Shares. The Company will, upon request of the holder
of the Ordinary Shares issued upon exercise of the Warrants evidenced hereby,
deposit such Ordinary Shares on behalf of such holder pursuant to the terms of
the Deposit Agreement and deliver to the holder of such shares the appropriate
number of ADSs evidenced by ADRs.
The Company further covenants and agrees that it will take all such action
as may be necessary to insure that all Ordinary Shares delivered upon exercise
of the Warrants evidenced hereby shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price) (i) be
duly and validly authorized and issued and fully paid and nonassessable shares,
and (ii) be issued in compliance with all applicable governmental laws and
regulations.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state taxes and charges which may be payable in
respect of the initial issuance or delivery of any Ordinary Shares, ADSs
representing such Ordinary Shares or ADRs evidencing such ADSs, upon the
exercise of the Warrants evidenced hereby. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the transfer or delivery of this Warrant Certificate or the issuance or
delivery of certificates for Ordinary Shares in a name other than that of the
Warrant Holder or to issue or deliver any certificates for Ordinary Shares upon
the exercise of any Warrant evidenced hereby until any such tax shall have been
paid (any such tax
<PAGE>
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being payable by the Warrant Holder at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 4. Ordinary Shares Record Date. The Warrant Holder shall for all
purposes be deemed to have become the holder of record of any Ordinary Shares
issued upon exercise of Warrants evidenced hereby on, and the certificate
representing any such Ordinary Shares shall be dated, the date upon which this
Warrant Certificate was duly surrendered and payment of the Purchase Price (and
any applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Ordinary Share transfer
books of the Company are closed, the Warrant Holder shall be deemed to have
become the record holder of such Ordinary Shares on, and such certificate shall
be dated, the next succeeding business day on which the Ordinary Share transfer
books of the Company are open. Prior to the exercise of the Warrants evidenced
hereby, the Warrant Holder shall not be entitled to any rights of a shareholder
of the Company with respect to Ordinary Shares for which the Warrants evidenced
hereby are exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein or required by law.
Section 5. Adjustment of Purchase Price, Number of Ordinary Shares and
Shares of Capital Stock Warrants Are Exercisable Into. The number and kind of
securities purchasable upon the exercise of each Warrant evidenced hereby and
the Purchase Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
(a) Adjustment for Change in Capital Stock. In case the Company shall (i)
pay a dividend on its Ordinary Shares, whether of Ordinary Shares or capital
shares of any other class or make any other distribution of Ordinary Shares,
(ii) subdivide its outstanding Ordinary Shares into a greater number of shares
or (iii) combine its outstanding Ordinary Shares into a smaller number of
Ordinary Shares, the number of Ordinary Shares purchasable upon exercise of each
Warrant evidenced hereby immediately prior thereto shall be adjusted so that the
Warrant Holder shall be entitled to receive the number of Ordinary Shares which
the Warrant Holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been exercised
immedi-
<PAGE>
-8-
ately prior to the happening of such event or any record date with respect
thereto.
An adjustment made pursuant to this Section 5(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event. Such adjustment shall be made successively
whenever such a payment, subdivision or combination is made.
(b) Adjustment for Other Distributions. In case the Company shall
distribute to all holders of its Ordinary Shares evidences of its indebtedness
(other than evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for, with or without payment of additional
consideration in cash or property, Ordinary Shares, either upon the occurrence
of a specified date or a specified event (in any case, "Convertible
Securities")), assets (excluding cash dividends or distributions payable out of
consolidated retained earnings and dividends or distributions referred to in
Section 5(a) or in Section 5(c)), shares of capital stock (other than Ordinary
Shares), or rights, options or warrants containing the right to subscribe for or
purchase debt securities, assets or securities of the Company (other than
Convertible Securities or Ordinary Shares) (collectively "Assets"), then in each
case the number of Ordinary Shares thereafter purchasable upon the exercise of
each Warrant evidenced hereby shall be determined by multiplying the number of
Ordinary Shares theretofore purchasable upon the exercise of each Warrant
evidenced hereby by a fraction, of which the numerator shall be the market price
per Ordinary Share (as defined in Section 5(f)) on the date of such
distribution, and the denominator of which shall be such market price per
Ordinary Share less the fair value as of such record date (as determined in good
faith by the Board of Directors of the Company) of the portion of the Assets
applicable to one Ordinary Share. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. A reclassification of the
Ordinary Shares (other than a change in par value, from par value to no par
value or from no par value to par value) into Ordinary Shares and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Ordinary Shares of such shares of such other class of stock
within the meaning of this Section 5(b) and, if the outstanding Ordinary Shares
shall be changed into larger or smaller number of Ordinary Shares as a part of
such reclassification, such change shall be deemed a subdivision or combina-
<PAGE>
-9-
tion, as the case may be, of the outstanding Ordinary Shares within the meaning
of Section 5(a).
No adjustment shall be made pursuant to this Section 5(b) unless, on the
record date for such distribution, the market price per Ordinary Share exceeds
the fair market value of the Assets applicable to each outstanding Ordinary
Share. In the event, and each time, that the Company distributes Assets to all
holders of its Ordinary Shares and the market price per Ordinary Share on the
record date for such distribution is less than or equal to the fair market value
of the Assets applicable to each outstanding Ordinary Share on such date, the
Company shall either (i) distribute Assets to the Warrant Holder on the record
date for such distribution when such Assets are distributed to the holders of
Ordinary Shares as though all Warrants evidenced hereby had been exercised as of
such record date or (ii) deposit such Assets in trust with a trustee. If the
Company elects to distribute Assets to the Warrant Holder, the Company shall, on
the date Assets are distributed to holders of Ordinary Shares, distribute to
such Warrant Holder the Assets that it would have been entitled to receive on
such date if it had exercised the Warrants evidenced hereby immediately prior to
the record date for such distribution. If, however, the Company elects to
deposit the Assets due the Warrant Holder in trust, the Company shall, on the
date Assets are distributed to holders of Ordinary Shares, place in trust the
Assets that the Warrant Holder would have been entitled to receive on such date
if all of the Warrants evidenced hereby had been exercised immediately prior to
the record date for such distribution; and the Warrant Holder shall be entitled
upon exercise of the Warrants evidenced hereby to receive the Ordinary Shares
issuable upon exercise thereof, the Assets placed in trust in respect of such
Warrants, and the interest and dividends paid on such Assets since being placed
in trust. In the event any Warrants evidenced hereby have not been exercised
prior to the termination of the Expiration Date, any assets remaining in such
trust after distributions have been made in respect of Warrants exercised shall
be returned to the Company.
(c) Adjustment for Issuance of Ordinary Shares. If at any time after the
date hereof the Company shall (except as hereinafter provided) issue or sell any
Ordinary Shares for consideration in an amount per Ordinary Share less than the
market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale, then the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby shall be
adjusted to
<PAGE>
-10-
equal the product obtained by multiplying the number of Ordinary Shares for
which such Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of Ordinary Shares
outstanding immediately after such issue or sale, and (B) the denominator of
which shall be the sum of (1) the number of Ordinary Shares outstanding
immediately prior to such issue or sale, and (2) the aggregate consideration
received from the issuance or sale of such additional Ordinary Shares divided by
the market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale; provided, however, that no
adjustment shall be made pursuant to this Section 5(c) upon the issuance of
Ordinary Shares (i) in a bona fide public offering pursuant to a firm commitment
or best efforts underwriting, (ii) upon the issuance of up to 500,000 Ordinary
Shares, or ADSs representing such Ordinary Shares, of the Company pursuant to
any employee stock option, purchase or similar plan which may be established by
the Company from time to time providing for options, warrants or similar rights
to purchase Ordinary Shares, or ADSs representing such Ordinary Shares, of the
Company or (iii) upon the issuance of Ordinary Shares pursuant to (A) the
Agreement among the Company, Nale Laboratories Corporation and Bernard J. Berk,
(B) the warrants issued pursuant to the Warrant Agreement dated as of October
17, 1994 between the Company and Elan Corporation, plc, (C) the warrants issued
pursuant to the Warrant Agreement dated as of October 17, 1994 between the
Company and Montgomery Securities, (D) the warrants issued pursuant to the
Warrant Purchase Agreement dated as of March 28, 1996 by and between the Company
and Warner-Lambert Company or (E) the warrants to purchase in the aggregate
amount 170,000 Ordinary Shares, or ADSs representing such Ordinary Shares,
issued on June 28, 1996 to certain current and former directors of the Company.
(d) Issuance of Warrants or Other Rights. In case the Company shall
distribute to all holders of its Ordinary Shares or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Ordinary Shares or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Ordinary Shares are issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities plus the price paid to the Company to acquire such warrants, other
rights or Convertible Securities shall be less than the market price per
Ordinary Share (as defined in Section 5(f)) in effect immediately prior to the
time
<PAGE>
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of such distribution, issue or sale, then the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby shall be adjusted
as provided in Section 5(c) on the basis that (A) the maximum number of Ordinary
Shares issuable pursuant to all such warrants or other rights or necessary to
give effect to the conversion or exchange of all such Convertible Securities
shall be deemed to be issued and outstanding, (B) the price per share for such
Ordinary Shares shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Ordinary Shares are available to such
holders, and (C) the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such warrants
or other rights; provided, however, that no adjustment shall be made pursuant to
this Section 5(d) upon the issuance of any warrants or options or other rights
to subscribe for up to 500,000 Ordinary Shares, or ADSs representing such
Ordinary Shares, of the Company, pursuant to any employee stock option, purchase
or similar plan which may be established by the Company from time to time. No
further adjustments of the number of Ordinary Shares for which any Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares or of such Convertible Securities upon exercise of such warrants
or other rights or upon the actual issue of such Ordinary Shares upon such
conversion or exchange of such Convertible Securities.
(e) Adjustments for Issuance of Convertible Securities. In case the
Company shall distribute to all holders of its Ordinary Shares or shall in any
manner (whether directly or by assumption in a merger in which the Company is
the surviving corporation) issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Ordinary Shares are issuable upon such
conversion or exchange, plus the price paid to the Company to acquire such
Convertible Security, shall be less than the market price per Ordinary Share (as
defined in Section 5(f)), in effect immediately prior to the time of such
distribution, issue or sale, then the number of Ordinary Shares purchasable upon
the exercise of each Warrant evidenced hereby shall be adjusted as provided in
Section 5(c) on the basis that (i) the maximum number of Ordinary Shares
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to be issued and outstanding, (ii) the price per
share of such Ordinary Shares shall be deemed to be the lowest possible price in
any range of prices at which such Ordinary Shares are available to such holders,
and (iii) the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issu-
<PAGE>
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ance of such Convertible Securities. No adjustment of the number of Ordinary
Shares for which any Warrant evidenced hereby is exercisable shall be made under
this Section 5(e) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 5(d). No
further adjustments of the number of Ordinary Shares for which any such Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares upon conversion or exchange of such Convertible Securities and,
if any issue or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments have been or are to be made pursuant to other
provisions of this Section 5, no further adjustments shall be made by reason of
such issue or sale. For the purposes of this Section 5(e), the date as of which
the current market price of Ordinary Shares shall be computed shall be the
earliest of (a) the date on which the Company shall take a record of the holders
of its Ordinary Shares for the purpose of entitling them to receive any such
Convertible Securities or (b) the date of actual issuance of such Convertible
Securities.
(f) Market Price. For the purpose of any computation under Sections 5(b),
5(c), 5(d), 5(e) and 8(b), the market price per Ordinary Share at any date shall
be the fair value thereof determined in the reasonable good faith judgment of
the Board of Directors of the Company; provided, however, that if the Ordinary
Shares, or ADSs representing such Ordinary Shares, are listed or admitted for
trading on any domestic national securities exchange or quoted in the
over-the-counter market or the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System, the market price per
Ordinary Share shall be the average of the daily closing prices for 20
consecutive trading days preceding the date of such computation. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on the principal
national securities exchange on which the Ordinary Shares or ADSs, as the case
may be, are listed or admitted to trading or, if not listed or admitted to
trading, the average of the last reported sales price or in case no such
reported sales take place on such day, the average of the closing bid and asked
prices of the Ordinary Shares in the over-the-counter market as reported by
NASDAQ or the NASDAQ National Market System or any comparable system or, if the
Ordinary Shares are not
<PAGE>
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included for quotation in the over-the-counter market or the NASDAQ National
Market System or a comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association of Securities
Deals, Inc. selected from time to time by the Board of Directors of the Company
for that purpose.
(g) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Ordinary Shares purchasable upon exercise of the Warrants evidenced
hereby shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Ordinary Shares
purchasable upon the exercise of each such Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.
(h) Adjustment in Purchase Price. Whenever the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby is adjusted as
herein provided, the Purchase Price payable upon exercise of each such Warrant
shall be adjusted by multiplying such Purchase Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of Ordinary
Shares purchasable upon the exercise of each such Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Ordinary
Shares purchasable immediately thereafter.
(i) When No Adjustment Required. No adjustment in the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby need be
made under Sections 5(b), 5(d) and 5(e) if the Company issues or distributes to
the Warrant Holder, the Assets, warrants or other rights or Convertible
Securities referred to in those paragraphs which the Warrant Holder would have
been entitled to receive had the Warrants evidenced hereby been exercised prior
to the happening of such event or the record date with respect thereto. No
adjustment need be made for a change in the par value or to no par value of the
Ordinary Shares; provided, however, that the Purchase Price shall at no time be
less than the par value of the Ordinary Shares of the Company, provided,
further, that the Company shall reduce the par value of its Ordinary Shares from
time to time as necessary so that such par value shall not be more than the
Purchase Price then in effect.
(j) Ordinary Shares. For all purposes of this Warrant Certificate, the
term "Ordinary Shares" shall mean (i) the
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class of stock designated as the Ordinary Shares of the Company on October 31,
1996 or (ii) any other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. In the event
that at any time, as a result of an adjustment made pursuant to Section 5(a),
the Warrant Holder shall become entitled to purchase any securities of the
Company other than Ordinary Shares, thereafter the number of such other shares
so purchasable upon exercise of each Warrant evidenced hereby and the Purchase
Price of such shares shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Ordinary Shares contained in Sections 5(a) through 5(i) herein,
inclusive, this Section 5(j) and the provisions of Section 2 and Sections 5(m)
and 5(n) herein, with respect to the Ordinary Shares, shall apply on like terms
to any such other securities.
(k) Expiration of Rights, Warrants or Convertible Securities. Upon the
expiration of any rights, warrants or Convertible Securities, if any thereof
shall not have been exercised, exchanged or converted, the Purchase Price and
the number of Ordinary Shares purchasable upon the exercise of each Warrant
evidenced hereby shall, upon such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (A) the only
Ordinary Shares so issued were the Ordinary Shares, if any, actually issued or
sold upon the exercise of such rights or warrants or conversion or exchange of
Convertible Securities and (B) such Ordinary Shares, if any, were issued or sold
for the consideration actually received by the Company upon such exercise,
conversion or exchange plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all of such rights,
warrants or Convertible Securities whether or not exercised, converted or
exchanged, as the case may be; provided, however, that no such readjustment
shall have the effect of increasing the Purchase Price or decreasing the number
of Ordinary Shares purchasable upon the exercise of each Warrant evidenced
hereby by an amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant or such rights, warrants or Convertible
Securities.
(l) In the event of any issuance of securities by the Company for
consideration in whole or in part in other than cash, the Board of Directors of
the Company shall determine in
<PAGE>
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good faith the value thereof which determination shall be conclusive and
binding.
(m) Voluntary Adjustment by the Company. The Company may at its option, at
any time prior to the Expiration Date, reduce the then current Purchase Price to
any amount deemed appropriate by the Board of Directors of the Company;
provided, however, the Company may not in any case increase the Purchase Price
pursuant to this Section 5(m); provided, further, if the Company elects to
reduce the then current Purchase Price, such reduction shall remain in effect
for at least a 30 day period, after which time the Company may, at its option,
reinstate the Purchase Price in effect immediately prior to such reduction.
(n) Statement on This Warrant Certificate. Irrespective of any adjustments
in the Purchase Price or the number or kind of shares purchasable upon the
exercise of the Warrants evidenced hereby, this Warrant Certificate and Warrant
Certificates hereafter issued may continue to express the same price and number
and kind of shares as are stated hereon.
Section 6. Certification of Adjusted Purchase Price and Number of Shares
Issuable. Whenever the Purchase Price and the number of Ordinary Shares issuable
upon the exercise of each Warrant evidenced hereby are adjusted as provided in
Section 5, the Company shall (a) prepare a certificate signed by its Chief
Executive Officer or a Vice President or other executive officer setting forth
the Purchase Price as so adjusted, the number of Ordinary Shares issuable upon
the exercise of each Warrant evidenced hereby as so adjusted and a brief
statement of the method of calculation of the adjustment and the facts
accounting for the adjustment, (b) promptly file with each transfer agent for
the Ordinary Shares a copy of such certificate, and (c) mail a brief summary
thereof to the Warrant Holder.
Section 7. Acceleration of Exercisability upon Sale of the Company or a
Change of Control. In the event that the Company undergoes a Sale (as defined)
or a Change of Control (as defined) prior to the Exiration Date, all of the
Warrants shall become fully exercisable.
For purposes of this Section 7, "Change of Control" means and shall be
deemed to have occurred if any person (within the meaning of the Securities and
Exchange Act of 1934, as amended), other than the Company or a Related Party (as
defined), is or becomes the beneficial owner, directly or indi-
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rectly, of voting securities representing 51% or more of the total voting power
of all then outstanding voting securities.
For purposes of this Section 7, "Related Party" means: (a) a majority
owned subsidiary of the Company, (b) an employee or group of employees of the
Company, (c) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (d) a corporation owned by the stockholders of the
Company in substantially the same proportion as their ownership of the voting
securities of the Company, and (e) each of Elan Corporation, plc, Dominion
Income Management Corp., Halisol SA, AIG Global Investment Corp., Goldman Sachs
& Co., Paribas Sante SA, Perrigo Company and Warner-Lambert Company.
For purposes of this Section 7, a "Sale" means and shall be deemed to have
occurred if: (a) the Company completes a merger, consolidation, sale, transfer
or other disposition that effects a Change of Control, or (b) the Company enters
into a transaction or series of transactions to sell, transfer or otherwise
dispose of all or substantially all of its properties or assets.
Section 8. Fractional Warrants and Fractional Shares. (a) The Company
shall not be required to issue fractions of Warrants or to distribute Warrant
Certificates which evidence fractional Warrants. In lieu of such fractional
Warrants, there shall be paid to the Warrant Holders with regard to which such
fractional Warrant would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Warrant. For purposes of
this Section 8(a), the current market value of a Warrant shall be the fair value
thereof determined in the reasonable good faith judgment of the Board of
Directors of the Company for the day immediately prior to the date on which such
fractional Warrant would have been otherwise issuable.
(b) Notwithstanding an adjustment pursuant to Section 5 in the number of
Ordinary Shares covered by any Warrant evidenced hereby, the Company shall not
be required to issue fractions of Ordinary Shares upon exercise of the Warrants
evidenced hereby or to distribute certificates which evidence fractional
Ordinary Shares. In lieu of fractional Ordinary Shares, there shall be paid to
the Warrant Holder at the time this Warrant Certificate is exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of an Ordinary Share. For purposes of this Section 8(b), the current
market value of an Ordinary Share shall be deter-
<PAGE>
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mined in accordance with Section 5(f) as of the day immediately prior to the
date of such exercise.
(c) The Warrant Holder by acceptance hereof, expressly waives such Warrant
Holder's right to receive any fractional Warrant evidenced hereby or any
fractional Ordinary Share upon exercise of a Warrants evidenced hereby.
Section 9. Right of Action. All rights of action in respect of this
Warrant Certificate are vested in the respective Warrant Holders; and any
Warrant Holders may, in its own behalf and for its own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise in respect of, its right to exercise the Warrants
evidenced by this Warrant Certificate in the manner provided in this Warrant
Certificate.
Section 10. Agreement of Warrant Certificate Holders. The Warrant Holder
by accepting same consents and agrees with the Company that:
(a) registration of transfer of this Warrant Certificate may be made
only on the registry books of the Company if surrendered at the address of
the Company, duly endorsed, or accompanied by a proper instrument of
transfer; and
(b) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced hereby (notwithstanding any notations of ownership or
writing on this Warrant Certificates made by anyone other than the
Company) for all purposes whatsoever, and the Company shall not be
affected by any notice to the contrary.
Section 11. Issuance of New Warrant Certificate. Notwithstanding any of
the provisions of this Warrant Certificate, the Company may, at its option,
issue a new Warrant Certificate evidencing the Warrants evidenced hereby in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares of
capital stock or other securities or property purchasable under this Warrant
Certificate made in accordance with the provisions of this Agreement.
<PAGE>
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Section 12. Notice of Proposed Actions. In case the Company shall propose
(a) to pay any dividend payable in stock of any class to the holders of its
Ordinary Shares or to make any other distribution to the holders of its Ordinary
Shares (other than a cash dividend) or (b) to offer to the holders of its
Ordinary Shares rights, options or warrants to subscribe for or to purchase any
additional Ordinary Shares or shares of capital stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Ordinary Shares (other than a reclassification involving only the subdivision or
combination of outstanding Ordinary Shares), or (d) to effect any capital
reorganization, or (e) to effect any consolidation, merger or sale, transfer or
other disposition of all or substantially all of its property, assets or
business, or (f) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to the Warrant Holder,
a notice of such proposed action in accordance with Section 13 hereof, which
shall specify the date on which a record is to be taken for the purposes of such
stock dividend, distribution or rights, options or warrants, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, or winding up is to become
effective and the date of participation therein by the holders of Ordinary
Shares, if any such date is to be fixed, and such notice shall be so given at
least 20 calendar days (or 10 calendar days in any case specified in clause (a)
or (b) above) prior to the applicable record date, effective date or
participation date described above.
Section 13. Notices. Notices or demands authorized by this Agreement to be
given or made by the Warrant Holder to or on the Company shall be made in
writing by hand-delivery, next-day air courier, certified first-class mail,
return receipt requested, telex or facsimile to:
Warner Chilcott Public Limited Company
Lincoln House
Lincoln Place
Dublin 2, Ireland
Facsimile: (353) 1-662-4950
Attention: Corporate Secretary
Notices or demands authorized by this Agreement to be given or made by the
Company to the Warrant Holder shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return receipt requested,
telex or facsimile
<PAGE>
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to such holder at the address of the Warrant Holder as shown on the registry
books of the Company.
Section 14. Registration under the Securities Act of 1933. The Warrant
Holder represents and warrants to the Company that it will not dispose of any
Warrants or Ordinary Shares issuable upon exercise of the Warrants evidenced
hereby except, (i) to a "qualified institutional buyer" as such term is defined
in Rule 144A under the Act, upon receipt by the Company of a transfer letter
certifying as to the prospective transferee's status as a qualified
institutional buyer, (ii) pursuant to an effective registration statement under
the Act and any applicable state or foreign securities laws or (iii) upon
receipt by the Company and, in the event of any disposition of ADRs evidencing
ADSs representing Ordinary Shares issued upon exercise of the Warrants evidenced
hereby, receipt by the depositary who is party to the Deposit Agreement (the
"Depositary"), of an opinion of counsel reasonably acceptable to the Company
and, if applicable, the Depositary, that such registration is not required.
Section 15. Certificates To Bear Legends. Upon original issuance prior to
(i) the date which is three years after the later of the original issue date
thereof and the last date on which the Company or any affiliate of the Company
was the owner of the security (or any predecessor security) and (ii) such later
date, if any, as may be required by any subsequent change in applicable law,
each Ordinary Share or other security issued upon exercise of the Warrants
evidenced hereby shall bear a legend substantially to the following effect:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS
<PAGE>
-20-
SECURITY (OR ANY PREDECESSOR SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE
RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE RIGHT OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION REASONABLY ACCEPTABLE IN FORM AND SUBSTANCE TO EACH OF THEM
THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Section 16. Modification of Agreement. The Company and the Warrant Holder
may amend or supplement any provision of this Warrant Certificate only by a
statement in writing signed by each of the Company and the Warrant Holder.
Section 17. Successors. All provisions of this Warrant Certificate by or
for the benefit of the Company or the Warrant Holder shall bind and inure to the
benefit of their respective successors and assigns hereunder.
Section 18. Benefits of this Agreement. Nothing in this Warrant
Certificate expressed or nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the Company and the Warrant Holder any right,
remedy or claim under or by reason of this Warrant Certificate or of any
provision hereof; and all provisions in this Warrant Certificate contained shall
be for the sole and
<PAGE>
-21-
exclusive benefit of the Company and its successors and of the Warrant Holder.
Section 19. New York Contract. This Warrant Certificate shall be governed
in all respects by the laws of the State of New York, without giving effect to
principles of conflict of laws.
Section 20. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant Certificate are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
<PAGE>
-22-
WITNESS the signature of the proper officer of the Company. Dated as of
October 31, 1996.
WARNER CHILCOTT PUBLIC
LIMITED COMPANY
By _____________________________________
Name:
Title:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE RIGHT
OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF OPINIONS OF
<PAGE>
-2-
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION REASONABLY ACCEPTABLE IN FORM
AND SUBSTANCE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
<PAGE>
-3-
Series C No. W05 200,000 Warrants
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Warrant Certificate
THIS CERTIFIES THAT for value received Paul S. Herendeen, or registered
assigns (the "Warrant Holder"), is the owner of the number of Warrants set forth
above, each of which entitles the owner thereof to purchase at any time on or
after the date hereof until the earlier of (i) 5 P.M. (New York time) on
February 3, 2008 or (ii) the occurrence of a Termination Event (as defined) (the
"Expiration Date"), at the office of the Company, one fully paid and
nonassessable Ordinary Share, par value $.05 per share ("Ordinary Share"),
represented by one American Depositary Share ("ADS"), evidenced by American
Depository Receipts ("ADRs"), of WARNER CHILCOTT PUBLIC LIMITED COMPANY
(formerly named Nale Laboratories public limited company), a public limited
company organized and existing under the laws of Ireland (the "Company"), at the
purchase price and according to the schedule set forth in Section 2 hereof, upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of Ordinary Shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of February 3, 1998, based on the
Ordinary Shares of the Company as constituted at such date.
Section 1. Transfer, Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
This Warrant Certificate, with or without other Warrant Certificates, may
be transferred or exchanged for another Warrant Certificate or Warrant
Certificates, entitling the Warrant Holder to purchase a like number of Ordinary
Shares as this Warrant Certificate entitles such Warrant Holder to purchase. In
the event that the Warrant Holder desires to transfer, split up, combine or
exchange this Warrant Certificate, the Warrant Holder shall make such request in
writing delivered to the Company, and shall surrender this Warrant Certificate
to the Company. Thereupon the Company shall deliver to the person entitled
thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental
<PAGE>
-4-
charge that may be imposed in connection with any transfer, split up,
combination or exchange of this Warrant Certificate. Notwithstanding the
foregoing, the Company shall have no obligation to cause Warrants to be
transferred on its books to any person, unless the Warrant Holder shall furnish
to the Company evidence of compliance with the Securities Act, in accordance
with the provisions of Section 14 hereof.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor to the Warrant Holder in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
Section 2. Exercise of Warrants; Purchase Price; Expiration of Warrants.
(a) The Warrant Holder may exercise the Warrants evidenced hereby, in whole or
in part, according to the following schedule:
Exercisable number of Warrants = (N x Q x .0625) minus P
Where:
N = total number of Warrants (subject to adjustment pursuant to
Section 5 hereof),
Q = the number of whole calendar quarters which have elapsed
from December 31, 1997, and
P = the number of Warrants (if any) previously exercised
Notwithstanding the foregoing, the Board of Directors of the Company and/or a
committee thereof may, at its absolute discretion, declare any Warrants to be
exercisable in whole or in part as from any date earlier than the date upon
which it would otherwise become exercisable. Further, as described more
completely in Section 7 hereof, upon a change of control, consolidation, sale or
merger of the Company, all outstanding Warrants shall become exercisable.
(b) Warrants may be exercised in accordance with the foregoing paragraph
(a) upon surrender of this Warrant Certifi-
<PAGE>
-5-
cate with the Form of Election to Purchase, duly executed, to the Company at the
address of the Company, at or prior to the Expiration Date, together with
payment of the Purchase Price (as defined) for each Ordinary Share as to which
the Warrants evidenced hereby are exercised.
(c) The Warrants shall expire prior to February 3, 2008 in the following
cases (each being a "Termination Event"): (1) the death of the Warrant Holder in
which case the personal representative of the deceased Warrant Holder may at any
time or from time to time, but subject to the other provisions of this Warrant
Certificate and in no case later than one year after such death, exercise any
Warrants, but only to the extent that such Warrants were exercisable by the
Warrant Holder at the time of his death, and (2) the Warrant Holder ceases to be
employed by the Company by reason of resignation, dismissal, retirement,
disability or otherwise ("Separation") in which case the Warrant Holder may at
any time, but subject to the other provisions of this Warrant Certificate and in
no case later than thirty days after Separation, exercise any Warrants, but only
to the extent that such Warrants were exercisable by the Warrant Holder at the
date of Separation.
(d) The purchase price for each Ordinary Share pursuant to the exercise of
Warrants evidenced hereby shall initially be $9.77 (the "Purchase Price") but
will be subject to adjustment as provided in Section 5 hereof and shall be
payable as provided in Section 2(e) hereof.
(e) Upon receipt of this Warrant Certificate, with the Form of Election to
Purchase duly executed, accompanied by payment of the Purchase Price for the
Ordinary Shares to be purchased and an amount equal to any applicable transfer
tax in cash, or by certified check, bank draft or postal or express money order
payable to the order of the Company, the Company shall thereupon promptly (i)
requisition from any transfer agent of the Ordinary Shares of the Company,
certificates for the number of whole Ordinary Shares to be purchased and (ii)
promptly after receipt of such certificates cause the same to be delivered to or
upon the order of the Warrant Holder, registered in such name or names as may be
designated by such Warrant Holder, and, when appropriate, promptly deliver cash
to be paid in lieu of issuance of fractional Ordinary Shares to or upon the
order of the Warrant Holder.
(f) In the event that the Warrant Holder shall exercise less than all the
Warrants evidenced hereby, a new Warrant Certificate evidencing Warrants
equivalent to the Warrants re-
<PAGE>
-6-
maining unexercised shall be issued by the Company to the Warrant Holder or to
the Warrant Holder's duly authorized assigns, subject to the provisions of
Section 8 hereof.
Section 3. Reservation and Availability of Ordinary Shares. The Company
covenants and agrees that it will cause to be reserved and kept available at all
times, free from preemptive rights and out of its authorized and available
Ordinary Shares (including treasury shares), the number of Ordinary Shares that
will be sufficient to permit the exercise in full of all outstanding Warrants
evidenced hereby.
The Company further covenants and agrees to reserve sufficient ADSs under
the Deposit Agreement, dated as of June 16, 1997 (the "Deposit Agreement"),
among the Company, The Bank of New York, as Depositary, and holders from time to
time of ADRs issued thereunder to permit the deposit thereunder of Ordinary
Shares represented by all Warrants evidenced hereby and the issuance of ADSs
representing such Ordinary Shares. The Company will, upon request of the holder
of the Ordinary Shares issued upon exercise of the Warrants evidenced hereby,
deposit such Ordinary Shares on behalf of such holder pursuant to the terms of
the Deposit Agreement and deliver to the holder of such shares the appropriate
number of ADSs evidenced by ADRs.
The Company further covenants and agrees that it will take all such action
as may be necessary to insure that all Ordinary Shares delivered upon exercise
of the Warrants evidenced hereby shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price) (i) be
duly and validly authorized and issued and fully paid and nonassessable shares,
and (ii) be issued in compliance with all applicable governmental laws and
regulations.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state taxes and charges which may be payable in
respect of the initial issuance or delivery of any Ordinary Shares, ADSs
representing such Ordinary Shares or ADRs evidencing such ADSs, upon the
exercise of the Warrants evidenced hereby. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the transfer or delivery of this Warrant Certificate or the issuance or
delivery of certificates for Ordinary Shares in a name other than that of the
Warrant Holder or to issue or deliver any certificates for Ordinary Shares upon
the exercise of any Warrant evidenced hereby until any such tax shall have been
paid (any such tax being payable by the Warrant Holder at the time of surrender)
<PAGE>
-7-
or until it has been established to the Company's satisfaction that no such tax
is due.
Section 4. Ordinary Shares Record Date. The Warrant Holder shall for all
purposes be deemed to have become the holder of record of any Ordinary Shares
issued upon exercise of Warrants evidenced hereby on, and the certificate
representing any such Ordinary Shares shall be dated, the date upon which this
Warrant Certificate was duly surrendered and payment of the Purchase Price (and
any applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Ordinary Share transfer
books of the Company are closed, the Warrant Holder shall be deemed to have
become the record holder of such Ordinary Shares on, and such certificate shall
be dated, the next succeeding business day on which the Ordinary Share transfer
books of the Company are open. Prior to the exercise of the Warrants evidenced
hereby, the Warrant Holder shall not be entitled to any rights of a shareholder
of the Company with respect to Ordinary Shares for which the Warrants evidenced
hereby are exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein or required by law.
Section 5. Adjustment of Purchase Price, Number of Ordinary Shares and
Shares of Capital Stock Warrants Are Exercisable Into. The number and kind of
securities purchasable upon the exercise of each Warrant evidenced hereby and
the Purchase Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
(a) Adjustment for Change in Capital Stock. In case the Company shall (i)
pay a dividend on its Ordinary Shares, whether of Ordinary Shares or capital
shares of any other class or make any other distribution of Ordinary Shares,
(ii) subdivide its outstanding Ordinary Shares into a greater number of shares
or (iii) combine its outstanding Ordinary Shares into a smaller number of
Ordinary Shares, the number of Ordinary Shares purchasable upon exercise of each
Warrant evidenced hereby immediately prior thereto shall be adjusted so that the
Warrant Holder shall be entitled to receive the number of Ordinary Shares which
the Warrant Holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been exercised
immedi-
<PAGE>
-8-
ately prior to the happening of such event or any record date with respect
thereto.
An adjustment made pursuant to this Section 5(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event. Such adjustment shall be made successively
whenever such a payment, subdivision or combination is made.
(b) Adjustment for Other Distributions. In case the Company shall
distribute to all holders of its Ordinary Shares evidences of its indebtedness
(other than evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for, with or without payment of additional
consideration in cash or property, Ordinary Shares, either upon the occurrence
of a specified date or a specified event (in any case, "Convertible
Securities")), assets (excluding cash dividends or distributions payable out of
consolidated retained earnings and dividends or distributions referred to in
Section 5(a) or in Section 5(c)), shares of capital stock (other than Ordinary
Shares), or rights, options or warrants containing the right to subscribe for or
purchase debt securities, assets or securities of the Company (other than
Convertible Securities or Ordinary Shares) (collectively "Assets"), then in each
case the number of Ordinary Shares thereafter purchasable upon the exercise of
each Warrant evidenced hereby shall be determined by multiplying the number of
Ordinary Shares theretofore purchasable upon the exercise of each Warrant
evidenced hereby by a fraction, of which the numerator shall be the market price
per Ordinary Share (as defined in Section 5(f)) on the date of such
distribution, and the denominator of which shall be such market price per
Ordinary Share less the fair value as of such record date (as determined in good
faith by the Board of Directors of the Company) of the portion of the Assets
applicable to one Ordinary Share. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. A reclassification of the
Ordinary Shares (other than a change in par value, from par value to no par
value or from no par value to par value) into Ordinary Shares and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Ordinary Shares of such shares of such other class of stock
within the meaning of this Section 5(b) and, if the outstanding Ordinary Shares
shall be changed into larger or smaller number of Ordinary Shares as a part of
such reclassification, such change shall be deemed a subdivision or combina-
<PAGE>
-9-
tion, as the case may be, of the outstanding Ordinary Shares within the meaning
of Section 5(a).
No adjustment shall be made pursuant to this Section 5(b) unless, on the
record date for such distribution, the market price per Ordinary Share exceeds
the fair market value of the Assets applicable to each outstanding Ordinary
Share. In the event, and each time, that the Company distributes Assets to all
holders of its Ordinary Shares and the market price per Ordinary Share on the
record date for such distribution is less than or equal to the fair market value
of the Assets applicable to each outstanding Ordinary Share on such date, the
Company shall either (i) distribute Assets to the Warrant Holder on the record
date for such distribution when such Assets are distributed to the holders of
Ordinary Shares as though all Warrants evidenced hereby had been exercised as of
such record date or (ii) deposit such Assets in trust with a trustee. If the
Company elects to distribute Assets to the Warrant Holder, the Company shall, on
the date Assets are distributed to holders of Ordinary Shares, distribute to
such Warrant Holder the Assets that it would have been entitled to receive on
such date if it had exercised the Warrants evidenced hereby immediately prior to
the record date for such distribution. If, however, the Company elects to
deposit the Assets due the Warrant Holder in trust, the Company shall, on the
date Assets are distributed to holders of Ordinary Shares, place in trust the
Assets that the Warrant Holder would have been entitled to receive on such date
if all of the Warrants evidenced hereby had been exercised immediately prior to
the record date for such distribution; and the Warrant Holder shall be entitled
upon exercise of the Warrants evidenced hereby to receive the Ordinary Shares
issuable upon exercise thereof, the Assets placed in trust in respect of such
Warrants, and the interest and dividends paid on such Assets since being placed
in trust. In the event any Warrants evidenced hereby have not been exercised
prior to the termination of the Expiration Date, any assets remaining in such
trust after distributions have been made in respect of Warrants exercised shall
be returned to the Company.
(c) Adjustment for Issuance of Ordinary Shares. If at any time after the
date hereof the Company shall (except as hereinafter provided) issue or sell any
Ordinary Shares for consideration in an amount per Ordinary Share less than the
market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale, then the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby shall be
adjusted to
<PAGE>
-10-
equal the product obtained by multiplying the number of Ordinary Shares for
which such Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of Ordinary Shares
outstanding immediately after such issue or sale, and (B) the denominator of
which shall be the sum of (1) the number of Ordinary Shares outstanding
immediately prior to such issue or sale, and (2) the aggregate consideration
received from the issuance or sale of such additional Ordinary Shares divided by
the market price per Ordinary Share (as defined in Section 5(f)) in effect
immediately prior to the time of such issue or sale; provided, however, that no
adjustment shall be made pursuant to this Section 5(c) upon the issuance of
Ordinary Shares (i) in a bona fide public offering pursuant to a firm commitment
or best efforts underwriting, (ii) upon the issuance of up to 1,500,000 Ordinary
Shares, or ADSs representing such Ordinary Shares, of the Company pursuant to
any employee stock option, purchase or similar plan which may be established by
the Company from time to time providing for options, warrants or similar rights
to purchase Ordinary Shares, or ADSs representing such Ordinary Shares, of the
Company or (iii) upon the issuance of Ordinary Shares pursuant to any warrants,
other rights or Convertible Securities outstanding as of the date hereof.
(d) Issuance of Warrants or Other Rights. In case the Company shall
distribute to all holders of its Ordinary Shares or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Ordinary Shares or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Ordinary Shares are issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities plus the price paid to the Company to acquire such warrants, other
rights or Convertible Securities shall be less than the market price per
Ordinary Share (as defined in Section 5(f)) in effect immediately prior to the
time of such distribution, issue or sale, then the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby shall be adjusted
as provided in Section 5(c) on the basis that (A) the maximum number of Ordinary
Shares issuable pursuant to all such warrants or other rights or necessary to
give effect to the conversion or exchange of all such Convertible Securities
shall be deemed to be issued and outstanding, (B) the price per share for such
Ordinary Shares shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Ordinary Shares are available
<PAGE>
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to such holders, and (C) the Company shall have received all of the
consideration payable therefor, if any, as of the date of the actual issuance of
such warrants or other rights; provided, however, that no adjustment shall be
made pursuant to this Section 5(d) upon the issuance of (i) any warrants or
options or other rights to subscribe for up to 1,500,000 Ordinary Shares, or
ADSs representing such Ordinary Shares, of the Company, pursuant to any employee
stock option, purchase or similar plan which may be established by the Company
from time to time or (ii) any warrants or options to purchase Ordinary Shares,
or ADSs representing such Ordinary Shares, which may be issued by the Company to
certain officers of the Company pursuant to any future employment agreements. No
further adjustments of the number of Ordinary Shares for which any Warrant
evidenced hereby is exercisable shall be made upon the actual issue of such
Ordinary Shares or of such Convertible Securities upon exercise of such warrants
or other rights or upon the actual issue of such Ordinary Shares upon such
conversion or exchange of such Convertible Securities.
(e) Adjustments for Issuance of Convertible Securities. In case the
Company shall distribute to all holders of its Ordinary Shares or shall in any
manner (whether directly or by assumption in a merger in which the Company is
the surviving corporation) issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Ordinary Shares are issuable upon such
conversion or exchange, plus the price paid to the Company to acquire such
Convertible Security, shall be less than the market price per Ordinary Share (as
defined in Section 5(f)), in effect immediately prior to the time of such
distribution, issue or sale, then the number of Ordinary Shares purchasable upon
the exercise of each Warrant evidenced hereby shall be adjusted as provided in
Section 5(c) on the basis that (i) the maximum number of Ordinary Shares
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to be issued and outstanding, (ii) the price per
share of such Ordinary Shares shall be deemed to be the lowest possible price in
any range of prices at which such Ordinary Shares are available to such holders,
and (iii) the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of Ordinary Shares for which any Warrant
evidenced hereby is exercisable shall be made under this Section 5(e) upon the
issuance of any Convertible Securities which are issued pursuant to the exercise
of any warrants or other subscription or purchase rights therefor if any such
adjustment shall previ-
<PAGE>
-12-
ously have been made upon the issuance of such warrants or other rights pursuant
to Section 5(d). No further adjustments of the number of Ordinary Shares for
which any such Warrant evidenced hereby is exercisable shall be made upon the
actual issue of such Ordinary Shares upon conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments have been or are
to be made pursuant to other provisions of this Section 5, no further
adjustments shall be made by reason of such issue or sale. For the purposes of
this Section 5(e), the date as of which the current market price of Ordinary
Shares shall be computed shall be the earliest of (a) the date on which the
Company shall take a record of the holders of its Ordinary Shares for the
purpose of entitling them to receive any such Convertible Securities or (b) the
date of actual issuance of such Convertible Securities.
(f) Market Price. For the purpose of any computation under Sections 5(b),
5(c), 5(d), 5(e) and 8(b), the market price per Ordinary Share at any date shall
be the fair value thereof determined in the reasonable good faith judgment of
the Board of Directors of the Company; provided, however, that if the Ordinary
Shares, or ADSs representing such Ordinary Shares, are listed or admitted for
trading on any domestic national securities exchange or quoted in the
over-the-counter market or the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System, the market price per
Ordinary Share shall be the average of the daily closing prices for 20
consecutive trading days preceding the date of such computation. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on the principal
national securities exchange on which the Ordinary Shares or ADSs, as the case
may be, are listed or admitted to trading or, if not listed or admitted to
trading, the average of the last reported sales price or in case no such
reported sales take place on such day, the average of the closing bid and asked
prices of the Ordinary Shares in the over-the-counter market as reported by
NASDAQ or the NASDAQ National Market System or any comparable system or, if the
Ordinary Shares are not included for quotation in the over-the-counter market or
the NASDAQ National Market System or a comparable system, the average of the
closing bid and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the Board
of Directors of the Company for that purpose.
<PAGE>
-13-
(g) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Ordinary Shares purchasable upon exercise of the Warrants evidenced
hereby shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Ordinary Shares
purchasable upon the exercise of each such Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.
(h) Adjustment in Purchase Price. Whenever the number of Ordinary Shares
purchasable upon the exercise of each Warrant evidenced hereby is adjusted as
herein provided, the Purchase Price payable upon exercise of each such Warrant
shall be adjusted by multiplying such Purchase Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of Ordinary
Shares purchasable upon the exercise of each such Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Ordinary
Shares purchasable immediately thereafter.
(i) When No Adjustment Required. No adjustment in the number of Ordinary
Shares purchasable upon the exercise of each Warrant evidenced hereby need be
made under Sections 5(b), 5(d) and 5(e) if the Company issues or distributes to
the Warrant Holder, the Assets, warrants or other rights or Convertible
Securities referred to in those paragraphs which the Warrant Holder would have
been entitled to receive had the Warrants evidenced hereby been exercised prior
to the happening of such event or the record date with respect thereto. No
adjustment need be made for a change in the par value or to no par value of the
Ordinary Shares; provided, however, that the Purchase Price shall at no time be
less than the par value of the Ordinary Shares of the Company, provided,
further, that the Company shall reduce the par value of its Ordinary Shares from
time to time as necessary so that such par value shall not be more than the
Purchase Price then in effect.
(j) Ordinary Shares. For all purposes of this Warrant Certificate, the
term "Ordinary Shares" shall mean (i) the class of stock designated as the
Ordinary Shares of the Company on February 3, 1998 or (ii) any other class of
stock resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to Section 5(a), the Warrant Holder shall become
entitled to pur-
<PAGE>
-14-
chase any securities of the Company other than Ordinary Shares, thereafter the
number of such other shares so purchasable upon exercise of each Warrant
evidenced hereby and the Purchase Price of such shares shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Ordinary Shares contained in
Sections 5(a) through 5(i) herein, inclusive, this Section 5(j) and the
provisions of Section 2 and Sections 5(m) and 5(n) herein, with respect to the
Ordinary Shares, shall apply on like terms to any such other securities.
(k) Expiration of Rights, Warrants or Convertible Securities. Upon the
expiration of any rights, warrants or Convertible Securities, if any thereof
shall not have been exercised, exchanged or converted, the Purchase Price and
the number of Ordinary Shares purchasable upon the exercise of each Warrant
evidenced hereby shall, upon such expiration, be readjusted and shall thereafter
be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (A) the only
Ordinary Shares so issued were the Ordinary Shares, if any, actually issued or
sold upon the exercise of such rights or warrants or conversion or exchange of
Convertible Securities and (B) such Ordinary Shares, if any, were issued or sold
for the consideration actually received by the Company upon such exercise,
conversion or exchange plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all of such rights,
warrants or Convertible Securities whether or not exercised, converted or
exchanged, as the case may be; provided, however, that no such readjustment
shall have the effect of increasing the Purchase Price or decreasing the number
of Ordinary Shares purchasable upon the exercise of each Warrant evidenced
hereby by an amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant of such rights, warrants or Convertible
Securities.
(l) In the event of any issuance of securities by the Company for
consideration in whole or in part in other than cash, the Board of Directors of
the Company shall determine in good faith the value thereof which determination
shall be conclusive and binding.
(m) Voluntary Adjustment by the Company. The Company may at its option, at
any time prior to the Expiration Date, reduce the then current Purchase Price to
any amount deemed appropriate by the Board of Directors of the Company;
provided, however, the Company may not in any case increase the
<PAGE>
-15-
Purchase Price pursuant to this Section 5(m); provided, further, if the Company
elects to reduce the then current Purchase Price, such reduction shall remain in
effect for at least a 30 day period, after which time the Company may, at its
option, reinstate the Purchase Price in effect immediately prior to such
reduction.
(n) Statement on This Warrant Certificate. Irrespective of any adjustments
in the Purchase Price or the number or kind of shares purchasable upon the
exercise of the Warrants evidenced hereby, this Warrant Certificate and Warrant
Certificates hereafter issued may continue to express the same price and number
and kind of shares as are stated hereon.
Section 6. Certification of Adjusted Purchase Price and Number of Shares
Issuable. Whenever the Purchase Price and the number of Ordinary Shares issuable
upon the exercise of each Warrant evidenced hereby are adjusted as provided in
Section 5, the Company shall (a) prepare a certificate signed by its Chief
Executive Officer or a Vice President or other executive officer setting forth
the Purchase Price as so adjusted, the number of Ordinary Shares issuable upon
the exercise of each Warrant evidenced hereby as so adjusted and a brief
statement of the method of calculation of the adjustment and the facts
accounting for the adjustment, (b) promptly file with each transfer agent for
the Ordinary Shares a copy of such certificate, and (c) mail a brief summary
thereof to the Warrant Holder.
Section 7. Acceleration of Exercisability upon Sale of the Company or a
Change of Control. In the event that the Company undergoes a Sale (as defined)
or a Change of Control (as defined) prior to the Exiration Date, all of the
Warrants shall become fully exercisable.
For purposes of this Section 7, "Change of Control" means and shall be
deemed to have occurred if any person (within the meaning of the Securities and
Exchange Act of 1934, as amended), other than the Company or a Related Party (as
defined), is or becomes the beneficial owner, directly or indirectly, of voting
securities representing 51% or more of the total voting power of all then
outstanding voting securities.
For purposes of this Section 7, "Related Party" means: (a) a majority
owned subsidiary of the Company, (b) an employee or group of employees of the
Company, (c) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (d) a corporation owned by the stockhold-
<PAGE>
-16-
ers of the Company in substantially the same proportion as their ownership of
the voting securities of the Company, and (e) each of Elan Corporation, plc,
Dominion Income Management Corp., Halisol SA, AIG Global Investment Corp.,
Goldman Sachs & Co., Paribas Sante SA, Perrigo Company and Warner-Lambert
Company.
For purposes of this Section 7, a "Sale" means and shall be deemed to have
occurred if: (a) the Company completes a merger, consolidation, sale, transfer
or other disposition that effects a Change of Control, or (b) the Company enters
into a transaction or series of transactions to sell, transfer or otherwise
dispose of all or substantially all of its properties or assets.
Section 8. Fractional Warrants and Fractional Shares. (a) The Company
shall not be required to issue fractions of Warrants or to distribute Warrant
Certificates which evidence fractional Warrants. In lieu of such fractional
Warrants, there shall be paid to the Warrant Holders with regard to which such
fractional Warrant would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Warrant. For purposes of
this Section 8(a), the current market value of a Warrant shall be the fair value
thereof determined in the reasonable good faith judgment of the Board of
Directors of the Company for the day immediately prior to the date on which such
fractional Warrant would have been otherwise issuable.
(b) Notwithstanding an adjustment pursuant to Section 5 in the number of
Ordinary Shares covered by any Warrant evidenced hereby, the Company shall not
be required to issue fractions of Ordinary Shares upon exercise of the Warrants
evidenced hereby or to distribute certificates which evidence fractional
Ordinary Shares. In lieu of fractional Ordinary Shares, there shall be paid to
the Warrant Holder at the time this Warrant Certificate is exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of an Ordinary Share. For purposes of this Section 8(b), the current
market value of an Ordinary Share shall be determined in accordance with Section
5(f) as of the day immediately prior to the date of such exercise.
(c) The Warrant Holder by acceptance hereof, expressly waives such Warrant
Holder's right to receive any fractional Warrant evidenced hereby or any
fractional Ordinary Share upon exercise of a Warrants evidenced hereby.
<PAGE>
-17-
Section 9. Right of Action. All rights of action in respect of this
Warrant Certificate are vested in the respective Warrant Holders; and any
Warrant Holders may, in its own behalf and for its own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise in respect of, its right to exercise the Warrants
evidenced by this Warrant Certificate in the manner provided in this Warrant
Certificate.
Section 10. Agreement of Warrant Certificate Holders. The Warrant Holder
by accepting same consents and agrees with the Company that:
(a) registration of transfer of this Warrant Certificate may be made
only on the registry books of the Company if surrendered at the address of
the Company, duly endorsed, or accompanied by a proper instrument of
transfer; and
(b) the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced hereby (notwithstanding any notations of ownership or
writing on this Warrant Certificates made by anyone other than the
Company) for all purposes whatsoever, and the Company shall not be
affected by any notice to the contrary.
Section 11. Issuance of New Warrant Certificate. Notwithstanding any of
the provisions of this Warrant Certificate, the Company may, at its option,
issue a new Warrant Certificate evidencing the Warrants evidenced hereby in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares of
capital stock or other securities or property purchasable under this Warrant
Certificate made in accordance with the provisions of this Agreement.
Section 12. Notice of Proposed Actions. In case the Company shall propose
(a) to pay any dividend payable in stock of any class to the holders of its
Ordinary Shares or to make any other distribution to the holders of its Ordinary
Shares (other than a cash dividend) or (b) to offer to the holders of its
Ordinary Shares rights, options or warrants to subscribe for or to purchase any
additional Ordinary Shares or shares of capital stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Ordinary
<PAGE>
-18-
Shares (other than a reclassification involving only the subdivision or
combination of outstanding Ordinary Shares), or (d) to effect any capital
reorganization, or (e) to effect any consolidation, merger or sale, transfer or
other disposition of all or substantially all of its property, assets or
business, or (f) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to the Warrant Holder,
a notice of such proposed action in accordance with Section 13 hereof, which
shall specify the date on which a record is to be taken for the purposes of such
stock dividend, distribution or rights, options or warrants, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, or winding up is to become
effective and the date of participation therein by the holders of Ordinary
Shares, if any such date is to be fixed, and such notice shall be so given at
least 20 calendar days (or 10 calendar days in any case specified in clause (a)
or (b) above) prior to the applicable record date, effective date or
participation date described above.
Section 13. Notices. Notices or demands authorized by this Agreement to be
given or made by the Warrant Holder to or on the Company shall be made in
writing by hand-delivery, next-day air courier, certified first-class mail,
return receipt requested, telex or facsimile to:
Warner Chilcott Public Limited Company
Lincoln House
Lincoln Place
Dublin 2, Ireland
Facsimile: (353) 1-662-4950
Attention: Corporate Secretary
Notices or demands authorized by this Agreement to be given or made by the
Company to the Warrant Holder shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return receipt requested,
telex or facsimile to such holder at the address of the Warrant Holder as shown
on the registry books of the Company.
Section 14. Registration under the Securities Act of 1933. The Warrant
Holder represents and warrants to the Company that it will not dispose of any
Warrants or Ordinary Shares issuable upon exercise of the Warrants evidenced
hereby except, (i) to a "qualified institutional buyer" as such term is defined
in Rule 144A under the Act, upon receipt by the Company of a transfer letter
certifying as to the prospective
<PAGE>
-19-
transferee's status as a qualified institutional buyer, (ii) pursuant to an
effective registration statement under the Act and any applicable state or
foreign securities laws or (iii) upon receipt by the Company and, in the event
of any disposition of ADRs evidencing ADSs representing Ordinary Shares issued
upon exercise of the Warrants evidenced hereby, receipt by the depositary who is
party to the Deposit Agreement (the "Depositary"), of an opinion of counsel
reasonably acceptable to the Company and, if applicable, the Depositary, that
such registration is not required.
Section 15. Certificates To Bear Legends. Upon original issuance prior to
(i) the date which is two years after the later of the original issue date
thereof and the last date on which the Company or any affiliate of the Company
was the owner of the security (or any predecessor security) and (ii) such later
date, if any, as may be required by any subsequent change in applicable law,
each Ordinary Share or other security issued upon exercise of the Warrants
evidenced hereby shall bear a legend substantially to the following effect:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO (X) THE DATE
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR SECURITY) AND (Y) SUCH LATER
DATE, IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE
LAW (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
<PAGE>
-20-
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE RIGHT OF THE COMPANY IN ITS SOLE DISCRETION PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION REASONABLY ACCEPTABLE IN FORM AND SUBSTANCE TO EACH OF THEM
THAT SUCH REGISTRATION IS NOT REQUIRED. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Section 16. Modification of Agreement. The Company and the Warrant Holder
may amend or supplement any provision of this Warrant Certificate only by a
statement in writing signed by each of the Company and the Warrant Holder.
Section 17. Successors. All provisions of this Warrant Certificate by or
for the benefit of the Company or the Warrant Holder shall bind and inure to the
benefit of their respective successors and assigns hereunder.
Section 18. Benefits of this Agreement. Nothing in this Warrant
Certificate expressed or nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the Company and the Warrant Holder any right,
remedy or claim under or by reason of this Warrant Certificate or of any
provision hereof; and all provisions in this Warrant Certificate contained shall
be for the sole and exclusive benefit of the Company and its successors and of
the Warrant Holder.
Section 19. New York Contract. This Warrant Certificate shall be governed
in all respects by the laws of the State of New York, without giving effect to
principles of conflict of laws.
Section 20. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant Certificate are inserted for convenience only and shall
not control or
<PAGE>
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affect the meaning or construction of any of the provisions hereof.
<PAGE>
-22-
WITNESS the signature of the proper officer of the Company. Dated as of
February 3, 1998.
WARNER CHILCOTT PUBLIC
LIMITED COMPANY
/s/James G. Andress
--------------------------------------------
James G. Andress
Chairman of the Board and Chief
Executive Officer
REVOLVING CREDIT AND SECURITY AGREEMENT
Revolving Credit and Security Agreement dated March 30, 1998 among WARNER
CHILCOTT, INC., a corporation organized under the laws of the State of Delaware
("Borrower"), the financial institutions which are now or which hereafter become
a party hereto (collectively, the "Lenders" and individually a "Lender") and PNC
BANK, NATIONAL ASSOCIATION, a national banking association, ("PNC"), as agent
for Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited consolidated and consolidating financial statements of Warner PLC for
the fiscal year ended December 31, 1997.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Advances" shall mean the Revolving Advances.
"Advance Rates" shall have the meaning set forth in Section 2.1(a)
hereof.
"Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with such Person, or (b) any Person who is
a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes
of this definition, control of a Person shall mean the power, direct or
indirect, (x) to vote 30% or more of the securities having ordinary voting
power for the election of directors of such Person, or (y) to direct or
cause the direction of the management and policies of such Person (it
being understood that the right to elect one director to the board of
directors of a Person shall not be deemed to be the power to direct or
cause the direction of the management and policies of such Person) whether
by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as
publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time
by PNC as a means of pricing some loans to its customers and is neither
tied to any external rate of interest or index nor does it necessarily
reflect the lowest rate of interest actually charged by PNC to any
particular class or category of customers of PNC.
"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
<PAGE>
"Borrower" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all permitted successors and assigns of such
Persons.
"Borrower's Account" shall have the meaning set forth in Section
2.7.
"BT Credit Facility" shall mean the credit facility between the
Borrower, lenders parties thereto, BT Commercial Corporation, as
Administrative Agent, and Bankers Trust Company, as Issuing Bank, dated as
of April 26,1996, together with all related documents thereto, including,
without limitation, any guarantee agreements, and security agreements, in
each case as amended, supplemented or otherwise modified.
"Business Day" shall mean with respect to Eurodollar Rate Loans, any
day on which commercial banks are open for domestic and international
business, including dealings in Dollar deposits in London, England and New
York, New York and with respect to all other matters, any day other than a
day on which commercial banks in New York are authorized or required by
law to close.
"Cash Equivalents" shall mean and be defined as those items set
forth in Section 7.4(a) through (d).
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. "9601 et
seq.
"Change of Control" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in a transfer of
control of Borrower to a Person who is not an Original Owner or (b) any
merger or consolidation of or with Borrower or sale of all or
substantially all of the property or assets of Borrower. For purposes of
this definition, "control of Borrower" shall mean the power, direct or
indirect (x) to vote 50% or more of the securities having ordinary voting
power for the election of directors of Borrower or (y) to direct or cause
the direction of the management and policies of Borrower by contract or
otherwise.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance,
stamp, occupation and property taxes, custom duties, fees, assessments,
liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts,
imposed by any taxing or other authority, domestic or foreign (including,
without limitation, the Pension Benefit Guaranty Corporation or any
environmental agency or superfund), upon the Collateral, Borrower or any
of its Affiliates.
"Closing Date" shall mean March 30, 1998 or such other date as may
be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) the Leasehold Interests;
<PAGE>
(f) all of Borrower's right, title and interest in and to (i)
its respective goods and other property including, but not limited
to, all merchandise returned or rejected by Customers, relating to
or securing any of the Receivables; (ii) all of Borrower's rights as
a consignor, a consignee, an unpaid vendor, mechanic, artisan, or
other lienor, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional amounts
due to Borrower from any Customer relating to the Receivables; (iv)
other property, including warranty claims, relating to any goods
securing this Agreement; (v) all of Borrower's contract rights,
rights of payment which have been earned under a contract right,
instruments, documents, chattel paper, warehouse receipts, deposit
accounts, money, securities and investment property to the extent
assignable; (vi) if and when obtained by Borrower, all real and
personal property of third parties in which Borrower has been
granted a lien or security interest as security for the payment or
enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which
Borrower has expressly granted a security interest or may in the
future grant a security interest to Agent hereunder, or in any
amendment or supplement hereto or thereto, or under any other
agreement between Agent and Borrower;
(g) all of Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers,
computers, computer software (owned by Borrower or in which it has
an interest), computer programs, tapes, disks and documents relating
to (a), (b), (c), (d), (e) or (f) of this Paragraph; and
(h) all proceeds and products of (a), (b), (c), (d), (e), and
(f) in whatever form, including, but not limited to: cash, deposit
accounts (whether or not comprised solely of proceeds), certificates
of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the
payment of money, chattel paper, security agreements, documents,
eminent domain proceeds, condemnation proceeds and tort claim
proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a document in the form
of Exhibit 15.3 hereto, properly completed and otherwise in form and
substance satisfactory to Agent by which the Purchasing Lender purchases
and assumes a portion of the obligation of Lenders to make Advances under
this Agreement.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, domestic or foreign,
necessary to carry on Borrower's business, including, without limitation,
any Consents required under all applicable federal, state or other
applicable law.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with Borrower, are treated as a
single employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both
with respect to any contract or contract right, and/or any party who
enters into or proposes to enter into any contract or other arrangement
with Borrower, pursuant to which Borrower is to deliver any personal
property or perform any services.
"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Defaulting Lender" shall have the meaning set forth in Section
2.12(a) hereof.
<PAGE>
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Rate Loan" shall mean any Advance that bears interest
based upon the Base Rate.
"Early Termination Date" shall have the meaning set forth in Section
13.1 hereof.
"Eligible Inventory" shall mean and include Inventory excluding work
in process, with respect to Borrower valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Agent's
opinion, obsolete, slow moving or unmerchantable and which Agent, in its
reasonable discretion, shall not deem ineligible Inventory, based on such
reasonable considerations as Agent may from time to time deem appropriate
including, without limitation, whether the Inventory is subject to a
perfected, first priority security interest in favor of Agent and whether
the Inventory conforms to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority over
such goods or the use or sale thereof.
"Eligible Receivables" shall mean and include with respect to
Borrower, each Receivable of Borrower arising in the ordinary course of
such Borrower's business and which Agent, in its reasonable credit
judgment, shall deem to be an Eligible Receivable, based on such
reasonable considerations as Agent may from time to time deem appropriate.
A Receivable shall not be deemed eligible unless such Receivable is
subject to Agent's first priority perfected security interest and no other
Lien (other than Permitted Encumbrances), and is evidenced by an invoice
or other documentary evidence satisfactory to Agent. In addition, no
Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an Affiliate of any
Borrower or to a Person controlled by an Affiliate of Borrower;
(b) it is due or unpaid more than ninety (90) days after the
original invoice date;
(c) twenty-five percent (25%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder. Such percentage
may, in Agent's sole discretion, be increased or decreased from time to
time;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property or call a meeting of its creditors, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment
for the benefit of creditors, (iv) commence a voluntary case under any
state or federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii)
acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United States
of America, unless the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Agent in its reasonable discretion;
(g) the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
<PAGE>
(h) Agent believes, in its reasonable judgment, that collection of
such Receivable is insecure or that such Receivable may not be paid by
reason of the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the Borrower
assigns its right to payment of such Receivable to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727
et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied
with other applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been shipped
and delivered to and accepted by the Customer or the services giving rise
to such Receivable have not been performed by the Borrower and accepted by
the Customer or the Receivable otherwise does not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit determined
by Agent, in its sole discretion, to the extent such Receivable exceeds
such limit;
(l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier of
Borrower or the Receivable is contingent in any respect or for any reason;
(m) the Borrower has made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in the
ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each
respective invoice related thereto;
(n) shipment of the merchandise or the rendition of services has not
been completed;
(o) any return, rejection or repossession of the merchandise has
occurred;
(p) such Receivable is not payable to Borrower;
(q) more than fifty percent (50%) in dollar value of the aggregate
Receivables due from a Customer are past due; or
(r) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes as they relate to the
protection of the environment including without limitation CERCLA, RCRA,
the Toxic Substance Control Act, 15 U.S.C. ss.2601, et seq. and those
governing the use, storage, treatment, generation, transportation,
processing, handling, production or disposal of Hazardous Substances and
the rules, regulations, decisions, orders and directives of of any
Governmental Body implementing them.
"Equipment" shall mean and include as to Borrower all of Borrower's
goods (other than Inventory) whether now owned or hereafter acquired and
wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures,
parts, accessories and all replacements and substitutions therefor or
accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations
promulgated thereunder.
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar
<PAGE>
Rate.
"Eurodollar Rate" shall mean with respect to any Eurodollar Rate
Loan for any Interest Period, the interest rate per annum determined by
the Agent by dividing (the resulting quotient rounded upward to the
nearest 1/100th of 1% per annum) (i) the rate of interest determined by
the Agent in accordance with its usual procedures (which determination
shall be conclusive and binding upon the Borrower, absent manifest error
on the part of the Agent) to be equal to the offered rates for deposits in
Dollars for the applicable Interest Period which appear on Page 3750 of
the TELERATE rate reporting system or other similar system as of
approximately 11:00 a.m., Greenwich Mean Time, two (2) Business Days prior
to the first day of such Interest Period for an amount comparable to such
Eurodollar Rate Loan and having a borrowing date and a maturity comparable
to such Interest Period by (ii) a number equal to 1.00 minus the Reserve
Percentage. The Eurodollar Rate may also be expressed by the following
formula:
Eurodollar Rate = Offered rate on TELERATE page 3750
--------------------------------------------
1.00 - Reserve Percentage
If more than one offered rate appears on Page 3750 of the TELERATE rate
reporting system or similar system, the rate will be the arithmetic mean
of such offered rates.
"Event of Default" shall mean the occurrence of any of the events
set forth in Article X hereof.
"Financial Support Undertaking" shall mean the Financial Support
Undertaking in the form of Exhibit 1.2(a) given by Warner PLC and Warner
Bermuda in favor of Agent.
"Formula Amount" shall have the meaning set forth in Section 2.1(a)
hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include as to Borrower all of
Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of the Receivables by a Customer all
rights of indemnification and all other intangible property of every kind
and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or
pertaining to a government.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean any flammable explosives, radon,
radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane,
hazardous materials, wastes, hazardous or toxic substances regulated by
any applicable Environmental Law.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be
classified upon a balance sheet as liabilities (except capital stock and
surplus earned or otherwise) and in any event, without limitation by
reason of enumeration, shall include all indebtedness, debt and other
similar monetary obligations of such Person whether direct or guaranteed,
and all premiums, if any, due at the required prepayment dates of such
indebtedness, and all indebtedness secured by a Lien on assets owned by
such Person, whether
<PAGE>
or not such indebtedness actually shall have been created, assumed or
incurred by such Person. Any indebtedness of such Person resulting from
the acquisition by such Person of any assets subject to any Lien shall be
deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or
not actually so created, assumed or incurred.
"Indenture" shall mean a certain Indenture dated April 15, 1996 with
respect to the issuance by the Borrower of $69,000,000 aggregate principal
amount of its Senior Subordinated Discounted Notes Due 2001.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b) hereof.
"Inventory" shall mean and include as to Borrower all of Borrower's
now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of service
or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which
are or might be used or consumed in Borrower's business or used in selling
or furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Leasehold Interests" shall mean all of each Borrower's right, title
and interest in and to the premises located at Rockaway 80 Corporate
Center. 100 Enterprise Drive, Suite 280, Rockaway, NJ.
"Lender" and "Lenders" shall have the meaning ascribed to such term
in the preamble to this Agreement and shall include each Person which
becomes a transferee, successor or assign of any Lender.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect
of any asset of any kind or nature whatsoever including, without
limitation, any conditional sale or other title retention agreement, any
lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (b) Borrower's ability to pay the
Obligations in accordance with the terms thereof, (c) the value of the
Collateral, or Agent's Liens on the Collateral or the priority of any such
Lien or (d) the practical realization of the benefits of Agent's and each
Lender's rights and remedies under this Agreement and the Other Documents.
"Maximum Revolving Advance Amount" shall mean $30,000,000.
"Monthly Advances" shall have the meaning set forth in Section 3.1
hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Note" shall mean the Revolving Credit Note.
"Obligations" shall mean and include any and all of Borrower's
Indebtedness and/or liabilities to Agent or Lenders or any corporation
that directly or indirectly controls or is controlled by or is under
common control with Agent or any Lender of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several,
joint and several, absolute or contingent, due or to become due, now
existing or hereafter arising, contractual or tortious, liquidated or
<PAGE>
unliquidated, regardless of how such indebtedness or liabilities arise or
by what agreement or instrument they may be evidenced or whether evidenced
by any agreement or instrument, including, but not limited to, any and all
of Borrower's Indebtedness and/or liabilities under this Agreement, the
Other Documents or under any other agreement between Agent or Lenders and
Borrower and all obligations of Borrower to Agent or Lenders to perform
acts or refrain from taking any action.
"Original Owner" shall mean Warner PLC.
"Other Documents" shall mean the Note, the Questionnaire, Warner
Bermuda's Guaranty, the Financial Support Undertaking, the Trademark
Assignment and any and all other agreements, instruments and documents,
including, without limitation, guaranties, pledges, powers of attorney,
consents, and all other writings heretofore, now or hereafter executed by
Borrower or any guarantor and/or delivered to Agent or any Lender in
respect of the transactions contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or
other ownership interests having ordinary voting power to elect a majority
of the directors of the Person, or other Persons performing similar
functions for any such Person.
"Participant" shall mean each Person who shall be granted the right
by any Lender to participate in any of the Advances and who shall have
entered into a participation agreement in form and substance satisfactory
to such Lender.
"Payment Office" shall mean initially Two Tower Center Boulevard,
East Brunswick, New Jersey 08816; thereafter, such other office of Agent,
if any, which it may designate by notice to Borrower and to each Lender to
be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or
other governmental charges not delinquent or being contested in good faith
and by appropriate proceedings and with respect to which proper reserves
have been taken by Borrower; provided, that, the Lien shall have no effect
on the priority of the Liens in favor of Agent or the value of the assets
in which Agent has such a Lien and a stay of enforcement of any such Lien
shall be in effect; (c) Liens disclosed in the financial statements
referred to in Section 5.5 hereof, the existence of which Agent has
consented to in writing; (d) deposits or pledges to secure obligations
under worker's compensation, social security or similar laws, or under
unemployment insurance; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of Borrower's business; (f)
judgment Liens that have been stayed or bonded and mechanics', workers',
materialmen's or other like Liens arising in the ordinary course of
Borrower's business with respect to obligations which are not due or which
are being contested in good faith by the Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other
property of the Borrower and (y) the aggregate amount of Indebtedness
secured by such Liens incurred as a result of such purchases during any
fiscal year shall not exceed the amount provided for in Section 7.6
hereof; (h) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Borrower or
any of its Subsidiaries; (i) easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries; (j)
Liens arising from precautionary UCC financing Statements regarding
operating leases permitted by this Agreement; (k) any interest or title of
a licensor, lessor or sublessor under any lease permitted by this
Agreement; and (l) Liens securing outstanding obligations not exceeding
$250,000 in the aggregate at any one time provided the same do not affect
Borrower's Inventory or Receivables.
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit
<PAGE>
corporation, joint venture, entity or government (whether Federal, state,
county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Borrower or any member
of the Controlled Group or any such Plan to which Borrower or any member
of the Controlled Group is required to contribute on behalf of any of its
employees.
"Projections" shall have the meaning set forth in Section 5.5(a)
hereof.
"Purchasing Lender" shall have the meaning set forth in Section 15.3
hereof.
"Questionnaire" shall mean the Documentation Information
Questionnaire and the responses thereto provided by Borrower and delivered
to Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976
42 U.S.C. ss.6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of Borrower's right, title and
interest in and to the owned and leased premises identifiedas Rockaway 80
Corporate Center, 100 Enterprise Drive, Suite 280, Rockaway, New Jersey
07866.
"Receivables" shall mean and include, as to Borrower, all of
Borrower's accounts, contract rights, instruments (including those
evidencing indebtedness owed to Borrower by its Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and
acceptances, and all other forms of obligations owing to Borrower arising
out of or in connection with the sale or lease of Inventory or the
rendition of services, all guarantees and other security therefor, whether
secured or unsecured, now existing or hereafter created, and whether or
not specifically sold or assigned to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.
"Releases" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least sixty-six and
two-thirds percent (66_%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding sixty-six and two-thirds percent
(66_%) of the Commitment Percentages.
"Reserve Percentage" shall mean the maximum effective percentage in
effect on any day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including, without limitation, supplemental, marginal and emergency
reserve requirements) with respect to euroccurency funding.
"Revolving Advances" shall mean Advances made pursuant to Section
2.1(a) hereof.
"Revolving Credit Note" shall have the meaning set forth in Section
2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per annum
equal to (a) the sum of the Base Rate with respect to Domestic Rate Loans,
and (b) the sum of the Eurodollar Rate plus one and three-quarters (1
3/4%) percent with respect to Eurodollar Rate Loans.
<PAGE>
"Settlement Date" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case
it shall be the next succeeding Business Day.
"Shareholders' Equity" shall mean, at a particular date, all amounts
which would be included under shareholders' equity on the balance sheet of
Borrower on a consolidated basis determined in accordance with GAAP as at
such date.
"Subordinated Debt Payments" shall mean and include all cash
actually expended to make payments of principal and interest pursuant to
the Indenture.
"Subsidiary" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the
directors of such corporation, or other Persons performing similar
functions for such entity, are owned, directly or indirectly, by such
Person.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Termination Event" shall mean (i) a Reportable Event with respect
to any Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any
member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan
or Multiemployer Plan; (v) any event or condition (a) which might
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan or Multiemployer
Plan, or (b) that may result in termination of a Multiemployer Plan
pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or any member of the Controlled Group from a Multiemployer Plan.
"Trademark Assignment" shall mean the Trademark Collateral
Assignment and Security Agreement in form attached hereto as Exhibits
1.2(b1) and (b2).
"Transactions" shall have the meaning set forth in Section 5.5
hereof.
"Transferee" shall have the meaning set forth in Section 16.3(b)
hereof.
"Undrawn Availability" at a particular date shall mean an amount
equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum
Revolving Advance Amount, minus (b) the sum of (i) the outstanding amount
of Advances plus (ii) all amounts due and owing to Borrower's trade
creditors which are outstanding sixty (60) days beyond normal trade terms,
all as determined by the Agent.
"Warner Bermuda" shall mean Warner Chilcott (Bermuda) Limited, an
exempted company of the Commonwealth of Bermuda.
"Warner Bermuda's Guaranty" shall mean the Continuing Limited
Non-Recourse and Collateralized Guaranty in form attached hereto as
Exhibit 1.2(c).
"Warner PLC" shall mean Warner Chilcott Public Limited Company, a
public limited company incorporated under the laws of the Republic of
Ireland.
"Week" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following
Tuesday.
<PAGE>
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New Jersey shall have the
meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1.(a) Revolving Advances. Subject to the terms and conditions set forth
in this Agreement, each Lender, severally and not jointly, will make Revolving
Advances to Borrower in aggregate amounts outstanding at any time equal to such
Lender's Commitment Percentage of the lesser of (x) the Maximum Revolving
Advance Amount or (y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(b) hereof
("Receivables Advance Rate"), of Eligible Receivables, plus
(ii) up to the lesser of (A) 60%, subject to the provisions of
Section 2.1(b) hereof ("Inventory Advance Rate"), of the value of the
Eligible Inventory (the Receivables Advance Rate and the Inventory Advance
Rate shall be referred to collectively, as the "Advance Rates") or (B)
$15,000,000 in the aggregate at any one time, plus
(iii) up to 95% of cash or Cash Equivalents maintained at the Agent
and in form and substance acceptable to the Agent, minus
(iv) such reserves as Agent may reasonably deem proper and necessary
from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1 (a)(y)(iv) at any time and from time to time shall
be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by the secured promissory note ("Revolving Credit Note") substantially
in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be increased or decreased
by Agent at any time and from time to time in the exercise of its reasonable
discretion. Borrower acknowledges that decreasing the Advance Rates or
increasing the reserves may limit or restrict Advances requested by Borrower.
2.2. Procedure for Revolving Advances Borrowing.
(a) Borrower may notify Agent prior to 11:00 a.m. on a Business Day of
Borrower's request to incur, on that day, a Revolving Advance hereunder. Should
any amount required to be paid as interest hereunder, or as fees or other
charges under this Agreement or any other agreement with Agent or Lenders, or
with respect to any other Obligation, become due, same shall be deemed a request
for a Revolving Advance as of the date such payment is due, in the amount
required to pay in full such interest, fee, charge or Obligation under this
Agreement or any other agreement with Agent or Lenders, and such request shall
be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event Borrower
desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent at
least three (3) Business Days' prior written notice, specifying (i) the date
<PAGE>
of the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be an integral multiple of $1,000,000, and (iii) the duration of
the first Interest Period therefor. Interest Periods for Eurodollar Rate Loans
shall be for one, two or three months; provided, if an Interest Period would end
on a day that is not a Business Day, it shall end on the next succeeding
Business Day unless such day falls in the next succeeding calendar month in
which case the Interest Period shall end on the next preceding Business Day. No
Eurodollar Rate Loan shall be made available to Borrower during the continuance
of a Default or an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on the
date such Eurodollar Rate Loan is made and shall end on such date as Borrower
may elect as set forth in (b)(iii) above provided that the exact length of each
Interest Period shall be determined in accordance with the practice of the
interbank market for offshore Dollar deposits and no Interest Period shall end
after the last day of the Term.
Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d) hereof, as the case may be. Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrower, Borrower
shall be deemed to have elected to convert to a Domestic Rate Loan subject to
Section 2.2(d) hereof.
(d) Provided that no Event of Default shall have occurred and be
continuing, Borrower may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar Rate Loan, or on any Business
Day with respect to Domestic Rate Loans, convert any such loan into a loan of
another type in the same aggregate principal amount provided that any conversion
of a Eurodollar Rate Loan shall be made only on the last Business Day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrower desires to convert a loan, Borrower shall give Agent not less than
three (3) Business Days' prior written notice to convert from a Domestic Rate
Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written notice to
convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date
of such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
outstanding more than four (4) Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior written notice,
Borrower may prepay the Eurodollar Rate Loans in whole at any time or in part
from time to time, without premium or penalty, but with accrued interest on the
principal being prepaid to the date of such repayment. Borrower shall specify
the date of prepayment of Advances which are Eurodollar Rate Loans and the
amount of such prepayment. In the event that any prepayment of a Eurodollar Rate
Loan is required or permitted on a date other than the last Business Day of the
then current Interest Period with respect thereto, such Borrower shall indemnify
Agent and Lenders therefor in accordance with Section 2.2(f) hereof.
(f) Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including, but not limited to, any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrower shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (g), the term "Lender" shall include any Lender and the office
or branch where any Lender or any corporation or bank controlling such Lender
makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar
Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder
shall forthwith be canceled and Borrower shall, if any affected Eurodollar Rate
Loans are then outstanding, promptly upon request from Agent, either pay all
such affected
<PAGE>
Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans
of another type. If any such payment or conversion of any Eurodollar Rate Loan
is made on a day that is not the last day of the Interest Period applicable to
such Eurodollar Rate Loan, Borrower shall pay Agent, upon Agent's request, such
amount or amounts as may be necessary to compensate Lenders for any loss or
expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan
as a result of such payment or conversion, including (but not limited to) any
interest or other amounts payable by Lenders to lenders of funds obtained by
Lenders in order to make or maintain such Eurodollar Rate Loan. A certificate as
to any additional amounts payable pursuant to the foregoing sentence submitted
by Lenders to Borrower shall be conclusive absent manifest error.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions hereof. The proceeds of each
Revolving Advance requested by Borrower or deemed to have been requested by
Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving
Advances to the extent Lenders make such Revolving Advances, be made available
to Borrower on the day so requested by way of credit to such Borrower's
operating account at PNC, or such other bank as Borrower may designate following
notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
2.4. Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Amount or (b) the Formula Amount.
2.5. Repayment of Advances.
(a) The Advances shall be due and payable in full on the last day of the
Term subject to earlier prepayment as herein provided.
(b) Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Agent on the date received. In consideration of
Agent's agreement to conditionally credit Borrower's Account as of the Business
Day on which Agent receives those items of payment, Borrower agrees that, in
computing interest under this Agreement, all items of payment shall be deemed
applied by Agent on account of the Obligations one (1) Business Day after the
Business Day Agent receives such payments via wire transfer or electronic
depository check. Agent is not, however, required to credit Borrower's Account
for the amount of any item of payment which is unsatisfactory to Agent and Agent
may charge Borrower's Account for the amount of any item of payment which is
returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrower's
Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrower shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.
2.6. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
<PAGE>
2.7. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrower a statement showing the accounting for the Advances made, payments made
or credited in respect thereof, and other transactions between Agent and
Borrower, during such month. The monthly statements shall be deemed correct and
binding upon Borrower in the absence of manifest error and shall constitute an
account stated between Lenders and Borrower except and to the extent Agent
receives a written statement of Borrower's specific exceptions thereto within
thirty (30) days after such statement is received by Borrower. The records of
Agent with respect to the loan account shall be conclusive evidence absent
manifest error of the amounts of Advances and other charges thereto and of
payments applicable thereto.
2.8. Additional Payments. Any sums expended by Agent or any Lender due to
Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrower's Account as a Revolving Advance and added to the
Obligations.
2.9. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced according to
the applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrower on account of the
principal of and interest on the Revolving Advances, shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in Sections
2.9(a) and (b) hereof, commencing with the first Business Day following the
Closing Date, each borrowing of Revolving Advances shall be advanced by Agent
and each payment by Borrower on account of Revolving Advances shall be applied
first to those Revolving Advances advanced by Agent. On or before 1:00 P.M., New
York time, on each Settlement Date commencing with the first Settlement Date
following the Closing Date, Agent and Lenders shall make certain payments as
follows: (I) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week (if any) exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with funds in an amount equal to its applicable Commitment Percentage of
the difference between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Revolving Interest Rate on outstanding Advances which it has
funded.
(iii) Promptly following each Settlement Date, Agent shall submit to
each Lender a certificate with respect to payments received and Advances
made during the Week immediately preceding such Settlement Date.
(d) If any Lender or Participant (a "benefitted Lender") shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect
<PAGE>
of such other Lender's Advances, or interest thereon, and such greater
proportionate payment or receipt of Collateral is not expressly permitted
hereunder, such benefitted Lender shall purchase for cash from the other Lenders
a participation in such portion of each such other Lender's Advances, or shall
provide such other Lender with the benefits of any such Collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to share
the excess payment or benefits of such Collateral or proceeds ratably with each
of Lenders; provided, however, that if all or any portion of such excess payment
or benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. Each Lender so purchasing a portion of
another Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrower a corresponding amount. Agent
will promptly notify Borrower of its receipt of any such notice from a Lender.
If such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times (iii)
the number of days from and including such Settlement Date to the date on which
such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this paragraph
(e) shall be conclusive, in the absence of manifest error. If such amount is not
in fact made available to Agent by such Lender within three (3) Business Days
after such Settlement Date, Agent shall be entitled to recover such an amount,
with interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrower; provided, however, that Agent's
right to such recovery shall not prejudice or otherwise adversely affect
Borrower's rights (if any) against such Lender.
2.10. Mandatory Prepayments.
(a) When Borrower sells or otherwise disposes of any Collateral other than
Inventory in the ordinary course of business, Borrower shall repay the Advances
in an amount equal to the net proceeds of such sale (i.e., gross proceeds less
the reasonable costs of such sales or other dispositions), such repayments to be
made promptly but in no event more than one (1) Business Day following receipt
of such net proceeds, and until the date of payment, such proceeds shall be held
in trust for Agent. The foregoing shall not be deemed to be implied consent to
any such sale otherwise prohibited by the terms and conditions hereof. Such
repayments shall be applied to the Advances in such order as Agent may
determine, subject to Borrowers' ability to reborrow Revolving Advances in
accordance with the terms hereof.
2.11. Use of Proceeds. Borrower shall apply the proceeds of Advances to
(i) repay existing indebtedness owed under the BT Credit Facility, (ii) pay fees
and expenses relating to this transaction, and (iii) to provide for their
working capital needs.
2.12. Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrower that it does not intend to
make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.12 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the "Non-Defaulting
Lenders") which are not Defaulting Lenders based on their respective Commitment
Percentages, and no Commitment Percentage of any Lender or
<PAGE>
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters relating to
this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
(d) Other than as expressly set forth in this Section 2.12, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this Section
2.12 shall be deemed to release any Defaulting Lender from its obligations under
this Agreement and the Other Documents, shall alter such obligations, shall
operate as a waiver of any default by such Defaulting Lender hereunder, or shall
prejudice any rights which Borrower, Agent or any Lender may have against any
Defaulting Lender as a result of any default by such Defaulting Lender
hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears on the
last day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar
Rate Loans with an Interest Period in excess of three months, at the earlier of
(a) each three months on the anniversary date of the commencement of such
Eurodollar Rate Loan or (b) the end of the Interest Period. Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month (the "Monthly Advances") at a rate per annum equal to, the applicable
Revolving Interest Rate. Whenever, subsequent to the date of this Agreement, the
Base Rate is increased or decreased, the Revolving Interest Rate for Domestic
Rate Loans shall be similarly changed without notice or demand of any kind by an
amount equal to the amount of such change in the Base Rate during the time such
change or changes remain in effect. The Eurodollar Rate shall be adjusted with
respect to Eurodollar Rate Loans without notice or demand of any kind on the
effective date of any change in the Reserve Percentage as of such effective
date. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, (i) the Obligations other than Eurodollar Rate Loans shall
bear interest at the Revolving Interest Rate for Domestic Loans plus two (2%)
percent per annum and (ii) Eurodollar Rate Loans shall bear interest at the
Revolving Interest Rate for Eurodollar Rate Loans plus three and three-quarters
(3 3/4%) percent per annum (as applicable, the "Default Rate").
3.2.(a) Closing Fee. Upon the execution of this Agreement, Borrower shall
pay to Agent a Closing Fee as set forth in the commitment letter issued by the
Agent in favor of the Borrower on February 11, 1998.
(b) Facility Fee. If, for any month during the Term, the average daily
unpaid balance of the Advances for each day of such month does not equal the
Maximum Revolving Advance Amount, then Borrower shall pay to Agent for the
ratable benefit of Lenders a fee at a rate equal to three-eighths of one percent
(3/8%) per annum on the amount by which the Maximum Revolving Advance Amount
exceeds such average daily unpaid balance. Such fee shall be payable to Agent in
arrears on the last day of each month.
<PAGE>
3.3. Collateral Monitoring Fee. Borrower shall pay to Agent on the first
day of each month a collateral monitoring fee in an amount equal to $1,500 per
month. In addition, the Borrower shall pay to Agent, for each person employed to
perform field examinations, collateral analysis and/or other business analysis,
an amount equal to $600 per day for each person performing such examinations or
analysis, plus all costs and disbursements incurred by Agent in the performance
of such examinations or analysis.
3.4. Computation of Interest and Fees. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate for Domestic Rate Loans during such extension.
3.5. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrower, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrower and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.6. Increased Costs. In the event that after the date hereof, the
adoption or effectiveness of any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by any Lender (for purposes of this Section 3.6, the term
"Lender" shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or any
Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement or any Other Document or change the basis
of taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Other
Documents (except for changes in the rate of tax on the net income or net
profits. or any franchise tax based on net income or net profits, of Agent
or any Lender by the jurisdiction or any political subdivisions' in which
such Agent or Lender maintains its principal office or lending office or
is incorporated);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in
or for the account of, advances or loans by, or other credit extended by,
any office of Agent or any Lender, including (without limitation) pursuant
to Regulation D of the Board of Governors of the Federal Reserve System;
or
(c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other
Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems in its reasonable opinion to be material or to
reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the Advances by an amount that Agent or such Lender deems
in its reasonable opinion to be material, then, in any case Borrower shall
promptly pay Agent or such Lender, upon its demand in writing, such additional
amount as will compensate Agent or such Lender for such additional cost or such
reduction, as the case may be. Agent or such Lender shall certify the amount as
determined in good faith of such additional cost or reduced amount to Borrower,
and such certification shall be conclusive absent manifest error.
3.7. Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the Eurodollar
Rate applicable pursuant to Section
<PAGE>
2.2 hereof for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar
Rate Loan
then Agent shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be canceled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
last Business Day of the then current Interest Period applicable to such
affected Eurodollar Rate Loan, shall be converted into an unaffected type of
Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
Borrower shall not have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
3.8. Capital Adequacy.
(a) In the event that Agent or any Lender shall have determined in its
reasonable opinion that any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Agent or any Lender (for purposes of this Section 3.8,
the term "Lender" shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or any
Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Agent or any Lender's capital
as a consequence of its obligations hereunder to a level below that which Agent
or such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to be material in
its reasonable opinion, then, from time to time, Borrower shall pay upon demand
to Agent or such Lender such additional amount or amounts as will compensate
Agent or such Lender for such reduction. In determining such amount or amounts,
Agent or such Lender may use any reasonable averaging or attribution methods.
The protection of this Section 3.8 shall be available to Agent and each Lender
regardless of any possible contention of invalidity or inapplicability with
respect to the applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such amount or
amounts as determined in good faith as shall be necessary to compensate Agent or
such Lender with respect to Section 3.8(a) hereof when delivered to Borrower
shall be conclusive absent manifest error.
IV. COLLATERAL AND GUARANTY: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, Borrower hereby
assigns, pledges and grants to Agent for the ratable benefit of each Lender a
continuing security interest in and to all of the Collateral, whether now owned
or existing or hereafter acquired or arising and wheresoever located. Borrower
shall mark its books and records as may be necessary or appropriate to evidence,
protect and perfect Agent's security interest and shall cause its financial
statements to reflect such security interest.
<PAGE>
4.2. Perfection of Security Interest. Borrower shall take all action that
may be necessary or desirable, or that Agent may reasonably request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of Uniform Commercial Code as adopted in the State of New
Jersey. All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrower's
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Agent's option, shall be paid to Agent for the ratable
benefit of Lenders promptly upon demand.
4.3. Disposition of Collateral. Borrower will safeguard and protect all
Collateral for Agent's general account and make no disposition thereof whether
by sale, lease or otherwise except (a) the sale of Inventory in the ordinary
course of business and (b) the disposition or transfer of obsolete and worn-out
Equipment in the ordinary course of business during any fiscal year having an
aggregate fair market value of not more than $100,000 and only to the extent
that the proceeds of any such disposition are used to either (i) acquire
replacement Equipment which is subject to Agent's first priority security
interest, or (ii) pay down outstanding Revolving Advances.
4.4. Preservation of Collateral. In addition to the rights and remedies
set forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's interest in and to preserve the
Collateral, including the hiring of such security guards or the placing of other
security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of Borrower's premises a custodian who shall have full authority
to do all acts necessary to protect Agent's interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use Borrower's owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral; and (e)
shall have, and is hereby granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and through Borrower's
owned or leased property. Borrower shall cooperate fully with all of Agent's
efforts to preserve the Collateral and will take such actions to preserve the
Collateral as Agent may direct. All of Agent's expenses of preserving the
Collateral, including any expenses relating to the bonding of a custodian, shall
be charged to Borrower's Account as a Revolving Advance of a Domestic Rate Loan
and added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at the time
the Collateral becomes subject to Agent's security interest: (a) Borrower shall
be the sole owner of and fully authorized and able to sell, transfer, pledge
and/or grant a first priority security interest in each and every item of the
its respective Collateral to Agent; and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by Borrower or delivered to Agent or any
Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of Borrower that appear on such
documents and agreements shall be genuine and Borrower shall have full capacity
to execute same; and (d) Borrower's Equipment and Inventory shall be located as
set forth on Schedule 4.5 hereto and shall not be removed from such location(s)
without the prior written consent of Agent except with respect to the sale of
Inventory in the ordinary course of business and Equipment to the extent
permitted in Section 4.3 hereof.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a
<PAGE>
Lien upon or encumber or allow or suffer to be encumbered in any way except for
Permitted Encumbrances, any part of the Collateral. Borrower shall defend
Agent's interests in the Collateral against any and all Persons whatsoever. At
any time following demand by Agent for payment of all Obligations, Agent shall
have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form contained, including without limitation:
labels, stationery, documents, instruments and advertising materials. If Agent
exercises this right to take possession of the Collateral, Borrower shall, upon
demand, assemble it in the best manner possible and make it available to Agent
at a place reasonably convenient to Agent. In addition, with respect to all
Collateral, Agent and Lenders shall be entitled to all of the rights and
remedies set forth herein and further provided by the Uniform Commercial Code or
other applicable law. Borrower shall, and Agent may, at its option, instruct all
suppliers, carriers, forwarders, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which Agent holds a security
interest to deliver same to Agent and/or subject to Agent's order and if they
shall come into Borrower's possession, they, and each of them, shall be held by
Borrower in trust as Agent's trustee, and Borrower will immediately deliver them
to Agent in their original form together with any necessary endorsement.
4.7. Books and Records. Borrower shall (a) keep proper books of record and
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrower.
4.8. Financial Disclosure. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
Term to exhibit and deliver to Agent and each Lender copies of any Borrower's
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to Agent and each
Lender any information such accountants may have concerning Borrower's financial
status and business operations, subject in all cases to the policies and
procedures of such accountants and auditors. Borrower hereby authorizes all
federal, state and municipal authorities to furnish to Agent and each Lender
copies of reports or examinations relating to Borrower, whether made by Borrower
or otherwise; however, Agent and Lender will attempt to obtain such information
or materials directly from Borrower prior to obtaining such information or
materials from such accountants or such authorities.
4.9. Compliance with Laws. Borrower shall comply in all material respects
with all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to its respective Collateral or any part
thereof or to the operation of Borrower's business the non-compliance with which
could reasonably be expected to have a Material Adverse Effect on Borrower. The
assets of Borrower at all times shall be maintained in accordance with the
requirements of all insurance carriers which provide insurance with respect to
the assets of Borrower so that such insurance shall remain in full force and
effect.
4.10. Inspection of Premises. At all reasonable times Agent and each
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from Borrower's books, records, audits, correspondence and
all other papers relating to the Collateral and the operation of Borrower's
business. Agent, any Lender and their agents may enter upon Borrower's premises
after providing notice to the Borrower (or in the absence of notice after a
Default or Event of Default has occurred) at any time during business hours and
at any other reasonable time, and from time to time, for the purpose of
inspecting the Collateral and any and all records pertaining thereto and the
operation of Borrower's business.
4.11. Insurance. Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At Borrower's own cost and
expense in amounts and with carriers acceptable to Agent, Borrower shall (a)
keep all its insurable properties and properties in which Borrower has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to Borrower's including, without limitation, business
<PAGE>
interruption insurance; (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to Borrower insuring against
larceny, embezzlement or other criminal misappropriation of insured's officers
and employees who may either singly or jointly with others at any time have
access to the assets or funds of Borrower either directly or through authority
to draw upon such funds or to direct generally the disposition of such assets;
(c) maintain public and product liability insurance against claims for personal
injury, death or property damage suffered by others; (d) maintain all such
worker's compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which Borrower is engaged in business; (e) furnish
Agent with (i) copies of all policies and evidence of the maintenance of such
policies by the renewal thereof at least thirty (30) days before any expiration
date, and (ii) appropriate loss payable endorsements in form and substance
satisfactory to Agent, naming Agent as a co-insured and lender loss payee as its
interests may appear with respect to all insurance coverage referred to in
clauses (a), and above, and providing (A) that all proceeds thereunder shall be
payable to Agent, (B) no such insurance shall be affected by any act or neglect
of the insured or owner of the property described in such policy, and (C) that
such policy and loss payable clauses may not be caneled, amended or terminated
unless at least thirty (30) days' prior written notice is given to Agent. In the
event of any loss thereunder, the carriers named therein hereby are directed by
Agent and the Borrower to make payment for such loss to Agent and not to
Borrower and Agent jointly. If any insurance losses are paid by check, draft or
other instrument payable to Borrower and Agent jointly, Agent may endorse such
Borrower's name thereon and do such other things as Agent may deem advisable to
reduce the same to cash. Agent is hereby authorized to adjust and compromise
claims under insurance coverage referred to in clauses (a) and (b) above. All
loss recoveries received by Agent upon any such insurance may be applied to the
Obligations, in such order as Agent in its sole discretion shall determine. Any
surplus shall be paid by Agent to Borrower or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by Borrowers to Agent, on
demand.
4.12. Failure to Pay Insurance. If Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor on behalf of Borrower,
and charge Borrower's Account therefor as a Revolving Advance of a Domestic Rate
Loan and such expenses so paid shall be part of the Obligations.
4.13. Payment of Taxes. Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon Borrower or any
of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any tax by any governmental
authority is or may be imposed on or as a result of any transaction contemplated
by this Agreement between Borrower and Agent or any Lender which Agent or any
Lender may be required to withhold or pay or if any taxes, assessments, or other
Charges remain unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent's or any Lender's reasonable opinion, would be
likely to create a valid Lien on the Collateral, Agent may without notice to
Borrower pay the taxes, assessments or other Charges and Borrower hereby
indemnifies and holds Agent and each Lender harmless in respect thereof. Agent
will not pay any taxes, assessments or Charges to the extent that Borrower has
contested or disputed those taxes, assessments or Charges in good faith, by
expeditious protest, administrative or judicial appeal or similar proceeding
provided that any related tax lien is stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent's security
interest in or Lien on the Collateral. The amount of any payment by Agent under
this Section 4.13 shall be charged to Borrower's Account as a Revolving Advance
and added to the Obligations and, until Borrower shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision for the payment thereof has been made), Agent may hold without
interest any balance standing to Borrower's credit and Agent shall retain its
security interest in any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Borrower shall at all times pay,
when and as due, its rental obligations under all leases under which it is a
tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a bona fide
and valid account
<PAGE>
representing a bona fide indebtedness incurred by the Customer therein named,
for a fixed sum as set forth in the invoice relating thereto (provided
immaterial or unintentional invoice errors shall not be deemed to be a breach
hereof) with respect to an absolute sale or lease and delivery of goods upon
stated terms of Borrower, or work, labor or services theretofore rendered by
Borrower as of the date each Receivable is created. Same shall be due and owing
in accordance with the Borrower's standard terms of sale without dispute, setoff
or counterclaim except as may be stated on the accounts receivable schedules
delivered by Borrower to Agent.
(b) Solvency of Customers. Each Customer, to the best of Borrower's
knowledge, as of the date each Receivable is created, is and will be solvent and
able to pay all Receivables on which the Customer is obligated in full when due
or with respect to such Customers of Borrower who are not solvent Borrower has
set up on its books and in its financial records bad debt reserves adequate to
cover such Receivables.
(c) Locations of Borrower. Borrower's chief executive office is located at
Rockaway 80 Corporate Center, 100 Enterprise Drive, Suite 280, Rockaway, New
Jersey 07866. Until written notice is given to Agent by Borrower of any other
office at which Borrower keeps its records pertaining to Receivables, all such
records shall be kept at such executive office.
(d) Collection of Receivables. Until Borrower's authority to do so is
terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default or a Default or when Agent in its sole
discretion deems it to be in Lenders' best interest to do so), Borrower will, at
Borrower's sole cost and expense, but on Agent's behalf and for Agent's account,
collect as Agent's property and in trust for Agent all amounts received on
Receivables, and shall not commingle such collections with Borrower's funds or
use the same except to pay Obligations. Borrower shall deliver to Agent, or
deposit in the Blocked Account, in original form and on the date of receipt
thereof, all checks, drafts, notes, money orders, acceptances, cash and other
evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any time Agent shall
have the right to send notice of the assignment of, and Agent's security
interest in, the Receivables to any and all Customers or any third party holding
or otherwise concerned with any of the Collateral. Thereafter, Agent shall have
the sole right to collect the Receivables, take possession of the Collateral, or
both. Agent's actual collection expenses, including, but not limited to,
stationery and postage, telephone and telegraph, secretarial and clerical
expenses and the salaries of any collection personnel used for collection, may
be charged to Borrower's Account and added to the Obligations.
(f) Power of Agent to Act on Borrower's Behalf. Agent shall have the right
to receive, endorse, assign and/or deliver in the name of Agent or Borrower any
and all checks, drafts and other instruments for the payment of money relating
to the Receivables, and Borrower hereby waives notice of presentment, protest
and non-payment of any instrument so endorsed. Borrower hereby constitutes Agent
or Agent's designee as Borrower's attorney with power (i) to endorse Borrower's
name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) to sign Borrower's name on any invoice
or bill of lading relating to any of the Receivables, drafts against Customers,
assignments and verifications of Receivables; (iii) to send verifications of
Receivables to any Customer; (iv) to sign Borrower's name on all financing
statements or any other documents or instruments deemed necessary or appropriate
by Agent to preserve, protect, or perfect Agent's interest in the Collateral and
to file same; (v) to demand payment of the Receivables; (vi) to enforce payment
of the Receivables by legal proceedings or otherwise; (vii) to exercise all of
Borrower's rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Receivables; (ix) to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign Borrower's name on
a proof of claim in bankruptcy or similar document against any Customer; (xi) to
prepare, file and sign Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(xii) to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliiously or with gross (not mere) negligence; this power being coupled with an
interest is irrevocable while any of the Obligations remain unpaid. Agent shall
have the right at any time to change the address for delivery of mail addressed
to
<PAGE>
Borrower to such address as Agent may designate and to receive, open and dispose
of all mail addressed to Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Agent may, without notice or consent from
Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept the
return of the goods represented by any of the Receivables, without notice to or
consent by Borrower, all without discharging or in any way affecting Borrower's
liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All proceeds of
Collateral shall, at the direction of Agent, be deposited by Borrower into a
lockbox account, dominion account or such other "blocked account" ("Blocked
Accounts") as Agent may require pursuant to an arrangement with Agent. All funds
deposited in such "blocked account" shall immediately become the property of
Agent and Borrower shall obtain the agreement by such bank to waive any offset
rights against the funds so deposited. Neither Agent nor any Lender assumes any
responsibility for such "blocked account" arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by the Agent thereunder. Alternatively, Agent may establish
depository accounts ("Depository Accounts") in the name of the Agent, at the
Agent for the deposit of such funds and Borrower shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Agent in lieu of depositing same to the Blocked Accounts.
(i) Adjustments. Borrower will not, without Agent's consent which shall
not be unreasonably withheld, compromise or adjust any material amount of the
Receivables (or extend the time for payment thereof) or accept any returns of
merchandise or grant any additional discounts, allowances or credits thereon
except for those compromises, adjustments, returns, discounts, credits and
allowances as have been heretofore customary in the business of Borrower.
4.16. Inventory. To the extent Inventory held for sale or lease has been
produced by Borrower, it has been and will be produced by Borrower in accordance
with the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrower shall not use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation. Borrower shall have the right to
sell Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of Borrower's obligations under any contract or agreement
assigned to Agent or such Lender, and neither Agent nor any Lender shall be
responsible in any way for the performance by Borrower of any of the terms and
conditions thereof.
4.19. Environmental Matters. (a) Borrower shall ensure that the Real
Property remains in compliance with all applicable Environmental Laws and shall
not place or permit to be placed any Hazardous Substances on any Real Property
except as not prohibited by applicable law or appropriate governmental
authorities.
(b) In the event Borrower obtains, gives or receives notice of any Release
or threat of Release of a reportable quantity of any Hazardous Substances at the
Real Property (any such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of violation, request for information or
notification pursuant to any
<PAGE>
Environmental Laws that it is potentially responsible for investigation or
cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority") in each case
which would reasonably be expected to result in a Material Adverse Effect, then
Borrower shall, within five (5) Business Days, give written notice of same to
Agent detailing facts and circumstances of which Borrower is aware giving rise
to the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and is not intended to create nor shall it create any obligation upon Agent or
any Lender with respect thereto.
(c) Borrower shall promptly forward to Agent copies of all material
documents and reports concerning a Hazardous Discharge at the Real Property that
Borrower is required to file with any Governmental Body under any Environmental
Laws. Such information is to be provided solely to allow Agent to protect
Agent's security interest in the Real Property and the Collateral.
(d) In the event of any Hazardous Discharge or Environmental Complaint,
Borrower shall take all necessary action required under any applicable
Environmental Laws to address any such effect. If Borrower shall fail to respond
promptly to any Hazardous Discharge or Environmental Complaint or Borrower shall
fail to comply with any of the requirements of any Environmental Laws which
could reasonably be expected to result in a Material Adverse Effect, Agent on
behalf of Lenders may, but without the obligation to do so, for the sole purpose
of protecting Agent's interest in Collateral: (A) give such notices or (B) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as are required under any applicable
Environmental Laws to deal with any such Hazardous Discharge or Environmental
Complaint. All reasonable costs and expenses incurred by Agent and Lenders (or
such third parties) in the exercise of any such rights, including any such sums
paid in connection with any judicial or administrative investigation or
proceedings, fines and penalties, together with interest thereon from the date
expended at the Default Rate for Domestic Rate Loans constituting Revolving
Advances shall be paid upon demand by Borrower, and until paid shall be added to
and become a part of the Obligations secured by the Liens created by the terms
of this Agreement or any other agreement between Agent, any Lender and Borrower.
(e) At such time as the Agent has notice of any Hazardous Discharge or
Environmental Complaint which could reasonably be expected to result in a
Material Adverse Effect, Agent may request Borrower to provide Agent, at
Borrower's expense, with an environmental site assessment or environmental audit
report prepared by an environmental engineering firm acceptable in the
reasonable opinion of Agent, to assess with a reasonable degree of certainty the
existence of a Hazardous Discharge and the potential costs of taking necessary
actions required by any applicable Environmental Laws with respect thereto.
(f) Borrower shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including reasonable attorney's fees, suffered or incurred by
Agent or Lenders under any Environmental Laws, including, without limitation,
the assertion of any Lien thereunder, with respect to any Hazardous Discharge or
the presence of any Hazardous Substances affecting the Real Property, which
originates or emerges from the Real Property, including any loss of value of the
Real Property as a result of the foregoing in each case prior to the termination
of this Agreement except to the extent such loss, liability, damage and expense
is attributable to any actions on the part of Agent or any Lender. Borrower's
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
(g) For purposes of Section 4.19 and 5.7, all references to Real Property
shall be deemed to include all of Borrower's right, title and interest in and to
its leased premises.
4.20. Financing Statements. Except as respects the financing statements
filed by Agent and the financing
<PAGE>
statements described on Schedule 1.2, no financing statement covering any of the
Collateral or any proceeds thereof is on file in any public office.
4.21. Guaranty. Warner Bermuda shall execute and deliver to the Agent the
Warner Bermuda's Guaranty and the Trademark Assignment.
4.22. Support of Warner PLC and Warner Bermuda. Warner PLC and Warner
Bermuda shall execute and deliver to the Agent the Financial Support
Undertaking.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1. Authority. Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of Borrower's bylaws, certificate of incorporation or other
applicable documents relating to Borrower's formation or to the conduct of
Borrower's business or, where such contravention with respect to the Borrower
could have a Material Adverse Effect, of any agreement or undertaking to which
Borrower is a party or by which Borrower is bound, and (b) will not result in
the creation of any Lien, except Permitted Encumbrances, upon any asset of
Borrower or conflict with nor result in any breach in any of the provisions of
or constitute a default under the provisions of any charter document, bylaw or,
where such breach with respect to the Borrower could have a Material Adverse
Effect, any agreement or instrument, to which Borrower or its property is a
party or by which it may be bound.
5.2. Formation and Qualification. (a) Borrower is duly incorporated and in
good standing under the laws of the state of Delaware and is qualified to do
business and is in good standing in the states of New Jersey and New York which
constitute all states in which qualification and good standing are necessary for
Borrower to conduct its business and own its property and where the failure to
so qualify could reasonably be expected to have a Material Adverse Effect on
such Borrower. Borrower has delivered to Agent true and complete copies of its
certificate of incorporation and by-laws and will promptly notify Agent of any
amendment or changes thereto.
(b) The Borrower has no Subsidiaries.
5.3. Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement and the Other Documents shall
be true at the time of Borrower's execution of this Agreement and the Other
Documents, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.
5.4. Tax Returns. Borrower's federal tax identification number is
#223426958. Borrower has filed or properly extended all federal, state and local
tax returns and other reports each is required by law to file with respect to
taxes and has paid all taxes, assessments, fees and other governmental charges
that are due and payable. Federal, state and local income tax returns of
Borrower have been examined and reported upon by the appropriate taxing
authority or closed by applicable statute and satisfied for all fiscal years
prior to and including the fiscal year ending December 31, 1997. The provision
for taxes on the books of Borrower are adequate for all years not closed by
applicable statutes, and for its current fiscal year, and Borrower has no
knowledge of any deficiency or additional assessment in connection therewith not
provided for on its books.
5.5. Financial Statements.
(a) The income statement and cash flow projections of the Borrower and its
projected balance sheets as of the Closing Date, copies of which are annexed
hereto as Exhibit 5.5(a) (the "Projections") were prepared by the Chief
<PAGE>
Financial Officer of Borrower, are based on underlying assumptions which provide
a reasonable basis for the projections contained therein and reflect Borrower's
judgment based on present circumstances of the most likely set of conditions and
course of action for the projected period.
(b) The balance sheet of the Borrower, as of December 31, 1997, and the
related statements of income, changes in stockholder's equity, and changes in
cash flow for the period ended on such date provided by the consolidating
schedules prepared in connection with Warner PLC's audited financial statements
as of December 31, 1997, accompanied by reports thereon containing opinions
without qualification by independent certified public accountants, copies of
which have been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application in which such
accountants concur and present fairly the financial position of the Borrower at
such date and the results of their operations for such period).
(c) The balance sheet of the Borrower, as of February 28, 1998, and the
related statements of income, changes in shareholders equity, and changes in
cash flow for the period ended on such date provided by the consolidating
schedules prepared in connection with Warner PLC's management prepared financial
statements as of February 28, 1998, copies of which have been delivered to the
Agent, have been prepared in accordance with GAAP, consistently applied. Since
February 28, 1998 there has been no change in the condition, financial or
otherwise, of Borrower as shown on the consolidating balance sheet as of such
date and no change in the aggregate value of machinery, equipment and Real
Property owned by Borrower, except changes in the ordinary course of business,
none of which individually or in the aggregate has been materially adverse.
5.6. Corporate Name. Borrower has not been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except Warner Chilcott Laboratories, nor has Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years except that
Borrower acquired the Warner Chilcott Pharmaceuticals Division from
Warner-Lambert Company on March 28, 1996.
5.7. O.S.H.A. and Environmental Compliance.
(a) Borrower has duly complied with, and its facilities, business, assets,
property, leaseholds and Equipment are in compliance in all material respects
with, the provisions of the Federal Occupational Safety and Health Act, and all
other Environmental Laws; there have been no outstanding citations, notices or
orders of non-compliance issued to Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
(b) Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws.
(c) To the best knowledge of Borrower, (i) there are no visible signs of
releases, spills, discharges, leaks or disposal (collectively referred to as
"Releases") of Hazardous Substances at, upon, under or within any Real Property;
(ii) there are no underground storage tanks or polychlorinated biphenyls on the
Real Property; (iii) neither the Real Property nor any premises leased by
Borrower has ever been used as a treatment, storage or disposal facility of
Hazardous Substances; and (iv) no Hazardous Substances are present on the Real
Property, excepting such quantities as are handled in accordance with all
applicable manufacturer's instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the
commercial business of Borrower.
5.8. Solvency; No Litigation or Violation.
(a) After giving effect to the Transactions, Borrower will be solvent,
able to pay its debts as they mature, have capital sufficient to carry on its
business and all businesses in which it is about to engage, and (i) as of the
Closing Date, the fair present saleable value of its assets, calculated on a
going concern basis, is in excess of the amount of its liabilities and (ii)
subsequent to the Closing Date, the fair saleable value of its assets
(calculated on a going concern basis)
<PAGE>
will be in excess of the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), Borrower does not have (i) any
pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect on Borrower, and
(ii) any liabilities nor indebtedness for borrowed money other than the
Obligations.
(c) Borrower is not in violation of any applicable statute, regulation or
ordinance in any respect which could reasonably be expected to have a Material
Adverse Effect on Borrower, nor is Borrower in violation of any order of any
court, governmental authority or arbitration board or tribunal which could
reasonably be expected to have a Material Adverse Effect.
(d) The Borrower does not maintain any Plan subject to Title IV of ERISA.
(i) No Plan has incurred any "accumulated funding deficiency," as defined in
Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not
waived, and Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of
each Plan, (ii) each Plan which is intended to be a qualified plan under Section
401(a) of the Code as currently in effect has been determined by the Internal
Revenue Service to be qualified under Section 401(a) of the Code and the trust
related thereto is exempt from federal income tax under Section 501(a) of the
Code, (iii) neither Borrower nor any member of the Controlled Group has incurred
any liability to the PBGC other than for the payment of premiums, and there are
no premium payments which have become due which are unpaid, (iv) no Plan has
been terminated by the plan administrator thereof nor by the PBGC, and there is
no occurrence which would cause the PBGC to institute proceedings under Title IV
of ERISA to terminate any Plan, (v) at this time, the current value of the
assets of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and neither Borrower nor any member of the Controlled
Group knows of any facts or circumstances which would materially change the
value of such assets and accrued benefits and other liabilities, (vi) Borrower
and each member of the Controlled Group are in compliance in all material
respects with the responsibilities, obligations and duties imposed on them by
ERISA with respect to any Plan, (vii) neither Borrower nor any member of a
Controlled Group has incurred any liability for any excise tax arising under
Section 4972 or 4980B of the Code, and no fact exists which could give rise to
any such liability, (viii) neither Borrower nor any member of the Controlled
Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a
material "prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) Borrower and each member of the Controlled Group has made all contributions
due and payable with respect to each Plan, (x) there exists no event described
in Section 4043(b) of ERISA, for which the thirty (30) day notice period
contained in 29 CFR '2615.3 has not been waived, (xi) neither Borrower nor any
member of the Controlled Group has any fiduciary responsibility for investments
with respect to any plan existing for the benefit of persons other than
employees or former employees of Borrower and any member of the Controlled
Group, and (xii) neither Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.
5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, trade names,
assumed names, trade secrets and licenses owned or utilized by Borrower are set
forth on Schedule 5.9 hereto, are valid and have been duly registered or filed
with all appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such material patent, trademark, copyright, design right, trade name, trade
secret or license and Borrower is not aware of any grounds for any challenge,
except as set forth in Schedule 5.9 hereto. Each patent, patent application,
patent license, trademark, trademark application, trademark license, service
mark, service mark application, service mark license, copyright, copyright
application and copyright license owned or held by Borrower and all trade
secrets used by Borrower consist of original material or property developed by
Borrower or was lawfully acquired by Borrower from the proper and lawful owner
thereof. Each of such items has been maintained so as to preserve the value
thereof from the date of creation or acquisition thereof. With respect to all
software used by Borrower, Borrower is in possession of all source and object
codes related to each piece of software or is the beneficiary of a source code
escrow agreement, each such source code escrow agreement
<PAGE>
being listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Borrower (a) is in compliance with and (b) has
procured and is now in possession of, all material licenses or permits required
by any applicable federal, state, or local law or regulation for the operation
of its business in each jurisdiction wherein it is now conducting or proposes to
conduct business and where the failure to procure such licenses or permits could
have a Material Adverse Effect on Borrower.
5.11. Default of Indebtedness. Borrower is not in default in the payment
of the principal of or interest on any Indebtedness or under any instrument
wherein the amount in dispute is in excess of $100,000 or agreement under or
subject to which any Indebtedness has been issued and no event has occurred
under the provisions of any such instrument or agreement which with or without
the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
5.12. No Default. Borrower is not in default in the payment or performance
of any of its contractual obligations and no Default has occurred which could
reasonably be expected to have a Material Adverse Effect on Borrower.
5.13. No Burdensome Restrictions. No Borrower is party to any contract or
agreement the performance of which could have a Material Adverse Effect on
Borrower. Borrower has not agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.14. No Labor Disputes. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of Borrower's employees
threatened or in existence and no labor contract is scheduled to expire during
the Term.
5.15. Margin Regulations. Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. Investment Company Act. Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by Borrower in this
Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of fact or omits to state any fact necessary to make the statements
herein or therein not misleading. There is no fact known to Borrower or which
reasonably should be known to Borrower which Borrower has not disclosed to Agent
in writing with respect to the transactions contemplated by this Agreement which
could reasonably be expected to have a Material Adverse Effect on Borrower.
5.18. Swaps. Borrower is not a party to, nor will it be a party to, any
swap agreement whereby Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
5.19. Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or affecting
the Collateral conflicts with, or requires any Consent which has not already
been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.20. Application of Certain Laws and Regulations. Neither Borrower nor
any Affiliate of Borrower is subject
<PAGE>
to any statute, rule or regulation which regulates the incurrence of any
Indebtedness, including without limitation, statutes or regulations relative to
common or interstate carriers or to the sale of electricity, gas, steam, water,
telephone, telegraph or other public utility services.
5.21. Business and Property of Borrower. Upon and after the Closing Date,
Borrower does not propose to engage in any business other than developing,
manufacturing and/or marketing pharmaceutical products and activities necessary
to conduct the foregoing. On the Closing Date, Borrower will own all the
property and possess all of the rights and Consents necessary for the conduct of
the business of Borrower.
VI. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and termination
of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h) hereof. Agent may,
without making demand, charge Borrower's Account for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, trade names, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on Borrower; and (c)
make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof.
6.3. Violations. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to Borrower which could reasonably be expected to have a
Material Adverse Effect on Borrower.
6.4. Government Receivables. Take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between Borrower and the United States, any
state or any department, agency or instrumentality of any of them.
6.5. Shareholders' Equity. Maintain during each fiscal quarter,
Shareholders' Equity of not less than the amount set forth on the following
schedule:
Period Minimum $MM
------ -----------
First Quarter 1998 50.0
Second Quarter 1998 45.0
Third Quarter 1998 41.0
Fourth Quarter 1998 39.0
First Quarter 1999 40.0
Second Quarter 1999 42.0
<PAGE>
Third Quarter 1999 46.0
Fourth Quarter 1999 51.0
First Quarter 2000 54.5
Second Quarter 2000 60.0
Third Quarter 2000 65.0
Fourth Quarter 2000 70.5
First Quarter 2001 74.0
As of February 28, 1998 Borrower's Shareholders' Equity was $56,051,000.
6.6. Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
6.8. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11 and 9.12 as to which GAAP is
applicable to be complete and correct in all material respects (subject, in the
case of interim financial statements, to normal year-end audit adjustments) and
to be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as concurred in by
such reporting accountants or officer, as the case may be, and disclosed
therein).
VII. NEGATIVE COVENANTS.
Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other reorganization with or
into any other Person or acquire all or a substantial portion of the assets or
stock of any Person or permit any other Person to consolidate with or merge with
it.
(b) Sell, lease, transfer or otherwise dispose of any of its properties or
assets, except (i) in the ordinary course of its business (including pursuant to
license arrangements entered into in the ordinary course of business), (ii) as
permitted by Section 4.3 hereof, or (iii) with the prior written consent of the
Agent which shall not be unreasonably withheld, the sale, lease, transfer or
other disposition of properties or assets in the aggregate amount of less than
$500,000 in any fiscal year.
7.2. Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (i) guarantees in connection with indemnity programs for employees;
<PAGE>
(ii) guarantees in connection with indemnification provided in the
organizational documents of the Borrower; (iii) indemnifications and guarantees
granted by the Borrower in the ordinary course of business pursuant to supply,
distribution, development and manufacturing agreements in the aggregate amount
of less than $500,000.
7.4. Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate other than (i)
trade credit extended on usual and customary terms in the ordinary course of
business, (ii) advances to employees and agents to meet expenses incurred by
such employees and agents in the ordinary course of business, (iii) loans and
advances to employees to assist with relocation and similar costs and expenses
no greater than $250,000 at any time outstanding, (iv) deposits made in the
ordinary course of business consistent with past practices to secure the
performance of leases, and (v) advances, loans or extensions of credit granted
in the ordinary course of business pursuant to supply, distribution, development
and manufacturing agreements in the aggregate amount of less than $500,000.
7.6. Capital Expenditures. Contract for, purchase or make any expenditure
or commitments for fixed or capital assets (including capitalized leases) in any
fiscal year in an amount in excess of $1,000,000.
7.7. Dividends. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of Borrower (other than dividends
or distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of Borrower
except that so long as (a) a notice of termination with regard to this Agreement
shall not be outstanding, (b) no Event of Default or Default shall have
occurred, and (c) the purpose for such purchase, redemption or dividend shall be
as set forth in writing to Agent at least ten (10) days prior to such purchase,
redemption or dividend and such purchase, redemption or dividend shall in fact
be used for such purpose, Borrower shall be permitted to pay dividends to Parent
to pay interest accrued under the Indenture, to the extent permitted provided,
however, that after giving effect to the payment of such dividends there shall
not exist any Event of Default or Default.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for capital expenditures permitted under
Section 7.6 hereof; (iii) Indebtedness due under the Indenture and (iv) any
other outstandingIndebtedness not to exceed $500,000 in the aggregate at any one
time
7.9. Nature of Business. Substantially change the nature of the business
in which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or property which are useful in,
and are to be used in, its business as presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions disclosed in the
ordinary course of business, on an arm's-length basis on terms no less favorable
than terms which could have been obtainable from a Person other than an
Affiliate except sales of products between Warner PLC and Borrower, between any
of Warner PLC's Subsidiaries and the Borrower or between Barr Laboratories, Inc.
and the Borrower.
<PAGE>
7.11. Leases. Enter as lessee into any new lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all new leased
property would exceed $500,000 in any one fiscal year.
7.12. Subsidiaries.
(a) Form any Subsidiary unless (i) such Subsidiary expressly joins in this
Agreement as a borrower and becomes jointly and severally liable for the
obligations of Borrower hereunder, under the Note, and under any other agreement
between Borrower and Lenders and (ii) Agent shall have received all documents,
including legal opinions, it may reasonably require to establish compliance with
each of the foregoing conditions.
(b) Enter into any partnership, joint venture or similar arrangement.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than Borrower's business as conducted on
the date of this Agreement.
7.15. Amendment of Articles of Incorporation, Bylaws. Without the prior
written consent of the Agent which will not be unreasonably withheld, amend,
modify or waive any term or provision of its Articles of Incorporation or
By-Laws unless such amendment, modification or waiver (i) could not have a
Material Adverse Effect or (ii) is required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plansubject to Title IV of ERISA, (ii) engage, or permit any member of the
Controlled Group to engage, in any material non-exempt "prohibited transaction",
as that term is defined in section 406 of ERISA and Section 4975 of the Code,
(iii) incur, or permit any member of the Controlled Group to incur, any
"accumulated funding deficiency", as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could result in
material liability of Borrower or any member of the Controlled Group or the
imposition of a lien on the property of Borrower or any member of the Controlled
Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the
Controlled Group to assume, any obligation to contribute to any Multiemployer
Plan, (vi) incur, or permit any member of the Controlled Group to incur, any
withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify
Agent of the occurrence of any Termination Event, (viii) fail to comply, or
permit a member of the Controlled Group to fail to comply in all material
respects, with the requirements of ERISA or the Code or other applicable laws in
respect of any Plan, (ix) fail to meet, or permit any member of the Controlled
Group to fail to meet, all minimum funding requirements under ERISA or the Code
or postpone or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. Except as permitted pursuant to Section
7.18 hereof, at any time, directly or indirectly, prepay any Indebtedness (other
than to Lenders), or repurchase, redeem, retire or otherwise acquire any
Indebtedness of Borrower.
7.18. Subordinated Debt Payment. At any time, directly or indirectly, pay,
prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on
account of any principal of, interest on or premium payable in connection with
the repayment or redemption of the Subordinated Debt Payment, except as
expressly required by the terms of the Indenture as in effect on the Closing
Date.
7.19. Other Agreements. Enter into any material amendment, waiver or
modification of the Acquisition
<PAGE>
Agreement or any related agreements.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Note duly executed and
delivered by an authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or
reasonably requested by the Agent to be filed, registered or recorded in
order to create, in favor of Agent, a perfected security interest in or
lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have
received an acknowledgment copy, or other evidence satisfactory to it, of
each such filing, registration or recordation and satisfactory evidence of
the payment of any necessary fee, tax or expense relating thereto;
(c) Corporate Proceedings of Borrower. Agent shall have received a
copy of the resolutions in form and substance reasonably satisfactory to
Agent, of the Board of Directors of Borrower authorizing (i) the
execution, delivery and performance of this Agreement, the Note, any
related agreements (collectively the "Documents") and (ii) the granting by
Borrower of the security interests in and liens upon the Collateral in
each case certified by the Secretary or an Assistant Secretary of Borrower
as of the Closing Date; and, such certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of
Borrower executing this Agreement, any certificate or other documents to
be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the Articles
or Certificate of Incorporation of Borrower, and all amendments thereto,
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation together with copies of the Bylaws of
Borrower certified as accurate and complete by the Secretary of Borrower;
(f) Good Standing Certificates. Agent shall have received good
standing certificates for Borrower dated not more than thirty (30) days
prior to the Closing Date, issued by the Secretary of State or other
appropriate official of Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's business activities or the
ownership of its properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the executed legal
opinions of counsel to Borrower, Warner Bermuda and Warner PLC in form and
substance satisfactory to Agent which shall cover such matters incident to
the transactions contemplated by this Agreement, the Note, and related
agreements as Agent may reasonably require and Borrower hereby authorizes
and directs such counsel to deliver such opinions to Agent and Lenders;
(h) No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Borrower or against the officers or directors of
Borrower (A) in connection with the Other Documents or any of the
transactions contemplated thereby and which, in the reasonable opinion of
Agent, is deemed material or (B) which could, in the reasonable opinion of
Agent, have a Material Adverse Effect;
<PAGE>
and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to Borrower or the conduct of its business or
inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
(i) Financial Condition Certificates. Agent shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(i)
hereto.
(j) Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables,
Inventory, General Intangibles, Leasehold Interest and Equipment of
Borrower and all books and records in connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date pursuant to Article III hereof;
(l) Guaranty, Financial Support Undertaking, Other Documents. Agent
shall have received the executed the Financial Support Undertaking, and
Warner Bermuda's Guaranty and all Other Documents, each in form and
substance satisfactory to Lenders;
(m) Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form
of loss payee endorsement naming Agent as loss payee, and certified copies
of Borrowers' liability insurance policies, together with endorsements
naming Agent as a co-insured;
(n) Environmental Reports. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms with respect to all Real Property owned or leased by
Borrower;
(o) Payment Instructions. Agent shall have received written
instructions from Borrower directing the application of proceeds of the
initial Advances made pursuant to this Agreement;
(p) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
Agent for the collection or servicing of the Receivables and proceeds of
the Collateral;
(q) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by
this Agreement and the Other Documents; and, Agent shall have received
such Consents and waivers of such third parties as might assert claims
with respect to the Collateral, as Agent and its counsel shall deem
necessary;
(r) No Material Adverse Change. (i) since February 28, 1998, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been
proven to be inaccurate or misleading in any material respect;
(s) Leasehold Agreements. Agent shall have received landlord,
mortgagee, warehouseman or other agreements satisfactory to Agent with
respect to all premises leased by Borrower at which Inventory is located;
(t) Indenture. Agent shall have received final executed copies of
the Indenture and related documents which shall contain such terms and
provisions including, without limitation, subordination terms,
satisfactory to Agent;
(u) Contract Review. Agent shall have reviewed all material
contracts of Borrowers including,
<PAGE>
without limitation, leases, union contracts, labor contracts, vendor
supply contracts, license agreements and distributorship agreements and
such contracts and agreements shall be satisfactory in all respects to
Agent;
(v) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of Borrower dated as of
the date hereof, stating that (i) all representations and warranties set
forth in this Agreement and the Other Documents are true and correct in
all material respects on and as of such date (except representations and
warranties which relate solely to an earlier date or time, which
representations shall be true and effective on and as of the appropriate
dates or times referred to therein), (ii) Borrower is on such date in
compliance with all the terms and provisions set forth in this Agreement
and the Other Documents and (iii) on such date no Default or Event of
Default has occurred or is continuing;
(w) Borrowing Base. Agent shall have received evidence from Borrower
that the aggregate amount of Eligible Receivables and Eligible Inventory
is sufficient in value and amount to support Advances in the amount
requested by Borrower on the Closing Date;
(x) Undrawn Availability. After giving effect to the initial
Advances hereunder, Borrower shall have Undrawn Availability of at least
$3,000,000;
(y) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions
shall be reasonably satisfactory in form and substance to Agent and its
counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations and
warranties made by Borrower in or pursuant to this Agreement and any
related agreements to which it is a party, and each of the representations
and warranties contained in any certificate, document or financial or
other statement furnished at any time under or in connection with this
Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such
date;
(b) No Default. No Event of Default or Default shall have occurred
and be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date; provided, however that
Lenders, in their sole discretion, may continue to make Advances
notwithstanding the existence of an Event of Default or Default and that
any Advances so made shall not be deemed a waiver of any such Event of
Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be
made, after giving effect thereto, the aggregate Advances shall not exceed
the maximum amount of Advances permitted under Section 2.1 hereof.
(d) Warner PLC and Warner Bermuda Cash Balance. Agent shall have
received evidence that Warner PLC and Warner Bermuda maintain a balance of
cash or Cash Equivalents on a consolidated basis (exclusive of Borrower's
accounts or other assets) of at least $15,000,000; and
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
<PAGE>
9.1. Disclosure of Material Matters. Promptly upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
Borrower's reclamation or repossession of, or the return to Borrower of, a
material amount of goods or claims or disputes asserted by any Customer or other
obligor.
9.2. Schedules. Deliver to Agent on or before the fifteenth (15th) day of
each month as and for the prior month (a) accounts receivable agings, (b)
accounts payable schedules and (c) Inventory reports. In addition, Borrower will
deliver to Agent at such intervals as Agent may require: (i) confirmatory
assignment schedules, (ii) copies of Customer's invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents and/or
information regarding the Collateral as Agent may reasonably require including,
without limitation, trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section are
to be in form satisfactory to Agent and executed by Borrower and delivered to
Agent from time to time solely for Agent's convenience in maintaining records of
the Collateral, and Borrower's failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent's Lien with respect
to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Sections 9.7 and 9.8 hereof, with a
certificate signed by the President of Borrower stating, to the best of his
knowledge, that Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent Borrower is not in compliance
with the foregoing laws, the certificate shall set forth with specificity all
areas of non-compliance and the proposed action Borrower will implement in order
to achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any litigation, suit
or administrative proceeding affecting Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect on
Borrower.
9.5. Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event of default
under the Indenture; (c) any event which with the giving of notice or lapse of
time, or both, would constitute an event of default under the Indenture; (d) any
event, development or circumstance whereby any financial statements or other
reports furnished to Agent fail in any material respect to present fairly, in
accordance with GAAP consistently applied, the financial condition or operating
results of Borrower as of the date of such statements; (e) any accumulated
retirement plan funding deficiency which, if such deficiency continued for two
plan years and was not corrected as provided in Section 4971 of the Code, could
subject Borrower to a tax imposed by Section 4971 of the Code; (f) each and
every default by Borrower which might result in the acceleration of the maturity
of any Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (g) any other development in the business or affairs of
Borrower which could reasonably be expected to have a Material Adverse Effect;
in each case describing the nature thereof and the action Borrower proposes to
take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between Borrower and the United States, any
state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent, within ninety (90) days
after the end of each fiscal year of Borrower, financial statements of Borrower
as provided by the consolidating schedules of the annual audited financial
statements of Warner PLC including, but not limited to, statements of income and
shareholders' equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and satisfactory to Agent. In
addition, the reports shall be accompanied by a certificate of Borrower's Chief
Financial Officer which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether
<PAGE>
it is continuing and the steps being taken by Borrower with respect to such
event, and such certificate shall have appended thereto calculations which set
forth Borrower's compliance with the requirements or restrictions imposed by
Sections 6.5, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Agent within forty-five (45)
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrower on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrower on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate signed by the Chief Financial Officer of Borrower,
which shall state that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrower with
respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof.
9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days
after the end of each month, an unaudited balance sheet of Borrower on a
consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrower on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrower's Chief Financial Officer of Borrower,
which shall state that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrower with
respect to such event and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof.
9.10. Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all notices sent pursuant to the Indenture.
9.11. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Note have been complied with by Borrower including, without
limitation and without the necessity of any request by Agent, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
notice of Borrower's opening of any new office or place of business or
Borrower's closing of any existing office or place of business, and (c) promptly
upon Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
Borrower is a party or by which Borrower is bound.
9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30)
days prior to the beginning of each Borrower's fiscal years commencing with
fiscal year 1999, a month by month projected operating budget and cash flow of
Borrower on a consolidated and consolidating basis for such fiscal year
(including an income statement and cash flow for each month and a balance sheet
as at the end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by the President or Chief Financial Officer
of Borrower to the effect that such projections have been prepared on the basis
of sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.13. Variances From Operating Budget. Furnish Agent, concurrently with
the delivery of the financial statements referred to in Section 9.7 and 9.8
hereof, a written report summarizing all material variances from budgets
submitted by Borrower pursuant to Section 9.12 hereof and a discussion and
analysis by management with respect to such variances.
<PAGE>
9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt notice of
(i) any lapse or other termination of any Consent issued to Borrower by any
Governmental Body or any other Person that is material to the operation of
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by Borrower with any Governmental Body or Person, if such
reports indicate any material change in the business, operations, affairs or
condition of Borrower, or if copies thereof are requested by Lender, and (iv)
copies of any material notices and other communications from any Governmental
Body or Person which specifically relate to Borrower.
9.15. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) Borrower or any member of the Controlled Group knows or
has reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which Borrower or any member of the
Controlled Group has taken, is taking or proposes to take with respect thereto,
(iii) a funding waiver request has been filed with respect to any Plan together
with all communications received by Borrower or any member of the Controlled
Group with respect to such request, (iv) any increase in the benefits of any
existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) Borrower or any member of
the Controlled Group shall receive from the PBGC a notice of intention to
terminate a Plan or to have a trustee appointed to administer a Plan, together
with copies of each such notice, (vi) Borrower or any member of the Controlled
Group shall receive any favorable or unfavorable determination letter from the
Internal Revenue Service regarding the qualification of a Plan under Section
401(a) of the Code, together with copies of each such letter; (vii) Borrower or
any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice;
(viii) Borrower or any member of the Controlled Group shall fail to makea
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or payment; (ix) Borrower or any
member of the Controlled Group knows that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
10.2. any representation or warranty made or deemed made by Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by Borrower to (i) furnish financial information when due or
when requested, or (ii) permit the inspection of its books or records;
<PAGE>
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property;
10.5. except as otherwise provided for in Sections 10.1 and 10.3 hereof,
failure or neglect of Borrower to perform, keep or observe any term, provision,
condition, covenant herein contained, or contained in any other agreement or
arrangement, now or hereafter entered into between Borrower and Agent or any
Lender;
10.6. any judgment or judgments are rendered or judgment liens filed
against Borrower for an aggregate amount in excess of $250,000 which within
thirty (30) days of such rendering or filing is not either satisfied, stayed or
discharged of record;
10.7. Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
10.8. Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9. Warner PLC, any Subsidiary of Warner PLC, including without
limitation Warner Bermuda, or any Subsidiary of Borrower shall (i) apply for,
consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. any change in Borrower's condition or affairs (financial or
otherwise) which in Agent's reasonable opinion has a Material Adverse Effect;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10.12. an event of default has occurred and been declared under the
Indenture which default shall not have been cured or waived within any
applicable grace period;;
10.13. a default of the obligations of Borrower under any other agreement
to which it is a party shall occur which reasonably could be expected to have a
Material Adverse Effect on its condition, affairs or prospects (financial or
otherwise) which default is not cured within any applicable grace period and the
aggregate principal amount of such Indebtedness with respect to which a default
or an event of default has occurred, or the maturity of which is permitted to be
accelerated, exceeds $100,000;
10.14. termination or breach of the Warner PLC's Support Agreement or the
Warner Bermuda's Guaranty or similar agreement executed and delivered to Agent
in connection with the Obligations of Borrower, or if Warner PLC or Warner
Bermuda attempts to terminate, challenges the validity of, or their liability
under, any such document or similar agreement;
<PAGE>
10.15. any Change of Control shall occur;
10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in writing
to Agent;
10.17. (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or trade name of
Borrower, the continuation of which is material to the continuation of
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, trade name or patent
and such proceedings shall not be dismissed or discharged within sixty (60)
days, or (c) schedule or conduct a hearing on the renewal of any license,
permit, trademark, trade name or patent necessary for the continuation of
Borrower's business and the staff of such Governmental Body issues a report
recommending the termination, revocation, suspension or material adverse
modification of such license, permit, trademark, trade name or patent; (ii) any
agreement which is necessary or material to the operation of Borrower's business
shall be revoked or terminated and not replaced by a substitute acceptable to
Agent within thirty (30) days after the date of such revocation or termination,
and such revocation or termination and non-replacement contemplated by clause
(i) or (ii) of this Section 10.17 would reasonably be expected to have a
Material Adverse Effect on Borrower;
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body, or Borrower or the title and rights of Borrower or any
Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of litigation which might, in the opinion
of Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents;
10.19. the operations of Borrower's facilities, whether owned, leased or
operated by third parties, are interrupted at any time for more than any period
of seven (7) consecutive days, unless Borrower shall (i) be entitled to receive
for such period of interruption, proceeds of business interruption insurance
sufficient to assure that its per diem cash needs during such period is at least
equal to its average per diem cash needs for the consecutive three month period
immediately preceding the initial date of interruption and (ii) receive such
proceeds in the amount described in clause (i) preceding not later than thirty
(30) days following the initial date of any such interruption; provided,
however, that notwithstanding the provisions of clauses (i) and (ii) of this
section, an Event of Default shall be deemed to have occurred if such Borrower
shall be receiving the proceeds of business interruption insurance for a period
of thirty (30) consecutive days; or
10.20. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, Borrower or any
member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect on
Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, the
obligation of Lenders to make Advances hereunder shall be terminated other than
as may be required by an appropriate order of the bankruptcy court having
jurisdiction over Borrower. Upon the occurrence of any Event of Default, Agent
shall have the right to exercise any and all other rights and remedies provided
for herein, under the Uniform Commercial Code and at law or equity generally,
including, without limitation, the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Agent may enter any of Borrower's premises or
other premises without legal process and without incurring
<PAGE>
liability to Borrower therefor, and Agent may thereupon, or at any time
thereafter, in its discretion without notice or demand, take the Collateral and
remove the same to such place as Agent may deem advisable and Agent may require
Borrower to make the Collateral available to Agent at a convenient place. With
or without having the Collateral at the time or place of sale, Agent may sell
the Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Excet as to that
part of the Collateral which is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Agent shall give
Borrower reasonable notification of such sale or sales, it being agreed that in
all events written notice mailed to Borrower at least five (5) days prior to
such sale or sales is reasonable notification. At any public sale Agent or any
Lender may bid for and become the purchaser, and Agent, any Lender or any other
purchaser at any such sale thereafter shall hold the Collateral sold absolutely
free from any claim or right of whatsoever kind, including any equity of
redemption and such right and equity are hereby expressly waived and released by
Borrower. In connection with the exercise of the foregoing remedies, Agent is
granted permission to use all of Borrower's trademarks, trade styles, trade
names, patents, patent applications, licenses, franchises and other proprietary
rights which are used in connection with (a) Inventory for the purpose of
disposing of such Inventory and (b) Equipment for the purpose of completing the
manufacture of unfinished goods. The proceeds realized from the sale of any
Collateral shall be applied as follows: first, to the reasonable costs, expenses
and attorneys' fees and expenses incurred by Agent for collection and for
acquisition, completion, protection, removal, storage, sale and delivery of the
Collateral; second, to interest due upon any of the Obligations and any fees
payable under this Agreement; and, third, to the principal of the Obligations.
If any deficiency shall arise, Borrower shall remain liable to Agent and Lenders
therefore.
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply Borrower's property
held by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Borrower hereby waives notice of non-payment of
any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE
<PAGE>
AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until March __, 2001 (the "Term") unless
sooner terminated as herein provided. Borrower may terminate this Agreement at
any time upon ninety (90) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term (the date of such prepayment hereinafter referred to as the
"Early Termination Date"), Borrowers shall pay to Agent for the benefit of
Lenders an early termination fee in an amount equal to (x) $300,000 if the Early
Termination Date occurs on or after the Closing Date to and including the date
immediately preceding the first anniversary of the Closing Date, and (y)
$225,000 if the Early Termination Date occurs on or after the first anniversary
of the Closing Date to and including the date immediately preceding the second
anniversary of the Closing Date.
13.2. Termination. The termination of the Agreement shall not affect
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrower's Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished Agent and Lenders with
an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, Borrower waives any rights which it may have under Section 9-404(1)
of the Uniform Commercial Code to demand the filing of termination statements
with respect to the Collateral, and Agent shall not be required to send such
termination statements to Borrower, or to file them with any filing office,
unless and until this Agreement shall have been terminated in accordance with
its terms and all Obligations paid in full in immediately available funds. All
representations, warranties, covenants, waivers and agreements contained herein
shall survive termination hereof until all Obligations are paid or performed in
full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
3.2(a) charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement (including
without limitation, collection of the Note) Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
<PAGE>
14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of Borrower to perform its obligations hereunder. Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any of the Other Documents, or to inspect the properties,
books or records of Borrower. The duties of Agent as respects the Advances to
Borrower shall be mechanical and administrative in nature; Agent shall not have
by reason of this Agreement a fiduciary relationship in respect of any Lender;
and nothing in this Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon Agent any obligations in respect of this
Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of Borrower in connection with the making and the continuance of the
Advances hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of Borrower. Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any time
or times thereafter except as shall be provided by Borrower pursuant to the
terms hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of Borrower, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Note, the Other Documents or the financial
condition of Borrower, or the existence of any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent reasonably satisfactory to Borrower. In the event that the
Required Lenders are unable to designate a successor agent within thirty (30)
days of receipt of the notice set forth above, the Agent shall so designate the
successor agent.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder,
<PAGE>
upon advice of counsel selected by it. Agent may employ agents and
attorneys-in-fact and shall not be liable for the default or misconduct of any
such agents or attorneys-in-fact selected by Agent with reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrower
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with Borrower as
if it were not performing the duties specified herein, and may accept fees and
other consideration from Borrower for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, and 9.9 from Borrower pursuant to
the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. Borrower's Undertaking to Agent. Without prejudice to its
respective obligations to Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
<PAGE>
XV. MISCELLANEOUS.
15.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey applied to contracts to be
performed wholly within the State of New Jersey. Any judicial proceeding brought
by or against Borrower with respect to any of the Obligations, this Agreement or
any related agreement may be brought in any court of competent jurisdiction in
the State of New Jersey, United States of America, and, by execution and
delivery of this Agreement, Borrower accepts for itself and in connection with
its properties, generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. Borrower hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by registered mail (return receipt requested)
directed to Borrower at its address set forth in Section 15.6 and service so
made shall be deemed completed five (5) days after the same shall have been so
deposited in the mails of the United States of America. Nothing herein shall
affect the right to serve process in any manner permitted by law or shall limit
the right of Agent or any Lender to bring proceedings against Borrower in the
courts of any other jurisdiction. Borrower waives any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens. Any
judicial proceeding by Borrower against Agent or any Lender involving, directly
or indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be brought only in
a federal or state court located in the County of Middlesex, State of New
Jersey.
15.2. Entire Understanding. (a) This Agreement and the documents executed
concurrently herewith contain the entire understanding between Borrower, Agent
and each Lender and supersedes all prior agreements and understandings, if any,
relating to the subject matter hereof. Any promises, representations, warranties
or guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, signed by Borrower's, Agent's and each Lender's
respective officers. Neither this Agreement nor any portion or provisions hereof
may be changed, modified, amended, waived, supplemented, discharged, canceled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Borrower acknowledges
that it has been advised by counsel in connection with the execution of this
Agreement and Other Documents and is not relying upon oral representations or
statements inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrower may, subject to the provisions of this Section
15.2 (b), from time to time enter into written supplemental agreements to this
Agreement or the Other Documents executed by Borrower or others, including
specifically the Financial Support Undertaking, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any manner
the rights of Lenders, Agent or Borrower thereunder or the conditions,
provisions or terms thereof of waiving any Event of Default thereunder, but only
to the extent specified in such written agreements; provided, however, that no
such supplemental agreement shall, without the consent of all Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the maturity of any Note or the due date for any amount
payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrower to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter,
amend or modify this Section 16.2(b).
(iv) release any Collateral during any calendar year (other than in
accordance with the provisions of this Agreement) having an aggregate
value in excess of $1,000,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after giving effect
thereto the total of
<PAGE>
Advances outstanding hereunder would exceed the Formula Amount for more
than thirty (30) consecutive Business Days or exceed one hundred and ten
percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates in effect
on the Closing Date.
(viii) increase the Maximum Revolving Advance Amount.
(ix) Modify the definitions contained herein of the terms Eligible
Inventory and Eligible Receivables.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of receipt of such request, such Lender shall be deemed to
have consented to matter that was the subject of the request. In the event that
Agent requests the consent of a Lender pursuant to this Section 15.2 and such
consent is denied, then PNC may, at its option, require such Lender to assign
its interest in the Advances to PNC or to another Lender or to any other Person
designated by the Agent (the "Designated Lender"), for a price equal to the then
outstanding principal amount thereof plus accrued and unpaid interest and fees
due such Lender, which interest and fees shall be paid when collected from
Borrower. In the event PNC elects to require any Lender to assign its interest
to PNC or to the Designated Lender, PNC will so notify such Lender in writing
within forty five (45) days following such Lender's denial, and such Lender will
assign its interest to PNC or the Designated Lender no later than five (5) days
following receipt of such notice pursuant to a Commitment Transfer Supplement
executed by such Lender, PNC or the Designated Lender, as appropriate, and
Agent.
15.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof provided that Borrower shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrower be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Transferee. Borrower hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property actually
or constructively held by such Transferee as security for the Transferee's
interest in the Advances.
(c) Any Lender may with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in minimum amounts of not less than $5,000,000, pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and
Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a
<PAGE>
Commitment Percentage as set forth therein, and (ii) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrower hereby
consent to the addition of such Purchasing Lender and the resulting adjustment
of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Borrower shall execute and
deliver such further documents and do such further acts and things in order to
effectuate the foregoing
(d) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Advances owing to each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, Agent and Lenders may treat each Person whose name
is recorded in the Register as the owner of the Advance recorded therein for the
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall receive a fee in the amount of $2,500
payable by the applicable Purchasing Lender upon the effective date of each
transfer or assignment to such Purchasing Lender.
(e) Borrower authorize each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrower which
has been delivered to such Lender by or on behalf of Borrower pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrower.
15.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
15.5. Indemnity. Borrower shall indemnify Agent, each Lender and each of
their respective officers, directors, Affiliates, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel) which may be imposed on, incurred by, or asserted
against Agent or any Lender in any litigation, proceeding or investigation
instituted or conducted by any governmental agency or instrumentality or any
other Person with respect to any aspect of, or any transaction contemplated by,
or referred to in, or any matter related to, this Agreement or the Other
Documents, whether or not Agent or any Lender is a party thereto, except to the
extent that any of the foregoing arises out of the gross negligence or willful
misconduct of the party being indemnified.
15.6. Notice. Any notice or request hereunder may be given to Borrower or
to Agent or any Lender at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of
the party to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation
<PAGE>
of its receipt, in each case addressed to each party at its address set forth
below or at such other address as has been furnished in writing by a party to
the other by like notice:
(A) If to Agent or PNC Bank, National Association
PNC at: Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Attention: Michelle Stanley-Nurse, VP
Telephone: 732-220-4337
Telecopier: 732-220-4399
with a copy to: Wilentz, Goldman & Spitzer
90 Woodbridge Center Drive
Woodbridge, New Jersey 07095
Attention: Stuart A. Hoberman, Esq.
Telephone: 732-855-6052
Telecopier: 732-855-6117
(B) If to a Lender other than Agent, as specified on the signature pages
hereof
(C) If to Borrower at: Warner Chilcott, Inc.
Rockaway 80 Corporate Center
100 Enterprise Drive, Suite 280
Rockaway, New Jersey 07866
Attention: Paul Herendeen, CFO
Telephone: 973-442-3246
Telecopier: 973-442-3283
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: William M. Hartnett, Esq.
Telephone: 212-701-3000
Telecopier: 212-269-5420
15.7. Survival. The obligations of Borrowers under Sections 2.2(f), 3.6,
3.7, 3.8, 4.19(h), 14.7 and 15.5 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.
15.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.9. Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by Agent, Agent on behalf of Lenders and Lenders (a)
in all efforts made to enforce payment of any Obligation or effect collection of
any Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with Borrower, or (e) in connection with any advice given to Agent or any Lender
with respect to its rights and obligations under this Agreement and all related
agreements, may be charged to Borrower's Account and shall be part of the
Obligations.
<PAGE>
15.10. Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy at law may prove to be inadequate relief to
Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving that actual damages are not an adequate remedy.
15.11. Consequential Damages. Neither Agent nor any Lender, nor any agent
or attorney for any of them, shall be liable to Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
15.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.13. Counterparts; Telecopied Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
15.15. Confidentiality; Sharing Information. (a) Agent, each Lender and
each Transferee shall hold all non-public information obtained by Agent, such
Lender or such Transferee pursuant to the requirements of this Agreement in
accordance with Agent's, such Lender's and such Transferee's customary
procedures for handling confidential information of this nature; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by applicable law or
court order, Agent, each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify the Borrower of the applicable request
for disclosure of such non-public information (A) by a Governmental Body or
representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by Borrower other than those documents and instruments in possession
of Agent or any Lender in order to perfect its Lien on the Collateral once the
Obligations have been paid in full and this Agreement has been terminated.
(b) Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to Borrower or
one or more of its Affiliates (in connection with this Agreement or otherwise)
by any Lender or by one or more Subsidiaries or Affiliates of such Lender and
Borrower hereby authorizes each Lender to share any information delivered to
such Lender by Borrower and its Subsidiaries pursuant to this Agreement, or in
connection with the decision of such Lender to enter into this Agreement, to any
such Subsidiary or Affiliate of such Lender, it being understood that any such
Subsidiary or Affiliate of any Lender receiving such information shall be bound
by the provision of Section 15.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of the Loan Agreement.
15.16. Publicity. Borrower and each Lender hereby authorizes Agent to make
appropriate announcements of the financial arrangement entered into among
Borrower, Agent and Lenders, including, without limitation, announcements which
are commonly known as tombstones, in such publications and to such selected
parties as Agent shall in its sole and absolute discretion deem appropriate.
Each of the parties has signed this Agreement as of the day and year first
above written.
<PAGE>
WARNER CHILCOTT, INC.
ATTEST:
/s/Roger M. Boissonneault
-------------------------------------
Name: ROGER M. BOISSONNEAULT
/s/Paul S. Herendeen Title President
- - -------------------------------
Name: PAUL S. HERENDEEN
Title: Executive Vice President/Secretary
[SEAL]
PNC BANK, NATIONAL ASSOCIATION,
as Lender and as Agent
/s/David L. Raphaels
-------------------------------------
Name: DAVID L. RAPHAELS
Title: Vice President
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Commitment Percentage: 53.333%
BANKAMERICA BUSINESS CREDIT INC.
/s/Ernest Pelli
-------------------------------------
Name: ERNEST PELLI
Title: Vice President
40 East 52nd Street/2nd Floor
New York, New York 10022
Commitment Percentage: 46.667%
FINANCIAL SUPPORT UNDERTAKING
THIS FINANCIAL SUPPORT UNDERTAKING (the "Undertaking") made by WARNER
CHILCOTT PUBLIC LIMITED COMPANY ("Warner PLC"), a public limited company
incorporated under the laws of Ireland, having an office at 345 Park Avenue,
Eighth Floor, New York, New York 10154, and by Warner Chilcott (Bermuda) Limited
("Warner Bermuda"), an exempted company incorporated under the laws of Bermuda,
having an address at P. O. Box HM1022, Hamilton HMDX Bermuda (Warner PLC and
Warner Bermuda shall hereinafter be referred to collectively as "Warner") in
favor of PNC BANK, NATIONAL ASSOCIATION, a national banking association
organized under the laws of the United States, having an office located at Two
Tower Center Boulevard, East Brunswick, New Jersey 08816, as Agent for the
Lenders under the Loan Agreement (as such terms are hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to a certain Revolving Credit and Security Agreement
dated of even date herewith by and between Warner Chilcott, Inc., a Delaware
corporation (the "Borrower"), PNC Bank, National Association and one or more
financial institutions named therein or which hereafter become a party thereto
(together with PNC Bank, National Association, collectively, the "Lenders") and
PNC Bank, National Association as the agent for the Lenders (PNC Bank, National
Association in such capacity, the "Agent") (as such may be amended from time to
time, the "Loan Agreement"), the Lenders have agreed to make certain Revolving
Advances to the Borrower; and
WHEREAS, as a condition precedent to the making of the Revolving Advances
by the Lenders to the Borrower, Warner has agreed to financially support the
operations of the Borrower in accordance with the provisions of this
Undertaking; and
WHEREAS, the Borrower is a wholly owned subsidiary of Warner PLC and
Warner PLC and Warner Bermuda will derive benefits from the financial
accommodations being accorded the Borrower by the Lenders pursuant to the terms
of the Loan Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make and/or continue to make the Revolving Advances (as each such
term is defined in the Loan Agreement), and in consideration of the Revolving
Advances made pursuant to the terms of the Loan Agreement and Other Documents,
and to enable the Revolving Advances to be maintained or obtained by the
Borrower under the terms of the Loan Agreement, Warner hereby agrees with the
Lenders as follows:
1. Warner shall, on a consolidated basis (exclusive of Borrower's
accounts), establish and maintain during the term of the Loan Agreement, a
balance in an amount of not less than $15,000,000 consisting of unpledged
and unencumbered cash and cash equivalents in form and substance
reasonably satisfactory to the Lenders. Warner will provide to the Lenders
from time to time, at the request of the Lenders, evidence satisfactory to
the Lenders that such balance has been established and is being
maintained.
2. Warner shall monitor the financial condition of the Borrower and
provide the Borrower with sufficient funds to ensure that the Borrower
maintains, at all times, Undrawn Availability as determined by the Agent,
of not less than $1,500,000. In the event that Agent determines that such
Undrawn Availability is less than $1,500,000 and so advises Warner
pursuant to Section 9 hereof, Warner shall, within five (5) days of the
sending of notice, provide the Borrower with sufficient funds to maintain
Undrawn Availability of $1,500,000.
3. In addition to and independent of its other obligations described
herein, including, but not limited to those set forth in paragraphs 1 and
2 above, in the event the Borrower suffers Cash Losses (as hereinafter
defined) based upon the Quarterly Financial Statements to be delivered to
the Lenders by the Borrower pursuant to Section 9.8 of the Loan Agreement,
Warner shall, on a quarterly basis and within three (3) days of receipt of
<PAGE>
notice from the Lenders, provide the Borrower by wire transfer with cash
funds in an amount equal to: (a) Fifty percent (50%) of such Cash Losses
with respect to the first $7,000,000 of actual cumulative Cash Losses
incurred from the date hereof; and (b) One Hundred percent (100%) of all
Cash Losses incurred in excess of $7,000,000, less amounts of cash
provided by Warner to the Borrower during the applicable quarterly period.
For the purposes hereof, the term "Cash Losses" shall mean and be defined
as Borrower's net losses (or income) after taxes, plus depreciation,
amortization and non-cash interest expense, less all non-cash income and
less all distributions permitted under the Loan Agreement.
4. All cash funds provided by Warner pursuant to clauses 2 and 3 of
this Agreement shall be contributed to the Borrower as either equity or
subordinated debt in form and substance reasonably satisfactory to the
Agent and shall be deposited in Borrower's account at the Agent, Account
#8008995934. All such cash funds provided by Warner pursuant to clauses 2
and 3 of this Undertaking shall remain with Borrower and may not be repaid
or otherwise returned to Warner as long as the Loan Agreement remains in
effect and any Obligations of Borrower remain outstanding.
5. Warner PLC shall provide to the Agent within thirty (30) days
after the end of each of Warner PLC's fiscal quarters, Warner PLC's
financial statements in form and substance satisfactory to the Agent,
together with all documentation submitted by Warner PLC to the Securities
and Exchange Commission, including all Form 20Fs, as well as a Certificate
by the Chief Financial Officer of Warner certifying as to all cash funds
contributed by Warner to the Borrower, as well as specifically: (a) all
cash funds delivered to the Borrower pursuant to the terms hereof and (b)
all cash funds returned to Warner by Borrower other than cash paid to
Warner for goods and services provided.
6. The failure of Warner to comply with any of the terms or
conditions contained herein shall be deemed an Event of Default under the
Loan Agreement.
7. This Undertaking is a continuing Undertaking and nothing shall
terminate, discharge or satisfy the liability of Warner hereunder until
the Obligations of the Borrower have been satisfied in full.
8. The Lenders may, in their reasonable discretion, enforce the
Obligations of Warner as contained herein and exercise any rights or
remedies which the Lenders may have by law (such rights and remedies being
cumulative and not alternative or exclusive) without pursuing or
exhausting any rights or remedy the Lenders may have against the Borrower
or any other person or entity for which the Lenders have with respect to
any collateral or any guaranty or any or all of such Obligations. The
Lenders need not join the Borrower or any other person or entity as a
party in any action brought to enforce the provisions hereof; and the
Lenders may exercise any right or remedy which they have under this
Undertaking without regard to any actions or omissions of the Borrower or
any other person or entity.
9. All notices, requests and other communications pursuant to this
Undertaking shall be in writing, to be either delivered by hand, overnight
delivery, or sent certified mail, return receipt requested, addressed to
the Agent at its office located at Two Tower Center Boulevard, East
Brunswick, New Jersey 08816, ATTENTION: Business Credit Department, or to
Warner at the address set forth on page 1 of this Undertaking, or at such
other address as either may give notice to the other as herein provided.
Any notice, request or communication hereunder shall be deemed to have
been given when delivered. However, and notwithstanding any other term or
provision contained herein to the contrary, Warner Bermuda hereby appoints
Warner PLC as its Agent to receive all service of process arising out of
any dispute relating to this Undertaking.
10. Any capitalized term not otherwise defined herein shall have the
meaning ascribed thereto in the Loan Agreement.
11. This Undertaking shall be construed in accordance with and
governed by the laws of the State of New Jersey.
<PAGE>
12. This Undertaking shall be binding upon Warner, as well as its
successors or assigns and inure to the benefit of the Lenders and the
Lenders' successors and assigns.
13. WARNER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW JERSEY AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW JERSEY IN
CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
UNDERTAKINGS. WARNER HEREBY WAIVES THE DEFENSES OF FORUM NON CONVENIENS
AND IMPROPER VENUE.
14. WARNER EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
LITIGATION RELATING TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
UNDERTAKING OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION WITH ANY OF THE
OBLIGATIONS.
IN WITNESS WHEREOF, has executed this Undertaking this 30th day of March,
1998.
ATTEST: WARNER CHILCOTT PUBLIC LIMITED COMPANY
/s/Paul S. Herendeen /s/Roger M. Boissonneault
- - ------------------------------ ------------------------------------
PAUL S. HERENDEEN, EVP ROGER M. BOISSONNEAULT, President
[SEAL]
WARNER CHILCOTT (BERMUDA) LIMITED
/s/Kevin Insley
---------------------------------
KEVIN INSLEY, Vice President
CONTINUING LIMITED NON-RECOURSE AND COLLATERALIZED GUARANTY
THIS LIMITED CONTINUING NON-RECOURSE AND COLLATERALIZED GUARANTY (the
"Guaranty") made by WARNER CHILCOTT (BERMUDA) LIMITED ("Guarantor"), an exempted
company incorporated under the laws of Bermuda, in favor of PNC BANK, NATIONAL
ASSOCIATION, a national banking association organized under the laws of the
United States, having an office located at Two Tower Center Boulevard, East
Brunswick, New Jersey 08816, as Agent for the Lenders under the Loan Agreement
(as such terms are hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to a certain Revolving Credit and Security Agreement
dated of even date herewith by and between Warner Chilcott, Inc., a Delaware
corporation (the "Borrower"), PNC Bank, National Association and one or more
financial institutions named therein or which hereafter become a party thereto
(together with PNC Bank, National Association, collectively, the "Lenders") and
PNC Bank, National Association as the agent for the Lenders (PNC Bank, National
Association in such capacity, the "Agent") (as such may be amended from time to
time, the "Loan Agreement"), the Lenders have agreed to make certain Revolving
Advances to the Borrower; and
WHEREAS, as a condition precedent to the making of the Revolving Advances
by the Lenders to the Borrower, the Guarantor has agreed to pledge certain
trademarks and trademark applications pursuant to a Trademark Collateral
Assignment and Security Agreement dated the date hereof, as security for the
Lender's repayment in full of all Obligations (as such term is defined in the
Loan Agreement) in accordance with the provisions of this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make and/or continue to make the Revolving Advances (as each such
term is defined in the Loan Agreement), the Guarantor hereby agrees with the
Lenders as follows:
1. In consideration of the Revolving Advances made pursuant to the
terms of the Loan Agreement and Other Documents, and to enable the
Revolving Advances to be maintained or obtained by the Borrower under the
terms of the Loan Agreement, the Guarantor hereby irrevocably and
unconditionally guarantees the full, prompt and unconditional payment,
when due, whether by acceleration or otherwise, of any and all
liabilities, indebtedness, agreements or obligations of the Borrower, in
connection with the Obligations whether direct or indirect, now existing
or hereafter arising, contingent or absolute, joint or several, matured or
unmatured, together with interest thereon and all attorneys' fees, costs
and expenses of collection incurred by the Lenders in enforcing any of
such indebtedness; provided, however, that the Guarantor's obligations
hereunder shall be limited solely to any proceeds received by the Bank
upon the liquidation of the security interest granted in paragraph 12
hereof (the "Obligations of the Borrower" or "Obligations").
2. This Guaranty shall extend to and cover every extension or
renewal of, and every obligation accepted in substitution for, any
Obligations of the Borrower, which extensions, renewals or substitutions
are herein consented and agreed to, and the Guarantor shall be bound
hereby irrespective of the existence, value or condition of any collateral
the Lenders may at any time hold or the validity, irregularity or
enforceability of any instrument, writing or arrangement relating to any
such Obligations of the Borrower or collateral and irrespective of any
present or future law or order of any government (whether of right or in
fact) or of any
<PAGE>
agency thereof, purporting to reduce, amend or otherwise affect any
Obligations of the Borrower or to vary the terms of payment of the
Obligations.
3. The Guarantor hereby warrants and represents as follows:
(a) The Guarantor has the legal capacity to execute, deliver
and carry out the terms of this Guaranty and all other instruments
and documents delivered and to be delivered by it in connection
herewith.
(b) This Guaranty has been duly executed and delivered and
constitutes the valid and legally binding obligation of the
Guarantor, enforceable in accordance with its terms.
(c) No consent or approval of any person or waiver of any lien
or right of distraint or similar right, and no consent, license,
approval or authorization of or registration, qualification,
designation, declaration or filing with any governmental authority
on the part of the Guarantor is required in connection with the
execution and delivery of this Guaranty.
(d) The Guarantor is not in default under any indenture,
mortgage, deed of trust, agreement or other instrument to which it
is a party or by which it is bound. The Guarantor is not in default
in any material respect under any applicable statute, rule, order,
decree or regulation of any court, arbitrator or governmental body
or agency having jurisdiction over the Guarantor.
(e) The execution, delivery and the performance of, and
compliance with, this Guaranty on the part of the Guarantor will not
(with or without the giving of notice or lapse of time, or both)
result in any violation of, or be in conflict with, or constitute a
default under, the terms of any contract, note indenture or other
agreement to which the Guarantor is a party, or of any judgment,
decree, order, statute, rule or regulation to which the Guarantor is
subject.
(f) The Guarantor is not a party to any agreement or
instrument or subject to any restrictions materially and adversely
affecting the business, properties or financial condition of the
Guarantor.
(g) There are no outstanding judgments, actions, proceedings,
claims or investigations pending or threatened before any court or
governmental body which may materially and adversely affect the
business, properties or financial condition of the Guarantor.
(h) All financial statements of the Guarantor previously
supplied to the Lenders are true and correct in all material
respects and present fairly the financial position of the Guarantor
as of the dates therein stated.
(i) The Guarantor has filed all tax returns which are required
to be filed, and has paid all taxes which have become due pursuant
to such returns or pursuant to any assessment received by it.
(j) Neither the financial statements referred to in subsection
(h), nor any certificate, statement, report or other document
furnished to the Lenders by the Guarantor in connection herewith or
in connection with any transaction contemplated hereby, nor this
Guaranty contain any untrue statement of material fact or omit to
state any material fact necessary in order to make the statements
contained therein not misleading.
(k) The Guarantor is solvent on the date hereof. For the
purpose of this Guaranty, the term "solvent" shall mean that: (i)
the fair value of the Guarantor's property is in excess of the total
amount of its debts; and (ii) the Guarantor is able to pay its debts
as they mature.
<PAGE>
4. The Guarantor covenants and agrees as follows:
(a) The Guarantor shall, upon reasonable request of the
Lenders and as soon as reasonably possible, furnish, or cause to be
furnished, to the Lenders such other financial and business
information pertaining to the Guarantor as the Lenders may request.
(b) The Guarantor shall pay and discharge, as they become due,
all taxes, assessments, debts, claims and other governmental or
non-governmental charges lawfully imposed upon, or incurred by it or
its properties and assets, except taxes, assessments, debts, claims
and charges contested in good faith in appropriate proceedings.
(c) The Guarantor shall promptly notify the Lenders of any
litigation, actions, proceedings, claims or investigations pending
or threatened against it which may materially and adversely affect
the financial condition of the Guarantor.
(d) The Guarantor shall promptly notify the Lenders of any
material and adverse change in the financial condition of the
Guarantor, or of the existence of any default hereunder or any of
the documents delivered in connection with the Obligations.
5. The Guarantor hereby waives notice of acceptance of this Guaranty
and also waives diligence, presentment, demand, protest and notice of
dishonor of any obligations evidenced by a note or otherwise, and notice
of any other kind whatsoever.
6. The Guarantor hereby assents to all terms and agreements
heretofore or hereafter made by the Borrower, or any other obligor with
respect to the Revolving Advances, with the Lenders.
7. The Guarantor hereby consents and agrees that the Lenders may,
without prejudice to any claim against the Guarantor hereunder, at any
time, or from time to time, in the Lender's reasonable discretion and in
accordance with the terms of the Loan Agreement, and without notice to the
Guarantor: (a) renew, extend or change the time of payment and the manner,
place or terms of payment of any Obligations of the Borrower; (b)
exchange, release or surrender all or any collateral which the Lenders may
at any time hold as security for the Obligations of the Borrower, or the
obligations of the Guarantor independently hereunder; (c) waive, release
or subordinate any security interest, in whole or in part, now or
hereafter held as security for any of the Obligations of the Borrower, or
the obligations of the Guarantor hereunder; (d) sell and purchase by the
Lenders any collateral in which the Lenders have a security interest at
any public or private sale or at any broker's board, crediting net
proceeds upon any obligation secured thereby; (e) settle or compromise
with the Borrower or with any other obligor with respect to the Revolving
Advances, any Obligations of the Borrower; (f) subordinate the payment of
any Obligations of the Borrower or obligations of any other person or
entity to the payment of any other debt which may be owing to the Lenders;
or (g) apply any sums by whomsoever paid or whosoever realized to any
Obligations of the Borrower.
8. This Guaranty is a continuing guaranty and nothing shall
terminate, discharge or satisfy the liability of the Guarantor hereunder
until the earlier to occur of (i) the satisfaction in full of the
Obligations of the Borrower, or (ii) the liquidation of the security
interest ganted in paragraph 12 hereof.
9. The Lenders may, in their reasonable discretion, exercise any
right or remedy which the Lenders have under this Guaranty or by law (such
rights and remedies being cumulative and not alternative or exclusive)
<PAGE>
without pursuing or exhausting any right or remedy the Lenders have
against the Borrower or any other person or entity or which the Lenders
have with respect to any collateral or any other guaranty of any or all of
such Obligations. The Lenders need not join the Borrower or any other
person or entity as a party in any action brought to enforce the
provisions hereof; and the Lenders may exercise any right or remedy which
it has under this Guaranty without regard to any actions or omissions of
the Borrower or any other person or entity.
10. No delay on the Lenders' part in exercising any right hereunder
or in taking any action to collect or enforce payment of any Obligations
of the Borrower, either as against the Borrower or any other person or
entity, shall operate as a waiver of any such right or in any manner
prejudice the Lenders' rights against the Guarantor.
11. The Guarantor agrees that, if any of the Obligations of the
Borrower are not satisfied when due, the Guarantor will, without demand
upon or notice to the Guarantor, forthwith satisfy such Obligations, or if
the maturity of any Obligations of the Borrower hereby guaranteed is
accelerated, by bankruptcy or otherwise as against the Borrower, such
maturity shall also be deemed accelerated for the purposes of this
Guaranty and without demand upon or notice to the Guarantor, and the Bank
shall collect from the Guarantor the total amount hereby guaranteed,
subject to the provisions of paragraph 12 hereof.
12. As security for the performance of the Guarantor's obligations
hereunder, the Guarantor: (a) has assigned to the Lenders certain
trademarks and trademark applications, and has executed, on even date
herewith, a certain Trademark Collateral Assignment and Security
Agreement; and (b) grants the Bank a security interest in and a right of
setoff against all monies, deposits, instruments or other property of any
kind, without limitation, owned by the Guarantor or in which the Guarantor
has a joint or contingent interest and which now or any time hereafter are
in the possession or control of the Bank or in transit by mail or carrier
to or from the Bank or in possession of any third person acting on the
Bank's behalf for any reason whatsoever. Notwithstanding any other
provision of this Guaranty, the obligations of the Guarantor hereunder are
non-recourse, and the Guarantor shall not be liable for any deficiency
that may remain with respect to the Obligations of the Borrower after
liquidation of the security as set forth above.
13. The Guarantor shall not exercise any rights they have acquired
by way of subrogation under this Guaranty or otherwise, unless and until
all of the Obligations of the Borrower have been paid in full. If any
payment is made to the Guarantor on account of such subrogation rights
when any of the Obligations of the Borrower are not paid in full, each and
every amount so paid will forthwith be turned over to the Bank to be
credited and applied upon any of the Obligations of the Borrower whether
matured or unmatured. Any and all present and future debts and obligations
of the Borrower to the Guarantor are hereby waived and postponed in favor
of and subordinated to the full payment and performance of all Obligations
of the Borrower to the Lenders.
14. This Guaranty shall continue to be effective or reinstated, as
the case may be, if at any time payment of any of the Obligations of the
Borrower, or any part thereof, is rescinded or must otherwise be returned
by the Bank upon the insolvency or bankruptcy of the Borrower, or
otherwise, as though such payment had not been made.
15. If the Obligations of the Borrower are also guaranteed by any
other person or entity, by continuing guaranty or by endorsement of any
note of the Borrower or otherwise, the obligation of such other person or
entity and the Guarantor's obligations hereunder shall be deemed to be
several, and the release by the Lender of any such other guarantor, or
settlement with such other guarantor or the revocation or impairment of
such guaranty, shall not operate to prejudice the Lenders' rights against
the Guarantor hereunder.
<PAGE>
16. No waiver of any of the Lenders' rights hereunder and no
modification or amendment of this Guaranty, shall be deemed to be made by
the Lenders unless the same shall be in writing, duly signed on behalf of
the Bank by a duly authorized officer, and each such waiver, if any, shall
apply only with respect to the specific instance involved, and shall in no
way impair the rights or the obligations of the Guarantor to the Lenders
in any other respect at any other time.
17. Notwithstanding anything herein to the contrary, until such time
as the Obligations have indefeasibly been repaid in full or this Guaranty
is terminated pursuant to its terms, the Guarantor hereby irrevocably
waives and releases any and all legal and equitable rights to recover from
the Borrower (i) any sums paid by the Guarantor under the terms of this
Guaranty and/or other documents delivered in connection with the
Obligations including, without limitation, all rights of subrogation and
all other rights that would result in the Guarantor being deemed a
creditor of the Borrower under the Federal Bankruptcy Code, and any other
law, and (ii) any and all claims the Guarantor has or may have against the
Borrower which are not related to or arising from or in connection with
this Guaranty, or other documents delivered in connection with the
Obligations, that do or would result in the Guarantor being deemed a
creditor of the Borrower under the Federal Bankruptcy Code or any other
law.
18. The Lenders shall be under no duty or obligation to the
Guarantor or anyone else to, nor shall the Lenders have any liability
whatsoever to the Guarantor or anyone else for failing to: (i) preserve,
protect or marshal any collateral it may hold as security for the
Obligations of the Borrower, or the obligations of the Guarantor
hereunder; (ii) preserve or protect the rights of the Borrower or any
other obligor with respect to the Obligations against any person claiming
an interest in any collateral the Lenders may hold as security for the
Obligations of the Borrower, or the obligations of the Guarantor
hereunder; (iii) realize upon any collateral it may hold as security for
the Obligations of the Borrower, or the obligations of the Guarantor
hereunder; in any particular order or manner or seek repayment of the
Obligations from any particular source; or (iv) permit any substitution or
exchange of all or any part of any collateral it may hold as security for
the Obligations of the Borrower, or the obligations of the Guarantor
hereunder; or release any part of any said collateral from any lien, even
if that substitution or release would leave the Lenders adequately
secured.
19. All notices, requests and other communications pursuant to this
Guaranty shall be in writing, to be either delivered by hand, overnight
delivery, or sent certified mail, return receipt requested, addressed to
the Agent at its office located at Two Tower Center Boulevard, East
Brunswick, New Jersey 08816, ATTENTION: Commercial Finance Department, or
to the Guarantor at the address set forth on page 1 of this Guaranty, or
at such other address as either may give notice to the other as herein
provided. Any notice, request or communication hereunder shall be deemed
to have been given when delivered.
20. The words importing the singular number mean and include the
plural number and vice versa, and words of the masculine gender mean and
include correlative words of the feminine and/or neuter gender and vice
versa.
21. This Guaranty shall be construed in accordance with and governed
by the laws of the State of New Jersey.
22. This Guaranty shall be binding upon the Guarantor, as well as
its successors or assigns and inure to the benefit of the Lenders and the
Lenders' successors and assigns.
23. THE GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF
<PAGE>
THE COURTS OF THE STATE OF NEW JERSEY AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW JERSEY IN
CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS GUARANTY. THE GUARANTOR HEREBY WAIVES THE DEFENSES OF FORUM NON
CONVENIENS AND IMPROPER VENUE.
24. THE GUARANTOR EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
LITIGATION RELATING TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
GUARANTY OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION WITH ANY OF THE
OBLIGATIONS.
25. This Guaranty shall terminate upon the earlier to occur of (a)
the satisfaction in full of the Obligations of the Borrower or, (b) the
liquidation of the security interest granted in paragraph 12 hereof.
26. This Guaranty shall also terminate and the security for such
guaranty as set forth in Section 12 hereof shall be released in the event
that:
(a) The Guarantor transfers to a new entity the trademarks and
trademark applications which are the subject of the Trademark
Collateral Assignment and Security Agreement; and
(b) The new entity executes and delivers to the Agent for the
Lenders a continuing limited non-recourse and collateralized
guaranty as well as a trademark collateral assignment and security
agreement in forms substantially the same as being executed on the
date hereof by the Guarantor.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty this ___ day
of March, 1998.
WARNER CHILCOTT (BERMUDA) LIMITED
/s/Kevin Insley
---------------------------------
KEVIN INSLEY, Vice President
TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
THIS TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT is made on the
30th day of March, 1998 between WARNER CHILCOTT, INC., a Delaware corporation
having its principal office at Rockaway 80 Corporate Center, 100 Enterprise
Drive, Suite 280, Rockaway, New Jersey 07866 ("Assignor"), and PNC BANK,
NATIONAL ASSOCIATION, having an office at Two Tower Center, East Brunswick, New
Jersey 08816, as Agent for the Lenders under the Loan Agreement (as such terms
are hereinafter defined).
BACKGROUND. Assignor has executed and delivered its Revolving Credit Notes
(the "Notes") to the Lenders in the aggregate principal amount of up to
$30,000,000, pursuant to the terms of a certain Revolving Credit and Security
Agreement dated of even date herewith by and between the Assignor (also known as
the "Borrower"), PNC Bank, National Association and one or more financial
institutions named therein or which hereafter become a party thereto (together
with PNC Bank, National Association, collectively, the "Lenders") and PNC Bank,
National Association as Agent for the Lenders (PNC Bank, National Association,
in such capacity, the "Agent") (as such may be amended from time to time, the
"Loan Agreement"). In order to induce the Lenders to execute and deliver the
Loan Agreement, Assignor has agreed to collaterally assign to the Lenders
certain trademark rights. This Agreement is being executed contemporaneously
with the Loan Agreement under which the Lenders are being granted a lien on and
security interest in accounts receivable, inventory, equipment and certain other
assets ("Other Assets") relating to products sold under the Trademarks (as such
term is defined in paragraph 1) whereby the Lenders shall have the right to
foreclose on the Trademarks and the Other Assets in the event of the occurrence
and continuance of an Event of Default (as such terms are defined in the Loan
Agreement), in order that the Lenders or any subsequent owner of the Trademarks
may continue to use the Trademarks in substantially the same manner as used by
Assignor.
NOW, THEREFORE, in consideration of the premises, Assignor hereby agrees
with the Lenders as follows:
1. To secure the complete and timely satisfaction of all Obligations
(as such term is defined in the Loan Agreement), Assignor hereby grants,
assigns and conveys to the Lenders the Assignor's entire right, title and
interest in and to the trademark applications and trademarks listed in
Schedule A hereto (as the same may be amended pursuant hereto from time to
time), including without limitation all renewals thereof, all proceeds of
infringement suits, the right to sue for past, present and future
infringements and all rights corresponding thereto throughout the world
(all of the foregoing are collectively called the "Trademarks"), and the
goodwill of the business to which each of the Trademarks relates.
2. Assignor covenants and warrants that to the best of its knowledge
(actual or constructive):
(a) The Trademarks are subsisting and have not been adjudged
invalid or unenforceable;
(b) Each of the Trademarks is valid and enforceable;
(c) No claim has been made that the use of any of the Trademarks
does or may violate the rights of any third person;
(d) Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the
Trademarks, free and clear of any liens, charges and
encumbrances, including without limitation pledges,
assignments, licenses, registered user agreements and
covenants by Assignor
<PAGE>
not to sue third persons, other than the assignment to the
Lenders pursuant to this Agreement;
(e) Assignor has the unqualified right to enter into this
Agreement and perform its terms;
(f) Assignor has used, and will continue to use for the duration
of this Agreement, proper statutory notice in connection with
its use of the Trademarks;
(g) Assignor has used, and will continue to use for the duration
of this Agreement, consistent standards of quality in its
manufacture or use of products sold under the Trademarks; and
(h) Assignor (along with its predecessors in interest) does not
own any other Trademarks and/or patents, trade names, service
marks or other intangible assets which are registered with the
United States Patent and Trademark Office in Washington, D.C.
3. Assignor hereby grants to the Lenders and its employees and
agents upon reasonable notice the right to visit Assignor's facilities
which maintain or store products sold under any of the Trademarks, and to
inspect the products and quality control records relating thereto.
Assignor shall do any and all acts reasonably required by the Lenders to
ensure Assignor's compliance with paragraph 2(g).
4. Assignor agrees that, until all of the Obligations shall have
been satisfied in full, it will not enter into any agreement (for example,
a license agreement) which is inconsistent with Assignor's obligations
under this Agreement, without the Lenders' prior written consent, such
consent not to be unreasonably withheld.
5. If, before the Obligations shall have been satisfied in full,
Assignor shall obtain rights to any new trademarks or trademark
applications the provisions of paragraph 1 shall automatically apply
thereto and Assignor shall give the Lenders prompt written notice thereof.
6. Assignor authorizes the Lenders to modify this Agreement by
amending Schedule A to include any future trademarks and trademark
applications covered by paragraphs 1 and 5.
7. Unless and until there shall have occurred an Event of Default,
the Lenders hereby grant to Assignor the exclusive, nontransferable right
and license to use the Trademarks on and in connection with products sold
by Assignor, for Assignor's own benefit and account and for none other.
Assignor agrees not to sell or assign its interest in, or grant any
sublicense under, the license granted to Assignor in this paragraph 7,
without the prior written consent of the Lenders which consent shall not
be unreasonably withheld.
8. If any Event of Default shall have occurred, Assignor's license
under the Trademarks, as set forth in paragraph 7, shall terminate
forthwith, and the Lenders shall have, in addition to all other rights and
remedies given to them by this Agreement and the Loan Agreement, those
rights and remedies allowed by law and the rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any
jurisdiction in which the Trademarks may be located and, without limiting
the generality of the foregoing, the Lenders may immediately, without
demand of performance and without other notice (except as set forth next
below) or demand whatsoever to Assignor, all of which are hereby expressly
waived, and without advertisement, sell at public or private sale or
otherwise realize upon in a commercially reasonable manner, all or from
time to time any of the Trademarks, or any interest which the Assignor may
have therein, and after deducting from the proceeds of sale or other
disposition of the Trademarks all reasonable expenses (including all
<PAGE>
reasonable expenses for broker's fees and legal services), may apply the
residue of such proceeds to the payment of the Obligations. Any remainder
of the proceeds after payment in full of the Obligations shall be paid
over to the Assignor. Notice of any sale or other disposition of the
Trademarks shall be given to Assignor at least five (5) Business Days (as
such term is defined in the Loan Agreement) before the time of any
intended public or private sale or other disposition of the Trademarks is
to be made, which notice Assignor hereby agrees shall be reasonable notice
of such sale or other disposition. At any such sale or other disposition,
the holder of any of the Notes or the Lenders may, to the extent
permissible under applicable law, purchase the whole or any part of the
Trademarks sold, free from any right or equity of redemption on the part
of Assignor, which right and equity of redemption are hereby waived and
released.
9. At such time as Assignor shall completely satisfy all of the
Obligations, this Agreement shall terminate and the Lenders shall execute
and deliver to Assignor at Assignor's expense all deeds, assignments and
other instruments as may be necessary or proper to re-vest in Assignor
full title to the Trademarks, subject to any disposition thereof which may
have been made by the Lenders pursuant hereto.
10. Any and all reasonable fees, costs and expenses, of whatever
kind or nature, including reasonable attorney fees and legal expenses
incurred by the Lenders in connection with the preparation of this
Agreement and all other documents relating hereto and the consummation of
this transaction, the filing or recording of any documents (including all
taxes in connection therewith) in public offices, the payment or discharge
of any taxes, counsel fees, maintenance fees, encumbrances or otherwise
protecting, maintaining or preserving the Trademarks, in defending or
prosecuting any actions or proceedings arising out of or related to the
Trademarks, or in the enforcement by the Lenders of any of its rights or
remedies under this Agreement, the Loan Agreement or any Other Document
(as such term is defined in the Loan Agreement) shall be borne and paid by
Assignor on demand by the Lenders and until so paid shall be added to the
principal amount of the Obligations and shall bear interest at the Default
Rate (as such term is defined in the Loan Agreement).
11. Assignor shall have the duty, through counsel reasonably
acceptable to the Lenders, to prosecute diligently any trademark
applications of the Trademarks pending as of the date of this Agreement or
thereafter until the Obligations shall have been paid in full, to make
federal application on registrable but unregistered Trademarks, to file
and prosecute opposition and cancellation proceedings and to do any and
all acts which are necessary or desirable to preserve and maintain all
rights in the Trademarks. Any expenses incurred in connection with the
Trademarks shall be borne by Assignor. The Assignor shall not abandon any
Trademark without the consent of the Lenders, which consent shall not be
unreasonably withheld.
12. Assignor shall have the right to bring any opposition
proceedings, cancellation proceedings or lawsuit in its own name to
enforce or protect the Trademarks, in which event the Lenders may, if
necessary, be joined as a nominal party to such suit if Lenders shall have
been satisfied that they are not incurring any risk of liability because
of such joinder. Assignor shall promptly, upon demand, reimburse and
indemnify Lenders for all damages, costs and expenses, including attorney
fees, incurred by Lenders in the fulfillment of the provisions of this
paragraph 12. The obligations of the Assignor under this paragraph 12
shall survive the termination of this Agreement.
13. In the event of the occurrence of a Default or an Event of
Default, Assignor hereby authorizes and empowers the Lenders to make,
constitute and appoint any officer or agent of the Lenders as the Lenders
may select, in its sole discretion, as Assignor's true and lawful
attorney-in-fact, with the power to endorse Assignor's name on all
applications, documents, papers and instruments necessary for the Lenders
to use the Trademarks, or to grant or issue any exclusive or nonexclusive
license under the Trademarks to anyone
<PAGE>
else, or necessary for Lenders to assign, pledge, convey or otherwise
transfer title in or dispose of the Trademarks to anyone else. Assignor
hereby ratifies all that such attorney shall lawfully do or cause to be
done by virtue hereof. This power of attorney shall be irrevocable for the
life of this Agreement.
14. If Assignor fails to comply with any of its obligations
hereunder, the Lenders may do so in Assignor's name or in the Lenders'
name, but at Assignor's expense, and Assignor hereby agrees to reimburse
the Lenders in full for all expenses, including reasonable attorney's
fees, incurred by the Lenders in protecting, defending and maintaining the
Trademarks.
15. No course of dealing between Assignor and the Lenders, nor any
failure to exercise, nor any delay in exercising, on the part of the
Lenders, any right, power or privilege hereunder or under the Loan
Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
16. All of the Lenders' rights and remedies with respect to the
Trademarks, whether established hereby or by the Loan Agreement, or by any
other agreement(s) or by law shall be cumulative and may be exercised
singly or concurrently.
17. The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this
Agreement in any jurisdiction.
18. This Agreement is subject to modification only by a writing
signed by the parties, except as provided in paragraph 6.
19. The benefits and burdens of this Agreement shall inure to the
benefit of and be binding upon the respective successors and permitted
assigns of the parties.
20. The validity and interpretation of this Agreement and the rights
and obligations of the parties shall be governed by the laws of the State
of New Jersey.
21. THE PARTIES HERETO AGREE TO THE JURISDICTION OF THE FEDERAL AND
STATE COURTS LOCATED IN NEW JERSEY IN CONNECTION WITH ANY MATTER ARISING
HEREUNDER, INCLUDING THE COLLECTION AND ENFORCEMENT HEREOF.
THE ASSIGNOR AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTIONS OF
THE LENDERS. THIS WAIVER IS MADE KNOWINGLY AND IN CONSIDERATION OF THE
ADVANCES MADE UNDER THE LOAN AGREEMENT.
22. This Agreement, the Loan Agreement and the Other Documents
embody the entire agreement and understanding between the Assignor and the
Lenders and supersedes all prior agreements and understandings relating to
the subject matter hereof and thereof.
<PAGE>
WITNESS the execution hereof under seal as of the day and year first above
written.
ATTEST: WARNER CHILCOTT, INC.
/s/Paul S. Herendeen /s/Roger M. Boissonneault
- - ---------------------------------- -------------------------------------
PAUL S. HERENDEEN ROGER M. BOISSONNEAULT, President
Executive Vice President/Secretary
[SEAL]
PNC BANK, NATIONAL ASSOCIATION
As Agent
/s/David L. Raphaels
-------------------------------------
DAVID L. RAPHAELS, Vice President
TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
THIS TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT is made on the
30th day of March, 1998 between WARNER CHILCOTT (BERMUDA) LIMITED, an exempted
company incorporated under the laws of Bermuda having an address at P. O. Box HM
1022, Hamilton HMDX Bermuda ("Assignor"), and PNC BANK, NATIONAL ASSOCIATION
having an office at Two Tower Center, East Brunswick, New Jersey 08816, as Agent
for the Lenders under the Loan Agreement (as such terms are hereinafter
defined).
BACKGROUND. Assignor has executed and delivered on even date herewith its
Continuing Limited Non-Recourse and Collateralized Guaranty (the "Guaranty") to
the Lenders guarantying the Obligations of WARNER CHILCOTT, INC., a Delaware
corporation (the "Borrower"), pursuant to the terms of a certain Revolving
Credit and Security Agreement dated of even date herewith by and between the
Borrower, PNC Bank, National Association, and one or more financial institutions
named therein or which hereafter become a party thereto (together with PNC Bank,
National Association, collectively, the "Lenders") and PNC Bank, National
Association as the agent for the Lenders (PNC Bank, National Association in such
capacity, the "Agent") (as such may be amended from time to time, the "Loan
Agreement"). In order to induce the Lenders to execute and deliver the Loan
Agreement, Assignor has agreed to collaterally assign to the Lenders certain
trademark rights. This Agreement is being executed contemporaneously with the
Loan Agreement under which the Lenders are being granted a lien on and security
interest in accounts receivable, inventory, equipment and certain other assets
("Other Assets") relating to products sold under the Trademarks (as such term is
defined in paragraph 1) whereby the Lenders shall have the right to foreclose on
the Trademarks and the Other Assets in the event of the occurrence and
continuance of an Event of Default (as such terms are defined in the Loan
Agreement), in order that the Lenders or any subsequent owner of the Trademarks
may continue to use the Trademarks in substantially the same manner as used by
Assignor or Borrower.
NOW, THEREFORE, in consideration of the premises, Assignor hereby agrees
with the Lenders as follows:
1. To secure the complete and timely satisfaction of all Obligations
(as such term is defined in the Loan Agreement) and the liabilities of the
Assignor pursuant to the Guaranty, Assignor hereby grants, assigns and
conveys to the Lenders the Assignor's entire right, title and interest in
and to the trademark applications and trademarks listed in Schedule A
hereto (as the same may be amended pursuant hereto from time to time),
including without limitation all renewals thereof, all proceeds of
infringement suits, the right to sue for past, present and future
infringements and all rights corresponding thereto throughout the world
(all of the foregoing are collectively called the "Trademarks"), and the
goodwill of the business to which each of the Trademarks relates.
2. Assignor covenants and warrants that to the best of its knowledge
(actual or constructive):
(a) The Trademarks are subsisting and have not been adjudged
invalid or unenforceable;
(b) Each of the Trademarks is valid and enforceable;
(c) No claim has been made that the use of any of the Trademarks
does or may violate the rights of any third person;
<PAGE>
(d) Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the
Trademarks, free and clear of any liens, charges and
encumbrances, including without limitation pledges,
assignments, licenses, registered user agreements and
covenants by Assignor not to sue third persons, other than the
assignment to the Lenders pursuant to this Agreement;
(e) Assignor has the unqualified right to enter into this
Agreement and perform its terms;
(f) Assignor has used, and will continue to use for the duration
of this Agreement, proper statutory notice in connection with
its use of the Trademarks;
(g) Assignor has used, and will continue to use for the duration
of this Agreement, consistent standards of quality in its
manufacture or use of products sold under the Trademarks; and
(h) Assignor (along with its predecessors in interest) does not
own any other Trademarks and/or patents, trade names, service
marks or other intangible assets which are registered with the
United States Patent and Trademark Office in Washington, D.C.
3. Assignor hereby grants to the Lenders and its employees and
agents upon reasonable notice the right to visit Assignor's facilities
which maintain or store products sold under any of the Trademarks, and to
inspect the products and quality control records relating thereto.
Assignor shall do any and all acts reasonably required by the Lenders to
ensure Assignor's compliance with paragraph 2(g).
4. Assignor agrees that, until all of the Obligations shall have
been satisfied in full, it will not enter into any agreement (for example,
a license agreement) which is inconsistent with Assignor's obligations
under this Agreement, without the Lenders' prior written consent, such
consent not to be unreasonably withheld.
5. If, before the Obligations shall have been satisfied in full,
Assignor shall obtain rights to any new trademarks or trademark
applications the provisions of paragraph 1 shall automatically apply
thereto and Assignor shall give the Lenders prompt written notice thereof.
6. Assignor authorizes the Lenders to modify this Agreement by
amending Schedule A to include any future trademarks and trademark
applications covered by paragraphs 1 and 5.
7. Unless and until there shall have occurred an Event of Default,
the Lenders hereby grant to Assignor the exclusive, nontransferable right
and license to use the Trademarks on and in connection with products sold
by Assignor or Borrower, for Assignor's own benefit and account and for
none other. Assignor agrees not to sell or assign its interest in, or
grant any sublicense under, the license granted to Assignor in this
paragraph 7, without the prior written consent of the Lenders which
consent shall not be unreasonably withheld.
8. If any Event of Default shall have occurred, Assignor's license
under the Trademarks, as set forth in paragraph 7, shall terminate
forthwith, and the Lenders shall have, in addition to all other rights and
remedies given to them by this Agreement and the Loan Agreement, those
rights and remedies allowed by law and the rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any
jurisdiction in which the Trademarks may be located and, without limiting
the generality of the foregoing, the Lenders may immediately, without
demand of performance and without other notice (except as set forth next
below) or demand whatsoever to Assignor, all of which are hereby expressly
waived, and without advertisement, sell at public or private sale or
otherwise realize upon in a commercially reasonable manner, all
<PAGE>
or from time to time any of the Trademarks, or any interest which the
Assignor may have therein, and after deducting from the proceeds of sale
or other disposition of the Trademarks all reasonable expenses (including
all reasonable expenses for broker's fees and legal services), may apply
the residue of such proceeds to the payment of the Obligations. Any
remainder of the proceeds after payment in full of the Obligations shall
be paid over to the Assignor. Notice of any sale or other disposition of
the Trademarks shall be given to Assignor at least five (5) Business Days
(as such term is defined in the Loan Agreement) before the time of any
intended public or private sale or other disposition of the Trademarks is
to be made, which notice Assignor hereby agrees shall be reasonable notice
of such sale or other disposition. At any such sale or other disposition,
the Lenders or the holder of any of the notes or other instruments
evidencing the Obligations may, to the extent permissible under applicable
law, purchase the whole or any part of the Trademarks sold, free from any
right or equity of redemption on the part of Assignor, which right and
equity of redemption are hereby waived and released.
9. At such time as Borrower shall completely satisfy all of the
Obligations, this Agreement shall terminate and the Lenders shall execute
and deliver to Assignor at Assignor's expense all deeds, assignments and
other instruments as may be necessary or proper to re-vest in Assignor
full title to the Trademarks, subject to any disposition thereof which may
have been made by the Lenders pursuant hereto.
10. Any and all reasonable fees, costs and expenses, of whatever
kind or nature, including reasonable attorney fees and legal expenses
incurred by the Lenders in connection with the preparation of this
Agreement and all other documents relating hereto and the consummation of
this transaction, the filing or recording of any documents (including all
taxes in connection therewith) in public offices, the payment or discharge
of any taxes, counsel fees, maintenance fees, encumbrances or otherwise
protecting, maintaining or preserving the Trademarks, in defending or
prosecuting any actions or proceedings arising out of or related to the
Trademarks, or in the enforcement by the Lenders of any of its rights or
remedies under this Agreement, the Guaranty, the Loan Agreement or any
Other Document (as such term is defined in the Loan Agreement) shall be
borne and paid by Assignor on demand by the Lenders and until so paid
shall be added to the principal amount of the Obligations and shall bear
interest at the Default Rate (as such term is defined in the Loan
Agreement).
11. Assignor shall have the duty, through counsel reasonably
acceptable to the Lenders, to prosecute diligently any trademark
applications of the Trademarks pending as of the date of this Agreement or
thereafter until the Obligations shall have been paid in full, to make
federal application on registrable but unregistered Trademarks, to file
and prosecute opposition and cancellation proceedings and to do any and
all acts which are necessary or desirable to preserve and maintain all
rights in the Trademarks. Any expenses incurred in connection with the
Trademarks shall be borne by Assignor. The Assignor shall not abandon any
Trademark without the consent of the Lenders, which consent shall not be
unreasonably withheld.
12. Assignor shall have the right to bring any opposition
proceedings, cancellation proceedings or lawsuit in its own name to
enforce or protect the Trademarks, in which event the Lenders may, if
necessary, be joined as a nominal party to such suit if Lenders shall have
been satisfied that they are not incurring any risk of liability because
of such joinder. Assignor shall promptly, upon demand, reimburse and
indemnify Lenders for all damages, costs and expenses, including attorney
fees, incurred by Lenders in the fulfillment of the provisions of this
paragraph 12. The obligations of the Assignor under this paragraph 12
shall survive the termination of this Agreement.
13. In the event of the occurrence of a Default or an Event of
Default under the Loan Agreement, Assignor hereby authorizes and empowers
the Lenders to make, constitute and appoint any officer or agent of the
Lenders as the Lenders may select, in its sole discretion, as Assignor's
true and lawful attorney-in-fact, with the power to endorse Assignor's
name on all applications, documents, papers and instruments necessary for
the Lenders to use the Trademarks, or to grant or issue any exclusive or
nonexclusive license
<PAGE>
under the Trademarks to anyone else, or necessary for Lenders to assign,
pledge, convey or otherwise transfer title in or dispose of the Trademarks
to anyone else. Assignor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney
shall be irrevocable for the life of this Agreement.
14. If Assignor fails to comply with any of its obligations
hereunder, the Lenders may do so in Assignor's name or in the Lenders'
name, but at Assignor's expense, and Assignor hereby agrees to reimburse
the Lenders in full for all expenses, including reasonable attorney's
fees, incurred by the Lenders in protecting, defending and maintaining the
Trademarks.
15. No course of dealing between Assignor and the Lenders, nor any
failure to exercise, nor any delay in exercising, on the part of the
Lenders, any right, power or privilege hereunder or under the Loan
Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
16. All of the Lenders' rights and remedies with respect to the
Trademarks, whether established hereby or by the Guaranty or Loan
Agreement, or by any other agreement(s) or by law shall be cumulative and
may be exercised singly or concurrently.
17. The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this
Agreement in any jurisdiction.
18. This Agreement is subject to modification only by a writing
signed by the parties, except as provided in paragraph 6.
19. The benefits and burdens of this Agreement shall inure to the
benefit of and be binding upon the respective successors and permitted
assigns of the parties.
20. The validity and interpretation of this Agreement and the rights
and obligations of the parties shall be governed by the laws of the State
of New Jersey.
21. THE PARTIES HERETO AGREE TO THE JURISDICTION OF THE FEDERAL AND
STATE COURTS LOCATED IN NEW JERSEY IN CONNECTION WITH ANY MATTER ARISING
HEREUNDER, INCLUDING THE COLLECTION AND ENFORCEMENT HEREOF.
THE ASSIGNOR AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR THE ACTIONS
OF THE LENDERS. THIS WAIVER IS MADE KNOWINGLY AND IN CONSIDERATION OF THE
ADVANCES MADE UNDER THE LOAN AGREEMENT.
22. This Agreement, the Guaranty, the Other Documents and the other
Loan Documents embody the entire agreement and understanding between the
Assignor and the Lenders and supersedes all prior agreements and
understandings relating to the subject matter hereof and thereof.
<PAGE>
WITNESS the execution hereof under seal as of the day and year first above
written.
WARNER CHILCOTT (BERMUDA) LIMITED
/s/Kevin Insley
---------------------------------------
KEVIN INSLEY, Vice President
- - -----------------------
[SEAL]
PNC BANK, NATIONAL ASSOCIATION
As Agent
/s/David L. Raphaels
---------------------------------------
DAVID L. RAPHAELS, Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
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