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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number:
Warner Chilcott Public Limited Company
(Exact name of Registrant as specified in its charter)
Ireland Not Applicable
(Jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
Lincoln House, Lincoln Place, Dublin 2, Ireland 353-1-662-4962
(Address of principal executive offices) (Registrants telephone number,
including area code)
Securities registered or to be registered pursuant to Section 12(b)
of the Act: None
Securities registered or to be registered pursuant to Section 12 (g)
of the Act:
American Depository Shares, representing Ordinary Shares, par value $0.05 each
Nasdaq National Market Ordinary Shares par value $0.05 each Nasdaq National
Market*
* Listed, not for trading, but only in connection with the listing of
American Depositary Shares, pursuant to the requirements of the Securities
and Exchange Commission.
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
As of March 26, 1999 there were 12,366,808 Ordinary Shares outstanding. The
aggregate market value of the Ordinary Shares (based upon the last sale price of
$7.00 per share as of March 26, 1999 on the Nasdaq National Market System) held
by non-affiliates of the registrant was $49,472,353.00. For the purposes of this
calculation, shares owned by officers, directors (and their affiliates) and 10%
or greater shareholders known to the registrant have been deemed to be
affiliates, which should not be construed to indicate that any such person
possesses the power, direct or indirect, to direct or cause the direction of the
management or policies of the Registrant or that such person is controlled by or
under common control with the Registrant.
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DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A (the "Proxy Statement") within 120 days after the end of the
fiscal year ended December 31, 1998. Portions of the Proxy Statement for the
Annual Meeting of Shareholders scheduled to be held on June 3, 1999 are
incorporated by reference in Part III of this report.
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TABLE OF CONTENTS
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GENERAL...........................................................................................................1
CAUTIONARY STATEMENT..............................................................................................2
PART I............................................................................................................3
ITEM 1. BUSINESS........................................................................................3
ITEM 2. PROPERTIES ...................................................................................18
ITEM 3. LEGAL PROCEEDINGS..............................................................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................20
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS...........................20
ITEM 6. SELECTED FINANCIAL DATA........................................................................22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...........52
PART III.........................................................................................................53
ITEM 14. FINANCIAL STATEMENTS AND EXHIBITS.............................................................53
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General
As used herein, the "Company" refers to Warner Chilcott Public Limited Company
("Warner Chilcott plc") and its consolidated subsidiaries, unless the context
requires otherwise, and "WCI" refers to Warner Chilcott, Inc., a Delaware
corporation and wholly owned subsidiary of Warner Chilcott plc. Unless otherwise
indicated, the Company's financial statements and other financial data contained
in this Form 10-K are presented in United States dollars ($) and are prepared in
accordance with generally accepted accounting principles in the United States
("U.S. GAAP").
Reporting on Form 10-K
While the Company is a "Foreign Registrant" within the meaning of the
Securities Exchange Act of 1934, it elected to file as a "Domestic
Registrant" effective June 30, 1998. This Annual Report is therefore
the first Annual Report of the Company to be filed on Form 10-K.
Trademarks and Service Marks
The following are trademarks and service marks belonging to, licensed
to, or otherwise used by the Company throughout this Form 10-K:
CHOLEDYL(R)
DORYX(R)
ERYC(R)
LOCHOLEST(R)
MANDELAMINE(R)
NATAFORT(R)
PYRIDIUM(R)
PYRIDIUM(R) PLUS
VECTRIN(R)
WARNER CHILCOTT(TM)
WARNER CHILCOTT LABORATORIES(TM)
K-DUR(R), IMDUR(R) and NITRODUR(R) are registered trademarks of Key
Pharmaceuticals, a division of Schering Corporation
("Schering-Plough"). The Company has permission to use these
marks pursuant to a Distribution Agreement with
Schering-Plough (the "Schering-Plough" Agreement).
ESTRACE(R) and OVCON(R) are registered trademarks of Bristol-Myers
Squibb Company ("Bristol-Myers"). Warner Chilcott has
permission to use these marks pursuant to a Co-Promotion
Agreement with Apothecon, Inc. ("Apothecon"), a subsidiary of
Bristol-Myers (the "Bristol-Myers Agreement").
ADALAT(R) is a registered trademark of Bayer AG.
HYTRIN(R) is a registered trademark of Abbott Laboratories
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Cautionary Statement
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 sections of this Form
10-K entitled "Customers," "Trademarks, Patents and Proprietary Rights,"
"Competition," "Government Regulation," "Manufacturing and Supply," "Product
Liability" and "Factors That May Affect Future Operating Results" and in the
Company's 1997 Annual Report on Form 20-F and quarterly reports on Form 10-Q
filed with the Securities and Exchange Commission, which may cause actual
results to differ materially from those discussed in such forward-looking
statements. The forward-looking statements within this Form 10-K are identified
by words such as "believes," "anticipates," "expects," "intends," "may," "will,"
and other similar expressions. However these 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-K 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.
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Part I
Item 1. Business.
Overview
The Company is primarily 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: women's health care, cardiology, and dermatology. All of the Company's
branded products are promoted by the Company's specialty sales force.
The Company currently markets a portfolio of branded products including:
NataFort(R), a prescription prenatal vitamin designed to improve patient
compliance by virtue of its smaller size relative to competing products,
Pyridium(R) Plus, an orally active urinary tract analgesic antispasmodic agent
used for irritative bladder conditions, Vectrin(R), an antibiotic used most
frequently for the treatment of acne, Doryx(R), a broad spectrum antibiotic,
LoCholest(R), a lipid regulator for the reduction of LDL cholesterol levels,
Estrace(R), a hormone replacement vaginal cream, Ovcon(R) 35, an oral
contraceptive, K-Dur(R), a sustained release potassium supplement, Imdur(R), a
once-daily oral nitrate for the treatment of angina and NitroDur(R), a
nitroglycerin patch for the treatment of angina. NataFort(R), Pyridium(R) Plus,
Vectrin(R), Doryx(R) and LoCholest(R) are products owned by the Company;
Estrace(R) and Ovcon(R) are products owned by Bristol-Myers and promoted by the
Company under the Bristol-Myers Agreement; and K-Dur(R), Imdur(R) and
NitroDur(R) are products owned by Schering-Plough and promoted by the Company
under the Schering-Plough Agreement.
The Company plans to add additional products to its portfolio of branded
products through internal development, co-promotion agreements, in-licensing,
acquisition and development collaborations with other companies.
History
The Company is an Irish public limited company founded in 1992 as Nale
Laboratories Limited ("Nale"). In March 1996 Nale acquired certain assets and
assumed certain liabilities (the "Acquisition") of Warner Chilcott Laboratories,
a division of the Warner-Lambert Company (the "Division"). 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. The Company also 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, the Company
utilizes the services of an outside telemarketing organization to cover almost
5,000 independent pharmacies. The 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.
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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.
Developments during 1998 and Early 1999
The Company achieved a number of milestones during 1998 and early 1999
including:
. NataFort(R), the Company's internally developed prenatal vitamin,
achieved extraordinary market penetration in its first full year of
sales. By July 1998, NataFort(R) was the fastest growing product in its
category. By February 1999, NataFort(R) captured the number one
position in terms of new prescription market share.
. In July 1998 the Company entered into an agreement to market a number
of Schering-Plough's branded products initially including K-Dur(R),
Imdur(R) and Nitro-Dur(R) (See Item 1, Business - Collaborative
Arrangements).
. The Company grew its pharmaceutical sales force to number approximately
270 professionals, supported by an expanded sales management and
product marketing team.
. The Company successfully eliminated all administrative reliance on
Warner Lambert Company, putting in place its own sales support,
personnel, legal, financial and distribution systems.
. In September 1998 the FDA approved Elan Corporation, plc's ("Elan")
ANDA filing for Isosorbide-5-mononitrate extended release tablets, 60
mg. The product was developed for the Company by Elan, the Company's
largest shareholder. Marketing rights to the product were subsequently
assigned to Apothecon with the Company retaining a financial interest
in sales by Apothecon.
. In February 1999 the Company entered into a five year Co-Promotion
Agreement with Apothecon to promote Ovcon(R) 35 and Estrace(R) Cream to
the women's health care market. In addition, the Company also entered
into a License Agreement with Bristol-Myers allowing it to develop a
new oral contraceptive to be marketed under the Ovcon(R) trademark.
. In March 1999 the Company launched Pyridium(R) Plus, an orally active
urinary tract analgesic antispasmodic agent used for irritative bladder
conditions.
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Strategy
The Company's goal is to be a leading marketer of branded prescription medicines
targeted for niche therapeutic applications in the United States. The main
elements of the Company's strategy are:
. Sales and Marketing: maintain a highly trained, dedicated, specialist
sales force capable of executing the company's marketing plans in the
chosen specialist markets;
. Branded Products: focus on growth through building a portfolio of
proprietary branded pharmaceutical products targeted at three
speciality therapeutic segments: women's health care, cardiology and
dermatology;
. Marketing Alliances: generate high-margin revenue streams to amortize
the cost of the Company's sales force; gain access to new product
opportunities through establishing brand marketing and management
relationships with top-tier pharmaceutical companies;
. Product Development: acquire, in-license and develop in-house new
branded products and line extensions to existing branded products to
provide a platform for future growth; and
. Multisource Products: take advantage of opportunities arising from the
Company's existing generic product portfolio and development pipeline
to enhance the above strategy.
Sales and Marketing
The Company pursues the commercialization of branded pharmaceutical products
that it believes will benefit from promotional activities directed toward
physician specialists. The Company has built two direct sales forces, the first
focused on general pharmaceutical sales and the other a dermatology sales force.
These sales organizations focus their efforts on high volume prescribing
physicians in each of the Company's target segments.
The Company began building its sales organization in 1997. By the end of 1998,
the Company had established a sales organization of approximately 270
professionals as well as the infrastructure to support and manage its sales
effort. The Company intends to augment its sales organization as needed to
support the promotion of the Company's existing and future branded products.
The Company's marketing strategy is to promote its branded products to high
volume prescribing physicians through these dedicated specialty sales forces.
The Company employs precision marketing techniques, which include ongoing
analyses of actual prescription data, to identify and target physicians that are
likely to be receptive to promotional efforts for the Company's products.
Generally, the physicians targeted tend to be specialists concentrated in
metropolitan areas and within larger group practices. This concentration enables
the Company to maximize the impact of its sales effort. Telemarketing and other
services are used to support its sales organization in the Company's efforts to
maintain frequent points of contact with targeted physicians.
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The Company's general sales force began promoting LoCholest(R) to cardiologists
in the second quarter of 1997 and NataFort(R) to obstetricians and gynecologists
in January 1998. In July 1998 the general sales force began promoting cardiology
products covered by the Schering-Plough Agreement and in March 1999 began
promoting Pyridium(R) Plus and the women's health products covered by the
Bristol-Myers Agreement.
The Company's dermatology sales force began promoting Vectrin(R) in the second
quarter of 1997. The Company believes that its dermatology sales force, at its
current size, provides adequate reach and frequency to promote Vectrin(R)
effectively and has capacity to handle new products as needed.
The Company endeavors to supply its sales forces with a full complement of
support materials to assist in their efforts to promote and position the
Company's products. The Company works to produce packaging, sample kits, visual
aids and other collateral sales materials that it believes are equal in quality
and professionalism to those used by much larger pharmaceutical concerns.
Branded Products
The Company markets a portfolio of branded products primarily in the women's
health care, cardiology and dermatology segments. The following table identifies
the Company's branded product marketing and development activities.
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Product Therapeutic Application Status
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Women's Health Care
NataFort(R) Prenatal Vitamin Developed in-house, launched in December 1997
Pyridium(R) Urinary Tract Analgesia Acquired from Warner-Lambert in 1997
Pyridium(R) Plus Urinary Tract Acquired rights from Warner-Lambert in 1997,
Analgesia/Antispasmodic continued development in-house and launched in
March 1999
Ovcon(R) 35 Oral Contraceptive Bristol-Myers Agreement, began promoting in March
1999
Doryx(R) Antibacterial Acquired from Warner-Lambert in 1997, re-launched
March 1998
Mandelamine(R) Antibacterial Acquired from Warner-Lambert in 1997
Estrace(R) Cream Hormone Replacement Bristol-Myers Agreement, began promoting in March
1999
Cardiology
LoCholest(R) Lipid Regulation Licensed from Eon; launched in 1997
K-Dur(R) Potassium Supplement Schering-Plough Agreement
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Imdur(R) Angina Schering-Plough Agreement
NitroDur(R) Angina Schering-Plough Agreement
Dermatology
Vectrin(R) Antibacterial Developed in-house, launched in 1997
Other Products
Choledyl(R) SA Bronchodilator Acquired from Warner-Lambert in 1997
Eryc(R) Antibacterial Acquired from Warner-Lambert in 1997
</TABLE>
Women's Health Care Products
The Company is marketing and developing prescription products for the treatment
and support of women's health care.
NataFort(R)
In December 1997 the Company launched NataFort(R), a prescription
strength prenatal vitamin designed to improve patient compliance by
virtue of its smaller tablet size relative to other products in the
category. In developing NataFort(R), the Company performed market
research that indicated that the ingredients that physicians look for
in a prenatal vitamin are folic acid and iron. Meanwhile, patients
expressed a strong negative reaction to the size of the tablets.
Prenatal vitamins tend to be large due to the inclusion of calcium in
their formulation. Although calcium is quite important, the amount of
calcium in other prenatal vitamins ranges from only 17% to 21% of the
recommended daily allowance. Patients taking these prenatal vitamins
need to obtain additional calcium from other sources. Also, the
absorption of iron is inhibited by the presence of calcium. The
Company's solution was to formulate NataFort(R) with a full 1 mg of
folic acid and 60 mg of elemental iron but without calcium. As such,
NataFort(R) tablets are significantly smaller than the competition and,
due to the absence of calcium, potentially allow for improved iron
absorption. NataFort(R) is a grandfathered drug and is therefore not
subject to NDA/ANDA pre-market clearance requirements (see Item 1 -
Government Regulation). It was developed internally by the Company. The
entire product development cycle from initiation through market
introduction was completed in less than nine months.
NataFort competes in the prescription prenatal vitamin market in which
sales in the United States were approximately $100 million in 1998.
Pyridium(R) and Pyridium(R) Plus
Pyridium(R)is an orally active urinary tract analgesic agent which
helps to relieve urinary pain, burning, urgency and frequency related
to urinary tract infections. Pyridium(R) was introduced by the Company,
then a division of Warner-Lambert Company in 1927. In 1998
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there were nearly 2.5 million prescriptions written for Pyridium(R).
However, most of those prescriptions were filled with a generic product
substituted for the brand.
Pyridium(R) Plus was introduced by Parke-Davis in 1980. Pyridium(R)
Plus contains 150 mg phenazopyridine hydrochloride in combination with
0.3 mg hyoscyamine hydrobromide and 15 mg butabarbital. Hyoscyamine
hydrobromide, a parasympatholytic, acts to relieve detrusor muscle
spasm. Butabarbital, a short-to-intermediate-acting sedative, helps to
provide bladder sedation and bring a sense of calm and comfort to the
bladder in distress. The Company reintroduced Pyridium(R) Plus in March
1999. The product is positioned to capitalize on the brand equity
associated with the Pyridium(R) trademark but is intended for patients
with more chronic irritative bladder conditions. While generic
substitution is and will remain a significant issue for the Company's
Pyridium(R) brand, the Company does not expect Pyridium(R) Plus to have
generic competition for some time.
Doryx(R)
Doryx(R) capsules contain specially coated pellets of doxycycline
hyclate for oral administration. Doxycycline is indicated for the
treatment of a broad range of infections. Doryx(R) was introduced in
1986 by Warner-Lambert and was promoted to primary care physicians and
obstetrician/gynecologists. Its point of difference versus other
available doxycycline products is its pelletized delivery system.
Doryx(R) pellets pass through the stomach and dissolve only after
reaching the small intestine, facilitating absorption of the
doxycycline in a uniform manner. The reduction in high local drug
concentrations lessens the potential for GI upset. The Company
relaunched Doryx(R) in the first half of 1998.
Estrace(R) Cream
Estrace(R) estradiol vaginal cream is a hormone replacement therapy for
the treatment of vaginal and vulval atrophy as well as for the
reduction of moderate to severe menopause symptoms. Estrace(R) Cream is
promoted by the Company pursuant to the Bristol-Myers Agreement since
March 1999. The product contains beta-estradiol as its active
ingredient. Estrace(R) Cream is the number two product in its segment.
Ovcon(R)35
Ovcon(R)35 is an oral contraceptive composed of norethindrone and
ethinyl estradiol. It was introduced by Bristol-Myers and the Company
began promoting the product in March 1999 pursuant to the Bristol-Myers
Agreement. Ovcon(R)35 had sales of approximately $40 million dollars in
1998.
Mandelamine(R)
Mandelamine(R) is an oral tablet which is utilized in the prevention
and treatment of urinary tract infections and cystitis. It has an
antibacterial action of formaldehyde which is
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particularly suited for prevention and therapy of chronic infections as
bacteria and fungi that do not develop resistance to formaldehyde.
Cardiology Products
The Company is marketing and developing prescription products for the treatment
of angina pectoris and lipid disorders.
LoCholest(R)
LoCholest(R) powder is a resin that acts as a cholesterol-lowering
agent and is intended for oral administration. Patients take
LoCholest(R) by mixing it with milk, fruit juice, water or another
beverage of their choice. The Company's primary positioning for
LoCholest(R) is as an adjunct therapy for patients taking statins.
Clinical studies have shown that cholestyramine can improve the
efficacy of LDL cholesterol reduction when used concomitantly with
statins. The Company believes that the non-systemic, non-absorbed
mechanism of action, and the resulting safety profile, make its use in
combination with statins an attractive alternative for patients that
may not achieve desired reductions in LDL with statins alone. Use of
LoCholest(R) in combination with statins may also allow physicians to
prescribe lower dosage levels of statins while still achieving desired
results.
K-Dur(R)
K-Dur(R) is an immediately dispersing extended release oral dosage form
of potassium chloride that is used for the prevention and treatment of
hypokalemia (abnormally low potassium concentration in the blood).
Hypokalemia can be caused by a number of conditions including the use
of diuretics. The Company is promoting K-Dur(R) pursuant to the
Schering-Plough Agreement. The product was originally introduced by
Schering-Plough and contains 1500 mg of microencapsulated potassium
chloride USP.
Imdur(R)
Imdur(R) is a once-daily oral nitrate that is used for the treatment of
angina. The Company is promoting Imdur(R) pursuant to the Schering-
Plough Agreement.
Nitro-Dur(R)
Nitro-Dur(R) transdermal patch is an organic nitrate formulation used
for the treatment of angina pectoris due to coronary artery disease.
The product comes in five different dosage sizes and is designed to
provide continuous controlled release of nitroglycerin through intact
skin. The Company is promoting Nitro-Dur(R) pursuant to the Schering-
Plough Agreement.
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Dermatology Products
The Company markets and develops prescription products for the treatment of acne
and other dermatological conditions. In 1996, sales of products to treat these
conditions in the United States were approximately $2.4 billion.
Vectrin(R)
Vectrin(R) is the Company's orally administered brand of minocycline
HCL, a semi-synthetic derivative of tetracycline used as an anti-
microbial agent against a wide range of organisms. More than 60% of the
prescriptions written for minocycline have been generated by
dermatologists for the treatment of acne.
Other Products
Choledyl(R)
Choledyl(R) (oxtriphylline) is the choline salt of theophylline.
Theophylline relaxes the smooth muscle of the bronchial airways and
thus acts mainly as a bronchodilator. Choledyl(R) SA tablets have been
formulated to provide therapeutic serum levels of drug when
administered every 12 hours. Choledyl(R) SA tablets are indicated for
relief or prevention of asthmatic symptoms and bronchospasm associated
with chronic bronchitis and emphysema.
Eryc(R)
Eryc(R), the Company's brand of erythromycin, is an orally administered
capsule containing enteric-coated pellets of erythromycin which protect
the erythromycin base from inactivation by gastric acidity.
Erythromycin is often prescribed by dermatologists as a lower cost
alternative to minocycline and for patients for whom tetracycline and
penicillin derivatives are contraindicated. Eryc(R) was introduced in
1981 by Warner-Lambert. The Company began selling Eryc(R) in the first
half of 1998.
Collaborative Arrangements
In July 1998 the Company entered into a collaborative sales and marketing
arrangement with Schering-Plough. Under the terms of the arrangement, the
Company is responsible for the development and execution of promotional strategy
and sales detailing of K-Dur(R), Imdur(R) and Nitro-Dur(R). The Company promotes
the products through its in-house sales force, targeting high-prescribing
physicians.
In February 1999 the Company entered into a Co-Promotion Agreement with
Apothecon, a subsidiary of Bristol-Myers, to promote Estrace(R) Cream and
Ovcon(R) 35 to the women's health market. Under the terms of the agreement, the
Company is responsible for the promotion of these two branded products to
physicians.
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Product Development
Branded pharmaceutical products are marketed under proprietary brand names and
through programs designed to attract the loyalty of prescribing physicians. The
Company's current portfolio and development pipeline of branded products are
targeted at the women's healthcare, cardiology and dermatology segments. These
segments are large and afford attractive growth opportunities.
Through its in-house expertise in product development and regulatory affairs and
collaborations with corporate partners the Company identifies opportunities to
develop and launch additional branded pharmaceutical products. The Company's
strategy is to pursue products that represent improvements to existing
pharmaceuticals rather than creating new chemical entities. Improvements to
existing products generally involve less development and regulatory risk and
shorter time lines from concept to market. Where appropriate, the Company plans
to leverage the expertise of its collaborators in the development of new branded
products. In its evaluation of prospective product development projects, the
Company expects to maintain a strong bias towards projects that have the ability
to produce meaningful financial results in the near-term.
The Company also uses its in-house expertise, as well as the technology and
expertise of its corporate collaborators, to develop improvements and line
extensions for existing and future branded products. Enhancements may take the
form of modified formulations, novel delivery methods or alternative dosages.
Modifications of existing products are expected to enable the Company to extend
the life, and therefore the value, of its various brands.
The Company continually scans the pharmaceutical markets for opportunities to
acquire or in-license branded products in the Company's targeted specialty
areas. Candidates generally have, or can be modified to have, genuine points of
difference relative to competing products and are prescribed primarily by
physician specialists. The Company evaluates the competitive dynamics associated
with a product candidate to assess the ability of the Company to build
sustainable brand equity in the products through promotion. The Company also
weighs the financial risks and rewards of pursuing the product. The Company
believes that there will be numerous opportunities to acquire or in-license
branded products from large pharmaceutical concerns as those companies
increasingly shift their efforts away from products with annual revenue
potential of less than $100 million.
Multisource Generic Products: Pending ANDAs
As part of the Acquisition, the Company acquired a portfolio of 70 generic
products. In 1998, sales of these products were approximately $31.4 million in
the United States. Approximately 41.3% of these sales were attributable to
gemfibrozil. Other significant products of the Company include hydrocodone with
APAP with total 1998 sales of $2.1 million (representing 6.7% of total generic
sales), amoxicillin with total 1998 sales of $2.2 million (representing 7.1% of
total generic sales) and nitroglycerin patches with total 1998 sales of $1.9
million (representing 6.2% of total generic sales). However, with the launch of
its branded product initiative in 1997, the Company's primary focus shifted to
the development, acquisition and in-licensing of branded products and the
Company announced its intention to reduce or eliminate its generic
pharmaceutical business except for those
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products that it considered of significant value. The Company continues to
pursue the approval of certain generic products it considers of significant
value including nifedipine CC and terazosin.
Nifedipine (Adalat(R) CC).
Adalat(R) CC is an extended release version of the calcium channel
blocking agent nifedipine, which is sold by Miles, a division of Bayer
AG. Adalat(R) CC was approved by the FDA in July 1993. While the active
ingredient nifedipine is off-patent, Adalat(R) CC is protected by
formulation patents assigned to Bayer AG. The Company believes that if
a product is developed with a formulation different from the one used
in Adalat(R) CC, it should be available for generic competition. To
date, however, no company has succeeded in gaining an ANDA approval for
a generic version of Adalat(R) CC. Elan, who is developing the product
for the Company, filed an ANDA for a 30 mg dosage of a generic version
of Adalat(R) CC in June 1997 and, in accordance with the Waxman-Hatch
Act, notified Bayer AG that the Company does not believe that it is
infringing the formulation patents that cover Adalat(R) CC. Elan was
subsequently sued for patent infringement by Bayer. Elan and the
Company vigorously defended the suit, and filed a motion for summary
judgment to dismiss it. This motion was granted on March 16, 1999 (See
Item 3 - Legal Proceedings).
Terazosin (Hytrin(R)).
Terazosin hydrochloride is currently marketed as Hytrin(R) by Abbott
Laboratories ("Abbott"). Hytrin(R) is an alpha-blocker indicated for
use as an anti-hypertensive agent and also for the treatment of benign
prostatic hyperplasia (BPH). In April 1998 the Company was sued by
Abbott for an alleged patent infringement related to the Company's ANDA
filing for terazosin. The Company is vigorously defending the suit (See
Item 3 B Legal Proceedings).
Customers
The Company's customers include the nation's leading pharmaceutical wholesalers,
drug distributors and chain drug stores. The Company also sells certain products
in the government sector, both on the U.S. federal and state levels. The Company
has witnessed a consolidation of many customers, as chain drug stores and
wholesalers merge or consolidate. In addition, with regard to the Company's
generic pharmaceutical business, a number of the Company's customers have
instituted source programs that limit the number of the suppliers of generic
pharmaceuticals carried by that customer. As a result of these developments,
there is heightened competition among pharmaceutical companies for the business
of this smaller and more selective customer base.
During 1998, McKesson and Bergen Brunswig accounted for approximately $8.5
million and $6.0 million respectively, representing approximately 15% and 13%
respectively, of the Company's sales before rebates.
12
<PAGE>
Trademarks, Patents and Proprietary Rights
Due to the branded product focus of the Company, it considers its trademarks
valuable assets and actively manages its trademark portfolio, maintaining
long-standing trademarks as well as obtaining trademark registrations for new
brands. The Company polices its trademark portfolio against infringement but
there can be no assurance that these efforts will be successful or that the
Company will have adequate remedies for any breach.
The Company believes that licenses from Elan and certain of the Company's other
strategic collaborators to patent rights relating to the Company's products,
particularly the Company's complex generic products, as well as the technologies
and processes used to formulate and manufacture these products, are important to
the Company's business. The success of these products may depend, in part, upon
the ability of the Company's strategic collaborators to protect these patent
rights. There can be no assurance that the Company's strategic collaborators
will succeed in protecting these patent rights, or that any patents or licenses
will (a) protect the Company against competitors with similar technologies, (b)
not be infringed upon or designed around by others, (c) not be challenged by
others and held to be invalid or unenforceable, or (d) not be terminated by a
licensor pursuant to various terms in such licenses or due to any breach.
The Company also relies on trade secrets and proprietary knowledge, which it
generally seeks to protect by confidentiality, non-disclosure and assignment of
invention agreements with its employees, consultants, licensees and other
companies. There can be no assurance, however, that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known by competitors. In
addition, there can be no assurance that the aforementioned persons will not
claim rights to intellectual property arising out of their work.
Competition
The pharmaceutical industry is highly competitive. The Company's branded
products are in competition with brands marketed by other pharmaceutical
companies including large, fully integrated concerns with financial, marketing,
legal and product development resources substantially greater than those of the
Company. In addition, several of the Company's branded products are off-patent
and therefore compete with generic pharmaceuticals that claim to offer
equivalent therapeutic benefits at a lower cost. In some cases third-party
payors encourage the use of lower cost generic products by paying or reimbursing
a user or supplier of a branded prescription product at a lower purchase price
than would be paid or reimbursed for a generic product, making branded products
less attractive, from a cost perspective, to buyers.
The Company's generic products are in competition with offerings from numerous
generic pharmaceutical companies as well as products from off-patent divisions
of major international innovator companies.
13
<PAGE>
The aggressive pricing activities of the Company's generic competitors and the
payment and reimbursement policies of third-party payors could have a material
adverse effect on the Company's business, results of operations and financial
condition.
As the pharmaceutical industry is characterized by rapid product development and
technological change, the Company's pharmaceutical products could be rendered
obsolete or made uneconomical by the development of new pharmaceuticals to treat
the conditions addressed by the Company's products, technological advances
affecting the cost of production, or marketing or pricing actions by one or more
of the Company's competitors. The Company's business, results of operations and
financial condition could be materially adversely affected by any one or more of
such developments. Competitors may also be able to complete the regulatory
process for certain products before the Company and, therefore, may begin to
market their products in advance of the Company's products. The Company believes
that competition among prescription pharmaceutical products will be based on,
among other things, product efficacy, safety, reliability, availability and
price. From time to time, the Company may compete for the in-license or
acquisition of certain branded products with other pharmaceutical companies
pursuing a similar strategy.
The pharmaceutical industry is also characterized by frequent litigation between
generic drug companies and branded drug companies. The Company may find it
necessary to initiate or defend lawsuits to enforce its rights and to determine
the scope and validity of the proprietary rights of others. Litigation can be
costly and time-consuming, and there can be no assurance that the Company's
litigation expenses will not be significant in the future or that the outcome of
such litigation will be favorable to the Company (See Item 3, Legal
Proceedings).
Government Regulation
The research, development and commercial activities relating to branded and
generic prescription pharmaceutical products are subject to extensive regulation
by US and foreign governmental authorities. Certain pharmaceutical products are
subject to rigorous preclinical testing and clinical trials and to other
approval requirements by the FDA in the United States under the Federal Food,
Drug and Cosmetic Act ("FDCA") and the Public Health Services Act and by
comparable agencies in most foreign countries.
The FDCA, The Public Health Act, the Controlled Substances Act, and other
federal statutes and regulations govern or influence all aspects of the
Company's business. All pharmaceutical marketers are directly or indirectly
(through third parties) subject to regulations that cover the manufacture,
testing, storage, labeling, documentation/record keeping, approval, advertising,
promotion, sale, warehousing, and distribution of pharmaceutical drug products.
Non-compliance with applicable requirements can result in fines and other
judicially imposed sanctions, including product seizures, injunctive actions and
criminal prosecutions. In addition, administrative or judicial actions can
result in the recall of products, and the total or partial suspension of
manufacture and/or distribution. The government can also refuse to approve
pending applications or supplements to approved applications. The FDA also has
the authority to withdraw approvals of drugs in accordance with statutory due
process procedures.
14
<PAGE>
FDA approval is required before any dosage form of any new unapproved drug,
including a generic equivalent of a previously approved drug, can be marketed.
Certain drugs are not considered by the FDA to be "new" drugs and fall outside
of the typical FDA pre-marketing approval process. These drugs, referred to as
"grandfathered" products, generally were in use prior to the enactment of the
FDCA. Several of the Company's products are being marketed in reliance upon
their status as grandfathered drugs. In addition, the Company has identified
grandfathered drugs as a potential source of opportunities to develop and launch
new products. The FDA has expressed the view that all prescription drugs should
ultimately be subject to pre-market clearance requirements. If the FDA adopts
this stance it could potentially affect products currently, or proposed to be,
marketed as grandfathered drugs. There can be no assurance that the FDA will not
challenge the grandfathered status of drugs including those marketed by the
Company.
US Drug Approval Process
In the US, marketing authority for prescription drugs is granted by
approval of either an abbreviated new drug application (the "ANDA" or
generic drug approval process) or by approval of a new drug application
(the "NDA" process). All applications for FDA approval are
comprehensive documents that must contain information relating to
chemistry, analytical and processing controls, product formulation,
stability, manufacturing process, packaging, labeling, and quality
control. ANDAs contain evidence of bioequivalence compared to a
reference-listed NDA product, whereas NDAs contain clinical safety and
efficacy data supporting the approval of the drug product for its
intended use.
Regarding both ANDAs and NDAs (including any supplements thereto),
there can be no assurance that approval will be granted by the FDA on a
timely basis, if at all. Even after approval is granted, further
studies may be required to provide additional data on safety. Also, the
FDA regulations require post-marketing reporting of adverse drug events
of the drug product. The FDA may, at any time, take action to modify
and restrict the drug's product labeling or withdraw approval of the
product, should new information come to light about the safety of the
drug product.
The FDA regulates post-marketing advertising and promotional activities
to assure that such activities are being conducted in conformity with
statutory and regulatory requirements. Failure to adhere to such
requirements can result in regulatory actions that could have an
adverse effect on the Company's business, results of operation, and
financial condition.
ANDAs
The Drug Price Competition and Patent Restoration Act of 1984 (known as
the Waxman-Hatch Act) established procedures and regulations regarding
the ANDA process. ANDAs may be approved by the FDA for those drug
products that are no longer protected by patents and those whose
exclusivity period(s), if applicable, has expired. ANDAs may also be
submitted for drugs that differ in dosage form or strength; under the
Waxman-Hatch Act, this is accomplished by obtaining permission to file
an ANDA for the change to the reference-
15
<PAGE>
listed product by first gaining approval of a Suitability Petition. A
product is not eligible for ANDA approval if it is not bioequivalent to
the reference listed "brand-name" drug or if its labeling differs in
terms of indications, dosage, or safety/efficacy information. However,
such a drug product may be approved as an NDA with supportive data from
clinical trials.
NDAs
NDAs can be submitted for New Chemical Entity (NCE) drug products or
for drug products that are not otherwise eligible for ANDA approval.
Whether the NDA product is an NCE or a non-NCE compound, appropriate
pre-clinical and toxicology data must be available or referenced by the
applicant. By comparison, the NDA process for an NCE is usually much
longer, requires significantly more resources, and has potentially more
risk than either the ANDA process or the non-NCE NDA process. Prior to
submission of the NDA, an investigational new drug ("IND") is submitted
to the FDA. The IND provides details on pre-clinical studies (including
toxicology assessments) and the protocols for any proposed testing in
human subjects. Clinical trials in human subjects/patients are
conducted according to strict protocols submitted as part of the IND.
Each trial is conducted in accordance with certain standards under
protocols that detail the objectives of the study, the parameters to be
used to monitor safety and the efficacy criteria to be evaluated. The
NDA process is likely to take many years and require the expenditure of
substantial resources.
cGMP Regulation
Manufacturers of marketed drugs must comply with current Good
Manufacturing Practice ("cGMP") regulations and other applicable laws
and regulations required by the FDA, the Environmental Protection
Agency ("EPA") and other regulatory agencies. Failure to do so could
lead to sanctions, which may include an injunction suspending
manufacturing, the seizure of drug products and the refusal to approve
additional marketing applications. The Company relies upon and will in
the future continue to rely upon third parties for the manufacture of
its products. The Company seeks to ensure that any third party with
whom it contracts for product manufacturing will comply with cGMP. The
FDA conducts periodic inspections to ensure compliance with these
rules. However, there can be no assurance that any such third parties
will be found to be in compliance with cGMP standards. Any such
non-compliance could result in a temporary or permanent interruption in
the development and testing of the Company's planned products or in the
marketing of approved products, as well as increased costs. Such
non-compliance could have a material adverse effect on the Company's
business, results of operations and financial condition.
Other Regulation
The Prescription Drug Marketing Act ("PDMA"), which amends various
sections of the FDCA, imposes requirements and limitations upon drug
sampling and prohibits states from licensing wholesale distributors of
prescription drugs unless the state licensing program meets certain
federal guidelines that include, among other things, state licensing of
wholesale
16
<PAGE>
distributors of prescription drugs under federal guidelines that
include minimum standards for storage, handling and record keeping. In
addition, the PDMA sets forth civil and criminal penalties for
violations of these and other provisions. Various sections of the PDMA
are still being implemented by the FDA and the states. Nevertheless,
failure by the Company or its distributors to comply with the
requirements of the PDMA could have a material adverse effect on the
Company's business, results of operations and financial condition.
Medicaid, Medicare and other reimbursement legislation or programs
govern reimbursement levels, including requiring that all
pharmaceutical companies rebate to individual states a percentage of
their revenues arising from Medicaid-reimbursed drug sales. The Company
believes that the federal and/or state governments may continue to
enact measures in the future aimed at reducing the cost of drugs to the
public. The Company cannot predict the nature of such measures or their
impact on the Company's profitability.
Federal, state and local laws of general applicability, such as laws
regulating working conditions also govern the Company. In addition, the
Company may be subject to some liability for compliance with
environmental laws by third party manufacturers of the Company's
products. Compliance with such general laws and environmental laws is
not expected to have a material effect on the earnings, cash
requirements or competitive position of the Company in the foreseeable
future. However, no assurance can be given that changes to, or
compliance with such laws will not have a material effect on the
Company's earnings, cash requirements or competitive position.
Products marketed outside of the United States that are manufactured in
the United States are subject to certain FDA regulations, as well as
regulation by the country in which the products are sold. While the
Company currently does not have plans to market products in other
countries, it may do so from time to time.
Manufacturing and Supply
The Company currently contracts with third parties for its product manufacturing
requirements. Accordingly the Company is dependent upon its contract
manufacturers to comply with regulatory requirements and to keep their
facilities in good working order. To ensure such compliance the Company conducts
quality assurance audits of the contract manufacturers sites and batch records
and other documents are examined to determine compliance with FDA requirements
and the Company's specifications. However, there can be no assurance that these
contract manufacturers will be able to manufacture the Company's products
without interruption, that these suppliers will comply with their obligations
under supply agreements with the Company, or that the Company will have adequate
remedies for any breach. In the event a supplier suffers an event that would
render it unable to manufacture the Company's product requirements for a
sustained period, the resulting delay could have a material adverse effect on
the Company.
The principal components used in the Company's products are active and inactive
pharmaceutical ingredients and certain packaging materials. Certain components
may be available only from sole-source suppliers. In addition, the FDA must
approve suppliers of certain ingredients for the
17
<PAGE>
Company's products. The development and regulatory approval of the Company's
products are dependent upon its ability to procure active ingredients and
packaging materials from FDA approved sources. FDA approval of a new supplier
would be required if, for example, active ingredients or such packaging
materials were no longer available from the initially approved source. The
qualification of a new supplier could potentially delay the manufacture of the
drug involved. Arrangements with foreign suppliers are subject to certain
additional risks, including the availability of governmental clearances, export
duties, political instability, currency fluctuations and restrictions on the
transfer of funds.
Although the Company considers its sources of supply to be adequate, and to
date, no significant difficulty has been encountered in obtaining product
materials, there can be no assurance that the Company will continue to be able
to obtain materials as required or at reasonable prices. An extended inability
to obtain materials or significant price increases that cannot be passed on to
customers could have a material adverse effect on the Company.
Product Liability
Product liability suits by consumers represent a continuing risk to firms in the
pharmaceutical industry. Although the Company carries product liability
insurance, it believes that no reasonable amount of insurance can fully protect
against all such risks due to the inherent risks associated with the production
of pharmaceuticals for human consumption.
Seasonality
The Company's business, taken as a whole, is not materially affected by seasonal
factors.
Personnel
As of December 31, 1998 the Company had 227 full-time employees. In addition,
the Company has approximately 85 sales representatives that it uses pursuant to
contract from two outside companies. None of the Company's employees are covered
by a collective bargaining agreement. The Company believes that its employee
relations are satisfactory.
Item 2. Properties
The Company's principal executive offices are located in Dublin, Ireland. In
addition, WCI leases 23,600 square feet in Rockaway, New Jersey under a lease
that expires in 2001 and leased 1000 square feet of office space in New York,
New York under a lease which expires in April 1999 and which will not be
renewed.
Item 3. Legal Proceedings.
There has been substantial litigation in the pharmaceutical and biotechnology
industries with respect to the manufacture, use and sale of new products that
are the subject of conflicting proprietary rights. Under the Waxman-Hatch Act,
when a drug developer submits an ANDA for a generic drug, and
18
<PAGE>
the developer believes that an unexpired patent which has been listed with the
FDA as covering that brand name product will not be infringed by the developer's
product or is invalid or unenforceable, the developer must so certify to the
FDA. That certification must also be provided to the patent holder, who may
challenge the developer's certification of non-infringement, invalidity or
unenforceability by filing a suit for patent infringement. If a suit is filed
within 45 days of the patent holder's receipt of such certification, the FDA can
review and tentatively approve the ANDA, but is precluded from granting final
marketing approval of the product until a final judgement in the action has been
rendered or 30 months from the date the certifications was received, whichever
is sooner. Should a patent holder commence a lawsuit with respect to alleged
patent infringement by the Company, the uncertainties inherent in patent
litigation make the outcome of such litigation difficult to predict. The
potential delay in obtaining FDA approval to market the Company's product
candidates as a result of litigation, as well as the expense of such litigation,
whether or not the Company is successful, could have a material adverse effect
on the Company's business, results of operations and financial condition. In
addition, even if the Company's ANDA has been approved by the FDA, an innovator
may pursue alternative legal remedies against the Company without regard to the
Waxman-Hatch Act.
In September 1997 the Company announced that following acceptance for filing of
Elan's ANDA for a generic version of Bayer AG's Adalat(R) CC, Elan had been sued
in the United States District Court for the Northern District of Georgia for
patent infringement by Bayer, seeking injunctive relief. Elan developed the
product for the Company pursuant to a development and license agreement. Bayer's
complaint alleged that the infringement was willful and sought to enjoin the FDA
from approving the ANDA and to enjoin sales of the nifedipine product which is
the subject of the ANDA until Bayer's patent expires. In June 1998 Elan filed a
motion for summary judgment seeking a ruling that the proposed product does not
infringe Bayer's patent. A hearing was held on the motion in December 1998 and
on March 16, 1999, the court dismissed the action and granted summary judgment
in favor of Elan, ruling that the proposed product does not infringe Bayer's
patent. As of the date of this report, Bayer has not filed an appeal of such
ruling. However, if such an appeal is filed, Elan and the Company intend to
continue to vigorously contest the action as they believe Bayer's action to be
without merit.
On April 6, 1998 the Company was sued by Abbott Laboratories in the United
States District Court for the Northern District of Illinois for an alleged
patent infringement related to the Company's ANDA filing for terazosin
hydrochloride. Abbott markets terazosin hydrochloride under the brand name
Hytrin(R). On August 28, 1998 the judge hearing a case Abbott had commenced
against another terazosin hydrochloride ANDA applicant, Geneva Pharmaceuticals,
Inc granted summary judgement against Abbott. Abbott has appealed this adverse
judgement and as of the date of this report, the appeal had not been argued or
decided. On September 9, 1998 WCI moved for partial summary judgement dismissing
the action based on the summary judgement of the Geneva case. The court granted
WCI's motion and entered a final judgement in favor of WCI dismissing the
action. Abbott appealed dismissal of the action to the U.S. Court of Appeals for
the Federal Circuit and Abbott and WCI have submitted an agreed motion to the
Court of Appeals to stay the appeal pending the court's determination of the
Geneva appeal.
19
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Part II
Item 5. Market for Registrants Common Equity and Related Shareholder
Matters
The Company's ADSs have been traded on the Nasdaq National Market since August
1997 (Symbol: WCRX). No securities of the Company are traded in any other
market, domestic or foreign. The following table sets forth for the periods
indicated the high and low sales prices for the Company's ADSs as reported by
Nasdaq.
<TABLE>
<CAPTION>
Sales Price
High Low
<S> <C> <C>
1997:
Third Quarter 19 1/4 17 1/2
Fourth Quarter 17 3/4 10 5/8
1998:
First Quarter 12 1/2 9 1/2
Second Quarter 13 9 1/8
Third Quarter 11 5/8 5 1/2
Fourth Quarter 10 9/16 5 3/8
1999:
First Quarter (through March 26, 1999) 9 3/4 4 3/4
</TABLE>
There were approximately 43 shareholders of record at December 31, 1998. The
Company has not paid cash dividends on its Ordinary Shares and does not intend
to pay cash dividends on its Ordinary Shares in the foreseeable future.
Taxation and Exchange Controls
U.S. Federal Income Tax Treatment of the Company.
Under the income tax treaty currently in effect between the United
States and Ireland (the "Treaty"), Warner Chilcott plc will not be
subject to U.S. Federal income tax (other than withholding tax imposed
on U.S. source dividends and certain interest) unless it engages in a
trade or business in the United States through a permanent
establishment in the United States. Warner Chilcott plc's ownership of
its U.S. subsidiaries does not, in itself, constitute a permanent
establishment. Warner Chilcott plc expects to be able to conduct its
activities in a manner that will not result in it being considered to
be engaged in a trade or business or to have a permanent establishment
in the United States. The Company's U.S. subsidiaries, as U.S.
corporations, are subject to U.S. taxation.
20
<PAGE>
U.S. Federal Income Tax Consequences to United States Shareholders.
Holders of The Company's ADSs will be treated as the owners of the
underlying Ordinary Shares for U.S. Federal income tax purposes.
Dividends paid by the Company will not qualify for the dividends
received deduction otherwise available to U.S. corporate shareholders.
Irish Taxation
Warner Chilcott plc is a public limited company incorporated and
resident in Ireland. A company is regarded as resident in Ireland for
tax purposes if it is centrally managed and controlled in Ireland.
The standard rate of taxation in Ireland on a company's profits in 1998
was 32%. However, the first IR,50,000 of profits in 1998 and the first
IR,100,000 of profits in 1999 of a company or, where a company is part
of a group of companies, of such group were, in 1998 subject to
taxation at a lower rate of 25%. With effect from January 1, 1999, the
standard rate of taxation has been reduced to 28%. Certain taxation
reliefs are available to companies, which meet specific qualifying
criteria. The Company intends to take advantage of such reliefs where
possible. Reliefs, which may be available to the Company, are Shannon
Relief, Patent Exemption and Manufacturing Relief.
Irish Exchange Controls
Irish exchange control regulations ceased to apply from and after
December 31, 1992. Except in certain exceptional circumstances, there
are no restrictions on non-residents of Ireland dealing in domestic
securities, which includes shares or depositary receipts of Irish
companies such as the Company. Dividends and redemption proceeds also
continue to be freely transferable to non-resident holders of such
securities.
The Financial Transfers Act, 1992 gives power to the Minister for
Finance of Ireland to make provision for the restriction of financial
transfers between Ireland and other countries. The Company does not
anticipate that Irish exchange controls or regulations under the
Financial Transfers Act, 1992 will have a material effect on its
business, results of operations and financial condition or will impose
any material limitations on the acquisition or disposal of ADSs by any
investor (including a U.S. investor).
There are no restrictions under the Company's Articles of Association,
or under Irish Law that limit the right of non-resident or foreign
owners to hold or vote the Ordinary Shares.
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<PAGE>
Item 6. Selected Financial Data
The following selected historical consolidated financial information of the
Company for each of the fiscal years in the five-year period ended December 31,
1998 has been derived from the Company's consolidated financial statements,
which financial statements have been audited by the Company's external auditors.
The consolidated financial statements as of December 31, 1998 and 1997, and for
each of the years in the three-year period ended December 31, 1998, and the
reports thereon, are included in Item 8 of this Form 10-K.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 (1) 1995 1994
-------------- ------------- ------------- ------------- -------------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................. $ 64,894 $ 75,827 $ 62,734 $ 48 $ --
Costs and expenses
Cost of goods sold.................. 34,230 62,863 53,367 -- --
Selling, general and administrative. 47,330 29,076 13,792 1,948 655
Research and development............ 3,241 6,526 10,915 7,434 5,811
One-time charge--acquired in-process
research and development........ -- -- 16,000 -- --
-------------- ------------- ------------- ------------- -------------
Total costs and expenses................. 84,801 98,465 94,074 9,382 6,466
-------------- ------------- ------------- ------------- -------------
Operating loss........................... (19,907) (22,638) (31,340) (9,334) (6,466)
Net interest income (expense)............ (390) (5,736) (7,999) 1,560 317
Net loss................................. $ (20,297) $ (28,374) $ (39,339) $ (7,774) $ (6,149)
============== ============= ============= ============= =============
Net loss per ordinary share(2)........... $(1.64) $ (3.39) $(9.62) $(3.17) $(11.13)
============== ============= ============= ============= =============
Weighted average ordinary shares
outstanding(2)...................... 12,366,808 8,359,623 4,087,210 2,454,710 552,507
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 (1) 1995 1994
-------------- ------------- ------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................. $ 43,133 $ 52,786 $ 2,663 $ 21,055 $ 32,213
Working capital (deficit).................. 58,901 51,770 10,498 20,107 24,033
Total assets............................... 157,017 171,737 123,668 21,575 32,317
Due to Elan Corporation, plc(3)............ 7,697 5,267 10,313 946 8,250
Short-term debt............................ -- 14,511 18,200 -- --
Working capital facility................... 20,393 -- -- -- --
Long-term debt, convertible into Ordinary
Shares................................ 8,897 7,902 53,204 -- --
Shareholders' equity (deficit)............. $104,943 $124,646 $ 28,183 $ 20,366 $ 24,033
</TABLE>
(1) Includes the results of the Division from March 28, 1996, the date the
Acquisition was consummated.
(2) Net loss per ordinary share is based on the weighted average number of
outstanding ordinary shares. The Company has adopted the provisions of SFAS
128 "Earnings per Share."
(3) Includes $3.7 million long-term obligation payable to Elan as of December
31, 1996.
22
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company is a developer and marketer of branded prescription pharmaceutical
products for niche therapeutic applications. It has acquired rights to market
its products through internal development, marketing alliances, in-licensing and
acquisitions. The Company promotes these products to three segments of the U.S.
pharmaceutical market: women's health care, cardiology and dermatology. The
Company also distributes a number of generic pharmaceutical products.
Founded in 1992, the Company initially focused on the development and
commercialization of so-called "complex generic" pharmaceutical products. In
1996, the Company acquired the Warner Chilcott division of Warner-Lambert. The
name "Warner Chilcott" had been associated with ethical (branded) medicines for
over 90 years. In the years prior to the Company's acquisition of Warner
Chilcott, the division had become a distributor of non-differentiated generic
products. By late 1996, the Company's management set in motion a plan to return
Warner Chilcott to its roots as a marketer and developer of ethical (branded)
medicines.
The Company's sales of branded products began in the second quarter of 1997 with
the launch of Vectrin(R), a branded minocycline product promoted to the
dermatology segment and LoCholest(R), a lipid regulator promoted to the
cardiology segment. In June 1997 the Company acquired a number of branded
products from Warner-Lambert including Pyridium(R), an orally active urinary
tract analgesic agent, Doryx(R), a broad spectrum antibiotic, and Eryc(R), an
oral capsule containing enteric-coated pellets of erythromycin. In December
1997 the Company launched NataFort(R), a prescription prenatal vitamin.
In July 1998 Warner Chilcott entered into a promotion agreement with
Schering-Plough under which the Company began to utilize its sales and marketing
organization to promote two of Schering's cardiovascular products: Imdur(R) and
K-Dur(R). Under the terms of the agreement, Warner Chilcott's compensation is
based upon the sales of both products. Marketing alliances, such as the
agreement with Schering-Plough, represent an important source of branded product
opportunities for Warner Chilcott. In February 1999 the Company entered into a
promotion agreement with Bristol-Myers under which the Company markets two
women's health care products: Ovcon(R) 35, a low dose oral contraceptive, and
Estrace(R) Cream, an estradiol vaginal cream for the treatment of vaginal and
vulval atrophy as well as for menopause symptoms.
Revenue from sales of branded products accounted for 0.0%, 11.0% and 25.3% of
total revenue for the years 1996, 1997 and 1998 respectively. Revenue from
marketing alliances were first generated in 1998 and accounted for 26.3% of
total revenue. Revenue associated with the sale of generic products continued to
decline as expected over the three years.
The foundation for the Company's future success is its sales and marketing
organization. The Company began to build its sales force in early 1997 and
continued those efforts through 1998. It increased its sales force, including
sales management, from 175 people at year-end 1997 to 270 at the end of 1998.
The Company's target for its sales force is roughly 295 based on 250
23
<PAGE>
representatives in the primary care sales force, 25 in the dermatology sales
force and 20 in sales force management.
Future revenue growth will be dependent on the Company increasing the sales of
its existing portfolio and adding new products through acquisition,
in-licensing, marketing alliances or self-development.
Results of Operations
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to the Consolidated Financial
Statements, appearing in Item 8.
Years Ended December 31, 1998 and 1997
Total revenue for the year ended December 31, 1998 declined 14.4% to $64.9
million from $75.8 million for the year ended December 31, 1997. Branded sales
during the year increased 97.5% to $16.4 million from $8.3 for the prior year.
This increase was due to the launch of NataFort(R) and increased sales of both
Vectrin(R) and Doryx(R) partly offset by a decline in sales of LoCholest(R). The
Company began selling NataFort(R) in December 1997; however, meaningful sales of
the product began in the first quarter of 1998. The Company de-emphasized
LoCholest(R) in mid 1998 in anticipation of the agreement with Schering-Plough.
Sales of non-differentiated generic products during 1998 declined $36.1 million
or 53.5% to $31.4 million due to the out-licensing of the Company's generic
minocycline product to Barr Laboratories beginning in the fourth quarter of 1997
and decreased emphasis on generic products in favor of the Company's branded
offerings.
Gross profit on product sales was $13.6 million for the year ended December 31,
1998 as compared to $13.0 million for the year 1997. The gross margin for
branded and generic products sales increased by approximately 11% to 28.5%
during the year ended December 31, 1998. Improved gross profits reflect the
Company's increased focus on higher-margin branded products. As mentioned above,
1998 sales of branded products increased 97.5% and generic product sales
decreased 53.5% from 1997. Improved gross profit results would have been greater
if not for unfavorable inventory adjustments associated with the Company's
non-differentiated generic business and returns of short-dated branded goods
during the year.
Revenues from marketing alliances totaled $17.0 million for the year and
included revenues from the promotion of Imdur(R) and K-Dur(R) for Schering-
Plough, earnings from the Company's distribution arrangement for IS5MN with
Bristol-Myers and royalties on sales of generic minocycline under an agreement
with Barr Laboratories. Revenues from the marketing alliance with Schering-
Plough for Imdur(R) were negatively impacted during the fourth quarter of 1998
due to generic product competition. This generic competition also affected the
royalties the Company earned on sales of IS5MN by Bristol-Myers.
Selling, general and administrative expenses totaled $41.7 million for the year
compared to $23.6 million in 1997, an increase of 76.6%. The most significant
factor contributing to the increase was the expansion of the Company's sales
force. The sales force averaged 155 sales representatives in 1998 compared with
less than 40 in 1997. Advertising and promotion expenses increased by $0.5
million as the Company aggressively promoted three products during 1998 and only
two during
24
<PAGE>
1997. General and administrative expenses increased by $3.5 million compared
with the prior year, $1.7 million related to additions made to strengthen the
administrative staff and $1.7 million due to significant increases in legal
costs related to litigation of the Company's ANDA filings for two complex
generic products, nifedipine CC and terazosin.
Research and development expenses for the year were down from $6.5 million in
1997 to $3.2 million in 1998. The Company's R&D strategy shifted in mid 1997 to
focus on development projects with near-term revenue potential and relatively
low funding requirements including, for example, line extensions of the
Company's branded products.
Interest income increased from $1.5 million in 1997 to $2.6 million in 1998 due
to the interest income earned on the net proceeds from the Company's IPO and
related financings in August of 1997. Interest expense in the year decreased to
$3.0 million as compared to $7.3 million in 1997. This favorable result reflects
the exchange and conversion of $49.5 million of senior subordinated discount
notes into ordinary shares in June 1997.
The net result of the factors outlined above was that the net loss for the year
ended December 31, 1998 decreased by 28.5% to $20.3 million as compared to a net
loss of $28.4 million for the year 1997. Increased sales of branded products
combined with the revenue from marketing alliances more than offset the
increased costs of the Company's sales force and increased administrative
expense. Basic and dilutive loss per ordinary share for the year decreased to
($1.64) on 12.4 million shares from ($3.39) on 8.4 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, and the exchange and conversion of senior
subordinated discount notes for ordinary shares.
Years Ended December 31, 1997 and 1996
Total revenues were $75.8 million for the year ended December 31, 1997 compared
to $62.7 million in 1996. The increase is attributable to the fact that the 1996
results include revenues for the Warner Chilcott division (the "Division") only
for the period from the date of acquisition, March 28, 1996, to December 31,
1996. Including revenues for the Division on a pro forma basis for the full year
1996 net sales were $78.1 million. Measured against pro forma 1996 results, 1997
revenues decreased 2.9% reflecting a decline in sales of the Company's generic
products offset by the introduction of branded products beginning in the second
quarter of 1997. Sales of generic products declined from $78.1 million in 1996
to $67.5 million; a reduction of 13.6%.
The Company launched two branded products, Vectrin(R) and LoCholest(R), in the
second quarter of 1997, began to sell five branded products acquired from
Warner-Lambert in June and launched NataFort(R) in December. Together these
branded products accounted for $8.3 million of revenue versus zero in the prior
year. Branded products are sold at margins that are considerably higher than
those realized on the sale of generic products. Accordingly, the Company saw its
gross margin expand to 17.1% of sales for the full year 1997 from 14.9% in the
prior year. Including the results for the Division for the full year, pro forma
gross margin for 1996 was 11.3%.
25
<PAGE>
Selling, general and administrative expenses for 1997 were $23.6 million, an
increase of 127.7% over the $10.4 million posted in 1996. A number of factors
produced the marked increase in these expenses. First and foremost, in 1997 the
Company began to assemble two professional sales forces to promote its various
branded products. Second, the 1997 results include general and administrative
costs for the Division for the full year versus approximately nine months in
1996. Finally, the Company incurred substantial advertising and promotion
expenses in 1997 in connection with the launches of Vectrin(R) and LoCholest(R)
and, to a much lesser extent, NataFort(R).
Research and development expense decreased from $10.9 million in 1996 to $6.5
million in 1997, a reduction of $4.4 million or 40.4%. Research and development
expenses include ongoing costs associated with various product development
projects including both branded and complex generic products. The decline in
research and development spending reflects both a reduction in development costs
for complex generic products as the projects moved from development stage to
filing stage and a shift in the Company's emphasis to focus on lower cost, lower
risk projects with near-term revenue potential; particularly so-called
"grandfathered" products suitable for branded strategies and extensions of, or
improvements to, the Company's existing branded offerings.
In 1996, the Company recorded a $16.0 million charge relating to the write off
of acquired in-process research and development costs associated with the
Acquisition. This charge represented the estimated fair value of acquired
products for which FDA approval had not been received as of the acquisition
date. The Company is completing the development of certain of these products and
has already filed, or intends to file, ANDAs with the FDA.
Excluding the one-time write off of acquired research and development discussed
above, the Company's operating loss for the year ended December 31, 1997
increased to $22.6 million from $15.3 million in 1996. The increase resulted
primarily from the expenses of building the two sales forces, the costs of
launching new branded products and the inclusion of a full year's expenses for
the Division.
Interest income increased from $0.4 million in 1996 to $1.5 million in 1997 due
to the interest income earned on the net proceeds from the Company's IPO and
related financings in August of 1997. Interest expense in the year decreased to
$7.3 million as compared to $8.4 million in 1996. This favorable result reflects
the exchange and conversion of $49.5 million of senior subordinated discount
notes into ordinary shares in June 1997.
The net loss for the year ended December 31, 1997 was $28.3 million compared to
a net loss of $39.3 million in the prior year. The main factors leading to this
reduced loss were the one-time write off of $16.0 million of acquired research
and development recorded in 1996 offset by the costs of building the two sales
forces and launching new branded products.
Liquidity and Capital Resources
At December 31, 1998, cash and cash equivalents on hand amounted to $43.1. This
balance is primarily the result of the infusion of capital from the Company's
initial public offering in August 1997 and related financings totalling
approximately $74.6 million. Proceeds from the IPO have been used to fund
operating losses and ongoing working capital requirements. The Company's
26
<PAGE>
working capital adjusted to exclude cash and short-term debt balances, increased
to $15.8 million at December 31, 1998 from $13.5 million at year-end 1997. This
increased investment in adjusted working capital and the net loss posted for the
year were funded primarily by cash and equivalents on hand and increased
borrowings under the Company's bank credit facility.
On March 30, 1998, the Company entered into a $30 million senior secured credit
agreement with a syndicate of banks led by PNC Business Credit to fund a portion
of its investment in inventories and accounts receivable. At December 31, 1998,
the Company had $20.4 million outstanding under this credit facility, an
increase of $5.9 million over the $14.5 million owed on the predecessor credit
facility at December 31, 1997. Credit availability under the PNC facility is
based on the balances of certain inventory, accounts receivable and other assets
of Warner Chilcott, Inc., the Company's wholly owned United States operating
subsidiary. The amounts outstanding under the predecessor facility at December
31, 1997 were classified as a short-term obligation. The PNC facility provides
for credit availability through March 2001. Accordingly, the amounts outstanding
under the PNC facility at December 31, 1998 were classified as long-term
obligations.
The Company posted a substantial loss for the year ended December 31, 1998 and
losses may continue in 1999 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 ($43.1 million at December 31, 1998) and availability under its working
capital facility provide the Company with access to sufficient capital to meet
its requirements for at least the next two years. 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.
Net Operating Loss Carryforwards
At December 31, 1998, the Company has available net operating loss carryforwards
for United States Federal income tax reporting purposes of $47.6 million and
state income tax reporting purposes of approximately $30.9 million. Ultimate
utilization or availability of such net operating losses and certain deferred
tax assets may be limited if a significant change in ownership occurs, as
defined by rules enacted with the United States Tax Reform Act of 1986. The
Company did not pay any Federal income taxes in 1998, 1997 or 1996.
Inflation
Inflation had no material impact on the Company's operations during the year
ended December 31, 1998.
27
<PAGE>
Year 2000
During 1997 the Company initiated a plan to identify, assess and remediate "Year
2000" issues. This plan consists of three phases as follows: Phase I -
identification of all internal business critical systems and applications, key
vendors, and major customers. Although completed in June 1998, Phase I includes
the ongoing assessment of new vendors and customers as they become associated
with the Company's business activities. Phase II - assessment of year 2000
compliance for all systems and activities identified in Phase I. Phase II was
completed by December 31, 1998. Phase III - remediation and/or development of
contingency plans for non-compliant systems and activities. While contingency
plans have been developed for third party vendors, Phase III will continue to be
addressed through the transition of Year 2000 to ensure a smooth implementation
of contingency plans, if required.
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 put into place new systems to replace those
systems previously provided by Warner-Lambert Company to the former Division. As
a result, the Company's computer systems and applications have been recently
developed. Year 2000 upgrades of network software and hardware, and financial
software were completed during this year with the exception of the Company's
general ledger system and WAN Firewall which the Company is currently working
on. All internal business critical systems and applications are Year 2000
compliant with the exception of the Company's voice mail system which the
Company is currently updating. The Company expects that the general ledger
system, WAN Firewall and voice mail system will be Year 2000 compliant by the
end of the second quarter of 1999, and expects the associated costs to be
immaterial.
The Company has sent written inquiries to its key vendors and major customers as
to their progress in identifying and addressing Year 2000 compliance issues.
Those vendors and customers who have responded have reported that they expect to
be Year 2000 compliant well before the critical date.
The Company does not expect the costs associated with Year 2000 compliance to be
material. As of December 31, 1998, the Company incurred less than $100,000 in
the above mentioned system and application upgrades. These costs were paid from
available funds. The Company does not expect to incur additional costs of
significance and has not deferred information systems projects in order to
address Year 2000 issues.
The most significant Year 2000 risk faced by the Company is compliance on the
part of third party vendors with whom the Company does business. Warner Chilcott
utilizes third party vendors to perform a variety of functions including, but
not limited to, warehousing, distribution, billing services, product
manufacture, market research and sales force recruitment. Although these vendors
have supplied the Company with written confirmation of their anticipation of
Year 2000 compliance, the Company is developing contingency plans to address
potential problems should their efforts prove unsuccessful.
28
<PAGE>
Based on the Company's assessment efforts to date, the Company believes that
year 2000 issues will not be disruptive to its operations, nor have a material
adverse effect on its financial condition or results of operations. The
Company's beliefs and expectations, however, are based on certain assumptions
and expectations that ultimately may prove to be inaccurate. There can be no
assurance that the failure to ensure year 2000 compliance by a third party would
not have a material adverse effect on the Company.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, which becomes effective for our financial
statements beginning January 1, 2000. SFAS No. 133 requires a company to
recognize all derivative instruments as assets or liabilities in its balance
sheet and measures them at fair value. The Company does not expect the adoption
of this Statement to have a material impact on our financial statements.
The American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-1, Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use and SOP 98-5, Reporting on the Costs of Start-up
Activities, which are effective for our 1999 financial statements. The Company
does not expect adoption of these SOPs to have a material impact on our
financial statements.
Factors That May Affect Future Operating Results
Following is a discussion of some of 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.
The Company has a history of operating losses. Operating losses have been posted
since the formation of the Company in 1992. As of December 31, 1998, the
Company's accumulated deficit was $103.6 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.
29
<PAGE>
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. 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.
The Company 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
30
<PAGE>
and results of operations could be materially adversely affected by the
unfavorable outcome of legal actions and proceedings.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The following discussion about our exposure in market risk of financial
instruments contains forward-looking statements. Actual results may differ
materially from those described.
Our holdings of financial instruments are comprised of U.S. corporate debt,
foreign corporate debt, U.S. and state government debt, foreign
government/agency guaranteed debt, bank deposits and certificates of deposit,
and commercial paper. All such instruments are classified as securities
available for sale. We do not invest in portfolio equity securities or
commodities or use financial derivatives for trading purposes. Our debt security
portfolio represents funds held temporarily pending use in our business and
operations. We manage these funds accordingly. We seek reasonable assuredness of
the safety of principal and market liquidity by investing in rated fixed income
securities while at the same time seeking to achieve a favorable rate of return.
Our market risk exposure consists principally of exposure to changes in interest
rates. Our holdings are also exposed to the risks of changes in the credit
quality of issuers. We invest in the shorter-end of the maturity spectrum, and
at December 31, 1998, 100% of such holdings matured in one year or less.
Item 8. Financial Statements and Supplementary Data
Warner Chilcott's financial statements and schedule at December 31, 1998 and
1997 and for the years ended December 31, 1998, 1997 and 1996 and the
Independent Auditors' Reports thereon are included below.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Warner Chilcott Public Limited Company
31
<PAGE>
We have audited the accompanying consolidated balance sheet of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. In connection with our audit of the consolidated financial
statements, we also have audited the financial statement schedule as listed in
the accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audit.
We conducted our audit in accordance with United State generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1998, and the results
of their operations and their cash flows for the year then ended in conformity
with United States generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Short Hills, New Jersey
February 16, 1999
STATEMENT OF INDEPENDENT CHARTERED ACCOUNTANTS
To the Directors and Shareholders of Warner Chilcott Public Limited Company
We have audited the accompanying consolidated balance sheet of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1997 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1997 and 1996. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule as listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
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<PAGE>
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1997 and the results
of their operations and their cash flows for the years ended December 31, 1997
and 1996, in conformity with accounting principles generally accepted in the
United States. Also in our opinion, based on our audits, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG
Chartered Accountants
Dublin, Ireland
February 24, 1998
33
<PAGE>
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $43,133 $52,786
Accounts receivable 18,050 14,599
Inventories 13,099 16,175
Prepaid expense and other assets 7,403 7,399
---------- ----------
Total current assets 81,685 90,959
---------- ----------
Fixed Assets:
Equipment, furniture and fixtures 1,076 1,148
Other Assets:
Intangible assets 74,256 79,630
---------- ----------
Total assets $157,017 $171,737
========== ==========
LIABILITIES
Current Liabilities:
Accounts payable $8,833 $11,417
Accrued liabilities 6,254 7,994
Due to Elan Corporation, plc and subsidiaries 7,697 5,267
Short-term debt -- 14,511
---------- ----------
Total current liabilities 22,784 39,189
---------- ----------
Other Liabilities:
Working capital facility 20,393 --
Long-term debt 8,897 7,902
---------- ----------
Total liabilities 52,074 47,091
---------- ----------
SHAREHOLDERS' EQUITY
Ordinary Shares, par value $.05 per share; 50,000,000 shares
authorized, 12,366,808 shares issued and outstanding at
December 31, 1998 and 1997 618 618
Deferred Shares, par value IR,1 per share; 30,000 shares 45 45
authorized, 30,000 shares issued and outstanding at December 31,
1998 and 1997
Additional paid-in capital 208,939 208,962
Accumulated deficit (103,578) (83,281)
Deferred compensation (1,081) (1,698)
---------- ----------
Total shareholders' equity 104,943 124,646
---------- ----------
Total liabilities and shareholders' equity $157,017 $171,737
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of U.S. dollars, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES
Branded product sales $ 16,440 $ 8,322 $ --
Generic product sales 31,405 67,505 62,705
Marketing alliances and other revenue 17,049 -- 29
-------------- -------------- --------------
Total revenues 64,894 75,827 62,734
-------------- -------------- --------------
OPERATING EXPENSES
Cost of goods sold 34,230 62,863 53,367
Selling, general and administrative 41,709 23,618 10,373
Depreciation and amortization 5,621 5,458 3,419
Research and development 3,241 6,526 10,915
Onetime charge -- acquired in process
research and development -- -- 16,000
-------------- -------------- --------------
Total operating expenses 84,801 98,465 94,074
-------------- -------------- --------------
OPERATING LOSS BEFORE TAXES (19,907) (22,638) (31,340)
-------------- -------------- --------------
OTHER INCOME
Interest income 2,622 1,524 441
Interest expense (3,012) (7,260) (8,440)
-------------- -------------- --------------
Total other income (expense) (390) (5,736) (7,999)
-------------- -------------- --------------
NET LOSS BEFORE TAXES (20,297) (28,374) (39,339)
-------------- -------------- --------------
Income taxes -- -- --
-------------- -------------- --------------
NET LOSS $ (20,297) $(28,374) $(39,339)
============== ============== ==============
Net loss per ordinary share
Basic and Dilutive $ (1.64) $ (3.39) $ (9.62)
============== ============== ==============
Weighted average ordinary shares outstanding 12,366,808 8,359,623 4,087,210
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE>
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Deferred Additional
Number of Share Share Paid-in Accumulated Deferred
Shares Capital Capital Capital Deficit Compensation Total
------------ ------- -------- --------- ----------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 2,349,563 $117 $45 $35,772 $(15,568) -- $20,366
Stock issued for 2,415,000 121 -- 48,179 -- -- 48,300
cash
Issue expenses -- -- -- (1,774) -- -- (1,774)
Issue of warrant -- -- -- 630 -- -- 630
Net loss -- -- -- (39,339) -- (39,339)
------------ ------- -------- --------- ----------- ---------- ---------
Balance at December 31, 1996 4,764,563 238 45 82,807 (54,907) -- 28,183
Stock issued for 4,775,000 239 -- 82,267 -- -- 82,506
cash
Issue expenses -- -- -- (7,918) -- -- (7,918)
Conversion of
senior
subordinated 2,827,245 141 -- 49,336 -- -- 49,477
notes into
ordinary shares
Stock compensation -- -- -- 2,470 -- (2,470) --
Stock compensation -- -- -- -- -- 772 772
expense
Net loss -- -- -- -- (28,374) (28,374)
------------ ------- -------- --------- ----------- ---------- ---------
Balance at December 31, 1997 12,366,808 618 45 208,962 (83,281) (1,698) 124,646
Issue expenses -- -- -- (23) -- -- (23)
Stock -- -- -- -- -- 617 617
compensation
expense
Net loss -- -- -- -- (20,297) -- (20,297)
------------ ------- -------- --------- ----------- ---------- ---------
Balance at December 31, 1998 12,366,808 $618 $45 $208,939 $(103,578) $(1,081) $104,943
============ ======= ======== ========= =========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE>
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(20,297) $(28,374) $(39,339)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities
Depreciation and amortization 5,621 5,458 3,419
Accretion of loan discount 995 4,174 4,904
Deferred financing costs write-off -- 1,069 --
Stock compensation expense 617 772 --
Loss on sale of fixed assets -- 98 --
One time charge - in process research and -- -- 16,000
development
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, prepaid expense and other assets (3,455) (1,326) 3,190
Decrease in inventories 3,076 7,125 12,971
(Decrease) increase in accounts
payable and accrued liabilities (4,324) 5,327 13,512
---------- ---------- ----------
Net cash (used in) provided by
operating activities (17,767) (5,677) 14,657
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired and
deferred acquisition costs -- -- (144,813)
Purchase of tangible fixed assets (175) (495) (546)
Purchase of intangible assets -- (12,389) --
Sale of tangible fixed assets -- 1,168 --
---------- ---------- ----------
Net cash used in investing activities (175) (11,716) (145,359)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Working capital facility proceeds, net 20,393 -- --
Shortterm debt (repayment) proceeds (14,511) (2,343) 16,854
Short term advance - Elan Corporation, plc -- -- 144,370
Repayment of short term advance - Elan -- -- (144,370)
Corporation, plc
Loan proceeds (repayment) - Elan Corporation, plc 2,430 (4,729) --
Proceeds from longterm debt -- -- 48,300
Net proceeds from issuance of share capital (23) 74,588 46,526
Proceeds from sale of warrant -- -- 630
---------- ---------- ----------
Net cash provided by financing activities 8,289 67,516 112,310
---------- ---------- ----------
Net (decrease) increase in cash and cash (9,653) 50,123 (18,392)
equivalents
Cash and cash equivalents, beginning of year 52,786 2,663 21,055
---------- ---------- ----------
Cash and cash equivalents, end of year $43,133 $52,786 $2,663
========== ========== ==========
Cash paid for interest $1,542 $1,395 $1,010
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE>
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Warner Chilcott Public Limited Company ("Warner Chilcott" or the "Company") is
an Irish company with operations in Dublin, Ireland and Rockaway, NJ, USA. The
Company's consolidated financial statements include the financial statements for
Warner Chilcott Public Limited Company and all of its subsidiaries and are
prepared in U.S. dollars in conformity with United States generally accepted
accounting principles.
The Company 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 markets: cardiology, women's
health care and dermatology. All of the Company's branded products are promoted
by the Company's sales force. The Company operates in one business segment and
all of its revenues were generated in the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed in the preparation of the accompanying
consolidated financial statements are in conformity with generally accepted
accounting principles in the United States.
(a) Basis of consolidation
The consolidated financial statements include the accounts of Warner Chilcott
Public Limited Company and its subsidiaries. Significant intercompany
transactions and balances have been eliminated.
(b) Estimates and assumptions
The preparation of financial statements in accordance with United States
generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.
(c) Financial instruments
The Company considers all liquid interest-earning investments with original
maturities of ninety days or less to be cash equivalents. Investments with
maturities between ninety days and one year are considered short-term
investments. Cash and short-term investments are stated at cost plus accrued
interest, which approximates market value. From time to time, the Company
pledges cash and equivalents as collateral for borrowings under its working
capital facility. (See Note 9)
(d) 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, which approximate
average cost.
(e) Equipment, furniture and fixtures
Equipment, furniture and fixtures are stated at cost, net of accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the various assets (primarily five years or the life
of the lease or leasehold improvement).
(f) Intangible assets
Purchased goodwill and other intangible assets resulting from business
acquisitions are carried at cost and are amortized over their estimated useful
lives, which range between 5 and 20 years. Where events or circumstances are
present which indicate that the carrying amount of an intangible asset may not
be
38
<PAGE>
recoverable, the Company estimates the future undiscounted cash flows expected
to result from use of the asset and its eventual disposition. Where future
undiscounted cash flow is less than the carrying amount of the asset, the
Company will recognize an impairment loss. Otherwise, no loss is recognized.
(g) Revenue recognition
Revenue from sales is recognized upon shipment of product to the customer. The
Company warrants products against defects and for specific quality standards,
permitting the return of products under certain circumstances. Sales are
recorded net of deductions for cash discounts, sales returns, customer rebates
and pricing adjustments. Revenue from marketing alliances is recognized when
earned under the terms of the associated contracts.
(h) Research and development
Research and development costs are expensed as incurred.
(i) Foreign currency transactions
The Company's financial statements are prepared in U.S. dollars. Revenues are
generated in the United States and, in general, other business transactions are
also denominated in U.S. dollars. Accordingly, the Company's exposure to
currency fluctuations is limited. Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than
U.S. dollars are included in the results of operations as incurred.
(j) Income Taxes
Corporation tax is provided on the results for the year. The Company applies
Statement of Financial Accounting Standard ("SFAS") No. 109 "Accounting for
Income Taxes," which requires deferred tax assets and liabilities to be
recognized for future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled.
(k) Stock based compensation
The Company grants stock options for fixed numbers of shares to employees and
directors generally with an exercise price equal to the fair value of the shares
at the date of grant. The Company accounts for stock option grants to employees
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and includes appropriate disclosures as required by
SFAS No. 123, "Accounting for Stock-Based Compensation."
(l) Impairment of long-lived assets and long-lived assets to be disposed of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of" requires that long-lived assets and certain
identifiable intangible assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The application of this Statement did not have any impact on the
Company's consolidated financial statements.
(m) Net loss per ordinary share
The Company calculates net loss per ordinary share in accordance with the
provisions of SFAS No. 128, "Earnings Per Share." 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 each of the years ended
December 31, 1998, 1997 and 1996. Stock options and warrants have not been
included in the calculation since the inclusion of such shares would be
antidilutive (See Notes 10 and 11).
39
<PAGE>
(n) Comprehensive income
In June 1997, the Financial Accounting Standards Board (FASB) issued 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 loss is comprised
solely of net loss.
3. ACQUISITIONS
On March 28, 1996, the Company acquired certain assets, including the accounts
receivables, inventories, intellectual property, licenses, trade names and
know-how of the Warner Chilcott Division ("the Division") of Warner-Lambert
Company for approximately U.S. $145 million in cash plus certain other expenses.
The acquisition was accounted for as a purchase and, accordingly the operating
results for the Division are included in the Company's financial statements
beginning March 28, 1996. The Company had utilized Warner-Lambert since the
acquisition for certain transition services and currently utilizes
Warner-Lambert for contract manufacturing.
The total consideration paid including expenses and the allocation of such costs
are summarized by asset category below (in thousands of U.S. dollars):
Consideration $144,927
--------
Allocation of purchase price:
Tangible assets (receivables, inventories, etc.) 62,663
Assumed liabilities (9,360)
Acquired in process research and development 16,000
Trade name 35,000
Abbreviated New Drug Applications 6,200
Supply Agreement 4,800
Goodwill 29,624
The supply agreement is being amortized over its estimated useful life of 5
years. The remaining intangibles, including goodwill are being amortized over
their estimated useful lives of 20 years. The acquired in process research and
development value was written off in 1996. The respective values were determined
with the assistance of an independent appraiser.
In July 1997, the Company acquired five branded products from the Warner-Lambert
Company for approximately $13.0 million. The five brands were Pyridium(R),
Mandelamine(R), Doryx(R), Eryc(R), and Choledyl SA(R). The acquisition costs are
being amortized over 15 years.
40
<PAGE>
4. ACCOUNTS RECEIVABLE
December 31,
1998 1997
(in thousands of U.S. dollars)
------------------------------
Trade receivables $10,189 $15,941
Marketing alliance receivables 8,869 --
Other non-trade receivables 559 177
--------- ---------
19,617 16,118
Less allowance for doubtful accounts 1,567 1,519
--------- ---------
$18,050 $14,599
--------- ---------
5. INVENTORIES
December 31,
1998 1997
(in thousands of U.S. dollars)
------------------------------
Raw materials $ 1,897 $ 3,687
Finishing supplies 3 7
Work in process 932 492
Finished goods 11,597 12,460
--------- ---------
14,429 16,646
Less reserve for obsolescence 1,330 471
--------- ---------
$13,099 $16,175
--------- ---------
6. EQUIPMENT, FURNITURE AND FIXTURES
December 31,
1998 1997
(in thousands of U.S. dollars)
------------------------------
Equipment, furniture and fixtures $ 1,565 $ 1,390
Less accumulated depreciation 489 242
--------- ---------
$ 1,076 $ 1,148
--------- ---------
Depreciation expense amounted to $247,000, $179,000, and $315,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.
41
<PAGE>
7. INTANGIBLE ASSETS
December 31,
1998 1997
(in thousands of U.S. dollars)
------------------------------
Goodwill $29,624 $29,624
Tradename and other intangibles 58,389 58,389
--------- ---------
88,013 88,013
Less accumulated amortization 13,757 8,383
--------- ---------
$74,256 $79,630
--------- ---------
Amortization expense amounted to $5,374,000, $5,279,000, and $3,104,000 for the
years ended December 31, 1998, 1997, and 1996, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each material class of financial instrument:
Cash, cash equivalents and accounts receivable carrying amount approximates fair
value due to the short-term maturities of these instruments.
Other creditors, short-term debt and due to Elan carrying amount approximates
fair value due to the short-term maturities of these instruments.
Long-term debt and working capital facility carrying amount approximates fair
value based on market comparables.
The Company invests its cash in U.S. government securities and debt instruments
of financial institutions and corporations with investment grade credit ratings.
The Company has established guidelines relative to diversification and
maturities that are designed to help ensure safety and liquidity.
9. DEBT
Working Capital Facility
On March 30, 1998 Warner Chilcott, Inc., the Company's U.S. operating subsidiary
("WCI"), entered into a $30 million revolving credit facility and security
agreement with a syndicate of banks led by PNC Business Credit. The facility
expires in March 2001. The PNC facility replaced a facility provided by Bankers
Trust Commercial Corporation.
The PNC facility is collateralized by substantially all of the assets of Warner
Chilcott, Inc. including cash balances, accounts receivable, inventory, fixed
assets and other intangible assets. Availability under the credit facility is
based upon the balances of qualified collateral; primarily accounts receivable,
inventory and certain cash balances. Under the credit agreement, Warner
Chilcott, Inc. is required to maintain a minimum balance of shareholders'
equity. At December 31, 1998 the Company was in compliance with the covenants of
the PNC facility. Warner Chilcott, plc, Warner Chilcott Ireland Limited, and
Warner Chilcott Limited (Bermuda) have also pledged certain assets and financial
support for the facility.
Interest on outstanding borrowings accrues at either PNC's Base Rate or LIBOR
plus one and three-quarter percent. In addition, the Company pays a commitment
fee equal to three-eighths of one percent on the unused
42
<PAGE>
portion of the facility. Interest expense related to the PNC and predecessor
credit facilities in 1998, 1997 and 1996, including commitment fees, were $1.7,
$1.8 and $2.1 million respectively.
Senior Subordinated Discount Notes
In April 1996, WCI issued $69 million principal amount of Senior Subordinated
Discount Notes ("Notes") due 2001 at a 30% discount to the principal amount.
Gross proceeds to WCI amounted to $48.3 million, which were utilized to fund the
acquisition of the Division. No interest accrued on the Notes through October
25, 1998. The discount on the Notes was amortized to interest expense at a rate
of 14.8%, compounded semi-annually. At October 25, 1998 the discount on the
Notes was fully amortized and the Notes were carried at 100% of their principal
amount. Beginning October 25, 1998, interest began to accrue on the Notes at a
rate of 16.8% per annum paid semi-annually on each April 30th and October 31st.
At its sole discretion, the Company may issue additional Notes in lieu of cash
payment of any or all interest due on the Notes on each interest payment date.
The Notes are unsecured and rank subordinate in right of payment to all senior
indebtedness of WCI. The Notes are redeemable at the option of WCI, in whole or
in part, at any time prior to maturity at redemption prices equal to 105% of the
principal amount of the Notes plus accrued interest.
In June 1997, the Company offered all holders of the Notes the right to exchange
Notes for newly issued Convertible Senior Subordinated Discount Notes ("the
Convertible Notes") and detachable warrants to purchase Ordinary Shares of the
Company. The holders of 87% of the principal amount of the Notes accepted the
offer and the Company issued $49.5 million of Convertible Notes and detachable
warrants in exchange for $49.5 million of Notes. The conversion price for the
Convertible Notes, the number of shares subject to the detachable warrants and
the exercise price of the warrants were ultimately determined by the price at
which the Company sold shares in its IPO in August 1997. Following the exchange,
the Company exercised an option to convert the Convertible Notes into Ordinary
Shares. The net result of the exchange of Notes for Convertible Notes and
detachable warrants and the subsequent conversion of the Convertible Notes into
shares was that the Company issued 2,827,245 Ordinary Shares and warrants to
purchase an aggregate 141,362 Ordinary Shares exercisable at $17.50 per share.
The table below shows the components of long-term debt as of December 31, 1998
and 1997:
December 31,
1998 1997
(in thousands of U.S. dollars)
-------------------------------
Senior subordinated discount notes $ 6,228 $ 6,228
Accreted interest 2,669 1,674
----------- ------------
Long-term debt $ 8,897 $ 7,902
----------- ------------
The amount of original issue discount amortized to interest expense was $1.0
million in 1998 and $4.2 million in 1997.
10. SHARE CAPITAL
Ordinary Shares
In August 1997 the Company completed its initial public offering (the "IPO")
selling 3,500,000 shares at an issue price of $17.50 per Ordinary Share.
Concurrent with the IPO, Barr Laboratories Inc. purchased 250,000 Ordinary
Shares in a private placement at an issue price of $16.275 per share which
equated to the IPO issue price net of underwriting discounts and commissions.
Also, at the time of the IPO, Elan Corporation, plc exercised a warrant to
purchase 500,000 Ordinary Shares at a price of $16.00 per share. In September
1997 the underwriters of the Company's IPO exercised an option to cover
over-allotments and purchased an
43
<PAGE>
additional 525,000 Ordinary Shares from the Company at a price of $17.50 per
share less underwriting discounts and commissions. The net proceeds to the
Company of the IPO and related financings totalled $74.6 million.
In 1997, the Company issued 2,827,245 Ordinary Shares and 141,362 detachable
warrants in exchange for Convertible Senior Subordinated Discount Notes (See
Note 9).
Deferred Shares
Holders of Deferred Shares will not be entitled to receive dividends or to
receive notice of or be represented at shareholder meetings of the Company or to
vote at such meetings. On liquidation or a winding up of the Company the holders
of Deferred Shares will be entitled to receive the par value of the Deferred
Shares after the holders of the Ordinary Shares have received the par value of
the Ordinary Shares but shall not be entitled to otherwise participate in the
assets which are available for distribution.
Warrants Issued In Connection With Financing Activities
The Company from time to time has issued warrants in connection with various
financing activities.
On September 30, 1997, the Company issued a five-year warrant to Elan to
purchase 150,000 Ordinary Shares at an exercise price of $22.75 per share in
conjunction with bridge financing for the purchase of five products from Warner
Lambert.
In connection with Barr's purchase of shares at the time of the IPO, the Company
issued to Barr a warrant to purchase up to 250,000 Ordinary Shares exercisable
at $16.275 per share. The warrant becomes exercisable as to 62,500 shares during
four one-year periods beginning on each of the first, second, third and fourth
anniversaries of the IPO. If Barr does not exercise, in full, its right to
purchase the 62,500 shares during any one-year period, such portion of the
warrant expires. At December 31, 1998, this warrant was exercisable as to 62,500
shares.
In connection with the acquisition of the Division, the Company issued a warrant
to Warner-Lambert for $672,000. This warrant entitles Warner-Lambert to purchase
1,130,158 Ordinary Shares of the Company for $18 million. This warrant is
exercisable through January 31, 2001.
During the years ended December 31, 1995 and 1996 the Company issued warrants to
shareholders to purchase 151,275 and 88,080 Ordinary Shares, respectively, at an
exercise price of $16.00 per share. These warrants are exercisable through
October 17, 1999.
In October 1994 the Company issued warrants to purchase 75,000 Ordinary Shares
to Montgomery Securities in connection with a private placement. These warrants
are exercisable at $19.20 per Ordinary Share at any time up to October 17, 1999.
Other Warrants
In October 1994, the Company granted to an individual who was, at the time, an
officer of the Company a warrant to purchase 10,000 Ordinary Shares at a
consideration of $0.05 per share and a warrant to purchase 33,334 Ordinary
Shares at an exercise price of $16.00 per share. These warrants are exercisable
through October 17, 1999.
During 1996, 100,000 warrants were issued to an individual who was, at the time,
an officer and director of the Company. The exercise price of $20.00 per share
was equal to the estimated fair value of the shares on the date of the grant.
The warrants are exercisable through June 28, 2001.
44
<PAGE>
Other
In December 1998, Elan Corporation, plc, contributed 600,000 shares of the
Company's stock to an entity formed by it and selected members of senior
management of the Company. Under the terms of the transaction, Elan retained the
right to proceeds from the sale of the shares at prices up to $11.50 per share.
Thereafter, Elan would be entitled to receive 50% of any sales proceeds in
excess of $11.50 per share.
11. EMPLOYEE AND DIRECTOR STOCK OPTIONS AND COMPENSATORY WARRANTS
Incentive Share Option Scheme
In April 1997, the Company adopted an Incentive Share Option Scheme for
officers, directors and employees which provides for both nonqualified stock
options and incentive stock options. The option exercise price is the fair
market value at the date of grant. Options for officers, employees, and
directors generally vest over four years and expire on the earlier of ten years
from the date of grant or after a specified period following the participant's
separation from the Company. At December 31, 1998 options for 799,450 shares
were outstanding under the Scheme, 700,550 shares were available for future
grants and 260,026 were exercisable.
Warrants Issued to Officers and Directors
The Company has issued warrants to certain executives and to directors that are
not governed by the Incentive Share Option Scheme. These warrants are described
below:
In June 1996, the Company issued warrants to directors to purchase up to an
aggregate 60,000 Ordinary Shares at an exercise price of $20.00 per share. The
exercise price on the date of grant was equal to the estimated fair value of the
shares on that date. The warrants are exercisable through June 28, 2001.
In March 1997, the Company issued warrants to two executives pursuant to
employment agreements approved by the Board of Directors. The warrants allow the
executives to purchase up to an aggregate 650,000 shares (520,000 at an exercise
price of $20.00 per share and 130,000 at an exercise price of $1.00 per share).
These warrants become exercisable ratably over 16 quarterly periods which began
October 1, 1996, but would be immediately exercisable in full if the Company
undergoes a change of control. The warrants expire on the earlier of October 31,
2006 or after a specified period following the termination of the executive's
employment with the Company. The difference between the estimated fair value of
the shares on the date of grant ($20.00) and the $1.00 per share exercise price
was recorded as deferred compensation expense totalling $2,470,000 on the date
of grant and is being amortized over the vesting period. Compensation expense
charged against income in respect of these warrants was $617,000 for the year
ended December 31, 1998 and $772,000 for the year ended December 31, 1997.
In February 1998, the Company issued a warrant to an executive pursuant to an
employment agreement approved by the Board of Directors. The warrant allows the
executive to purchase up to 200,000 Ordinary Shares at an exercise price of
$9.77 per share. The exercise price on the date of grant was equal to the fair
market value of the shares on that date. The warrant becomes exercisable (vests)
over 16 quarterly periods which began January 1, 1998, but would be immediately
exercisable in full if the Company undergoes a change of control. The warrants
expire on the earlier of February 3, 2008 or after a specified period following
the termination of the executive's employment with the Company.
45
<PAGE>
Options outstanding under the Scheme and warrants issued to officers and
Directors are summarized below:
<TABLE>
<CAPTION>
Price Per Share
-------------------------------------------------
Weighted
Shares Range Average
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Balance at December 31, 1995 - - -
Granted 60,000 $20.00 $20.00
Exercised - - -
Cancelled - - -
------------------------ ------------------------ ------------------------
Balance at December 31, 1996 60,000 $20.00 $20.00
Granted 926,750 $1.00-20.00 $17.33
Exercised - - -
Cancelled (7,500) $20.00 $20.00
------------------------ ------------------------ ------------------------
Balance at December 31, 1997 979,250 $1.00 - $20.00 $17.48
Granted 748,450 $6.00 - $9.88 $ 9.22
Exercised - - -
Cancelled (18,250) $9.77 - $20.00 $14.70
- ----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 1,709,450 $1.00 - $20.00 $13.89
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Exercisable at December 31, 1998 735,651 $1.00 - $20.00 $15.96
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Following is option and warrant data at December 31, 1998 by exercise price
range:
<TABLE>
<CAPTION>
Exercise Price Range $1.00 to $6.00 to $10.00 to Total
$5.99 $10.00 $20.00
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of shares subject to options and warrants 130,000 738,950 840,500 1,709,450
Weighted average exercise price $1.00 $9.21 $20.00 $13.89
Weighted average remaining contractual life (years) 7.75 9.23 7.53 8.28
Number of exercisable options and warrants 73,125 147,213 515,313 735,651
Weighted average exercise price of exercisable
options and warrants $1.00 $9.23 $20.00 $15.96
</TABLE>
The Company applies APB Opinion No. 25 in accounting for option grants under its
Incentive Share Option scheme and the issuance of warrants to officers and
directors. Accordingly, no compensation cost has been recorded in the
consolidated statement of operations for stock options or warrants granted at
exercise prices at least equal to fair market value on the date of grant. Had
the Company determined compensation cost based on the fair value of options and
warrants issued at the grant date under SFAS No.123, the Company's net loss
46
<PAGE>
and net loss per ordinary share would have been reduced to the pro forma amounts
indicated below (in thousands of dollars, except per share amounts).
1998 1997 1996
--------------- -------------- ---------------
Net loss as reported $(20,297) $(28,374) $(39,339)
Pro forma net loss $(22,767) $(30,817) $(39,499)
Pro forma net loss
per ordinary share $(1.84) $(3.69) $(9.66)
The pro forma amounts shown in the table above reflect the impact of options and
warrants granted in 1996 and after. There were no options or warrants granted to
employees or directors prior to 1996. Warrants issued for acquisition-related
consideration or in connection with financing activities were not included in
the analysis.
The per share weighted-average fair value of options and warrants granted during
1998, 1997 and 1996 was $4.54, $5.53 and $5.00 using the Black-Scholes
option-pricing model. Values were estimated using a weighted average life of
3.0, 3.6 and 5.0 years in 1998, 1997 and 1996, no expected dividend yield in any
year, volatility of .728 in 1998 and .256 in 1997, and risk free interest rates
of 4.6%, 6.0% and 5.5% in 1998, 1997 and 1996.
12. 401(k) SAVINGS PLAN
In April 1996, Warner Chilcott adopted a 401(k) savings plan in which a
participant may elect to defer an amount not in excess of 15% of his or her
compensation. The Company shall make matching contributions to the plan on
behalf of all participants who make elective deferrals. The Company shall
contribute and allocate to each participant's account matching contributions
equal to 50% of up to 6% of the participant's contributions.
The Company's contributions recognized for the year ended December 31, 1998,
1997 and 1996 were $174,200, $59,500 and $42,400, respectively.
13. TAXES
The Company operates in Ireland and the United States and is subject to various
taxes on income in both jurisdictions. Although the Company is currently
generating losses, tax relief may be available to offset future taxable
earnings. However, there can be no assurance that such relief will be available
to the Company.
47
<PAGE>
SFAS No. 109 requires, among other things, recognition of future tax benefits
measured at enacted rates attributable to temporary differences between
financial statement and income tax basis of assets and liabilities and to tax
net operating losses if realization of such benefits were likely to occur. Under
SFAS No. 109, the Company's deferred tax assets as of December 31, 1998 and
1997, respectively, are estimated as follows:
December 31,
1998 1997
(in thousands of U.S. dollars)
------------------------------
Deferred tax assets
Net operating loss carryforward $18,026 $12,187
Amortization of intangibles 5,329 5,660
Disqualified interest carryforward 826 826
Other, net (252) 10
--------- ---------
Subtotal 23,929 18,683
Valuation allowance (23,929) (18,683)
--------- ---------
Net deferred tax asset $ -- $ --
--------- ---------
For the three years ended December 31, 1998, 1997 and 1996, the temporary
differences that give rise to significant portions of deferred tax assets relate
primarily to net operating losses in the amount of $18,456,000, $22,414,000 and
$9,525,000. There are no significant deferred tax liabilities at December 31,
1998. The valuation allowance for deferred tax assets at December 31, 1998, 1997
and 1996 was $23,929,000, $18,683,000, and $10,914,000 respectively.
At December 31, 1998, the Company has available net operating loss carryforwards
for United States Federal income tax reporting purposes of $47,615,000 and state
income tax reporting purposes of approximately $30,932,000. Ultimate utilization
or availability of such net operating losses and certain deferred tax assets may
be limited if a significant change in ownership occurs, as defined by rules
enacted with the United States Tax Reform Act of 1986. The Company did not pay
any Federal income taxes in 1998, 1997 or 1996.
14. SIGNIFICANT CONCENTRATIONS
Significant customers / revenue sources
In 1998, the Company derived 25% of its total revenue from the promotion of
several cardiovascular products under an agreement with Schering Corporation.
The Company's sales force promotes these Schering products to a targeted doctor
population and in turn receives a fee based on Schering's sales of the products
to the trade. The agreement expires in June 2001 but may be terminated sooner by
either party under certain circumstances. Amounts earned by the Company under
the promotion agreement are paid on a quarterly basis within 45 days of the end
of each calendar quarter. At December 31, 1998, $8.1 million of the balance of
accounts receivable are amounts due from Schering.
48
<PAGE>
The Company distributes its pharmaceutical products through wholesalers,
distributors and direct to certain retailers. The following table shows
significant customer sales as a percentage of total sales:
December 31,
1998 1997 1996
------------ ------------ -------------
Customer A 17% 12% 15%
Customer B 12% 7% 7%
Customer C 10% 15% 13%
Credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of short-term investments and
accounts receivable. The Company's short-term investments consist of
interest-bearing securities issued by investment grade entities and exposure to
any one entity is limited.
Trade receivables are primarily due from wholesalers, distributors, major
retailers of pharmaceutical products, and multi-national pharmaceutical
companies located in the United States. The Company completes ongoing credit
evaluations of its customers and sales made on credit are generally not
collateralized. The following table shows significant trade receivables as a
percentage of total accounts receivable:
December 31,
1998 1997
------------- ------------
Customer A 11% 18%
Customer B 10% 12%
Customer C 9% 23%
15. COMMITMENTS AND CONTINGENCIES
Leases
The Company has various operating leases for the rental of office space and
sales force vehicles and equipment. Future minimum rental commitments for
operating leases with non-cancelable terms in excess of one year are as follows:
Minimum Rental Payments
-----------------------------
1999 $ 917
2000 945
2001 538
2002 544
2003 549
Thereafter 46
--------
Total $3,539
--------
Rent expense under operating leases during the years ended 1998, 1997, and 1996
was $571,300, $206,000 and $108,000 respectively.
Employment Agreements
49
<PAGE>
The Company has employment agreements with three of its executives, all of whom
are also directors. The agreements provide for minimum salary levels as well as
incentive bonuses that are payable if specified management goals are attained.
The agreements also contain provisions that would entitle each executive to
severance payments based upon their then current base salary in the event of
termination other than for "cause" as defined in the agreements. The maximum
contingent liability for such severance payments at December 31, 1998 totalled
$1.0 million.
16. RELATED PARTIES
The Company has ongoing business dealings with three companies (Elan, Barr, and
Boron-LePore) that are related parties. The Company employs certain procedures
to ensure that transactions with these parties take place on terms no more
favorable than could be obtained from unrelated third parties.
Elan Corporation, plc.
At December 31, 1998, Elan Corporation, plc and its subsidiaries held 19.6% of
the ordinary share capital of the Company (excluding shares that are part of the
transaction described in Note 10). Mr. Thomas G. Lynch, Executive Vice
President, Chief Financial Officer and a member of the Board of Directors of
Elan, serves on the Company's Board of Directors. The companies have ongoing
product development activities, for which the Company owes $7.0 million as of
December 31, 1998, and Elan also provides certain administration and support
services for the Company for fee.
The Company incurred research and development costs charged by Elan of $4.1
million and $8.5 million in the years ended December 31, 1997 and 1996,
respectively. No research and development costs were charged by Elan in 1998.
General and administrative expenses of $326,200, $582,900 and $644,840 in the
years ended December 31, 1998, 1997 and 1996 and equity issue expenses of
$1,774,000 in the year ended December 31, 1996 were charged by Elan. These
charges were expensed to operations and charged to additional paid-in capital
accordingly. Amounts billed to the Company by Elan for administrative services
are due within 30 days of receipt of invoice.
Barr Laboratories, Inc.
In 1997, the Company entered into an agreement under which Barr distributes
minocycline capsules manufactured under the Company's ANDA. Royalties from this
agreement of $94,000 and $262,000 were included in the Company's financial
results for the years ended December 31, 1998 and 1997, respectively. Barr holds
250,000 of the Company's Ordinary Shares and a warrant to purchase an additional
250,000 shares. Mr. Bruce Downey, the Chairman, President and Chief Executive
Officer of Barr serves on the Company's Board of Directors.
Boron-LePore Group, Inc.
Boron-LePore provides a range of services to the Company including providing
contract sales personnel, recruitment of sales representatives and certain
sample data record keeping. Mr. Roger Boissonneault, the President and Chief
Operating Officer of Warner Chilcott, serves on the Board of Boron-LePore. For
the years ended December 31, 1998 and 1997 fees of $5.6 million and $2.2 million
were charged by Boron-LePore and expensed to operations. No fees were incurred
during the year ended December 31, 1996.
50
<PAGE>
Schedule II
Valuation and Qualifying Accounts.
<TABLE>
<CAPTION>
Write-
offs
Balance against Additions
at Reserves Resulting Balance
Beginning Additional and other from Deduc- End of
of Period Reserves Reserves Acquisition tions Period
--------- ---------- --------- ----------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
1998:
Allowance for doubtful accounts $ 1,519 $ 50 $ (2) -- -- $ 1,567
Reserve for inventory obsolescence $ 471 $ 1,672 $ (813) -- -- $ 1,330
1997:
Allowance for doubtful accounts $ 2,030 -- $ (511) -- -- $ 1,519
Reserve for inventory obsolescence $ 1,331 $ 790 $(1,650) -- -- $ 471
1996:
Allowance for doubtful accounts -- -- -- $ 2,047 $ (17) $ 2,030
Reserve for iventory obsolescence -- -- -- $ 2,000 $ (669) $ 1,331
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
51
<PAGE>
Part III
Item 14. Financial Statements and Exhibits
(a) The following documents are filed with this Form 10-K
Financial Statements:
Index to Consolidated Financial Statements
Reports of Independent Auditors
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the Years Ended December
31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flow for the Years Ended December
31, 1998, 1997 and 1996
Notes to the Consolidated Financial Statements
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
The financial statement schedule should be read in conjunction
with the consolidated financial statements. Financial statement
schedules not included in this Annual Report on Form 10-K have
been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
Exhibits filed as part of this Report:
Exhibit No. Description
- ---------- -----------
2.1++ Asset Purchase Agreement, dated as of
February 13, 1996, by and between
Warner Chilcott, Inc. ("WCI") and
Warner-Lambert Company ("Warner-
Lambert")
3.1++ Memorandum and Articles of
Association, as amended, of Warner
Chilcott Public Limited Company (the
"Company")
4.1++ Deposit Agreement, dated as of June
16, 1997, among the Company, The Bank
of New York, and Owners from time to
time of the Company's ADSs
4.2++ Form of Ordinary Share Certificate
4.3++ Form of ADR Certificate (included
within Exhibit 4.1)
4.4++ Form of Senior Subordinated Discount
Note
4.5++ Form of Convertible Senior
Subordinated Discount Note
52
<PAGE>
4.6++ Form of Warrant for converting
holders of Rule 144 ADSs
10.1++ Incentive Share Option Scheme of the
Company, dated as of April 3, 1997
10.2++* Master Development and License
Agreement, dated as of October 17,
1994, by and between the Company and
Elan Corporation plc ("Elan")
10.3++* Development License and Supply
Agreement, dated as of November 10,
1994, by and between the Company and
Elan
10.4++* Development License and Supply
Agreement, dated as of March 10,
1995, by and between the Company and
Elan
10.5++* Development License and Supply
Agreement, dated as of March 10,
1995, by and between the Company and
Elan
10.6++ Administrative Support Agreement,
dated as of October 17, 1994, by and
between the Company and Elan
10.7++* Toll Manufacturing Agreement
(Minocycline) dated as of March 28,
1996 by and between WCI and Warner-
Lambert
10.8++* Gemfibrozil Supply Agreement, dated
as of March 28, 1996, by and between
WCI and Warner-Lambert
10.9++* Desmopressin Agreement, dated as of
March 28, 1996, by and between the
Company and Warner-Lambert
10.10++* Choledyl SA Supply Agreement, dated
as of June 26, 1997, by and between
Warner Chilcott (Bermuda) Limited and
Warner-Lambert
10.11++* Doryx and Eryc Packaging Agreement,
dated as of June 26, 1997, by and
between Warner Chilcott (Bermuda)
Limited and Warner-Lambert
10.12++* Transition Services Agreement, dated
as of March 28, 1996, by and between
WCI and Warner-Lambert
10.13++ Shareholders Agreement, dated as of
October 17, 1994, by and between the
Company and Elan
10.14+ Shareholders Agreement, dated as of
August 13, 1997 between the Company
and Barr Laboratories, Inc.
10.15++* Manufacturing Agreement, dated as of
December 30, 1994, by and between the
Company and Mova Pharmaceutical
Corporation ("Mova")
53
<PAGE>
10.16++* Development Agreement, dated as of
January 19, 1995, by and between the
Company and Mova
10.17++* LoCholest Supply Agreement, dated as
of September 13, 1996, by and between
the Company and Eon Labs
Manufacturing Inc.
10.18++* Supply and Rebate Agreement, dated as
of May 17, 1996, by and between the
Company and Cardinal Distribution
10.19++* Supply and Rebate Agreement, dated as
of March 28, 1997, by and between the
Company and McKesson Drug Company
10.20+* License and Distribution Agreement,
dated as of December 31, 1997, by and
between the Company and FH Faulding &
Co. Ltd.
10.21++ Private Placement Memorandum dated as
of March 13, 1996
10.22++ Purchase Agreement, dated as of April
25, 1996, by and among the Company,
WCI and the purchasers named therein
10.23++ Registration Rights Agreement, dated
as of October 17, 1994, by and among
the Company and the purchasers named
therein, together with all amendments
thereto
10.24++ Registration Rights Agreement, dated
as of April 25, 1996, by and among
the Company and the purchasers named
therein, together with all amendments
thereto
10.25++ Indenture, dated as of April 15,
1996, by and between WCI and Fleet
National Bank of Connecticut, as
Trustee
10.26++ Warrant Agreement, dated as of
October 17, 1994, by and between the
Company and Elan
10.27++ Warrant Agreement, dated as of March
26, 1996, by and between the Company
and Warner-Lambert
10.28++* Promotion and Sales Agreement, dated
as of November 25, 1996, by and
between the Company and Dermatology
Sales Specialists
10.29++ Purchase Agreement, dated as of June
26, 1997, by and between Warner
Chilcott (Bermuda) Limited and
Warner-Lambert
10.30++ Stock and Warrant Purchase Agreement,
dated as of July 8, 1997, by and
between Barr Laboratories, Inc. and
the Company
54
<PAGE>
10.31++ Exchange Agreement, dated as of June
15, 1997, by and among the Company
and the exchanger parties thereto
10.32# Employment Agreement between the
Company and James G. Andress, dated
March 3, 1997
10.33# Employment Agreement between the
Company and Roger M. Boissonneault,
dated March 3, 1997
10.34# Employment Agreement between the
Company and Paul S. Herendeen, dated
February 3, 1998
10.35+ Employment Agreement between the
Company and Beth P. Hecht, dated
December 1, 1998
10.36# Warrant Certificate Agreement between
the Company and James G. Andress,
dated October 31, 1996
10.37# Warrant Certificate Agreement between
the Company and James G. Andress,
dated October 31, 1996
10.38# Warrant Certificate Agreement between
the Company and Roger M.
Boissonneault, dated October 31, 1996
10.39# Warrant Certificate Agreement between
the Company and Paul S. Herendeen,
dated February 3, 1998
10.40# Revolving Credit and Security
Agreement, dated March 30, 1998,
among WCI, PNC Bank National
Association and the Lenders thereto
10.41# Financial Support Undertaking, dated
March 30, 1998, made by the Company
and Warner Chilcott (Bermuda) Limited
in favor of PNC Bank National
Association
10.42# Continuing Limited Non-Recourse and
Collateralized Guaranty, dated March
30, 1998, made by Warner Chilcott
(Bermuda) Limited in favor of PNC
Bank National Association
10.43# Trademark Collateral Assignment and
Security Agreement, from WCI to PNC
Bank National Association dated March
30, 1998
10.44# Trademark Collateral Assignment and
Security Agreement from Warner
Chilcott (Bermuda) Limited to PNC
Bank National Association dated March
30, 1998
10.45##* Promotion Agreement between Schering
Corporation and the Company dated
July 16, 1998
55
<PAGE>
10.46##* Amendment to Promotion Agreement with
Schering Corporation dated September
3, 1998
10.47+* CoPromotion Agreement between
Apothecon, Inc. and WCI dated January
1, 1999
10.48+* License Agreement (Ovcon) between
Bristol-Myers Squibb Company and
Warner Chilcott Laboratories Ireland
Limited, dated February 1, 1999
27.1+ Financial Data Schedule
++ Previously filed by the Registrant in the Registration Statement on Form
F-1, as amended (File no. 333-7240), and incorporated by reference.
# Previously filed by the Registrant in the Company's Quarterly Report on
From 10-Q for the quarterly period ended June 30, 1998 and incorporated by
reference.
## Previously filed by the Registrant in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1998 and
incorporated by reference.
+ Filed Herewith
* Confidential material has been omitted from this exhibit and filed
separately with the SEC pursuant to a request for confidential treatment.
56
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registration has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
WARNER-CHILCOTT PUBLIC LIMITED COMPANY
(Registrant)
By: /s/ James G. Andress
-----------------------------------
Name: James G. Andress
Title: Chairman, Chief Executive Officer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ James G. Andress Chairman, Chief Executive Officer (Principal March 30, 1999
- --------------------------------- Executive Officer) and Director
James G. Andress
/s/ Roger M. Boissonneault President, Chief Operating Officer and Director March 30, 1999
- ---------------------------------
Roger M. Boissonneault
/s/ Paul S. Herendeen Executive Vice President and Chief Financial Officer March 30, 1999
- --------------------------------- (Principal Financial and Accounting Officer)
Paul S. Herendeen
/s/ David Pinkerton Director March 30, 1999
- ---------------------------------
David Pinkerton
/s/ Harold Chefitz Director March 30, 1999
- ---------------------------------
Harold Chefitz
/s/ Docteur Nicole Bru Director March 30, 1999
- ---------------------------------
Docteur Nicole Bru
</TABLE>
57
<PAGE>
<TABLE>
<S> <C> <C>
/s/ James H. Bloem Director March 30, 1999
- -------------------------------
James H. Bloem
/s/ Bruce Downey Director March 30, 1999
- -------------------------------
Bruce Downey
/s/ Thomas G. Lynch Director March 30, 1999
- -------------------------------
Thomas G. Lynch
/s/ Donald E. Panoz Director March 30, 1999
- -------------------------------
Donald E. Panoz
</TABLE>
58
<PAGE>
EXHIBIT 10.14
SHAREHOLDER'S AGREEMENT
Dated as of August 13, 1997
by and between
WARNER CHILCOTT PUBLIC LIMITED COMPANY
and
BARR LABORATORIES, INC.
<PAGE>
SHAREHOLDER'S AGREEMENT
SHAREHOLDER'S AGREEMENT, dated as of August 13, 1997, by and
between Warner Chilcott Public Limited Company, a public limited company
organized and existing under the laws of Ireland (the "Company"), and Barr
Laboratories, Inc., a New York corporation ("Barr").
R E C I T A L S :
A. Pursuant to the Stock and Warrant Purchase Agreement, dated
as of July 8, 1997, by and between the Company and Barr (the "Purchase
Agreement"), Barr will purchase 250,000 American Depository Shares ("ADSs"),
each ADS representing one Ordinary Share, par value $.05, of the Company
("Ordinary Share"), and the Company will grant to Barr a Warrant to purchase
250,000 Ordinary Shares (the "Barr Warrants"), represented by ADSs.
B. The Company and Barr desire to enter into this
Shareholders' Agreement for the purpose of regulating certain aspects of Barr
relationships with regard to the Company and of providing for certain matters
relating to the Ordinary Shares and the rights and remedies of Investors.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the parties
hereto agree as follows:
ARTICLE I
1.1 Definitions
Capitalized terms used herein without definition shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"ADRs" shall mean American Depositary Receipts, evidencing
ADSs.
"ADSs" shall mean American Depositary Shares, evidenced by
ADRs, each American Depositary Share representing one Ordinary Share.
"Advice" shall have the meaning set forth in the last
paragraph of Section 4.3 hereof.
"Affiliate" of any specified person shall mean any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any person, means the power to
direct or cause the direction of the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms of "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
-1-
<PAGE>
"Agreement" shall mean this Shareholder's Agreement, as the
same may be amended, supplemented or modified from time to time in accordance
with the terms hereof.
"Barr Warrants" shall mean the warrants issued to Barr
pursuant to the Purchase Agreement.
"Business Day" shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday in the United States or a day on which
banking institutions in the state of New York generally are authorized or
required by law or other government actions to close.
"Capital Stock" means the Ordinary Shares, as represented by
ADSs, and any securities into or for which the Ordinary Shares, as represented
by ADSs, are convertible or exchangeable.
"Change of Control" means, as to any Person, a change, shift
or transfer of control with respect to such Person (including any change in the
control of any entity controlling such Person).
"class" means all of the Ordinary Shares considered as a
whole.
"Company" shall mean Warner Chilcott Public Limited Company, a
public limited company organized and existing under the laws of Ireland.
"Elan Warrants" shall mean the warrants issued pursuant to the
Warrant Agreement dated as of October 17, 1994, between the Company and Elan
Corporation, plc.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC promulgated pursuant
thereto.
"Exchange Holders" shall mean the holders of the ADSs of the
Company pursuant to the Exchange Agreement dated as of June 15, 1997 and the
securities issuable or issued upon the exercise of the warrant contemplated by
such Exchange Agreement.
"Holders" shall mean any Investors owning or having the right
to acquire Registrable Securities.
"Immediate Family Members" of a natural Person means the
spouse and lineal descendants (including legally adopted descendants) of such
Person.
"Indemnified Party" shall have the meaning set forth in
Section 5.1(c) hereof.
"Indemnifying Party" shall have the meaning set forth in
Section 5.1(c) hereof.
-2-
<PAGE>
"Investor Warrants" shall have the meaning set forth in the
Purchase Agreement dated as of October 17, 1994, among the Company and the
purchasers who are signatories thereto.
"Investors" means Barr and any Permitted Transferees of Barr
who are party (including by joinder) to this Agreement.
"Losses" shall have the meaning set forth in Section 5.1(a)
hereof.
"Montgomery Shares" shall mean the securities issuable or
issued upon exercise of the warrant granted to Montgomery Securities pursuant to
the Warrant Agreement dated as of October 17, 1994, between the Company and
Montgomery Securities.
"1994 Holders" shall mean the holders of ADSs of the Company
purchased pursuant to the Purchase Agreement dated as of October 17, 1994, among
the Company and the purchasers who are signatories thereto.
"Permitted Transferee" means any transferee of Capital Stock
acquired from any Investor, in a transaction that is not prohibited pursuant to
Section 2.1
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Proceeding" shall mean an action, claim, suit or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" shall mean the prospectus included in a
Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A promulgated
pursuant to the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Public Stock" means any shares of Capital Stock of any class
that is listed on a national securities exchange or that has been accepted for
inclusion in the National Association of Securities Dealers Automated Quotation
System or any similar national over-the-counter market.
"Registrable Securities" shall mean the ADSs purchased by the
Investors pursuant to the Purchase Agreement and the securities issued or
issuable upon exercise of the Barr Warrants and, in each case, any securities
issued or issuable with respect to such ADSs or
-3-
<PAGE>
securities by way of a stock dividend or stock split or in connection with a
combination of securities, recapitalization, merger, consolidation or other
reorganization upon original issuance thereof, and at all times subsequent
thereto, until, in the case of any such ADS or security, (A) it has been
registered effectively pursuant to the Securities Act and disposed of in
accordance with a Registration Statement covering it, (B) subject to Section 5.3
hereof, it is sold by the Holder thereof pursuant to Rule 144 or, if available,
Rule 144A (or any similar provisions then in effect), (C) subject to Section 5.3
hereof, it shall have been otherwise transferred and a new certificate or
certificates for such security not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent disposition of such
security shall not require registration or qualification of such security under
the Securities Act or (D) it ceases to be outstanding.
"Registration Statement" shall mean any registration statement
contemplated by Section 4.1 hereof, including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Rule 144" shall mean Rule 144 promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially the
same effect as such Rule.
"Rule 144A" shall mean Rule 144A promulgated by the SEC
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC having
substantially the same effect as such Rule.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Special Counsel" shall mean any special counsel to the
Holders of Registrable Securities, for which Holders of Registrable Securities
will be reimbursed pursuant to Section 4.3.
"Total Voting Power" means the total combined voting power in
the election of directors of all shares of Capital Stock then outstanding.
"Transfer" means any direct or indirect transfer, sale,
conveyance, pledge, hypothecation or other disposition, including, without
limitation, any of the foregoing which occurs by virtue of any Change of
Control.
"underwritten offering" shall mean a registration in
connection with which securities of the Company are sold to an underwriter for
reoffering to the public pursuant to an effective registration statement.
"Warner-Lambert Warrant" shall mean the warrant issued to
Warner-Lambert Company pursuant to the Warrant Purchase Agreement dated as of
March 28, 1996, between the Company and Warner-Lambert Company.
-4-
<PAGE>
ARTICLE II
2.1 Transfers by Investors. (a) No Investor shall Transfer
any Capital Stock now or hereafter owned by such Investor except as expressly
permitted in this Section 2.1.
(b) Without the consent of the Company or any other Investor
and without first offering such Capital Stock to the Company or any other
Investor, each Investor, at any time, may (i) Transfer to any Person any Capital
Stock which constitutes Public Stock and (ii) without regard to whether such
Capital Stock is Public Stock at such time, (a) in the case of an Investor that
is not a natural Person, Transfer any Capital Stock which it may now or
hereafter own to any Affiliate of such Investor which is not a natural Person,
and (b) in the case of an Investor that is a natural Person, Transfer any
Capital Stock to any Immediate Family Member or any trust or custodian account
for the sole benefit of such Investor or his Immediate Family Members and in
accordance with applicable laws of descent and distribution; provided, however,
that the transferee of any such Investor pursuant to clauses (a) or (b) above
shall join in this Agreement by the execution of a joinder agreement in the form
attached hereto as Exhibit A.
(c) In addition to Transfers permitted by subsection (b)
above, (i) an Investor may Transfer any Capital Stock only with the prior
approval of the Board of Directors of the Company by resolution of a majority of
the whole board (which approval may be withheld or given at the discretion of
the Board of Directors); and (ii) an Investor may make any Transfer required or
permitted to be made by such Investor pursuant to the provisions of Section 2.2.
2.2 Transfers to Comply with Laws. Notwithstanding any
contrary provision herein, no Investor may Transfer or offer to Transfer any
shares of Capital Stock (or solicit any offers to Transfer any shares of Capital
Stock), except in compliance with the Securities Act and in compliance with any
applicable state securities laws and rules and regulations promulgated
thereunder.
ARTICLE III
3.1 Voting and Election of Directors and Approval of
Contractual Arrangements. (a) From and after the date hereof and until such time
that Investors hold less than 51% of the Company's Capital Stock purchased
pursuant to the Purchase Agreement, Barr shall have the right to designate and
nominate an individual (a "Barr Designee") for election to the Board of
Directors of the Company, which individual shall be acceptable to the Company;
and each of the Investors severally agrees that in exercising its voting rights
on the election of directors, whether or not at an annual or special meeting of
the Company and whether or not at an adjourned meeting or whether by written
consent, such Investor shall vote its shares of the Company's voting Capital
Stock for, and will take all necessary actions within its control to cause, the
nomination and the election of the Barr Designee to the Board of Directors of
the Company.
The initial Barr Designee shall be Bruce L. Downey. Barr shall
have the right to remove its designee at any time and replace any such designee.
Each Investor agrees, upon written request of Barr, to take any and all actions
reasonably necessary to effect the removal from the Board of Directors of the
director who is the Barr Designee and the appointment or
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election of another director as the Barr Designee to replace such director so
removed or to permit Barr to have the representation on the Board of Directors
of the Company contemplated by this Section 3.1.
(b) Nothing in this Section 3.1 shall be deemed to impair the
right of the Board of Directors to increase or reduce (but not below the number
of directors then in office) the size of the Company's Board of Directors in the
manner provided in the Memorandum and Articles of Association of the Company. If
approved by the vote of a majority of the whole Board of Directors, the Company
may enter into one or more agreements with holders of Capital Stock of the
Company which provide for representation of such holders on the Board of
Directors. Each Investor, upon receipt of a copy of such other agreement and
provided that the holders of Capital Stock entitled to the benefits thereof are
obligated to vote shares of Capital Stock held by them for the Barr Designee,
agrees to vote all shares of Capital Stock held by it for and will take all
other actions within its control to cause the nomination and election of the
directors designated by other holders of Capital Stock in accordance with such
agreements. Barr may, at its option, by written notice to the Company,
irrevocably waive its rights to designate a nominee for a directorship.
(c) The Company and the Investors hereby agree that all
contractual arrangements between the Company and such Investor will be subject
to approval by, or ratification of, a committee of the Board of Directors of the
Company consisting of the Chief Executive Officer of the Company and one or more
other directors unaffiliated with such Investor, as to the fairness of the terms
and conditions of such arrangements to the Company, and will be on a basis no
less favorable to the Company than could be arranged with third parties.
ARTICLE IV
4.1 Registration Rights. (a) Piggy-Back Registration Rights.
If the Company at any time proposes to file a registration statement under the
Securities Act with respect to any offering by the Company for its own account
or for the account of others of any class of security to be offered for cash
(other than (i) a registration statement on Forms F-4, F-8, S-4 or S-8, (ii) a
registration statement filed on Form F-1 or Form S-1 for an offering of capital
stock of the Company solely to any one or more of the Company's management,
employees or former employees, (iii) a registration statement filed in
connection with a transaction pursuant to Rule 145 under the Securities Act or
(iv) the first registration statement for an underwritten offering of capital
stock of the Company for its own account), then the Company shall in each case
give written notice of such proposed filing to the Holders at least thirty days
before the anticipated filing date, and such notice shall offer (a "Piggy-Back
Registration Offer") such Holders the opportunity to include any or all of the
outstanding Registrable Securities held by them in such registration statement
(a "Piggy-Back Registration") and shall set forth the intended method of
disposition of the securities proposed to be registered by the Company. Each
Holder desiring to have Registrable Securities registered under this Section
4.1(a) shall so notify the Company in writing within twenty days after the
receipt by such Holder of the written notice provided for in the preceding
sentence (which notification shall set forth the amount of Registrable
Securities for which registration is requested) and the Company will use its
best
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efforts to cause all such Registrable Securities, the Holders of which shall
have so requested the registration thereof, to be registered under the
Securities Act to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) by the Holders of the
Registrable Securities to be so registered; provided, however, that if such
registration shall be in connection with an underwritten offering and, if the
managing underwriter or underwriters of such offering, as selected by the
Company, shall advise the Company in writing that in its or their opinion the
total amount or kind of securities which the Holders, the Company and any other
persons or entities intend to include in such offering exceeds the amount which
can be sold in such offering without an adverse effect on the price, timing or
distribution of the securities offered, the Company shall be required to include
in such registration only the amount of Registrable Securities and securities of
other persons or entities, if any, which the managing underwriter or
underwriters determine, in its or their sole discretion, can be sold without an
adverse effect on the price, timing or distribution of the securities offered
(the securities so included to be apportioned as follows: (i) first, pro rata
among (A) the Exchange Holders, (B) the 1994 Holders and (C) the holders of
outstanding Ordinary Shares, or ADSs representing such Ordinary Shares, issued
or issuable upon exercise of the Investor Warrants and the Warner-Lambert
Warrant, (ii) second, pro rata among the holders of securities issued upon
exercise of the Elan Warrants, (iii) third, the Montgomery Shares and (iv)
fourth, pro rata among the Holders of Registrable Securities requesting Piggy-
Back Registration thereof; provided, however, that in the event that any such
request for Piggy-Back Registration is in response to a demand registration
pursuant to the Elan Warrants, then the securities so included to be apportioned
as follows: (i) first, pro rata among the holders of securities issued upon
exercise of the Elan Warrants, (ii) second, pro rata among (A) the Exchange
Holders, (B) the 1994 Holders and (C) the holders of outstanding Ordinary
Shares, or ADSs representing such Ordinary Shares, issued or issuable upon
exercise of the Investor Warrants and the Warner-Lambert Warrant, (iii) third,
the Montgomery Shares and (iv) fourth, the Holders of Registrable Securities
requesting Piggy-Back Registration. In the event that a registration shall be,
in whole or in part, in connection with an underwritten offering of ADSs, or
Ordinary Shares underlying such ADSs, the Company shall not be required to
include any Registrable Securities in such registration unless the Holders
requesting registration thereof agree to accept the offering on substantially
the same terms and conditions as the ADSs, or Ordinary Shares underlying such
ADSs, otherwise being sold by the Company in such underwritten offering.
Notwithstanding the foregoing, the Company shall be obligated
to make only two Piggy-Back Registration Offers and thereafter the Company shall
have no further obligation under this Section 4.1(a); provided, however, that if
any such Piggy-Back Registration in which Holders have requested inclusion of
Registrable Securities is not declared effective or if at least 50% of the
Registrable Securities of such Holders requested to be included therein are not
so included, such Piggy-Back Registration shall not constitute a Piggy-Back
Registration Offer for the purpose of this Section 4.1(a). Notwithstanding
anything to the contrary in this Section 4.1(a), the Company shall have the
right, in its sole discretion, to discontinue any registration under this
Section 4.1(a) at any time prior to the effective date of such registration if
the registration of securities for the Company's account giving rise to such
registration under this Section 4.1(a) is, in the sole discretion of the
Company, discontinued by the Company.
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(b) Demand Registration. (i) Right to Demand. At any time
after six months after the effective date of the first registration statement
for an underwritten offering of securities of the Company for its own account,
the Holders of not less than 50% of the outstanding Registrable Securities may
make a written request to the Company for registration under and in accordance
with the provisions of the Securities Act of all or part of such Registrable
Securities (a "Demand Registration"). Within ten days after receipt of any such
request, the Company will give written notice (the "Notice") of such
registration request to all Holders, and the Company will include in such
registration all outstanding Registrable Securities of such Holders with respect
to which the Company has received written requests for inclusion therein. Each
Holder desiring to have Registrable Securities registered under this Section
4.1(b) shall so notify the Company in writing within ten days after the receipt
by such Holder of the Notice. All requests made pursuant to this Section 4.1(b)
will specify the amount of the Registrable Securities to be registered and will
also specify the intended method or methods of disposition thereof.
Notwithstanding the foregoing, the Company shall not be required to effect a
Demand Registration hereunder unless such Demand Registration is in respect of
the number of Registrable Securities whose aggregate offering price is expected
to be at least $1,000,000.
(ii) Number of Demand Registrations. The Company shall be
obligated to effect one Demand Registration. The Company shall not be deemed to
have effected a Demand Registration unless and until such Demand Registration is
declared effective.
(iii) Priority on Demand Registrations. Notwithstanding
anything in this Section 4.1(b) to the contrary, if the managing underwriter or
underwriters of a Demand Registration (or, in the case of a Demand Registration
not being underwritten, Holders of at least 50% of the outstanding Registrable
Securities sought to be registered therein), advise the Company in writing that
in its or their opinion the total amount of securities proposed to be sold in
such Demand Registration exceeds the amount which can be sold in such offering
without an adverse effect on the price, timing or distribution of the securities
offered, the Company shall be required to include in such registration only the
amount of Registrable Securities which the managing underwriter or underwriters
(or Holders, as the case may be) determine, in its or their sole discretion, can
be sold without an adverse effect on the price, timing or distribution of the
securities offered (the securities so included to be apportioned as follows: (i)
first, pro rata among the Holders of Registrable Securities making the Demand
Registration, (ii) second, pro rata among (A) the Exchange Holders, (B) the 1994
Holders and (C) the holders of outstanding Ordinary Shares, or ADSs representing
such Ordinary Shares, issued or issuable upon exercise of the Investor Warrants
and the Warner-Lambert Warrant, (iii) third, pro rata among the holders of
securities issued upon exercise of the Elan Warrants, (iv) fourth, the
Montgomery Shares; provided that if such Holders have requested inclusion in
such Demand Registration and more than 50% of the Registrable Securities of such
Holders requested to be included are not so included, such Holders shall be
entitled to one additional Demand Registration hereunder on the same terms and
conditions as would have applied to such Holders had such earlier Demand
Registration not been made.
(iv) Selection of Underwriters. If any offering pursuant to a
Demand Registration is in the form of an underwritten offering, the Company
shall have the right to select the managing underwriter or underwriters to
administer the offering, which managing
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underwriter or underwriters shall be of nationally recognized standing and
reasonably satisfactory to the Holders of a majority of the Registrable
Securities to be registered.
4.2 Hold-Back Agreements. (a) Restrictions on Public Sale by
Holders of Registrable Securities. Subject to Section 4.2(b), the registration
rights of the Holders pursuant to this Agreement and the ability to offer and
sell Registrable Securities pursuant to a Registration Statement are subject to
the following conditions and limitations, and each of the Holders agrees with
the Company that:
(i) If the Company determines in its good faith
judgment that the filing of a Registration Statement under Section 4.1 hereof or
the use of any Prospectus would require the disclosure of important information
which the Company has a bona fide business purpose for preserving as
confidential or the disclosure of which would impede the Company's ability to
consummate a significant transaction, upon written notice of such determination
by the Company, the rights of each of the Holders to offer, sell or distribute
any Registrable Securities pursuant to such Registration Statement or to require
the Company to take action with respect to the registration or sale of any
Registrable Securities pursuant to such Registration Statement (including any
action contemplated by Section 4.3 hereof) will for up to 120 days in any 12-
month period be suspended until the date upon which the Company notifies the
Holders in writing that suspension of such rights for the grounds set forth in
this Section 4.2(a)(i) is no longer necessary.
(ii) If consummation of any business combination
by the Company has occurred or is probable for purposes of Rule 3-05 or Article
11 of Regulation S-X under the Securities Act, upon written notice thereof by
the Company to the Holders, the rights of each of the Holders to offer, sell or
distribute any Registrable Securities pursuant to a Registration Statement or to
require the Company to take action with respect to the registration or sale of
any Registrable Securities pursuant to such Registration Statement (including
any action contemplated by Section 4.2 hereof) will for up to 120 days in any
12-month period be suspended until the date on which the Company has obtained
the financial information required by Rule 3-05 or Article 11 of Regulation S-X
to be included in such Registration Statement.
(iii) In the case of the registration of any
underwritten primary offering of capital stock of the Company (other than any
registration by the Company on Form F-8 or Form S-8, or a successor or
substantially similar form, of (A) an employee stock option, stock purchase or
compensation plan or of securities issued or issuable pursuant to any such plan,
or (B) a dividend reinvestment plan), each Holder agrees, if requested in
writing by the managing underwriter or underwriters administering such offering,
not to effect any offer, sale or distribution of Registrable Securities (or any
option or right to acquire Registrable Securities) during the period commencing
on the 10th day prior to the effective date of the registration statement
covering such underwritten primary offering and ending on the date specified by
such managing underwriter or underwriters in such written request.
(b) Limitation on Blackouts. Notwithstanding the provisions of
paragraph (a) of this Section 4.2 or the last paragraph of Section 4.3, the
aggregate number of days (whether or not consecutive) during which the Company
may delay the effectiveness of a Registration
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Statement under Section 4.1 hereof or prevent offerings, sales or distributions
by the Holders pursuant to paragraph (a) of this Section 4.2 or the last
paragraph of Section 4.3 shall in no event exceed 120 days during any 12-month
period.
4.3 Registration Procedures. In connection with the Company's
registration obligations pursuant to Section 4.1 and Section 4.2 hereof, the
Company will:
(a) Prepare and file with the SEC a Registration Statement on
the appropriate form available for the sale of such Registrable Securities and
cause such Registration Statement to become effective and remain effective for a
period of up to 120 days, or such shorter period which will terminate when all
Registrable Securities covered by such Registration Statement have been sold;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to a Registration Statement as may be necessary to
keep such Registration Statement continuously effective for a period of up to
120 days, or such shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold; cause the
related Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement as so amended or in such Prospectus as so
supplemented;
(c) Notify the Holders of Registrable Securities to be sold
and their Special Counsel, if any, immediately (i) when a Registration Statement
or any post-effective amendment thereto has become effective, (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to a Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement covering any or all of
the Registrable Securities or the initiation of any proceedings for that
purpose, (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby cease to be true and correct in all material respects, (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (vi) of the happening of any event that makes
any statement made in a Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in a Registration
Statement, Prospectus or documents so that, in the case of a Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, not misleading, and that in the case of a Prospectus, it
will not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
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(d) Furnish to each Holder of Registrable Securities and their
Special Counsel, if any, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits (other than exhibits to
documents incorporated by reference into such Registration Statement) to the
extent requested by such person (including those previously furnished or
incorporated by reference) as soon as practicable after the filing of such
documents with the SEC;
(e) Deliver to each Holder of Registrable Securities and their
Special Counsel, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such persons reasonably request; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders of Registrable Securities and the underwriters,
if any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto;
(f) Prior to any public offering of Registrable Securities
pursuant to a Registration Statement, use its reasonable efforts to register or
qualify such Registrable Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United States as any Holder or
managing underwriter reasonably requests in writing; use its reasonable efforts
to keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things in the opinion of the Company
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by such Registration Statement; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any tax
in any such jurisdiction where it is not then so subject;
(g) Cooperate with the Holders to facilitate the timely
preparation and delivery of ADRs evidencing Registrable Securities to be sold,
which ADRs shall not bear any restrictive legends and to enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or Holders may request at least
two Business Days prior to any sale of Registrable Securities;
(h) Upon the occurrence of any event contemplated by Section
4.3(c)(vi), prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(i) Use its reasonable efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed.
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The Company may require each seller of Registrable Securities
to furnish to the Company such information regarding the distribution of such
Registrable Securities as is required by law to be disclosed in a Registration
Statement and the Company may exclude from such registration the Registrable
Securities of any seller who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If a Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal statute then in force, the deletion of the
reference to such Holder in any amendment or supplement to a Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
During such time as the Holders of Registrable Securities may
be engaged in a distribution of such Registrable Securities, such Holders shall
comply with Regulation M promulgated under the Exchange Act, and pursuant
thereto, shall, among other things: (i) not engage in any stabilization activity
in connection with the securities of the Company in contravention of such Rules;
(ii) distribute the Registrable Securities solely in the manner described in the
Registration Statement; (iii) cause to be furnished to the managing underwriter
or underwriters, if any, or to the offeree if an offer is not made through the
managing underwriter or underwriters, if any, such copies of the Prospectus and
any amendment or supplement thereto and documents incorporated by reference
therein as may be required by law; and (iv) not bid for or purchase any
securities of the Company or attempt to induce any person to purchase any
securities of the Company other than as permitted under the Exchange Act.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 4.3(c)(ii),
4.3(c)(iii), 4.3(c)(iv), 4.3(c)(v) or 4.3(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Registrable Securities until such
Holder's receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 4.3(h) hereof, or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
4.4 Registration Expenses. (a) All fees and expenses incident
to the performance of or compliance with this Agreement by the Company shall be
borne by the Company whether or not a Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
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required to be made with the National Association of Securities Dealers, Inc.
and (B) in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriter or underwriters, if any, or Holders of
a majority of Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing ADRs evidencing Registrable
Securities and of printing Prospectuses if the printing of Prospectuses is
requested by the managing underwriter or underwriters, if any, or by the Holders
of a majority of the Registrable Securities included in a Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders
(subject to the provisions of Section 4.4(b) hereof), (v) fees and disbursements
of all independent chartered accountants for the Company (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company so desires such insurance, and (vii) fees and expenses
of all other persons retained by the Company; provided that the fees, discounts
and commissions of any underwriter or underwriters will be borne by the selling
Holders of the Registrable Securities included in a Registration Statement in
the relative proportion to the number of Registrable Securities of each such
Holder included in any Registration Statement. In addition, the Company shall
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange on
which similar securities issued by the Company are then listed.
(b) In connection with a Registration Statement, the Company
shall reimburse the Holders of the Registrable Securities for the reasonable
fees and disbursements of one firm of attorneys chosen by the Holders of a
majority of the Registrable Securities.
(c) Notwithstanding anything in this Section 4.4(c) to the
contrary, the Company shall not be required to pay any fees or expenses of any
Demand Registration begun pursuant to Section 4.1(b) hereof if the registration
request is subsequently withdrawn at any time at the request of the Holders of a
majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such fees and expenses), unless the Holders of
a majority of the Registrable Securities agree to forfeit their right to any
Demand Registration pursuant to Section 4.1(b) hereof; provided, however, that
if at the time of such withdrawal, the Holders have learned of a material
adverse change in the condition, business or prospects of the Company from that
know to the Holders of a majority of the Registrable Securities then outstanding
at the time of their request that makes the proposed offering unreasonable in
the good faith judgment of a majority in interest of the Holders of the
Registrable Securities then the Holders shall not be required to pay any such
expenses and the right to one Demand Registration pursuant to Section 4.1(b)
hereof shall not be forfeited.
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ARTICLE V
5.1 Indemnification. (a) Indemnification by the Company. The
Company shall, notwithstanding termination of this Agreement and without
limitation as to time, indemnify and hold harmless each Holder of Registrable
Securities, the officers, directors and employees of each of them, and each
person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the directors, officers,
agents and employees of such controlling persons, to the fullest extent lawful,
from and against any and all losses, claims, damages and liabilities
(collectively, "Losses"), arising out of or based upon (i) any untrue or alleged
untrue statement of a material fact contained in a Registration Statement under
which Registrable Securities held by such Holder were registered under the
Securities Act or offered for sale, in any preliminary prospectus (if used prior
to the effective date of such Registration Statement) or in any Prospectus or
any form of prospectus or in any amendment or supplement thereto (if used during
the period the Company is required to keep the Registration Statement
effective), in each case, on the effective date of such Registration Statement
or post-effective amendment, or the date of such Prospectus, including any
preliminary prospectus, or supplement, (ii) any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, necessary to make the statements therein in light of the
circumstances under which they were made) not misleading, (iii) any violation or
alleged violation by the Company of either of the Securities Act or the Exchange
Act, or any rule or regulation promulgated thereunder, or any state securities
law, and will reimburse, as incurred, each such indemnified party for any
reasonable legal or other out-of-pocket expenses reasonably incurred by them in
connection with investigating or defending against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action in
respect thereof; provided, however, that the Company will not be liable in any
such case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement, preliminary prospectus, Prospectus, form of prospectus
or any amendment or supplement thereto, in reliance upon and in conformity with
information regarding such Holder furnished in writing to the Company by or on
behalf of such Holder expressly for use therein; provided, further, however,
that the Company shall not be liable to the extent that (A) any such Losses
arise out of or are based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any preliminary prospectus if (i) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus, such Holder failed to send or deliver a copy of the Prospectus with
or prior to the delivery of written confirmation of the sale by such Holder of a
Registrable Security to the person asserting such Losses who purchased such
Registrable Security that is the subject thereof and (ii) the Prospectus would
have adequately corrected such untrue statement or alleged untrue statement or
such omission or alleged omission or (B) any such Losses arise primarily out of
or are based solely upon an untrue statement or alleged untrue statement or
omission or alleged omission in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission is adequately corrected
in an amendment or supplement to the Prospectus (such that there is no longer
any untrue statement of a material fact in the Prospectus or omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading) and if,
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having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, the Holder of Registrable
Securities thereafter failed to deliver such Prospectus as so amended or
supplemented, prior to or concurrently with the sale of a Registrable Security
to the person asserting such Losses who purchased such Registrable Security that
is the subject thereof from such Holder.
(b) Indemnification by a Holder of Registrable Securities. In
connection with a Registration Statement in which a Holder of Registrable
Securities is participating, such Holder of Registrable Securities shall furnish
to the Company in writing such information as the Company reasonably requests
for use in connection with a Registration Statement or any Prospectus and agrees
to indemnify and hold harmless the Company, its directors, officers, agents and
employees, each person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents and employees of such controlling persons, to the fullest
extent lawful, from and against all Losses arising solely out of or based solely
upon (i) any untrue statement of a material fact contained in a Registration
Statement, any Prospectus, or any form of prospectus, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company expressly for use therein; (ii) the use by such Holder of any Prospectus
after such time as the Company has advised such Holder that the filing of a
post-effective amendment or supplement thereto is required, except the
Prospectus as so amended or supplemented, or after such time as the obligation
of the Company to keep the Registration Statement effective and current has
expired; or (iii) any information given or representation made by such Holder to
any purchaser in connection with the sale of Registrable Securities which is not
contained in and not in conformity with the Prospectus (as amended or
supplemented at the time of the giving of such information or making of such
representation). In no event shall the liability of any selling holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall so notify the
person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided that the failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations pursuant to this Agreement,
except to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have prejudiced the Indemnifying Party.
Any such Indemnified Party shall have the right to employ
separate counsel in any such action, claim or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party
has agreed to pay such fees and expenses; or (2) the Indemnifying
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<PAGE>
Party shall have failed promptly to assume the defense of such action, claim or
proceeding and to employ counsel reasonably satisfactory to such Indemnified
Party in any such action, claim or proceeding; or (3) the named parties to any
such action, claim or proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party), it being understood, however, that, the Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all Indemnified Parties (other
than counsel for which the Indemnifying Party has agreed to pay under clause (1)
above), which firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
proceeding in respect of which any Indemnified Party is a party and is entitled
to indemnity hereunder, unless such settlement includes an unconditional release
of such Indemnified Party from all liability on claims that are the subject
matter of such proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such action or proceeding in a manner not
inconsistent with this Section 5.1) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim by an Indemnified Party for
indemnification under Section 5.1(a) or 5.1(b) hereof is found unenforceable by
a court of competent jurisdiction (even though the express provisions hereof
provide for indemnification in such case), then each applicable Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
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<PAGE>
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5.1(c), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or Proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.1(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5.1(d), an
Indemnifying Party that is a Holder of Registrable Securities shall not be
required to contribute any amount in excess of the amount by which the proceeds
actually received by such Indemnifying Party from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Indemnifying Party has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
5.2 Rules 144 and 144A. The Company shall use its best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Registrable
Securities, make publicly available other information so long as necessary to
permit sales of its securities pursuant to Rule 144 or Rule 144A. The Company
further covenants that it will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 or Rule 144A. Upon the request of any Holder of Registrable
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
5.3 Transfer of Registration Rights. Notwithstanding anything
contained herein to the contrary, the rights to participate in Company
registrations under Article IV hereof may be assigned by any Holder to a
transferee or assignee of Registrable Securities; provided that the Company is
given written notice by such Holder of Registrable Securities at the time of or
within 10 days after such transfer, setting forth the name and address of such
transferee or assignee and identifying the Registrable Securities with respect
to which such registration rights are being assigned; provided, further, that
such transferee or assignee acquires not less than 100,000 Registrable
Securities.
ARTICLE VI
6.1 Miscellaneous. (a) Remedies. In the event of a breach by
the Company or by a Holder of Registrable Securities, of any of their
obligations under this Agreement, each Holder of Registrable Securities or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder of
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<PAGE>
Registrable Securities agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(b) Subsequent Registration Rights Agreements. After the date
hereof, without the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to any person
the right to request the Company to register any securities of the Company under
the Securities Act unless the rights so granted are subject in all respects to
the prior rights of the Holders of Registrable Securities set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company
are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of certain Holders of Registrable Securities and that
does not directly or indirectly affect the rights of other Holders of
Registrable Securities may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or facsimile to:
(i) If to the Company at:
Lincoln House
Lincoln Place
Dublin 2, Ireland
Facsimile: 353-1-662-4950
Attention: David G. Kelly
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile: (212) 269-5420
Attention: William M. Hartnett, Esq.
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(ii) If to Barr at:
2 Quaker Road
P.O. Box 2900
Pomona, New York 10970-0519
Facsimile: (914) 353-3476
Attention: Chief Financial Officer
(iii) If to any other person who is then the
registered Holder of any Registrable
Securities, to the address of such Holder as
it appears in the stock transfer books of
the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being delivered to a reputable
overnight delivery service for delivery on the next Business Day; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(e) Additional Parties. Only Persons (other than the initial
signatory hereto) that execute a joinder agreement in the form of Exhibit A
shall be deemed to be Investors. Except to the extent limited in any joinder
agreement, each Person that so becomes an Investor after the date hereof shall
be entitled to all rights and privileges of an Investor as if he or she had been
an original signatory to this Agreement.
(f) Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no assignment of
rights under this agreement will be valid unless made in connection with a
contemporaneous Transfer of Capital Stock which is not prohibited by this
Agreement; and provided, further, that upon any such assignment, the assignee
shall comply with Section 6.1(e) hereof. The Company may not assign or otherwise
transfer any rights under this Agreement without the prior written consent of
each of the parties hereto.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full
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force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
WARNER CHILCOTT PUBLIC LIMITED COMPANY
By: /s/ Roger M. Boissoneault
-------------------------------------
Name: Roger M. Boissoneault
Title: President
BARR LABORATORIES, INC.
By: /s/ Bruce Downey
-------------------------------------
Name: Bruce Downey
Title: President
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<PAGE>
Exhibit A
SHAREHOLDER'S AGREEMENT SIGNATURE PAGE
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Investor:
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By:
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Name:
Title:
Date:
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Address:
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Telephone:
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Telex:
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Telecopy:
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Confidential Treatment
EXHIBIT 10.20
Redacted information, denoted as "[REDACTED]," has been omitted from this
document pursuant to a request for confidential treatment that has been
separately filed with the Commission.
LICENSE AND DISTRIBUTION AGREEMENT
Between
F H FAULDING & CO LIMITED
A.C.N. 007 870 984
and
WARNER CHILCOTT plc
<PAGE>
LICENSE AND DISTRIBUTION AGREEMENT dated as
of December 31, 1997 between F H FAULDING &
CO LIMITED, A.C.N. 007 870 984, a limited
liability company organized and existing
under the laws of Australia, with its
principal offices at 115 Sherriff Street,
Underdale, South Australia 5032, Australia
("FAULDING") and WARNER CHILCOTT plc, a
corporation organized and existing under the
laws of the Republic of Ireland, with its
principal offices at Lincoln House, Lincoln
Place, Dublin 2, Ireland ("WARNER
CHILCOTT").
WHEREAS, FAULDING and WARNER CHILCOTT, as assignee of Warner-Lambert
Company, are parties to the Prior License and Supply Agreements pursuant to
which FAULDING granted WARNER CHILCOTT a license to certain know-how and
information related to the Product and the exclusive right to manufacture and
distribute the Product in the Territory;
WHEREAS, FAULDING and its Affiliate, Purepac Pharmaceutical Co.
("Purepac") are parties to an Agreement dated as of March 15, 1995, pursuant to
which FAULDING granted Purepac a non-exclusive license to distribute a Competing
Product in the Territory;
WHEREAS, the parties intend hereby to terminate the Prior License and
Supply Agreements and to set forth the terms upon which FAULDING will grant
WARNER CHILCOTT:
A. the exclusive right to import, distribute, promote
and sell the Product in the Territory; and
B. a license to the Technology for the sole purpose of
selling and distributing the Product in the Territory
upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, FAULDING and WARNER CHILCOTT agree to the following:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
a. "Affiliates" shall mean (i) an entity controlled by a
common parent that owns more than fifty percent of the voting stock of both such
entity and one of the parties to this Agreement and (ii) such parent company.
b. "Certificate of Analysis" shall mean a document, which is
signed and dated by a duly authorized representative of FAULDING certifying that
the Product conforms with the Product Specification.
<PAGE>
c. "CIP" shall mean "Carriage and Insurance Paid" to the
destination specified in Section 7 hereof, as such term is defined in Incoterms.
d. "Competing Product" shall mean a pharmaceutical product
which is an AB-rated equivalent to Doryx(TM) 100 mg capsules, as currently
defined in the 17th edition of Approved Drug Products with Therapeutic
Equivalence Evaluations, issued by the United States Department of Health and
Human Services.
e. "Confidential Information" shall mean and include all
information which may be disclosed by either party or its Affiliates to the
other party or its Affiliates either pursuant to this Agreement or pursuant to
any prior agreement concerning (i) the Product; (ii) any technology of either
party, including, without limitation, the Technology, (iii) any marketing
strategies and business of either party, including such strategies and business
relating directly to the Product, and (iv) any technology generated by either of
them as a result of the rights granted and obligations arising under this
Agreement but shall not include information which the party receiving the
information can show: (i) either is or becomes available to the public other
than as a result of a disclosure by the receiving party; (ii) at the time of
receipt is already in the possession of the receiving party or (iii) becomes
lawfully available to the receiving party on a non-confidential basis from a
third party entitled to make that disclosure.
f. "cGMP" shall mean current good manufacturing practices as
required by the U S. Food, Drug and Cosmetic Act and the regulations promulgated
thereunder.
g. "FDA" shall mean the U.S. Food and Drug Administration and
any successor organization.
h. "Firm Order" shall have the meaning set forth in Section
6(b).
i. "FOB" shall mean "Free on Board" to the destination
specified in Section 7 hereof, as such term is defined in Incoterms.
j. "Incoterms" shall mean the 1990 edition of the
International Commercial terms published by the International Chamber of
Commerce, as may be amended or modified from time to time.
k. "Independent Analyst" shall mean an analyst that is
acceptable to both of the parties.
l. "Intellectual Property Rights" shall include all rights and
interests, vested or arising out of any patent, copyright, design, trade mark,
trade secrets, goodwill or Confidential Information rights whether arising by
common law or by statute or any right to apply for registration under a statute
in respect of those or like rights.
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<PAGE>
m. "Latent Defect" shall mean a deviation from Product
Specification that is discovered subsequent to receipt by WARNER CHILCOTT in any
Product that had met Product Specification at the time of receipt.
n. "Medical Affairs Liaison" shall have the meaning set forth
in Section 13.
o. "Minimum Obligation Period" shall have the meaning set
forth in Section 11.
p. "Net Sales of Product" shall mean WARNER CHILCOTT's gross
invoiced sales of Product less [REDACTED], which is the agreed upon allowance
for cash discounts and Medicaid rebates. Any discount, allowance, rebate,
management fee or wholesaler chargeback for Product that is given to a customer
due to the purchase of a product other than the Product, or due to the purchase
of any service, shall not be taken into consideration in the calculation of Net
Sales of Product.
q. "Objection Notice" shall have the meaning set forth in
Section 8(b).
r. "Prior License and Supply Agreements" shall mean the U.S.
License Agreement and the U.S. Supply Agreement, both of which are dated as of
September 5, 1985 as amended between F H FAULDING & Co Limited and WARNER
CHILCOTT, Inc., as assignee of Warner-Lambert Company.
s. "Product" shall mean the Doryx(TM) 100 mg capsules to be
supplied by FAULDING to WARNER CHILCOTT for marketing and distribution in the
Territory.
t. "Product Specification" shall mean the latest approved
specification of the Product by the FDA.
u. "Purepac" shall mean Purepac Pharmaceutical Co., an
Affiliate of Faulding, whose principal offices are located at 200 Elmora Avenue,
Elizabeth, New Jersey.
v. "Regulatory Authority" shall mean the FDA and/or any other
like authority whether Federal or State regulating the manufacture,
distribution, marketing and/or sale in the U.S. of therapeutic substances.
w. "Tablet" shall have the meaning set forth in Section 4.
x. "Technology" shall mean the technology in relation to the
Product, including the technical, scientific, industrial information and
knowledge, confidential information and expertise in relation to such Product.
y. "Territory" shall mean the United States of America,
including its territories and possessions and the Commonwealth of Puerto Rico.
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<PAGE>
z. "Warner Chilcott, Inc." shall mean Warner Chilcott, Inc., a
New Jersey corporation and wholly owned subsidiary of WARNER CHILCOTT.
2. GRANT OF EXCLUSIVE LICENSE
a. FAULDING hereby grants to WARNER CHILCOTT and, subject to
the provisions set forth in Section 2(e), to Warner Chilcott, Inc.:
i. an exclusive license, exclusive even as to
Licensor (subject to the provisions of
Section 11 below) to package, store,
promote, sell and distribute the Product in
the Territory on the terms and conditions
set forth in this Agreement; and
ii. an exclusive license, exclusive except as to
Licensor and its Affiliates for the sole
purpose of qualifying an alternate
manufacturing site under Section 5 below, to
use the Technology for the sole purpose of
packaging, storing, promoting, selling and
distributing the Product in the Territory
and to assist FAULDING in qualifying an
alternate manufacturer of the Product under
the circumstances described in Section 5
hereto.
b. WARNER CHILCOTT agrees that during the term of this
Agreement, it:
i. will not sell or attempt to sell the
Product, either on its own account or
through any third party outside the
Territory nor will it sell any Product to
any person or corporation within the
Territory where it has reasonable grounds to
believe that such other person or
corporation intends to sell the Product
outside the Territory;
ii. will not manufacture, sell or distribute any
Competing Product or attempt to manufacture,
sell or distribute any Competing Product,
either on its own account or through any
third party, whether within or outside the
Territory, and
iii. will maintain facilities to package Product
and hold Product for distribution within the
Territory only in (A) the Territory and (B)
the Republic of Ireland; and
iv. will refer to FAULDING all inquiries, sales
leads, prospects and other information
WARNER CHILCOTT may receive concerning sales
and prospective sales of the Product outside
the Territory.
c. FAULDING agrees that, during the term of the
Agreement:
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<PAGE>
i. subject to the provisions of Section 11, it
will not market, sell or attempt to market
or sell the Product or any Competing Product
within the Territory, either on its own
account or through any third party, nor will
it market or sell (nor will it allow or
permit any Affiliate or other related party
to market or sell) any Product, or any
Competing Product, to any person or
corporation outside the Territory where it
has reasonable grounds to believe that such
other person or corporation intends to sell
such Product within the Territory; and
ii. will refer to WARNER CHILCOTT all inquiries,
sales leads, prospects and other information
FAULDING or its Affiliates may receive
concerning sales and prospective sales of
the Product within the Territory.
d. WARNER CHILCOTT understands and agrees that FAULDING has
the right to distribute, or grant any rights to any third party to distribute
the Product outside the Territory subject to the provisions of subsection (c) of
this Section.
e. WARNER CHILCOTT agrees that without FAULDING's prior
written consent, it will not grant any sub-license of the rights granted to it
under Section 2(a) nor delegate the exercise of the rights granted to it under
Section 2(a) to any party, other than Warner Chilcott, Inc. and understands and
agrees that the grant of the license in Section 2(a) hereof to Warner Chilcott,
Inc. (but not to WARNER CHILCOTT) will be automatically terminated, without the
necessity of FAULDING providing notice to WARNER CHILCOTT or Warner Chilcott,
Inc., in the event that WARNER CHILCOTT's beneficial percentage interest in
Warner Chilcott, Inc. falls below 51% beneficial ownership.
3. TERMINATION OF PRIOR AGREEMENTS.
Contemporaneously with the execution of this Agreement:
a. the parties agree to, and hereby terminate, the Prior
License and Supply Agreements in their entirety; and
b. FAULDING agrees to cause Purepac (and all other Affiliates
and related parties of Faulding) (i) immediately upon the parties' execution of
this Agreement, to ship no more than 500 bottles (each containing 50 capsules)
of its Competing Product into the Territory and (ii) no later than five (5) full
business days after the date hereof, to cease accepting any orders for its
Competing Product. Notwithstanding the foregoing, however, the parties
acknowledge and agree that Purepac Pharmaceutical Co. will retain the FDA
approval for such Competing Product. Moreover, WARNER CHILCOTT agrees to
reimburse FAULDING for unsold Product in Purepac's possession, at the rate of
[REDACTED] per capsule, up to an aggregate maximum payment of [REDACTED].
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<PAGE>
4. NEGOTIATION OF FURTHER AGREEMENT
The parties agree to enter into good faith negotiations with
respect to a potential new agreement pursuant to which Faulding, in return for
appropriate consideration from WARNER CHILCOTT, would develop a [REDACTED]
tablet (the "Tablet") for WARNER CHILCOTT's distribution in the Territory. It is
the parties' mutual intent to enter into a license and distribution agreement
with respect to the Tablet on substantially similar commercial terms as are
contained in this Agreement and that the Tablet agreement would supersede and
replace this Agreement. Unless this Agreement is so superseded (or otherwise
expires or is terminated), Faulding agrees that neither it nor its Affiliates or
related parties will, during the term of this Agreement, market. distribute or
sell Tablets in the Territory.
5. QUALIFICATION OF ALTERNATIVE MANUFACTURING SITE
ln the event that FAULDING fails, for any reason, to supply
WARNER CHILCOTT with Product in full for a period of three (3) months or more
after the date of delivery specified by WARNER CHILCOTT in any Firm Order, the
parties will reasonably agree to the selection of a third party for the supply
of WARNER CHILCOTT's requirements of Product until FAULDING is capable of
resuming the supply of Product to WARNER CHILCOTT, and FAULDING will use
commercially reasonable efforts to arrange for such supply (including, if
necessary, qualifying such alternate manufacturing facility).
6. FORECASTS; SUPPLY OF PRODUCT.
a. The parties currently intend that FAULDING will supply
Product, in bulk capsule form, to WARNER CHILCOTT. In the event that at any time
during the term of this Agreement, WARNER CHILCOTT desires to have FAULDING
deliver Product in finished pack form, the parties agree to negotiate in good
faith the terms upon which the Product will be so delivered.
b. On the date hereof and, thereafter, on the first day of
each quarter during the term of this Agreement, WARNER CHILCOTT shall provide
FAULDING with a forecast of its requirements of Product for distribution in the
Territory for the immediately ensuing twelve month period, specifying the
approximate quantities of Product for use as samples and the approximate
quantities for sale in the Territory. The forecast for the most current
three-month period shall constitute a firm order ("Firm Order") which (i) shall
state in reasonable detail the quantities of Product ordered and dates for
delivery of Product; (ii) the quantities to be used as samples and (iii) shall
be binding on both parties regarding the amount of Product to be purchased or
supplied, as the case may be. The forecast for the remaining nine-month period
is for planning purposes only and does not constitute a commitment to purchase
or supply.
c. No Firm Order delivered hereunder, subsequent to the
initial Firm Order, shall provide for an increase of more than [REDACTED]
([REDACTED]%) per cent of the quantity of Product contained in the immediately
preceding Firm Order, unless otherwise agreed by both parties.
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<PAGE>
d. The Firm Orders will specify delivery dates not less than
90 days in advance of the date of such Firm Order. Upon receipt of a Firm Order
from WARNER CHILCOTT, FAULDING shall effect delivery of the Product covered
thereby in accordance with its current production and delivery schedule, using
commercially reasonable efforts to ship Product within ten (10) business days of
the shipment date specified in the Firm Order to the destination designated in
the Firm Order. FAULDING will notify WARNER CHILCOTT of any expected delay or
back order of the Product and the expected shipping date within eight (8)
business days of its receipt of the Firm Order.
e. The batch size for the Product shall be [REDACTED]
capsules, unless the parties agree in writing to an alternate batch size. WARNER
CHILCOTT shall place all Firm Orders for Product in multiples of the batch size.
Any batch, or multiple thereof, may be comprised, at WARNER CHILCOTT's option,
of any reasonable combination of Product for sample use or commercial sale.
f. If WARNER CHILCOTT claims that there is a shortage of
Product delivered by FAULDING pursuant to a Firm Order, it shall submit written
notice to FAULDING within sixty (60) days after the date of a delivery of such
Firm Order. In case of alleged non-delivery, a written claim must be submitted
to FAULDING within thirty (30) days of the FAULDING delivery advice notice. In
the absence of such a written claim, in the case of either alleged shortage or
non-delivery, the Product shall be deemed to have been delivered in accordance
with this Agreement. In any event, WARNER CHILCOTT shall not be entitled to
cancel or refuse to accept delivery by reason only of an alleged shortage or a
delay in the shipment of any Firm Order.
7. PURCHASE PRICE; PAYMENTS & ADJUSTMENTS
a. FAULDING will manufacture and supply bulk capsules of
Product to WARNER CHILCOTT, FOB carrier Adelaide, Australia:
i. for WARNER CHILCOTT's commercial sale in the
Territory at the initial price of (a)
[REDACTED], per [REDACTED] capsules, and
ii. for distribution in the Territory as samples
at [REDACTED] per [REDACTED] capsules.
The parties agree that these initial prices will stay in effect for a period of
at least one year from the date hereof. Thereafter, the purchase price will be
reviewed annually and may be increased by FAULDING, upon thirty (30) days prior
written notice to WARNER CHILCOTT, to include demonstrated increases of the
actual direct costs of manufacturing Product (raw materials, labor, reasonable
direct overhead etc). Any revised price will apply only to Product shipped
pursuant to Firm Orders placed after the effective date of the revised price.
b. WARNER CHILCOTT will pay for the Product within thirty (30)
days after FAULDING's delivery of the Product and acceptance by WARNER CHILCOTT
under this Section
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6(a) of this Agreement and such payment will be effected by wire transfer into
an account designated by FAULDING. Payment will be in U. S. Dollars.
8. ACCEPTANCE OF THE PRODUCT.
a. FAULDING will supply a Certificate of Analysis with each
delivery of the Product.
b. All Product received by WARNER CHILCOTT shall be deemed
accepted unless WARNER CHILCOTT gives FAULDING written notice (the "Objection
Notice") either (i) within thirty (30) days of such receipt or (ii) within five
(5) days of the delivery of notice upon the discovery of a Latent Defect, as set
forth in subsection (f) hereof. In either case, WARNER CHILCOTT shall specify
the manner in which the shipment of Product, in whole or part, fails to meet
FAULDING's warranties set forth in Section 9(a) of this Agreement.
c. In the event that WARNER CHILCOTT gives written notice to
FAULDING under Section 9(a) and the parties are unable, within thirty (30) days
of that notice, to agree upon whether a batch of Product complies with the
requirements set forth in Section 9(a), the parties agree to submit a sample of
the Product to an Independent Analyst for a report.
d. The cost of the report of the Independent Analyst will be
paid by the party against which the Independent Analyst rules.
e. If the Independent Analyst determines that the Product does
not comply with the requirements set forth in Section 9(a), FAULDING will
replace such Product free of charge to WARNER CHILCOTT and FAULDING will
reimburse WARNER CHILCOTT for WARNER CHILCOTT's reasonable expenses with respect
to the shipment of such Product, including, without limitation freight expenses
and shipment expenses incurred by WARNER CHILCOTT in connection with the
disposition or return of such Product.
f. It is possible for a shipment of Product, or a portion
thereof, to have Latent Defects. As soon as either party becomes aware of a
Latent Defect in any batch of Product, it shall immediately give written notice
to the other party and the batch involved, at WARNER CHILCOTT's election, shall
be deemed rejected as of the date of such notice. Upon determination, pursuant
to the procedures set forth in subsections (c)- (e) of this Section, in that any
Latent Defect has been caused by an action or omission by FAULDING or an
Affiliate of Faulding, FAULDING shall use commercially reasonable efforts, at
its own cost, to ship replacement Product to WARNER CHILCOTT.
9. MANUFACTURE, TRANSPORT, STORAGE AND DISTRIBUTION OF THE
PRODUCT
a. Faulding warrants that all quantities of Product supplied
by FAULDING to WARNER CHILCOTT pursuant to this Agreement will:
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i. conform in all respects to the Product
Specification;
ii. be manufactured in conformity with cGMP and
with any applicable FDA regulations; and
iii. will not contain any product or article that
would cause the Product to be adulterated or
misbranded within the meanings of Section
501 and 502 of the Food, Drug and Cosmetic
Act.
OTHER THAN THE REPRESENTATIONS SET FORTH IN THIS SECTION 9(a), FAULDING MAKES NO
OTHER WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE
PRODUCT AND WILL NOT BE LIABLE TO WARNER CHILCOTT FOR CONTINGENT, REMOTE,
INCIDENTAL OR CONSEQUENTIAL DAMAGES.
b. FAULDING will supply WARNER CHILCOTT with instructions
concerning suitable conditions for transport and storage of the Product and
WARNER CHILCOTT warrants it will transport and store the Product under those
suitable conditions so as not to adversely affect the Product.
c. WARNER CHILCOTT warrants that it will package and label the
Product, and maintain and update the package insert labeling in compliance with
all applicable laws and regulations in the Territory. In the event that either
of the parties becomes aware of any defect in any batch of Product it will
immediately notify the other party and provide such party with a full disclosure
of that defect or unsuitability.
d. Each of the WARNER CHILCOTT and FAULDING agrees to comply
with its respective regulatory submission obligations in the Territory with
respect to the Product and WARNER CHILCOTT agrees to pay any regulatory fees
arising from WARNER CHILCOTT's or Warner Chilcott, Inc.'s use of the Product
hereunder.
e. FAULDING assumes all loss and indemnifies and holds
harmless WARNER CHILCOTT and its Affiliates and their respective officers,
director, employees, distributors and agents from and against any and all loss
(excluding consequential loss and loss of profits), liability, damage, fee, cost
(including reasonable attorneys fees), expense, suit, claim, demand, judgement
and prosecution directly arising or resulting from (i) Faulding's warranties set
forth in Section 9(a) of this Agreement or (ii) any reckless or unlawful act on
the part of FAULDING or any of its employees or agents for personal injury
(including death) suffered while engaged in performance of this Agreement.
f. FAULDING will procure at its own expense from a mutually
acceptable insurer, and maintain in full force and effect throughout the term of
this Agreement and for five (5) years thereafter, product liability insurance
with a single limit liability of not less than [REDACTED] in one claim and in
the aggregate, for bodily injury, death or property damage, insuring WARNER
CHILCOTT from and against any and all loss (excluding consequential loss and
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loss of profits), liability, damage, fee, cost (including reasonable attorneys
fees), expense, suit, claim, demand, judgement and prosecution directly arising
from or incidental to or resulting from the manufacture of the Product. This
provision does not limit FAULDING's liability under Section 9(e). FAULDING will,
when reasonably requested by WARNER CHILCOTT to do so, provide to WARNER
CHILCOTT a copy of such policy or a certificate of insurance evidencing the
required coverage and evidence that the policy remains in force.
g. WARNER CHILCOTT assumes all risk of loss and indemnifies
and holds harmless FAULDING and its Affiliates, sub-licensees and designees and
their respective officers, directors and employees from and against any and all
loss (excluding consequential loss and loss of profits), liability, damage, fee,
cost (including reasonable attorney's fees), expense, suit, claim, demand,
judgement and prosecution directly or indirectly arising from or resulting from
(i) a breach by WARNER CHILCOTT of its obligations under this Agreement, (ii)
the marketing, distribution, sale, the transportation, storage or packaging of
the Product by WARNER CHILCOTT or any of its Affiliates, sub-licensees or
designees or any of their respective employees or agents (other than matters
covered by subsection 9(e) above) or (iii) any reckless or unlawful act on the
part of WARNER CHILCOTT, its Affiliates, sub-licensees or designees or any of
their respective employees or agents for personal injury (including death)
suffered while engaged in performance of this Agreement.
h. WARNER CHILCOTT will procure at its own expense from a
mutually acceptable insurer, and maintain in full force and effect throughout
the term of this Agreement and for [REDACTED] years thereafter, product
liability insurance with a single limit liability of not less than [REDACTED] in
one claim and in the aggregate for bodily injury, death or property damage,
insuring FAULDING and its Affiliates and designees from and against any and all
loss (excluding consequential loss and loss of profits), liability, damage, fee,
cost (including reasonable attorney's fees), expense, suit, claim, demand,
judgement and prosecution directly or indirectly arising from or incidental to
or resulting from a breach by WARNER CHILCOTT of its obligations under this
Agreement, or from the marketing, distribution, sale transportation, storage or
packaging of the Product by WARNER CHILCOTT (other than matters covered by
subsection 9(e) above). This provision does not limit WARNER CHILCOTT's
liability under clause 9(g). WARNER CHILCOTT will, when reasonably requested by
FAULDING to do so, provide to FAULDING a copy of such policy or a certificate of
insurance evidencing the required coverage and evidence that the policy remains
in force.
10. MARKETING AND OTHER RELATED DUTIES OF THE PARTIES
a. WARNER CHILCOTT will use commercially reasonable efforts to
distribute the Product in the Territory and to maximize sales of the Product
throughout the Territory and will maintain appropriate warehousing, sales and
distribution personnel and facilities to perform this and its other obligations
under this Agreement.
b. Each of the parties will provide the other party with
reports and information reasonably required by the other party to assist it in
fulfilling its obligations hereunder.
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11. MINIMUM ORDERS FOR COMMERCIAL SALE
a. For so long as no Competing Product is being sold or
marketed in the Territory, WARNER CHILCOTT's minimum purchase obligations of
Product for commercial sale in the Territory during the term of the Agreement
are as follows:
i. Period ending [REDACTED] [REDACTED] capsules
ii. [REDACTED] [REDACTED] capsules
iii. [REDACTED] [REDACTED] capsules
iv. [REDACTED] [REDACTED] capsules
v. For each
[REDACTED]
month period
subsequent to
[REDACTED]
during the term
of the Agreement [REDACTED] capsules
The parties agree that in order to comply with the minimum purchase obligations
of this Section 11, WARNER CHILCOTT shall be obligated to place Firm Orders at a
point in time in each of the periods set forth above ( a "Minimum Obligation
Period") so that FAULDING will have sufficient time as set forth in Section
6(d), during that Minimum Obligation Period to fill and ship a quantity of
Product at least equal to WARNER CHILCOTT's minimum purchase obligation for that
same Period. To the extent, however, that FAULDING, for any reason other than a
default by WARNER CHILCOTT, is delayed in its ability to manufacture and ship
Product during any Minimum Obligation Period, WARNER CHILCOTT's minimum purchase
obligation for such Minimum Obligation Period will be excused. Notwithstanding
the provisions of the previous sentence, however, any quantity of Product
ordered to fulfill a minimum purchase obligation during any Minimum Obligation
Period, which FAULDING ships in any subsequent Period, will only be credited
against WARNER CHILCOTT's minimum purchase obligation for the period in which it
was ordered and not for any subsequent Period and any failure by FAULDING to
ship Product during any Minimum Obligation Period will not excuse WARNER
CHILCOTT's minimum purchase obligations for any subsequent Periods, as set forth
in this Section 11.
b. WARNER CHILCOTT agrees to guarantee full payment for the
respective minimum quantity of Product, as set forth above, irrespective of
whether, in the applicable Period (i) WARNER CHILCOTT purchases, or fails to
purchase, such respective minimum quantity or (ii) FAULDING takes either of the
actions set forth in Section 1 l(d) hereof. The parties agree that any sale of
Product by FAULDING for WARNER CHILCOTT's distribution as samples shall not be
included in the calculation of WARNER CHILCOTT's minimum purchase obligation.
c. On the last business day of each of the periods set forth
in Section 11(a), WARNER CHILCOTT shall pay, by wire transfer, the amount due to
FAULDING, if any, pursuant to WARNER CHILCOTT's applicable minimum payment
obligation set forth in Section 1 l(a).
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d. In the event that WARNER CHILCOTT fails during any of the
foregoing periods to purchase Product from FAULDING in the respective minimum
quantities set above, FAULDING shall have the option upon thirty (30) days'
prior written notice to WARNER CHILCOTT to:
i. convert the license granted hereunder to a
non-exclusive license;
ii. terminate this Agreement; or
iii. purchase the registered Doryx(TM) brand
product at a price equal to three times
WARNER CHILCOTT's Net Sales of Product in
the Territory during the immediately
preceding twelve (12) month period from the
date of FAULDING's notice.
provided however, that WARNER CHILCOTT shall be permitted during such thirty
(30) day period to pay an amount equal to the shortfall between the minimum
purchase quantities and the actual number of capsules purchased, multiplied by
[REDACTED] per [REDACTED] capsules and upon such payment to avoid the
termination therefor of this Agreement, of WARNER CHILCOTT's exclusive grant
hereunder, or of the sale of the registered Doryx(TM) brand product.
e. WARNER CHILCOTT has paid FAULDING, contemporaneously with
the execution of this Agreement, a nonrefundable advance payment in the amount
of [REDACTED], toward its minimum purchase obligation of Product under Section
1.1 (a)(ii), which payment shall be credited against its purchase of Product
during the period from July 1 through December 31, 1998.
f. In the event that a third party commences marketing a
Competing Product, the parties agree that (i) the license granted hereunder
shall become non-exclusive as to FAULDING and FAULDING or its sublicensees shall
have the right to store, promote, distribute and sell its Competing Product in
the Territory and (ii) WARNER Chilcott will continue to have the right to
purchase Product for sale in the Territory at the same price as set forth herein
but will be relieved of its minimum purchase obligations hereunder as of the
date the third party commences marketing the aforementioned Competing Product.
In the event that the license granted hereunder shall become non-exclusive
pursuant to Section 1 l(d), WARNER Chilcott will continue to have the right to
purchase Product for sale in the Territory at the same price as set forth herein
but will be relieved of its minimum purchase obligations hereunder as of the
date of FAULDING's written notice to WARNER CHILCOTT.
12. RECALLS
a. If WARNER CHILCOTT or FAULDING determines that any quantity
of Product should be recalled for any reason, that party will give to the other
party notice of the need to recall that quantity and specify its reasons for the
need to carry out the recall. If possible, such notice shall be in writing to
the other party. If, however, either party determines that in order to avoid
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<PAGE>
an immediate or perceived threat to health, time does not permit written notice,
such notice may be by phone to the other party's Medical Affairs Liaison to be
confirmed in writing after such notice.
b. If within twenty four (24) hours of the receipt of the
notice, the parties are unable to agree upon the need to carry out the recall,
either party may mandate that the Product be recalled, with or without the
agreement of the other party, if it reasonably determines that such recall is
necessary to protect the public health or is necessary to insure compliance with
applicable laws and regulations.
c. The reasonable out-of-pocket costs of the recall and
replacement of Products, if applicable, will be borne by the party, whose
commission or omission has caused the necessity of such recall. If the parties
are unable to reach agreement regarding the necessity of a recall or the party
responsible for its costs, either party may request that the Product be
submitted to an Independent Analyst for a report, the cost of which shall be
paid by the party whose act or omission has caused the necessity of the recall.
d. WARNER CHILCOTT will administer all recalls.
e. In the event that the FDA requires or otherwise initiates a
recall of the Product for any reason whatsoever, WARNER CHILCOTT will forthwith
administer the recall.
13. ADVERSE DRUG EVENT REGULATION.
a. The parties shall each appoint a liaison (a "Medical
Affairs Liaison") to communicate with each other with regard to information
required in this Section 13 and Section 12 hereof. Either party may change its
Medical Affairs Liaison by written notice to the other party.
b. During the term of this Agreement, WARNER CHILCOTT and
FAULDING shall give each other notice, as set forth in this Section 14, of any
adverse drug experience ("ADE") associated with the Product as to which WARNER
CHILCOTT or FAULDING obtains information in accordance with the following:
i. Any ADE case report obtained by WARNER
CHILCOTT or FAULDING shall be reported to
the other's Medical Affairs Liaison, by
facsimile within five (5) working days, or
in the event of a serious or unexpected ADE,
three (3) working days, of receipt of the
Minimum Criteria. The recipient shall
acknowledge receipt of such information
within one (1) working day of its receipt of
the report. Reports shall be made on either
a CIMS I, Medwatch or ADRAC blue card form.
As used in this subsection, "Minimum
Criteria" shall mean (A) name of the drug;
(B) a description of the adverse drug
experience; (C) patient identifiers (any one
or more of the following: the name,
initials, clinical investigation number,
age, sex or weight and (D) an identifiable
source (i.e., the reporter)
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<PAGE>
ii. WARNER CHILCOTT shall prepare and submit to
the FDA the periodic safety reports with a
copy being provided to FAULDING.
iii. Each of the parties will maintain complete
and accurate records of each ADE for such
periods as may be required by applicable law
in the Territory, but not less than five (5)
years after the date of receipt.
c. WARNER CHILCOTT will (i) file any ADE Report for Product
required by the applicable Regulatory Authority; (ii) give FAULDING timely
notice of any meetings or discussions with the relevant Regulatory Authority
concerning safety of the Product and (iii) notify FAULDING of any regulatory
action taken concerning the safety of the Product within one (1) business day of
the action being taken and will provide FAULDING with complete information
concerning that action.
14. INTELLECTUAL PROPERTY
a. WARNER CHILCOTT acknowledges and agrees that FAULDING,
subject to WARNER CHILCOTT's Intellectual Property Rights set forth in
subsection (b) of this Section, is the owner of all Intellectual Property Rights
of any kind in relation to the Technology and the Product and any improvements
made by FAULDING to the Technology or the Product, including, without
limitation, the right to patents, registered or other designs, copyright,
trademarks or trade names. Nothing contained in this Agreement shall be
effective to give WARNER CHILCOTT any rights of ownership in and to any
Intellectual Property Rights of FAULDING and the license granted to WARNER
CHILCOTT pursuant to Section 2 of this Agreement is for the sole purpose of
selling and marketing the Product in the Territory.
b. FAULDING acknowledges and agrees that WARNER CHILCOTT is
the owner of all Intellectual Property Rights of any kind in relation to WARNER
CHILCOTT's trademarks, trade names and logos, including "Doryx". Other than as
set forth in Section 11(d), nothing contained in this Agreement shall be
effective to give FAULDING any rights of ownership in and to any Intellectual
Property Rights of WARNER CHILCOTT.
c. In the event of either party becoming aware of a patent or
other third party Intellectual Property Right in the Territory which may be
potentially infringed by the Product, its formulation, use or its process of
manufacture, or the use in relation to the Product of any of WARNER CHILCOTT's
trademarks, trade names or logos, that party will immediately notify the other
party.
d. If either party becomes aware of a potential infringement
of the other party's Intellectual Property Rights in the Territory it will
immediately notify the other party.
e. FAULDING will have the sole right to determine what
conduct, if any, to take in relation to the infringement of FAULDING's
Intellectual Property Rights and WARNER CHILCOTT will have the sole right to
determine what conduct, if any, to take in relation to the infringement of
WARNER CHILCOTT's Intellectual Property Rights (collectively, the "Infringed
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Party"). At the request of the Infringed Party the other party will consult,
cooperate with and assist the Infringed Party in any such conduct and the
Infringed Party will reimburse other party's reasonable expenses associated
therewith.
15 CONFIDENTIALITY
a Each of the parties agrees that it will not, unless
specifically authorized by the other party:
i. disclose any Confidential Information of the
other party that it may acquire at any time
during the term of this Agreement to a third
party;
ii. make use of any Confidential Information of
the other party for any purpose other than
for the purposes set forth in this
Agreement; or
iii. make, or allow anyone else to make, copies
of any Confidential Information of the other
party unless for the purposes set forth in
this Agreement.
b Each of the parties will:
i. use its best efforts to prevent unauthorized
disclosure of the Confidential Information
by its employees; and
ii. restrict the disclosure of the Confidential
Information to only those of its employees
who require the Confidential Information for
the purposes of fulfilling its obligations
under this Agreement and to the relevant
Regulatory Authority in the Territory.
c. If either party (the "Receiving Party") is required (by
oral questions, interrogations, requests for information or documents, subpoena
or similar process) to disclose any Confidential Material of the other party, it
agrees to provide the other party with prompt notice of such request(s), to the
extent practicable, so that the other party may seek an appropriate protective
order and/or waive the Receiving Party's compliance with the provisions of this
Agreement. If, failing the entry of a protective order or receipt of a waiver
under this Agreement, the Receiving Party is, in the opinion of its counsel,
compelled to disclose Confidential Material of the other party under pain of
liability for contempt or other censure or penalty, it may disclose such
information to such tribunal(s) without liability under this Agreement
d. All Confidential Information, whether in permanent or
magnetic/computer disk form or any other form, will be returned to the
disclosing party within thirty (30) days of the termination of the Agreement,
for any reason whatsoever, or the expiration of the Agreement.
e. The obligations undertaken by each party under this
Section shall continue in force for a period of five (5) years following the
termination or expiration of this Agreement.
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<PAGE>
16. AUDITS.
a. WARNER CHILCOTT or its authorized representative shall
have the right, no more than once annually and at its own cost, to visit
FAULDING's manufacturing and laboratory facilities for Product during regular
business hours, provided WARNER CHILCOTT gives fourteen (14) days prior written
notice to FAULDING. During any such visit, WARNER CHILCOTT's representatives
shall have the right (a) to inspect the manufacturing facilities for the
Product, (b) to inspect quality control procedures relative to the Product, and
(c) to audit any records and reports pertinent to the manufacturing of Product
to ensure that FAULDING complies with all applicable regulations for the
production of Product, including, without limitation, compliance with applicable
cGMP; provided that the information is not proprietary in nature.
b. FAULDING shall have the right, no more than once annually
and at its own cost, during regular business hours, provided FAULDING gives
fourteen (14) days prior written notice to WARNER CHILCOTT to have a qualified
accountant of FAULDING, or a qualified auditor, reasonably approved by WARNER
CHILCOTT, audit WARNER CHILCOTT's records relative to the payments to FAULDING
set forth in Section 11 of this Agreement.
c. The party conducting the audit or inspection shall assume
all risk of loss and indemnify and hold the other party harmless from and
against any and all loss, liability, damage, claim and expense including, but
not limited to, reasonable attorneys' fees arising out of or resulting from such
audits or inspections.
d. In the event of an audit by a Regulatory Authority with
respect to the Product, FAULDING shall use its best efforts to provide such
Regulatory Authority with a prompt, accurate and complete response to any
deficiencies noted during the audit. FAULDING agrees that it shall use its best
efforts to promptly address, and, if necessary correct, any and all such
deficiencies to the satisfaction of the Regulatory Authority and of WARNER
CHILCOTT.
e. In the event of an audit by a Regulatory Authority with
respect to the Product, WARNER CHILCOTT shall use its best efforts to provide
such Regulatory Authority with a prompt, accurate and complete response to any
deficiencies noted during the audit. WARNER CHILCOTT agrees that it shall use
its best efforts to correct promptly any and all deficiencies to the
satisfaction of the Regulatory Authority and of FAULDING.
f. Each party will promptly give the other party written
notice at the commencement of any audit by a Regulatory Authority with respect
to the Product.
17. TERM AND TERMINATION.
a. This Agreement shall be for an initial seven (7) year term
commencing as of the date of this Agreement. Thereafter, this Agreement shall
automatically be renewed for renewal terms of two (2) years' duration unless
either party shall provide the other party with notice of its intent not to
renew the Agreement not less than six (6) months prior to the expiration of the
initial term or any renewal term then in effect; provided, however, that the
provision of such notice of
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intent not to renew shall not effect any of the other substantive rights of the
parties under this Agreement during the final six (6) months of the initial or
renewal term during which such notice is provided.
b. This Agreement may be terminated by a non defaulting
party;
i. by notice in writing if the other party
shall default in the performance of any of
its obligations under this Agreement and
such default shall continue for a period of
not less than thirty (30) days after written
notice specifying such default shall have
been given; or
ii. if the other party makes an arrangement with
its creditors or goes into receivership or
liquidation, or if a receiver or a receiver
and manager is appointed in respect of the
whole or part of the property or business of
the party in default;
iii. if a major part of the assets or all of the
assets of the other party are disposed of or
acquired by any other person; or
iv. it has been notified by the other party of
circumstances constituting force majeure
pursuant to Section 18 and that force
majeure prevails for a continuous period of
six (6) months.
c. Upon thirty (30) days after notice of termination has been
given, as herein provided, or in the event of FAULDING's termination of this
Agreement under Section 17(b), the date the notice of termination has been
delivered to WARNER CHILCOTT, the right of WARNER CHILCOTT to place orders for
Product with FAULDING shall cease.
d. In the event that WARNER CHILCOTT terminates this
Agreement in accordance with subsection (b)(i) because of FAULDING's failure to
deliver Product (for any reason other than force majeure) within thirty (30)
days after the delivery date specified in any Firm Order placed in accordance
with Sections 6(c) and (d), FAULDING agrees to refrain from, and to cause it
Affiliates to refrain from:
i. marketing the Product or any Competing
Product in the Territory; or
ii. providing to any third party any right to
market the Product or any Competing Product
in the Territory
for a period of six (6) months from the date of termination.
e. The parties acknowledge that any termination of this
Agreement shall be without prejudice to any rights of either party which may
have arisen prior to or as a result of such termination.
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f. Upon expiration of or termination of this Agreement, for
any reason whatsoever, WARNER CHILCOTT shall, at its own expense unless
otherwise specified:
i. as soon as commercially practicable cease to
promote, market, or sell Product in the
Territory, except as to quantities of
Product already in inventory or in transit,
which may be sold; and
ii. not engage in conduct, the likely result of
which will be to indicate an affiliation or
sponsorship with or approval from FAULDING.
18. FORCE MAJEURE
Notwithstanding any other provision of this Agreement, neither party
will be deemed to be in breach of this Agreement, or otherwise be liable to the
other, for any delay in the performance, or the non-performance of any of its
obligations under this Agreement, to the extent that the delay or nonperformance
is outside the control of the parties including acts of God, strikes, fires,
floods, extreme drought, riot, war, embargoes, government actions or government
restrictions affecting production, formulation and/or registration of the
Product (including legislation specifically prohibiting the importation,
marketing or sale by anyone of the chemical compounds constituting the Product)
in the Territory, and the circumstances constituting the force majeure were
notified to the other party as soon as possible thereafter. The party subject to
force majeure will take all reasonable steps within its power to resolve the
circumstances constituting force majeure as soon as possible. Subject to clause
17(b)(iv), the time for performance of that obligation and any consequential
obligation will be extended accordingly.
19 NOTICES
Notices provided under this Agreement to be given or served by either
party on the other shall be given in writing and served personally or by prepaid
registered airmail post or by express mail or by means of facsimile to the
following respective addresses or to such other addresses as the parties may
hereafter advise each other in writing. It is agreed and understood by the
parties that any such notice shall be deemed given and served one day after it
is transmitted by facsimile or a date three (3) days after the date of express
mail or mail by courier.
TO: FAULDING:
F H FAULDING & CO LIMITED ACN 007 870 984
115 Sherriff Street, Underdale 5032
South Australia
Attn: Company Secretary
Fax: 61 8 8234 8380
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with a copy to:
FAULDING INC.
200 Elmora Avenue
Elizabeth, New Jersey 07207
Attn: General Counsel
Fax: 908 659-2410
TO: WARNER CHILCOTT:
WARNER CHILCOTT plc.
Lincoln House, Lincoln Place
Dublin 2, Ireland
Attn:
Fax:
with a copy to:
WARNER CHILCOTT, INC.
Rockaway 80 Corporate Center
100 Enterprise Drive
Suite 280
Rockaway, New Jersey 07866
Attn: President
Fax: 973 442-3224
20. GOVERNING LAW.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of New York, excluding such state's rules
relating to conflicts of laws, and its form, execution, validity, construction
and effect shall be determined in accordance with such internal laws. The
parties hereto irrevocably submit to the exclusive jurisdiction of the Federal
and State Courts located in the State of New York, County of New York.
21. EXECUTION OF ALL NECESSARY ADDITIONAL DOCUMENTS.
Each party agrees that it will forthwith upon the request of the other
party execute and deliver all such instruments and agreements and will take all
such other actions as the other party may reasonably request from time to time
in order to effectuate the provision and purposes of this Agreement.
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22. WAIVER.
The failure of either of the parties to insist upon a strict
performance of any other terms and provisions therein shall not be deemed a
waiver of any subsequent breach of default in the terms or provisions of this
Agreement.
23. ASSIGNMENT AND AMENDMENT.
Other than an assignment by FAULDING to any of its Affiliates, neither
this Agreement nor any rights arising hereunder shall be assigned by one party
without the prior written consent of the other and then only upon approval of
the other party and acceptance of such assignment in written form approved by
such party, which approval shall not be unreasonably withheld. Other than an
amendment by FAULDING to the price for the Product set forth in Section 7(a), no
amendment hereof shall be binding unless made in writing and signed by the
parties hereto.
24. ENTIRE AGREEMENT.
This Agreement incorporates the entire understanding of the parties and
revokes and supersedes any and all agreements, contracts, understandings or
arrangements that might have existed heretofore between the parties regarding
the subject matter hereof.
25. SEVERABILITY.
If any term or provision of this Agreement shall be held invalid or
unenforceable, the remaining terms hereof shall not be affected, but shall be
valid and enforced to the fullest extent permitted by law.
26. HEADINGS.
The headings used in this Agreement are intended for guidance only and
shall not be considered part of this written understanding between the parties
hereto.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on
the date first above written.
F H FAULDING & CO LIMITED
By: /s/ Scott Richards
-------------------------------
WARNER CHILCOTT plc
By: /s/ Roger M. Boissoneault
-------------------------------
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Exhibit 10.35
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of December 1,
1998, between WARNER CHILCOTT PUBLIC LIMITED COMPANY., a public limited company
organized under the laws of Ireland (the "Company"), and Beth P. Hecht
("Executive").
RECITALS
WHEREAS the Company and Executive desire and agree to enter
into an employment relationship by means of this employment agreement.
NOW THEREFORE in consideration of the promises and mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment.
(a) The Company hereby agrees to hire Executive as its Senior
Vice President, General Counsel and Assistant Secretary to render legal services
to the Company and to perform such other duties commensurate with such office.
During her employment hereunder, Executive shall report to the Executive Vice
President and Chief Financial Officer of the Company. Such position is
part-time, with Executive agreeing to work 3.5 days per week for the benefits
enumerated herein.
(b) Executive hereby accepts such employment and agrees to
render the services described above to the best of her abilities in a diligent,
trustworthy, businesslike and efficient manner. It shall not be a violation of
this Agreement for Executive to (i) serve as a director, Corporate Secretary
and/or legal consultant to ChiRex Inc. or its group companies; (ii) serve on
corporate, civic or charitable boards or committees, or (c) deliver lectures,
fulfill speaking engagements or teach at educational institutions, so long as
such activities do not significantly interfere with Executive's commitment to
work in accordance with this Agreement.
(c) The duties to be performed by Executive hereunder shall be
performed primarily at the U.S. office of the Company at Rockaway Corporate
Center, 100 Enterprise Drive, Suite 280, Rockaway, New Jersey 07866, subject to
reasonable travel requirements on behalf of the Company.
2. Term of Employment. The employment period of Executive by
the Company shall commence on or before January 31, 1999 and end on December 31,
2001 (the "Initial Term") unless further extended or sooner terminated as
hereinafter provided. Executive may terminate her employment during the Initial
Term with six weeks written notice to the Company. Commencing on December 31,
2001, and each December 31 thereafter, the term of Executive's employment shall
<PAGE>
automatically be extended for one additional year to, respectively, December 31,
2002, and each December 31 thereafter, unless, not later than two months prior
to the end of any renewal term, either party hereunder shall have given notice
to the other party that it does not wish to extend this Agreement. If the
Company gives Executive notice that it does not wish to extend this Agreement
during the Initial Term or any renewal term, Executive shall be entitled to the
severance payments provided in Section 4(d) hereof. As used herein the
"Employment Period" shall refer to the Initial Term and any renewal term of
Executive's employment with the Company.
3. Base Salary and Benefits.
(a) During the Employment Period, Executive's base salary
shall be $150,000 per annum (the "Base Salary"). The Base Salary shall be
subject to adjustment from time to time in accordance with the compensation
policies and practices of the Company; however, in no case shall Executive's
salary be reduced below $150,000 per annum for a 3.5 day workweek. The Base
Salary shall be payable in regular installments in accordance with the Company's
general payroll practices and shall be subject to customary withholding.
(b) The Company shall reimburse Executive for all reasonable
expenses incurred by her in the course of performing her duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses. The
parties agree that such expenses shall include, by way of example and not
limitation, cellular telephone service and home fax machine and telephone line.
(c) Executive shall 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.
(d) In addition to the Base Salary, Executive shall be
eligible to receive an annual cash bonus in a target amount equal to 50% of her
then current Base 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) On the date that Executive commences employment with the
Company, she will be issued a ten year warrant to purchase 75,000 ordinary
shares represented by ADSs and evidenced by ADRs of Warner Chilcott Public
Limited Company. The warrant would be immediately exercisable as to 25,000 of
such shares and would become exercisable as to the remaining 50,000 of such
shares at a rate of 3,125 per calendar quarter (4 year vesting). The exercise
price for the warrant will be set at the closing price for the Company's shares
as of December 31, 1998. Other terms of the warrant will be described in the
Warrant Certificate, which will be issued to Executive. Executive may also be
awarded, from time to time, additional compensation (such as warrants, stock
options, stock appreciation rights, performance shares, restricted stock or
unrestricted stock) pursuant to the Company's Incentive Share Option Scheme
("ISOS") or any additional or replacement incentive compensation program
established for the key employees of the Company. Any awards under such programs
shall be at such levels or in such amounts as the Board of Directors
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deems, in its sole discretion, appropriate for the position occupied by
Executive and her performance therein. Executive will be considered for a grant
under the ISOS beginning in the first calendar quarter of 1999.
(f) On the first regular payroll period following Executive's
first day of active employment, the Company shall pay Executive a signing bonus
in the amount of $25,000.
(g) Executive shall be entitled to vacation time with
compensation of 14 days per annum. Executive shall also be entitled to all paid
holidays given by the Company to its key officers.
(h) There shall be no material reduction or diminution of the
benefits provided in this Section 3, (i) unless Executive shall have given her
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 3(c), for across the board benefit reductions similarly affecting all
senior management personnel of the Company.
4. Termination and Change of Control
(a) If the Executive shall die during the Employment Period,
this Agreement shall terminate effective as of the date of Executive's death,
except that Executive's surviving spouse or, if none, her estate, shall be
entitled to receive the benefits set forth in Section 4(d) below.
(b) At the sole discretion of the Board of Directors,
Executive may be terminated if the Executive is disabled (as defined below) and
shall have been absent from her duties with the Company on a full time basis for
one hundred and eighty (180) consecutive days, and, within thirty (30) days
after written notice by the Company to do so, the Executive shall not have
returned to the performance of her duties hereunder on a full time basis. In the
event of such termination, the Company shall make to Executive the payments
specified in Section 4(d). As used herein, the term "disabled" shall (i) mean
that Executive is unable, as a result of a medically determinable physical or
mental impairment, to perform the duties and services of her position, or (ii)
have the meaning specified in any disability insurance policy maintained by the
Company, whichever is more favorable to the Executive.
(c) The Company may, by notice to Executive, terminate
Executive's employment hereunder for cause. As used herein, "cause" shall mean
(i) the conviction of Executive of a felony or conviction of a misdemeanor if
such misdemeanor involves moral turpitude; or (ii) Executive's voluntary
engagement in conduct constituting larceny, embezzlement, conversion or any
other act involving the misappropriation of Company funds in the course of her
employment; or (iii) the willful refusal to carry out specific directions of the
Board of Directors, which directions shall be consistent with the provisions
hereof; or (iv) Executive's committing any act of gross negligence or
intentional misconduct in the performance or non-performance of her duties as an
employee of the Company; or (v) any material breach by the Executive of any
material provision of this Agreement (other than for reasons related only to the
business performance of the Company or business results achieved by Executive).
For purposes of this Section 4(c), no act or failure to act on Executive's part
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shall be considered to be reason for termination for cause if done, or omitted
to be done, by Executive in good faith and with the reasonable belief that the
action or omission was in the best interests of the Company. Upon the
termination of Executive's employment for cause, the Company shall pay to
Executive (x) her Base Salary accrued through the effective date of termination,
payable at the time such payment is otherwise due and payable hereunder, and (y)
all other amounts and benefits to which 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 Executive participates.
(d) Executive's employment may be terminated at any time by
the Company without cause; provided, however, that in such event Executive shall
be entitled to receive (so long as she executes and delivers the Company's
standard form of release) an amount equal to Executive's then current Base
Salary for a period of eighteen months plus all other amounts and benefits to
which 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 Executive
participates. The foregoing amounts shall be payable in one lump sum payment
within ten (10) days after Executive's last day of active employment. In
addition, Executive shall be entitled to continue participation in the Company's
health and other welfare benefit plans, at the Company's expense, for a period
of up to eighteen months or until Executive is covered by a successor employer's
benefit plans, whichever is sooner.
(e) If (i) Executive's employment is terminated pursuant to
subsections (a), (b), (d), (e) or (g)(A) of this Section 4; or (ii) a "Change in
Control" of the Company (as defined in Section 4(f) below) occurs; in either
case, all stock options, restricted stock, deferred compensation and similar
benefits which have not yet become vested on the date of termination or the date
of a Change in Control, as the case shall be, will become vested upon such
event, and Executive shall be permitted to exercise all such rights in the
one-hundred eighty day period immediately following Executive's date of
termination (or such longer date as determined in good faith by the Company in
the event securities laws prevent exercise of such rights in such period), and
in the case of a Change of Control, whether or not Executive remains employed
with the Company or terminates his employment in accordance with this subsection
(e). If a Change in Control event involves a tender offer for all or part of the
Company's shares, the vesting date for stock options and restricted stock
pursuant to this subsection (e) shall be a date which permits Executive to
participate in such tender offer with such stock options or restricted shares.
In addition, if a Change in Control occurs, Executive may, after such Change in
Control, terminate her employment with the Company for any reason after the
expiry of sixty (60) days immediately following the effective date of such
Change in Control, in which event Executive shall be entitled to the payments
specified in Section 4(d) above and to the other rights described elsewhere in
this Agreement.
(f) For purposes of this Agreement, a "Change in Control" of
the Company shall be deemed to have occurred if: (i) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities and Exchange Act of 1934)
becomes the beneficial owner, directly or indirectly, of Company securities
representing 30% or more of the capital stock of the Company; or (ii)
individuals who constitute the Company's Board of Directors as of the date of
this Agreement (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided, however,
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that any person becoming a director subsequent to the date of this Agreement
whose election, or nomination for election by the Company's stockholders, was
approved by a vote of at least 51% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be, for the purpose of this clause (ii),
considered as though such person were a member of the Incumbent Board; or (iii)
the Company's shareholders approve a merger or consolidation (where in either
case the Company is not the survivor thereof) in which shareholders of the
Company cease to own at least 51% of the surviving entity's voting power, or a
sale or disposition of all or substantially all of the Company's assets or a
plan of partial or complete liquidation of the Company. Notwithstanding the
foregoing, a "Change in Control" shall not include events whereby any of Elan
Corporation plc, Dominion Income Management Corp., Halisol S.A., AIG Global
Investment Corp., Goldman Sachs & Co., Paribas Sante SA, Perrigo Company or
Warner-Lambert Company becomes the beneficial owner of Company securities
representing 30% or more of the capital stock of the Company.
(g) Executive's employment may be terminated by the
Executive,
(A) for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean: (x) the assignment to
Executive of any duties inconsistent in any respect
with Executive's position (including status, offices,
titles, and reporting requirements), authority,
duties or responsibilities as contemplated by Section
1(a) hereof, or any other action by the Company which
results in a diminution in such position, authority,
duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied
by the Company promptly after receipt of notice
thereof given by Executive; (y) any failure by the
Company to comply with any of the provisions of
Section 3 hereof, other than an isolated,
insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by
Executive; (z) the Company's requiring Executive to
be based at any office or location other than as
provided in Section 1(c) hereof; (xx) any purported
termination by the Company of Executive's employment
otherwise than as expressly permitted by this
Agreement; or (yy) any failure by the Company to
obtain an express assumption of this Agreement by a
successor as required pursuant to Section 15 hereof.
Upon any termination pursuant to this subsection (g),
Executive shall be entitled to the payment specified
in Section 4(d) hereof and to the other rights
described therein (subject to her compliance
therewith).
(B) by resignation or retirement. If Executive resigns or
retires, this Agreement shall terminate as of the
effective date of Executive's retirement or
resignation and thereupon Executive shall be entitled
solely to the payments and benefits set forth in
Sections 4(c) and (l) hereof.
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(h) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this subsection (h)) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties
are hereinafter collectively referred to as the "Excise Tax"), the Company shall
pay to Executive at the time specified in subparagraph (k) below an additional
amount (a "Gross-Up Payment") such that the net amount of the Gross-Up Payment
retained by Executive, after deduction of all federal, state and local income
tax (and any interest and penalties imposed with respect thereto), employment
tax and Excise Tax on the Gross-Up Payment, shall be equal to the amount of the
Excise Tax imposed on such Payment.
(i) For purposes of the foregoing subparagraph (h), the proper
amounts, if any, of the Excise Tax and the Gross-Up Payment shall be determined
in the first instance by the Company. Such determination by the Company shall be
communicated in writing by the Company to Executive at least fourteen (14) days
prior to the occurrence of a Change of Control. Within ten (10) days of being
provided with written notice of any such determination, Executive may provide
written notice to the Chairperson of the Compensation Committee of the Board of
Directors of the Company of any disagreement, in which event the amounts, if
any, of the Excise Tax and the Gross-Up Payment shall be determined by tax
counsel mutually selected by the Company and Executive. The determination of the
Company (or in the event of disagreement, the tax counsel selected) shall be
final and nonreviewable.
(j) For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amount of such Excise Tax under
subparagraph (h), the following principles will be applicable:
(A) Any payments or benefits received or to be received
by Executive in connection with a termination of
employment shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code shall be
treated as subject to the Excise Tax unless in the
opinion of tax counsel mutually selected by the
parties pursuant to subsection (i) above, such other
payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess
parachute payments (in whole or in part) represents
reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code; and
(B) The value of any non-cash benefits or any deferred
payment or benefit shall be determined in accordance
with Section 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed to pay federal
income taxes at the highest marginal rate of
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tax in the calendar year in which the Gross-Up
Payment is to be made and state and local income
taxes at the highest marginal rate of tax in the
state and locality of Executive's residence on the
date of termination, net of the maximum reduction in
federal income taxes which could be obtained from
deduction of such state and local taxes.
(k) The Payments provided for in subparagraph (h) shall be
made in a cash, lump-sum payment, net of any required tax withholdings, upon the
later of (i) the fifth business day following the effective date of termination,
or (ii) the calculation of the amount of the Gross-Up Payment under subparagraph
(i). Any Payment required hereunder that is not made in a timely manner shall
bear interest at a rate equal to the prime rate quoted on the date the payment
is first overdue by Citibank N.A., New York, New York plus two percent until
paid.
(l) Amounts which are vested benefits or which Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
in any contract or agreement with the Company or any of its affiliated companies
at or subsequent to the date of termination of Executive's employment for any
reason shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
5. Confidential Information.
(a) Executive acknowledges and agrees that the information,
observations and data obtained by her while employed by the Company and its
subsidiaries concerning the business or affairs of the Company or any other
subsidiary ("Confidential Information") are the property of the Company or such
subsidiary. Therefore, Executive agrees to keep secret and retain in the
strictest confidence all Confidential Information, including without limitation,
trade "know-how" secrets, customer lists, pricing policies, operational methods,
technical processes, formulae, inventions and research projects and other
business affairs of the Company, learned by her prior to or after the date of
this Agreement, and not to disclose them to anyone outside the Company, either
during or after her employment with the Company, except (i) in the course of
performing her duties hereunder; (ii) with the Company's express written
consent; (iii) to the extent that the Confidential Information becomes generally
known to and available for use by the public other than as a result of
Executive's acts or omissions; or (iv) where required to be disclosed by court
order, subpoena or other government process. If Executive shall be required to
make disclosure pursuant to the provisions of clause (iv) of the preceding
sentence, Executive promptly, but in no event more than 48 hours after learning
of such subpoena, court order or other governmental process, shall notify the
Company, by personal delivery or fax (pursuant to Section 10 hereof), and, at
the Company's expense, shall take all reasonably necessary steps requested by
the Company to defend against the enforcement of such subpoena, court order or
other governmental process and permit the Company to intervene and participate
with counsel of its own choice in any related proceeding.
(b) Executive shall deliver to the Company at the termination
of her employment, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software and other
documents and data (and copies thereof) relating
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to the Confidential Information, Work Product (as defined below) or the business
of the Company or any subsidiary which she may then possess or have under his
control.
6. Inventions and Patents. Executive acknowledges that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its subsidiaries' actual or
anticipated business, research and development or existing or future products or
services and which are conceived, developed or made by Executive while employed
by the Company or its predecessor and its subsidiaries ("Work Product") belong
to the Company or such subsidiary. Executive shall promptly disclose such Work
Product to the Board and perform all actions reasonably requested by the Board
(whether during or after her employment) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
7. Indemnification. The Company will indemnify Executive and
her legal representatives, to the fullest extent permitted by the laws of the
State of New Jersey and the existing by-laws of the Company or any other
applicable laws or the provisions of any other corporate document of the
Company, and Executive shall be entitled to the protection of any insurance
policies the Company may elect to obtain generally for the benefit of its
directors and officers, against all costs, charges and expenses whatsoever
incurred or sustained by her or her legal representatives in connection with any
action, suit or proceeding to which she or her legal representatives may be made
a party by reason of her being or having been a director or officer of the
Company or of any of its subsidiaries or affiliates or actions taken purportedly
on behalf of the Company or of any of its subsidiaries or affiliates. The
Company shall advance to Executive the amount of her expenses incurred in
connection with any proceeding relating to 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 7 will continue
as to Executive after she ceases to be an officer of the Company and shall inure
to the benefit of her heirs, executors and administrators. The Company shall
not, without Executive's written consent, cause or permit any amendment of the
Company's governing documents which would affect Executive's rights to
indemnification and expense reimbursement thereunder.
8. Non-Compete, Non-Solicitation. Subject to Section 1(b)
hereof, Executive covenants and agrees that, during the Employment Period and
for a period of six months thereafter so long as she has been paid under Section
4(d) above,
(a) Executive shall not, 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 directly competes with the Company with respect to the
development, marketing, testing, manufacture or delivery of substantially
similar pharmaceutical products within the United States. Nothing herein shall
prohibit Executive from holding less than 5% of the outstanding stock of any
corporation required to file periodic reports with the SEC 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.
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(c) Executive shall not, directly or indirectly, through
another entity (i) induce or attempt to induce any employee or director of the
Company or any subsidiary to leave the employ or board of the Company or such
subsidiary, or in any way interfere with the relationship between the Company or
any subsidiary and any employee or director thereof (except that Executive shall
not be prohibited from soliciting or hiring Cheryl Whalen) (ii) induce or
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any subsidiary to cease doing business
with the Company or such subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any subsidiary (including, without limitation, making any
negative statements or communications about the Company or its subsidiaries).
(d) If, at the time of enforcement of this Section 8, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law. Executive agrees that the restrictions
contained in this Section 8 are reasonable.
(e) In the event of the breach or a threatened breach by
Executive of any of the provisions of this Section 8, the Company, in addition
and supplementary to other rights and remedies existing in its favor, may apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting
9. Executive's Representations. Executive hereby represents
and warrants to the Company that (i) the execution, delivery and performance of
this Agreement by Executive do not and shall not conflict with, breach, violate
or cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which she is bound, and (ii) upon the
execution and delivery of this Agreement by the parties, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that she has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that she fully understands the terms and conditions contained
herein.
10. Notices. Any notice provided for in this Agreement shall
be in writing and shall be deemed to have been duly given if delivered
personally with receipt acknowledged or sent by registered or certified mail or
equivalent, if available, postage prepaid, or by fax (which shall be confirmed
by a writing sent by registered or certified mail or equivalent on the same day
that such fax was sent), addressed to the parties at the following addresses or
to such other address as such party shall hereafter specify by notice to the
other:
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Notices to Executive: Beth P. Hecht
295 Phillips Hill Road
New City, NY 10956
(914) 634-1074 (Phone)
Notices to the Company: Warner Chilcott plc
Rockaway 80 Corporate Center
100 Enterprise Drive
Rockaway, NJ 07866
(973) 442-3200 (Phone)
(973) 442-3283 (Fax)
Attention: Chief Financial Officer
11. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement constitutes the
complete agreement and understanding among the parties and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
13. No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any party.
14. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive, the Company and
their respective heirs, successors and assigns, except that Executive may not
assign her rights or delegate her obligations hereunder without the prior
written consent of the Company. The Company will require any successor to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
16. Choice of Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto
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shall be governed by, and construed in accordance with, the laws of the State of
New Jersey without giving effect to any choice of law or conflict of law rules
or provisions that would cause the application of the laws of any jurisdiction
other than the State of New Jersey.
17. Amendment and Waiver. The provisions of this Agreement may
be amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
18. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, the making, interpretation or the breach thereof,
other than (a) a claim solely for injunctive relief for any alleged breach of
the provisions of Sections 5 and/or 8 as to which the parties shall have the
right to apply for specific performance to any court having equity jurisdiction;
and (b) the determination of Excise Tax and Gross-Up Payment pursuant to Section
4 herein; shall be settled by arbitration in New York City by one arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and judgement upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof and any party to the
arbitration may, if he elects, institute proceedings in any court having
jurisdiction for the specific performance of any such award. The powers of the
arbitrator shall include, but not be limited to, the awarding of injunctive
relief.
19. Legal Fees and Expenses. The Company agrees to pay, as
incurred, to the full extent permitted by law, all reasonable legal fees and
expenses which Executive may reasonably incur as a result of (a) review and/or
any claims made regarding the Company's determination of Excise Tax and Gross-Up
Amount pursuant to Section 4 herein, or (b) any contest brought in good faith
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity, or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code.
20. No Mitigation or Set-Off. The provisions of this Agreement
are not intended to, nor shall they be construed to require that Executive
mitigate the amount of any payment provided for in this Agreement by seeking or
accepting other employment, nor shall the amount of any payment provided for in
this Agreement be reduced by any compensation earned by Executive as a result of
her employment by another employer or otherwise. The Company's obligations to
make the payments to Executive required under this Agreement, and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action that the
Company may have against Executive.
21. Tax Withholding. The parties agree to treat all amounts
paid to Executive hereunder as compensation for services. Accordingly, the
Company may withhold from any amount payable under this Agreement such Federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
* * * * * * * * * * * * * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WARNER CHILCOTT plc
/s/ Roger M. Boissoneault
--------------------------------------
Name: Roger M. Boissoneault
Title: President
/s/ Beth P. Hecht
--------------------------------------
Beth P. Hecht
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Confidential Treatment
Exhibit 10.47
Redacted information, denoted as "[REDACTED]," has been omitted from this
document pursuant to a request for confidential treatment that has been
separately filed with the Commission.
COPROMOTION AGREEMENT
This COPROMOTION AGREEMENT is made as of the Effective Date
(defined below), by and between APOTHECON, INC., a wholly-owned subsidiary of
Bristol-Myers Squibb Company ("BMS"), having a place of business at 777 Scudders
Mill Road, Plainsboro, New Jersey 08536 ("APOTHECON"), and WARNER CHILCOTT INC.,
having a place of business at Rockaway 80 Corporate Center, 100 Enterprise
Drive, Suite 280, Rockaway, New Jersey 07866 ("WCI").
W I T N E S S E T H:
WHEREAS, APOTHECON markets and distributes norethindrone and
ethinyl estradiol tablets, USP, under the trademark Ovcon(R)35; and
WHEREAS, APOTHECON also markets and distributes Estradiol
Vaginal Cream, USP, 0.01%, under the trademark Estrace(R); and
WHEREAS, WCI is engaged in the business of marketing
pharmaceutical products to physicians; and
WHEREAS, APOTHECON wishes to expand the promotion of
Ovcon(R)35 and Estrace(R) cream to physicians, and WCI desires to have the right
to copromote said products, upon the terms specified herein.
NOW, THEREFORE, in consideration of the mutual covenants
herein set forth, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the corresponding meanings set forth below:
"Affiliate" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person. A Person shall be regarded as in control of
another Person if it/he/she owns, or directly or indirectly controls, more than
fifty percent (50%) of the voting securities (or comparable equity interests) or
other ownership interests of the other Person, or if it/he/she directly or
indirectly possesses the power to direct or cause the direction of the
management or policies of the other Person, whether through the ownership of
voting securities, by contract or any other means whatsoever.
"Agreement" means this agreement, together with all
appendices, exhibits and schedules hereto, and as the same may be amended or
supplemented from time to time hereafter by a written agreement duly executed by
authorized representatives of each party hereto.
<PAGE>
"Agreement Quarter" means each three-month period commencing
on the first day of January, April, July, or October, as the case may be, during
the Copromotion Term.
"Agreement Year" means each 12-month period commencing on the
Effective Date and each anniversary thereof during the Copromotion Term.
"Call List" shall have the meanings specified in Section 5
hereof.
"Confidential and Proprietary Information" has the meaning set
forth in Section 14 hereof.
"Copromotion Term" has the meaning specified in Section 12(a)
hereof.
"Estrace(R)" means all current presentations of estradiol
vaginal cream, USP, 0.01%, currently approved by the FDA for the treatment of
vulval and vaginal atrophy (as more fully specified in the labeling for the
product) and marketed under the trademark Estrace(R). For the avoidance of
doubt, any line extensions of Estrace(R) cream developed and introduced by WCI
pursuant to separate license agreements between WCI and APOTHECON are
specifically excluded from the definition of "Estrace(R)".
"Effective Date" of this Agreement means January 1, 1999.
"Manufacturing Cost" means, with respect to samples of the
Products, the cost to BMS of raw materials, component costs, energy, labor
(salary and benefits) and reasonable overhead charges relating to the
manufacture of a specified quantity of either of Products, and other direct and
allocable indirect costs to manufacture such product, including but not limited
to manufacturing charges for material adjustments, for offgrade or defective
material, handling losses, physical adjustments, salvage and start-up costs, and
charges in the nature of depreciation and amortization of capitalized costs of
manufacturing equipment and facilities, all consistently applied in accordance
with U.S. GAAP. If either of the Products is manufactured by a third party, the
costs shall be the amount paid by APOTHECON for such Products, plus any of the
aforementioned costs that are incurred in completing the testing, manufacture,
packaging and delivery of the Products.
"Marketing Plan" has the meaning specified in Section 5
hereof.
"National Marketing Team" or "NMT" has the meaning specified
in Section 5 hereof.
"Net Sales" means for the applicable period the gross amount
invoiced for the Products by APOTHECON or its licensees to unAffiliated third
parties in the Territory, less the following amounts to the extent deducted on
such invoice or absorbed by APOTHECON in accordance with U.S. GAAP: (i)
quantity, trade, and/or cash discounts, allowances, rebates, and price
adjustments or reductions allowed or given, provided however that such
discounts, allowances, rebates, adjustments and reductions are ordinary and
usual in the industry; (ii) freight, postage and shipping insurance expenses
absorbed by APOTHECON and not reimbursed by the invoicee; (iii) credits,
rebates, chargebacks, or refunds allowed for rejected, outdated or returned
Products; (iv) sales and other excise taxes and duties directly related to the
sale, to the extent that such items are
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included in the gross invoice price (but not including taxes assessed against
the income derived from such sale). If Products are sold for compensation other
than cash, Net Sales shall be calculated based on the fair market value of the
Products in cash.
"Ovcon(R)35" means all current presentations of norethindrone
and ethinyl estradiol tablets, USP, currently approved by the FDA as an oral
contraceptive (as more fully specified in the labeling for the product) and
marketed under the trademark "Ovcon(R)35".
"Person" shall mean an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint stock
company, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority, or any other form of entity not
specifically listed herein.
"Physician" means any physician or other health care
professional authorized by applicable law to prescribe Ovcon(R)35 or Estrace(R).
"Products" means Ovcon(R)35 and Estrace(R) and any other
product the parties may mutually agree to add to this Agreement, which addition
shall be set forth in writing and appended to this Agreement.
"Serious adverse event" and "Non-serious adverse event" have
the meanings set forth in section 8(h) hereof.
"Territory" means the United States of America, and
specifically excluding Puerto Rico and any U.S. held territories and
possessions.
"Trademarks" means the trademarks "Ovcon(R)35" and
"Estrace(R)" and any other trademarks or trade names (whether registered or
unregistered) that APOTHECON decides to use on or with either of the Products or
in any promotional material related to either of the Products in the Territory
during the Copromotion Term.
2. Grant of Rights to WCI.
(a) APOTHECON hereby engages WCI, on an exclusive basis (even
as to APOTHECON), to promote the Products to Physicians in the Territory during
the Copromotion Term, upon the terms and conditions set forth in this Agreement.
APOTHECON reserves all rights not expressly granted hereunder, including,
without limitation, the right to promote the Products to Persons other than
Physicians, including, without limitation, the managed care trade. It is
understood and agreed by the parties that WCI may promote the Products itself or
through any of its Affiliates, provided that such Affiliates agree to be bound
by all the terms and conditions of this Agreement.
(b) APOTHECON hereby grants to WCI a fully-paid up,
nonexclusive right and license to use the Trademarks during the Copromotion Term
solely in connection with the promotion of the Products in the Territory in
accordance with this Agreement. WCI shall not grant any sublicenses with respect
to the Trademarks without the prior, express written consent of APOTHECON;
except that WCI is hereby authorized to grant sublicenses to use the Trademarks
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to its Affiliates if such Affiliates are utilized to promote the Products in
accordance with Section 2(a) herein and provided that such Affiliates agree to
be bound by all the terms and conditions of this Agreement.
(c) WCI acknowledges that BMS is the sole and exclusive owner
of all right, title and interest in and to the Trademarks (including the
application and any subsequent registrations and renewals thereof). In
connection with its use of the Trademarks, WCI shall not in any way or manner
represent to others that it owns or has any ownership rights in the Trademarks
and any subsequent registrations thereof. WCI agrees and acknowledges that any
goodwill accruing or arising from its use of the Trademarks shall be for the
sole benefit of APOTHECON and/or BMS. WCI shall not take any action that
impairs, contests or tends to impair or contest APOTHECON's and/or BMS's right,
title and interest in and to the Trademarks and any goodwill associated with the
Trademarks. All rights to use the Trademarks not expressly granted to WCI by BMS
pursuant this Agreement are reserved.
(d) WCI shall not use or display any other mark or marks in
connection with the Trademarks, except for trademarks used or adopted by WCI
generally, such as "Warner Chilcott" or the "WC" logo, that are used on
packaging and/or advertising or promotional material for the Products and that
are physically separate from the Trademarks. Notwithstanding the foregoing
exception, WCI shall not use or adopt any variation of the Trademarks or any
word or mark that is confusingly similar to the Trademarks. WCI shall comply
with the terms and conditions of this Agreement and all federal and state laws,
statutes and regulations in connection with its use of the Trademarks.
(e) APOTHECON and its Affiliates shall be responsible, at
their own cost and expense, for taking all actions required for the application,
registration, maintenance and renewal of the Trademarks in the United States
Patent and Trademark Office. BMS shall not permit any U.S. registration for the
Trademarks to lapse or become abandoned. WCI shall furnish APOTHECON with all
information reasonably requested by APOTHECON (including specimens and samples
illustrating the manner of use of the Trademarks) and documents (including the
execution and delivery of any and all affidavits, declarations, oaths and other
documents) to assist APOTHECON and its Affiliates in maintaining trademark
protection and registrations for the Trademarks.
(f) WCI shall promptly notify APOTHECON of: (i) any actual or
suspected infringement or misuse of the Trademarks, or (ii) any information
which may adversely affect the Trademarks. If either of the Trademarks is
infringed by a Third Party, APOTHECON and its Affiliates shall have the right
and option, but not the obligation, to bring an action for infringement, at
their sole expense, against the Third Party, and/or reach a settlement with the
Third Party. Except as may be otherwise set forth in any license agreement
between APOTHECON or its Affiliates and WCI or its Affiliates concerning the
"Ovcon(R)" or "Estrace(R)" trademark, the proceeds of any recovery resulting
from an infringement action against and/or settlement with a Third Party shall
belong to APOTHECON.
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3. Copromotion by WCI.
(a) WCI shall use best efforts, within the standard of
commercial reasonableness, to diligently promote the Products in the Territory
to Physicians in accordance with the terms of this Agreement during the
Copromotion Term; provided, that such efforts shall not be less than those that
it employs to promote its other principal products to Physicians, including, at
a minimum, the efforts undertaken to promote [REDACTED]; and provided, further,
that WCI's sales force shall make the position details set forth in the
Marketing Plan.
(b) Except as provided for in Section 6 of this Agreement or
otherwise agreed to by the parties and subject to the terms and conditions of
this Agreement, WCI shall be solely responsible for the costs and expenses of
establishing, maintaining and training its sales force and conducting its other
activities under this Agreement, provided, however, that the contents and
strategic direction of any training provided by WCI that relates to the Products
shall be coordinated and agreed to by APOTHECON.
(c) WCI shall provide APOTHECON, within five (5) working days
of transmission, complete copies and/or transcripts of all home office generated
(for example, those sent out by WCI's Sales, Marketing and Sales Training
departments) communications (whether written, electronic or visual aids) to any
of WCI's sales representatives concerning the promotion of the Products. The
individual to which these shall be sent will be designated by APOTHECON upon
execution of this Agreement. In addition, all written, electronic and visual
communications provided to any of WCI sales representatives regarding strategy,
positioning or selling messages for the Products will be subject to prior review
and approval by APOTHECON.
(d) APOTHECON shall retain sole responsibility for contractual
and other relationships with managed care organizations, formularies, insurers,
and governmental agencies and instrumentalities (including without limitation
Medicare, Medicaid, the Veterans Administration, and military entities).
(e) During the Copromotion Term and for [REDACTED] months
thereafter, WCI shall not market, promote or otherwise sell any [REDACTED] or
[REDACTED] product other than the Products, provided however, that this
subsection (e) shall not apply to any line extensions of Ovcon(R) or Estrace(R)
that WCI may obtain rights to pursuant to separate license agreements with
APOTHECON.
4. Responsibilities of APOTHECON.
(a) APOTHECON shall have the sole authority to determine the
price of the Products, including price increases or decreases and the timing
thereof as determined by APOTHECON in its sole discretion. APOTHECON will
consult with WCI prior to implementing any price change, but such consultation
shall not restrict or limit APOTHECON's sole authority and discretion to
implement changes.
(b) APOTHECON shall have the sole responsibility, at its cost
and expense, for the manufacture, shipping, distribution and warehousing of the
Products, for the invoicing and
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billing of purchasers of the Products, for order confirmation (if any) in
accordance with APOTHECON customary practices, and for the collection of
receivables resulting from Net Sales. APOTHECON will book all sales of the
Products. All sales will be deemed made pursuant to contract between APOTHECON
and the customer.
(c) APOTHECON shall use commercially reasonable efforts,
including maintaining reasonable levels of inventory in light of customary
industry practice, to ensure that sufficient stock of the Products will be
available in its inventory to fill orders from the trade in accordance with
normal industry practices.
(d) APOTHECON shall use reasonable efforts consistent with
applicable legal requirements to maintain all necessary authorizations with the
FDA to manufacture and market the Products in the Territory. WCI shall refrain
from engaging in any act or omission inconsistent with such legal requirements.
(e) Subject to Section 15, APOTHECON reserves the right to
assign to a third party (by sale, license or otherwise) all rights to either of
the Products (including the IND and NDA), as and upon such terms as APOTHECON
may elect and determine in its sole and absolute discretion.
5. National Marketing Team.
(a) A committee for marketing and promoting the Products to
Physicians in the Territory will be established promptly by APOTHECON and WCI
after execution of this Agreement (such committee being referred to herein as
the "National Marketing Team" or the "NMT"). The National Marketing Team shall
be composed of four (4) persons, with APOTHECON and WCI each being entitled to
designate two (2) individuals. The initial members shall be designated by each
party in writing promptly following execution of this Agreement. Each party may
change its designated members at any time upon advance written notice to the
other party.
(b) WCI shall present a marketing plan for the Products to the
NMT for review and approval not less frequently than annually covering a period
not to exceed one year. Each marketing plan shall include a list of Physicians
to whom the Products will be promoted during the period covered by the Marketing
Plan (the "Call List"). Each marketing plan shall identify the direct selling
and marketing activities to be conducted by WCI in each Agreement Quarter
covered by the Marketing Plan, including the product sampling levels and
scheduling. The marketing plan shall be subject to final review and written
approval by APOTHECON (the marketing plan so approved being referred to herein
as the "Marketing Plan"). Each Marketing Plan shall remain in effect until a new
Marketing Plan is again so approved by APOTHECON. Deviations from an approved
Marketing Plan will require resubmission to and approval by APOTHECON.
(c) Subject to final review by and written approval from
APOTHECON, the NMT shall also be responsible for:
(i) developing and revising existing and new
promotional materials for the Products for in-person promotion to
Physicians, including the package inserts, labeling
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and other materials to the extent that the same relate specifically to
the marketing of the Products to Physicians;
(ii) developing promotional programs for the
Products to Physicians;
(iii) planning market research activities;
(iv) preparing any new materials directly related
to the Products that are to be used to train WCI's sales force;
(v) planning symposia, seminars and other
professional relations events of specific interest to Physicians; and
(vi) determining the types and frequency of
reports to be provided by WCI to APOTHECON with respect to WCI's
undertakings under this Agreement.
(d) The NMT shall meet not less than once in each Agreement
Quarter during the Copromotion Term or as otherwise agreed by the parties in
writing, at such locations as are designated by each party alternatingly. Each
party shall bear the costs and expenses of its designated members that are
incurred in connection with the National Marketing Committee meetings.
(e) Notwithstanding anything in this Section 5 or that might
otherwise imply to the contrary in this Agreement, APOTHECON shall have
strategic responsibility and sole authority and responsibility for obtaining all
legal, regulatory and medical approvals related to the selling and use of all
promotional materials prepared or approved by the National Marketing Team.
6. Funding of Promotional Activities.
(a) During the Copromotion Term, and subject to Sections 6(b)
and 7 (in the case of product samples), APOTHECON will produce and provide to
WCI those quantities of promotional, sales, marketing and educational materials
specified in the Marketing Plan and approved by APOTHECON ("Sales Materials"),
as well as those quantities of samples of the Products specified in the
Marketing Plan.
(b) APOTHECON shall fund the cost of the Sales Materials
(development and production costs only) and product samples referenced in
Section 6(a) in an amount not to exceed [REDACTED] for each Agreement Year,
provided, however, that: (i) in the event that the combined Net Sales of the
Products in any Agreement Year shall be less than the combined Net Sales of the
Products in [REDACTED], then APOTHECON'S funding obligation pursuant to this
Section 6(b) in the immediately following year shall decrease by the percentage
decline of combined Net Sales of the Products measured against combined Net
Sales of the Products in [REDACTED]; and (ii) in the event that the Agreement is
terminated with respect to either Ovcon(R)35 or Estrace(R), then APOTHECON's
funding obligation pursuant to this Section 6(b) shall be decreased for the
remainder of the Copromotion Term by a percentage calculated by dividing the
amount of the
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terminated product's Net Sales by the Products' combined Net Sales, each for the
twelve (12) months preceding the termination, and multiplying the resulting
quotient by one hundred (100).
(c) For purposes of accounting for APOTHECON's funding
obligation under Section 6(b), the cost of the Sales Materials shall be
[REDACTED], and the cost of the product samples shall be [REDACTED].
(d) Except for APOTHECON's funding obligation as set forth in
section 6(b) hereof, WCI shall be solely responsible for all costs incurred in
the promotion of the Products to Physicians in the Territory. WCI may, at its
own expense, purchase from APOTHECON Sales Materials and/or product samples in
quantities in excess of the amounts that APOTHECON is required to fund pursuant
to Section 6(b), provided, however, that if the amounts so purchased are in
excess of those set forth in the Marketing Plan, WCI shall provide APOTHECON
with sufficient notice of its intent to make such purchases as to enable
APOTHECON to supply the requested Sales Materials and/or product samples.
(e) APOTHECON shall invoice the purchase price of the Sales
Materials and/or product samples to WCI at the price specified in Section 6(c)
above. WCI shall pay for such Sales Materials and/or product samples within
[REDACTED] days after receipt of same by WCI, or shall credit same against such
amount as may then be remaining under APOTHECON's annual funding obligation
under Section 6(b).
(f) APOTHECON shall be under no obligation to conduct or
develop symposia, seminars, technical and scientific exhibits and other
professional relations events with respect to the Products or to conduct
additional Phase I, II, III or IV clinical trials with respect to the Products.
If requested by WCI and approved by APOTHECON in writing:
(i) WCI may conduct or develop symposia,
seminars, technical and scientific exhibits and other professional
relations events with respect to the Products; and
(ii) WCI may conduct additional Phase IV clinical
trials with respect to the use of the Products, provided that APOTHECON
and its Affiliates shall have the exclusive right to use for any
purpose the data resulting from any such clinical studies including,
but not limited to, product registrations and product licenses related
to the Products, throughout the world.
WCI shall be solely responsible for all costs or expenses incurred by WCI or
APOTHECON pursuant to clauses (i) and (ii) of this Section 6(f), and APOTHECON
shall have no contribution or reimbursement obligation hereunder with respect to
same.
7. Product Samples; Additional Clinical Studies.
(a) Product samples supplied by APOTHECON to WCI pursuant to
Section 6 will by used solely in making detail calls to Physicians in the
Territory. Product samples will in all cases be shipped to WCI on not less than
sixty (60) days' advance written notice and subject to the prevailing shipping
schedules of APOTHECON.
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(b) Product samples will be shipped to a WCI central
distribution point from which WCI will further distribute them to its sales
representatives. All costs of such distribution by WCI shall be borne solely by
WCI. Once WCI accepts shipment of product samples from APOTHECON, WCI shall be
responsible for all product samples accountability and compliance with the
Prescription Drug Marketing Act, as amended, and other applicable federal, state
and local laws relating to samples. WCI is further responsible for adherence by
its sales representatives to such laws.
(c) Product samples shall have a shelf life of not less than
[REDACTED] months.
8. Certain Regulatory Matters.
(a) All regulatory matters regarding the Products shall remain
under the exclusive control of APOTHECON, subject to the participation by WCI in
matters related to the marketing of the Products to Physicians in the Territory.
APOTHECON will have the sole responsibility, at its cost and expense, to respond
to products and medical complaints and to handle all returns and recalls of the
Products.
(b) APOTHECON shall furnish WCI with efficacy and safety
information reasonably requested by WCI to assist it in promoting the Products
to Physicians, including, without limitation, relevant clinical and safety data
included in the New Drug Application for the Products and information related to
the efficacy and safety profile of the Products since their approval by the FDA.
Such information shall be treated as Confidential Information of APOTHECON, and
shall not be disclosed to third parties or used for any purpose other than WCI's
performance of its obligations under this Agreement without APOTHECON's prior
written approval.
(c) Beginning as of the Effective Date of this Agreement, each
party shall promptly notify the other party of any significant event(s) that
affect the marketing of the Products, including, but not limited to, adverse
drug experiences and governmental inquiries, whether within or outside the
Territory.
Serious adverse events for the Products (as defined in section
8(h) below) learned by WCI shall be submitted to APOTHECON within three (3)
working days but no more than four (4) calendar days from the receipt date by
WCI.
Non-serious adverse events for the Products (as defined in
section 8(h) below) that are spontaneously reported to WCI shall be submitted to
APOTHECON no more than one (1) month from the date received by WCI; provided,
however, that medical and scientific judgment should be exercised in deciding
whether expedited reporting is appropriate in other situations, such as
important medical events that may not be immediately life-threatening or result
in death or hospitalization but may jeopardize the patient or may require
intervention to prevent a serious adverse event outcome.
APOTHECON shall have the reporting responsibility for such
events to applicable regulatory health authorities anywhere in the world.
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WCI shall report all such adverse events involving the
Products learned by it to:
Vice President, Worldwide Safety & Surveillance
Bristol-Myers Squibb Company
P.O. Box 5400
Mail Stop HW19-1.01
Princeton, New Jersey 08543-5400
U.S.A.
[REDACTED]
A CIOMS-I form or a form that contains the data elements of a CIOMS-I form is
recommended.
Serious adverse events concerning the Products learned by
APOTHECON shall be reported by APOTHECON to WCI at the time that APOTHECON
reports such events to FDA, and shall be sent to:
Vice President B Regulatory Affairs
Warner Chilcott, Inc.
100 Enterprise Drive B Suite 280
Rockaway, NJ 07866
[REDACTED]
(d) Beginning as of the Effective Date of this Agreement, each
party shall promptly notify the other party in writing of any order, request or
directive of a court or other governmental authority to recall or withdraw
either of the Products in any jurisdiction. APOTHECON shall be responsible, at
its sole cost and expense, for the costs of any recall or withdrawal of the
Products.
(e) Upon being contacted by the Food and Drug Administration
(FDA) or any other federal, state or local agency for any regulatory purpose
pertaining to this Agreement or to the Products, WCI shall, if not prohibited by
applicable law, immediately notify APOTHECON and will not respond to the agency
until consulting with APOTHECON, to the maximum feasible extent; provided,
however, that the foregoing shall not be construed to prevent WCI in any way
from complying, and WCI may permit unannounced FDA or similar inspections
authorized by law and respond to the extent necessary to comply, with its
obligation under applicable law.
(f) WCI shall inform Bristol Myers Squibb Company's office of
the Vice President, Worldwide Safety & Surveillance of any Product Quality
Complaint received within three (3) working days but no more than four (4)
calendar days from the receipt date by WCI. A Product Quality Complaint is
defined as any complaint that questions the purity, identity, potency or quality
of either of the Products, its packaging, or labeling, or any complaint that
concerns any incident that causes the drug product or its labeling to be
mistaken for, or applied to, another article or any bacteriological
contamination, or any significant chemical, physical, or other change or
deterioration in the distributed drug product, or any failure of one or more
distributed batches of the drug product
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to meet the specifications therefor in the NDA for the Products. Such
information shall be sent to the same address as set forth in Section 8(c) above
(g) BMS Professional Services Department shall handle all
medical inquiries concerning the Products. WCI shall refer all routine medical
information requests in writing to:
Bristol-Myers Squibb Company
Professional Services Department
P.O. Box 4500 P15-01
Princeton, NJ 08543-4500
Urgent medical information requests shall be referred by telephone to:
Professional Services Department: [REDACTED]
(h) A "serious" adverse event for the Products is defined as
any untoward medical occurrence that at any dose for either of the Products: (i)
results in death; (ii) is life-threatening; (iii) requires inpatient
hospitalization or prolongation of existing hospitalization; (iv) results in
persistent or significant disability/incapacity; (v) is a congenital
anomaly/birth defect; (vi) results in drug dependency or drug abuse; (vii) is
cancer, or (viii) is an overdose. A "nonserious" adverse event is defined as
that which is not serious.
9. Compliance with Law and Labeling.
(a) Each party shall maintain in full force and effect all
necessary licenses, permits and other authorizations required by law to carry
out its duties and obligations under this Agreement. Each party shall comply
with all laws, ordinances, rules and regulations (collectively, "Laws")
applicable to its activities under this Agreement, including without limitation,
any requirements of any product license applicable to the Products in the
Territory; provided, however, that WCI shall be solely responsible for
compliance with those Laws pertaining to the activities conducted by it
hereunder (including, without limitation, those Laws that apply to documentation
and records retention pertaining to the distribution and use of product samples
by it under this Agreement), notwithstanding that the FDA may, as a matter of
law, be entitled to hold APOTHECON accountable or responsible (whether primarily
or secondarily) for failure of WCI to comply with such Laws. The parties will
reasonably cooperate with one another with the goal of ensuring full compliance
with Laws.
(b) WCI shall make no representations or warranties relative
to either of the Products that conflict or are inconsistent with the
FDA-approved label for the respective Products. WCI shall be responsible for any
documented out-of-pocket costs incurred by APOTHECON resulting from statements
made by its sales representatives that relate to the safety or efficacy of the
Products that are not in compliance with applicable law or have not been
authorized by APOTHECON in advance in writing.
(c) The parties acknowledge to each other that the breach of
any obligation contained in this Section 9 shall constitute a material breach of
the Agreement. The parties further agree that the absence of a similar
materiality acknowledgement for another Section in this
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Agreement shall not be evidential as to whether a breach of such Section or of
any other aspect of this Agreement constitutes a material breach.
10. Copromotion Compensation.
As compensation for services rendered by WCI during the
Copromotion Term, APOTHECON shall pay WCI a "Performance Fee" based on Net Sales
as set forth on Schedule A (as to Ovcon(R)35) and Schedule B (as to Estrace(R)).
11. Payments and Reporting.
(a) APOTHECON shall furnish WCI, within fifteen (15) days
after each month, a report setting forth in reasonable detail the calculation of
WCI's compensation under Section 10 with respect to such period, including the
calculation of gross to net sales (and, in addition to a report for December, a
report with respect to the entire Agreement Year).
(b) Compensation due WCI (or payments due APOTHECON) under
Section 10 shall be paid within [REDACTED] days after each Agreement Quarter.
(c) The parties will maintain complete and accurate books and
records in sufficient detail to enable verification of WCI's performance
hereunder and the basis for calculating the compensation paid by APOTHECON to
WCI hereunder. Either party may demand an audit of the other party's relevant
books and records in order to verify the other's reports on the aforesaid
matters. Upon reasonable prior notice to the party to be audited, the
independent public accountants of the other party shall have access to the
relevant books and records of the party to be audited in order to conduct a
review or audit thereof. Such access shall be available during normal business
hours not more than once each calendar quarter during the Copromotion Term and
only for a period until two years after the relevant period in question. The
accountants shall be entitled to report its conclusions and calculations to the
party requesting the audit, except that in no event shall the accountants
disclose the names of customers of either party or the prices, discounts,
rebates, or other terms of sale charged by APOTHECON for the Products.
The party requesting the audit shall bear the full cost of the
performance of any such audit except as hereinafter set forth. If, as a result
of any inspection of the books and records of APOTHECON, it is shown that
APOTHECON's payments to WCI under this Agreement were less than the amount which
should have been paid, then APOTHECON shall make all payments required to be
made to eliminate any discrepancy revealed by said inspection within 30 days
after WCI's demand therefor. If, as a result of any inspection of the books and
records of WCI, it is shown that APOTHECON's funding of costs associated with
its funding obligations under this Agreement were more than the amount which
should have been paid, then WCI shall reimburse APOTHECON for the discrepancy
revealed by said inspection within 30 days after APOTHECON's demand therefor.
Furthermore, if the payments were more or less than the amount which should have
been paid by an amount in excess of [REDACTED] percent [REDACTED] of the
payments actually made during the period in question, the party responsible for
the discrepancy shall also reimburse the auditing party for its documented
out-of-pocket costs of such inspection.
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12. Copromotion Term and Termination.
(a) The Copromotion Term shall be for five (5) years and shall
begin effective January 1, 1999 (even if the Agreement is executed after such
date) and shall end on December 31, 2003, unless terminated earlier in
accordance with Section 12(b), (c) or (d) below or unless extended pursuant to
section 12(g) by the parties' mutual agreement (the "Copromotion Term").
(b) Upon sixty (60) days written notice to WCI, APOTHECON may
terminate the Copromotion Term without penalty with respect to Ovcon(R)35 or
Estrace(R) upon the occurrence of any of the following:
(i) total prescriptions for such product in any
Agreement Year do not exceed [REDACTED] percent [REDACTED] of the
respective base prescription levels for such product set forth on
Schedule C attached hereto; or
(ii) total prescriptions for such product in any
two (2) consecutive Agreement Quarters do not exceed the sum of the
respective base prescription levels for such product set forth on
Schedule C attached hereto; or
(iii) APOTHECON sells or out-licenses Ovcon(R)35 or
Estrace(R) Cream to an unAfilliated third party (so long as such sale
or out-license is in accordance with Section 15 herein), or all of the
outstanding stock or all or substantially all of the business assets of
APOTHECON are sold to an unAffiliated third party, provided that in
either such event APOTHECON shall pay to WCI an amount equal to the
Performance Fee earned by WCI with respect to each such sold or out-
licensed product to the date of termination plus an amount equal to
[REDACTED] of the aggregate Performance Fee earned by WCI with respect
to each such sold or out-licensed product for the four full calendar
quarters immediately preceding the quarter in which the date of
termination occurs; or
(iv) BMS permanently stops manufacturing such
product, provided that APOTHECON shall continue to provide the market
with such product for eighteen (18) months from the date of the notice,
and provided further, that APOTHECON will provide reasonable technical
assistance to WCI if WCI wishes to transfer production to a third party
acceptable to APOTHECON.
In all instances, prescription levels shall be as reported by the International
Marketing Services Prescription Reporting Services, or such other prescription
services to which the parties may mutually agree in writing.
(c) Upon written notice to WCI, APOTHECON may terminate the
Copromotion Term without penalty with respect to the Agreement in its entirety
upon the occurrence of either of the following:
(i) [REDACTED] percent [REDACTED or more of the
voting securities of WCI are sold or transferred or WCI otherwise
undergoes a change of control; or
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<PAGE>
(ii) WCI breaches any material obligation or duty
under this Agreement and said breach is continuing thirty (30) days
after APOTHECON has advised WCI in writing of the existence and nature
of the breach; or
(iii) APOTHECON receives notice that WCI has become
insolvent or has suspended business in all material respects hereof, or
has consented to an involuntary petition purporting to be pursuant to
any reorganization or insolvency law of any jurisdiction, or has made
an assignment for the benefit of creditors, or has applied for or
consented to the appointment of a receiver or trustee for a substantial
part of its property or assets.
(d) WCI may terminate the Copromotion Term without penalty
with respect to Ovcon(R)35 or Estrace(R) or with respect to the Agreement in its
entirety, as follows:
(i) at any time, without cause, upon one hundred
eighty (180) days written notice to APOTHECON; or
(ii) APOTHECON breaches any material obligation or
duty under this Agreement and said breach is continuing sixty (60) days
after WCI has advised APOTHECON in writing of the existence and nature
of the breach; or
(iii) WCI receives notice that APOTHECON has become
insolvent or has suspended business in all material respects hereof, or
has consented to an involuntary petition purporting to be pursuant to
any reorganization or insolvency law of any jurisdiction, or has made
an assignment for the benefit of creditors, or has applied for or
consented to the appointment of a receiver or trustee for a substantial
part of its property or assets.
(e) Neither the termination nor expiration of the Copromotion
Term shall release or operate to discharge either party from (i) any liability
or obligation that may have accrued prior to such termination or expiration, or
(ii) any other agreement which may exist between the parties regarding line
extensions of the Products or any other product, except as may be set forth in
such other agreement. Any termination of the Copromotion Term by a party shall
not be an exclusive remedy, but shall be in addition to any legal or equitable
remedies that may be available to the terminating party. However, neither party
shall be liable to the other party for any damages (whether direct, indirect,
special, consequential, incidental, or other, including lost profits) sustained
by reason of expiration of this Agreement or for termination of this Agreement
by a party in accordance with the terms hereof.
(f) During any notice period, each party shall continue to
fulfill its obligations under this Agreement. Upon the termination or expiration
of the Copromotion Term, WCI shall promptly cease all of its promotion
activities pursuant to this Agreement, discontinue any use of the Trademarks,
return to APOTHECON all sales training, promotional, marketing material,
APOTHECON call lists and computer files, and any remaining product samples
(i.e., not already distributed or destroyed with destruction certified by WCI)
that may have been supplied to WCI by APOTHECON under this Agreement.
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<PAGE>
(g) The Copromotion Term may be extended at the expiration of
the initial Copromotion Term upon the mutual written consent of the parties.
13. Indemnification and Insurance.
(a) APOTHECON shall defend, indemnify and hold WCI and its
employees, agents, officers, directors and affiliates (a "WCI Party") harmless
from and against any and all losses, liabilities, obligations, claims, fees
(including, without limitation, attorneys fees), expenses and lawsuits incurred
by a WCI Party that are claimed by any third party and that result from or arise
in connection with (i) the breach of any covenant, representation or warranty of
APOTHECON contained in this Agreement, (ii) the manufacturing, storage, sale or
distribution of the Products by APOTHECON or any licensee or affiliate thereof,
including, without limitation, any claim of patent infringement, (iii) any
product liability claim related to the Products, including, without limitation,
the use by any person of any Products that were manufactured, sold or
distributed by APOTHECON or any licensee or affiliate thereof, (iv) any
contamination of or defect in the Products; and (v) breach by APOTHECON of its
obligations under Section 9 hereof. Notwithstanding anything in this Section
13(a), APOTHECON shall not be obligated to indemnify a WCI Party for any
liability related to the Products for which WCI has assumed an indemnification
obligation under Section 13(b) below.
(b) WCI shall defend, indemnify and hold APOTHECON and its
employees, agents, officers, directors and affiliates (an "APOTHECON Party")
harmless from and against any and all losses, liabilities, obligations, claims,
fees (including, without limitation, attorneys fees), expenses and lawsuits
brought against or incurred by an APOTHECON Party by a third party resulting
from or arising in connection with (i) the breach by WCI of any covenant,
representation or warranty of WCI contained in this Agreement, (ii) any
contamination, mislabeling, or adulteration of any product samples occurring
while such product samples are under the control of WCI, and/or (iii) breach by
WCI of its obligations under Section 9 hereof.
(c) To receive the benefits of the indemnity under clauses (a)
or (b) above, as applicable, an indemnified party must (i) give the indemnifying
party written notice of any claim or potential claim promptly after the
indemnified party receives notice of any such claim; (ii) allow the indemnifying
party to assume the control of the defense and settlement (including all
decisions relating to litigation, defense and appeal) of any such claim (so long
as it has confirmed its indemnification obligation to such indemnified party
under this Section 13); and (iii) so long as such cooperation does not vitiate
any legal privilege to which it is entitled, reasonably cooperate (provided the
indemnifying party reimburses the indemnified party's reasonable documented
out-of-pocket expenses) with the indemnifying party in its defense of the claim
(including, without limitation, making documents and records available for
review and copying and making persons within its/his/her control available for
pertinent testimony). If the indemnifying party defends the claim, an
indemnified party may participate in, but not control, the defense of such claim
at its/his/her sole cost and expense. An indemnifying party shall have no
liability under this Section 13 as to any claim for which settlement or
compromise of such claim or an offer of settlement or compromise of such claim
is made by an indemnified party without the prior consent of the indemnifying
party.
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(d) WCI acknowledges and agrees that any WCI sales force
personnel (including contract sales personnel, telemarketers, independent
contractors, employees, and agents) used by WCI to fulfill its obligations under
this Agreement are not, and are not intended to be or be treated as, employees
of APOTHECON or any of its Affiliates, and that such individuals are not
eligible to participate in any "employee benefit plans", as such term is defined
in section 3(3) of ERISA, that are sponsored by BMS or any of its Affiliates.
APOTHECON shall not be responsible to WCI, to any employees,
agents, contractors, telemarketers, or other personnel of WCI used by it to
perform its obligations under this Agreement, or to any governmental entity for
any compensation or benefits (including, without limitation, vacation and
holiday remuneration, healthcare coverage or insurance, life insurance, pension
or profit-sharing benefits and disability benefits), payroll-related taxes or
withholdings, or any governmental charges or benefits (including without
limitation unemployment and disability insurance contributions or benefits and
workmen's compensation contributions or benefits) that may imposed upon or be
related to the performance by WCI and any of its employees, agents, contractors,
telemarketers, or other personnel used by WCI to discharge its obligations under
this Agreement, all of which shall be the sole responsibility of WCI, even if it
is subsequently determined by any court, the IRS or any other governmental
agency that such individual may be a common law employee of APOTHECON or any of
its Affiliates. All such matters of compensation, benefits and other terms of
employment for any employee, agent, contractor, telemarketer, or other personnel
used by WCI shall be solely a matter between WCI and such individual(s) or
entities.
WCI will indemnify, defend, and hold harmless each APOTHECON
Party from and against any damages, liability, loss and costs that may be paid
or payable by any such APOTHECON Party resulting from or in connection with any
claim or other cause of action asserted by:
(i) any employees, agents, contractors,
telemarketers, or other personnel of WCI used by it to perform its
obligations under this Agreement, or
(ii) by any third party (including federal, state
or local governmental authorities) with respect to:
(iii) any payment or obligation to make a payment
to any employees, agents, contractors, telemarketers, or other
personnel used by WCI to perform its obligations under this Agreement
with respect to any compensation, benefits of any type under any
employee benefit plan (as such term is defined above), and any other
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee
benefit plans, programs or arrangements that may be sponsored at any
time by APOTHECON or any of its Affiliates or by WCI or any of its
Affiliates, even if it is subsequently determined by any court, the IRS
or any other governmental agency that any such employee, agent,
contractor, telemarketer, and other person used by WCI to discharge its
obligations hereunder may be a common law employee of APOTHECON or any
of its Affiliates; and
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(iv) the payment or withholding of any
contributions, payroll taxes, or any other payroll-related item by or
on behalf of WCI or any of its employees, agents, contractors,
telemarketers, and other personnel with respect to which APOTHECON, WCI
or any of WCI's employees, agents, contractors, telemarketers, and
other personnel may be responsible hereunder or pursuant to applicable
law to pay, make, collect, withhold or contribute, even if it is
subsequently determined by any court, the IRS or by any other
governmental agency that any such employee, agent, contractor,
telemarketer, and other person used by WCI to discharge its obligations
hereunder may be a common law employee of APOTHECON or any of its
Affiliates.
Nothing contained in this Section 13(d) is intended to or will effect or limit
any compensation payable by APOTHECON to WCI for the services rendered by WCI
pursuant to this Agreement.
(e) WCI shall maintain for the entire term of this Agreement
comprehensive general liability and product liability coverage of no less than
[REDACTED] per occurrence. Apothecon, Inc. and Bristol-Myers Squibb Company
shall be named as insureds on the policy. WCI shall furnish to APOTHECON
evidence of such insurance, upon request.
(f) The indemnification obligations set forth in this Section
13 shall survive termination of the Agreement.
14. Confidentiality.
(a) Each party acknowledges that it may receive confidential
or proprietary information of the other party in the performance of this
Agreement. Each party shall hold confidential and shall not, directly or
indirectly, disclose, publish or use for the benefit of any third party or
itself, except in carrying out its duties hereunder, any confidential or
proprietary information of the other party, without first having obtained the
furnishing party's written consent to such disclosure or use. "Confidential or
proprietary information" shall include, inter alia, know-how, scientific
information, clinical data, efficacy and safety data, adverse event information,
formulas, methods and processes, specifications, pricing information (including
discounts, rebates and other price adjustments) and other terms and conditions
of sales, customer information, business plans, and all other intellectual
property. This restriction shall not apply to any information within the
following categories:
(i) information that is known to the receiving
party or its Affiliates prior to the time of disclosure to it, to the
extent evidenced by written records or other competent proof;
(ii) information that is independently developed
by employees, agents, or independent contractors of the receiving party
or its Affiliates without reference to or reliance upon the information
furnished by the disclosing party, as evidenced by written records or
other competent proof;
(iii) information disclosed to the receiving party
or its Affiliates by a third party that has a right to make such
disclosure;
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(iv) information that is contained in any written
promotional material prepared by APOTHECON for use in connection with
the Products; or
(v) any other information that becomes part of
the public domain through no fault or negligence of the receiving
party.
The receiving party shall also be entitled to disclose the
other party's Confidential Information that is required to be disclosed in
compliance with applicable laws or regulations (including, without limitation,
to comply with SEC, NASDAQ or stock exchange disclosure requirements), or by
order of any governmental body or a court of competent jurisdiction; provided
that the party required to disclose such information shall use all reasonable
efforts to obtain confidential treatment of such information by the agency or
court.
(b) This obligation shall survive the termination or
expiration of this Agreement for [REDACTED] years.
(c) The confidentiality obligations described above shall be
in addition to the parties' obligations under the Confidential Disclosure
Agreement dated as of July 14, 1998, except that to the extent there is an
conflict between that agreement and provisions of this Agreement, this Agreement
shall govern.
15. Right of First Negotiation
If, during the Copromotion Term for either of the Products,
APOTHECON determines that it is interested in entering into an arrangement with
an unAffiliated Person (hereinafter "Third Party") to sell or out-license the
right to sell either of the Products or the right to either of the Trademarks
(any such rights being hereafter referred to as a "Right"), then, provided the
Copromotion Term for the product or trademark to be sold or out-licensed is
still in effect, APOTHECON shall give WCI a right of first negotiation to
acquire such Right as follows:
(a) APOTHECON shall give written notice to WCI of its interest
in selling or out-licensing the Right. WCI shall have [REDACTED] days after
receipt of such notice to decide whether or not it wishes to pursue negotiations
for such an arrangement with respect to such Right and to submit a proposal to
APOTHECON. In the event that WCI declines to pursue negotiations or does not
reply to APOTHECON's notice within the [REDACTED] day period, APOTHECON shall be
free to negotiate and enter into an arrangement with respect to such Right with
a Third Party.
(b) In the event that WCI expresses interest in negotiations
and submits a preliminary proposal, then for an additional [REDACTED] day
period, APOTHECON shall conduct negotiations on an exclusive basis with WCI
diligently and in good faith to reach an arrangement with WCI. At the end of
such [REDACTED] day period, if the parties have not reached an agreement at such
time, WCI shall give APOTHECON a written notice setting forth the final offer by
WCI for such an arrangement (the Final Offer). If APOTHECON rejects the Final
Offer, it shall thereafter be free to negotiate and enter into an arrangement
with respect to such Right with a Third Party as provided in section 15(c).
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(c) In the event the parties fail to negotiate a written
agreement pursuant to Sections 15(b) above within the period provided therein,
APOTHECON shall be free to enter into an arrangement for the selling or
out-licensing of the Right with a Third Party; provided, however, that for a
period of twelve months from the expiration of the [REDACTED] exclusive
negotiation period set forth in section 15(b) APOTHECON shall not enter into an
arrangement with a Third Party with respect to such Right on terms less
favorable to APOTHECON than the Final Offer without first reoffering to WCI the
opportunity to enter into an arrangement on the terms set forth in the Final
Offer. In the event of such a reoffer, WCI shall have [REDACTED] days to advise
APOTHECON of its interest in entering into an arrangement on such terms. In the
event that WCI expresses interest in such an arrangement on such terms, the
parties shall conduct exclusive negotiations and conclude an agreement
incorporating such terms within [REDACTED] days thereafter. For purposes of this
Section 15(c), WCI acknowledges and agrees that APOTHECON shall have the right,
in its sole discretion, to determine whether an offer from a Third Party that
consists in whole or in part of non-cash compensation is more or less favorable
to APOTHECON than the Final Offer.
16. Representations and Warranties.
(a) APOTHECON represents and warrants to WCI that (i) the
execution, delivery and performance of this Agreement by APOTHECON does not
conflict with, or constitute a breach of or under, any order, judgment,
agreement or instrument to which APOTHECON is a party; (ii) the execution,
delivery and performance of this Agreement by APOTHECON does not require the
consent of any person or the authorization of (by notice or otherwise) any
governmental or regulatory authority; (iii) the rights granted by APOTHECON to
WCI hereunder do not conflict with any rights granted by APOTHECON to any third
party; and (iv) APOTHECON or BMS owns the Trademarks and NDAs for the Products.
(b) WCI represents and warrants to BMS that (i) the execution,
delivery and performance of this Agreement by WCI does not conflict with, or
constitute a breach of or under, any order, judgment, agreement or instrument to
which WCI is a party; and (ii) the execution, delivery and performance of this
Agreement by WCI does not require the consent of any person or the authorization
of (by notice or otherwise) any governmental or regulatory authority.
17. Notices. Unless otherwise explicitly set forth herein, any
notice required or permitted to be given hereunder shall be in writing and shall
be delivered personally by hand, or sent by reputable overnight courier,
signature required, to the addresses of each party set forth below or to such
other address or addresses as shall be designated in writing in the same matter:
(a) If to APOTHECON:
APOTHECON, INC.
777 Scudders Mill Road
Plainsboro, NJ 08536
Attention: General Manager
with a copy to the attention of the "Vice President and Senior Counsel" at the
same address.
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(b) If to WCI:
Warner Chilcott Inc.
Rockaway 80 Corporate Center
100 Enterprise Drive
Suite 280
Rockaway, N.J. 07866
Attention: President
with a copy to "General Counsel" at the same address.
All notices shall be deemed given when received by the addressee.
18. Miscellaneous Provisions.
(a) Assignment. Neither party shall assign or otherwise
transfer this Agreement or any interest herein or right hereunder without the
prior written consent of the other party, and any such purported assignment,
transfer or attempt to assign or transfer any interest herein or right hereunder
shall be void and of no effect; except that (i) APOTHECON may sell or
out-license any Right pursuant to Section 15 of this Agreement and (ii) each
party (x) may assign its rights and obligations hereunder to an Affiliate
without the prior consent of the other party (although, in such event, the
assigning party shall remain responsible for all of its obligations and
agreements set forth herein, notwithstanding such assignment) and (y) may assign
its rights and obligations to a successor (whether by merger, consolidation,
reorganization or other similar event) or purchaser of all or substantially all
of its business assets relating to the Products, provided, that such successor
or purchaser has agreed in writing to assume all of such party's rights and
obligations hereunder and a copy of such assumption is provided to the other
party hereunder, and provided further that nothing in this Section 18(a) shall
preclude APOHTECON from exercising its right to terminate the Copromotion Term
under Section 12 (b) or (c).
(b) Non-Waiver. Any failure on the part of a party to enforce
at any time or for any period of time any of the provisions of this Agreement
shall not be deemed or construed to be a waiver of such provisions or of any
right of such party thereafter to enforce each and every such provision on any
succeeding occasion or breach thereof.
(c) Dispute Resolution. If any dispute arises under this
Agreement which cannot be resolved expeditiously by the NMT after due
consideration, the matter shall be submitted to the President of WCI and the
General Manager of APOTHECON for resolution. Any dispute that can not be so
resolved within 30 days after submission shall be submitted for arbitration in
accordance with the rules of the American Arbitration Association, and the award
or decision made by the arbitrator(s) designated pursuant to the American
Arbitration Association rules of arbitration shall be binding upon the parties
hereto and a judgment consistent therewith may be entered in any court of
competent jurisdiction; provided, however, that nothing herein contained shall
preclude a party from seeking equitable remedies in any court of competent
jurisdiction. Any such arbitration proceedings shall be conducted in New Jersey.
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(d) Entirety of Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all previous and contemporaneous verbal and written agreements,
representations and warranties with respect to such subject matter. This
Agreement (or any provision or term hereof) may be released, waived, changed or
supplemented only by a written agreement signed by an officer or other
authorized representative of the party against whom enforcement of any release,
waiver, change or supplement is sought. This Agreement shall not be strictly
construed against either party hereto.
(e) Public Announcements. The form and content of any public
announcement to be made by one party regarding this Agreement, or the subject
matter contained herein, shall be subject to the prior written consent of the
other party (which consent may not be unreasonably withheld), except as may be
required by applicable law (including, without limitation, disclosure
requirements of the SEC, NASDAQ, or any other stock exchange) in which event the
other party shall endeavor to give the other party reasonable advance notice and
review of any such disclosure. Proposed public announcements submitted to the
other party for approval shall be considered approved if the submitting party
has not received comments or objections from the other party within fifteen (15)
days from the date of submission, provided that public announcements proposed by
WCI must be simultaneously provided to both the General Manager and in house
Legal Counsel for APOTHECON, at Apothecon, Inc., 777 Scudders Mill Road,
Plainsboro, New Jersey.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New Jersey,
without regard to its conflicts of law principles.
(g) Relationship of the Parties. In making and performing this
Agreement, the parties are acting, and intend to be treated, as independent
entities and nothing contained in this Agreement shall be construed or implied
to create an agency, partnership, joint venture, or employer and employee
relationship between APOTHECON and WCI. Except as otherwise provided herein,
neither party may make any representation, warranty or commitment, whether
express or implied, on behalf of or incur any charges or expenses for or in the
name of the other party. No party shall be liable for the act of any other party
unless such act is expressly authorized in writing by both parties hereto.
(h) Counterparts. This Agreement shall become binding when any
one or more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against the
party whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
(i) Force Majeure. Neither party shall be liable to the other
party for any failure to perform as required by this Agreement if the failure to
perform is due to circumstances reasonably beyond such party's control,
including, without limitation, acts of God, civil disorders or commotions, acts
of aggression, fire, explosions, floods, drought, war, sabotage, embargo,
unexpected safety or efficacy results obtained with either of the Products,
utility failures, material shortages, labor disturbances, a national health
emergency, or appropriations of property. A party
-21-
<PAGE>
whose performance is affected by a force majeure event shall take prompt action
using its reasonable best efforts to remedy the effects of the force majeure
event.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Apothecon, INC. Warner Chilcott Inc.
By: /s/ Richard J. Lane By: /s/ Roger M. Boissonneault
----------------------------------- ----------------------------
Richard J. Lane Roger M. Boissonneault
Title: President U.S. Title: President
Medicines Group and
Worldwide Franchise Management
Prepared by Harvey C. Kaish,
McCarter & English, LLP
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<PAGE>
Schedule A
Ovcon(R) & Estrace(R) Co-Promotion
Ovcon(R) 35 Payment Schedule
The following sets forth the performance based payment
schedule under which Apothecon will pay WCI for co-promoting Ovcon(R)35 in the
United States.
(i) For the quarter ended March 31, 1999, [REDACTED] of
the excess, if any, of Net Sales for Ovcon(R)35 from [REDACTED] to [REDACTED]
and [REDACTED] of the excess, if any over [REDACTED].
(ii) For the quarter ended June 30, 1999, [REDACTED] of the
excess, if any, of Net Sales for Ovcon(R)35 from [REDACTED] to [REDACTED] and
[REDACTED] of the excess, if any, over [REDACTED].
(iii) For the quarter ended September 30, 1999, [REDACTED]
of the excess, if any, of Net Sales of Ovcon(R)35 from [REDACTED] to [REDACTED]
and [REDACTED] of the excess, if any, over [REDACTED].
(iv) For the year ended December 31, 1999, [REDACTED] of
the excess, if any, of Net Sales for Ovcon(R)35 for the year ended December 31,
1999 from [REDACTED to [REDACTED] and [REDACTED] of the excess, if any, over
[REDACTED], minus the total of Performance Fees paid to WCI in respect of
Ovcon(R)35 for the first three calendar quarters of 1999. If the amount
calculated in accordance with the foregoing is a negative number, WCI shall pay
to Apothecon such amount.
(v) For each calendar quarter beginning with the first
quarter of 2000 through the fourth quarter of 2003, [REDACTED] of the excess, if
any, of Net Sales of Ovcon(R)35 from [REDACTED] to [REDACTED] and [REDACTED] of
the excess, if any, over [REDACTED].
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<PAGE>
Schedule B
Ovcon(R) & Estrace(R) Co-Promotion
Estrace Cream Payment Schedule
The following sets forth the performance based payment
schedule under which Apothecon will pay WCI for co-promoting Estrace(R) cream in
the United States.
(i) For the quarter ended March 31, 1999, [REDACTED] of
the excess, if any, of Net Sales for Estrace(R) cream from [REDACTED] to
[REDACTED] and [REDACTED] of the excess, if any over [REDACTED].
(ii) For the quarter ended June 30, 1999, [REDACTED] of the
excess, if any, of Net Sales for Estrace(R) cream from [REDACTED] to [REDACTED]
and [REDACTED] of the excess if any, over [REDACTED].
(iii) For the quarter ended September 30, 1999, [REDACTED]
of the excess, if any, of Net Sales of Estrace(R) cream from [REDACTED] to
[REDACTED] and [REDACTED] of the excess, if any, over [REDACTED].
(iv) For the year ended December 31, 1999, [REDACTED] of
the excess, if any, of the Net Sales for Estrace(R) Cream for the year ended
December 31, 1999 from [REDACTED] to [REDACTED] and [REDACTED] of the excess, if
any, over [REDACTED] minus the total of Performance Fees paid to WCI in respect
of Estrace(R) cream for the first three calendar quarters of 1999. If the amount
calculated in accordance with the foregoing is a negative number, WCI shall pay
to Apothecon such amount.
(v) For each calendar quarter beginning with the first
quarter of 2000 through the fourth quarter of 2003, [REDACTED] of the excess, if
any, of Net Sales of Estrace(R) cream from [REDACTED] to [REDACTED] and
[REDACTED] of the excess, if any, over [REDACTED].
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<PAGE>
Schedule C
Ovcon(R) & Estrace(R) Co-Promotion
Base Prescription Levels
<TABLE>
<CAPTION>
Total Prescriptions
Quarter Ending Year Ovcon(R)35 Estrace(R) Cream
<S> <C> <C> <C>
March 31st 2000 [REDACTED] [REDACTED]
June 30th 2000 [REDACTED] [REDACTED]
September 30th 2000 [REDACTED] [REDACTED]
December 31st 2000 [REDACTED] [REDACTED]
March 31st 2001 [REDACTED] [REDACTED]
June 30th 2001 [REDACTED] [REDACTED]
September 30th 2001 [REDACTED] [REDACTED]
December 31st 2001 [REDACTED] [REDACTED]
March 31st 2002 [REDACTED] [REDACTED]
June 30th 2002 [REDACTED] [REDACTED]
September 30th 2002 [REDACTED] [REDACTED]
December 31st 2002 [REDACTED] [REDACTED]
March 31st 2003 [REDACTED] [REDACTED]
June 30th 2003 [REDACTED] [REDACTED]
September 30th 2003 [REDACTED] [REDACTED]
December 31st 2003 [REDACTED] [REDACTED]
</TABLE>
-26-
<PAGE>
Confidential Treatment
Exhibit 10.48
Redacted information denoted as "[REDACTED]," has been omitted from this
document pursuant to a request for confidential treatment that has been
separately filed with the Commission.
LICENSE AGREEMENT
Ovcon(R)[REDACTED]
This LICENSE AGREEMENT is made as of the Effective Date by and between,
on the one hand, BRISTOL-MYERS SQUIBB COMPANY, having a place of business at 777
Scudders Mill Road, Plainsboro, New Jersey 08543-4500 ("BMS"), and, on the other
hand, WARNER CHILCOTT LABORATORIES IRELAND LIMITED, having a place of business
at Lincoln House, Lincoln Place, Dublin 2, Ireland ("WCL") and, for purposes of
indemnification under Article IX only, WARNER CHILCOTT INC., having a place of
business at Rockaway 80 Corporate Center, 100 Enterprise Drive, Suite 280,
Rockaway, New Jersey 07866 ("WCI").
WITNESSETH:
WHEREAS, BMS owns the right, title and interest in and to the Trademark
(as defined herein); and
WHEREAS, BMS owns the right, title and interest in and to approved New
Drug Applications covering the manufacture and sale of norethindrone and ethinyl
estradiol tablets, USP, in formulations containing 50 and 35 micrograms ethinyl
estradiol, which are currently marketed by Apothecon, Inc. (an Affiliate of BMS,
hereinafter referred to as "Apothecon") in the Territory under the trademarks
Ovcon(R)50 and Ovcon(R)35, respectively; and
WHEREAS, WCL desires to market and sell a norethindrone and ethinyl
estradiol tablet in a formulation containing [REDACTED] micrograms ethinyl
estradiol under the trademark "Ovcon(R)[REDACTED]"; and
WHEREAS, BMS is willing to grant to WCL an exclusive license (except as
to BMS, its Affiliates, or a purchaser or in-licensor in accordance with Article
II(F) herein) to use and display the "Ovcon(R)" trademark in connection with the
marketing and sale by WCL of a norethindrone and ethinyl estradiol tablet in a
formulation containing [REDACTED] micrograms ethinyl estradiol and to facilitate
WCL's securing its own NDA for that tablet.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
I. Definitions
For purposes of this Agreement, the following terms shall have the
corresponding meanings set forth below:
<PAGE>
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person. A Person shall be regarded as in control of another Person if
it/he/she owns, or directly or indirectly controls, more than fifty percent
(50%) of the voting securities (or comparable equity interests) or other
ownership interests of the other Person, or if it/he/she directly or indirectly
possesses the power to direct or cause the direction of the management or
policies of the other Person, whether through the ownership of voting
securities, by contract or any other means whatsoever.
"Agreement" means this agreement, together with all appendices,
exhibits and schedules hereto, and as the same may be amended or supplemented
from time to time hereafter by a written agreement duly executed by authorized
representatives of each party hereto.
"Agreement Quarter" means each three-month period commencing on the
first day of January, April, July, or October, as the case may be, during the
Agreement Term.
"Agreement Term" has the meaning specified in Article VIII hereof.
"Commercial Launch" means the first commercial sale of the Product to
an unAffiliated Third Party.
"Confidential and Proprietary Information" has the meaning set forth in
Article X hereof.
"Copromotion Agreement" means the agreement for the copromotion of
Ovcon(R)35 and Estrace(R) entered into between Apothecon and WCI as of January
1, 1999 solely as it pertains to Ovcon(R)35.
"Effective Date" means February 1, 1999.
"Net Sales" means for the applicable period the gross amount invoiced
for the Product by WCL or its licensees to unAffiliated third parties in the
Territory, less the following amounts to the extent deducted on such invoice or
absorbed by WCL in accordance with U.S. GAAP: (i) quantity, trade and/or cash
discounts, allowances, rebates, and price adjustments or reductions allowed or
given, provided, however, that such discounts, allowances, rebates, adjustments
and reductions are ordinary and usual in the industry; (ii) freight, postage,
and shipping insurance expenses absorbed by WCL and not reimbursed by the
invoicee; (iii) credits, rebates, charge backs, or refunds allowed for rejected,
outdated, or returned Product; (iv) sales and other excise taxes and duties
directly related to the sale, to the extent such items are included in the gross
invoice price (but not including taxes assessed against the income derived from
such sale). If a Product is sold for compensation other than cash, Net Sales
shall be calculated based on the fair market value of the Product in cash.
"Ovcon(R)35" means all current presentations of norethindrone and
eithinyl estradiol tablets, USP, currently approved by the FDA as an oral
contraceptive (as more fully specified in the labeling for the product) and
marketed under the trademark Ovcon(R)35.
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<PAGE>
"Ovcon Products" means all current presentations and formulations of
norethindrone and ethinyl estradiol tablets, USP, currently approved by the FDA
and marketed under and/or utilizing the trademark "Ovcon(R)."
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority, or any other form of entity not
specifically listed herein.
"Product" means finished pharmaceutical preparations containing as
their active ingredients norethindrone and [REDACTED] micrograms ethinyl
estradiol.
"Serious Adverse Event" and "Non-Serious Adverse Event" have the
meanings set forth in Articles VII(G).
"Territory" means the United States of America, and specifically
excluding Puerto Rico and any U.S. held territories and possessions.
"Third Party" means any Person other than a party to this Agreement or
an Affiliate thereof.
"Trademark" means the trademark "Ovcon(R)".
II. Grant to WCL
A. Subject to all the terms and conditions of this Agreement, BMS
hereby grants to WCL an exclusive license, (except as to BMS, its Affiliates, or
a purchaser or in-licensor of the Trademark in accordance with Article II(F)
herein), to use the Trademark in the Territory during the Agreement Term solely
in connection with the promotion, marketing and sale of the Product in the
Territory in accordance with the terms of this Agreement. WCL shall not transfer
or grant any sublicenses with respect to the Trademark without the prior,
express written consent of BMS, except that WCL is hereby authorized to grant
nontransferable sublicenses to use the Trademark to its Affiliates for the sole
purpose of carrying out WCL's obligations and efforts under this Agreement,
provided that such Affiliates agree to be bound by the terms and conditions of
this Agreement.
B. WCL acknowledges that BMS is the sole and exclusive owner of all
right, title and interest in and to the Trademark (including the application and
any subsequent registrations and renewals thereof). In connection with its use
of the Trademark, WCL shall not in any way or manner represent to others that it
owns or has any ownership rights in the Trademark and any subsequent
registrations thereof. WCL agrees and acknowledges that any goodwill accruing or
arising from its use of the Trademark shall be for the sole benefit of BMS. WCL
shall not take any action that impairs, contests or tends to impair or contest
BMS's right, title and interest in and to the Trademark and any goodwill
associated with the Trademark. All rights to use the Trademark not expressly
granted to WCL by BMS pursuant this Agreement are reserved.
C. WCL shall not use or display any other mark or marks in connection
with the
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<PAGE>
Trademark, except for trademarks used or adopted by WCL generally, such as
"Warner Chilcott" or the "WC" logo, that are used on packaging and/or
advertising or promotional material for the Product and that are physically
separate from the Trademark. Notwithstanding the foregoing exception, WCL shall
not use or adopt any variation of the Trademark or any word or mark that is
confusingly similar to the Trademark. WCL shall comply with the terms and
conditions of this Agreement and all federal and state laws, statutes and
regulations in connection with its use of the Trademark.
D. WCL shall not use or display the Trademark in connection with or as
part of the promotion, marketing or sale of the Product for a therapeutic area
other than: (i) oral contraception; or (ii) such other therapeutic area as is
consistent with the approved FDA labeling for the Product, provided, however,
that such labeling is consistent with that for the class of products to which
the Product belongs.
E. BMS shall be responsible, at its own cost and expense, for taking
all actions required for the application, registration, maintenance and renewal
of the Trademark in the United States Patent and Trademark Office. BMS shall not
permit any U.S. registration for the Trademark to lapse or become abandoned. WCL
shall furnish BMS with all information reasonably requested by BMS (including
specimens and samples illustrating the manner of use of the Trademark) and
documents (including the execution and delivery of any and all affidavits,
declarations, oaths and other documents) to assist BMS in maintaining trademark
protection and registrations for the Trademark.
F. During the Agreement Term, BMS may not use (itself or through an
Affiliate) or out-license the Trademark to any Third Party for any finished
pharmaceutical preparations containing as its active ingredients norethindrone
and [REDACTED] micrograms ethinyl estradiol. Notwithstanding the foregoing, BMS
may sell or out-license the Trademark to an Affiliate or a Third Party provided,
however, that: (i) WCL's exclusive license to utilize the Trademark under the
terms of this Agreement shall survive any such sale or out-license for the
Agreement Term; and (ii) any such sale or out-license of the Trademark to a
Third Party shall be made in accordance with Section 15 of the Copromotion
Agreement.
G. WCL shall promptly notify BMS of: (i) any actual or suspected
infringement or misuse of the Trademark, or (ii) any information which may
adversely affect the Trademark. If the Trademark is infringed by a Third Party,
BMS shall have the right and option, but not the obligation, to bring an action
for infringement, at its sole expense, against the Third Party, and/or reach a
settlement with the Third Party. In the event BMS elects not to bring an action
for infringement or settle the claims against the Third Party, then BMS shall
give WCL prompt written notice of that election so that the claim is not
compromised, and WCL shall have the right and option, but not the obligation, at
its cost and expense, to initiate infringement litigation against the Third
Party and/or reach a settlement with the Third Party. The proceeds of any
recovery resulting from an infringement action against and/or settlement with a
Third Party shall be applied first to the unreimbursed expenses and legal fees
of the party bring the action or entering into the settlement. Any remaining
balance shall be divided between BMS and WCL based on the Net Sales of the
Ovcon(R) Products (for BMS) and the Product (for WCL) as a percentage of the
combined Net Sales for both the Ovcon(R) Products and the Product, each in the
twelve (12) month period preceding the date on which the monies are actually
collected. By way of example, if sales for the Ovcon(R)
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<PAGE>
Products are [REDACTED], and sales of the Product are [REDACTED], then BMS would
be entitled to [REDACTED] of the remaining recovery and WCL to [REDACTED].
III. Product Development
A. WCL shall diligently pursue, within the standards of commercial
reasonableness, the development of, and an approved NDA for, the Product. WCL
shall have sole responsibility for undertaking and funding all aspects of the
development of the Product, including, but not limited to, Product formulation
and obtaining FDA approval to market the Product. WCL shall be the owner of all
NDAs and intellectual property derived from such activities, including patents,
(excluding, however, all intellectual property rights related to the Trademark,
which rights are and shall continue to be owned by BMS) and BMS shall not in any
way represent to others that it owns or has any ownership rights in the NDA or
WCP intellectual property relating to the Product apart from the Trademark.
B. BMS shall provide WCL with reasonable access to the NDA for
Ovcon(R)35 in connection with WCL's development of the Product. WCL hereby
acknowledges and agrees that all information in the NDA is and will be treated
as Confidential and Proprietary Information of BMS.
C. At BMS's option and sole discretion, BMS will provide WCL, in
response to a request by WCL, with product development and regulatory support
services in connection with WCL's development of the Product. BMS shall invoice
WCL for any support services it provides to WCL utilizing BMS's then current
standard absorbed cost for such services, calculated in accordance with U.S.
GAAP, consistently applied. WCL shall pay the invoices within thirty (30) days
of its receipt thereof.
IV. Product Marketing
A. WCL shall be solely responsible for undertaking and funding all
aspects of the marketing, promotion, and sale of the Product in the Territory,
including but not limited to all regulatory matters. WCL shall maintain in full
force and effect all necessary licenses, permits and other authorizations
required by law to carry out its duties and obligations under this Agreement.
WCL shall comply with all laws, ordinances, rules and regulations (collectively,
"Laws") applicable to its activities under this Agreement.
B. WCL shall market the Product under the WCL label. WCL shall make no
representations or warranties relative to the Product that conflict or are
inconsistent with the FDA-approved label for the Product.
C. During the Agreement Term WCL shall not promote or otherwise market
the Product in a manner designed to convert prescribers or users of the Ovcon(R)
Products to the Product.
D. WCL shall obtain BMS's prior approval of WCL's use of the Trademark
in promotional and advertising materials, which approval shall not be
unreasonably withheld. For purposes of implementing the foregoing, WCL shall
provide BMS with samples of its use of the Trademark in promotional and
advertising materials no less than sixty (60) days prior to WCL's first
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<PAGE>
commercial use of such materials, and BMS shall provide any objections to the
proposed use of the Trademark, if any, within thirty (30) days of its receipt of
the samples.
V. CONSIDERATION
A. In consideration of the Trademark license and the NDA for the
Ovcon(R) Products being made available to WCL, WCL agrees to compensate BMS as
follows:
1. If WCI does not terminate the Copromotion Agreement prior to
December 31, 2003, WCL will pay BMS a royalty in the amount of [REDACTED] of all
Net Sales of the Product in the Territory during the Agreement Term, plus, if
the Commercial Launch of the Product occurs during the Copromotion Term, (as
defined in the Copromotion Agreement):
(a) the difference, if any, between (i) the Net Sales of
Ovcon(R)35 in the Territory during the [REDACTED] months preceding the
month of the Commercial Launch of the Product, and (ii) the Net Sales
of Ovcon(R)35 in the [REDACTED] following the Commercial Launch of the
Product; plus
(b) the difference, if any, between (i) the Net Sales of
Ovcon(R)35 in the Territory during the [REDACTED] preceding the month
of the Commercial Launch of the Product, and (ii) the Net Sales of
Ovcon(R)35 in the [REDACTED] months following the Commercial Launch of
the Product; plus
(c) the difference, if any, between (i) the Net Sales of
Ovcon(R)35 in the Territory during the [REDACTED] months preceding the
month of the Commercial Launch of the Product and (ii) the Net Sales of
Ovcon(R)35 in the [REDACTED] months following the Commercial Launch of
the Product.
It is understood that that payments set forth in Articles V(A)(1)(a) through (c)
above are intended to insure that the Product does not convert existing
Ovcon(R)35 sales, and that there shall be no credit, offset or other payment due
from BMS or any of its Affiliates to WCL as a result of any of those differences
being a negative number.
2. In the event that WCI terminates the Copromotion Agreement prior to
December 31, 2003 and such termination is not due to a Substantial Disruption of
the Market or an uncured breach of the Copromotion Agreement by Apothecon, WCL
will pay BMS a royalty of [REDACTED] of Net Sales of the Product dating from the
effective date of the termination of the Copromotion Agreement.
3. In the event that WCI terminates the Copromotion Agreement prior to
December 31, 2003 due to a Substantial Disruption of the Market or an uncured
breach of the Copromotion Agreement by Apothecon, WCL will pay BMS a royalty of
[REDACTED] of Net Sales of the Product dating from the effective date of the
termination of the Copromotion Agreement.
4. In the event Apothecon terminates the Copromotion Agreement prior to
December 31, 2003 due to an uncured breach by WCI or pursuant to Sections
12(b)(i) or (ii) of the
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<PAGE>
Copromotion Agreement (i.e., for failure to meet the prescription goals set
forth therein), WPC will pay BMS a royalty of [REDACTED] of Net Sales of the
Product dating from the effective date of the termination of the Copromotion
Agreement.
B. As used in Article V(A), herein, "Net Sales" of Ovcon(R)35 is as
defined in the Copromotion Agreement, and "Substantial Disruption of the Market"
means: (a) the commercialization of an AB rated generic version or equivalent of
Ovcon(R)35; or (b) APOTHECON'S inability to supply Ovcon(R)35 for [REDACTED]
consecutive days; or (c) a material recall or other regulatory or governmental
action affecting the availability of Ovcon(R)35 for sale.
C. Royalties due hereunder shall accrue from the date of Commercial
Launch through the end of the Agreement Term.
D. Royalties due hereunder shall accrue when Product is billed.
VI. Payments and Reporting
A. WCL shall furnish to BMS a written report covering each Agreement
Quarter, showing the gross sales price and the Net Sales Price of all Product
sold by WCL during each Agreement Quarter and the royalties which shall have
accrued. Said reports shall be due on the forty-fifth day (45th) day following
the close of each Agreement Quarter. In case no royalty is due for any Agreement
Quarter, WCL shall so report.
B. Royalties shown to have accrued by each of the royalty reports
provided for under Article VI(A) of this Agreement shall be due and payable on
the date such royalty report is due. Amounts payable under Articles V(A)(1)(a)
through (c) shall be due and payable on the forty-fifth day (45th) following
each of the three respective twelve month periods following the Commercial
Launch of the Product.
C. The parties will maintain complete and accurate books and records in
sufficient detail to enable verification of the basis for calculating the
compensation or other payments paid by WCL to BMS hereunder. Either party may
demand an audit of the other party's relevant books and records in order to
verify the other's reports and/or invoices on the aforesaid matters. Upon
reasonable prior notice to the party to be audited, the independent public
accountants of the other party shall have access to the relevant books and
records of the party to be audited in order to conduct a review or audit
thereof. Such access shall be available during normal business hours not more
than once each calendar year during the Agreement Term and only for a period
until two years after the relevant period in question. The accountants shall be
entitled to report its conclusions and calculations to the party requesting the
audit, except that in no event shall the accountants disclose the names of
customers of either party or the prices, discounts, rebates, or other terms of
sale charged by BMS or its Affiliates for Ovcon(R)35 or by WCL for the Product.
The party requesting the audit shall bear the full cost of the
performance of any such audit except as hereinafter set forth. If, as a result
of any inspection of the books and records of WCL, it is shown that WCL's
payments to BMS under this Agreement were less than the amount which
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<PAGE>
should have been paid, then WCL shall make all payments required to be made to
eliminate any discrepancy revealed by said inspection within 30 days after BMS's
demand therefor. If, as a result of any inspection of the books and records of
BMS, it is shown that WCL's payments to BMS under this Agreement were more than
the amount which should have been paid, then BMS shall reimburse WCL for the
discrepancy revealed by said inspection within 30 days after WCL's demand
therefor. Furthermore, if the payments were more or less than the amount which
should have been paid by an amount in excess of [REDACTED] percent [REDACTED] of
the payments actually made during the period in question, the party responsible
for the discrepancy shall also reimburse the auditing party for its out-of-
pocket costs of such inspection.
VII. Adverse Experience Reporting
A. All regulatory matters regarding the Product shall be the
responsibility of WCL. WCL will have the sole responsibility, at its cost and
expense, to respond to product and medical complaints and to handle all returns
and recalls of the Product. WCL shall provide BMS with prompt notice of all
recalls.
B. Beginning as of the Effective Date of this Agreement, each party
shall promptly notify the other party of any significant event(s) that affects
the marketing of the Product, including, but not limited to, adverse drug
experiences and governmental inquiries, whether within or outside the Territory,
concerning the Ovcon Products or the Product.
Serious adverse events (as defined in Article VII(G) below) for the
Product or the Ovcon(R) Products learned by a party shall be submitted to the
other within three (3) working days but no more than four (4) calendar days from
the receipt date.
Non-serious adverse events for the Product or the Ovcon(R) Products (as
defined in Article VII(C) below) that are spontaneously reported to a party
shall be submitted to the other party no more than one (1) month from the date
received by the first party; provided, however, that medical and scientific
judgment should be exercised in deciding whether expedited reporting is
appropriate in other situations, such as important medical events that may not
be immediately life-threatening or result in death or hospitalization but may
jeopardize the patient or may require intervention to prevent a serious adverse
event outcome.
C. WCL shall have the responsibility of reporting serious and
non-serious adverse events concerning the Product to the applicable regulatory
health authorities anywhere in the world.
-8-
<PAGE>
WCL shall report all adverse events involving the Product learned by it
to:
Vice President, Worldwide Safety & Surveillance
Bristol-Myers Squibb Company
P.O. Box 5400
Mail Stop HW19-1.01
Princeton, New Jersey 08543-5400
U.S.A.
Facsimile No.: (609) 818-3804
Telephone No.: (609) 818-3737
A. CIOMS-I form or a form that contains the data elements of a
CIOMS-I form is recommended.
Serious adverse events concerning the Ovcon Products learned by BMS
shall be reported by BMS to WCL at the time that BMS reports such events to FDA,
and shall be sent to:
Vice President B Regulatory Affairs
Warner Chilcott
100 Enterprise Drive
Rockaway, New Jersey 07866
Facsimile No.: (973) 442-3224
Telephone No.: (973) 442-3200
D. Beginning as of the Effective Date of this Agreement, each party
shall promptly notify the other party in writing of any order, request or
directive of a court or other governmental authority to recall or withdraw the
Product or the Ovcon(R) Products in any jurisdiction.
E. WCL shall inform Bristol Myers Squibb Company's office of the Vice
President, Worldwide Safety & Surveillance of any Product Quality Complaint
received within three (3) working days but no more than four (4) calendar days
from the receipt date by WCL. A Product Quality Complaint is defined as any
complaint that questions the purity, identity, potency or quality of the
Product, its packaging, or labeling, or any complaint that concerns any incident
that causes the drug product or its labeling to be mistaken for, or applied to,
another article or any bacteriological contamination, or any significant
chemical, physical, or other change or deterioration in the distributed drug
product, or any failure of one or more distributed batches of the drug product
to meet the specifications therefor in the NDA for the Product. Such information
shall be sent to the same address as set forth in Article VII(C) above.
F. WCL shall handle all medical inquiries concerning the Product.
G. A "serious" adverse event for the Product is defined as any untoward
medical occurrence that at any dose for the Product: (i) results in death; (ii)
is life-threatening; (iii) requires inpatient hospitalization or prolongation of
existing hospitalization; (iv) results in persistent or significant
disability/incapacity; (v) is a congenital anomaly/birth defect; (vi) results in
drug dependency or drug abuse; (vii) is cancer, or (viii) is an overdose. A
"nonserious" adverse event
-9-
<PAGE>
is defined as that which is not serious.
VIII. Agreement Term
A. Unless sooner terminated pursuant to Article VIII(B) below, the term
of this Agreement (including the Trademark license granted herein) (the
"Agreement Term") shall commence on the Effective Date and end on the later of:
(i) twenty (20) years from the date of the Commercial Launch of the Product, or
(ii) the expiration of any patent rights held by WCL relating to the Product.
B. Upon written notice to WCL, BMS may terminate the Agreement Term
without penalty upon the occurrence of any of the following events:
1. [REDACTED] percent [REDACTED] or more the voting securities
of WCL are sold or transferred to a Person that, in the reasonable judgment of
BMS, is a competitor or potential competitor of BMS or any of its
Affiliates,(for purposes of the foregoing, voting securities sold or transferred
to an Affiliate of a Person shall be deemed to be sold or transferred to such
Person); or
2. WCL breaches any material obligation or duty under this
Agreement and said breach is continuing thirty (30) days after BMS has advised
WCL in writing of the existence and nature of this breach.
3. BMS receives notice that WCL or WCI has become insolvent or
has suspended business in all material respects hereof, or has consented to an
involuntary petition purporting to be pursuant to any reorganization or
insolvency law of any jurisdiction, or has made an assignment for the benefit of
creditors, or has applied for or consented to the appointment of a receiver or
trustee for a substantial part of its property or assets.
4. WCL does not or ceases to diligently pursue, within
the standards of commercial reasonableness,
development of, or an approved NDA for, the Product.
C. Neither the termination nor expiration of the Agreement Term shall
release or operate to discharge any party from: (i) any liability or obligation
that may have accrued prior to such termination or expiration, or (ii) any other
agreement which may exist between the parties, except as may be set forth in
such other agreement. Any termination of the Agreement Term by a party shall not
be an exclusive remedy, but shall be in addition to any legal or equitable
remedies that may be available to the terminating party. However, no party shall
be liable to another party for any damages (whether direct, indirect, special,
consequential, incidental, or other, including lost profits) sustained by reason
of expiration of this Agreement or for termination of this Agreement by a party
in accordance with the terms hereof.
D. During any notice period, each party shall continue to fulfill its
obligations under this Agreement. Upon the termination or expiration of the
Agreement Term, WCL shall discontinue any use of the Trademark.
-10-
<PAGE>
IX. Indemnification and Insurance
A. WCL and WCI shall, jointly and severally, defend, indemnify and hold
BMS and its employees, agents, officers, directors and affiliates (a "BMS
Party") harmless from and against any and all losses, liabilities, obligations,
claims, fees (including, without limitation, attorneys fees), expenses and
lawsuits incurred by a BMS Party that are claimed by any third party and that
result from or arise in connection with (i) the breach of any covenant,
representation or warranty of WCL contained in this Agreement, (ii) the
manufacturing, sale or distribution of the Product by WCL or any licensee or
affiliate thereof, including, without limitation, any claim of patent
infringement, (iii) any product liability claim related to the Product,
including, without limitation, the use by any person of the Product, (iv) any
contamination of or defect in the Product; and (v) breach by WCL of its
obligations under Article IV hereof. In addition to the foregoing, WCI agrees to
indemnify BMS for all losses arising from WCL's breach of its obligations under
Article V of this Agreement.
B. BMS shall defend, indemnify and hold WCL and its employees, agents,
officers, directors and affiliates (a "WCL Party") harmless from and against any
and all losses, liabilities, obligations, claims, fees (including, without
limitation, attorneys fees), expenses and lawsuits brought against or incurred
by a WCL Party by a third party resulting from or arising in connection with (i)
the breach by BMS of any covenant, representation or warranty of BMS contained
in this Agreement.
C. To receive the benefits of the indemnity under clauses (A) or (B)
above, as applicable, an indemnified party must (i) give the indemnifying party
written notice of any claim or potential claim promptly after the indemnified
party receives notice of any such claim; (ii) allow the indemnifying party to
assume the control of the defense and settlement (including all decisions
relating litigation, defense and appeal) of any such claim (so long as it has
confirmed its indemnification obligation responsibility to such indemnified
party under this Article IX; and (iii) so long as such cooperation does not
vitiate any legal privilege to which it is entitled, reasonably cooperate
(provided the indemnifying party reimburses the indemnified party's reasonable
documented out-of-pocket expenses) with the indemnifying party in its defense of
the claim (including, without limitation, making documents and records available
for review and copying and making persons within its/his/her control available
for pertinent testimony). If the indemnifying party defends the claim, an
indemnified party may participate in, but not control, the defense of such claim
at its/his/her sole cost and expense. An indemnifying party shall have no
liability under this Article IX as to any claim for which settlement or
compromise of such claim or an offer of settlement or compromise of such claim
is made by an indemnified party without the prior consent of the indemnifying
party.
D. WCL shall maintain for the entire Agreement Term commercial general
liability coverage and product liability coverage (including umbrella liability
coverage and excess umbrella liability coverage) in per occurrence and aggregate
amounts no less, and with deductibles no greater, than those set forth on
Exhibit A, each with insurers with Best ratings of A- or better. Apothecon, Inc.
and Bristol-Myers Squibb Company shall be named as insureds on the policy. WCL
shall furnish to BMS evidence of such insurance, upon request.
E. The indemnification obligations set forth in this Article IX shall
survive termination of the Agreement.
-11-
<PAGE>
X. Confidentiality
A. Each party acknowledges that it may receive confidential or
proprietary information of another party in the performance of this Agreement.
Each party shall hold confidential and shall not, directly or indirectly,
disclose, publish or use for the benefit of any third party or itself, except in
carrying out its duties hereunder, any confidential or proprietary information
of the other party, without first having obtained the furnishing party's written
consent to such disclosure or use. "Confidential or proprietary information"
shall include, inter alia, know-how, scientific information, clinical data,
efficacy and safety data, adverse event information, formulas, methods and
processes, specifications, pricing information (including discounts, rebates and
other price adjustments) and other terms and conditions of sales, customer
information, business plans, and all other intellectual property. This
restriction shall not apply to any information within the following categories:
(1) information that is known to the receiving party or its
Affiliates prior to the time of disclosure to it, to the extent
evidenced by written records or other competent proof;
(2) information that is independently developed by employees,
agents, or independent contractors of the receiving party or its
Affiliates without reference to or reliance upon the information
furnished by the disclosing party, as evidenced by written records or
other competent proof;
(3) information disclosed to the receiving party or its
Affiliates by a third party that has a right to make such disclosure;
(4) information that is contained in any written promotional
material prepared by BMS for use in connection with the Ovcon Products
or in any written promotional material prepared by WCL in connection
with the Product; or
(5) any other information that becomes part of the public
domain through no fault or negligence of the receiving party.
The receiving party shall also be entitled to disclose the other
party's Confidential Information that is required to be disclosed in compliance
with applicable laws or regulations (including, without limitation, to comply
with SEC, NASDAQ or stock exchange disclosure requirements), or by order of any
governmental body or a court of competent jurisdiction; provided that the party
required to disclose such information shall use all reasonable efforts to obtain
confidential treatment of such information by the agency or court.
(b) This obligation shall survive the termination or
expiration of this Agreement for five (5) years.
(c) The confidentiality obligations described above shall be
in addition to the any obligations a party may have under the Confidential
Disclosure Agreement between Apothecon and WCI dated as of July 14, 1998, except
that to the extent there is an conflict between that agreement and provisions of
this Agreement, this Agreement shall govern.
-12-
<PAGE>
XI. Representations and Warranties
A. BMS represents and warrants to WCL that (i) the execution, delivery
and performance of this Agreement by BMS does not conflict with, or constitute a
breach of or under, any order, judgment, agreement or instrument to which BMS is
a party; (ii) the execution, delivery and performance of this Agreement by BMS
does not require the consent of any person or the authorization of (by notice or
otherwise) any governmental or regulatory authority; (iii) the rights granted by
BMS to WCL hereunder do not conflict with any rights granted by BMS to any Third
Party; (iv) it is the sole and exclusive owner of the Trademark , free and clear
of any liens or encumbrances; (v) it has not received any notice of, and is not
aware of any facts that indicate a likelihood of, any infringement or
misappropriation by any Third Party with respect to the Trademark; and (vi) BMS
or an Affiliate of BMS owns the NDA for Ovcon(R)35.
B. WCL represents and warrants to BMS that (i) the execution, delivery
and performance of this Agreement by WCL does not conflict with, or constitute a
breach of or under, any order, judgment, agreement or instrument to which WCL is
a party; and (ii) the execution, delivery and performance of this Agreement by
WCL does not require the consent of any person or the authorization of (by
notice or otherwise) any governmental or regulatory authority.
XII. Notices
Unless otherwise explicitly set forth herein, any notice required or
permitted to be given hereunder shall be in writing and shall be delivered
personally by hand, or sent by reputable overnight courier, signature required,
to the addresses of each party set forth below or to such other address or
addresses as shall be designated in writing in the same matter:
(A) If to BMS:
Bristol Myers Squibb Company
777 Scudders Mill Road
Plainsboro, NJ 08536
Attention: General Manager
with a copy to the attention of the "Vice President and Senior Counsel" at the
same address.
(B) If to WCL:
Warner Chilcott Laboratories Ireland Limited
c/o Warner Chilcott Inc.
Rockaway 80 Corporate Center
100 Enterprise Drive
Suite 280
Rockaway, N.J. 07866
Attention: President and General Counsel
-13-
<PAGE>
with a copy to:
Warner Chilcott Laboratories Ireland Limited
Lincoln House
Lincoln Place
Dublin 2, Ireland
Attention: General Manager
All notices shall be deemed given when received by the addressee.
XIII. Miscellaneous Provisions
A. Assignment. No party shall assign or otherwise transfer this
Agreement or any interest herein or right hereunder without the prior written
consent of the other party, and any such purported assignment, transfer or
attempt to assign or transfer any interest herein or right hereunder shall be
void and of no effect; except that each party (i) may assign its rights and
obligations hereunder to an Affiliate without the prior consent of the other
party (although, in such event, the assigning party shall remain responsible for
all of its obligations and agreements set forth herein, notwithstanding such
assignment) and (ii) subject to BMS's right to terminate the Agreement under
Article VIII(B)(1), may assign its rights and obligations to a successor
(whether by merger, consolidation, reorganization or other similar event) or
purchaser of all or substantially all of its business assets relating to the
Product, provided, that such successor or purchaser has agreed in writing to
assume all of such party's rights and obligations hereunder and a copy of such
assumption is provided to the other party hereunder; and except that BMS may
sell or out-license the rights to the Trademark as set forth in Article II(F).
B. Non-Waiver. Any failure on the part of a party to enforce at any
time or for any period of time any of the provisions of this Agreement shall not
be deemed or construed to be a waiver of such provisions or of any right of such
party thereafter to enforce each and every such provision on any succeeding
occasion or breach thereof.
C. Dispute Resolution. If any dispute arises under this Agreement, the
matter shall be submitted to the President of WCL and the General Manager of
Apothecon for resolution. Any dispute that cannot be so resolved within 30 days
after submission shall be submitted for arbitration in accordance with the rules
of the American Arbitration Association, and the award or decision made by the
arbitrator(s) designated pursuant to the American Arbitration Association rules
of arbitration shall be binding upon the parties hereto and a judgment
consistent therewith may be entered in any court of competent jurisdiction;
provided, however, that nothing herein contained shall preclude a party from
seeking equitable remedies in any court of competent jurisdiction.
Any such arbitration proceedings shall be conducted in New Jersey.
D. Entirety of Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all previous and contemporaneous verbal and written agreements,
representations and warranties with respect to such subject matter. This
Agreement (or any provision or term hereof) may be released, waived, changed or
-14-
<PAGE>
supplemented only by a written agreement signed by an officer or other
authorized representative of the party against whom enforcement of any release,
waiver, change or supplement is sought. This Agreement shall not be strictly
construed against any party hereto.
E. Public Announcements. The form and content of any public
announcement to be made by one party regarding this Agreement, or the subject
matter contained herein, shall be subject to the prior written consent of the
other party (which consent may not be unreasonably withheld), except as may be
required by applicable law (including, without limitation, disclosure
requirements of the SEC, NASDAQ, or any other stock exchange) in which event the
other party shall endeavor to give the other party reasonable advance notice and
review of any such disclosure. Proposed public announcements submitted to the
other party for approval shall be considered approved if the submitting party
has not received comments or objections from the other party within fifteen (15)
days from the date of submission, provided that public announcements proposed by
WCL or WCI must be simultaneously provided to both the General Manager and in
house Legal Counsel for Apothecon, at Apothecon, Inc., 777 Scudders Mill Road,
Plainsboro, New Jersey.
F. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey, without regard to
its conflicts of law principles.
G. Relationship of the Parties. In making and performing this
Agreement, the parties are acting, and intend to be treated, as independent
entities and nothing contained in this Agreement shall be construed or implied
to create an agency, partnership, joint venture, or employer and employee
relationship between BMS and WCL or BMS and WCI. Except as otherwise provided
herein, no party may make any representation, warranty or commitment, whether
express or implied, on behalf of or incur any charges or expenses for or in the
name of any other party. No party shall be liable for the act of any other party
unless such act is expressly authorized in writing by both such parties.
H. Counterparts. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against the
party whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
-15-
<PAGE>
I. Force Majeure. No party shall be liable to any other party for any
failure to perform as required by this Agreement if the failure to perform is
due to circumstances reasonably beyond such party's control, including, without
limitation, acts of God, civil disorders or commotions, acts of aggression,
fire, explosions, floods, drought, war, sabotage, embargo, unexpected safety or
efficacy results obtained with the Product, utility failures, material
shortages, labor disturbances, a national health emergency, or appropriations of
property. A party whose performance is affected by a force majeure event shall
take prompt action using its reasonable best efforts to remedy the effects of
the force majeure event.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Effective Date.
Bristol Myers Squibb Company Warner Chilcott Laboratories Ireland Limited
By: /s/ Richard J. Lane By: /s/ Roger M. Boissonneault
--------------------------- -----------------------------
Richard J. Lane Roger M. Boissonneault
Title: President U.S. Title: President
Medicines Group and Warner Chilcott, Inc.
Worldwide Franchise
Management
Prepared by Harvey C. Kaish
McCarter & English, LLP
-16-
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