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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER: 005-52501
WARNER CHILCOTT PUBLIC LIMITED COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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IRELAND NOT APPLICABLE
(JURISDICTION OF INCORPORATION OR (IRS EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
LINCOLN HOUSE, LINCOLN PLACE, DUBLIN 2, 353-1-662-4962
IRELAND (REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE)
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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 DEPOSITARY SHARES, REPRESENTING ORDINARY SHARES, PAR VALUE $0.05 EACH;
NASDAQ
NATIONAL MARKET ORDINARY SHARES, PAR VALUE $0.05 EACH*
* 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 8, 2000 there were 12,383,507 Ordinary Shares outstanding. The
aggregate market value of the Ordinary Shares (based upon the last sale price of
$16.00 per share as of March 8, 2000 on the Nasdaq National Market System) held
by non-affiliates of the registrant was $112,342,320.00. 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, 1999. Portions of the Proxy Statement for the
Annual Meeting of Shareholders scheduled to be held on May 16, 2000 are
incorporated by reference in Part III of this report.
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TABLE OF CONTENTS
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General....................................................................... 1
Foward-Looking Statements..................................................... 2
Part I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 13
Item 3. Legal Proceedings........................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......... 13
Part II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters....................................... 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 23
Item 8. Financial Statements and Supplementary Data................. 23
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 47
Part III
Item 10. Directors and Executive Officers of the Registrant.......... 48
Item 14. Financial Statements and Exhibits........................... 51
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GENERAL
Unless the context otherwise requires, all references in this Form 10-K to
"Warner Chilcott", "us", "our", or "we" are to Warner Chilcott Public Limited
Company, its predecessors, successors and subsidiaries, including Warner
Chilcott, Inc; references to "WCI" are to Warner Chilcott, Inc.; and references
to "WCplc" are to Warner Chilcott Public Limited Company but not its
subsidiaries. Unless specified, all financial information in this Form 10-K is
(1) information regarding Warner Chilcott Public Limited Company and its
consolidated subsidiaries; (2) presented in United States dollars ($), and (3)
prepared in accordance with generally accepted accounting principles in the
United States.
TRADEMARKS AND SERVICE MARKS
The following are trademarks and service marks belonging to, licensed to,
or otherwise used by us throughout this Form 10-K:
CHOLEDYL(R)
DORYX(R)
ERYC(R)
ESTRACE(R)
LOCHOLEST(R)
MANDELAMINE(R)
NATACHEW(TM)
NATAFORT(R)
OVCON(R)
PYRIDIUM(R)
PYRIDIUM(R) PLUS
WARNER CHILCOTT(TM)
WARNER CHILCOTT LABORATORIES(TM)
K-DUR(R), IMDUR(R), LOTRISONE(R) and NITRO-DUR(R) are registered
trademarks of Key Pharmaceuticals, a division of Schering-Plough
Corporation. Warner Chilcott has permission to use these marks pursuant
to an agreement with Schering-Plough.
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements relate to
analyses and other information which are based on forecasts of future results
and estimates of amounts not yet determinable. These statements also relate to
our future prospects, developments and business strategies.
These forward-looking statements are identified by their use of terms and
phrases, such as "anticipate", "believe", "could", "estimate", "expect",
"intend", "may", "plan", "predict", "project", "will", and similar terms and
phrases, including references to assumptions. However, these words are not the
exclusive means of identifying such statements. These statements are contained
in many sections of this Form 10-K including those entitled "Customers,"
"Trademarks, Patents and Proprietary Rights," "Competition," "Government
Regulation," "Manufacturing and Supply," "Product Liability" and "Risk Factors"
and in our 1998 Annual Report on Form 10-K 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.
Forward-looking statements include:
- changes in general economic and business conditions;
- dependence on continued acquisition of products;
- management of growth of business and integration of product acquisitions;
- changes in current pricing levels;
- competition for acquisition of products;
- manufacturing capacity constraints; and
- the availability, terms and deployment of capital.
We do not undertake to update our forward-looking statements to reflect
future events or circumstances.
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PART I
ITEM 1. BUSINESS
OVERVIEW
We develop and market branded prescription pharmaceutical products in the
United States. Our primary area of focus is the large and growing women's health
and urology therapeutic categories. We also participate in the cardiology and
dermatology categories. Through our national sales force of over 260
representatives, we market branded pharmaceutical products directly to physician
specialists across the United States, including obstetrician/gynecologists,
urologists, cardiologists, dermatologists and high-prescribing general/family
practitioners. We have an experienced management team with significant
pharmaceutical industry expertise, specifically in the marketing of prescription
pharmaceutical brands.
An important part of our strategy is to acquire established branded
pharmaceutical products and to increase their sales through enhanced promotion
targeted to high-prescribing physicians. We also internally develop branded
products as well as product line extensions for our existing products, such as
new formulations, dosages or new indications. Line extensions are particularly
valuable because they may enable us to extend the growth potential of our
brands.
We currently market 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; NataChew(TM), a prescription
strength chewable prenatal vitamin; Estrace(R), a hormone replacement vaginal
cream; Ovcon(R) 35 and Ovcon(R) 50, two oral contraceptives; Pyridium(R) Plus,
an orally active urinary tract analgesic antispasmodic agent used for irritative
bladder conditions; Doryx(R), a broad spectrum antibiotic; LoCholest(R), a lipid
regulator for the reduction of LDL cholesterol levels; K-Dur(R), a sustained
release potassium supplement; Nitro-Dur(R), a nitroglycerin patch for the
treatment of angina; and Lotrisone(R), a topical combination
antifungal/corticosteroid. NataFort(R), NataChew(TM), Estrace(R), Ovcon(R) 35,
Ovcon(R) 50, Pyridium(R) Plus, Doryx(R) and LoCholest(R) are products owned by
us; K-Dur(R), Nitro-Dur(R), and Lotrisone(R) are products owned by
Schering-Plough and promoted by us under our agreement with Schering-Plough.
HISTORY
We are an Irish public limited company founded in 1992 as Nale Laboratories
Limited. In March 1996 Nale acquired certain assets and assumed certain
liabilities of Warner Chilcott Laboratories, a division of the Warner-Lambert
Company. Following this transaction, Nale changed its name to Warner Chilcott
Public Limited Company and the assets and liabilities acquired from
Warner-Lambert are now organized in the United States in our wholly-owned
subsidiary Warner Chilcott, Inc.
As part of the acquisition of Warner Chilcott Laboratories, we acquired a
portfolio of seventy generic pharmaceutical products. In 1997 we launched our
branded product initiative and switched our primary focus to the development,
acquisition and in-licensing of branded pharmaceutical products, and began to
reduce our generic pharmaceutical business. We have made significant progress
towards the reduction of our generic product portfolio, with less than ten
generic products remaining of the original seventy.
Our revenues are currently generated in the United States and the U.S.
dollar is our functional currency. Accordingly, our 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, we will be subject to taxation on our
earnings in the jurisdictions in which we operate. At present, such
jurisdictions include Ireland and the United States.
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DEVELOPMENTS DURING 1999 AND EARLY 2000
We achieved a number of milestones during 1999 and early 2000 including:
- In February 2000 we acquired three branded women's healthcare
pharmaceutical products from Bristol-Myers Squibb Company, Estrace(R)
vaginal cream and two oral contraceptives, Ovcon(R) 35 and Ovcon(R)50. We
funded the acquisition through the sale of senior notes under Rule 144A.
- Our NataFort(R) prenatal vitamin achieved remarkable success in only its
second year of sales since its launch. Today, more new prescriptions are
filled in the United States for NataFort(R) than for any other prenatal
vitamin.
- We launched two new branded pharmaceutical products, NataChew(TM) and
Pyridium(R) Plus, with outstanding results.
- We sold our Vectrin(R) brand minocycline product to Medicis
Pharmaceutical Corp. for an initial payment plus future milestone and
royalty revenues.
- We repositioned our Doryx(R) brand for the dermatology market in late
1999 with measurable success.
- We solidified our alliance with Schering-Plough, adding Lotrisone(R) and
Nitro-Dur(R) to our Co-Promotion Agreement.
- We continued to phase out our generic pharmaceutical business by selling
our pending ANDA for an extended-release nifedipine product back to Elan
Corporation for an initial fee and future milestone payments.
Additionally, we will receive a royalty from Elan payable on product
sales.
- We strengthened our management team with highly qualified executives in
key positions (legal, marketing, investor relations, human resources and
information technology) to create organizational excellence.
STRATEGY
Our growth strategy is to maximize the value of our sales and marketing
organization by developing, acquiring and promoting specialty pharmaceutical
products. We believe that our ability to identify and integrate branded
pharmaceutical products and to leverage our sales and marketing infrastructure
positions us for continued growth. Specifically, we intend to pursue the
following:
- Seek Product Acquisition Opportunities
We intend to take advantage of industry consolidation and cost cutting
trends to selectively pursue acquisitions of branded pharmaceutical
products. We generally seek branded pharmaceutical products that (1) have
market exclusivity, (2) lend themselves to product line extensions, (3)
are promotion sensitive, or (4) complement our existing product lines or
therapeutic focus;
- Increase Sales Through Targeted Marketing and Promotion
We seek to increase the sales of our branded products through
face-to-face meetings with targeted physicians and promotional efforts,
including sampling, advertising, telemarketing, direct mail and medical
education. In addition, we will continue to cross-market a variety of
products to physicians to leverage the value of our sales force; and
- Increase Sales Through Product Line Extensions
To date, our product development efforts have focused on product line
extensions, which allow us to leverage our brand names and enhance
product differentiation. The implementation of this strategy has resulted
in the successful introduction of several product line extensions,
including Pyridium(R)Plus and NataChew(TM). We will continue to pursue
product line extensions of our existing and newly acquired products.
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SALES AND MARKETING
We market branded pharmaceutical products that we believe will benefit from
promotional activities directed toward physician specialists. We have a sales
and marketing infrastructure that includes over 260 sales representatives
dedicated to promoting and marketing branded pharmaceutical products. We believe
that we have the fourth largest sales force targeted to promoting women's health
products to obstetrician/ gynecologists in the United States.
We began building our sales organization in 1997. By the end of 1998, we
had established a sales organization of over 260 professionals as well as the
infrastructure to support and manage our sales efforts. We ended 1999 with a
sales force and infrastructure similar in size as that at year-end 1998. We
intend to augment our sales organization as needed to support the promotion of
our existing and future branded products. We believe that our sales force at its
present size provides adequate resources to execute the promotional plans for
the Estrace(R) and Ovcon(R) products acquired recently from Bristol-Myers
Squibb.
Our marketing strategy is to promote our branded products to high volume
prescribing physicians through our specialty sales forces. We focus our sales
force by employing precision marketing techniques, including comprehensive
internal analysis of actual prescription data. We use this data to identify and
target physicians that are likely to produce the greatest return on our
promotional efforts.
Generally, the physicians we target tend to be specialists concentrated in
metropolitan areas and within larger group practices. This concentration enables
us to use our sales force to achieve greater reach and frequency. Our seasoned
representatives have developed relationships with physicians in the segments we
target.
Our management team has instituted a number of programs related to
compensation, incentives and professional advancement in order to keep our sales
representatives motivated with respect to their marketing efforts. Sales
representatives are regularly reviewed and ranked based on a number of key
factors of performance. Those rankings are then taken into account in
determining base compensation, performance bonuses and professional advancement.
The programs have proven effective in motivating our sales representatives and
in identifying exceptional employees whose skills warrant advancement to
supervisory/management roles within our sales organization.
We endeavor to supply our sales forces with a full complement of support
materials to assist in their efforts to promote and position our products. We
believe that our sales representatives and the sample kits, visual aids and
other collateral sales materials that we have developed for use by our sales
representatives are of a level of quality, professionalism and sophistication
that positions us to successfully compete with much larger pharmaceutical
concerns.
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BRANDED PRODUCTS
We market a portfolio of branded products primarily in the women's health
care, cardiology and dermatology segments. The following table identifies our
material 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
NataChew(TM)......................... Chewable Prenatal Vitamin Developed in-house, launched in
November 1999
Pyridium(R).......................... Urinary Tract Analgesic Acquired from Warner-Lambert in
June 1997
Pyridium(R) Plus..................... Urinary Tract Analgesic/ Acquired rights from Warner-
Antispasmodic Lambert in June 1997, continued
development in-house and
launched in March 1999
Estrace(R) Cream..................... Estrogen Replacement Began promoting in March 1999
under promotion agreement,
acquired rights from
Bristol-Myers Squibb in
February 2000
Ovcon(R) 35.......................... Oral Contraceptive Began promoting in March 1999
under promotion agreement,
acquired rights from
Bristol-Myers Squibb in
February 2000
Ovcon(R) 50.......................... Oral Contraceptive Acquired rights from
Bristol-Myers Squibb in
February 2000
Mandelamine(R)....................... Antibacterial Acquired from Warner-Lambert in
June 1997
CARDIOLOGY
LoCholest(R)......................... Lipid Regulation Licensed from Eon, launched in
1997
K-Dur(R)............................. Potassium Supplement Began promoting in July 1998
under agreement with Schering-
Plough
Nitro-Dur(R)......................... Angina Began promoting in January 1999
under agreement with Schering-
Plough
DERMATOLOGY
Doryx(R)............................. Antibiotic Acquired from Warner-Lambert in
June 1997
Lotrisone(R)......................... Antifungal/Anti-inflammatory Began promoting in January 1999
under agreement with Schering-
Plough
Eryc(R).............................. Antibiotic Acquired from Warner-Lambert in
June 1997
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Women's Health Products
We market and develop prescription products for the treatment and support
of women's health. The following provides a more detailed description of such
products.
NataFort(R)
In December 1997 we launched NataFort(R), a prescription strength prenatal
vitamin designed to improve patient compliance by virtue of its relatively small
tablet size. After only two years of marketing, today more new prescriptions are
filled in the United States for NataFort(R) than for any other prenatal vitamin.
In developing NataFort(R), we performed market research that indicated that the
most important ingredients that physicians seek in a prenatal vitamin are folic
acid and iron. Meanwhile, patients expressed a strong negative reaction to the
size of the tablets which reduced patient compliance. Prenatal vitamins tend to
be large due to the inclusion of calcium in their formulation. Although thought
to be less important than folic acid or iron, calcium was traditionally included
in prenatal vitamins before the introduction of NataFort(R). In addition, the
absorption of iron may be inhibited by the presence of calcium. Our solution was
to formulate NataFort(R) with folic acid and iron but without calcium. As such,
NataFort(R) tablets are smaller than competing vitamins and, due to the absence
of calcium, potentially allow for improved iron absorption. Prenatal vitamins
are grandfathered drugs and therefore not subject to FDA pre-market clearance
requirements.
NataChew(TM)
NataChew(TM) is a prescription strength chewable prenatal vitamin which was
developed internally and launched in November 1999. NataChew(TM) is a wildberry
flavored chewable tablet that provides ten essential vitamins, including folic
acid, and iron. The product was designed to enhance patient compliance by using
a pleasant-tasting chewable format. We licensed proprietary taste masking
technology to overcome the unpleasant taste of iron. The difficulty in taste
masking iron has been the primary obstacle to the introduction of chewable
vitamin alternatives for pregnant women.
Pyridium(R) and Pyridium(R) Plus
Pyridium(R) is an orally active urinary tract analgesic agent that helps
relieve urinary pain, burning, urgency and frequency related to urinary tract
infections. Pyridium(R) Plus, a line extension of Pyridium(R), was introduced by
Warner-Lambert Company in 1980. We 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 irritative bladder
conditions. Our efforts in marketing Pyridium(R) Plus have helped us establish
solid relationships with high-volume prescribing urologists.
Estrace(R) Cream
Estrace(R) vaginal cream is a hormone replacement therapy for the treatment
of vaginal and vulval atrophy. We began promoting Estrace(R) cream in March 1999
under an agreement with Bristol-Myers Squibb. In February 2000, we acquired the
rights to this product. Estrace(R) cream contains beta-estradiol as its active
ingredient.
Ovcon(R) 35
Ovcon(R) 35 is an oral contraceptive composed of norethindrone and ethinyl
estradiol. It was introduced by Bristol-Myers Squibb in 1978 and we began
promoting the product in March 1999 under an agreement with Bristol-Myers
Squibb. In February 2000, we acquired the rights to this product.
Ovcon(R) 50
Ovcon(R) 50 is an oral contraceptive composed of norethindrone and ethinyl
estradiol. It was introduced by Bristol-Myers Squibb in 1975 and we began
promoting the product in March 1999 under an agreement with Bristol-Myers
Squibb. In February 2000, we acquired the rights to this product.
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Cardiology Products
We market and develop prescription products for the treatment of angina
pectoris and lipid disorders. The following provides a more detailed description
of such products.
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.
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. We promote K-Dur(R)
under an agreement with Schering-Plough.
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 dosages and is designed to provide continuous
controlled-release of nitroglycerin through intact skin. We promote Nitro-Dur(R)
under an agreement with Schering-Plough.
Dermatology Products
We market and develop prescription products for the treatment of acne and
other dermatological conditions. The following provides a more detailed
description of such products.
Doryx(R)
Doryx(R), our proprietary brand of doxycycline, is an orally administered
antibiotic capsule containing enteric-coated pellets of doxycycline hyclate. It
may be a useful adjunctive therapy in the treatment of severe acne. Doryx (R)
was introduced in 1986 by Warner-Lambert. We acquired Doryx(R) in July 1997. In
September 1999 we repositioned the product for the dermatology segment and
directed our dermatology sales force to promote Doryx(R) to targeted physicians.
Lotrisone(R) Cream
Lotrisone(R) cream contains a combination of clotrimazole, USP, a synthetic
antifungal agent, and betamethasone dipropionate, USP, a synthetic
corticosteroid for dermatological use. It is indicated for the topical treatment
of certain dermal infections. We promote Lotrisone(R) under an agreement with
Schering-Plough.
Eryc(R)
Eryc(R), our brand of erythromycin, is an orally administered antibiotic
capsule containing enteric-coated pellets of erythromycin that protect the
erythromycin base from inactivation by gastric acidity. Dermatologists often
prescribe erythromycin 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. We began selling Eryc(R) in
the first half of 1998.
COLLABORATIVE RELATIONSHIPS
In July 1998 we became responsible for developing and executing promotional
plans to improve the market performance of two Schering-Plough brands: Imdur(R),
a long-acting nitrate for patients with angina, and K-Dur(R), a potassium
supplement. Under the original agreement with Schering-Plough, we were
compensated based on the market performance of both brands relative to fixed
sales targets. This agreement proved to be rewarding financially and was an
important element in reducing our operating losses in the third and fourth
calendar quarters of 1998.
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In January 1999 we modified the Schering-Plough agreement, changing the mix
of products promoted by us to include K-Dur(R), Nitro-Dur(R), and Lotrisone(R).
This agreement generated consistent revenue for us through 1999, although at
lower levels than were earned under the original agreement.
In November 1999 we again modified the terms of the Schering-Plough
agreement. We will continue to promote the same three products, K-Dur(R),
Nitro-Dur(R) and Lotrisone(R), through the year 2000. The agreement was changed
to provide a more direct link between our performance in influencing the market
share of the promoted brands and our compensation. We expect the current
arrangement with Schering-Plough to be a meaningful and consistent contributor
to our revenues during the year 2000.
PRODUCT DEVELOPMENT
Branded pharmaceutical products are marketed under proprietary brand names
and through programs designed to attract the loyalty of prescribing physicians.
Our current portfolio and development pipeline of branded products are targeted
at the fast-growing women's health category. We also maintain a presence in the
cardiology and dermatology markets. These markets are large and afford
attractive growth opportunities.
Through our in-house expertise in product development and regulatory
affairs and collaborations with corporate partners, we identify opportunities to
develop and launch additional branded pharmaceutical products. Our strategy is
to pursue products that represent improvements to existing pharmaceuticals
rather than create new chemical entities. Improvements to existing products
generally involve less development and regulatory risk and shorter time lines
from concept to market. Where appropriate, we plan to utilize the expertise of
our collaborators in the development of new branded products.
We also use our in-house expertise, as well as the technology and expertise
of our 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 us to extend the proprietary position,
and therefore the value, of our various brands.
GENERIC PRODUCTS
Consistent with the launch of our branded product initiative to primarily
focus our business efforts on branded pharmaceutical products, we have
significantly decreased our generic product line to less than ten at December
31, 1999 from over seventy generics two years ago. We intend to continue to
reduce or eliminate our generic pharmaceutical business.
CUSTOMERS
Our customers include the nation's leading pharmaceutical wholesalers, drug
distributors and chain drug stores. We also sell certain products in the
government sector, both on the U.S. federal and state levels. Our three largest
customers are McKesson HBOC, Cardinal Health and Bergen Brunswig. During 1999,
McKesson HBOC accounted for approximately $11 million, or 21%, of our net sales,
Cardinal Health accounted for approximately $7 million, or 13% of our net sales,
and Bergen Brunswig accounted for approximately $5 million, or 9%, of our net
sales.
We derived 24% of our 1999 revenue from our agreement with Schering-Plough
under which we promote three Schering-Plough products.
TRADEMARKS, PATENTS AND PROPRIETARY RIGHTS
Due to our branded product focus, we consider our trademarks valuable
assets and actively manage our trademark portfolio, maintaining long-standing
trademarks as well as obtaining trademark registrations for new brands. We
police our trademark portfolio against infringement but there can be no
assurance that these efforts will be successful or that we will have adequate
remedies for any breach.
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We believe that licenses from certain of our strategic collaborators to
patent rights relating to our products, as well as the technologies and
processes used to formulate and manufacture these products, are important to our
business. The success of these products may depend, in part, upon our ability
and the ability of our strategic collaborators to protect these patent rights.
There can be no assurance that we or our strategic collaborators will succeed in
protecting these patent rights, or that any patents or licenses will (a) protect
us 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.
We also rely on trade secrets and proprietary knowledge, which we generally
seek to protect by confidentiality, non-disclosure and assignment of invention
agreements with our employees, consultants, licensees and other companies. There
can be no assurance, however, that these agreements will not be breached, that
we will have adequate remedies for any breach or that our 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. Our 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 ours.
Our branded pharmaceutical products are or may become subject to
competition from generic equivalents. There is no proprietary protection for
some of the branded products we sell. Generic substitutes for some of our
branded products are sold by other pharmaceutical companies which claim that
their products provide equivalent therapeutic benefits at a lower cost. In
addition, governmental and other pressure to reduce pharmaceutical costs may
result in physicians prescribing products for which there are generic
substitutes. Increased competition from the sale of generic pharmaceutical
products may cause a decrease in revenue from our branded products and could
have a material adverse effect on our business, financial condition and results
of operations.
As the pharmaceutical industry is characterized by rapid product
development and technological change, our pharmaceutical products could be
rendered obsolete or made uneconomical by the development of new pharmaceuticals
to treat the conditions addressed by our products, technological advances
affecting the cost of production, or marketing or pricing actions by one or more
of our competitors. Our business, results of operations and financial condition
could be materially adversely affected by any one or more of these developments.
Our competitors may also be able to complete the regulatory process for new
products before we are able to do so and, therefore, may begin to market their
products in advance of our products. We believe that competition among both
branded and generic pharmaceuticals aimed at the markets identified by us will
be based on, among other things, product efficacy, safety, reliability,
availability and price. There can be no assurance that developments by others
will not render any product or technology we produce or may produce obsolete or
otherwise non-competitive.
GOVERNMENT REGULATION
FDA Requirements
The research, development and commercial activities relating to branded and
generic prescription pharmaceutical products are subject to extensive regulation
by U.S. 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 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 our
business. All pharmaceutical marketers are directly or indirectly (through third
parties) subject to regulations that cover the manufacture, testing, storage,
labeling,
10
<PAGE> 14
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.
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.
We cannot make any assurances that approval for our products will be granted by
the FDA on a timely basis, if at all. Even after approval is granted, we may be
required to undertake further studies to provide additional data on safety.
Also, 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.
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 our products are being marketed in reliance upon their
status as grandfathered drugs. In addition, we have 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. We cannot assure you that the FDA will not challenge the
grandfathered status of drugs including those marketed by us.
The FDA also regulates post-marketing advertising and promotional
activities to assure that these activities are being conducted in conformity
with statutory and regulatory requirements. Failure to adhere to these
requirements can result in regulatory actions that could have an adverse effect
on our business, results of operations, and financial condition.
Manufacturers of marketed drugs must comply with current Good Manufacturing
Practice regulations and other applicable laws and regulations required by the
FDA, the Environmental Protection Agency 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. We rely and will in the future continue to
rely upon third parties for the manufacture of our products. We seek to ensure
that any third party with whom we contract for product manufacturing will comply
with these regulations and laws. 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 current standards. Any such
non-compliance could result in a temporary or permanent interruption in the
development and testing of our planned products or in the marketing of approved
products, as well as increased costs. Non-compliance could have a material
adverse effect on our business, results of operations and financial condition.
Other Regulation
The Prescription Drug Marketing Act, 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 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, if we
or our distributors fail to comply with the requirements of the PDMA, such
failure could have a material adverse effect on our business, results of
operations and financial condition.
11
<PAGE> 15
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. We believe 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 or implementing price controls. We cannot predict
the nature of such measures or their impact on our profitability.
We are subject to federal, state and local laws of general applicability,
such as laws regulating working conditions. In addition, we may be subject to
some liability for compliance with environmental laws by third party
manufacturers of our products. Compliance with such general laws and
environmental laws is not expected to have a material effect on our earnings,
cash requirements or competitive position in the foreseeable future. However, we
cannot make any assurances that changes to, or compliance with such laws will
not have a material effect on our 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 we do not currently have plans
to market our products in other countries, we may do so from time to time.
MANUFACTURING AND SUPPLY
We contract with third parties for our entire product manufacturing
requirements and most of our products are manufactured by a single source.
Accordingly, we are dependent upon our contract manufacturers to comply with
regulatory requirements and to keep their facilities in good working order. To
ensure such compliance we conduct quality assurance audits of the contract
manufacturer's sites and batch records and other documents are examined to
determine compliance with FDA requirements and our specifications. However,
there can be no assurance that these contract manufacturers will be able to
manufacture our products without interruption, that these suppliers will comply
with their obligations under supply agreements with us, or that we will have
adequate remedies for any breach. In the event a supplier suffers an event that
would render it unable to manufacture our product requirements for a sustained
period, the resulting delay could have a material adverse effect on us.
The principal components used in our 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 our products. The development and
regulatory approval of our products are dependent upon our 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 we consider our 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 we 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 us.
PRODUCT LIABILITY
Product liability suits by consumers represent a continuing risk to firms
in the pharmaceutical industry. Although we carry product liability insurance,
we believe 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. An increase in product liability claims
or product recalls could harm our business.
SEASONALITY
Our business, taken as a whole, is not materially affected by seasonal
factors.
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<PAGE> 16
PERSONNEL
As of December 31, 1999 we had 313 full-time employees. None of our
employees are covered by a collective bargaining agreement. We believe that our
employee relations are satisfactory.
ITEM 2. PROPERTIES
Our principal executive offices are located in Dublin, Ireland. In addition
our U.S. subsidiary, Warner Chilcott, Inc., leases approximately 24,000 square
feet in Rockaway, New Jersey under a lease that expires in 2004.
ITEM 3. LEGAL PROCEEDINGS
On April 6, 1998 our Warner Chilcott, Inc. subsidiary was sued by Abbott
Laboratories in the United States District Court for the Northern District of
Illinois for an alleged patent infringement related to our 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. On September 9, 1998 we moved
for partial summary judgement dismissing the action based on the summary
judgement of the Geneva case. The court granted our motion and entered a final
judgement in favor of us dismissing the action. Abbott appealed dismissal of
both the Geneva action and our action to the U.S. Court of Appeals for the
Federal Circuit. By judgement effective December 15, 1999, the Court of Appeals
affirmed the District Court's judgement dismissing both actions. Abbott filed a
petition for certiorari seeking review of the Court of Appeals decision in the
Geneva case by the U.S. Supreme Court and on January 10, 2000, the Supreme Court
denied Abbott's petition for certiorari. Under the Supreme Court's rules, Abbott
has until March 15, 2000 to file a petition for certiorari in their case against
us. However, it is unlikely that Abbott will do so, and in light of the Supreme
Court's denial of certiorari in the Geneva case, it is extremely unlikely that
any such petition would be granted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our American Depositary Shares "ADSs", representing Ordinary Shares, have
been traded on the Nasdaq National Market since August 1997 (Symbol: WCRX). None
of our securities are traded in any other market, domestic or foreign. The
following table sets forth, for the periods indicated, the high and low sale
prices for our ADSs as reported by Nasdaq.
<TABLE>
<CAPTION>
SALES PRICE
-------------
HIGH LOW
---- ---
<S> <C> <C>
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............................................. 9 3/4 4 3/4
Second Quarter............................................ 9 4 1/2
Third Quarter............................................. 8 7/8 6 5/8
Fourth Quarter............................................ 10 1/4 7
2000:
First Quarter (through March 9, 2000)..................... 18 8 3/8
</TABLE>
There were approximately 40 shareholders of record at December 31, 1999. We
have not paid cash dividends on our ADSs and do not intend to do so in the
foreseeable future.
TAXATION AND EXCHANGE CONTROLS
U.S. Federal Income Tax Treatment of Warner Chilcott
Under the income tax treaty currently in effect between the United States
and Ireland, we will not be subject to U.S. Federal income tax (other than
withholding tax imposed on U.S. source dividends and certain interest) unless we
engage in a trade or business in the United States through a permanent
establishment in the United States. Ownership of our U.S. subsidiaries does not,
in itself, constitute a permanent establishment. We expect to be able to conduct
our activities in a manner that will not result in us being considered to be
engaged in a trade or business or to have a permanent establishment in the
United States. Warner Chilcott, Inc., our U.S. subsidiary, is subject to U.S.
taxation as a U.S. corporation.
U.S. Federal Income Tax Consequences to United States Shareholders
Holders of our ADSs will be treated as the owners of the underlying
Ordinary Shares for U.S. Federal income tax purposes. Dividends paid by us, if
any, will not qualify for the dividends received deduction otherwise available
to U.S. corporate shareholders.
Irish Taxation
We are 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 or, in certain circumstances, if it is
incorporated in Ireland.
The standard rate of taxation in Ireland on a company's profits in 1999 was
28%. However, the first IRL100,000 of profits in 1999 of a company or, where a
company is part of a group of companies, of such group were subject to taxation
at a lower rate of 25%. With effect from January 1, 2000, the standard rate of
14
<PAGE> 18
taxation has been reduced to 24% for trading income, while passive income is
taxable at 25%. The 25% rate will continue to apply for passive income, while
for trading income the following rates have been legislated for:
<TABLE>
<CAPTION>
YEAR RATE
- ---- ----
<S> <C>
2001.................................................. 20.0%
2002.................................................. 16.0%
2003 et seq. ......................................... 12.5%
</TABLE>
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 Patent Exemption
and Manufacturing Relief.
Irish Exchange Controls
Irish exchange control regulations ceased to apply effective 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 Warner Chilcott. 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. We do not anticipate that Irish exchange controls
or regulations under the Financial Transfers Act, 1992 will have a material
effect on our 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 our Articles of Association, or under Irish
Law that limit the right of non-resident or foreign owners to hold or vote the
Ordinary Shares.
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is selected consolidated financial data of Warner Chilcott
Public Limited Company and its subsidiaries at the dates and for the years
indicated. The selected consolidated statements of operations data for the years
ended December 31, 1999 and 1998 and the selected balance sheet data as of
December 31, 1999 and 1998 were derived from the historical financial statements
of Warner Chilcott Public Limited Company and its subsidiaries that were audited
by KPMG LLP and appear elsewhere in this Form 10-K. The selected consolidated
statement of operations data for the year ended December 31, 1997 was derived
from the historical financial statements of Warner Chilcott that were audited by
KPMG Chartered Accountants and appear elsewhere in this Form 10-K. The selected
consolidated statements of operations data for the years ended December 31, 1996
and 1995 and the selected balance sheet data as of December 31, 1997, 1996 and
1995 were derived from audited historical statements of Warner Chilcott that do
not appear elsewhere in this Form 10-K.
The selected consolidated financial data set forth below should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the audited
consolidated financial statements and accompanying notes included elsewhere in
this Form 10-K.
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<PAGE> 19
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(1).................... $ 74,035 $ 64,894 $ 75,827 $ 62,734 $ 48
Costs and expenses
Cost of goods sold........... 27,704 34,230 62,863 53,367 --
Selling, general and
administrative............ 46,409 41,709 23,618 10,373 1,934
Depreciation and
amortization.............. 5,520 5,621 5,458 3,419 14
Research and development..... 3,100 3,241 6,526 10,915 7,434
One-time charge -- acquired
in-process research and
development(2)............ -- -- -- 16,000 --
----------- ----------- ---------- ---------- ----------
Total costs and expenses....... 82,733 84,801 98,465 94,074 9,382
----------- ----------- ---------- ---------- ----------
Operating loss................. (8,698) (19,907) (22,638) (31,340) (9,334)
Net interest income
(expense).................... (747) (390) (5,736) (7,999) 1,560
Gain on sale of assets(3)...... 2,744 -- -- -- --
----------- ----------- ---------- ---------- ----------
Net loss....................... $ (6,701) $ (20,297) $ (28,374) $ (39,339) $ (7,774)
=========== =========== ========== ========== ==========
Net loss per ordinary
share(4)..................... $ (0.54) $ (1.64) $ (3.39) $ (9.62) $ (3.17)
=========== =========== ========== ========== ==========
Weighted average ordinary
shares outstanding(4)........ 12,367,706 12,366,808 8,359,623 4,087,210 2,454,710
=========== =========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- --------------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 50,954 $ 43,133 $ 52,786 $ 2,663 $21,055
Working capital.................. 56,516 58,901 51,770 10,498 20,107
Total assets..................... 132,462 157,017 171,737 123,668 21,575
Working capital debt............. 12,098 20,393 14,511 18,200 --
Long-term debt................... 10,476 8,897 7,902 53,204 --
Shareholders' equity............. $ 98,984 $104,943 $124,646 $ 28,183 $20,366
======== ======== ======== ======== =======
</TABLE>
- ---------------
(1) The increase in revenue from 1995 to 1996 reflects our acquisition, in March
1996, of the Warner Chilcott division from Warner-Lambert Company.
(2) Represents the write-off of acquired in-process research and development
related to the acquisition of the Warner Chilcott division.
(3) Represents the gain on the sale of our Vectrin(R) branded minocycline
product in September 1999.
(4) Net loss per ordinary share is based on the weighted average number of
outstanding ordinary shares. We have adopted the provisions of SFAS 128
"Earnings per Share".
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto, appearing in Item 8. See
"Risk Factors" for trends and uncertainties known to us that could cause
reported financial information to differ materially from future results.
16
<PAGE> 20
OVERVIEW
Warner Chilcott is a developer and marketer of branded prescription
pharmaceutical products in the United States. Our primary areas of focus are the
large and growing women's health and urology therapeutic categories. We also
maintain a presence in the cardiology and dermatology categories. Through our
national sales force of over 260 representatives, we market branded
pharmaceutical products directly to physician specialists including
obstetrician/gynecologists, urologists, cardiologists and high-prescribing
general/family practitioners across the country. Our key strengths are brand
management, target marketing and sales execution. We have an experienced
management team with significant pharmaceutical industry expertise, specifically
in the marketing of prescription pharmaceutical brands.
An important part of our business strategy is to acquire established
branded pharmaceutical products and to increase their sales through enhanced
promotion aimed and delivered to carefully selected physicians. We also create
value by internally developing other branded products as well as product line
extensions for our existing products such as new formulations, dosages or new
indications. Line extensions are particularly valuable to us because they may
provide our products with unique and proprietary benefits that would give rise
to advantages in comparison with current or potentially competitive products. In
addition, during 1999 we marketed and promoted products on behalf of
Schering-Plough Corporation and Bristol-Myers Squibb Company, two of the world's
leading pharmaceutical companies.
As part of our plan to focus on branded products, in the second quarter of
1997 we launched Vectrin(R) and LoCholest(R) and acquired a number of branded
products from Warner-Lambert including Pyridium(R), Doryx(R) and Eryc(R). In
December 1997, we launched NataFort(R). In July 1998, we entered into an
agreement with Schering-Plough Corporation under which we began promoting two of
Schering-Plough's cardiovascular products, Imdur(R) and K-Dur(R). The
Schering-Plough agreement was modified in 1999 and we currently promote three
products for Schering-Plough, K-Dur(R), Nitro-Dur(R) and Lotrisone(R). In
February of 1999, we entered into an agreement with Bristol-Myers Squibb under
which we promoted two Bristol-Myers Squibb products, Estrace(R) cream, an
estrogen replacement product, and Ovcon(R) 35, an oral contraceptive. On
February 15, 2000 we purchased the Estrace(R) cream and Ovcon(R) 35 products
from Bristol-Myers Squibb together with another oral contraceptive, Ovcon(R) 50,
for an aggregate $180.0 million. Also in 1999, we launched Pyridium(R) Plus and
NataChew(TM), line extensions of two of our existing branded products.
As a result of our efforts to expand our branded product sales, gross
margins improved from 17.1% for the year ended December 31, 1997 to 28.5% for
the year ended December 31, 1998, and to 43.0% for the year ended December 31,
1999. Branded products generally generate significantly higher gross margins
than generic products.
During the period from 1997 to the present, as part of our strategic plan,
we invested heavily in building our sales force. As a result, our selling,
general and administrative expenses increased significantly as a percentage of
our revenues. We began to build our sales force in early 1997 and ended that
year with 175 professionals. By the end of 1998 we had over 260 sales
representatives, and we ended 1999 with a sales force similar in size.
RECENT DEVELOPMENT
On February 15, 2000 we completed the acquisition of three branded
pharmaceutical products from Bristol-Myers Squibb Company for a total purchase
price of $180.0 million. The acquired products were: Estrace(R) cream, an
estrogen replacement therapy product, and Ovcon(R) 35 and Ovcon(R) 50, two oral
contraceptives. We financed the acquisition of the three products through the
sale on February 15, 2000 of $200.0 million of 12 5/8% Senior Notes due 2008.
We have been promoting Estrace(R) cream and Ovcon(R) 35 since March 1999
under a promotion agreement with Bristol-Myers Squibb. As a result, we do not
expect to increase the size of our sales force, marketing or administrative
groups to support the acquisition of these brands.
17
<PAGE> 21
RESULTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
Total revenue for the year ended December 31, 1999 was $74.0 million
compared to $64.9 million for the year ended December 31, 1998, an increase of
$9.1 million or 14.1%. The increase in revenue was comprised of an $18.3 million
increase in branded product sales and an $8.4 million increase in market
alliance and other revenue, offset by a decline in generic product sales of
$17.6 million.
Sales of branded products more than doubled to $34.8 million as compared to
$16.4 million in 1998. NataFort(R) and Doryx(R) sales increased significantly
over the prior year. The launch of two branded products during 1999, Pyridium(R)
Plus and NataChew(TM) also contributed to the improved branded product sales.
Although we sold Vectrin(R) in September 1999 and recorded less than nine
month's sales, Vectrin(R) sales in the year ended December 31, 1999 were
comparable with the full year's sales recorded in 1998. Generic product sales of
$13.8 million decreased $17.6 million, or 56.2%, from $31.4 million in 1998 as
we continued our planned exit from this low-margin business.
Gross profit on product sales increased $7.3 million to $20.9 million from
$13.6 million in 1998 due to a significant improvement in gross profit margin.
Gross profit margin on product sales was 43.0% in 1999 as compared to 28.5% in
1998. This improvement reflects our expanded branded product portfolio,
increased branded product sales and the planned decline in lower-margin generic
product activities.
Marketing alliance and other revenue of $25.4 million increased $8.4
million, or 49.3%, from $17.0 million in 1998. Part of this increase was the
result of us licensing our rights to an extended-release nifedipine product to
Elan in exchange for $7.0 million of payments in 1999. We may receive additional
milestone and royalty payments under the nifedipine license agreement if the FDA
approves the product. Revenue earned under our promotion agreement with
Schering-Plough increased in 1999 as compared to 1998. However, we began
promoting products for Schering-Plough in the third quarter of 1998 and,
therefore, earned royalties from this activity for only half of 1998 compared to
a full year in 1999. Also contributing to the overall increase in marketing
alliance and other revenue were royalty/milestone revenues generated in
connection with our sale of the Vectrin(R) product line in September 1999. These
increases were slightly offset by a decline in royalty revenue we earned
associated with a product called IS5MN. We licensed our rights to this product
to Elan in late 1998 and terminated the agreement in early 1999 as significant
generic competition reduced the value of the agreement to a nominal amount.
Selling, general and administrative expenses increased $4.7 million, or
11.3%, to $46.4 million as compared to $41.7 million in 1998. Costs related to
the expansion of our sales force from an average of 155 representatives in 1998
to over 260 in 1999 were the main factor contributing to the increased spending
level over 1998. Advertising and promotion expenses increased $0.4 million due
to marketing efforts for two products launched in 1999, Pyridium(R)Plus and
NataChew(TM), substantially offset by decreased promotion for our existing
products. General and administrative expenses in 1999 were consistent with 1998.
Increased spending to strengthen our administrative staff was offset by
decreased consulting and outside service costs. A major factor in the decline of
legal costs in 1999 compared with 1998 was the reduction in legal fees related
to litigation of a patent claim associated with the extended-release nifedipine
product. We licensed our rights to the nifedipine product to Elan in the first
quarter of 1999 and were not responsible for litigation costs thereafter.
Research and development costs of $3.1 million were consistent with 1998 as
we continued to focus on development projects with near-term revenue potential
and relatively low funding requirements including, for example, line extensions
of our branded products. Interest income of $2.3 million declined $0.4 million
due to slightly lower investment results. Overall interest expense of $3.0 was
consistent with 1998. Increased interest costs related to our senior
subordinated discount notes were offset by decreased interest costs related to
our working capital credit facility. Our average borrowings under our credit
facility declined compared with 1998 due to increased working capital efficiency
and the proceeds from the sale of the Vectrin(R) product assets in September
1999.
18
<PAGE> 22
In September 1999 we recognized a gain of $2.7 million on the sale of our
Vectrin(R) minocycline HCL product line. At closing, we received $11.0 million
of cash in exchange for all the tangible and intangible assets associated with
the Vectrin(R) brand including inventory, samples and the related abbreviated
new drug application (ANDA). Under terms of the agreement, we also received
rights to possible royalty and milestone payments. Beginning in the fourth
quarter of 1999 we began to earn both royalties and milestone payments and those
amounts are included under the caption "Marketing alliance and other revenue".
The net loss for the year ended December 31, 1999 decreased $13.6 million
to $6.7 million as compared to $20.3 million for the prior year. Improved gross
profit on product sales, increased marketing alliance and other revenue and the
gain recognized on the sale of the Vectrin(R) product line significantly
exceeded the increase in field selling costs. Basic and diluted loss per
ordinary share for the year decreased to ($0.54) from ($1.64) on a similar
number of shares outstanding.
Years Ended December 31, 1998 and 1997
Our 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. Our sales
of branded products during the year increased 97.5% to $16.4 million from $8.3
million for the prior year. This increase was due to our launch of NataFort(R)
and increased sales of both Vectrin(R) and Doryx(R) partly offset by a decline
in sales of LoCholest(R). We began selling NataFort(R) in December 1997;
however, meaningful sales of the product began in the first quarter of 1998. We
de-emphasized LoCholest(R) in mid 1998 in anticipation of the promotion
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 our generic minocycline product to Barr Laboratories beginning
in the fourth quarter of 1997 and decreased emphasis on generic products in
favor of our branded offerings.
We generated gross profit on product sales of $13.6 million for the year
ended December 31, 1998 as compared to $13.0 million for the year 1997. Our
gross margin for branded and generic products sales increased from 17.1% to
28.5% during the year ended December 31, 1998. Our improved gross margins
reflect our increased focus on higher-margin branded products and this
improvement would have been greater if not for unfavorable inventory adjustments
associated with our 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 our license of rights to IS5MN 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.
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 our 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 we aggressively promoted three products during 1998 and only two
during 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 our FDA filings for two
complex generic products, an extended-release nifedipine product and terazosin.
Research and development expenses for the year were down from $6.5 million
in 1997 to $3.2 million in 1998. Our 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 our 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 our IPO and related
financings in August of 1997. Interest expense in the
19
<PAGE> 23
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 revenue from marketing alliances more than offset the
increased costs of our sales force and increased administrative expense. Basic
and diluted 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 our initial public offering in August 1997 and related
financings, and the exchange and conversion of senior subordinated discount
notes for ordinary shares.
LIQUIDITY AND CAPITAL RESOURCES
We were able to improve our liquidity over the course of 1999. We ended the
year 1999 with more cash and cash equivalents, $51.0 million compared with $43.1
million, and less debt, $22.6 million compared with $29.3 million, than we had
as of December 31, 1998. Major contributors to the improvement included a
significant reduction of our investment in working capital and the sale of the
Vectrin(R) branded minocycline product in September 1999. Our cash outflow from
operations (net loss plus depreciation and amortization) was $1.2 million as
compared with $14.7 million in 1998, a significant improvement. As we continued
to wind down our low-margin generic activities, our working capital requirements
decreased dramatically. Branded product sales have significantly lower cost of
goods, and therefore lesser inventory investment, and are sold under more
favorable terms that result in a lesser investment in accounts receivable.
Accounts receivable declined $6.5 million from the balance at year-end 1998
to $11.5 million due to the shift in the mix of sales from generic to branded
products outlined above and a decrease in the amount receivable under the
Schering-Plough promotion agreement. Revenue earned under the Schering-Plough
agreement is paid quarterly in arrears. Revenue earned in the fourth quarter
1998 was significantly larger than was earned in the same period of 1999.
Inventory declined $9.1 million from $13.1 million at year-end 1998 to $4.0
million at year-end 1999. Generic product inventory is more costly as a
percentage of sales than that of our branded products and, due to our product
mix shift, our investment in inventory dropped considerably. The sale of
Vectrin(R) in September 1999 also contributed to the decrease in inventory as
all inventory of Vectrin(R) was transferred to Medicis in connection with the
sale.
The reduction in prepaid expenses and other current assets from year-end
1998 was primarily the result of our licensing our rights to IS5MN-PM to Elan
early in 1999. Included in prepaid expenses at December 31, 1998 was $4.5
million that represented our development commitment to the IS5MN-PM project. A
corresponding amount was included as a liability under the caption "Due to Elan
Corporation, plc and subsidiaries". In connection with the licensing of the
IS5MN-PM rights back to Elan, the prepaid amount and the related liability were
eliminated. In addition, inventory of samples used in the promotion of our
branded products are carried as prepaid expense items. A more rapid turnover of
our sample inventory and the sale of Vectrin(R) also contributed to the drop in
prepaid expense and other current assets.
Accounts payable declined from $8.8 million at December 31, 1998 to $3.2
million at December 31, 1999 due to the decreased investment in generic
inventory discussed above and timing of certain inventory purchases. The amount
due to Elan decreased as the remaining development obligation for IS5MN-PM
discussed above and other amounts were settled with Elan early in 1999. Accrued
liabilities of $7.4 million rose $1.2 million due to an increase in incentive
accruals for our expanded sales force and administrative staff, offset in part
by a reduction in certain purchase accruals. These factors resulted in a decline
in current liabilities of $11.9 million to $10.9 million at year-end 1999.
The outstanding balance under our working capital credit facility declined
$8.3 million to $12.1 million at year-end 1999. We entered into this $30.0
million facility agreement on March 30, 1998 with a syndicate of banks, led by
PNC Business Credit, to fund a portion of our investment in inventories and
accounts receivable. Credit availability under the PNC facility is based on the
balances of certain inventory, accounts receivable
20
<PAGE> 24
and other assets of Warner Chilcott, Inc., our wholly-owned United States
operating subsidiary. As of December 31, 1999 we had an additional $8.6 million
of borrowing capacity available under the facility.
During 1999 we elected to satisfy two semi-annual interest installments on
our senior subordinated discount notes by issuing additional notes in lieu of
cash. The interest installments due April 30, 1999 and October 31, 1999 amounted
to $0.8 million each.
On February 15, 2000 we acquired the Estrace(R) cream, Ovcon(R) 35 and
Ovcon(R) 50 products from Bristol-Myers Squibb for $180.0 million. In connection
with the acquisition, on that date we sold $200.0 million of 12 5/8% senior
notes due 2008 at a discount to yield 13%. Net proceeds from the issuance of the
senior notes, after estimated transaction expenses, were approximately $186.3
million. As a requirement of the senior note transaction, on February 14, 2000
we prepaid all $10.5 million of the outstanding senior subordinated discount
notes. We also modified our working capital credit facility to reduce the
maximum amount available to $10.0 million. We intend to use our working capital
credit facility to fund periodic fluctuations in our funding requirements, and
amounts outstanding are expected to be modest and outstanding for short periods
of time.
We posted a loss for the year ended December 31, 1999. With the February
2000 acquisition of the Estrace(R) cream and Ovcon(R) brands, we expect to be
cash flow positive from operations and to achieve profitability for the year
2000. We intend to fund our liquidity needs through a combination of our cash
flow from operations, cash balances on hand and availability under our working
capital credit facility. We believe that these sources will be sufficient to
fund our anticipated working capital needs for the foreseeable future. However,
in the event that we make significant future acquisitions, we may be required to
raise additional funds through additional borrowings or the issuance of
additional debt or equity securities.
NET OPERATING LOSS CARRYFORWARDS
At December 31, 1999 we had available net operating loss carryforwards for
United States Federal income tax reporting purposes of approximately $62 million
which begins expiring in 2011. At December 31, 1999 we had net operating loss
carryforwards for state income tax reporting purposes of approximately $40
million which expire at various dates. 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. We did not pay any Federal income taxes in
1999, 1998 or 1997.
INFLATION
Inflation had no material impact on our operations during the year ended
December 31, 1999.
YEAR 2000
Our internal business critical systems and applications were updated for
Year 2000 compliance. We rely on third party vendors to manufacture our
products, as well as vendors to perform additional functions including, but not
limited to, warehousing, distribution, billing services and market research.
Prior to December 31, 1999 all of our critical vendors informed us that they
were Year 2000 compliant. We did not experience any problems with our internal
business critical systems and applications nor, are we aware of any continuing
Year 2000 problems affecting our critical vendors.
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, as amended, becomes effective for our
financial statements beginning January 1, 2001. SFAS No. 133 requires a company
to recognize all derivative instruments as assets or liabilities in its balance
sheet and measure them at fair value. We do not expect the adoption of this
Statement to have a material impact on our financial statements.
21
<PAGE> 25
In December 1999 the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101). SAB 101 summarizes certain of the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB 101 requires a company to follow its guidance not later than the first
quarter of its fiscal year beginning after December 15, 1999 through a
cumulative effect of a change in accounting principle. We do not expect adoption
of this standard to have a material impact on our financial statements.
RISK FACTORS
Following is a discussion of some of the risks and historical facts that
should be considered when evaluating our current and future results. This
discussion is not intended to include all risks and historical facts that could
produce adverse results.
We have a history of operating losses. Operating losses have been posted
since the formation of the Company in 1992. As of December 31, 1999 the
Company's accumulated deficit was $110.3 million. Our ability to achieve
profitability will depend upon, among other things, the success of our branded
product portfolio, including the Estrace(R) cream and Ovcon(R) brands acquired
in February 2000, and the continuation of our marketing alliance with
Schering-Plough.
With the issuance of the $200.0 million face amount of 12 5/8% senior notes
on February 15, 2000 we have a significant amount of indebtedness. Our
substantial indebtedness could limit our ability to raise additional funding
needed to execute our growth strategy. Although we may seek additional funding
through the public or private capital markets, there can be no assurance that
any such funding will be available to us, if needed. Our ability to pay
principal and interest on our indebtedness depends on our financial and
operating performance, each of which is subject to prevailing economic
conditions and financial, business and other factors, some of which are beyond
our control.
Intense competition exists within the pharmaceutical industry. Many
companies, some with greater financial, marketing and development capabilities
than Warner Chilcott, are engaged in developing, marketing and selling products
that compete with the products offered by us. Other products now in use or under
development by others may be more effective or have fewer side effects than our
current or future products. The industry is characterized by rapid technological
change, and competitors may develop their products more rapidly than us.
Competitors may also be able to complete the regulatory process sooner and,
therefore, may begin to market their products in advance of our products.
Product developments by others may render one or more of our products 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 us, 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
our 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 our operations.
We depend on third parties for the manufacture of our products, including
the Estrace(R) cream and Ovcon(R) brands acquired in February 2000. Currently we
do not possess the facilities or resources needed for these activities. Our
strategy for development, commercialization and manufacturing of certain of our
products entails entering into various arrangements with corporate
collaborators, licensors and others. If any of
22
<PAGE> 26
our corporate collaborators were unable to satisfy their contractual obligations
to us, there can be no assurance that we would be able to negotiate similar
arrangements with other third parties.
Many of the principal components of our products are available only from
single source suppliers. There can be no assurance that we 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.
We are engaged in the manufacture and marketing of products that may give
rise to the development of certain legal actions and proceedings. We carry
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 we
manufacture and market new products. Our financial condition 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, 1999 100% of such holdings matured in one year or less.
We financed the February 2000 acquisition of the Bristol-Myers Squibb
products through the sale of senior notes by our Warner Chilcott, Inc.
subsidiary. On February 15, 2000 Warner Chilcott, Inc. issued $200 million of
12 5/8% senior notes due 2008 at a discount of $3.7 million to yield 13%.
Interest payments on the senior notes are due semi-annually in arrears on each
February 15th and August 15th beginning August 15, 2000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Warner Chilcott's financial statements and schedule at December 31, 1999
and 1998 and for the years ended December 31, 1999, 1998 and 1997 and the
Independent Auditors' Reports thereon are included below.
23
<PAGE> 27
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Audited Consolidated Financial Statements:
Independent Auditors' Report................................ 25
Statement of Independent Chartered Accountants.............. 26
Consolidated Balance Sheets as of December 31, 1999 and
1998................................................... 27
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997....................... 28
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997........... 29
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997....................... 30
Notes to Consolidated Financial Statements................ 31
Financial Statement Schedule:
Valuation and Qualifying Accounts......................... 47
</TABLE>
24
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Warner Chilcott Public Limited Company
We have audited the accompanying consolidated balance sheets of Warner
Chilcott Public Limited Company and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years then ended. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and the 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 United States generally accepted
auditing standards. Those standards require that we plan and perform the audits
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.
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, 1999 and
1998, and the results of their operations and their cash flows for each of the
years 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 22, 2000
25
<PAGE> 29
STATEMENT OF INDEPENDENT CHARTERED ACCOUNTANTS
To the Directors and Shareholders of
Warner Chilcott Public Limited Company
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Warner Chilcott Public Limited Company
and subsidiaries for the year ended December 31, 1997. In connection with our
audit of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and the 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 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 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 results of operations and cash
flows of Warner Chilcott Public Limited Company and subsidiaries for the year
ended December 31, 1997, in conformity with accounting principles generally
accepted in the United States. Also in our opinion, based on our audit, 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
26
<PAGE> 30
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 50,954 $ 43,133
Accounts receivable, net............................... 11,526 18,050
Inventories............................................ 4,025 13,099
Prepaid expense and other assets....................... 915 7,403
--------- --------
Total current assets.............................. 67,420 81,685
--------- --------
Fixed Assets:
Equipment, furniture and fixtures, net................. 1,177 1,076
Intangible assets, net.................................... 63,865 74,256
--------- --------
Total assets...................................... $ 132,462 $157,017
========= ========
LIABILITIES
Current Liabilities:
Accounts payable....................................... $ 3,204 $ 8,833
Accrued liabilities.................................... 7,438 6,254
Due to Elan Corporation, plc and subsidiaries.......... 262 7,697
--------- --------
Total current liabilities......................... 10,904 22,784
--------- --------
Other Liabilities:
Working capital facility............................... 12,098 20,393
Long-term debt......................................... 10,476 8,897
--------- --------
Total liabilities................................. 33,478 52,074
--------- --------
SHAREHOLDERS' EQUITY
Ordinary Shares, par value $.05 per share; 50,000,000
shares authorized, 12,377,034 shares issued and
outstanding at December 31, 1999, and 12,366,808 issued
and outstanding at December 31, 1998................... 619 618
Deferred Shares, par value IR [pound sterling] 1 per share;
30,000 shares authorized, 30,000 shares issued and
outstanding at December 31, 1999 and December 31,
1998.................................................... 45 45
Additional paid-in capital................................ 209,062 208,939
Accumulated deficit....................................... (110,279) (103,578)
Deferred compensation..................................... (463) (1,081)
--------- --------
Total shareholders' equity........................ 98,984 104,943
--------- --------
Total liabilities and shareholders' equity........ $ 132,462 $157,017
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 31
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,
----------------------------------------
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Branded product sales.............................. $ 34,813 $ 16,440 $ 8,322
Generic product sales.............................. 13,767 31,405 67,505
Marketing alliance and other revenue............... 25,455 17,049 --
----------- ----------- ----------
Total revenues............................. 74,035 64,894 75,827
----------- ----------- ----------
OPERATING EXPENSES
Cost of goods sold................................. 27,704 34,230 62,863
Selling, general and administrative................ 46,409 41,709 23,618
Depreciation and amortization...................... 5,520 5,621 5,458
Research and development........................... 3,100 3,241 6,526
----------- ----------- ----------
Total operating expenses................... 82,733 84,801 98,465
----------- ----------- ----------
OPERATING LOSS....................................... (8,698) (19,907) (22,638)
----------- ----------- ----------
OTHER INCOME (EXPENSE)
Interest income.................................... 2,264 2,622 1,524
Interest expense................................... (3,011) (3,012) (7,260)
Gain on sale of assets............................. 2,744 -- --
----------- ----------- ----------
Total other income (expense)............... 1,997 (390) (5,736)
----------- ----------- ----------
LOSS BEFORE TAXES.................................... (6,701) (20,297) (28,374)
----------- ----------- ----------
Income taxes......................................... -- -- --
----------- ----------- ----------
NET LOSS............................................. $ (6,701) $ (20,297) $ (28,374)
=========== =========== ==========
Net loss per ordinary share
Basic and Diluted.................................. $ (0.54) $ (1.64) $ (3.39)
=========== =========== ==========
Weighted average ordinary shares outstanding......... 12,367,706 12,366,808 8,359,623
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE> 32
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, 1996....... 4,764,563 $238 $45 $ 82,807 $ (54,907) $ -- $ 28,183
Stock issued for cash............ 4,775,000 239 -- 82,267 -- -- 82,506
Issue expenses................... -- -- -- (7,918) -- -- (7,918)
Conversion of senior subordinated
notes into ordinary shares..... 2,827,245 141 -- 49,336 -- -- 49,477
Stock compensation............... -- -- -- 2,470 -- (2,470) --
Stock compensation expense....... -- -- -- -- -- 772 772
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 compensation expense....... -- -- -- -- -- 617 617
Net loss......................... -- -- -- -- (20,297) -- (20,297)
---------- ---- --- -------- --------- ------- --------
BALANCE AT DECEMBER 31, 1998....... 12,366,808 $618 $45 $208,939 $(103,578) $(1,081) $104,943
Stock option/warrant exercises
and miscellaneous capital...... 10,226 1 -- 39 -- -- 40
Stock compensation expense....... -- -- -- 84 -- 618 702
Net loss......................... -- -- -- -- (6,701) -- (6,701)
---------- ---- --- -------- --------- ------- --------
BALANCE AT DECEMBER 31, 1999....... 12,377,034 $619 $45 $209,062 $(110,279) $ (463) $ 98,984
========== ==== === ======== ========= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 33
WARNER CHILCOTT PUBLIC LIMITED COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $ (6,701) $(20,297) $(28,374)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Depreciation and amortization......................... 5,520 5,621 5,458
Accretion of loan discount............................ -- 995 4,174
Deferred financing cost write-off..................... -- -- 1,069
Stock compensation expense............................ 702 617 772
(Gain) loss on sale of assets......................... (2,744) -- 98
Notes issued in lieu of cash interest payments........ 1,579 -- --
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, prepaid
expense and other assets......................... 12,562 (3,455) (1,326)
Decrease in inventories............................. 6,396 3,076 7,125
(Decrease) increase in accounts payable and accrued
liabilities...................................... (4,445) (4,324) 5,327
-------- -------- --------
Net cash provided by (used in) operating
activities..................................... 12,869 (17,767) (5,677)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets............................. 11,000 -- 1,168
Purchase of intangible assets............................ -- -- (12,389)
Purchase of fixed assets................................. (358) (175) (495)
-------- -------- --------
Net cash provided by (used in) investing
activities..................................... 10,642 (175) (11,716)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Working capital facility (repayment) proceeds, net....... (8,295) 20,393 --
Short-term debt repayment................................ -- (14,511) (2,343)
(Repayment) proceeds -- Elan Corporation, plc............ (7,435) 2,430 (4,729)
Net proceeds from issuance of share capital.............. 40 (23) 74,588
-------- -------- --------
Net cash (used in) provided by financing
activities..................................... (15,690) 8,289 67,516
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 7,821 (9,653) 50,123
Cash and cash equivalents, beginning of year............. 43,133 52,786 2,663
-------- -------- --------
Cash and cash equivalents, end of year................... $ 50,954 $ 43,133 $ 52,786
======== ======== ========
Cash paid for interest................................... $ 1,328 $ 1,542 $ 1,395
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 34
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
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 branded prescription pharmaceutical products in the United States. Warner
Chilcott's primary focus is the women's health care market, with a continued
presence in the cardiology and dermatology markets. All of the Company's branded
products are promoted by the Company's sales force. The Company manages and
operates its business as one segment and the majority of its operating 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 8)
(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).
31
<PAGE> 35
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
(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 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. In
general, the Company's operating and other business transactions are 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 and directors in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and related interpretations,
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
32
<PAGE> 36
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
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, 1999, 1998 and 1997. Stock options and warrants have not been
included in the calculation since the inclusion of such shares would be
antidilutive (See Notes 9 and 10).
(n) Comprehensive income
SFAS No. 130, "Reporting Comprehensive Income" defines comprehensive income
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. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Trade receivables........................................... $ 5,823 $10,189
Marketing alliance receivables.............................. 6,044 8,869
Other non-trade receivables................................. 1,082 559
------- -------
12,949 19,617
Less allowance for doubtful accounts........................ 1,423 1,567
------- -------
$11,526 $18,050
======= =======
</TABLE>
4. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------ -------
<S> <C> <C>
Raw materials............................................... $ 17 $ 1,897
Finishing supplies.......................................... 3 3
Work-in-process............................................. 957 932
Finished goods.............................................. 3,936 11,597
------ -------
4,913 14,429
Less reserve for obsolescence............................... 888 1,330
------ -------
$4,025 $13,099
====== =======
</TABLE>
33
<PAGE> 37
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
5. EQUIPMENT, FURNITURE AND FIXTURES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
------ ------
<S> <C> <C>
Equipment, furniture and fixtures........................... $1,924 $1,565
Less accumulated depreciation............................... 747 489
------ ------
$1,177 $1,076
====== ======
</TABLE>
Depreciation expense amounted to $258, $247 and $179 for the years ended
December 31, 1999, 1998 and 1997, respectively.
6. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Goodwill.................................................... $29,624 $29,624
Tradename and other intangibles............................. 52,189 58,389
------- -------
81,813 88,013
Less accumulated amortization............................... 17,948 13,757
------- -------
$63,865 $74,256
======= =======
</TABLE>
Amortization expense amounted to $5,262, $5,374 and $5,279 for the years
ended December 31, 1999, 1998, and 1997, respectively.
7. 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 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.
8. DEBT
Working Capital Facility
On March 30, 1998 Warner Chilcott, Inc., the Company's U.S. operating
subsidiary ("WCI"), entered into a $30,000 revolving credit facility and
security agreement with a syndicate of banks led by PNC Business Credit ("the
"PNC facility"). The facility expires in March 2001. The PNC facility replaced a
facility provided by Bankers Trust Commercial Corporation.
34
<PAGE> 38
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
The PNC facility is collateralized by substantially all of the assets of
WCI 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, WCI is required to
maintain a minimum balance of shareholders' equity. At December 31, 1999 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 portion of
the facility. Interest expense related to the PNC and predecessor credit
facilities in 1999, 1998 and 1997, including commitment fees, were $1,592,
$1,735 and $1,761, respectively.
Senior Subordinated Discount Notes
In April 1996 WCI issued $69,000 principal amount of Senior Subordinated
Discount Notes ("Notes") due 2001 at a 30% discount to the principal amount.
Gross proceeds to WCI amounted to $48,300, which were utilized to fund the
acquisition of the Warner-Lambert division. 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. The discount on the Notes was amortized to interest
expense at a rate of 14.8%, compounded semi-annually.
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 $49,477 of Convertible Notes and detachable
warrants in exchange for $49,477 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.
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. The Company issued additional Notes in payment of the
interest installments due April 30, 1999 and October 31, 1999.
The table below shows the components of long-term debt as of December 31,
1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------- ------
<S> <C> <C>
Principal, beginning of year................................ $ 8,897 $6,228
Accreted interest........................................... -- 2,669
Notes issued for interest payments.......................... 1,579 --
------- ------
$10,476 $8,897
======= ======
</TABLE>
35
<PAGE> 39
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
9. 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 that
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 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
totaled $74,588.
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 8).
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 Company.
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, 1999, this warrant entitled Barr to
purchase 187,500 shares and was exercisable as to 62,500 shares.
In connection with the acquisition of the Warner-Lambert division in 1996,
the Company issued a warrant to Warner-Lambert Company for $672. This warrant
entitles Warner-Lambert to purchase 1,130,158 Ordinary Shares of the Company for
an aggregate of $18,003. This warrant is exercisable through January 31, 2001.
Other Warrants
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.
36
<PAGE> 40
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
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 100% of the proceeds from the sale of the shares at a price up to
$11.50 per share, and certain additional proceeds from the sale of these shares
at higher amounts.
During 1999 warrants for the purchase of a total of 410,189 Ordinary Shares
expired. A warrant for the purchase of 10,000 Ordinary Shares at an exercise
price of $0.05 was exercised in 1999.
10. 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 that provides for stock options. In June 1999
the Scheme was amended to provide for grants to consultants and members of the
Company's medical advisory board. The option exercise price is the fair market
value at the date of grant. Options 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, 1999
options for 1,384,413 shares were outstanding under the Scheme, 115,243 shares
were available for future grants and 545,687 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 totaling $2,470 on the date of
grant and is being amortized over the vesting period. Compensation expense
charged against income in respect of these warrants was $618, $617 and $772 for
the years ended December 31, 1999, 1998 and 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 that began January 1, 1998, but would be immediately
exercisable in full if the Company undergoes a change of control. The warrant
expires on the earlier of February 3, 2008 or after a specified period following
the termination of the executive's employment with the Company.
37
<PAGE> 41
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
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, 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
Granted...................................... 628,575 $7.00 - $10.19 $ 7.82
Exercised.................................... (344) $6.75 - $ 8.13 $ 6.99
Cancelled.................................... (43,268) $6.75 - $20.00 $ 9.14
--------- -------------- ------
Balance at December 31, 1999................... 2,294,413 $1.00 - $20.00 $12.32
========= ============== ======
Exercisable at December 31, 1999............... 1,233,812 $1.00 - $20.00 $14.60
========= ============== ======
</TABLE>
Following is option and warrant data at December 31, 1999 by exercise price
range:
<TABLE>
<CAPTION>
$1.00 TO $6.00 TO $10.00 TO
EXERCISE PRICE RANGE $5.99 $10.00 $20.00 TOTAL
- -------------------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Number of shares subject to options
and warrants....................... 130,000 1,305,863 858,550 2,294,413
Weighted average exercise price...... $1.00 $8.54 $19.78 $12.32
Weighted average remaining
contractual life (years)........... 6.75 8.70 6.60 7.80
Number of exercisable options and
warrants........................... 105,625 418,843 709,344 1,233,812
Weighted average exercise price of
exercisable options and warrants... $1.00 $8.90 $20.00 $14.60
-------- ---------- -------- ----------
</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 and
net loss per ordinary share would have been increased to the pro forma amounts
indicated below.
38
<PAGE> 42
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
AS REPORTED
Net loss.......................................... $(6,701) $(20,297) $(28,374)
Basic and diluted net loss per ordinary share..... $ (0.54) $ (1.64) $ (3.39)
PRO FORMA
Net loss.......................................... $(8,756) $(22,767) $(30,817)
Basic and diluted net loss per ordinary share..... $ (0.71) $ (1.84) $ (3.69)
</TABLE>
The per share weighted-average fair value of options and warrants granted
during 1999, 1998 and 1997 was $2.23, $4.54 and $5.53, respectively, using the
Black-Scholes option pricing model. Values were estimated using a weighted
average life of 2.5, 3.0 and 3.6 years in 1999, 1998 and 1997, no expected
dividend yield in any year, volatility of 38.8% in 1999, 72.8% in 1998 and 25.6%
in 1997, and risk free interest rates of 5.4 %, 4.6% and 6.0% in 1999, 1998 and
1997, respectively.
11. 401(K) SAVINGS PLAN
In April 1996 Warner Chilcott adopted a 401(k) savings plan that provides
eligible employees with the option to defer amounts not in excess of 15% of his
or her compensation. The Company makes matching contributions to the plan on
behalf of all participants who make elective deferrals. The Company contributes
and allocates to each participant's account matching contributions equal to 50%
of up to 6% of the participant's contributions. The Company's contributions vest
at 25% per year up to 100% at the participant's completion of four years of
employment.
The Company's contributions recognized for the years ended December 31,
1999, 1998 and 1997 were $375, $174 and $59, respectively.
12. SALE OF VECTRIN(R)
In September 1999 the Company completed the sale of its Vectrin(R) product
line including certain inventory, samples and the related FDA approval, and
received $11,000 in cash at closing. The Company reported a pre-tax gain of
$2,744 from the sale that is included in the Statement of Operations under the
caption "Other income -- Gain on sale of assets". As part of the sale and
purchase agreement, the Company will also receive royalties and milestone
payments based on certain future events. Royalty and milestone revenues from
this agreement are included in the Statement of Operations under the caption
"Marketing alliance and other revenue". Vectrin(R) net sales were recognized by
the Company until the date of sale and, such net sales amounted to $3,236 for
the year ended December 31, 1999. Net sales for the years ended December 31,
1998 and 1997 amounted to $3,799 and $2,902, respectively.
13. ELAN AGREEMENTS
In March 1999 the Company reached a binding agreement with Elan
Corporation, plc ("Elan") under which Elan agreed to acquire Warner Chilcott's
marketing rights to an extended-release nifedipine product. Under terms of the
agreement, as of March 31, 1999 Elan was obligated to make a non-refundable
payment, which was received, of $3,000 to Warner Chilcott and such amount was
recorded as revenue in the first quarter of 1999 under the caption "Marketing
alliance and other revenue". In June 1999 the Company executed the definitive
agreement licensing the extended-release nifedipine product to Elan and received
an additional $4,000 that was recorded as revenue in the second quarter of 1999.
Under the agreement, additional license fees would be due to Warner Chilcott
upon the completion of certain milestones including FDA approval of the pending
ANDA for the product. Warner Chilcott would also be entitled to receive
royalties
39
<PAGE> 43
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
based upon revenues derived from the product. As of December 31, 1999 the
Company had not earned any additional fees or royalties from this agreement.
Also in March 1999 the Company reached a binding agreement with Elan under
which Elan re-acquired the marketing rights to an isosorbide-5-mononitrate
product ("IS5MN-PM") that Elan had been developing for Warner Chilcott. Under
terms of the agreement, as of March 31, 1999, Elan was obligated to make a
payment to Warner Chilcott in an amount equal to Warner Chilcott's remaining
contractual obligation relating to the development of IS5MN-PM. Such amount had
been carried by Warner Chilcott as an asset in "Prepaid expense and other
assets" and as a liability in "Due to Elan Corporation, plc and subsidiaries".
In concluding this transaction and reducing both the related asset and
liability, Warner Chilcott did not recognize an income statement effect.
14. 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.
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 more likely than not.
Under SFAS No. 109, the Company's deferred tax assets as of December 31, 1999
and 1998 are estimated as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets
Net operating loss carryforward........................... $ 23,428 $ 18,026
Amortization of intangibles............................... 5,256 5,329
Disqualified interest carryforward........................ 826 826
Other, net................................................ (1,630) (252)
-------- --------
Subtotal............................................... 27,880 23,929
Valuation allowance....................................... (27,880) (23,929)
-------- --------
Net deferred tax asset................................. $ -- $ --
======== ========
</TABLE>
At December 31, 1999 the Company had available net operating loss
carryforwards for United States Federal income tax reporting purposes of
approximately $62,000 which begins expiring in 2011. At December 31, 1999, the
Company had net operating loss carryforwards for state income tax reporting
purposes of approximately $40,000 which expire at various dates. 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 1999, 1998 or 1997.
15. SIGNIFICANT CONCENTRATIONS
Significant customers/revenue sources
In 1999 the Company derived 24% of its total revenue from the promotion of
several products under an agreement with Schering Corporation. The Company's
sales force promotes these Schering products to a targeted physician population
and in turn receives a fee based on the market performance of the products. The
agreement expires in December 2000 but may be terminated sooner by either party
under certain circum-
40
<PAGE> 44
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
stances. 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, 1999 $5,555 of the Company's accounts receivable balance represents
amounts due from Schering.
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. 21% 17% 12%
Customer B.................................................. 13% 12% 7%
Customer C.................................................. 9% 10% 15%
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Customer A.................................................. 10% 11%
Customer B.................................................. 0% 10%
Customer C.................................................. 6% 9%
</TABLE>
16. 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-cancellable terms in excess of one year are as
follows:
MINIMUM RENTAL PAYMENTS
<TABLE>
<S> <C>
2000........................................................ $ 532
2001........................................................ 538
2002........................................................ 543
2003........................................................ 548
2004........................................................ 38
Thereafter.................................................. --
------
Total............................................. $2,199
------
</TABLE>
Rent expense under operating leases during the years ended 1999, 1998 and
1997 was $2,124, $571, and $206, respectively.
41
<PAGE> 45
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
Employment Agreements
The Company has employment agreements with six of its executives. 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, 1999 totalled $1,770.
17. RELATED PARTIES
The Company has ongoing business dealings with three companies, as
described below, 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, 1999 Elan Corporation, plc ("Elan") and its subsidiaries
held 19.6% of the Company's outstanding ADSs, representing Ordinary Shares,
(excluding shares that are part of the transaction described in Note 9). 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.
Although the companies did not have a product development relationship at
December 31, 1999, they have had such relationships prior to this date and may
have similar relationships in the future (see Note 13). Also, Elan provides
certain administrative and support services to the Company for a fee.
The Company incurred research and development costs charged by Elan of
$4,083 in the year ended December 31, 1997. No research and development costs
were charged by Elan in 1999 and 1998. The Company recorded administrative and
support fees charged by Elan of $237, $326 and $583 in the years ended December
31, 1999, 1998 and 1997. 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
Laboratories, Inc. ("Barr") distributed minocycline capsules manufactured under
the Company's ANDA. Royalties from this agreement of $63, $94 and $262 were
included in the Company's financial results for the years ended December 31,
1999, 1998 and 1997, respectively. This agreement was mutually terminated in
1998. Barr holds 250,000 of the Company's Ordinary Shares and a warrant to
purchase an additional 187,500 shares. Mr. Bruce Downey, the Chairman, President
and Chief Executive Officer of Barr, serves on Warner Chilcott's Board of
Directors.
Boron-LePore Group, Inc.
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, 1999, 1998 and 1997 fees
of $2,232, $5,654 and $2,160, respectively, were charged by Boron-LePore and
expensed to operations.
42
<PAGE> 46
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
18. CONSOLIDATING SCHEDULE
Following are consolidation schedules reflecting Balance Sheet and
Statement of Operations information for the Company as of December 31, 1999 and
1998, and for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
WARNER
WARNER CHILCOTT
CHILCOTT LABORATORIES
WARNER (BERMUDA), WARNER IRELAND ELIMINATION
CHILCOTT, PLC LTD. CHILCOTT, INC. LTD. ENTRIES CONSOLIDATED
------------- ---------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1999
BALANCE SHEET INFORMATION:
ASSETS
Cash and cash equivalents............ $ 44 $29,021 $ 21,889 $ -- $ -- $ 50,954
Accounts receivable.................. -- -- 11,351 175 -- 11,526
Inventories.......................... -- -- 4,025 -- -- 4,025
Other assets......................... 64 -- 851 -- -- 915
-------- ------- -------- ------ --------- --------
Total current assets.......... 108 29,021 38,116 175 -- 67,420
-------- ------- -------- ------ --------- --------
Long-term assets..................... -- -- 61,242 3,800 -- 65,042
Investment in subsidiaries........... 161,938 -- -- -- (161,938) --
-------- ------- -------- ------ --------- --------
Total assets.................. $162,046 $29,021 $ 99,358 $3,975 $(161,938) $132,462
======== ======= ======== ====== ========= ========
LIABILITIES AND EQUITY
Current liabilities.................. $ 261 $ -- $ 10,431 $ 212 $ -- $ 10,904
Inter-company accounts............... (3,574) 7,506 (4,941) 1,009 -- --
Working capital facility............. -- -- 12,098 -- -- 12,098
Long-term debt....................... -- -- 10,476 -- -- 10,476
Shareholders' equity................. 165,359 21,515 71,294 2,754 (161,938) 98,984
-------- ------- -------- ------ --------- --------
Total liabilities and
shareholders' equity........ $162,046 $29,021 $ 99,358 $3,975 $(161,938) $132,462
======== ======= ======== ====== ========= ========
STATEMENT OF OPERATIONS INFORMATION:
REVENUES
Product sales........................ $ -- $ -- $ 48,580 $ -- $ -- $ 48,580
Marketing alliance and other
revenue............................ -- -- 18,546 7,101 (192) 25,455
-------- ------- -------- ------ --------- --------
Total revenues................ -- -- 67,126 7,101 (192) 74,035
-------- ------- -------- ------ --------- --------
OPERATING EXPENSES
Cost of goods sold................... -- -- 27,704 -- -- 27,704
Selling, general & administration ... 1,359 6 44,649 395 -- 46,409
Dep. & amortization.................. 6 -- 5,202 312 -- 5,520
Research and development............. -- -- 356 2,936 (192) 3,100
-------- ------- -------- ------ --------- --------
Total operating expenses...... 1,365 6 77,911 3,643 (192) 82,733
-------- ------- -------- ------ --------- --------
Interest income (expense), net......... -- 1,437 (2,184) -- -- (747)
Gain on sale of assets................. -- -- 2,744 -- -- 2,744
Income taxes........................... -- -- -- -- -- --
-------- ------- -------- ------ --------- --------
NET LOSS............................... $ (1,365) $ 1,431 $(10,225) $3,458 $ -- $ (6,701)
======== ======= ======== ====== ========= ========
</TABLE>
43
<PAGE> 47
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WARNER
WARNER CHILCOTT
CHILCOTT LABORATORIES
WARNER (BERMUDA), WARNER IRELAND ELIMINATION
CHILCOTT, PLC LTD. CHILCOTT, INC. LTD. ENTRIES CONSOLIDATED
------------- ---------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
BALANCE SHEET INFORMATION:
ASSETS
Cash and cash equivalents............ $ 7 $27,160 $ 15,953 $ 13 $ -- $ 43,133
Accounts receivable.................. -- 291 16,834 925 -- 18,050
Inventories.......................... -- -- 13,099 -- -- 13,099
Other assets......................... 94 2 2,807 4,500 -- 7,403
-------- ------- -------- ------ --------- --------
Total current assets.......... 101 27,453 48,693 5,438 -- 81,685
-------- ------- -------- ------ --------- --------
Long-term assets..................... -- -- 71,220 4,112 -- 75,332
Investment in subsidiaries........... 146,949 -- -- -- (146,949) --
-------- ------- -------- ------ --------- --------
Total assets.................. $147,050 $27,453 $119,913 $9,550 $(146,949) $157,017
======== ======= ======== ====== ========= ========
LIABILITIES AND EQUITY
Current liabilities.................. $ 569 $ -- $ 14,389 $7,826 $ -- $ 22,784
Inter-company accounts............... (19,502) 22,358 (5,283) 2,427 -- --
Working capital facility............. -- -- 20,393 -- -- 20,393
Long-term debt....................... -- -- 8,897 -- -- 8,897
Shareholders' equity................. 165,983 5,095 81,517 (703) (146,949) 104,943
-------- ------- -------- ------ --------- --------
Total liabilities and
shareholders' equity........ $147,050 $27,453 $119,913 $9,550 $(146,949) $157,017
======== ======= ======== ====== ========= ========
STATEMENT OF OPERATIONS INFORMATION:
REVENUES
Product sales........................ $ -- $ -- $ 47,845 $ -- $ -- $ 47,845
Marketing alliance and other
revenue............................ -- -- 16,484 750 (185) 17,049
-------- ------- -------- ------ --------- --------
Total revenues................ -- -- 64,329 750 (185) 64,894
-------- ------- -------- ------ --------- --------
OPERATING EXPENSES
Cost of goods sold................... -- -- 34,230 -- -- 34,230
Selling, general & administration ... 2,741 10 38,360 598 -- 41,709
Dep. & amortization.................. 234 -- 5,311 76 -- 5,621
Research and development............. 2,316 -- 330 780 (185) 3,241
-------- ------- -------- ------ --------- --------
Total operating expenses...... 5,291 10 78,231 1,454 (185) 84,801
-------- ------- -------- ------ --------- --------
Interest income (expense), net......... -- 2,143 (2,533) -- -- (390)
Income taxes........................... -- -- -- -- -- --
-------- ------- -------- ------ --------- --------
NET LOSS............................... $ (5,291) $ 2,133 $(16,435) $ (704) $ -- $(20,297)
======== ======= ======== ====== ========= ========
</TABLE>
44
<PAGE> 48
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WARNER
WARNER CHILCOTT
CHILCOTT PHARMA-
WARNER (BERMUDA), WARNER CEUTICAL ELIMINATION
CHILCOTT, PLC LTD. CHILCOTT, INC. CORP. ENTRIES CONSOLIDATED
------------- ---------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
STATEMENT OF OPERATIONS INFORMATION:
REVENUES
Product sales........................ $ -- $ -- $ 75,827 $ -- $ -- $ 75,827
-------- ------- -------- ------ --------- --------
Total revenues................ -- -- 75,827 -- -- 75,827
-------- ------- -------- ------ --------- --------
OPERATING EXPENSES
Cost of goods sold................... -- -- 62,863 -- -- 62,863
Selling, general & administration ... 2,720 23 20,791 84 -- 23,618
Dep. & amortization.................. 10 409 5,039 -- -- 5,458
Research and development............. 5,054 -- 1,472 -- -- 6,526
-------- ------- -------- ------ --------- --------
Total operating expenses...... 7,784 432 90,165 84 -- 98,465
-------- ------- -------- ------ --------- --------
Interest income (expense), net......... 40 1,228 (7,004) -- -- (5,736)
Income taxes........................... -- -- -- -- -- --
-------- ------- -------- ------ --------- --------
NET LOSS............................... $ (7,744) $ 796 $(21,342) $ (84) $ -- $(28,374)
======== ======= ======== ====== ========= ========
</TABLE>
19. SUBSEQUENT EVENTS
Product Acquisitions
On February 15, 2000 the Company completed the acquisition of three branded
pharmaceutical products from Bristol-Myers Squibb Company ("BMS") for a purchase
price of $180,000. The purchase price is subject to downward adjustment under
certain circumstances. The products acquired were Estrace(R) cream, Ovcon(R) 35
and Ovcon(R) 50. Unaudited revenues for these products in total were estimated
to be approximately $50,000 in 1999. In connection with the acquisition, WCI
entered into transitional support and supply agreements with BMS under which BMS
will supply WCI with its requirements for Estrace(R) cream, Ovcon(R) 35 and
Ovcon(R) 50 for a period up to 10 years. The Company acquired all of the
intangible assets associated with the three products including the trademarks,
regulatory files, manufacturing know-how and other intellectual property. The
acquisition of the products will be accounted for as a purchase. Under purchase
accounting, the purchase price will be allocated to the tangible and intangible
assets acquired based upon their respective fair values as of the purchase date
in accordance with Accounting Principle Board Opinion No. 16. The final purchase
price and allocation of the purchase price have not been determined. However, a
preliminary allocation of the $180,000 purchase price based upon current
estimates resulted in $168,000 being allocated to intangible assets associated
with the products, primarily the product rights, and $12,000 to goodwill. There
were no tangible assets acquired. The Company will amortize the acquired
intangible assets over 20 years, their estimated useful life.
Issuance of Senior Notes
The Company financed the acquisition of the BMS products discussed above
through the sale of senior notes by WCI. On February 15, 2000 WCI issued
$200,000 of 12 5/8% senior notes due 2008 at a discount of $3,664 to yield 13%.
Interest payments on the senior notes are due semi-annually in arrears on each
February 15th and August 15th beginning August 15, 2000. Proceeds from the
issuance of the senior notes, net of the discount and estimated transaction
expenses, were approximately $186,300. The senior notes will be shown on the
Company's balance sheet net of the discount. The discount and transaction fees
will be
45
<PAGE> 49
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
amortized to interest expense over the eight-year term of the senior notes. The
senior notes are unconditionally guaranteed by Warner Chilcott, plc, WCI's
parent company.
Other Transactions
In connection with the sale of the 12 5/8% senior notes, on February 14,
2000 the Company prepaid all $10,476 of the senior subordinated discount notes
outstanding at a redemption price equal to 105% of the principal amount
outstanding. The redemption premium of $524 will be recognized as an
extraordinary loss in the first quarter of the year 2000.
Also in connection with the sale of the 12 5/8% senior notes, on February
18, 2000 the Company prepaid all amounts outstanding under its senior secured
working capital facility. On February 28, 2000 the Company amended its working
capital facility to reduce the maximum amount available to $10,000 from its
previous $30,000 and to extend the life of the agreement for two years under
terms substantially the same as were in place under the previous facility.
46
<PAGE> 50
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT WRITE-OFF'S BALANCE
BEGINNING OF ADDITIONAL AGAINST END OF
PERIOD RESERVES RESERVES PERIOD
------------ ---------- ----------- -------
<S> <C> <C> <C> <C>
1999:
Allowance for doubtful accounts.................. $1,567 $ 22 $ (166) $1,423
Reserve for inventory obsolescence............... $1,330 $2,320 $(2,762) $ 888
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
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
47
<PAGE> 51
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table provides information regarding directors, executive
officers and certain personnel of WC plc:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James G. Andress........................... 61 Chairman of the Board of Directors and
Chief Executive Officer
James H. Bloem............................. 49 Director(1)(2)
Roger M. Boissonneault..................... 51 President, Chief Operating Officer and
Director
Diane M. Cady.............................. 45 Senior Vice President, Investor Relations
and Corporate Communications
Harold N. Chefitz.......................... 65 Director(1)
Tina deVries, Ph.D. ....................... 39 Senior Director of Research and Development
Bruce L. Downey............................ 52 Director
Norma A. Enders............................ 37 Senior Vice President of Regulatory Affairs
Christopher J. Gabanski.................... 47 Vice President, Dermatology Sales
Elizabeth Greenberg........................ 42 Vice President, Human Resources
Arthur F. Haney, M.D. ..................... 54 Director
Beth P. Hecht.............................. 36 Senior Vice President, General Counsel
Paul S. Herendeen.......................... 44 Executive Vice President, Chief Financial
Officer and Director
David G. Kelly............................. 38 Group Vice President, Finance and Secretary
Thomas G. Lynch............................ 43 Director(1)(2)
A. Dominick Musacchio...................... 56 Vice President, New Business Development
Robert K. Pallas........................... 59 Vice President, Sales
David B. Pinkerton......................... 39 Director(2)
William J. Poll............................ 48 Vice President, Finance and Trade Relations
Didier Voydeville.......................... 48 Director
Kathleen A. Wickman........................ 48 Vice President, Marketing
</TABLE>
- ---------------
(1) Member of Compensation Committee of WC plc.
(2) Member of Audit Committee of WC plc.
Messrs. Andress, Boissonneault and Herendeen and Ms. Hecht are the
directors of WCI. Mr. Andress is the Chief Executive Officer of WCI; Mr.
Boissonneault is the President and Chief Operating Officer of WCI; and Mr.
Herendeen is the Executive Vice President and Chief Financial Officer of WCI;
and Ms. Hecht is the Senior Vice President, General Counsel and Secretary of
WCI.
James G. Andress has served as the Chief Executive Officer and a Director
of WC plc since November 1996. Mr. Andress has served as Chairman of the Board
of Directors since 1998. From 1989 to 1995, he was President and Co-Chief
Executive Officer of Information Resources, Inc., a publicly traded company,
which is the world's largest provider of scanner-based point-of-sale movement
and promotion data for the consumer packaged goods industry. From 1988 to 1989,
he served as Chairman, Global Pharmaceuticals of Beecham and Chairman, Health
Care Products & Services of SmithKline Beecham plc. From 1984 to 1988, Mr.
Andress was President and Chief Operating Officer of Sterling Drug, a publicly
traded pharmaceutical and consumer products company. From 1974 to 1984, he held
various positions with Abbott Laboratories, Inc., including President, Abbott
Canada, Vice President, Pacific Far East, Corporate
48
<PAGE> 52
Vice President, Planning & Development and Corporate Vice President, Abbott Home
Health Care Division. Mr. Andress earned his B.S. in Engineering from the United
States Military Academy and his M.B.A. from the Wharton School of Finance and
Commerce. Mr. Andress also serves on the Board of Directors of Allstate
Insurance Company, Information Resources, Inc., Xoma Corporation, Inc., The
Liposome Company, Inc., Sepracor, Inc. and Optioncare, Inc.
James H. Bloem has served as a Director since 1997. Mr. Bloem is an
independent business and financial consultant. He was formerly Executive Vice
President of Perrigo Company from 1995 to 1999. Prior to joining Perrigo
Company, Mr. Bloem served as Chief Financial Officer, Treasurer and General
Counsel of Herman Miller Inc. and as a partner of the law firm of Law, Weathers
& Richardson. He is a graduate of Calvin College, Vanderbilt University School
of Law and the Harvard University Graduate School of Business Administration.
Mr. Bloem serves on several boards of private companies and is a Certified
Public Accountant.
Roger M. Boissonneault has served as President and Chief Operating Officer
of WC plc since 1996. Mr. Boissonneault has served as a Director of WC plc since
1998. From 1976 to 1996 Mr. Boissonneault served in various capacities with
Warner-Lambert Company, including Vice President, Female Healthcare, Director of
Warner-Lambert Corporate Strategic Planning, and Director of
Obstetrician/Gynecologist Marketing. Mr. Boissonneault has a B.A. in Biology
from the University of Connecticut and an M.B.A. from Rutgers University. Mr.
Boissonneault also serves on the Board of Directors of Boron LePore and
Associates.
Diane M. Cady has served as Senior Vice President, Investor Relations and
Corporate Communications since 1999. From 1996 to 1999, Ms. Cady served as Vice
President, Investor Relations to Alpharma, Inc., a multinational specialty
pharmaceuticals company. Before joining Alpharma, Ms. Cady served as Vice
President of PLYGEM Industries, Inc., an NYSE traded company. Ms. Cady majored
in Bioscience at the University of California, Santa Barbara and became director
of a radioimmunoassay laboratory for the University's Institute of Environmental
Stress.
Harold N. Chefitz has served as a Director of WC plc since 1995. Mr.
Chefitz is a partner in the investment firm of Boles Knop & Company, LLC,
Managing Director of CK Advisors, LLC and general partner of CK Capital LP. Mr.
Chefitz was formerly a Senior Managing Director of Gerard Klauer Mattison & Co.
("GKM") and the Chairman of Chefitz Health Care Investments. Before joining GKM,
Mr. Chefitz was Managing Director and Head of the Health Care Group at
Prudential Securities. Mr. Chefitz has held various positions with Furman Selz
Incorporated (an international securities and investment banking firm),
Swergold, Chefitz Incorporated (an investment banking firm co-founded by Mr.
Chefitz) and Goldman, Sachs & Co. and has over 25 years of experience in
domestic and international health care financings. Mr. Chefitz has a B.S. degree
from Boston University and attended Boston College Law School. Mr. Chefitz
served as the Chairman of the Board of Columbia University School of
Pharmaceutical Sciences. Mr. Chefitz currently serves as a member of the Board
of Directors of Kensey Nash, Precision Therapeutics and Elan Motor Technology.
Tina deVries, Ph.D. has served as Senior Director of Research and
Development of WC plc since 1996. From 1989 to 1990, Dr. deVries served with
Warner-Lambert Company in their Research and Development Department and she has
over seven years of experience in the R&D area, previously serving as Senior
Research Associate, Parke-Davis Pharmaceutical Research. Dr. deVries holds a
B.S. in Pharmacy and Ph.D. in Pharmaceutics and Pharmaceutical Chemistry from
The Ohio State University.
Bruce L. Downey has served as a Director of WC plc since 1997. Since 1994,
Mr. Downey has served as Chairman, Chief Executive Officer and President of Barr
Laboratories, Inc.
Norma A. Enders has served as Senior Vice President of Regulatory Affairs
for WC plc since 1996. From 1985 to 1996, Ms. Enders was employed with
Warner-Lambert Company with responsibility for Warner Chilcott Division
Regulatory Affairs. Ms. Enders holds a B.S. degree in Pharmacy from Rutgers
College of Pharmacy.
49
<PAGE> 53
Christopher J. Gabanski has served as Vice President, Dermatology Sales,
since 1998. From 1997 to 1998 Mr. Gabanski served as Vice President, Sales,
Genderm Corp. From 1992 to 1996 Mr. Gabanski served as Regional Sales Director
of Neutrogena Dermatologics, a Johnson and Johnson company.
Elizabeth Greenberg has served as Vice President, Human Resources since
September 1999. From 1988 to 1999 she was Vice President, Human Resources at
Vital Signs Inc., a publicly traded medical device company. Ms. Greenberg holds
a B.A. from Montclair State University.
Arthur F. Haney has served as a Director of WC plc since February 28, 2000.
He is the Roy T. Parker Professor of Obstetrics and Gynecology at Duke
University Medical Center and Director of Duke's Division of Reproductive
Endocrinology and Infertility since 1981. Dr. Haney received a B.S.E.E. from the
University of Pennsylvania and an M.D. from the University of Arizona College of
Medicine.
Beth P. Hecht has served as Senior Vice President and General Counsel since
1999. From 1997 to 1999, Ms. Hecht served as General Counsel, Vice President and
Secretary of ChiRex Inc., a publicly traded pharmaceutical and fine chemical
concern. Prior to joining ChiRex, from 1993 to 1997, Ms. Hecht served as
Corporate Counsel and Secretary for Alpharma, Inc., a multinational NYSE traded
pharmaceutical company. Ms. Hecht received a B.A. from Amherst College and a
J.D. from the Harvard Law School.
Paul S. Herendeen has served as Executive Vice President and Chief
Financial Officer since 1998. Mr. Herendeen has served as a Director of WC plc
since 1996. From 1995 to 1998, Mr. Herendeen served as a Principal of Dominion
Management Corp. Prior to joining Dominion, Mr. Herendeen was an investment
professional with Prudential Equity Investors and held various investment
banking positions with Oppenheimer & Co., Inc. and Continental Bank. Mr.
Herendeen has a B.S. in Management from Boston College and an M.B.A. from the
Darden School at the University of Virginia. Mr. Herendeen has served on the
boards of directors of several private companies.
David G. Kelly has served as Group Vice President, Finance of WC plc since
1995. Mr. Kelly has served as the Corporate Secretary of WC plc since 1997. From
1987 to 1990, he served in various capacities at Elan, including Projects
Accountant, Director of Finance U.S., and most recently, from 1993 to 1995,
Director of Operations and Administration of Elan Pharma, Inc. (U.S.). From 1990
to 1991 he served as Chief Financial Officer and then Chief Executive Officer of
Xtra-Vision Corporation, a Boston based retail chain. Prior to 1987, Mr. Kelly
was a Chartered Accountant at KPMG. He is a graduate in Economics from the
University of Dublin, Trinity College.
Thomas G. Lynch has served as a Director of WC plc since 1992. Mr. Lynch
has served as the Executive Vice President and Chief Financial Officer of Elan
since 1993. Prior to joining Elan, he was a partner in the international
accounting firm of KPMG, where he specialized in the provision of international
corporate finance services. Mr. Lynch is also a Director of Elan, Axogen
Limited, Advanced Therapeutic Systems Limited, Nanogen Incorporated, Pembroke
Capital Limited and Icon Limited.
A. Dominick Musacchio has served as Vice President, New Business
Development for WC plc since 1996. From 1973 to 1996, he served in various
capacities at Warner-Lambert, including management positions with Parke-Davis
and the Warner Chilcott Division of Warner-Lambert. In his previous position as
Director, Marketing and Sales, he was one of the original senior management
members responsible for planning and launching the generic pharmaceutical
business of the Division. Mr. Musacchio holds a B.S. degree in Marketing and an
M.B.A. in Marketing from Fairleigh Dickinson University.
Robert K. Pallas has served as Vice President, Sales, since 1998. From 1997
to 1998 Mr. Pallas served as a consultant to Warner Chilcott, Inc. From 1994 to
1997 Mr. Pallas served as consultant in Sales and Marketing to Schering-Plough
Corporation.
David B. Pinkerton has served as a Director of WC plc since 1996. Mr.
Pinkerton is Managing Director of Alternative Investments for AIG Global
Investment Corp. ("AIG") since 1984 which includes a portfolio of approximately
$4 billion of venture capital, leverage buyouts, direct placements and hedged
strategies. From 1984 to 1986, Mr. Pinkerton was a securities analyst with AIG.
Mr. Pinkerton received his B.S. degree in
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<PAGE> 54
Finance and Economics from the University of Delaware in 1983 and his J.D.
degree from Brooklyn Law School in 1990.
William J. Poll has served as Vice President, Finance and Trade Relations
for WC plc since 1996. From 1977 to 1996 he served in various capacities at
Warner-Lambert, including Director of Financial Information Services. Mr. Poll
is a C.P.A. and has a B.S. degree in Accounting and an M.B.A. in Finance from
Seton Hall University.
Didier Voydeville has served as a Director of WC plc since 1999. Mr.
Voydeville is the Chairman and Chief Executive Officer of La Financiere de Dion,
an investment advisory firm located in France. Mr. Voydeville has been with FDD
since 1994 and serves as an advisor to Halisol S.A. and Madame Nicole Bru,
shareholders of WC plc. Prior to joining FDD, Mr. Voydeville was a Project
Finance Officer at the Ministry of Industry, a French government post. He holds
a Doctorate in Economics from the University of Paris. Mr. Voydeville currently
serves as a member of the Board of Directors of La Lorraine D'Investissement Et
De Conseil Eurl and also serves as a representative of Halisol S.A. to SPEF
Pre-IPO European Fund, Association Docteurs Bru and SA du 12 Rue De La Bourse.
Kathleen A. Wickman has served as Vice President, Marketing, of WC plc
since 1999. From 1996 until 1999, Ms. Wickman served in various positions
including Strategic Business Director for Berlex Laboratories, a unit of
Schering AG.
ITEM 14. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following documents are filed with this Form 10-K
FINANCIAL STATEMENTS:
Index to Consolidated Financial Statements
Independent Auditors' Report
Statement of Independent Chartered Accountants
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flow for the Years Ended December 31, 1999,
1998 and 1997
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.
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<PAGE> 55
EXHIBITS FILED AS PART OF THIS REPORT:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1++ Asset Purchase Agreement, dated as of February 13, 1996, by
and between Warner Chilcott, Inc. and Warner-Lambert Company
3.1++ Memorandum and Articles of Association, as amended, of
Warner Chilcott Public Limited 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
4.6++ Form of Warrant for converting holders of Rule 144 ADSs
10.1### Incentive Share Option Scheme of the Company, originally
adopted on April 3, 1997, amended on June 3, 1999
10.2### Agreement between Elan Corporation, plc and the Company
dated June 24, 1999
10.3### Asset Purchase Agreement between Warner Chilcott, Inc. and
Medicis Pharmaceutical Corp. dated September 14, 1999
10.4+++* Asset Purchase Agreement between Warner Chilcott, Inc. and
Bristol-Myers Squibb dated January 26, 2000
10.5+++* Estrace Transitional Support and Supply Agreement between
Westwood-Squibb Pharmaceuticals, Inc. and Warner Chilcott,
Inc. dated January 26, 2000
10.6++* Administrative Support Agreement, dated as of October 17,
1994, by and between the Company and Elan
10.7+++* Ovcon Transitional Support and Supply Agreement between
Bristol-Squibb Pharmaceuticals, Inc. and Warner Chilcott,
Inc. dated January 26, 2000
10.8++* Gemfibrozil Supply Agreement, dated as of March 28, 1996,
between Warner Chilcott, Inc. 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
10.12z Employment Agreement between the Company and Diane Cady,
dated June 15, 1999
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
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.
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
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, Warner Chilcott, Inc. 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 Warner
Chilcott, Inc. 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
10.28z Employment Agreement between the Company and Norma A.
Enders, dated August 20, 1999
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
10.31++ Exchange Agreement, dated as of June 15, 1997, by and among
the Company and the exchanger parties thereto
10.32z Employment Agreement between the Company and James G.
Andress, dated August 1, 1999
10.33z Employment Agreement between the Company and Roger M.
Boissonneault, dated August 1, 1999
10.34z Employment Agreement between the Company and Paul S.
Herendeen, dated August 1, 1999
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 Warner Chilcott, Inc., 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
</TABLE>
53
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
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
10.46##* First Amendment to Promotion Agreement with Schering
Corporation dated September 3, 1998
10.47###* Second Amendment to Promotion Agreement with Schering
Corporation dated May 10, 1999
10.48z Indenture, dated as of February 15, 2000, between Warner
Chilcott, Inc. and Bank of New York, as Trustee
10.49z Senior Note Purchase Agreement between Warner Chilcott, Inc.
and Credit Suisse First Boston dated February 15, 2000
10.50z Registration Rights Agreement dated February 15, 2000, among
Warner Chilcott, Inc., Credit Suisse First Boston
Corporation, CIBC World Market Corp. and SG Cowen Securities
Corporation
10.51z Amendment to Revolving Credit and Security Agreement dated
February 28, 2000, between Warner Chilcott, Inc. and PNC
Bank National Association
27.1z Financial Data Schedule
</TABLE>
---------------
++ 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
Form 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.
### Previously filed by the Registrant in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1999.
#### Previously filed by the Registrant in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1999.
+ Previously filed by the Registrant in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, and incorporated by
reference.
+++ Previously filed by the Registrant in the Company's Report on Form 8-K
dated February 15, 2000.
z Filed herewith.
* Confidential material has been omitted from this exhibit and filed
separately with the SEC pursuant to a request for confidential
treatment.
(b) Report on Form 8-K:
On February 29, 2000 we filed a Form 8-K Report, dated February 15, 2000,
which announced our purchase of three branded pharmaceutical products from
Bristol-Myers Squibb Company and our Warner Chilcott Inc. subsidiary's issuance
of $200 million aggregate principal amount of debt securities.
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<PAGE> 58
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
---- ----- ----
<C> <C> <S>
/s/ JAMES G. ANDRESS Chairman, Chief Executive March 16, 2000
- --------------------------------------------------- Officer (Principal Executive
James G. Andress Officer) and Director
/s/ ROGER M. BOISSONNEAULT President, Chief Operating March 16, 2000
- --------------------------------------------------- Officer and Director
Roger M. Boissonneault
/s/ PAUL S. HERENDEEN Executive Vice President, March 16, 2000
- --------------------------------------------------- Chief Financial Officer
Paul S. Herendeen (Principal Financial and
Accounting Officer) and
Director
/s/ JAMES H. BLOEM Director March 16, 2000
- ---------------------------------------------------
James H. Bloem
/s/ HAROLD N.CHEFITZ Director March 16, 2000
- ---------------------------------------------------
Harold N. Chefitz
/s/ BRUCE L. DOWNEY Director March 16, 2000
- ---------------------------------------------------
Bruce L. Downey
/s/ ARTHUR F. HANEY Director March 16, 2000
- ---------------------------------------------------
Arthur F. Haney
/s/ THOMAS G. LYNCH Director March 16, 2000
- ---------------------------------------------------
Thomas G. Lynch
/s/ DAVID B. PINKERTON Director March 16, 2000
- ---------------------------------------------------
David B. Pinkerton
/s/ DIDIER VOYDEVILLE Director March 16, 2000
- ---------------------------------------------------
Didier Voydeville
</TABLE>
55
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of June
15, 1999, between WARNER CHILCOTT PUBLIC LIMITED COMPANY., a public limited
company organized under the laws of Ireland (the "Company"), and Diane Cady
("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, Investor Relations and Corporate Communications to render
full-time services to the Company and to perform such other duties commensurate
with such office.
(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.
(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 September 7, 1999 and end on December
31, 2002 (the "Initial Term") unless further extended or sooner terminated as
hereinafter provided. Executive may terminate her employment during the Initial
Term with sixty (60) days written notice to the Company. Commencing on December
31, 2002, and each December 31 thereafter, the term of Executive's employment
shall automatically be extended for one additional year to, respectively,
December 31, 2003, and each December 31 thereafter, unless, not later than sixty
(60) days 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
1
<PAGE> 2
"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 $175,000 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 $175,000 per annum. 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. For
1999, such bonus, if any, shall be prorated to reflect the amount of time
actually worked in such calendar year.
(e) Executive will receive options to purchase 60,000 ordinary
shares represented by ADSs and evidenced by ADRs of Warner Chilcott Public
Limited Company. Twelve thousand of said options shall be immediately
exercisable after Executive's first day of employment, with the remaining 48,000
of such shares vesting quarterly over four years. Other terms of the stock
options shall be as set forth in the Warner Chilcott Incentive Share Option
Program (the "Plan"). 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 Plan 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 deems, in
its sole discretion, appropriate for the position occupied by Executive and her
performance therein. Executive will be considered for an additional grant under
the Plan beginning in Spring 2000.
(f) Within thirty days after execution of this Agreement, the
Company shall pay Executive a signing bonus in the amount of $25,000.
2
<PAGE> 3
(g) Executive shall be entitled to vacation time with
compensation of 20 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.
(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. 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 her
supervisor and/or 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 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
3
<PAGE> 4
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 a "Change in Control" of the Company (as defined in
Section 4(f) below) occurs, all stock options, restricted stock, deferred
compensation and similar benefits which have not yet become vested on the date
of a Change in Control will become vested upon such event, and Executive shall
be permitted to exercise all such rights whether or not Executive remains
employed with the Company or terminates her 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.
(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, 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
4
<PAGE> 5
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, and titles),
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)(A),
Executive shall be entitled to the payment specified in
Section 4(d).
(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.
(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
5
<PAGE> 6
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 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
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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;
(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
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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.
(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
Linda Menzel) (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.
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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:
Notices to Executive: Diane Cady
212 Pascack Road
Park Ridge, NJ 07656
(201) 391-5913 (Phone)
Notices to the Company: Warner Chilcott plc
Rockaway 80 Corporate Center
100 Enterprise Drive
Rockaway, NJ 07866
(973) 442-3200 (Phone)
(973) 442-3316 (Fax)
Attention: General Counsel
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.
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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 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
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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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Execution Copy
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WARNER CHILCOTT PLC
/s/ PAUL S. HERENDEEN
----------------------------
NAME: PAUL S. HERENDEEN
TITLE: EVP & CFO
/s/ DIANE CADY
-----------------------------
DIANE CADY
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of
August 20, 1999, between WARNER CHILCOTT PUBLIC LIMITED COMPANY., a public
limited company organized under the laws of Ireland (the "Company"), and Norma
A. Enders ("Executive").
RECITALS
WHEREAS Executive is currently employed by the Company as its
Senior Vice President, Regulatory Affairs;
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 continue to employ Executive
as its Senior Vice President, Regulatory Affairs, to render full time services
to the Company and to perform such other duties commensurate with such office.
During her employment hereunder, Executive shall report to the President/Chief
Operating Officer of the Company.
(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.
(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 August 20, 1999 and end on December 31,
2002 (the "Initial Term") unless further extended or sooner terminated as
hereinafter provided. Executive may terminate her employment during the Initial
Term with two months written notice to the Company. Commencing on December 31,
2002, and each December 31 thereafter, the term of Executive's employment shall
automatically be extended for one additional year to, respectively, December 31,
2003, 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
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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 $140,000 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 $140,000 per annum. 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.
(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. It
is understood and agreed that for calendar year 1999, Executive's bonus target
amount shall be prorated, with eight months of such year at 30% and the
remaining four months at the above-referenced 50%.
(e) Executive may 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 deems, in its sole discretion, appropriate for
the position occupied by Executive and her performance therein.
(f) Executive shall be entitled to vacation time as set forth
in the Company Vacation Policy. Executive shall also be entitled to all paid
holidays given by the Company to its key officers.
(g) 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
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<PAGE> 3
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
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.
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(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, warrants, 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 her 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, 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
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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.
(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
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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 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
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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 to the
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Confidential Information, Work Product (as defined below) or the business of the
Company or any subsidiary which she may then possess or have under her 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
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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.
(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 (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 had the
opportunity to consult with independent legal counsel regarding her 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
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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:
Notices to Executive: Norma A. Enders
192 Stanhope Road
Sparta, NJ 07871
(973) 729-1445 (Phone)
Notices to the Company: Warner Chilcott plc
Rockaway 80 Corporate Center
100 Enterprise Drive
Rockaway, NJ 07866
(973) 442-3200 (Phone)
(973) 442-3316 (Fax)
Attention: General Counsel
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
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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 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 she 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
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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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Execution Copy
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WARNER CHILCOTT PLC
/s/ ROGER BOISSONNEAULT
----------------------------
NAME: ROGER BOISSONNEAULT
TITLE: PRESIDENT/CHIEF OPERATING OFFICER
/s/ NORMA A. ENDERS
-----------------------------
NORMA A. ENDERS
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<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of
August 1, 1999, between WARNER CHILCOTT PUBLIC LIMITED COMPANY., a public
limited company organized under the laws of Ireland (the "Company"), and James
G. Andress ("Executive").
RECITALS
WHEREAS Executive is currently employed by the Company as its
Chief Executive Officer and President; and
WHEREAS Executive and the Company are parties to a previous
Employment Agreement, dated March 3, 1997, which is hereby superseded and
replaced by this 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 continue to employ Executive
as its Chief Executive Officer to render full time services to the Company and
to perform such other duties commensurate with such office.
(b) Executive hereby accepts such employment and agrees to
render the services described above to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner. It shall not be a violation of
this Agreement for Executive to serve on corporate, civic or charitable boards
or committees so long as such activities do not significantly interfere with
Executive's commitment to work in accordance with this Agreement.
(c) During the Employment Period (as defined in Section 2
below), the Company shall include Executive in any slate of nominees proposed by
the Company for election or reelection, as the case may be, to the Company's
Board of Directors. Upon termination of Executive's employment under this
Agreement for any reason, or the expiration of this Agreement, Executive shall
immediately submit his resignation from the Board of Directors.
2. TERM OF EMPLOYMENT. The employment period of Executive by
the Company shall commence on or before August 1, 1999 and end on December 31,
2002 (the "Initial Term") unless further extended or sooner terminated as
hereinafter provided. Executive may terminate his employment during the Initial
Term with two months written notice to the Company.
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Commencing on December 31, 2002, and each December 31 thereafter, the term of
Executive's employment shall automatically be extended for one additional year
to, respectively, December 31, 2003, 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 $315,000 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 $315,000 per annum. 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 him in the course of performing his 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 his
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) Executive may 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 deems, in its sole discretion, appropriate for
the position occupied by Executive and his performance therein.
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(f) Executive shall be entitled to vacation time with
compensation of 20 days per annum. Executive shall also be entitled to all paid
holidays given by the Company to its key officers.
(g) There shall be no material reduction or diminution of the
benefits provided in this Section 3, (i) unless Executive shall have given his
prior written consent to such reduction or diminution and an equitable
arrangement (embodied in an ongoing substitute or alternative benefit or plan)
has been made with respect to such benefit or plan or (ii) except, in the case
of Section 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, his 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 his 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 his 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 his 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 his
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 his 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
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,
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the Company shall pay to Executive (x) his 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 he executes and delivers the Company's
standard form of release) an amount equal to Executive's then current Base
Salary for a period of twelve 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, warrants, 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 his 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
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"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided, however, 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) any purported termination by the
Company of Executive's employment otherwise than as
expressly permitted by this Agreement; or (xx) 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 his 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
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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 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 him 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 him prior to or after the date of
this Agreement, and not to disclose them to anyone outside the Company, either
during or after his employment with the Company, except (i) in the course of
performing his 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
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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 his 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 to the Confidential
Information, Work Product (as defined below) or the business of the Company or
any subsidiary which he 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 his 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
his 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 him or his legal representatives in connection with any
action, suit or proceeding to which he or his legal representatives may be made
a party by reason of him 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 his 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 he ceases to be an officer of the Company and shall inure
to the benefit of his heirs, executors and administrators. The Company shall
not, without 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 he has been paid under Section
4(d) above,
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(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.
(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 (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 he 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
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hereby acknowledges and represents that he has had the opportunity to consult
with independent legal counsel regarding his rights and obligations under this
Agreement and that he 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:
Notices to Executive: James G. Andress
1381 North Elm Tree Road
Lake Forest, IL 60045
(847) 234-1226 (Phone)
Notices to the Company: Warner Chilcott plc
Rockaway 80 Corporate Center
100 Enterprise Drive
Rockaway, NJ 07866
(973) 442-3200 (Phone)
(973) 442-3316 (Fax)
Attention: General Counsel
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.
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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 his rights or delegate his 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 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
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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
his 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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Execution Copy
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WARNER CHILCOTT PLC
/s/ HAROLD CHEFITZ
----------------------------
NAME: HAROLD CHEFITZ
TITLE: DIRECTOR, MEMBER OF COMPENSATION
COMMITTEE
/s/ PAUL S. HERENDEEN
-----------------------------
PAUL S. HERENDEEN
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of
August 1, 1999, between WARNER CHILCOTT PUBLIC LIMITED COMPANY., a public
limited company organized under the laws of Ireland (the "Company"), and Roger
M. Boissonneault ("Executive").
RECITALS
WHEREAS Executive is currently employed by the Company as its
Chief Operating Officer and President; and
WHEREAS Executive and the Company are parties to a previous
Employment Agreement, dated March 3, 1997, which is hereby superseded and
replaced by this 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 continue to employ Executive
as its Chief Operating Officer and President to render full time services to the
Company and to perform such other duties commensurate with such office. During
his employment hereunder, Executive shall report to the Chief Executive Officer
of the Company.
(b) Executive hereby accepts such employment and agrees to
render the services described above to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner. It shall not be a violation of
this Agreement for Executive to serve on corporate, civic or charitable boards
or committees 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 August 1, 1999 and end on December 31,
2002 (the "Initial Term") unless further extended or sooner terminated as
hereinafter provided. Executive may terminate his employment during the Initial
Term with two months written notice to the Company. Commencing on December 31,
2002, and each December 31 thereafter, the term of Executive's
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employment shall automatically be extended for one additional year to,
respectively, December 31, 2003, 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 $260,000 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 $260,000 per annum. 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 him in the course of performing his 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 his
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) Executive may 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 deems, in its sole discretion, appropriate for
the position occupied by Executive and his performance therein.
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(f) Executive shall be entitled to vacation time with
compensation of 20 days per annum. Executive shall also be entitled to all paid
holidays given by the Company to its key officers.
(g) There shall be no material reduction or diminution of the
benefits provided in this Section 3, (i) unless Executive shall have given his
prior written consent to such reduction or diminution and an equitable
arrangement (embodied in an ongoing substitute or alternative benefit or plan)
has been made with respect to such benefit or plan or (ii) except, in the case
of Section 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, his 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 his 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 his 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 his 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 his
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 his 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
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,
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the Company shall pay to Executive (x) his 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 he 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, warrants, 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 his 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
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"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided, however, 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 his
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
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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 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 him 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 him prior to or after the date of
this Agreement, and not to disclose them to anyone outside the Company, either
during or after his employment with the Company, except (i) in the course of
performing his 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
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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 his 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 to the Confidential
Information, Work Product (as defined below) or the business of the Company or
any subsidiary which he 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 his 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
his 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 him or his legal representatives in connection with any
action, suit or proceeding to which he or his legal representatives may be made
a party by reason of him 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 his 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 he ceases to be an officer of the Company and shall inure
to the benefit of his heirs, executors and administrators. The Company shall
not, without 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 he has been paid under Section
4(d) above,
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(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.
(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 (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 he 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
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hereby acknowledges and represents that he has had the opportunity to consult
with independent legal counsel regarding his rights and obligations under this
Agreement and that he 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:
Notices to Executive: Roger M. Boissonneault
5 North Bridge Drive
Long Valley, NJ 07853
(973) 252-6696 (Phone)
Notices to the Company: Warner Chilcott plc
Rockaway 80 Corporate Center
100 Enterprise Drive
Rockaway, NJ 07866
(973) 442-3200 (Phone)
(973) 442-3316 (Fax)
Attention: General Counsel
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.
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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 his rights or delegate his 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 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
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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
his 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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Execution Copy
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WARNER CHILCOTT PLC
/s/ HAROLD CHEFITZ
----------------------------
NAME: HAROLD CHEFITZ
TITLE: DIRECTOR, MEMBER OF COMPENSATION
COMMITTEE
/s/ ROGER M. BOISSONNEAULT
-----------------------------
ROGER M. BOISSONNEAULT
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<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of
August 1, 1999, between WARNER CHILCOTT PUBLIC LIMITED COMPANY., a public
limited company organized under the laws of Ireland (the "Company"), and Paul S.
Herendeen ("Executive").
RECITALS
WHEREAS Executive is currently employed by the Company as its
Chief Financial Officer and Executive Vice President; and
WHEREAS Executive and the Company are parties to a previous
Employment Agreement, dated February 3, 1998, which is hereby superseded and
replaced by this 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 continue to employ Executive
as its Chief Financial Officer and Executive Vice President to render full time
services to the Company and to perform such other duties commensurate with such
office. During the Employment Period (as defined in Section 2 below), the
Company shall include Executive in any slate of nominees proposed by the Company
for election or reelection, as the case may be, to the Company's Board of
Directors. Upon termination of Executive's employment under this Agreement for
any reason, or the expiration of this Agreement, Executive shall immediately
submit his resignation from the Board of Directors. During his employment
hereunder, Executive shall report to the Chief Executive Officer of the Company.
(b) Executive hereby accepts such employment and agrees to
render the services described above to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner. It shall not be a violation of
this Agreement for Executive to serve on corporate, civic or charitable boards
or committees 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.
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2. TERM OF EMPLOYMENT. The employment period of Executive by
the Company shall commence on or before August 1, 1999 and end on December 31,
2002 (the "Initial Term") unless further extended or sooner terminated as
hereinafter provided. Executive may terminate his employment during the Initial
Term with two months written notice to the Company. Commencing on December 31,
2002, and each December 31 thereafter, the term of Executive's employment shall
automatically be extended for one additional year to, respectively, December 31,
2003, 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 $245,000 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 $245,000 per annum. 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 him in the course of performing his 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 his
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) Executive may 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
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of Directors deems, in its sole discretion, appropriate for the position
occupied by Executive and his performance therein.
(f) Executive shall be entitled to vacation time with
compensation of 20 days per annum. Executive shall also be entitled to all paid
holidays given by the Company to its key officers.
(g) There shall be no material reduction or diminution of the
benefits provided in this Section 3, (i) unless Executive shall have given his
prior written consent to such reduction or diminution and an equitable
arrangement (embodied in an ongoing substitute or alternative benefit or plan)
has been made with respect to such benefit or plan or (ii) except, in the case
of Section 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, his 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 his 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 his 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 his 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 his
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 his 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
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on Executive's part 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) his 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 he 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, warrants, 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 his 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)
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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, 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 his compliance
therewith).
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(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.
(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
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<PAGE> 7
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 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 him 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 him prior to or after the date of
this Agreement, and not to disclose them to anyone outside the Company, either
during or after his employment with the Company, except (i) in the course of
performing his 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
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<PAGE> 8
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 his 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 to the Confidential
Information, Work Product (as defined below) or the business of the Company or
any subsidiary which he 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 his 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
his 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 him or his legal representatives in connection with any
action, suit or proceeding to which he or his legal representatives may be made
a party by reason of him 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 his 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 he ceases to be an officer of the Company and shall inure
to the benefit of his heirs, executors and administrators. The Company shall
not, without 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
<PAGE> 9
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 he 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.
(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 (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
9
<PAGE> 10
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 he 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 he has had the opportunity to consult
with independent legal counsel regarding his rights and obligations under this
Agreement and that he 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:
Notices to Executive: Paul S. Herendeen
7 Maple Road
Chatham Township, NJ 07928
(973) 701-2860 (Phone)
Notices to the Company: Warner Chilcott plc
Rockaway 80 Corporate Center
100 Enterprise Drive
Rockaway, NJ 07866
(973) 442-3200 (Phone)
(973) 442-3316 (Fax)
Attention: General Counsel
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.
10
<PAGE> 11
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 his rights or delegate his 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 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
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<PAGE> 12
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
his 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.
12
<PAGE> 13
Execution Copy
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WARNER CHILCOTT PLC
/s/ HAROLD CHEFITZ
-----------------------------
NAME: HAROLD CHEFITZ
TITLE: DIRECTOR, MEMBER OF
COMPENSATION COMMITTEE
/s/ JAMES G. ANDRESS
-----------------------------
JAMES G. ANDRESS
13
<PAGE> 1
================================================================================
WARNER CHILCOTT, INC.,
as Issuer
and
WARNER CHILC0TT PUBLIC LIMITED COMPANY,
as Guarantor
to
THE BANK OF NEW YORK,
as Trustee
----------------
INDENTURE
Dated as of February 15, 2000
----------------
12 % Senior Notes due 2008
12 % Senior Notes due 2008, Series B
================================================================================
<PAGE> 2
INDENTURE, dated as of February 15, 2000, between Warner Chilcott,
Inc. ("Issuer"), a Delaware corporation, having its principal office at Rockaway
80 Corporate Center, 100 Enterprise Drive, Suite 280, Rockaway, New Jersey
07866, Warner Chilcott Public Limited Company ("Parent"), a company organized
under the laws of the Republic of Ireland, as Guarantor, and The Bank of New
York, a New York banking corporation, as Trustee (herein called the "Trustee").
Issuer has duly authorized the creation of an issue of its
$200,000,000 12 % Senior Notes due 2008 (the "Initial Securities"), and its
$200,000,000 12 % Senior Notes due 2008, Series B (the "Exchange Securities")
and if and when issued pursuant to a private exchange for Initial Securities,
Issuer's 12 % Senior Notes due 2008 (the "Private Exchange Notes") and, together
with the Initial Securities, the Exchange Securities and any Additional
Securities issued in compliance with Section 4.03, the "Securities"), of
substantially the tenor and amounts hereinafter set forth and, to provide
therefor, the Issuer has duly authorized the execution and delivery of this
Indenture.
Parent has duly authorized the full and unconditional guarantee of
the Initial Securities, and upon the issuance of the Exchange Securities, if
any, the Exchange Securities.
All things necessary have been done to make the Securities, when
executed by Issuer and authenticated and delivered hereunder and duly issued by
Issuer, the valid obligations of Issuer and to make this Indenture a valid
agreement of Issuer, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. "Additional Assets" means:
(i) any property, plant or equipment used in a Related Business;
(ii) any Product Line;
(iii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by Parent,
Issuer or another Restricted Subsidiary; or
(iv) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary;
<PAGE> 3
provided, however, that any such Restricted Subsidiary described in clauses
(iii) or (iv) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by, or (ii) 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 the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall
also mean any beneficial owner of Capital Stock representing 5% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of Issuer or
of rights or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, license of rights,
transfer or other disposition (or series of related sales, leases, transfers or
dispositions) by Parent, Issuer or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of: (i) any
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held by a Person
other than Parent, Issuer or a Restricted Subsidiary); (ii) all or substantially
all the assets of any division or line of business of Parent, Issuer or any
Restricted Subsidiary; or (iii) any other assets of Parent or any Restricted
Subsidiary outside of the ordinary course of business of Parent, Issuer or such
Restricted Subsidiary.
The following shall not be an Asset Disposition for the purposes of
clauses (i), (ii) and (iii) above:
(A) a disposition by Parent or a Restricted Subsidiary to Issuer or
by Issuer or Parent or a Restricted Subsidiary to a Wholly Owned
Subsidiary;
(B) for purposes of Section 4.06 only, a disposition that
constitutes a Restricted Payment permitted by Section 4.04, any payment
permitted and made pursuant to the proviso of clause (i) of the definition
of Restricted Payment or a Permitted Investment;
(C) a disposition of assets or a licensing of rights relating to
assets with a fair market value of less than $250,000;
(D) for purposes of Section 4.06 only, a disposition by Parent,
Issuer or a Restricted Subsidiary of a Product Line in consideration for
the acquisition by Parent, Issuer or a Restricted Subsidiary of another
Product Line; provided, however, that, if the Product Line so disposed had
revenues for the four consecutive fiscal quarters for which financial
statements of Parent have been either included in a report filed with the
SEC or filed with the Trustee
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<PAGE> 4
immediately preceding such disposition in excess of $2,500,000, (x) such
disposition has been determined by a nationally recognized investment
banking firm to be fair, from a financial viewpoint, to Parent, Issuer and
their Restricted Subsidiaries and (y) on the date of such disposition and
after giving effect thereto and to the related acquisition, Parent and
Issuer would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to Section 4.03(a);
(E) any disposition that constitutes a Change of Control or any
disposition permitted by Section 5.01;
(F) disposals or replacements of obsolete, uneconomical, negligible,
worn out or surplus property; and
(G) the license of the rights to the Estrace(R) brand name to BMS
pursuant to the terms of the BMS License Agreement.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness, the quotient obtained by dividing: (i) the sum of the
products of numbers of years from the date of determination to the dates of each
successive scheduled principal payment of or redemption or similar payment with
respect to such Indebtedness multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Bank Indebtedness" means all obligations pursuant to the Senior
Credit Facilities.
"BMS" means, collectively, Bristol-Myers Squibb Company,
Westwood-Squibb Pharmaceuticals, Inc. and Bristol-Myers Laboratories Company.
"BMS Acquisition" means the acquisition by Issuer of three branded
pharmaceutical Product Lines from BMS pursuant to the Asset Purchase Agreement,
dated as of January 25, 2000, between BMS and Issuer.
"BMS License Agreement" means, collectively, the Transitional
Support and Supply Agreements, each dated as of January 25, 2000, between BMS
and Issuer.
"Board of Directors" means the Board of Directors of Parent or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day on which commercial banks in the
State of New York are open for business other than any day on which such banks
are authorized or required by law to close, including Saturday and Sunday.
3
<PAGE> 5
"Capital Lease Obligations" means an obligation that is required to
be classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-S under the Exchange Act, except that for purposes
of this clause (i) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of Parent;
(ii) individuals who on the Issue Date constituted the board of
directors of Parent or Issuer (together with any new directors whose
election by such board of directors or whose nomination for election by
the shareholders of Parent or Issuer, as applicable, was approved by a
vote of 66-2/3% of the directors of Parent or Issuer, as applicable, then
still in office who were either directors of Parent or Issuer, as
applicable, on the Issue Date or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors then in office;
(iii) the adoption of a plan relating to the liquidation or
dissolution of Parent or Issuer; or
(iv) the merger or consolidation of Parent or Issuer with or into
another Person or the merger of another Person with or into Parent or
Issuer, or the sale of all or substantially all the assets of Parent or
Issuer and its subsidiaries (determined on a consolidated basis) to
another Person other than a transaction following which (A) in the case of
a merger or consolidation of Parent, securities that represented 100% of
the Voting Stock of Parent immediately prior to such transaction (or other
securities into which such securities are converted as part of such merger
or consolidation transaction) constitute at least a majority of the voting
power of the Voting Stock of the surviving Person in such merger or
consolidation transaction, (B) in the case of a sale of assets
transaction, the transferee Person becomes the obligor in respect of the
Securities and a Subsidiary of the transferor of such assets or (C) in the
case of a merger or
4
<PAGE> 6
consolidation of Issuer, the surviving entity continues to be a Wholly
Owned Subsidiary of Parent and there has not occurred a Change of Control
of Parent.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which financial statements have
been either included in a report filed with the SEC or filed with the Trustee
to (ii) Consolidated Interest Expense for such four fiscal quarters; provided,
however, that:
(1) if Parent, Issuer or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding
or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness
as if such Indebtedness had been Incurred on the first day of such period;
(2) if Parent, Issuer or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for
such period shall be calculated on a pro forma basis as if such discharge
had occurred on the first day of such period and as if Parent, Issuer or
such Restricted Subsidiary has not earned the interest income actually
earned during such period in respect of cash or Temporary Cash Investments
used to repay, repurchase, defease or otherwise discharge such
Indebtedness;
(3) if since the beginning of such period Parent, Issuer or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of
such Asset Disposition for such period, or increased by an amount equal to
the EBITDA (if negative), directly attributable thereto for such period
and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of Parent, Issuer or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to Parent,
Issuer and their continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent Parent, Issuer and their continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale);
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(4) if since the beginning of such period Parent, Issuer or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring
a calculation to be made hereunder, which constitutes all or substantially
all of an operating unit of a business, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period; and
(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
Parent, Issuer or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to
clause (3) or (4) above if made by Parent, Issuer or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
as if such Asset Disposition, Investment or acquisition occurred on the
first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition or disposition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer of
Parent or Issuer. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest of such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of Parent and its consolidated Restricted Subsidiaries
(including Issuer), plus, to the extent not included in such total interest
expense, and to the extent incurred by Parent, Issuer or their Restricted
Subsidiaries, without duplication:
(i) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction;
(ii) amortization of debt discount and, subject to the proviso at
the end of this definition, amortization of debt issuance cost;
(iii) capitalized interest;
(iv) non-cash interest expenses;
(v) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
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(vi) net costs attributable to Hedging Obligations;
(vii) Preferred Stock dividends in respect of all Preferred Stock
held by Persons other than Parent, Issuer or a Wholly Owned Subsidiary of
Parent or Issuer (other than dividends payable solely in Capital Stock
(other than Disqualified Stock) of the issuer of such Preferred Stock);
(viii) interest incurred in connection with Investments in
discontinued operations;
(ix) interest accruing on any Indebtedness of any other Person to
the extent such Indebtedness is Guaranteed by (or secured by the assets
of) Parent, Issuer or any Restricted Subsidiary; and
(x) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than Parent or Issuer)
in connection with Indebtedness Incurred by such plan or trust;
excluding, however, to the extent otherwise included, any expense or
amortization relating to stock options or stock appreciation rights; provided,
however, that with respect to amortization of debt issuance cost, the only
amount to be included in Consolidated Interest Expense is the amount, if any, of
such amortization that exceeds 5% of the Consolidated Interest Expense for the
applicable period (excluding amortization of debt issuance cost).
"Consolidated Net Income" means, for any period, the net income of
Parent and its consolidated Subsidiaries (including Issuer); provided, however,
that there shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than Parent or Issuer) if
such Person is not a Restricted Subsidiary, except that: (A) subject to
the exclusion contained in clause (iv) below, Parent's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to Parent, Issuer or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (iii) below); and (B) Parent's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by Parent or a
Subsidiary thereof in a pooling of interests transaction for any period
prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or
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indirectly, to Parent or Issuer, except that: (A) subject to the exclusion
contained in clause (iv) below, Parent's or Issuer's equity, as the case
may be, in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to Parent, Issuer or another
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause); and (B) Parent's
or Issuer's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of Parent, its consolidated Subsidiaries
(including Issuer) or any other Person (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed of in
the ordinary course of business and any gain (but not loss) realized upon
the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any repurchases, repayments or
redemptions of Investments, proceeds realized on the sale of the Investments or
return of capital to Parent, Issuer or a Restricted Subsidiary to the extent
such repurchases, repayments, redemptions, proceeds or returns increase the
amount of Restricted Payments permitted under such covenant pursuant to clause
(a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Parent and its consolidated Subsidiaries (including Issuer),
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of Parent for which financial statements have been
either included in a report filed with the SEC or filed with the Trustee, as the
sum of:
(i) the par or stated value of all outstanding Capital Stock of
Parent plus
(ii) paid-in capital or capital surplus relating to such Capital
Stock plus
(iii) any retained earnings or earned surplus
less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.
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"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder) or upon
the happening of any event:
(i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(ii) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(iii) is mandatorily redeemable or must be purchased upon the
occurrence of certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated Maturity of the
Securities; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset disposition" or "change of control" occurring prior to
the first anniversary of the Stated Maturity of the Securities shall not
constitute Disqualified Stock if:
(x) the "asset disposition" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than terms applicable to the
Securities and described in Sections 4.06 and 4.09; and
(y) any such requirement only becomes operative after
compliance with such terms applicable to the Securities, including
the purchase of any Securities tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net Income,
plus the following to the extent deducted in calculating such Consolidated Net
Income:
(a) all income tax expense of Parent, Issuer and their consolidated
Restricted Subsidiaries;
(b) Consolidated Interest Expense;
(c) depreciation and amortization expense of Parent, Issuer and
their consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid operating activity item that was paid in cash in
a prior period); and
(d) all other non-cash charges of Parent, Issuer and their
consolidated Restricted Subsidiaries (excluding any such non-cash charge
to the extent that it represents an accrual of or reserve for cash
expenditures in any future period);
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in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to Issuer by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means the debt securities of Issuer issued
pursuant to this Indenture in exchange for, and in an aggregate principal amount
at maturity equal to, the Securities, in compliance with the terms of the
Registration Rights Agreement.
"Foreign Asset Sale" means an Asset Disposition in respect of the
Capital Stock or assets of a Foreign Subsidiary or a Restricted Subsidiary of
the type described in Section 936 of the Code to the extent that the proceeds of
such Asset Disposition are received by a Person subject in respect of such
proceeds to the tax laws of a jurisdiction other than the United States or any
State thereof or the District of Columbia.
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction, or derives more than 80% of its sales or net
income from (or has more than 80% of its assets located in) territories and
jurisdictions, other than the United States or a State thereof or the District
of Columbia.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in:
(i) the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants;
(ii) statements and pronouncements of the Financial Accounting
Standards Board;
(iii) such other statements by such other entity as approved by a
significant segment of the accounting profession; and
(iv) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in
periodic reports required to be filed pursuant to Section 13 of the
Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
SEC.
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"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person:
(i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness of such Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise); or
(ii) entered into for the purpose of assuring in any other manner
the obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means Warner Chilcott Public Limited Company, a
corporation organized under the laws of the Republic of Ireland, and its
successors and any current or future domestic Subsidiaries which enter into a
Guaranty Agreement.
"Guaranty" means the Guarantee by Parent of Issuer's obligations
with respect to the Securities or any other Guarantee made with respect to the
Securities.
"Guaranty Agreement" means a supplemental Indenture, in a form
satisfactory to the Trustee, pursuant to which a Guarantor guarantees Issuer's
obligations with respect to the Securities on the terms provided for in this
Indenture.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Person at the time it becomes a Restricted Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. Any
amendment, modification or waiver of any provision of any document pursuant to
which Indebtedness was previously Incurred shall not be deemed to be an
Incurrence of Indebtedness as long as such amendment, modification or waiver
does not (A) increase the principal or premium thereof or interest rate thereon,
(B) change to an earlier date the Stated Maturity thereof or the date of any
scheduled or required principal payment thereon or the time or circumstances
under which such Indebtedness may or shall be redeemed, (C) if such Indebtedness
contractually subordinated in right of payment to the Securities, modify or
affect, in any manner
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adverse to the Holders, such subordination, (D) if Issuer is the obligor
thereon, provide that a Restricted Subsidiary shall be an obligor or (E)
violate, or cause the Indebtedness to violate, the provisions of Sections 4.05
and 4.10. Neither the accrual of interest (whether or not such interest is
payable in cash) nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into
by such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock of
such Person or, with respect to any Preferred Stock of any Subsidiary of
such Person, the principal amount of such Preferred Stock to be determined
in accordance with this Indenture (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
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(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Interest Rate Agreement" means in respect of a Person any interest
rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and Section
4.04:
(i) "Investment" shall include the portion (proportionate to
Parent's or Issuer's equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of Parent or Issuer at
the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, Parent or Issuer shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) Parent's or Issuer's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to Parent's or Issuer's equity interest in such Subsidiary)
of the fair market value of the net assets of such Subsidiary at the time
of such redesignation; and
(ii) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"Issue Date" means the date of this Indenture.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
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"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of:
(i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all federal, state, provincial,
foreign and local taxes required to be accrued as a liability under GAAP,
as a consequence of such Asset Disposition;
(ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of
the proceeds from such Asset Disposition;
(iii) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such
Asset Disposition; and
(iv) the deduction of appropriate amounts provided by the seller as
a reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed in such Asset Disposition and
retained by Parent, Issuer or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof
"Obligations" means with respect to any Indebtedness all obligations
for principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.
"Officer" means the Chairman of the Board, the President, any
Executive Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
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"Permitted Investment" means an Investment by Parent, Issuer or any
Restricted Subsidiary in:
(i) Parent, Issuer, a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary
is a Related Business;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, Parent, Issuer or a Restricted
Subsidiary; provided, however, that such Person's primary business is a
Related Business;
(iii) cash and Temporary Cash Investments;
(iv) receivables owing to Parent, Issuer or any Restricted
Subsidiary if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary
trade terms as Parent, Issuer or any such Restricted Subsidiary deems
reasonable under the circumstances;
(v) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(vi) loans or advances to employees made in the ordinary course of
business of Parent, Issuer or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to Parent,
Issuer or any Restricted Subsidiary or in satisfaction of judgments;
(viii) any Person to the extent such Investment represents the
non-cash portion of the consideration received for an Asset Disposition as
permitted pursuant to Section 4.06;
(ix) Investments existing on the Issue Date as listed on Schedule D
to this Indenture;
(x) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
(xi) Investments the payment for which consists solely of Capital
Stock of Parent; and
(xii) other Investments that do not exceed in the aggregate $5
million.
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"Permitted Liens" means, with respect to any Person:
(i) pledges or deposits by such Person under worker's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of
judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review
and Liens arising solely by virtue of any statutory or common law
provision relating to banker's Liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided, however, that (A) such deposit
account is not a dedicated cash collateral account and is not subject to
restrictions against access by Parent or Issuer in excess of those set
forth by regulations promulgated by the Federal Reserve Board and (B) such
deposit account is not intended by Parent or Issuer or any Restricted
Subsidiary to provide collateral to the depository institution.
(iii) Liens for taxes not yet subject to penalties for non-payment
or which are being contested in good faith and by appropriate proceedings;
(iv) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in
the ordinary course of its business; provided, however, that such letters
of credit do not constitute Indebtedness;
(v) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes,
or zoning or other restrictions as to the use of real property or Liens
incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the
operation of the business of such Person;
(vi) Liens securing Indebtedness Incurred to finance the
construction, purchase or lease of, or repairs, improvements or additions
to, property, plant, equipment or other assets of such Person; provided,
however, that the Lien may not extend to any other property owned by such
Person or any of its Restricted Subsidiaries at the time the Lien is
Incurred (other than assets and property
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affixed or appurtenant thereto), and the Indebtedness (other than any
interest thereon) secured by the Lien may not be Incurred more than 180
days after the later of the acquisition, completion of construction,
repair, improvement, addition or commencement of full operation of the
property subject to the Lien;
(vii) Liens to secure Indebtedness Incurred pursuant to the Senior
Credit Facilities; provided, however, that the Liens may not extend to any
property other than the property covered by such Liens on the Issue Date
and other similar assets acquired in the ordinary course of business (but
may not extent to the assets acquired from BMS in the BMS Acquisition);
(viii) Liens existing on the Issue Date and listed on Schedule E to
this Indenture;
(ix) Liens on property or shares of Capital Stock of another Person
at the time such other Person becomes a Subsidiary of such Person;
provided, however, that the Liens may not extend to any other property
owned by such Person or any of its Restricted Subsidiaries (other than
assets and property affixed or appurtenant thereto);
(x) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of
a merger or consolidation with or into such Person or a Subsidiary of such
Person; provided, however, that the Liens may not extend to any other
property owned by such Person or any of its Restricted Subsidiaries (other
than assets and property affixed or appurtenant thereto);
(xi) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Indebtedness that is, and is permitted to be under
this Indenture, secured by a Lien on the same property securing such
Hedging Obligations; and
(xii) Liens to secure any Refinancing (or successive Refinancings)
as a whole, or in part, of any Indebtedness secured by any Lien referred
to in the foregoing clauses (vi), (vii), (viii), (ix) or (x); provided,
however, that:
(A) such new Lien shall be limited to all or part of the
same property and assets that secured or, under the
written agreements pursuant to which the original Lien
arose, could secure the original Lien (plus improvements
and accessions to, such property or proceeds or
distributions thereof); and
(B) the Indebtedness secured by such Lien at such time is
not increased to any amount greater than the sum of (x)
the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under
clauses (vi), (viii), (ix) or (x) at the time the
original Liens became a Permitted Lien and (y) an amount
necessary to pay any fees
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and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or
replacement.
Notwithstanding the foregoing, "Permitted Liens" shall not include any Lien
described in clauses (vi), (ix) or (x) above to the extent such Lien applies to
any Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to Section 4.06. For purposes of this definition, the term
"Indebtedness" shall be deemed to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"Principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Product Line" means any pharmaceutical product or product line.
"Public Equity Offering" means an underwritten primary public
offering of common stock of Parent pursuant to an effective registration
statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Parent, Issuer or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with this Indenture, including Indebtedness
that Refinances Refinancing Indebtedness; provided, however, that:
(i) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;
(ii) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than
the Average Life of the Indebtedness being Refinanced; and
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<PAGE> 20
(iii) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium
and defeasance costs) under the Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Subsidiary that Refinances Indebtedness of Parent or Issuer or
(y) Indebtedness of Parent, Issuer or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business in which Parent or Issuer was
engaged on the Issue Date and any business related, ancillary or complementary
to any business of Parent or Issuer in which Parent or Issuer was engaged on the
Issue Date.
"Restricted Payment" with respect to any Person means:
(i) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of its
Capital Stock (other than dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock) and dividends or
distributions payable solely to Parent, Issuer or a Restricted Subsidiary,
and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders
(or owners of an equivalent interest in the case of a Subsidiary that is
an entity other than a corporation)); provided, however, that any such
declaration or payment to Parent, Issuer or to any Restricted Subsidiary
shall not be a Restricted Payment; and provided, further, that any such
declaration or payment by Issuer to Parent shall be made in the form of a
loan from Issuer to Parent meeting the requirements of clause (b)(2) of
Section 4.03;
(ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of Parent held by any Person or of any Capital
Stock of Issuer or any Restricted Subsidiary held by any Person (other
than Parent or any Wholly Owned Subsidiary of Parent, including Issuer),
including the exercise of any option to exchange any Capital Stock (other
than into Capital Stock of Parent that is not Disqualified Stock);
(iii) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations of such Person (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of such purchase,
repurchase or other acquisition); or
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<PAGE> 21
(iv) the making of any Investment (other than a Permitted
Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of Parent or Issuer
that is not an Unrestricted Subsidiary and, in the case of Parent, includes
Issuer, Warner Chilcott (Bermuda) Limited and Warner Chilcott Laboratories
Ireland Limited.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned by Parent, Issuer or a Restricted Subsidiary on the Issue
Date or thereafter acquired by Parent, Issuer or a Restricted Subsidiary whereby
Parent, Issuer or a Restricted Subsidiary transfers such property to a Person
and Parent, Issuer or a Restricted Subsidiary leases it from such Person.
"SEC" means the U.S. Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of a Person secured by
a Lien.
"Senior Credit Facilities" means (i) the Credit Agreement by and
among Issuer, the lenders referred to therein and PNC National Bank, National
Association, as Agent for the lenders, together with the related documents
thereto (including the term loans and revolving loans thereunder, any guarantees
and security documents), as amended, extended, renewed, restated, supplemented
or otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time and (ii)
any agreement (and related document) governing Indebtedness incurred to
Refinance, in whole or in part, the borrowings and commitments then outstanding
or permitted to be outstanding under such Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933.
"Senior Indebtedness" of a Person means:
(i) Indebtedness of such Person, whether outstanding on the Issue
Date or thereafter Incurred; and
(ii) accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization
relating to such Person to the extent post-filing interest is allowed in
such proceeding) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is
responsible or liable
unless, in the case of clauses (i) and (ii), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Securities, in
the case of Issuer, or to such Person's
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<PAGE> 22
Guaranty, in the case of a Guarantor; provided, however, that Senior
Indebtedness shall not include:
(1) any obligation of the Company to any Subsidiary;
(2) any liability for federal, state, local or other taxes owed or
owing by such Person;
(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof
or instruments evidencing such liabilities);
(4) any Indebtedness of such Person (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect
to any other Indebtedness or other obligation of such Person; or
(5) that portion of any Indebtedness which at the time of Incurrence
is Incurred in violation of this Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of Parent or Issuer, as applicable, within the
meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means, with respect to a Person, any
Indebtedness of such Person (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the Securities,
in the case of Issuer, or to such Person's Guaranty, in the case of a Guarantor,
as the case may be, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
"Subsidiary Guarantor" means each Restricted Subsidiary that
provides a Subsidiary Guaranty.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the Securities.
21
<PAGE> 23
"Tax" means any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and other liabilities related
thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession of any government or any authority or agency therein or
thereof having power to tax.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof;
(ii) investments in time deposit accounts, certificates of deposit
and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America, any state thereof or any
foreign country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess
of $50,000,000 (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor;
(iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in clause
(ii) above;
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of Parent or Issuer) organized and in existence under the laws
of the United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any
investment therein is made of "P-l" (or higher) according to Moody's
Investors Service, Inc. or "A-l" (or higher) according to Standard and
Poor's Ratings Group; and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"TIA" means the Trust Indenture Act of 1939 (15
U.S.C.ss.ss.77aaa-77bbb) as in effect on the date of this Indenture, except as
set forth in Section 9.03 hereof
"Trust Officer" means when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any vice
president,
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<PAGE> 24
assistant vice president, assistant secretary, assistant treasurer, trust
officer or any other officer of the Trustee who customarily performs functions
similar to those performed by the Persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of Parent (other
than Issuer) or Issuer that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors
may designate any Subsidiary of the Parent (other than Issuer) or Issuer
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital
Stock or Indebtedness of, or holds any Lien on any property of, Parent, Issuer
or any other Subsidiary of Parent or Issuer that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $l,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 4.04.
The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation (x) Parent or Issuer could Incur $1.00 of additional
Indebtedness under Section 4.03(a) and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions. Any Subsidiary may be, or may be designated as, an Unrestricted
Subsidiary (or not so designated) for purposes of this Indenture without regard
to whether such Subsidiary is, or is so designated (or not so designated), for
purposes of any other agreement relating to Indebtedness of Parent or Issuer or
any of their Subsidiaries. Covenants applicable solely to Parent, Issuer and
Restricted Subsidiaries and to indirect actions taken by such Persons shall not
apply to, and shall not apply to actions taken by, Unrestricted Subsidiaries.
"U.S. Dollar Equivalent" means with respect to any monetary amount
in a currency other than U.S. dollars, at any time for determination thereof,
the amount of U.S. dollars obtained by converting such foreign currency involved
in such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in The Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.
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<PAGE> 25
Except as described in Section 4.03, whenever it is necessary to
determine whether Issuer has complied with any covenant in this Indenture or a
Default has occurred and an amount is expressed in a currency other than U.S.
dollars, such amount shall be treated as the U.S. Dollar Equivalent determined
as of the date such amount is initially determined in such currency.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer s option.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by
Parent or Issuer or one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions,
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Additional Amounts" ................... 4.16
"Additional Securities" ................ 2.02
"Affiliate Transaction" ................ 4.07
"Bankruptcy Law" ....................... 6.01
"Change of Control Offer" .............. 4.12
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"Excluded Holder" ...................... 4.16
"Initial Lien" ......................... 4.10
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Offer" ................................ 4.06(b)
"Offer Amount" ......................... 4.06(c)(2)
"Offer Period .......................... 4.06(c)(2)
"Paying Agent" ......................... 2.03
"Purchase Date" ........................ 4.06(c)(1)
"Registrar" ............................ 2.03
"Successor Company" .................... 5.01 (a)(i)
</TABLE>
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SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities and the Guaranties;
"indenture security holder" means a Security holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means Parent, Issuer, each
Subsidiary Guarantor and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
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<PAGE> 27
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Rule l44A/Regulation S Appendix attached hereto (the "Appendix")
which is hereby incorporated in and expressly made part of this Indenture. The
Initial Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to the Appendix, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements (including the Guaranty) required by
law, stock exchange rule, agreements to which Issuer is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to Parent or Issuer). Each Security shall be dated the date of its
authentication.
SECTION 2.02. (a) Execution and Authentication. Two Officers shall
sign the Securities for the Issuer by manual or facsimile signature. The
Issuer's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of $200,000,000, upon a written order of
Issuer signed by two Officers or by an Officer and either an Assistant Treasurer
or an Assistant Secretary of Issuer. Such order shall specify the amount of the
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated.
The Trustee may appoint an authenticating agent reasonably
acceptable to Issuer to authenticate the Securities. Unless limited by the terms
of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
(b) Subject to compliance with Section 4.03 of this Indenture,
Issuer is permitted to issue more Securities after the Issue Date ("Additional
Securities") under
26
<PAGE> 28
this Indenture in an unlimited amount. The Initial Securities, the Exchange
Securities and any Additional Securities subsequently issued under this
Indenture would be treated as a single class for all purposes under this
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase.
SECTION 2.03. Registrar and Paying Agent. Issuer shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange.
Issuer may have one or more co-registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
The Issuer shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. Issuer shall notify the
Trustee of the name and address of any such agent. If Issuer fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.07. Parent, Issuer or
any of their domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar, co-registrar or transfer agent.
Issuer initially appoints The Bank of New York as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, Issuer shall deposit with
the Paying Agent a sum sufficient to pay such principal and interest when so
becoming due. Issuer shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any default by Issuer in making any such payment. If the Issuer,
Parent or a Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. Issuer at any time
may require a Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed by the Paying Agent. Upon complying with this
Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, Issuer shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
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SECTION 2.06. Transfer and Exchange. The Securities shall be issued
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code are met. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, Issuer shall execute and the Trustee
shall authenticate Securities at the Registrar's or co-registrar's request.
Issuer may require payment of a sum sufficient to pay all taxes, assessments or
other governmental charges in connection with any transfer or exchange pursuant
to this Section. Issuer shall not be required to make and the Registrar need not
register transfers or exchanges of Securities selected for redemption (except,
in the case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities for a period of 15 days before the mailing of
Securities to be redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of any
Security, Issuer, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of Issuer, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected
by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled to
the same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, Issuer shall issue and
the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. Such Holder shall furnish an
indemnity bond sufficient in the judgment of Issuer and the Trustee to protect
the Issuer, the Trustee, the Paying Agent, the Registrar and any co-registrar
from any loss which any of them may suffer if a Security is replaced. Issuer and
the Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of Issuer.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
Issuer or an Affiliate of Issuer holds the Security.
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<PAGE> 30
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and Issuer receive proof satisfactory to them
that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive Securities are
ready for delivery, Issuer may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that Issuer considers appropriate
for temporary Securities. Without unreasonable delay, Issuer shall prepare and
the Trustee shall authenticate definitive Securities and deliver them in
exchange for temporary Securities.
SECTION 2.10. Cancellation. Issuer at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to Issuer unless
Issuer directs the Trustee to deliver canceled Securities to Issuer. Issuer may
not issue new Securities to replace Securities it has redeemed, paid or
delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If Issuer defaults in a payment of
interest on the Securities, Issuer shall pay defaulted interest (plus interest
on such defaulted interest to the extent lawful) in any lawful manner. Issuer
may pay the defaulted interest to the persons who are Securityholders on a
subsequent special record date. Issuer shall fix or cause to be fixed any such
special record date and payment date to the reasonable satisfaction of the
Trustee and shall promptly mail to each Securityholder a notice that states the
special record date, the payment date and the amount of defaulted interest to be
paid.
SECTION 2.12. CUSIP Numbers. Issuer in issuing the Securities may
use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
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ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If Issuer elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
Issuer shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from Issuer to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee in its
sole discretion shall deem to be fair and appropriate and in accordance with
methods generally used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from outstanding Securities
not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000. Securities and portions of them the Trustee selects shall be in amounts
of $l,000 or a whole multiple of $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
The Trustee shall notify Issuer promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, Issuer shall mail a
notice of redemption by first-class mail to each Holder of Securities to be
redeemed at such Holder's registered address. The notice shall identify the
Securities to be redeemed and shall state (including CUSIP numbers):
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to
be redeemed;
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(6) that, unless Issuer defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
and
(7) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At Issuer's request, the Trustee shall give the notice of redemption
in Issuer's name and at Issuer's expense. In such event, Issuer shall provide
the Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date). Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the redemption
date, Issuer shall deposit with the Paying Agent (or, if Issuer or a Subsidiary
of Issuer is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all Securities
to be redeemed on that date other than Securities or portions of Securities
called for redemption which have been delivered by Issuer to the Trustee for
cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, Issuer shall execute and the Trustee shall
authenticate for the Holder (at Issuer's expense) a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Issuer shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Issuer shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
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SECTION 4.02. SEC Reports. Notwithstanding that neither Parent nor
Issuer may be subject to the reporting requirements of Sections 13 or 15(d) of
the Exchange Act, Parent or Issuer shall file with the SEC (to the extent the
SEC will accept the same for filing) and provide to the Trustee and
Securityholders at the times specified for the filing of such information,
documents and reports under such Sections with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections. In addition, so long as any of the Securities are outstanding, Parent
and Issuer will make available to any prospective purchaser of Securities or
beneficial owner thereof (upon written request to Parent or WCI) in connection
with any sales thereof the information required by Rule 144A(d)(4) under the
Securities Act.
Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.03. Limitation on Indebtedness. (a) Each of Parent and
Issuer shall not, and shall not permit any of their respective Restricted
Subsidiaries to, Incur, directly or indirectly, any Indebtedness; provided,
however, that Parent and Issuer may Incur Indebtedness if, on the date of such
Incurrence and after giving effect thereto on a pro forma basis no Default has
occurred and is continuing and the Consolidated Coverage Ratio exceeds 2.00 to
1.
(b) Notwithstanding the foregoing paragraph (a), so long as no
Default has occurred and is continuing, (i) Parent and Issuer shall be entitled
to incur any or all of the following Indebtedness, (ii) their respective Wholly
Owned Subsidiaries shall be entitled to Incur any of the Indebtedness described
in clause (2) below and (iii) their respective Restricted Subsidiaries
(including Restricted Subsidiaries that are Wholly Owned Subsidiaries) shall be
entitled to Incur any of the Indebtedness described in clause (5) below and,
with respect to the Securities or Additional Securities only, clause (8) below:
(1) Indebtedness Incurred pursuant to the Senior Credit Facilities
(including Guarantees); provided, however, that, after giving effect to
any such Incurrence, the aggregate principal amount of such Indebtedness
then outstanding does not exceed the greater of: (x) $10,000,000 and (y)
the sum of(A) 60% of the book value of the inventory of Parent, Issuer and
their Restricted Subsidiaries plus (B) 85% of the book value of the
accounts receivable of Parent, Issuer and their Restricted Subsidiaries,
in each case determined on a consolidated basis; less the sum of all
permanent repayments theretofore made with respect to such Indebtedness
made pursuant to Section 4.06;
(2) Indebtedness owed to and held by Parent, Issuer or any of their
respective Wholly Owned Subsidiaries; provided, however, that (A) any
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subsequent issuance or transfer of any Capital Stock which results in any
such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or
any subsequent transfer of such Indebtedness (other than to Parent, Issuer
or any of their respective Wholly Owned Subsidiaries) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the
obligor thereon (and shall not be deemed to be permitted by this clause
(2)); and (B) if Parent or Issuer is the obligor on such Indebtedness,
such Indebtedness is expressly subordinated to the prior payment in full
in cash of all obligations with respect to the Securities;
(3) the Securities (other than any Additional Securities);
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this Section 4.03(b))
and listed on Schedule A hereto;
(5) Indebtedness of a domestic Restricted Subsidiary Incurred and
outstanding on or prior to the date on which (x) such Subsidiary was
acquired by Parent, Issuer or a Restricted Subsidiary (other than
Indebtedness Incurred in connection with, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Subsidiary became a
Subsidiary or was acquired by Parent, WCI or a Restricted Subsidiary) or
such Subsidiary was designated a Restricted Subsidiary or (y) such
Subsidiary was designated a Restricted Subsidiary; provided, however, that
on the date of such acquisition and after giving pro forma effect thereto,
Parent or Issuer would have been able to Incur at least $1.00 of
additional Indebtedness pursuant to Section 4.03(a);
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (3), (4) or (5) of this
Section 4.03(b) or this clause (6); provided, however, that to the extent
such Refinancing Indebtedness directly or indirectly Refinances
Indebtedness of a Subsidiary Incurred pursuant to clause (5), such
Refinancing Indebtedness shall be Incurred only by such Subsidiary;
(7) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by such Person
pursuant to this Indenture;
(8) Indebtedness consisting of the Guaranty of the Securities by a
Guarantor and any Guarantee by a Guarantor of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (1), (2), (3), (4), (6)
or (9) of this Section 4.03(b); and
(9) Indebtedness of Parent or Issuer in an aggregate principal
amount which, when taken together with all other Indebtedness of Parent or
Issuer, respectively, outstanding on the date of such Incurrence (other
than Indebtedness
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permitted by clauses (1) through (7) of this Section 4.03(b)) does not
exceed $20,000,000.
(c) Notwithstanding the foregoing, none of Parent, Issuer or any
other Guarantor shall Incur any Indebtedness pursuant to Section 4.03(b) if the
proceeds thereof are used, directly or indirectly, to Refinance any Subordinated
Obligations of Parent, Issuer or any other Guarantor unless such Indebtedness
shall be subordinated to the Securities or the applicable Guaranty to at least
the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.03,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, Issuer, in its sole
discretion, will classify such item of Indebtedness at the time of Incurrence
and only be required to include the amount and type of such Indebtedness in one
of the above clauses and (ii) Issuer shall be entitled to divide and classify an
item of Indebtedness in more than one of the types of Indebtedness described
herein.
(e) For purposes of determining compliance with any U.S. dollar
denominated restriction on the Incurrence of Indebtedness where the Indebtedness
Incurred is denominated in a different currency, the amount of such Indebtedness
shall be the U.S. Dollar Equivalent determined on the date of the Incurrence of
such Indebtedness. provided, however, that if any such Indebtedness denominated
in a different currency is subject to a Currency Agreement with respect to U.S.
dollars covering all principal, premium, if any, and interest payable on such
Indebtedness, the amount of such Indebtedness expressed in U.S. dollars shall be
as provided in such Currency Agreement. The principal amount of any Refinancing
Indebtedness Incurred in the same currency as the Indebtedness being Refinanced
shall be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to
the extent that (i) such U.S. Dollar Equivalent was determined based on a
Currency Agreement, in which case the Refinancing Indebtedness shall be
determined in accordance with the preceding sentence, and (ii) the principal
amount of the Refinancing Indebtedness exceeds the principal amount of the
Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such
excess shall be determined on the date such Refinancing Indebtedness is
Incurred.
SECTION 4.04. Limitation on Restricted Payments. (a) Each of Parent
and Issuer shall not, and shall not permit any of their respective Restricted
Subsidiaries, directly or indirectly, to make a Restricted Payment if at the
time Parent, Issuer or a Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) Parent is not able to Incur an additional $1.00 of Indebtedness
under Section 4.03(a); or
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(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of(without
duplication):
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter during which
the Issue Date occurs to the end of the most recent fiscal quarter
prior to the date of such Restricted Payment for which financial
statements have either been included in a report filed with the SEC
or filed with the Trustee (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit); plus
(B) 100% of the aggregate Net Cash Proceeds received by Parent
from the issuance or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of Parent and other than an
issuance or sale to an employee stock ownership plan or to a trust
established by Parent or any of its Subsidiaries for the benefit of
their employees) and 100% of any cash contribution to the equity of
Parent subsequent to the Issue Date; plus
(C) 100% of the aggregate Net Cash Proceeds received by Parent
from the issue, sale or exercise of its Capital Stock (other than
Disqualified Stock) to or by an employee stock ownership plan
subsequent to the Issue Date; provided, however, that if such
employee stock ownership plan Incurs any Indebtedness to finance the
purchase or exercise of such Capital Stock, such Net Cash Proceeds
shall be included only to the extent that any such proceeds are
equal to any increase in the Consolidated Net Worth resulting from
principal repayments made by such employee stock ownership plan with
respect to Indebtedness Incurred by it to finance the purchase or
exercise of such Capital Stock; plus
(D) the amount by which Indebtedness of Parent is reduced on
Parent's balance sheet, upon the conversion or exchange (other than
by a Subsidiary of Parent) subsequent to the Issue Date of any
Indebtedness of Parent convertible or exchangeable for Capital Stock
(other than Disqualified Stock) of Parent (less the amount of any
cash, or the fair value of any other property, distributed by Parent
upon such conversion or exchange); plus
(E) an amount equal to the sum of(x) the net reduction in
Investments (other than Permitted Investments) made by Parent or
Issuer or any Restricted Subsidiary in any Person resulting from
repurchases, repayments or redemptions of such Investments by such
Person, proceeds realized on the sale of such Investment, proceeds
representing the return of capital (excluding dividends and
distributions), in each case received by Parent, Issuer or any
Restricted Subsidiary, and (y) to the extent such
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Person is an Unrestricted Subsidiary, the portion (proportionate to
Parent's or Issuer's equity interest in such Subsidiary, as
appropriate) of the fair market value of the net assets of such
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any such Person or
Unrestricted Subsidiary, the amount of Investments (excluding
Permitted Investments) previously made (and treated as a Restricted
Payment) by Parent, Issuer or any Restricted Subsidiary in such
Person or Unrestricted Subsidiary; plus
(F) $1,000,000.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment (other than a Restricted Payment
described in clause (i) of the definition of "Restricted Payment" set
forth in Section 1.01) made out of the Net Cash Proceeds of the
substantially concurrent sale of, or made by exchange for, Capital Stock
of Parent (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of Parent or an employee stock ownership
plan or to a trust established by Parent or any of its Subsidiaries for
the benefit of their employees) or a substantially concurrent cash
contribution to the equity of Parent; provided, however, that (A) such
Restricted Payment shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale or such
capital contribution (to the extent so used for such Restricted Payment)
shall be excluded from the calculation of amounts under clause (3)(B) of
Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness which is permitted to be Incurred pursuant to Section
4.03(b)(6); provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be excluded
in the calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this Section 4.04; provided, however, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing (or
result therefrom); provided further, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(iv) any purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations upon a change of control
of Parent or an asset disposition as defined in, and to the extent
required by, this Indenture or other agreement pursuant to which such
Subordinated Obligations were issued, but only if Parent, in the case of
an asset disposition that qualifies as
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an "Asset Disposition," has applied the Net Available Cash from such Asset
Disposition in accordance with Section 4.06 or, in the case of a
transaction that constitutes a "Change of Control," has complied with
Section 4.12; or
(v) any purchase, redemption or other acquisition or retirement for
value of Issuer's remaining outstanding senior subordinated discount notes
due 2001.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. Parent and Issuer shall not, and shall not permit any
of their respective Restricted Subsidiaries to, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock to Parent, Issuer or a Restricted Subsidiary
or pay any Indebtedness owed to Parent, Issuer or any Restricted Subsidiary, (b)
make any loans or advances to Parent or Issuer or (c) transfer any of its
property or assets to Parent or Issuer, except:
(i) any encumbrance or restriction pursuant to this Indenture hereto
or pursuant to an agreement in effect at or entered into on the Issue
Date, and listed on Schedule B to this Indenture;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by Parent or Issuer (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by Parent or Issuer) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause
(iii) or contained in any amendment to an agreement referred to in clause
(i) or (ii) of this Section 4.05 or this clause (iii); provided, however,
that the encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement or amendment are no
less favorable to the Securityholders than encumbrances and restrictions
with respect to such Restricted Subsidiary contained in such predecessor
agreements;
(iv) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary
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permitted under this Indenture to the extent such restrictions restrict
the transfer of the property subject to such security agreements or
mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) Parent and Issuer shall not, and shall not permit any of their respective
Restricted Subsidiaries to, directly or indirectly, consummate any Asset
Disposition unless:
(i) Parent, Issuer or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the
fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the applicable Board of
Directors, of the shares and assets subject to such Asset Disposition;
(ii) in the case of any Asset Disposition, including a license of
rights, (1) at least 80% of the consideration thereof received by Parent,
Issuer or such Restricted Subsidiary is in the form of cash or cash
equivalents or (2) in the case only of license of rights, if after giving
pro forma effect thereto, either (x) Parent and Issuer are able to Incur
an additional $1 .00 of Indebtedness under Section 4.03(a); or (y)(A) the
Consolidated Coverage Ratio improves after giving effect to the
transaction and (B) the aggregate book value of Issuer's assets that are
subject to licensing of rights made in reliance upon this clause (2)(y)
does not exceed 10% of Parent's consolidated total assets as of the end of
the most recent fiscal quarter for which financial statements have been
either included in a report filed with the SEC or filed with the Trustee;
and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by Parent, Issuer or such Restricted
Subsidiary, as the case may be:
(A) first, to the extent Parent or Issuer elects (or is
required by the terms of any Indebtedness), to prepay, repay, redeem
or purchase Senior Indebtedness or Indebtedness (other than any
Disqualified Stock) of a Wholly Owned Subsidiary (in each case other
than Indebtedness owed to Parent, Issuer or any other Affiliate of
Parent or Issuer) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash;
(B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to the extent
Parent or Issuer elects, to acquire Additional Assets within one
year from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; and
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(C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), to
make an Offer to the holders of the Securities (and to holders of
other Senior Indebtedness designated by Parent or Issuer) to
purchase Securities (and such other Senior Indebtedness) pursuant to
and subject to the conditions of Section 4.06(b);
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A) or (C) above, Parent, Issuer or such
Restricted Subsidiary shall permanently retire such Indebtedness and shall cause
the related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.06,
Parent, Issuer and the Restricted Subsidiaries shall not be required to apply
any Net Available Cash in accordance with this Section 4.06(a) except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with this Section 4.06(a) exceeds $5,000,000.
Pending application of Net Available Cash pursuant to this Section 4.06(a), such
Net Available Cash shall be invested in Temporary Cash Investments or applied to
temporarily reduce revolving credit indebtedness.
For the purposes of this Section 4.06, the following are deemed to
be cash or cash equivalents: (x) the assumption of Indebtedness of Parent,
Issuer or any Restricted Subsidiary and the release of Parent, Issuer or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition; and (y) securities received by Parent, Issuer or any
Restricted Subsidiary from the transferee that are promptly converted by Parent,
Issuer or such Restricted Subsidiary into cash.
To the extent that any or all of the Net Available Cash of any
Foreign Asset Sale is prohibited or delayed by applicable local law from being
repatriated to the United States, the portion of such Net Available Cash so
affected shall not be required to be applied at the time provided above, but may
be retained by the applicable Restricted Subsidiary so long, but only so long,
as the applicable local law shall not permit repatriation to the United States
(Parent or Issuer shall, subject to the following paragraph, promptly take or
cause the applicable Restricted Subsidiary to promptly take all actions within
their respective control by the applicable local law to permit such
repatriation). Once such repatriation of any of such affected Net Available Cash
is permitted under the applicable local law, such repatriation shall be
immediately effected and such repatriated Net Available Cash shall be applied in
the manner set forth in this Section 4.06 as if such Asset Disposition had
occurred on the date of such repatriation.
To the extent that the Board of Directors determines, in good faith,
that repatriation of any or all of the Net Available Cash of any Foreign Asset
Sale would have an adverse tax or other consequence to Parent or Issuer, the Net
Available Cash so affected may be retained outside of the United States for so
long as such adverse tax or other consequence would continue. Such determination
shall be reevaluated by the Board of Directors on an annual basis.
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(b) In the event of an Asset Disposition that requires the purchase
of Securities (and other Senior Indebtedness) pursuant to Section
4.06(a)(iii)(C), Issuer shall be required to purchase Securities tendered
pursuant to an offer by Issuer for the Securities (and other Senior
Indebtedness) (the "Offer") at a purchase price of 100% of their principal
amount (or, in the event such other Senior Indebtedness was issued with
significant original issue discount, 100% of the accreted value thereof) without
premium plus accrued but unpaid interest (or, in respect of such other Senior
Indebtedness, such lesser price, if any, as may be provided for by the terms of
such Senior Indebtedness) in accordance with the procedures (including
prorationing in the event of oversubscription) set forth in Section 4.06(c). If
the aggregate purchase price of Securities (and any other Senior Indebtedness)
tendered pursuant to the Offer is less than the Net Available Cash allotted to
the purchase thereof, Issuer shall be required to apply the remaining Net
Available Cash in accordance with Section 4.06(a)(iii)(D). Issuer shall not be
required to make an Offer to purchase Securities (and other Senior Indebtedness)
pursuant to this Section 4.06 if the Net Available Cash available therefor is
less than $5,000,000 (which lesser amount shall be carried forward for purposes
of determining whether such an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after Issuer
becomes obligated to make an Offer, Issuer shall be obligated to deliver to the
Trustee and send, by first-class mail to each Holder, a written notice stating
that the Holder may elect to have his Securities purchased by Issuer either in
whole or in part (subject to prorating as hereinafter described in the event the
Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at
the applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Purchase
Date") and shall contain such information concerning the business of Issuer
which Issuer in good faith believes will enable such Holders to make an informed
decision (which at a minimum shall include (i) the most recently filed Annual
Report on Form 10-K (including audited consolidated financial statements) of
Issuer or Parent, the most recent subsequently filed Quarterly Report on Form
I0-Q and any Current Report on Form 8-K of Issuer or Parent filed subsequent to
such Quarterly Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding successor
reports), (ii) a description of material developments in Issuer's business
subsequent to the date of the latest of such Reports and (iii) if material,
appropriate pro forma financial information) and all instructions and materials
necessary to tender Securities pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, Issuer shall deliver to the Trustee
an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"),
(ii) the allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and (iii) the compliance of such
allocation with the provisions of Section 4.06(a). On such date, Issuer shall
also irrevocably deposit with the Trustee or with a paying agent (or, if Issuer
is acting as its own paying agent, segregate and hold in trust) in Temporary
Cash Investments, maturing on the last day prior to the Purchase Date or on the
Purchase
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Date if funds are immediately available by open of business, an amount equal to
the Offer Amount to be held for payment in accordance with the provisions of
this Section. Upon the expiration of the period for which the Offer remains open
(the "Offer Period"), Issuer shall deliver to the Trustee for cancellation the
Securities or portions thereof which have been properly tendered to and are to
be accepted by Issuer. The Trustee shall, on the Purchase Date, mail or deliver
payment to each tendering Holder in the amount of the purchase price. In the
event that the aggregate purchase price of the Securities delivered by Issuer to
the Trustee is less than the Offer Amount applicable to the Securities, the
Trustee shall deliver the excess to Issuer immediately after the expiration of
the Offer Period for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to Issuer at
the address specified in the notice at least three Business Days prior to the
Purchase Date. Holders shall be entitled to withdraw their election if the
Trustee or Issuer receives not later than one Business Day prior to the Purchase
Date, a telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security which was delivered for purchase by
the Holder and a statement that such Holder is withdrawing his election to have
such Security purchased. If at the expiration of the Offer Period the aggregate
principal amount of Securities (and any other Senior Indebtedness included in
the Offer) surrendered by holders thereof exceeds the Offer Amount, Issuer shall
select the Securities and the other Senior Indebtedness to be purchased on a pro
rata basis (with such adjustments as may be deemed appropriate by Issuer so that
only Securities (and the other Senior Indebtedness) in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part shall be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered.
(4) At the time Issuer delivers Securities to the Trustee which are
to be accepted for purchase, Issuer shall also deliver an Officers' Certificate
stating that such Securities are to be accepted by Issuer pursuant to and in
accordance with the terms of this Section. A Security shall be deemed to have
been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering Holder.
(d) Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, Issuer shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) Each of
Parent and Issuer shall not, and shall not permit their respective Restricted
Subsidiaries to, enter into or permit to exist any transaction or series of
transactions, involving aggregate consideration in excess of $25,000 (including
the purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any
41
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service) with, or for the benefit of, any Affiliate of Parent or Issuer (an
"Affiliate Transaction") unless:
(i) the terms thereof are no less favorable to Parent or Issuer or
such Restricted Subsidiary than those that could be obtained at the time
of such transaction in arm's-length dealings with a Person who is not such
an Affiliate;
(ii) if such Affiliate Transaction involves an amount in excess of
$1,000,000, (1) the terms thereof are set forth in writing and (2) a
majority of the disinterested directors of Parent have determined in good
faith that the criteria set forth in clause (i) of this Section 4.07(a)
are satisfied and have approved the relevant Affiliate Transaction as
evidenced by a Board Resolution; and
(iii) if such Affiliate Transaction involves an amount in excess of
$5,000,000, has been determined by an investment banking firm of national
prominence to be fair, from a financial standpoint, to Parent, Issuer and
their Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit:
(i) any Investment (other than a Permitted Investment) or other
Restricted Payment, in each case permitted to be made pursuant to Section
4.04 or any payment deemed to not be a Restricted Payment due to the
proviso in subsection (1) of the definition thereof in Section 1.01;
(ii) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved
by the Board of Directors;
(iii) loans or advances to employees in the ordinary course of
business of Parent, Issuer or their Restricted Subsidiaries, but in any
event not to exceed $2,500,000 in the aggregate outstanding at any one
time;
(iv) the payment of reasonable fees and compensation to and
indemnity provided on behalf of directors of Parent, Issuer and their
Restricted Subsidiaries;
(v) any Affiliate Transaction between Parent or Issuer and their
respective Wholly Owned Subsidiaries or between Wholly Owned Subsidiaries
of either Parent or Issuer;
(vi) the issuance or sale of any Capital Stock (other than
Disqualified Stock) of Parent; and
(vii) any agreement as in effect on the Issue Date and described in
the offering circular of Issuer dated February 11, 2000 with respect to
the Securities (so long as such renewals or extensions are not materially
less favorable to Parent, Issuer or the Restricted Subsidiaries) and the
transactions evidenced thereby.
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SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. Neither Parent nor Issuer shall sell or otherwise
dispose of any Capital Stock of their respective Restricted Subsidiaries, or, in
the case of Parent, Issuer, and shall not permit any Restricted Subsidiary or,
in the case of Parent, Issuer, directly or indirectly, to issue or sell or
otherwise dispose of any of its Capital Stock except:
(i) to Parent, Issuer or a Wholly Owned Subsidiary of Parent or
Issuer;
(ii) directors' qualifying shares;
(iii) if, immediately after giving effect to such issuance, sale or
other disposition, none of Parent, Issuer or any of their Subsidiaries
owns any Capital Stock of such Restricted Subsidiary; or
(iv) if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made under Section
4.04 if made on the date of such issuance, sale or other disposition.
In addition, Issuer shall not, directly or indirectly, issue or sell
or otherwise dispose of any of its Capital Stock to any Person other than
Parent.
SECTION 4.09. Future Guarantors. Except as described below, Parent
and Issuer shall cause each domestic Restricted Subsidiary that is organized or
acquired after the Issue Date to execute and deliver to the Trustee a Guaranty
Agreement or other instrument pursuant to which such Restricted Subsidiary shall
Guarantee payment of the Securities, whereupon such Subsidiary shall become a
Subsidiary Guarantor. Parent and Issuer shall also cause each non-guarantor
Subsidiary and each foreign Subsidiary that is organized or acquired after the
Issue Date which has Guaranteed or which Guarantees any Indebtedness of Parent
or Issuer to execute and deliver to the Trustee a Guaranty Agreement or other
instrument pursuant to which such non-guarantor or foreign Subsidiary will
Guarantee payment of Parent's obligations under the Guarantee and Issuer's
obligations under the Securities on a senior basis and, with respect to all
terms other than ranking, on the same terms and conditions as those set forth in
the Guarantee of such other Indebtedness of Parent or Issuer given by such
non-guarantor or foreign Subsidiary.
SECTION 4.10. Limitation on Liens. Each of Parent and Issuer shall
not and shall not permit any of their respective Restricted Subsidiaries to,
directly or indirectly, incur or permit to exist any Lien (the "Initial Lien")
of any nature whatsoever on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired,
other than Permitted Liens, without effectively providing that the Securities
shall be secured equally and ratably with (or prior to) the obligations so
secured for so long as such obligations are so secured.
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Any Lien created for the benefit of the holders of the Securities
pursuant to the preceding sentence shall provide by its terms that such Lien
shall be automatically and unconditionally released and discharged upon the
release and discharge of the Initial Lien.
SECTION 4.11. Limitation on Sale/Leaseback Transactions. Each of
Parent and Issuer shall not, and shall not permit any of their respective
Restricted Subsidiaries to, enter into any Sale/Leaseback Transaction with
respect to any property unless:
(1) Parent, Issuer or such Restricted Subsidiary would be entitled
to (A) Incur Indebtedness in an amount equal to the Attributable Debt with
respect to such Sale/Leaseback Transaction under Section 4.03 and (B)
create a Lien on such property securing such Attributable Debt without
equally and ratably securing the Securities pursuant to Section 4.10;
(2) the net proceeds received by Parent, Issuer or any Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at least
equal to the fair value (as determined by the applicable Board of
Directors) of such property; and
(3) Parent or Issuer, as the case may be, applies the proceeds of
such transaction in compliance with Section 4.06.
SECTION 4.12. Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder shall have the right to require that Issuer repurchase
such Holder's Securities at a purchase price in cash equal to 101% of the
principal amount thereof on the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), in accordance with the terms contemplated in Section
4.09(b).
(b) Within 30 days following any Change of Control, Issuer shall
mail a notice to each Holder with a copy to the Trustee (the "Chance of Control
Offer") stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require Issuer to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof on
the date of purchase, plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest on the relevant interest payment
date);
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);
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(3) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by Issuer, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to Issuer at
the address specified in the notice at least three Business Days prior to the
purchase date. Holders shall be entitled to withdraw their election if the
Trustee or Issuer receives not later than one Business Day prior to the purchase
date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by Issuer under
this Section shall be delivered by the Trustee for cancellation, and Issuer
shall pay the purchase price plus accrued and unpaid interest, if any, to the
Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section, Issuer
shall not be required to make a Change of Control Offer following a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise this in compliance with the requirements set forth in this
Section 4.12 applicable to a Change of Control Offer made by Issuer and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.
(f) Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, Issuer shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.13. Compliance Certificate. Parent and Issuer shall
deliver to the Trustee within 120 days after the end of each fiscal year of
Parent and Issuer an Officers' Certificate stating that in the course of the
performance by the signers of their duties as Officers of Parent and Issuer they
would normally have knowledge of any Default and whether or not the signers know
of any Default that occurred during such period. If they do, the certificate
shall describe the Default, its status and what action Parent and Issuer are
taking or propose to take with respect thereto. Parent and Issuer also shall
comply with TIA ss.314(a)(4).
The Issuer shall deliver to the Trustee, as soon as possible and in
any event within five days after the Issuer becomes aware of the occurrence of
any Event of Default or an event which, with notice or the lapse of time or
both, would constitute an Event of Default, an Officers' Certificate setting
forth the details of such Event of Default or default and the action which the
Issuer proposes to take with respect thereto.
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SECTION 4.14. Further Instruments and Acts. Upon request of the
Trustee, Parent or Issuer will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.15. Business Activities. Parent and Issuer shall not, and
shall not permit any of their respective Restricted Subsidiaries to, engage in
any business other than a Related Business.
SECTION 4.16. Additional Amounts. All payments made by Parent under
or with respect to its Guaranty shall be made free and clear of, and without
withholding or deduction in or on account of, any present or future Taxes
imposed or levied by or on behalf of any Taxing Authority within the Republic of
Ireland, or within any other jurisdiction in which Parent is organized or
engaged in business for tax purposes, unless Parent is required to withhold or
deduct Taxes by law or by the interpretation or administration thereof. If
Parent is required to withhold or deduct any amount for or on account of Taxes
imposed by a Taxing Authority within the Republic of Ireland, or within any
other jurisdiction in which Parent is organized or engaged in business for tax
purposes, from any payment made under or with respect to the Guaranty, Parent
shall pay such additional amounts ("Additional Amounts") as may be necessary so
that the net amount received by each holder of Securities (including Additional
Amounts) after such withholding or deduction shall not be less than the amount
the holder and beneficial owner would have received if such Taxes had not been
withheld or deducted; provided that no Additional Amounts shall be payable with
respect to a payment made to a holder of Securities or to a third party on
behalf of a Holder (each an "Excluded Holder") with respect to any Tax which
would not have been imposed, payable or due: (i) but for the existence of any
present or former connection between the Holder (or the beneficial owner of, or
person ultimately entitled to obtain an interest in, such Securities) and the
Republic of Ireland or any other jurisdiction in which Parent is organized or
engaged in business for tax purposes other than the holding of the Securities;
(ii) but for the failure to comply upon written notice by Parent delivered 60
days prior to any payment date with a request by Parent to satisfy any
certification, identification or any other report requirements, whether imposed
by statute, treaty, regulation or administrative practice concerning
nationality, residence or connection with the Republic of Ireland or any other
jurisdiction in which Parent is organized or engaged in business for tax
purposes; (iii) if the presentation of Securities for payment had occurred
within 30 days after the date such payment was due and payable or was provided
for, whichever is later; (iv) if the beneficial owner of, or person ultimately
entitled to obtain an interest in, such Securities had been the holder of the
Securities and would not be entitled to the payment of Additional Amounts; or
(v) in respect of any estate, inheritance, gift, sales or excise tax. Parent
shall also (i) make such withholding or reduction and (ii) remit the full
payment deducted or withheld to the relevant authority in accordance with
applicable law. Parent shall make reasonable efforts to obtain certified copies
of tax receipts evidencing the payment of any Taxes so deducted or withheld from
each Taxing Authority imposing such Taxes. Parent shall furnish to the holders
of the Securities, within 60 days after the date the payment of any Taxes so
deducted or withheld is due pursuant to applicable law, either certified copies
of tax receipts evidencing such
<PAGE> 48
payment by Parent or, if such receipts are not obtainable, other evidence of
such payments by Parent, as the case may be.
At least 30 days prior to each date on which any payment under or
with respect to the Guaranty is paid, if Parent shall be obligated to pay
Additional Amounts with respect to such payment, Parent shall deliver to the
Trustee an Officers' Certificate stating the fact that such Additional Amounts
will be payable and the amounts so payable and will set forth such other
information necessary to enable the Trustee to pay such Additional Amounts to
the holders of Securities on the payment date.
Whenever in this Indenture there is mentioned, in any context, the
payment of amounts based upon the principal, premium, if any, interest or of any
other amount payable under or with respect to any of the Securities, such
mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
ARTICLE 5
Successor Company
SECTION 5.01. When Parent or Issuer May Merge or Transfer Assets.
(a) Neither Parent nor Issuer shall consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia
or, in the case of such a transaction involving Parent, the laws of the
Republic of Ireland or another country that is a member of the European
Union, Japan or Canada and the Successor Company (if not Parent or Issuer)
shall expressly assume, by an Indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of Parent or Issuer under the Securities and this Indenture;
(ii) immediately after giving pro forma effect to such transaction
(and treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
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(iv) immediately after giving pro forma effect to such transaction,
the Successor Company shall have Consolidated Net Worth in an amount that
is not less than the Consolidated Net Worth of Parent or Issuer
immediately prior to such transaction;
(v) Parent or Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental Indenture (if any)
comply with this Indenture;
(vi) Parent or Issuer shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Holders will not recognize income, gain
or loss for federal income tax purposes as a result of such transaction
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
transaction had not occurred; and
(vii) solely in the case of a transaction involving Parent where the
Successor Company is a person organized and existing under the laws of any
country other than the United State of America or the Republic of Ireland,
Parent shall have delivered to the Trustee an Opinion of Counsel stating
that after giving effect to such transaction, the Parent's Guaranty or a
comparable substitute guaranty will continue to be enforceable against the
Successor Company in accordance with its terms;
provided, however; that clauses (iii) and (iv) shall not be applicable to (A) a
Restricted Subsidiary consolidating with, merging into or transferring all or
part of its properties and assets to either Parent or Issuer or (B) Parent or
Issuer merging with one of its Affiliates solely for the purpose and with the
sole effect of reincorporating Parent or Issuer in another jurisdiction.
The Successor Company shall be the successor to Parent or Issuer and
shall succeed to, and be substituted for, and may exercise every right and power
of, Parent or Issuer, as the case may be under this Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease shall not be
released from the obligation to pay the principal of and interest on the
Securities.
(b) Neither Parent nor Issuer shall permit any Subsidiary Guarantor
to consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or series of transactions, all or substantially all of its assets to
any Person unless:
(i) except in the case of a Subsidiary Guarantor that has been
disposed of in its entirety to another Person (other than to Parent,
Issuer or an Affiliate of Parent or Issuer), whether through a merger,
consolidation or sale of Capital Stock or assets, if in connection
therewith Parent or Issuer provides an Officers' Certificate to the
Trustee to the effect that Parent or Issuer will comply with its
obligations under Section 4.06 in respect of such disposition, the
resulting, surviving or transferee Person (if not such Subsidiary) shall
be a Person organized
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and existing under the laws of the jurisdiction under which such
Subsidiary was organized or under the laws of the United States of
America, or any State thereof or the District of Columbia, and such Person
shall expressly assume, by a Guaranty Agreement, in a form satisfactory to
the Trustee, all the obligations of such Subsidiary, if any, under its
Subsidiary Guaranty;
(ii) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the resulting, surviving or transferee Person as
a result of such transaction as having been issued by such Person at the
time of such transaction), no Default shall have occurred and be
continuing; and
(iii) Parent or Issuer delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such Guaranty Agreement, if any,
complies with this Indenture.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) there is a default in any payment of interest on any Security
when the same becomes due and payable and such default continues for a
period of 30 days;
(2) there is a default in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon required repurchase, upon declaration or
otherwise;
(3) Parent or Issuer fails to comply with Section 5.01;
(4) Parent or Issuer fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 or 4.12 (other than a failure to
purchase Securities when required under Section 4.06 or 4. 12) and such
failure continues for 30 days after the notice specified below;
(5) Parent Issuer, or any Subsidiary Guarantor fails to comply with
any of its agreements in the Securities or this Indenture (other than
those referred to in clause (1), (2), (3) or (4) above) and such failure
continues for 60 days after the notice specified below;
(6) Indebtedness of Parent, Issuer, any Subsidiary Guarantor or any
Significant Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated
exceeds $5,000,000 or its foreign currency equivalent;
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(7) Parent, Issuer, any Subsidiary Guarantor or any Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against Parent, Issuer, any Subsidiary
Guarantor or any Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of Parent, Issuer, any Subsidiary
Guarantor or any Significant Subsidiary or for any substantial part
of its property; or
(C) orders the winding up or liquidation of Parent, Issuer,
any Subsidiary Guarantor or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$5,000,000 or its foreign currency equivalent at the time is entered
against Parent, Issuer, any Subsidiary Guarantor or any Significant
Subsidiary, remains outstanding for a period of 60 days following the
entry of such judgment or decree and is not discharged, waived or the
execution thereof stayed within 10 days after the notice specified below;
or
(10) a Guaranty ceases to be in full force and effect (other than in
accordance with the terms of such Guaranty) or a Guarantor denies or
disaffirms its obligations under its Guaranty.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
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The term "Bankruptcy Law" means Title II, United States Code, or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clauses (4), (5) or (9) is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify Parent or Issuer, as the case may be, of the
Default and Parent or Issuer does not cure such Default within the time
specified after receipt of such notice. Such notice must specify the Default,
demand that it be remedied and state that such notice is a "Notice of Default."
Parent or Issuer shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action Parent or Issuer is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to Parent or
Issuer) occurs and is continuing, the Trustee by notice to Issuer, or the
Holders of at least 25% in principal amount of the Securities by notice to
Issuer and the Trustee, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to Parent or Issuer
occurs and is continuing, the principal of and interest on all the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders. The
Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
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SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security, (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to this Indenture or
(iii) a Default in respect of a provision that under Section 9.02 cannot be
amended without the consent of each Securityholder affected. When a Default is
waived, it is deemed cured, but no such waiver shall extend to any subsequent or
other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of
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any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
Issuer for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to Issuer, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
THIRD: to Issuer.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, Parent or Issuer shall mail to each Securityholder and the Trustee a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by
Holders of more than 10% in principal amount of the Securities.
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SECTION 6.12. Waiver of Stay or Extension Laws. Neither Parent nor
Issuer shall (to the extent each may lawfully do so) at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
neither Parent nor Issuer shall (to the extent that each may lawfully do so)
expressly waive all benefit or advantage of any such law, and shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
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(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with Parent or Issuer.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively
rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
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(f) Any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by a written request or order and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction.
(h) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document. but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Issuer, personally or by agent or
attorney at the sole cost of the Issuer and shall incur no liability or
additional liability of any kind by reason of such inquiry or investigation.
(i) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee ahs actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Securities and this Indenture; and
(j) The rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with Parent, Issuer or Affiliates of Parent or Issuer
with the same rights it would have if it were not Trustee. Any Paying Agent,
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for Issuer's use
of the proceeds from the Securities and it shall not be responsible for any
statement of Parent or Issuer in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder
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notice of the Default within 90 days after it occurs. Except in the case of a
Default in payment of principal of or interest on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is not opposed to the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each January 1 beginning with the January 1 following the date
of this Indenture, and in any event prior to February 1 in each year, the
Trustee shall mail to each Securityholder a brief report dated as of February 1
that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss.
313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. Parent and Issuer agree to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. Issuer shall pay to the
Trustee from time to time such compensation as the Issuer and the Trustee shall
from time to time agree in writing for its services rendered by it hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Issuer shall reimburse the Trustee upon request for
all reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. Issuer shall
indemnify the Trustee, or any predecessor Trustee and their agent, against any
and all loss, damage, liability or expense, including taxes (other than taxes
based upon, measured by or determined by the income of the Trustee), (including
attorneys' fees) incurred by it in connection with the administration or
acceptance of this trust and the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim (whether asserted
by the Company, or any Holder or any other Person) and shall file any
undertaking required by a court of law as described in Section 6.11. The Trustee
shall notify Issuer promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify Issuer shall not relieve Issuer of its
obligations hereunder. Issuer shall defend the claim and the Trustee may have
separate counsel and Issuer shall pay the fees and expenses of such counsel.
Issuer need not reimburse any expense or indemnify against any loss, liability
or expense determined by a court of competent jurisdiction to have been incurred
by the Trustee through the Trustee's own willful misconduct, negligence or bad
faith.
To secure Issuer's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
Issuer's payment obligations pursuant to this Section shall survive
the discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a
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Default specified in Section 6.01(7) or (8) with respect to Parent or Issuer,
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying Issuer. The Holders of a majority in principal amount of
the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. Issuer shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by Issuer or by the Holders of a
majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), Issuer shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Issuer. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee, at the Issuer's
expense.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the
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resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Parent or
Issuer. The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
When (i) Issuer delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
Issuer irrevocably deposits with the Trustee funds sufficient to pay at maturity
or upon redemption all outstanding Securities, including interest thereon to
maturity or such redemption date (other than Securities replaced pursuant to
Section 2.07), and if in either case Parent or Issuer pays all other sums
payable hereunder by Parent or Issuer, then this Indenture shall, subject to
Sections 8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of Issuer accompanied by
an Officers' Certificate and an Opinion of Counsel and at the cost and expense
of Issuer.
(b) Subject to Sections 8.01(c) and 8.02, Issuer at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance
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option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11 and 4.12 and the operation of Sections 6.01(4),
6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10) (but, in the case of Sections
6.01(7) and (8), with respect only to Significant Subsidiaries) and the
limitations contained in Sections 5.0l(a)(iii) and (iv) ("covenant defeasance
option"). Issuer may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option.
If Issuer exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default with respect
thereto. If Issuer exercises its covenant defeasance option, payment of the
Securities may not be accelerated because of an Event of Default specified in
Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8), 6.01(9) or 6.01(10) (but, in the
case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries)
or because of the failure of Issuer to comply with Section 5.0l(a)(iii) or
(iv).
If Issuer exercises its legal defeasance option or its covenant
defeasance option, each Guarantor, if any, shall be released from all its
obligations with respect to its Guaranty.
Upon satisfaction of the conditions set forth herein and upon
request of Issuer, the Trustee shall acknowledge in writing the discharge of
those obligations that Issuer terminates thereby.
(c) Notwithstanding clauses (a) and (b) above, Issuer's obligations
in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this
Article 8 shall survive until the Securities have been paid in full. Thereafter,
Issuer's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. Issuer may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) Issuer irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal of and interest
on the Securities to maturity or redemption, as the case may be;
(2) Issuer delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that
the payments of principal and interest when due and without reinvestment
on the deposited U.S. Government Obligations plus any deposited money
without investment will provide cash at such times and in such amounts as
will be sufficient to pay principal and interest when due on all the
Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Sections 6.01(7) or (8) with respect to
Parent or Issuer occurs which is continuing at the end of the period;
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(4) the deposit does not constitute a default under any other
agreement binding on Issuer;
(5) Issuer delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, Issuer shall have
delivered to the Trustee an Opinion of Counsel stating that (i) Issuer has
received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been
a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, Issuer shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for federal
income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance
had not occurred; and
(8) Issuer delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, Issuer may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities.
SECTION 8.04. Repayment to Issuer. The Trustee and the Paying Agent
shall promptly turn over to Issuer upon request any excess money or securities
held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to Issuer upon request any money held by them for the
payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to Issuer for
payment as general creditors.
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SECTION 8.05. Indemnity for Government Obligations. Issuer shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, Issuer's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if
Issuer has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, Issuer shall be subrogated to
the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. Parent, Issuer, Subsidiary
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Securities or to secure
the Securities;
(5) to add to the covenants of Parent, WCI or a Subsidiary Guarantor
for the benefit of the Holders or to surrender any right or power herein
conferred upon Parent, Issuer or a Subsidiary Guarantor;
(6) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA; or
(7) to make any change that does not adversely affect the rights of
any Securityholder.
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After an amendment under this Section becomes effective, Issuer
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. Parent, Issuer, Subsidiary
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Securities). However, without the consent of each Securityholder affected
thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security
or change the time at which any Security may be redeemed in accordance
with Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Securities on or after the due dates
therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Securities;
(7) make any change in Section 6.04 or 6.07 or the second sentence
of this Section;
(8) make any change in the ranking or priority of any Securities
that would adversely affect the Holders; or
(9) make any change in any Guaranty that would adversely affect the
Securityholders.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, Issuer
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give
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such notice to all Securityholders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
Issuer may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if Issuer or the Trustee so determines, Issuer in
exchange for the Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Parent and Issuer shall not, and
shall not permit any of their respective Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder
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for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
Guaranty
SECTION 10.01. Guaranty. Parent hereby absolutely, unconditionally
and irrevocably guarantees the Securities and obligations of Issuer hereunder
and thereunder on a senior, unsecured basis, and guarantees to each Holder of a
Security authenticated and delivered by the Trustee, and to the Trustee on
behalf of such Holder, that: (a) the principal of (and premium, if any) and
interest on the Security shall be paid in full when due, whether at Stated
Maturity, by acceleration or otherwise (including, without limitation, the
amount that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Law), together with interest on the overdue
principal, if any, and interest on any overdue interest, to the extent lawful,
and all other obligations of Issuer to the Holders or the Trustee hereunder or
thereunder shall be paid in full or performed, all in accordance with the terms
hereof and thereof, and (b) in case of any extension of time of payment or
renewal of any Security or of any such other obligations, the same shall be paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at Stated Maturity, by acceleration or otherwise, subject,
however, in the case of clauses (a) and (b) above, to the limitations set forth
in Section 10.04 hereof.
RIDER 66A [TO BE SUPPLIED]
Parent hereby agrees that its obligations hereunder shall be
unconditional irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against Issuer, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor.
Parent hereby waives (to the extent permitted by law) the benefits
of diligence, presentment, demand for payment, filing of claims with a court in
the event of insolvency or bankruptcy of Issuer, any right to require a
proceeding first against Issuer or any other Person, protest, notice and all
demands whatsoever and covenants that the Guaranty of Parent shall not be
discharged as to any Security except by complete performance of the obligations
contained in such Security and such Guaranty. Parent hereby agrees that, in the
event of a default in payment of principal (or premium, if any) or interest on
such Security whether at its Stated Maturity, by acceleration, purchase or
otherwise, legal proceedings must be instituted by the Trustee on behalf of, or
by, the Holder of such Security, subject to the terms and conditions set forth
in this Indenture, directly against Parent to enforce Parent's Guaranty without
first proceeding against Issuer. Parent agrees that if, after the occurrence and
during the continuance of an Event
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of Default, the Trustee or any of the Holders are prevented by applicable law
from exercising their respective rights to accelerate the maturity of the
Securities, to collect interest on the Securities, or to enforce or exercise any
other right or remedy with respect to the Securities, Parent shall pay to the
Trustee for the account of the Holders, upon demand therefor, the amount that
would otherwise have been due and payable had such rights and remedies been
permitted to be exercised by the Trustee or any of the Holders.
If any Holder or the Trustee is required by any court or otherwise
to return to Issuer or Parent, or any custodian, trustee, liquidator or other
similar official acting in relation to either Issuer or Parent, any amount paid
by any of them to the Trustee or such Holder, the Guarantee of Parent, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Parent further agrees that, as between Parent, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article 6 hereof for the
purposes of the Guaranty of Parent, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any acceleration of such Obligations
as provided in Article 6 hereof, such Obligations (whether or not due and
payable) shall forthwith become due and payable by Parent for the purpose of the
Guaranty of Parent.
SECTION 10.02. Guaranty of Each Subsidiary Guarantor. Any domestic
Subsidiary Guarantor from time to time party hereto, shall jointly and
severally, irrevocably and fully and unconditionally Guarantee, on a senior,
unsecured basis, the punctual payment when due, whether at Stated Maturity, by
acceleration or otherwise, of all Obligations of Issuer under this Indenture and
the Securities.
Any term or provision of this Indenture notwithstanding, each
Subsidiary Guaranty shall not exceed the maximum amount that can be Guaranteed
by the applicable Subsidiary Guarantor without rendering the Subsidiary
Guaranty, as it relates to such Subsidiary Guarantor, voidable under applicable
law' relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
SECTION 10.03. Severability. In case any provision of the Parent's
Guaranty or any other Guaranty shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions thereof shall
not in any way be affected or impaired thereby.
SECTION 10.04. Limitation of Guarantor's Liability. Parent and by
its acceptance hereof each Holder confirms that it is the intention of all such
parties that the Guarantee by Parent pursuant to its Guaranty not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law or the provisions of its local law relating to
fraudulent transfer or conveyance. To effectuate the foregoing intention, the
Holders and Parent hereby irrevocably agree that the obligations of Parent under
its Guaranty shall be limited to the maximum amount that will not, after giving
effect to all other contingent and fixed liabilities of Parent result in the
obligations of Holdings under its Guaranty constituting such fraudulent transfer
or conveyance.
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SECTION 10.05. Subrogation. Parent shall be subrogated to all rights
of Holders against Issuer in respect of any amounts paid by Parent pursuant to
the provisions of Section 10.01; provided, however, that, if an Event of Default
has occurred and is continuing, Parent shall not be entitled to enforce or
receive any payments arising out of, or based upon, such right of subrogation
until all amounts then due and payable by Issuer under this Indenture or the
Securities shall have been paid in full.
SECTION 10.06. Reinstatement. Parent hereby agrees that the Guaranty
provided for in Section 10.01 shall continue to be effective or be reinstated,
as the case may be, if at any time, payment, or any part thereof, of any
obligations or interest thereon is rescinded or must otherwise be restored by a
Holder to Issuer upon the bankruptcy or insolvency of Issuer or Parent.
SECTION 10.07. Release of Holdings. Concurrently with the discharge,
defeasance or the covenant defeasance of the Securities under Section 8.01,
Parent shall be released from all of its Obligations under the Guaranty under
this Article 10.
SECTION 10.08. Execution and Delivery of Guaranty. To evidence its
Guaranty set forth in Section 10.01, each of Parent and any Subsidiary Guarantor
hereby agrees that a notation of such Guaranty substantially in the form
included as Exhibit B shall be endorsed by a duly authorized officer of such
entity on each Security authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of each such entity by one of its duly
authorized officers.
Each of Parent and any Subsidiary Guarantor hereby agrees that its
Guaranty set forth in Section 10.01 and 10.02, respectively, shall remain in
full force and effect notwithstanding any failure to endorse on each Security a
notation of such Guaranty.
If the duly authorized officers of Parent and any Subsidiary
Guarantor whose signatures appear on this Indenture or on their respective
Guaranty no longer hold their offices at the time the Trustee authenticates the
Security on which a Guaranty is endorsed, the Guaranty shall be valid
nevertheless.
SECTION 10.09. Benefits Acknowledged. Parent acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that its Guarantee and waiver pursuant to its
Guaranty are knowingly made in contemplation of such benefits.
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
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SECTION 11.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to Parent, Issuer or a Subsidiary Guarantor:
c/o Warner Chilcott, Inc.
Rockaway 80 Corporate Center
100 Enterprise Drive, Suite 280
Rockaway, NJ 07866
Attn: Paul S. Herendeen
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, NY 10286
Attn: Corporate Trust Trustee Administration
Parent, Issuer or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 11 .04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Parent or Issuer to the Trustee to take or
refrain from taking any action under this Indenture, Parent or Issuer shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
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(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by Parent, Issuer or by any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with Parent or Issuer shall be disregarded and deemed
not to be outstanding, except that, for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned shall be so disregarded.
Also, subject to the fore going, only Securities outstanding at the time shall
be considered in any such determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 11.09. Governing Law. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
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SECTION 11.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of Parent or Issuer shall not have any
liability for any obligations of Parent or Issuer under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
SECTION 11.11. Successors. All agreements of Parent or Issuer in
this Indenture and the Securities shall bind their successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
WARNER CHILCOTT, INC., as Issuer
By: /s/James G. Andress
WARNER CHILCOTT PUBLIC LIMITED
COMPANY, as Guarantor
By: /S/ Beth P. Hecht
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THE BANK OF NEW YORK, as Trustee
By: /s/ Thomas E. Tabor
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$200,000,000
WARNER CHILCOTT, INC.
WARNER CHILCOTT PUBLIC
LIMITED COMPANY
12(epsilon)% Senior Notes Due 2008
PURCHASE AGREEMENT
February 11, 2000
CREDIT SUISSE FIRST BOSTON CORPORATION
As Representative of the Several Purchasers,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Warner Chilcott, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to Credit Suisse First Boston Corporation ("CSFBC") and the
several other initial purchasers named in Schedule A hereto (the "Purchasers")
U.S.$200,000,000 principal amount of its 12(epsilon)% Senior Notes due 2008
("Offered Securities") to be issued under an indenture, dated as of February 15,
2000 (the "Indenture"), among the Company, Warner Chilcott Public Limited
Company, the owner of 100% of the capital stock of the Company (the
"Guarantor"), and The Bank of New York, as Trustee. The obligations of the
Issuer under the Indenture and the Offered Securities will be fully and
unconditionally guaranteed on a senior basis by the Guarantor (the "Guaranty").
The United States Securities Act of 1933 is herein referred to as the
"Securities Act."
The Company has entered into an Asset Purchase Agreement dated as of
January 26, 2000 (the "BMS Agreement") to acquire Estrace(R) vaginal cream,
Ovcon(R) 35 oral contraceptive and Ovcon(R) 50 oral contraceptive (collectively,
the "Product Lines") from Bristol-Myers Squibb Company ("BMS") for total
consideration of $180 million (the "Acquisition"). In connection with
Acquisition, the Company and BMS have entered into two Transitional Services and
Supply Agreements, each dated as of January 26, 2000. with respect to the
Product Lines (collectively the "Supply Agreements"). The Acquisition is subject
to the satisfaction or waiver of certain conditions and, accordingly, there can
be no assurance that the Acquisition will be completed on the terms and
conditions set forth in the BMS Agreement, or at all.
Each of the Company and the Guarantor hereby agrees with the several
Purchasers as follows:
2. Representations and Warranties of the Company and the Guarantor. Each
of the Company and the Guarantor, jointly and severally, represents and warrants
to, and agrees with, the Purchasers that:
(a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be offered by the Purchasers
have been prepared by the Company. Such preliminary offering
circular (the "Preliminary Offering Circular") and offering circular
(the "Offering Circular"), as supplemented as of the date of this
Agreement, together with the documents listed in Schedule B hereto
and any other document approved by the Company or the Guarantor for
use in connection with the contemplated resale of the Offered
Securities are hereinafter collectively referred to as the "Offering
Document". On the date of this Agreement, the Offering Document
<PAGE> 2
does not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon
written information furnished to the Company by any Purchaser
through Credit Suisse First Boston Corporation ("CSFBC")
specifically for use therein. it being understood and agreed that
the only such information is that described as such in Section 7(b)
hereof. Except as disclosed in the Offering Document, on the date of
this Agreement, the Guarantor's Annual Report on Form 10-K most
recently filed with the Securities and Exchange Commission (the
"Commission") and all subsequent reports (collectively, the
"Exchange Act Reports") which have been filed by the Guarantor with
the Commission or sent to stockholders pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act") do not include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such
documents, when they were filed with the Commission, conformed in
all material respects to the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder.
(b) The Company has been duly incorporated and is an existing
corporation under the laws of the State of Delaware, with power and
authority to own its properties and conduct its business as
described in the Offering Document; and the Company is duly
qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such qualification,
except where the failure to so qualify to be in good standing would
not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the condition (financial or
other), business, properties or results of operations of the
Guarantor and the Guarantor's subsidiaries taken as a whole
("Material Adverse Effect").
(c) The Guarantor has been duly incorporated and is an
existing public limited company under the laws of the Republic of
Ireland, with power and authority to own its properties and conduct
its business as described in the Offering Document; and the
Guarantor is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify to be in good
standing would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(d) The Company has no subsidiaries. Each subsidiary of the
Guarantor (other than the Company) has been duly incorporated and is
an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority
(corporate and other) to own its properties and conduct its business
as described in the Offering Document; and each subsidiary of the
Guarantor is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify to be in good
standing would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect; all of the issued and
outstanding capital stock of each subsidiary of the Guarantor,
including the Company, has been duly authorized and validly issued
and is fully paid and nonassessable; and the capital stock of each
subsidiary (including the Company) owned by the Guarantor, directly
or through subsidiaries, is owned free from liens, encumbrances and
defects. Schedule C sets forth a true, correct and complete list of
all subsidiaries of the Guarantor.
(e) The Indenture has been duly authorized; the Offered
Securities have been duly authorized; and when the Offered
Securities are delivered and paid for pursuant to this Agreement on
the Closing Date (as defined below), the Indenture will have been
duly executed and delivered, such Offered Securities will have been
duly executed, authenticated, issued and delivered and will conform
to the description thereof contained in the Offering Document and
the Indenture and such Offered Securities will constitute valid and
legally binding obligations of the Company,
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enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(f) The Guaranty has been duly authorized; and when the
Offered Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, the Guaranty will conform to the
description thereof contained in the Offering Document and the
Guaranty will constitute the valid and legally binding obligation of
the Guarantor, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(g) The Registration Rights Agreement dated the date hereof,
among the Company, the Guarantor and the Purchasers (the
"Registration Rights Agreement"), conforms to the description
thereof contained in the Offering Document and the Registration
Rights Agreement, when the Offered Securities are delivered and paid
for pursuant to this Agreement on the Closing Date, will constitute
the valid and legally binding obligation of the Company and the
Guarantor, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(h) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company or the
Guarantor on the one hand and any person on the other hand that
would give rise to a valid claim against the Company, the Guarantor
or the Purchasers for a brokerage commission, finder's fee or other
like payment with respect to the transactions contemplated by this
Agreement or the Registration Rights Agreement.
(i) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is
required for the consummation of the transactions contemplated by
this Agreement (including the issuance of the Offered Securities and
the making of the Guaranty) and the Registration Rights Agreement in
connection with the issuance and sale of the Offered Securities by
the Company except for the order of the Commission declaring the
Exchange Offer Registration Statement or the Shelf Registration
Statement (each as defined in the Registration Rights Agreement)
effective.
(j) Except as disclosed in the Offering Document, under
current laws and regulations of the Republic of Ireland and any
political subdivision thereof, all interest, principal, premium, if
any, and other payments due or made on the Guaranty may be paid by
the Guarantor to the holder thereof in United States dollars or
Irish pounds that may be converted into foreign currency and freely
transferred out of the Republic of Ireland and all such payments
made to holders thereof who are non-residents of the Republic of
Ireland will not be subject to income, withholding or other taxes
under laws and regulations of the Republic of Ireland or any
political subdivision or taxing authority thereof or therein and
will otherwise be free and clear of any other tax, duty, withholding
or deduction in the Republic of Ireland or any political subdivision
or taxing authority thereof or therein and without the necessity of
obtaining any governmental authorization in Ireland or any political
subdivision or taxing authority thereof or therein.
(k) The execution, delivery and performance of the Indenture,
the Guaranty, this Agreement and the Registration Rights Agreement,
and the issuance and sale of the Offered Securities and compliance
with the terms and provisions thereof will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, the Guarantor or any
subsidiary of the Guarantor or any of their properties, or any
agreement or instrument to which the Company, the Guarantor or any
such
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subsidiary is a party or by which the Company, the Guarantor or any
such subsidiary is bound or to which any of the properties of the
Company, the Guarantor or any such subsidiary is subject, or the
charter or by-laws of the Company, the Guarantor or any such
subsidiary. The Company has full power and authority to authorize,
issue and sell the Offered Securities and the Guarantor has full
power and authority to guarantee the obligations of the Company
under the Indenture and the Offered Securities.
(l) This Agreement and the Registration Rights Agreement have
been duly authorized, executed and delivered by the Company and the
Guarantor.
(m) Except as disclosed in the Offering Document, the Company,
the Guarantor and the Guarantor's subsidiaries have good and
marketable title to all real properties and all other properties and
assets owned by them, in each case free from liens, encumbrances and
defects that would materially affect the value thereof or materially
interfere with the use made or to be made thereof by them; and
except as disclosed in the Offering Document, the Company, the
Guarantor and the Guarantor's subsidiaries hold any leased real or
personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to
be made thereof by them.
(n) The Company, the Guarantor and the Guarantor's
subsidiaries possess adequate certificates, authorities or permits
issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by them and to be operated by them
immediately following the Acquisition and have not received any
notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined
adversely to the Company, the Guarantor or any of the Guarantor's
subsidiaries, would individually or in the aggregate, have a
Material Adverse Effect.
(o) No labor dispute with the employees of the Company, the
Guarantor or any subsidiary of the Guarantor exists or, to the
knowledge of the Company or the Guarantor, is imminent that might
have a Material Adverse Effect.
(p) The Company, the Guarantor and the Guarantor's
subsidiaries own, possess or can acquire on reasonable terms,
adequate trademarks, trade names and other rights to inventions,
know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement
of or conflict with asserted rights of others with respect to any
intellectual property rights that, if determined adversely to the
Company, the Guarantor or any of the Guarantor's subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(q) None of the Company, the Guarantor or any of the
Guarantor's subsidiaries is (i) in violation of its charter or
statute as applicable, or by-laws (or other similar organizational
documents), (ii) in default in the performance or observation of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which it
is a party or by which any of them may be bound, or to which any of
its property or assets is subject except for such defaults that
would not result in a Material Adverse Effect or (iii) in violation
of any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company,
the Guarantor or any of its subsidiaries or any of their assets or
properties, except as disclosed in the Offering Document.
Specifically, and without limiting the foregoing, except as
disclosed in the Offering Document, none of the Company, the
Guarantor or any of the Guarantor's subsidiaries is in violation of
any statute, any rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or
4
<PAGE> 5
toxic substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any
environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to
any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and neither the Company
nor the Guarantor is aware of any pending investigation which might
lead to such a claim.
(r) Except as disclosed in the Offering Document, there are no
pending actions, suits or proceedings against or affecting the
Company, the Guarantor or any of the Guarantor's subsidiaries or any
of their respective properties that, if determined adversely to the
Company, the Guarantor or any of the Guarantor's subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company and
the Guarantor to perform their respective obligations under the
Indenture, this Agreement, the Guaranty or the Registration Rights
Agreement, or which are otherwise material in the context of the
sale of the Offered Securities; and no such actions, suits or
proceedings are threatened or, to the Company's or the Guarantor's
knowledge, contemplated.
(s) The financial statements of the Guarantor and its
consolidated subsidiaries included in the Offering Document present
fairly the financial position of the Guarantor and its consolidated
subsidiaries as of the dates shown and their results of operations
and cash flows for the periods shown, the special purpose historical
statements of net sales and product contribution of the Product
Lines included in the Offering Document present fairly the net sales
and product contribution of the Product Lines for the periods shown,
and, except as otherwise disclosed in the Offering Document, such
financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States
applied on a consistent basis; the assumptions used in preparing the
pro forma financial statements included in the Offering Document
provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate effect
to those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding
historical financial statement amounts; and to the best knowledge of
the Company and the Guarantor, there has been no material adverse
change in the net sales and product contribution of the Product
Lines for the period commencing October 1, 1999 through the date
hereof.
(t) Except as disclosed in the Offering Document, since the
date of the latest audited financial statements of the Guarantor and
its consolidated subsidiaries included in the Offering Document
there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of
operations of the Company, the Guarantor and the Guarantor's
subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Company or
the Guarantor on any class of its capital stock.
(u) To the best knowledge of the Guarantor, except as
disclosed in the Offering Document, since the date of the latest
audited special purpose historical statements of net sales and
product contribution of the Product Lines included in the Offering
Document there has been no material adverse change, nor any
development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties
or results of operations of the Product Lines.
(v) Neither the Company nor the Guarantor is an open-end
investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of
the United States Investment Company Act of 1940 (the "Investment
Company
5
<PAGE> 6
Act"); and neither the Company nor the Guarantor is and, after
giving effect to the offering and sale of the Offered Securities and
the application of the proceeds thereof as described in the Offering
Document, neither will be an "investment company" as defined in the
Investment Company Act.
(w) No securities of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as the Offered Securities
are listed on any national securities exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system.
(x) Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the
offer and sale of the Offered Securities in the manner contemplated
by this Agreement will be exempt from the registration requirements
of the Securities Act by reason of Section 4(2) thereof and
Regulation S thereunder; and it is not necessary to qualify an
indenture in respect of the Offered Securities under the United
States Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
(y) Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf (i) has, within the six-month
period prior to the date hereof, offered or sold in the United
States or to any U.S. person (as such terms are defined in
Regulation S under the Securities Act) the Offered Securities or any
security of the same class or series as the Offered Securities or
(ii) has offered or will offer or sell the Offered Securities (A) in
the United States by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act or (B) with respect to any such securities sold in
reliance on Rule 903 of Regulation S ("Regulation S") under the
Securities Act, by means of any directed selling efforts within the
meaning of Rule 902(c) of Regulation S. The Company, its affiliates
and any person acting on its or their behalf have complied and will
comply with the offering restrictions requirement of Regulation S.
The Company has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered
Securities except for this Agreement.
(z) The Guarantor is subject to Section 13 or 15(d) of the
Exchange Act.
(aa) The representations, warranties and agreements of the
Company set forth in the BMS Agreement and the Supply Agreements
and, to the best knowledge of the Company and the Guarantor after
due inquiry, the representations, warranties and agreements of BMS
set forth in the BMS Agreement and the Supply Agreements, are true
and correct as of the date hereof.
(bb) Except as disclosed in the Offering Document, upon the
completion of the Acquisition, the Company will have good and
marketable title to the Product Lines, in each case free from liens,
encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made
thereof by it.
(cc) Upon the completion of the Acquisition, the Company will
own the intellectual property rights necessary to conduct the
business to be operated by them with respect to the Product Lines as
described in the Offering Document.
(dd) Each of KMPG LLP and KPMG, who have certified certain
financial statements of the Company, whose report is included in the
Offering Document and who have delivered the letter referred to in
Section 6(a) hereof, are independent public accountants as required
by the Securities Act and the Rules and Regulations (as defined in
Section 6(a) hereof) during the periods covered by the financial
statements on which they have reported contained in the Offering
Document.
(ee) The Company, the Guarantor and the Guarantor's
subsidiaries have filed all tax returns that are required to be
filed or have duly requested extensions thereof and have paid all
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<PAGE> 7
taxes required to be paid by any of them and any related
assessments, fines or penalties, except for any such tax,
assessment, fine or penalty that is being contested in good faith
and by appropriate proceedings; and adequate charges, accruals and
reserves have been provided for in the financial statements referred
to in Section 2(a) above in respect of all taxes for all periods as
to which the tax liability of the Company, the Guarantor or any of
the Guarantor's subsidiaries has not been finally determined or
remains open to examination by applicable taxing authorities.
(ff) Each of the Company and the Guarantor maintain a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The
Company, the Guarantor and the Guarantor's subsidiaries have not
made, and, to the knowledge of the Company and the Guarantor, no
employee or agent of the Company, the Guarantor or any of the
Guarantor's subsidiaries has made, any payment of the Company's
fund, Guarantor's funds or any subsidiary's funds or received or
retained any funds (i) in violation of the Foreign Corrupt
Practices Act, as amended, or (ii) in violation of any other
applicable law, regulation or rule.
(gg) No forward-looking statement (within the meaning of
Section 27A of the Exchange Act) contained in the Offering Document
has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.
(hh) Each of the Company and the Guarantor is, and immediately
after the completion of the Acquisition and the issuance of Notes
will be, Solvent. As used herein, "Solvent" means, on a particular
date, that on such date (A) the fair market value of the assets of
each of the Company and the Guarantor is greater than the total
amount of respective liabilities (including contingent liabilities)
of the Company and the Guarantor, (B) the present fair salable value
of the assets of each of the Company and the Guarantor is greater
than the amount that will be required to pay the probable
liabilities of the Company and the Guarantor on its debts as they
become absolute and matured, (C) each of the Company and Guarantor
is able to realize upon its assets and pay its debts and other
liabilities, including contingent obligations, as they mature and
(D) neither the Company nor the Guarantor has an unreasonably small
capital.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
the Offered Securities from the Company, at a purchase price of 95.168% of the
principal amount thereof plus accrued interest, if any, from February 15, 2000
to the Closing Date (as hereinafter defined).
The Company will deliver against payment of the purchase price the Offered
Securities in the form of one or more permanent global Securities in definitive
form (the "Global Securities") deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any permanent global Securities will be held only
in book-entry form through DTC, except in the limited circumstances described
in the Offering Document. Payment for the Offered Securities shall be made by
the Purchaser in federal (same day) funds by official check or checks or wire
transfer to an account at a bank acceptable to CSFBC drawn to the order of the
Company at the office of Kirkland & Ellis at 9:00 A.M. (New York time), on
February 15, 2000, or at such other time not later than seven full business days
thereafter as CSFBC and the Company determine, such time being herein referred
to as the "Closing Date", against delivery to the Trustee as custodian for DTC
of the Global Securities representing all of the Offered Securities. The Global
Securities will be made available for checking at the above office of Kirkland &
Ellis at least 24 hours prior to the Closing Date.
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<PAGE> 8
4. Representations by Purchasers; Resale by Purchaser. (a) Each Purchaser
severally represents and warrants to the Company that it is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(b) Each Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may
not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with
Regulation S or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser severally
represents and agrees that it has offered and sold the Offered
Securities, and will offer and sell the Offered Securities only in
accordance with Rule 903 or Rule 144A under the Securities Act
("Rule 144A"). Accordingly, neither such Purchaser nor its
affiliates, nor any persons acting on its or their behalf, have
engaged or will engage in any directed selling efforts with respect
to the Offered Securities, and such Purchaser, its affiliates and
all persons acting on its or their behalf have complied and will
comply with the offering restrictions requirement of Regulation S
and Rule 144A.
(c) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered
Securities except with the prior written consent of the Company.
(d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the
United States by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act, including, but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. Each Purchaser
severally agrees, with respect to resales made in reliance on Rule
144A of any of the Offered Securities, to deliver either with the
confirmation of such resale or otherwise prior to settlement of such
resale a notice to the effect that the resale of such Offered
Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule
144A.
(e) Each of the Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the date six months
after the date of issue of the Offered Securities will not offer or
sell any Offered Securities to persons in the United Kingdom except
to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied
and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to
the Offered Securities in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it
in connection with the issue of the Offered Securities to a person
who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom such document may otherwise lawfully be
issued or passed on.
5. Certain Agreements of the Company and the Guarantor. Each of the
Company and the Guarantor, jointly and severally, agrees with the several
Purchasers that:
(a) The Company or the Guarantor will advise CSFBC promptly of
any proposal to amend or supplement the Offering Document and will
not effect such amendment or supplementation without CSFBC's
consent. If, at any time prior to the completion of the resale of
the Offered Securities by the Purchasers, any event occurs as a
result of which the Offering
8
<PAGE> 9
Document as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, the
Company or the Guarantor promptly will notify CSFBC of such event
and promptly will prepare, at its own expense, an amendment or
supplement which will correct such statement or omission. Neither
CSFBC's consent to, nor the Purchasers' delivery to offerees or
investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(b) The Company or the Guarantor will furnish to CSFBC copies
of any preliminary offering circular, the Offering Document and all
amendments and supplements to such documents, in each case as soon
as available and in such quantities as CSFBC requests, and the
Company or the Guarantor will furnish to CSFBC on the date hereof
three copies of the Offering Document signed by a duly authorized
officer of each of the Company and the Guarantor, one of which will
include the independent accountants' reports therein manually signed
by such independent accountants. At any time when the Guarantor is
not subject to Section 13 or 15(d) of the Exchange Act, the Company
or the Guarantor will promptly furnish or cause to be furnished to
CSFBC (and, upon request, to each of the other Purchasers) and, upon
request of holders and prospective purchasers of the Offered
Securities, to such holders and purchasers, copies of the
information required to be delivered to holders and prospective
purchasers of the Offered Securities pursuant to Rule 144A(d)(4)
under the Securities Act (or any successor provision thereto) in
order to permit compliance with Rule 144A in connection with resales
by such holders of the Offered Securities. The Company or the
Guarantor will pay the expenses of printing and distributing to the
Purchasers all such documents.
(c) The Company will arrange for the qualification of the
Offered Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions in
the United States and Canada as CSFBC designates and will continue
such qualifications in effect so long as required for the resale of
the Offered Securities by the Purchasers, provided that the Company
will not be required to qualify as a foreign corporation or to file
a general consent to service of process in any such state.
(d) While any Offered Securities are outstanding, the
Guarantor will furnish to CSFBC (and, upon request, to each of the
other Purchasers), (i) the information to be provided to the Trustee
for the Offered Securities pursuant to the Indenture and (ii) from
time to time, such other information concerning the Company or the
Guarantor as CSFBC may reasonably request.
(e) During the period of two years after the Closing Date, the
Company or the Guarantor will, upon request, furnish to CSFBC, each
of the other Purchasers and any holder of Offered Securities a copy
of the restrictions on transfer applicable to the Offered
Securities.
(f) During the period of two years after the Closing Date, the
Company or the Guarantor will not, and will not permit any of its
affiliates (as defined in Rule 144 under the Securities Act) to,
resell any of the Offered Securities that have been reacquired by
any of them.
(g) During the period of two years after the Closing Date,
neither the Company nor the Guarantor will be or become, an open-end
investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of
the Investment Company Act.
(h) The Company and the Guarantor will pay all expenses
incidental to the performance of their obligations under this
Agreement, the Indenture, the Guaranty and the Registration Rights
Agreement, including (i) the fees and expenses of the Trustee and
its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of
the Offered Securities and, as applicable, the Exchange Securities
(as defined in the Registration
9
<PAGE> 10
Rights Agreement), the preparation and printing of this Agreement,
the Registration Rights Agreement, the Guaranty, the Offered
Securities, the Indenture, the Offering Document and amendments and
supplements thereto, and any other document relating to the
issuance, offer, sale and delivery of the Offered Securities and as
applicable, the Exchange Securities; (iii) the cost of qualifying
the Offered Securities for trading in The Portal(SM) Market
("PORTAL") and any expenses incidental thereto; (iv) the cost of
any advertising approved by the Company in connection with the
issue of the Offered Securities, (v) for any expenses (including
fees and disbursements of counsel) incurred in connection with
qualification of the Offered Securities or the Exchange Securities
for sale under the laws of such jurisdictions in the United States
and Canada as CSFBC designates and the printing of memoranda
relating thereto, (vi) for any fees charged by investment rating
agencies for the rating of the Offered Securities or the Exchange
Securities, (vii) for expenses incurred in distributing preliminary
offering circulars and the Offering Document (including any
amendments and supplements thereto) to the Purchasers and (viii)
one-half of the fees and disbursements of Purchasers' counsel up to
a maximum of $250,000. The Company and the Guarantor will also pay
or reimburse the Purchasers (to the extent incurred by them) for all
travel expenses of the Purchasers and the Company's officers and
employees and any other expenses of the Purchasers and the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities from the Purchasers.
(i) In connection with the offering, until CSFBC shall have
notified the Company and the other Purchasers of the completion of
the resale of their Offered Securities, none of the Company, the
Guarantor or any of the Guarantor's affiliates has or will, either
alone or with one or more other persons, bid for or purchase for any
account in which they or any of their affiliates has a beneficial
interest any Offered Securities or attempt to induce any person to
purchase any Offered Securities; and neither they nor any of their
affiliates will make bids or purchases for the purpose of creating
actual, or apparent, active trading in, or of raising the price of,
the Offered Securities.
(j) The Guarantor will indemnify and hold harmless the
Purchasers against any documentary, stamp or similar issuance tax,
including any interest and penalties, on the creation of the
Guaranty and on the execution and delivery of this Agreement. All
payments to be made by the Guarantor hereunder shall be made without
withholding or deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever unless the
Guarantor is compelled by law to deduct or withhold such taxes,
duties or charges. In that event, the Guarantor shall pay such
additional amounts as may be necessary in order that the net amounts
received after such withholding or deduction shall equal the amounts
that would have been received if no withholding or deduction had
been made.
6. Conditions of the Obligations of the Purchasers. The obligations of the
several Purchasers to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of the
Company and the Guarantor herein, to the accuracy of the statements of officers
of the Company and the Guarantor made pursuant to the provisions hereof, to the
performance by the Company and the Guarantor of its obligations hereunder and to
the following additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the
date of this Agreement, of each of KPMG LLP and KPMG in agreed form
confirming that they are independent public accountants within the
meaning of the American Institute of Certified Public Accountants
and the applicable published rules and regulations thereby and to
the effect that:
(i) in their opinion the financial statements examined
by them and included in the Offering Document and in the
Exchange Act Reports comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the applicable published rules and
regulations thereunder ("Rules and Regulations");
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<PAGE> 11
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Offering Document and in the Exchange Act Reports;
(iii) on the basis of the review referred to in clause
(ii) above, a reading of the latest available interim
financial statements of the Guarantor, inquiries of officials
of the Guarantor who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) the unaudited financial statements included in
the Offering Document do not comply as to form in all
material respects with the applicable accounting
requirements of the Securities Act and the related
published Rules and Regulations or any material
modifications should be made to such unaudited financial
statements for them to be in conformity with generally
accepted accounting principles;
(B) at the date of the latest available balance
sheet read by such accountants, or at a subsequent
specified date not more than three business days prior
to the date of this Agreement, there was any change in
the capital stock or any increase in short-term
indebtedness or long-term debt of the Company and its
consolidated subsidiaries or, at the date of the latest
available balance sheet read by such accountants, there
was any decrease in consolidated net current assets or
net assets, as compared with amounts shown on the latest
balance sheet included in the Offering Document; or
(C) for the period from the closing date of the
latest income statement included in the Offering
Document to the closing date of the latest available
income statement read by such accountants there were any
decreases, as compared with the corresponding period of
the previous year, in consolidated net sales, net
operating income, consolidated income before
extraordinary items or net income or in the ratio of
earnings to fixed charges;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Offering Document
discloses have occurred or may occur or which are described in
such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Offering Document (in
each case to the extent that such dollar amounts, percentages
and other financial information are derived from the general
accounting records of the Guarantor and its subsidiaries
subject to the internal controls of the Guarantor's accounting
system or are derived directly from such records by analysis
or computation) with the results obtained from inquiries, a
reading of such general accounting records and other
procedures specified in such letter and have found such dollar
amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in
such letter.
(v) other items, in form and substance satisfactory to
the Purchaser, concerning the financial information with
respect to the Guarantor and the Guarantor's subsidiaries and
the unaudited pro forma financial data, in each case as set
forth in the Offering Document.
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<PAGE> 12
(b) The Purchasers shall have received a letter, dated the
date of this Agreement, of PricewaterhouseCoopers LLP in form and
substance satisfactory to the Purchasers concerning the financial
information with respect to the Product Lines set forth in the
Offering Document.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) a change in U.S. or
international financial, political or economic conditions or
currency exchange rates or exchange controls as would, in the
judgment of CSFBC, be likely to prejudice materially the success of
the proposed issue, sale or distribution of the Offered Securities,
whether in the primary market or in respect of dealings in the
secondary market, or (ii) (A) any change, or any development or
event involving a prospective change, in the condition (financial or
other), business, properties or results of operations of the
Company, the Guarantor or the Guarantor's subsidiaries which, in the
judgment of CSFBC, is material and adverse and makes it impractical
or inadvisable to proceed with completion of the offering or the
sale of and payment for the Offered Securities; (B) any downgrading
in the rating of any debt securities of the Company by any
"nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Securities Act), or any public
announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company or the
Guarantor (other than an announcement with positive implications of
a possible upgrading, and no implication of a possible downgrading,
of such rating); (C) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting
of minimum prices for trading on such exchange, or any suspension of
trading of any securities of the Company or the Guarantor on any
exchange or in the over-the-counter market; (D) any banking
moratorium declared by U.S. Federal or New York authorities; or (E)
any outbreak or escalation of major hostilities in which the United
States or Ireland is involved, any declaration of war by Congress or
any other substantial national or international calamity or
emergency if, in the judgment of CSFBC, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the
offering or sale of and payment for the Offered Securities.
(d) The Purchasers shall have received an opinion, dated the
Closing Date, of Kirkland & Ellis, U.S. counsel for the Company and
the Guarantor, substantially in the form of Exhibit 1 hereto.
(e) The Purchasers shall have received an opinion, dated the
Closing Date, of McCann Fitzgerald, Irish counsel for the Company
and the Guarantor, in form and substance satisfactory to CSFBC and
its counsel.
(f) The Purchasers shall have received an opinion, dated the
Closing Date, of Beth Hecht, General Counsel of the Company and the
Guarantor, substantially in the form of Exhibit 2 hereto.
(g) The Purchasers shall have received from Weil, Gotshal &
Manges LLP, counsel for the Purchaser, such opinion, dated the
Closing Date, with respect to the validity of the Offered
Securities, the Offering Circular, the exemption from registration
for the offer and sale of the Offered Securities by the Company to
the several Purchasers and the resales by the several Purchasers as
contemplated hereby and other related matters as CSFBC may require,
and the Company' and the Guarantor shall have furnished to such
counsel such documents as they request for the purpose of enabling
them to pass upon such matters with reference to same in the
Offering Circular.
(h) The Purchasers shall have received a certificate, dated
the Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company and the
Guarantor in which such officers, to the best of their knowledge
after reasonable investigation, shall state that the representations
and warranties of the Company and the Guarantor in this
12
<PAGE> 13
Agreement are true and correct, that the Company and the Guarantor
have complied with all agreements and satisfied all conditions on
their parts to be performed or satisfied hereunder at or prior to
the Closing Date, and that, subsequent to the dates of the most
recent financial statements in the Offering Document, there has been
no material adverse change, or any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the
Guarantor and the Guarantor's subsidiaries taken as a whole except
as set forth in or contemplated by the Offering Document or as
described in such certificate.
(i) The Purchasers shall have received a letter, dated the
Closing Date, of KPMG LLP which meets the requirements of subsection
(a) of this Section, except that the specified date referred to in
such subsection will be a date not more than three days prior to the
Closing Date for the purposes of this subsection.
(j) The Purchasers shall have received a letter, dated the
Closing Date, of PricewaterhouseCoopers LLP which meets the
requirements of subsection (b) of this Section, except that the
specified date referred to in such subsection will be a date not
more than three days prior to the Closing Date for the purposes of
this subsection.
(k) The Acquisitions pursuant to the BMS Agreement shall have
been completed on the terms contained in the BMS Agreement.
(l) The Purchasers shall have received evidence, in form and
substance satisfactory to the Purchasers and their counsel, that the
Company's existing working capital facility with a syndicate of
banks led by PNC Business Credit has been repaid in full and that
all liens securing such facility have been released.
(m) The Purchasers shall have received evidence, in form and
substance satisfactory to the Purchasers and their counsel, that the
Company's existing Senior Subordinated Discount Notes due 2001 have
been redeemed in full.
The Company will furnish the Purchasers with such conformed copies of such
opinions, certificates, letters and documents as the Purchasers reasonably
requests. CSFBC may in its sole discretion waive compliance with any conditions
to the obligations of the Purchasers hereunder.
7. Indemnification and Contribution. (a) The Company and the Guarantor,
jointly and severally, will indemnify and hold harmless each Purchaser, its
partners, directors and officers and each person, if any, who controls such
Purchaser within the meaning of Section 15 of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which each
Purchaser may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Offering Document, or any
amendment or supplement thereto, or any related preliminary offering circular or
the Exchange Act Reports, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, including any losses, claims, damages or liabilities
arising out of or based upon the Company's or the Guarantor's failure to perform
its obligations under Section 5(a) of this Agreement, and will reimburse each
Purchaser or any legal or other expenses reasonably incurred by such Purchaser
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Company and the Guarantor will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Company or the Guarantor by any Purchaser through
13
<PAGE> 14
CSFBC specifically for use therein, it being understood and agreed that the only
such information consists of the information described as such in subsection (b)
below.
(b) Each Purchaser will severally and not jointly indemnify
and hold harmless the Company, the Guarantor, their directors and
officers and each person, if any, who controls the Company or the
Guarantor within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities to which the
Company or the Guarantor may become subject, under the Securities
Act or the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Offering Document,
or any amendment or supplement thereto, or any related preliminary
offering circular, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company or the Guarantor by such
Purchaser through CSFBC specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the
Company or the Guarantor in connection with investigating or
defending any such loss, claim, damage, liability or action as such
expenses are incurred, it being understood and agreed that the only
such information furnished by any Purchaser consists of the
following information in the Offering Document furnished on behalf
of each Purchaser: the third paragraph, the second and third
sentences of the eight paragraph, and the ninth paragraph, under the
caption "Plan of Distribution;" provided, however, that the
Purchasers shall not be liable for any losses, claims, damages or
liabilities arising out of or based upon the Company's or the
Guarantor's failure to perform its obligations under Section 5(a) of
this Agreement.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under subsection (a) or (b) above,
notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such
action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes
an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action
and does not include a statement as to or an admission of fault,
culpability or failure to act by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the
Company and the Guarantor on the one hand and the Purchasers on the
other from the offering of the Offered
14
<PAGE> 15
Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the
Guarantor on the one hand and the Purchasers on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant
equitable considerations. The relative benefits received by the
Company and the Guarantor on the one hand and the Purchasers on the
other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by
the Company bear to the total discounts and commissions received by
the Purchasers from the Company under this Agreement. The relative
fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantor or the
Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding
the provisions of this subsection (d), no Purchaser shall be
required to contribute any amount in excess of the amount by which
the total price at which the Offered Securities purchased by it were
resold exceeds the amount of any damages which such Purchaser has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in
proportion to their respective purchase obligations and not joint.
(e) The obligations of the Company and the Guarantor under
this Section shall be in addition to any liability which the Company
and the Guarantor may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any
Purchaser within the meaning of the Securities Act or the Exchange
Act; and the obligations of the Purchasers under this Section shall
be in addition to any liability which the Purchasers may otherwise
have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Company or the Guarantor within the
meaning of the Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in their
obligations to purchase Offered Securities hereunder and the aggregate principal
amount of Offered Securities that such defaulting Purchaser or Purchasers agreed
but failed to purchase does not exceed 10% of the total principal amount of
Offered Securities, CSFBC may make arrangements satisfactory to the Company for
the purchase of such Offered Securities by other persons, including any of the
Purchasers, but if no such arrangements are made by the Closing Date, the
non-defaulting Purchasers shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Purchasers agreed but failed to purchase. If any Purchaser or
Purchasers so default and the aggregate principal amount of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
principal amount of Offered Securities and arrangements satisfactory to CSFBC
and the Company for the purchase of such Offered Securities by other persons are
not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Purchaser or the Company,
except as provided in Section 9. As used in this Agreement, the term "Purchaser"
includes any person substituted for a Purchaser under this Section. Nothing
herein will relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company, the Guarantor or their officers and of the several Purchasers set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made
by or on behalf of any Purchaser, the Company, the Guarantor or any of their
respective representatives, officers or directors or
15
<PAGE> 16
any controlling person, and will survive delivery of and payment for the Offered
Securities. If this Agreement is terminated pursuant to Section 8 or if for any
reason the purchase of the Offered Securities by the Purchasers is not
consummated, the Company and the Guarantor shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Purchasers pursuant to Section 7 shall remain
in effect. If the purchase of the Offered Securities by the Purchasers is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 8 or the occurrence of any event specified in
clause (C), (D) or (E) of Section 6(c)(ii), the Company and the Guarantor will
reimburse the Purchasers for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Purchasers will be mailed, delivered or telegraphed and confirmed to the
Purchasers c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue,
New York, N.Y. 100 10-3629, Attention: Investment Banking Department --
Transactions Advisory Group, or, if sent to the Company or the Guarantor, will
be mailed, delivered or telegraphed and confirmed to it at Rockaway 80 Corporate
Center, 100 Enterprise Drive, Suite 280, Rockaway, New Jersey 07866, Attention:
Paul S. Herendeen, Chief Financial Officer; provided, however, that any notice
to a Purchaser pursuant to Section 7 will be mailed, delivered or telegraphed
and confirmed to such Purchaser.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company and the Guarantor as
if such holders were parties thereto.
12. Representation of Purchasers. You will act for the several Purchasers
in connection with this purchase, and any action under this Agreement taken by
you will be binding upon all the Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
The Company and the Guarantor hereby submit to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. The Guarantor irrevocably
appoints Kirkland & Ellis, with offices on the date hereof located at 153 East
53rd Street, New York, New York 10022, as its authorized agent in the Borough of
Manhattan in The City of New York upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and
written notice of said service to the Guarantor, by the person serving the same
to the address provided in Section 10, shall be deemed in every respect
effective service of process upon the Guarantor in any such suit or proceeding.
The Guarantor further agrees to take any and all action as may be necessary to
maintain such designation and appointment of such agent in full force and effect
for a period of seven years from the date of this Agreement.
The obligation of the Guarantor in respect of any sum due to the Purchaser
shall, notwithstanding any judgment in a currency other than United States
dollars, not be discharged until the first business day, following receipt by
the Purchaser of any sum adjudged to be so due in such other currency, on which
(and only to the extent that) the Purchaser may in accordance with normal
banking procedures purchase United States dollars with such other currency; if
the United States dollars so purchased are less than the sum originally due to
the Purchaser hereunder, the Company agrees, as a separate obligation and
16
<PAGE> 17
notwithstanding any such judgment, to indemnify the Purchaser against such loss.
If the United States dollars so purchased are greater than the sum originally
due to the Purchaser hereunder, the Purchaser agrees to pay to the Guarantor an
amount equal to the excess of the dollars so purchased over the sum originally
due to the Purchaser hereunder.
17
<PAGE> 18
If the foregoing is in accordance with the Purchaser's understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company, the Guarantor
and the Purchaser in accordance with its terms.
Very truly yours,
WARNER CHILCOTT, INC.
By /s/ Paul S. Herendeen
Paul S. Herendeen
Executive Vice President and
Chief Financial Officer
WARNER CHILCOTT PUBLIC LIMITED COMPANY
By /s/Paul S. Herendeen
Paul S. Herendeen
The foregoing Purchase Agreement Executive Vice President and
is hereby confirmed and accepted Chief Financial Officer
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ M. Roderick Rivera
M. Roderick Rivera
Director
Acting on behalf of itself
and as the Representative
of the several Purchasers
18
<PAGE> 1
$200,000,000
WARNER CHILCOTT, INC.
12 5/8% Senior Subordinated Notes due 2008
REGISTRATION RIGHTS AGREEMENT
February 11, 2000
Credit Suisse First Boston Corporation
As Representative of the Several Initial Purchasers
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Warner Chilcott, Inc., a Delaware corporation (the "Issuer"), proposes to
issue and sell to Credit Suisse First Boston Corporation, CIBC World Markets
Corp. and SG Cowen Securities Corporation (collectively, the "Initial
Purchasers"), upon the terms set forth in a purchase agreement of even date
herewith (the "Purchase Agreement"), $200,000,000 aggregate principal amount of
its 12 5/8% Senior Subordinated Notes due 2008 (the "Initial Securities") to be
guaranteed (the "Guaranty") by Warner Chilcott Public Limited Company (the
"Guarantor" and, collectively with the Issuer, the "Company"). The Initial
Securities will be issued pursuant to an Indenture, dated as of February 15,
2000 (the "Indenture"), among the Issuer, the Guarantor and The Bank of New
York, as trustee (the "Trustee"). As an inducement to the Initial Purchasers to
enter into the Purchase Agreement, the Company agrees with the Initial
Purchasers, for the benefit of the Initial Purchasers and the holders of the
Securities (as defined below) (collectively the "Holders"), as follows:
1. Registered Exchange Offer. Unless not permitted by applicable law
(after the Company has complied with the ultimate paragraph of this Section 1),
the Company shall prepare and, not later than 90 days (such 90th day being a
"Filing Deadline") after the date on which the Initial Purchasers purchase the
Initial Securities pursuant to the Purchase Agreement (the "Closing Date"), file
with the Securities and Exchange Commission (the "Commission") a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to a proposed offer (the "Registered Exchange Offer") to the Holders of
Transfer Restricted Securities (as defined in Section 6 hereof), who are not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
the Initial Securities, a like aggregate principal amount of debt securities of
the Company issued under the Indenture, identical in all material respects to
the Initial Securities and registered under the Securities Act (the "Exchange
Securities"). The Company shall use its best efforts to (i) cause such Exchange
Offer Registration Statement to become effective under the Securities Act within
150 days after the Closing Date (such 150th day being an "Effectiveness
Deadline") and (ii) keep the Exchange Offer Registration Statement effective for
not less than 30 days (or longer, if required by applicable law) after the date
notice of the Registered Exchange Offer is mailed to the Holders (such period
being called the "Exchange Offer Registration Period").
If the Company commences the Registered Exchange Offer, the Company (i)
will be entitled to consummate the Registered Exchange Offer 30 days after such
commencement (provided that the
<PAGE> 2
Company has accepted all the Initial Securities theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer) and (ii) will be
required to consummate the Registered Exchange Offer no later than 40 days after
the date on which the Exchange Offer Registration Statement is declared
effective (such 40th day being the "Consummation Deadline").
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities electing to exchange the
Initial Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the securities
laws of the several states of the United States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment, is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the lesser of 180 days and the date on which all Exchanging Dealers and the
Initial Purchasers have sold all Exchange Securities held by them (unless such
period is extended pursuant to Section 3(j) below) and (ii) the Company shall
make such prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Exchange Securities
for a period of not less than 180 days after the consummation of the Registered
Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects to the Initial
Securities (the "Private Exchange Securities"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
2
<PAGE> 3
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice
thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.
3
<PAGE> 4
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
If following the date hereof there has been announced a change in
Commission policy with respect to exchange offers that in the reasonable opinion
of counsel to the Company raises a substantial question as to whether the
Registered Exchange Offer is permitted by applicable federal law, the Company
will seek a no-action letter or other favorable decision from the Commission
allowing the Company to consummate the Registered Exchange Offer. The Company
will pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company will take all such other actions as
may be requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (i) participating in
telephonic conferences with the Commission, (ii) delivering to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that the Registered
Exchange Offer should be permitted and (iii) diligently pursuing a resolution
(which need not be favorable) by the Commission staff.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the
180th day after the Closing Date, (iii) an Initial Purchaser so requests with
respect to the Initial Securities (or the Private Exchange Securities) not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following consummation of the Registered Exchange Offer or
(iv) any Holder (other than an Exchanging Dealer) is not eligible to participate
in the Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange and any such Holder so requests, the Company shall take the following
actions (the date on which any of the conditions described in the foregoing
clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv)
the receipt of the required notice, being a "Trigger Date"):
(a) The Company shall promptly (but in no event more than 90 days
after the Trigger Date (such 90th day being a "Filing Deadline")) file
with the Commission and thereafter use its best efforts to cause to be
declared effective no later than 150 days after the Trigger Date (such
150th day being an "Effectiveness Deadline") a registration statement (the
"Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act (hereinafter,
the "Shelf Registration"); provided, however, that no Holder (other than
an Initial Purchaser) shall be entitled to have the Securities held by it
covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement applicable to
such Holder.
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(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period
if extended pursuant to Section 3(j) below) from the date of its
effectiveness or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement (i) have been sold
pursuant thereto or (ii) are no longer restricted securities (as defined
in Rule 144 under the Securities Act, or any successor rule thereof) (the
"Shelf Registration Period"). The Company shall be deemed not to have used
its best efforts to keep the Shelf Registration Statement effective during
the requisite period if it voluntarily takes any action that would result
in Holders of Securities covered thereby not being able to offer and sell
such Securities during that period, unless such action is required by
applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, the Company shall use its best efforts to reflect
in each such document, when so filed with the Commission, such comments
as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto
in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; (iii) if requested by an Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K
under the Securities Act, as applicable, in the prospectus forming a part
of the Exchange Offer Registration Statement; (iv) include within the
prospectus contained in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," reasonably acceptable to the
Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange
Securities received by such broker-dealer in the Registered Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the Commission
or such positions or policies, in the reasonable judgment of the Initial
Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders who propose to sell Securities pursuant to the Shelf Registration
Statement as selling securityholders.
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<PAGE> 6
(b) The Company shall give written notice to the Initial Purchasers,
the Holders of the Securities and any Participating Broker-Dealer from
whom the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which notice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in
order that the Registration Statement or the prospectus do not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least
one copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if
the Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without
charge, at least one copy of the Exchange Offer Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this
Agreement, to the use of the prospectus or any amendment or supplement
thereto by each of the selling Holders of the Securities in connection
with the offering and sale of the Securities covered by the prospectus, or
any amendment or supplement thereto, included in the Shelf Registration
Statement.
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<PAGE> 7
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, if
necessary, any Participating Broker-Dealer and such other persons required
to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities covered
by the prospectus, or any amendment or supplement thereto, included in
such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities pursuant to any
Registration Statement the Company shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities covered by such Registration Statement; provided,
however, that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it is not then so qualified or
(ii) take any action which would subject it to general service of process
or to taxation in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities
to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period of
time prior to sales of the Securities pursuant to such Registration
Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company
is required to maintain an effective Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
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,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of
the prospectus until the requisite changes to the prospectus have been
made, then the Initial Purchasers, the Holders of the Securities and any
such Participating Broker-Dealers shall suspend use of such prospectus,
and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1 above shall each be extended by the
number of days from and including the date of the giving of such notice to
and including the date when the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer shall have received
such amended or supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee with printed
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<PAGE> 8
certificates for the Initial Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make
generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act, no later
than 45 days after the end of a 12-month period (or 90 days, if such
period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of the
Securities as the Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement, and the Company may exclude
from such registration the Securities of any Holder that unreasonably
fails to furnish such information within a reasonable time after receiving
such request.
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and
take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the
Securities pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i)
make reasonably available for inspection by the Holders of the Securities,
any underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent
retained by the Holders of the Securities or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and (ii) cause the Company's officers,
directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Securities or any
such underwriter, attorney, accountant or agent in connection with the
Shelf Registration Statement, in each case, as shall be reasonably
necessary to enable such persons, to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; provided, however,
that the foregoing inspection and information gathering shall be
coordinated on behalf of the Initial Purchasers by you, and on behalf of
the other parties, by one counsel designated by and on behalf of such
other parties as described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel
to deliver an opinion and updates thereof relating to the Securities in
customary form addressed to such Holders and the managing underwriters, if
any, thereof and dated, in the case of the initial opinion, the effective
date of such Shelf Registration Statement (it being agreed that the
matters to be covered by such opinion shall include, without limitation,
the due incorporation and good standing of the Company and its
subsidiaries; the qualification of the Company and its subsidiaries to
transact business as foreign
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<PAGE> 9
corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 3(o) hereof; the due
authorization, execution, authentication and issuance, and the validity
and enforceability, of the applicable Securities; the absence of material
legal or governmental proceedings involving the Company and its
subsidiaries; the absence of governmental approvals required to be
obtained in connection with the Shelf Registration Statement, the offering
and sale of the applicable Securities, or any agreement of the type
referred to in Section 3(o) hereof; the compliance as to form of such
Shelf Registration Statement and any documents incorporated by reference
therein and of the Indenture with the requirements of the Securities Act
and the Trust Indenture Act, respectively; and, as of the date of the
opinion and as of the effective date of the Shelf Registration Statement
or most recent post-effective amendment thereto, as the case may be, the
absence from such Shelf Registration Statement and the prospectus included
therein, as then amended or supplemented, and from any documents
incorporated by reference therein of an untrue statement of a material
fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
(in the case of any such documents, in the light of the circumstances
existing at the time that such documents were filed with the Commission
under the Exchange Act); (ii) its officers to execute and deliver all
customary documents and certificates and updates thereof requested by any
underwriters of the applicable Securities and (iii) its independent public
accountants and the independent public accountants with respect to any
other entity for which financial information is provided in the Shelf
Registration Statement to provide to the selling Holders of the applicable
Securities and any underwriter therefor a comfort letter in customary form
and covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by
any Initial Purchaser or any known Participating Broker-Dealer, the
Company shall cause (i) its counsel to deliver to such Initial Purchaser
or such Participating Broker-Dealer a signed opinion in the form set forth
in Section 6(d)-(g) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) its independent public accountants and the independent public
accountants with respect to any other entity for which financial
information is provided in the Registration Statement to deliver to such
Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as
set forth in Sections 6(a), (b), (j) and (k) of the Purchase Agreement,
with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the
case may be, the Company shall mark, or caused to be marked, on the
Initial Securities so exchanged that such Initial Securities are being
canceled in exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be; in no event shall the Initial Securities
be marked as paid or otherwise satisfied.
(t) The Company will use its best efforts to (a) if the Initial
Securities have been rated prior to the initial sale of such Initial
Securities, confirm such ratings will apply to the Securities covered by a
Registration Statement, or (b) if the Initial Securities were not
previously rated, cause the Securities covered by a Registration Statement
to be rated with the appropriate rating agencies, if so requested by
Holders of a majority in aggregate principal amount of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
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<PAGE> 10
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member of
an underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company will
assist such broker-dealer in complying with the requirements of such
Rules, including, without limitation, by (i) if such Rules, including Rule
2720, shall so require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of the
Registration Statement relating to such Securities, to exercise usual
standards of due diligence in respect thereto and, if any portion of the
offering contemplated by such Registration Statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 5 hereof and (iii) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Rules.
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.
4. Registration Expenses. (a) All expenses incident to the Company's
performance of and compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement is ever filed or becomes
effective, including without limitation;
(i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and
state "blue sky" or securities laws;
(iii) all expenses of printing (including printing certificates for
the Securities to be issued in the Registered Exchange Offer and the
Private Exchange and printing of Prospectuses), messenger and delivery
services and telephone;
(iv) all fees and disbursements of counsel for the Company;
(v) all application and filing fees in connection with listing the
Exchange Securities on a national securities exchange or automated
quotation system pursuant to the requirements hereof, and
(vi) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit
and comfort letters required by or incident to such performance).
The Company will bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and expenses
of any person, including special experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities who are tendering Initial Securities in the
Registered Exchange Offer and/or selling or reselling Securities pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements (up to $10,000) of
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not more than one counsel, who shall be Weil, Gotshal & Manges LLP unless
another firm shall be chosen by the Holders of a majority in principal amount of
the Transfer Restricted Securities for whose benefit such Registration Statement
is being prepared.
5. Indemnification. (a) The Company agrees to indemnify and hold harmless
each Holder of the Securities, any Participating Broker-Dealer and each person,
if any who controls such Holder or such Participating Broker-Dealer within the
meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof, provided, however, that
(i) the Company shall not be liable in any such case to the extent that 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 a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to a Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Company
had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their officers
and directors and each person who controls such underwriters within the meaning
of the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to
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<PAGE> 12
such Holder and furnished to the Company by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, the Company for
any legal or other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending any loss,
claim, damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability which such Holder may otherwise have to the
Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action, and does not include a statement as
to or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the exchange of the Securities, pursuant to
the Registered Exchange Offer, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge. access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been required to
pay by reason of
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<PAGE> 13
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. For purposes of this
paragraph (d), each person, if any, who controls such indemnified party within
the meaning of the Securities Act or the Exchange Act shall have the same rights
to contribution as such indemnified party and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act shall
have the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iv) below being herein called a "Registration Default"):
(i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline;
(ii) any Registration Statement required by this Agreement is not
declared effective by the Commission on or prior to the applicable
Effectiveness Deadline;
(iii) the Registered Exchange Offer has not been consummated on or prior
to the Consummation Deadline; or
(iv) any Registration Statement required by this Agreement has been
declared effective by the Commission but (A) such Registration
Statement thereafter ceases to be effective or (B) such Registration
Statement or the related prospectus ceases to be usable in
connection with resales of Transfer Restricted Securities during the
periods specified herein because either (1) any event occurs as a
result of which the related prospectus forming part of such
Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make
the statements therein in the light of the circumstances under which
they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to
comply with the Securities Act or the Exchange Act or the respective
rules thereunder.
Each of the foregoing will constitute a Registration Default whatever the reason
for any such event and whether it is voluntary or involuntary or is beyond the
control of the Company or pursuant to operation of law or as a result of any
action or inaction by the Commission.
Additional Interest shall accrue on the Securities over and above the
interest set forth in the title of the Securities from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 0.50% per
annum (the "Additional Interest Rate") for the first 90-day period immediately
following the occurrence of such Registration Default. The Additional Interest
Rate shall increase by an additional 0.50% per annum with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum Additional Interest Rate of 2.0% per annum.
13
<PAGE> 14
(b) A Registration Default referred to in Section 6(a)(iv) hereof shall be
deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of(x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to Section 6(a) will
be payable in cash on the regular interest payment dates with respect to the
Securities. The amount of Additional Interest will be determined by multiplying
the applicable Additional Interest Rate by the principal amount of the
Securities and further multiplied by a fraction, the numerator of which is the
number of days such Additional Interest Rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of an Initial Security for an Exchange Note, the date on which
such Exchange Note is sold to a purchaser who receives from such broker-dealer
on or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
7. 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 Securities, make publicly
available other information so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A. The Company covenants that it will
take such further action as any Holder of Securities may reasonably request, all
to the extent required from time to time to enable such Holder to sell
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Initial Securities identified to the Company by the
Initial Purchasers upon request. Upon the request of any Holder of Initial
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
14
<PAGE> 15
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Miscellaneous.
(a) Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Section 1 and 2 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 1 and
2 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the date
of this Agreement enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Fax No.: (212) 310-8007
Attention: Matthew D. Bloch, Esq.
15
<PAGE> 16
(3) if to the Company, at its address as follows:
c/o Warner Chilcott, Inc.
Rockaway 80 Corporate Center
100 Enterprise Drive, Suite 280
Rockaway, NJ 07866
Fax No.: (973) 442-3362
Attention: Paul S. Herendeen
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022-4675
Fax No.: (212) 446-4900
Attention: Frederick Tanne, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; three business days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged by
recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(e) Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.
(f) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(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) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
4) Severability. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(k) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are
16
<PAGE> 17
deemed to be affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
(l) Agent for Service; Submission to Jurisdiction; Waiver of Immunities.
By the execution and delivery of this Agreement, the Company (i) acknowledges
that it has, by separate written instrument, irrevocably designated and
appointed Kirkland & Ellis, with offices on the date hereof located at 153 East
53rd Street, New York, NY 10022 (and any successor entity), as its authorized
agent upon which process may be served in any suit or proceeding arising out of
or relating to this Agreement that may be instituted in any federal or state
court in the State of New York or brought under federal or state securities
laws, and acknowledges that Kirkland & Ellis accepted such designation, (ii)
submits to the nonexclusive jurisdiction of any such court in any such suit or
proceeding, and (iii) agrees that service of process upon Kirkland & Ellis
written notice of said service to the Company shall be deemed in every respect
effective service of process upon it in any such suit or proceeding. The Company
further agrees to take any and all action, including the execution and filing of
any and all such documents and instruments, as may be necessary to continue such
designation and appointment of Kirkland & Ellis full force and effect so long as
any of the Securities shall be outstanding. To the extent that the Company may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such immunity in respect of this
Agreement, to the fullest extent permitted by law.
(m) Judgment Currency. The Company hereby covenants and agrees that the
following provisions shall apply to conversion of currency in the case of the
Initial Securities, the Exchange Securities and the Private Exchange Securities
and this Agreement:
(i) If for the purpose of obtaining judgment in, or enforcing the
judgment of, any court in any country other than the United States, it
becomes necessary to convert into any other currency (the "judgment
currency") an amount due in United States Dollars, then the conversion
shall be made at the rate of exchange prevailing on the Business Day
before the day which judgment is given or the order of enforcement is
made, as the case may be. The term "rate(s) of exchange" shall mean the
rate at which the Initial Purchasers are able or would have been able on
the relevant date to purchase at such money center bank in the City of New
York as the Initial Purchasers designate at such time, United States
Dollars with judgment currency above and includes any premiums and costs
of exchange payable.
(ii) The Company hereby agrees to indemnify the Initial Purchasers,
each Holder, if any, and each Indemnified Party against any loss incurred
by any of them as a result of any judgment or order being given or made
for any amount due under this Agreement and the Initial Securities, the
Exchange Securities and the Private Exchange Securities and such judgment
or order being expressed and paid in the judgment currency and as a result
of any variation as between (i) the rate of exchange at which the United
States Dollar amount is converted into the judgment currency for the
purpose of such judgment or order and (ii) the spot rate of exchange in
the City of New York at which the Company on the date of payment of
judgment or order is able to purchase United States Dollars with the
amount of the judgment currency actually paid by the Company. The
foregoing indemnity shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot
rate of exchange" shall include any premiums and costs of exchange payable
in connection with the purchase of, or conversion into, United States
Dollars.
17
<PAGE> 18
(n) All calculations under this Agreement based on amounts which are
initially in Irish Pounds will be converted into United States Dollars based on
the rate of exchange in effect on the date of calculation and vice versa.
(o) Joint and Several Obligations. The obligations of the Issuer and the
Guarantor under this Agreement shall be joint and several.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers, the Issuer and the Guarantor in accordance
with its terms.
Very truly yours,
WARNER CHILCOTT, INC.
By:/s/James G. Andress
WARNER CITHLCOTT PUBLIC LIMITED
COMPANY
By:/s/Beth P. Hecht
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
Acting on behalf of itself
and as the Representative
of the several Initial Purchasers
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/M. Roderick Rivera
18
<PAGE> 1
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT ("First
Amendment") made this 28th day of February, 2000 by and between WARNER CHILCOTT,
INC., a corporation organized under the laws of the State of Delaware
("Borrower"), the financial institutions which are now or which hereafter become
a party hereto (collectively, the "Lenders" and individually a "Lender") and PNC
BANK, NATIONAL ASSOCIATION, a national banking association, ("PNC"), as agent
for Lenders (PNC, in such capacity, the "Agent").
WITNESSETH
WHEREAS, the Bank and the Borrower have previously entered into a
commercial lending arrangement in accordance with the terms and provisions of a
certain Loan and Security Agreement dated March 30, 1998 (the "Agreement"); and
WHEREAS, the parties desire to amend this Agreement pursuant to the
terms set forth in this First Amendment and memorialize the amendments to the
Agreement by this writing.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed as follows:
1. The definitions of the terms "Indenture" and "Maximum Revolving
Advance Amount" are hereby deleted from the Agreement and new definitions are
substituted therefor to read as follows:
"Indenture" shall mean a certain Indenture dated February 15,
2000 with respect to the issuance by the Borrower of
$200,000,000 aggregate principal amount of its Senior Notes
Due 2008.
"Maximum Revolving Advance Amount" shall mean $10,000,000.
2. A new definition is hereby added to Subsection 1.2 of the
Agreement to read as follows:
"Warner PLC Guaranty" shall mean the Continuing Guaranty in
the form attached hereto as Exhibit A.
3. Subsection 2.1(a) of the Agreement is hereby deleted and a new
Subsection 2.1(a) is substituted therefor to read as follows:
2.1 (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally
and not jointly, will make Revolving Advances to Borrower in
aggregate amounts outstanding at any time equal to such
Lender's Commitment Percentage of the lesser of(x) the Maximum
Revolving Advance Amount or (y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(b)
hereof ("Receivables Advance Rate"), of Eligible Receivables,
plus
(ii) up to the lesser of (A) 60%, subject to the provisions of
Section 2.1(b) hereof ("Inventory Advance Rate"), of the value
of the Eligible Inventory (the Receivables Advance Rate and
the Inventory Advance Rate shall be referred to collectively,
as the "Advance Rates") or (B) $5,000,000 in the aggregate at
any one time, plus
(iii) up to 95% of cash or Cash Equivalents maintained at the
Agent and in form and substance acceptable to the Agent, minus
(iv) such reserves as Agent may reasonably deem proper and
necessary from time to time.
In no event shall Revolving Advances against Eligible
Receivables of Schering-Plough exceed $2,500,000 at any time,
in the aggregate.
1
<PAGE> 2
The amount derived from the sum of(x) Sections 2.1(a)(y)(i),
(ii) and (iii) minus (y) Section 2.1 (a)(y)(iv) at any time
and from time to time shall be referred to as the "Formula
Amount". The Revolving Advances shall be evidenced by the
amended revolving credit note ("Revolving Credit Note")
substantially in the form attached hereto as Exhibit A.
4. Subsection 2.11 of the Agreement is hereby deleted and a new
Subsection 2.11 is substituted therefor to read as follows:
2.11 Use of Proceeds. Borrower shall apply the proceeds of
Advances to (i) repay existing indebtedness owed to the
Lenders, (ii) pay fees and expenses relating to this
transaction, and (iii) to provide for the working capital
needs of the Borrower.
5. Subsections 3.2 and 3.3 of the Agreement are hereby deleted and
new Subsections 3.2 and 3.3 are substituted therefor to read as follows:
3.2.(a) Closing Fee. Upon the execution of this First
Amendment, Borrower shall pay to Agent a Closing Fee as in the
amount of $225,000.
(b) Unused Line Fee. If, for any month during the Term, the
average daily unpaid balance of the Advances for each day of
such month does not equal the Maximum Revolving Advance
Amount, then Borrower shall pay to Agent for the ratable
benefit of Lenders a fee at a rate equal to three-eighths of
one percent (3/8%) per annum on the amount by which the
Maximum Revolving Advance Amount exceeds such average daily
unpaid balance. Such fee shall be payable to Agent in arrears
on the last day of each month.
(c) Facility Fee. The Borrower shall pay to the Agent on or
before the first day of January of each year during the Term
the sum of $50,000.
3.3. Collateral Monitoring Fee. Borrower shall pay to Agent on
the first day of each month a collateral monitoring fee in an
amount equal to $1,500 per month. In addition, the Borrower
shall pay to Agent, for each person employed to perform field
examinations, collateral analysis and/or other business
analysis, an amount equal to $750 per day for each person
performing such examinations or analysis, plus all costs and
disbursements incurred by Agent in the performance of such
examinations or analysis.
6. The following sentence is hereby added at the end of Subsection 4.2:
The Lenders agree to release their lien and security interest
with respect to Borrower's trademarks and trade names
provided:
(a) the Borrower has secured additional financing from other
sources which require the granting of a security interest in
Borrower's trademarks and trade names to such other sources;
and
(b) such other sources agree to grant to the Lenders a license
which would allow the Lenders to utilize the trademarks and
trade names in connection with the sale of assets in a
liquidation of the Borrower by the Lenders. The term of such
license shall be satisfactory to the Lenders in their sole
discretion.
7. Subsections 7.7, 7.11 and 7.18 of the Agreement are hereby deleted and
new Subsections 7.7, 7.11 and 7.18 are substituted therefor to read as follows:
7.7. Dividends. Declare, pay or make any dividend or
distribution on any shares of the common stock or preferred
stock of Borrower (other than dividends or distributions
payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any common or
preferred stock, or of any options to purchase or acquire any
such shares of common or preferred stock of Borrower except:
(i) that so long as (a) a notice of termination with regard to
this Agreement shall not be outstanding, (b) no Event of
Default or Default shall have occurred, and (c) the purpose
for such purchase,
2
<PAGE> 3
redemption or dividend shall be as set forth in writing to Agent at
least ten (10) days prior to such purchase, redemption or dividend
and such purchase, redemption or dividend shall in fact be used for
such purpose, Borrower shall be permitted to pay dividends to Parent
to pay interest accrued under the Indenture, to the extent permitted
provided, however, that after giving effect to the payment of such
dividends there shall not exist any Event of Default or Default;
(ii) for cash dividends not to exceed $1,000,000 in the aggregate
per fiscal year.
7.11 Leases. Enter as lessee into any new lease arrangement for real
or personal property (unless capitalized and permitted under Section
7.6 hereof) if after giving effect thereto, aggregate annual rental
payments for all new leased property would exceed $750,000 in any
one fiscal year.
7.18 Subordinated Debt Payment. At any time, directly or indirectly,
pay, prepay, repurchase, redeem, retire or otherwise acquire or make
any payment on account of any principal of, interest on, or premium
payable, in connection with the repayment or redemption of the
Subordinated Debt Payment, except as expressly required by the terms
of the Indenture.
8. A new Subsection 7.20 is hereby added to the Agreement to read as
follows:
7.20 Interest Coverage Ratio. Cause, suffer or permit the Borrower's
Interest Coverage Ratio to be less than 1 to 1. For the purposes
hereof, the term "Interest Coverage Ratio" shall be deemed to mean
the ratio of EBITDA to total interest payable on all of Borrower's
Debt as determined in accordance with GAAP.
9. Subsection 13.1 of the Agreement is hereby deleted and a new Subsection
13.1 is substituted therefor to read as follows:
13.1. Term. This Agreement, which shall inure to the benefit
of and shall be binding upon the respective successors and
permitted assigns of Borrower, Agent and each Lender, shall
become effective on the date hereof and shall continue in full
force and effect until February 28, 2002 (the "Term") unless
sooner terminated as herein provided. Borrower may terminate
this Agreement at any time upon ninety (90) days' prior
written notice upon payment in full of the Obligations. In the
event the Obligations are prepaid in full prior to the last
day of the Term (the date of such prepayment hereinafter
referred to as the "Early Termination Date"), Borrower shall
pay to Agent for the benefit of Lenders an early termination
fee in the amount of $50,000.
10. Simultaneously with the execution of this First Amendment and as a
condition precedent to the consummation of the transaction evidenced by this
First Amendment, the Borrower shall deliver to the Bank the following: (a)
Evidence of the completion and funding of the indebtedness evidenced by the
Indenture; (b) Evidence of the acquisition by Borrower from Bristol-Myers Squibb
of the project known as Excalibur; (c) Receipt and satisfactory review of the
audited financial statements of the Excalibur product lines; (d) Delivery of a
borrowing base certificate satisfactory to the Lenders evidencing Undrawn
Availability of at least $5,000,000; (e) The executed Revolving Credit Note; (f)
Resolutions and a certificate from the Borrower's corporate secretary indicating
approval of the transactions contemplated by this First Amendment; (g) Opinion
of Borrower's counsel with respect to due execution, delivery and performance of
the transactions evidenced by this First Amendment and related documents; (h)
the Warner PLC Guaranty; (i) Resolutions and a Certificate from Warner PLC's
corporate secretary indicating approval of the Warner PLC Guaranty; (j) Opinion
of Warner PLC's counsel with respect to due execution, delivery and performance
of the transaction evidenced by the Warner PLC Guaranty; and (k) payment of the
Closing Fee.
11. The Agent and the Lenders acknowledge that the Financial Support
Undertaking is hereby released and has no further force or effect.
12. Notwithstanding any term or provision contained herein, or in the
Agreement or the Other Documents, to the contrary, in connection with the
acquisition by Borrower from Bristol-Myers Squibb of the project known as
Excalibur, the Lenders are not being granted a security interest in any
Intellectual Property (as such term is defined in the Asset Purchase Agreement
dated as of January 26, 2000, between Bristol-Myers Squibb Company and Warner
Chilcott, Inc.) or any other General Intangibles acquired by the Borrower on or
after January 26, 2000 as part of the acquisition of a business or business
entity. However, (a) by this writing the Borrower hereby grants the
3
<PAGE> 4
Lenders a license to utilize the trademarks and trade names referred to above in
connection with the sale of assets in a liquidation of the Borrower by the
Lenders; and (b) the Borrower shall not grant a security interest or assign to
any other party the trademarks and trade names referred to above unless such
other party provides the Lenders with documentation satisfactory to the Lenders
in their sole discretion, such documentation to provide the Lenders with a
license which would allow the Lenders to utilize the trademarks and trade names
in connection with the sale of assets in a liquidation of the Borrower by the
Lender. In the event that the Borrower at any time in the future acquires any
other business entity that includes inventory subject to trade names or
trademarks, the Lenders shall not include the value of any such inventory within
the Borrowing Base.
13. The Borrower hereby affirms and/or makes the representations and
warranties contained in Section V of the Agreement as amended herein, and
represents that said representations and warranties are true as of the date of
this First Amendment.
14. The Borrower hereby affirms and/or agrees to comply with the
covenants contained in Sections VI and VII of the Agreement as amended herein.
15. All the remaining terms and conditions of the Agreement and all
other Loan Documents (including any amendments thereto) except as specifically
modified herein or in connection herewith shall remain in full force and effect,
and any term not otherwise defined herein shall have the meaning described
thereto in the Agreement or the other Loan Documents.
16. This First Amendment may be executed in counterpart originals.
* * * * *
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals or caused these presents to be signed by their respective corporate
officers and the proper corporate seal to be affixed hereto the day and year
first above written.
WARNER CHILCOTT, INC.
ATTEST:
By /s/ Paul S. Herendeen
Name: Paul S. Herendeen
/s/ Beth P. Hecht Title: Executive Vice President & Chief Financial Officer
Name: Beth P. Hecht
Title: Senior Vice President & General Counsel
[SEAL]
PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent
By: /s/ Michelle Stanley-Nurse
Name: MICHELLE STANLEY-NURSE
Title: Vice President
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Commitment Percentage: 100%
5
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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