<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 2000
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WARNER CHILCOTT PUBLIC LIMITED COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
IRELAND 2834 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
WARNER CHILCOTT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2834 22-3426958
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
ROCKAWAY 80 CORPORATE CENTER, 100 ENTERPRISE DRIVE, SUITE 280
ROCKAWAY, NEW JERSEY 07866
(973) 442-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
C/O BETH P. HECHT
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ROCKAWAY 80 CORPORATE CENTER, 100 ENTERPRISE DRIVE, SUITE 280
ROCKAWAY, NEW JERSEY 07866
(973) 442-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
ANDREW E. NAGEL
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 5/8% Senior Notes due 2008........ $200,000,000 $1,000 $200,000,000 $52,800
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Guarantees........................... N/A N/A N/A N/A
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the securities
as of , 2000.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON ANY DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON THE DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
Subject to Completion, dated
May , 2000
PROSPECTUS
May , 2000
WARNER CHILCOTT, INC.
Offer for all outstanding 12 5/8% Senior Notes due 2008
in aggregate principal amount of $200,000,000
in exchange for 12 5/8% Series B Senior Notes due 2008
The exchange offer expires at 5:00 p.m. New York City time on ,
2000, unless we extend this date.
If you decide to participate in this exchange offer, you will receive
exchange notes that will be the same as old notes, except the exchange notes
will be registered with the Securities and Exchange Commission and you will be
able to offer and sell them freely to any potential buyer. This is beneficial to
you since your old notes are not registered with the Securities and Exchange
Commission and you may not offer or sell the old notes without registration or
an exemption from registration under federal securities laws.
There is no public market for the old notes or the exchange notes. However,
you may trade the old notes and the exchange notes in The Portal Market.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the exchange notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
<PAGE> 3
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUMMARY.................... 1
RISK FACTORS.......................... 9
USE OF PROCEEDS....................... 16
CAPITALIZATION........................ 17
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA...................... 18
SELECTED CONSOLIDATED FINANCIAL
DATA................................ 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 26
BUSINESS.............................. 32
MANAGEMENT............................ 45
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................ 51
</TABLE>
<TABLE>
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PAGE
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<S> <C>
PRINCIPAL STOCKHOLDERS................ 52
DESCRIPTION OF EXCHANGE NOTES......... 54
DESCRIPTION OF WORKING CAPITAL
FACILITY............................ 91
EXCHANGE OFFER........................ 92
UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS...................... 99
PLAN OF DISTRIBUTION.................. 99
LEGAL MATTERS......................... 101
EXPERTS............................... 101
AVAILABLE INFORMATION................. 101
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>
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UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO
"WARNER CHILCOTT," "US," "OUR," OR "WE" ARE TO WARNER CHILCOTT PUBLIC LIMITED
COMPANY, ITS PREDECESSORS, SUCCESSORS AND SUBSIDIARIES, INCLUDING WARNER
CHILCOTT INC., THE ISSUER OF THE EXCHANGE NOTES; 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 PROSPECTUS IS INFORMATION REGARDING WARNER CHILCOTT PUBLIC
LIMITED COMPANY AND ITS CONSOLIDATED SUBSIDIARIES, INCLUDING WCI. REFERENCES TO
"BMS" ARE TO BRISTOL-MYERS SQUIBB COMPANY.
------------------
The following are trademarks and service marks belonging to or licensed to
Warner Chilcott: 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.
i
<PAGE> 4
PROSPECTUS SUMMARY
The following summary contains basic information about this exchange offer
and highlights the most important features of this exchange offer. For a more
complete understanding of this exchange offer, we encourage you to read this
entire document and the documents we have referred you to.
THE OLD NOTE OFFERING
Old Notes.................. We sold the old notes to Credit Suisse First Boston
Corporation, CIBC World Markets Corp. and SG Cowen
Securities Corporation, the initial purchasers, on
February 15, 2000. The initial purchasers
subsequently resold the old notes to qualified
institutional buyers under Rule 144A of the
Securities Act of 1933.
Exchange and Registration
Rights Agreement......... We, Credit Suisse First Boston, CIBC World Markets
and SG Cowen, and WCplc (as guarantor) entered into
a registration rights agreement on February 11,
2000. The registration rights agreement granted
Credit Suisse First Boston, CIBC World Markets and
SG Cowen and any subsequent holders of the old
notes exchange and registration rights. We intend
that the exchange offer satisfy those exchange and
registration rights. The exchange and registration
rights we granted will terminate upon the
consummation of our exchange offer.
THE EXCHANGE OFFER
Securities Offered......... Up to $200,000,000 of 12 5/8% Series B senior notes
due 2008. The terms of the exchange notes and old
notes are identical in all material respects,
except for transfer restrictions and registration
rights relating to the old notes.
The Exchange Offer......... We are offering to exchange the old notes for a
principal amount equal to the principal amount of
exchange notes. Old notes may be exchanged only in
integral principal multiples of $1,000.
Expiration Date; Withdrawal
of Tender.................. Our exchange offer will expire 5:00 p.m. New York
City time, on , 2000, or a later date
and time if we choose to extend this exchange
offer. You may withdraw your tender of old notes at
any time prior to the expiration date. We will
return any old notes not accepted by us for
exchange for any reason at our expense as promptly
as possible after the expiration or termination of
our exchange offer.
Conditions to the Exchange
Offer...................... Based on an interpretation by the staff of the
Securities and Exchange Commission in no-action
letters issued to third parties, we believe that
you may offer for resale, resell or otherwise
transfer the exchange notes without complying with
the registration and prospectus delivery provisions
of the Securities Act of 1933, provided that:
- the exchange notes are acquired in the
ordinary course of your business.
- you do not intend to participate and have no
arrangement or understanding with any person
to participate in the distribution of the
exchange notes and
1
<PAGE> 5
- you are not our "affiliate" within the
meeting of Rule 405 under the Securities Act
of 1933.
Our obligation to accept for exchange or to issue
the exchange notes in exchange for, any old notes
is subject to:
- customary conditions relating to compliance
with any applicable law,
- any applicable interpretation by any staff
of the Securities and Exchange Commission,
or
- any order of any governmental agency or
court of law.
We currently expect that each of the conditions
will be satisfied and that no waivers will be
necessary. See "The Exchange Offer -- Conditions."
Procedures for Tendering
Old Notes.................. Each holder of old notes wishing to accept the
exchange offer must complete sign and date the
Letter of Transmittal, or a facsimile. The holder
must mail or otherwise deliver the Letter of
Transmittal, or facsimile, together with the old
notes and any other required documentation, to the
exchange agent at the address in the section "The
Exchange Offer" under the heading "Procedures for
Tendering Old Notes."
Use of Proceeds............ We will not receive any proceeds from the exchange
of notes according to the terms of our exchange
offer.
Exchange Agent............. The Bank of New York is serving as the exchange
agent in connection with our exchange offer.
Federal Income Tax
Consequences............. Warner Chilcott has received an opinion from
Kirkland & Ellis that the exchange of old notes in
accordance with the terms of this exchange offer
will not be a taxable event to you for federal
income tax purposes. See "United States Federal
Income Tax Considerations."
THE EXCHANGE NOTES
The terms of the exchange notes are identical in all significant respects
to the terms of the old notes, except that the old notes differed with respect
to their transfer restrictions and registration rights.
Issuer..................... Warner Chilcott, Inc.
Securities Offered......... $200,000,000 in aggregate principal amount of
12 5/8% Series B Senior Notes due 2008, referred to
throughout this document as the "exchange notes."
Maturity................... February 15, 2008.
Interest Payments.......... Payment frequency -- every six months on February
15 and August 15. First payment August 15, 2000.
Guarantee.................. The exchange notes will be unconditionally
guaranteed on a senior basis by WCplc, WCI's 100%
parent. If we cannot make payments on the exchange
notes when they are due, the parent guarantor must
make them instead.
2
<PAGE> 6
Optional Redemption........ On or after February 15, 2004, we may redeem some
or all of the exchange notes at any time at the
redemption prices listed in the section
"Description of the Notes" under the heading
"Optional Redemption," plus accrued interest.
Optional Redemption after
Public Equity Offerings.... At any time (which may be more than once) before
February 15, 2003, WCI can choose to redeem up to
35% of the original principal amount of the
exchange notes with money that WCplc raises in
equity offerings at a redemption price of 112.625%
of the face amount redeemed, plus accrued interest
if at least 65% of the aggregate principal amount
of the exchange notes remain outstanding afterwards
and are held by non-affiliates of WCI. See
"Optional Redemption" in the section "Description
of the Notes."
Change of Control Offer.... If a change of control of WCplc occurs as described
in the section "Description of the Notes" under the
heading "Change of Control," we must give holders
of the exchange notes the opportunity to sell to
WCI their exchange notes at a purchase price of
101% of their face amount, plus accrued interest.
Ranking.................... These exchange notes and the parent guarantee are
unsecured senior debts.
They effectively rank behind all of our and our
parent guarantor's existing and future senior
secured indebtedness to the extent of the value of
the assets securing that indebtedness. They rank
equally with all of our existing and future senior
indebtedness, and that of our parent guarantor.
They rank ahead of all our existing and future
subordinated indebtedness, and that of our parent
guarantor.
As of December 31, 1999, after giving effect to (1)
the issuance of the old notes pursuant to the old
note offering, (2) the acquisition of three branded
products from BMS, (3) the redemption of WCI's
remaining outstanding senior subordinated discount
notes, (4) the repayment of amounts outstanding
under our working capital facility and (5) the
amendment of our working capital facility, we would
have had no indebtedness outstanding (other than
the old notes) and none of WCplc's subsidiaries
would have had any indebtedness to third parties.
Basic Covenants of the
Indenture.................. We will issue the exchange notes under an indenture
among us, the parent guarantor and The Bank of New
York, as trustee. The indenture contains covenants
that limit our ability to:
- incur or guarantee additional indebtedness;
- pay dividends or distributions on, or redeem
or repurchase, capital stock;
- make investments;
- issue or sell capital stock of subsidiaries;
- engage in transactions with affiliates;
- transfer or sell assets;
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<PAGE> 7
- incur liens or enter into any sale/leaseback
transactions; and
- consolidate, merge or transfer all or
substantially all of our assets.
These covenants are subject to important exceptions
and qualifications, which are described in the
"Description of the Notes" section of this
prospectus.
RISK FACTORS
You should carefully consider all of the information in this prospectus. In
particular, you should evaluate the specific risk factors set forth under "Risk
Factors" for a discussion of the material risks involved with an investment in
the exchange notes.
4
<PAGE> 8
WARNER CHILCOTT, INC.
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
therapeutic category. 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 country, including obstetrician/gynecologists, urologists, cardiologists,
dermatologists, and high-prescribing primary care physicians. We have an
experienced management team with significant pharmaceutical industry expertise,
specifically in the marketing of prescription pharmaceutical brands.
RECENT ACQUISITIONS
On January 26, 2000, we entered into an agreement with Bristol-Myers Squibb
Company ("BMS") to acquire three branded pharmaceutical products for aggregate
consideration, as adjusted, of $175.1 million. We completed this acquisition on
February 15, 2000. The acquired products are:
- Estrace(R) vaginal cream, an estrogen replacement therapy product, with
net sales of $21.4 million for the year ended December 31, 1999; and
- Ovcon(R) 35 and Ovcon(R) 50, two oral contraceptives, with net sales
totaling $28.6 million for the year ended December 31, 1999.
We acquired Estrace(R) cream and the Ovcon(R) brands because they are
proprietary brands with solid growth prospects competing in two important
segments of the women's health market, which is our area of strategic focus and
strength. Our goal is to increase the value of both brands through increased
promotional support, product repositioning and the development of line
extensions. We believe that both brands will respond to the higher level of
promotional support and that we intend to use to support the brands.
We have been promoting Estrace(R) cream and Ovcon(R) 35 for BMS since March
1999. As a result of our efforts, the performance of both products has improved
as measured by monthly total prescriptions. We believe that under our ownership,
by raising the priority of these products for our sales force and building upon
our existing strong relationships with physicians, we can further improve the
financial performance and market penetration of these products. Specifically we
have:
- elevated Estrace(R) cream and Ovcon(R) 35 to be our sales force's number
one priority;
- restructured the compensation of our sales force to emphasize sales of
the acquired products;
- increased the number of physicians targeted for the promotion of these
products; and
- expanded the target market for Estrace(R) cream to include urologists.
RECENT DEVELOPMENTS
On February 15, 2000, we issued $200,000,000 of 12 5/8% senior notes due
2008. We used a portion of the proceeds of the old note offering for the
acquisition of the three branded pharmaceutical products from BMS, the repayment
of amounts under our working capital facility and to redeem the senior
subordinated discount notes due 2001.
On May 4, 2000, WCplc entered into an agreement with Galen Holdings, plc
pursuant to which WCplc has agreed to become a wholly owned subsidiary of Galen.
The acquisition would be effected through a scheme of arrangement under the laws
of the Republic of Ireland. Under the agreement, Galen proposes to issue 2.5 new
Galen ordinary shares for each WCplc share (equivalent to 2.5 Galen shares for
each WCplc ADS) pursuant to the terms of the scheme of arrangement. The
acquisition is subject to various conditions, including, among other things,
sanction by the High Court of Ireland, regulatory approval, and approval by
WCplc's and Galen's shareholders. In the event that the acquisition is
completed, we or Galen will commence a Change of Control Offer. For more
information on the Change of Control Offer, see the section entitled
"Description of Exchange Notes -- Change of Control."
5
<PAGE> 9
On May 3, 2000, WCplc announced financial results for the first quarter
ended March 31, 2000. In particular, WCplc announced: (1) that it had achieved
quarterly net earnings of $581,000 or $0.05 per share on a fully diluted basis;
(2) that revenues had increased 24% compared to the same period one year ago to
$26,079,000; (3) that gross profit on product sales increased to $11,408,000;
and (4) that it had $36.1 million of cash and cash equivalents on hand.
The address of Warner Chilcott, Inc. is Rockaway 80 Corporate Center, 100
Enterprise Drive, Suite 280, Rockaway, New Jersey 07866, and our telephone
number is (973) 442-3200. Warner Chilcott Public Limited Company, our 100%
parent, is located at Lincoln House, Lincoln Place, Dublin 2, Ireland. Warner
Chilcott Public Limited Company can be reached by telephone at (353) 1-662-4962.
6
<PAGE> 10
SUMMARY FINANCIAL DATA
The following table presents summary financial and other data with respect
to Warner Chilcott Public Limited Company and subsidiaries and has been derived
from the audited consolidated financial statements of Warner Chilcott Public
Limited Company and its subsidiaries as of December 31, 1999, and for the years
ended December 31, 1999, 1998 and 1997 and the unaudited pro forma consolidated
financial statements included elsewhere in this prospectus which give effect to
the acquisition of the three branded pharmaceutical products from BMS, the old
note offering including the application of the net proceeds therefrom. The
unaudited pro forma consolidated financial statements do not purport to
represent what Warner Chilcott Public Limited Company and its subsidiaries'
results of operations or financial condition would actually have been had the
events assumed therein in fact occurred on the dates indicated therein, nor do
they purport to project Warner Chilcott Public Limited Company and its
subsidiaries' results of operations or financial condition for any future period
or date. The information set forth below should be read together with the other
information contained under the captions "Capitalization," "Selected
Consolidated Financial Data," "Unaudited Pro Forma Consolidated Financial
Statements" and "Management Discussion and Analysis of Financial Condition and
Results of Operations," Warner Chilcott Public Limited Company and its
subsidiaries' consolidated financial statements and related notes and the
special purpose historical statements of net sales and product contribution of
the three branded pharmaceutical products that we acquired from BMS included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA
------------
HISTORICAL FOR THE YEAR
-------------------------------------- ENDED
FOR YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------- ------------
1997 1998 1999 1999
---------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................................... $ 75,827 $ 64,894 $ 74,035 $ 124,033
Costs and expenses
Cost of goods sold......................... 62,863 34,230 27,704 29,604
Selling, general and administrative........ 23,618 41,709 46,409 50,197
Depreciation and amortization.............. 5,458 5,621 5,520 14,273
Research and development................... 6,526 3,241 3,100 3,100
---------- ----------- ----------- -----------
Total costs and expenses..................... 98,465 84,801 82,733 97,174
---------- ----------- ----------- -----------
Operating income (loss)...................... (22,638) (19,907) (8,698) 26,859
---------- ----------- ----------- -----------
Net interest income (expense)................ (5,736) (390) (747) (24,766)
Gain on sale of assets(1).................... -- -- 2,744 2,744
---------- ----------- ----------- -----------
Net income (loss)............................ $ (28,374) $ (20,297) $ (6,701) $ 4,837
========== =========== =========== ===========
Net income (loss) per ordinary
share -- diluted(2)........................ $ (3.39) $ (1.64) $ (0.54) $ .39
========== =========== =========== ===========
Weighted average ordinary shares
outstanding -- diluted(2).................. 8,359,623 12,366,808 12,367,706 12,460,649
========== =========== =========== ===========
</TABLE>
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<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 50,954 $ 41,139
Working capital............................................. 56,516 46,701
Total assets................................................ 132,462 305,494
Working capital facility.................................... 12,098 --
Long-term debt.............................................. 10,476 196,337
Shareholders' equity........................................ 98,984 98,253
</TABLE>
- ---------------
(1) Represents the gain on the sale of our Vectrin(R) branded minocycline
product in September 1999.
(2) Net (loss) income per ordinary share-diluted is based on the weighted
average number of outstanding ordinary shares. We have adopted the
provisions of SFAS 128 "Earnings per Share."
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<PAGE> 12
RISK FACTORS
Before you invest in the Notes, you should carefully consider these risk
factors, as well as the other information contained in this prospectus, in
evaluating an investment in the exchange notes. The material risks described
below are not the only ones facing our company.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR
FINANCIAL POSITION AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THESE
EXCHANGE NOTES.
We have a significant amount of indebtedness. The following chart is
presented as of December 31, 1999:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Total indebtedness.......................................... $ 22.6 $196.3
Stockholders' equity........................................ 99.0 98.3
------ ------
Total capitalization........................................ $121.6 $294.6
Debt to total capitalization ratio.......................... 0.2:1 0.7:1
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
- limit our ability to borrow additional amounts for working capital,
capital expenditures, acquisitions, debt service requirements, execution
of our growth strategy, research and development costs or other purposes;
- require us to dedicate a substantial portion of our cash flow to pay
principal and interest on our debt, which will reduce the funds available
for working capital, capital expenditures, acquisitions and other general
corporate purposes;
- limit our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate which could make us more
vulnerable to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation; and
- place us at a disadvantage compared to our competitors that have less
debt.
Our ability to pay principal of and interest on these exchange notes, to
service our other debt and to refinance indebtedness when necessary depends on
our financial and operating performance, each of which is subject to prevailing
economic conditions and to financial, business and other factors beyond our
control.
We cannot assure you that we will generate sufficient cash flow from
operations or that we will be able to obtain sufficient funding to satisfy all
of our obligations, including these exchange notes. If we are unable to pay our
debts, we will be required to pursue one or more alternative strategies, such as
selling assets, refinancing or restructuring our indebtedness or selling
additional equity capital. However, we cannot assure you that any alternative
strategies will be feasible at the time or prove adequate. Also, some
alternative strategies will require the consent of our lenders before we engage
in those strategies. See "Description of Exchange Notes" and "Description of
Indebtedness."
POSSIBLE ADDITIONAL BORROWINGS -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE MAY
STILL BE ABLE TO INCUR MORE DEBT. THIS COULD FURTHER EXACERBATE THE RISKS
DESCRIBED ABOVE.
We may be able to incur additional indebtedness in the future. The terms of
the indenture for these exchange notes do not, and the terms of our working
capital facility do not, fully prohibit us from doing so. All of the borrowings
under our working capital facility are secured by substantially all of our
existing assets and are, therefore, effectively senior to these exchange notes
to the extent of such assets. The addition of new debt to our current debt
levels could increase the leverage-related risks described above. See
"Description of Exchange Notes" and "Description of Indebtedness."
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<PAGE> 13
RESTRICTIVE COVENANTS -- THE INDENTURE FOR THE EXCHANGE NOTES AND THE NEW SENIOR
CREDIT FACILITY WILL CONTAIN VARIOUS COVENANTS WHICH LIMIT OUR MANAGEMENT'S
DISCRETION IN THE OPERATIONS OF OUR BUSINESS.
The indenture for the exchange notes and our working capital facility, will
contain various provisions that limit our management's discretion by restricting
our ability to:
- incur additional debt and issue preferred stock;
- pay dividends and make other distributions;
- prepay debt;
- make investments and other restricted payments;
- enter into sale and leaseback transactions;
- create liens;
- sell assets; and
- enter into certain transactions with affiliates.
These restrictions on our management's ability to operate our business in
accordance with its discretion could have a material adverse effect on our
business.
In addition, our working capital facility requires us to meet certain
financial ratios in order to draw funds.
If we default under any financing agreements, our lenders could:
- elect to declare all amounts borrowed to be immediately due and payable,
together with accrued and unpaid interest; and/or
- terminate their commitments, if any, to make further extensions of
credit.
If we are unable to pay our obligations to our senior secured lenders, they
could proceed against any or all of the collateral securing our indebtedness to
them. The collateral under our working capital facility consists of
substantially all of WCI's existing assets. In addition, a breach of certain of
these restrictions or covenants, or an acceleration by our senior secured
lenders of our obligations to them, would cause a default under the exchange
notes. We may not have, or be able to obtain, sufficient funds to make
accelerated payments, including payments on the exchange notes, or to repay the
exchange notes in full after we pay our senior secured lenders to the extent of
their collateral. See "Description of Indebtedness" and "Description of the
Exchange Notes."
WE HAVE A HISTORY OF OPERATING LOSSES. WE CANNOT ASSURE YOU THAT WE WILL BE
PROFITABLE OR THAT WE WILL BE ABLE TO MAINTAIN PROFITABILITY.
Warner Chilcott has a history of operating losses. We have posted operating
losses since our formation in 1992. As of December 31, 1999, we had an
accumulated deficit of approximately $101.3 million. Our ability to achieve
revenue growth and profitability will depend upon, among other things:
- the success of the products being acquired from BMS;
- continuation of our marketing alliance with Schering-Plough;
- completing development of our proposed products;
- raising sufficient funds to finance our activities; and
- success of our current product portfolio.
DEPENDENCE ON SCHERING-PLOUGH AGREEMENT -- WE DEPEND ON OUR PROMOTION AGREEMENT
WITH SCHERING-PLOUGH FOR A LARGE PART OF OUR REVENUES.
We have a sales and marketing agreement under which our sales force
promotes branded products for Schering-Plough. Revenue generated under this
agreement represented approximately 24% of our gross revenues for year ended
December 31, 1999 (or 14% for such period on a pro forma basis). Our agreement
with Schering-Plough will expire on December 31, 2000, unless renewed upon
mutual
10
<PAGE> 14
agreement. The termination or lack of renewal of this agreement could have a
material adverse impact on our revenues and our business.
MANUFACTURING AND SUPPLY -- IF WE HAVE PROBLEMS WITH ANY OF THE COMPANIES WHO
MANUFACTURE PRODUCTS FOR US OR THEIR SUPPLIERS OF RAW MATERIALS, OUR PROFIT
MARGIN AND OUR ABILITY TO DELIVER PRODUCTS COULD BE ADVERSELY AFFECTED.
We currently contract with third parties for all our product manufacturing
requirements, including the branded pharmaceutical products we acquired from
BMS. Accordingly, we are dependent upon our contract manufacturers to comply
with regulatory requirements and to keep their facilities in good working order.
To ensure compliance, we conduct quality assurance audits of our contract
manufacturers, and examine sites and batch records and other documents to
determine compliance with FDA requirements and our specifications. However, we
cannot assure you that these contract manufacturers will be able to manufacture
our products without interruption, that our 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. Some components may
be available only from sole-source suppliers. In addition, the FDA must approve
suppliers of some 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, we
cannot assure you 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 our customers could have
a material adverse effect on us.
In addition, in connection with the BMS acquisition, we have entered into
transitional support and supply agreements with BMS under which BMS agrees to
sell to us, and we agree to purchase from BMS, substantially all of our
requirements for the acquired products. However, BMS's obligations to supply us
are qualified and subject to conditions (such as the occurrence of a force
majeure). Our remedies in the event of a failure to supply will not completely
insure our risk of loss in such event. See "Business -- Manufacturing and
Supply."
WE MAY BE UNABLE TO CONTINUE TO IMPLEMENT OUR GROWTH STRATEGY.
Our strategy for growth is primarily dependent upon our continued ability
to acquire branded products that can be promoted through our existing marketing
and distribution channels and, when appropriate, to develop line extensions
related to or based upon such acquired branded products. Other companies,
including those with substantially greater financial, marketing and sales
resources, are competing with us to acquire new products. We may not be able to
identify appropriate product candidates and acquire rights to additional
products on acceptable terms, if at all, or be able to obtain future financing
for such acquisition on acceptable terms, if at all. The inability to effect
acquisitions of additional branded products may have a material adverse effect
on our future business, financial condition and results of operations.
Furthermore, even if we obtain rights to a pharmaceutical product, we may not be
able to generate sales sufficient to create a profit or otherwise avoid a loss.
Our ability to commercialize new products, whether acquired, in-licensed or
developed internally, may be delayed or prevented as a result of:
- delays associated with the need to potentially reformulate our products
and comply with other requirements associated with the licensing
processes;
11
<PAGE> 15
- our need to respond to patent infringement lawsuits, brought by
innovators of products which we are in the process of developing,
challenging notices of non-infringement submitted as part of FDA filings.
COMPETITION -- WE ARE SUBJECT TO INTENSE COMPETITION IN OUR INDUSTRY.
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 pharmaceutical products we sell. Generic substitutes for
some of our branded pharmaceutical 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.
The pharmaceutical industry is also characterized by frequent litigation.
We may find it necessary to initiate or defend lawsuits to enforce our rights
and to determine the scope and validity of the proprietary rights of others.
Litigation can be costly and time-consuming, and we cannot assure you that our
litigation expenses will not be significant in the future or that the outcome of
such litigation will be favorable to us.
WE MAY BE UNSUCCESSFUL IN MANAGING THE GROWTH OF OUR BUSINESS OR INTEGRATING NEW
PRODUCT ACQUISITIONS.
In order to effectively manage our acquisitions, we must maintain adequate
operational, financial and management information systems and motivate and
effectively manage an increasing number of employees. Our future success will
depend in part on our ability to retain or hire qualified employees to operate
our business efficiently in accordance with applicable regulatory standards. If
our management is unable to manage these changes effectively and integrate our
acquisitions successfully, these changes and acquisitions could materially and
adversely affect our business, financial condition and results of operations.
OUR FAILURE TO BE REIMBURSED BY THIRD-PARTY PAYERS OR PRICING PRESSURES BY
MANAGED CARE ORGANIZATIONS COULD DECREASE OUR REVENUES.
Our commercial success in producing, marketing and selling products will
depend, in part, on the availability of adequate reimbursement from third-party
health care payers, such as government and private health insurers and managed
care organizations. Third-party payers are increasingly challenging the pricing
of medical products and services. We cannot assure you that reimbursement will
be available to enable us to achieve market acceptance of our products or to
maintain price levels sufficient to realize an appropriate return on our
investment in product acquisition and development. If adequate reimbursement
levels are not provided, our business, financial condition and results of
operations could be materially and adversely effected. The market for our
products may be limited by actions of third-party payers. For example, many
managed health care organizations are now controlling the pharmaceutical
products that
12
<PAGE> 16
are on their formulary lists. The resulting competition among pharmaceutical
companies to place their products on these formulary lists has created a trend
of downward pricing pressure in the industry. We cannot assure you that our
products will be included on the formulary lists of managed care organizations
or that downward pricing pressures in the industry generally will not negatively
impact our operations. Further, a number of legislative and regulatory proposals
aimed at changing the health care system have been proposed. While we cannot
predict whether any such proposals will be adopted or the effect such proposals
may have on our business, the pending nature of such proposals, as well as the
adoption of any proposal, may exacerbate industry-wide pricing pressures and
could have a material adverse effect on our financial condition or results of
operations.
WE MAY BE UNABLE TO OBTAIN GOVERNMENT APPROVAL FOR, OR COMPLY WITH GOVERNMENT
REGULATIONS RELATING TO, OUR PRODUCTS.
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. We cannot
predict the extent to which we may be affected by legislative and other
regulatory actions and developments concerning various aspects of our
operations, our products and the health care field generally. We, as well as
other drug companies manufacturing or marketing drugs in the United States, are
required to obtain approval from the FDA based upon pre-clinical testing,
manufacturing chemistry and control data, bioavailability and other clinical
data before marketing most drug products. The generation of the required data is
regulated by the FDA and can be time-consuming and expensive without assurance
that the results will be adequate to justify approval.
We cannot assure you that our current FDA filings which we file with
respect to our future proposed products will be approved in a timely manner, if
at all, or that we can meet other regulatory requirements for our future
proposed products. Even if we are successful in obtaining all required
premarketing approvals, postmarketing requirements and/or our inability or
failure to comply with other regulations could result in suspension or
limitation of approvals. Additionally, we cannot predict the extent to which we
may be affected by legislative and regulatory developments concerning our
products and the health care field generally. New governmental regulation may
adversely effect our operations or competitive position in the future. See
"Business -- Government Regulation."
CUSTOMER CONCENTRATION AND CONSOLIDATION OF THE DISTRIBUTION NETWORK FOR
PHARMACEUTICAL PRODUCTS COULD RESULT IN REDUCED PRODUCT PURCHASES AND INCREASED
PRODUCT RETURNS BY OUR CUSTOMERS.
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. Consolidation or financial difficulties could cause
customers to reduce their inventory levels, return products or reduce product
offerings, which could have a material adverse effect on our business, results
of operations and financial condition. Although product returns were
approximately 6% of gross sales for the year ended December 31, 1999, we cannot
assure you that actual levels of returns will not increase or significantly
exceed the amounts we have anticipated.
Our three largest customers are McKesson HBOC, Bergen Brunswig and Cardinal
Health. During 1999, McKesson HBOC accounted for approximately $11 million, or
21%, of our net sales, Bergen Brunswig accounted for approximately $5 million,
or 9%, of our net sales, and Cardinal Health accounted for approximately $7
million, or 13%, of our net sales. In addition, these three customers and one
other each individually accounted for more than 10% of the gross sales of the
three products we have acquired from BMS for the same period. The loss of any of
these customers or a significant reduction in our business with any of them
could have a material adverse effect on our business, results of operations and
our financial condition.
AN INCREASE IN PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS COULD HARM OUR
BUSINESS.
Testing, manufacturing, marketing and selling pharmaceutical products
entails a risk of product liability. Product liability insurance coverage is
expensive, difficult to obtain and may not be available in
13
<PAGE> 17
the future on acceptable terms, if at all. We carry primary product liability
insurance in the amount of $10 million per claim and $10 million in the
aggregate on a claims-made basis and umbrella liability insurance, which we can
use for product liability claims, in the amount of $50.0 million per claim and
$50.0 million in the aggregate. We cannot assure you that this coverage is
adequate to cover potential liability claims. If we acquire or develop new
products, we cannot assure you that additional liability insurance coverage for
these new products will be available on acceptable terms, if at all. Our
business, results of operations and financial condition could be materially
adversely affected by the assertion of a product liability claim, and we could
be rendered insolvent if we do not have sufficient financial resources to
satisfy any liability resulting from such a claim or to fund the legal defense
of such a claim.
Product recalls may be issued at our discretion or at the discretion of the
FDA, other government agencies or other companies having regulatory authority
for pharmaceutical product sales. We cannot assure you that product recalls will
not occur in the future. Any product recall could materially adversely affect
our business, financial condition and results of operations.
RELIANCE ON TRADEMARKS AND OTHER INTELLECTUAL PROPERTY -- OUR INABILITY TO
PROTECT OUR TRADEMARKS, SERVICE MARKS, TRADE NAMES AND TRADE SECRETS COULD
ADVERSELY AFFECT OUR BUSINESS
Due to our branded product focus, we consider our trademarks valuable
assets. Therefore, we actively manage our trademark portfolio, maintain
long-standing trademarks and obtain trademark registrations for new brands. We
police our trademark portfolio against infringement. However, we cannot assure
you that these efforts will be successful or that we will have adequate remedies
for 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. We
cannot assure you, 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, we cannot assure you that
these persons will not claim rights to intellectual property arising out of
their work.
RELIANCE ON KEY PERSONNEL -- THE LOSS OF THE SERVICES OF ANY MEMBERS OF OUR
SENIOR MANAGEMENT TEAM OR SCIENTIFIC STAFF COULD ADVERSELY AFFECT OUR BUSINESS.
We are dependent on the continued services of the principal members of our
scientific and management staffs. The loss of the services of these individuals
might impede the achievement of our acquisition and development objectives. We
face intense competition for personnel from other companies, academic
institutions, government entities, and other organizations. Although we believe
that we are adequately staffed in key positions and that we will be successful
in retaining skilled, highly qualified and experienced management, operational
and scientific personnel, we cannot assure you that we will be able to attract
and retain qualified personnel on acceptable terms. The loss of key personnel,
or our inability to attract and retain additional, highly skilled employees,
could have a material adverse effect on our business, results or operations and
financial conditions. We do not maintain key-person life insurance on any of our
employees.
WE MAY NOT BE ABLE TO DEDUCT THE INTEREST ON THE EXCHANGE NOTES.
Our ability to deduct some or all of the interest we will pay on the
exchange notes may be limited by Section 163(j) of the U.S. Internal Revenue
Code of 1986, due to the guarantee of the exchange notes issued by WCplc.
Section 163(j) will apply if WCI's ratio of long-term debt to shareholder's
equity (as computed for this purpose) exceeds 1.5:1. As of December 31, 1999, on
a pro forma basis after giving effect to (1) the issuance of $200.0 million face
amount of the old notes; (2) the repayments of amounts outstanding under our
working capital facility, and (3) the redemption of our remaining senior
subordinated discount notes due 2001, WCI's debt to equity ratio was
approximately 2.8:1. This limitation will apply to interest in respect of all
years in which that ratio exceeds 1.5:1. So long as the limitation applies, WCI
will not in general be able to deduct interest on the exchange notes to the
extent that WCI has "excess interest expense," that is, net interest expense
exceeding 50% of its taxable income (before taking account of net interest
expense). Whether WCI has excess interest expense in any year, and the
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<PAGE> 18
resulting impact of the limitation, will depend upon WCI's results of operations
during the term of the exchange notes.
ENFORCEMENT OF LEGAL PROCESS OUTSIDE THE UNITED STATES -- IT MAY BE DIFFICULT
FOR INVESTORS TO EFFECT SERVICE AND ENFORCE LEGAL PROCESS ON PERSONS AND
COMPANIES WHICH ARE NOT RESIDENT IN THE UNITED STATES, INCLUDING WCPLC.
Service of process upon individuals or firms that are not resident in the
United States may be difficult to obtain within the United States. Some of the
members of our Board of Directors and our senior management team are located in
the Republic of Ireland and WCplc is incorporated in the Republic of Ireland.
Furthermore, since some of WCplc's assets are located outside the United States,
any judgment obtained in the United States against WCplc or such persons may not
be collectible within the United States. We have appointed CT Corporation
System, 111 Eighth Avenue, New York, NY 10011, as our agent to receive service
of process in any actions against us in any federal court or court in the State
of New York arising out of the offering and the sale of the Notes. We have not
given consent for such agent to accept service of process in connection with any
other claim.
We have been advised by our legal counsel in Ireland, McCann Fitzgerald,
that any judgment obtained in the courts of the United States generally is
enforceable in the Republic of Ireland, without retrial or examination on the
merits of the case, on the condition that there is reciprocity in the United
States of the enforcement of judgments obtained in Irish courts, and provided
that:
- the judgment has not been obtained or alleged to have been obtained by
fraud or trick;
- the decision of the court in such state and the enforcement thereof was
not and would not be contrary to natural or constitutional justice under
the laws of Ireland;
- the enforcement of the judgment would not be contrary to public policy as
understood by the Irish courts or constitute the enforcement of a
judgment of a penal or revenue (tax) nature;
- the judgment is final and conclusive and is for a debt or definite sum of
money;
- the procedural rules of the court giving the judgment have been observed;
- the jurisdiction of the courts in such state has been exercised in
circumstances which, as a matter of Irish law, an Irish court will
recognize as justifying enforcement of the judgment; and
- the judgment is not inconsistent with a judgment of the Irish courts in
respect of the same matter.
However, the United States is not a party to any treaty or convention
governing recognition and enforcement of foreign judgments. Accordingly, we
cannot assure you that a final judgment of a United States court will be
enforceable against WCplc in Ireland.
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE
FOR THE EXCHANGE NOTES.
If a change of control occurs, you have the right to require WCI to
repurchase any or all of the exchange notes you own at a price equal to 101% of
the principal amount thereof, together with any interest WCI owes you. In the
event that Galen completes the acquisition, we or Galen will commence a Change
of Control Offer. See "Prospectus Summary -- Recent Developments" and
"Description of Exchange of Notes -- Change of Control." Upon a change of
control, WCI also may be required immediately to repay the outstanding
principal, any accrued interest on and any other amounts owed by us under the
senior credit facility and any other indebtedness or preferred stock then
outstanding. We cannot assure you that we would be able to repay amounts
outstanding under the senior credit facility or obtain necessary consents under
the facility to purchase the exchange notes. Any requirement to offer to
purchase any outstanding exchange notes may result in our having to refinance
our outstanding indebtedness, which we may not be able to do. In addition, even
if we were able to refinance such indebtedness, the financing may be on terms
unfavorable to us. If WCI fails to repurchase all of the exchange notes tendered
for purchase upon the occurrence of a change of control, the failure will be an
event of default under the indenture governing the exchange notes. In addition,
the change of control covenant does not cover all
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<PAGE> 19
corporate reorganizations, mergers or similar transactions and may not provide
you with protection in a highly leveraged transaction.
NO PRIOR MARKET FOR THESE EXCHANGE NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE
TRADING MARKET WILL DEVELOP FOR THESE EXCHANGE NOTES.
There is no established trading market for these exchange notes. Although
each Initial Purchaser has informed us that it currently intends to make a
market in these exchange notes, the Initial Purchasers have no obligation to do
so and may discontinue making a market at any time without notice. These
exchange notes are being offered and sold only to qualified institutional buyers
and are subject to restrictions on transfer, which are described under the
"Transfer Restrictions" section of this prospectus.
We have applied to have the exchange notes designated as eligible for
trading in the PortalSM Market. However, we do not intend to apply for listing
of the exchange notes on any securities exchange.
The liquidity of any market for the exchange notes will depend upon the
number of holders of the exchange notes, our performance, the market for similar
securities, the interest of securities dealers in making a market in the
exchange notes and other factors. A liquid trading market may not develop for
the exchange notes.
THE TRADING PRICE OF THE EXCHANGE NOTES MAY BE VOLATILE.
The trading price of the exchange notes could be subject to significant
fluctuation in response to, among other factors, variations in operating
results, developments in industries in which we do business, general economic
conditions, changes in securities analysts' recommendations regarding our
securities and changes in the market for noninvestment grade securities
generally. Such volatility may adversely affect the market price of the exchange
notes.
USE OF PROCEEDS
Warner Chilcott Inc. and Warner Chilcott Public Limited Company will not
receive any proceeds from this exchange offer.
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<PAGE> 20
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
December 31, 1999 presented on an actual basis and a pro forma basis giving
effect to the issuance of the old notes and the application of the net proceeds
from the sale of the old notes. The information presented below should be read
in conjunction with our consolidated financial statements included elsewhere in
this prospectus and the related notes thereto.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C>
Cash....................................................... $ 50.9 $ (9.8) $ 41.1
====== ====== ======
Long term debt:
Working capital facility................................. 12.1 (12.1) --
12 5/8% Senior Notes Due 2008(1)......................... -- 196.3 196.3
Senior Subordinated Discount Notes Due 2001.............. 10.5 (10.5) --
------ ------ ------
Total debt................................................. 22.6 173.7 196.3
------ ------ ------
Shareholders' equity
Ordinary and deferred shares............................. 0.7 -- 0.7
Additional paid-in capital............................... 209.1 -- 209.1
Accumulated deficit...................................... (110.3) (0.7) (111.0)
Deferred compensation.................................... (0.5) -- (0.5)
------ ------ ------
Total shareholders' equity............................ 99.0 (0.7) 98.3
------ ------ ------
Total capitalization....................................... $121.6 $173.0 $294.6
====== ====== ======
</TABLE>
- ---------------
(1) Net of $3.7 million of discount.
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<PAGE> 21
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial information of
Warner Chilcott Public Limited Company ("Warner Chilcott") is based on the
historical consolidated financial statements of Warner Chilcott, adjusted to
give pro forma effect to the following, which we collectively refer to as the
"transactions": (1) the acquisition of the three branded pharmaceutical products
from Bristol-Myers Squibb ("BMS") for $175.1 million, (2) the issuance of $200.0
million face amount of 12 5/8% senior notes at a discount of $3.7 million to
yield 13.0% (the "Notes"), (3) the repayment of amounts outstanding under our
prior working capital facility, (4) the redemption of our remaining senior
subordinated discount notes due 2001, and (5) the closing of a new senior
capital facility.
The unaudited pro forma consolidated balance sheet as of December 31, 1999
gives effect to the transactions as if they had occurred on December 31, 1999.
The unaudited pro forma consolidated statement of operations for the year ended
December 31, 1999 gives effect to the transactions as if they had occurred on
January 1, 1999. The unaudited pro forma adjustments are based upon available
information and certain assumptions that we believe are reasonable under the
circumstances. The unaudited pro forma consolidated financial statements do not
purport to represent what Warner Chilcott's results of operations or financial
condition would actually have been had the transactions occurred on such dates,
nor do they purport to project Warner Chilcott's results of operations or
financial condition for any future period or date. The information set forth
below should be read together with the special purpose financial statements of
net sales and product contribution of the three branded pharmaceutical products
which we acquired from BMS and Warner Chilcott's consolidated financial
statements included elsewhere in this prospectus.
The acquisition of the branded pharmaceutical products from BMS was
accounted for as a purchase. Under purchase accounting, the total purchase price
is allocated to the tangible and intangible assets acquired based upon their
respective fair values as of the purchase date in accordance with Accounting
Principles Board Opinion No. 16. The allocation of the purchase price for the
branded pharmaceutical products from BMS resulted in an allocation of $168.0
million to the products and $7.1 million to goodwill as there were no tangible
assets acquired. The accompanying unaudited pro forma consolidated financial
statements are based on this allocation.
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<PAGE> 22
WARNER CHILCOTT PUBLIC LIMITED COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA
WARNER CHILCOTT ADJUSTMENTS PRO FORMA
--------------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 50,954 $ (9,815)(1) $ 41,139
Accounts receivable............................ 11,526 11,526
Inventories.................................... 4,025 4,025
Prepaid expense and other assets............... 915 915
--------- ---------
Total current assets...................... 67,420 57,605
--------- ---------
Fixed Assets:
Equipment, furniture and fixtures.............. 1,177 1,177
Intangible assets................................. 63,658 175,054(2) 238,712
Deferred financing costs.......................... 207 7,793(3) 8,000
--------- ---------
Total assets.............................. $ 132,462 $ 305,494
========= =========
LIABILITIES
Current Liabilities:
Accounts payable............................... $ 3,204 $ 3,204
Accrued liabilities............................ 7,438 7,438
Due to Elan Corporation, plc and
subsidiaries................................. 262 262
--------- ---------
Total current liabilities................. 10,904 10,904
--------- ---------
Other Liabilities:
Working capital facility....................... 12,098 (12,098)(4) --
Senior Subordinated Discount Notes Due 2001.... 10,476 (10,476)(4) --
Senior Subordinated Notes Due 2008............. -- 196,337(4) 196,337
--------- ---------
Total long-term debt...................... 22,574 196,337
--------- ---------
Total liabilities......................... 33,478 207,241
--------- ---------
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.... 619 619
Deferred Shares, par value IR pound sterling 1 per
share; 30,000 shares authorized, 30,000 shares
issued and outstanding at December 31, 1999.... 45 45
Additional paid-in capital........................ 209,062 209,062
Accumulated deficit............................... (110,279) (731)(5) (111,010)
Deferred compensation............................. (463) (463)
--------- ---------
Total shareholders' equity................ 98,984 98,253
--------- ---------
Total liabilities and shareholders'
equity............................... $ 132,462 $ 305,494
========= =========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated balance sheet.
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<PAGE> 23
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(1)Cash and cash equivalents -- to reflect adjustments to record the following:
<TABLE>
<S> <C> <C>
To record the proceeds from the issuance of the Notes....... $196,337
To record the payment for the acquisition of the branded
pharmaceutical products from BMS....................... (175,054)
To record the repayment of amounts outstanding under the
prior credit facility.................................. (12,098)
To record the redemption of senior subordinated discount
notes.................................................. (10,476)
To record the payment of the prepayment penalty on senior
subordinated discount notes............................ (524)
To record the payment of transaction fees associated with
the issuance of the Notes and the new senior credit
facility............................................... (8,000)
--------
Total............................................. $ (9,815)
(2) Intangible assets -- to reflect an adjustment to record the
intangible assets associated with the acquisition of
the three branded pharmaceutical products from BMS..... $175,054
(3) Deferred financing costs -- to reflect adjustments to record
the following:
Deferred financing costs related to the issuance of the
Notes and the new senior credit facility............... $ 8,000
--------
To eliminate unamortized deferred financing costs related to
the prior credit facility.............................. (114)
To eliminate unamortized deferred financing costs related to
the senior subordinated discount notes................. (93)
--------
Total............................................. $ 7,793
(4) Other Liabilities -- to reflect adjustments to record the
following:
To record the repayment of amounts outstanding under the
prior credit facility.................................. $(12,098)
To record the repayment of senior subordinated discount
notes.................................................. (10,476)
To record the issuance of the Notes, net of $3,663 of
discount............................................... 196,337
(5) Accumulated deficit -- to reflect adjustments to record the
following:
To record the write-off of the unamortized deferred
financing costs from the prior credit facility......... $ (114)
To record the write-off of the unamortized deferred
financing costs from senior subordinated discount notes (93)
To record the prepayment penalty associated with the
retirement of the senior subordinated discount notes... (524)
--------
Total............................................. $ (731)
========
</TABLE>
20
<PAGE> 24
WARNER CHILCOTT PUBLIC LIMITED COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACTUAL
--------------------------------- PRO FORMA
WARNER CHILCOTT BMS PRODUCTS(1) ADJUSTMENTS PRO FORMA
--------------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Branded product sales................ $ 34,813 $49,998 $ -- $ 84,811
Generic product sales................ 13,767 -- -- 13,767
Marketing alliance and other
revenue........................... 25,455 -- --(3) 25,455
---------- ------- -------- ----------
Total revenues............... 74,035 49,998 -- 124,033
---------- ------- -------- ----------
OPERATING EXPENSES
Cost of goods sold................... 27,704 2,613 (713)(2) 29,604
Selling, general and
administrative.................... 46,409 3,788 --(3) 50,197
Depreciation and amortization........ 5,520 -- 8,753(4) 14,273
Research and development............. 3,100 -- -- 3,100
---------- ------- -------- ----------
Total operating expenses..... 82,733 6,401 8,040 97,174
---------- ------- -------- ----------
OPERATING INCOME (LOSS)................ (8,698) 43,597 (8,040) 26,859
---------- ------- -------- ----------
OTHER INCOME (EXPENSE)
Interest income...................... 2,264 -- (460)(5) 1,804
Interest expense..................... (3,011) -- (23,559)(6) (26,570)
Gain on sale of assets............... 2,744 -- -- 2,744
---------- ------- -------- ----------
Total other income
(expense).................. 1,997 -- (24,019) (22,022)
---------- ------- -------- ----------
INCOME (LOSS) BEFORE TAXES............. (6,701) 43,597 (32,059) 4,837
---------- ------- -------- ----------
Income Taxes........................... -- -- --(7) --
---------- ------- -------- ----------
INCOME (LOSS) BEFORE NON-RECURRING
CHARGES DIRECTLY RELATED TO THE
TRANSACTIONS(8)...................... $ (6,701) $43,597 $(32,059) $ 4,837
========== ======= ======== ==========
Weighted average ordinary shares
outstanding
Basic................................ 12,367,706 12,367,706
========== ==========
Diluted.............................. 12,367,706 12,460,649
========== ==========
Income (loss) before non-recurring
charges directly related to the
transactions per ordinary share
Basic................................ $ (0.54) $ 0.39
========== ==========
Diluted.............................. $ (0.54) $ 0.39
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated statements of
operations.
21
<PAGE> 25
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The unaudited pro forma consolidated financial information is based on the
historical financial statements of Warner Chilcott Public Limited Company
("Warner Chilcott"), adjusted to give pro forma effect to the acquisition of
the three branded pharmaceutical products from Bristol-Myers Squibb ("BMS"),
issuance of the Notes, the repayment of amounts outstanding under our prior
working capital facility, the redemption of our remaining outstanding senior
subordinated discount notes due 2001 and the closing of a new senior credit
facility.
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 1999 gives effect to the above as if they had occurred
on January 1, 1999. The unaudited pro forma adjustments set forth below are
based upon available information and assumptions that Warner Chilcott
believes are reasonable under the circumstances. The unaudited pro forma
consolidated statement of operations does not purport to project Warner
Chilcott's operating results of operations for any future period. The
statement of operations does not include the impact of any non-recurring
charges related to the transactions, including those described in note (5)
of the notes to the unaudited pro forma consolidated balance sheet. The
information set forth below should be read together with Warner Chilcott's
consolidated financial statements and related notes and the special purpose
historical statements of net sales and product contribution of the branded
pharmaceutical products which were acquired from BMS.
(1) Represents the historical results of the three branded pharmaceutical
products acquired from BMS. See the special purpose historical statements of
net sales and product contribution and the related notes.
(2) Adjustments to reduce cost of goods sold as reported by BMS in the special
purpose historical statements of net sales and product contribution under
U.S. generally accepted accounting principles to amounts that Warner
Chilcott would have paid for product purchases under the 10 year supply
agreement with BMS. The method of determining Warner Chilcott's cost of
product under the supply agreement excludes certain indirect costs that were
captured by BMS in cost of goods sold under generally accepted accounting
principles. Warner Chilcott's cost of goods sold under generally accepted
accounting principles will be a function of its cost of product purchases
from BMS under the supply agreement.
(3) During the year ended December 31, 1999, BMS did not use either its sales
force or a contract sales organization (other than Warner Chilcott) to
promote Estrace(R) cream or the Ovcon(R) products. Accordingly, no amounts
for field selling expenses were included in the special purpose historical
statements of net sales and profit contribution during those periods. During
the period from March 1999 to December 1999, Warner Chilcott promoted two of
the three acquired products, Estrace(R) cream and Ovcon(R) 35, under a
promotion agreement with BMS. Warner Chilcott's cost of promoting the
products under the agreement were limited to the allocation of a portion of
its sales force's capacity. All other expenses, including the costs of
distribution, administration, samples and other promotional material and
activities, were borne by BMS and are captured in selling, general and
administrative expense in the special purpose statements of profit
contribution. For the year ended December 31, 1999 Warner Chilcott did not
recognize any marketing alliance revenue related to its promotion of
Estrace(R) cream and Ovcon(R) 35.
The amounts reported by BMS under selling, general and administrative
expense in the special purpose historical statements of net sales and
product contribution include actual amounts spent on promotional activities
and allocations for marketing, distribution and freight costs, including in
1999 certain costs incurred under the Warner Chilcott co-promotion
agreement. Warner Chilcott has determined that its costs to perform each of
these functions would have approximated those reported by BMS. Accordingly,
no adjustment was made to increase or decrease selling, general and
administrative expense to compute the pro forma amounts.
22
<PAGE> 26
(4) Represents the amortization of the intangible assets associated with the
three branded products. Our allocation of the $175.1 million purchase price
for the three branded products is as follows: $168.0 million to the products
(trade names, regulatory files, general know-how) and $7.1 million to
goodwill, both to be amortized over 20 years.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(IN THOUSANDS)
<S> <C>
Amortization of:
Acquired products (20 years)................................ $8,400
Goodwill (20 years)......................................... 353
------
$8,753
</TABLE>
(5) Reflects a reduction in pro forma interest income attributable to a $9.8
million reduction in the amount of cash available for investment at an
assumed investment rate of 4.7% based on Warner Chilcott's historical
returns on invested funds. The reduction in interest income follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(IN THOUSANDS)
<S> <C>
Decrease in interest income................................. $(460)
</TABLE>
(6) Adjustments to reflect the increase in interest expense resulting from the
issuance of the 12 5/8% Notes, amortization of the related debt discount and
deferred financing costs, the availability fee of .375% on our new $10.0
million senior secured credit facility and the repayment of all other
indebtedness including the senior subordinated notes due 2001 and amounts
outstanding under our prior working capital facility.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(IN THOUSANDS)
<S> <C>
Issuance of $200 million of Notes at 12 5/8%................ $(25,250)
Amortization of debt discount............................... (283)
Amortization of deferred financing costs.................... (1,000)
Availability fee under new credit facility.................. (37)
Interest on repaid debt..................................... 3,011
--------
$(23,559)
</TABLE>
(7) No adjustment has been made to recognize income tax expense in preparing the
pro forma statements. As of December 31, 1999, Warner Chilcott had net
operating loss carryforwards of $62.0 million for U.S. federal income tax
purposes and $40.0 million for state income tax purposes. The pro forma
financial statements assume that the pre-tax pro forma income would be
offset by the utilization of these tax losses. A description of the
statutory tax rates to be incurred assuming the utilization of the net
operating loss carry forwards is provided below:
<TABLE>
<S> <C>
U.S. federal statutory rate................. 35.0%
State taxes, net of federal benefit......... 5.0%
Utilization of tax loss carry forwards...... (40.0%)
-------
Pro forma tax rate................ 0.0%
</TABLE>
Once Warner Chilcott's net operating loss carry forwards are fully utilized
for financial reporting purposes, we will be required to recognize income
tax expense at our then current effective tax rate. Due to IRS rules, the
tax deductibility of some interest expense on the Notes may be deferred or
not be able to be utilized at all.
(8) Before non-recurring charges directly related to the transactions as
described in note (5) to the notes to the unaudited pro forma consolidated
balance sheet.
23
<PAGE> 27
SELECTED CONSOLIDATED 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 prospectus. The selected consolidated
statements of operations data for the year ended December 31, 1997 was derived
from the historical financial statements of Warner Chilcott Public Limited
Company and subsidiaries that were audited by KPMG Chartered Accountants and
appear elsewhere in this prospectus. 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 Public Limited Company and
subsidiaries that do not appear elsewhere in this prospectus.
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 prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(1)........................ $ 48 $ 62,734 $ 75,827 $ 64,894 $ 74,035
Costs and expenses
Cost of goods sold............... -- 53,367 62,863 34,230 27,704
Selling, general and
administrative................ 1,934 10,373 23,618 41,709 46,409
Depreciation and amortization.... 14 3,419 5,458 5,621 5,520
Research and development......... 7,434 10,915 6,526 3,241 3,100
One-time charge -- acquired in-
process research and
development(2)................ -- 16,000 -- -- --
---------- ---------- ---------- ----------- -----------
Total costs and expenses........... 9,382 94,074 98,465 84,801 82,733
---------- ---------- ---------- ----------- -----------
Operating loss..................... (9,334) (31,340) (22,638) (19,907) (8,698)
---------- ---------- ---------- ----------- -----------
Net interest income (expense)...... 1,560 (7,999) (5,736) (390) (747)
Gain on sale of assets(3).......... -- -- -- -- 2,744
---------- ---------- ---------- ----------- -----------
Net loss........................... $ (7,774) $ (39,339) $ (28,374) $ (20,297) $ (6,701)
========== ========== ========== =========== ===========
Net loss per ordinary share(4)..... $ (3.17) $ (9.62) $ (3.39) $ (1.64) $ (0.54)
========== ========== ========== =========== ===========
Weighted average ordinary shares
outstanding(4)................... 2,454,710 4,087,210 8,359,623 12,366,808 12,367,706
========== ========== ========== =========== ===========
</TABLE>
24
<PAGE> 28
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 21,055 $ 2,663 $ 52,786 $ 43,133 $ 50,954
Working capital............................. 20,107 10,498 51,770 58,901 56,516
Total assets................................ 21,575 123,668 171,737 157,017 132,462
Working capital debt........................ -- 18,200 14,511 20,393 12,098
Long-term debt.............................. -- 53,204 7,902 8,897 10,476
Shareholders' equity........................ $ 20,366 $ 28,183 $124,646 $104,943 $ 98,984
======== ======== ======== ======== ========
OTHER FINANCIAL INFORMATION:
Ratio of earnings to fixed charges(5)....... -- -- -- -- --
</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 writeoff of acquired in-process research and development
related to the acquisition of the Warner Chilcott division in 1996.
(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."
(5) For the years ended December 31, 1995, 1996, 1997, 1998 and 1999, we
recorded losses and our earnings were insufficient to cover fixed charges.
The earnings deficiencies for these periods were $7.8 million, $39.3
million, $28.4 million, $20.3 million and $6.7 million, respectively. On a
pro forma basis, as adjusted for the purchase of products from BMS and the
issuance of the Notes (see Unaudited Pro Forma Consolidated Financial Data),
the 1999 ratio of earnings to fixed charges was 1.18 to 1.
25
<PAGE> 29
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 included elsewhere in this
prospectus. See "Risk Factors" for trends and uncertainties known to us that
could cause reported financial information to differ materially from future
results.
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 aggregate consideration, as adjusted, of $175.1 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 products 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 aggregate
consideration, as adjusted, of $175.1 million. The acquired products were:
Estrace(R) cream, an estrogen replacement therapy product, and Ovcon(R) 35 and
Ovcon(R) 50,
26
<PAGE> 30
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.
RESULTS OF OPERATIONS
Year 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 began to earn
additional milestone and royalty revenues under the nifedipine license agreement
in March 2000 when the FDA approved 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
27
<PAGE> 31
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.
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
28
<PAGE> 32
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 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.
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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 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 aggregate consideration, as
adjusted, of $175.1 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 $188.3 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.
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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 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 measures them at fair value. We do not expect the adoption of this
Statement to have a material impact on our financial statements.
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 us to adopt its guidance not later than the second quarter of
its fiscal year beginning after December 15, 1999 through a cumulative effect of
a change in accounting principle calculated as of January 1, 2000. We do not
expect adoption of this standard to have a material impact on our financial
statements.
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.
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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
therapeutic category. 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 country including obstetrician/gynecologists, urologists, cardiologists,
dermatologists, and high-prescribing primary care physicians. We have an
experienced management team with significant pharmaceutical industry expertise,
specifically in the marketing of prescription pharmaceutical brands. On a pro
forma basis, we would have had total revenues and earnings before interest,
taxes, depreciation and amortization for the year ended December 31, 1999 of
$124.0 million and $41.1 million, respectively.
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.
On January 26, 2000, we entered into an agreement with Bristol-Myers Squibb
Company to acquire three branded pharmaceutical products for aggregate
consideration, as adjusted, of $175.1 million. We completed this acquisition on
February 15, 2000. The products we acquired through that transaction are:
- Estrace(R) vaginal cream, an estrogen replacement therapy product, with
net sales of $21.4 million for the year ended December 31, 1999; and
- Ovcon(R) 35 and Ovcon(R) 50, two oral contraceptives, with net sales
totaling $28.6 million for the year ended December 31, 1999.
We acquired Estrace(R) cream and the Ovcon(R) brands because they are
proprietary brands with solid growth prospects competing in two important
segments of the women's health market, which is our area of strategic focus and
strength. Our goal is to increase the value of both brands through increased
promotional support, product repositioning and the development of line
extensions. We believe that both brands will respond to the higher level of
promotional support that we intend to use to support the products relative to
BMS's efforts over the last several years.
COMPETITIVE STRENGTHS
We believe that our competitive strengths include the following:
- National Sales and Marketing Infrastructure
We have a fully operational sales and marketing organization with
national scale including over 260 sales representatives dedicated to
promoting branded pharmaceutical products. We believe we have the fourth
largest sales force promoting women's health products to
obstetrician/gynecologists in the United States. Our seasoned
representatives have established relationships with physicians in each of
our targeted segments. Our sales force is currently promoting our own
products as well as three for Schering-Plough. This portfolio produces,
in the aggregate, more than $500 million in annual sales.
- Precision Marketing Expertise
We focus our sales force by using precision marketing techniques,
including internal analysis of actual prescription data. We use this data
to identify and target physicians who are high volume prescribers and are
likely to produce the greatest return on our promotional efforts. While
at Warner-Lambert, members of our senior management team were pioneers in
utilizing precision marketing methods and have brought the benefits of
their experience to Warner Chilcott. Precision marketing techniques help
us to target physicians, measure the effectiveness of our promotional
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efforts and evaluate the skill of our individual sales representatives.
In addition to the sophisticated analysis and use of market data, our
sales representatives are provided with the same tools used by large
pharmaceutical companies, including personal digital assistants to
electronically receive and use this market data while in the field. We
believe that our precision marketing expertise enables us to successfully
compete with larger pharmaceutical concerns.
- Focus on Women's Health
Women's health is a large and growing market. We believe women's health
will generate strong growth driven by fundamental demographic and
behavioral trends. Women's health is well suited for precision marketing
because relatively small audiences of physicians, primarily obstetrician/
gynecologists, account for a large percentage of prescriptions written.
With our sales force, we currently have the ability to reach high volume
prescribing obstetrician/gynecologists in our target segments at least
once every two weeks. We believe that this reach and frequency enables
our sales representatives to establish and maintain solid relationships
with their target physicians, which will enable us to cross-market
complementary products.
- BMS Acquisition Expands Our Women's Health Product Portfolio
The acquisition of Estrace(R) cream and the Ovcon(R)brand from BMS
provides us with an entry into two important women's health markets:
hormone replacement therapy and oral contraceptives. We expect that our
strong relationships with obstetrician/gynecologists and urologists will
enhance our ability to successfully promote the acquired products.
Beginning in March 1999 we began to market two of these products under an
agreement with BMS. At the time of the acquisition, our sales force was
familiar with the products as it was already actively promoting them to
many of the physician targets. We believe that, as a result of our
experience with these products, their integration into our product
portfolio can be accomplished quickly and with few of the risks typically
associated with new product acquisitions.
- Demonstrated Success with Branded Products
We have demonstrated the ability to increase the market share of a range
of branded products. In 1998, we introduced a new prescription prenatal
vitamin, NataFort(R). Today, more new prescriptions are filled in the
United States for NataFort(R) than for any other branded prenatal
vitamin. In March 1999, we launched our brand extension for Pyridium(R),
Pyridium(R) Plus, and within eight months the product was generating more
than 14,000 prescriptions per month. Since July 1998, we have been
promoting several branded products for Schering-Plough. During this
period, the market share of two of these products, K-Dur(R) and
Lotrisone(R), both market leaders in mature segments, have shown
meaningful increases.
- Experienced Management Team
We have an experienced management team with extensive pharmaceutical
industry expertise. James Andress, our Chairman and CEO, and Roger
Boissonneault, our President and Chief Operating Officer, have over 50
years of combined experience at major pharmaceutical companies, including
Warner-Lambert, Abbott Laboratories, SmithKline Beecham and Sterling
Drug. While at Warner-Lambert, Mr. Boissonneault had responsibility for
the successful women's health division from 1986 to 1995.
RECENT DEVELOPMENTS
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.
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- 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.
On February 15, 2000, we issued $200,000,000 of 12 5/8% senior notes due
2008. We used a portion of the proceeds of the old note offering for the
acquisition of the three branded pharmaceutical products from BMS, the repayment
of amounts under our working capital facility and to redeem the senior
subordinated discount notes due 2001.
On May 4, 2000, WCplc entered into an agreement with Galen Holdings, plc
pursuant to which WCplc has agreed to become a wholly owned subsidiary of Galen.
The acquisition would be effected through a scheme of arrangement under the laws
of the Republic of Ireland. Under the agreement, Galen proposes to issue 2.5 new
Galen ordinary shares for each WCplc share (equivalent to 2.5 Galen shares for
each WCplc ADS) pursuant to the terms of the scheme of arrangement. The
acquisition is subject to various conditions, including, among other things,
sanction by the High Court of Ireland, regulatory approval, and approval by
WCplc's and Galen's shareholders. In the event that the acquisition is
completed, we or Galen will commence a Change of Control Offer. For more
information on the Change of Control Offer, see the section entitled
"Description of Exchange Notes -- Change of Control."
On May 3, 2000, WCplc announced financial results for the first quarter
ended March 31, 2000. In particular, WCplc announced: (1) that it had achieved
quarterly net earnings of $581,000 or $0.05 per share on a fully diluted basis;
(2) that revenues had increased 24% compared to the same period one year ago to
$26,079,000; (3) that gross profit on product sales increased to $11,408,000;
and (4) that it had $36.1 million of cash and cash equivalents on hand.
GROWTH 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
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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.
INDUSTRY OVERVIEW
Prescription drug expenditures are the fastest growing component of health
care expenditures in the United States. The U.S. Health Care Financing
Administration estimates that pharmaceuticals currently account for
approximately 6.5% of U.S. health care expenditures, and are expected to
increase to 8% by 2007. Estimated U.S. pharmaceutical sales for 1998 were
approximately $75 billion, and HCFA projects continued sales increases at an
average annual growth rate of approximately 10% through 2007, compared to an
average annual growth rate of approximately 7% for total health care costs
during this period. Factors underlying this increase in prescription drug
expenditures include:
- increases in research and development expenditures by drug manufacturers,
resulting in many new drug introductions;
- a shorter FDA approval cycle for new pharmaceuticals;
- high prices for new "blockbuster" drugs;
- an aging population; and
- increased demand for prescription drugs due to increased disease
awareness by patients, effective direct-to-consumer advertising by drug
manufacturers and a growing reliance on medication in lieu of lifestyle
changes.
In recent years, the pharmaceutical industry has been characterized by
consolidation which has increased the level of sales necessary for an individual
product to justify active marketing and promotion from large pharmaceutical
companies. For example, for the year ended December 31, 1998, the additional
sales required for 1% sales growth for large global pharmaceutical companies
such as Merck & Co., Johnson & Johnson and Novartis Pharmaceuticals, a
subsidiary of Novartis AG, are $269 million, $237 million and $231 million,
respectively. We believe that large pharmaceutical companies have begun to focus
their marketing efforts on drugs with annual sales in excess of $250 million,
newer or novel drugs which have the potential for high volume sales and products
which fit within core therapeutic or marketing priorities. As a result, major
pharmaceutical companies increasingly have sought to divest small or non-
strategic product lines that can be profitable for emerging pharmaceutical
companies, like us, to manufacture and market.
THE HORMONE REPLACEMENT MARKET
In the U.S., hormone replacement therapy is an approximately $2.2 billion
market. Estrogen drug products and estrogens in combination with progestins used
for the treatment of symptoms associated with menopause make up the vast
majority of the market.
Vaginal hormone replacement is a sub-segment of the overall hormone
replacement market and is comprised of products that deliver estrogen directly
to the vaginal tissue. We estimate this market to be roughly $100 million.
According to the U.S. Bureau of the Census, there are over 30 million women over
the age of 55 in the United States. Many of these women are candidates for
vaginal estrogen replacement therapy. We expect continued growth in the market
for vaginal estrogen preparations due to the rising number of postmenopausal
women, increased life expectancy and a general increase in awareness of the
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benefits of estrogen replacement therapy. Estrogen based vaginal creams are
currently indicated in the treatment of vulval and vaginal atrophy, a common
symptom in post-menopausal women.
THE ORAL CONTRACEPTIVE MARKET
In the U.S., oral contraceptives are a $1.6 billion market. The total
market, measured in dollars, grew 7.4% in 1998 compared with 1997 and 10.6% in
the first six months of 1999 compared with the same period in 1998. Oral
contraceptives are used by over 90 million women worldwide and have been shown
to produce safe and effective contraception. The vast majority of the market is
composed of oral contraceptive pills consisting of estrogen combined with a
progestin.
Ovcon(R) 35 competes in the low-dose segment of the market, which is
comprised of products with 30 to 35 micrograms of estrogen. These low-dose oral
contraceptives comprise roughly 85% of the total market. The low-dose segment
grew 4.1% in the first half of 1999 compared with 1998. The low-dose segment
further breaks down into two sub-segments: the monophasics, including Ovcon(R)
35, that maintain the same ratio of progestin and estrogen throughout the cycle;
and the multiphasics that have a changing ratio throughout the cycle. The
monophasics market has been declining while the multiphasics have contributed to
the overall market growth. We believe that the recent increase in the low-dose
multiphasic sub-segment and the decline in the low-dose monophasics is due in
large part to the major competitors in the oral contraceptive market (Ortho
McNeil/Johnson & Johnson and Wyeth-Ayerst/AHP) placing their primary promotional
emphasis on their newer, multiphasic offerings.
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 which includes over 260 sales representatives
dedicated to promoting and marketing branded pharmaceutical products. We believe
we have the fourth largest sales force targeted to promoting women's health
products to obstetrician/gynecologists in the U.S.
We began building our sales organization in 1997. By the end of 1998, we
had established a sales organization of approximately 260 professionals as well
as the infrastructure to support and manage our sales efforts. 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 us with adequate resources to execute the promotional
plans for the branded products discussed in this prospectus, including those
acquired from BMS.
Our marketing strategy is to promote our branded products to high volume
prescribing physicians through our targeted 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. While part of Warner-Lambert, members of our senior
management team were pioneers in utilizing precision marketing methods and have
brought the benefits of their experience to Warner Chilcott. Precision marketing
techniques help us to target physicians, measure the effectiveness of our
promotional efforts and evaluate the skill of our individual sales
representatives.
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 260 person 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. Our 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
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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 packaging, 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.
BRANDED PRODUCTS
We market a portfolio of branded products primarily in the women's health,
cardiology and dermatology segments. The following table identifies our branded
product marketing and development activities.
<TABLE>
<CAPTION>
PRODUCT THERAPEUTIC APPLICATION STATUS
- ------- ----------------------- ------
<S> <C> <C>
WOMEN'S HEALTH
NataFort(R) Prenatal Vitamin Developed in-house, launched in December 1997
NataChew(TM) Chewable Prenatal Developed in-house, launched in November 1999
Vitamin
Pyridium(R) Urinary Tract Analgesic Acquired rights from Warner-Lambert in June
1997
Pyridium(R) Plus Urinary Tract Acquired rights from Warner-Lambert in June
Analgesic/ 1997, continued development in-house and
Antispasmodic 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- Began promoting in January 1999 under
inflammatory agreement with Schering-Plough
Eryc(R) Antibiotic Acquired from Warner-Lambert in June 1997
</TABLE>
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WOMEN'S HEALTH PRODUCTS
We are marketing and developing 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.
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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.
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
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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 very rewarding financially and
was an important element in reducing our operating losses in the third and
fourth calendar quarters of 1998.
In January 1999, we modified our agreement with Schering-Plough, changing
the mix of products promoted by us to include K-Dur(R), NitroDur(R), a
nitroglycerine patch for angina and Lotrisone(R), an
antifungal/anti-inflammatory corticosteroid cream. This agreement generated
consistent revenue for us through the first three quarters of 1999, although at
lower levels than were earned under the original agreement.
In November 1999, we again modified the terms of our agreement with
Schering-Plough. We will continue to promote the same three products, K-Dur(R),
NitroDur(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 segments. These segments 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 creating new chemical entities. Improvements to existing products
generally involve less development and regulatory risk and shorter time lines
from concept to market. Where appropriate, we plan to utilize the expertise of
our collaborators in the development of new branded products. In our evaluation
of prospective product development projects, we expect to maintain a strong bias
towards projects that have the ability to produce meaningful financial results
in the near-term.
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.
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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.
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 pharmaceutical products we sell. Generic substitutes for
some of our branded pharmaceutical 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
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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, 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.
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 the Company.
We cannot assure you 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, the FDA regulations require post-marketing reporting of adverse drug
events of the drug product. The FDA may, at any time, take action to modify and
restrict the drug's product labeling or withdraw approval of the product, should
new information come to light about the safety of the drug product.
The FDA regulates post-marketing advertising and promotional activities to
assure that 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
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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.
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. 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 assure you 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
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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. See "Risk Factors -- 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.
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.
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.
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. Abbott's time to file a petition for
certiorari in their case against us expired on March 15, 2000 with Abbott having
filed no petition.
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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 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
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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.
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.
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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 Finance and Economics from the
University of Delaware in 1983 and his J.D. degree from Brooklyn Law School in
1990.
47
<PAGE> 51
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.
ELECTION OF DIRECTORS; COMMITTEES OF THE BOARD
Under Irish company law, WCplc must have a minimum of two directors.
WCplc's Articles of Association set the maximum number of directors of WCplc at
12, which number may be changed by a resolution of the shareholders. At each
annual general meeting of shareholders, one-third of the Directors, or if their
number is not three or a multiple of three, then the number nearest to
one-third, shall retire from office and may be reelected if willing to act.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee oversees actions taken by WCplc
independent auditors, recommends the engagement of auditors and reviews any
internal audits WCplc may perform. The current members of the Audit Committee
are Messrs. Bloem, Lynch and Pinkerton. The Compensation Committee approves the
compensation of executives of the Company, makes recommendations to the Board of
Directors with respect to standards for setting compensation levels and
administers the Company's Incentive Share Option Plan. The current members of
the Compensation Committee are Messrs. Chefitz, Bloem and Lynch.
COMPENSATION OF DIRECTORS
As of 1999, directors who are also officers of WCplc do not receive
compensation from WCplc for their services as directors. Those directors who are
not officers of WCplc, currently James H. Bloem, Didier Voydeville, Harold N.
Chefitz, Bruce L. Downey, Arthur F. Haney, Thomas G. Lynch and David B.
Pinkerton, receive $10,000 annually for their services as directors. In
addition, the outside directors receive 5,000 options on the date of our annual
meeting, plus, for new directors only, an initial grant of 10,000 options. The
outside directors are also paid $1,000 for each board meeting attended in
person, $500 for each board meeting attended by phone, $1,000 for each committee
meeting attended in person and $500 for each committee meeting attended via
telephone.
SHAREHOLDER'S AGREEMENTS
Pursuant to a shareholder's agreement dated October 17, 1994 by and between
WCplc and Elan, Elan has the right to appoint one director to the Board of
Directors (currently Thomas G. Lynch) for as long as Elan continues to own: (i)
a previously issued warrant, or any portion thereof; (ii) any ordinary share of
WCplc, or ADS representing such ordinary share, issued upon exercise of the Elan
warrant; or (iii) any ADS, or ordinary share represented thereby, purchased by
Elan pursuant to the purchase agreement dated as of October 17, 1994, any of
which have not been registered under the Securities Act or sold in compliance
with Rule 144 or Rule 144A under the Securities Act. All matters pertaining to
our relationship with Elan must be approved by a committee of the Board of
Directors consisting of our Chief Executive Officer and President and one or
more directors who are unaffiliated with Elan.
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<PAGE> 52
Pursuant to a shareholders agreement dated August 13, 1997 by and between
WCplc and Barr Laboratories, Barr has the right to designate and nominate an
individual for election to the Board of Directors for as long as Barr holds at
least 127,500 of the Company's shares.
EMPLOYMENT AGREEMENTS
Messrs. Andress, Boissonneault and Herendeen and Mses. Cady, Enders and
Hecht have each signed employment agreements with WCplc. Each employment
agreement is terminable by either party without notice, subject to certain
termination provisions which include the payment of a severance amount
consisting of the executive officer's then current salary for a period of twelve
or eighteen months plus all other amounts and benefits to which the executive is
entitled if WCplc terminates the executive officer's employment without cause.
These contracts also contain non-compete provisions which restrict the executive
officers from being involved in, for the period of their employment and for any
period for which the executive officer receives payment, including any severance
amount, from WCplc, any business which is in competition with the business of
WCplc. In addition, each employment agreement contains an express obligation of
confidentiality in respect of WCplc's technological and commercial secrets and
an agreement to assign all intellectual property rights to WCplc.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table discloses, for the fiscal years
indicated, individual compensation information for Mr. Andress and the four
other most highly compensated executive officers of WCplc who were serving as
executive officers at the end of fiscal year 1999 (collectively, the "named
executives").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------- SECURITIES
OTHER UNDERLYING OTHER BENEFITS/
FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ------ ------- ------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James G. Andress........... 1999 326,161 225,000 -- 50,000 15,212(1)
Chief Executive Officer 1998 313,750 -- 10,000(3) 50,000 20,254(1)
and Chairman 1997 300,000 175,000 1,907,500(3)(5) 500,000 19,691(1)
Roger M. Boissonneault..... 1999 254,260 200,000 -- 100,000 15,492(1)
President and Chief 1998 222,917 100,000 10,000(3) 25,000 20,254(1)
Operating Officer 1997 207,061 120,000 570,000(5) 150,000 19,920(1)
Paul S. Herendeen.......... 1999 241,760 200,000 -- 30,000 15,492(1)
Executive Vice President 1998 206,250 100,000 189,500(2) 200,000 19,400(1)
and Chief Financial
Officer
Norma A. Enders............ 1999 140,058 60,000 -- 15,000 14,382(1)
Senior Vice President, 1998 118,333 50,000 -- 10,000 14,929(1)
Regulatory Affairs
Beth P. Hecht.............. 1999 165,625 75,000 25,000(4) 75,000 12,530(1)
Senior Vice President and 1998 -- -- -- -- --
General Counsel
</TABLE>
- ---------------
(1) Represents amounts contributed for the benefit of the named executive under
WCplc's 401(k) Plan, and Group Life and Health Insurance Plans.
(2) Represents reimbursement of relocation expenses in the amount of $104,500, a
signing bonus of $75,000 and director fees of $10,000 as described in (3).
(3) Represents fees paid to serve as a director on WCplc's board which were
$10,000 annually for 1998 and $7,500 annually for 1997. Beginning in 1999,
directors who are also officers of WCplc do not receive compensation from
WCplc for their services as directors.
(4) Represents signing bonus.
(5) Represents the difference between estimated fair value and exercise price of
the ordinary shares underlying warrants awarded.
49
<PAGE> 53
OPTION GRANTS IN FISCAL YEAR 1999
The following table discloses, for the named executives (a) the number of
shares as to which options and/or warrants were granted during 1999 and (b) the
option exercise price (which was in all cases, not less than the market price on
the date of the grant).
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE POTENTIAL REALIZED VALUE AT
UNDERLYING EMPLOYEES OF BASE ASSUMED ANNUAL RATES OF
OPTIONS IN FISCAL PRICE EXPIRATION STOCK PRICE APPRECIATION
(#)(1) YEAR ($SH) DATE FOR OPTION TERM(2)
------------- ---------- --------- ---------- ---------------------------
NAME 5%($) 10%($)
- ---- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James G. Andress........ 50,000 7.95% 8.13 02/11/09 255,824 643,022
Roger M.
Boissonneault......... 40,000/60,000 15.91% 8.13/7.06 02/11/09 477,357 1,172,862
& 08/14/09
Paul S. Herendeen....... 30,000 4.77% 8.13 02/11/09 153,494 385,813
Norma A. Enders......... 15,000 2.39% 8.13 02/11/09 76,747 192,906
Beth P. Hecht........... 75,000 11.93% 6.75 01/01/09 359,609 938,140
</TABLE>
- ---------------
(1) Compensatory options and warrants granted by WCplc 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 WCplc. The
options granted to the named executives in 1999 were issued in this manner,
with the exception of options granted to Ms. Hecht of which 25,000 vested
immediately. The exercise price is the fair market value at the date of
grant.
(2) Amounts represent hypothetical gains that could be achieved for options if
exercised at the end of the option term. These gains are based on assumed
rates of stock price appreciation of 5% and 10% compounded annually from the
date options are granted. Actual gains, if any, on share option exercises
will depend on the future performance of the ordinary shares on the date on
which the options are exercised.
OPTION EXERCISES AND YEAR END VALUES FOR FISCAL YEAR 1999
The following table shows information regarding the exercise of stock
options during fiscal year 1999 by the named executives and the number and value
of any unexercised stock options held by them as of December 31, 1999:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN
NUMBER OF UNEXERCISED THE MONEY OPTION/
SHARES OPTIONS/WARRANTS AT FY-END WARRANTS AT FY-END
ACQUIRED ON VALUE (#) EXERCISABLE/ ($)EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- ----------- ----------- -------------------------- -----------------------
<S> <C> <C> <C> <C>
James G. Andress........ -- -- 437,500/162,500 774,953/267,797
Roger M.
Boissonneault......... -- -- 144,063/130,937 255,699/300,363
Paul S. Herendeen....... -- -- 115,625/124,375 53,352/92,023
Norma A. Enders......... -- -- 37,813/22,187 7,366/27,746
Beth P. Hecht........... -- -- 37,500/37,500 128,906/128,906
</TABLE>
- ---------------
(1) Based on the closing price of $10.19 for the ADSs as reported by the Nasdaq
National Market on December 31, 1999, less the applicable option exercise
price.
INCENTIVE SHARE OPTION PLAN
On April 3, 1997, WCplc adopted an incentive share option plan, which was
amended on June 3, 1999. Under this plan, the Board of Directors (or a committee
of the Board) may grant options to
50
<PAGE> 54
employees, directors and consultants of WCplc or its subsidiaries for the
purchase of ordinary shares, as represented by American Depository Shares. The
plan is intended to provide incentives to, and rewards for, certain eligible
employees, directors and consultants of WCplc or its subsidiaries who have
contributed and will continue to contribute to the success of WCplc. The option
prices are determined by the board (or a committee of the board), but option
prices may not be less than one hundred percent (100%) of the fair market value
of the ordinary shares, represented by ADSs, on the date the option is granted;
provided, however, that in the case of a participant who at the time the options
are granted, is a citizen or resident of the United States for federal income
tax purposes and owns more than ten percent (10%) of the total combined voting
power of all classes of stock of WCplc or its affiliates, the option prices may
not be less than one hundred and ten percent (110%) of the fair market value of
the ordinary shares, represented by ADSs, on the date the options are granted.
An aggregate of 1,500,000 ordinary shares of WCplc, represented by ADSs,
have been reserved for issuance under the Incentive Share Option Plan, subject
to adjustments to reflect changes in WCplc's capitalization. As of March 31,
2000, there were no remaining shares available for grant under the Plan as
1,486,078 shares have been reserved for issuance pursuant to outstanding options
and 13,922 shares have been issued pursuant to exercised options. All options
may be exercised at such times and in such amounts as may be determined at the
time of the granting of the options by the Board (or a committee of the Board);
provided, however, that no options may be exercised later than ten years after
the date upon which they were granted; and provided, further, that in the case
of a Ten Percent Holder no options may be exercised later than four years after
the date upon which they were granted. Options granted within 30 days of the
adoption of the Incentive Share Option Plan may begin to vest on earlier dates,
not being earlier than June 28, 1996, rather than the actual date of grant.
WCplc does not propose options to begin to vest prior to the commencement date
of an employee's employment with WCplc.
Options may be exercised within 30 days (or such longer period as the Board
may determine) after retirement, resignation, or termination of the option
holder's employment or service with WCplc or its subsidiaries (or one year after
such termination because of death), but only to the extent that they had become
exercisable at retirement, resignation or termination. Any unexercised options
shall expire in the event of an option holder's retirement or dismissal or
otherwise (other than as provided in the preceding sentence). Under certain
circumstances involving change of control of WCplc, the Board (or a committee of
the Board) may accelerate the exercisability and termination of the options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 8, 1999, WCplc announced that an entity formed by selected
members of senior management, including the named executives, acquired 600,000
shares of WCplc's stock from Elan. Under the terms of the transaction, Elan
retained the right to proceeds from the sale of the shares at prices up to
$11.50. Thereafter, Elan would be entitled to receive 50% of any realized gains.
51
<PAGE> 55
PRINCIPAL STOCKHOLDERS
All of the outstanding common stock of WCI is owned by WCplc. The following
table sets forth below certain information regarding beneficial ownership of
WCplc's ordinary shares (including the ADSs) at February 29, 2000 (i) by each
person who is known to own beneficially more than five percent of the ordinary
shares (including the ADSs), (ii) by WCplc's directors, (iii) by WCplc's
executive officers and (iv) by all directors and officers as a group. Except as
indicated in the footnotes to the table, the persons named therein have sole
voting power and investment power with respect to all ordinary shares shown as
beneficially owned by them, subject to community property laws where applicable.
Except as otherwise indicated, the address of each person is WCplc's
headquarters, located at Lincoln House, Lincoln Place, Dublin 2, Ireland.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
BENEFICIAL OWNER ORDINARY SHARES ORDINARY SHARES(1)
- ---------------- --------------- ------------------
<S> <C> <C>
Elan Corporation, plc(2).................................... 2,631,290 20.91%
Lincoln House, Lincoln Place
Dublin 2, Ireland
William H. Gates III(3)..................................... 1,518,039 12.23%
2365 Carillon Point
Kirkland, WA 98033
Warner-Lambert Company(4)................................... 1,130,158 8.37%
201 Tabor Road
Morris Plains, NJ 07950
State of Wisconsin Investment Board......................... 1,075,000 8.68%
121 East Wilson Street
Madison, WI 53703
Wellington Management Company, LLP.......................... 816,900 6.60%
75 State Street
Boston, MA 02109
Halisol S.A.(5)............................................. 801,343 6.46%
112 Avenue Kleber
75116 Paris
France
James G. Andress(6)(7)...................................... 607,500 4.73%
Roger M. Boissonneault(6)(8)................................ 285,750 2.28%
Paul S. Herendeen(6)(9)..................................... 252,500 2.02%
Norma A. Enders(10)......................................... 86,563 *
Beth C. Hecht(6)(11)........................................ 71,125 *
James H. Bloem(12).......................................... 6,938 *
Harold N. Chefitz(13)....................................... 23,556 *
Bruce L. Downey(14)......................................... 6,938 *
Arthur F. Haney(15)......................................... 3,750 *
Thomas G. Lynch(16)......................................... 72,881 *
David B. Pinkerton(17)(19).................................. 15,970 *
Didier Voydeville(18)....................................... 1,875 *
All directors and executive officers as a group (21
persons).................................................. 1,884,021 13.89%
</TABLE>
- ---------------
* Less than 1%.
(1) Figures are based upon 12,380,344 shares outstanding as of February 29,
2000. The figures assume exercise by only the shareholder or group named in
each row of all warrants and/or options for the purchase of ordinary shares
held by such shareholder or group which are exercisable within 60 days of
February 29, 2000.
(2) Amount shown represents the aggregate number of: (a) 2,426,768 ADSs, and
(b) 204,522 ordinary shares subject to warrants which are currently
exercisable; both (a) and (b) held by Elan International Services, Ltd.
52
<PAGE> 56
(3) Amount shown represents the aggregate number of: (a) 1,484,441 ADSs, and
(b) 33,598 ordinary shares subject to warrants which are currently
exercisable; both (a) and (b) held by Mr. Gates and Castle Gate, LLC.
(4) Based on 1,130,158 ordinary shares subject to warrants which are currently
exercisable, held by Warner-Lambert Company.
(5) Amount shown represents the aggregate number of (a) 773,825 ADSs; (b)
15,018 ordinary shares subject to warrants which are currently exercisable;
and (c) 12,500 options and warrants which are currently exercisable. (a)
and (b) held by Halisol, S.A. and its Chairwoman, Madame Nicole Bru, who
was a director of WCplc until 1999, and (c) held by Ms. Bru personally.
(6) Amounts shown include ordinary shares held by an entity formed by selected
members of senior management, including the named executives. The amount
shown for each named shareholder includes the number of shares held by such
entity in which such named shareholder has a pecuniary interest. Such
ordinary shares were acquired from Elan Corporation as announced on January
8, 1999. The entity, and not the named persons, has the sole power to vote
such shares.
(7) Amount shown includes 475,000 ordinary shares issuable upon exercise of
currently exercisable options and warrants.
(8) Amount shown includes 161,500 ordinary shares issuable upon exercise of
currently exercisable options and warrants.
(9) Amount shown includes 130,000 ordinary shares issuable upon exercise of
currently exercisable options and warrants.
(10) Amount shown includes 41,563 ordinary shares issuable upon exercise of
currently exercisable options.
(11) Amount shown includes 40,625 ordinary shares issuable upon exercise of
currently exercisable options.
(12) Amount shown represents 5,938 ordinary shares issuable upon exercise of
currently exercisable options.
(13) Amount shown includes 13,556 ordinary shares issuable upon exercise of
currently exercisable options and warrants.
(14) Amount shown includes 5,938 ordinary shares issuable upon exercise of
currently exercisable options. Excludes (a) 250,000 ADSs; and (b) 62,500
ordinary shares subject to warrants which are currently exercisable, both
(a) and (b) held by Barr Laboratories of which Mr. Downey serves as
Chairman, Chief Executive Officer and President. Mr. Downey disclaims
beneficial ownership of ADSs and shares in (a) and (b).
(15) Amount shown represents 3,750 ordinary shares issuable upon exercise of
currently exercisable options and warrants.
(16) Amount shown includes 14,050 ordinary shares issuable upon exercise of
currently exercisable warrants and options. Excludes 2,631,290 ordinary
shares, including warrants, owned by Elan (see footnote 2 above). Mr.
Lynch, who serves as a director of WCplc, is Executive Vice President and
Chief Financial Officer of Elan. Accordingly, Mr. Lynch may be deemed to
share voting and dispositive power as to the shares held by Elan. Mr. Lynch
disclaims beneficial ownership of such shares.
(17) Amount shown includes 13,508 ordinary shares issuable upon exercise of
currently exercisable options.
(18) Amount shown consists of 1,875 ordinary shares issuable upon exercise of
currently exercisable options.
(19) Excludes (a) 496,120 ADSs; and (b) 7,056 ordinary shares subject to
warrants which are currently exercisable: both (a) and (b) held by National
Union Fire Insurance Company of Pittsburgh of which Mr. Pinkerton serves as
Vice President. Mr. Pinkerton disclaims beneficial ownership of these
shares.
53
<PAGE> 57
DESCRIPTION OF EXCHANGE NOTES
You can find the definition of some of the terms used in this description
are defined under the subheading "Definitions." For the purposes of this
description only, the words "we" and "us" refer only to WCI and not to Parent or
any of WCI's subsidiaries and the term "Parent" refers only to WCplc and not to
any of its subsidiaries.
We issued the notes under an indenture dated as of February 15, 2000 among
ourself, WCplc, as Guarantor and The Bank of New York, as trustee. The terms of
the exchange notes include those stated in the indenture and those made part of
the indenture by reference to the Trust Indenture Act of 1939.
The following description is only a summary of the material provisions of
the indenture, the notes and the registration rights agreement. We urge you to
read the indenture, the notes and the registration rights agreement because
they, not this description, define your rights as holders of these exchange
notes. You may request copies of the indenture, the notes and the registration
rights agreement at our address set forth under the heading "Where You Can Find
More Information."
BRIEF DESCRIPTION OF THE EXCHANGE NOTES
These exchange notes:
- are unsecured senior obligations of WCI;
- are effectively subordinated to senior secured indebtedness to the extent
of the assets securing that indebtedness;
- are senior in right of payment to any future Subordinated Obligations of
WCI; and
- are guaranteed on a senior basis by Parent, which holds all the capital
stock of WCI.
PRINCIPAL, MATURITY AND INTEREST
WCI will issue the exchange notes in an aggregate principal amount of
$200.0 million. The exchange notes will mature on February 15, 2008. WCI will
issue the exchange notes in denominations of $1,000 and any integral multiple of
$1,000. Subject to our compliance with the covenant described under the
subheading "-- Certain Covenants -- Limitations on Indebtedness," WCI is
permitted to issue more exchange notes under the indenture in an unlimited
principal amount. Any such additional exchange notes that are actually issued
will be treated as issued and outstanding exchange notes (and as the same class
as the exchange notes) for all purposes of the indenture and this "Description
of Exchange Notes" unless the context indicates otherwise.
Interest on these exchange notes will accrue at the rate of 12 5/8% per
annum and will be payable semiannually in arrears on February 15 and August 15,
commencing on August 15, 2000. We will make each interest payment to the holders
of record of these exchange notes on the immediately preceding February 1 and
August 1. We will pay interest on overdue principal at 1% per annum in excess of
the above rate and will pay interest on overdue installments of interest at such
higher rate to the extent lawful.
Interest on these exchange notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
OPTIONAL REDEMPTION
Except as set forth below, we will not be entitled to redeem the exchange
notes at our option prior to February 15, 2004.
On and after February 15, 2004, we will be entitled at our option to redeem
all or a portion of the exchange notes upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed in percentages of principal
amount on the redemption date), plus accrued interest to the redemption date
54
<PAGE> 58
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the 12-month period commencing on February 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------ ----------
<S> <C>
2004...................................................... 106.3125%
2005...................................................... 104.2083%
2006...................................................... 102.1042%
2007 and thereafter....................................... 100.0000%
</TABLE>
In addition, before February 15, 2003, we may at our option on one or more
occasions redeem exchange notes in an aggregate principal amount of not to
exceed 35% of the aggregate principal amount of the exchange notes originally
issued at a redemption price (expressed as a percentage of principal amount) of
112.625%, plus accrued and unpaid interest to the redemption date (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date), with the Net Cash Proceeds from one
or more Public Equity Offerings following which there is a public market;
provided that:
(1) at least 65% of such aggregate principal amount of exchange notes
(which include additional notes, if any), remains outstanding
immediately after the occurrence of each such redemption (other than
exchange notes held, directly or indirectly, by WCI or its Affiliates);
and
(2) each such redemption occurs within 60 days after the date of the
related Public Equity Offering.
METHODS OF RECEIVING PAYMENTS ON THE EXCHANGE NOTES
If we are redeeming less than all the exchange notes at any time, the
Trustee will select exchange notes on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate.
We will redeem exchange notes of $1,000 or less in whole and not in part.
We will cause notices of redemption to be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each holder of exchange
notes to be redeemed at its registered address.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that exchange note shall state the portion of the
principal amount thereof to be redeemed. We will issue a new exchange note in
principal amount equal to the unredeemed portion of the original exchange note
in the name of the holder thereof upon cancellation of the original exchange
note. Exchange notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on
exchange notes or portions of them called for redemption.
MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES
We are not required to make any mandatory redemption or sinking fund
payments with respect to the exchange notes. However, under certain
circumstances, we may be required to offer to purchase the exchange notes as
described under the captions "-- Change of Control" and "Certain Covenants --
Limitation on Sales of Assets and Subsidiary Stock." We may at any time and from
time to time purchase exchange notes in the open market or otherwise.
GUARANTIES
Parent, collectively with any current or future domestic subsidiaries which
enter into a guaranty agreement, the "guarantors", will jointly and severally
guarantee, on a senior basis, our obligations under these exchange notes. The
obligations of the guarantor will be limited as necessary to prevent it from
constituting a fraudulent conveyance under applicable law.
55
<PAGE> 59
If the guaranty were rendered voidable, it could be subordinated by a court
to all other indebtedness (including guarantees and other contingent
liabilities) of the guarantor, and, depending on the amount of such
indebtedness, a guarantor's liability on its guaranty could be reduced to zero.
The guaranty of any guarantor (other than Parent) will be released:
(1) upon the sale or other disposition (including by way of consolidation
or merger) of any guarantor; or
(2) upon the sale or disposition of all or substantially all the assets of
any guarantor;
in each case other than to WCI or an Affiliate of WCI and as permitted by
the indenture.
RANKING
Other Senior Indebtedness Versus Exchange Notes
The payment of the principal of, premium, if any, and interest on the
exchange notes and the payment of any guaranty will rank pari passu in right of
payment to the Senior Indebtedness of WCI or the relevant guarantor, as the case
may be, including the obligations of WCI under the Senior Credit Facilities.
As of December 31, 1999, after giving pro forma effect to (i) the issuance
of the old notes, (ii) the repayment of all outstanding amounts under our
working capital facility and (iii) the redemption of WCI's remaining outstanding
senior subordinated discount notes due 2001, neither Parent nor WCI have any
Senior Indebtedness other than the exchange notes. However, WCI will have the
ability to incur up to $10.0 million (or, possibly, a greater amount based on a
borrowing base) of other Senior Indebtedness under the Senior Credit Facility.
The Notes are unsecured obligations of WCI and the Guaranty is an unsecured
obligation of Parent. Secured debt and other secured obligations of Parent and
WCI (including the Senior Credit Facilities) will be effectively senior to the
Notes to the extent of the value of the assets securing such debt or other
obligations.
Liabilities of Subsidiaries Versus Notes
Claims of creditors of the non-guarantor subsidiaries of Parent and WCI
generally will have priority with respect to the assets and earnings of those
non-guarantor subsidiaries over claims of holders of the exchange notes.
Although the indenture limits the incurrence of Indebtedness and preferred
stock of Parent and of certain of WCI's subsidiaries, this limitation is subject
to a number of significant qualifications. Moreover, the indenture does not
impose any limitation on the incurrence by Parent, WCI and their subsidiaries of
liabilities that are not considered indebtedness under the indenture. See
"-- Covenants -- Limitation on Indebtedness."
Subordinated Indebtedness Versus Notes
The indebtedness evidenced by these exchange notes will rank senior in
right of payment to all future subordinated indebtedness of WCI and the guaranty
will rank senior to all future subordinated indebtedness of Parent.
ADDITIONAL AMOUNTS
All payments made by Parent under or with respect to its guaranty will 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
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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 will pay such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
each holder of exchange notes (including Additional Amounts) after such
withholding or deduction will 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 will be payable with respect to a
payment made to a holder of exchange notes 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 exchange notes) 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 Notes; (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 exchange notes 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 exchange notes had been the holder of the exchange notes 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 will 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
will 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 will furnish to the holders of the
exchange notes, 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 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 will be obligated to pay Additional
Amounts with respect to such payment, Parent will 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
exchange notes on the payment date.
BOOK-ENTRY, DELIVERY AND FORM
We will initially issue the exchange notes in the form of one or more
global notes (the "Global Note"). The Global Note will be deposited with, or on
behalf of, The Depository Trust Company (the "Depository") and registered in the
name of the Depository or its nominee. Except as set forth below, the Global
Note may be transferred, in whole and not in part, only to the Depository or
another nominee of the Depository. You may hold your beneficial interests in the
Global Note directly through the Depository if you have an account with the
Depository or indirectly through organizations which have accounts with the
Depository.
Upon the transfer of an exchange note in definitive form, such exchange
note will, unless the Global Note has previously been exchanged for Notes in
definitive form, be exchanged for an interest in the Global Note representing
the principal amount of exchange notes being transferred.
The Depository has advised us as follows: the Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of participants, which are
institutions that have accounts with the Depository and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities
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through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to indirect participants such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, whether directly or indirectly.
The Company expects that pursuant to procedures established by the
Depository, upon the deposit of the Global Note with the Depository, the
Depository will credit, on its book-entry registration and transfer system, the
principal amount of Notes represented by such Global Note to the accounts of
participants. The accounts to be credited shall be designated by the Initial
Purchasers. Ownership of beneficial interests in the Global Note will be limited
to participants or persons that may hold interests through participants.
Ownership of beneficial interests in the Global Note will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depository (with respect to participants' interests), the
participants and the indirect participants (with respect to the owners of
beneficial interests in the Global Note other than participants). The laws of
some jurisdictions may require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and laws
may impair the ability to transfer or pledge beneficial interests in the Global
Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of any related Notes
evidenced by the Global Note for all purposes of such Notes and the indenture.
Except as set forth below, as an owner of a beneficial interest in the Global
Note, you will not be entitled to have the exchange notes represented by the
Global Note registered in your name, will not receive or be entitled to receive
physical delivery of certificated Notes and will not be considered to be the
owner or holder of any exchange notes under the Global Note. We understand that
under existing industry practice, in the event an owner of a beneficial interest
in the Global Note desires to take any action that the Depository, as the holder
of the Global Note, is entitled to take, the Depository would authorize the
participants to take such action, and the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
We will make payments of principal of, premium, if any, and interest on
Notes represented by the Global Note registered in the name of and held by the
Depository or its nominee to the Depository or its nominee, as the case may be,
as the registered owner and holder of the Global Note.
We expect that the Depository or its nominee, upon receipt of any payment
of principal of, premium, if any, or interest on the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. We also expect that
payments by participants or indirect participants to owners of beneficial
interests in the Global Note held through such participants or indirect
participants will be governed by standing instructions and customary practices
and will be the responsibility of such participants or indirect participants. We
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Note for any exchange note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
indirect participants or the relationship between such participants or indirect
participants and the owners of beneficial interests in the Global Note owning
through such participants.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
trustee nor WCI will have any responsibility or liability for the performance by
the Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
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CERTIFICATED NOTES
Subject to certain conditions, the exchange notes represented by the Global
Note are exchangeable for certificated notes in definitive form of like tenor in
denominations of $1,000 and integral multiples thereof if:
(1) the Depository notifies us that it is unwilling or unable to continue
as Depository for the Global Note or the Depository ceases to be a
clearing agency registered under the Exchange Act and, in either case,
we are unable to locate a qualified successor within 90 days;
(2) we in our discretion at any time determine not to have all the exchange
notes represented by the Global Note; or
(3) a default entitling the holders of the exchange notes to accelerate the
maturity thereof has occurred and is continuing.
Any exchange note that is exchangeable as above is exchangeable for
certificated Notes issuable in authorized denominations and registered in such
names as the Depository shall direct. Subject to the foregoing, the Global Note
is not exchangeable, except for a Global Note of the same aggregate denomination
to be registered in the name of the Depository or its nominee. In addition, such
certificates will bear the legend referred to under "Transfer Restrictions",
unless we determine otherwise in accordance with applicable law, subject, with
respect to such certificated notes, to the provisions of such legend.
SAME-DAY PAYMENT
The indenture requires us to make payments in respect of exchange notes
(including principal, premium and interest) by wire transfer of immediately
available funds to the U.S. dollar accounts with banks in the U.S. specified by
the holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder shall have the right to require that WCI repurchase such
holder's exchange notes 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):
(1) 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-5 under the Exchange Act, except that for purposes of
this clause (1) 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;
(2) individuals who on the Issue Date constituted the Board of Directors of
Parent or WCI (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders
of Parent or WCI, as applicable, was approved by a vote of 66 2/3% of
the directors of Parent or WCI, as applicable, then still in office who
were either directors 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 applicable Board of Directors then in
office;
(3) the adoption of a plan relating to the liquidation or dissolution of
Parent or WCI; or
(4) the merger or consolidation of Parent or WCI with or into another
Person or the merger of another Person with or into Parent or WCI, or
the sale of all or substantially all the assets of Parent or WCI and
its subsidiaries (determined on a consolidated basis) to another Person
other
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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 exchange notes and a Subsidiary of the transferor of
such assets or (C) in the case of a merger or consolidation of WCI, the
surviving entity continues to be a Wholly Owned Subsidiary of Parent
and there has not occurred a Change of Control of Parent.
Within 30 days following any Change of Control, we will mail a notice to
each Holder with a copy to the trustee (the "Change of Control Offer") stating:
(1) that a Change of Control has occurred and that such holder has the
right to require us to purchase such holder's exchange notes 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 after giving effect to such Change of
Control);
(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, as determined by us, consistent with the covenant
described hereunder, that a holder must follow in order to have its
exchange notes purchased.
We will 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 in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by us and
purchases all exchange notes validly tendered and not withdrawn under such
Change of Control Offer.
We will 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 exchange notes as a result of a Change of
Control. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the covenant described hereunder, we will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached our obligations under the covenant described hereunder by virtue
of its compliance with such securities laws or regulations.
The Change of Control purchase feature of the exchange notes may in certain
circumstances make it more difficult or discourage a sale or takeover of Parent
or WCI and, thus, the removal of incumbent management. The Change of Control
purchase feature is a result of negotiations between us and the Initial
Purchasers. Parent has entered into an agreement with Galen Holdings plc which
would result in a Change of Control. See "Prospectus Summary -- Recent
Developments." Subject to the limitations discussed below, we could, in the
future, enter into certain transactions, including acquisitions, refinancings or
other recapitalizations, that would not constitute a Change of Control under the
indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to Incur additional Indebtedness are contained in
the covenants described under "-- Certain Covenants -- Limitation on
Indebtedness," "-- Limitation on Liens" and "-- Limitation on Sale/Leaseback
Transactions." Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the exchange notes then
outstanding. Except for the limitations contained in such covenants, however,
the indenture will not contain any covenants or provisions that may afford
holders of the exchange notes protection in the event of a highly leveraged
transaction.
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The Senior Credit Facilities contains, and we anticipate that future
indebtedness that we may incur may contain, prohibitions on the occurrence of
certain events that would constitute a Change of Control or require the
repurchase of such indebtedness upon a Change of Control. Moreover, the exercise
by the holders of their right to require us to repurchase the exchange notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on us. Finally,
our ability to pay cash to the holders of exchange notes following the
occurrence of a Change of Control may be limited by our then existing financial
resources. There can be no assurance that sufficient funds will be available
when necessary to make any required repurchases.
The provisions under the indenture relative to our obligation to make an
offer to repurchase the exchange notes as a result of a Change of Control may be
waived or modified with the written consent of the holders of a majority in
principal amount of the exchange notes.
CERTAIN COVENANTS
The indenture contains covenants including, among others, the following:
Limitation on Indebtedness
(a) Each of Parent and WCI will not, and will not permit any of their
respective Restricted Subsidiaries to, Incur, directly or indirectly, any
Indebtedness; provided, however, that Parent and WCI will be entitled to 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 our
Consolidated Coverage Ratio exceeds 2.0 to 1.
(b) Notwithstanding the foregoing paragraph (a), so long as no Default has
occurred and is continuing, (i) Parent and WCI will be entitled to Incur any or
all of the following Indebtedness, (ii) their respective Wholly Owned
Subsidiaries will 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) will be entitled to
Incur any of the Indebtedness described in clause (5) below and, with respect to
the exchange notes or additional notes 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) $10.0 million and
(y) the sum of (A) 60% of the book value of the inventory of Parent,
WCI and their Restricted Subsidiaries plus (B) 85% of the book value of
the accounts receivable of Parent, WCI 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 pursuant to the covenant described under "-- Limitation on
Sales of Assets and Subsidiary Stock;"
(2) Indebtedness owed to and held by Parent, WCI or any of their respective
Wholly Owned Subsidiaries; provided, however, that (A) any 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 us or any of
our 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 WCI 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 Notes;
(3) the exchange notes (other than any additional notes);
(4) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2) or (3) of this covenant) and listed on a
schedule to the indenture;
(5) Indebtedness of a domestic Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary was
acquired by Parent, WCI or Restricted Subsidiary (other
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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 us) or such
subsidiary was designated a Restricted Subsidiary; provided, however,
that on the date of such acquisition and after giving pro forma effect
thereto, we would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to paragraph (a) of this covenant;
(6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant
to paragraph (a) or pursuant to clause (3), (4) or (5) 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 the indenture;
(8) Indebtedness consisting of the guaranty of the exchange notes by a
guarantor and any guarantee by a guarantor of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (1), (2), (3), (4), (6)
or (9); and
(9) Indebtedness of Parent or WCI in an aggregate principal amount which,
when taken together with all other Indebtedness of Parent or WCI,
respectively, outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (7) above or paragraph
(a)) does not exceed $20.0 million.
(c) Notwithstanding the foregoing, none of Parent, WCI or any other
Guarantor will Incur any Indebtedness pursuant to the foregoing paragraph (b) if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations of Parent, WCI or any other Guarantor unless such
Indebtedness shall be subordinated to the Notes or the applicable Guaranty to at
least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant, (i) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, WCI, 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) WCI will be entitled to divide and classify an item of
Indebtedness in more than one of the types of Indebtedness described above.
(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 will 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 will be
as provided in such Currency Agreement. The principal amount of any Refinancing
Indebtedness Incurred in the same currency as the Indebtedness being Refinanced
will 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 will 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 will be
determined on the date such Refinancing Indebtedness is Incurred.
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Limitation on Restricted Payments
(a) Each of Parent and WCI will not, and will not permit any of their
respective Restricted Subsidiaries, directly or indirectly, to make a Restricted
Payment if at the time Parent, WCI 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 entitled to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness;" or
(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 the
Investments (other than Permitted Investments) made by Parent or
WCI 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, WCI or any
Restricted Subsidiary, and (y) to the extent such Person is an
Unrestricted Subsidiary, the portion (proportionate to Parent's or
WCI'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,
WCI or any Restricted Subsidiary in such Person or Unrestricted
Subsidiary; plus
(F) $1.0 million.
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(b) The preceding provisions will not prohibit:
(1) any Restricted Payment (other than a Restricted Payment described in
clause (1) of the definition of "Restricted Payment") 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 paragraph (a) above;
(2) 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 the covenant
described under "-- Limitation on Indebtedness;" 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;
(3) dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividend would have complied with this
covenant; 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;
(4) 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, the 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 an "Asset Disposition," has
applied the Net Available Cash from such Asset Disposition in
accordance with the covenant entitled "-- Limitation on Sales of Assets
and Subsidiary Stock" or, in the case of a transaction that constitutes
a "Change of Control," has complied with the provision described under
"-- Change of Control;" or
(5) any purchase, redemption or other acquisition or retirement for value
of WCI's remaining outstanding senior subordinated discount notes due
2001.
Limitation on Restrictions on Distributions from Restricted Subsidiaries
Parent and WCI will not, and will 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, WCI or a Restricted Subsidiary or pay any
Indebtedness owed to Parent or WCI, (b) make any loans or advances to Parent or
WCI or (c) transfer any of its property or assets to Parent or WCI, except:
(1) any encumbrance or restriction pursuant to the indenture itself or
pursuant to an agreement in effect at or entered into on the Issue Date
and listed on a schedule to the indenture;
(2) 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 WCI (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
WCI) and outstanding on such date;
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(3) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred
to in clause (1) or (2) of this covenant or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or
(2) of this covenant or this clause (3); 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 noteholders than encumbrances and restrictions
with respect to such Restricted Subsidiary contained in such
predecessor agreements;
(4) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease or the
property leased thereunder;
(5) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness of a Restricted
Subsidiary permitted under the indenture to the extent such
restrictions restrict the transfer of the property subject to such
security agreements or mortgages; and
(6) 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.
Limitation on Sales of Assets and Subsidiary Stock
(a) Parent and WCI will not, and will not permit any of their respective
Restricted Subsidiaries to, directly or indirectly, consummate any Asset
Disposition unless:
(1) Parent, WCI 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 Board of Directors, of the shares and
assets subject to such Asset Disposition;
(2) in the case of any Asset Disposition, including a license of rights,
(i) at least 80% of the consideration thereof received by Parent, WCI
or such Restricted Subsidiary is in the form of cash or cash
equivalents or (ii) in the case only of license of rights, if after
giving pro forma effect thereto, either (x) Parent and WCI are able to
Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of
the covenant described under "-- Limitation on Indebtedness;"; or
(y)(A) our Consolidated Coverage Ratio improves after giving effect to
the transaction and (B) the aggregate book value of WCI's assets that
are subject to licensing of rights made in reliance upon this clause
(ii)(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
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Parent, WCI or such Restricted Subsidiary, as
the case may be:
(A) first, to the extent Parent or WCI 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, WCI or any other Affiliate of Parent
or WCI) 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 WCI 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
(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 Notes (and to
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holders of other Senior Indebtedness designated by Parent or WCI)
to purchase Notes (and such other Senior Indebtedness) pursuant to
and subject to the conditions contained in the indenture;
provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A) or (C) above, Parent, WCI
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 covenant, Parent, WCI and
the Restricted Subsidiaries will not be required to apply any Net Available Cash
in accordance with this covenant except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this covenant exceeds $5.0 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash shall be invested in
Temporary Cash Investments or applied to temporarily reduce revolving credit
indebtedness.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents:
(1) the assumption of Indebtedness of Parent, WCI or any Restricted
Subsidiary and the release of Parent, WCI or such Restricted Subsidiary
from all liability on such Indebtedness in connection with such Asset
Disposition; and
(2) securities received by Parent, WCI or any Restricted Subsidiary from
the transferee that are promptly converted by Parent, WCI 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 will not permit repatriation to the United States
(Parent or WCI will, 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 will be applied in the manner set forth
in this covenant 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 WCI, 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.
(b) In the event of an Asset Disposition that requires the purchase of the
exchange notes (and other Senior Indebtedness) pursuant to clause (a)(3)(C)
above, WCI will purchase exchange notes tendered pursuant to an offer by WCI for
the Notes (and such other Senior Indebtedness) 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 prorating in the event of oversubscription) set forth in the
indenture. If the aggregate purchase price of the securities tendered exceeds
the Net Available Cash allotted to their purchase, WCI will select the
securities to be purchased on a pro rata basis but in round denominations, which
in the case of the Notes will be denominations of $1,000 principal amount or
multiples thereof. WCI will not be required to make such an offer to purchase
Notes (and other Senior Indebtedness) pursuant to this covenant if the Net
Available Cash available therefor is less than $5.0 million (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).
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(c) WCI will 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 exchange notes pursuant to this covenant.
To the extent that the provisions of any securities laws or regulations conflict
with provisions of this covenant, WCI will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
under this clause by virtue thereof.
Limitation on Affiliate Transactions
(a) Each of Parent and WCI will not, and will not permit any of their
respective Restricted Subsidiaries to, enter into or permit to exist any
transaction, or series of related 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 service), with, or for the benefit of, any Affiliate of Parent or WCI (an
"Affiliate Transaction") unless:
(1) the terms of the Affiliate Transaction are no less favorable to Parent,
WCI or such Restricted Subsidiary than those that could be obtained at
the time of the Affiliate Transaction in arm's-length dealings with a
Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of $1.0
million, (A) the terms of the Affiliate Transaction are set forth in
writing and (B) a majority of the disinterested directors of Parent
have determined in good faith that the criteria set forth in clause (1)
are satisfied and have approved the relevant Affiliate Transaction as
evidenced by a resolution of the Board of Directors; and
(3) if such Affiliate Transaction involves an amount in excess of $5.0
million, has been determined by an investment banking firm of national
prominence to be fair, from a financial standpoint, to Parent, WCI and
their Restricted Subsidiaries.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(1) any Investment (other than a Permitted Investment) or other Restricted
Payment, in each case permitted to be made pursuant to the covenant
described under "-- Limitation on Restricted Payments" or any payment
deemed to not be a Restricted Payment due to the proviso in subsection
(1) of the definition thereof;
(2) 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;
(3) loans or advances to employees in the ordinary course of business of
Parent, WCI or their Restricted Subsidiaries, but in any event not to
exceed $2.5 million in the aggregate outstanding at any one time;
(4) the payment of reasonable fees and compensation to and indemnity
provided on behalf of directors of Parent, WCI and their Restricted
Subsidiaries;
(5) any Affiliate Transaction between Parent or WCI and their respective
Wholly Owned Subsidiaries or between Wholly Owned Subsidiaries of
either Parent or WCI;
(6) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of Parent; and
(7) any agreement as in effect on the Issue Date and described in the
prospectus (so long as such renewals or extensions are not materially
less favorable to Parent, WCI or the Restricted Subsidiaries) and the
transactions evidenced thereby.
Limitation on the Sale or Issuance of Capital Stock of WCI and Restricted
Subsidiaries
Neither Parent nor WCI shall sell or otherwise dispose of any Capital Stock
of any of their respective Restricted Subsidiaries or, in the case of Parent,
WCI, and shall not permit any Restricted Subsidiary or,
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in the case of Parent, WCI, directly or indirectly, to issue or sell or
otherwise dispose of any of its Capital Stock except:
(1) to Parent, WCI or a Wholly Owned Subsidiary of Parent or WCI;
(2) directors' qualifying shares;
(3) if, immediately after giving effect to the issuance, sale or other
disposition, none of Parent, WCI or any of their Subsidiaries owns any
Capital Stock of the Restricted Subsidiary; or
(4) if, immediately after giving effect to the issuance, sale or other
disposition, the Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in the Person remaining after
giving effect to the issuance, sale or other disposition would have
been permitted to be made under the covenant described under
"--Limitation on Restricted Payments" if made on the date of the
issuance, sale or other disposition.
In addition, WCI shall not, directly or indirectly, issue or sell or
otherwise dispose of any of its Capital Stock to any Person other than Parent.
Limitation on Liens
Each of Parent and WCI will not, and will 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 exchange notes shall be secured equally and
ratably with (or prior to) the obligations so secured for so long as such
obligations are so secured.
Any Lien created for the benefit of the holders of the Notes 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.
Limitation on Sale/Leaseback Transactions
Each of Parent and WCI will not, and will not permit any of their
respective Restricted Subsidiaries to, enter into any Sale/Leaseback Transaction
with respect to any property unless:
(1) Parent, WCI 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 pursuant to the covenant
described under "-- Limitation on Indebtedness" and (B) create a Lien
on such property securing such Attributable Debt without equally and
ratably securing the exchange notes pursuant to the covenant described
under "-- Limitation on Liens;"
(2) the net proceeds received by Parent, WCI or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal
to the fair value (as determined by the Board of Directors) of such
property; and
(3) Parent or WCI, as the case may be, applies the proceeds of such
transaction in compliance with the covenant described under
"-- Limitation on Sale of Assets and Subsidiary Stock."
Merger and Consolidation
Neither Parent nor WCI will consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions,
directly or indirectly, all or substantially all its assets to, any Person,
unless:
(1) 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
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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 WCI)
shall expressly assume, by an indenture supplemental thereto, executed
and delivered to the trustee, in form satisfactory to the trustee, all
the obligations of Parent or WCI, as the case may be, under the
exchange notes and the indenture;
(2) 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 such Successor Company or such Subsidiary at the time
of such transaction), no Default shall have occurred and be continuing;
(3) immediately after giving pro forma effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness;"
(4) 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 WCI
immediately prior to such transaction;
(5) Parent or WCI 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 the indenture;
(6) Parent or WCI 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
(7) 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 States 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 (3) and (4) will 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 WCI or (B) Parent or WCI
merging with one of its Affiliates solely for the purpose and with the sole
effect of reincorporating Parent or WCI in another jurisdiction.
The Successor Company will be the successor to Parent or WCI and shall
succeed to, and be substituted for, and may exercise every right and power of,
Parent or WCI, as the case may be, under the 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 exchange notes.
Neither Parent nor WCI will permit any Subsidiary Guarantor to consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
a series of transactions, all or substantially all of its assets to any Person
unless:
(1) except in the case of a Subsidiary Guarantor that has been disposed of
in its entirety to another Person, other than to Parent, WCI or an
Affiliate of Parent or WCI, whether through a merger, consolidation or
sale of Capital Stock or assets, if in connection therewith Parent or
WCI provides an Officers' Certificate to the trustee to the effect that
Parent or WCI will comply with its obligations under the covenant
described under "-- Limitation on Sales of Assets and Subsidiary Stock"
in respect of such disposition, the resulting, surviving or transferee
Person (if not such Subsidiary) shall be a Person organized 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
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guaranty agreement, in a form satisfactory to the trustee, all the
obligations of such Subsidiary, if any, under its Subsidiary Guaranty;
(2) 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
(3) Parent or WCI 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 the
indenture.
BUSINESS ACTIVITIES
Parent and WCI will not, and will not permit any of their respective
Restricted Subsidiaries to, engage in any business other than Related Business.
PAYMENTS FOR CONSENT
Parent and WCI will not, and will not permit any of their respective
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any holder of exchange notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the indenture or the exchange notes unless such consideration is offered to
be paid and is paid to all holders of the exchange notes that consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
FUTURE GUARANTORS
Parent and WCI will cause each domestic Restricted Subsidiary created or
acquired after the Issue Date to execute and deliver to the trustee a guaranty
agreement pursuant to which such Restricted Subsidiary will guarantee payment of
the exchange notes on the same terms and conditions as those set forth in the
indenture.
In addition, Parent and WCI will cause each existing non-guarantor
Subsidiary and each foreign Subsidiary created or acquired after the Issue Date
which has guaranteed or which guarantees any Indebtedness of Parent or WCI to
execute and deliver to the Trustee a Guaranty Agreement pursuant to which such
non-guarantor or foreign Subsidiary will guarantee payment of Parent's
obligations under the guaranty and WCI's obligations under the exchange notes 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 WCI given by such non-guarantor or foreign Subsidiary.
SEC REPORTS
Regardless of whether Parent or WCI is at any time subject to the reporting
requirements of Sections 13 or 15(d) of the Exchange Act, we will file with the
SEC (to the extent the SEC will accept the same for filing) and provide to the
trustee and noteholders 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 exchange notes are
outstanding, Parent and WCI will make available to any prospective purchaser of
exchange notes 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.
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DEFAULTS
Each of the following is an Event of Default:
(1) a default in the payment of interest on the exchange notes when due,
continued for 30 days;
(2) a default in the payment of principal of any exchange note when due at
its Stated Maturity, upon optional redemption, upon required purchase,
upon declaration or otherwise;
(3) the failure by Parent or WCI to comply with its obligations under
"-- Certain Covenants -- Merger and Consolidation" above;
(4) the failure by Parent or WCI to comply for 30 days after notice with
any of its obligations in the covenants described above under "Change
of Control" (other than a failure to purchase Notes) or under
"-- Certain Covenants" under "-- Limitation on Indebtedness,"
"-- Limitation on Restricted Payments," "-- Limitation on Restrictions
on Distributions from Restricted Subsidiaries," "-- Limitation on Sales
of Assets and Subsidiary Stock" (other than a failure to purchase
Notes), "-- Limitation on Affiliate Transactions," "-- Limitation on
the Sale or Issuance of Capital Stock of WCI and Restricted
Subsidiaries," "-- Limitation on Liens," "-- Limitation on
Sale/Leaseback Transactions," "-- Future Guarantors" or "-- SEC
Reports;"
(5) the failure by Parent, WCI or a Guarantor to comply for 60 days after
notice with its other agreements contained in the indenture;
(6) Indebtedness of Parent, WCI, any 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
$5.0 million (the "cross acceleration provision");
(7) certain events of bankruptcy, insolvency or reorganization of Parent,
WCI, any Guarantor or any Significant Subsidiary (the "bankruptcy
provisions");
(8) any judgment or decree for the payment of money in excess of $5.0
million is entered against Parent, WCI, any guarantor or any
Significant Subsidiary, remains outstanding for a period of 60
consecutive days following such judgment and is not discharged, waived
or stayed within 10 days after notice (the "judgment default
provision"); or
(9) 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.
However, a default under clauses (4), (5) and (8) will not constitute an Event
of Default until the Trustee or the holders of 25% in principal amount of the
outstanding exchange notes notify Parent or WCI, as the case may be, of the
default and Parent or WCI does not cure such default within the time specified
after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding exchange notes may
declare the principal of and accrued but unpaid interest on all the exchange
notes to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of Parent or WCI
occurs and is continuing, the principal of and interest on all the exchange
notes will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the trustee or any holders of the
exchange notes. Under certain circumstances, the holders of a majority in
principal amount of the outstanding exchange notes may rescind any such
acceleration with respect to the exchange notes and its consequences.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default occurs and is continuing, the trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of the exchange
notes unless such holders have offered to the trustee reasonable indemnity or
security against any loss, liability or
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expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no holder of a exchange note may pursue any
remedy with respect to the indenture or the exchange notes unless:
(1) such holder has previously given the trustee notice that an Event of
Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding exchange
notes have requested the trustee to pursue the remedy;
(3) such holders have offered the trustee reasonable security or indemnity
against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity; and
(5) holders of a majority in principal amount of the outstanding exchange
notes have not given the trustee a direction inconsistent with such
request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding exchange notes are given the right to 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. The trustee,
however, may refuse to follow any direction that conflicts with law or the
indenture or that the trustee determines is unduly prejudicial to the rights of
any other holder of a exchange note or that would involve the trustee in
personal liability.
If a Default occurs, is continuing and is known to the Trustee, the Trustee
must mail to each holder of the exchange notes notice of the Default within 90
days after it occurs. Except in the case of a Default in the payment of
principal of or interest on any exchange note, the trustee may withhold notice
if and so long as a committee of its trust officers determines that withholding
notice is not opposed to the interest of the holders of the exchange notes. In
addition, we are required to deliver to the trustee, within 120 days after the
end of each fiscal year, a certificate indicating whether the signers thereof
know of any Default that occurred during the previous year. We are required to
deliver to the trustee, within 30 days after the occurrence thereof, written
notice of any event which would constitute certain Defaults, their status and
what action we are taking or propose to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture may be amended with the
consent of the holders of a majority in principal amount of the exchange notes
then outstanding (including consents obtained in connection with a tender offer
or exchange for the exchange notes) and any past default or compliance with any
provisions may also be waived with the consent of the holders of a majority in
principal amount of the exchange notes then outstanding. However, without the
consent of each holder of an outstanding exchange note affected thereby, an
amendment may not, among other things:
(1) reduce the amount of exchange notes whose holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on any
exchange note;
(3) reduce the principal of or extend the Stated Maturity of any exchange
note;
(4) reduce the amount payable upon the redemption of any exchange note or
change the time at which any exchange note may be redeemed as described
under "-- Optional Redemption" above;
(5) make any Note payable in money other than that stated in the exchange
note;
(6) impair the right of any holder of the exchange notes to receive payment
of principal of and interest on such holder's exchange notes 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 exchange notes;
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(7) make any change in the amendment provisions which require each holder's
consent or in the waiver provisions;
(8) make any change in the ranking or priority of any exchange note that
would adversely affect the noteholders; or
(9) make any change in any guaranty that would adversely affect the
noteholders.
Notwithstanding the preceding, without the consent of any holder of the
exchange notes, Parent, WCI, the guarantors and trustee may amend the indenture:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of Parent, WCI or the trustee under the indenture;
(3) to provide for uncertificated notes in addition to or in place of
certificated notes (provided that the uncertificated notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated notes are described in Section
163(f)(2)(B) of the Code);
(4) to add guarantees with respect to the exchange notes or to secure the
exchange notes;
(5) to add to the covenants of Parent, WCI or a guarantor for the benefit
of the holders of the exchange notes or to surrender any right or power
conferred upon Parent, WCI or a guarantor;
(6) to make any change that in no manner whatsoever adversely affects the
rights of any holder of the exchange notes; or
(7) to comply with any requirement of the SEC in connection with the
qualification of the indenture under the Trust Indenture Act.
The consent of the holders of the exchange notes is not necessary under the
indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the indenture becomes effective, we are required
to mail to holders of the exchange notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the
exchange notes, or any defect therein, will not impair or affect the validity of
the amendment.
TRANSFER
The exchange notes will be issued in registered form and will be
transferable only upon the surrender of the Notes being transferred for
registration of transfer. We may require payment of a sum sufficient to cover
any tax, assessment or other governmental charge payable in connection with
certain transfers and exchanges.
DEFEASANCE
At any time, we may terminate all our obligations under the exchange notes
and the indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the exchange notes, to replace mutilated, destroyed,
lost or stolen exchange notes and to maintain a registrar and paying agent in
respect of the exchange notes.
In addition, at any time we may terminate our obligations under "-- Change
of Control" and under the covenants described under "-- Certain Covenants"
(other than the covenant described under "-- Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries and the judgment default provision described
under
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"-- Defaults" above and the limitations contained in clauses (3) and (4) of the
first paragraph under "-- Certain Covenants -- Merger and Consolidation" above
("covenant defeasance").
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the exchange notes may not be accelerated because of an Event
of Default with respect thereto. If we exercise our covenant defeasance option,
payment of the exchange notes may not be accelerated because of an Event of
Default specified in clause (4), (6), (7) (with respect only to Significant
Subsidiaries), (8) or (9) under "-- Defaults" above or because of the failure of
Parent or WCI to comply with clause (3) or (4) of the first paragraph under
"-- Certain Covenants -- Merger and Consolidation" above. If we exercise our
legal defeasance option or our covenant defeasance option, each guarantor will
be released from all of its obligations with respect to its guaranty.
In order to exercise either of our defeasance options, we must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the exchange notes will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit and defeasance
and will be subject to federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if such deposit and
defeasance had not occurred (and, in the case of legal defeasance only, such
Opinion of Counsel must be based on a ruling of the Internal Revenue Service or
other change in applicable federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is to be the trustee under the indenture. We have
appointed The Bank of New York as registrar and paying agent with regard to the
exchange notes.
The indenture contains certain limitations on the rights of the trustee,
should it become a creditor of Parent or WCI, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
either eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The holders of a majority in principal amount of the outstanding exchange
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. If an Event of Default occurs (and is not cured), the
trustee will be required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any holder of exchange
notes, unless such holder shall have offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the indenture.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of WCI or any
guarantor will have any liability for any obligations of WCI or any guarantor
under the exchange notes, any Guaranty or the indenture or for any claim based
on, in respect of, or by reason of such obligations or their creation. Each
holder of the exchange notes by accepting an exchange note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the exchange notes. Such waiver and release may not be effective to
waive liabilities under the U.S. federal securities laws, and it is the view of
the SEC that such a waiver is against public policy.
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GOVERNING LAW
The indenture and the exchange notes will be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
DEFINITIONS
"Additional Assets" means:
(1) any property, plant or equipment used in a Related Business;
(2) any Product Line;
(3) the Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by Parent, WCI or
another Restricted Subsidiary; or
(4) Capital Stock constituting a minority interest in any Person that at
such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clauses (3)
or (4) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means:
(1) any other Person, directly or indirectly, controlling or controlled by;
or
(2) 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 the covenants described
under "-- Certain Covenants -- Limitation on Restricted Payments," "-- Certain
Covenants -- Limitation on Affiliate Transactions" and "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" 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 WCI 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, WCI 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:
(1) 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, WCI or a Restricted Subsidiary;
(2) all or substantially all the assets of any division or line of business
of Parent, WCI or any Restricted Subsidiary; or
(3) any other assets of Parent or any Restricted Subsidiary outside of the
ordinary course of business of Parent, WCI or such Restricted
Subsidiary.
The following shall not be an Asset Disposition for the purposes of clauses (1),
(2) and (3) above:
(A) a disposition by Parent or a Restricted Subsidiary to WCI or by WCI or
Parent or a Restricted Subsidiary to a Wholly Owned Subsidiary;
(B) for purposes of the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only,
a disposition that constitutes a Restricted Payment permitted
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by the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments," any payment permitted and made pursuant to the
proviso of clause (1) 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 the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only,
a disposition by Parent, WCI or a Restricted Subsidiary of a Product
Line in consideration for the acquisition by Parent, WCI 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 immediately preceding such disposition in excess of $2.5
million, (x) such disposition has been determined by a nationally
recognized investment banking firm to be fair, from a financial
viewpoint, to Parent, WCI and their Restricted Subsidiaries and (y) on
the date of such disposition and after giving effect thereto and to the
related acquisition, Parent and WCI would have been able to Incur at
least $1.00 of additional Indebtedness pursuant to paragraph (a) of the
covenant described under the caption "-- Certain
Covenants -- Limitation on Indebtedness;"
(E) any disposition that constitutes a Change of Control or any disposition
permitted by the covenant described under "-- Merger or Consolidation;"
(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
Bristol-Meyers Squibb pursuant to the terms of the license agreement to
be entered into between Bristol-Meyers Squibb and WCI in connection
with the BMS acquisition described elsewhere in this prospectus.
"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 Notes, 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:
(1) 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
(2) the sum of all such payments.
"Bank Indebtedness" means all obligations pursuant to the Senior Credit
Facilities.
"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.
"Capital Lease Obligation" 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.
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"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.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (x) 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 (y)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that:
(1) if Parent, WCI 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, WCI 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, WCI 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, WCI 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, WCI or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to Parent,
WCI 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, WCI and their continuing
Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale;
(4) if since the beginning of such period Parent, WCI 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, WCI
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, WCI or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest
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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 WCI. 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 WCI,
plus, to the extent not included in such total interest expense, and to the
extent incurred by Parent, WCI or their Restricted Subsidiaries, without
duplication:
(1) interest expense attributable to capital leases and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction;
(2) amortization of debt discount and, subject to the proviso at the end
of this definition, amortization of debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expenses;
(5) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing;
(6) net costs attributable to Hedging Obligations;
(7) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than Parent, WCI or a Wholly Owned Subsidiary of Parent
or WCI, other than dividends payable solely in Capital Stock, other
than Disqualified Stock, of the issuer of such Preferred Stock;
(8) interest incurred in connection with Investments in discontinued
operations;
(9) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by, or secured by the assets
of, Parent, WCI or any Restricted Subsidiary; and
(10) 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 WCI, 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; and
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 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 WCI; provided, however, that there
shall not be included in such Consolidated Net Income:
(1) any net income of any Person, other than Parent or WCI, if such Person
is not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (4) 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, WCI or a Restricted Subsidiary as a dividend or other
distribution, subject, in the
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case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (3) 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;
(2) 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;
(3) 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 indirectly, to Parent or WCI, except that:
(A) subject to the exclusion contained in clause (4) below, Parent's or
WCI'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, WCI 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 WCI's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(4) any gain, but not loss, realized upon the sale or other disposition of
any assets of Parent, its consolidated Subsidiaries, including WCI, 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;
(5) extraordinary gains or losses; and
(6) the cumulative effect of a change in accounting principles;
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants -- Limitation on Restricted Payments" 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, WCI 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 WCI,
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:
(1) the par or stated value of all outstanding Capital Stock of Parent plus
(2) paid-in capital or capital surplus relating to such Capital Stock plus
(3) 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.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
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"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:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(3) 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
Notes; 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 purchase 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 Notes shall not constitute
Disqualified Stock if:
(1) 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 the terms applicable to the Notes and described
under "-- Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock" and "-- Certain Covenants -- Change of Control;" and
(2) any such requirement only becomes operative after compliance with such
terms applicable to the Notes, including the purchase of any Notes
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:
(1) all income tax expense of Parent, WCI and their consolidated Restricted
Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation and amortization expense of Parent, WCI 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
(4) all other non-cash charges of Parent, WCI and their consolidated
Restricted Subsidiaries (excluding any non-cash charge to the extent
that it represents an accrual of or reserve for cash expenditures in
any future period);
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 WCI 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 Notes" means the debt securities of WCI issued pursuant to the
indenture in exchange for, and in an aggregate principal amount at maturity
equal to, the Notes, 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
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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:
(1) the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting Standards
Board;
(3) such other statements by such other entity as approved by a significant
segment of the accounting profession; and
(4) 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.
"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:
(1) 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
(2) 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 WCI's obligations with respect
to the exchange notes or any other Guarantee made with respect to the exchange
notes.
"Guaranty Agreement" means a supplemental indenture, in a form satisfactory
to the trustee, pursuant to which a Guarantor guarantees WCI's obligations with
respect to the exchange notes on the terms provided for in the indenture.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note 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
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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
is contractually subordinated in right of payment to the Notes, modify or
affect, in any manner adverse to the Holders, such subordination, (D) if WCI 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 the
covenants entitled "-- Limitation on Restrictions on Distributions from
Subsidiaries" and "-- Limitation on Liens." 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:
(1) the principal in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by exchange 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;
(2) all Capital Lease Obligations of such Person and all Attributable Debt
in respect of Sale/ Leaseback Transactions entered into by such Person;
(3) 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);
(4) 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 (1)
through (3) 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);
(5) 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 the indenture, but excluding, in each
case, any accrued dividends;
(6) all obligations of the type referred to in clauses (1) through (5) 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;
(7) all obligations of the type referred to in clauses (1) through (6) 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 and the amount of the obligation so secured;
and
(8) 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.
"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.
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"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 the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments:"
(1) "Investment" shall include the portion, proportionate to Parent's or
WCI's equity interest in such Subsidiary, of the fair market value of
the net assets of any Subsidiary of Parent or WCI 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 WCI shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an
amount, if positive, equal to (A) Parent's or WCI's "Investment" in
such Subsidiary at the time of such redesignation less (B) the portion,
proportionate to Parent's or WCI'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
(2) 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 on which the exchange notes are originally
issued.
"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.
"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:
(1) 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;
(2) 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;
(3) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries as a result of such Asset
Disposition; and
(4) 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, WCI 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.
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"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.
"Permitted Investment" means an Investment by Parent, WCI or any Restricted
Subsidiary in:
(1) Parent, WCI, 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 any such Restricted Subsidiary
is a Related Business;
(2) 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, WCI or a Restricted
Subsidiary; provided, however, that such Person's primary business is
a Related Business;
(3) cash and Temporary Cash Investments;
(4) receivables owing to Parent, WCI 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, WCI or any such Restricted Subsidiary deems
reasonable under the circumstances;
(5) 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;
(6) loans or advances to employees made in the ordinary course of business
of Parent, WCI or such Restricted Subsidiary;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to Parent, WCI or
any Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as
permitted pursuant to the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock;"
(9) Investments existing on the Issue Date as listed in a schedule to the
indenture;
(10) 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;
(11) Investments the payment for which consists solely of Capital Stock of
Parent; and
(12) Other Investments that do not exceed in the aggregate $5.0 million.
"Permitted Liens" means, with respect to any Person:
(1) 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;
(2) 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
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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
WCI 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 WCI or any Restricted Subsidiary to provide collateral to
the depository institution;
(3) Liens for taxes not yet subject to penalties for non-payment or which
are being contested in good faith and by appropriate proceedings;
(4) 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;
(5) 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;
(6) 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 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;
(7) 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 extend to the assets acquired from BMS in the
BMS acquisition;
(8) Liens existing on the Issue Date and listed on a schedule to the
indenture;
(9) 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;
(10) 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;
(11) Liens securing Hedging Obligations so long as such Hedging Obligations
relate to Indebtedness that is, and is permitted to be under the
indenture, secured by a Lien on the same property securing such
Hedging Obligations; and
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(12) 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 (6), (7), (8), (9) or (10); 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 (6), (8), (9) or (10) at the time the
original Lien became a Permitted Lien and (y) an amount necessary to
pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement.
Notwithstanding the foregoing, "Permitted Liens" will not include any Lien
described in clauses (6), (9) or (10) above to the extent such Lien applies to
any Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to the covenant described under "-- Certain Covenants -- Limitation on
Sale of Assets and Subsidiary Stock." 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 an exchange note means the principal of the exchange note
plus the premium, if any, payable on the exchange note 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, WCI or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being Refinanced;
(2) 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
(3) 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;
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provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of Parent or WCI or
(B) Indebtedness of Parent, WCI or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business in which Parent or WCI was engaged on
the Issue Date and any business related, ancillary or complementary to any
business of Parent or WCI in which Parent or WCI was engaged on the Issue Date.
"Restricted Payment" with respect to any Person means:
(1) 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, WCI 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, WCI or to any Restricted Subsidiary
shall not be a Restricted Payment; and provided, further, that any such
declaration or payment by WCI to Parent shall be made in the form of a
loan from WCI to Parent meeting the requirements of clause (b)(2) of
the covenant described under "-- Certain Covenants -- Limitation on
Indebtedness;"
(2) 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 WCI or any Restricted Subsidiary held by any Person (other
than Parent or any Wholly Owned Subsidiary of Parent, including WCI),
including the exercise of any option to exchange any Capital Stock,
other than into Capital Stock of Parent that is not Disqualified Stock;
(3) 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
(4) the making of any Investment, other than a Permitted Investment, in any
Person.
"Restricted Subsidiary" means any Subsidiary of Parent or WCI that is not
an Unrestricted Subsidiary and, in the case of Parent, includes WCI, Warner
Chilcott (Bermuda) Limited and Warner Chilcott Laboratories Ireland Limited.
"Sale/Leaseback Transaction" means an arrangement relating to property
owned by Parent, WCI or a Restricted Subsidiary on the Issue Date or thereafter
acquired by Parent, WCI or a Restricted Subsidiary whereby Parent, WCI or a
Restricted Subsidiary transfers such property to a Person and Parent, WCI or a
Restricted Subsidiary leases it from such Person.
"SEC" means the U.S. Securities and Exchange Commission.
"Senior Credit Facilities" means (i) the Credit Agreement by and among WCI,
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.
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"Senior Indebtedness" of a Person means:
(1) Indebtedness of such Person, whether outstanding on the Issue Date or
thereafter Incurred; and
(2) 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 (1) and (2), 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 exchange notes,
in the case of WCI, or to such Person's guaranty, in the case of a guarantor;
provided, however, that Senior Indebtedness shall not include:
(1) any obligation of such Person 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 the indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Parent or WCI, 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 exchange notes, in the
case of WCI, 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, with respect to 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:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
"Tax" means any tax, duty, levy, impost, assessment or other governmental
charge, including penalties, interest and any 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.
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"Temporary Cash Investments" means any of the following:
(1) 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;
(2) 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;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above
entered into with a bank meeting the qualifications described in clause
(2) above;
(4) 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 WCI, 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-1", or higher, according to Moody's
Investors Service, Inc. or "A-1", or higher, according to Standard and
Poor's Ratings Group; and
(5) 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.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of Parent, other than WCI, or WCI that at the time of
determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of Parent, other than WCI,
or WCI, 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, WCI or any other Subsidiary of Parent or WCI 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 $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (A) Parent or WCI could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "-- Certain
Covenants -- Limitation on Indebtedness" and (B) 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 the 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 WCI or any of their Subsidiaries. Covenants
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applicable solely to Parent, WCI 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.
Except as described under "Certain Covenants -- Limitation on
Indebtedness", whenever it is necessary to determine whether WCI has complied
with any covenant in the indenture or a Default has occurred and an amount is
expressed in a currency other than U.S. dollars, such amount will 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
WCI or one or more Wholly Owned Subsidiaries.
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DESCRIPTION OF WORKING CAPITAL FACILITY
WCI is currently the borrower under a revolving credit facility and
security agreement with PNC Business Credit. The facility, as amended in
connection with the BMS acquisition, consists of a revolving credit facility
providing for borrowings of up to $10.0 million, subject to a borrowing base
determined with reference to WCI's inventory, accounts receivables and other
current assets. The facility expires in March 2001.
The existing working capital facility is collateralized by certain assets
of WCI, including cash balances, accounts receivable, inventory, fixed assets
and certain intangible assets. The intangible assets associated with the
Estrace(R) and Ovcon(R) brands are pledged as collateral under the working
capital facility. 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, we were in
compliance with the covenants of the working capital facility. The working
capital facility is guaranteed by WC plc.
Interest on outstanding borrowings accrues at either PNC's Base Rate or
LIBOR plus one and three-quarter percent. In addition, we pay a commitment fee
equal to three-eights of one percent on the unused portion of the facility.
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EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions in this prospectus and in the
letter of transmittal, we will accept any and all notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the expiration date. We
will issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of outstanding notes accepted in the exchange offer. Holders
may tender some or all of their notes pursuant to the exchange offer. However,
notes may be tendered only in integral multiples of $1,000.
The form and terms of the exchange notes are the same as the form and terms
of the notes except that:
(1) the exchange notes have been registered under the Securities Act
of 1933 and hence will not bear legends restricting their transfer thereof;
and
(2) the holders of the exchange notes will not be entitled to rights
under the registration rights agreement. These rights include the
provisions for an increase in the interest rate on the notes in some
circumstances relating to the timing of the exchange offer. All of these
rights will terminate when the exchange offer is terminated. The exchange
notes will evidence the same debt as the notes. Holders of exchange notes
will be entitled to the benefits of the indenture.
As of the date of this prospectus, $200.0 million aggregate principal
amount of notes was outstanding. We have fixed the close of business on
, 2000 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially.
We intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
We shall be deemed to have accepted validly tendered notes when, as and if
we have given oral or written notice to the exchange agent. The exchange agent
will act as agent for the tendering holders for the purpose of receiving the
exchange notes from the issuers.
If any tendered notes are not accepted for exchange because of an invalid
tender, the occurrence of other events in this prospectus or otherwise, we will
return the certificates for any unaccepted notes, at our expense, to the
tendering holder as promptly as practicable after the expiration date.
Holders who tender notes in the exchange offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes with respect to the exchange of notes. We will pay
all charges and expenses, other than transfer taxes in some circumstances, in
connection with the exchange offer as described under the subheading "-- Fees
and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 2000, unless we extend the exchange offer. In that case, the term
"expiration date" shall mean the latest date and time to which the exchange
offer is extended. Notwithstanding the foregoing, we will not extend the
expiration date beyond , 2000.
In order to extend the exchange offer, prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date,
we will:
(1) notify the exchange agent of any extension by oral or written
notice and
(2) mail to the registered holders an announcement of any extension.
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We reserve the right, in our sole discretion,
(1) if any of the conditions below under the heading "Conditions"
shall not have been satisfied,
(A) to delay accepting any notes,
(B) to extend the exchange offer or
(C) to terminate the exchange offer, or
(2) to amend the terms of the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice of delay to the registered
holders. We will give oral or written notice of any delay, extension or
termination to the exchange agent.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from their date of issuance. Holders
of notes that are accepted for exchange will receive, in cash, accrued interest
on the exchange notes to, but not including, the date of issuance of the
exchange notes. We will make the first interest payment on the exchange notes on
August 15, 2000. Interest on the notes accepted for exchange will cease to
accrue upon issuance of the exchange notes.
Interest on the exchange notes is payable semi-annually on each February 15
and August 15, commencing on August 15, 2000.
PROCEDURES FOR TENDERING OLD NOTES
Only a holder of notes may tender notes in the exchange offer. To tender in
the exchange offer, a holder must
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal,
- have the signatures guaranteed if required by the letter of transmittal,
and
- mail or otherwise deliver the letter of transmittal or such facsimile,
together with the notes and any other required documents, to the exchange
agent prior to 5:00 p.m., New York City time, on the expiration date.
To tender notes effectively, the holder must complete the letter of transmittal
and other required documents and the exchange agent must receive all the
documents prior to 5:00 p.m., New York City time, on the expiration date.
Delivery of the notes may be made by book-entry transfer in accordance with the
procedures described below. The exchange agent must receive confirmation of
book-entry transfer prior to the expiration date.
The tender by a holder and the acceptance of the tender by us will
constitute agreement between the holder and us under the terms and subject to
the conditions in this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE
HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO US. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should promptly instruct the registered holder to tender on the beneficial
owner's behalf. See "Instruction to Registered Holder and/or Book-Entry Transfer
Facility Participant from Owner" included with the letter of transmittal.
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An institution that is a member firm of the Medallion system must guarantee
signatures on a letter of transmittal or a notice of withdrawal unless the notes
are tendered:
(1) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on
the letter of transmittal; or
(2) for the account of member firm of the Medallion system.
If the letter of transmittal is signed by a person other than the
registered holder of any notes listed in that letter of transmittal, the notes
must be endorsed or accompanied by a properly completed bond power, signed by
the registered holder as the registered holder's name appears on the notes. An
institution that is a member firm of the Medallion System must guarantee the
signature.
Trustees, executors, administrators, guardians, attorneys-in-fact, offices
of corporations or others acting in a fiduciary or representative capacity
should indicate their capacities when signing the letter of transmittal or any
notes or bond powers. Evidence satisfactory to us of their authority to so act
must be submitted with the letter of transmittal.
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the notes at
the book-entry transfer facility, The Depository Trust Company, for the purpose
of facilitating the exchange offer. Subject to the establishment of the
accounts, any financial institution that is a participant in The Depository
Trust Company's system may make book-entry delivery of notes. To do so, the
financial institution should cause the book-entry transfer facility to transfer
the notes into the exchange agent's account with respect to the notes following
the book-entry transfer facility's procedures for transfer. Delivery of the
notes may be effected through book-entry transfer into the exchange agent's
account at the book-entry transfer facility. However, the holder must transmit
and the exchange agent must receive or confirm an appropriate letter of
transmittal properly completed and duly executed with any required signature
guarantee and all other required documents on or prior to the expiration date,
or, if the guaranteed delivery procedures described below are complied with,
within the time period provided under such procedures. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the exchange
agent.
The Depositary and The Depository Trust Company have confirmed that the
exchange offer is eligible for The Depository Trust Company Automated Tender
Offer Program. Accordingly, The Depository Trust Company participants may
electronically transmit their acceptance of the exchange offer by causing The
Depository Trust Company to transfer notes to the depositary in accordance with
The Depository Trust Company's Automated Tender Offer Program procedures for
transfer. The Depository Trust Company will then send an "agent's message" to
the Depositary.
The term "agent's message" means a message transmitted by The Depository
Trust Company, received by the Depositary and forming part of the confirmation
of a book-entry transfer, which states that
(1) The Depository Trust Company has received an express
acknowledgment from the participant in The Depository Trust Company
tendering notes subject of the book-entry confirmation,
(2) the participant has received and agrees to be bound by the terms
of the letter of transmittal and
(3) we may enforce such agreement against such participant.
In the case of an agent's message relating to guaranteed delivery, the term
means a message transmitted by The Depository Trust Company and received by the
Depositary, which states that The Depository Trust Company has received an
express acknowledgment from the participant in The Depository Trust Company
tendering notes that such participant has received and agrees to be bound by the
notice of guaranteed delivery.
Notwithstanding the foregoing, in order to validly tender in the exchange
offer with respect to securities transferred through the Automated Tender Offer
Program, a The Depository Trust Company
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participant using Automated Tender Offer Program must also properly complete and
duly execute the applicable letter of transmittal and deliver it to the
Depositary.
By the authority granted by The Depository Trust Company, any The
Depository Trust Company participant which has notes credited to The Depository
Trust Company account at any time (and held of record by The Depository Trust
Company's nominee) may directly provide a tender as though it were the
registered holder by completing, executing and delivering the applicable letter
of transmittal to the Depositary. Delivery of documents to The Depository Trust
Company does not constitute delivery to the Depositary.
All questions as to the
- validity,
- form,
- eligibility (including time of receipt),
- acceptance of tendered notes and
- withdrawal of tendered notes
will be determined by us in our sole discretion. Our determination will be final
and binding. We reserve the absolute right to reject any and all notes not
properly tendered. We reserve the absolute right to reject any notes which would
be unlawful if accepted, in the opinion of our counsel. We also reserve the
right in our sole discretion to waive any defects, irregularities or conditions
of tender as to particular notes. Our interpretation of the terms and conditions
of the exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of notes must be cured within such
time as we shall determine. We intend to notify holders of defects or
irregularities with respect to tenders of notes. However, neither we, the
exchange agent nor any other person shall incur any liability for failure to
give such notification. Tenders of notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any notes
received by the exchange agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the exchange agent to the tendering holders, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their notes and:
(1) whose notes are not immediately available;
(2) who cannot deliver their notes, the letter of transmittal or any
other required documents to the exchange agent; or
(3) who cannot complete the procedures for book-entry transfer, prior
to the expiration date
may effect a tender if:
(1) they tender through an institution that is a member firm of the
Medallion system;
(2) prior to the expiration date, the exchange agent receives from an
institution that is a member firm of the Medallion system a properly
completed and duly executed notice of guaranteed delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of
the holder, the certificate number(s) of such notes and the principal
amount of notes tendered, stating that the tender is being made and
guaranteeing that, within five New York Stock Exchange trading days after
the expiration date, the letter of transmittal (or facsimile thereof)
together with the certificate(s) representing the notes (or a confirmation
of book-entry transfer of such notes into the
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exchange agent's account at the book-entry transfer facility), and any
other documents required by the letter of transmittal will be deposited by
the firm with the exchange agent; and
(3) the exchange agent receives
(A) such properly completed and executed letter of transmittal (of
facsimile thereof),
(B) the certificate(s) representing all tendered notes in proper
form for transfer (or a confirmation of book-entry transfer of such
notes into the exchange agent's account at the book-entry transfer
facility), and
(C) all other documents required by the letter of transmittal
upon five New York Stock Exchange trading days after the expiration
date.
Upon request to the exchange agent, we will send a notice of guaranteed
delivery to holders who wish to tender their notes according to the guaranteed
delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders may withdraw
tenders of notes at any time prior to 5:00 p.m., New York City time, on the
expiration date. To withdraw a tender of notes in the exchange offer, the
exchange agent must receive a telegram, telex, letter or facsimile transmission
notice of withdrawal at its address in this prospectus prior to 5:00 p.m., New
York City time, on the expiration date. Any such notice of withdrawal must:
(1) specify the name of the person having deposited the notes to be
withdrawn;
(2) identify the notes to be withdrawn (including the certificate
number(s) and principal amount of such notes, or, in the case of notes
transferred by book-entry transfer, the name and number of the account at
the book-entry transfer facility to be credited);
(3) be signed by the holder in the same manner as the original
signature on the letter of transmittal by which such notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee with respect to the
notes register the transfer of notes into the name of the person
withdrawing the tender; and
(4) specify the name in which any notes are to be registered, if
different from that of the person who deposited the notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices. Our determination shall be final and
binding on all parties. We will not deem notes so withdrawn to have been validly
tendered for purposes of the exchange offer. We will not issue exchange notes
for withdrawn notes unless you validly retender the withdrawn notes. We will
return any notes which have been tendered but which are not accepted for
exchange to the holder of the notes at our cost as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. You may
retender properly withdrawn notes by following one of the procedures described
above under the heading "Procedures for Tendering Old Notes" at any time prior
to the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or exchange notes for, any notes, and may
terminate or amend the exchange offer as provided in this prospectus before the
acceptance of the notes, if:
(1) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the exchange offer
which, in our sole judgment, might materially impair our ability to proceed
with the exchange offer or any development has occurred in any existing
action or proceeding which may be harmful to us or any of our subsidiaries;
or
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(2) any law, statute, rule, regulation or interpretation by the staff
of the Securities and Exchange Commission is proposed, adopted or enacted,
which, in our sole judgment, might impair our ability to proceed with the
exchange offer or impair the contemplated benefits of the exchange offer to
us; or
(3) any governmental approval has not been obtained, which we believe,
in our sole discretion, is necessary for the consummation of the exchange
offer as outlined in this prospectus.
If we determine in our sole discretion that any of the conditions are not
satisfied, we may:
(1) refuse to accept any notes and return all tendered notes to the
tendering holders;
(2) extend the exchange offer and retain all notes tendered prior to
the expiration of the exchange offer, subject, however, to the rights of
holders to withdraw their notes; or
(3) waive such unsatisfied conditions of the exchange offer and accept
all properly tendered notes which have not been withdrawn.
EXCHANGE AGENT
The Bank Of New York has been appointed as the exchange agent for the
exchange offer. You should direct all
- executed letters of transmittal,
- questions,
- requests for assistance,
- requests for additional copies of this prospectus or of the letter of
transmittal and
- requests for Notices of Guaranteed Delivery
to the exchange agent addressed as follows:
<TABLE>
<S> <C> <C>
By Overnight Courier and By Hand: By Registered or
by Hand after 4:30 p.m. Certified Mail:
on the Expiration Date: The Bank of New York
101 Barclay Street The Bank of New York
The Bank of New York New York, NY 10286 101 Barclay Street
101 Barclay Street Attn: Kin Lau New York, NY 10286
New York, NY 10286 Corporate Trust Operations, 7E Attn: Kin Lau
Attn: Kin Lau Corporate Trust Operations, 7E
Corporate Trust Operations, 7E Via Facsimile:
(212) 815-6339
Attn: Kin Lau
Corporate Trust Operations, 7E
Confirm by telephone:
(212) 815-3750
</TABLE>
Delivery other than those above will not constitute a valid delivery.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We are mailing the
principal solicitation. However, our officers and regular employees and those of
our affiliates may make additional solicitation by telegraph, telecopy,
telephone or in person.
We have not retained any dealer-manager in connection with the exchange
offer. We will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. However, we will pay the exchange agent
reasonable and customary fees for its services. We will reimburse the exchange
agent for its reasonable out-of-pocket expenses.
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We will pay the cash expenses incurred in connection with the exchange
offer. These expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
notes. The carrying value is face value, net of discount, as reflected in our
accounting records on the date of exchange. The expenses of the exchange offer
will be expensed over the term of the exchange notes.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange. However, holders who
instruct us to register exchange notes in the name of, or request that old notes
not tendered or not accepted in the exchange offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax on that transfer.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF EXCHANGE NOTES
The notes that are not exchanged for exchange notes under the exchange
offer will remain restricted securities. Accordingly, those notes may be resold
only:
(1) to us (upon redemption of the notes or otherwise);
(2) so long as the notes are eligible for resale pursuant to Rule
144A, to a person inside the United States who is a qualified institutional
buyer according to Rule 144A under the Securities Act of 1933 or pursuant
to another exemption from the registration requirements of the Securities
Act of 1933, based upon an opinion of counsel reasonably acceptable to us;
(3) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act of 1933; or
(4) under an effective registration statement under the Securities Act
of 1933
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALES OF THE EXCHANGE NOTES
Based on interpretations by the staff of the Securities and Exchange
Commission in no-action letters issued to third parties, we believe that a
holder or other person who receives exchange notes will be allowed to resell the
exchange notes to the public without further registration under the Securities
Act of 1933 and without delivering a prospectus that satisfies the requirements
of Section 10 of the Securities Act of 1933. The holder, other than a person
that is our "affiliate" within the meaning of Rule 405 under the Securities Act
of 1933, who receives exchange notes in exchange for notes in the ordinary
course of business and who is not participating, need not intend to participate
or have an arrangement or understanding with any person to participate in the
distribution of the exchange notes. However, if any holder acquires exchange
notes in the exchange offer for the purpose of distributing or participating in
a distribution of the exchange notes, the holder cannot rely on the position of
the staff of the Securities and Exchange Commission enunciated in the no-action
letters or any similar interpretive letters. A holder who acquires exchange
notes in order to distribute them must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933 in connection
with any resale transaction, unless an exemption from registration is otherwise
available. Further, each broker-dealer that receives exchange notes for its own
account in exchange for notes as a result of market-making activities or other
trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, including the opinion of counsel described below,
is based upon current provisions of the Internal Revenue Code of 1986, as
amended, applicable Treasury regulations, judicial authority and administrative
rulings and practice. The Internal Revenue Service may take a contrary view, and
no ruling from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the following statements and conditions. Any changes or interpretations
may or may not be retroactive and could affect the tax consequences to holders.
Some holders, including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States, may be subject to special rules not
discussed below. We recommend that each holder consult his own tax advisor as to
the particular tax consequences of exchanging such holder's old notes for
exchange notes, including the applicability and effect of any state, local or
foreign tax laws.
Kirkland & Ellis has advised us that in its opinion, the exchange of the
old notes for exchange notes pursuant to the exchange offer will not be treated
as an "exchange" for federal income tax purposes because the exchange notes will
not be considered to differ materially in kind or extent from the old notes.
Rather, the exchange notes received by a holder will be treated as a
continuation of the old notes in the hands of such holder. As a result, there
will be no federal income tax consequences to holders exchanging old notes for
exchange notes pursuant to the exchange offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account under
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of exchange notes.
This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of exchange notes
received in exchange for old notes if the old senior notes were acquired as a
result of market-making activities or other trading activities.
We and our parent guarantor have agreed to make this prospectus, as amended
or supplemented, available to any broker-dealer to use in connection with any
such resale for a period of at least 90 days after the expiration date. In
addition, until 2000, all dealers effecting transactions in the
exchange notes may be required to deliver a prospectus.
Neither we nor our parent guarantor will receive any proceeds from any sale
of exchange notes by broker-dealers. Exchange notes received by broker-dealers
for their own accounts under the exchange offer may be sold from time to time in
one or more transactions
- in the over-the-counter market,
- in negotiated transactions,
- through the writing of options on the exchange notes or a combination of
such methods of resale,
- at market prices prevailing at the time of resale,
- at prices related to such prevailing market prices or
- at negotiated prices.
Any resale may be made directly to purchasers or to or through brokers or
dealers. Brokers or dealers may receive compensation in the form of commissions
or concessions from any broker-dealer or the purchasers of any such exchange
notes. An "underwriter" within the meaning of the Securities Act of 1933
includes
(1) any broker-dealer that resells exchange notes that were received
by it for its own account pursuant to the exchange offer or
(2) any broker or dealer that participates in a distribution of such
exchange notes.
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Any profit on any resale of exchange notes and any commissions or concessions
received by any persons may be deemed to be underwriting compensation under the
Securities Act of 1933. The letter of transmittal states that, by acknowledging
that it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933.
Based on interpretations by the staff of the Securities and Exchange
Commission in no-action letters issued to third parties, we believe that a
holder or other person who receives exchange notes will be allowed to resell the
exchange notes to the public without further registration under the Securities
Act of 1933 and without delivering to the purchasers of the exchange notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act
of 1933. The holder (other than a person that is an "affiliate" of Warner
Chilcott within the meaning of Rule 405 under the Securities Act of 1933) who
receives exchange notes in exchange for old notes in the ordinary course of
business and who is not participating, need not intend to participate or have an
arrangement or understanding with person to participate in the distribution of
the exchange notes.
However, if any holder acquires exchange notes in the exchange offer for
the purpose of distributing or participating in a distribution of the exchange
notes, the holder cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in such no-action letters or any similar
interpretive letters. The holder must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933 in connection
with any resale transaction. A secondary resale transaction should be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K under
the Securities Act of 1933, unless an exemption from registration is otherwise
available.
Further, each broker-dealer that receives exchange notes for its own
account in exchange for old notes, where the old notes were acquired by such
participating broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of any exchange notes. We and each of our parent
guarantor have agreed, for a period of not less than 90 days from the
consummation of the exchange offer, to make this prospectus available to any
broker-dealer for use in connection with any such resale.
For a period of not less than 90 days after the expiration date we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests those documents
in the letter of transmittal. We and our parent guarantor have jointly and
severally agreed to pay all expenses incident to the exchange offer, including
the expenses of one counsel for the holders of the old notes, other than
commissions or concessions of any brokers or dealers. We will indemnify the
holders of the old notes against liabilities under the Securities Act of 1933,
including any broker-dealers.
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LEGAL MATTERS
Kirkland & Ellis, New York, New York will issue an opinion with respect to
the issuance of the exchange notes offered hereby, including
1) our existence and good standing under our jurisdiction of
incorporation,
2) our authorization of the sale and issuance of the exchange notes
and
3) the enforceability of the exchange notes.
EXPERTS
The consolidated financial statements and schedule of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1999 and 1998, and
for each of the years then ended, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, included herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements and schedule of Warner Chilcott
Public Limited Company and subsidiaries for the year ended December 31, 1997
have been included herein and in the registration statement in reliance upon the
report of KPMG, independent chartered accountants, included herein, and upon the
authority of said firm as experts in accounting and auditing.
The historical statements of net sales and product contribution for the
Ovcon(R) and Estrace(R) cream product lines for the years ended December 31,
1999, 1998 and 1997 have been included herein and in the registration statement
in reliance upon the report of KPMG LLP, independent certified public
accountants, included herein, and upon the authority of said firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-4, the "Exchange Offer Registration Statement," which term
shall encompass all amendments, exhibits, annexes and schedules thereto,
pursuant to the Securities Act of 1933, and the rules and regulations
promulgated thereunder, covering the exchange notes being offered. This
prospectus does not contain all the information in the exchange offer
registration statement. For further information with respect to Warner Chilcott,
Inc. and Warner Chilcott Public Limited Company, and the exchange offer,
reference is made to the exchange offer registration statement. Statements made
in this prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. For a more complete
understanding and description of each contract, agreement or other document
filed as an exhibit to the exchange offer registration statement, we encourage
you to read the documents contained in the exhibits.
The exchange offer registration statement, including the exhibits thereto,
can be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Securities and
Exchange Commission at Seven World Trade Center, Suite 1300, New York, New York
10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the Securities and Exchange
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission. The address of such Web site is:
http://www.sec.gov.
Our parent guarantor, Warner Chilcott Public Limited Company is currently
and following completion of this exchange offer we will be subject to the
informational requirements of the Securities Act of 1933, and in accordance
therewith will be required to file periodic reports and other information with
the
101
<PAGE> 105
Securities and Exchange Commission. Our obligation to file periodic reports and
other information with the Securities and Exchange Commission will be suspended
if the exchange notes are held of record by fewer than 300 holders as of the
beginning of our fiscal year other than the fiscal year in which the exchange
offer registration statement is declared effective.
We will nevertheless be required to continue to file reports with the
Securities and Exchange Commission if the exchange notes are listed on a
national securities exchange. In the event we cease to be subject to the
informational requirements of the Securities Exchange Act of 1934, we will be
required under the indenture to continue to file with the Securities and
Exchange Commission the annual and quarterly reports, information, documents or
other reports, including reports on Forms 10-K, 10-Q and 8-K, which would be
required pursuant to the informational requirements of the Securities Exchange
Act of 1934.
Under the indenture, we shall file with the trustee annual, quarterly and
other reports after it files such reports with the Securities and Exchange
Commission. Annual reports delivered to the trustee and the holders of exchange
notes will contain financial information that has been examined and reported
upon, with an opinion expressed by an independent public accountant. We will
also furnish such other reports as may be required by law.
Information contained in this prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other similar terminology, or by discussions of strategy.
Our actual results could differ materially from those anticipated by any such
forward-looking statements as a result of factors described in the "Risk
Factors" beginning on page 9 and elsewhere in this prospectus.
The market and industry data presented in this prospectus are based upon
third-party data. While we believe that such estimates are reasonable and
reliable, estimates cannot always be verified by information available from
independent sources. Accordingly, readers are cautioned not to place undue
reliance on such market share data.
102
<PAGE> 106
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WARNER CHILCOTT PUBLIC LIMITED COMPANY
Audited Consolidated Financial Statements:
Independent Auditors' Report................................ F-2
Statement of Independent Chartered Accountants.............. F-3
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... F-4
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.......................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997.............. F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... F-7
Notes to Consolidated Financial Statements.................. F-8
Financial Statement Schedule: Valuation and Qualifying
Accounts.................................................. F-24
OVCON AND ESTRACE CREAM PRODUCTS OF APOTHECON (A SUBSIDIARY
OF BRISTOL-MYERS SQUIBB COMPANY)
Independent Auditors' Report................................ F-25
Historical Statements of Net Sales and Product
Contribution.............................................. F-26
Notes to the Historical Statements of Net Sales and Product
Contribution.............................................. F-27
</TABLE>
F-1
<PAGE> 107
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 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 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
F-2
<PAGE> 108
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 audits.
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
F-3
<PAGE> 109
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 IRL1 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.
F-4
<PAGE> 110
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.
F-5
<PAGE> 111
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.
F-6
<PAGE> 112
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.
F-7
<PAGE> 113
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).
F-8
<PAGE> 114
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
F-9
<PAGE> 115
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
may not be recoverable. The application of this Statement did not have any
impact on the Company's consolidated financial statements.
(m) Net loss per ordinary share
The Company calculates net loss per ordinary share in accordance with the
provisions of SFAS No. 128, "Earnings Per Share." Net loss and weighted average
shares outstanding used for computing diluted loss per share were the same as
that used for computing basic loss per share for each of the years ended
December 31, 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>
F-10
<PAGE> 116
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.
F-11
<PAGE> 117
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>
F-12
<PAGE> 118
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.
F-13
<PAGE> 119
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.
F-14
<PAGE> 120
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.
F-15
<PAGE> 121
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
F-16
<PAGE> 122
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
would also be entitled to receive royalties 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
F-17
<PAGE> 123
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
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 circumstances. Amounts earned by
the Company under the promotion agreement are paid on a quarterly basis within
45 days of the end of each calendar quarter. At December 31, 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>
F-18
<PAGE> 124
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
Rent expense under operating leases during the years ended 1999, 1998 and
1997 was $2,124, $571, and $206, respectively.
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.
F-19
<PAGE> 125
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>
F-20
<PAGE> 126
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>
F-21
<PAGE> 127
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
F-22
<PAGE> 128
WARNER CHILCOTT PUBLIC LIMITED COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
will be 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.
F-23
<PAGE> 129
WARNER CHILCOTT PUBLIC LIMITED COMPANY
FINANCIAL STATEMENT SCHEDULE
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>
F-24
<PAGE> 130
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Warner Chilcott Public Limited Company
We have audited the accompanying historical statements of net sales and
product contribution for the years ended December 31, 1999, 1998 and 1997, of
the Ovcon and Estrace Cream product lines (the "Products") of Apothecon, a
subsidiary of Bristol-Myers Squibb Company. These historical statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these historical statements 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 audit
to obtain reasonable assurance about whether the historical statements of net
sales and product contribution are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in these historical statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the historical statements. We believe
that our audits provide a reasonable basis for our opinion.
As described in Note 2, the accompanying historical statement of net sales
and product contribution attributable to the Products are not intended to be a
complete presentation of the Ovcon and Estrace Cream financial position or
results of operations.
In our opinion, the historical statements referred to above present fairly,
in all material respects, the net sales and product contribution of the Products
as described in Note 2 for the years ended December 31, 1999, 1998 and 1997, in
conformity with United States generally accepted accounting principles.
/S/ KPMG
Short Hills, New Jersey
March 31, 2000
F-25
<PAGE> 131
OVCON AND ESTRACE CREAM PRODUCTS OF APOTHECON
(A SUBSIDIARY OF BRISTOL-MYERS SQUIBB COMPANY)
HISTORICAL STATEMENTS OF NET SALES AND PRODUCT CONTRIBUTION
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net sales................................................... $49,998 $68,696 $62,225
Cost of goods sold.......................................... 2,613 4,173 2,889
Distribution................................................ 613 728 606
Marketing................................................... 1,861 837 842
Promotion................................................... 1,314 588 631
------- ------- -------
Product contribution................................... $43,597 $62,370 $57,257
------- ------- -------
</TABLE>
See accompanying notes to historical statements of net sales and product
contribution.
F-26
<PAGE> 132
OVCON AND ESTRACE CREAM PRODUCTS OF APOTHECON
(A SUBSIDIARY OF BRISTOL-MYERS SQUIBB COMPANY)
NOTES TO THE HISTORICAL STATEMENTS OF NET SALES AND PRODUCT CONTRIBUTION
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
Ovcon and Estrace Cream (the "Products") are manufactured and marketed by
Apothecon, a subsidiary of Bristol-Myers Squibb Company ("BMS"). Ovcon is an
oral contraceptive and is indicated for the prevention of pregnancy. Estrace
Cream is a hormone replacement vaginal cream. The Products are sold primarily
through distributors in the United States. The Products were acquired by Warner
Chilcott, plc (WC) on February 15, 2000.
2. BASIS OF PRESENTATION
The accompanying historical statements present the combined net sales and
product contribution of the Products. These historical statements include all
the adjustments necessary for a fair presentation of the net sales and product
contribution of the Products. These historical statements set forth the net
sales and operational expenses attributable to the Products and do not purport
to represent all the costs, expenses and resultant operating earnings or
complete financial statements associated with a stand alone, separate entity.
The statements of net sales and product contribution include amounts
attributable to the manufacture, distribution, marketing and promotion of the
Products. Net sales include gross sales less product specific sales returns,
cash discounts, government rebates, and certain other customer discounts.
Inventories are valued at average cost, not in excess of market value.
In January of 1999, BMS entered into a co-promotion agreement to expand
promotion of the Products to physicians. Fees relating to this agreement were
$716 in 1999 and are classified in marketing expense.
3. NET SALES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross sales................................................. $57,171 $75,348 $70,284
Returns................................................... 3,384 3,137 4,977
Cash discounts............................................ 1,279 1,679 1,472
Government rebates........................................ 482 709 540
Other customer discounts.................................. 2,028 1,127 1,070
------- ------- -------
Net sales................................................... $49,998 $68,696 $62,225
------- ------- -------
</TABLE>
F-27
<PAGE> 133
OVCON AND ESTRACE CREAM PRODUCTS OF APOTHECON
(A SUBSIDIARY OF BRISTOL-MYERS SQUIBB COMPANY)
NOTES TO THE HISTORICAL STATEMENTS OF NET SALES AND PRODUCT
CONTRIBUTION -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales
Ovcon..................................................... $28,566 $48,394 $47,852
Estrace Cream............................................. 21,432 20,302 14,373
------- ------- -------
$49,998 $68,696 $62,225
------- ------- -------
Product contribution
Ovcon..................................................... $24,982 $43,519 $43,699
Estrace Cream............................................. 18,615 18,851 13,558
------- ------- -------
$43,597 $62,370 $57,257
------- ------- -------
</TABLE>
Sales are recorded when goods are shipped. Returns in 1997 include a
voluntary recall relating to Ovcon packaging.
There were four customers individually accounting for more than 10% of the
Products' gross sales in all periods presented. In the aggregate these customers
accounted for approximately 65% -- 85% of total gross sales.
F-28
<PAGE> 134
- --------------------------------------------------------------------------------
$200,000,000
WARNER CHILCOTT, INC.
12 5/8% Senior Notes due 2008
PROSPECTUS
, 2000
- --------------------------------------------------------------------------------
<PAGE> 135
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Warner Chilcott, Inc. is a corporation organized under the laws of the
State of Delaware. Article Ten of Warner Chilcott, Inc.'s Certificate of
Incorporation provides as follows:
The Corporation may indemnify, to the full extent permitted by the
General Corporation Law of the State of Delaware and as provided in the
By-Laws of the Corporation, any and all persons whom it shall have the
power to indemnify from and against any and all expenses, liabilities or
other matters.
Article Eleven of Warner Chilcott, Inc.'s Certificate of Incorporation
provides further that:
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however, that this
Article Eleven shall not eliminate or limit the liability of a director (I)
for any breach of such director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section
174 of Title 8 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction from which such director derives an improper
personal benefit. If the General Corporation Law of the State of Delaware
is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the full extent permitted
by the General Corporation Law of the State of Delaware, as so amended. No
amendment to or repeal of this Article Eleven shall apply to or have any
effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring at the time of or prior to such amendment or repeal. Any repeal
or modification of this Article Eleven shall not adversely affect any right
or protection of a director of the Corporation existing under this
Certificate of Incorporation.
Warner Chilcott Public Limited Company is a corporation organized
under the laws of the Republic of Ireland. Article 133 of Warner Chilcott
Public Limited Company's Articles of Association provides that:
Subject to the provisions of and so far as may be admitted by the
Companies Acts, 1963 to 1990, every Director, Managing Director, Auditor,
Secretary or other officer of the Company shall be entitled to be
indemnified by the Company against all costs, charges, losses, expenses and
liabilities incurred by him in the execution and discharge of his duties or
in relation thereto including (without prejudice to the generality of the
foregoing) any liability incurred by him in defending any proceedings,
civil or criminal, which relate to anything done or omitted to be done or
alleged to have been done or omitted by him as an officer or employee of
the Company and in which judgment is given in his favour (or the
proceedings are otherwise disposed of without any finding or admission of
material breach of duty on his part) or in which he is acquitted or in
connection with any application under any statute for relief from liability
in respect of any such act or omission in which relief is granted to him by
the Court.
Article 134 of Warner Chilcott Public Limited Company's Articles of
Association provides further that:
To the extent permitted by law the Directors may arrange insurance
cover at the cost of the Company in respect of any liability, loss or
expenditure incurred by any Director, officer or the Auditors in relation
to anything done or alleged to have been done or omitted to be done by him
or them as Director, officer or Auditors. Subject to the provisions of the
Companies Acts, 1963 to 1990, the Directors shall have the power to
purchase and maintain insurance for or for the benefit of any persons who
are or were at any time Directors, officers, employees or auditors of the
Company or of
II-1
<PAGE> 136
any Holding Company of the Company or of any subsidiary undertaking of the
Company or of such Holding Company, or who are or were at any time trustees
of any pension or retirement benefit scheme for the benefit of any
employees or ex employees of the Company or of any subsidiary undertaking,
including (without prejudice to the generality of the foregoing) insurance
against any liability incurred by such persons in respect of any act or
omission in the actual or purported execution or discharge of their duties
or in the exercise or purported exercise of their powers or otherwise in
connection with their duties, powers or offices in relation to any such
Holding Company or subsidiary undertaking or pension or retirement benefit
scheme.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
See Exhibit Index.
(b) Financial Statement Schedule.
All other schedules have been omitted because they are not applicable or
because the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(A) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(B) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information in the
registration statement;
(C) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 137
The undersigned registrant hereby undertakes that:
(4) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(5) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
* * * * *
II-3
<PAGE> 138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rockaway,
State of New Jersey on May 12, 2000.
Warner Chilcott Public Limited Company
By: /s/ BETH P. HECHT
------------------------------------
Name: Beth P. Hecht
Title: Senior Vice President,
General Counsel &
Assistant Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul Herendeen his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Warner
Chilcott Public Limited Company), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on May 12, 2000.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/s/ JAMES G. ANDRESS Chairman of the Board and Chief Executive
- -------------------------------------------------------- Officer (principal executive officer)
James G. Andress
/s/ PAUL S. HERENDEEN Executive Vice President, Chief Financial
- -------------------------------------------------------- Officer and Director (principal
Paul S. Herendeen financial officer and accounting
officer)
/s/ ROGER M. BOISSONEAULT President, Chief Operating Officer and
- -------------------------------------------------------- Director
Roger M. Boissoneault
/s/ JAMES H. BLOEM Director
- --------------------------------------------------------
James H. Bloem
</TABLE>
II-4
<PAGE> 139
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/s/ HAROLD N. CHEFITZ Director
- --------------------------------------------------------
Harold N. Chefitz
/s/ BRUCE L. DOWNEY Director
- --------------------------------------------------------
Bruce L. Downey
/s/ ARTHUR F. HANEY Director
- --------------------------------------------------------
Arthur F. Haney
/s/ THOMAS G. LYNCH Director
- --------------------------------------------------------
Thomas G. Lynch
/s/ DAVID B. PINKERTON Director
- --------------------------------------------------------
David B. Pinkerton
/s/ DIDIER VOYDEVILLE Director
- --------------------------------------------------------
Didier Voydeville
</TABLE>
II-5
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rockaway,
State of New Jersey on May 12, 2000.
Warner Chilcott, Inc.
By: /s/ BETH P. HECHT
------------------------------------
Name: Beth P. Hecht
Title: Senior Vice President,
General
Counsel & Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul Herendeen his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Warner
Chilcott Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on May 12, 2000.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/s/ JAMES G. ANDRESS Chairman of the Board and Chief Executive
- -------------------------------------------------------- Officer (principal executive officer)
James G. Andress
/s/ PAUL S. HERENDEEN Executive Vice President, Chief Financial
- -------------------------------------------------------- Officer and Director (principal
Paul S. Herendeen financial officer and accounting
officer)
/s/ BETH P. HECHT Senior Vice President, General Counsel,
- -------------------------------------------------------- Secretary and Director
Beth P. Hecht
/s/ ROGER M. BOISSONNEAULT President, Chief Operating Officer and
- -------------------------------------------------------- Director
Roger M. Boissonneault
</TABLE>
II-6
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Purchase Agreement, dated as of February 15,2000, by and
among Warner Chilcott, Inc., Warner Chilcott plc and Credit
Suisse First Boston (incorporated by reference to Exhibit
10.49 to Annual Report on Form 10-K for the year ended
December 31, 1999 (File No. 005-52501)).
2.1 Asset Purchase Agreement, dated as of February 13, 1996, by
and between Warner Chilcott, Inc. and Warner-Lambert Company
(incorporated by reference to Exhibit 2.1 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
3.1 Memorandum and Articles of Association, as amended, of
Warner Chilcott Public Limited Company (incorporated by
reference to Exhibit 3.1 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
3.2** Certificate of Incorporation of Warner Chilcott, Inc.
3.3** By-Laws of Warner Chilcott, Inc.
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 (incorporated by reference to Exhibit
4.1 to Registration Statement on Form F-1, as amended, (File
No. 333-7240)).
4.2 Form of Ordinary Share Certificate (incorporated by
reference to Exhibit 4.2 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
4.3 Form of ADR Certificate (included within Exhibit 4.1)
4.4 Form of Senior Subordinated Discount Note (incorporated by
reference to Exhibit 4.4 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
4.5 Form of Convertible Senior Subordinated Discount Note
(incorporated by reference to Exhibit 4.5 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
4.6 Form of Warrant for converting holders of Rule 144 ADSs
(incorporated by reference to Exhibit 4.6 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
4.7 Indenture dated as of February 15, 2000 by and among Warner
Chilcott, Inc., Warner Chilcott plc and the Bank of New York
(incorporated by reference to Exhibit 10.48 to Annual Report
on Form 10-K for the year ended December 31, 1999 (File No.
005-52501)).
5.1** Opinion of Kirkland & Ellis
8.1** Opinion of Kirkland & Ellis with respect to federal tax
consequences
10.1 Incentive Share Option Scheme of the Company, originally
adopted on April 3, 1997, amended on June 3, 1999
(incorporated by reference to Exhibit 10.2 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999
(File No. 005-52501)).
10.2 Agreement between Elan Corporation, plc and the Company
dated June 24, 1999 (incorporated by reference to Exhibit
10.3 to Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999 (File No. 005-52501)).
10.3 Asset Purchase Agreement between Warner Chilcott, Inc. and
Medicis Pharmaceutical Corp. dated September 14, 1999
(incorporated by reference to Exhibit 10.1 to Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999
(File No. 005-52501)).
10.4 Asset Purchase Agreement between Warner Chilcott, Inc. and
Bristol-Myers Squibb dated January 26, 2000 (incorporated by
reference to Exhibit 10.1 to Company's Report on Form 8-K
dated February 15, 2000 (File No. 005-52501)).
10.5 Estrace Transitional Support and Supply Agreement between
Westwood-Squibb Pharmaceuticals, Inc. and Warner Chilcott,
Inc. dated January 26, 2000 (incorporated by reference to
Exhibit 10.2 to Company's Report on Form 8-K dated February
15, 2000 (File No. 005-52501)).
10.6 Administrative Support Agreement, dated as of October 17,
1994, by and between the Company and Elan (incorporated by
reference to Exhibit 10.5 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
</TABLE>
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<TABLE>
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10.7 Ovcon Transitional Support and Supply Agreement between
Bristol-Squibb Pharmaceuticals, Inc. and Warner Chilcott,
Inc. dated January 26, 2000 (incorporated by reference to
Exhibit 10.3 to Company's Report on Gorm 8-K dated February
15, 2000 (File No. 005-52501)).
10.8 Gemfibrozil Supply Agreement, dated as of March 28, 1996,
between Warner Chilcott, Inc. and Warner-Lambert
(incorporated by reference to Exhibit 10.9 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
10.9 Desmopressin Agreement, dated as of March 28, 1996, by and
between the Company and Warner-Lambert (incorporated by
reference to Exhibit 10.10 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
10.10 Choledyl SA Supply Agreement, dated as of June 26, 1997, by
and between Warner Chilcott (Bermuda) Limited and
Warner-Lambert (incorporated by reference to Exhibit 10.11
to Registration Statement on Form F-1, as amended, (File No.
333-7240)).
10.11 Doryx and Eryc Packaging Agreement, dated as of June 26,
1997, by and between Warner Chilcott (Bermuda) Limited and
Warner-Lambert (incorporated by reference to Exhibit 10.12
to Registration Statement on Form F-1, as amended, (File No.
333-7240)).
10.12 Employment Agreement between the Company and Diane Cady,
dated June 15, 1999 (incorporated by reference to Exhibit
10.2 to Annual Report on Form 10-K for the year ended
December 31, 1999 (File No. 005-52501).
10.13 Shareholders Agreement, dated as of October 17, 1994, by and
between the Company and Elan (incorporated by reference to
Exhibit 10.14 to Registration Statement on Form F-1, as
amended, (File No. 333-7240)).
10.14 Shareholders Agreement, dated as of August 13, 1997, between
the Company and Barr Laboratories, Inc. (incorporated by
reference to Exhibit 10.14 to Annual Report on Form 10-K for
the year ended December 31, 1998 (File No. 005-52501)).
10.15 Manufacturing Agreement, dated as of December 30, 1994, by
and between the Company and Mova Pharmaceutical Corporation
(incorporated by reference to Exhibit 10.16 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
10.16 Development Agreement, dated as of January 19, 1995, by and
between the Company and Mova (incorporated by reference to
Exhibit 10.17 to Registration Statement on Form F-1, as
amended, (File No. 333-7240)).
10.17 LoCholest Supply Agreement, dated as of September 13, 1996,
by and between the Company and Eon Labs Manufacturing Inc.
(incorporated by reference to Exhibit 10.19 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
10.18 Supply and Rebate Agreement, dated as of May 17, 1996, by
and between the Company and Cardinal Distribution
(incorporated by reference to Exhibit 10.21 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
10.19 Supply and Rebate Agreement, dated as of March 28, 1997, by
and between the Company and McKesson Drug Company
(incorporated by reference to Exhibit 10.22 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
10.20 License and Distribution Agreement, dated as of December 31,
1997, by and between the Company and FH Faulding & Co. Ltd.
(incorporated by reference to Exhibit 10.20 to Annual Report
on Form 10-K for the year ended December 31, 1998 (File No.
005-52501)).
10.21 Private Placement Memorandum dated as of March 13, 1996
(incorporated by reference to Exhibit 10.24 to Registration
Statement on Form F-1 , as amended,(File No. 333-7240)).
10.22 Purchase Agreement, dated as of April 25, 1996, by and among
the Company, Warner Chilcott, Inc. and the purchasers named
therein (incorporated by reference to Exhibit 10.25 to
Registration Statement on Form F-1, as amended, (File No.
333-7240)).
</TABLE>
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<TABLE>
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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 (incorporated by
reference to Exhibit 10.26 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
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 (incorporated by
reference to Exhibit 10.27 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
10.25 Indenture, dated as of April 15, 1996, by and between Warner
Chilcott, Inc. and Fleet National Bank of Connecticut, as
Trustee (incorporated by reference to Exhibit 10.28 to
Registration Statement on Form F-1, as amended, (File No.
333-7240)).
10.26 Warrant Agreement, dated as of October 17, 1994, by and
between the Company and Elan (incorporated by reference to
Exhibit 10.29 to Registration Statement on Form F-1, as
amended, (File No. 333-7240)).
10.27 Warrant Agreement, dated as of March 26, 1996, by and
between the Company and Warner-Lambert (incorporated by
reference to Exhibit 10.30 to Registration Statement on Form
F-1, as amended, (File No. 333-7240)).
10.28 Employment Agreement between the Company and Norma A.
Enders, dated August 20, 1999 (incorporated by reference to
Exhibit 10.28 to Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 005-52501)).
10.29 Purchase Agreement, dated as of June 26, 1997, by and
between Warner Chilcott (Bermuda) Limited and Warner-Lambert
(incorporated by reference to Exhibit 10.42 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
10.30 Stock and Warrant Purchase Agreement, dated as of July 8,
1997, by and between Barr Laboratories, Inc. and the Company
(incorporated by reference to Exhibit 10.44 to Registration
Statement on Form F-1, as amended, (File No. 333-7240)).
10.31 Exchange Agreement, dated as of June 15, 1997, by and among
the Company and the exchanger parties thereto (incorporated
by reference to Exhibit 10.45 to Registration Statement on
Form F-1, as amended, (File No. 333-7240)).
10.32 Employment Agreement between the Company and James G.
Andress, dated August 1, 1999 (incorporated by reference to
Exhibit 10.32 to Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 005-52501)).
10.33 Employment Agreement between the Company and Roger M.
Boissonneault, dated August 1, 1999 (incorporated by
reference to Exhibit 10.33 to Annual Report on Form 10-K for
the year ended December 31, 1999 (File No. 005-52501)).
10.34 Employment Agreement between the Company and Paul S.
Herendeen, dated August 1, 1999 (incorporated by reference
to Exhibit 10.34 to Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 005-52501)).
10.35 Employment Agreement between the Company and Beth P. Hecht,
dated December 1, 1998 (incorporated by reference to Exhibit
10.35 to Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 005-52501)).
10.36 Warrant Certificate Agreement between the Company and James
G. Andress, dated October 31, 1996 (incorporated by
reference to Exhibit 10.4 to Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 (File No. 005-52501)).
10.37 Warrant Certificate Agreement between the Company and James
G. Andress, dated October 31, 1996 (incorporated by
reference to Exhibit 10.5 to Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 (File No. 005-52501)).
10.38 Warrant Certificate Agreement between the Company and Roger
M. Boissonneault, dated October 31, 1996 (incorporated by
reference to Exhibit 10.6 to Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 (File No. 005-52501)).
</TABLE>
<PAGE> 144
<TABLE>
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10.39 Warrant Certificate Agreement between the Company and Paul
S. Herendeen, dated February 3, 1998 (incorporated by
reference to Exhibit 10.8 to Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 (File No. 005-52501)).
10.40 Revolving Credit and Security Agreement, dated March 30,
1998, among Warner Chilcott, Inc., PNC Bank National
Association and the Lenders thereto (incorporated by
reference to Exhibit 10.9 to Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 (File No. 005-52501)).
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 (incorporated by reference
to Exhibit 10.10 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 (File No. 005-52501)).
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
(incorporated by reference to Exhibit 10.11 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 005-52501)).
10.43 Trademark Collateral Assignment and Security Agreement, from
WCI to PNC Bank National Association dated March 30, 1998
(incorporated by reference to Exhibit 10.12 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 005-52501)).
10.44 Trademark Collateral Assignment and Security Agreement from
Warner Chilcott (Bermuda) Limited to PNC Bank National
Association dated March 30, 1998 (incorporated by reference
to Exhibit 10.13 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 (File No. 005-52501)).
10.45 Promotion Agreement between Schering Corporation and the
Company dated July 16, 1998 (incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 (File No. 005-52501)).
10.46 First Amendment to Promotion Agreement with Schering
Corporation dated September 3, 1998 (incorporated by
reference to Exhibit 10.2 to Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998 (File No.
005-52501)).
10.47 Second Amendment to Promotion Agreement with Schering
Corporation dated May 10, 1999 (incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999 (File No. 005-52501)).
10.48 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 (incorporated by reference to Exhibit 10.50 to
Annual Report on Form 10-K for the year ended December 31,
1999 (File No. 005-52501)).
10.49 Amendment to Revolving Credit and Security Agreement dated
February 28, 2000, between Warner Chilcott, Inc. and PNC
Bank National Association (incorporated by reference to
Exhibit 10.51 to Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 005-52501)).
12.1** Statement of Ratio of Earnings to Fixed Charges
21.1** Subsidiaries of the Registrant
23.1** Consent of KPMG LLP
23.2** Consent of KPMG LLP
23.3** Consent of KPMG
23.4** Consent of Kirkland & Ellis (included in Exhibit 5.1)
24.1** Powers of Attorney (included in signature pages)
25.1** Statement of Eligibility of Trustee on Form T-1
</TABLE>
<PAGE> 145
<TABLE>
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27.1 Financial Data Schedule (incorporated by reference to
Exhibit 27.1 to Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 005-52501)).
99.1** Form of Letter of Transmittal
99.2** Form of Letter of Notice of Guaranteed Delivery
99.3** Form of Tender Instructions
</TABLE>
- ---------------
** Filed herewith.
* Confidential material has been omitted from this exhibit and filed
separately with the SEC pursuant to a request for confidential treatment.
<PAGE> 1
Exhibit 3.2
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THAT "WARNER CHILCOTT, INC." IS DULY INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE
EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE RECORDS OF THIS
OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS.
THE FOLLOWING DOCUMENTS HAVE BEEN FILED:
CERTIFICATE OF INCORPORATION, FILED THE SEVENTH DAY OF FEBRUARY, A.D.
1996, AT 2:30 O'CLOCK P.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE
ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED
TO DATE.
AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID
TO DATE.
State Seal /S/ EDWARD J. FREEL
-----------------------------
Edward J. Freel
Authentication: 0245316
Date: 02-08-00
<PAGE> 2
PAGE 1
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THAT ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "WARNER CHILCOTT, INC.", FILED IN THIS OFFICE ON THE SEVENTH
DAY OF FEBRUARY, A.D. 1996, AT 2:30 O'CLOCK P.M.
State Seal /S/ EDWARD J. FREEL
------------------------------
Edward J. Freel
Authentication: 0245315
Date: 02-08-00
1
<PAGE> 3
2/7/96
CERTIFICATE OF INCORPORATION
OF
WARNER CHILCOTT, INC.
ARTICLE ONE
The name of this Corporation (hereinafter called the "Corporation") is
Warner Chilcott, Inc.
ARTICLE TWO
The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington, County of New Castle; and the name of the registered
agent of the Corporation in the State of Delaware at such address is The
Corporation Trust Company.
ARTICLE THREE
The nature of the business and the purposes to be conducted and
promoted by the Corporation are to conduct any lawful business, to promote any
lawful purpose and to engage in any lawful act or activity for which a
corporation may be organized under the General Corporation Law of the State of
Delaware, as the same may be amended from time to time. The Corporation is to
have perpetual existence.
ARTICLE FOUR
The Corporation shall have authority, to be exercised by the Board of
Directors, to issue 100 shares of common stock of the Corporation, par value
$.01 per share (the "Common
<PAGE> 4
Stock"), and 100 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"). Each holder of Common Stock shall at every meeting of
stockholders of the Corporation be entitled to one vote in person or by proxy
for each share of Common Stock held by such holder. Subject to the express terms
of the Preferred Stock, the holders of the Common Stock are entitled to the
entire voting power, all dividends declared and paid by the Corporation and all
assets of the Corporation in the event of any liquidation, dissolution, or
winding up of the Corporation.
The Board of Directors is hereby empowered to cause the Preferred Stock
to be issued from time to time for such consideration as it may from time to
time fix, and to cause such Preferred Stock to be issued as a class without
series or in series with such voting powers and such designations, preferences
and relative, participating, optional or other special rights, including
conversion and exchange rights, as designated by the Board of Directors pursuant
to the provisions of the General Corporation Law of the State of Delaware.
ARTICLE FIVE
The number of directors which shall constitute the whole Board of
Directors of the Corporation shall be determined pursuant to the By-Laws of the
Corporation as provided therein. Elections of directors need not be by written
ballot.
ARTICLE SIX
The name and mailing address of the incorporator is as follows:
Name Address
---- -------
Thomas W. Reader c/o Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
3
<PAGE> 5
ARTICLE SEVEN
In furtherance and not in limitation of the powers conferred by statute
and in accordance with any relevant provisions of the By-Laws of the
Corporation, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind the By-Laws of the Corporation.
ARTICLE EIGHT
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
ARTICLE NINE
To the extent allowed by law, any action that is required to be or may
be taken at a meeting of the stockholders of the Corporation may be taken
without a meeting if one or more written consents, prepared in accordance with
the provisions of the General Corporation Law of the State of Delaware,
describing the action taken, shall be signed by persons who would be entitled to
vote at a meeting those shares having voting power to cast not less than the
minimum number (or numbers, in the case of voting by classes) of votes that
would be necessary to authorize or take such action at a meeting at which all
stockholders entitled to vote were present and voted. Any such written consent
shall be included in the minutes or filed with the corporate records.
ARTICLE TEN
The Corporation may indemnify, to the full extent permitted by the
General Corporation Law of the State of Delaware and as provided in the By-Laws
of the Corporation,
4
<PAGE> 6
any and all persons whom it shall have the power to indemnify from and against
any and all expenses, liabilities or other matters.
ARTICLE ELEVEN
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article Eleven
shall not eliminate or limit the liability of a director (i) for any breach of
such director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of Title 8 of the General
Corporation Law of the State of Delaware, or (iv) for any transactions from
which such director derives an improper personal benefit. If the General
Corporation Law of the State of Delaware is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the full extent permitted by the General Corporation Law of the State of
Delaware, as so amended. No amendment to or repeal of this Article Eleven shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring at the time of or prior to such amendment or repeal. Any
repeal or modification of this Article Eleven shall not adversely affect any
right or protection of a director of the Corporation existing under this
Certificate of Incorporation.
5
<PAGE> 7
I, the undersigned, being the incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this Certificate of Incorporation, hereby
declaring that this is my act and deed and that the facts herein stated are true
and accordingly have hereunto set may hand this 7th day of February, 1996.
/S/ THOMAS W. READER
-------------------------------
Thomas W. Reader
6
<PAGE> 1
EXHIBIT 3.3
WARNER CHILCOTT, INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be located in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware, as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held at such place, within or without the State of Delaware, as may be
fixed from time to time by the board of directors.
Section 2. Annual meetings of shareholders shall be held, commencing
with the fifth month following the close of the corporation's first fiscal year
with the date and hour to be fixed by the board of directors, at which the
shareholders shall elect, pursuant to law, a board of directors, and transact
such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting, stating the
date, time, and place of the meeting, shall be delivered not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the president, the secretary,
or the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Meetings of shareholders for any purpose other than the
election of directors may be held at such time and place within or without the
State of Delaware as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Special meetings of the shareholders for any purpose or
purposes, unless otherwise prescribed by statute or by the charter, may be
called by the president, the chairman of the board of
<PAGE> 2
directors, the board of directors, such other officers or persons provided in
the certificate of incorporation, or upon written demand of at least twenty-five
percent (25%) of all of the votes entitled to be cast on any issue proposed to
be considered.
Section 3. Written or printed notice of a special meeting stating the
date, time and place of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) days nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the president, the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. A majority of the votes entitled to be cast on a matter by a
voting group constitutes a quorum of the voting group for action on that matter,
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum shall not be present or represented at any meeting of
the shareholders, the shareholders present in person or represented by proxy
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 2. If a quorum is present, action on a matter by a voting group
is approved if the votes cast within the voting group favoring the action exceed
the votes cast opposing the action, unless the vote of a greater number of
affirmative votes is required by law or the certificate of incorporation.
Section 3. Each outstanding share of stock having voting power shall be
entitled to one vote on each matter voted on at a meeting of shareholders unless
the certificate of incorporation or law provides otherwise. A shareholder may
vote either in person or by proxy as provided for in a signed appointment form
executed by the shareholder or by his or her duly authorized attorney-in-fact.
Section 4. Any action required or permitted to be taken at a meeting of
the shareholders may be taken without a meeting (1) if one or more written
consents setting forth the action so taken shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof, or (2)
if so provided in the certificate of incorporation, by persons who would be
entitled to vote at a meeting those shares having voting power to cast not less
than the minimum number (or numbers, in the case of voting groups) of votes that
would be necessary to authorize or take the action at a meeting at which all the
shareholders entitled to vote were present and voted.
2
<PAGE> 3
ARTICLE V
DIRECTORS
Section 1. The board of directors shall consist of a minimum of one and
a maximum of seven members. The number of directors may be fixed or changed
within the minimum or maximum by the shareholders or by the board of directors.
Directors need not be residents of the State of Delaware nor shareholders of the
corporation. The directors, other than the first board of directors, shall be
elected at the annual meeting of the shareholders, and each director elected
shall serve until the next succeeding annual meeting and until such director's
successor shall have been elected and qualified. The first board of directors
shall hold office until the first meeting of shareholders.
Section 2. Any vacancy occurring on the board of directors may be
filled by the affirmative vote of the majority of the remaining directors even
if such directors constitute less than a quorum of the board. The term of office
of any director elected to fill a vacancy shall expire at the next shareholders'
meeting at which directors are elected.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by the affirmative vote of majority of the remaining
directors present at a meeting even if such directors constitute less than a
quorum of the board.
Section 3. The business affairs of the corporation shall be managed by
its board of directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute, by the certificate
of incorporation or by these by-laws directed or required to be exercised or
done by the shareholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside the State of
Delaware, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may
be held either within or without the State of Delaware.
3
<PAGE> 4
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting or as shall be fixed by the consent in
writing of all the directors. No notice of such meeting shall be necessary to
the newly elected directors or in order to legally constitute the meeting,
provided a quorum shall be present.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by
the chairman of the board, by the president, or by any two directors on at least
twenty-four hours' notice if delivered by wire or phone and at least 3-days'
notice if by first-class mail to each director.
Section 5. Notice of a special meeting need not be given to any
director who submits a signed waiver of notice before or after the meeting.
Attendance or participation of a director at any meeting shall constitute a
waiver of notice of such meeting, unless the director, at the beginning of the
meeting (or promptly upon his or her arrival), objects to holding the meeting or
transacting business at the meeting, and does not thereafter vote for or assent
to action taken at the meeting. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of the notice of such meeting.
Section 6. A majority of the directors shall constitute a quorum for
the transaction of business, unless a greater number is required by law or by
the certificate of incorporation. The act of majority of the directors present
at any meeting at which a quorum is present shall be the act of the board of
directors, unless the act of a greater number is required by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 7. Any action required or permitted to be taken at a meeting of
the directors may be taken without a meeting if one or more written consents,
setting forth the action so taken, shall be signed by all of the directors
entitled to vote with respect to the subject matter thereof.
ARTICLE VII
COMMITTEES
The board of directors may create one or more committees that may
consist of one or more members of the board. Committee members shall serve at
the board of directors' pleasure. To the extent specified by the board of
directors or certificate of incorporation, each committee shall have and
exercise all of the authority of the board of directors in the management of the
corporation, except as otherwise provided by law.
4
<PAGE> 5
ARTICLE VIII
NOTICES
Section 1. Whenever notice is required to be given to any director or
shareholder under statute, the certificate of incorporation or these by-laws, it
shall be construed to mean written notice, which may be by mail, addressed to
such director or shareholder at his or her address as it appears on the records
of the corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time it is deposited in the United States mail. Notice
to directors also may be given by telegram or telephone.
Section 2. Whenever notice is required to be given under statute, the
certificate of incorporation or these by-laws, a waiver thereof, in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation, chosen by the board of
directors, shall be a president and a secretary. The board of directors may also
choose one or more vice-presidents, one or more assistant secretaries, a
treasurer and one or more assistant treasurers. Any number of offices may be
held by the same person.
Section 2. The board of directors, at its first meeting after each
annual meeting of shareholders, shall choose a president and a secretary,
neither of whom need be a member of the board.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed, with or without cause, at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders, shall have
general and active management of the business of the corporation and shall see
that all orders and resolutions of the board of directors are carried into
effect.
5
<PAGE> 6
Section 7. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed, and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
Section 8. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders, and shall record all of the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose, and shall perform like duties for the
standing committees when required. The secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
board of directors, and shall perform such other duties as may be prescribed by
the board of directors or president, under whose supervision the secretary shall
be. The secretary shall have custody of the corporate seal of the corporation,
and the secretary, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it, and when so affixed, it may be attested by
his or her signature or by the signature of such assistant secretary. The board
of directors may give general authority to any other officer to affix the seal
of the corporation and to attest the affixing by his or her signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence of disability of the secretary, perform the duties and exercise
the powers of the secretary, and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 11. The treasurer shall have the custody of the corporate funds
and securities, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of directors.
Section 12.. The treasurer shall disburse the funds of the corporation
as may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his or her transactions as treasurer and of the financial condition of the
corporation.
Section 13. The treasurer, if required by the board of directors, shall
give the corporation a bond, in such sum and with such surety or sureties as
shall be satisfactory to the board of directors, for the faithful performance of
the duties of his or her office and for the restoration to the corporation, in
case of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control, belonging to the corporation.
6
<PAGE> 7
Section 14. The assistant treasurer or, if there shall be more than
one, the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer, and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE X
CAPITAL STOCK
Section 1. The shares of the corporation shall be represented by
certificates, or the board of directors may authorize the issuance of shares
without certificates. Each share certificate shall be signed by the president or
a vice president and the secretary or treasurer or an assistant secretary or
treasurer of the corporation, or by the board of directors, and may be sealed
with the seal of the corporation or a facsimile thereof.
When the corporation is authorized to issue different classes of shares
or different series within a class, there shall be set forth upon the face or
back of the certificate, or the certificate shall have a statement that the
corporation will furnish to any shareholder upon request and without charge, a
full statement of the designations, preferences, limitations, and relative
rights applicable to each class, and the variations in the relative rights,
preferences, and limitations determined for each series and the authority of the
board of directors to fix and determine the relative rights and preferences of
subsequent series.
Section 2. The signatures of the persons signing a share certificate
may be facsimiles. If the certificate is signed in facsimile, then it must be
countersigned by a transfer agent or an employee of the corporation. The
transfer agent or registrar may sign either manually or by facsimile. In case
any person who has signed, or whose facsimile signature has been placed upon
such certificate, has ceased to hold such office before such certificate is
issued, the certificate nevertheless is valid.
Section 3. The board of directors may direct that a new certificate be
issued in place of any certificate previously issued by the corporation, which
is alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
Section 4. Upon surrender, to the corporation or the transfer agent of
the corporation, of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate shall be cancelled and the transaction recorded upon the
books of the corporation.
Section 5. For the purpose of determining shareholders entitled to
notice of, or to vote
7
<PAGE> 8
at, any meeting of shareholders, or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors may fix a
record date, in advance, that may not be more than seventy (70) days before the
meeting or action requiring a determination of shareholders. If no such record
date is fixed by the board of directors, the date on which the resolution of the
board of directors declaring such dividend is adopted, as the case may be, shall
be the record date for such determination of shareholders.
Section 6. The corporation shall be entitled to recognize a person,
registered on its books as the owner of shares, as having the exclusive right to
receive dividends and to vote with respect to shares shown to be owned, and as
being exclusively liable for calls and assessments upon shares shown to be
owned. The corporation shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
Section 7. A list of shareholders as of the record date, prepared in
alphabetical order, arranged by voting group, showing the address of and the
number of shares held by each shareholder, and certified by the corporate
officer responsible for its preparation or the transfer agent, shall be open for
inspection at any meeting of shareholders.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Subject to the law and any applicable provisions of the
certificate of incorporation, dividends may be declared by the board of
directors at any regular or special meeting, and may be paid in cash, in
property or in shares of the corporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends, such sum or sums as the
directors from time to time, in their absolute discretion, think proper, as a
reserve fund to meet contingencies, for equalizing dividends, for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation. The
directors also may modify or abolish any such reserve in the manner in which it
was created.
Section 3. All checks or demands for money, and notes of the
corporation, shall be signed by such officer or officers, or such other person
or persons as the board of directors may from time to time designate.
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
Section 5. The corporate seal shall have inscribed thereon the name of
the
8
<PAGE> 9
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
These by-laws may be amended or repealed, or new by-laws may be
adopted, by the affirmative vote of majority of the board of directors at any
regular or special meeting of the board unless the certificate of incorporation
or law reserves this power to the shareholders.
9
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF KIRKLAND & ELLIS]
To Call Writer Directly:
(212) 446-4800
May 3, 2000
Warner Chilcott, Inc.
Rockaway 80 Corporate Center
100 Enterprise Drive, Suite 280
Rockaway, New Jersey 07866
Re: Exchange Offer for $200,000,000 12 5/8% Senior Notes due 2008
for $200,000,000 12 5/8% Series B Senior Notes due 2008
Dear Ladies and Gentlemen:
We have acted as counsel to Warner Chilcott, Inc. (the "Company") and
the Parent Guarantor (together with the Company, the "Registrants") in
connection with the proposed offer (the "Exchange Offer") to exchange an
aggregate principle amount of up to $200,000,000 12 5/8% Senior Notes due 2008
(the "Old Notes") for $200,000,000 12 5/8% Series B Senior Notes due 2008 (the
"Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"). Such Registration Statement, as
amended or supplemented, is hereinafter referred to as the "Registration
Statement". The Exchange Notes are to be issued pursuant to the Indenture (the
"Indenture"), dated as of February 15, 2000 by and among the Registrants and The
Bank of New York, as the Trustee, in exchange for and in replacement of the
Company's outstanding Old Notes, of which $200,000,000 in aggregate principal
amount is outstanding.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as have deemed necessary for the purposes of this opinion,
including (i) the corporate and organizational documents of each of the
Registrants, (ii) minutes and records of the corporate proceedings of each of
the Registrants with respect to the issuance of the Exchange Notes, (iii) the
Registration Statement and exhibits thereto and (iv) the Notes Exchange and
Registration Rights Agreement, dated as of February 11, 2000, among the
Registrants, Credit Suisse First Boston, CIBC World Markets, and SG Cowen.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as
<PAGE> 2
copies and the authenticity of the originals of all documents submitted to us as
copies. We have also assumed the genuineness of the signatures of persons
signing all documents in connection with which this opinion is rendered, the
authority of such persons signing on behalf of the parties thereto other than
the Registrants, and the due authorization, execution and delivery of all
documents by the parties thereto other than the Registrants. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Registrants and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(i) Warner Chilcott, Inc. is in good standing under the laws of the
State of Delaware.
(ii) The sale and issuance of the Exchange Notes has been validly
authorized by the Company.
(iii) When the Exchange Notes are issued pursuant to the Exchange
Offer, the Exchange Notes will constitute valid and binding obligations of the
Registrants and the Indenture will be enforceable in accordance with its terms.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principals of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and
(iii) except for purposes of the opinion in paragraph 1, any laws except the
laws except the laws of the State of New York.
We hereby consent to the filing of this opinion in Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of the rules and regulations of
the Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the State of New York be changed by legislative action, judicial
decision or otherwise.
<PAGE> 3
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
KIRKLAND & ELLIS
<PAGE> 1
[LETTERHEAD OF KIRKLAND & ELLIS]
EXHIBIT 8.1
[DATE], 2000
Warner Chilcott, Inc.
Rockaway 80 Corporate Center
100 Enterprise Drive, Suite 280
Rockaway, New Jersey 07866
Re: Exchange Offer for $200,000,000 12 5/8% Senior Notes due 2008 for
$200,000,000 12 5/8% Series B Senior Notes due 2008
We have acted as counsel to Warner Chilcott, Inc. (the "Company") and
the Parent Guarantor (together with the Company, the "Registrants") in
connection with the proposed offer (the "Exchange Offer") to exchange an
aggregate principle amount of up to $200,000,000 12 5/8% Senior Notes due 2008
(the "Old Notes") for $200,000,000 12 5/8% Series B Senior Notes due 2008 (the
"Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"). Such Registration Statement, as
amended or supplemented, is hereinafter referred to as the "Registration
Statement".
You have requested our opinion as to certain United States federal
income tax consequences of the Exchange Offer. In preparing our opinion, we have
reviewed and relied upon the Registration Statement and such other documents as
we deemed necessary.
On the basis of the foregoing, it is our opinion that the exchange of
the Old Notes for the Exchange Notes pursuant to the Exchange Offer will not be
treated as an "exchange" for United States federal income tax purposes, because
the Exchange Notes will not be considered to differ materially in kind or extent
from the Old Notes. Rather, the Exchange Notes received by a holder will be
treated as a continuation of the Old Notes in the hands of that holder.
Accordingly, there will be no federal income tax consequences to holders solely
as a result of the exchange of the Old Notes for Exchange Notes under the
Exchange Offer.
The opinion set forth above is based upon the applicable provisions of
the Internal Revenue Code of 1986, as amended, the Treasury Regulations
promulgated or proposed
<PAGE> 2
Warner Chilcott, Inc.
[DATE] 2000
Page 2
thereunder, current positions of the Internal Revenue Service (the "IRS")
contained in published revenue rulings, revenue procedures, and announcements,
existing judicial decisions and other applicable authorities. No tax ruling has
been sought from the IRS with respect to any of the matters discussed herein.
Unlike a ruling from the IRS, an opinion of counsel is not binding on the IRS.
Hence, no assurance can be given that the opinion stated in this letter will not
be successfully challenged by the IRS or that a court would reach the same
conclusion. We express no opinion concerning any tax consequences of the
Exchange Offer except as expressly set forth above.
We consent to the filing of this opinion as an exhibit to the
registration statement, to the reference to this firm and the inclusion of our
opinion in the section entitled "United States Federal Income Tax
Considerations" in the registration statement. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Kirkland & Ellis
<PAGE> 1
EXHIBIT 12.1
Warner Chilcott Public Limited Company
Statement of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31, 1999
-------------------------
1995 1996 1997 1998 HISTORICAL PRO FORMA(1)
--------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
FIXED CHARGES
Interest expense as reported - 8,440 7,260 3,012 $ 3,011 $26,570
Portion of rents representative of the
interest factor 5 10 20 50 200 200
--------- --------- --------- --------- --------- ---------
Consolidated Interest Expense 5 8,450 7,280 3062 $ 3,211 $26,770
========= ========= ========= ========= ========= =========
EARNINGS
Consolidated net (loss) income
Net (loss) income as reported (7,774) (39,339) (28,374) (20,297) $ (6,701) $4,837
Plus:
Taxes - - - - - -
Fixed charges 5 8,450 7,280 3,062 3,211 26,770
--------- --------- --------- --------- --------- ---------
Earnings as adjusted (7,769) (30,889) (21,094) (17,235) $ (3,490) $31,607
========= ========= ========= ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES - - - - - 1.18
========= ========= ========= ========= ========= =========
</TABLE>
(1) Reflects the effect of the purchase of the products from BMS and the
issuance of the Notes.
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Warner Chilcott Public Limited Company:
1. Warner Chilcott, Inc.;
2. Warner Chilcott (Bermuda) Limited;
3. Warner Chilcott Laboratories Ireland Limited.
Warner Chilcott, Inc. has no subsidiaries.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Warner Chilcott Public Limited Company
We consent to the use of our reports included herein on the Warner
Chilcott Public Limited Company consolidated financial statements and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Short Hills, New Jersey
May 10, 2000
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Warner Chilcott Public Limited Company
We consent to the use of our reports included herein on the historical
statements of net sales and product contribution of the Ovcon and Estrace Cream
Products of Apothecon (a subsidiary of Bristol-Meyers Squibb Company) and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Short Hills, New Jersey
May 10, 2000
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Warner Chilcott Public Limited Company
We consent to the use of our report included herein on the Warner
Chilcott Public Limited Company consolidated 1997 financial statements and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG
Dublin, Ireland
May 10, 2000
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
---------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
</TABLE>
---------------------------
WARNER CHILCOTT PUBLIC LIMITED COMPANY
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Ireland Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
</TABLE>
-------------
WARNER CHILCOTT, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 22-3426958
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Rockaway 80 Corporate Center
100 Enterprise Drive, Suite 280
Rockaway, New Jersey 07866
(Address of principal executive offices) (Zip code)
</TABLE>
12-5/8% Senior Notes due 2008
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Name Address
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of New York 2 Rector Street, New York, N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 10th day of May, 2000.
THE BANK OF NEW YORK
By: /S/ MICHAEL CULHANE
-------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
-3-
<PAGE> 4
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS In Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .......................... $3,247,576
Interest-bearing balances ................................................... 6,207,543
Securities:
Held-to-maturity securities ................................................. 827,248
Available-for-sale securities ............................................... 5,092,464
Federal funds sold and Securities purchased under agreements to resell.......... 5,306,926
Loans and lease financing receivables:
Loans and leases, net of unearned
income...............37,734,000
LESS: Allowance for loan and
lease losses............575,224
LESS: Allocated transfer risk
reserve........................13,278
Loans and leases, net of unearned income, allowance, and reserve ............ 37,145,498
Trading Assets ................................................................. 8,573,870
Premises and fixed assets (including capitalized leases) ....................... 723,214
Other real estate owned ........................................................ 10,962
Investments in unconsolidated subsidiaries and associated companies ............ 215,006
Customers' liability to this bank on acceptances outstanding ................... 682,590
Intangible assets .............................................................. 1,219,736
Other assets ................................................................... 2,542,157
-------------
Total assets ................................................................... $71,794,790
=============
LIABILITIES
Deposits:
In domestic offices ......................................................... $27,551,017
Noninterest-bearing..........................................11,354,172
Interest-bearing.............................................16,196,845
In foreign offices, Edge and Agreement subsidiaries, and IBFs ............... 27,950,004
</TABLE>
-4-
<PAGE> 5
<TABLE>
<S> <C>
Noninterest-bearing.............................................639,410
Interest-bearing.............................................27,310,594
Federal funds purchased and Securities sold under agreements to repurchase ..... 1,349,708
Demand notes issued to the U.S.Treasury ........................................ 300,000
Trading liabilities ............................................................ 2,339,554
Other borrowed money:
With remaining maturity of one year or less ................................. 638,106
With remaining maturity of more than one year through three years ........... 449
With remaining maturity of more than three years ............................ 31,080
Bank's liability on acceptances executed and outstanding ....................... 684,185
Subordinated notes and debentures .............................................. 1,552,000
Other liabilities .............................................................. 3,704,252
-------------
Total liabilities .............................................................. 66,100,355
=============
EQUITY CAPITAL
Common stock ................................................................... 1,135,284
Surplus ........................................................................ 866,947
Undivided profits and capital reserves ......................................... 3,765,900
Net unrealized holding gains (losses) on available-for-sale securities ......... ( 44,599)
Cumulative foreign currency translation adjustments ............................ ( 29,097)
-------------
Total equity capital ........................................................... 5,694,435
-------------
Total liabilities and equity capital ........................................... $71,794,790
=============
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
__
Thomas A. Renyi |
Alan R. Griffith | Directors
Gerald L. Hassell |
__|
-5-
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
12 5/8% SENIOR NOTES DUE 2008
OF
WARNER CHILCOTT, INC.
PURSUANT TO THE PROSPECTUS DATED , 2000
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , 2000 UNLESS EXTENDED
(THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed and submitted to the Exchange Agent: THE BANK OF NEW
YORK.
<TABLE>
<S> <C> <C>
By Overnight Courier and by Hand By Hand: By Registered or Certified Mail:
after 4:30 p.m. on the Expiration Date: The Bank of New York The Bank of New York
The Bank of New York 101 Barclay Street 101 Barclay Street
101 Barclay Street New York, NY 10286 New York, NY 10286
New York, NY 10286 Attn: Kin Lau Attn: Kin Lau
Attn: Kin Lau Corporate Trust Operations, 7E Corporate Trust Operations, 7E
Corporate Trust Operations, 7E
</TABLE>
By Facsimile:
(212) 815-6339
Attn: Kin Lau
Corporate Trust Operations, 7E
Confirm by telephone:
(212) 815-3750
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (212)
815-3750 OR BY FACSIMILE AT (212) 815-6339.
The undersigned hereby acknowledge receipt of the Prospectus dated ,
2000 (the "Prospectus") of Warner Chilcott, Inc., a Delaware corporation, (the
"Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Issuer's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 12 5/8% Senior Notes due 2008 (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement, for each $1,000
principal amount of its outstanding 12 5/8% Senior Notes due 2008 (the "Notes"),
of which $200,000,000 aggregate principal amount is outstanding. Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
The undersigned hereby tenders the Notes described in Box I below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
<PAGE> 2
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instruction to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Issuer, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Issuer upon receipt by the
Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms in the
Prospectus under the caption "Exchange Offer--Withdrawal of Tenders." All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of the undersigned and any Beneficial Owner(s), and every obligation
of the undersigned or any Beneficial Owners hereunder shall be binding upon the
heirs, representatives, successors, and assigns of the undersigned and such
Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, and adverse claims
when the Tendered Notes are acquired by the Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information in Box
2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuer, and
(iv) the undersigned and each Beneficial Owner acknowledge and agree that any
person participating in the Exchange Offer with the intention or for the purpose
of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), in connection with a secondary resale of the Exchange Notes acquired by
such person and cannot rely on the position of the Staff of the Securities and
Exchange Commission
<PAGE> 3
(the "Commission") described in the no-action letters that are discussed in the
section of the Prospectus entitled "Exchange Offer." In addition, by accepting
the Exchange Offer, the undersigned hereby (i) represents and warrants that, if
the undersigned or any Beneficial Owner of the Notes is a Participating
Broker-Dealer, such Participating Broker-Dealer acquired the Notes for its own
account as a result of market-making activities or other trading activities and
has not entered into any arrangement or understanding with the Issuer or any
affiliate of the Issuer (within the meaning of Rule 405 under the Securities
Act) to distribute the New Notes to be received in the Exchange Offer, and (ii)
acknowledges that, by receiving New Notes for its own account in exchange for
Notes, where such Notes were acquired as a result of market-making activities or
other trading activities, such Participating Broker-Dealer will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes.
- - CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
- - CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4).
- - CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
<TABLE>
<CAPTION>
AGGREGATE
NAMES AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
TOTAL
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000 of principal amount
Unless otherwise indicated in this column, the principal amount of all Note
Certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
<PAGE> 4
BOX 2
BENEFICIAL OWNER(S)
<TABLE>
<CAPTION>
STATE OF PRINCIPAL RESIDENCE OF EACH BENEFICIAL OWNER OF PRINCIPAL AMOUNT OF TENDERED NOTES HELD FOR ACCOUNT OF
TENDERED NOTES BENEFICIAL OWNER
<S> <C>
</TABLE>
BOX 3
SPECIAL DELIVERY INSTRUCTION'S
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES
ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT
AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
(please print)
Address:
(include Zip Code)
Tax Identification or
Social Security No.:
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
<PAGE> 5
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
Account Number:
Transaction Code Number:
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
X
X
(Signature of Registered
Holder(s) or Authorized Signatory)
Note: The above lines must be signed by the registered holder(s) of Notes as
their name(s) appear(s) on the Notes or by persons(s) authorized to become
registered holder(s) (evidence of which authorization must be transmitted with
this Letter of Transmittal). If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer, or other person acting in a
fiduciary or representative capacity, such person must record his or her full
title below. See Instruction 5.
Name(s):
Capacity:
Street Address:
(include Zip Code)
Area Code and Telephone Number:
Tax Identification or Social Security Number:
Signature Guarantee
(If required by Instruction 5)
Authorized Signature
X
Name:
(please print)
Title:
Name of Firm:
(Must be an Eligible Institution as defined in
Instruction 2)
Address:
(include Zip Code)
Area Code and Telephone Number:
Dated:
BOX 7
BROKER-DEALER STATUS
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities.
<PAGE> 6
PAYOR'S NAME: WARNER CHILCOTT, INC.
SUBSTITUTE
Form W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below. See instructions if your name has
changed.
Address
City, State and ZIP Code
List account number(s) (optional)
PART 1--PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION Social Security
NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY Number or TIN
SIGNING AND DATING BELOW
PART 2--Check the box if you are NOT subject to backup withholding under the
provisions of section 3406(a)(1)(C) of the Internal Revenue Code because (1) you
have not been notified that you are subject to backup withholding as a result of
failure to report all interest or dividends or (2) the Internal Revenue Service
has notified you that you are no longer subject to backup withholding.
[ ]
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE.
SIGNATURE __________________________ DATE ___________
PART 3 --
Awaiting TIN [ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE> 7
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute Form
W-9, and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address herein, and either certificates
for Tendered Notes must be received by the Exchange Agent at its address herein
or such Tendered Notes must be transferred pursuant to the procedures for
book-entry transfer described in the Prospectus (and a confirmation of such
transfer received by the Exchange Agent), in each case prior to 5 00 p.m., New
York City time, on the Expiration Date. The method of delivery of certificates
for Tendered Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the tendering holder and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the Holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Notes should be sent to the Issuers. Neither the Issuers nor the
registrar are under any obligation to notify any tendering holder of the
Issuer's acceptance of Tendered Notes prior to the closing of the Exchange
Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedures described below, including completion of Box
4. Pursuant to such procedures: (i) such tender must be made by or through a
firm which is a member of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (an "Eligible Institution") and the Notice
of Guaranteed Delivery must be signed by the holder; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of the Tendered Notes and the principal amount
of Tendered Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal together with the certificate(s)
representing the Notes and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all Tendered
Notes in proper form for transfer, must be received by the Exchange Agent within
five New York Stock Exchange trading days after the Expiration Date. Any holder
who wishes to tender Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Notes prior to 5:00 New York City time, on
the Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by an Eligible
Holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes Tendered" (Box 1)
above. The entire principal amount of Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount
<PAGE> 8
of all Notes held by the holder is not tendered, then Notes for the principal
amount of Notes not tendered and Exchange Notes issued in exchange for any Notes
tendered and accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Notes is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in- fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Issuers, evidence satisfactory to the Issuer of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box entitled "Special Delivery Instructions" (Box 3 )
or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the Exchange Notes and/or
substitute Notes for principal amounts not tendered or not accepted for exchange
are to be sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the Exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
<PAGE> 9
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Issuer is not provided with the correct TIN, the Holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 certifying that
the TIN provided is correct (or that such holder is awaiting a TIN, and that (i)
the holder has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of failure to report all
interest or dividend or (ii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
Tendered Notes are registered in more than one name or are not in the name of
the actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the right to reject any and all Notes not
validly tendered or any Notes the Issuer's acceptance of which would, in the
opinion of the Issuer or its counsel, be unlawful. The Issuer also reserves the
right to waive any conditions of the Exchange Offer or defects or irregularities
in tenders of Notes as to any ineligibility of any holder who seeks to tender
Notes in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Issuer shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must he cured
within such time as the Issuer shall determine. Neither the Issuer, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of Notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF NOTES.
Subject to the terms and conditions of the Exchange Offer, the Issuer will
accept for exchange all validly tendered Notes as soon as practicable after the
Expiration Date and will issue Exchange Notes therefor as soon as practicable
thereafter. For
<PAGE> 10
purposes of the Exchange Offer, the Issuer shall be deemed to have accepted
tendered Notes when, as and if the Issuer has given written or oral notice
(immediately followed in writing) thereof to the Exchange Agent. If any Tendered
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Notes will be returned, without expense, to the undersigned at the
address shown in Box 1 or at a different address as may be indicated herein
under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures in
the Prospectus under the caption "The Exchange Offer."
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
12 5/8% SENIOR NOTES DUE 2008
OF
WARNER CHILCOTT, INC.
PURSUANT TO THE PROSPECTUS DATED , 2000
This form must be used by a holder of 12 5/8% Senior Notes due 2008 (the
"Notes") of Warner Chilcott, Inc., a Delaware corporation, (the "Company"), who
wishes to tender Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in "Exchange Offer--Guaranteed Delivery Procedures" of the
Company's Prospectus, dated , 2000 (the "Prospectus") and in Instruction
2 to the related Letter of Transmittal. Any holder who wishes to
tender Notes pursuant to such guaranteed delivery procedures must ensure that
the Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Exchange Offer. Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , 2000 UNLESS EXTENDED
(THE "EXPIRATION DATE").
The Bank of New York
(the "Exchange Agent")
<TABLE>
<S> <C> <C>
By Overnight Courier and by By Hand: By Registered or Certified
Hand after 4:30 p.m. on the The Bank of New York Mail:
Expiration Date: 101 Barclay Street The Bank of New York
The Bank of New York New York, NY 10286 101 Barclay Street
101 Barclay Street Attn: Kin Lau New York, NY 10286
New York, NY 10286 Corporate Trust Operations, 7E Attn: Kin Lau
Attn: Kin Lau Corporate Trust Operations, 7E
Corporate Trust Operations, 7E
</TABLE>
By Facsimile:
(212) 815-6339
Attn: Kin Lau
Corporate Trust Operations, 7E
Confirm by telephone:
(212) 815-3750
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN ONE LISTED ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS NOTICE OF GUARANTEED DELIVERY OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (212)
815-3750, OR BY FACSIMILE AT (212) 815-6339.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be
<PAGE> 2
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the condition, in the Prospectus and the related Letter of Transmittal,
receipt of which is hereby acknowledged, the principal amount of Notes as
described below pursuant to the guaranteed delivery procedures described in the
Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
<S> <C> <C>
</TABLE>
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or Authorized Signatory:
Names of Registered Holder(s):
Date: , 1999
Address:
Area Code and Telephone No.:
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer or other person acting in a fiduciary or representative capacity,
such person must provide the following information.
Please print name(s) and address(es)
Name(s):
Capacity:
Address(es):
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility described in the
prospectus under the caption, "Exchange Offer--Guaranteed Delivery Procedures"
and in the Letter of Transmittal) and any other required documents, all by 5:00
p.m., New York City time, on the fifth New York Stock Exchange trading day
following the Expiration Date.
Name of firm:
(AUTHORIZED SIGNATURE)
Address: Name:
(PLEASE PRINT)
Title:
(INCLUDE ZIP CODE)
Area Code and Tel. No.: Dated:
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
<PAGE> 5
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address prior to the Expiration Date. The method of delivery of
this Notice of Guaranteed Delivery and any other required documents to the
Exchange Agent is at the election and sole risk of the holder, and the delivery
will be deemed made only when actually received by the Exchange Agent. If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. As an alternative to delivery by mail, the holders may
wish to consider using an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedures, see Instruction 2 of the Letter of
Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
<PAGE> 1
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
WARNER CHILCOTT, INC.
12 5/8% SENIOR NOTES DUE 2008
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
(the "Prospectus") of Warner Chilcott, Inc., a Delaware corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 12 5/8% Senior Notes due 2008 (the "Notes") held by
you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 12 5/8% Senior Notes due 2008
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE) ,
(ii) the undersigned is acquiring the Exchange Notes in
<PAGE> 2
the ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iv)
the undersigned acknowledges that any person participating in the Exchange Offer
for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "Act"), in connection with a secondary resale transaction of the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission set forth in no-action letters
that are discussed in the section of the Prospectus entitled "The Exchange Offer
- -- Resales of the Exchange Notes," and (v) the undersigned is not an
"affiliate," as defined in Rule 405 under the Act, of the Company; (b) to agree,
on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c)
to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Notes.
SIGN HERE
Name of beneficial owner(s):
- --------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
Name (please print):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
- ----------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
