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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 2000.
REGISTRATION NO. 333-30764
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST HORIZON PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 2834 58-2004779
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
660 HEMBREE PARKWAY, SUITE 106
ROSWELL, GA 30076
(770) 442-9707
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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MAHENDRA G. SHAH, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
FIRST HORIZON PHARMACEUTICAL CORPORATION
660 HEMBREE PARKWAY, SUITE 106
ROSWELL, GA 30076
TELEPHONE: (770) 442-9707
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
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STEPHEN D. FOX, ESQ. LESLIE E. DAVIS, ESQ.
ARNALL GOLDEN & GREGORY, LLP TESTA, HURWITZ & THIBEAULT, LLP
2800 ONE ATLANTIC CENTER 125 HIGH STREET
1201 WEST PEACHTREE STREET BOSTON, MA 02110
ATLANTA, GA 30309 TEL: (617) 248-7000
TEL: (404) 873-8500
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1) FEE(2)
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Common Stock, $0.001 par value per share 4,370,000 shares $14.00 $61,180,000 $16,151.52
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(1) Includes 570,000 shares to cover an over-allotment option granted by the
Registrant to the Underwriters.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) promulgated under the Securities Act. This fee was
paid previously.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH 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. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 4, 2000
3,800,000 SHARES
1ST HORIZON LOGO
COMMON STOCK
This is an initial public offering of common stock by First Horizon. We are
selling 3,800,000 shares of common stock. We estimate that the initial public
offering price will be between $12.00 and $14.00 per share.
------------------
Prior to this offering, there has been no public market for our common
stock. We have applied to have the shares of common stock approved for quotation
on the Nasdaq National Market under the symbol FHRX.
------------------
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Per Share Total
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Initial public offering price............................... $ $
Underwriting discounts and commissions......................
Proceeds to First Horizon, before expenses..................
</TABLE>
We have granted the underwriters an option for a period of 30 days to
purchase up to 570,000 additional shares of common stock.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CHASE H&Q
BANC OF AMERICA SECURITIES LLC
THOMAS WEISEL PARTNERS LLC
, 2000
<PAGE> 3
NITROLINGUAL(R) PUMPSPRAY is an oral spray of nitroglycerin used for the
acute relief or prevention of angina pectoris, which is the medical term for
chest pain due to coronary heart disease.
[GRAPHICS-BOTTLE OF NITROLINGUAL PUMPSPRAY]
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 5
Tradenames and Trademarks used in this Prospectus........... 15
Forward-Looking Statements.................................. 15
Use of Proceeds............................................. 15
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 27
Management.................................................. 40
Certain Relationships and Related Transactions.............. 51
Principal Stockholders...................................... 53
Description of Capital Stock................................ 55
Shares Eligible for Future Sale............................. 58
Underwriting................................................ 60
Legal Matters............................................... 62
Experts..................................................... 62
Additional Information...................................... 62
Index to Financial Statements............................... F-1
</TABLE>
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SUMMARY
THE COMPANY
First Horizon Pharmaceutical Corporation markets and sells brand name
prescription drugs. We focus on the treatment of chronic conditions, including
cardiovascular diseases, respiratory and gastroenterological disorders, and pain
and inflammation. Our strategy is to acquire pharmaceutical products that other
companies do not actively market that we believe have a high sales growth
potential and complement our existing products. In addition, we seek to develop
new patentable formulations, use new delivery methods and seek regulatory
approval for new indications of existing products.
Large multinational companies dominate the U.S. prescription pharmaceutical
market. These companies are increasingly divesting products which, as a result
of consolidation or lack of strategic fit, do not meet the threshold level of
sales required for continued marketing and promotion. In 1999 alone, we acquired
and licensed products from American Home Products Corporation and Aventis
(formerly Rhone-Poulenc Rorer).
Since 1992, we have introduced 12 products, three of which use the same
brand name. We market our products through our nationwide sales and marketing
force of 137 professionals. Our key products include the angina product,
Nitrolingual, the gastrointestinal products, Robinul and Robinul Forte, and the
liquid cold and allergy product, Tanafed. In 1999, we acquired marketing rights
from Aventis and Pohl-Boskamp to Nitrolingual, a product used for the acute
relief or prevention of chest pain resulting from heart disease. We believe that
this product had U.S. sales of approximately $12 million in 1998, a 12.6%
increase over 1997. In February 2000, we launched an improved version of this
product called Nitrolingual Pumpspray. We acquired Robinul and Robinul Forte
from American Home Products Corporation in January 1999. Since 1993, we have
marketed Tanafed, a liquid cold and allergy product primarily for children.
Third parties manufacture all of our products.
We recently concluded development agreements with Penwest Pharmaceuticals
Co. and Inpharmakon Corporation for a product that we are developing for the
treatment of migraine headache. The FDA has approved the marketing of the active
ingredient in this product for the treatment of other conditions. We are also
currently developing a new use of the active ingredient in Robinul to treat
symptoms associated with the excessive production of saliva.
Our net revenues have grown from approximately $1.6 million for the year
ended December 31, 1995 to approximately $18.6 million for the year ended
December 31, 1999. We achieved this through a combination of increased sales of
existing products and acquisitions.
RECENT DEVELOPMENTS
On April 14, 2000, we acquired from Warner-Lambert Company exclusive rights
to market, distribute and sell a prescription product called "Ponstel" in the
United States. The FDA has approved this product for the relief of mild to
moderate pain for patients 14 years of age and older when therapy for the pain
will not exceed one week and for pain associated with menstruation. The purchase
price for the rights to this product was $13 million. We paid $9.5 million in
cash, which we borrowed under a bridge loan from LaSalle Bank National
Association, and we issued a promissory note to Warner-Lambert for the remaining
$3.5 million. We intend to repay LaSalle Bank and Warner-Lambert from the
proceeds of this offering. We believe Ponstel had U.S. sales of approximately
$3.3 million in 1999, a 16% increase over 1998.
In addition, on April 14, 2000, we entered into an agreement with
Warner-Lambert to purchase exclusive rights in the United States and other
countries to market, distribute and sell a product called "Cognex", as well as
all of Warner-Lambert's rights to a new unapproved version of Cognex, called
"Cognex CR". The FDA has approved Cognex for the treatment of mild to moderate
1
<PAGE> 6
dementia associated with Alzheimer's disease. The purchase of Cognex is
contingent on Warner-Lambert receiving FTC approval for the transaction and upon
satisfaction of other specified conditions. Warner-Lambert must divest certain
assets in order to complete its pending merger with Pfizer Inc. and the FTC must
approve its product divestitures. If we conclude this acquisition, we will be
required to pay $3.5 million in cash for the product. We believe Cognex had
sales of approximately $7.7 million in 1999, a decline of 35% from 1998, $2.7
million of which was in the United States.
If we conclude the purchase of Cognex before the conclusion of this
offering, we will borrow the purchase price under our bridge loan with LaSalle
Bank which we will repay from the proceeds of the offering. If we conclude the
purchase after conclusion of this offering, we will pay Warner-Lambert $3.5
million from the proceeds of the offering.
We must pay Warner-Lambert up to an additional $1.5 million in purchase
price if we receive FDA approval to market a new version of Cognex, called
Cognex CR. If approved, Cognex CR will also treat mild to moderate dementia
associated with Alzheimer's disease, but we believe that the new version will
offer convenience to patients by reducing the number of tablets required from
four times per day to one time per day.
We believe that the acquisition of the rights to these products complements
our growth strategy of acquiring products that others do not actively market.
We incorporated in 1992. Our principal office is located at 660 Hembree
Parkway, Suite 106, Roswell, Georgia 30076 and our telephone number is (770)
442-9707. Our corporate Internet address is www.horizonpharm.com. We do not
intend the information contained on our website to be a part of this prospectus.
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THE OFFERING
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Common stock offered................................. 3,800,000 shares
Common stock to be outstanding after the
offering(1)........................................ 12,339,643 shares
Use of proceeds...................................... We intend to apply the proceeds from the
offering as follows: to repay approximately
$12,680,000 of debt outstanding as of April
14, 2000 under our credit facility with
LaSalle Bank, to pay $3,500,000 under our
promissory note with Warner-Lambert
relating to the purchase of Ponstel, to pay
$3,500,000 for the purchase of Cognex if we
conclude the purchase after the offering or
to repay an additional $3,500,000 under our
credit facility with LaSalle Bank if we
acquire Cognex before the offering, to pay
a $200,000 fee due under our amended
product development agreement, and for
general corporate purposes, including the
development of new products, the expansion
of our sales and marketing force and new
product acquisitions.
Nasdaq National Market symbol........................ FHRX
</TABLE>
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(1) This number excludes 1,767,500 shares subject to options granted under our
stock plans.
The information presented in this prospectus assumes that the underwriters
do not exercise their over-allotment option.
3
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SUMMARY FINANCIAL DATA
The following summary historical and as adjusted financial data should be
read together with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and related notes
included elsewhere in this prospectus. The as adjusted balance sheet data
summarized below reflects the sale of the 3,800,000 shares of common stock we
are offering at an assumed initial public offering price of $13.00 per share
after deducting the underwriting discounts and commissions and our estimated
offering expenses and the use of proceeds from the offering to repay $3,720,000
of debt outstanding as of March 31, 2000.
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<CAPTION>
THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------------
----------------------------------------------------------------- MARCH 31, MARCH 31,
1995 1996 1997 1998 1999 1999 2000
----------- ----------- ---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
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STATEMENT OF
OPERATIONS DATA:
Net revenues.......... $1,620,720 $2,516,616 $5,557,700 $9,252,058 $18,624,514 $4,199,934 $7,119,638
Operating income
(loss).............. (37,715) (395,185) (288,018) 269,421 1,655,049 697,380 (10,952)
Net income (loss)..... (92,025) (344,348) (180,446) 135,554 770,464 375,901 (38,531)
Net income (loss) per
common share:
Basic:............ $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.10 $ 0.05 $ (0.00)
Diluted:.......... $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.09 $ 0.04 $ (0.00)
Weighted average
common shares
outstanding:
Basic:............ 5,636,137 5,830,000 7,576,580 7,978,234 8,028,673 7,981,248 8,539,643
Diluted:.......... 5,636,137 5,830,000 7,576,580 8,584,329 8,975,493 8,759,904 8,539,643
</TABLE>
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<CAPTION>
MARCH 31, MARCH 31,
2000 2000
----------- -----------
ACTUAL AS ADJUSTED
(UNAUDITED) (UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 735,337 $41,957,337
Working capital............................................. (1,002,183) 42,699,817
Total assets................................................ 13,683,087 54,905,087
Borrowings under revolving loan agreement................... 2,000,000 --
Long-term debt including current portion.................... 2,575,708 855,708
Accumulated deficit......................................... (935,353) (935,353)
Total stockholders' equity.................................. 3,664,302 48,606,302
</TABLE>
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RISK FACTORS
RISKS RELATED TO OUR BUSINESS
WE CURRENTLY DEPEND ON TWO KEY PRODUCTS FOR A LARGE PORTION OF OUR SALES, AND
SUBSTANTIAL DECLINES IN EITHER OF THEM WOULD RESULT IN OUR BEING UNPROFITABLE.
Any factor that adversely affects the sale of our key products could
significantly decrease our sales and profits. Tanafed accounted for 24% and
Robinul and Robinul Forte accounted for 28% of our total revenues in 1999.
OUR GROWTH WILL SUFFER IF WE DO NOT ACQUIRE RIGHTS TO NEW PRODUCTS AND INTEGRATE
THEM SUCCESSFULLY.
We depend on acquisitions of rights to products from others as our primary
source for new products. Risks in acquiring new products include the following:
- the availability of new products that we find attractive and
complementary to our business; and
- the price to acquire or obtain a license for these products.
We often face significant competition from other pharmaceutical companies
in acquiring rights to products, which makes it more difficult to find
attractive products on acceptable terms. In addition, while integrating new
products such as our recently introduced Nitrolingual Pumpspray and recently
acquired Ponstel product, management will have to continue to effectively market
our existing products. Failure to do this successfully could reduce our sales
and profits.
WE MAY ENCOUNTER PROBLEMS IN THE MANUFACTURE OF OUR PRODUCTS THAT COULD LIMIT
OUR ABILITY TO SELL OUR PRODUCTS.
We depend entirely on third parties to manufacture our products.
Third parties manufacture all of our products, and we do not currently have
the ability to manufacture products. Except for any rights and remedies which we
may have because of contracts with our manufacturers, we have no control over
the availability of our products, or their quality or cost to us. We do not
maintain alternative manufacturing sources for any of our products and we may
not be able to locate alternative manufacturers on commercially acceptable terms
in the event of a manufacturing interruption. We do not have business
interruption insurance. Furthermore, due to the patent held on Nitrolingual
Pumpspray by our supplier, Pohl-Boskamp, no alternative source for Nitrolingual
exists. Similarly, the manufacturing process for producing the raw materials for
Tanafed is patented, and no other source for these materials is currently
available.
We will need to replace our supply source for Ponstel.
Warner-Lambert has agreed to manufacture Ponstel for us only until December
31, 2000. We must secure a new manufacturer to commence supplying Ponstel at the
time that the Warner-Lambert manufacturing agreement expires. We may not be able
to timely locate and contract with a manufacturer capable of manufacturing and
supplying us with Ponstel at an acceptable cost. In addition, our supply
agreement requires that we purchase a fixed quantity of Ponstel. If demand for
Ponstel increases or we are delayed in securing a replacement manufacturer, we
may have insufficient quantities of Ponstel to fulfill orders.
We have no written agreements for the manufacture of our Zoto-HC and Protuss-D
products.
Because we do not have a written agreement with the manufacturer of our
Zoto-HC and Protuss-D products, we may lack rights and remedies which may be
available under a written supply agreement.
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Our existing supply agreements may prohibit us from entering into potentially
more favorable supply relationships with others.
Each of our third-party manufacturing agreements requires that we purchase
all of our product requirements from the manufacturers that are a party to those
agreements. This could hinder our ability to enter into manufacturing agreements
with other manufacturers that may be more beneficial or less costly to us.
POHL-BOSKAMP CAN TERMINATE OUR RIGHTS TO NITROLINGUAL.
Based on industry data suggesting that Nitrolingual had sales of
approximately $12 million in 1998, Nitrolingual may become one of our key
products. Pohl-Boskamp can terminate our distribution agreement for Nitrolingual
if a company with a product competitive with Nitrolingual acquires direct or
indirect influence or control over our company or if a very significant change
in our stockholders occurs so that Kapoor-Pharma Investments and our employees,
management and directors, and any of their respective affiliates, do not in the
aggregate directly or indirectly beneficially own at least 20% of our shares.
THE AVAILABILITY OF A PREVIOUS VERSION OF OUR NITROLINGUAL PRODUCT COULD REDUCE
ITS SALES.
The availability of a previous version of our Nitrolingual Pumpspray
product may affect our sales. We have exclusive rights to sell Nitrolingual
Pumpspray in the United States. However, Aventis previously marketed another
version of this product named Nitrolingual Spray. Although Aventis has never
manufactured and no longer markets this product, existing inventories of
Nitrolingual Spray remain with distributors which, along with retailers, may
wish to sell these existing inventories prior to purchasing our Nitrolingual
product. In addition, Aventis did not actively market Nitrolingual in 1999 and
we believe that it will take time to rebuild loyalty to Nitrolingual and restore
sales to formerly achieved levels.
FINANCIAL RESULTS MAY FLUCTUATE DUE TO FACTORS OUTSIDE OF OUR CONTROL.
The timing of product acquisitions and licenses, including our recent
acquisition of Ponstel and the execution of our agreement to acquire Cognex, and
the completion and launch of products under development is based in part on
factors beyond our control. The unpredictability of such events could cause
fluctuations in sales, profits and our stock price. Specifically, we may face
increased costs in integrating Ponstel and Cognex, if acquired, into our
operations. Further, the seasonality of sales of our cough, cold and allergy
products contributes to quarterly fluctuations in our operating results.
WE FACE COMPETITION FROM GENERIC PRODUCTS THAT COULD REDUCE SALES OF OUR
PRODUCTS.
Nitrolingual competes with a generic tablet product. Our Zebutal Capsules,
Protuss Liquid, Protuss-DM Tablets, Protuss-D Liquid, Zoto-HC ear drops and
Mescolor Tablets are not protected by patents and face competition from less
expensive generic products. In addition, competitors could develop generics to
compete with our Robinul, Robinul Forte and recently acquired Ponstel products
which are not protected by patents. Third-party payors and pharmacists can
substitute generics for our products even if physicians prescribe them.
Government agencies and third-party payors often put pressure on patients to
purchase generic products instead of brand-name products as a way to reduce
healthcare costs. An increase in the amount of generic competition against any
one or more of our products could reduce sales.
STRONG COMPETITION IN DEVELOPING AND MARKETING PRODUCTS COULD HURT OUR SALES.
Many pharmaceutical companies actively market and sell products that
compete with our products. Our Protuss line and Tanafed, Zebutal, Defen-LA and
recently acquired Ponstel products compete against products sold both
over-the-counter and by prescription and which are marketed
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by larger pharmaceutical companies with greater financial resources for
marketing and manufacturing. In addition, barriers to entry for products
competitive with these products are low, which makes it easier for smaller
companies to enter the market. Also, currently marketed products often have a
significant competitive advantage over new entrants, which could hurt future
sales of our products under development for the treatment of migraine headache
and excessive salivation. Competitors may also be able to complete the
regulatory approval process sooner and therefore be able to market their
products before we can.
The high level of competition in our industry could force us to reduce the
price at which we sell our products, consequently reducing our sales or
requiring us to spend more to market our products, which would increase our
expenses and reduce our profits. For example, our Zebutal, Zoto-HC and Protuss
line of products have experienced significant competition from generic products.
Further, other products currently available or under development by other
pharmaceutical companies may be more effective or offered at lower prices than
our current or future products.
A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A LARGE PORTION OF OUR SALES AND THE
LOSS OF ONE OF THEM, OR CHANGES IN THEIR PURCHASING PATTERNS, COULD HURT OUR
BUSINESS.
We sell most of our products to a small number of wholesale drug
distributors. In 1999, sales to Bergen Brunswig Corporation, Cardinal Health,
Inc. and McKesson HBOC, Inc. represented approximately 10%, 19% and 28%,
respectively, of our total sales. Because of the small number of wholesale drug
distributors, further consolidation in this industry or financial difficulties
of these distributors could result in the combination or elimination of
warehouses, which could increase returns of our products or, as a result of
distributors reducing inventory levels, delay the purchase of our products.
IF WE CANNOT PROTECT OUR TRADEMARK REGISTRATIONS, OUR SALES AND PROFITS COULD
DECLINE.
Because of the large number of products on the market which compete with
our products, we believe that our brand names are an important factor in
establishing product recognition. Our trademark registrations could be
challenged by others which could result in the loss of use of one or more of our
trademarks because of third-party claims could reduce sales and profits.
Maintenance of our trademarks requires that we enforce our rights by preventing
infringement by third parties, and we may not have the resources to stop others
from infringing our trademarks.
IF OUR PRODUCTS UNDER DEVELOPMENT FAIL IN CLINICAL STUDIES OR IF WE FAIL OR
ENCOUNTER DIFFICULTIES IN OBTAINING REGULATORY APPROVAL FOR NEW PRODUCTS OR NEW
USES OF EXISTING PRODUCTS, WE WILL BE UNABLE TO MARKET AND SELL THOSE PRODUCTS.
If we cannot obtain FDA approval for our products under development to
treat migraine headache and excessive salivation and to market the unapproved
version of Cognex, our future sales growth will suffer. In the future, we may
develop other products or other uses for our existing products and we must
receive regulatory approval to market these new products or new indications. We
do not have experience in obtaining FDA approval for new products or new uses of
already-approved products. As a result, we rely on third-parties to formulate,
develop and manufacture the materials needed for clinical trials, including
those for our products under development to treat migraine headache, excessive
salivation and a once-a-day formulation for Cognex. We also rely on third
parties to conduct clinical trials for us. Some aspects of the clinical trials
for our products will therefore be outside of our control.
We are preparing to begin clinical studies of our migraine headache product
under development. Our ongoing clinical studies might be delayed or halted for
various reasons, including:
- we do not obtain FDA approval of an investigational new drug application
for our migraine product which is required before clinical trials may
begin;
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- we do not obtain FDA approval of a supplemental new drug application to
market our product under development for the treatment of excessive
salivation;
- our products are not shown to be effective;
- we do not comply with requirements concerning the protection of the
rights and welfare of human subjects;
- patients experience unacceptable side effects or die during clinical
trials;
- patients do not enroll in the studies at the rate we expect; and
- product supplies are not sufficient to treat the patients in the studies.
In addition, the party from whom we license rights to develop a component
of our migraine product could terminate the agreement if we fail to achieve
certain scheduled performance milestones, including the completion of clinical
trials by April 2002 and applying for FDA approval of the product within six
months after completing clinical trials.
WE OR THIRD-PARTIES MAY VIOLATE GOVERNMENT REGULATIONS AND WE MAY INCUR
SIGNIFICANT EXPENSES TO COMPLY WITH SUCH REGULATIONS.
All of our third-party manufacturers and product packaging companies are
subject to inspection by the FDA and, in appropriate cases, the Drug Enforcement
Administration and foreign regulators. From time to time, some of our
third-party manufacturers have received warning letters from the FDA concerning
noncompliance with manufacturing requirements. If our third-party manufacturers
do not comply with FDA regulations in the future, they may not be able to
deliver products to us or we may have to recall products. Many government
agencies regulate our business, including the following:
- the FDA;
- the Drug Enforcement Administration;
- the Consumer Product Safety Commission;
- the Occupational Safety and Health Administration;
- the Health Care Financing Administration;
- the Environmental Protection Agency; and
- state, local and foreign governments.
IF THIRD-PARTY PAYORS DO NOT ADEQUATELY REIMBURSE PATIENTS FOR OUR PRODUCTS, OUR
SALES AND PROFITS COULD DECLINE.
Because our products are sold by prescription, we depend on third-party
payors, such as the government, private healthcare insurers and managed care
organizations, to include these products on their lists of products for which
third-party payors will reimburse patients. Third-party payors continuously
challenge the pricing of medical products and services by substituting cheaper
products on their approved lists. If these third-party payors remove any of our
products from their lists or choose not to pay for our product prescriptions,
patients and pharmacies may not continue to choose our products.
In the past several years, there have been federal and state government
initiatives or reforms affecting the payment for healthcare services and
products, including proposals that would limit reimbursement under the Medicare
and Medicaid programs.
8
<PAGE> 13
WE DEPEND ON HIGHLY TRAINED MANAGEMENT, AND WE MAY NOT BE ABLE TO KEEP CURRENT
MANAGEMENT OR HIRE QUALIFIED MANAGEMENT PERSONNEL IN THE FUTURE.
The loss of the services of our key regulatory, technical and management
personnel could hurt our ability to develop and market products. In addition,
Dr. Mahendra G. Shah, our chief executive officer, does not provide exclusive
full-time services to us. As part of our growth strategy, we will need to
attract new operational and marketing personnel, and we may have difficulty
hiring personnel at an acceptable cost.
PRODUCT LIABILITY CLAIMS AND PRODUCT RECALLS COULD HURT OUR PROFITS.
Side effects or marketing or manufacturing problems pertaining to one of
our approved products could result in product liability claims or adverse
publicity. These claims could be expensive, or could result in withdrawal of
approval to market the product or recall of the product. These problems often
occur with little or no notice in connection with the sale of pharmaceutical
products. For instance, we instituted a voluntary recall on our Protuss-DM
product in January 1999 because of a labeling error. However, we quickly
corrected the error and the financial impact was immaterial to our results of
operations.
OUR LEVEL OF DEBT COULD REDUCE OUR GROWTH.
As of April 14, 2000, we had total outstanding indebtedness of
approximately $17,036,000, or approximately 82% of our total capitalization. In
addition, we may borrow an additional $3,500,000 if we conclude the acquisition
of Cognex before the offering. Even after this offering and the repayment of the
term loan and bridge loan under our credit facility with LaSalle Bank, we expect
that we may incur additional indebtedness to implement our growth strategy.
Significant debt could:
- limit our operating flexibility as a result of requirements of our
lender;
- require us to use a large portion of our cash flow from operations for
debt payments that would reduce the availability of our cash flow to fund
operations, product acquisitions, the expansion of our sales force and
facilities and research and development efforts; and
- limit additional acquisitions due to restrictive covenants in our credit
facility.
WE EXPECT TO REQUIRE ADDITIONAL FUNDING AND IF WE CANNOT OBTAIN IT, OUR SALES,
PROFITS, ACQUISITIONS AND DEVELOPMENT PROJECTS COULD SUFFER.
After the offering, we expect that we will need additional funds to acquire
or obtain licenses for new products, expand our sales force, support the
marketing and sales of new products and facilities and develop and test new
products. We may seek additional funding through public and private financing,
including equity and debt offerings. Adequate funds for these purposes, whether
through the financial markets or from other sources, may not be available when
we need them or on terms acceptable to us. Insufficient funds could cause us to
delay, scale back, or abandon some or all of our product acquisitions, licensing
opportunities, marketing, and product development programs and manufacturing
opportunities.
IF WE DO NOT SECURE OR ENFORCE OUR PATENTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS, WE COULD ENCOUNTER INCREASED COMPETITION THAT COULD ADVERSELY AFFECT OUR
OPERATING RESULTS.
We do not hold patent rights covering the products we are distributing and
do not in some cases have the right to enforce patents our licensors hold. We
obtained exclusive distribution rights in the United States to distribute our
Nitrolingual Pumpspray and Tanafed products but have no or only limited rights
to enforce the patents relating to these products. We have a license from
Penwest Pharmaceuticals Co. to use the patented TIMERx technology in our
migraine product
9
<PAGE> 14
under development. If we complete the Cognex acquisition, we will acquire
certain patent rights relating to the use of an active ingredient in Cognex to
treat conditions associated with Alzheimer's disease. Any exclusivity afforded
by any of these patents could cease because the other party could terminate the
license or because we have no or only limited rights to enforce patents or to
require enforcement actions by the owners of the patents.
Proceedings involving our rights in patents or patent applications could
result in adverse decisions. In addition, the confidentiality agreements
required of our employees and third-parties may not provide adequate protection
for our trade secrets, know-how and other proprietary information which we rely
on to develop and sell our products. If any of our employees or third-parties
disclose any of our trade secrets or know-how, we could encounter increased
competition.
OUR PRODUCTS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES,
WHICH COULD REQUIRE US TO PAY LICENSE FEES OR DEFEND LITIGATION THAT COULD BE
EXPENSIVE OR PREVENT US FROM SELLING PRODUCTS.
The manufacture, use or sale of our products may infringe on the patent,
trademark and other intellectual property rights of others. Based on the nature
of competition, patent and trademark infringement problems occur frequently in
connection with the sale and marketing of cough, cold, allergy, headache and
other pharmaceutical products. If we do not avoid infringement of the
intellectual property rights of others, we may have to seek a license to sell
our products, defend an infringement action or challenge the validity of the
intellectual property in court, all of which could be expensive and time
consuming. In addition, if we are found liable for infringing a patent, we may
have to stop selling some of our products and pay damages.
Even though most of our product agreements under which we license
intellectual property rights from others contain provisions that allow us to
recover costs and damages if we have to defend or are found liable for
infringing a patent of a third party, the agreements under which we obtained
rights to Nitrolingual and Ponstel and our agreement to acquire Cognex do not
contain these indemnification provisions. It could be very costly if we have to
defend the patents or trademarks covering Nitrolingual Pumpspray, Ponstel or
Cognex, or if we were found liable for infringement.
TECHNOLOGICAL ADVANCES MAY MAKE OUR PRODUCTS OBSOLETE.
Rapid technological change occurs in the pharmaceutical industry, which
could make our products obsolete and reduce our sales and profits. Specifically,
vaccines and preventative medications to prevent the flu and gene therapy to
treat cardiovascular disease, may reduce the need for our products.
THE REGULATORY STATUS OF SOME OF OUR PRODUCTS MAKES THESE PRODUCTS SUBJECT TO
INCREASED COMPETITION AND OTHER RISKS.
The regulatory status of our Protuss, Protuss-D, Protuss-DM, Zoto-HC,
Tanafed, Mescolor and Defen-LA products allows third parties to more easily
introduce competitive products, and may make it more difficult for us to sell
these products in the future. Currently, an FDA program allows us to manufacture
and market these products and permits others to manufacture and market the same
and similar products without submitting safety or efficacy data. These markets
are already highly competitive and, except for a license to one of the raw
materials in Tanafed, we do not hold rights in patents protecting us against
such competitive pressures. This results in increased competition because other
companies can enter the market without having to submit safety and efficacy data
to sell competing products. On several occasions, the FDA has considered
changing the classification of these types of drugs from prescription to
over-the-counter use. If they do change the classification, we might have to
reformulate them, submit safety and efficacy data on our products which could be
costly, or we might have to discontinue selling these products if the FDA
10
<PAGE> 15
does not approve our marketing application. We could lose third-party
reimbursement for the products and face increased competition. We are unable to
predict the timing of any of these actions, but they could occur soon.
WE HAVE BEEN INVOLVED IN CONFLICTS IN THE PAST UNDER ONE OF OUR DEVELOPMENT
AGREEMENTS WITH A RELATED PARTY AND MAY ENCOUNTER CONFLICTS IN THE FUTURE.
John N. Kapoor, Ph.D., our majority stockholder and director, also
beneficially owns 50% of the common stock of Inpharmakon Corporation, a party to
one of our product development agreements. Mahendra G. Shah, Ph.D., our Chairman
and Chief Executive Officer, is a director and the Chairman of Inpharmakon. The
other owner of Inpharmakon has in the past renegotiated some of the terms of our
development agreement by seeking to terminate our development agreement with
Inpharmakon. On May 3, 2000, we entered into an amendment to this agreement in
which both parties released each other from any previous claims or disputes
under the agreement. Conflicts between the parties may develop in the future and
may not be resolved in our favor. Under some circumstances, if Inpharmakon
terminates this agreement, it will have rights to develop and market this
product using the data and information that we have developed and for which we
have expended significant resources.
OUR AGREEMENT TO ACQUIRE COGNEX CREATES ADDITIONAL RISKS.
Our growth will suffer if we do not conclude the purchase of Cognex.
Our agreement to purchase rights to market and sell Cognex is contingent
upon receiving FTC approval of the purchase and the satisfaction of other
customary conditions. If the FTC does not approve the purchase, or if the other
conditions to closing are not satisfied, it would hurt our growth strategy and
delay or prevent higher sales.
Our sales force has no experience selling products like Cognex.
As a drug for the treatment of conditions associated with Alzheimer's
disease, Cognex is primarily prescribed by neurologists, psychiatrists and
geriatric physicians. Our sales force has not made sales to neurologists,
psychiatrists and geriatric physicians in the past and is not trained in this
area. We will be required to incur additional selling expenses to develop our
sales staff to sell Cognex, and we risk delays and inefficiencies in the sale of
Cognex pending completion of our sales force development for these purposes.
If the Cognex acquisition closes, we will sell the product outside the United
States and we have no experience with international sales and regulations.
If the Cognex transaction closes, we intend to actively market Cognex both
in the United States and abroad. We have no experience selling products outside
the United States. We are not familiar with registering or obtaining other
regulatory approvals outside of the United States and we have no international
marketing presence or sales force. We intend to enter into a transition services
agreement with Warner-Lambert under which it will provide some transitional
administrative services to us until November 30, 2000 in connection with the
sale of Cognex in specified European countries. We currently have no
arrangements for third party support to sell and market Cognex in Europe, or to
provide administrative, selling and marketing services for international markets
other than several specified countries in Europe. To the extent we are unable to
obtain, either internally or from third parties, necessary administrative and
selling and marketing services for international sales of Cognex, we may be
forced to suspend or abandon such sales which accounted for approximately 65% of
1999 sales of Cognex.
11
<PAGE> 16
Potential adverse side effects may cause the FDA to revoke its approval of
Cognex.
One of Cognex's potential side effects is a short term increase in liver
enzymes which can cause liver malfunction problems. The FDA could decide to
revoke its marketing approval for Cognex based on these side effects.
Cognex has declining sales and new competing products may further erode its
sales.
We believe worldwide sales of Cognex declined from $11.8 million in 1998 to
$7.7 million in 1999. We also face competition from existing and new Alzheimer
drugs. For instance, Pfizer Inc. began marketing "Aricept", a product for the
treatment of conditions associated with Alzheimer's disease, in 1997. Aricept
has some marketing advantages over Cognex including that it is a once a day
formulation and that it does not require liver monitoring. Novartis Inc.
recently received FDA approval to market another product for the treatment of
conditions associated with Alzheimer's disease called "Excellon". Novartis
currently markets this product worldwide. Shire Pharmaceuticals Group plc and
Janssen Pharmaceutica have entered into an agreement to co-market a product
called "Remanyl" for patients suffering from Alzheimer's disease. The FDA has
not approved Remanyl yet, however these companies have marketed the product in
other countries. The marketing and selling of Excellon and Remanyl may further
erode sales of Cognex.
We may not be able to obtain rights to market Cognex CR.
Because Cognex CR has not yet been approved by the FDA, we must obtain such
approval before we can market Cognex CR. In addition, a third-party controls the
manufacture and the intellectual property rights for the drug delivery system of
Cognex CR. If we are not able to obtain a license from this third-party or enter
into a manufacturing and supply agreement with this party, we may not be able to
manufacture or market and sell Cognex CR.
The FTC may order us to return Cognex to Warner-Lambert.
Our agreement to acquire Cognex states that the FTC may order us to return
Cognex to Warner-Lambert to then be sold by Warner-Lambert to a third party if
we voluntarily cease to sell Cognex for 60 days or more, or we otherwise fail to
pursue good efforts to sell Cognex in the United States, other than for reasons
outside our control. In addition, the FTC may order us to return Cognex to
Warner-Lambert if we fail to pursue the sale and manufacture or third party
manufacture of Cognex within one year from receiving FTC approval, subject to an
extension.
RISKS RELATED TO OUR OFFERING
AFTER THE OFFERING, EXISTING OFFICERS, DIRECTORS AND OUR PRINCIPAL STOCKHOLDER
WILL RETAIN A SUBSTANTIAL BLOCK OF STOCK THAT WILL ALLOW THEM TO ELECT DIRECTORS
AND DIRECT THE OUTCOME OF MATTERS REQUIRING STOCKHOLDER APPROVAL.
After the offering, our officers, directors and principal stockholder will
beneficially own approximately 65% of our outstanding common stock.
Kapoor-Pharma Investments, L.P. will own approximately 53% of our outstanding
common stock after the offering. As majority stockholder, Kapoor-Pharma
Investments has the power to elect all of our directors. As long as
Kapoor-Pharma Investments has the right to elect a majority of the board of
directors, it will hold significant control or influence over our policies and
acts. John N. Kapoor, Ph.D., one of our directors, is president and sole
shareholder of EJ Financial Enterprises, Inc. EJ Financial Enterprises is the
managing general partner of Kapoor-Pharma Investments, L.P. In addition,
Mahendra G. Shah, Ph.D., our Chairman and Chief Executive Officer, is
vice-president of EJ Financial Enterprises.
12
<PAGE> 17
THE MARKET PRICE OF OUR COMMON STOCK AFTER THE OFFERING MIGHT NOT EXCEED THE
OFFERING PRICE.
Prior to this offering, there was no public market for our common stock,
and a significant public trading market may not develop or continue after this
offering. We and the underwriters determined the initial public offering price
through negotiations. If the market price of the common stock after the offering
does not exceed the initial public offering price, investors will not realize
any return on their investment. If the market price of the common stock after
the offering is less than the initial public offering price, investors may lose
some or all of their investment.
OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE.
The market prices for securities of drug companies are highly volatile.
Various factors, including factors that are not related to our operating
performance, may cause significant volume and price fluctuations in the market.
The following factors may cause fluctuations in our stock price:
- fluctuations in operating results;
- rates of product acceptance;
- timing or delay of regulatory approvals, including our migraine product
under development or our line extension of Robinul to treat symptoms
associated with excessive salivation;
- whether third-party manufacturers experience interruptions in the supply
of raw materials or encounter regulatory problems;
- failure to meet financial estimates or expectations of securities
analysts;
- developments in or disputes regarding patent or other proprietary rights;
and
- future sales of substantial amounts of common stock by our existing
stockholders.
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET AFTER THE OFFERING COULD
CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.
Our shareholders could sell substantial amounts of our common stock in the
public market following the offering. As a result, the aggregate number of
shares of our common stock available to the public would increase and,
consequently, the price of our common stock could fall. We cannot predict the
timing or amount of future sales of shares of our stock or the effect, if any,
that market sales of shares, or the availability of shares for sale, will have
on the prevailing market price of our common stock. Upon completion of the
offering, we will have 12,339,643 outstanding shares of common stock, assuming
no exercise of outstanding options. Of these shares, the 3,800,000 shares sold
in this offering will be freely tradeable. This leaves 8,539,643 currently
outstanding shares that will be eligible for sale in the public market as
follows:
- 100,000 available for immediate sale on the date of this prospectus; and
- 8,439,643 available for sale 180 days after our stock begins trading on
the Nasdaq National Market, subject in some cases to volume and other
restrictions
In addition, 1,767,500 shares are issuable upon the exercise of currently
outstanding options. These shares will be eligible for sale 180 days after our
stock begins trading on the Nasdaq National Market, subject in some cases to
restrictions contained in stock option agreements which defer the exercisability
of the options.
After this offering, we expect to file a registration statement covering
shares of common stock issuable upon exercise of options and other grants under
our stock plans. This will allow shares purchased upon the exercise of such
options to be sold in the public markets, subject in some cases to volume and
other restrictions.
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<PAGE> 18
ANTI-TAKEOVER PROVISIONS COULD DISCOURAGE A THIRD PARTY FROM MAKING A TAKEOVER
OFFER THAT COULD BE BENEFICIAL TO STOCKHOLDERS.
Some of the provisions in our Restated Certificate of Incorporation and the
anti-takeover provisions under Delaware Law could delay or prevent a third party
from acquiring us or replacing members of our board of directors, even if the
acquisition or the replacements would be beneficial to our stockholders. These
provisions could also reduce the price that certain investors might be willing
to pay for shares of our common stock and result in the market price being lower
than it would be without these provisions. Our charter documents contain
anti-takeover devices including:
- only one of the three classes of directors is elected each year;
- stockholders cannot amend our bylaws unless at least two-thirds of the
shares entitled to vote approve it;
- our board of directors can issue shares of preferred stock without
shareholder approval under any terms, conditions, rights and preferences
that the board determines; and
- stockholders must give advance notice to nominate directors or to submit
proposals for consideration at stockholder meetings.
STOCKHOLDERS WILL EXPERIENCE SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK VALUE
OF THEIR COMMON STOCK.
Investors will suffer immediate and substantial dilution. The initial
public offering price per share will significantly exceed the net tangible book
value per share of ($0.22). Accordingly, investors will suffer immediate and
substantial dilution. This dilution will result because our existing investors
paid substantially less than the initial public offering price when they bought
their shares of our common stock. The exercise of outstanding options to
purchase our common stock will result in further dilution to new investors.
THE NET PROCEEDS FROM THE OFFERING MAY BE ALLOCATED IN WAYS WITH WHICH YOU AND
OTHER STOCKHOLDERS MAY NOT AGREE.
Except for repayment of our bridge loan with LaSalle Bank, the payment of a
$200,000 fee to Inpharmakon Corporation under our amended development agreement
and the payment of our promissory note with Warner-Lambert, management will have
significant flexibility in applying the net proceeds of this offering.
Therefore, management could use these proceeds for purposes other than those
contemplated at the time of the offering.
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<PAGE> 19
TRADENAMES AND TRADEMARKS USED IN THIS PROSPECTUS
We own or have rights to tradenames and registered trademarks that we use
in connection with the sale of our products. We have filed an application to
register the trademark Zebutal in the United States. We own the U.S. registered
trademarks Ponstel(R), Tanafed(R), Protuss(R), Mescolor(R), Zoto-HC(R) and
Defen(R). If we complete our acquisition of Cognex, we will acquire the U.S.
registered trademark Cognex(R) and its international counterparts currently held
by Warner-Lambert. Nitrolingual(R), Robinul(R) and TIMERx(R) are registered U.S.
trademarks of G. Pohl Boskamp GmbH & Co., American Home Products Corporation and
Penwest Pharmaceuticals Co., respectively.
FORWARD-LOOKING STATEMENTS
Many statements made in this prospectus under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and elsewhere are forward-looking
statements that are not based on historical facts. Because these forward-looking
statements involve risks and uncertainties, there are important factors that
could cause actual results to differ materially from those expressed or implied
by these forward-looking statements, including those discussed under "Risk
Factors."
The forward-looking statements made in this prospectus relate only to
events as of the date on which the statements are made.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,800,000 shares of
common stock that we are offering will be $44,942,000 after deducting estimated
offering expenses and assuming an initial public offering price of $13.00 per
share. If the underwriters' over-allotment option is exercised in full, assuming
an initial public offering price of $13.00 per share, we estimate that the net
proceeds will be $51,833,300.
We anticipate using the net proceeds from this offering as follows: for
general corporate purposes, including the development of new products, the
expansion of our sales and marketing force, new product acquisitions, repayment
of approximately $12,680,000 of debt outstanding as of April 14, 2000 under the
term loan and bridge loan of our credit facility with LaSalle Bank, repayment of
$3,500,000 under our promissory note with Warner-Lambert and payment of a
$200,000 fee due under our amended product development agreement with
Inpharmakon Corporation. If we acquire Cognex, we will use $3,500,000 of the net
proceeds to fund that acquisition, either through repayment of an additional
$3,500,000 under our bridge loan if we acquire Cognex before we conclude this
offering, or payment of $3,500,000 to Warner-Lambert for the purchase of Cognex
if we acquire Cognex after the offering.
Borrowings under the term loan bear interest at our choice of either the
prime rate of interest or LIBOR plus 2%, and the note matures on May 2, 2001.
Borrowings under the bridge loan, which we used to purchase Ponstel, bear
interest at our choice of the prime rate of interest or LIBOR plus 1.5%.
Borrowings under the bridge loan mature on our receipt of the proceeds from this
offering. Our promissory note with Warner-Lambert, which we entered into to pay
the remaining amount of the purchase price of Ponstel, is interest-free and
matures upon our receipt of the proceeds from this offering.
We will retain broad discretion over the use of the net proceeds of this
offering. The amounts and timing of the expenditures may vary significantly
depending on numerous factors, such as the progress of our development efforts,
technological advances and the competitive environment for our products. We
might also use a portion of the net proceeds to acquire or invest in
complementary businesses, products and technologies. Other than the agreement to
acquire Cognex and other than as described under "Business -- Product
Development", we are not currently a
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<PAGE> 20
party to any agreements to acquire or invest in any new businesses, products or
technologies. However, we regularly review opportunities for new acquisitions
and investments.
Pending use of the net proceeds, we intend to invest the net proceeds in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. The payment of cash
dividends is subject to the discretion of our board of directors and will be
dependent upon many factors, including our earnings, our capital needs and
general financial condition. We anticipate that for the forseeable future, we
will retain earnings, if any, in order to finance the expansion and development
of our business. Our credit facility prohibits the payment of any dividends or
other distributions on any shares of our stock.
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<PAGE> 21
CAPITALIZATION
The following table sets forth as of March 31, 2000, the actual
capitalization of our company and our capitalization, as adjusted to reflect the
issuance and sale of the 3,800,000 shares of common stock we are offering at an
assumed public offering price of $13.00 per share and the use of the proceeds
from the offering to repay $3,720,000 of debt outstanding as of March 31, 2000.
This table should be read in conjunction with our financial statements and the
notes to the financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
----------------------------------
ACTUAL AS ADJUSTED
----------- --------------------
<S> <C> <C>
Borrowings under revolving credit facility.............. $ 2,000,000 $ 0
Long-term debt, including current portion............... 2,575,708 855,708
Stockholders' equity:
Preferred stock, $0.001 par value; 1,000,000 shares
authorized, no shares outstanding, actual and as
adjusted........................................... -- --
Common stock, $0.001 par value; 40,000,000 shares
authorized, 8,539,643 shares issued and outstanding
in 1999 and 12,339,643 as adjusted shares issued
and outstanding.................................... 8,540 12,340
Additional paid-in capital.............................. 5,788,220 50,726,420
Deferred compensation................................... (1,197,105) (1,197,105)
Accumulated deficit..................................... (935,353) (935,353)
----------- ------------
Total stockholders' equity.................... 3,664,302 48,606,302
----------- ------------
Total capitalization.......................... $ 8,240,010 $ 49,462,010
=========== ============
</TABLE>
The number of shares of common stock to be outstanding after this offering
does not include:
- 1,767,500 shares issuable upon exercise of options outstanding as of May
3, 2000, at a weighted average exercise price of $1.61 per share; and
- 570,000 shares issuable pursuant to the underwriters' over-allotment
option.
The board of directors approved the grant of options under our 2000 Stock
Plan to purchase 187,950 shares subject to completion of this offering at an
exercise price equal to the initial public offering price per share in this
offering. Following this grant, there will be 1,812,050 shares available for
future grants under this plan.
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<PAGE> 22
DILUTION
Our net tangible book value as of March 31, 2000 was ($1.865) million, or
($0.22) per share of common stock. Net tangible book value per share represents
the amount of total tangible assets less total liabilities divided by the number
of shares of common stock outstanding at that date. After giving effect to the
sale of the 3,800,000 shares of common stock at an assumed initial public
offering price of $13.00 per share, and after deducting underwriting discounts
and commissions and estimated offering expenses, our as adjusted net tangible
book value as of March 31, 2000 would have been $43.077 million, or $3.49 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.71 per share to existing stockholders, and an immediate dilution of
$9.51 per share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Net tangible book value per share at December 31, 1999.... ($0.22)
Increase per share attributable to new investors.......... 3.71
------
Pro forma net tangible book value per share after this 3.49
offering..................................................
------
Dilution per share to new investors......................... $ 9.51
======
</TABLE>
The following table summarizes, on an as adjusted basis as of March 31,
2000, the differences between the number of shares of common stock that we
issued, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors purchasing shares in this
offering at an assumed initial public offering price of $13.00 per share.
<TABLE>
<CAPTION>
SHARES ISSUED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders......... 8,539,643 69.2% $ 4,234,900 8.6% $ 0.50
New investors.......... 3,800,000 30.8 44,942,000 91.4 11.83
---------- ----- ----------- -----
Total........ 12,339,643 100.0% 49,176,900 100.0%
========== ===== =========== =====
</TABLE>
The discussion regarding dilution and these tables assumes no exercise of
any outstanding stock options. The discussion does not include: (a) 1,767,500
shares issuable upon exercise of options outstanding under our 1997
Non-Qualified Stock Option Plan at a weighted average exercise price of $1.61 or
(b) 570,000 shares issuable at an assumed price of $13.00 per share pursuant to
the underwriters' over-allotment option. The board of directors approved the
grant of options to purchase 187,950 shares under our 2000 Stock Plan subject to
completion of this offering, at an exercise price equal to the public offering
price per share in this offering. Following this grant, there will be 1,812,050
shares available for future grants under our 2000 Stock Plan.
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<PAGE> 23
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to and
should be read in conjunction with, our financial statements and the related
notes and other financial information included elsewhere in this prospectus, as
well as "Management's Discussion and Analysis of Financial Condition and Results
of Operations". The selected financial data as of December 31, 1997, 1998, and
1999 and for the years ended December 31, 1997, 1998, and 1999 were derived from
our financial statements that have been audited by Arthur Andersen LLP,
independent public accountants. The selected financial data as of December 31,
1995 and 1996 and March 31, 1999 and 2000 were derived from unaudited financial
statements which, in the opinion of management, include all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of our financial condition and results of operations. These results may not be
indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ 1,620,720 $ 2,516,616 $ 5,557,700 $ 9,252,058 $18,624,514
Operating costs and expenses:
Cost of revenues..................... 329,692 489,905 1,136,691 1,903,054 3,140,416
Selling, general and administrative
expenses, excluding non-cash
compensation expense............... 1,302,766 2,393,018 4,545,254 6,789,358 12,400,439
Non-cash selling, general and
administrative expense............. -- -- 133,500 -- 143,986
Depreciation and amortization........ 25,977 28,878 30,273 35,225 424,274
Research and development............. -- -- -- 255,000 860,350
----------- ----------- ----------- ----------- -----------
Total operating costs and expenses:... 1,658,435 2,911,801 5,845,718 8,982,637 16,969,465
Operating (loss) income............... (37,715) (395,185) (288,018) 269,421 1,655,049
Other (expense) income:
Interest expense..................... (54,310) (67,461) (5,496) (14,017) (356,598)
Interest income...................... -- 3,314 2,909 4,383 11,950
Other................................ -- -- 3,629 (2,749) 8,059
----------- ----------- ----------- ----------- -----------
Total other (expense) income.......... (54,310) (64,147) 1,042 (12,383) (336,589)
----------- ----------- ----------- ----------- -----------
(Loss) income before benefit
(provision) for income taxes......... (92,025) (459,332) (286,976) 257,038 1,318,460
Benefit (provision) for income
taxes................................ -- 114,984 106,530 (121,484) (547,996)
----------- ----------- ----------- ----------- -----------
Net (loss) income..................... $ (92,025) $ (344,348) $ (180,446) $ 135,554 $ 770,464
=========== =========== =========== =========== ===========
Net (loss) income per common share:
Basic................................ $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.10
=========== =========== =========== =========== ===========
Diluted.............................. $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.09
=========== =========== =========== =========== ===========
Weighted average common shares
outstanding:
Basic................................ 5,636,137 5,830,000 7,576,580 7,978,234 8,028,673
=========== =========== =========== =========== ===========
Diluted.............................. 5,636,137 5,830,000 7,576,580 8,584,329 8,975,493
=========== =========== =========== =========== ===========
<CAPTION>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 1999 MARCH 31, 2000
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $4,199,934 $ 7,119,638
Operating costs and expenses:
Cost of revenues..................... 719,432 1,061,737
Selling, general and administrative
expenses, excluding non-cash
compensation expense............... 2,550,153 5,491,653
Non-cash selling, general and
administrative expense............. 10,722 87,269
Depreciation and amortization........ 79,302 114,639
Research and development............. 142,945 375,292
---------- -----------
Total operating costs and expenses:... 3,502,554 7,130,590
Operating (loss) income............... 697,380 (10,952)
Other (expense) income:
Interest expense..................... (55,758) (72,060)
Interest income...................... 2,197 5,591
Other................................ 2,450 9,822
---------- -----------
Total other (expense) income.......... (51,111) (56,647)
---------- -----------
(Loss) income before benefit
(provision) for income taxes......... 646,269 (67,599)
Benefit (provision) for income
taxes................................ (270,368) 29,068
---------- -----------
Net (loss) income..................... $ 375,901 $ (38,531)
========== ===========
Net (loss) income per common share:
Basic................................ $ 0.05 $ (0.00)
========== ===========
Diluted.............................. $ 0.04 $ (0.00)
========== ===========
Weighted average common shares
outstanding:
Basic................................ 7,981,248 8,539,643
========== ===========
Diluted.............................. 8,759,904 8,539,643
========== ===========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------- AS OF MARCH 31,
1995 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- ----------- --------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 71,652 $ 30,986 $ 244,766 $ 425,023 $ 219,688 $ 735,337
Working capital...................... 188,995 (645,249) 687,426 640,090 (733,884) (1,002,183)
Total assets......................... 643,639 834,238 1,758,872 2,933,101 11,077,744 13,683,087
Borrowings under revolving loan
agreement........................... -- -- -- 602,928 800,000 2,000,000
Long-term debt including current
portion............................. -- -- -- -- 2,898,886 2,575,708
Accumulated deficit.................. (1,278,046) (1,622,394) (1,802,840) (1,667,286) (896,822) (935,353)
Total stockholders' (deficit)
equity.............................. (131,660) (477,011) 814,326 956,130 3,615,564 3,664,302
</TABLE>
19
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We currently market and sell 12 brand name prescription drugs through our
nationwide sales and marketing force of 137 professionals. We seek to acquire
and obtain licenses for pharmaceutical products that other companies do not
actively market and to increase sales through aggressive promotion and
marketing. As part of this strategy, on April 14, 2000, we acquired exclusive
rights to distribute, market and sell Ponstel in the United States, and entered
into an agreement to acquire exclusive rights in the United States and other
countries to distribute, market and sell Cognex, pending FTC approval and other
conditions. In addition, we seek to increase the value of existing products by
developing new formulations and new delivery methods, and seeking new
indications for existing products.
We have historically increased revenues and seek to increase revenues in
the future from our ability to make product acquisitions and increase sales of
current products.
QUARTERS ENDED MARCH 31, 2000 AND MARCH 31, 1999
Net Revenues. Revenues from product sales are recognized upon shipment to
customers and are shown net of sales adjustments. Net revenues are net of
provisions for discounts, rebates to customers, returns, and other adjustments
which are provided in the same period that the related sales are recorded. Net
revenues for the quarter ended March 31, 2000 were $7,120,000 compared to
$4,200,000 for the quarter ended March 31, 1999, a 70% increase. Of this
increase, $2,698,000 is due to our commencing sales of Zebutal in January 1999,
Robinul and Robinul Forte in February 1999 and Nitrolingual Pumpspray in
February 2000. Sales of products sold prior to 1999 or "existing products"
increased $222,000 due to expansion of our sales force into new territories and
increased demand for our products. Deductions from revenue increased $781,000
due to higher Medicaid rebates primarily on Robinul and Robinul Forte, higher
customer rebates for sales of Nitrolingual Pumpspray, and higher discounts due
to customers taking advantage of our prompt pay discount.
Net revenues for the quarter ended March 31, 2000 do not include the effect
of sales of Ponstel. We acquired Ponstel in April 2000, and believe that Ponstel
had annual sales of $3,264,000 in 1999.
Cost of Revenues. Cost of revenues for the quarter ended March 31, 2000
were $1,062,000, compared to $719,000 for the quarter ended March 31, 1999, a
48% increase. Costs of revenues for the quarter ended March 31, 2000 do not
include the cost of revenues for Ponstel.
Gross Margin. Gross margin for the quarter ended March 31, 2000 was 85%,
compared to 83% for the quarter ended March 31, 1999. This increase primarily
resulted from the higher gross margin earned on Robinul and Robinul Forte. Gross
margin for the quarter ended March 31, 2000 does not include the effect of net
revenues and cost of sales of Ponstel. We believe that the gross margin earned
on Ponstel will be comparable to our current gross margin for all products
currently sold.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of salaries, commissions, bonuses, training and
education costs, sample and promotional costs, royalty and commission payments
to product licensors, office expenses, travel expenses, payroll taxes, rent and
utilities, insurance, outside professional services, taxes, bad debts and other
general office expenses. Selling, general and administrative expenses for the
quarter ended March 31, 2000 were $5,492,000, compared to $2,550,000 for the
quarter ended March 31, 1999, a 115% increase. Selling related expenses
increased due to the addition of sales force representatives, increased
commission expense due to higher sales and increased salaries for existing sales
representatives. We also incurred significantly higher marketing and promotional
expense due to the launch of Nitrolingual Pumpspray and increased sampling.
Royalty expense increased due to
20
<PAGE> 25
increased sales of Robinul and Robinul Forte, and due to royalties on sales of
Nitrolingual Pumpspray. Also, on January 1, 2000, we entered into a licensing
agreement with Jame Fine Chemicals, Inc., a supplier of a raw material for
Tanafed. Under the terms of the agreement, we began paying royalties based on
net sales of Tanafed. There was no comparable royalty expense on Tanafed for the
quarter ended March 31, 1999. Management expects selling expenses to continue to
increase for the remainder of 2000 due to marketing and promotional expenses for
the launch of Ponstel and due to continued sales force expansion.
General and administrative expenses increased due to the addition of
managers and support personnel in our corporate headquarters, increased
insurance cost, and higher reserves for doubtful accounts. In addition, in March
2000, we engaged a consulting firm to make recommendations on the alignment and
optimization of our sales force.
Non-Cash Selling, General and Administrative Expense. Non-cash selling,
general and administrative expense for the quarter ended March 31, 2000 were
$87,000, compared to $11,000 for the quarter ended March 31, 1999. This increase
resulted from our issuing stock options at exercise prices that were less than
the market value of our stock at the time of issuance, as determined by an
independent valuation.
Depreciation and Amortization Expense. Depreciation and amortization
expense was $115,000 for the quarter ended March 31, 2000, compared to $79,000
for the quarter ended March 31, 1999, a 46% increase. This increase resulted
from higher amortization expense related to the Robinul and Robinul Forte and
increased depreciation expense on furniture, computers and software used in our
corporate headquarters.
Research and Development Expense. Research and development expenses
consist primarily of costs incurred to develop formulations, engage contract
research organizations to conduct clinical studies, test products under
development and engage medical and regulatory consultants. We expense all
research and development costs as incurred. Research and development expense was
$375,000 for the quarter ended March 31, 2000, as compared to $143,000 for the
quarter ended March 31, 1999, a 162% increase. This increase resulted from
continued development of our migraine headache product. Also, on January 1, 2000
we entered into the licensing agreement with Jame Fine Chemicals. Under the
terms of the agreement, we paid an up-front license fee. We will continue to
incur significant research and development expenses as we continue to develop
our migraine headache product. We expect to incur approximately $1,300,000 of
research and development expenses during the remainder of 2000 related to the
development of the migraine headache product.
Interest Expense. Interest expense was $72,000 for the quarter ended March
31, 2000, compared to $56,000 for the quarter ended March 31, 1999, a 29%
increase. This increase resulted from higher average borrowings under our credit
facility.
Income Tax Benefit. The company recorded an income tax benefit of $29,000
for the quarter ended March 31, 2000, compared to a provision for income taxes
of $270,000 for the quarter ended March 31, 1999. This $299,000 change resulted
from the company incurring a pre-tax loss for the quarter ended March 31, 2000
versus pre-tax income for the quarter ending March 31, 1999.
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Net Revenues. Net revenues for the year ended December 31, 1999 were
$18,625,000, compared to $9,252,000 for the year ended December 31, 1998, a 101%
increase. Of this increase, $6,206,000 resulted from product acquisitions and
licensing agreements made in 1999, or from products that earned revenues for the
first time in 1999. Sales of existing products were $12,419,000, a $3,167,000 or
34% increase over 1998. This increase primarily resulted from the expansion of
our sales force, increased marketing efforts and the continued increase in
demand for our products as a
21
<PAGE> 26
result of current and prior efforts of our sales force. Rebates and other sales
allowances were $2,156,000 in 1999 primarily related to Medicaid rebates on
Robinul and Robinul Forte.
Net revenues for 1999 do not include the effect of sales of Nitrolingual
Pumpspray or Ponstel. We began selling Nitrolingual Pumpspray in February, 2000
and acquired Ponstel in April, 2000. We believe the U.S. sales of Nitrolingual
were $12,000,000 in 1998, and sales of Ponstel were $3,264,000 in 1999.
Cost of Revenues. Cost of revenues for the year ended December 31, 1999
were $3,140,000, compared to $1,903,000 for the year ended December 31, 1998, a
65% increase. Cost of revenues for 1999 do not include the costs of revenues for
Nitrolingual or Ponstel.
Gross Margin. Gross margin for the year ended December 31, 1999 was 83%,
compared to 79% in 1998. The increase in gross margin primarily resulted from
the higher gross margin earned on Robinul and Robinul Forte which we began
selling in February 1999.
Gross margin for 1999 and 1998 does not include the effect of net revenues
and cost of revenues for Nitrolingual Pumpspray or Ponstel. We believe that the
gross margin for Nitrolingual Pumpspray and Ponstel will be comparable to our
current gross margin for all products currently sold.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1999 were $12,400,000,
compared to $6,789,000 for the year ended December 31, 1998, an 83% increase.
Selling-related expenses increased over the previous year due to increased
expenses related to sales force expansion, higher commission and royalty
payments and larger sample, marketing and promotional costs. General and
administrative expenses increased over the previous year due to increased
compensation and related expenses, and increased costs as a result of relocation
of our corporate offices from a 7,603-square-foot facility to a
24,300-square-foot facility in September 1998.
Management expects a significant increase in selling expenses during 2000
due to increased marketing expenses associated with the company's launch of
Nitrolingual Pumpspray and Ponstel. Management also expects an increase in
selling expenses due to expansion of the company's sales force in 2000. In
addition, selling expenses in 2000 and beyond will include royalty expenses and
sales representative commissions for Nitrolingual Pumpspray. The company did not
incur any royalty expense or commission expense for Nitrolingual Pumpspray in
1999.
Non-cash Selling, General and Administrative Expense. Non-cash
compensation expenses were $144,000 for the year ended December 31, 1999,
compared to no expense for the year ended December 31, 1998. This expense
resulted from our issuing stock options in 1999 at exercise prices that were
less than the market value of our stock at time of issuance, as determined by an
independent valuation.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses were $424,000 for the year ended December 31, 1999, compared to $35,000
for the year ended December 31, 1998. This increase primarily resulted from
amortization expense related to the purchase in 1999 of Robinul and Robinul
Forte.
Amortization expenses will increase in 2000 and beyond to reflect
amortization expense related to the company's acquisition of Ponstel in April
2000. This expense could further increase if the company concludes any other
product acquisitions.
Research and Development Expenses. Research and development expenses were
$860,000 for the year ended December 31, 1999, compared to $255,000 for the year
ended December 31, 1998. This increase resulted from our continuing development
of a new product for the treatment of migraine headache and our continuing
development of a line extension of Robinul for the treatment of symptoms
associated with excessive salivation.
22
<PAGE> 27
The company will continue to incur significant research and development
expenses as it continues to develop the migraine headache product. Management
anticipates that the company will incur approximately $1,600,000 of research and
development cost in 2000 related to the migraine headache product and
approximately $3,000,000 in subsequent years through 2002 related to conducting
clinical trials, filing a new drug application and making payments to
third-parties under our joint development agreements.
Interest Expense. Interest expense for the year ended December 31, 1999
was $357,000, compared to $14,000 for the year ended December 31, 1998. The
$343,000 increase resulted primarily from borrowings for the acquisition of
Robinul and Robinul Forte.
Interest Income. Interest income for the year ended December 31, 1999 was
$12,000, compared to $4,000 for the year ended December 31, 1998. This $8,000
increase resulted from increased average cash balances resulting from improved
financial performance.
Income Tax Expense. Income tax expense for the year ended December 31,
1999 was $548,000, compared to $121,000 for the year ended December 31, 1998.
The $427,000 increase resulted from increased pre-tax income.
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Net Revenues. Net revenues for the year ended December 31, 1998 were
$9,252,000, compared to $5,558,000 for the year ended December 31, 1997, a 66%
increase. The increase resulted from the expansion of our sales force from 47
sales representatives and three district managers at the end of 1997 to 69 sales
representatives and three district managers at the end of 1998 and the continued
increase in demand for our products as a result of prior efforts of our sales
force.
Cost of Revenues. Cost of revenues for the year ended December 31, 1998
were $1,903,000, compared to $1,137,000 for the year ended December 31, 1997, a
67% increase.
Gross Margin. Gross margins for the years ended December 31, 1998 and 1997
were 79%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1998 were $6,789,000,
compared to $4,545,000 for the year ended December 31, 1997, a 49% increase.
Selling-related expenses increased over the previous year due to increased
expenses related to sales force expansion, higher commission and royalty
payments and larger sample, marketing and promotional costs. General and
administrative expenses increased over the previous year due to increased
compensation and related expenses, and increased costs as a result of relocation
of our corporate offices from a 7,603-square-foot facility to a
24,300-square-foot facility in September, 1998.
Non-cash Selling, General and Administrative Expense. We had non-cash
compensation expenses of $0 for the year ended December 31, 1998, compared to
$134,000 for the year ended December 31, 1997. The 1997 non-cash compensation
expense resulted from our issuing stock options in 1997 at exercise prices that
were less than the market value of our stock at the time of issuance, as
determined by an independent valuation.
Research and Development Expenses. Research and development expenses were
$255,000 for the year ended December 31, 1998, compared to no expenses for the
year ended December 31, 1997. We paid $200,000 in development fees to
Inpharmakon Corporation for the fee for licensing our migraine product under
development.
Depreciation and Amortization Expense. Depreciation and amortization
expense was $35,000 for the year ended December 31, 1998, compared to $30,000
for the year ended December 31, 1997, a 17% increase. The increase resulted from
purchases of computers for new personnel and furniture related to our corporate
office relocation.
23
<PAGE> 28
Interest Income. Interest income for the year ended December 31, 1998 was
$4,000, compared to $3,000 for the year ended December 31, 1997. The $1,000
increase resulted from increased average cash balances resulting from improved
financial performance.
Interest Expense. Interest expense for the year ended December 31, 1998
was $14,000, compared to $5,000 for the year ended December 31, 1997. The $9,000
increase resulted primarily from borrowings on our line of credit with LaSalle
Bank.
Income Tax Expense. Income tax expense for the year ended December 31,
1998 was $121,000, compared to a benefit of $107,000 for the year ended December
31, 1997. The $228,000 increase resulted from 1998 being our first profitable
operating year.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity requirements arise from debt service, working capital
requirements and funding of acquisitions. We have met these cash requirements
through cash from operations, proceeds from our line of credit, borrowings for
product acquisitions, and the issuance of common stock to our majority
stockholder.
Our cash and cash equivalents were $735,000 at March 31, 2000. Our cash and
cash equivalents at December 31, 1999, 1998 and 1997 were $220,000, $425,000 and
$245,000, respectively. Net cash used in operating activities for the quarter
ended March 31, 2000 was $273,000. This use of cash was primarily the result of
increased purchases of inventories primarily for our launch of Nitrolingual
Pumpspray, partially offset by an increase in accounts payable and accrued
expenses. Net cash provided by operating activities for the year ended 1999 was
$1,018,000. Our sources of cash were primarily from net income and increases in
accounts payable and accrued expenses partially offset by increases in accounts
receivable, inventories and deferred taxes. Net cash used in operating
activities for the years ended 1998 and 1997 was $181,000 and $196,000,
respectively. Our use of net cash was primarily a result of increases in
accounts receivable and inventories partially offset by increases in deferred
taxes, accounts payable and accrued expenses plus net income.
Net cash used in investing activities for the quarter ended March 31, 2000
was $69,000 for the purchase of property and equipment for our corporate
headquarters. We purchased intangible assets in 1999 for $4,000,000 in cash with
an additional $1,800,000 financed by the seller of the assets. As a part of the
acquisition, we also assumed estimated liabilities of $218,000 for returns of
products shipped by the seller prior to the acquisition date. In addition, we
spent $186,000 for the purchase of property and computer related items in 1999.
Net cash used in investing activities in 1998 and 1997 was $208,000 and
$121,000, respectively. These investments were primarily for the purchase of
property and computer related items.
Net cash provided by financing activities for the quarter ended March 31,
2000 was $858,000. This cash was the result of increased borrowings from our
line of credit, offset by payments on long term debt. During 1999, we borrowed
$4,000,000 and incurred indebtedness of $1,800,000 for the purchase of
intangible assets. In 1999, we also made payments of $1,235,000 on long-term
debt and had a net increase of $197,000 on our revolving line of credit. During
1998, we borrowed $563,000 under our revolving line of credit. During 1997, we
financed our capital requirements by raising $550,000 through the issuance of
stock to our majority shareholder.
In May 1998, we entered into a credit facility with LaSalle Bank National
Association which was subsequently amended and currently consists of a revolving
loan, a term loan and a bridge loan. The revolving loan is subject to borrowing
base limitations and inventory balances. The revolving credit facility provides
for borrowings of up to $3,500,000 which reduces to $2,500,000 on June 30, 2000.
Borrowings under the revolving credit facility bear interest at the bank's prime
rate, and are due on May 2, 2001. At March 31, 2000, the outstanding balance
under the revolving loan was $2,000,000 with an interest rate of 9.00%, and we
had additional availability under the terms of the facility of $1,500,000. We
borrowed $2,400,000 under our term loan facility in January 1999
24
<PAGE> 29
bearing interest at our choice of either LaSalle's prime rate or LIBOR plus 2%.
The term loan is repayable in monthly payments of $40,000 plus accrued interest
and matures on May 2, 2001. At March 31, 2000 outstanding indebtedness under the
term loan was $1,720,000 with an interest rate of 7.53%. We plan to repay this
term loan in full with proceeds from this offering.
On April 14, 2000, the credit facility was amended to provide for bridge
financing of up to $13,000,000 to finance product acquisitions. On April 14,
2000, we borrowed $9,500,000 under this bridge loan for our purchase of Ponstel.
We will borrow an additional $3,500,000 to purchase Cognex if we conclude this
acquisition prior to conclusion of this offering. Borrowings under the bridge
loan bear interest at our choice of the prime rate of interest or LIBOR plus
1.5%. Interest on the bridge loan is payable monthly beginning on May 1, 2000.
Borrowings under the bridge loan mature on our receipt of the proceeds from this
offering.
As a condition to entering into the bridge loan, LaSalle Bank required that
the bridge loan be secured by a pledge by the 1992 Kapoor Children's Trust to
LaSalle Bank of an interest in securities and investments in the amount of
$10,000,000. We entered into a Reimbursement Agreement with the Trust on April
14, 2000 to obtain this pledge of assets. As consideration for this pledge, we
will pay the Trust a fee in of $100,000 per year, pro rated for the amount of
time that the pledge is in effect, plus all of the Trust's expenses incurred in
connection with the Reimbursement Agreement.
Our credit facility with LaSalle Bank is secured by our accounts
receivable, inventories, equipment and intangible assets including our
intellectual properties.
Under the terms of our credit facility, we must maintain a minimum net
worth plus subordinated debt of $3,300,000 plus 75% of net income, a ratio of
liabilities to net worth plus subordinated debt after the conclusion of this
offering of 2.25 to 1.00, a minimum specified EBITDA, and a fixed charge
coverage ratio ranging from .75 to 1.00 to 1.25 to 1.00. The credit facility
also limits our ability to incur additional indebtedness, and prohibits
substantial asset sales and cash dividends.
On April 14, 2000, we also issued a promissory note to Warner-Lambert
evidencing $3,500,000 of the purchase price of Ponstel. This promissory note is
interest-free and matures upon our receipt of the proceeds from this offering.
We expect that the proceeds from this offering, cash from operations and
borrowings under our credit facility will be adequate to fund our current
operations and current working capital requirements for the next eighteen
months. In the event that we make significant future product acquisitions, we
expect that we will need to raise additional funds. Adequate funds for these
purposes, whether through the financial markets or from other sources, may not
be available when needed or on terms acceptable to us. Insufficient funds may
cause us to delay, scale back or abandon some or all of our future product
acquisition opportunities.
Our future capital requirements and the adequacy of our available funds
will depend on many factors, including:
- the timing and cost of product acquisitions and licensing agreements;
- regulatory approval of our migraine product under development and the
Robinul product extension;
- size and scope of our development efforts for additional products;
- cost, timing and outcomes of regulatory reviews;
- expansion of our sales and marketing force;
- determinations as to the commercial potential of our products under
development;
- status of competitive products;
25
<PAGE> 30
- defending and enforcing intellectual property rights; and
- establishment, continuation or termination of third-party manufacturing
agreements.
IMPACT OF INFLATION
We have experienced only moderate price increases under our agreements with
third-party manufacturers as a result of raw material and labor price increases.
We have passed these price increases along to our customers.
SEASONALITY
Although our business is generally non-seasonal, sales of certain products,
such as cough and cold products, increase slightly between October and March due
to the cold and flu season. We expect the impact of seasonality to decrease as
we acquire or obtain licenses for products that treat chronic conditions.
However, we anticipate that the seasonality may continue to affect sales for the
foreseeable future.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." We must adopt SFAS No. 133 for the year
ending December 31, 2000. SFAS No. 133 established methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. Adoption of SFAS No. 133 is not
expected to have a material impact on our financial condition or results of
operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Our operating results and cash flows are subject to fluctuations from
changes in foreign currency exchange rates and interest rates.
Our purchases of Nitrolingual Pumpspray under our agreement with
Pohl-Boskamp are made in German Deutsche marks. Our next purchase obligation
under this agreement is payable on May 24, 2000 and we expect to make purchases
several times per year. In connection with our currently pending purchase
obligation, based on our evaluation of exchange rates with the German Deutsche
mark on April 10, 2000, we purchased a contract payable in U.S. dollars at an
exchange rate of 2.025 Deutsche marks to the dollar to satisfy our purchase
obligation on May 24, 2000. While the effect of foreign currency translations
has not been material to our results of operations to date, currency
translations on export sales or import purchases could be adversely affected in
the future by the relationship of the U.S. dollar with foreign currencies.
To the extent that following conclusion of this offering we borrow under
our credit facility with LaSalle Bank, we will experience market risk with
respect to changes in the general level of the interest rates and its effect
upon our interest expense. Borrowings under our credit facility with LaSalle
Bank bear interest at variable rates. Because such rates are variable, an
increase in interest rates will result in additional interest expense and a
reduction in interest rates will result in reduced interest expense.
26
<PAGE> 31
BUSINESS
OVERVIEW
We currently market and sell 12 brand name prescription drugs to
high-prescribing primary care and select specialty physicians through our
nationwide sales and marketing force of 137 professionals. Since our formation,
we have introduced 12 products including two line extensions. Our strategy is to
acquire and obtain licenses for pharmaceutical products that other companies do
not actively market and to increase sales through aggressive promotion and
marketing. In addition, we seek to increase the value of existing products by
developing new formulations and new delivery methods, and seeking new
indications. We incorporated in 1992 as the surviving corporation of a merger in
July 1992 between Century Pharmaceutical Corporation and Horizon Pharmaceutical
Corporation. The company originally promoted over-the-counter cough and cold
products. In late 1992, we launched the prescription cough and cold products
Defen-LA and Protuss Liquid and began focusing on prescription drugs for chronic
conditions.
Our key products include Nitrolingual, Robinul and Robinul Forte, and
Tanafed. In 1999, we acquired marketing rights to Robinul and Robinul Forte from
American Home Products Corporation and to Nitrolingual from Pohl-Boskamp. In
February 2000, we began marketing a new version of this product called
Nitrolingual Pumpspray. We have marketed Tanafed since 1993. We recently entered
into development agreements with Penwest Pharmaceuticals Co. and Inpharmakon
Corporation for a product that we are developing for the treatment of migraine
headache. We are also currently developing a line extension of Robinul to treat
symptoms associated with the excessive production of saliva.
Our net revenues have grown from approximately $1.6 million for the year
ended December 31, 1995 to approximately $18.6 million for the year ended
December 31, 1999. We achieved this from a combination of increased sales of
existing products and product acquisitions and licenses.
On April 14, 2000, we acquired exclusive rights to market, distribute and
sell Ponstel in the United States from Warner-Lambert and entered into an
agreement to acquire exclusive rights from Warner-Lambert to market, distribute
and sell Cognex in the United States and other countries, pending FTC approval
and the satisfaction of other customary conditions.
FIRST HORIZON STRATEGY
We believe that our ability to market, acquire and develop brand name
products and our ability to increase our sales and improve our marketing
infrastructure uniquely positions us to continue to grow. We focus on products
that treat chronic conditions primarily because patients and physicians remain
loyal to such products. This results in repeat use over an extended period of
time, generates recurring consistent revenue streams and lowers marketing costs
necessary to maintain existing sales.
The key elements of our strategy include:
- Increase sales of products through targeted promotion. We seek to
increase sales by promoting our products to high-prescribing primary care
and specialty physicians through our nationwide sales and marketing force
that includes 137 professionals. We also use targeted direct mail and
telemarketing to promote our products.
- Identify and license or acquire brand name prescription products. We
seek to acquire the rights to brand name pharmaceutical products that we
believe will benefit from increased marketing efforts to high-prescribing
primary care and specialty physicians, leverage our existing sales
infrastructure, complement our existing products and have the potential
for market exclusivity.
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- Develop proprietary products and line extensions. We seek to reduce the
costs and risks of development by focusing on drugs that the FDA has
already approved in the United States. We plan to develop products,
including line extensions of our current drugs, using patent-protected
delivery systems or formulations that offer market differentiation and
the potential for market exclusivity.
PRODUCTS
We currently market and sell the following products:
<TABLE>
<CAPTION>
DATE OF
PRODUCT INTRODUCTION PRODUCT INDICATION
- ------- -------------------- ------------------
<S> <C> <C>
Ponstel.......................... 2000 Relief of mild to moderate pain
for patients 14 years of age and
older for therapies lasting less
than a week and for painful
menstruation
Nitrolingual Pumpspray........... 2000 Acute relief or prevention of an
attack of angina pectoris due to
heart disease
Robinul and Robinul Forte........ 1999 Adjunctive therapy for the
treatment of peptic ulcer
Zebutal Capsules................. 1999 Tension headache
Protuss DM Tablets............... 1997 Cough and congestion
Mescolor Tablets................. 1994 Allergy and runny nose
Protuss-D Liquid................. 1994 Cough and congestion
Zoto-HC Ear Drops................ 1994 Swimmer's ear infections
Tanafed Suspension............... 1993 Allergy and cold
Defen-LA Tablets................. 1992 Cough and cold
Protuss Liquid................... 1992 Cough and congestion
</TABLE>
We have entered into an agreement to acquire rights to Cognex pending FTC
approval and the satisfaction of other customary conditions. The FDA has
approved Cognex under a new drug application for the treatment of mild to
moderate dementia associated with Alzheimer's disease.
The FDA approved Ponstel, Nitrolingual Pumpspray, Robinul and Robinul Forte
under new drug applications. The FDA also approved an abbreviated new drug
application for Zebutal. Our other products are classified by the FDA as drugs
that may be marketed without submitting safety and efficacy data.
Nitrolingual
On February 1, 2000, we began marketing Nitrolingual Pumpspray for which we
acquired from Pohl-Boskamp exclusive distribution rights in the United States.
Nitrolingual Pumpspray is an oral spray of nitroglycerin used for the acute
relief or prevention of chest pain associated with angina pectoris that results
from heart disease. Pohl-Boskamp holds a patent that was issued in 1993 on the
formulation of Nitrolingual.
Aventis previously had the rights to market the chlorofluorocarbon (CFC)
version of this product named Nitrolingual Spray. We believe that Nitrolingual
Pumpspray has marketing advantages over Nitrolingual Spray. Unlike the previous
version, Nitrolingual Pumpspray is packaged in a translucent, plastic-coated
glass bottle, that allows patients to easily see the amount
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of product left in the bottle. In addition, Nitrolingual Pumpspray does not
contain CFC, making it environmentally friendly.
The primary competitor to Nitrolingual Pumpspray is nitroglycerin tablets.
Unlike tablets, which begin to lose their potency immediately upon opening the
bottle, Nitrolingual Pumpspray maintains its potency for two years. Further,
studies have shown that Nitrolingual Pumpspray provides for more rapid
absorption than the tablets. Each metered dose provides for consistent delivery
of nitroglycerin. Also, unlike the tablets, Nitrolingual Pumpspray requires no
special storage or handling to maintain its potency.
According to the American Heart Association, about 6.2 million Americans
suffer from angina pectoris.
Robinul and Robinul Forte
On January 29, 1999, we acquired exclusive rights in the United States to
Robinul and Robinul Forte, which is a higher-strength dosage of Robinul. Both
Robinul and Robinul Forte belong to a class of drugs known as anticholinergics,
which reduce the motion of the gastrointestinal tract. The FDA has approved both
products for use as a therapy in conjunction with other therapeutics in the
treatment of peptic ulcer. Compared to other anticholinergics, the Robinul
product line has an overall better side effect profile and is longer acting,
thereby requiring fewer doses. We are currently developing a line extension and
will seek regulatory approval to use the active ingredient in Robinul to treat
symptoms associated with the excessive production of saliva. Since acquiring the
products, we have substantially increased the sales of Robinul and Robinul
Forte. Industry sources estimate that the U.S. market for anticholinergics was
$130 million in 1999.
Tanafed
Tanafed is a liquid cold and allergy product marketed for children. We
believe that pediatricians prescribe Tanafed because it is effective and
children prefer its taste. The National Center for Health Statistics estimated
that 20 million days were lost from school in 1994.
Cough, Cold and Allergy Products
Our other products for the treatment of cough, cold and allergy are
Defen-LA Tablets, Mescolor Tablets and the Protuss product line, which includes
Protuss Liquid, Protuss DM Tablets and Protuss-D Liquid.
Ponstel
On April 14, 2000, we acquired exclusive rights from Warner-Lambert to
market, distribute and sell Ponstel in the United States. Ponstel has been
manufactured and marketed by Warner-Lambert or its affiliates. Ponstel capsules
are used for the relief of mild to moderate pain for patients 14 years of age
and older if therapy will be for less than one week and for primary
dysmenorrhea, which is pain associated with menstruation.
According to the American Pain Foundation, one in three American adults
lose more than twenty hours of sleep each month due to pain. Pain costs an
estimated $100 billion each year and lost workdays due to pain add up to over 50
million days a year. One class of frequently prescribed pain relievers is
nonsteroidal anti-inflammatory drugs ("NSAIDs"). Ponstel is a well known NSAID
and we believe that its advantages are its non-addictive qualities, low
stomach-related side effects and efficacy.
Cognex
On April 14, 2000, we entered into an agreement with Warner-Lambert to
purchase exclusive rights in the United States and other countries to market,
distribute and sell Cognex, as well as
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rights to a new unapproved controlled release version of Cognex. Our acquisition
of this product is subject to FTC approval of the transaction and the
satisfaction of customary conditions. Cognex is marketed by Warner-Lambert or
its affiliates and manufactured by one of its affiliates. Cognex tablets are
used for the treatment of mild to moderate dementia associated with Alzheimer's
disease.
Alzheimer's disease is a progressive, degenerative disease that attacks the
brain and results in impaired memory, thinking and behavior. Although no cure
for Alzheimer's disease is currently available, good planning and medical and
social management can ease the burdens on the patient and family. According to
the Alzheimer's Association, approximately 4 million Americans have Alzheimer's
disease. Cognex is one of only three FDA-approved drug treatments for mild to
moderate dementia associated with Alzheimer's disease.
Cognex is currently sold in twenty-one countries, including the United
States. We intend to actively market the product in the United Sates and in
Europe and intend to enter into an agreement with Warner-Lambert to provide
transitional administrative services in specific European countries until
November 30, 2000. In order for us to continue to sell Cognex outside the United
States, we will be required to obtain, either internally or through third
parties, the necessary administrative and marketing and selling support
services.
Other Products
We sell Zoto-HC ear drops for the treatment of swimmer's ear infections and
Zebutal Capsules for the treatment of tension headaches. A study has shown that
approximately nine out of ten people have at least one headache in any given
year. Headaches account for approximately 18 million outpatient visits annually
to hospitals and healthcare clinics.
PRODUCT DEVELOPMENT
We seek to maximize the value of drugs by developing new patentable
formulations, using new delivery methods and seeking regulatory approval for new
indications. Through the use of these distinct formulations and patent-protected
delivery systems, we plan to create a marketing advantage over generic drugs and
reduce substitution by the pharmacist. Some of these development projects
include line extensions which allow us to extend the life cycle of our key
products. We expect the strength of extensive literature-based clinical data on
the active ingredients in our products under development, current acceptance and
usage of the active ingredients in these products by healthcare professionals,
and the safety profile of the active ingredients in approved products will
reduce development costs and risks associated with FDA approval.
Migraine Product (FHPC 01)
We are developing a proprietary formulation of a product named FHPC 01 for
the treatment of migraine headaches, which contains an active ingredient that is
currently approved by the FDA for other indications. We have entered into a
development agreement with Penwest Pharmaceuticals Co. to develop a product
using Penwest's patented TIMERx controlled-release technology. Penwest has also
granted us the right to reference their Drug Master File as necessary for us to
file a new drug application for this product. A Drug Master File is a submission
to the FDA, often in support of a new drug application, that companies may use
to provide confidential, detailed information about facilities, processes or
articles used in the manufacturing, processing, packaging and storing of one or
more human drugs. We have developed a once a day formulation for this product
and we filed an investigational new drug application for this product on
February 17, 2000 which has been accepted by the FDA. We have engaged Parexel
International to conduct clinical trials for this product. A study has shown
that an estimated 23.6 million Americans suffer from migraine
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headaches. Of these, approximately half suffer from migraines that are
moderately to severely disabling.
Excessive Salivation Product (FHPC 02)
We are developing a product named FHPC 02 for the treatment of the symptoms
associated with the excessive production of saliva primarily in children. This
product will be a line extension of our Robinul products. We have entered into
an agreement with Mikart to develop a new dosage form. We plan to initiate
clinical trials and file for a supplementary new drug application to market the
product. Excessive salivation, also known as Sialorrhea, is a socially
embarrassing condition that occurs in patients who suffer from cerebral palsy
and Parkinson's disease.
Formulation and Clinical Trials
We generally seek to contract third parties to formulate, develop and
manufacture materials needed for clinical trials and to perform scale-up work.
We select third-party contractors that we believe have the capability to
commercially manufacture the products. By selecting qualified third parties
capable of both developing formulations and providing full-scale manufacturing
services, we believe we will be able to shorten development and scale-up times
necessary for production. The key advantage to this approach is that the
third-party contractor will have the equipment, operational parameters and
validated testing procedures already in place for the commercial manufacture of
our products. Our management team has experience in selecting and managing
activities of third-party contract companies.
SALES AND MARKETING
To maximize the effectiveness of our selling efforts, our sales force
focuses on high-prescribing primary care and select specialty physicians. Our
sales force seeks to develop close relationships with these physicians and
respond to their needs. We intend to enhance our existing marketing and sales
channels to expand and increase the penetration of our products. We have
expanded our sales and marketing force to 137 professionals nationwide.
We sell our products to pharmaceutical wholesalers (who in turn distribute
to pharmacies), chain drug stores, other retail merchandisers and, on a limited
basis, directly to pharmacies. In 1999, sales to our top five pharmaceutical
wholesalers accounted for over 72% of all of our sales. Three of the five
wholesalers each accounted for 10% or more of all of our sales: McKessonHBOC
(28%), Cardinal Health (19%) and Bergen Brunswig (10%).
We have traditionally targeted our sales efforts in areas with low
managed-care penetration in which it is easier to establish a presence. In
addition, we have a group of sales professionals that focuses exclusively on
building relationships with managed-care organizations that can be leveraged
across markets. We continue to strengthen this group to gain access to
formularies and develop long-term working relationships that may lead to
adoption of our products.
During 1999, our Robinul line accounted for 27.5% of our revenues and our
cough, cold and allergy products accounted for 57.5% of our revenues. During
1998, our cough, cold and allergy products accounted for 82.0% of our revenues
and Zoto-HC accounted for 18.0% of our revenues. During 1997, our cough, cold
and allergy products accounted for 80.9% of our revenues and Zoto-HC accounted
for 19.1% of our revenues.
THIRD-PARTY AGREEMENTS
Nitrolingual Pumpspray
In July 1999, we acquired from Pohl-Boskamp the exclusive rights to
distribute, market and sell Nitrolingual Pumpspray beginning on February 1, 2000
in the United States for five years plus an additional five-year renewal period
subject to establishing mutually acceptable minimum purchase
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requirements. Under the agreement, Pohl-Boskamp supplies us with our
requirements of product at prices that decrease as volume purchased in each year
increases. We must purchase designated minimum quantities in each year of the
agreement and pay a royalty on net sales of the product. Also, Pohl-Boskamp can
terminate our distribution agreement for Nitrolingual if a company with a
product competitive with Nitrolingual acquires direct or indirect influence or
control over our company, or if a very significant change in our stockholders
occurs so that Kapoor-Pharma Investments and Horizon employees, management,
directors, and any of their respective affiliates, do not in the aggregate
directly or indirectly beneficially own at least 20% of our shares.
Aventis had exclusive rights through January 2000, to a version of the
product containing CFC named Nitrolingual Spray. To promote earlier adoption of
Nitrolingual Pumpspray, we obtained exclusive marketing rights from Aventis to
market Nitrolingual Spray in the United States as of November 22, 1999. We
promoted Nitrolingual Spray for a short period of time to reduce inventories of
the product in the distribution channels. Since the launch of Nitrolingual
Pumpspray, we have not marketed this CFC product.
Robinul/Robinul Forte
On January 29, 1999, we acquired exclusive rights in the United States to
Robinul and Robinul Forte tablets from American Home Products Corporation. We
will pay the $647,302 aggregate remaining portion of the purchase price
quarterly through February 2001. In addition, we must pay royalties on net
sales. We negotiated for American Home Products Corporation or its designee to
continue to manufacture and supply the product to us until January 29, 2001. We
have an agreement with Mikart, dated April 23, 1999, for Mikart to become
qualified under applicable regulations to manufacture and supply our
requirements for Robinul. Under this agreement, Mikart will manufacture the
products for five years from the time Mikart becomes a qualified manufacturer
plus renewal terms of one year until either party elects not to renew. The
agreement with Mikart requires that we purchase certain designated minimum
quantities.
Tanafed
On January 1, 1996, we obtained exclusive distribution rights from
Unisource, Inc. to Tanafed in North America through December 31, 2003 plus an
additional seven years at our option. The agreement requires us to purchase all
of our requirements for Tanafed from Unisource, including at least certain
minimum quantities of Tanafed in each year of the agreement. We entered into a
patent license agreement with Jame Fine Chemicals, Inc., a supplier of a raw
material for Tanafed, effective January 1, 2000. This agreement grants us a
semi-exclusive license to use, sell and distribute finished products containing
an active ingredient used in Tanafed. The licensed patent covers the
manufacturing process of an active ingredient used in Tanafed. The license
continues through the life of the licensed patent, and we have agreed to pay an
upfront license fee and certain royalties based on net sales of Tanafed at rates
which we believe are within industry customary ranges. Another party also has a
license for one of the active ingredients in Tanafed.
Migraine Product (FHPC 01)
On October 31, 1998, we entered into an agreement with Inpharmakon
Corporation in which we acquired rights to the proprietary information for the
migraine product FHPC 01 for which we plan to conduct clinical studies and
submit a new drug application. The agreement expires on October 31, 2008, but we
may renew it indefinitely after expiration. On May 3, 2000, we entered into an
amendment to this agreement in which Inpharmakon Corporation released us from
all previous claims that Inpharmakon Corporation may have had under the
agreement, and deleted the required time within which we must commence clinical
trials and file for regulatory approval of the product. Under the amended
agreement, we must develop a workable once-a-day formulation for the drug,
conduct clinical trials, and file for and exert reasonable efforts to obtain
regulatory approval for the drug. If we do not obtain regulatory approval of the
drug within a specified time
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after filing for such approval and thereafter commence and continue to
aggressively market and sale the product, Inpharmakon may terminate the
agreement. In the event that Inpharmakon terminates the agreement for failure to
achieve these milestones, Inpharmakon may purchase rights to develop the drug at
our costs to date. We must also pay up to an aggregate of $950,000 in
non-refundable fees to Inpharmakon at various developmental milestones through
and including regulatory approval of the product, and, in the event of
commercial sales of the product, we must pay royalties at rates which we believe
are within industry customary ranges. We must also pay Inpharmakon $200,000
within 30 days after this offering. If we elect to sell the business opportunity
to a third party, we must share the proceeds of the sale with Inpharmakon.
On March 25, 1999, we acquired rights from Penwest Pharmaceuticals Co. to
use Penwest's TIMERx controlled-release technology to develop a product
containing the active ingredient in FHPC 01. Under the Penwest agreement, we
have the right to manufacture, use and sell the developed product in North
America and Mexico for a period extending fifteen years from the date a new drug
application is issued for the product, as well as a license under certain
Penwest patents. We must pay Penwest up to an aggregate of approximately
$2,600,000 of non-refundable fees upon achieving specified development
milestones through the first anniversary of the first commercial sale of the
product following regulatory approval and royalties upon any sales of the
migraine product at rates which we believe are within industry customary ranges.
Penwest may terminate the agreement in the event we fail to timely achieve
designated performance milestones within prescribed time periods.
Ponstel
On April 14, 2000, we acquired exclusive rights from Warner-Lambert to
market, distribute and sell Ponstel in the United States. The total purchase
price for the rights to Ponstel was $13 million. We paid $9.5 million in cash,
which we borrowed under a bridge loan from LaSalle Bank, and issued a promissory
note to Warner-Lambert for $3.5 million for the rights to this product. Under
the asset purchase agreement, we purchased the following:
- the U.S. Ponstel trademark;
- all regulatory approvals and regulatory applications for Ponstel in the
United States, including its new drug application;
- all technical information, know-how and market research results relating
to the manufacture, packaging, testing, development, distribution,
marketing, use and sale of Ponstel, including the raw materials used in
its manufacture; and
- managed care agreements used for the sale of Ponstel.
Under this agreement, we also assumed certain specified and customary
liabilities and obligations arising out of our ownership of Ponstel which arise
after the closing of the transaction.
In addition we agreed to purchase all of the current inventories of Ponstel
for approximately $100,000.
On April 14, 2000, we also entered into a supply agreement under which
Warner-Lambert will supply and we will purchase designated quantities of Ponstel
until December 31, 2000. We will pay Warner-Lambert a production fee for its
manufacture of Ponstel. We plan to secure a replacement manufacturer for Ponstel
in the near future and are currently in negotiations with a potential
manufacturer.
Cognex
On April 14, 2000, we entered into an agreement with Warner-Lambert to
purchase exclusive rights in the United States and other countries to market,
distribute and sell Cognex as well as rights to a new unapproved version of
Cognex, called Cognex CR. The purchase of Cognex is
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contingent on Warner-Lambert receiving FTC approval for the transaction and the
satisfaction of other customary conditions. If we acquire Cognex, we will be
required to pay $3.5 million in cash for the product. Warner-Lambert may
terminate this agreement if the transaction has not closed by June 30, 2000,
unless it has not closed because of a delay in receiving FTC approval. The
purchase agreement provides for the purchase of the following:
- the U.S. Cognex trademark and its international counterparts;
- certain patent rights relating to the use of an active ingredient in
Cognex to treat conditions associated with Alzheimer's disease.
- all worldwide regulatory approvals and regulatory applications for
Cognex, including its new drug application in the United States;
- all technical information, know-how and market research results relating
to the manufacture, packaging, testing, development, distribution,
marketing, use and sale of Cognex, including the raw materials used in
its manufacture;
- all of the royalties that Warner-Lambert has prepaid with respect to a
patent covering the use of an active ingredient in Cognex; and
- all promotional materials related to Cognex, including advertising,
promotional and sales training materials owned by Warner-Lambert.
In addition, we acquired rights to a new unapproved version of Cognex,
called Cognex CR. We must pay Warner-Lambert up to $1.5 million in additional
purchase price if we obtain FDA approval to market Cognex CR. If approved,
Cognex CR will also treat mild to moderate dementia associated with Alzheimer's
disease, but we believe that the new version will offer convenience to patients
by reducing the number of tablets required from four times per day to one time
per day. Warner-Lambert has provided us with the new drug application package
for our use in seeking this approval from the FDA and international regulatory
authorities. We may have to undertake additional clinical studies for this
approval.
Under this agreement, if the Cognex transaction closes, we must submit
reports to the FTC regarding the status of FDA approvals of Cognex and our
efforts to market the product. In the event that we voluntarily stop selling
Cognex for 60 days or more, or we otherwise fail to pursue good efforts to sell
Cognex in the United States other than for reasons outside our control, the FTC
may order that Cognex revert back to Warner-Lambert and be divested by the FTC
to another purchaser. In addition, the FTC may order us to return Cognex if we
fail to pursue the sale and manufacture or third party manufacture of Cognex
within one year from receiving FTC approval, subject to an extension.
Under the purchase agreement for the Cognex transaction, we will be
required to pay royalties on net sales of Cognex. However, we will be entitled
to apply the amount of royalties that Warner-Lambert has prepaid for these
patents and we do not expect to pay significant royalties in the near future.
The asset purchase agreement for Cognex provides for a supply agreement
under which an affiliate of Warner-Lambert will manufacture and supply to us
either Cognex or the active ingredient in Cognex for two years after the Cognex
transaction closes, subject to a one year renewal. We will pay a production fee
for the manufacture of Cognex and the active ingredient. The supply agreement
contains designated quantities of Cognex and its active ingredient that
Warner-Lambert's affiliate will supply to us and that we must purchase. We plan
to secure a replacement manufacturer for Cognex and are currently in
negotiations with a potential manufacturer.
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Pursuant to the purchase agreement, we intend to enter into a transition
services agreement with Warner-Lambert under which it will provide transitional
administrative services to us until November 30, 2000 in connection with the
sale of Cognex in certain specified European countries. These services will
include maintenance of Cognex registrations, contact with regulatory authorities
including reporting requirements, responding to customer complaints, sales
administration, shipping management, billing, processing of returns, storage,
responding to any regulatory inquiries or investigations, responding to any
customer complaints and communicating with physicians in relation to the
product. Warner-Lambert may terminate this agreement if any person or entity
acquires ownership or control of 50% or more of our common stock or acquires
substantially all of our assets.
Other Products
Generally, our other products are manufactured pursuant to manufacturing
and supply agreements for remaining terms ranging from one to five years.
Generally, these agreements require that we purchase all of our requirements for
these products from the manufacturers which are a party to these agreements,
including specified minimum purchase quantities of the product for each year.
Except for our Defen-LA, Protuss-D and Zoto-HC products, these agreements
generally state that the product supplier will provide products only to us.
MANUFACTURERS AND SINGLE SOURCE SUPPLIERS
We use third-party manufacturers for the production of our products for
development and commercial purposes. Given the general under-utilization of
resources, the availability of excess capacity for manufacturing in the
marketplace, and the lower cost of outsourcing, we intend to continue to
outsource our manufacturing for the near-term.
We currently use the services of seven third-party manufacturers for our
products. These manufacturers manufacture our products pursuant to our product
specifications. We have manufacturing and supply agreements with six of these
manufacturers. The terms of these agreements generally range from two years to
ten years except that we have a transitional supply agreement with
Warner-Lambert for Ponstel which expires December 31, 2000. Under some of these
agreements, the manufacturers or other third-parties own the rights to the
product that we have under our marketing licenses. We have not entered into
agreements for alternative manufacturing sources for any of our products. The
suppliers of Nitrolingual Pumpspray and the raw material for Tanafed hold
patents relating to their respective products. The patents may provide us with a
competitive advantage because the patents create a barrier to entry to other
companies that might otherwise seek to develop similar products.
TRADEMARKS
We have a U.S. registered trademark for Horizon Pharmaceutical and have
filed for the trademark for First Horizon Pharmaceutical. Our products are sold
under a variety of trademarks registered in the United States, including
Ponstel, Zoto-HC, Protuss, Mescolor, Defen and Tanafed. We have filed for the
trademark Zebutal. Further, we have been licensed rights to use the Nitrolingual
and Robinul trademarks in the United States from Pohl-Boskamp and American Home
Products, respectively. We have rights to the TIMERx trademark pursuant to our
rights to market the product we have under development with Penwest. If we
acquire Cognex, we will own the U.S. rights to the Cognex trademark and its
international counterparts.
PATENTS
We consider the protection afforded by patents important to our business.
We intend to seek patent protection in the United States and selected foreign
countries where deemed appropriate for products we develop.
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Nitrolingual Pumpspray
By virtue of our distribution agreement with Pohl-Boskamp for Nitrolingual
Pumpspray, we are afforded marketing exclusivity arising from Pohl-Boskamp's
1993 U.S. patent relating to the product. This patent expires in 2010.
Tanafed
We entered into a licensing agreement with the raw material supplier for
our Tanafed product effective January 1, 2000. This agreement grants us a
license to market and distribute Tanafed for which the manufacturer has a patent
covering the manufacturing process of one of its active ingredients. This patent
expires in 2014.
Migraine Product (FHPC 01)
Pursuant to our development agreement with Penwest for a once-a-day
migraine product, we are the licensee of certain Penwest patents for the purpose
of manufacturing and marketing the product under development. These patents
expire from 2008 through 2016.
Active Ingredient in Robinul/Robinul Forte
In 1999, we filed a patent application directed to the use of
glycopyrrolate for the treatment of certain new indications. Glycopyrrolate is
the active ingredient in Robinul and Robinul Forte.
Cognex
In the event we acquire Cognex pursuant to our purchase agreement with
Warner-Lambert, we may acquire certain patent rights relating to the use of an
active ingredient in Cognex to treat conditions associated with Alzheimer's
disease.
COMPETITION
The market for drugs is highly competitive with many established
manufacturers, suppliers and distributors actively engaged in all phases of the
business. We believe that competition in the sale of our products is based
primarily on price, service, availability and product efficacy. Our brand-name
pharmaceutical products may be subject to competition from alternate therapies
during the period of patent protection and thereafter from generic equivalents.
Some of our products have generic equivalents in the marketplace.
We also compete with other pharmaceutical companies for new products and
product line acquisitions. These competitors include Dura Pharmaceuticals, Inc.,
Forest Laboratories, Inc., Watson Pharmaceuticals, Inc., King Pharmaceuticals,
Inc., Shire Pharmaceuticals Group plc, Jones Pharma Inc. and other companies
that acquire branded product lines from other pharmaceutical companies.
GOVERNMENT REGULATION
According to the Federal Food, Drug, and Cosmetic Act ("FDC Act"), all new
drugs are subject to premarket approval by the FDA. Applicable FDA law will
treat our development of new products and new uses for approved products or the
development of any of our line extensions as "new drugs," which requires the
submission of a New Drug Application ("NDA") or a supplemental NDA ("sNDA"), and
approval by the FDA.
The steps required for approval of an NDA or sNDA may include:
- pre-clinical studies;
- submission to the FDA of an Investigational New Drug application ("IND"),
which must become effective before human clinical trials commence;
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<PAGE> 41
- adequate and well-controlled human clinical trials to establish the
safety and effectiveness of the product;
- submission of an NDA or an sNDA to the FDA; and
- FDA approval of the NDA or sNDA prior to any commercial sale or shipment
of the product.
Pre-clinical studies generally include laboratory evaluation of product
chemistry and formulation, as well as animal studies, if appropriate, to assess
quality and safety. An applicant submits the results of the pre-clinical studies
with chemistry, manufacturing, and control information and pharmacology and
toxicology data to the FDA as a part of an IND and for review by the FDA prior
to the commencement of human clinical trials. Unless the FDA objects to an IND,
the IND will become effective 30 days following its receipt by the FDA.
Clinical trials involve the administration of the investigational new drug
to humans. The trials are subject to extensive regulation including compliance
with Good Clinical Practices, obtaining informed patient consent and review and
approval of each study by an Institutional Review Board. Clinical trials are
typically conducted in three sequential phases, although phases may overlap. In
Phase I, the investigational new drug usually is administered to healthy human
subjects and is tested for safety. Phase II usually involves studies in a
limited patient population to:
- determine the initial effectiveness of the investigational new drug for
specific indications;
- determine dosage tolerance and optimal dosage; and
- identify possible adverse effects and safety risks.
When an investigational new drug is found to be effective and to have an
acceptable safety profile in Phase II evaluation, Phase III trials are
undertaken to further evaluate clinical effectiveness and to further test for
safety within an expanded patient population. The FDA reviews both the clinical
plans and the results of the trials and may require the study to be discontinued
at any time if there are significant safety issues. In some cases, the FDA can
request Phase IV clinical studies after approval of the NDA. These studies can
be designed to obtain additional safety and efficacy data, detect new uses for
or abuses of a drug, or determine effectiveness for labeled indications under
conditions of widespread usage. These studies can involve significant additional
expenses.
Once the FDA has approved an NDA, the holder of the NDA may request changes
in the conditions of approval contained in its NDA through a sNDA. The format,
content and procedures applicable to NDA supplements are generally the same as
those for NDAs. However, the only information required in a supplement is that
needed to support the requested change. If the NDA or sNDA is based on new
clinical investigations which are essential to the approval of the application,
other than bioavailability studies, it may qualify for a three-year period of
exclusivity, distinct from any applicable patent protection that may exist. The
FDA may also require user fees for prescription drug NDAs or sNDAs. Supplements
proposing to include a new indication for use in pediatric populations are not
subject to user fees.
Another form of an NDA is the so-called "505(b)(2)" NDA, which applicants
submit pursuant to Section 505(b)(2) of the FDC Act. This type of NDA permits
the inclusion of safety and effectiveness studies that the applicant has not
conducted or been granted a right of reference by the sponsor of the studies. In
addition, the FDA recommends a 505(b)(2) NDA for a modification, such as a new
dosage form, of a previously approved drug which requires more than merely
bioequivalence data. This NDA is similar to a full NDA, except that, under
conditions prescribed by the FDA, it may be supported in whole or in part by one
or more study investigations published in scientific literature in lieu of the
applicant's clinical trials. We intend to submit this type of application to
market potential product line extensions or new uses of already-approved
products.
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<PAGE> 42
In addition, if we submit a certain type of new drug application, the FDA
will require us to certify as to any patent which covers the drug for which we
seek approval. If there is a patent in existence, a certain type of
certification is made and proper notice to the patent holder of our intent to
market the drugs is given, and the patent holder makes an infringement claim
within a specified time period, then the FDA will not approve our marketing
application for thirty months or until the patent litigation is resolved,
whichever occurs sooner. In addition, distinct from patent considerations,
approval of a certain type of new drug application could be delayed because of
the existence of non-patent exclusivity afforded by the FDA for the innovator
drug.
The least burdensome application for new drug approval is the abbreviated
NDA ("ANDA"), which may apply to a new drug that is shown to be bioequivalent to
a drug previously approved by the FDA for safety and effectiveness and listed as
the drug to which bioequivalence must be shown. An applicant may submit an ANDA
for products that are the same as an approved drug regarding active
ingredient(s), route of administration, dosage form, strength and conditions of
use recommended on the labeling. The ANDA requires bioequivalence data and other
technical and manufacturing information, but typically no safety and
effectiveness studies.
Even after obtaining regulatory approval, such approval may require
post-marketing testing and surveillance to monitor the safety of the product. In
addition, the product approval may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing. At
present, companies cannot export pharmaceutical products that cannot be lawfully
sold in the United States unless certain statutorily prescribed conditions are
met.
FDA regulations require that we report adverse events, submit new marketing
and promotional materials, submit changes we plan to make to the product
manufacturing or labeling and comply with recordkeeping requirements and
requirements relating to the distribution of drug samples to physicians. In the
event that we do not comply with the FDA requirements, the manufacture, sales
and distribution of our products may be suspended, and we may be prevented from
obtaining FDA approval of new products.
Our third-party manufacturers must adhere to FDA regulations relating to
current good manufacturing practice ("cGMP") regulations, which include
requirements relating to organization of personnel, buildings and facilities,
equipment, control of components and drug product containers and closures,
production and process controls, packaging and labeling controls, holding and
distribution, laboratory controls, records and reports, and returned and
salvaged products. Ongoing compliance with cGMP procedures, labeling and other
regulatory requirements are monitored through periodic inspections and market
surveillance by state and federal agencies, including the FDA. Failure by our
third-party manufacturers to comply with these rules could result in sanctions
being imposed, including fines, injunctions, civil penalties, suspension or
withdrawal of FDA approvals, seizures or recalls of products, operating
restrictions and criminal prosecutions. In addition, we rely upon our
third-party manufacturers to provide many of the documents that we use to comply
with our FDA reporting requirements for Ponstel, Robinul, Robinul Forte, and
Nitrolingual.
In addition, we are subject to fees under the Prescription Drug User Fee
Act for new drug applications for new drug products and sNDAs for new uses,
except that we may qualify for a waiver of the fee for our first new drug
application. We will be responsible for paying these fees for sNDAs and
subsequent submissions, unless we receive approval from the FDA for a waiver,
reduction or refund.
We are also subject to regulation under other federal and state laws,
including the Occupational Safety and Health Act and other environmental laws
and regulations, national restrictions on technology transfer, and import,
export and customs regulations. In addition, some of our products that contain
controlled substances, such as Protuss and Protuss-D, are subject to Drug
Enforcement Administration regulations relating to storage, distribution,
importation and sampling procedures. We have registered with the Drug
Enforcement Administration under the Controlled
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<PAGE> 43
Substances Act which establishes, among other things, registration, security and
recordkeeping requirements. We must also comply with federal and state
anti-kickback and other healthcare fraud and abuse laws.
In addition, whether or not we obtain FDA approval, we must obtain approval
of a pharmaceutical product by comparable governmental regulatory authorities in
foreign countries prior to the commencement of clinical trials and subsequent
marketing of such product in such countries. The approval procedure varies from
country to country, and the time required may be longer or shorter than that
required for FDA approval.
REIMBURSEMENT
Our ability to market our products successfully will depend in part on the
extent to which reimbursement for the costs of the products will be available
from government health administration authorities, private health insurers, and
managed care organizations in the United States and in any foreign markets where
we may sell our products. Third-party payors can affect the pricing or relative
attractiveness of our products by regulating the reimbursement they provide on
our products and competing products. Insurance carriers may not reimburse
healthcare providers for use of our products used for new indications. Domestic
and foreign government and third-party payors are increasingly attempting to
contain healthcare costs by limiting both coverage and the level of
reimbursement for new pharmaceutical products.
PRODUCT LIABILITY INSURANCE
We currently maintain a product liability insurance policy. We do not
currently maintain business interruption insurance.
EMPLOYEES
We had 150 full-time employees as of December 31, 1999, including 127 sales
and marketing employees in the field, and 23 in management, finance and
administration. We also maintain active independent contractor relationships
with various individuals with whom we have consulting agreements. We believe our
employee relations are good. None of our employees is subject to a collective
bargaining agreement.
PROPERTIES
We lease a 24,300 square-foot facility in Roswell, Georgia. Our facility
includes space for offices and a warehouse. This lease expires on August 31,
2003. We also lease executive office space on a short-term basis in Raleigh,
North Carolina, and Phoenix, Arizona, for our regional managers. We believe that
our facilities are adequate for our current requirements; however, we anticipate
that as we grow, we will require additional facilities.
LEGAL PROCEEDINGS
From time to time, we may become involved in routine litigation. Currently,
we are not a party to any material legal proceedings.
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<PAGE> 44
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following are our executive officers and directors as of the date of
this prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Mahendra G. Shah, Ph.D............ 55 Chairman of the Board and Chief Executive Officer
R. Brent Dixon.................... 55 President and Director
Gregory P. Hauck.................. 33 Secretary and Vice President, Developed Products
Balaji Venkataraman............... 34 Vice President and Chief Financial Officer
Robert D. Godfrey, Jr............. 38 Vice President, Sales
William G. Campbell............... 44 Controller
John N. Kapoor, Ph.D.(1).......... 56 Director
Pierre Lapalme(1)(2).............. 60 Director
Jon S. Saxe(1)(2)................. 63 Director
</TABLE>
- ------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mahendra G. Shah, Ph.D. is the Chairman of the Board and Chief Executive
Officer. Dr. Shah has been a director since 1993, and his present term as
director will expire in 2001. Dr. Shah became Chief Executive Officer in October
1999. Dr. Shah maintains other employment and expects to dedicate a majority of
his working time to the company. From 1991 to the present, he has been a Vice
President of EJ Financial Enterprises, Inc., which manages a fund that invests
in healthcare companies. From 1996 to the present, he has been the President of
Protomed Pharmaceuticals, Inc. which is a privately-held drug development
company. From 1987 to 1991, he was the Senior Director of New Business
Development with Fujisawa USA, Inc. Prior to that time, he worked in various
scientific and management positions with Schering-Plough and Bristol
Myers-Squibb Company. He serves on the board of Structural Bioinformatics Inc.,
Zarix, Introgen Therapeutics and Inpharmakon Corporation. He previously served
on the board of Unimed Pharmaceuticals. Dr. Shah received a Ph.D. degree in
Industrial Pharmacy from St. John's University. EJ Financial Enterprises, Inc.
is the sole shareholder and managing general partner of Kapoor Pharma
Investments, L.P., our largest shareholder.
R. Brent Dixon is the President and a director of the company. He has been
a director since 1993, and his present term as director will expire in 2002. Mr.
Dixon has been with the company since its formation. He has been our President
since 1993 and served as a Vice-President from 1992 to 1993. He has over 30
years of operational, sales, and strategic market development experience in the
pharmaceutical industry. Prior to working at the company, he was President of
Dixon and Associates, a healthcare consulting company. Prior to that he served
as National Sales Manager for Center Laboratories, a subsidiary of Merck AG. Mr.
Dixon has also served as a Regional and District Manager for Roberts
Pharmaceuticals and Adams Laboratories. Mr. Dixon attended St. Petersburg Junior
College and the University of Mississippi.
Gregory P. Hauck is the Secretary and Vice President of Developed Products.
He has been with the company since its formation and has been serving as
Vice-President since 1993. He is responsible for developing product promotional
materials as well as product line marketing strategies. In his previous position
as Vice President of Sales and Marketing for the company from 1994 to 1997, he
was responsible for implementing its sales strategies. Mr. Hauck began working
with the company in 1992 as the National Sales Manager where he was primarily
responsible for the
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<PAGE> 45
hiring and training of all new sales representatives. He entered the
pharmaceutical industry in 1989 as a sales representative with Hauck
Pharmaceuticals and Roberts Pharmaceuticals. Mr. Hauck received a B.S. degree in
Education from the University of Georgia and, afterwards, spent a brief period
of time as an educator.
Balaji Venkataraman has been the Vice President and Chief Financial Officer
since October 1999. Between August 1998 and September 1999, he was Vice
President of Corporate Development and Strategic Planning at the company. He
also served as a consultant to the company during his employment as the Director
of Strategic Planning at EJ Financial Enterprises, Inc. from September 1997 to
August 1998. From 1995 to 1997, he was an Associate, Licensing and New Business
Start-Up, at the University of Pennsylvania Center for Technology Transfer. From
1994 to 1995, he was the Marketing Manager at Curative Technologies Inc., a
wound care services company. From 1993 to 1994, he was a Technical Sales
Representative for Millipore Corporation. From 1991 to 1993 he was the Senior
Research Chemist at Scios Inc. He has also held product management and finance
positions at Schering Plough and Pfizer. Mr. Venkataraman received an M.S.
degree in Organic Chemistry from Case Western Reserve University and an M.B.A.
degree from the Wharton School at the University of Pennsylvania.
Robert D. Godfrey, Jr. has been Vice President of Sales since 1998. He
served as the National Sales Manager between 1996 and 1998. He began his career
with the company in 1992 as a Sales Representative for the Jacksonville,
Florida, territory and was promoted in 1994 to District Manager of the entire
Florida sales territory. At that time, in addition to his managerial
responsibilities, he continued to promote First Horizon products to physicians
and pharmacies until 1995. Prior to his career with the company, Mr. Godfrey
held the position of Marketing Research Consultant with MGT Information Systems
and also worked independently as a Research Consultant in the southeastern
United States. Mr. Godfrey received an M.B.A. degree and a B.S. degree in
Marketing from Jacksonville University.
William G. Campbell has been our Controller and Treasurer since 1998. Prior
to joining First Horizon, from 1995 to 1998, Mr. Campbell was the Controller/CFO
of DialysisAmerica, Inc. He was the Associate Administrator/CFO of Stringfellow
Memorial Hospital from 1993 to 1995; and from 1989 to 1993, he was the Director
of Budgets, Costs and Reimbursement at Grady Memorial Hospital, a large public
teaching hospital. His prior professional experience also includes a number of
profit and not-for-profit consulting, big five public accounting, governmental
auditing and internal audit positions. Mr. Campbell is a Certified Public
Accountant and received a B.A. degree in Accounting from Walsh College of
Accountancy and Business Administration and an M.B.A. degree in Accounting from
Kennesaw State College.
John N. Kapoor, Ph.D. has been one of our directors since 1996, and his
present term as director will expire in December 2000. Dr. Kapoor has over 20
years of experience in the healthcare field through his ownership and management
of healthcare-related businesses. In 1990, Dr. Kapoor founded Kapoor-Pharma
Investments, L.P., our largest stockholder, and its managing partner, EJ
Financial Enterprises, Inc., of which he is the President and sole shareholder.
EJ Financial provides funds and strategic advice to healthcare businesses. Dr.
Kapoor is the Chairman of OptionCare, Inc., Akorn, Inc. and NeoPharm, Inc. Dr.
Kapoor is a director of Integrated Surgical Systems, Inc., as well as a Chairman
of a private company and a director of several other private companies. Dr.
Kapoor received a B.Sc. degree from Bombay University and a Ph.D. degree in
medicinal chemistry from the State University of New York.
Dr. Kapoor was previously the chairman and president of Lyphomed Inc.
Fujisawa Pharmaceutical Co. Ltd. was a major stockholder of Lyphomed from the
mid-1980s until 1990, at which time Fujisawa completed a tender offer for the
remaining shares of Lyphomed, including the shares held by Dr. Kapoor. In 1992,
Fujisawa filed suit in federal district court in Illinois against Dr. Kapoor
alleging that between 1980 and 1986, Lyphomed filed a large number of allegedly
fraudulent new drug applications with the FDA, and that Dr. Kapoor's failure to
make certain
41
<PAGE> 46
disclosures to Fujisawa constituted a violation of federal securities laws and
the Racketeer Influenced and Corrupt Organizations Act. Fujisawa also alleged
state law claims. Dr. Kapoor countersued, and in 1999, the litigation was
settled on terms mutually acceptable to the parties. The terms of the settlement
are subject to a confidentiality agreement. Dr. Kapoor also controls Inpharmakon
Corporation, a party to one of our development agreements.
Pierre Lapalme was elected a director in April 2000. His term as director
will expire in 2002. Mr. Lapalme has served as President and Chief Executive
Officer of the North American division of Ethypharm, Inc. since 1997. Mr.
Lapalme is the non-executive Chairman of the Board of DiagnoCure Inc. From 1994
to 1997, he served as President and General Manager of Lavipharm Inc. Mr.
Lapalme served as Senior Vice President and General Manager for the North
American division of Rhone-Poulenc Rorer Inc. U.S.A. from 1990 to 1993 and as
President and Chief Executive Officer of the North American division of
Rhone-Poulenc Rorer Inc. Canada from 1979 to 1990. From 1964 to 1979, Mr.
Lapalme held various executive positions at Ciba-Geigy Pharmaceuticals in
Canada. Mr. Lapalme received a Business Administration degree in Marketing from
the University of Western Ontario.
Jon S. Saxe was elected a director in January 2000. His term as director
will expire in December, 2001. He also serves as a Director of Protein Design
Labs, Inc. Mr. Saxe served as President of Protein Design Labs, Inc. from
January 1995 to May 1999. In addition, he is a Director of Questcor
Pharmaceuticals Inc., Incyte Pharmaceuticals Inc., ID Biomedical Corporation,
InSite Vision, and is Chairman of Point Biomedical Corporation and Iconix
Pharmaceuticals. Mr. Saxe served as President of Saxe Associates, a
biotechnology consulting firm, from May 1993 to December, 1994. He served as the
President, Chief Executive Officer and a Director of Synergen, Inc., a
biopharmaceutical company, from October 1989 to April, 1993. Mr. Saxe served in
various positions including Vice President of Licensing and Corporate
Development and Head of the Patent Law Department for Hoffmann-LaRoche, Inc.
from 1960 through 1989. Mr. Saxe received a B.S. Ch.E. degree from
Carnegie-Mellon University, a J.D. degree from George Washington University
School of Law, and an L.L.M. degree from New York University School of Law.
EXECUTIVE OFFICERS
Each officer serves at the discretion of our board of directors and holds
office until his successor is elected and qualified or until his earlier
resignation or removal. There are no family relationships among any of our
directors or executive officers.
ELECTION OF DIRECTORS
Dr. Shah, Mr. Dixon and Dr. Kapoor were elected to the board under a
stockholder agreement. Under the terms of this agreement, the board of directors
was set at three members. In addition, Kapoor-Pharma Investments has the right
to elect two directors, and Dr. Shah, Mr. Dixon and Mr. Hauck have the right to
elect one director by majority vote. This agreement will terminate upon
completion of this offering.
Our board of directors increased the number of directors from three to five
in January 2000. Pursuant to our bylaws, the board filled the two vacancies
created by the increase by appointing Jon S. Saxe and John E. Robson as
directors. Mr. Robson resigned as director in April 2000 and the board filled
the resulting vacancy by appointing Pierre Lapalme.
BOARD COMPOSITION
Pursuant to our Restated Certificate of Incorporation, the board of
directors is divided into three classes of directors:
- Class A, whose term will expire at the annual meeting of stockholders to
be held in the year 2000;
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<PAGE> 47
- Class B, whose term will expire at the annual meeting of stockholders to
be held in the year 2001;
- Class C, whose term will expire at the annual meeting of stockholders to
be held in the year 2002.
John N. Kapoor is a Class A director. Mahendra G. Shah and Jon S. Saxe are
Class B directors. R. Brent Dixon and Pierre Lapalme are Class C directors.
Directors within each class are elected to serve three-year terms and
approximately one-third of the directors sit for election at each annual meeting
of the Company's stockholders.
A classified board of directors may have the effect of deterring or
delaying any attempt by any group to obtain control of the company by a proxy
contest since a third party would be required to have its nominees elected at
two separate meetings of the board of directors in order to elect a majority of
the members of the board.
BOARD COMMITTEES
The board of directors has formed an audit committee to review the results
and scope of the audit of our annual financial statements, to discuss various
matters with the auditors, to receive statements from the auditors and to make
recommendations to the board of directors regarding the inclusion of audited
financial statements in our annual reports. The current members of our audit
committee are Jon S. Saxe, John E. Kapoor and Pierre Lapalme.
The board of directors has also formed a compensation committee to
recommend salaries and incentive compensation for executive officers and to
administer our stock plan. The members of the compensation committee are Jon S.
Saxe and Pierre Lapalme.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
In January 2000, our board of directors established a compensation
committee. Messrs. Lapalme and Saxe currently serve as members of the
compensation committee. For the year ended December 31, 1999, the entire board
of directors determined executive compensation. Two members of our board of
directors, Mahendra G. Shah and R. Brent Dixon, are also employees. Dr. Shah has
participated in certain transactions with us in the past. See "Certain
Relationships and Related Transactions."
DIRECTOR COMPENSATION
We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. Each director who
is not an employee also receives a fee of $12,000 per year and $1,000 for each
board meeting attended. Each director who is not an employee and not affiliated
with a greater than 10% stockholder receives options to purchase shares of our
common stock upon election to the board.
SCIENTIFIC ADVISORY BOARD
We have engaged a scientific and medical advisor to advise us on issues
related to specific pharmaceutical products. The current advisor is an expert in
clinical development, medical sciences and drug development. We plan to add
additional members with different expertise to support our growth. In certain
cases, this advisor has agreed to be available for consultation for a specified
number of days each year, but he may consult and meet informally with us on a
more frequent basis. Our current scientific and medical advisor may have other
commitments that may limit his availability to us. Our scientific advisory board
consists of the following individual:
Nelson L. Levy, M.D., Ph.D., is currently the Chief Executive Officer of
the CoreTechs Corporation, which implements a unique paradigm of technology
transfer and which starts science-
43
<PAGE> 48
based companies. He was previously President of Fujisawa Pharmaceutical Company,
where he refocused and revitalized the sales and marketing organizations,
in-licensed two major pharmaceuticals and filed an NDA for FK-506 (Prograf),
Fujisawa's leading product. From 1981 to 1984, he was the Vice President for
Pharmaceutical Research at Abbott Laboratories. He is on the board of directors
of two public and three private companies and on the scientific advisory boards
of three other companies, two of which are publicly traded. He is a Summa Cum
Laude graduate of Yale University, received his M.D. degree from the Columbia
College of Physicians and Surgeons and a Ph.D. degree in Immunology from Duke
University.
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<PAGE> 49
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the
compensation awarded to or earned by our chief executive officer and by each of
our four other most highly compensated executive officers (the "Named Executive
Officers") who earned in excess of $100,000 in cash compensation during the year
ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS ALL
------------------ ---------------------- OTHER
SHARES COMPEN-
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS SATION(1)
- --------------------------- -------- ------- ---------------------- ---------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D.(1).............
Chairman and Chief Executive
Officer........................... $ -- $55,200 300,000 $ --
R. Brent Dixon
President and Director............... 100,000 27,600 60,000 1,570(2)
Balaji Venkataraman
Vice President and Chief Financial
Officer........................... 93,400 21,250 200,000 24(3)
Gregory P. Hauck
Vice President, Developed Products... 89,000 20,000 50,000 624(4)
Robert D. Godfrey, Jr.
Vice President, Sales................ 85,950 20,000 70,000 2,024(5)
</TABLE>
- ------------------------------
(1) Dr. Shah did not receive a salary in 1999.
(2) Represents $1,546 contributed under the 401(k) plan and $24 for term life
insurance premiums.
(3) Represents $24 for term life insurance premiums.
(4) Represents $600 contributed under the 401(k) plan and $24 for term life
insurance premiums.
(5) Represents $2,000 contributed under the 401(k) plan and $24 for term life
insurance premiums.
STOCK OPTION GRANTS
The following tables show for the year ended December 31, 1999, information
regarding options granted to, and held at year end by, the Named Executive
Officers.
Amounts reported in the potential realizable value column below are
hypothetical values that may be realized upon exercise of the options
immediately prior to the expiration of their term, calculated by assuming that
the stock price on the date of grant as determined by the board of directors
appreciates at the indicated annual rate compounded annually for the entire term
of the option (10 years). The 0% annual rate of appreciation shows the value at
the grant date based upon the stated market price of the stock on the date of
grant. The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent our estimate or
projection of the future common stock price.
45
<PAGE> 50
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL OPTIONS MARKET
UNDERLYING GRANTED TO EXERCISE PRICE ON
OPTIONS EMPLOYEES IN PRICE PER DATE OF
NAME GRANTED FISCAL YEAR(1) SHARE GRANT EXPIRATION DATE
- ---- ---------- -------------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D....... 25,000(2) 3.2% $2.50 $3.08 3/17/09
275,000(3) 35.0 2.65 4.48 10/22/09
R. Brent Dixon............... 60,000(4) 7.6 2.50 3.08 3/17/09
Balaji Venkataraman.......... 40,000(5) 5.1 1.88 4.48 9/1/09
60,000(3) 7.6 1.88 4.48 10/22/09
100,000(3) 12.7 2.65 4.48 10/22/09
Robert D. Godfrey, Jr........ 20,000(4) 2.5 2.50 3.08 3/17/09
50,000(3) 6.4 2.65 4.48 10/22/09
Gregory P. Hauck............. 50,000(4) 6.4 2.50 3.08 3/17/09
<CAPTION>
POTENTIAL REALIZABLE VALUE OF
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
----------------------------------
NAME 0% 5% 10%
- ---- -------- ---------- ----------
<S> <C> <C> <C>
Mahendra G. Shah, Ph.D....... $ 14,500 $ 62,925 $ 137,218
503,250 1,278,048 2,466,741
R. Brent Dixon............... 34,800 151,020 329,324
Balaji Venkataraman.......... 104,000 216,698 389,599
156,000 325,047 584,398
183,000 464,745 896,997
Robert D. Godfrey, Jr........ 11,600 50,340 109,775
91,500 232,372 448,498
Gregory P. Hauck............. 29,000 125,850 274,436
</TABLE>
- ------------------------------
(1) In 1999, options to purchase a total of 785,500 shares of common stock were
granted.
(2) The option holder may exercise the option to purchase 25% of these shares of
common stock on March 17, 1999 and an additional 25% per year on the next
three anniversaries thereof.
(3) The option holder may exercise the option to purchase 25% of these shares of
common stock on October 22, 2000 and an additional 25% per year on the next
three anniversaries thereof.
(4) The option holder may exercise the option to purchase 25% of these shares of
common stock on March 17, 2000 and an additional 25% per year on the next
three anniversaries thereof.
(5) The option holder may exercise the option to purchase 25% of these shares of
common stock on September 1, 1999 and an additional 25% per year on the next
three anniversaries thereof.
None of our Named Executive Officers exercised stock options in the fiscal
year ended December 31, 1999. The following table sets forth information
concerning the number and value of unexercised options held by each of our Named
Executive Officers on December 31, 1999. There was no public market for our
common stock as of December 31, 1999. Accordingly, the fair market value on
December 31, 1999 is based on an assumed initial public offering price of $13.00
per share. This valuation at December 31, 1999 does not represent the actual
value of our stock at December 31, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1999
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D........................ 106,250 293,750 $1,303,125 $3,043,125
R. Brent Dixon................................ 265,000 135,000 3,309,375 1,558,125
Balaji Venkataraman........................... 10,000 190,000 111,200 2,035,800
Robert D. Godfrey, Jr......................... 35,000 115,000 414,375 1,228,125
Gregory P. Hauck.............................. 265,000 125,000 3,309,375 1,453,125
</TABLE>
EXECUTIVE OFFICERS EMPLOYMENT AGREEMENTS
On January 1, 2000, we entered into employment agreements with Mahendra G.
Shah, Ph.D., R. Brent Dixon, Balaji Venkataraman, Robert D. Godfrey, Jr.,
Gregory P. Hauck and William G. Campbell. These employment agreements may be
terminated by us with or without cause. The officers may terminate employment
upon sixty days written notice to us. Upon termination of Messrs. Shah, Dixon
and Venkataraman's employment without cause, as defined in the agreement,
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<PAGE> 51
each officer will be entitled to receive his salary for twelve months following
termination, a lump sum equal to 100% of the bonus he received the preceding
calendar year, if any, continued health insurance coverage substantially
equivalent to that provided to the officer prior to termination for twelve
months following termination, a car allowance for twelve months following
termination, and all of the officer's unvested options will immediately vest and
become exercisable.
Upon termination of Messrs. Godfrey, Hauck and Campbell's employment
without cause, each officer will be entitled to receive his salary for six
months following termination, a lump sum equal to 50% of the bonus he received
the preceding calendar year, if any, continued health insurance coverage
substantially equivalent to that provided to the officer prior to termination
for six months following termination, a car allowance for six months following
termination and all of the officer's unvested options will immediately vest and
become exercisable.
Upon termination by us for cause, termination in the event of death or
termination by the officer, each officer or his estate is entitled to receive
all accrued but unpaid salary as of the date of termination. Upon any
termination of these agreements, each officer or his estate will have 120 days
from the date of termination to exercise any vested options.
These employment agreements provide for a base salary of $110,000 for Dr.
Shah, $102,000 for Mr. Dixon, $95,000 for Mr. Venkataraman, $90,000 for Mr.
Godfrey, $85,000 for Mr. Hauck and $80,000 for Mr. Campbell. In addition, these
employment agreements entitle each executive officer to receive a bonus based on
the percentage of his salary, if we and/or the officer meets certain performance
goals to be established by the board of directors each year. The compensation
committee will review the performance goals and determine whether or not we
and/or the executive have achieved the performance goals based on our financial
statements. The board retains the right to award additional compensation to each
officer based on the officer's contributions to the company.
The agreements provide that in the event of a change of control, as defined
in the agreements, all options become fully vested and immediately exercisable.
The employment agreements restrict each officer from engaging in or having
any financial interest in a business that is in competition with our business
during that officer's employment with the company and for thirty-six months
following termination of employment. A business is in competition with us if it
involves research and development work involving products that we market at the
time of termination or that were under study by us at that time and were
expected to be marketed within six months. This provision does not prevent the
officers from investing in a publicly held company, provided that the officer's
beneficial ownership of securities does not exceed 5% of the outstanding class
of the publicly held company's securities. The employment agreements also
restrict each officer from soliciting our suppliers, customers or clients for
thirty-six months after employment. This provision does not prohibit an officer
from soliciting wholesale customers, managed care agencies, scientific or
computer consultants, lawyers or manufacturers as long as manufacturers have
excess capacity. The employment agreements also prohibit each officer from
soliciting, employing or engaging any of our employees or affiliates for
thirty-six months following employment. The employment agreements prohibit each
officer from disclosing any of our trade secrets, confidential information or
ideas that the officer may have acquired or developed relating to our business
for twelve months following employment.
EMPLOYEE BENEFIT PLANS
1997 Non-Qualified Stock Option Plan
Our 1997 Non-Qualified Stock Option Plan, as amended, was adopted by our
board of directors and approved by our stockholders June 18, 1997. The 1997 plan
authorizes the issuance of up to 4,000,000 shares of our common stock.
Currently, options to purchase an aggregate of 1,767,500 shares of our common
stock at a weighted average exercise price of $1.61 per share are outstanding
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<PAGE> 52
under the 1997 plan. Upon the closing of this offering, no additional grants of
stock options will be made under this 1997 plan.
Options granted under the plan are not transferable by the optionee except
by will or by the laws of descent and distribution. Options will become
immediately exercisable in the event of a change of control if the surviving
company does not assume the options granted under the plan.
The 2000 Stock Plan
Our board of directors and stockholders approved the 2000 Stock Plan in
February 2000. This plan provides for the granting of:
- incentive stock options under the Internal Revenue Code of 1986;
- options that do not qualify as incentive stock options;
- stock awards or stock bonuses; and
- sales of stock.
The 2000 Stock Plan provides for the grants of these options and other
awards to officers, directors, full and part-time employees, advisors and
consultants. Only full-time employees may receive incentive stock options. We
have reserved 2,000,000 shares of common stock for issuance under the 2000 Stock
Plan. Our compensation committee administers the 2000 Stock Plan and has the
sole authority to determine:
- the meaning and application of the terms of the plan and all grant
agreements;
- the persons to whom option or stock grants are made;
- the nature and amount of option or stock grants;
- the price to be paid upon exercise of each option;
- the period within which options may be exercised;
- the restrictions on stock awards; and
- the other terms and conditions of awards.
In order to meet one of the requirements of Section 162(m) of the Internal
Revenue Code, the 2000 Stock Plan limits to 500,000 the number of shares that
may be covered by grants to any single person in any one calendar year.
The exercise price per share for incentive stock options cannot be less
than the fair market value of our common stock on the date of the grant. If a
recipient owns more than 10% of our common stock, incentive stock options
granted to that recipient must have an exercise price of not less than 110% of
the fair market value of our common stock on the grant date. Determinations of
fair market value are made in accordance with the plan. The compensation
committee has the authority to determine the exercise price for non-qualified
stock options.
The compensation committee has the authority to determine the term of each
option. However, the term of stock options may not exceed 10 years from the date
of grant. In the case of an incentive option granted to an owner of more than
10% of our common stock, the term may not exceed five years from the date of
grant.
Generally, the recipient of an option may exercise it only while employed
by us, except that a recipient may exercise vested options for 60 days after
termination of employment or such later date as set forth in the grant
agreement, a recipient may exercise vested options for twelve months following
disability, and if a recipient dies while employed by us, his or her estate,
heirs or beneficiaries may exercise vested options held by the recipient within
twelve months following the
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<PAGE> 53
date of death. The plan also provides for the acceleration of vesting and
exercisability of options and vesting of stock awards if we are subject to a
change of control.
The compensation committee has the authority to award stock under the plan
as stock bonuses. In addition, the compensation committee may issue stock under
the plan for consideration, including promissory notes and services. The
compensation committee also has the authority to determine the terms, conditions
and restrictions of stock awards and sales of stock, which may include
restrictions on transferability, voting, repurchase by us and forfeiture of
shares. If shares of the stock are subject to forfeiture, we will retain all
dividends or other distributions paid on the stock until the shares are no
longer subject to forfeiture, at which time we will pay all accumulated amounts
to the recipient. Unless otherwise determined by the compensation committee,
shares awarded as a stock bonus to an officer or director may not be sold until
six months after the date of the award. All shares relating to stock awards or
stock sales are counted against the aggregate number of shares available for
granting awards under the 2000 Stock Plan.
If a stock split, stock dividend, consolidations, recapitalizations,
reorganizations or similar event occurs, we will make proportional adjustments
to the number of shares of common stock reserved for issuance under the 2000
Stock Plan and issuable under outstanding options and adjustments to the
exercise prices of outstanding options.
Awards under the plan are not transferable except by will or the laws of
descent and distribution. The 2000 Stock Plan will terminate in February, 2010,
and we may not grant awards under it after termination. Our board of directors
may amend, alter or discontinue the plan at any time, provided that we must
obtain shareholder approval for any change that would increase the number of
shares reserved for issuance or would change the class of persons eligible to
receive grants. In addition, the board may not amend the plan to:
- fix the exercise price per share for incentive stock options at less than
100% of the fair market value of a share of common stock on the date of
grant;
- extend the expiration date of the plan;
- extend the maximum period of ten years during which holders may exercise
options; or
- materially increase the benefits to participants under the plan.
In no event may the board or shareholders amend the plan, alter or impair
the rights of an existing recipient without their consent.
As a condition to the exercise of an option, the vesting or award of a
stock bonus or the vesting or sale of stock, we may require the recipient to pay
over to us all applicable federal, state and local taxes that we must withhold.
At the discretion of the compensation committee and upon the request of a
recipient, the withholding tax requirements may be satisfied by withholding
shares of stock otherwise issuable to the recipient.
The board of directors approved the grant of options, subject to completion
of this offering, to purchase 187,950 shares at an exercise price per share
equal to the public offering price per share in this offering. These options
will be issued upon completion of this offering. Following this grant, there
will be 1,812,050 shares available for future option grants under the 2000 Stock
Plan.
Employee Stock Purchase Plan
Our employee stock purchase plan was adopted in February 2000 and is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code. We have reserved 500,000 shares of
common stock for the stock purchase plan. In order to participate in the stock
purchase plan, employees must meet eligibility requirements, including length of
employment. At present participating employees will be able to direct us to make
payroll deductions of up to 7% of their regular compensation during an offering
period for the purchase of shares of our common stock. Each offering period will
be six months, with the first offering period
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<PAGE> 54
beginning on the later of July 1, 2000 or the effective date of the registration
statement for the plan. The stock purchase plan will provide participating
employees with the right, subject to specific limitations, to purchase our
common stock at a price equal to 85% of the lesser of the fair market value of
our common stock on the first or last day of the offering period. The stock
purchase plan will terminate on December 31, 2010. The board of directors has
the authority to amend, suspend or discontinue the stock purchase plan as long
as the change will not adversely affect participants without their consent and
as long as we receive any shareholder approval required by law.
401(k) Profit Sharing Plan
We have established a tax-qualified employee savings and retirement plan
for all of our employees who satisfy certain eligibility requirements, including
requirements relating to age and length of service. Under the 401(k) plan,
employees may elect to reduce their current compensation by up to 15% or the
statutory dollar limit, whichever is less, and have us contribute the amount of
this reduction to the 401(k) plan. In addition, we match a percentage of an
employee's contribution that we establish from time to time. Each employee is
fully vested in his or her salary contributions and our matching contributions
vest over six years.
We intend for the 401(k) plan to qualify under Section 401 of the Code so
that contributions by employees or by us to the 401(k) plan, and income earned
on plan contributions, are not taxable to employees until withdrawn from the
401(k) plan. Our contributions, if any, will be deducted by us when made.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Officers and Directors
Mahendra G. Shah, Ph.D., our Chairman and Chief Executive Officer, is the
Vice President of EJ Financial Enterprises, Inc. John N. Kapoor, Ph.D., one of
our directors, is President and sole shareholder of EJ Financial. EJ Financial
is the Managing General Partner of Kapoor-Pharma Investments, L.P. which
beneficially owns 76% of our Common Stock.
Reimbursement Agreement
On April 14, 2000, we entered into a Reimbursement Agreement with the
Kapoor Children's 1992 Trust (the "1992 Trust"). Under this agreement, the 1992
Trust agreed to pledge to LaSalle Bank as collateral for our bridge loan,
securities and investments in the amount of $10 million. John Kapoor is the
husband of Editha Kapoor, the Trustee of the 1992 Trust, and their children are
the beneficiaries. As consideration for this pledge, we will pay the Trust a fee
of $100,000 per year, pro rated for the amount of time that the pledge is in
effect, plus all of the 1992 Trusts' expenses incurred in connection with the
Reimbursement Agreement.
Collaboration Agreement
In 1998, we entered into a collaboration agreement with Inpharmakon
Corporation under which we acquired rights to the proprietary information for
our migraine product FHPC 01 currently under development. Under the agreement,
we must develop a workable once-a-day formulation for the drug, conduct clinical
trials, file for and obtain regulatory approval, and begin commercial sales of
the product within prescribed times. If we do not reach specified milestones on
a timely basis, Inpharmakon may terminate the agreement. In the event that
Inpharmakon terminates the agreement, the rights to develop FHPC 01 will revert
back to Inpharmakon who will, under certain circumstances, be free to develop
and market the product using the once a day formulation and the data from
clinical trials and all other information acquired or developed by us in
connection with our development efforts. We must also pay up to an aggregate of
$950,000 in non-refundable fees at various developmental milestones through and
including regulatory approval of the product, and, in the event of commercial
sales of the product, we must pay royalties at rates which we believe are within
industry customary ranges. If we elect to sell the business opportunity to a
third party, we must share the proceeds of the sale with Inpharmakon. We paid
$200,000 and $1,352 to Inpharmakon in 1998 and 1999, respectively, under this
agreement. The agreement expires on October 31, 2008 with automatic five-year
renewals thereafter. The terms of this agreement were negotiated at arms' length
by management, and we believe the terms are fair to us. The John N. Kapoor
Trust, dated September 30, 1989 (the "Trust"), owns 50% of the shares of
Inpharmakon Corporation. John N. Kapoor is Trustee of the Trust, and the Trust
is a partner of Kapoor-Pharma Investments. In addition, Dr. Shah is a director
of Inpharmakon Corporation and owns options to purchase 25,000 shares of
Inpharmakon.
The other owner of Inpharmakon has previously sought to renegotiate some of
the terms of this agreement based on disputes concerning our achievement of
milestones. On May 3, 2000, we entered into an amendment of this development
agreement in which both parties released each other from any previous claims or
disputes under the agreement. This amendment deletes provisions permitting
Inpharmakon to terminate the agreement if we do not initiate clinical trials
within a specified time period after completing a clinical biostudy on our
migraine product under development or if we do not file an NDA within a
specified time period after completing clinical trials. In addition, the
amendment provides for an increase in the total aggregate amount of milestone
payments that we must pay for development of the migraine product from $700,000
to $950,000. The amendment also requires that we pay Inpharmakon $200,000 within
thirty days after this offering.
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Packaging Agreement
In 1997, we entered into a packaging agreement with Diversified Healthcare
Services, Inc., under which we agreed to exclusively use Diversified Healthcare
to package samples of our Defen-LA, Mescolor, Protuss-DM and Zebutal products.
Under this agreement, Diversified Healthcare has the right to provide exclusive
packaging services for these products. We paid $83,000, $132,152 and $282,493 to
Diversified Healthcare in 1997, 1998 and 1999, respectively, under this
agreement. The term of this agreement is three years, with automatic yearly
renewals unless terminated by either party. The terms of this agreement were
negotiated at arm's length by management, and we believe the terms are fair to
us. Warren Hauck, Chief Executive Officer of Diversified Healthcare, is the
father of Gregory P. Hauck, our Vice President of Developed Products, and Daniel
C. Hauck, who currently owns 5.6% of our common stock. Steven Hauck, the
President of Diversified Healthcare, is the brother of Gregory and Daniel Hauck.
Non-compete Agreements
In 1996, we entered into two agreements with Crabapple Enterprises, Inc., a
prior and potential competitor, under which Crabapple agreed not to market
products that compete with our Protuss, Protuss-D and Zoto-HC products. We paid
$91,000, $159,902 and $162,768 to Crabapple in 1997, 1998 and 1999,
respectively, under these agreements. These agreements require us to pay
royalties on sales of these products at rates which we believe are within
industry customary standards. The term of the agreement for Protuss and
Protuss-D is seven years with an option to renew for an additional five years.
The term of the agreement for Zoto-HC is ten years with an option to renew for
an additional five years. Crabapple may cancel these agreements if minimum
royalty amounts are not paid. The terms of these agreements were negotiated at
arm's length by management, and we believe the terms are fair to us. Warren
Hauck, Chief Executive Officer of Crabapple, and Mary Hauck, Secretary of
Crabapple, are the parents of Gregory and Daniel Hauck.
Conversion of Notes into Common Stock
On January 11, 1999, Kapoor-Pharma Investments loaned us $1,600,000 at an
interest rate of 2% over the prime rate. In December, 1999, we converted
principal and $144,984 of accrued interest into 558,395 shares of common stock
pursuant to the terms of the loan agreement. We used this loan to acquire the
Robinul product line.
During 1997, we converted $385,000 in loans from Kamal R. Kapoor plus
$124,363 accrued interest into 814,978 shares of our common stock at a
conversion rate of $0.625 per share. Kamal Kapoor is John N. Kapoor's brother.
During 1997, we converted $150,000 in loans from the Trust plus $3,345
accrued interest into 245,352 shares of common stock at a conversion rate of
$0.625 per share.
During 1997, we converted $100,000 in loans from EJ Financial Enterprises
plus $25,575 accrued interest into 200,918 shares of common stock at a
conversion rate of $0.625 per share.
Sale of Common Stock
On January 27, 1997, we issued 320,000 shares of common stock to the Trust
for $200,000 or $0.625 per share.
On June 30, 1997, we issued 560,000 shares of common stock to Kapoor-Pharma
Investments for $350,000 or $0.625 per share.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock and as adjusted to reflect the sale of the shares
of common stock in this offering, by:
- each person or entity we know to own beneficially more than 5% of our
common stock;
- each of our directors;
- each of the Named Executive Officers; and
- all directors and executive officers as a group.
Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power, or shares voting and/or investment power
with his or her spouse, with respect to all shares of capital stock listed as
owned by that person or entity. Except as otherwise noted below, the address of
each person listed below is our address.
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission and assumes
the underwriters do not exercise their over-allotment option. the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and any shares as to which
the individual has the right to acquire beneficial ownership within 60 days of
the date of this prospectus through the exercise of any stock option, warrant or
other right. The inclusion in the following table of those shares, however, does
not constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
OWNED
NUMBER OF SHARES --------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ------------------------------------ ------------------- --------------- --------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Kapoor-Pharma Investments, L.P.(1).... 6,487,583 76.0% 52.6%
225 E. Deerpath, Suite 250
Lake Forest, IL 60045
Daniel C. Hauck(2).................... 480,000 5.6 3.9
842 Gable Gate Turn
Roswell, GA 30076
DIRECTORS AND NAMED EXECUTIVE OFFICERS
John N. Kapoor, Ph.D.(1).............. 6,487,583 76.0 52.6
R. Brent Dixon(3)..................... 785,000 8.9 6.2
Gregory P. Hauck(4)................... 782,500 8.9 6.2
Mahendra G. Shah, Ph.D.(5)............ 424,560 4.9 3.4
Robert D. Godfrey, Jr.(6)............. 55,000 * *
Balaji Venkataraman(7)................ 10,000 * *
Pierre Lapalme........................ -- -- --
Jon S. Saxe........................... -- -- --
All directors and executive officers
as a group (9 persons)(8)........... 8,549,643 91.6 65.1
</TABLE>
- ------------------------------
* Represents less than 1%.
(1) John N. Kapoor, Ph.D., one of our directors, is the president and sole
stockholder of the managing general partner of Kapoor-Pharma Investments,
L.P. In such capacity, Mr. Kapoor has the authority to vote and dispose of
the shares owned by Kapoor-Pharma Investments and is therefore deemed the
beneficial owner of those shares.
(2) Includes 240,000 shares owned through Gable Gate Enterprises, LLP, a family
limited partnership of which Mr. Hauck is the general partner.
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(3) Includes 305,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(4) Includes 302,500 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(5) Includes 112,500 shares of common stock issuable upon exercise of stock
options exercisable within 60 days. Also includes 10,000 shares that Dr.
Shah owns as custodian for his daughter that he may be deemed to
beneficially own.
(6) Includes 55,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(7) Includes 10,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(8) Includes 790,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 40,000,000 shares of common stock,
par value $.001, and 1,000,000 shares of preferred stock, par value $.001. Upon
the closing of this offering, there will be 12,339,643 shares of common stock
outstanding assuming that the underwriters do not exercise their over-allotment
right, and no shares of preferred stock outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of our stockholders. The holders of
common stock have no cumulative voting rights with respect to the election of
directors or any other matter.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the board of directors may from time to time
determine.
Upon the liquidation, dissolution, distribution of assets or winding up of
the company, holders of common stock are entitled to share ratably, in
proportion to the number of shares of common stock held, all the assets
remaining after distribution of the full preferential amounts due to the holders
of the outstanding shares of preferred stock, if any.
Holders of common stock are not entitled to preemptive rights or rights to
covert their common stock into any other securities. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Under our Restated Certificate of Incorporation, the board of directors has
the authority, without further action by the stockholders, to issue up to
1,000,000 shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, without any further vote or action by the
stockholders. The issuance of preferred stock could adversely affect the voting
power of holders of common stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of the company, which could have a depressive effect on the
market price of our common stock. We have no present plan to issue any shares of
preferred stock.
DELAWARE ANTI-TAKEOVER PROVISIONS
We are subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. Section 203, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder unless:
- Prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- Upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares
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owned by persons who are directors and also officers, and employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer; or
- On or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- Any merger or consolidation involving the corporation and the interested
stockholder;
- Any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- Subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; or
- The receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
CHARTER AND BYLAWS ANTI-TAKEOVER PROVISIONS
Pursuant to our Restated Certificate of Incorporation, the board of
directors is divided into three classes of directors. Directors within each
class are elected to serve three-year terms and approximately one-third of the
directors sit for election at each annual meeting of stockholders. A classified
board of directors may have the effect of deterring or delaying any attempt by
any group to obtain control of the company by a proxy contest since a third
party would be required to have its nominees elected at two separate meetings of
the board of directors in order to elect a majority of the member of the board.
A director may be removed only for cause and requires a vote of at least
two-thirds of the shares entitled to vote for election of directors.
In addition, our Restated Certificate of Incorporation also provides that
amendment of our bylaws by shareholders requires a vote of at least two-thirds
of the shares entitled to vote for the election of directors. This supermajority
restriction makes it more difficult for stockholders to require an amendment of
the bylaws and enhances the board's power with respect to matters of corporate
governance that are governed by the bylaws.
Our bylaws establish an advance notice procedure for stockholders to bring
matters before stockholder meetings, including proposed nominations of persons
for election to the board of directors and bringing business matters or
stockholder proposals before a meeting. These procedures specify the information
stockholders must include in their notice and the timeframe in which they must
give us notice. At a stockholder meeting, stockholders may only consider
nominations or proposals specified in the notice of meeting, nominations or
proposals brought before the meeting by or at the direction of the board of
directors, and nominations or proposals by a person who was a stockholder of
record on the record date for the meeting, who is entitled to vote at the
meeting and who has given us timely written notice, in proper form, of his or
her intention to bring that nomination or proposal before the meeting.
The bylaws do not give the board of directors the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a meeting. However, our bylaws may have the effect
of precluding the conduct of that item of business at a meeting if the proper
procedures are not followed. These provisions may discourage or deter a
56
<PAGE> 61
potential third party from conducting a solicitation of proxies to elect their
own slate of directors or otherwise attempting to obtain control of our company.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our Restated Certificate of Incorporation contains certain provisions
permitted under Delaware law relating to the liability of directors. These
provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in circumstances involving
certain wrongful acts, such as:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for any acts under Section 174 of the Delaware General Corporation Law;
or
- for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or any stockholder's
rights to seek non-monetary relief, such as an injunction or rescission, in the
event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws.
In addition, our Restated Certificate of Incorporation and Bylaws provide
the directors and executive officers indemnification protection to the fullest
extent permitted by Delaware law. We believe that these provisions will assist
us in attracting and retaining qualified individuals to serve as directors and
officers. Our Bylaws permit us to enter into agreements providing to each
officer or director indemnification rights substantially similar to those set
forth in the Bylaws and such agreements are expected to be entered into by each
member of our board of directors and each of our executive officers. Although
the form of indemnification agreement offers substantially the same scope of
coverage afforded by our Bylaws, it provides greater assurances to directors and
executive officers that indemnification will be available because, as a
contract, it cannot be modified unilaterally in the future by the board of
directors or by the stockholders to eliminate the rights it provides.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is LaSalle Bank
National Association.
LISTING
We have applied to have First Horizon common stock quoted on the Nasdaq
National Market under the symbol "FHRX."
57
<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices of shares of First
Horizon. In addition, since no shares outstanding prior to this offering will be
available for sale shortly after this offering because of certain contractual
and legal restrictions on resale as described below, sales of substantial
amounts of common stock in the public market after these restrictions lapse
could adversely affect the prevailing market price of shares of First Horizon
and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
12,339,643 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and excluding 1,767,500 shares issuable upon exercise of
outstanding options. Of these shares, all of the shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act, unless such shares are purchased by "affiliates" as that term is
defined in Rule 144 under the Securities Act. The remaining 8,539,643 shares of
common stock currently outstanding and 1,767,500 shares issuable upon the
exercise of outstanding options are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if registered or if they qualify for an exemption from
registration described below under Rules 144, 144(k) or 701 promulgated under
the Securities Act.
Beginning either on the date of this prospectus or 90 days after the date
of this prospectus, all 8,539,643 shares currently outstanding and 1,767,500
shares issuable upon the exercise of outstanding options will become eligible
for sale in the public market under Rule 144(k), Rule 144 or Rule 701. All but
100,000 of the shares currently outstanding are subject to lock-up agreements.
All 1,767,500 shares issuable upon the exercise of outstanding options are
subject to lock-up agreements. These lock-up agreements provide that the
stockholders will not sell or otherwise dispose of any shares of common stock
without the prior written consent of Chase Securities Inc. for a period of 180
days from the date our shares commence trading on the Nasdaq National Market.
Chase Securities Inc. may release all or any portion of the securities subject
to the lock-up agreements without notice. See "Underwriting."
Rule 144
Under Rule 144, beginning 90 days after the date the registration statement
of which this prospectus is a part is declared effective, a person, or persons
whose shares are aggregated, who has beneficially owned restricted shares for at
least one year, which generally includes the holding period of any prior owner
other than an affiliate, would generally be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the outstanding shares of our common stock then outstanding, which
will equal approximately 123,396 shares immediately after this offering;
or
- The average weekly trading volume of First Horizon's common stock on the
Nasdaq National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the company.
Rule 144(k)
Under Rule 144(k), a person who was not an affiliate of the company at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, which generally includes the
holding period of any prior owner except an affiliate, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
58
<PAGE> 63
Rule 701
In general, under Rule 701 of the Securities Act, any of our employees,
consultants or advisors, other than affiliates, who purchases or receives shares
from us in connection with a compensatory stock purchase plan or option plan or
other written agreement will be eligible to resell such shares beginning 90 days
after the effective date of the registration statement of which this prospectus
is a part, subject only to the manner of sale provisions of Rule 144, and by
affiliates under Rule 144 without compliance with the Rule 144 holding period
requirements.
We intend to file a registration statement under the Securities Act
covering the 2,000,000 shares of common stock reserved for issuance under our
2000 Stock Plan following completion of this offering. Thereafter, shares that
are issued under the plan will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market.
59
<PAGE> 64
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Chase Securities Inc.,
Banc of America Securities LLC and Thomas Weisel Partners LLC, have severally
agreed to purchase from us the following numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Chase Securities Inc........................................
Banc of America Securities LLC..............................
Thomas Weisel Partners LLC..................................
-------
Total.............................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are conditioned on the absence of any material adverse change in
our business and the receipt of certificates, opinions and letters from us, our
counsel and our independent auditors. The underwriters are committed to purchase
all shares of common stock offered in this prospectus if any shares are
purchased.
The underwriters propose to offer the shares of common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus and to dealers at the public offering price less a concession not in
excess of $ per share. The underwriters may allow and the dealers may
reallow a concession not in excess of $ per share to other dealers. After
the public offering of the shares, the underwriters may change this offering
price and other selling terms. The representatives of the underwriters have
informed us that the underwriters do not intend to confirm discretionary sales
in excess of 5% of the shares of common stock offered by this prospectus.
We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to 570,000 additional
shares of common stock at the public offering price, less the underwriting
discount set forth on the cover page of this prospectus. To the extent that the
underwriters exercise this option, each underwriter will have a firm commitment
to purchase a number of shares that approximately reflects the same percentage
of total shares the underwriter purchased in the above table. We will be
obligated to sell shares to the underwriters to the extent the option is
exercised. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of common stock offered in this
prospectus.
The following table shows the per share and total underwriting discounts
and commissions that we will pay to the underwriters. The underwriting discount
was determined based on an arms' length negotiation between the representatives
of the underwriters and us. These amounts are shown assuming both no exercise
and full exercise of the underwriters' over-allotment option to purchase
additional shares.
<TABLE>
<CAPTION>
PAID BY FIRST HORIZON
-----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................. $ $
Total................................................. $ $
</TABLE>
We estimate that our share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$1,000,000. This offering of the shares is made for delivery when, as and if
accepted by the underwriters and subject to prior sale and to withdrawal,
60
<PAGE> 65
cancellation or modification of this offering without notice. The underwriters
reserve the right to reject an order for the purchase of shares in whole or in
part.
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act, and to contribute to payments the
underwriters may be required to make in respect to those liabilities.
Each executive officer and director of First Horizon and substantially all
other holders of our securities have agreed during the period of 180 days after
the effective date of this prospectus, subject to specified exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock owned as of the date of this
prospectus or thereafter acquired directly by those holders or with respect to
which they have the power of disposition, without the prior written consent of
Chase Securities Inc. However, Chase Securities Inc. may, in its sole discretion
and at any time or from time to time, without notice, release all or any portion
of the securities subject to lock-up agreements. There are no existing
agreements between the representatives and any of our stockholders with respect
to any shares subject to a lock-up agreement providing consent to the sale of
shares prior to the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of Chase Securities Inc., subject to certain
exceptions, consent to the disposition of any shares held by stockholders
subject to lock-up agreements prior to the expiration of the lock-up period, or
issue, sell, contract to sell, or otherwise dispose of, any shares of common
stock, any options or warrants to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering, the issuance of our
common stock upon the exercise of outstanding options or warrants, and the
issuance of options under existing stock option and incentive plans provided
that those options do not vest prior to the expiration of the lock-up period.
See "Shares Eligible for Future Sale."
At our request, the underwriters have reserved up to five percent of the
shares of common stock to be sold in this offering to be offered for sale,
exclusive of the shares subject to the over-allotment option, at the initial
public offering price, to our directors, officers, employees, business
associates such as customers and suppliers and persons related to, or affiliated
with the foregoing persons. The number of shares available for sale to the
general public in this offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not so purchased will be
offered to the general public on the same basis as the other shares offered by
this prospectus.
Persons participating in this offering may over-allot or effect
transactions that stabilize, maintain or otherwise affect the market price of
the common stock at levels above those that might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or the effecting of any purchase of the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
this offering. A penalty bid means an arrangement that permits the underwriters
to reclaim a selling concession from a syndicate member in connection with this
offering when shares of common stock sold by the syndicate member are purchased
in syndicate covering transactions. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise.
Stabilizing, if commenced, may be discontinued at any time.
Before this offering, there was no public market for the common stock. The
initial public offering price for the common stock will be determined by
negotiations between ourselves and the representatives of the underwriters.
Among the factors to be considered in determining the initial
61
<PAGE> 66
public offering price will be prevailing market and economic conditions, our
revenues and earnings, market valuations of other companies engaged in
activities similar to ours, estimates of our business potential and prospects,
the present state of our business operations, our management and other factors
deemed relevant.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 166 filed
public offerings of equity securities, of which 113 have been completed, and has
acted as a syndicate member in an additional 92 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or other controlling persons, except with
respect to its contractual relationship with us pursuant to the underwriting
agreement entered into in connection with this offering.
LEGAL MATTERS
The validity of the shares of common stock that we are offering will be
passed upon for us by Arnall Golden & Gregory, LLP. Certain legal matters in
connection with this offering will be passed upon for the underwriters by Testa,
Hurwitz & Thibeault, LLP.
EXPERTS
The audited financial statements and schedule included in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act with
respect to the shares of common stock we are offering. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedule filed with it. We have omitted certain items in accordance
with the rules and regulations of the Commission. For further information with
respect to our business and the common stock we are offering, please see the
registration statement and the exhibits and schedule filed therewith. Statements
contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each statement being qualified in all
respects by such reference. You may inspect a copy of the registration
statement, and the exhibits and schedule filed with it, without charge at the
public reference facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's regional offices
located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048, and you can obtain copies of all or any part of the registration
statement from these offices upon the payment of the fees prescribed by the
Commission. You can obtain information on the operation of the public reference
room by calling the Commission at 1-800-SEC-0330. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov. We have
electronically filed the registration statement, including all exhibits and
schedule filed with it, with the Commission.
62
<PAGE> 67
FIRST HORIZON PHARMACEUTICAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Horizon Pharmaceutical Corporation:
We have audited the accompanying balance sheets of FIRST HORIZON
PHARMACEUTICAL CORPORATION (formerly Horizon Pharmaceutical Corporation, a
Delaware corporation) as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Horizon Pharmaceutical
Corporation as of December 31, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 17, 2000 (except with respect to
the matters discussed in Note 12
as to which the date is May 3, 2000.)
F-2
<PAGE> 69
FIRST HORIZON PHARMACEUTICAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- -----------
1998 1999 2000
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 425,023 $ 219,688 $ 735,337
Accounts receivable, net of allowance for doubtful
accounts, discounts and contractual adjustments of
$35,395, $55,783 and $125,188 at December 31,
1998, 1999 and March 31, 2000 respectively........ 1,147,248 2,900,623 2,861,497
Inventories.......................................... 402,397 798,615 1,795,464
Samples and other prepaid expenses................... 470,382 553,614 1,691,725
Deferred tax assets.................................. 146,931 550,780 550,781
----------- ----------- -----------
Total current assets......................... 2,591,981 5,023,320 7,634,804
----------- ----------- -----------
Property and equipment, net............................ 305,247 422,096 469,025
Other Assets:
Note receivable from related party................... 30,000 30,000 50,372
Intangibles, net..................................... 5,873 5,602,328 5,528,886
----------- ----------- -----------
Total other assets........................... 35,873 5,632,328 5,579,258
----------- ----------- -----------
Total assets................................. $ 2,933,101 $11,077,744 $13,683,087
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................... $ 553,318 $ 794,088 $ 1,773,379
Accrued expenses..................................... 795,645 2,892,727 3,593,219
Borrowings under revolving loan agreement............ 602,928 800,000 2,000,000
Current portion of long-term debt.................... -- 1,270,389 1,270,389
----------- ----------- -----------
Total current liabilities.................... 1,951,891 5,757,204 8,636,987
----------- ----------- -----------
Long-Term Liabilities:
Long-term debt, net of current maturities............ -- 1,628,497 1,305,319
Deferred tax liabilities............................. 25,080 76,479 76,479
----------- ----------- -----------
Total liabilities............................ 1,976,971 7,462,180 10,018,785
----------- ----------- -----------
Commitments and Contingencies (Notes 1,5,6,8,10 and 11)
Stockholders' Equity:
Preferred stock, 1,000,000 shares authorized and none
outstanding....................................... -- -- --
Common stock, $0.001 par value; 40,000,000 shares
authorized; 7,981,248 and 8,539,643 shares issued
and outstanding at December 31, 1998, 1999 and
March 31, 2000 respectively....................... 7,982 8,540 8,540
Additional paid-in capital........................... 2,615,434 5,788,220 5,788,220
Deferred compensation................................ 0 (1,284,374) (1,197,105)
Accumulated deficit.................................. (1,667,286) (896,822) (935,353)
----------- ----------- -----------
Total stockholders' equity................... 956,130 3,615,564 3,664,302
----------- ----------- -----------
Total liabilities and stockholders' equity... $ 2,933,101 $11,077,744 $13,683,087
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 70
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------------
------------------------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999 2000
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues....................... $5,557,700 $9,252,058 $18,624,514 $4,199,934 $7,119,638
Operating costs and expenses
Cost of revenues................. 1,136,691 1,903,054 3,140,416 719,432 1,061,737
Selling, general and
administrative expenses,
excluding the non-cash expense
presented below................ 4,545,254 6,789,358 12,400,439 2,550,153 5,491,653
Non-cash selling general and
administrative expense......... 133,500 -- 143,986 10,722 87,269
Depreciation and amortization.... 30,273 35,225 424,274 79,302 114,639
Research and development
expense........................ -- 255,000 860,350 142,945 375,292
---------- ---------- ----------- ---------- ----------
Total operating costs and
expenses................ 5,845,718 8,982,637 16,969,465 3,502,554 7,130,590
---------- ---------- ----------- ---------- ----------
Operating (loss) income............ (288,018) 269,421 1,655,049 697,380 (10,952)
---------- ---------- ----------- ---------- ----------
Other income (expense):
Interest expense................. (5,496) (14,017) (356,598) (55,758) (72,060)
Interest income.................. 2,909 4,383 11,950 2,197 5,591
Other............................ 3,629 (2,749) 8,059 2,450 9,822
---------- ---------- ----------- ---------- ----------
Total other income
(expense)............... 1,042 (12,383) (336,589) (51,111) (56,647)
---------- ---------- ----------- ---------- ----------
Income before benefit (provision)
for income taxes................. (286,976) 257,038 1,318,460 646,269 (67,599)
Benefit (provision) for income
taxes............................ 106,530 (121,484) (547,996) (270,368) 29,068
---------- ---------- ----------- ---------- ----------
Net (loss) income.................. $ (180,446) $ 135,554 $ 770,464 $ 375,901 $ (38,531)
========== ========== =========== ========== ==========
Net (loss) income per common share:
Basic............................ $ (0.02) $ 0.02 $ 0.10 $ 0.05 $ (0.00)
========== ========== =========== ========== ==========
Diluted.......................... $ (0.02) $ 0.02 $ 0.09 $ 0.04 $ (0.00)
========== ========== =========== ========== ==========
Weighted average common shares
outstanding:
Basic............................ 7,576,580 7,978,234 8,028,673 7,981,248 8,539,643
========== ========== =========== ========== ==========
Diluted.......................... 7,576,580 8,584,329 8,975,493 8,759,904 8,539,643
========== ========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 71
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT TOTAL
--------- ------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996........... 5,830,000 $5,830 $1,139,553 $ -- $(1,622,394) $ (477,011)
Conversion of debt to equity....... 1,261,248 1,262 787,021 -- -- 788,283
Proceeds from sale of stock........ 880,000 880 549,120 -- -- 550,000
Deferred compensation.............. -- -- 133,500 -- -- 133,500
Net loss........................... -- -- -- -- (180,446) (180,446)
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1997........... 7,971,248 7,972 2,609,194 -- (1,802,840) 814,326
Stock options exercised............ 10,000 10 6,240 -- -- 6,250
Net income......................... -- -- -- -- 135,554 135,554
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1998........... 7,981,248 7,982 2,615,434 -- (1,667,286) 956,130
Conversion of debt to equity....... 558,395 558 1,744,426 -- -- 1,744,984
Deferred compensation.............. -- -- 1,428,360 (1,284,374) -- 143,986
Net income......................... -- -- -- -- 770,464 770,464
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1999........... 8,539,643 $8,540 $5,788,220 $(1,284,374) $ (896,822) $3,615,564
========= ====== ========== =========== =========== ==========
Deferred Compensation (unaudited).. -- -- -- 87,269 -- 87,269
--------- ------ ---------- ----------- ----------- ----------
Net Loss (unaudited)............... -- -- -- -- (38,531) (38,531)
--------- ------ ---------- ----------- ----------- ----------
Balance, March 31, 2000
(unaudited)........................ 8,539,643 $8,540 $5,788,220 $(1,197,105) $ (935,353) $3,664,302
========= ====== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 72
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------------
----------------------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999 2000
--------- --------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................... $(180,446) $ 135,554 $ 770,464 $ 375,901 $ (38,531)
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization................... 30,273 35,225 424,274 79,302 114,639
Non-cash interest expenses...................... -- -- 144,984 --
Deferred tax provision.......................... (108,867) 102,000 (352,450) --
Non-cash compensation expense................... 133,500 -- 143,986 10,722 87,269
Loss on disposal of equipment................... -- 4,404 --
Changes in assets and liabilities net of
acquired assets and liabilities:
Accounts receivable........................... (226,597) (486,629) (1,753,375) (822,353) 39,126
Inventories................................... 35,309 (261,368) (396,218) (1,874) (996,849)
Samples and other prepaid expenses............ (304,815) (139,445) (83,232) 1,435 (1,138,112)
Note receivable from related party............ -- (30,000) -- -- (20,372)
Accrued expenses.............................. 153,621 446,429 1,763,019 317,500 700,492
Accounts payable.............................. 272,031 13,288 356,850 (106,307) 979,291
--------- --------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities................................ (195,991) (180,542) 1,018,302 (145,674) (273,047)
--------- --------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of intangibles........................... 500 -- (4,000,000) (4,000,000) --
Purchase of property and equipment................ (121,272) (208,464) (185,709) (75,020) (68,959)
--------- --------- ----------- ----------- -----------
Net cash used in investing activities....... (120,772) (208,464) (4,185,709) (4,075,020) (68,959)
Cash flows from financing activities:
Proceeds from revolving loan agreement............ -- 563,013 197,072 1,200,000
Proceeds from long-term debt...................... -- -- 4,000,000 4,000,000 (342,345)
Principal payments on long-term debt.............. (19,457) -- (1,235,000) (47,764) --
Proceeds from issuance of common stock............ 550,000 6,250 -- --
--------- --------- ----------- ----------- -----------
Net cash provided by financing activities... 530,543 569,263 2,962,072 3,952,236 857,655
--------- --------- ----------- ----------- -----------
Net change in cash and cash equivalents............. 213,780 180,257 (205,335) (268,458) 515,649
Cash and cash equivalents, beginning of period...... 30,986 244,766 425,023 425,023 219,688
--------- --------- ----------- ----------- -----------
Cash and cash equivalents, end of period............ $ 244,766 $ 425,023 $ 219,688 $ 156,565 $ 735,337
========= ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 73
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
First Horizon Pharmaceutical Corporation (formerly Horizon Pharmaceutical
Corporation, the "Company") is an emerging pharmaceutical company that markets
and sells brand name prescription drugs to high-prescribing primary care and
select specialty physicians in the United States through their nationwide sales
and marketing field force. The Company focuses on the treatment of chronic
conditions, including cardiovascular diseases, respiratory and
gastroenterological disorders, and pain and inflammation. The Company's strategy
is to acquire and obtain licenses for pharmaceutical products that other
companies do not actively market, and to increase sales through aggressive
promotion and marketing. In addition, the Company seeks to maximize the value of
their drugs by developing new patentable formulations, using new delivery
methods and seeking regulatory approval for new indications.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The financial statements as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the unaudited financial statements for
these interim periods have been included. The results of interim periods are not
necessarily indicative of results to be obtained for a full year.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment to customers and
are shown net of sales adjustments. Provisions for discounts, rebates to
customers, returns, and other adjustments are provided in the same period that
the related sales are recorded. Cost of revenues is comprised of purchased
product costs.
ROYALTIES AND COMMISSION COSTS
The Company pays royalties and commissions on the sale of certain products.
These costs are included in selling general and administrative costs in the
accompanying statement of operations. Total royalties and commission costs were
$81,000, $194,000, $620,000, $91,000 and $358,000 for the years ending December
31, 1997, 1998 and 1999, and for the three months ended March 31, 1999 and 2000,
respectively.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of costs incurred to
develop formulations, engage contract research organizations to conduct clinical
studies, test products under development and engage medical and regulatory
consultants. The Company expenses all research and development costs as
incurred. Research and development costs were $0, $255,000, $860,350, $142,945,
and $375,292 for the years ended December 31, 1997, 1998 and 1999, and for the
three months ended March 1, 1999 and 2000, respectively.
F-7
<PAGE> 74
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
RETURNS AND REBATE ALLOWANCES
The Company provides all customers with a right of return within six months
of the expiration date of the product, and as a result records a provision for
returns at the time of sale. The Company is contractually obligated to pay
rebates on the sale of certain prescription drugs. The reserve for returns and
rebates is estimated based upon historical experience and other relevant
information, in accordance with generally accepted accounting principles. There
is no certainty that future returns and rebates will not exceed established
reserves.
CASH AND CASH EQUIVALENTS
The Company considers only those investments that are highly liquid, and
readily convertible to cash with an original maturity of three months or less to
be cash equivalents. The Company had no cash equivalents at December 31, 1998,
1999 or March 31, 2000.
CONCENTRATION OF CREDIT RISK
The Company extends credit on an uncollateralized basis primarily to
wholesale drug distributors and retail pharmacy chains throughout the United
States. Historically, the Company has not experienced significant credit losses
on its accounts.
The Company's five largest customers accounted for approximately 79%, 66%,
and 68% of accounts receivable at December 31, 1998, 1999 and March 31, 2000,
respectively.
The following table represents a summary of sales to significant customers
as a percentage of the Company's total revenues:
<TABLE>
<CAPTION>
CUSTOMER 1997 1998 1999
- -------- ---- ---- ----
<S> <C> <C> <C>
McKesson HBOC, Inc.......................................... 29% 29% 28%
Cardinal Health, Inc........................................ 28 28 19
Bergen Brunswig Corporation................................. 12 12 10
</TABLE>
The Company relies on third-party suppliers to produce its products. The
supply of a product whose sales comprised 24% of the Company's sales in 1999 is
exclusively available through a single supplier.
Two products accounted for 46%, 49%, 51%, 41% and 51% of the Company's
sales in 1997, 1998 and 1999, and for the three months ended March 31, 1999 and
2000, respectively.
SEGMENT REPORTING
The Company operates in a single segment, the sale and marketing of
prescription drugs.
INVENTORIES
Inventories consist of purchased pharmaceutical products and are stated at
the lower of cost or market. Cost is determined using the first-in, first-out
method.
SAMPLES AND OTHER PREPAID EXPENSES
Samples and other prepaid expenses primarily consist of product samples
used in the sales and marketing efforts of the Company's products. Samples are
expensed upon distribution.
F-8
<PAGE> 75
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major improvements, which extend
the lives of existing property and equipment, are capitalized. Depreciation is
provided for on the straight-line basis over the estimated useful lives of the
assets. Accelerated depreciation is used for income tax purposes. Expenditures
for maintenance and repairs that do not extend the lives of the applicable
assets are charged to expense as incurred.
The estimated useful lives of the classes of assets generally are as
follows:
<TABLE>
<S> <C>
Office equipment........................................... Five to ten years
Furniture and fixtures..................................... Five to ten years
Computer hardware and software............................. Three to seven years
Leasehold improvements..................................... Five years
</TABLE>
The components of property and equipment as of December 31, 1998 and 1999,
and March 31, 2000 are as follows:
<TABLE>
<CAPTION>
1998 1999 MARCH 31, 2000
-------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Office equipment................................ $ 36,583 $ 42,315 $ 52,437
Furniture and fixtures.......................... 81,641 131,065 162,764
Computer hardware and software.................. 172,892 294,414 321,552
Leasehold improvements.......................... 89,617 98,648 98,648
-------- --------- ---------
380,733 566,442 635,401
Less accumulated depreciation and
amortization.................................. (75,486) (144,346) (166,376)
-------- --------- ---------
Property and equipment, net........... $305,247 $ 422,096 $ 469,025
======== ========= =========
</TABLE>
Depreciation and amortization expense related to property and equipment,
for the years ended December 31, 1997, 1998, 1999, and for the three months
ended March 31, 1999 and 2000, was $29,924, $34,745, $68,860, $14,560 and
$22,030, respectively.
In the event that facts and circumstances indicate that the carrying
amounts of property and equipment may be impaired, an evaluation of
recoverability is performed using the estimated future undiscounted cash flows
associated with the asset compared to the asset's carrying amount to determine
if a write-down is required.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or "SOP," No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. The Company was required to implement SOP No.
98-1 for the year ending December 31, 1999. The adoption of SOP No. 98-1 had no
impact to the financial condition or results of operations of the Company.
INTANGIBLE ASSETS
The costs of obtaining patents and product licenses are capitalized and
amortized on a straight-line basis over the estimated periods benefited by the
asset (15 to 20 years). Amortization of such assets is included in depreciation
and amortization expense in the accompanying financial statements. Amortization
expense for the years ended December 31, 1997, 1998, and 1999, and for
F-9
<PAGE> 76
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
the three months ended March 31, 1999 and 2000 was $979, $480, $269,326, $32,342
and $73,442, respectively.
The Company continually reevaluates the propriety of the carrying amount of
intangibles as well as the related amortization period to determine whether the
current events and circumstances warrant adjustments to the carrying values
and/or estimates of useful lives. This evaluation is performed using the
estimated projected future undiscounted cash flows associated with the asset
compared to the asset's carrying amount to determine if a write-down is
required. To the extent such projections indicate that the undiscounted cash
flows are not expected to be adequate to recover the carrying amounts, the
assets are written down to fair value as determined by discounting future cash
flows.
INCOME TAXES
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes."
SFAS No. 109 requires recognition of deferred tax assets and liabilities using
currently enacted tax rates.
ADVERTISING COSTS
The Company follows the policy of charging the costs of advertising to
expense as incurred. Advertising expenses were $46,188, $39,233, $178,929,
$45,725 and 453,726 for the years ending December 31, 1997, 1998 and 1999, and
for the three months ended March 31, 1999 and 2000, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's borrowings under its variable rate long-term debt agreements
are recorded at cost, which approximates fair value.
EARNINGS PER SHARE
As required by SFAS No. 128, "Earnings Per Share," the Company has
presented basic and diluted earnings per common share amounts in the
accompanying financial statements. Basic earnings per common share is calculated
based on the weighted average common shares outstanding during the year, while
diluted earnings per common share also gives effect to all potential dilutive
stock equivalents during each year such as options, warrants, and contingently
issuable shares. The Company incurred a net loss in 1997 and for the three
months ended March 31, 2000 and, as such, the weighted average number of common
shares used for diluted earnings per common share does not consider the
potential dilutive effect of 502,126 and 1,557,571 common stock equivalents,
respectively, as such consideration would have an antidilutive effect on
earnings per common share.
F-10
<PAGE> 77
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Below is the calculation of basic and diluted net (loss) income per common
share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------------- -------------------------------
1997 1998 1999 MARCH 31, 1999 MARCH 31, 2000
---------- ---------- ----------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net (loss) income.......... $ (180,446) $ 135,554 $ 770,464 $ 375,901 $ (38,531)
========== ========== =========== ========== ==========
Weighted average common
shares
outstanding -- basic..... 7,576,580 7,978,234 8,028,673 7,981,248 8,539,643
Dilutive effect of stock
options.................. N/A 606,095 946,820 778,656 N/A
---------- ---------- ----------- ---------- ----------
Weighted average common
shares
outstanding -- diluted... 7,576,580 8,584,329 8,975,493 8,759,904 8,539,643
========== ========== =========== ========== ==========
Basic net (loss) income per
share.................... $ (0.02) $ 0.02 $ 0.10 $ 0.05 $ (0.00)
========== ========== =========== ========== ==========
Diluted net (loss) income
per share................ $ (0.02) $ 0.02 $ 0.09 $ 0.04 $ (0.00)
========== ========== =========== ========== ==========
</TABLE>
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year financial statement presentation.
RESTATED FINANCIAL STATEMENTS
The financial statements for the period ending December 31, 1997 have been
restated to reflect certain adjustments for accrued expenses net of taxes.
SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company purchased intangible assets for $4,000,000 in cash with an
additional $1,800,000 financed by the seller. Pursuant to the acquisition, the
Company also assumed estimated liabilities of $218,460 for returns of products
shipped by the seller prior to the acquisition date in 1999.
The Company issued 1,261,248 and 558,395 shares of common stock in the
conversion of outstanding convertible debt (including accrued interest) totaling
$788,283 and $1,744,984 and in 1997 and 1999, respectively.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, ---------------------
------------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999 2000
---- ------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for taxes................... $ -- $ -- $777,927 $ 9,380 $324,741
==== ======= ======== ======== ========
Cash paid for interest................ $970 $10,855 $235,889 $ 27,010 $135,939
==== ======= ======== ======== ========
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company must
adopt SFAS No. 133 for the year ending December 31, 2000. SFAS No. 133
established methods of accounting for derivative financial
F-11
<PAGE> 78
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
instruments and hedging activities related to those instruments as well as other
hedging activities. Management believes adoption of SFAS No. 133 will not have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires additional disclosure and presentation of
amounts comprising comprehensive income beyond net income. The Company had no
items of other comprehensive income amounts for the periods presented. As a
result, the adoption had no impact on the Company's reporting under generally
accepted accounting principles.
2. REVOLVING LOAN AGREEMENT
In May 1998, the Company entered into a revolving loan agreement with a
bank under which the Company can borrow up to $1,000,000, subject to borrowing
base limitations based on eligible accounts receivable and inventory balances,
as defined in the agreement. The revolving loan agreement was amended and
restated on December 22, 1998 to provide for partial financing of a product
acquisition through a term loan. Under the amended agreement, terms of the
revolving loan facility provide for up to $2,500,000, subject to borrowing base
limitations based on eligible accounts receivable and inventory, as defined in
the agreement. Borrowings under the revolving loan facility bear interest at the
bank's prime rate, and are due on January 31, 2001. At December 31, 1999, the
outstanding balance under the revolving loan was $800,000 with an interest rate
of 8.5%, and the Company had additional availability under the terms of the
agreement of approximately $1,700,000. During January 2000, the loan agreement
was amended and restated to provide for borrowings up to $3,500,000 through June
30, 2000, reverting back to $2,500,000 from June 30, 2000 to January 31, 2001.
The revolving loan agreement contains certain restrictive covenants including,
among other things, minimum EBITDA levels and debt to equity ratio. Any failure
to comply with these requirements could have a material adverse effect on the
Company's operations, unless waivers are obtained.
F-12
<PAGE> 79
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and 1999, and
March 31, 2000:
<TABLE>
<CAPTION>
1998 1999 MARCH 31, 2000
-------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Term note payable (initial amount of
$2,400,000) to a bank bearing interest at
the lesser of Prime or LIBOR plus 2%
(7.96% at December 31, 1999), with
monthly payments of $40,000 plus accrued
interest maturing in December 2001....... $ -- $ 1,840,000 $ 1,720,000
Obligation to a seller of intangible assets
payable in quarterly installments of
$225,000 through February 2001, net of an
unamortized discount of $52,850, using an
interest rate of 8.75%................... -- 1,058,886 855,708
-------- ----------- -----------
-- 2,898,886 2,575,708
Less current maturities.................... -- (1,270,389) (1,270,389)
-------- ----------- -----------
Total............................ $ -- $ 1,628,497 $ 1,305,319
======== =========== ===========
</TABLE>
The term note payable contains certain restrictive covenants including,
among other things, minimum EBITDA levels and debt to equity ratio. Any failure
to comply with these requirements could have a material adverse effect on the
Company's operations, unless waivers are obtained.
Future maturities of long-term debt are $1,270,389 and $1,628,497 for the
years ended December 31, 2000 and 2001, respectively.
4. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- THREE MONTHS ENDED
1998 1999 MARCH 31, 2000
-------- ---------- ----------------------
(UNAUDITED)
<S> <C> <C> <C>
Employee compensation and benefits.... $510,578 $ 949,325 $ 585,957
Customer return allowance............. 140,000 272,423 325,524
Product rebates....................... -- 851,248 1,479,404
Interest.............................. 15,028 64,011 25,480
Other................................. 130,039 755,720 1,176,854
-------- ---------- ----------
$795,645 $2,892,727 $3,593,219
======== ========== ==========
</TABLE>
5. STOCKHOLDER'S EQUITY
In 1998, the Company approved a four-for-one common stock split, thus
increasing authorized common shares from 10 million to 40 million. All common
stock information for all periods presented herein has been restated to give
effect to this stock split.
F-13
<PAGE> 80
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCKHOLDER'S EQUITY -- (CONTINUED)
Through 1996, the Company borrowed $635,000 from related parties accruing
interest at Prime plus 2%. During 1997, the Company issued 1,261,248 shares of
common stock by converting the $635,000 of debt to shareholders, plus accrued
interest of $153,283 to common stock at a rate of $0.625 per share, the then
estimated fair market value. Additionally, the Company issued 880,000 shares of
common stock at $0.625 per share in exchange for $550,000 in cash.
In 1998, 10,000 shares of common stock were issued upon exercise of stock
options at an exercise price of $0.625 per share.
In December 1999, the Company issued 558,395 shares of common stock to the
Company's majority stockholder upon the conversion of $1.6 million of
convertible debt incurred in January 1999 for the purchase of a product license
and accrued interest of $144,984 thereon to common stock. The shares were
converted at a rate of $3.125 as stipulated in the applicable agreement. The
original debt agreement stipulated an interest rate of Prime plus 2% (10.25% at
the conversion date) with the full principal amount due by December 1, 2001.
Under the Company's Restated Certificate of Incorporation the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 1,000,000 shares of preferred stock in one or more series and to fix
the rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any series
or the designation of such series, without any further vote or action by the
stockholders. The issuance of preferred stock could adversely affect the voting
power of holders of common stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of the Company, which could have a depressive effect on the
market price of our common stock. The Company has no present plan to issue any
shares of preferred stock. As of December 31, 1998 and 1999 and March 31, 2000
there were no shares of preferred stock outstanding.
6. STOCK OPTIONS
Pursuant to the Company's 1997 Non-Qualified Stock Option Plan (the
"Plan"), the Board of Directors approved the issuance of options to purchase
shares of common stock of the Company to various employees. Under the Plan,
4,000,000 shares (adjusted for the 1998 four-for-one stock split) of common
stock were reserved for issuance. Vesting periods range from immediate to four
years, and options granted generally expire seven years from the date of grant.
All options also include accelerated vesting provisions in the event of a change
in control, as defined in the Plan.
F-14
<PAGE> 81
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTIONS -- (CONTINUED)
The Company has granted stock options to officers, directors, and employees
as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF SHARES AVERAGE
SUBJECT TO EXERCISE
OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding at December 31, 1996........................... -- N/A
Granted.................................................. 870,000 $0.556
Canceled................................................. -- N/A
---------
Outstanding at December 31, 1997........................... 870,000 0.556
Granted.................................................. 122,000 1.875
Canceled................................................. (10,000) 1.375
Exercised................................................ (10,000) 0.625
---------
Outstanding at December 31, 1998........................... 972,000 0.712
Granted.................................................. 785,500 2.494
Canceled................................................. (5,000) 2.250
Exercised................................................ -- N/A
---------
Outstanding at December 31, 1999........................... 1,752,500 $1.506
=========
Granted (unaudited)...................................... 47,500 8.350
Cancelled (unaudited).................................... (5,000) 2.125
Exercised (unaudited).................................... -- N/A
---------
Outstanding at March 31, 2000 (unaudited).................. 1,795,000 1.685
=========
Shares vested at December 31, 1999......................... 753,750
=========
Shares vested at March 31, 2000 (unaudited)................ 830,625
=========
</TABLE>
At December 31, 1999, approximately 2,237,500 shares remained reserved for
issuance under the 1997 Plan. Subsequent to year-end the Company retired the
1997 Plan. Prior to the retirement of the 1997 Plan the Company's board approved
the issuance of an additional 47,500 options, exercisable at $8.35 per share. At
February 14, 2000, 1,800,000 options were issued and outstanding under the 1997
Plan. The intent of Company management is to no longer issue options under the
1997 Plan. The following table sets forth the range of exercise prices, number
of shares, weighted average exercise price, and remaining contractual lives by
similar price and grant date at December 31, 1999.
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------- -----------------------
OUTSTANDING WEIGHTED WEIGHTED EXERCISABLE WEIGHTED
AT AVERAGE AVERAGE AT AVERAGE
DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICE 1999 CONTRACTUAL LIFE PRICE 1999 PRICE
- ----------------------------- ------------ ---------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.500 - $0.625 856,000 4.9 years $0.556 706,000 $0.540
1.875 - 1.880 234,000 7.7 years 1.876 41,500 1.877
2.500 - 2.650 662,500 9.6 years 2.605 6,250 2.500
--------- -------
Total 1,752,500 753,750
========= =======
</TABLE>
F-15
<PAGE> 82
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTIONS -- (CONTINUED)
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock options. Accordingly, the Company obtained appraisals
of the fair market value of the stock on the date of the option grant and will
recognize compensation expense over the vesting period of the options. The
Company has recognized compensation expense related to stock option grants of
$133,500, $0, $143,986, $10,722 and $87,269 in 1997, 1998 and 1999, and for the
three months ended March 31, 1999 and 2000 respectively. Had compensation costs
for these options been determined using the minimum value option pricing model
prescribed by SFAS 123, "Accounting for Stock Based Compensation," the Company's
Pro forma net (loss) income per common share would have been reported as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Net (loss) income:
As reported..................................... $(180,446) $135,554 $770,464
Pro-forma....................................... (251,889) 111,734 476,823
Net (Loss) Income per Common Share -- basic:
As Reported..................................... (0.02) 0.02 0.10
Pro-forma....................................... (0.03) 0.01 0.06
Net (Loss) Income per Common Share -- diluted:
As Reported..................................... (0.02) 0.02 0.09
Pro-forma....................................... (0.03) 0.01 0.05
</TABLE>
The weighted average minimum value of options granted during 1997, 1998 and
1999 is estimated at $0.44, $1.51, and $2.01 per share. The minimum value of
options is estimated on the date of the grant using the following weighted
average assumptions:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate........................... 6.19% 5.53% 5.57%
Expected dividend yield........................... -- -- --
4 4 4
Expected lives.................................... years years years
Expected volatility............................... --% --% --%
</TABLE>
On February 14, 2000, the Board of Directors and stockholders approved the
2000 Stock Plan. This plan provides for the granting of incentive stock options
under the Internal Revenue Code of 1986; options that do not qualify as
incentive stock options, stock awards or stock bonuses, and sales of stock. The
2000 Stock Plan provides for the grants of these options and other awards to
officers, directors, full- and part-time employees, advisors and consultants.
Only full-time employees may receive incentive stock options. The Company has
reserved 2,000,000 shares of common stock for issuance under the 2000 Stock
Plan. The Company's compensation committee administers the 2000 Stock Plan and
has the sole authority to determine the meaning and application of the terms of
the plan and all grant agreements, the persons to whom option or stock grants
are made, the nature and amount of option or stock grants, the price to be paid
upon exercise of each option, the period within which options may be exercised,
the restrictions on stock awards, and the other terms and conditions of awards.
The 2000 Stock Plan will terminate in February 2010. Subsequent to the approval
of this plan, the Company's Board of Directors approved the grant of options to
purchase 177,950 shares of common stock which will become effective upon the
issuance of stock by the Company in a public offering. Such options will be
exercisable at the offering price.
F-16
<PAGE> 83
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTIONS -- (CONTINUED)
The Company adopted an employee stock purchase plan on February 14, 2000
that is intended to qualify as an employee stock purchase plan within the
meaning of Section 423 of the Internal Revenue Code. The Company has reserved
500,000 shares of common stock for the stock purchase plan. In order to
participate in the stock purchase plan, employees must meet eligibility
requirements, including length of employment. Participating employees will be
able to direct the Company to make payroll deductions of up to 7% of their
compensation during an offering period for the purchase of shares of the
Company's common stock. Each offering period will be six months, beginning on
July 1, 2000. The stock purchase plan will provide participating employees with
the right, subject to specific limitations, to purchase the Company's common
stock at a price equal to 85% of the lesser of the fair market value of the
Company's common stock on the first or last day of the offering period. The
Board of Directors has the authority to amend, suspend or discontinue the stock
purchase plan as long as the change will not adversely affect participants
without their consent and as long as the Company receives the shareholder
approval required by law. The stock purchase plan will terminate on December 31,
2010.
7. INCOME TAXES
The benefit (provision) for income taxes for 1997, 1998 and 1999 consisted
of the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Current....................................... $ (2,337) $ (19,484) $(900,446)
Deferred...................................... 108,867 (102,000) 352,450
-------- --------- ---------
Total............................... $106,530 $(121,484) $(547,996)
======== ========= =========
</TABLE>
A reconciliation of the statutory rate to the effective rate as recognized
in the statement of operations is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate.................................... 35% (35)% (35)%
State taxes, net.......................................... 4 (4) (4)
Nondeductible meals and entertainment expenses............ (2) (8) (3)
-- --- ---
37% (47)% (42)%
== === ===
</TABLE>
F-17
<PAGE> 84
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES -- (CONTINUED)
Deferred tax assets and liabilities reflect the impact of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts recognized for income tax purposes.
Significant components of the Company's net deferred tax assets as of December
31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Current deferred tax assets:
Net operating loss carryforward........................... $ 33,196 $ --
Accrued liabilities....................................... 60,335 439,785
Deferred compensation..................................... 53,400 110,995
-------- --------
146,931 550,780
-------- --------
Long-term deferred tax liabilities:
Depreciation and amortization............................. 25,080 76,479
-------- --------
Net deferred tax assets........................... $121,851 $474,301
======== ========
</TABLE>
8. LICENSE AGREEMENTS AND PRODUCT RIGHTS
On January 1, 1996, the Company obtained exclusive distribution rights from
Unisource, Inc. for Tanafed in North America through December 31, 2003 with an
option for an additional seven years. The agreement requires the Company to
purchase all of their requirements for Tanafed from Unisource, including at
least certain minimum quantities of Tanafed in each year of the agreement. The
Company entered into a patent and license agreement with the raw materials'
supplier for Tanafed dated January 2000, which provides a license to a patent
covering an active ingredient in Tanafed.
On October 31, 1998, the Company entered into an agreement with Inpharmakon
Corporation in which the Company acquired rights to the proprietary information
for a migraine product for which the Company plans to conduct clinical studies
and submit a new drug application. The agreement expires on October 31, 2008,
but the Company may renew it indefinitely after expiration. If the Company does
not obtain regulatory approval of the drug within a specified time after filing
for such approval and thereafter commence and continue to aggressively market
and sale the product, Inpharmakon may terminate the agreement. In the event that
Inpharmakon terminates the agreement for failure to achieve these milestones,
Inpharmakon may purchase rights to develop the drug. The Company must also pay
up to an aggregate of $950,000 in non-refundable fees to Inpharmakon at various
developmental milestones through and including regulatory approval of the
product, and, in the event of commercial sales of the product, the Company must
pay royalties at rates which management believes are within industry customary
ranges. If the Company elects to sell the business opportunity to a third party,
the Company must share the proceeds of the sale with Inpharmakon.
On January 29, 1999, the Company acquired exclusive rights in the United
States to Robinul and Robinul Forte tablets from American Home Products
Corporation. The Company agreed to pay royalties on net sales as long as the
Company sells the product. The Company negotiated for AHP, or its designee, to
continue to manufacture and supply the product to the Company until January 29,
2001. The Company has an agreement with a supplier, dated April 23, 1999, for
the supplier to become qualified under applicable regulations to manufacture and
supply the requirements for Robinul. Under this agreement, the supplier will
manufacture the products for five
F-18
<PAGE> 85
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. LICENSE AGREEMENTS AND PRODUCT RIGHTS -- (CONTINUED)
years from the time the supplier becomes a qualified manufacturer plus renewal
terms of one year until either party elects to not renew. The agreement with the
supplier requires that the Company purchase certain designated minimum
quantities. The Company has capitalized the cost of obtaining the license and is
amortizing it over an estimated economic life of 20 years.
On March 25, 1999, the Company acquired the rights from Penwest
Pharmaceuticals Co. to the application of Penwest's controlled release TIMERx
technology to the active ingredient in the migraine product. Under the Penwest
agreement, the Company has the right to manufacture, use and sell the developed
product in North America and Mexico for a period extending fifteen years from
the date a new drug application is issued for the product, as well as a license
to the TIMERx(R) patents for such purpose. The Company must pay Penwest an
aggregate of up to approximately $2,600,000 of non-refundable fees upon
achieving specified development milestones through the first anniversary of the
first commercial sale of the product following regulatory approval and royalties
upon any sales of the migraine product. Penwest may terminate the agreement in
the event the Company fails to timely achieve designated performance milestones
within prescribed time periods.
In July 1999, the Company entered in to an agreement with Pohl-Boskamp for
the exclusive rights to distribute, market and sell Nitrolingual Pumpspray
beginning on February 1, 2000 in the United States for five years plus an
additional five year renewal period subject to establishing mutually acceptable
minimum purchase requirements. Under the agreement, Pohl-Boskamp supplies the
Company with their requirements of product at prices that decrease as volume
purchased in each year increases. The Company must purchase designated minimum
quantities in each year of the agreement and pay a royalty on net sales of the
product. Aventis had exclusive rights through January 2000 to a version of the
product containing CFC named Nitrolingual Spray. To promote earlier adoption of
Nitrolingual Pumpspray, the Company obtained exclusive rights from Aventis to
market this CFC product in the United States as of November 22, 1999.
Each of the Company's third-party manufacturing agreements requires that
the Company purchase all of their product requirements from the manufacturers
that are a party to those agreements.
The Company uses third-party manufacturers for the production of its
products for development and commercial purposes. Given the general
under-utilization of resources, the availability of excess capacity for
manufacturing in the marketplace, and the lower cost of outsourcing, the Company
intends to continue to outsource manufacturing for the near-term.
The Company currently uses the services of six third-party manufacturers
for manufacturing of the Company's products pursuant to the Company's product
specifications. The Company has manufacturing and supply agreements with five of
these manufacturers. The remaining terms of these agreements generally range
from one to five years. Under some of these agreements, the manufacturers or
other third parties own the rights to the product that the Company has under
their marketing licenses. Except for our Defen-LA, Protuss-D, and Zoto-HC
products, these agreements generally state that the product supplier will
provide products only to us. The Company has not entered into agreements for
alternative manufacturing sources for any of its products. The suppliers of
Nitrolingual Pumpspray and the raw materials for Tanafed hold patents for their
respective products.
F-19
<PAGE> 86
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. RETIREMENT PLAN
In 1996, the Company began a qualified defined contribution 401(k) plan,
which provides benefits to substantially all employees. The annual contribution,
if any, to the trust is at the discretion of the Board of Directors of the
Company. There were no employer contributions to the plan for the year ended
December 31, 1997. Employer contributions to the plan for the years ended
December 31, 1998 and 1999, and for the three months ended March 31, 1999 and
2000 were $20,695, $36,055, $8,781 and $29,593, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under a cancelable operating lease that
expires in August 2003. The total rent expense was $38,962, $90,315, $211,533,
$51,498, and $63,759 for the years ended December 31, 1997, 1998, and 1999, and
for the three months ended March 31, 1999 and 2000, respectively. The Company
leases vehicles for certain employees under cancelable lease agreements expiring
in 2001. The total vehicle lease expense under the lease agreement for the years
ended December 31, 1997, 1998 and 1999, and for the three months ended March 31,
1999 and 2000 was $0, $0, $434,393, $0 and $244,540, respectively.
The total minimum future commitment under leases for years succeeding
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
2000...................................................... $ 999,969
2001...................................................... 621,903
2002...................................................... 198,073
2003...................................................... 137,640
2004...................................................... 8,525
----------
Total............................................. $1,966,110
==========
</TABLE>
Subsequent to year end, the Company entered in employment contracts with
certain executives. These contracts provide base salaries ranging from $80,000
to $110,000.
11. RELATED-PARTY TRANSACTIONS
The Company purchases repackaging services from Diversified Healthcare
Services, a related party. For the years ended December 31, 1997, 1998, and 1999
and the three months ended March 31, 1999 and 2000, the amounts paid for
repackaging were approximately $83,000, $132,000, $282,000, $43,800 and $84,134,
respectively.
The Company pays royalties to a related party for particular products sold.
For the years ended December 31, 1997, 1998, and 1999 and the three months ended
March 31, 1999 and 2000, the amounts paid for royalties were approximately
$91,000, $160,000, $163,000, $29,344, and $42,797 respectively.
During 1997, the Company converted $385,000 in loans from Kamal Kapoor, a
related party, plus $124,363 accrued interest, into 814,978 shares of common
stock at a rate of $0.625 per share.
During 1997, the Company converted $150,000 in loans from the John N.
Kapoor Trust dated September 30, 1989, an affiliate of the Company, plus $3,345
accrued interest, into 245,352 shares of common stock at a rate of $0.625 per
share.
F-20
<PAGE> 87
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. RELATED-PARTY TRANSACTIONS -- (CONTINUED)
The Chairman and Chief Executive Officer of the Company did not receive a
salary for the year ended December 31, 1999.
During 1997, the Company converted $100,000 in loans from EJ Financial
Enterprises, plus $25,575 accrued interest, into 200,918 shares of common stock
at a rate of $0.625 per share.
On January 27, 1997, the Company issued 320,000 shares of its common stock
to the John Kapoor Trust in exchange for $200,000.
On June 30, 1997, the Company issued 560,000 shares of its common stock to
Kapoor-Pharma Investments in exchange for $350,000.
The Company extended a non-interest bearing note receivable to an officer
of the Company during 1998. As of December 31, 1998 and 1999 the amount due to
the Company under this note was $30,000.
During 1998, the Company entered into a collaboration agreement with
Inpharmakon Corporation, an affiliate of an officer of the Company, under which
Inpharmakon will assist the Company in developing their FHPC 01 product. The
Company paid $200,000, and $1,352 to Inpharmakon in 1998 and 1999, respectively,
under this agreement.
On January 11, 1999, Kapoor-Pharma Investments, an affiliate of the
Director of the Company, loaned the Company $1,600,000 at an interest rate of 2%
over the Prime Rate of Interest. In November 1999, the Company converted
principal and $144,984 of accrued interest totaling $1,744,984 into 558,395
shares of common stock at $3.125 per share, pursuant to the terms of the loan
agreement.
12. SUBSEQUENT EVENTS (UNAUDITED)
PRODUCT AGREEMENTS
On April 14, 2000, the Company acquired exclusive rights from
Warner-Lambert to distribute, market, and sell the drug Ponstel in the United
States for $9.5 million in cash and a $3.5 million promissory note to the
seller. The Company financed $9.5 million of the transaction under a bridge loan
agreement with LaSalle Bank. The agreement includes the purchase of the
licensing rights described above as well as certain trademarks. In addition the
Company agreed to purchase all of the outstanding inventory of Ponstel for
approximately $100,000. The promissory note is payable in full upon the receipt
of proceeds from an initial public offering of the Company's common stock and in
all cases no later than November 30, 2000.
The Company negotiated with Warner-Lambert to continue to manufacture and
supply the Ponstel product to the Company through December 31, 2000. The Company
is currently in negotiations to secure a replacement manufacturer for Ponstel.
On April 14, 2000, the Company entered into an agreement with
Warner-Lambert to purchase exclusive rights in the United States and other
countries to market, distribute and sell a drug called Cognex, as well as rights
to a new unapproved version of Cognex, called Cognex CR. The purchase of Cognex
is contingent on Warner-Lambert receiving Federal Trade Commission ("FTC")
approval for the transaction and the satisfaction of other customary conditions.
If the Company acquires Cognex, the Company will be required to pay $3.5 million
in cash for the product. Warner-Lambert may terminate this agreement if the
transaction has not closed by June 30, 2000, unless it has not closed because of
a delay in receiving FTC approval.
F-21
<PAGE> 88
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED) -- (CONTINUED)
The Company must also pay Warner-Lambert up to $1.5 million in additional
purchase price if the Company obtains FDA approval to market Cognex CR. The
Company may have to undertake additional studies for this approval. In the event
that the Company voluntarily stops selling Cognex for 60 days or more other than
for reasons outside their control, the FTC may order that Cognex revert back to
Warner-Lambert and be divested by the FTC to another purchaser.
The agreement for the Cognex transaction provides for a sublicense to the
Company of Warner-Lambert's rights to an active ingredient in Cognex. The
Company will be required to pay royalties on net sales of Cognex. However, the
Company will be entitled to apply the amount of royalties that Warner-Lambert
has prepaid for these patents and the Company does not expect to pay royalties
in the near future.
The agreement for Cognex provides for a supply agreement under which an
affiliate of Warner-Lambert will manufacture and supply Cognex to the Company
and supply to the Company the active ingredient in Cognex for two years after
the Cognex transactions close, subject to a one year renewal. The Company will
pay Warner-Lambert's affiliate a production fee for its manufacture of Cognex
and the active ingredient. The supply agreement contains designated quantities
of Cognex and its active ingredient that Warner-Lambert's affiliate will supply
and that the Company must purchase. The Company plans to secure a replacement
manufacturer for Cognex and is currently in negotiations with a potential
manufacturer.
As a condition to closing the Cognex purchase the Company intends to enter
into a transition services agreement with Warner-Lambert under which
Warner-Lambert will provide transitional administrative services to the Company
until November 30, 2000 in connection with the sale of Cognex in European
countries. These services will include maintenance of Cognex registrations,
contact with regulatory authorities including reporting requirements, responding
to customer complaints, sales administration, shipping management, billing,
processing of returns, storage, responding to any regulatory inquiries or
investigations, responding to any customer complaints and communicating with
physicians in relation to the product. Warner-Lambert may terminate this
agreement if any person or entity acquires ownership or control of 50% or more
of the Company's common stock or acquires substantially all of the Company's
assets.
BRIDGE LOAN AGREEMENT
In conjunction with the product acquisitions discussed above, the Company
entered into an amended credit facility with LaSalle Bank that provided for
bridge financing of up to $13,000,000 to finance the Company's product
acquisitions. On April 14, 2000 the Company borrowed $9,500,000 under this
bridge loan for the Company's purchase of Ponstel. The Company intends to borrow
an additional $3,500,000 to purchase Cognex if the Cognex transaction is closed
prior to conclusion of the Company's public offer of common stock. Borrowings
under the bridge loan bear interest at the Company's choice of the prime rate of
LIBOR plus 1.5% and in the event that the bridge loan is not paid in full within
six months thereafter the loan shall bear interest at the Company's choice of
prime rate or LIBOR plus 2.0%. Interest on the bridge loan is payable monthly
beginning on May 1, 2000. Borrowings under the bridge loan mature upon the
Company's receipt of proceeds from a public offering of the Company's common
stock and no later than April 14, 2001. In the event that the Company does not
complete a public offering within six months, the Company shall make monthly
principal installments of $150,000 commencing October 30, 2000 through May 2,
2001, with the remaining outstanding balance at that point in time due as a
balloon payment.
F-22
<PAGE> 89
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED) -- (CONTINUED)
Under the terms of the bridge loan agreement, the Company must maintain a
minimum net worth plus subordinated debt of $3,300,000 plus 75% of net income, a
ratio of liabilities to net worth plus subordinated debt after the conclusion of
the Company's public offering of common stock of 2.25 to 1.00, a minimum
specified EBITDA, ranging from $100,000 to $200,000 and a fixed charge coverage
ratio ranging from .75 to 1.00 to 1.25 to 1.00. The agreement limits the
Company's ability to incur additional indebtedness, and prohibits substantial
asset sales and cash dividends. Additionally the agreement amends the maturity
dates of the revolving loan agreement (Note 2) and the term note payable (Note
3) between LaSalle Bank and the Company to May 2, 2001. In addition to the
collateral assigned under the original agreements with LaSalle Bank, the Company
pledged, as collateral for the bridge loan, a security interest in the Ponstel
trademarks to LaSalle Bank.
As additional collateral, for the bridge loan financing, John Kapoor (a
director of the Company) and his wife pledged a security interest in the
securities and investments of the Kapoor Children's 1992 Trust totaling $10
million. As consideration for the Pledge, the Company will pay the Kapoor
Children's Trust $100,000 per year, for as long as the pledge is in effect, and
all of the Trusts expenses incurred in connection with perfecting the security
interest.
INPHARMAKON COLLABORATION AGREEMENT
On May 3, 2000 the Company entered into an agreement with Inpharmakon
Corporation, a related party, to amend certain payment terms under the existing
product development agreement between Inpharmakon and the Company whereby the
Company must pay to Inpharmakon an additional $200,000 within thirty days of
completion of a public offering of the Company's common stock. In the event that
the Company does not complete a public offering of their common stock by October
20, 2000 the Company is obligated to pay Inpharmakon an additional $100,000 and
provided further that in the event the Company has not completed a public
offering of their common stock by April 20, 2001 the Company must pay an
additional $100,000 to Inpharmakon.
F-23
<PAGE> 90
3,800,000 SHARES
(1ST HORIZON LOGO)
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
CHASE H&Q
BANC OF AMERICA SECURITIES LLC
THOMAS WEISEL PARTNERS LLC
-----------------------
, 2000
-----------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
UNTIL , 2000 (25 DAYS AFTER COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT BUY, SELL, OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts are estimates except for
the registration fee, the Nasdaq listing fee and the NASD filing fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ------
<S> <C>
Registration fee............................................ $ 16,152
Nasdaq National Market listing fee.......................... 83,875
NASD filing fee............................................. 6,618
Blue sky qualification fees and expenses.................... 5,000
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 328,355
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 25,000
----------
Total............................................. $1,000,000
==========
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, the Registrant's Restated Certificate of
Incorporation provides that no director of the Registrant will be personally
liable to the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of duty of
loyalty to First Horizon or to its stockholders, (b) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for
any transaction from which the director derived an improper personal benefit.
The Registrant's Restated Certificate of Incorporation further provides that the
Registrant must indemnify its directors and executive officers and may indemnify
its other officers and employees and agents to the fullest extent permitted by
Delaware law. The Registrant maintains a policy of directors and officers
insurance that provides insurance against certain expenses and liabilities which
may be incurred by directors and officers.
The Underwriting Agreement (Exhibit 1) will provide for indemnification by
the underwriters of the Registrant, its directors, its officers who sign the
registration statement, and the Registrant's controlling persons for certain
liabilities, including liabilities arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, the Registrant has sold or issued the
following unregistered securities:
(1) As of December 8, 1999, the Registrant issued an aggregate of
558,395 shares of its common stock for an aggregate consideration of
$1,744,984 to an accredited investor pursuant to the conversion of a
convertible promissory note issued to such accredited investor as of
January 11, 1999.
(2) As of December 7, 1998, the Registrant made effective a four for
one stock split with respect to its issued and outstanding common stock.
II-1
<PAGE> 92
(3) As of April 20, 1998, the Registrant issued 10,000 shares of its
common stock for an aggregate consideration of $6,250 to an employee
pursuant to the exercise of its stock option.
(4) As of June 30, 1997, the Registrant issued 560,000 shares of its
common stock for an aggregate consideration of $350,000 to one accredited
investor.
(5) At various times during the relevant three-year time period, the
Registrant issued to certain employees and consultants options to purchase
in the aggregate up to 1,725,500 shares of its common stock at exercise
prices ranging from $0.50 to $2.65 per share.
Exemption from the registration provisions of the Securities Act for the
transaction described in paragraph 2 above was claimed on the basis that such
transaction did not constitute an "offer," "offer to sell," "sale," or "offer to
buy" under Section 5 of the Securities Act. Exemption from the registration
provisions of the Securities Act for the other transactions described above was
claimed under Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder on the basis that such transaction did not involve any
public offering, the purchasers were sophisticated with access to the kind of
information registration would provide and that such purchasers acquired such
securities without a view towards distribution thereof. In addition, exemption
from the registration provisions of the Securities Act for the transactions
described in paragraphs 3 and 5 was claimed under Section 3(b) of the Securities
Act on the basis that such securities were sold pursuant to a written
compensatory benefit plans or pursuant to a written contract relating to
compensation and not for capital raising purposes under Rule 701 of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this
registration statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
1+ -- Form of Underwriting Agreement
3.1* -- Restated Certificate of Incorporation of the Registrant
3.2* -- Amended and Restated Bylaws of the Registrant
4.1** -- Form of Stock Certificate
4.2+ -- Amended and Restated Loan and Security Agreement dated as of
December 22, 1998 between the Registrant and LaSalle Bank
National Association
4.3+ -- First Amendment to Amended and Restated Loan and Security
Agreement dated as of May 10, 1999 between the Registrant
and LaSalle Bank National Association
4.4+ -- Second Amendment to Amended and Restated Loan and Security
Agreement dated as of January 2, 2000 between the Registrant
and LaSalle Bank National Association
4.5+ -- Third Amendment to Amended and Restated Loan and Security
Agreement dated as of April 14, 2000 between the Registrant
and LaSalle Bank National Association
4.6+ -- Reimbursement Agreement dated April 14, 2000 between the
Registrant and Kapoor Children's 1992 Trust
5** -- Opinion of Arnall Golden & Gregory, LLP
10.1* -- 1997 Non-Qualified Stock Option Plan
10.2* -- 2000 Stock Plan
10.3* -- Form of Nonqualified Stock Option Agreement
</TABLE>
II-2
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
10.4* -- Form of Employment Agreement dated as of January 1, 2000
between the Registrant and certain of its executive officers
10.5* -- Convertible Term Loan Note dated January 11, 1999 made by
the Registrant for the benefit of Kapoor Pharma Investments,
L.P., as amended by Amendment No. 1 to the Convertible Term
Note dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.6* -- Convertible Term Note Agreement dated January 11, 1999
between the Registrant and Kapoor Pharma Investments, L.P.,
as amended by Amendment No. 1 to the Convertible Term Note
dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.7* -- Lease Agreement dated June 28, 1998 between the Registrant
and ASC North Fulton Associates Joint Venture
10.8*** -- Product Development and Supply Agreement dated March 25,
1999 between the Registrant and Penwest Pharmaceuticals Co.
10.9*** -- Collaboration Agreement dated October 31, 1998 between the
Registrant and Inpharmakon Corporation
10.10*** -- Exclusive Patent License Agreement dated January 1, 2000
between the Registrant and Jame Fine Chemicals, Inc.
10.11*** -- Exclusive Distribution Agreement dated January 1, 1996
between the Registrant and Unisource, Inc.
10.12*** -- Manufacturing and Supply Agreement dated April 23, 1999
between the Registrant and Mikart, Inc.
10.13*** -- Product Supply Agreement dated January 29, 1999 between the
Registrant and American Home Products Corporation
10.14*** -- License Agreement dated January 29, 1999 between the
Registrant and American Home Products Corporation
10.15*** -- Distribution Agreement dated July 22, 1999 between the
Registrant and G. Pohl-Boskamp GmbH & Co.
10.16* -- Form of Indemnity Agreement between the Registrant and its
directors and executive officers
10.17***+ -- Asset Purchase Agreement dated April 10, 2000 between the
Registrant and Warner-Lambert Company
10.18***+ -- Supply Agreement dated April 14, 2000 between the Registrant
and Warner-Lambert Company
10.19***+ -- Asset Purchase Agreement dated April 14, 2000 between the
Registrant and Warner-Lambert Company
10.20+ -- Amendment No. 1 to the Product Development and Supply
Agreement, dated May 3, 2000 between the Registrant and
Penwest Pharmaceuticals Co.
10.21***+ -- Amendment to the Collaboration Agreement, dated May 3, 2000
between the Registrant and Inpharmakon Corporation
23.1+ -- Consent of Arthur Andersen LLP
23.2** -- Consent of Arnall Golden & Gregory, LLP (included in Exhibit
5)
</TABLE>
II-3
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
24.1* -- Powers of Attorney
24.2+ -- Power of Attorney (included on page II-6)
27 + -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Previously filed
** To be filed by amendment
*** First Horizon has requested confidential treatment for certain portions of
this exhibit pursuant to Rule 406 of the Securities Act of 1933, as
amended.
+ Filed herewith
(b) The following is the schedule filed as a part of the registration
statement: Schedule II -- Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide the underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 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 governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 95
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement on Form S-1 to be signed
on its behalf by the undersigned, in the City of Roswell, State of Georgia on
the 4th day of May, 2000.
FIRST HORIZON PHARMACEUTICAL CORPORATION
By: /s/ R. BRENT DIXON
---------------------------------------
R. Brent Dixon
President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MAHENDRA G. SHAH, PH.D.* Chairman of the Board and Chief May 4, 2000
- --------------------------------------------- Executive Officer (principal
Mahendra G. Shah, Ph.D. executive officer)
/s/ R. BRENT DIXON President and Director May 4, 2000
- ---------------------------------------------
R. Brent Dixon
/s/ JOHN. N. KAPOOR, PH.D.* Director May 4, 2000
- ---------------------------------------------
John. N. Kapoor, Ph.D.
/s/ BALAJI VENKATARAMAN* Vice President and Chief Financial May 4, 2000
- --------------------------------------------- Officer (principal financial and
Balaji Venkataraman accounting officer)
/s/ JON S. SAXE* Director May 4, 2000
- ---------------------------------------------
Jon S. Saxe
*By:/s/ R. BRENT DIXON
--------------------------------------
R. Brent Dixon
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 96
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Pierre Lapalme constitutes and appoints
R. Brent Dixon and Balaji Venkataraman, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, any related registration statement filed
pursuant to Rule 462 promulgated pursuant to the Securities Act, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, 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 might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed below by the following person in the capacity
and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PIERRE LAPALME Director May 4, 2000
- ---------------------------------------------
Pierre Lapalme
</TABLE>
II-6
<PAGE> 97
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Horizon Pharmaceutical Corporation:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of FIRST HORIZON PHARMACEUTICAL
CORPORATION (formerly Horizon Pharmaceutical Corporation, a Delaware
corporation) included in this registration statement and have issued our report
thereon dated February 17, 2000. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The schedule
located in this registration statement at item 16(b) is the responsibility of
the company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 17, 2000
II-7
<PAGE> 98
SCHEDULE II
FIRST HORIZON PHARMACEUTICAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS BALANCE
-------------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1997 Allowance for doubtful accounts $ -- $ 25,924 $ -- $ (12,674) $ 13,250
Allowance for customer returns 100,000 38,289 -- (38,289) 100,000
1998 Allowance for doubtful accounts 13,250 40,714 (18,569) 35,395
Allowance for customer returns 100,000 80,994 (40,994) 140,000
1999 Allowance for doubtful accounts 35,395 51,493 (31,105) 55,783
Allowance for customer returns 140,000 366,904 (234,481) 272,423
Allowance for product rebates -- 1,294,072 (442,824) 851,248
</TABLE>
II-8
<PAGE> 99
EXHIBIT INDEX
The following is a list of exhibits filed as a part of this registration
statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------
<C> <C> <S>
1+ -- Form of Underwriting Agreement
3.1* -- Restated Certificate of Incorporation of the Registrant.
3.2* -- Amended and Restated By-Laws of the Registrant.
4.1** -- Form of Stock Certificate
4.2+ -- Amended and Restated Loan and Security Agreement dated as of
December 22, 1998 between the Registrant and LaSalle Bank
National Association
4.3+ -- First Amendment to Amended and Restated Loan and Security
Agreement dated as of May 10, 1999 between the Registrant
and LaSalle Bank National Association
4.4+ -- Second Amendment to Amended and Restated Loan and Security
Agreement dated as of January 2, 2000 between the Registrant
and LaSalle Bank National Association
4.5+ -- Third Amendment to Amended and Restated Loan and Security
Agreement dated as of April 14, 2000 between the Registrant
and LaSalle Bank National Association
4.6+ -- Reimbursement Agreement dated April 14, 2000 between the
Registrant and the Kapoor Children's 1992 Trust
5** -- Opinion of Arnall Golden & Gregory, LLP
10.1* -- 1997 Non-Qualified Stock Option Plan
10.2* -- 2000 Stock Plan
10.3* -- Form of Nonqualified Stock Option Agreement
10.4* -- Form of Employment Agreement dated as of January 1, 2000
between the Registrant and certain of its executive officers
10.5* -- Convertible Term Loan Note dated January 11, 1999 made by
the Registrant for the benefit of Kapoor Pharma Investments,
L.P., as amended by Amendment No. 1 to the Convertible Term
Note dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.6* -- Convertible Term Note Agreement dated January 11, 1999
between the Registrant and Kapoor Pharma Investments, L.P.,
as amended by Amendment No. 1 to the Convertible Term Note
dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.7* -- Lease Agreement dated June 28, 1998 between the Registrant
and ASC North Fulton Associates Joint Venture
10.8*** -- Product Development and Supply Agreement, dated March 25,
1999 between the Registrant and Penwest Pharmaceuticals Co.
10.9*** -- Collaboration Agreement dated October 31, 1998 between the
Registrant and Inpharmakon Corporation
10.10*** -- Exclusive Patent License Agreement dated January 1, 2000
between the Registrant and Jame Fine Chemicals, Inc.
10.11*** -- Exclusive Distribution Agreement, dated January 1, 1996,
between the Registrant and Unisource, Inc.
</TABLE>
II-9
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------
<C> <C> <S>
10.12*** -- Manufacturing and Supply Agreement, dated April 23, 1999,
between the Registrant and Mikart, Inc.
10.13*** -- Product Supply Agreement, dated January 29, 1999, between
the Registrant and American Home Products Corporation
10.14*** -- License Agreement, dated January 29, 1999, between the
Registrant and American Home Products Corporation
10.15*** -- Distribution Agreement dated July 22, 1999 between the
Registrant and G. Pohl-Boskamp GmbH & Co.
10.16* -- Form of Indemnity Agreement between the Registrant and its
directors and executive officers
10.17***+ -- Asset Purchase Agreement dated April 10, 2000 between the
Registrant and Warner-Lambert Company
10.18***+ -- Supply Agreement dated April 14, 2000 between the Registrant
and Warner-Lambert Company
10.19***+ -- Asset Purchase Agreement dated April 14, 2000 between the
Registrant and Warner-Lambert Company
10.20+ -- Amendment No. 1 to the Product Development and Supply
Agreement, dated May 3, 2000 between the Registrant and
Penwest Pharmaceuticals Co.
10.21***+ -- Amendment to the Collaboration Agreement, dated May 3, 2000
between the Registrant and Inpharmakon Corporation
23.1+ -- Consent of Arthur Andersen LLP
23.2** -- Consent of Arnall Golden & Gregory, LLP (included in Exhibit
5)
24.1* -- Powers of Attorney
24.2+ -- Power of Attorney (included on page II-5)
27+ -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
*** First Horizon has requested confidential treatment for certain portions of
this exhibit pursuant to Rule 406 of the Securities Act of 1933, as amended.
+ Filed herewith
II-10
<PAGE> 1
EXHIBIT 1
5/3/00
FIRST HORIZON PHARMACEUTICAL CORPORATION
3,800,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
___________ __, 2000
Chase Securities Inc.
Banc of America Securities LLC
Thomas Weisel Partners LLC
c/o Chase Securities Inc.
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
First Horizon Pharmaceutical Corporation, a Delaware corporation
(herein called the "Company"), proposes to issue and sell [3,800,000] shares of
its authorized but unissued Common Stock, $.001 par value (herein called the
"Common Stock") (said [3,800,000] shares of Common Stock being herein called
the "Underwritten Stock"). The Company proposes to grant to the Underwriters
(as hereinafter defined) an option to purchase up to [570,000] additional
shares of Common Stock (herein called the "Option Stock", and with the
Underwritten Stock, herein collectively called the "Stock"). The Common Stock
is more fully described in the Registration Statement and the Prospectus
hereinafter mentioned and defined.
The Company hereby confirms the agreements made with respect to the
purchase of the Stock by the several underwriters, for whom you are acting,
named in Schedule I hereto (herein collectively called the "Underwriters,"
which term shall also include any underwriter purchasing Stock pursuant to
Section 3(b) hereof). You represent and warrant that you have been authorized
by each of the other Underwriters to enter into this Agreement on its behalf
and to act for it in the manner herein provided. Chase Securities Inc., Banc of
America Securities LLC and Thomas Weisel Partners have agreed to act as
representatives of the several Underwriters (in such
- --------
(1) Plus an option to purchase from the Company up to 570,000 additional
shares to cover over allotments.
<PAGE> 2
_____________, 2000
Page 2
capacity, the "Representatives") in connection with the offering and sale of
the Stock. As a part of this offering contemplated by this Agreement, Chase has
agreed to reserve out of the Stock set forth opposite its name on the Schedule
I to this Agreement, up to ______ shares, for sale to the Company's employees,
officers, directors, business associates and other parties associated with the
Company (collectively, "Participants"), as set forth in the Prospectus under
the heading "Underwriting" (the "Directed Share Program"). The shares of Stock
to be sold by Chase Securities Inc. pursuant to the Directed Share Program (the
"Directed Shares") will be sold by Chase Securities Inc. pursuant to this
Agreement at the public offering price. Any Directed Shares not orally
confirmed for purchase by any Participants as of 7:00 a.m. New York time on the
first day trading of the shares commences will be offered to the public by
Chase Securities Inc. as set forth in the Prospectus.
1. REGISTRATION STATEMENT. The Company has filed with the Securities
and Exchange Commission (herein called the "Commission") a registration
statement on Form S-1 (No. 333-30764), including the related Preliminary
Prospectus, for the registration under the Securities Act of 1933, as amended
(herein called the "Securities Act") of the Stock. Copies of such registration
statement and of each amendment thereto, if any, including the related
Preliminary Prospectus (meeting the requirements of Rule 430A of the rules and
regulations of the Commission) heretofore filed by the Company with the
Commission have been delivered to you.
The term "Registration Statement" as used in this agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a "Rule
462(b) Registration Statement"), and, in the event of any amendment thereto
after the effective date of such registration statement (herein called the
"Effective Date"), shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended (including any Rule 462(b)
Registration Statement). The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Stock first filed with the Commission
pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as
included in the Registration Statement) and, in the event of any supplement or
amendment to such prospectus after the Effective Date, shall also mean (from and
after the filing with the Commission of such supplement or the effectiveness of
such amendment) such prospectus as so supplemented or amended. The term
"Preliminary Prospectus" as used in this Agreement shall mean each Preliminary
Prospectus included in such registration statement prior to the time it becomes
effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
<PAGE> 3
_____________, 2000
Page 3
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each
Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each Preliminary Prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Stock. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Each Preliminary
Prospectus, as of its date, and the Prospectus, as amended or supplemented, as
of its date and at all subsequent times through the 30th day of the date
hereof, did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties set forth in the two immediately
preceding sentences do not apply to statements in or omissions from the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment thereto, or the Prospectus, or any Preliminary
Prospectus or any amendments or supplements thereto, made in reliance upon and
in conformity with information relating to any Underwriter furnished to the
Company in writing by the Representatives expressly for use therein. There are
no contracts or other documents required to be described in the Prospectus or
to be filed as exhibits to the Registration Statement which have not been
described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives three complete conformed copies of the
Registration Statement and three copies of each consent and certificate of
experts filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and Preliminary Prospectuses and the Prospectus,
as amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
<PAGE> 4
_____________, 2000
Page 4
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Closing Date
(as defined below) with respect to the Option Stock and the completion of the
Underwriters' distribution of the Stock, any offering material in connection
with the offering and sale of the Stock other than a Preliminary Prospectus,
the Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Stock. The Stock to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development, known to the Company or that could
reasonably have been expected to be known by the Company, that could reasonably
be expected to result in a material adverse change, in the condition, financial
or otherwise, or in the earnings, business, operations or prospects, whether or
not arising from transactions in the ordinary course of business, of the
Company (any such change or effect, where the context so requires, is called a
"Material Adverse Change" or a "Material Adverse Effect"); (ii) except as
disclosed in the Prospectus, the Company, has not incurred any material
liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not
in the ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or on any class
of capital stock or repurchase or redemption by the Company of any class of
capital stock.
(h) Independent Accountants. Arthur Andersen LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the Commission as
a part of the Registration Statement and included in the Prospectus and have
expressed their opinion with respect to the supporting schedules filed with the
Commission as part of the Registration Statement, are independent public or
certified public accountants as required by the Securities Act.
<PAGE> 5
_____________, 2000
Page 5
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the financial position of the Company as of
and at the dates indicated and the results of its operations and cash flows for
the periods specified. The supporting schedules included in the Registration
Statement present fairly in all material respects the information required to
be stated therein. Such financial statements and supporting schedules have been
prepared in conformity with generally accepted accounting principles as applied
in the United States, which principles have been applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules
are required to be included in the Registration Statement. The financial data
set forth in the Prospectus under the captions ["Summary--Summary Financial
Data", "Selected Financial Data" and "Capitalization"] fairly present the
information set forth therein on a basis consistent with that of the financial
statements contained in the Registration Statement.
(j) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as applied in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(k) Subsidiaries of the Company. The Company has no subsidiaries and
does not own or control, directly or indirectly, any corporation, association
or other entity.
(l) Incorporation and Good Standing of the Company. The Company has
been duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is organized with full corporate
power and authority to own its properties and conduct its business as described
in the prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction which
requires such qualification except where failure to be so qualified or in good
standing would not have a Material Adverse Effect.
(m) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options described in the
Prospectus). The Common Stock (including the Stock) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance
with federal and state securities laws. None of the outstanding Common Stock
were issued in violation of any preemptive rights, rights of first refusal or
other similar rights to
<PAGE> 6
_____________, 2000
Page 6
subscribe for or purchase securities of the Company. There are no authorized or
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company other than
those accurately described in the Prospectus. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the
options or other rights granted thereunder, set forth in the Prospectus
accurately and fairly presents in all material respects the information
required to be shown with respect to such plans, arrangements, options and
rights.
(n) Stock Exchange Listing. The Stock has been approved for inclusion
on the Nasdaq National Market, subject only to official notice of issuance.
(o) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Stock by
the Underwriters in the manner contemplated herein and in the Prospectus, (ii)
by the National Association of Securities Dealers, LLC and (iii) by the federal
and provincial laws of Canada.
(p) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Stock nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation of or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to,
(i) the charter or by-laws of the Company, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which the
Company is a party or bound or to which its property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree applicable to the
Company of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or any
of its properties, which conflict, breach, violation or imposition, with
respect to (ii) and (iii) above, could reasonably be expected to have a
Material Adverse Effect.
(q) No Defaults or Violations. The Company is not in violation or
default of (i) any provision of its charter or by-laws, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject or (iii) any
statute, law, rule, regulation, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its properties, as
applicable, except any such violation or default which would not, singly or in
the aggregate, result in a Material Adverse Change except as otherwise
disclosed in the Prospectus.
<PAGE> 7
_____________, 2000
Page 7
(r) No Actions, Suits or Proceedings. No action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or its property is pending or, to the best knowledge of
the Company, threatened that (i) could reasonably be expected to have a
Material Adverse Effect on the performance of this Agreement or the
consummation of any of the transactions contemplated hereby or (ii) could
reasonably be expected to result in a Material Adverse Effect.
(s) All Necessary Permits, Etc. The Company possesses such valid and
current certificates, authorizations or permits issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary to conduct
its business, except where failure to secure such could not reasonably be
expected to have Material Adverse Effect and the Company has not received any
notice of proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, could result in a Material Adverse Change.
(t) Title to Properties. The Company has good and marketable title to
all the properties and assets reflected as owned in the financial statements
referred to in Section 2(i) above (or elsewhere in the Prospectus), in each
case free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property by the Company. The
real property, improvements, equipment and personal property held under lease
by the Company are held under valid and enforceable leases, with such
exceptions as are not material and do not materially interfere with the use
made or proposed to be made of such real property, improvements, equipment or
personal property by the Company.
(u) Tax Law Compliance. The Company has filed all necessary federal,
state and foreign income and franchise tax returns or has properly requested
extensions thereof and has paid all taxes required to be paid, if due and
payable, by it and, if due and payable, any related or similar assessment, fine
or penalty levied against it, except as may be being contested in good faith
and by appropriate proceedings. The Company has made adequate charges, accruals
and reserves in the applicable financial statements referred to in Section 2(i)
above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company has not been
finally determined. The Company is not aware of any tax deficiency that has
been or might be asserted or threatened against the Company that could result
in a Material Adverse Change.
(v) Intellectual Property Rights. The Company owns or possesses
adequate rights to use all patents, patent rights or licenses, inventions,
collaborative research agreements, trade secrets, know-how, trademarks, service
marks, trade names and copyrights which are necessary to conduct its business
as described in the Registration Statement and Prospectus; the expiration of
any patents, patent rights, trade secrets, trademarks, service marks, trade
names or
<PAGE> 8
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Page 8
copyrights would not reasonably be expected to result in a Material Adverse
Change that is not otherwise disclosed in the Prospectus; the Company has not
received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of the Company by others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights; and the Company has not received any notice
of, and has no knowledge of, any infringement of or conflict with asserted
rights of others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would reasonably be expected to cause a Material Adverse Change.
There is no claim being made against the Company regarding patents, patent
rights or licenses, inventions, collaborative research, trade secrets,
know-how, trademarks, service marks, trade names or copyrights. The Company
does not in the conduct of its business as now or proposed to be conducted as
described in the Prospectus infringe or conflict with any right or patent of
any third party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the Company,
which such infringement or conflict is reasonably likely to result in a
Material Adverse Change.
(w) Year 2000 Preparedness. There are no issues related to the
Company's Year 2000 preparedness that (i) are of a character required to be
described or referred to in the Registration Statement or Prospectus by the
Securities Act which have not been accurately described in the Registration
Statement or Prospectus or (ii) might reasonably be expected to result in any
Material Adverse Change or that might materially affect its properties, assets
or rights.
(x) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or
any political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the
Company of the Stock.
(y) Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt
of payment for the Stock will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not
become subject to the Investment Company Act.
(Z) Insurance. The Company is insured by insurers of recognized
financial responsibility with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for its business including, but not limited to, policies covering
real and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and earthquakes, general liability and
Directors and Officers liability. The Company has no reason to believe that it
will not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable
<PAGE> 9
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Page 9
coverage from similar institutions as may be necessary or appropriate to
conduct its business as now conducted and at a cost that would not result in a
Material Adverse Change. The Company has not been denied any insurance coverage
which it has sought or for which it has applied.
(aa) Labor Matters. To the best of the Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers or manufacturers that might be
expected to result in a Material Adverse Change.
(bb) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Stock.
(cc) Lock-Up Agreements. Each officer and director of the Company and
each beneficial owner of [_____ or more percent] of the outstanding issued
share capital of the Company has agreed to sign an agreement substantially in
the form attached hereto as Exhibit A (the "Lock-up Agreements"). The Company
has provided to counsel for the Underwriters a complete and accurate list of
all securityholders of the Company and the number and type of securities held
by each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the Lock-up
Agreements presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers, directors
or other stockholders from any Lock-up Agreements currently existing or
hereafter effected without the prior written consent of Chase Securities Inc.
(dd) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any other person
required to be described in the Prospectus which have not been described as
required.
(ee) No Unlawful Contributions or Other Payments. Neither the Company
nor, to the best of the Company's knowledge, any employee or agent of the
Company, has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any law or
of the character required to be disclosed in the Prospectus.
(ff) Environmental Laws. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its business, except where the
failure to comply would not result in a Material Adverse Change, (ii) the
Company has received no notice from any governmental authority or third party
of an asserted claim under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus, (iii) the Company
is not currently aware that it will be required to make future material capital
expenditures to comply with Environmental Laws and
<PAGE> 10
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Page 10
(iv) no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et
seq.), or otherwise designated as a contaminated site under applicable state or
local law.
(gg) Periodic Review of Costs of Environmental Compliance. In the
ordinary course of its business, the Company conducts a periodic review of the
effect of Environmental Laws on the business, operations and properties of the
Company, in the course of which it identifies and evaluates associated costs
and liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties). On the
basis of such review and the amount of its established reserves, the Company
has reasonably concluded that such associated costs and liabilities would not,
individually or in the aggregate, result in a Material Adverse Change.
(hh) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or its "ERISA Affiliates"
(as defined below) are in compliance in all material respects with ERISA.
"ERISA Affiliate" means, with respect to the Company, any member of any group
of organizations described in Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company, or any of its ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfounded benefit liabilities" (as defined under ERISA). Neither the Company
nor any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975
or 4980B of the Code. Each "employee benefit plan" established or maintained by
the Company or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification, except where failure to maintain such qualification would not
have a Material Adverse Effect.
(ii) Consents Required in Connection with the Directed Share Program.
No consent, approval, authorization or order of, or qualification with, any
governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.
<PAGE> 11
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Page 11
(jj) No Improper Influence in Connection with the Directed Share
Program. The Company has not offered, or caused Chase Securities Inc. to offer,
Stock to any person pursuant to the Directed Share Program with the specific
intent to unlawfully influence (i) a customer or supplier of the Company to
alter the customer's or supplier's level or type of business with the Company
or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters in connection with the
terms of this Agreement shall be deemed to be a representation and warranty by
the Company to each Underwriter as to the matters set forth therein.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
shares of the Underwritten Stock to the several Underwriters and each of the
Underwriters agrees to purchase from the Company the respective aggregate
number of shares of Underwritten Stock set forth opposite its name in Schedule
I. The price at which such shares of Underwritten Stock shall be sold by the
Company and purchased by the several Underwriters shall be $___ per share. In
making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company shall immediately give notice thereof
to you, and the non-defaulting Underwriters shall have the right within 24
hours after the receipt by you of such notice to purchase, or procure one or
more other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the shares of the Stock which such
defaulting Underwriter or Underwriters agreed to purchase. If the
non-defaulting Underwriters fail so to make such arrangements with respect to
all such shares and portion, the number of shares of the Stock which each
non-defaulting Underwriter is otherwise obligated to purchase under this
Agreement shall be automatically increased on a pro rata basis to absorb the
remaining shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting Underwriters
shall not be obligated to purchase the shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
shares of the Stock exceeds 10% of the total number of shares of the Stock
which all Underwriters agreed to purchase hereunder. If the total number of
shares of the Stock which the defaulting Underwriter or Underwriters agreed to
purchase shall not be purchased or absorbed in accordance with the two
preceding sentences, the
<PAGE> 12
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Page 12
Company shall have the right, within 24 hours next succeeding the 24-hour
period above referred to, to make arrangements with other underwriters or
purchasers satisfactory to you for purchase of such shares and portion on the
terms herein set forth. In any such case, either you or the Company shall have
the right to postpone the Closing Date determined as provided in Section 5
hereof for not more than seven business days after the date originally fixed as
the Closing Date pursuant to said Section 5 in order that any necessary changes
in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company shall make arrangements within the 24-hour periods stated above for the
purchase of all the shares of the Stock which the defaulting Underwriter or
Underwriters agreed to purchase hereunder, this Agreement shall be terminated
without further act or deed and without any liability on the part of the
Company to any Underwriter and without any liability on the part of any
Underwriter to the Company. Nothing in this paragraph (b), and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase, severally and
not jointly, up to [570,000] shares in the aggregate of the Option Stock from
the Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-allotments
in the sale of the Underwritten Stock by the Underwriters and may be exercised
in whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of
the Option Stock as to which the several Underwriters are exercising the
option. Delivery of certificates for the shares of Option Stock, and payment
therefor, shall be made as provided in Section 5 hereof. The number of shares
of the Option Stock to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Stock to be purchased by
the several Underwriters as such Underwriter is purchasing of the Underwritten
Stock, as adjusted by you in such manner as you deem advisable to avoid
fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of
the Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front cover
page and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters and paragraphs - under
"Underwriting") constitutes the only information furnished by the Underwriters
to the Company for inclusion in the Registration Statement, any
<PAGE> 13
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Page 13
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company that the statements made
therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock
and (if the option granted by Section 3(c) hereof shall have been exercised not
later than 7:00 A.M., San Francisco time, on the date two business days
preceding the Closing Date) the Option Stock, and payment therefor, shall be
made at the office of Arnall Golden & Gregory, LLP, 2800 One Atlantic Center,
1201 West Peachtree Street, Atlanta, GA 30309, at 7:00 a.m., San Francisco
time, (i) on the third (3rd) full business day following the first day that the
Stock is traded, (ii) on the fourth business day after the date of this
Agreement, or (iii) at such time on such other day, not later than seven full
business days after the first day the Stock is traded, as shall be agreed upon
in writing by the Company and you. The date and hour of such delivery and
payment (which may be postponed as provided in Section 3(b) hereof) are herein
called the "Closing Date."
(b) If the option granted by Section 3(c) hereof shall be exercised
after 7:00 a.m., San Francisco time, on the date two business days preceding
the Closing Date for the Underwritten Stock, delivery of certificates for the
shares of Option Stock, and payment therefor, shall be made at the office of
Arnall Golden & Gregory, LLP, 2800 One Atlantic Center, 1201 West Peachtree
Street, Atlanta, GA 30309, at 7:00 a.m., San Francisco time, on the third
business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to
the Company or its order by one or more certified or official bank check or
checks or, at the Company's option, by wire transfer in same day funds. Such
payment shall be made upon delivery of certificates for the Stock to you for
the respective accounts of the several Underwriters against receipt therefor
signed by you. Certificates for the Stock to be delivered to you shall be
registered in such name or names and shall be in such denominations as you may
request at least one business day before the Closing Date, in the case of
Underwritten Stock, and at least one business day prior to the purchase
thereof, in the case of the Option Stock. Such certificates will be made
available to the Underwriters for inspection, checking and packaging at the
offices of Lewco Securities Corporation, 2 Broadway, New York, New York 10004
on the business day prior to the Closing Date or, in the case of the Option
Stock, by 3:00 p.m., New York time, on the business day preceding the date of
purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for Stock to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date for the Underwritten Stock or any later
date on which Option Stock is purchased for the account of such Underwriter.
Any such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
<PAGE> 14
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Page 14
6. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and
agrees as follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A,
if any, and (ii) not file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been
advised and furnished with a copy or to which you shall have reasonably
objected in writing or which is not in compliance with the Securities Act or
the rules and regulations of the Commission.
(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration Statement
or for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement, (iii) the institution or notice of intended
institution of any action or proceeding for that purpose, (iv) the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Stock for sale in any jurisdiction, or (v) the receipt by
it of notice of the initiation or threatening of any proceeding for such
purpose. The Company will make every reasonable effort to prevent the issuance
of such a stop order and, if such an order shall at any time be issued, to
obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you
a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus
as you may reasonably request, and (iii) thereafter from time to time during
the period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of
counsel for the Company or of counsel for the Underwriters, to
<PAGE> 15
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Page 15
supplement or amend the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser of the Stock, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus so that the Prospectus as so supplemented or amended will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading. If, after the initial public offering of the Stock
by the Underwriters and during such period, the Underwriters shall propose to
vary the terms of offering thereof by reason of changes in general market
conditions or otherwise, you will advise the Company in writing of the proposed
variation, and, if in the opinion either of counsel for the Company or of
counsel for the Underwriters such proposed variation requires that the
Prospectus be supplemented or amended, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the
several Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as you may reasonably designate and, during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, in keeping such qualifications in good standing under
said securities or blue sky laws; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to qualify as
a foreign corporation in any jurisdiction in which it is not so qualified. The
Company will, from time to time, prepare and file such statements, reports, and
other documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for distribution of
the Stock.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders
of the Company and of all information, documents and reports filed with the
Commission .
(h) Not later than the 45th [OR 90TH IF YEAR END] day following the
end of the fiscal quarter first occurring after the first anniversary of the
Effective Date, the Company will make generally available to its security
holders an earnings statement in accordance with Section 11(a) of the
Securities Act and Rule 158 thereunder.
<PAGE> 16
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(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. of the
Registration Statement, any Preliminary Prospectus and the Prospectus, (ii) the
furnishing to the Underwriters of copies of any Preliminary Prospectus and of
the several documents required by paragraph (c) of this Section 6 to be so
furnished, (iii) the printing of this Agreement and related documents delivered
to the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (d) of
this Section 6, (v) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph (g) of this Section 6 and (vi) the
printing and issuance of stock certificates, including the transfer agent's
fees.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
reasonable counsel fees and disbursements and cost of printing memoranda for
the Underwriters) paid by or for the account of the Underwriters or their
counsel in qualifying the Stock under state securities or blue sky laws and in
the review of the offering by the NASD.
(k) The Company will not without the prior written consent of Chase
Securities Inc., on behalf of the Underwriters, offer, sell or contract to
sell, or otherwise dispose of or enter into any transaction which is designed
to, or could be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other shares of Common Stock or
any securities convertible into, or exchangeable for, shares of Common Stock;
provided, however, that the Company may (i) issue and sell shares of Common
Stock pursuant to any stock option plan, stock ownership plan, stock purchase
plan or dividend reinvestment plan of the Company in effect at the date of the
Prospectus and described in the Prospectus so long as none of those shares may
be transferred and the Company shall enter stop transfer instructions with its
transfer agent and registrar against the transfer of any such Common Stock,
except with respect to shares of Common Stock issued pursuant to the Company's
stock purchase plan and except with respect to up to [45,000] shares of Common
Stock issued pursuant to any Company stock option plan (provided, that, with
respect to the holders of options to purchase shares of Common Stock issued
pursuant to such stock option plan, the Company shall use all reasonable
efforts to cause such option holders to execute a Lock-up Agreement), and (ii)
the Company may issue shares of Common Stock issuable upon the conversion of
securities or the exercise of warrants outstanding at the date of the
Prospectus and described in the Prospectus. These restrictions terminate after
the close of trading of the Stock on the 180th day after (and including) the
day the Stock commenced trading on the Nasdaq National Market (the "Lock-Up
Period").
<PAGE> 17
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(l) The Company agrees to use its best efforts to cause all directors,
officers, and beneficial holders of more than [___%] of the outstanding Common
Stock to agree to execute a Lock-up Agreement.
(m) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding
to or commenting on such rumor, publication or event.
(n) The Company is familiar with the Investment Company Act of 1940,
as amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(o) The Company (i) will comply with all applicable securities and
other applicable laws, rules and regulations in each jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program and
(ii) will pay all reasonable fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and any stamp
duties, similar taxes or duties or other taxes, if any, incurred by the
underwriters in connection with the Directed Share Program.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several,
to which such indemnified parties or any of them may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (herein called
the "Exchange Act"), or the common law or otherwise, and the Company agrees to
reimburse each such Underwriter and controlling person for any legal or other
expenses (including, except as otherwise hereinafter provided, reasonable fees
and disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b)
<PAGE> 18
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Page 18
registration statement) or any post-effective amendment thereto (including any
Rule 462(b) registration statement), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus or the Prospectus (as amended or as supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that (1) the indemnity agreements of the Company contained in this paragraph
(a) shall not apply to any such losses, claims, damages, liabilities or
expenses if such statement or omission was made in reliance upon and in
conformity with information furnished as herein stated or otherwise furnished
in writing to the Company by or on behalf of any Underwriter for use in any
Preliminary Prospectus or the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto and (2) the indemnity agreement
contained in this paragraph (a) with respect to any Preliminary Prospectus
shall not inure to the benefit of any Underwriter from whom the person
asserting any such losses, claims, damages, liabilities or expenses purchased
the Common Stock which is the subject thereof (or to the benefit of any person
controlling such Underwriter) if at or prior to the written confirmation of the
sale of such Stock a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person and the untrue statement
or omission of a material fact contained in such Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented)
unless the failure is the result of noncompliance by the Company with paragraph
(c) of Section 6 hereof. The indemnity agreements of the Company contained in
this paragraph (a) and the representations and warranties of the Company
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Common Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each
other Underwriter and each person (including each partner or officer thereof)
who controls the Company within the meaning of Section 15 of the Securities
Act, from and against any and all losses, claims, damages or liabilities, joint
or several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or the common law or otherwise and
to reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement)
<PAGE> 19
_____________, 2000
Page 19
or any post-effective amendment thereto (including any Rule 462(b) registration
statement) or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated or otherwise
furnished in writing to the Company by or on behalf of such indemnifying
Underwriter for use in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the "Notice")
of such service or notification to the party or parties from whom
indemnification may be sought hereunder. No indemnification provided for in
such paragraphs shall be available to any party who shall fail so to give the
Notice if the party to whom such Notice was not given was prejudiced by the
failure to give the Notice, but the omission so to notify such indemnifying
party or parties of any such service or notification shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of such
indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding
against, or investigation or inquiry of, an indemnified party. Any indemnifying
party shall be entitled, if it so elects within a reasonable time after receipt
of the Notice by giving written notice (herein called the Notice of Defense) to
the indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then one counsel for the indemnified party or
parties shall be entitled to conduct the defense to the extent
<PAGE> 20
_____________, 2000
Page 20
reasonably determined by such counsel to be necessary to protect the interests
of the indemnified party or parties and (ii) in any event, the indemnified
party or parties shall be entitled to have counsel chosen by such indemnified
party or parties participate in, but not conduct, the defense. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and the counsel chosen by the indemnifying party or parties
is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) through
(c) of this Section 7 for any legal or other expenses subsequently incurred by
the indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the indemnifying
party or parties shall bear the reasonable legal and other expenses incurred in
connection with the conduct of the defense as referred to in clause (i) of the
proviso to the preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expense of more than one
separate counsel (together with local counsel) with the reasonable approval of
and (B) the indemnifying party or parties shall bear such other expenses as it
or they have authorized to be incurred by the indemnified party or parties. If,
within a reasonable time after receipt of the Notice, no Notice of Defense has
been given, the indemnifying party or parties shall be responsible for any
reasonable legal or other expenses incurred by the indemnified party or parties
in connection with the defense of the action, suit, investigation, inquiry or
proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Underwriters shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Stock received
by the Company and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price of the Stock. Relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by each indemnifying
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into
<PAGE> 21
_____________, 2000
Page 21
account the equitable considerations referred to in the first sentence of this
paragraph (d). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities, or actions in respect thereof, referred
to in the first sentence of this paragraph (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigation, preparing to defend or defending against any
action or claim which is the subject of this paragraph (d). Notwithstanding the
provisions of this paragraph (d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Stock purchased by such Underwriter. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this paragraph
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in paragraph (c) of this Section 7).
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or
proceeding.
(F) The Company agrees to indemnify and hold harmless Chase Securities
and its affiliates and each person, if any, who controls Chase Securities or
its affiliates within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act ("Chase Securities Entities"), from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) (i) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
material prepared by or with the consent of the Company for distribution to
Participants in connection with the Directed Share Program, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (ii)
the failure of any Participant to pay for and accept delivery of Directed
Shares that the Participant has agreed to purchase; or (iii) related to,
arising out of, or in connection with the Directed Share Program
<PAGE> 22
_____________, 2000
Page 22
other than losses, claims, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the bad
faith or gross negligence of Chase Securities Entities.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date for the Underwritten Stock by giving written notice
to the Company if after the date of this Agreement trading in the Common Stock
shall have been suspended, or if there shall have occurred (i) the engagement
in hostilities or an escalation of major hostilities by the United States or
the declaration of war or a national emergency by the United States on or after
the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in
the Underwriters' reasonable judgment, make the offering or delivery of the
Stock impracticable, (iii) suspension of trading in securities generally or a
material adverse decline in value of securities generally on the New York Stock
Exchange, the American Stock Exchange, The Nasdaq Stock Market, or limitations
on prices (other than limitations on hours or numbers of days of trading) for
securities on either such exchange or system, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Underwriters' reasonable opinion materially and adversely affects or will
materially or adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company to the
Underwriters and no liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company under this
Agreement, including all costs and expenses referred to in paragraphs (i) and
(j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all its obligations to be performed hereunder at
or prior to the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
<PAGE> 23
_____________, 2000
Page 23
(b) The legality and sufficiency of the sale of the Stock hereunder
and the validity and form of the certificates representing the Stock, all
corporate proceedings and other legal matters incident to the foregoing, and
the form of the Registration Statement and of the Prospectus (except as to the
financial statements contained therein), shall have been approved at or prior
to the Closing Date by Testa, Hurwitz & Thibeault, LLP, counsel for the
Underwriters.
(c) You shall have received from each of Arnall Golden & Gregory, LLP,
counsel for the Company, and from Jones & Askew LLP, patent counsel for the
Company, an opinion, addressed to the Underwriters and dated the Closing Date,
covering the matters set forth in Annex A and Annex B hereto, respectively, and
if Option Stock is purchased at any date after the Closing Date, additional
opinions from each such counsel, addressed to the Underwriters and dated such
later date, confirming that the statements expressed as of the Closing Date in
such opinions remain valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such
a supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
(iv) the Company does not have any material contingent obligations which are
not disclosed in the Registration Statement and the Prospectus, (v) there are
not any pending or known threatened legal proceedings to which the Company is a
party or of which property of the Company or any of its subsidiaries is the
subject which are material and which are not disclosed in the Registration
Statement and the Prospectus, (vi) there are not any franchises, contracts,
leases or other documents which are required to be filed as exhibits to the
Registration Statement which have not been filed as required, and (vii) the
representations and warranties of the Company herein are true and correct in
all material respects as of the Closing Date or any later date on which Option
Stock is to be purchased, as the case may be, and (viii) there has not been any
material change in the market for securities in general or in political,
financial or economic conditions from those reasonably foreseeable as to render
it impracticable in your reasonable judgment to make a public offering of the
Stock, or a material adverse change in market levels for securities in general
(or those of companies in particular) or financial or economic conditions which
render it inadvisable to proceed.
<PAGE> 24
_____________, 2000
Page 24
(e) You shall have received on the Closing Date and on any later date
on which Option Stock is purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (d) of this Section 9 are true and
correct.
(f) You shall have received from Arthur Andersen LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option Stock is purchased, confirming that they are independent
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder
and based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (herein called the "Original
Letter"), but carried out to a date not more than four business days prior to
the Closing Date or such later date on which Option Stock is purchased (i)
confirming, to the extent true, that the statements and conclusions set forth
in the Original Letter are accurate as of the Closing Date or such later date,
as the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of the Original Letter or to reflect the availability of more recent
financial statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company which, in your sole judgment, makes it
impractical or inadvisable to proceed with the public offering of the Stock or
the purchase of the Option Stock as contemplated by the Prospectus.
(g) You shall have received from Arthur Andersen LLP a letter stating
that their review of the Company's system of internal accounting controls, to
the extent they deemed necessary in establishing the scope of their examination
of the Company's financial statements as at [______________], did not disclose
any weakness in internal controls that they considered to be material
weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.
(i) Prior to the Closing Date for the Underwritten Stock, the Stock to
be issued and sold by the Company shall have been duly authorized for listing
by the Nasdaq National Market upon official notice of issuance.
<PAGE> 25
_____________, 2000
Page 25
(j) The Company shall have obtained and delivered to you an executed
Lock-up Agreement from each officer and director of the Company, and each
beneficial owner of [__________ OR MORE PERCENT] of the outstanding issued
share capital of the Company.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Testa, Hurwitz & Thibeault, LLP, counsel for the
Underwriters, shall be reasonably satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company;
provided, however, that (i) in the event of such termination, the Company
agrees to indemnify and hold harmless the Underwriters from all costs or
expenses incident to the performance of the obligations of the Company under
this Agreement, including all costs and expenses referred to in paragraphs (i)
and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein, to fulfill any of the conditions herein, or to
comply with any provision hereof other than by reason of a default by any of
the Underwriters, the Company will reimburse the Underwriters severally upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of the
Company to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall
not be fulfilled, this Agreement may be terminated by the Company by giving
notice to you. Any such termination shall be without liability of the Company
to the Underwriters and without liability of the Underwriters to the Company;
provided, however, that in the event of any such termination the Company agrees
to indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company under this
Agreement, including all costs and expenses referred to in paragraphs (i) and
(j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to its other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in paragraph (a) of Section 7 of this Agreement, notwithstanding the
absence of a judicial
<PAGE> 26
_____________, 2000
Page 26
determination as to the propriety and enforceability of the obligations under
this Section 11 and the possibility that such payments might later be held to
be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 7 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions
of said Section 7, and their respective personal representatives, successors
and assigns. Nothing in this Agreement is intended or shall be construed to
give to any other person, firm or corporation any legal or equitable remedy or
claim under or in respect of this Agreement or any provision herein contained.
The term "successors and assigns" as herein used shall not include any
purchaser, as such purchaser, of any of the Stock from any of the several
Underwriters.
13. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing or by telegraph and, if to the
Underwriters, shall be mailed, telegraphed or delivered to Chase Securities
Inc., One Bush Street, San Francisco, California 94104; and if to the Company,
shall be mailed, telegraphed or delivered to it at its office, First Horizon
Pharmaceutical Corporation, 660 Hembree Parkway, Suite 106, Roswell, GA 30076,
Attention: Chief Financial Officer. All notices given by telegraph shall be
promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date for the Underwritten Stock,
the provisions of paragraphs (k) and (l) of Section 6 hereof shall be of no
further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
[the rest of this page intentionally left blank]
<PAGE> 27
_____________, 2000
Page 27
Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
FIRST HORIZON PHARMACEUTICAL CORPORATION
By:
------------------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
CHASE SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
THOMAS WEISEL PARTNERS LLC
By: Chase Securities Inc.
By:
----------------------------------
Name:
Title: Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
<PAGE> 28
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Page 28
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
STOCK TO BE
PURCHASED
---------
UNDERWRITERS
- ------------
<S> <C>
Chase Securities Inc....................................................
Banc of America Securities LLC..........................................
Thomas Weisel Partners LLC..............................................
--------
Total..........................................................
</TABLE>
<PAGE> 29
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Page 29
EXHIBIT A
LOCK-UP AGREEMENT
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
RE: First Horizon Pharmaceutical Corporation (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain
shares of Common Stock of the Company ("Common Stock") or securities
convertible into or exchangeable or exercisable for Common Stock. The Company
proposes to carry out a public offering of Common Stock (the "Offering") for
which you will act as the representatives (the "Representatives") of the
underwriters. The undersigned recognizes that the Offering will be of benefit
to the undersigned and will benefit the Company by, among other things, raising
additional capital for its operations. The undersigned acknowledges that you
and the other underwriters are relying on the representations and agreements of
the undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be
bound by this restriction,
<PAGE> 30
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Page 30
(ii) as a distribution to partners or shareholders of such person, provided
that the distributees thereof agree in writing to be bound by the terms of this
restriction, (iii) with respect to sales or purchases of Common Stock acquired
on the open market or (iv) with the prior written consent of__________________.
The foregoing restrictions will commence as of the date hereof and shall
terminate after the close of trading of the Common Stock on the 180th day after
(and including) the day the Common Stock commenced trading on the Nasdaq
National Market (the "Lock-Up Period"). The foregoing restriction has been
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to
lead to or result in a Disposition of Securities during the Lock-up Period,
even if such Securities would be disposed of by someone other than such holder.
Such prohibited hedging or other transactions would include, without
limitation, any short sale (whether or not against the box) or any purchase,
sale or grant of any right (including, without limitation, any put or call
option) with respect to any Securities or with respect to any security (other
than a broad-based market basket or index) that includes, relates to or derives
any significant part of its value from Securities. The undersigned also agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent and registrar against the transfer of shares of Common Stock or
Securities held by the undersigned except in compliance with the foregoing
restrictions.
This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned. In the event the Offering has not occurred on or before
September 30, 2000, this Lock-Up Agreement shall be of no further force or
effect.
Dated
---------------------------------------------
--------------------------------------------------
Printed Name of Holder
By:
-----------------------------------------------
Signature
--------------------------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf of an
entity)
<PAGE> 31
5/3/00
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF
COUNSEL FOR THE COMPANY
(i) The Company has been incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Company has adequate corporate power and authority to own,
lease and operate its properties and to conduct its business as described in
the Prospectus;
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in _______________________________________.
To such counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity;
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption "Capitalization" as
of the dates stated therein, the issued and outstanding shares of capital stock
of the Company outstanding prior to the issuance of the Stock have been duly
and validly issued and are fully paid and nonassessable, and will not have been
issued in violation of or subject to any preemptive right arising under the
certificate of incorporation or Delaware General Corporation Law, or to such
counsel's knowledge, any co-sale right, right of first refusal or other similar
right, other than any registration rights described in Opinion (xviii) hereof;
(v) The Underwritten Stock or the Option Stock, as the case may
be, to be issued by the Company pursuant to the terms of this Agreement have
been duly authorized and, upon issuance and delivery against payment therefor
in accordance with the terms hereof, will be duly and validly issued and fully
paid and nonassessable, will not have been issued in violation of or subject to
any preemptive right, co-sale right, right of first refusal or other similar
right contained in the Company's charter or By-laws, and to such counsel's
knowledge, will not have been issued in violation of or subject to any other
preemptive right, co-sale right, right of first refusal or other similar right.
(vi) The Company has adequate corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters
the Stock to be issued and sold by it hereunder;
(vii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and
delivery by you and compliance by all parties with applicable federal and state
securities laws, is a valid and binding agreement of the Company, enforceable
in accordance with its terms, except as rights to indemnification hereunder may
be limited by applicable law, except that a court may refuse to enforce or
limit the application of
<PAGE> 32
_____________, 2000
Page 2
this Agreement or certain provisions hereof as unconscionable or contrary to
public policy, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles (whether relief
is sought in a proceeding at law or in equity;
(viii) The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Securities Act;
(ix) The 8-A Registration Statement, as of its effective date,
complied as to form in all material respects with the requirements of the
Exchange Act; the 8-A Registration Statement has become effective under the
Exchange Act [and the Underwritten Stock or the Option Stock have been validly
registered under the Securities Act and the Rules and Regulations of the
Exchange Act and the applicable rules and regulations of the Commission
thereunder.] To our knowledge, no order suspending the effectiveness of the
Form 8-A Registration Statement has been issued by the Commission and no
proceeding for that purpose has been instituted or threatened by the
Commission.
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the requirements
of the Securities Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the captions
"Description of Capital Stock," ["Risk Factors--If our Products under
Development Fail..." and "--Violating Regulatory Affairs" and
"Business-Government Regulation,"] to the extent that it constitutes matters of
law or legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions; and the forms of certificates
evidencing the Common Stock and filed as exhibits to the Registration Statement
comply with the Delaware General Corporation Law;
(xii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of federal statutes,
the statutory laws of the State of Georgia and the Delaware General Corporation
Law are accurate and fairly present the information required to be presented by
the Securities Act;
(xiii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which are
not described or referred to therein or filed as required;
<PAGE> 33
_____________, 2000
Page 3
(xiv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree specifically naming the Company of any court, government or
governmental agency or body having jurisdiction over the Company or over any of
its properties or operations;
(xv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company, or over any of its properties or operations is
necessary in connection with the consummation by the Company of the
transactions herein contemplated, except (i) such as have been obtained under
the Securities Act or in connection with the 8-A Registration Statement, (ii)
such as may be required under state or other securities or Blue Sky laws in
connection with the purchase and the distribution of the Stock by the
Underwriters, (iii) such as may be required by the National Association of
Securities Dealers, LLC and (iv) such as may be required under the federal or
provincial laws of Canada;
(xvi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or any of
its subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Securities Act, other than those described
therein;
(xvii) To such counsel's knowledge, neither the Company nor any of
its subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries, or over any of their properties or
operations; and
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to securities
of the Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights known to
such counsel to registration of such shares of Company Common Stock or other
securities, because of the filing of the Registration Statement by the Company
have, with respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement or
<PAGE> 34
_____________, 2000
Page 4
have included securities in the Registration Statement pursuant to the exercise
of and in full satisfaction of such rights.
(xix) The Company is not and, after giving effect to the offering
and the sale of the Stock and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives
of the Company, the Representatives, Underwriters' Counsel and the
independent certified public accountants of the Company, at which such
conferences the contents of the Registration Statement and Prospectus
and related matters were discussed, and although they have not
verified the accuracy or completeness of the statements contained in
the Registration Statement or the Prospectus, nothing has come to the
attention of such counsel which leads them to believe that, at the
time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date for the Underwritten
Stock or Closing Date for the Option Stock, as the case may be, the
Registration Statement and any amendment or supplement thereto
including changes incorporated pursuant to Rule 430A (other than the
financial statements including supporting schedules and other
financial and statistical information derived therefrom, as to which
such counsel need express no comment) contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus (other than the financial
statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel
need express no comment), as of the date it was filed with the
Commission and at all times subsequent thereto up to and on the
Closing Date for the Underwritten Stock or the Closing Date for the
Option Stock, as the case may be, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
<PAGE> 35
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF
PATENT COUNSEL FOR THE COMPANY
____________, 2000
Chase Securities Inc.
Banc of America Securities LLC
Thomas Weisel Partners LLC
As Representatives of the several Underwriters
c/o Chase Securities Inc.
One Bush Street
San Francisco, CA 94104
Re: First Horizon Pharmaceutical Corporation
Ladies and Gentlemen:
We are intellectual property counsel to First Horizon Pharmaceutical
Corporation, a Delaware corporation (the "Company"), for certain of its
intellectual property. This opinion is being furnished to you pursuant to
Section 9(c) of the Underwriting Agreement dated as of ___________ (the
"Agreement") between you and the Company, relating to the issuance and sale to
you of certain shares of Common Stock of the Company. Unless otherwise defined
herein, the definition of the capitalized terms used herein shall be the same
as those in the Agreement.
We are familiar with the technology used by the Company in its
business and the manner of its use thereof as described in the Registration
Statement and the Prospectus. We have read the sections of the Registration
Statement and the Prospectus referring to patents, trade secrets, trademarks,
service marks or other proprietary information or materials; specifically, but
without limitation, we have read the statements in the Registration Statement
and the Prospectus under the captions, "Risk Factors", "Business - Products,"
"Business Product Development," "Business - Third Party Agreements," "Business
- - Trademarks," and "Business - Patents."
In our capacity as the Company's intellectual property counsel, we are
familiar with the Company's intellectual property. Based upon the foregoing,
and with respect to those intellectual property matters for which we are
responsible, we are of the opinion that:
<PAGE> 36
_____________, 2000
Page 2
(i) As of ___________, 2000, the Company has filed one United
States patent application, has licensed twenty (20) United States patents from
Penwest Pharmaceutical Corporation, and has licensed two (2) United States
patents from Jame Fine Chemicals, Inc., all of which are listed in Schedule A
hereto. In addition, the Company holds six (6) United States trademark
registrations, has filed two (2) United States trademark applications, and has
licensed three (3) trademarks from third parties, all of which are listed in
Schedule A hereto.
(ii) We are aware of no facts which would preclude the Company from
having clear title to the Company's patent application referred to or described
in the Registration Statement and Prospectus. Although we have not conducted an
independent investigation, we have not been informed of any fact that would
preclude the Company from having a valid license to the patents licensed from
Penwest Pharmaceutical Corporation or Jame Fine Chemicals, Inc. (collectively
"Licensors") referred to or described in the Registration Statement and
Prospectus. To the best of our knowledge, the Company has complied with the
U.S. Patent and Trademark Office ("PTO") duty of candor and good faith in
dealing with the PTO. To the best of our knowledge, an assignment from each
named inventor to the Company or to the Licensors for each patent and patent
application listed in Schedule A has been executed and filed with the PTO. We
are aware of no facts which would form a basis for a finding that the invention
disclosed in the Company's provisional patent application referred to or
described in the Registration Statement and Prospectus is unpatentable, or that
if claims based on the invention were to issue they would be invalid or
unenforceable. To the best of our knowledge, none of the patents licensed to
the Company and listed in Schedule A have expired for failure to pay
maintenance fees, have been withdrawn or abandoned. Although we have conducted
no additional independent investigation, we have not been informed of any fact
which would indicate that any the patents licensed by the Company are invalid
or unenforceable. Furthermore, although we have not conducted an independent
investigation, we have not been informed of any patent or patent application
which, if issued, would limit or prohibit the business now conducted or
proposed to be conducted by the Company as described in the Registration
Statement and Prospectus, except as described therein;
(iii) We are aware of no facts which would preclude the Company from
having ownership rights to the Company's trademark registrations or
applications to register the trademarks referred to or described in the
Registration Statement and Prospectus. Although we have not conducted an
independent investigation, we have not been informed of any fact that would
preclude the Company from having a valid license to use the trademarks referred
to or described in the Registration Statement and Prospectus;
(iv) We are aware of no pending or threatened action, suit,
proceeding or claim by others that the Company is infringing any patent,
trademark, service mark or other intellectual property right which could result
in any material adverse effect on the Company;
<PAGE> 37
_____________, 2000
Page 3
(v) We are aware of no legal or governmental proceedings pending
relating to the Company's intellectual property, other than PTO review of
pending applications for patents or trademark registrations, including appeal
proceedings, and, to the best of our knowledge, no such proceedings are
threatened or contemplated by governmental authorities or others;
(vi) We are aware of no other contract or document material to the
Company's intellectual property other than those described in the Registration
Statement and the Prospectus;
(vii) Based upon our review of United States Patent No. 5,186,925
(the `925 patent) which issued on February 16, 1993 in the name of G.
Pohl-Boskamp GmbH & Co. and its prosecution file history, and on information
from the Company as to the specifications of Nitrolingual Pumpspray product, to
the best of our knowledge the Nitrolingual Pumpspray product is covered by at
least one claim of the `925 patent.
(viii) Based upon our review of United States Patent No. 5,663,415
(the `415 patent) which issued September 2, 1997 in the name of Jame Fine
Chemicals, Inc. and its prosecution file history, and on information from the
Company as to the specifications of the Tanafed product, to the best of our
knowledge the manufacture of at least one of the active ingredients in the
Tanafed product is covered by at least one claim of the `415 patent.
(ix) Although we have not independently verified the accuracy or
completeness of the statements contained in the Registration Statement and the
Prospectus, nothing has come to our attention that causes us to believe that,
at the time the Registration Statement became effective or as of the date
hereof, the Registration Statement and Prospectus, particularly, including but
not limited to, the description under the captions "Risk Factors," "Business
Products," "Business - Product Development," "Business - Third Party
Agreements," "Business - Trademarks," and "Business - Patents," contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
This is solely for your information, and to assist you as the
underwriters in conducting your investigation of the affairs of the Company in
connection with the aforesaid Registration Statement and Prospectus, and it is
not to be quoted or otherwise referred to in any public disclosure document,
furnished to any other person, or filed with any governmental agency.
Very truly yours,
JONES AND ASKEW, LLP
By:
-------------------------------------
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated LOAN AND SECURITY AGREEMENT dated as of
December 22, 1998 (the "Agreement"), is entered into between HORIZON
PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Borrower"), whose
address is 660 Hembree Parkway, Suite 106, Roswell, Georgia 30076, and LASALLE
NATIONAL BANK, a national banking association (the "Bank"), whose address is 135
South LaSalle Street, Chicago, Illinois 60674.
In consideration of the mutual agreements hereinafter set forth, the
Borrower and the Bank hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. For the purposes of this Agreement, the
following capitalized words and phrases shall have the meanings set forth below.
"Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday on which banks are authorized or required to be closed
for the conduct of commercial banking business in Chicago, Illinois.
"Borrowing Base Amount" shall mean:
(a) an amount of up to 80% of the net amount (after
deduction of such reserves and allowances as the Bank deems proper and
necessary) of the Eligible Accounts; plus
(b) the lesser of (i) (a) 50% of the Non-Sample Inventory
plus (b) the lesser of 30% of Sample Inventory or $125,000, (calculated
as the lower of cost or market value computed on a first-in/first-out
basis, after deduction of such reserves and allowances as the Bank
deems proper and necessary), or (ii) the amount available for advance
on Eligible Accounts as set forth of (a) above.
"Code" shall mean the United States Bankruptcy Code, as now
existing or hereafter amended.
"Collateral" shall have the meaning set forth in Section 6.1.
"Default Rate" shall mean the Prime Rate plus 2% per annum.
"Depreciation" shall mean the total amounts added to
depreciation, amortization, obsolescence, valuation and other proper reserves,
as reflected on the Borrower's financial statement and determined in accordance
with GAAP.
"EBITDA" shall mean, for any period, the sum of the following:
(a) Net Income (excluding extraordinary and unusual items and income or loss
<PAGE> 2
attributable to equity in any affiliated or subsidiary corporations) for such
period, plus (b) Interest Charges, plus (c) income taxes payable or accrued,
plus (d) Depreciation for such period, plus (e) all other non-cash charges,
minus (f) that portion of net income arising out of the sale of assets outside
of the ordinary course of business (to the extend not previously excluded under
clause (a) of this definition), in each case to the extent included in
determining Net Income for such period.
"Eligible Accounts" shall mean those Accounts of the Borrower
which:
(a) are genuine in all respects and have arisen in the
ordinary course of the Borrower's business from (i) the performance of
services by the Borrower, which services have been fully performed,
acknowledged and accepted by the Account Debtor or (ii) the sale or
lease of Goods by the Borrower, including C.O.D. sales, which Goods
have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to and accepted by the Account
Debtor, and the Borrower has possession of, or has delivered to the
Bank at the Bank's request, shipping and delivery receipts evidencing
such shipment;
(b) are evidenced by an invoice delivered to the Account
Debtor thereunder, are due and payable within zero (0) days after the
date of the invoice or shipment of the Inventory referred to in the
invoice, whichever is later, and are not more than ninety (90) days
past due;
(c) do not arise from a "sale on approval" or a "sale or
return";
(d) have not arisen out of contracts with the United
States or any state, county, city or other governmental body, or any
department, agency or instrumentality thereof;
(e) are not due from an Account Debtor which is a
director, officer, employee, agent, subsidiary, parent or affiliate of
the Borrower,
(f) do not arise in connection with a sale to an Account
Debtor who is not a resident or citizen of and is located within the
United States of America;
(g) do not arise in connection with a sale to an Account
Debtor who is located within a state which requires the Borrower, as a
precondition to commencing or maintaining an action in the courts of
that state, either to (i) receive a certificate of authority to do
business and be in good standing in such state, or (ii) file a notice
of business activities or similar report, with such state's taxing
authority, unless (A) the Borrower has taken one of the actions
described in clauses (i) or (ii), (B) the failure to take one of the
actions described in either clause (i) or (ii) may be cured
retroactively by the Borrower at its election, or (C) the Borrower has
proven to the satisfaction of the Bank that it is exempt from any such
requirements under such state's laws;
(h) do not arise out of a contract or order which, by its
terms, forbids or makes void or unenforceable the assignment by the
Borrower to the Bank of the Account arising with respect thereto and
are not unassignable to the Bank for any other reason;
-2-
<PAGE> 3
(i) are the valid, legally enforceable and unconditional
obligation of the Account Debtor, are not the subject of any setoff,
counterclaim, credit, allowance or adjustment by the Account Debtor, or
of any claim by the Account Debtor denying liability thereunder in
whole or in part, and the Account Debtor has not refused to accept
and/or has not returned or offered to return any of the Goods or
services which are the subject of such Account;
(j) are not subject to any assignment, claim, lien,
security interest or encumbrance whatsoever, other than the security
interest of the Bank;
(k) no proceedings or actions are pending or threatened
against the Account Debtor which might result in any material adverse
change in its financial condition or in its ability to pay any Account
in full, and
(l) are otherwise not unacceptable to the Bank for any
other reason.
An Account which is an Eligible Account shall cease to be an Eligible
Account whenever it ceases to meet any one of the foregoing requirements.
If invoices representing twenty five percent (25%) or more of the
unpaid net amount of all Accounts from any one Account Debtor are unpaid more
than ninety (90) days after the due date of such invoices, then all Accounts
relating to such Account Debtor shall cease to be Eligible Accounts.
"Eligible Inventory" shall mean all Sample Inventory and
Non-Sample Inventory of the Borrower which:
(a) is not subject to any assignment, claim, lien,
security interest or encumbrance whatsoever, other than the security
interest of the Bank,
(b) is held for sale, lease or furnishing under contracts
of service, and is (except as the Bank may otherwise consent in
writing) new and unused;
(c) is not now and shall not at any time hereafter be
stored with a bailee, warehouseman or similar party without (i) the
Bank's prior written approval, and (ii) delivery to the Bank by such
party, non-negotiable warehouse receipts therefor in the Bank's name or
such other bailee's letter, in form and substance acceptable to the
Bank;
(d) is not unacceptable to the Bank, in its sole and
absolute discretion, due to age, type, category and/or quantity;
(e) is not produced in violation of the Fair Labor
Standards Act and/or subject to the so-called "hot goods" provisions
contained in Title 29 U.S.C. 215(a); and
(f) does not violate the negative covenants and satisfies
the affirmative covenants of the Borrower contained in this Agreement.
-3-
<PAGE> 4
Inventory which is Eligible Inventory shall cease to be Eligible
Inventory whenever it ceases to meet any one of the foregoing requirements.
"Environmental Laws" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to the Borrower's
business or facilities owned or operated by the Borrower, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes in the environment (including, without
limitation, ambient air, surface water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal transport or handling of Hazardous Materials.
"Event of Default" shall mean any of the events or conditions
set forth in Section 11 hereof.
"Fixed Charge Coverage Ratio" shall mean the ratio of EBITDA
minus capital expenditures for the period measured minus taxes paid for the
period measured, to required payments for the period measured.
"GAAP" shall mean generally accepted accounting principles,
using the accrual basis of accounting and consistently applied.
"Guaranty Obligations" shall mean all obligations of the
Borrower guaranteeing any indebtedness, dividend or other obligation, including
without limitation any indebtedness, dividend or other obligation which may be
issued or incurred at some future time, of any other person or entity (the
"primary obligor") in any manner, whether directly or indirectly, including
obligations incurred through an agreement, contingent or otherwise, by such
person or entity:
(a) to purchase such indebtedness or obligation or any
property or assets constituting security therefor;
(b) to advance or supply funds either (i) for the
purchase or payment of such indebtedness or obligation, or (ii) to maintain
working capital or other balance sheet condition or otherwise to advance or make
available funds for the purchase or payment of such indebtedness or obligation;
(c) to lease property or to purchase securities, property
or services with the purpose or intent of assuring the owner of such
indebtedness or obligation of the ability of the primary obligor to make payment
of the indebtedness or obligation;
(d) otherwise to assure the owner of the indebtedness or
obligation of the primary obligor against loss in respect thereof; or
(e) to induce the issuance of, or in connection with the
issuance of, any letter of credit.
-4-
<PAGE> 5
"Hazardous Materials" shall mean any hazardous, toxic or
dangerous substance, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials or wastes that are or become regulated under any
Environmental Law (including without limitation, any that are or become
classified as hazardous or toxic under any Environmental Law).
"Indebtedness" shall mean at any time (a) all Liabilities of
the Borrower, (b) all lease obligations of the Borrower in respect of real or
personal property which would, in accordance with GAAP, be required to be
capitalized on the lessee's balance sheet, (c) all other debt, secured or
unsecured, created, issued, incurred or assumed by the Borrower for money
borrowed or for the deferred purchase price of any fixed or capital asset, (d)
indebtedness secured by any mortgage, pledge, lien or security interest existing
on property owned by the Borrower whether or not the Indebtedness secured
thereby has been assumed, and (e) all Guaranty Obligations of the Borrower
whether or not reflected on its balance sheet.
"Indemnified Party" and "Indemnified Parties" shall mean,
respectively, each of the Bank and any parent corporations, affiliated
corporations or subsidiaries of the Bank, and each of their respective officers,
directors, employees, attorneys and agents, and all of such parties and
entities.
"Interest Period" shall mean, with regard to any LIBOR Loan,
successive one, two, three or six month periods as selected from time to time by
the Borrower by notice given to the Bank not less than three Business Days prior
to the first day of each respective Interest Period; provided, however, that:
(i) each such Interest Period occurring after the initial Interest Period of any
LIBOR Loan shall commence on the day on which the preceding Interest Period for
such LIBOR Loan expires, (ii) whenever the List day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided, however, that if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, then the last day
of such Interest Period shall occur on the immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on a day of a month
for which there is no numerically corresponding day in the calendar month in
which such Interest Period terminates, such Interest Period shall end on the
last Business Day of such calendar month; (iv) if the Term Loan is subject to a
Mandatory Prepayment, the last Business Day of the then current Interest Period
for LIBOR Loans must coincide with the date of the Mandatory Prepayment, and (v)
the final Interest Period must be such that its expiration occurs on or before
the Term Loan Maturity Date.
"Letter of Credit" and "Letters of Credit" shall mean,
respectively, a letter of credit and all such letters of credit issued by the
Bank, in its sole discretion, upon the execution
-5-
<PAGE> 6
and delivery by the Borrower and the acceptance by the Bank of any application
for Letter of Credit, as set forth in Section 2.3 of this Agreement.
"Letter of Credit Obligations" shall mean, at any time, an
amount equal to the aggregate of the original face amounts of all Letters of
Credit minus the sum of (i) the amount of any reductions in the original face
amount of any Letter of Credit which did not result from a draw thereunder, (ii)
the amount of any payments made by the Bank with respect to any draws made under
a Letter of Credit for which the Borrower has reimbursed the Bank, (iii) the
amount of any payments made by the Bank with respect to any draws made under a
Letter of Credit which have been converted to a Revolving Loan as set forth in
Section 2.3, and (iv) the portion of any issued but expired Letter of Credit
which has not been drawn by the beneficiary thereunder. For purposes of
determining the outstanding Letter of Credit Obligations at any time, the Bank's
acceptance of a draft drawn on the Bank pursuant to a Letter of Credit shall
constitute a draw on the applicable Letter of Credit at the time of such
acceptance.
"Liabilities" shall mean at all times all liabilities of the
Borrower that would be shown as such on a balance sheet of the Borrower prepared
in accordance with GAAP.
"LIBOR" shall mean a rate of interest equal to the per annum
rate of interest at which United States dollar deposits in an amount comparable
to the amount of the relevant LIBOR Loan and for a period equal to the relevant
Interest Period are offered generally to the Lender (rounded upward if
necessary, to the nearest 1/16 of 1.00%) in the London Interbank Eurodollar
market at 11:00 a.m. (London time) two Business Days prior to the commencement
of each Interest Period, or as LIBOR is otherwise determined by the Bank in its
sole and absolute discretion, such rate to remain fixed for such Interest
Period. The Bank's determination of LIBOR as provided above shall be conclusive,
absent manifest error.
"LIBOR Loan" or "LIBOR Loans" shall mean that portion, and
collectively those portions, of the aggregate outstanding principal balance of
the Term Loan that will bear interest at LIBOR plus two percent (2%) per annum,
of which at any time and from time to time, the Borrower may identify no more
than three (3) advances of the Term Loan which will bear interest based on
LIBOR, of which any particular LIBOR Loan must be in an amount equal to
$1,000,000 or a higher integral multiple thereof.
"Loans" shall mean, collectively, all Revolving Loans and Term
Loans made by the Bank to the Borrower and all Letters of credit issued by the
Bank for the benefit of the Borrower under and pursuant to this Agreement.
"Loan Documents" shall have the meaning set forth in Section
3.1.
"Mandatory Prepayment" shall have the meaning set forth in
Section 2.2(d).
"Maximum Letter of Credit Obligation" shall mean the lesser of
(a) the Revolving Loan Commitment less the aggregate amount of all Revolving
Loans outstanding at any time, or (b) the Borrowing Base Amount less the
aggregate amount of all Revolving Loans outstanding at any time.
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"Net Income" shall mean, with respect to any period, the
amount shown opposite the caption "Net Income" or a similar caption on the
financial statements of the Borrower, prepared in accordance with GAAP.
"Non-Sample Inventory" shall mean all inventory of the
Borrower that is not Sample Inventory.
"Notes" shall mean the Revolving Note and the Term Note.
"Obligations" shall mean the Loans, as evidenced by the Note,
all interest accrued thereon, any fees due the Bank hereunder, any expenses
incurred by the Bank hereunder and any and all other liabilities and obligations
of the Borrower (and of any partnership in which the Borrower is or may be a
partner) to the Bank, howsoever created, arising or evidenced, and howsoever
owned, held or acquired, whether now or hereafter existing, whether now due or
to become due, direct or indirect, absolute or contingent, and whether several,
joint or joint and several.
"Prime Loan" or "Prime Loans" shall mean that portion, and
collectively, those portions of the aggregate outstanding principal balance of
the Term Loan that will bear interest at the Prime Rate per annum.
"Prime Rate" shall mean the rate per annum in effect from time
to time as set by the Bank and called its Prime Rate. The effective date of any
change in the Prime Rate shall for purposes hereof be the date the rate is
changed by the Bank. The Bank shall not be obligated to give notice of any
change in the Prime Rate.
"Regulatory Change" shall mean the introduction of, or any
change in any applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over the Bank or its lending office.
"Revolving Interest Rate" shall mean the Prime Rate per annum.
"Revolving Loan" or "Revolving Loans" shall mean,
respectively, each direct advance and the aggregate of all such direct advances,
from time to time, made by the Bank to the Borrower under and pursuant to this
Agreement, as set forth in Section 2.1 of this Agreement.
"Revolving Loan Availability" shall mean at any time, tile
lesser of (a) the Revolving Loan Commitment less the Letter of Credit
Obligations, or (b) the Borrowing Base Amount less the Letter of Credit
Obligations.
"Revolving Loan Commitment" shall mean One Million and 00/100
Dollars ($1,000,000.00).
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"Revolving Loan Maturity Date" shall mean May 10, 1999, unless
extended by the Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Revolving Note.
"Revolving Note" shall have the meanings set forth in Section
4.1 hereof.
"Sample Inventory" shall mean that inventory of the Borrower
used as promotional material to be distributed to physicians, which is packaged
differently than the Borrower's typical inventory.
"Subordinated Debt" shall mean that portion of the Liabilities
of the Borrower which is subordinated to the Obligations in a manner
satisfactory to the Bank, including but not limited to, rights and time of
payments of principal and interest.
"Term Interest Rate" shall mean the Borrower's option of (i)
the Prime Rate per annum, or (ii) LIBOR plus two percent (2%) per annum.
"Term Loan" shall mean the direct advance or advances, from
time to time in the form of either Prime Loans and/or LIBOR Loans, made by the
Bank to the Borrower in the form of a Term Loan under and pursuant to this
Agreement, as set forth in Section 2.2 of this Agreement.
"Term Loan Commitment" shall mean Two Million Four Hundred
Thousand and 00/100 Dollars ($2,400,000.00).
"Term Loan Maturity Date" shall mean December 22, 2001, unless
extended by the Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Term Note.
"Term Note" shall have the meaning set forth in Section 3.1
hereof.
"UCC" shall mean the Uniform Commercial Code in effect in
Illinois from time to time.
1.2 Other Definitions. Capitalized words and phrases used herein
and not otherwise defined herein shall have the respective meanings assigned to
such terms as of the date hereof in the UCC, or as the context may otherwise
require.
2. COMMITMENT OF THE BANK.
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms and
conditions of this Agreement and the other Loan Documents, and in reliance upon
the representations and warranties of the Borrower set forth herein and in the
other Loan Documents, the Bank agrees to make such Revolving Loans at such times
as the Borrower may from time to time request until, but not including, the
Revolving Loan Maturity Date, and in such amounts as the Borrower from
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time request, provided, however, that the aggregate principal balance of all
Revolving Loans outstanding at any time shall not exceed the Revolving Loan
Availability. Revolving Loans made by the Bank may be repaid and, subject to the
terms and conditions hereof, borrowed again up to, but not including the
Revolving Loan Maturity Date unless the Revolving Loans are otherwise terminated
or extended as provided in this Agreement. The Revolving Loans shall be used by
the Borrower for the purpose of working capital.
(b) Revolving Loan Interest and Payments. Except as otherwise
provided in this Section 2.1(b), the principal amount of the Revolving
Loans outstanding from time to time shall bear interest at the
Revolving Interest Rate. Accrued and unpaid interest on the unpaid
balance of all Revolving Loans outstanding from time to time, shall be
due and payable monthly, in arrears, commencing on January 1, 1999 and
continuing on the first day of each calendar month thereafter, and on
the Revolving Loan Maturity Date. Any amount of principal or interest
on the Revolving Loans which is not paid when due, whether at stated
maturity, by acceleration or otherwise, shall bear interest payable on
demand at the Default Rate.
(c) Overadvances. In the event the aggregate outstanding
principal balance of all Revolving Loans and Letter of Credit
Obligations hereunder exceed the Revolving Loan Commitment, the
Borrower shall, without notice or demand of any kind, immediately make
such repayments of the Revolving Loans or take such other actions as
shall be necessary to eliminate such excess.
2.2 Term Loan.
(a) Term Loan Commitment. Subject to the terms and
conditions of this Agreement and the other Loan Documents, and in
reliance upon the representations and warranties of the Borrower set
forth herein and in the other Loan Documents, the Bank agrees to make a
Term Loan equal to the Term Loan Commitment. The Term Loan shall be
available to the Borrower in up to three (3) principal advances. The
Term Loan shall be used by the Borrower for acquisition financing. The
Term Loan may be prepaid in whole or in part at any time without
penalty, but shall be due in full on the Term Loan Maturity Date,
unless the credit extended under the Term Loan is otherwise terminated
or extended as provided in this Agreement.
(b) Term Loan Interest and Payments. Except as otherwise
provided in this Section 2.2(b), the principal amount of the Term Loan
outstanding from time to time shall bear interest at the Term Interest
Rate. Accrued and unpaid interest on that portion of the unpaid
principal balance of the Term Loan outstanding from time to time which
is a Prime Loan, shall be due and payable monthly, in arrears,
commencing on January 1, 1999 and continuing on the first day of each
calendar month thereafter, and on the Term Loan Maturity Date. Accrued
and unpaid interest on that portion of the unpaid principal balance of
the Term Loan outstanding from time to time which is a LIBOR Loan shall
be payable on (i) the last Business day of each Interest Period,
commencing on the first such date to occur after the date hereof,
provided that if a six month LIBOR period is selected,
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interest shall also be payable on the last day of the third month of
the Interest Period, (ii) on the date of any principal repayment of a
LIBOR Loan, and (iii) on the Term Loan Maturity Date. Any amount of
principal or interest on the Term Loan which is not paid when due,
whether at stated maturity, by acceleration or otherwise, shall bear
interest payable on demand at the Default Rate.
(c) Term Loan Principal Payments. The outstanding
principal balance of the Term Loan shall be repaid in equal monthly
principal installments of Forty Thousand and 00/100 Dollars
($40,000.00), together with an additional amount representing accrued
interest as set forth above, beginning on March 1, 1999, and continuing
on the first day of each month thereafter, with a final payment of all
outstanding principal and accrued interest due on the Term Loan
Maturity Date. Principal amounts repaid on the Term Note may not be
borrowed again. Also, if the Borrower chooses not to convert any
portion of the Term Loan which is a LIBOR Loan to a Prime Loan as
provided in Section 2.3(b) and 2.3(c), then such portion of the Term
Loan shall be immediately due and payable on the last Business Day of
the then existing Interest Period or on such earlier date as required
by law, all without further demand, presentment, protest or notice of
any kind, all of which are hereby waived by the Borrower.
(d) Mandatory Prepayment. If the outstanding principal
balance of the Term Loan is greater than Two Million and 00/100 Dollars
($2,000,000.00) on August 1, 1999, the Borrower shall immediately make
a principal repayment in an amount sufficient to reduce the principal
amount of the Term Loan to a maximum amount of Two Million and 00/100
Dollars ($2,000,000.00). This mandatory repayment shall not affect
principal repayment obligations set forth in Section 2.2(c).
2.3 Additional LIBOR Loan Provisions.
(a) LIBOR Loan Prepayments. The principal balance of any
LIBOR Loan may not be prepaid in whole or in part at any time. If, for
any reason, a LIBOR Loan is paid prior to the last Business Day of any
Interest Period, the Borrower agrees to indemnify the Bank against any
loss (including any loss on redeployment of the funds repaid), cost or
expense incurred by the Bank as a result of such prepayment.
(b) LIBOR Unavailability. If the Bank determines in good
faith (which determination shall be conclusive, absent manifest error)
prior to the commencement of any Interest Period that (i) United States
dollar deposits of sufficient amount and maturity for funding any LIBOR
Loan are not available to the Bank in the London Interbank Eurodollar
market in the ordinary course of business, or (ii) by reason of
circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the rate of
interest to be applicable to the relevant LIBOR Loan, the Bank shall
promptly notify the Borrower thereof and, so long as the foregoing
conditions continue, the Term Loan may not be advanced as a LIBOR Loan
thereafter. In addition, at the Borrower's option, each existing LIBOR
Loan shall be immediately (i) converted to a Prime Loan on the last
Business Day of the then existing Interest, or (ii) due and
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payable on the last Business Day of the then existing Interest Period,
without further demand, presentment, protest or notice of any kind, all
of which are hereby waived by the Borrower.
(c) Regulatory Change. In addition, if, after the date
hereof, a Regulatory Change shall, in the reasonable determination of
the Bank, make it unlawful for the Bank to make or maintain the LIBOR
Loans, then the Bank shall promptly notify the Borrower and the Term
Loan may not be advanced as a LIBOR Loan thereafter. In addition, at
the Borrower's option, each existing LIBOR Loan shall be immediately
(i) converted to a Prime Loan on the last Business Day of the then
existing Interest Period or on such earlier date as required by law, or
(ii) due and payable on the last Business Day of the then existing
Interest Period or on such earlier date as required by law, all without
further demand, presentment, protest or notice of any kind, all of
which are hereby waived by the Borrower.
(d) LIBOR Loan Indemnity. If any Regulatory Change
(whether or not having the force of law) shall (a) impose, modify or
deem applicable any assessment, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the account
of or loans by, or any other acquisition of funds or disbursements by,
the Bank; (b) subject the Bank or any LIBOR Loan to any tax, duty,
charge, stamp tax or fee or change the basis of taxation of payments to
the Bank of principal or interest due from the Borrower to the Bank
hereunder (other than a change in the taxation of the overall net
income of the Bank); or (c) impose on the Bank any other condition
regarding such LIBOR Loan or the Bank's funding thereof, and the Bank
shall determine (which determination shall be conclusive, absent
manifest error) that the result of the foregoing is to increase the
cost to the Bank of making or maintaining such LIBOR Loan or to reduce
the amount of principal or interest received by the Bank hereunder,
then the Borrower shall pay to the Bank, on demand, such additional
amounts as the Bank shall, from time to time, determine are sufficient
to compensate and indemnify the Bank for such increased cost or reduced
amount.
2.4 Interest and Fee Computation; Collection of Funds. Except as
otherwise set forth herein, all interest and fees shall be calculated on the
basis of a year consisting of 360 days and shall be paid for the actual number
of days elapsed. Principal payments submitted in funds not immediately available
shall continue to bear interest until collected. If any payment to be made by
the Borrower hereunder or under the Note shall become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment.
2.5 Letters of Credit. Subject to the terms and conditions of this
Agreement and upon the execution and delivery by the Borrower and the acceptance
by the Bank, in its sole and absolute discretion, of an application for letter
of credit, the Bank agrees to issue for the account of the Borrower out of the
Revolving Loan Availability, such Letters of Credit in the standard form of the
Bank and otherwise in form and substance acceptable to the Bank, from time to
time during the term of this Agreement, provided that the Letter of Credit
Obligations may not at any
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<PAGE> 12
time exceed the Maximum Letter of Credit Obligation and provided, further, that
no Letter of Credit shall have an expiration date later than the Revolving Loan
Maturity Date. The amount of any payments made by the Bank with respect to draws
made by a beneficiary under a Letter of Credit for which the Borrower has failed
to reimburse the Bank upon the earlier of (i) the Bank's demand for repayment,
or (ii) five (5) days from the date of such payment to such beneficiary by the
Bank, shall be deemed to have been converted to a Revolving Loan as of the date
such payment was made by the Bank to such beneficiary. Upon the occurrence of an
Event of a Default and at the option of the Bank, all Letter of Credit
Obligations shall be converted to Revolving Prime Loans, all without demand,
presentment, protest or notice of any land, all of which are hereby waived by
the Borrower.
3. CONDITIONS OF BORROWING.
Notwithstanding any other provision of this Agreement, the Bank shall
not be required to disburse or make all or any portion of the Loans if any of
the following conditions have occurred.
3.1 Loan Documents. The Borrower fails to execute and deliver to
the Bank the following Loan Documents (collectively, the "Loan Documents"), all
of which must be satisfactory to the Bank and the Bank's counsel in form,
substance and execution:
(a) Loan Agreement. This Agreement duly executed by the
Borrower.
(b) Revolving Note. A Revolving Note duly executed by the
Borrower, in the form attached hereto as Exhibit A.
(c) Term Note. A Term Note duly executed by the Borrower,
in the form attached hereto as Exhibit B.
(d) Landlord Waiver. A Landlord Waiver executed by
Diversified Healthcare Services, Inc., in the form attached hereto as
Exhibit C.
(e) Subordination Agreement. Subordination Agreement
dated as of the date of this Agreement, from each holder of
Subordinated Debt, in the form attached hereto as Exhibit E.
(f) Resolutions. Resolutions of the board of directors
and/or shareholders of the Borrower authorizing the execution of this
Agreement and the Loan Documents.
(g) Additional Documents. Such other certificates,
financial statements, schedules, resolutions, opinions of counsel,
notes and other documents which are provided for hereunder or which the
Bank shall require.
3.2 Event of Default. If any Event of Default, or any event which,
with notice or lapse of time, or both would constitute an Event of Default, has
occurred and is continuing.
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3.3 Material Adverse Changes. If, since the date of this
Agreement, there has been, in the Bank's sole and complete discretion, a
material adverse change in the financial condition or affairs of the Borrower.
3.4 Litigation. If any litigation or governmental proceeding has
been instituted against the Borrower or any of its officers or shareholders
which in the discretion of the Bank, reasonably exercised, shall adversely
affect the financial condition or continued operation of the Borrower.
3.5 Representations and Warranties. If any representation or
warranty of the Borrower contained herein or in any Loan Document shall be
untrue or incorrect as of the date of any advance as though made on such date,
except to the extent such representation or warranty expressly relates to an
earlier date.
4. NOTES EVIDENCING LOANS.
4.1 Revolving Note. The Revolving Loans and the Letter of Credit
Obligations shall be evidenced by a single Revolving Note (together with any and
all renewal, extension, modification or replacement notes executed by the
Borrower and delivered to the Bank and given in substitution therefor, the
"Revolving Note") in the form of Exhibit A attached hereto, duly executed by the
Borrower and payable to the order of the Bank. At the time of the initial
disbursement of a Revolving Loan and at each time an additional Revolving Loan
shall be requested hereunder or a repayment made in whole or in part thereon, an
appropriate notation thereof shall be made on the books and records of the Bank.
All amounts recorded shall be, absent demonstrable error, conclusive and binding
evidence of (i) the principal amount of the Revolving Loans advanced hereunder
and the amount of all Letter of Credit Obligations, (ii) any unpaid interest
owing on the Revolving Loans, and (iii) all amounts repaid on the Revolving
Loans or the Letter of Credit Obligations. The failure to record any such amount
or any error in recording such amounts shall not, however, limit or otherwise
affect the obligations of the Borrower under the Revolving Note to repay the
principal amount of the Revolving Loans, together with all interest accruing
thereon.
4.2 Term Note. The Term Loan shall be evidenced by a single Term
Note (together with any and all renewal extension, modification or replacement
notes executed by the Borrower and given in substitution therefor, the "Term
Note") in the form of Exhibit B attached hereto, duly executed by the Borrower
and payable to the order of the Bank. At the time of the initial disbursement of
the Term Loan, at each time an additional disbursement is made under the Term
Loan or a repayment made in whole or in part thereon, an appropriate notation
thereof shall be made on the books and records of the Bank. All amounts recorded
shall be, absent demonstrable error, conclusive and binding evidence of (i) the
principal amount of the Term Loan advanced hereunder, (ii) any unpaid interest
owing on the Term Loan and (iii) all amounts repaid on the Term Loan. The
failure to record any such amount or any error in recording such amounts shall
not, however, limit or otherwise affect the obligations of the Borrower under
the Term Note to repay the principal amount of the Term Loan, together with all
interest accruing thereon.
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5. MANNER OF BORROWING.
Each Revolving Loan shall be made available to the Borrower upon its
written or verbal request, from any person whose authority to so act has not
been revoked by the Borrower in writing previously received by the Bank. A
request for a Revolving Loan must be received by no later than 11:00 a.m.
Chicago, Illinois time, on the day it is to be funded. The proceeds of each
Revolving Loan shall be made available at the office of the Bank by credit to
the account of the Borrower or by other means requested by the Borrower and
acceptable to the Bank.
The Term Loan shall be made available to the Borrower, upon its written
or verbal request, from any person whose authority to so act has not been
revoked by the Borrower in writing previously received by the Bank. The Term
Loan may be advanced either as a Prime Loan or a LIBOR Loan, provided, however,
that at any time and from time to time, the Borrower may identify no more than
three (3) Term Loan advances which may be LIBOR Loans. A request for a Prime
Loan must be received by no later than 11:00 a.m. Chicago, Illinois time, on the
day it is to be funded. A request for a LIBOR Loan must be (i) received by no
later than 11:00 a.m. Chicago, Illinois time, three (3) days before the day it
is to be funded, and (ii) in an amount equal to $100,000.00 or a higher integral
multiple thereof. If for any reason the Borrower shall fail to select timely an
Interest Period for an existing LIBOR Loan, then such LIBOR Loan shall be
immediately converted to a Prime Loan on the last Business Day of the then
existing Interest Period, all without demand, presentment, protest or notice of
any kind, all of which are hereby waived by the Borrower. The proceeds of each
Prime Loan or LIBOR Loan shall be made available at the office of the Bank by
credit to the account of the Borrower or by other means requested by the
Borrower and acceptable to the Bank.
Each Letter of Credit shall be issued by the Bank upon the execution by
the Borrower and the acceptance by the Bank, in its sole discretion, of the
Bank's standard application therefor and the payment by the Borrower of the
Bank's usual and customary fees in connection therewith. All standby Letters of
Credit issued under and pursuant to this Agreement shall bear an annual fee
equal to 1.50% of the face amount of such standby Letter of Credit which fee,
along with any other applicable fees or interest, shall be payable in accordance
with the Bank's standard letter of credit fee schedule. All Letters of Credit
other than standby Letters of Credit shall bear such fees and interest and
contain such other terms as set forth in the Bank's standard letter of credit
fee schedule.
The Bank is authorized to rely on the telephonic, telecopy or
telegraphic loan requests which the Bank believes in its good faith judgment to
emanate from a properly authorized representative of the Borrower, whether or
not that is in fact the case. The Borrower does hereby irrevocably confirm,
ratify and approve all such advances by the Bank and does hereby indemnify the
Bank against losses and expenses (including court costs, attorneys' and
paralegals' fees) and shall hold the Bank harmless with respect thereto.
6. SECURITY FOR THE OBLIGATIONS.
6.1 Security for Obligations. As security for the payment of the
Obligations, the Borrower does hereby pledge, assign, transfer and deliver to
the Bank and does hereby grant to
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the Bank a continuing and unconditional security interest in and to any and all
property of the Borrower, of any kind or description, tangible or intangible,
whether now existing or hereafter arising or acquired, including, but not
limited to, the following (all of which property, along with the products and
proceeds therefrom, are individually and collectively referred to as the
"Collateral"):
(a) all property of, or for the account of, the Borrower
now or hereafter coming into the possession, control or custody of, or
in transit to, the Bank or any agent or bailee for the Bank or any
parent, affiliate or subsidiary of the Bank or any participant with the
Bank in the Loans, (whether for safekeeping, deposit, collection,
custody, pledge, transmission or otherwise), including all earnings,
dividends, interest, or other rights in connection therewith and the
products and proceeds therefrom, including the proceeds of insurance
thereon; and
(b) the additional property of the Borrower, whether now
existing or hereafter arising or acquired, and wherever now or
hereafter located, together with all additions and accessions thereto,
substitutions for, and replacements, products and proceeds therefrom,
and all of the Borrower's books and records relating thereto,
identified and set forth as follows:
(i) All Accounts (whether or not Eligible Accounts) and
all Goods whose sale, lease or other disposition by
the Borrower has given rise to Accounts and have been
returned to, or repossessed or stopped in transit by,
the Borrower, or rejected or refused by an Account
Debtor;
(ii) All Inventory (whether or not Eligible Inventory);
(iii) All Goods (other than Inventory), including, without
limitation, Equipment, vehicles, furniture and
Fixtures;
(iv) All Investment Property;
(v) All Chattel Paper, Instruments, Documents and General
Intangibles; and
(vi) All insurance policies and proceeds insuring the
foregoing property or any part thereof, including
unearned premiums.
6.2 Possession of Collateral. Until an Event of Default has
occurred hereunder, the Borrower shall be entitled to possession or use of the
Collateral. The cancellation or surrender of the Note, upon payment or
otherwise, shall not affect the right of the Bank to retain the Collateral for
any other of the Obligations.
6.3 Financing Statements. The Borrower shall, at the Bank's
request, at any time and from time to time, execute and deliver to the Bank such
financing statements and other documents and do such acts as the Bank deems
necessary in order to establish and maintain valid, attached and perfected first
security interests in the Collateral in favor of the Bank, free
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<PAGE> 16
and clear of all liens, claims and rights of third parties whatsoever (except as
otherwise specifically set forth in Section 8.2 hereof).
6.4 Additional Collateral. The Borrower shall deliver to the Bank
immediately upon its demand, such other collateral as the Bank may from time to
time request, should the value of the Collateral in the Bank's sole and absolute
discretion, decline, deteriorate, depreciate or become impaired, and does hereby
grant to the Bank a continuing security interest in such other collateral which,
when pledged, assigned and transferred to the Bank shall be and become part of
the Collateral. The Bank's security interests in each of the foregoing
Collateral shall be valid, complete and perfected whether or not covered by a
specific assignment.
6.5 Preservation of the Collateral. The Bank may, but is not
required to, take such action from time to time as the Bank deems appropriate to
maintain or protect the Collateral. The Bank shall have exercised reasonable
care in the custody and preservation of the Collateral if it takes such action
as the Borrower shall reasonably request in writing; provided, however, that
such request shall not be inconsistent with the Bank's status as a secured
party, and the failure of the Bank to comply with any such request shall not be
deemed a failure to exercise reasonable care. In addition, any failure of the
Bank to preserve or protect any rights with respect to the Collateral against
prior or third parties, or to do any act with respect to preservation of the
Collateral, not so requested by the Borrower, shall not be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral. The
Borrower shall have the sole responsibility for taking such action as may be
necessary, from time to time, to preserve all rights of the Borrower and the
Bank in the Collateral against prior or third parties. Without limiting the
generality of the foregoing, where Collateral consists in whole or in part of
securities, the Borrower represents to, and covenants with, the Bank that the
Borrower has made arrangements for keeping informed of changes or potential
changes affecting the securities (including, but not limited to, rights to
convert or subscribe, payment of dividends, reorganization or other exchanges,
tender offers and voting rights), and the Borrower agrees that the Bank shall
have no responsibility or liability for informing the Borrower of any such or
other changes or potential changes or for taking any action or omitting to take
any action with respect thereto.
7. REPRESENTATIONS AND WARRANTIES.
To induce the Bank to make the Loans, the Borrower makes the following
representations and warranties to the Bank, each of which shall be true and
correct as of the date of the execution and delivery of this Agreement, and
which shall survive the execution and delivery of this Agreement:
7.1 Organization. The Borrower is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware, with full
and adequate corporate power to carry on and conduct its business as presently
conducted, and is duly licensed or qualified in all foreign jurisdictions
wherein the nature of its activities require such qualification or licensing.
7.2 Authorization; Validity. The Borrower has full right, power
and authority to enter into this Agreement, to make the borrowings and execute
and deliver the Loan Documents as provided herein and to perform all of its
duties and obligations under this Agreement and the
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<PAGE> 17
Loan Documents. The execution and delivery of this Agreement and the Loan
Documents will not, nor will the observance or performance of any of the matters
and things herein or therein set forth, violate or contravene any provision of
law or of the articles of incorporation or bylaws of the Borrower. All necessary
and appropriate corporate action has been taken on the part of the Borrower to
authorize the execution and delivery of this Agreement and the Loan Documents.
This Agreement and the Loan Documents are valid and binding agreements and
contracts of the Borrower in accordance with their respective terms.
7.3 Compliance With Laws. The nature and transaction of the
Borrower's business and operations and the use of its properties and assets,
including, but not limited to, the Collateral or any real estate owned or
occupied by the Borrower, do not and during the term of the Loans shall not,
violate or conflict with any applicable law, statute, ordinance, rule,
regulation or order of any kind or nature, including, without limitation, the
provisions of the Fair Labor Standards Act or any zoning, land use, building,
noise abatement, occupational health and safety or other laws, any building
permit or any condition, grant, easement, covenant, condition or restriction,
whether recorded or not.
7.4 Environmental Laws and hazardous Substances. The Borrower
represents, warrants and agrees with the Bank that (i) the Borrower has not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off any of the premises of the
Borrower (whether or not owned by it) in any manner which at any time violates
any Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, (ii) the operations of the Borrower comply in all
material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder, (iii) there has
been no investigation, proceeding, complaint, order, directive, claim, citation
or notice by any governmental authority or any other person or entity, nor is
any pending or, to the best of the Borrower's knowledge, threatened, and the
Borrower shall immediately notify the Bank upon becoming aware of any such
investigation, proceeding, complaint, order, directive, claim, citation or
notice, and shall take prompt and appropriate actions to respond thereto, with
respect to any non-compliance with, or violation of, the requirements of any
Environmental Law by the Borrower or the release, spill or discharge, threatened
or actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter, which affects the
Borrower or its business, operations or assets or any properties at which the
Borrower has transported, stored or disposed of any Hazardous Materials, (iv)
the Borrower has no material liability, contingent or otherwise, in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Material; and (v)
without limiting the generality of the foregoing, the Borrower shall, following
determination by the Bank that there is non-compliance, or any condition which
requires any action by or on behalf of the Borrower in order to avoid any
non-compliance, with any Environmental Law, at the Borrower's sole expense,
cause an independent environmental engineer acceptable to the Bank to conduct
such test of the relevant site as are appropriate, and prepare and deliver a
report setting forth the result of such tests, a proposed plan for remediation
and an estimate of the costs thereof.
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<PAGE> 18
7.5 Absence of Breach. The execution, delivery and performance of
this Agreement, the Loan Documents and any other documents or instruments to be
executed and delivered by the Borrower in connection with the Loans shall not:
(i) violate any provisions of law or any applicable regulation, order, writ,
injunction or decree of any court or governmental authority, or (ii conflict
with, be inconsistent with, or result in any breach or default of any of the
terms, covenants, conditions, or provisions of any indenture, mortgage, deed of
trust, instrument, document, agreement or contract of any kind to which the
Borrower is a party or by which the Borrower or any of its property or assets
may be bound.
7.6 Collateral Representations. The Borrower is the sole owner of
the Collateral, free from any lien, security interest or encumbrance of any
kind, other than the lien of the Bank.
7.7 Financial Statements. All financial statements submitted to
the Bank have been prepared in accordance with GAAP on a basis, except as
otherwise noted therein, consistent with the previous fiscal year and truly and
accurately reflect the financial condition of the Borrower and the results of
the operations for the Borrower as of such date and for the periods indicated.
Since the date of the most recent financial statement submitted by the Borrower
to the Bank, there has been no material adverse change in the financial
condition or in the assets or liabilities of the Borrower, or any changes except
those occurring in the ordinary course of business.
7.8 Litigation and Taxes. There is no litigation or governmental
proceeding pending, or threatened, against the Borrower, which, if adversely
determined, would result in any material adverse change in the financial
condition or properties, business or operations of the Borrower. The Borrower
has duly filed all applicable income or other tax returns and has paid all
income or other taxes when due. There is no controversy or objection pending, or
threatened in respect of any tax returns of the Borrower.
7.9 Event of Default. No Event of Default has occurred and is
continuing, and no event has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an Event of Default
under this Agreement or any of the Loan Documents and the Borrower is not in
default (without regard to grace or cure periods) under any contract or
agreement to which it is a party.
7.10 ERISA Obligations. The Borrower has promptly paid and
discharged all obligations and liabilities arising under the Employee Retirement
Income Security Act of 1974 ("ERISA") of a character which if unpaid or
unperformed might result in the imposition of a lien against any of its
properties or assets.
7.11 Adverse Circumstances. No condition, circumstance, event,
agreement, document, instrument, restriction, litigation or proceeding (or
threatened litigation or proceeding or basis therefor) exists which could
adversely affect the validity or priority of the liens and security interests
granted to the Bank under the Loan Documents, which could materially adversely
affect the ability of the Borrower to perform its obligations under the Loan
Documents, which would constitute a default under any of the Loan Documents or
which would constitute such a default with the giving of notice or lapse of time
or both.
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<PAGE> 19
7.12 Lending Relationship. The Borrower acknowledges and agrees
that the relationship hereby created with the Bank is and has been conducted on
an open and arm's length basis in which no fiduciary relationship exists and
that the Borrower has not relied and is not relying on any such fiduciary
relationship in executing this Agreement and in consummating the Loans. The Bank
represents that it will receive the Note payable to its order as evidence of a
bank loan.
7.13 Business Loan. The Loans, including interest rate, fees and
charges as contemplated hereby, (i) are business loans within the purview of 815
ILCS 205/4(1)(c), as amended from time to time, (ii) are an exempted transaction
under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction, the Borrower or any property
securing the Loans.
7.14 Compliance with Regulation U. No portion of the proceeds of
the Loans nor any Letter of Credit shall be used by the Borrower, or any
affiliates of the Borrower, either directly or indirectly, for the purpose of
purchasing or carrying any margin stock, within the meaning of Regulation U as
adopted by the Board of Governors of the Federal Reserve System.
7.15 Complete Information. This Agreement and all financial
statements, schedules, certificates, confirmations, agreements, contracts, and
other materials submitted to the Bank in connection with or in furtherance of
this Agreement by or on behalf of the Borrower fully and fairly state the
matters with which they purport to deal, and neither misstate any material fact
nor, separately or in the aggregate, fail to state any material fact necessary
to make the statements made not misleading.
7.16 Place of Business. The principal place of business of the
Borrower is 660 Hembree Parkway, Suite 106, Roswell, Georgia 30076 and the
Borrower shall promptly notify the Bank of any change in such location. The
Borrower will not remove or permit the Collateral to be removed from such
location without the prior written consent of the Bank, except for Inventory
sold in the usual and ordinary course of the Borrower's business or inventory
stored at Diversified Healthcare Services, Inc. located at 11525 North Fulton
Industrial Boulevard, Alpharetta, Georgia 30004.
7.17 Year 2000 Compliance. The Borrower and its subsidiaries have
reviewed the areas within their business and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or its subsidiaries may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), and have made related appropriate inquiry
of material suppliers and vendors. Based on such review and program, the
Borrower believes that the Year 2000 Problem will not have a material adverse
effect on the Borrower.
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<PAGE> 20
8. NEGATIVE COVENANTS.
8.1 Indebtedness. The Borrower shall not, either directly or
indirectly, create, assume, incur or have outstanding any Indebtedness
(including purchase money indebtedness), or become liable, whether as endorser,
guarantor, surety or otherwise, for any debt or obligation of any other person,
firm or corporation, except:
(a) the Obligations;
(b) endorsement for collection or deposit of any
commercial paper secured in the ordinary course of business;
(c) obligations of the Borrower for taxes, assessments,
municipal or other governmental charges;
(d) obligations of the Borrower for accounts payable,
other than for money borrowed, incurred in the ordinary course of
business;
(e) obligations existing on the date hereof which are
disclosed on the financial statements referred to in Section 7.7;
(f) Guaranty Obligations of the Borrower to Frain
Industries, for the obligations of Elge, Inc., in an amount not to
exceed Eight Thousand Four Hundred Dollars ($8,400);
(g) other obligations of the Borrower to Frain Industries
pursuant to that certain Agreement dated January 1, 1999 by and between
the Borrower and Frain Industries; such Agreement must be reasonably
acceptable to the Bank and shall not be amended without the prior
written consent of the Bank; and
(h) additional indebtedness of the Borrower which is
previously approved in writing by the Bank, which approval may be
granted or denied by the Bank in its sole and absolute discretion.
8.2 Encumbrances. The Borrower shall not, either directly or
indirectly, create, assume, incur or suffer or permit to exist any mortgage,
pledge, encumbrance, security interest, assignment, lien or charge of any kind
or character upon any asset of the Borrower, whether owned at the date hereof or
hereafter acquired except:
(a) liens for taxes, assessments or other governmental
charges not yet due or which are being contested in good faith by
appropriate proceedings in such a manner as not to make the property
forfeitable;
(b) liens, charges and encumbrances incidental to the
conduct of its business or the ownership of its property and assets
which were not incurred in connection with the borrowing of money or
the obtaining of an advance or credit, and which do not in the
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<PAGE> 21
aggregate materially detract from the value of its property or assets
or materially impair the use thereof in the operation of its business;
(c) liens arising out of judgments or awards against the
Borrower with respect to which it shall concurrently therewith be
prosecuting a timely appeal or proceeding for review and with respect
to which it shall have secured a stay of execution pending such appeal
or proceedings for review;
(d) pledges or deposits to secure obligations under
worker's compensation laws or similar legislation;
(e) good faith deposits in connection with lending
contracts or leases to which the Borrower is a party;
(f) deposits to secure public or statutory obligations of
the Borrower;
(g) liens existing on the date hereof and disclosed on
the financial statements referred to in Section 7.7; and
(h) liens and security interests granted to the Bank
hereunder.
8.3 Investments. The Borrower shall not, either directly or
indirectly, make or have outstanding any new investments (whether through
purchase of stocks, obligations or otherwise) in, or loans or advances to, any
other person, firm or corporation, or acquire all or any substantial part of the
assets or business of any other person, firm or corporation except:
(a) investments in direct obligations of the United
States;
(b) investments in certificates of deposit issued by the
Bank or any bank with assets greater than One Hundred Million Dollars
($ 100,000,000.00);
(c) investments in Prime Commercial Paper (for purposes
hereof, Prime Commercial Paper shall mean short-term unsecured
promissory notes sold by large corporations and rated A-1/P-1 by
Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., and
Moody's Investment Service, Inc.); or
(d) additional investments of the Borrower which are
previously approved in writing by the Bank, which approval may be
granted or denied by the Bank in its sole and absolute discretion.
8.4 Transfer; Merger. The Borrower shall not, either directly or
indirectly, merge, consolidate, sell, transfer, lease, encumber or otherwise
dispose of all or any part of its property or business or all or any substantial
part of its assets, or sell or discount (with or without recourse) any of its
notes or Accounts.
8.5 Distributions. The Borrower shall not, either directly or
indirectly, purchase or redeem any shares of its stock, declare or pay any
dividends (other than stock dividends),
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<PAGE> 22
whether in cash or otherwise, or set aside any funds for any such purpose or
make any distribution to its shareholders. Notwithstanding the foregoing,
Borrower may (i) repurchase stock of employees leaving the Borrower, and (ii)
purchase treasury stock in an amount not to exceed $50,000.
8.6 Use of Proceeds. Neither the Borrower nor any affiliate of the
Borrower, shall use any portion of the proceeds of the Loans nor have any Letter
of Credit issued, either directly or indirectly, for the purpose of purchasing
any securities underwritten by ABN AMRO Incorporated, an affiliate of the Bank.
9. AFFIRMATIVE COVENANTS.
9.1 Compliance with Bank Regulatory Requirements. Upon demand by
the Bank, the Borrower shall reimburse the Bank for the Bank's additional costs
and/or reductions in the amount of principal or interest received or receivable
by the Bank if at any time after the date of this Agreement any law, treaty or
regulation or any change in any law, treaty or regulation or the interpretation
thereof by any governmental authority charged with the administration thereof or
any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or the Loans, whether or not having the force of law,
shall impose, modify or deem applicable any reserve (except reserve requirements
taken into account in calculating the interest rate) and/or special deposit
requirement against or in respect of assets held by or deposits in or for the
account of the Loans by the Bank or impose on the Bank any other condition with
respect to this Agreement or the Loans, the result of which is to either
increase the cost to the Bank of making or maintaining the Loans or to reduce
the amount of principal or interest received or receivable by the Bank with
respect to such Loans. Said additional costs and/or reductions will be those
which directly result from the imposition of such requirement or condition on
the making or maintaining of such Loans. All Loans shall be deemed to be match
funded for the purposes of the Bank's determination in the previous sentence.
Notwithstanding the foregoing, the Borrower shall not be required to pay any
such additional costs which could be avoided by the Bank with the exercise of
reasonable conduct and diligence.
9.2 Corporate Existence. The Borrower shall at all times preserve
and maintain its corporate existence, rights, franchises and privileges, and
shall at all times continue as a going concern in the business which the
Borrower is presently conducting.
9.3 Maintain Property. The Borrower shall at all times maintain,
preserve and keep its plant, properties and Equipment, including, but not
limited to, any Collateral, in good repair, working order and condition, normal
wear and tear excepted, and shall from time to time make all needful and proper
repairs, renewals, replacements, and additions thereto so that at all times the
efficiency thereof shall be fully preserved and maintained. The Borrower shall
permit the Bank to examine and inspect such plant, properties and Equipment,
including, but not limited to, any Collateral at all reasonable times.
9.4 Maintain Insurance. The Borrower shall at all times insure and
keep insured in insurance companies acceptable to the Bank, all insurable
property owned by it which is of a character usually insured by companies
similarly situated and operating like properties, against
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<PAGE> 23
loss or damage from fire and such other hazards or risks as are customarily
insured against by companies similarly situated and operating like properties;
and shall similarly insure employers' public and professional liability risks.
Prior to the date of the funding of the Note, the Borrower shall deliver to the
Bank a certificate setting forth in summary form the nature and extent of the
insurance maintained by the Borrower pursuant to this Section 9. All such
policies of insurance must be satisfactory to the Bank in relation to the amount
and term of the Obligations and type and value of the Collateral and assets of
the Borrower, shall identify the Bank as lender's loss payee and as an
additional insured. In the event the Borrower either fails to provide the Bank
with evidence of the insurance coverage required by this Section or at any time
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay any premium in whole or in part relating thereto, then
the Bank, without waiving or releasing any obligation or default by the Borrower
hereunder, may at any time (but shall be under no obligation to so act), obtain
and maintain such policies of insurance and pay such premium and take any other
action with respect thereto, which the Bank deems advisable. This insurance
coverage (i) may, but need not, protect the Borrower's interest in the such
property, including, but not limited to the Collateral and (ii) may not pay any
claim made by, or against, the Borrower in connection with such property,
including, but not limited to the Collateral. The Borrower may later cancel any
such insurance purchased by the Bank, but only after providing the Bank with
evidence that the Borrower has obtained the insurance coverage required by this
Section. The costs of such insurance obtained by the Bank, through and including
the effective date such insurance coverage is canceled or expires, shall be
payable on demand by the Borrower to the Bank, together with interest at the
Default Rate on such amounts until repaid and any other charges by the Bank in
connection with the placement of such insurance. The costs of such insurance,
which may be greater than the cost of insurance which the Borrower may be able
to obtain on its own, together with interest thereon at the Default Rate and any
other charges by the Bank in connection with the placement of such insurance may
be added to the total Obligations due and owing.
9.5 Tax Liabilities. The Borrower shall at all times pay and
discharge all property and other taxes, assessments and governmental charges
upon, and all claims (including claims for labor, materials and supplies)
against the Borrower or any of its properties, Equipment or Inventory, before
the same shall become delinquent and before penalties accrue thereon.
9.6 ERISA Liabilities. The Borrower shall at all times promptly
pay and discharge all ERISA obligations and liabilities of a character which if
unpaid or unperformed might result in the imposition of a lien against any of
its properties or assets and will promptly notify the Bank of (i) the occurrence
of any reportable event (as defined in ERISA) which might result in the
termination by the Pension Benefit Guaranty Corporation ("PBGC") of any employee
benefit plan (the "Plan") covering any officers or employees of the Borrower,
any benefits of which are, or are required to be, guaranteed by PBGC, (ii)
receipt of any notice from PBGC of its intention to seek termination of the Plan
or appointment of a trustee therefor, and (iii) its intention to terminate or
withdraw from the Plan. The Borrower shall not terminate any such Plan or
withdraw therefrom unless it shall be in compliance with all of the terms and
conditions of this Agreement after giving effect to any liability to PBGC
resulting from such termination or withdrawal.
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<PAGE> 24
9.7 Financial Statements. The Borrower shall at all times maintain
a standard and modern system of accounting, on the accrual basis of accounting
and in all respects in accordance with GAAP, and shall furnish to the Bank or
its authorized representatives such information regarding the business affairs,
operations and financial condition of the Borrower, including, but not limited
to:
(a) as soon as available, and in any event, within ninety
(90) days after the close of each of its fiscal years, a copy of the
annual audited financial statements of the Borrower, including balance
sheet, statement of income and, retained earnings, statement of cash
flows for the fiscal year then ended and such other information
(including information) as the Bank may reasonably request in
reasonable detail prepared by an independent certified public
accountant acceptable to the Bank, containing an unqualified opinion;
and
(b) as soon as available, and in any event, within thirty
(30) days following the end of each month, a copy of the financial
statements of the Borrower regarding such month, including balance
sheet, statement of income and retained earnings, statement of cash
flows for the month then ended and such other information (including
nonfinancial information) as the Bank may request in reasonable detail,
prepared and certified as accurate by the Borrower.
No change with respect to such accounting principles shall be made by
the Borrower without giving prior notification to the Bank. The Borrower
represents and warrants to the Bank that the financial statements delivered to
the Bank at or prior to the execution and delivery of this Agreement and to be
delivered at all times thereafter accurately reflect and will accurately reflect
the financial condition of the Borrower. The Bank shall have the right at all
times during business hours to inspect the books and records of the Borrower and
make extracts therefrom. The Borrower agrees to advise the Bank immediately of
any material adverse change in the financial condition, the operations or any
other status of the Borrower.
9.8 Supplemental Financial Statements. The Borrower shall
immediately upon receipt thereof, provide to the Bank copies of interim and
supplemental reports if any, submitted to the Borrower by independent
accountants in connection with any interim audit or review of the books of the
Borrower.
9.9 Borrowing Base Certificate. The Borrower shall, within twenty
(20) days after the end of each month, deliver to the Bank a Borrowing Base
Certificate in the form attached hereto as Exhibit D, certified to as accurate
by the Borrower.
9.10 Aged Accounts Schedule. The Borrower shall, within twenty (20)
days after the end of each month, deliver to the Bank an aged schedule of the
Accounts of the Borrower, listing the name and amount due from each Account
Debtor and showing the aggregate amounts due from (a) 0-30 days, (b) 31-60 days,
(c) 61-90 days and (d) more than 90 days, and certified to as accurate by the
Borrower.
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<PAGE> 25
9.11 Covenant Compliance Report. The Borrower shall within thirty
(30) days after the end of each fiscal quarter, deliver to the Bank a
computation in such detail as the Bank shall specify, showing compliance by the
Borrower with the financial covenants set forth in Section 10, and certified to
as accurate by the Borrower.
9.12 Inventory Reports. The Borrower shall, within twenty (20) days
after the end of each month, deliver to the Bank an inventory report, certified
to as accurate by the Borrower, and within such time as the Bank may specify,
such other schedules and reports as the Bank may require.
9.13 Other Reports. The Borrower shall, within such period of time
as the Bank may specify, deliver to the Bank such other schedules and reports as
the Bank may reasonably require.
9.14 Field Audits. The Borrower shall allow the Bank, at the
Borrower's sole expense, which shall not exceed Four Thousand Dollars ($4,000)
in any twelve (12) month period, to conduct an annual field examination of the
Accounts and Inventory of the Borrower, the results of which must be
satisfactory to the Bank in the Bank's sole and absolute discretion.
9.15 Notice of Proceedings. The Borrower shall, immediately after
knowledge thereof shall have come to the attention of any officer of the
Borrower, give written notice to the Bank of all threatened or pending actions,
suits, and proceedings before any court or governmental department, commission,
board or other administrative agency which may have a material effect on the
business, property or operations of the Borrower.
9.16 Notice of Default. The Borrower shall, immediately after the
commencement thereof, give notice to the Bank in writing of the occurrence of an
Event of Default or of any event which, with the lapse of time, the giving of
notice or both, would constitute an Event of Default hereunder.
9.17 Banking Relationship. The Borrower shall utilize the Bank as
its primary bank of account and depository for all financial services, including
all receipts, disbursements and related services.
9.18 Year 2000 Reporting. Any and all financial statements required
to be provided by the Borrower and/or its subsidiaries to the Bank herein shall:
(i) include a statement that the Year 2000 remediation efforts of the Borrower
and its subsidiaries are proceeding as scheduled, and (ii) indicate whether an
auditor, regulator, or third party consultant has issued a management letter or
other communication regarding the Year 2000 exposure, program or progress of the
Borrower and/or its subsidiaries.
10. FINANCIAL COVENANTS.
10.1 Net Worth plus Subordinated Debt. As of the end of each of its
fiscal quarters the Borrower shall maintain a Net Worth (as defined by GAAP)
plus subordinated Debt in an amount as follows: for the quarter ending December
31, 1998 of not less than Nine Hundred Sixty One Thousand Dollars ($961,000);
and for the quarter ended March 31, 1999 and each
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<PAGE> 26
fiscal quarter thereafter of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000), provided that such amount shall increase by an amount
equal to seventy-five percent (75%) of the Borrower's Net Income at each fiscal
year end.
10.2 Leverage. As of the end of each of its fiscal quarters, the
Borrower shall maintain a ratio of Liabilities to Net worth plus Subordinated
Debt of not greater than 2.25 to 1.00 until June 30, 1999, at which such ratio
shall not exceed 1.75 to 1.00.
10.3 EBITDA. As of the end of each of its fiscal quarters, the
Borrower shall maintain a minimum EBITDA according to the following schedule:
<TABLE>
<CAPTION>
QUARTER ENDED MINIMUM EBITDA
- ------------- --------------
<S> <C>
March 31, 1999 $ 200,000
June 30, 1999 $ 400,000
September 30, 1999 $ 600,000
December 31, 1999 and continuing thereafter $1,200,000
</TABLE>
10.4 Fixed Charge Coverage Ratio. As of the end of each of its
fiscal quarters, the Borrower shall maintain a Fixed Charge Coverage Ratio of
not less than 1.25 to 1.00.
10.5 Additional Equity. As of August 1, 1999, the Borrower's Net
Worth shall be at least Five Million Dollars ($5,000,000) greater than the
Borrower's Net Worth on December 31, 1998.
11. EVENTS OF DEFAULT.
The Borrower, without notice or demand of any kind, shall be in default
under this Agreement upon the occurrence of any of the following events (each an
"Event of Default").
11.1 Nonpayment of Obligations. Any amount due and owing on the
Note or any of the Obligations, whether by its terms or as otherwise provided
herein, is not paid when due.
11.2 Misrepresentation. Any oral or written warranty,
representation, certificate or statement in this Agreement, the Loan Documents
or any other agreement with the Bank shall be false when made or at any time.
11.3 Nonperformance. Any failure to perform or default in the
performance of any covenant, condition or agreement contained in this Agreement.
11.4 Default under Loan Documents. A default under any of the other
Loan Documents which is not cured within (3) days of its occurrence, all of
which covenants, conditions and agreements contained therein are hereby
incorporated in this Agreement by express reference, shall be and constitute an
Event of Default under this Agreement and any other of the Obligations.
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<PAGE> 27
11.5 Default under Other Agreements. Any default in any payment of
principal or interest for any other obligation beyond any period of grace
provided with respect thereto or in the performance of any other term, condition
or covenant contained in any agreement (including, but not limited to an
agreement in connection with the deferred purchase price of property) under
which any such obligation is created, the effect of which default is to cause or
permit the holder of such obligation to cause such obligation to become due
prior to its stated maturity.
11.6 Assignment for Creditors. The Borrower, any guarantor,
accommodation endorser, third party pledgor, or any other party liable with
respect to the Obligations (each, an "Obligor"), makes an assignment for the
benefit of creditors, fails to pay, or admits in writing its inability to pay
its debts as they mature; or if a trustee of any substantial part of the assets
of any Obligor is applied for or appointed, and in the case of such trustee
being appointed in a proceeding brought against such Obligor, the Obligor, by
any action or failure to act indicates its approval or consent to, or
acquiescence in such appointment and such appointment is not vacated, stayed on
appeal or otherwise shall not have ceased to continue in effect within thirty
(30) days after the date of such appointment
11.7 Bankruptcy. Any proceeding involving any Obligor, is commenced
by or against such Obligor under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law or statute of
the federal government or any state government, and in the case of any such
proceeding being instituted against such Obligor, (i) such Obligor, by any
action or failure to act indicates its approval of, consent to or acquiescence
therein, or (ii) an order shall be entered approving the petition in such
proceedings and such order is not vacated, stayed on appeal or otherwise shall
not have ceased to continue in effect within thirty (30) days after the entry
thereof.
11.8 Judgments. The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any lien against any
Obligor which is not fully covered by insurance.
11.9 Change in Control. Any sale, conveyance, assignment or other
transfer, directly or indirectly, of any ownership interest of the Borrower,
which results in any change in the identity of the individuals or entities
previously in control of the Borrower or the grant of a security interest in any
ownership interest of any individual or entity, directly or indirectly
controlling the Borrower, which could result in a change in the identity of the
individuals or entities previously in control of the Borrower. For the purpose
hereof, the terms "control" or "controlling" shall mean the possession of the
power to direct, or cause the direction of, the management and policies of the
Borrower by contract or voting of securities.
11.10 Collateral Impairment. The entry of any judgment, decree,
levy, attachment, garnishment or other process, or the filing of any lien
against, any of the Collateral or any collateral under a separate security
agreement securing any of the Obligations, or the loss, theft destruction,
seizure or forfeiture, or the occurrence of any deterioration or impairment of
any of the Collateral or any of the collateral under any security agreement
securing any of the Obligations, or any decline or depreciation in the value or
market price thereof (whether actual or
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<PAGE> 28
reasonably anticipated), which causes the Collateral, in the sole opinion of the
Bank acting in good faith, to become unsatisfactory as to value or character, or
which causes the Bank to reasonably believe that it is insecure and that the
likelihood for repayment of the Obligations is or will soon be impaired, time
being of the essence. The cause of such deterioration, impairment, decline or
depreciation shall include, but is not limited to, the failure by the Borrower
to do any act deemed necessary by the Bank to preserve and maintain the value
and collectability of the Collateral.
11.11 Death of Individual. The death of any Obligor who is a natural
person.
11.12 Material Adverse Event. The occurrence of any material adverse
event which causes a change in the financial condition of the Borrower, or which
would have a material adverse effect on the business of the Borrower.
12. REMEDIES.
Upon the occurrence of an Event of Default, the Bank shall have all
rights, powers and remedies set forth in the Loan Documents, in any written
agreement or instrument (other than this Agreement or the Loan Documents)
relating to any of the Obligations or any security therefor, or as otherwise
provided at law or in equity. Without limiting the generality of the foregoing,
the Bank may, at its option upon the occurrence of an Event of Default, declare
its commitments to the Borrower to be terminated and all Obligations to be
immediately due and payable; provided, however, that upon the occurrence of an
Event of Default under either Section 11.6. "Assignment for Creditors", or
Section 11.7, "Bankruptcy", all commitments of the Bank to the Borrower shall be
immediately terminated and all Obligations shall be automatically due and
payable, all without demand, notice or further action of any kind required on
the part of the Bank. The Borrower hereby waives any and all presentment,
demand, notice of dishonor, protest, and all other notices and demands in
connection with the enforcement of Bank's rights under the Loan Documents, and
hereby consents to, and waives notice of release, with or without consideration,
of any of the Borrower or any Collateral, notwithstanding anything contained
herein or in the Loan Documents to the contrary. In addition to the foregoing:
12.1 Possession and Assembly of Collateral. The Bank may, without
notice, demand or legal process of any kind, take possession of any or all of
the Collateral (in addition to Collateral of which the Bank already has
possession), wherever it may be found, and for that purpose may pursue the same
wherever it may be found, and may enter into any of the Borrower's premises
where any of the Collateral may be or is supposed to be, and search for, take
possession of, remove, keep and store any of the Collateral until the same shall
be sold or otherwise disposed of and the Bank shall have the right to store the
same in any of the Borrower's premises without cost to the Bank. At the Bank's
request, the Borrower will at the Borrowers' sole expense, assemble the
Collateral and make it available to the Bank at a place or places to be
designated by the Bank which is reasonably convenient to the Bank and the
Borrower.
12.2 Sale of Collateral. The Bank may sell any or all of the
Collateral at public or private sale, upon such terms and conditions as the Bank
may deem proper, and the Bank may
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<PAGE> 29
purchase any or all of the Collateral at any such sale. The Bank may apply the
net proceeds, after deducting all costs, expenses, attorneys' and paralegals'
fees incurred or paid at any time in the Collection, protection and sale of the
Collateral and the Obligations, to the payment of the Note and/or any of the
other Obligations, returning the excess proceeds, if any, to the Borrower. The
Borrower shall remain liable for any amount remaining unpaid after such
application, with interest. Any notification of intended disposition of the
Collateral required by law shall be conclusively deemed reasonably and properly
given if given by the Bank at least five (5) calendar days before the date of
such disposition. The Borrower hereby confirms, approves and ratifies all acts
and deeds of the Bank relating to the foregoing, and each part thereof.
12.3 UCC and Offset Rights. The Bank may exercise, from time to
time, any and all rights and remedies available to it under the UCC or under any
other applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any other agreements between any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or
immatured, including costs of collection and attorneys' and paralegals' fees,
and in such order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including,
but not limited to, balances, credits, deposits, accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to the Bank. The
Borrower, on behalf of itself and each Obligor, hereby waives the benefit of any
law that would otherwise restrict or limit the Bank in the exercise of its
right, which is hereby acknowledged, to appropriate at any time hereafter any
such indebtedness owing from the Bank to any Obligor.
12.4 Additional Remedies. The Bank shall have the right and power
to:
(a) instruct the Borrower, at its own expense, to notify
any parties obligated on any of the Collateral, including, but not
limited to, any Account Debtors, to make payment directly to the Bank
of any amounts due or to become due thereunder, or the Bank may
directly notify such obligors of the security interest of the Bank,
and/or of the assignment to the Bank of the Collateral and direct such
obligors to make payment to the Bank of any amounts due or to become
due with respect thereto, and thereafter, collect any such amounts due
on the Collateral directly from such persons obligated thereon;
(b) enforce collection of any of the Collateral
including, but not limited to, any Accounts, by suit or otherwise, or
make any compromise or settlement with respect to any of the
Collateral, or surrender, release or exchange all or any part thereof,
or comprise, extend or renew for any period (whether or not longer than
the original period) any thereunder;
(c) take possession or control of any proceeds and
products of any of the Collateral, including the proceeds of insurance
thereon;
(d) extend, renew or modify for one or more periods
(whether or not longer than the original period) the Note, any other of
the Obligations, any obligation of any nature of any other obligor with
respect to the Note or any of the Obligations;
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<PAGE> 30
(e) grant releases, compromises or indulgences with
respect to the Note, any of the Obligations, any extension or renewal
of any of the Obligations, any security therefor, or to any other
obligor with respect to the Note or any of the Obligations;
(f) transfer the whole or any part of securities which
may constitute Collateral into the name of the Bank or the Bank's
nominee without disclosing, if the Bank so desires, that such
securities so transferred are subject to the security interest of the
Bank, and any corporation, association, or any of the managers or
trustees of any trust issuing any of said securities, or any transfer
agent, shall not be bound to inquire, in the event that the Bank or
said nominee makes any further transfer of said securities, or any
portion thereof, as to whether the Bank or such nominee has the right
to make such further transfer, and shall not be liable for transferring
the same;
(g) vote the Collateral;
(h) make an election with respect to the Collateral under
Section 1111 of the Code or take action under Section 364 or any other
section of the Code; provided, however, that any such action of the
Bank as set forth herein shall not, in any manner whatsoever, impair or
affect the liability of the Borrower hereunder, nor prejudice, waive,
nor be construed to impair, affect, prejudice or waive the Bank's
rights and remedies at law, in equity or by statute, nor release,
discharge, nor be consumed to release or discharge, the Borrower, any
guarantor or other person, firm, corporation or other entity liable to
the Bank for the Obligations; and
(i) at any time, and from time to time, accept additions
to, releases, reductions, exchanges or substitution of the Collateral,
without in any way altering, impairing, diminishing or affecting the
provisions of this Agreement, the Loan Documents, or any of the other
Obligations, or the Banks rights hereunder, under the Note or under any
of the other Obligations.
The Borrower hereby ratifies and confirms whatever the Bank may do with
respect to the Collateral and agrees that the Bank shall not be liable for any
error of judgment or mistakes of fact or law with respect to actions taken in
good faith in connection with the Collateral.
12.5 Attorney-in-Fact. The Borrower hereby irrevocably makes,
constitutes and appoints the Bank (and any officer of the Bank or any person
designated by the Bank for that purpose) as the Borrower's true and lawful proxy
and attorney-in-fact (and agent-in-fact) in the Borrower's name, place and
stead, with full power of substitution, to (i) take such actions as are
permitted in this Agreement, (ii) execute such financing statements and other
documents and to do such other acts as the Bank may require to perfect and
preserve the Bank's security interest in, and to enforce such interests in the
Collateral, and (iii) carry out any remedy provided for in this Agreement,
including, without limitation, endorsing the Borrower's name to checks, drafts,
instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with the postmaster of the United States Post
Office serving the address of the Borrower, changing the address of the Borrower
to that of the Bank, opening all envelopes addressed to the Borrower and
applying any payments contained therein to the Obligations. The
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<PAGE> 31
Borrower hereby acknowledges that the constitution and appointment of such proxy
and attorney-in-fact are coupled with an interest and are irrevocable. The
Borrower hereby ratifies and confirms all that said attorney-in-fact may do or
cause to be done by virtue of any provision of this Agreement.
12.6 Application of Proceeds. The Bank will within three (3)
business days after receipt of cash or solvent credits from collection of items
of payment, proceeds of Collateral or any other source, apply the whole or any
part thereof against the Obligations secured hereby. The Bank shall further have
the exclusive right to determine how, when and what application of such payments
and such credits shall be made on the Obligations, and such determination shall
be conclusive upon the Borrower. Any proceeds of any disposition by the Bank of
all or any part of the Collateral may be first applied by the Bank to the
payment of expenses incurred by the Bank in connection with the Collateral,
including attorneys' fees and expenses.
12.7 No Waiver. No Event of Default shall be waived by the Bank
except in writing. No failure or delay on the part of the Bank in exercising any
right, power or remedy hereunder shall operate as a waiver of the exercise of
the same or any other right at any other time; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
There shall be no obligation on the part of the Bank to exercise any remedy
available to the Bank in any order. The remedies provided for herein are
cumulative and not exclusive of any remedies provided at law or in equity. The
Borrower agrees that in the event that the Borrower fails to perform, observe or
discharge any of its Obligations or liabilities under this Agreement or any
other agreements with the Bank, no remedy of law will provide adequate relief to
the Bank, and further agrees that the Bank shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
13. MISCELLANEOUS.
13.1 Obligations Absolute. None of the following shall affect the
Obligations of the Borrower to the Bank under this Agreement or the Banks rights
with respect to the Collateral:
(a) acceptance or retention by the Bank of other property
or any interest in property as security for the Obligations;
(b) release by the Bank of the Borrower or all or any
part of the Collateral or of any party liable with respect to the
Obligations;
(c) release, extension, renewal, modification or
substitution by the Bank of the Note, or any note evidencing any of the
Obligations, or the compromise of the liability of any guarantor of the
Obligations; or
(d) failure of the Bank to resort to any other security
or to pursue the Borrower or any other obligor liable for any of the
Obligations before resorting to remedies against the Collateral.
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<PAGE> 32
13.2 Entire Agreement. This Agreement (i) is valid, binding and
enforceable against the Borrower and the Bank in accordance with its provisions
and no conditions exist as to its legal effectiveness; (ii) constitutes the
entire agreement between the parties; and (iii) is the final expression of the
intentions of the Borrower and the Bank. No promises, either expressed or
implied, exist between the Borrower and the Bank, unless contained herein. This
Agreement supersedes all negotiations, representations, warranties, commitments
offers, contacts (of any kind or nature, whether oral or written) prior to or
contemporaneous, with the execution hereof.
13.3 Amendments: Waivers. No amendment, modification, termination,
discharge or waiver of any provision of this Agreement or of the Loan Documents,
or consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only for the specific purpose for
which given.
13.4 WAIVER OF DEFENSES. THE BORROWER, ON BEHALF OF ITSELF AND ANY
GUARANTORS OF ANY OF THE OBLIGATIONS, WAIVES EVERY PRESENT AND FUTURE DEFENSE,
CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW HAVE OR
HEREAFTER MAY HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS AGREEMENT. THE
BORROWER WAIVES ANY IMPLIED COVENANT OF GOOD FAITH AND RATIFIES AND CONFIRMS
WHATEVER THE BANK MAY DO PURSUANT TO THE TERMS OF TIES AGREEMENT. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO
THE BORROWER.
13.5 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, THE RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER
OBLIGATIONS, THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR
COURSE OF DEALING IN WHICH THE BANK AND THE BORROWER ARE ADVERSE PARTIES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL
ACCOMMODATION TO THE BORROWER.
13.6 LITIGATION. TO INDUCE THE BANK TO MAKE THE LOANS, THE BORROWER
IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS A RESULT
OR CONSEQUENCE OF THIS AGREEMENT, THE NOTE, ANY OTHER AGREEMENT WITH THE BANK OR
THE COLLATERAL, SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITES IN
THE CITY OF CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITES IN SAID
CITY, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE BORROWER
HEREBY WAIVES PERSONAL SERVICE OF ANY
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<PAGE> 33
AND ALL PROCESS AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE BORROWER AS SET FORTH
HEREIN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR
OTHERWISE.
13.7 Assignability. The Bank may at any time assign the Bank's
rights in this Agreement, the Note, the Obligations, or any part thereof and
transfer the Bank's rights in any or all of the Collateral, and the Bank
thereafter shall be relieved from all liability with respect to such Collateral.
In addition, the Bank may at any time sell one or more participations in the
Loans. The Borrower may not sell or assign this Agreement, or any other
agreement with the Bank or any portion thereof, either voluntarily or by
operation of law, without the prior written consent of the Bank. This Agreement
shall be binding upon the Bank and the Borrower and their respective legal
representatives and successors. All references herein to the Borrower shall be
deemed to include any successors, whether immediate or remote. In the case of a
joint venture or partnership, the term "Borrower" shall be deemed to include all
joint venturers or partners thereof, who shall be jointly and severally liable
hereunder.
13.8 Confidentiality. The Borrower and the Bank hereby agree and
acknowledge that any and all information relating to the Borrower which is (i)
furnished by the Borrower to the Bank (or to any affiliate of the Bank), and
(ii) non-public, confidential or proprietary in nature, shall be kept
confidential by the Bank or such affiliate in accordance with applicable law,
provided, however, that such information and other credit information relating
to the Borrower may be distributed by the Bank or such affiliate to the Bank's
or such affiliate's directors, officers, employees, attorneys, affiliates,
auditors and regulators, and upon the order of a court or other governmental
agency having jurisdiction over the Bank or such affiliate, to any other party.
The Borrower and the Bank further agree that this provision shall survive the
termination of this Agreement.
13.9 Notices. Except as otherwise provided herein, the Borrower
waives all notices and demands in connection with the enforcement of the Bank's
rights hereunder. All notices, requests, demands and other communications
provided for hereunder shall be in writing, sent by certified or registered
mail, postage prepaid, by facsimile, telegram or delivered in person, and
addressed as follows:
<TABLE>
<S> <C>
If to the Borrower: Horizon Pharmaceutical Corporation
660 Hembree Parkway
Suite 106
Roswell, Georgia 30076
Attention:
----------------------------------
</TABLE>
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<PAGE> 34
<TABLE>
<S> <C>
If to the Bank:
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60674
Attention: Michael Lenihan
</TABLE>
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
13.10 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
13.11 Facsimile Signatures. The Bank is hereby authorized to rely
upon and accept as an original any Loan Documents or other communication which
is sent to the Bank by facsimile, telegraphic or other electronic transmission
(each, a "Communication") which the Bank in good faith believes has been signed
by Borrower and has been delivered to the Bank by a properly authorized
representative of the Borrower, whether or not that is in fact the case.
Notwithstanding the foregoing, the Bank shall not be obligated to accept any
such Communication as an original and may in any instance require that an
original document be submitted to the Bank in lieu of, or in addition to, any
such Communication.
13.12 Binding Effect. This Agreement shall become effective upon
execution by the Borrower and the Bank. If this Agreement is not dated or
contains any blanks when executed by the Borrower, the Bank is hereby
authorized, without notice to the Borrower, to date this Agreement as of the
date when it was executed by the Borrower, and to complete any such blanks
according to the terms upon which this Agreement is executed.
13.13 Governing Law. This Agreement, the Loan Documents and the Note
shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Illinois (but giving
effect to federal laws applicable to national banks), and for all purposes shall
be construed in accordance with the laws of such State, without giving effect to
the choice of law provisions of such State.
13.14 Enforceability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by, unenforceable or invalid under any jurisdiction, such provision shall as to
such jurisdiction, be severable and be ineffective to the extent of such
prohibition or validity, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
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<PAGE> 35
13.15 Survival of Borrower Representations. All covenants,
agreements, representations and warranties made by the Borrower herein shall,
notwithstanding any investigation by the Bank, be deemed material and relied
upon by the Bank and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of the Note, and shall be deemed to be
continuing representations and warranties until such time as the Borrower has
fulfilled all of its Obligations to the Bank, and the Bank has been paid in
full. The Bank, in extending financial accommodations to the Borrower, is
expressly acting and relying on the aforesaid representations and warranties.
13.16 Extensions of Bank's Commitment and Notes. This Agreement
shall secure and govern the terms of any extensions or renewals of the Bank's
commitment hereunder and the Notes pursuant to the execution of any
modification, extension or renewal note executed by the Borrower and accepted by
the Bank in its sole and absolute discretion in substitution for any Note or
Notes.
13.17 Time of Essence. Time is of the essence in making payments
of all amounts due the Bank under this Agreement and in the performance and
observance by the Borrower of each covenant, agreement, provision and term of
this Agreement.
13.18 Indemnification. The Borrower agrees to defend (with counsel
satisfactory to the Bank), protect, indemnify and hold harmless each indemnified
Party from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and distributions
of any kind or nature (including, without limitation, the disbursements and the
reasonable fees of counsel for each Indemnified Party thereto, which shall also
include, without limitation, attorneys' fees and time charges of attorneys who
may be employees of the Bank, any parent corporation or affiliated corporation
of the Bank), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities, Environmental Laws and commercial laws and regulations,
under common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any of the Loan Documents, or
any act, event or transaction related or attendant thereto, the preparation,
execution and delivery of this Agreement and the Loan Documents, including, but
not limited to, the making or issuance and management of the Loans or any
Letters of Credit, the use or intended use of the proceeds of the Loans or any
Letters of Credit, the enforcement of the Bank's rights and remedies under this
Agreement, the Loan Documents, the Note, any other instruments and documents
delivered hereunder, or under any other agreement between the Borrower and the
Bank; provided, however, that the Borrower shall not have any obligations
hereunder to any Indemnified Party with respect to matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, the Borrower shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall together with interest
thereon at the Default Rate from the date incurred by each Indemnified Party
until paid by the Borrower, be added to
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<PAGE> 36
the Obligations of the Borrower and be secured by the Collateral. The provisions
of this section shall survive the satisfaction and payment of the other
Obligations and the termination of this Agreement
13.19 Documentation Costs. The Borrower shall reimburse the Bank for
all attorney's fees (including fees for in-house counsel) and other
documentation costs incurred by the Bank in preparation of this Agreement and
other loan documents, or in perfecting the Bank's security interest granted
hereunder.
13.20 Construction. As used herein, all provisions shall include the
masculine, feminine, neuter, singular and plural thereof, wherever the context
and facts require such construction and in particular the word "Borrower" shall
be so construed.
13.21 Amended and Restated Agreement. This Amended and Restated Loan
and Security Agreement is issued in substitution for that certain Loan and
Security Agreement between the Borrower and the Bank dated May 11, 1998.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this
Amended and Restated Loan and Security Agreement as of the date first above
written.
HORIZON PHARMACEUTICAL
CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
-------------------------------
LASALLE NATIONAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
-------------------------------
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<PAGE> 37
EXHIBIT A
REVOLVING NOTE
$1,000,000.00 Date: December 22, 1998
Due: May 10, 1999
On or before May 10, 1999 (the "Maturity Date"), HORIZON PHARMACEUTICAL
CORPORATION, a Georgia corporation (the "Borrower"), whose address is 660
Hembree Parkway, Suite 106, Roswell, Georgia 30076, for value received, promises
to Pay to the order of LASALLE NATIONAL BANK, a national banking association
(hereinafter, together with any holder hereof, called "Bank"), whose address is
135 South LaSalle Street, Chicago, Illinois 60674, the principal sum of One
Million and 00/100 Dollars ($1,000,000.00) or, if less, the aggregate unpaid
principal amount of all Revolving Loans (as hereinafter defined) made by the
Bank to the Borrower.
The unpaid principal amount hereof shall bear interest at the rate or
rates set forth in that certain Amended and Restated Loan and Security Agreement
between the Borrower and the Bank dated December 22, 1998 (the "Loan
Agreement"), and shall be payable from the date hereof on the aggregate unpaid
principal amount of all loans made by the Bank to the Borrower as set forth in
the Loan Agreement.
Principal and interest shall be paid to the Bank at its address set
forth above or at such other place as the holder of this Note shall designate in
writing to the Borrower.
This Note is executed pursuant to the Loan Agreement, as amended from
time to time. The terms and conditions of the Revolving Loan (as defined in the
Loan Agreement), which is evidenced by this Note, are set forth in the Loan
Agreement. Capitalized words and phrases not otherwise defined herein shall have
the meanings assigned thereto in the Loan Agreement.
The Borrower, without notice or demand of any kind except as provided
for in the Loan Agreement, shall be in default hereunder upon the occurrence of
any Event of Default set forth in the Loan Agreement, and without demand or
notice of any kind, the entire unpaid amount of all Obligations (as defined in
the Loan Agreement) shall become immediately due and payable, and the Bank may
take any action or avail itself of any remedy set forth in the Loan Agreement.
Except for such notices as may be required under the terms of the Loan
Agreement, the Borrower waives presentment, demand, notice, protest, and all
other demands, or notices, in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence.
This Note is made under and governed by the internal laws of the State
of Illinois.
This Revolving Note is issued in substitution for, but not in repayment
of that certain $1,000,000 Revolving Note of the Borrower payable to the Bank,
dated as of May 11, 1998, and is not and shall not be deemed to constitute a
novation therefor.
<PAGE> 38
IN WITNESS WHEREOF, the Borrower has executed this Revolving Note as of
the date set forth above.
HORIZON PHARMACEUTICAL
CORPORATION
By:
-------------------------------
Name:
------------------------------
Title:
----------------------------
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<PAGE> 39
EXHIBIT B
TERM NOTE
$2,400,000.00 Date: December 22, 1998
Chicago, Illinois Due: December 22, 2001
For value received, HORIZON PHARMACEUTICAL CORPORATION, a Delaware
corporation (the "Borrower"), whose address is 660 Hembree Parkway, Suite 106,
Roswell, Georgia, 30076, promises to pay to the order of LASALLE NATIONAL BANK,
a national banking association (the "Bank"), whose address is 135 South LaSalle
Street, Chicago, Illinois 60674, on or before December 22, 2001, or such earlier
date as set forth in that certain Amended and Restated Loan and Security
Agreement between the Borrower and the Bank dated December 22, 1998 (the "Loan
Agreement"), the principal sum of Two Million Four Hundred Thousand and 00/100
Dollars ($2,400,000.00) or such lesser amount as may be outstanding from time to
time.
The Borrower further promises to pay the Bank (i) principal payments at
the times and in the amounts as set forth in the Loan Agreement, and (ii)
interest on the aggregate principal amount outstanding, from time to time, from
the date hereof until paid in full at the rates and times set forth in the Loan
Agreement.
All payments of principal and interest hereunder shall be made in
lawful money of the United States of America in immediately available funds at
the office of the Bank set forth above, or at such other place as may be
designated by the holder to the Borrower in writing.
This Note evidences indebtedness incurred under the Loan Agreement, to
which reference is hereby made for a statement of additional terms and
conditions of this Note, including but not limited to the terms and conditions
under which the due date of this Note or any payment hereon may be accelerated.
The holder of this Note is entitled to all of the rights and benefits provided
for in the Loan Agreement.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
IN WITNESS WHEREOF, the parties hereto execute this Note as of the date
first above written.
HORIZON PHARMACEUTICAL CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 40
EXHIBIT C
LANDLORD WAIVER
THIS LANDLORD WAIVER dated as of December 22, 1998, is by DIVERSIFIED
HEALTHCARE SERVICES, INC. (the "Landlord") and is to and for the benefit of
LASALLE NATIONAL BANK (the "Bank"), whose address is 135 South LaSalle Street,
Chicago, Illinois 60674.
RECITALS:
A. The Landlord is the owner of real property commonly known as
11525 North Fulton Industrial Boulevard, Alpharetta, Georgia 30004 (the
"Premises").
B. Horizon Pharmaceutical Corporation (the "Tenant") stores or
may store inventory and/or other property on the Premises.
C. The Tenant has granted to the Bank a first security interest
in certain property which may from time to time be located in and on the
Premises as security for any and all loans which the Bank may make to the Tenant
from time to time.
D. The Bank is willing to make such loans only if the Landlord
waives any claims, demands or rights which the Landlord may have or acquire with
respect to such property.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Landlord agrees as follows:
1. The Landlord hereby waives any and all liens, claims, demands
or rights, however arising, including without limitation, the right to levy,
distrain, sue, execute or sell for unpaid rent, which the Landlord now has or
may hereafter acquire with respect to any or all of the property of the Tenant,
or in which the Tenant has an interest (whether such property is now or
hereafter located on or in the Premises), including, without limitation,
machinery, equipment, furniture, fixtures, inventory and goods or merchandise
and all additions, replacements and substitutions therefor, and all of the
proceeds thereof.
2. The Landlord agrees that the Bank, through its authorized
representatives, may enter upon the Premises at any time and from time to time
for purposes of removing any or all of the property of the Tenant or conduct a
sale or sales of the property on the Premises and that the Bank shall have no
obligation to the Landlord except the obligation to pay the Landlord a
reasonable rental for the Premises for the period after which the Bank notified
the Landlord of its intent to possess the property.
<PAGE> 41
3. The Landlord warrants to the Bank that the Tenant has complied
with all obligations owed to the Landlord by the Tenant, including without
limitation the payment of all rent as and when due. The Landlord agrees to give
the Bank written notice of the occurrence of any event which, with the giving of
notice or passage of time or both, could result in the creation of the right of
the Landlord to terminate any lease covering all or any part of the Premises or
to accelerate any rent due thereunder.
4. The laws of Illinois shall govern the validity, interpretation
and enforcement of this Waiver.
IN WITNESS WHEREOF, the undersigned has executed this Waiver on the
date first above appearing.
Diversified Healthcare Services, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Consented to:
Horizon Pharmaceutical Corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-2-
<PAGE> 42
EXHIBIT D
BORROWING BASE CERTIFICATE
Date: _____________________
Reference is made to the Loan and Security Agreement dated as of
December 22, 1998 (the "Loan Agreement") between Horizon Pharmaceutical
Corporation (the "Borrower") and LaSalle National Bank (the "Bank"), as amended
from time to time. All terms used in this Certificate are used with the meaning
ascribed to such terms in the Loan Agreement.
<TABLE>
<S> <C>
Accounts Receivable
- -------------------
1. Total Accounts Receivable at _________, __ $ _________
2. Less: Ineligibles $(_________)
3. Total Eligible Receivables $ _________
4. % of Advance 80%
5. Accounts Receivable Borrowing Base $ _________
Inventory
- ---------
6. Total Sample Inventory at _________, __ $ _________
7. Less: Ineligibles and Reserves $(_________)
8. Eligible Sample Inventory $ _________
9. % of Advance 30%
10. Initial Advance on Sample Inventory $ _________
11. Maximum Sample Inventory Advance $ 125,000
12. Sample Inventory Borrowing Base (lesser of 10 or 11) $ _________
13. Non-Sample Inventory Value $ _________
14. Less: Ineligibles and Reserves $ _________
15. Eligible Non-Sample Inventory $ _________
16. % of Advance 50%
17. Initial Advance on Non-Sample Inventory $ _________
18. Initial Inventory Borrowing Base (12+17) $ _________
19. Inventory Cap (amount shown on line 5) $ _________
20. Inventory Borrowing Base (lesser of 18 or 19) $ _________
21. Total Borrowing Base Amount (5+20) $ _________
22. Revolving Line of Credit Outstanding $ _________
23. Revolving Loan Collateral Excess $ _________
(Shortfall) (21-22) $ _________
</TABLE>
The undersigned hereby certifies that the above information and
computations are true and accurate and hereby represents and warrants that as of
the date hereof, (i) no event of default has occurred and is continuing, (ii)
the representations and warranties of the Borrower set forth in the
<PAGE> 43
Loan Agreement are true and correct in all material respects as of the date
hereof, and (iii) the Borrower is in compliance with covenants set forth in the
Loan Agreement.
Horizon Pharmaceutical Corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-2-
<PAGE> 44
EXHIBIT E
SUBORDINATION AGREEMENT
This Agreement is entered into as of December 22, 1998, by and among
_____________________ (the "Undersigned"), LASALLE NATIONAL BANK, a national
banking association (the "Bank") and HORIZON PHARMACEUTICAL CORPORATION (the
"Debtor").
WHEREAS, Debtor is indebted or may be indebted in the future to the
Bank in the approximate amount of $3,400,000 as evidenced by that certain
$2,400,000 Term Note of the Debtor payable to the Bank, dated December 22, 1998,
as amended, renewed, modified or replaced from time to time, and that certain
$1,000,000 Revolving Note of the Debtor payable to the Bank, dated December 22,
1998, as amended, renewed, modified or replaced from time to time (the "Notes");
and
WHEREAS, the Undersigned desires the Bank to extend or continue the
extension of credit to Debtor from time to time as Bank, in its sole discretion,
may determine, and Bank has required, as a condition to the extension or
continuation of such credit whatsoever that all present and future indebtedness
due the Undersigned from the Debtor is subordinated in the manner hereinafter
set forth; and
WHEREAS, the Undersigned is personally and financially interested in
the Debtor and the extension or continuation of the extension of credit, as
aforesaid, by Bank is necessary to the operation of the business of the Debtor
and will inure to the personal and financial benefit of the Undersigned.
NOW, THEREFORE, FOR VALUE RECEIVED, it is agreed that the preceding
provisions and preambles are an integral part hereof and that this Agreement
shall be construed in light thereof, and in consideration of the extension or
continuation of such credit by Bank to Debtor, as Bank may, in its sole
discretion, determine, and for other good and valuable considerations to the
Undersigned, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Subordination. The Undersigned hereby:
(A) Subordinates all indebtedness now or at any time or times
hereafter existing and owing by Debtor to the Undersigned, whether such
indebtedness is absolute or contingent, direct or indirect and howsoever
evidenced, including all interest thereon (collectively, the "Undersigned's
Claims") to any and all debts, demands, claim, liabilities or causes of action
for which Debtor may now or at any time or times hereafter in any way be liable
to Bank under any agreement, instrument, documents executed and delivered or
made by Debtor to Bank (collectively, the "Bank Loans");
<PAGE> 45
(B) Subordinates all security interests, liens, encumbrances and
claims which in any way secure the payment to the Undersigned of the
Undersigned's Claim (the "Undersigned Collateral") to all security interests,
liens, encumbrances and claims which in any way secure the payment of Bank Loans
(the "Bank Collateral"). All covenants, conditions and agreements contained in
any security agreement from the Debtor to the Bank are hereby incorporated
herein by express reference and a default thereunder shall be and constitute a
default under this Agreement;
(C) Agrees to instruct Debtor not to pay, and the Undersigned
agrees not to accept any payment of or assert or seek to enforce against Debtor,
the Undersigned Claims, including but not limited to repayment of any of the
Undersigned's Claims upon the maturity thereof provided that this Section shall
not prohibit the conversion of the Undersigned's Claim into stock of the Debtor
as provided for in that certain Subordinated Note Agreement between the
Undersigned and the Debtor, dated as of December __,1998, provided that such
conversion shall not be permitted during the occurrence of an event of default
under any of the loan documents evidencing any of the Bank Loans;
(D) Agrees that insolvency or bankruptcy in any manner whatsoever
of the Debtor shall not impair or affect this Agreement, and hereby irrevocably
authorizes Bank: (i) to collect, receive, enforce and accept any and all sums or
distributions of any kind that may become due, payable or distributable on or in
respect of the Undersigned's Claim or the Undersigned's Collateral whether paid
directly by Debtor or paid or distributed in any bankruptcy, receivership,
reorganization or dissolution proceedings or otherwise, and (ii) in Bank's sole
discretion, to make and present claims therefor, in any such proceedings, either
in Bank's name or in the name of the Undersigned, and agrees that in case any
such sums or distributions come into the Undersigned's possession or control,
the Undersigned shall promptly turn the same over to Bank in kind;
(E) Agrees not to join in any petition of bankruptcy or in any
creditors agreement affecting the Debtor's assets and grants to Bank an
irrevocable proxy to vote the Undersigned's Claims in any proceeding or
transaction, and agrees to execute all documents requested by Bank to facilitate
the exercise of such proxy;
(F) Agrees not to bring any suit or action to enforce the payment
of any of the Undersigned's Claim until the Bank Loans have been satisfied in
full and agrees that the Bank may intervene in any suit or action brought by the
Undersigned in violation of this Agreement and may interpose this Agreement as a
bar to such suit or action, and Debtor may also interpose this Agreement as a
bar to any suit or action by the Undersigned in violation hereof, provided that
this Section shall not prohibit the conversion of the Undersigned's Claims into
stock of the Debtor as provided for in that certain Subordinated Note Agreement
between the Undersigned and the Debtor, dated as of December __, 1998, provided
that such conversion shall not be permitted during the occurrence of an event of
default under any of the loan documents evidencing any of the Bank Loans; and
(G) Agrees to turn over to Bank any sum or sums at any time paid
to, or received by or on behalf of; the Undersigned in violation of the terms of
this Agreement.
-2-
<PAGE> 46
2. Representations. The Undersigned represents, warrants and
agrees with the Bank as follows:
(a) The Undersigned has not assigned or transferred the
Undersigned's Claims or the Undersigned's Collateral or any interest therein, to
any person, firm, association, corporation or party, and the Undersigned shall
make no such assignment or transfer thereof, and
(b) All agreements, instruments and documents evidencing the
Undersigned's Claims and the Undersigned's Collateral will be endorsed with a
proper notice of this Agreement substantially in the following manner.
"This Subordinated Note/Subordinated Note Agreement is subordinated to
all indebtedness now or hereafter owing by maker to LaSalle National
Bank, as provided in the Subordination Agreement dated as of December
22, 1998."
3. Continuing Agreement. (a) This Agreement shall constitute a
continuing agreement of Subordination, and Bank may lend, or continue to lend
monies, without notice to the Undersigned, extend credit and make other
accommodations to or for the account of the Debtor on the faith hereof, until
written notice of revocation of this Agreement shall be actually delivered to
Bank by the Undersigned. Any such notice of revocation shall not impair or
affect this Agreement in relation to any obligations or liabilities of Debtor
then existing or any obligations or liabilities created thereafter pursuant to
any previous commitment of Bank to Debtor, or any extensions or renewals of any
such commitment of Bank to Debtor, or any extensions or renewals of any such
obligations or liabilities, and as to all such obligations and liabilities and
extensions or renewals thereof, this Agreement shall continue effective until
the same shall have been fully discharged with interest.
(b) The Undersigned agrees that Bank, at any time, and from time
to time, either before or after any such notice of revocation, may enter into
such agreement or agreements with Debtor as Bank may deem proper to extend the
time of payment, renew or otherwise alter the terms of all or any of the
obligations or liabilities of Debtor to Bank or affecting any security
underlying any or all of such obligations or liabilities or may exchange, sell
or surrender or otherwise deal with any such security, or may release any
balance of funds of Debtor with Bank without notice to the Undersigned and
without in any way impairing or affecting this Agreement.
(c) The Bank, in its sole discretion, shall have the sole and
exclusive right and power, without notice to the Undersigned, to extend credit
or loan money to the Debtor; make renewals or extensions of indebtedness; loan
additional money to the Debtor after the creation of any indebtedness; modify
any of the terms of any loan agreement, note or other instrument relating to or
evidencing any of the Debtor to Bank, including, but not limited to, the sole
right to release or substitute Bank Collateral and the sole right to release
guarantors; and to deal in any manner whatsoever with any indebtedness payable
to Bank and any security or guaranty therefor.
4. Acceleration. If the Debtor or the Undersigned, or both,
violate any provision of this Agreement, or if any subordinate indebtedness is
accelerated, Bank may (but need not), by
-3-
<PAGE> 47
notice in writing delivered to the Undersigned, advise the Undersigned that all
indebtedness of the Debtor to the Bank has become immediately due and payable.
5. Further Assurances. The Undersigned agrees to furnish all
assignments, including assignment of financing statements under the Uniform
Commercial Code, and all documents requested by Bank to facilitate the
enforcement by Bank of its rights and remedies hereunder.
6. Payments in Trust. Any and all funds or other property
received by the Undersigned on any and all of the Undersigned Claims in
violation of the terms of this Agreement shall be received and held by the
Undersigned as trustee for Bank and shall be paid over to Bank in kind on
account of the Bank Loans.
7. Reliance. The Undersigned consents and agrees that all
obligations and liabilities of Debtor to Bank shall be deemed to have been made
or incurred at the request of the Undersigned and in reliance upon this
Agreement, provided, however, that neither the foregoing provision nor any other
provision contained in this Agreement shall be deemed or construed to
constitute, either directly or by implication, a guaranty by the Undersigned of
any debts, obligations or liabilities incurred by Debtor to Bank.
8. Expenses. The Undersigned agrees to pay all costs, legal
expenses and attorneys' and paralegals' fees of every kind, paid or incurred by
Bank in enforcing its rights hereunder, including, but not limited to,
litigation instituted in a State or Federal Court, as hereinafter provided
(including proceedings under the United States Bankruptcy Code) in enforcing its
rights in connection with this Agreement, or in defending against any defense,
cause of action, counterclaim, setoff or crossclaim based on any act of
commission or omission by Bank with respect to the Bank Loans or collateral for
Bank Loans promptly on demand of Bank or other person paying or incurring the
same.
9. Choice of Law. The Agreement has been delivered to the Bank at
its office set forth on the first page hereof, and shall be construed and the
rights, remedies and liabilities of the parties shall be determined in
accordance with the laws of the State of Illinois, in which state it shall be
performed by the Undersigned.
10. Forum. TO INDUCE BANK TO AFFORD FINANCIAL ACCOMMODATIONS TO
THE DEBTOR, THE UNDERSIGNED IRREVOCABLY AGREES THAT ALL ACTIONS ARISING DIRECTLY
OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF THIS AGREEMENT SHALL BE
INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF CHICAGO,
ILLINOIS, AND THE UNDERSIGNED HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND
VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN SAID CITY,
AND WAIVES ANY OBJECTION BASED ON FORUM NONCONVENIENS. THE UNDERSIGNED HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO THE UNDERSIGNED AT THE
-4-
<PAGE> 48
ADDRESS INDICATED IN BANKS RECORDS IN THE MANNER PROVIDED BY APPLICABLE STATUTE,
LAW, RULE OF COURT OR OTHERWISE.
11. Waiver. THE UNDERSIGNED WAIVES EVERY DEFENSE, CAUSE OF ACTION,
COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER MAY
HAVE, TO ANY ACTION BY BANK IN ENFORCING THIS AGREEMENT AND RATIFIES AND
CONFIRMS WHATEVER BANK MAY DO PURSUANT TO THE TERMS HEREOF. BANK AND THE
UNDERSIGNED, AND EACH OF THEM, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
IRREVOCABLY, THE RIGHT EITHER OR ANY MAY HAVE TO TRIAL BY JURY WITH RESPECT TO
ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH OR ANY COURSE OF CONDUCT OR COURSE OF DEALING, IN WHICH BANK AND THE
UNDERSIGNED ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
BANK MAKING BANK'S LOANS.
12. Interpretation. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13. Remedies. No delay on the part of Bank in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Bank of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy; nor shall any
modification, termination, discharge or waiver of any of the provisions be
binding upon Bank except as expressly set forth in a writing duly signed and
delivered on behalf of Bank.
14. Integration. This Agreement (i) is valid, binding and
enforceable in accordance with its provisions, and no conditions exist to the
legal effectiveness of this Agreement; (ii) contains the entire Agreement
between the Undersigned and Bank, (iii) is the final expression of their
intentions; and (iv) supersedes all negotiations, representations, warranties,
commitments, offers, contracts (of any kind or nature, whether oral or written)
prior to or contemporaneous with the execution hereof. No prior or
contemporaneous representations, warranties, understandings, offers or
agreements of any kind or nature, whether oral or written, have been made by
Bank or relied upon by the Undersigned in connection with the execution hereof.
No modification, discharge, termination or waiver of any of the provisions of
this Agreement shall be binding on Bank unless expressly set forth in a writing
duly signed and delivered on behalf of Bank.
15. No Fiduciary. The Undersigned specifically acknowledges and
agrees that the relationship hereby created with Bank is and has been conducted
on an open arm's length business basis in which no fiduciary relationship
exists, and that the Undersigned has not relied and is not relying on any
fiduciary relationship in the execution and delivery of this Agreement.
-5-
<PAGE> 49
16. Authorization. The Undersigned hereby represents and warrants
to Bank that the execution and delivery of this Agreement has been duly
authorized by resolutions heretofore adopted by its Board of Directors and
shareholders in accordance with law and its bylaws, a certificate with respect
thereto being hereto attached and by express reference made part hereof that
said resolutions have not been amended nor rescinded, are in full force and
effect, and that the officer or officers executing and delivering this Agreement
for and on behalf of the Undersigned are duly authorized so to act. Bank in
accepting this Agreement is expressly relying upon the aforesaid representations
and warranties.
17. Successors. The provisions hereof shall be continuing,
irrevocable and binding upon the Undersigned and upon the successors and assigns
of the Undersigned and shall inure to the benefit of Bank and its successors and
assigns.
18. Debtor Consent. (a) Debtor hereby consents to this Agreement
and agrees to abide hereby and to keep, observe and perform the several matters
and things herein intended to be kept, observed and performed by it, and
specifically agrees not to make any payments contrary to the intention and terms
of this Agreement.
(b) A breach of any of the terms and conditions of this Agreement
shall constitute a default in any and all Bank Loans made by Bank to Debtor.
SIGNED AND DELIVERED by the parties as of the date first above appearing.
HORIZON PHARMACEUTICAL CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
LASALLE NATIONAL BANK
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
-6-
<PAGE> 1
EXHIBIT 4.3
FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the "Amendment") dated as of May 10, 1999, is between HORIZON
PHARMACEUTICAL CORPORATION (the "Borrower") and LASALLE BANK NATIONAL
ASSOCIATION. formerly known as LaSalle National Bank, a national banking
association ("Bank").
RECITALS:
WHEREAS, the Borrower and the Bank have previously entered into that
certain Amended and Restated Loan and Security Agreement dated December 22,
1998 (the "Agreement"); and
WHEREAS, the Borrower requests, and the Bank is agreeable to
increasing the amount of and extending the maturity date of the Revolving Loan
and amending the Agreement pursuant the terms and conditions set forth therein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, it is agreed by the parties hereto as
follows:
1. RECITALS. The Recitals set forth above are hereby incorporated
herein and made a part hereof.
2. DEFINITIONS. All capitalized terms used herein without
definition shall have the respective meanings set forth in the Agreement.
3. AMENDMENTS TO THE AGREEMENT.
3.1 Borrowing Base Amount. Upon the Bank's receipt of
the Borrower's field audit, in form and substance acceptable to the
Bank, the definition of Borrowing Base Amount set forth in Section 1.
1 of the Agreement shall be amended and restated in its entirety as
follows:
"Borrowing Base Amount" shall mean:
(a) an amount up to 85% of the net amount (after deduction of
such reserves and allowances as the Bank deems proper and necessary)
of the Eligible Accounts; plus
(b) the lesser of (i) (a) 50% of the Non-Sample Inventory plus (b)
the lesser of 30% of Sample Inventory or $200,000, (calculated as the
lower of cost or market value computed on a first-in/first-out basis,
after deduction of such reserves and
<PAGE> 2
allowances as the Bank deems proper and necessary), or (ii) the amount
available for advance on Eligible Accounts as set forth in (a) above."
3.2 Revolving Loan Commitment. The definition of
Revolving Loan Commitment set forth in Section 1.1 of the Agreement is
hereby amended and restated in its entirety as follows:
"Revolving Loan Commitment" shall mean Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00)."
3.2 Revolving Loan Maturity Date. The definition of
Revolving Loan Maturity Date set forth in Section 1.1 of the
Agreement is hereby amended and restated in its entirety as follows:
"Revolving Loan Maturity Date" shall mean June 30, 2000, unless
extended by the Bank pursuant to any modification, extension or
renewal note executed by the Borrower and accepted by the Bank in its
sole and absolute discretion in substitution for the Revolving Note."
3.2 EBITDA. Section 10.3 of the Agreement is hereby
amended and restated in its entirety as follows:
"EBITDA. As of the end of each of its fiscal quarters, the Borrower
shall maintain a minimum EBITDA according to the following schedule:
<TABLE>
<CAPTION>
Quarter Ended Minimum EBITDA
------------- --------------
<S> <C>
June 30, 1999 $ 400,000
September 30, 1999 $1,500,000
December 31, 1999 and
continuing thereafter $2,000,000"
</TABLE>
3.2 Additional Equity. Section 10.5 of the Agreement is
hereby amended and restated in its entirety as follows:
"Additional Equity. As of November 1, 1999, the Borrower's Net Worth
shall be at least Five Million Dollars ($5,000,000) greater than the
Borrower's Net Worth on December 31, 1998."
4. WARRANTIES. To induce the Bank to enter into this Amendment,
the Borrower warrants that:
4.1 Authorization. The Borrower is duly authorized to
execute and deliver this Amendment and is and will continue to be duly
authorized to borrow monies under the Agreement, as amended hereby, and to
perform its obligations under the Agreement, as amended hereby.
-2-
<PAGE> 3
4.2 No Conflicts. The execution and delivery of this
Amendment and the performance by the Borrower of its obligations under the
Agreement, as amended hereby, do not and will not conflict with any provision
of law or of the charter or by-laws of the Borrower or of any agreement binding
upon the Borrower.
4.3 Validity and Binding Effect. The Agreement, as
amended hereby, is a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws
of general application affecting the enforcement of creditors' rights or by
general principles of equity limiting the availability of equitable remedies.
4.4 No Default. As of the closing date hereof, no Event
of Default under Section 11 of the Agreement, as amended by this Amendment, or
event or condition which, with the giving of notice or the passage of time,
shall constitute an Event of Default, has occurred or is continuing.
4.5 Warranties. As of the closing date hereof, the
representations and warranties in Section 7 of the Agreement are true and
correct as though made on such date, except for such changes as are
specifically permitted under the Agreement.
5. CONDITIONS PRECEDENT. This Amendment shall become effective
as of the date above first written after receipt by the Bank of the following
documents executed by the Borrower:
(a) this Amendment;
(b) $2,500,000 Revolving Note of the Borrower payable to
the Bank of even date herewith; and
(c) such other documents that the Bank may require.
6. GENERAL.
6.1 Law. This Amendment shall be construed in accordance
with and governed by the laws of the State of Illinois.
6.2 Successors. This Amendment shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and its successors and
assigns.
6.3 Confirmation of Agreement. Except as amended hereby,
the Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects:
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
Horizon Pharmaceutical Corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
LaSalle Bank National Association
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-4-
<PAGE> 5
REVOLVING NOTE
$2,500,000.00 Date: May 10, 1999
Due: June 30,2000
On or before June 30, 2000 (the "Maturity Date"), HORIZON
PHARMACEUTICAL CORPORATION, a Georgia corporation (the "Borrower), whose
address is 660 Hembree Parkway, Suite 106, Roswell, Georgia 30076, for value
received, promises to pay to the order of LASALLE BANK NATIONAL ASSOCIATION,
formerly known as LaSalle National Bank, a national banking association
(hereinafter, together with any holder hereof, called "Bank"), whose address is
135 South LaSalle Street, Chicago, Illinois 60674, the principal sum of Two
Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) or, if less,
the aggregate unpaid principal amount of all Revolving Loans (as hereinafter
defined) made by the Bank to the Borrower.
The unpaid principal amount hereof shall bear interest at the rate or
rates set forth in that certain Amended and Restated Loan and Security
Agreement between the Borrower and the Bank dated December 22, 1998, as amended
from time to time (the "Loan Agreement"), and shall be payable from the date
hereof on the aggregate unpaid principal amount of all loans made by the Bank
to the Borrower as set forth in the Loan Agreement.
Principal and interest shall be paid to the Bank at its address set
forth above or at such other place as the holder of this Note shall designate
in writing to the Borrower.
This Note is executed pursuant to the Loan Agreement, as amended from
time to time. The terms and conditions of the Revolving Loan (as defined in the
Loan Agreement), which is evidenced by this Note, are set forth in the Loan
Agreement. Capitalized words and phrases not otherwise defined herein shall
have the meanings assigned thereto in the Loan Agreement.
The Borrower, without notice or demand of any kind except as provided
for in the Loan Agreement shall be in default hereunder upon the occurrence of
any Event of Default set forth in the Loan Agreement, and without demand or
notice of any kind, the entire unpaid amount of all Obligations (as defined in
the Loan Agreement) shall become immediately due and payable, and the Bank may
take any action or avail itself of any remedy set forth in the Loan Agreement.
Except for such notices as may be required under the terms of the Loan
Agreement, the Borrower waives presentment, demand, notice, protest, and all
other demands, or notices, in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence.
This Note is made under and governed by the internal laws of the State
of Illinois.
-5-
<PAGE> 6
This Revolving Note is issued in substitution for, but not in
repayment of that certain $1,000,000 Revolving Note of the Borrower payable to
the Bank, dated as of December 22, 1998, and is not and shall not be deemed to
constitute a novation therefor.
IN WITNESS WHEREOF, the Borrower has executed this Revolving Note as
of the date set forth above.
Horizon Pharmaceutical Corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-6-
<PAGE> 7
BORROWING BASE CERTIFICATE
Date:_________________
Reference is made to the Amended and Restated Loan and Security Agreement dated
as of December 22, 1998, as amended (the "Loan Agreement") between Horizon
Pharmaceutical Corporation (the "Borrower") and LaSalle Bank National
Association, formerly known as LaSalle National Bank (the "Bank"). All terms
used in this Certificate are used with the meaning ascribed to such terms in
the Loan Agreement.
<TABLE>
<S> <C>
Accounts Receivable
1. Total Accounts Receivable at _____, ____ $
----------------
2. Less: Ineligibles ($ )
---------------
3. Total Eligible Receivables $
----------------
4. % of Advance 85%
5. Accounts Receivable Borrowing Base $
----------------
Inventory
6. Total Sample Inventory at _____, ____ $
----------------
7. Less: Ineligibles and Reserves ($ )
---------------
8. Eligible Sample Inventory $
----------------
9. % of Advance 30%
10. Initial Advance on Sample Inventory $
----------------
11. Maximum Sample Inventory Advance $ 200,000
12. Sample Inventory Borrowing Base (lesser of 10 or 11) $
----------------
13. Non-Sample Inventory Value $
----------------
14. Less: Ineligibles and Reserves $
----------------
15. Eligible Non-Sample Inventory $
----------------
16. % of Advance 50%
17. Initial Advance on Non-Sample Inventory $
----------------
18. Initial Inventory Borrowing Base (12+17) $
----------------
19. Inventory Cap (amount shown on line 5) $
----------------
20. Inventory Borrowing Base (lesser of 18 or 19) $
----------------
21. Total Borrowing Base Amount (5+20) $
----------------
22. Revolving Line of Credit Outstanding $
----------------
23. Revolving Loan Collateral Excess
(Shortfall) (21-22) $
----------------
</TABLE>
The undersigned hereby certifies that the above information and
computations are true and accurate and hereby represents and warrants that as
of the date hereof, (i) no event of default has occurred and is continuing,
(ii) the representations and warranties of the Borrower set forth in the Loan
Agreement are true and correct in all material respects as of the date hereof,
and (iii) the Borrower is in compliance with covenants set forth in the Loan
Agreement.
Horizon Pharmaceutical Corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-7-
<PAGE> 1
EXHIBIT 4.4
SECOND AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the "Amendment") dated as of January 6, 2000, is between HORIZON
PHARMACEUTICAL CORPORATION (the "Borrower") and LASALLE BANK NATIONAL
ASSOCIATION, formerly known as LaSalle National Bank, a national banking
association ("Bank").
RECITALS:
WHEREAS, the Borrower and the Bank have previously entered into that
certain Amended and Restated Loan and Security Agreement, dated December 22,
1998, as amended by that certain First Amendment dated as of May 10, 1999 (the
"Agreement"); and
WHEREAS, the Borrower requests, and the Bank is agreeable to
increasing the amount of and extending the maturity date of the Revolving Loan
and amending the Agreement pursuant to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, it is agreed by the parties hereto as
follows:
1. RECITALS. The Recitals set forth above are hereby incorporated herein
and made a part hereof.
2. DEFINITIONS. All capitalized terms used herein without definition shall
have the respective meanings set forth in the Agreement.
3. AMENDMENTS TO THE AGREEMENT.
3.1 Borrowing Base Amount. Upon the Bank's receipt of the
Borrower's field audit, in form and substance acceptable to the Bank, the
definition of Borrowing Base Amount set forth in Section 1.1 of the Agreement
shall be amended and restated in its entirety as follows:
" 'Borrowing Base Amount' shall mean:
(a) an amount up to 85 % of the net amount (after
deduction of such reserves and allowances as the Bank deems
proper and necessary) of the Eligible Accounts; plus
-1-
<PAGE> 2
(b) the lesser of (i) (a) 50% of the Non-Sample
Inventory plus (b) the lesser of 30% of Sample Inventory or
$200,000, (calculated as the lower of cost or market value
computed on a first-in/first-out basis, after deduction of
such reserves and allowances as the Bank deems proper and
necessary), or (ii) the amount available for advance on
Eligible Accounts as set forth in (a) above; plus
(c) an amount equal to Six Hundred Fifty Thousand
Dollars ($650,000.00) until March 31, 2000 reducing to the
amount of Three Hundred Thousand Dollars ($300,000.00) from
April 1, 2000 to June 30, 2000."
3.2 Revolving Loan Commitment. The definition of Revolving Loan
Commitment set forth in Section 1.1 of the Agreement is hereby amended and
restated in its entirety as follows:
" 'Revolving Loan Commitment' shall mean Three Million Five
Hundred Thousand and 00/100 Dollars ($3,500,000.00) until June, 30,
2000, reducing to Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00) until the Revolving Loan Maturity Date."
3.3 Revolving Loan Maturity Date. The definition of Revolving Loan
Maturity Date set forth in Section 1.1 of the Agreement is hereby amended and
restated in its entirety as follows:
" 'Revolving Loan Maturity Date' shall mean January 31, 2001,
unless extended by the Bank pursuant to any modification, extension or
renewal note executed by the Borrower and accepted by the Bank in its
sole and absolute discretion in substitution for the Revolving Note."
3.4 Net Worth plus Subordinated Debt. Section 10.1 of the
Agreement is hereby amended to delete the reference to the amount of "Two
Million Five Hundred Thousand Dollars ($2,500,000.00) and to insert a reference
to the amount of "Three Million Three Hundred Thousand Dollars
($3,300,000.00)".
3.5 Leverage. Section 10.2 of the Agreement is hereby amended and
restated as follows:
"As of the end of each of its fiscal quarters, the Borrower
shall maintain a ratio of Liabilities to Net Worth plus Subordinated
Debt of not greater than 2.25 to 1.00."
-2-
<PAGE> 3
3.6 EBITDA. Section 10.3 of the Agreement is amended and restated
as follows:
"As of the end of its fiscal quarters, the Borrower shall
maintain a minimum EBITDA according to the following schedule:
<TABLE>
<CAPTION>
Quarter Ended Minimum EBITDA
------------- --------------
<S> <C>
March 31, 2000 $ 325,000
June 30, 2000 $1,300,000
September 30, 2000 $2,700,000
December 31, 2000 $5,100,000
</TABLE>
3.7 Additional Equity. Section 10.5 of the Agreement is hereby
deleted.
4. WARRANTIES. To induce the Bank to enter into this Amendment, the
Borrower warrants that:
4.1 Authorization. The Borrower is duly authorized to execute and
deliver this Amendment and is and will continue to be duly authorized to borrow
monies under the Agreement, as amended hereby, and to perform its obligations
under the Agreement, as amended hereby.
4.2 No Conflicts. The execution and delivery of this Amendment and
the performance by the Borrower of its obligations under the Agreement, as
amended hereby, do not and will not conflict with any provision of law or of
the charter or by-laws of the Borrower or of any agreement binding upon the
Borrower.
4.3 Validity and Binding Effect. The Agreement, as amended hereby,
is a legal, valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights or by general principles of
equity limiting the availability of equitable remedies.
4.4 No Default. As of the closing date hereof, no Event of Default
under Section 11 of the Agreement, as amended by this Amendment, or event or
condition which, with the giving of notice or the passage of time, shall
constitute an Event of Default, has occurred or is continuing.
4.5 Warranties. As of the closing date hereof, the representations
and warranties in Section 7 of the Agreement are true and correct as though
made on such date, except for such changes as are specifically permitted under
the Agreement.
-3-
<PAGE> 4
5. CONDITIONS PRECEDENT. This Amendment shall become effective as of the
date above first written after receipt by the Bank of the following:
(a) a fully executed Amendment;
(b) an executed Revolving Note of the Borrower
payable to the Bank in the form of Exhibit A;
(c) a modification fee in the amount of Ten Thousand
Dollars ($10,000.00); and
(d) such other documents that the Bank may require.
6. GENERAL.
6.1 Law. This Amendment shall be construed in accordance with and
governed by the laws of the State of Illinois.
6.2 Successors. This Amendment shall be binding upon the Borrower
and the Bank and their respective successors and assigns, and shall inure to
the benefit of the Borrower and the Bank and its successors and assigns.
6.3 Confirmation of Agreement. Except as amended hereby, the
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
HORIZON PHARMACEUTICAL
CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
LASALLE BANK NATIONAL
ASSOCIATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-4-
<PAGE> 5
REVOLVING NOTE
$3,500,000.00 reducing to Date: January 6, 2000
$2,500,000.00 Due: January 31, 2001
HORIZON PHARMACEUTICAL CORPORATION, a Georgia corporation (the
"Borrower"), whose address is 660 Hembree Parkway, Suite 106, Roswell, Georgia
30076, for value received, promises to pay to the order of LASALLE BANK
NATIONAL ASSOCIATION, formerly known as LaSalle National Bank, a national
banking association (hereinafter, together with any holder hereof, called
"Bank"), whose address is 135 South LaSalle Street, Chicago, Illinois 60674,
the principal sum of Three Million Five Hundred Thousand and 00/100 Dollars
($3,500,000.00) until June 30, 2000 and Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000.00) until January 31, 2001 (the "Maturity Date") or,
if less, the aggregate unpaid principal amount of all Revolving Loans (as
hereinafter defined) made by the Bank to the Borrower.
The unpaid principal amount hereof shall bear interest at the rate or
rates set forth in that certain Amended and Restated Loan and Security
Agreement between the Borrower and the Bank dated December 22, 1998, as amended
from time to time (the "Loan Agreement"), and shall be payable from the date
hereof on the aggregate unpaid principal amount of all loans made by the Bank
to the Borrower as set forth in the Loan Agreement.
Principal and interest shall be paid to the Bank at its address set
forth above or at such other place as the holder of this Note shall designate
in writing to the Borrower.
This Note is executed pursuant to the Loan Agreement, as amended from
time to time. The terms and conditions of the Revolving loan (as defined in the
Loan Agreement), which is evidenced by this Note, are set forth in the Loan
Agreement. Capitalized words and phrases not otherwise defined herein shall
have the meanings assigned thereto in the Loan Agreement.
The Borrower, without notice or demand of any kind except as provided
for in the Loan Agreement, shall be in default hereunder upon the occurrence of
any Event of Default set forth in the Loan Agreement, and without demand or
notice of any kind, the entire unpaid amount of all Obligations (as defined in
the Loan Agreement) shall become immediately due and payable, and the Bank may
take any action or avail itself of any remedy set forth in the Loan Agreement.
Except for such notices as may be required under the terms of the Loan
Agreement, the Borrower waives presentment, demand, notice, protest, and all
other demands, or notices, in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence.
This Note is made under and governed by the internal laws of the State
of Illinois.
<PAGE> 6
This Revolving Note is issued in substitution for, but not in
repayment of that certain $2,500,000 Revolving Note of the Borrower payable to
the Bank, dated as of May 10, 1999, and is not and shall not be deemed to
constitute a novation therefor.
IN WITNESS WHEREOF, the Borrower has executed this Revolving Note as
of the date set forth above.
HORIZON PHARMACEUTICAL
CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-2-
<PAGE> 7
BORROWING BASE CERTIFICATE
Date: _____________
Reference is made to the Amended and Restated Loan and Security Agreement dated
as of December 22, 1998, as amended (the "Loan Agreement") between Horizon
Pharmaceutical Corporation (the "Borrower") and LaSalle Bank National
Association, formerly known as LaSalle National Bank (the "Bank"). All terms
used in this Certificate are used with the meaning ascribed to such terms in
the Loan Agreement.
<TABLE>
<S> <C>
Accounts Receivable
1. Total Accounts Receivable at _______, ___ $
----------------
2. Less: Ineligibles ($ )
----------------
3. Total Eligible Receivables $
----------------
4. % of Advance 85%
5. Accounts Receivable Borrowing Base $
----------------
Inventory
6. Total Sample Inventory at ______, ___ $
----------------
7. Less: Ineligibles and Reserves ($ )
----------------
8. Eligible Sample Inventory $
----------------
9. % of Advance 30%
10. Initial Advance on Sample Inventory $
----------------
11. Maximum Sample Inventory Advance $ 200,000
12. Sample Inventory Borrowing Base (lesser of 10 or 11) $
----------------
13. Non-Sample Inventory Value $
----------------
14. Less: Ineligibles and Reserves ($ )
----------------
15. Eligible Non-Sample Inventory $
----------------
16. % of Advance 50%
17. Initial Advance on Non-Sample Inventory $
----------------
18. Initial Inventory Borrowing Base (12+17) $
----------------
19. Inventory Cap (amount shown on line 5) $
----------------
20. Inventory Borrowing Base (lesser of 18 or 19) $
----------------
21. Total Borrowing Base Amount (5+20) $
----------------
22. Revolving Line of Credit Outstanding $
----------------
23. Revolving Loan Collateral Excess
(Shortfall) (21-22) $
----------------
Overadvance
24. Amount available through March 31, 2000 $ 650,000
25. Amount available from April 1, 2000 through June 30, 2000 $ 300,000
</TABLE>
The undersigned hereby certifies that the above information and
computations are true and accurate and hereby represents and warrants that as
of the date hereof, (i) no event of default has occurred and is continuing,
(ii) the representations and warranties of the Borrower set forth in the Loan
Agreement are true and correct in all material respects as of the date hereof
and (iii) the Borrower is in compliance with covenants set forth in the Loan
Agreement.
HORIZON PHARMACEUTICAL CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 4.5
THIRD AMENDMENT TO
AMENDED TO RESTATED LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the "Amendment") dated as of April 14, 2000, is between FIRST
HORIZON PHARMACEUTICAL CORPORATION, formerly known as Horizon Pharmaceutical
Corporation (the "Borrower") and LASALLE BANK NATIONAL ASSOCIATION, a national
banking association ("Bank").
RECITALS:
WHEREAS, the Borrower and the Bank have previously entered into that
certain Amended and Restated Loan and Security Agreement, dated December 22,
1998, as amended by that certain First Amendment to Amended and Restated Loan
and Security Agreement dated as of May 10, 1999, and as amended by that certain
Second Amendment to Amended and Restated Loan and Security Agreement dated as
of January 6, 2000 (the "Agreement"); and
WHEREAS, the Borrower requests, and the Bank is agreeable to provide a
new Bridge Loan in the amount of $13,000,000, to extend the maturity date of
the Revolving Loan, and to make such additional modifications as set forth
herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, it is agreed by the parties hereto as
follows:
RECITALS. The Recitals set forth above are hereby incorporated
herein and made a part hereof.
DEFINITIONS. All capitalized terms used herein without
definition shall have the respective meanings set forth in the Agreement.
AMENDMENTS TO THE AGREEMENT.
Fixed Charge Coverage Ratio. The definition of
Fixed Charge Coverage Ratio set forth in Section 1.1 of the Agreement is hereby
amended as restated in its entirety as follows:
" 'Fixed Charge Coverage Ratio' shall mean the ratio
of EBITDA less unfunded capital expenditures for the period
measured to scheduled principal and interest payments for the
period measured."
Loan. The definition of Loans set forth in Section
1.1 of the Agreement is hereby amended and restated in its entirety as follows:
" 'Loans' shall mean, collectively, all Revolving
Loans, Term Loans and the Bridge Loan made by the Bank to the
Borrower and all Letters of Credit
<PAGE> 2
issued by the Bank for the benefit of Borrower under and
pursuant to this Agreement.
Revolving Loan Maturity Date. The definition of
Revolving Loan Maturity Date set forth in Section 1.1 of the Agreement is
hereby amended and restated in its entirety as follows:
" 'Revolving Loan Maturity Date' shall mean May 2,
2001, unless extended by the Bank pursuant to any
modification, extension or renewal note executed by the
Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Revolving Note."
Term Loan Maturity Date. The definition of Term
Loan Maturity Date set forth in Section 1.1 of the Agreement is hereby amended
and restated in its entirety as follows:
" 'Term Loan Maturity Date' shall mean May 2, 2001,
unless extended by the Bank pursuant to any modification,
extension or renewal note executed by the Borrower and
accepted by the Bank in its sole and absolute discretion in
substitution for the Term Note."
The following definitions are hereby added to
Section 1.1 of the Agreement:
"Bridge Interest Rate" shall mean the Borrower's
option of (i) the Prime Rate per annum, or (ii) LIBOR plus
150 basis points, except that if the Bridge Loan is not
repaid in full within six months from the date hereof, the
LIBOR interest rate will increase by an additional 50 basis
points.
"Bridge Loan" shall mean the Loan made by Bank to
the Borrower in the form of a Bridge Loan under and pursuant
to this Agreement, as set for in Section 2.6 of this
Agreement.
"Bridge Loan Commitment" shall mean Thirteen Million
and 00/100 Dollars ($13,000,000.00).
"Bridge Loan Maturity Date" shall mean the earlier
of a Public Offering or one year from the date hereof.
"Bridge Note" shall mean the note, the form of which
is attached hereto as Exhibit C.
"Public Offering" shall mean any offering of debt
issued by or securities of the Borrower offered pursuant to
registration thereof under the Securities Act of 1993 and the
Securities Exchange Act of 1934.
Bridge Loan. The following is hereby added to the
Agreement:
<PAGE> 3
2.6 Bridge Loan.
1) Bridge Loan Commitment. Subject to the terms and
conditions of this Agreement and the other Loan Documents,
and in reliance upon the representations and warranties of
the Borrower set forth herein and in the other Loan
Documents, the Bank agrees to make a Bridge Loan in the
amount of the Bridge Loan Commitment. Up to $9,500,000 of the
proceeds of the Bridge Loan shall be used solely by Borrower
to purchase rights to and know how to manufacture the drug
"Ponstel" from Warner-Lambert and Parke Davis & Company and
up to $3,500,000 of the proceeds of the Bridge Loan shall be
used solely by Borrower to purchase rights to and know how to
manufacture the drug "Cognex" from Warner-Lambert and Parke
Davis & Company. The Bridge Loan may be prepaid in whole or
in part at any time without penalty, but shall be due in full
on the Bridge Loan Maturity Date, unless the credit extended
under the Bridge Loan is otherwise terminated or extended as
provided in this Agreement.
2) Term Loan Interest and Payments. Except as
otherwise provided in this Section 2.2(b), the principal
amount of the Bridge Loan outstanding from time to time shall
bear interest at the Bridge Interest Rate. Accrued and unpaid
interest on that portion of the unpaid principal balance of
the Bridge Loan outstanding from time to time which is a
Prime Loan, shall be due and payable monthly, in arrears,
commencing May 1, 2000 and continuing on the first day of
each calendar month thereafter, and on the Bridge Loan
Maturity Date. Accrued and unpaid interest on that portion of
the unpaid principal balance of the Bridge Loan outstanding
from time to time which is a LIBOR Loan shall be payable on
(i) first day of each calendar month, (ii) on the date of any
principal repayment of a LIBOR Loan, and (iii) on the Bridge
Loan Maturity Date. Any amount of principal or interest on
the Bridge Loan which is not paid when due, whether at stated
maturity, by acceleration or otherwise, shall bear interest
payable on demand at the Default Rate.
3) Mandatory Prepayment. If the Borrower completes
a Public Offering, all of the proceeds, after deducting
therefrom the expenses of the Public Offering, shall be used
by Borrower to immediately prepay the Bridge Loan. If the
Borrower does not complete a Public Offering within six
months from the date hereof, or if the Public Offering is not
sufficient to repay the Bridge Loan, Borrower shall commence
making monthly principal payments of $150,000 on October 30,
2000 and continuing on the last day of each month thereafter
through the Term Maturity Date.
4) Voluntary Prepayments. If the Borrower makes any
voluntary principal prepayment to Bank (except for principal
payments which may be required to be paid under the Revolving
Loan), such principal payments shall be applied first to
principal due on the Bridge Note. Thereafter, any voluntary
prepayments may be applied in such order as Borrower directs.
<PAGE> 4
Net Worth plus Subordinated Debt. Section 10.1
of the Agreement is hereby amended to delete the reference to
the amount of "Three Million Three Hundred Thousand Dollars
($3,300,000.00) and to insert a reference to the amount of
"Three Million Three Hundred Thousand Dollars
($3,300,000.00), plus 75% of net income earned in each fiscal
year subsequent to the fiscal year ending December 31, 1999".
Leverage. Section 10.2 of the Agreement is hereby
amended and restated as follows:
Until the net proceeds of a Public Offering are delivered to
Bank, as of the end of each of its fiscal quarters, the Borrower shall
maintain a ratio of Liabilities to Net Worth plus Subordinated Debt
according to the following schedule:
<TABLE>
<CAPTION>
Quarter Ended Maximum Leverage
------------- ----------------
<S> <C>
March 31, 2000 3:50:1:00
June 30, 2000 7.00:1.00
September 30, 2000 6.50:1.00
December 31, 2000 5.50:1.00
</TABLE>
Immediately after the proceeds of a Public Offering are
delivered to Bank, the Borrower shall maintain a ratio of Liabilities
to Net Worth of not greater than 2.25 to 1.00.
EBITDA. Section 10.3 of the Agreement is amended
and restated as follows:
As of the end of its fiscal quarters, the Borrower
shall maintain a minimum EBITDA according to the following
schedule:
<TABLE>
<CAPTION>
Quarter Ended Minimum EBITDA
------------- --------------
<S> <C>
March 31, 2000 $ 100,000
June 30, 2000 $ 800,000
September 30, 2000 $2,000,000
December 31, 2000 and thereafter $3,800,000
</TABLE>
Fixed Charge Coverage Ratio. Section 10.4 of
the Agreement is amended and restated as follows:
As of the end of each of its fiscal quarters for the
trailing twelve month period then ending, the Borrower shall
maintain a Fixed Charge Coverage Ratio according to the
following schedule:
<TABLE>
<CAPTION>
Quarter Ended Minimum Ratio
------------- -------------
<S> <C>
March 31, 2000 .75:1:00
June 30, 2000 .75:1.00
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
September 30, 2000 .90:1.00
December 31, 2000 and thereafter 1.25:1.00
</TABLE>
The following is hereby added as Section 11.13 of
the Agreement:
11.13 Breach of Security Agreement.a default
under the terms of that certain Security Agreement
of even date herewith between ____________, as
Trustee ("Pledgor") and the Bank wherein "Pledgor"
grants a security interest to Bank in that certain
Investment Account Number 2638254 at Northern Trust
Company, which default is not cured within five (5)
days after written notice thereof from the Bank to
Pledgor.
WARRANTIES. To induce the Bank to enter into this Amendment,
the Borrower warrants that:
Authorization. The Borrower is duly authorized to
execute and deliver this Amendment and is and will continue
to be duly authorized to borrow monies under the Agreement,
as amended hereby, and to perform its obligations under the
Agreement, as amended hereby.
No Conflicts. The execution and delivery of this
Amendment and the performance by the Borrower of its
obligations under the Agreement, as amended hereby, do not
and will not conflict with any provision of law or of the
charter or by-laws of the Borrower or of any agreement
binding upon the Borrower.
Validity and Binding Effect. The Agreement, as
amended hereby, is a legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights or
by general principles of equity limiting the availability of
equitable remedies.
No Default. As of the closing date hereof, no
Event of Default under Section 11 of the Agreement, as
amended by this Amendment, or event or condition which, with
the giving of notice or the passage of time, shall constitute
an Event of Default, has occurred or is continuing.
Warranties. As of the closing date hereof, the
representations and warranties in Section 7 of the Agreement
are true and correct as though made on such date, except for
such changes as are specifically permitted under the
Agreement.
CONDITIONS PRECEDENT TO INITIAL $9,500,000 ADVANCE UNDER THE
BRIDGE NOTE. This Amendment shall become effective as of the date above first
written
<PAGE> 6
and the Bank shall advance to Borrower the amount of $9,500,000 under the
Bridge Note after receipt by the Bank of the following:
5) a fully executed Amendment;
6) an executed Revolving Note of the Borrower payable to the Bank
in the form attached hereto as Exhibit A;
7) an executed Term Note of the Borrower payable to the Bank in
the form attached hereto as Exhibit B;
8) an executed Bridge Note of the Borrower payable to the Bank
in the form attached hereto as Exhibit C;
9) Secretary's certificate relating to corporate resolutions
authorizing the Amendment and the $13,000,000 Bridge Note;
10) a Security Agreement in the form attached hereto as Exhibit D
executed by Pledgor, pledging her interest in an investment account at
Northern Trust Company to secure the Bridge Loan;
11) a Custodial Account Control Agreement among Editha Kapoor,
Northern Trust Company and LaSalle Bank National Association;
12) an opinion of counsel for Pledgor in form and substance
satisfactory to Bank;
13) an executed copy of the Purchase Agreement wherein Borrower
agrees to purchase "Ponstel";
14) a consent from Warner Lambert to the transfer of Ponstel as
contemplated by this Amendment and Intellectual Property Security
Agreement;
15) a copy of the Bill of Sale from Warner Lambert;
16) a copy of the Warner Lambert Assignment letters to the Food
and Drug Administration;
17) an Intellectual Property Security Agreement for Ponstel;
18) a UCC-1 Financing Statement relating to the Intellectual
Property Security Agreement for "Ponstel";
19) a commitment fee in the amount of Nineteen Thousand Five
Hundred Dollars ($19,500.00);
<PAGE> 7
20) A UCC-3 financing statement reflecting the name change of
Borrower; and
21) such other documents that the Bank may reasonably require.
CONDITIONS PRECEDENT TO USE OF THE REMAINING $3,500,000 AVAILABLE
UNDER THE BRIDGE NOTE. The Bank shall advance the remaining $3,500,000
available under the Bridge Note after receipt by the Bank of the following:
22) a written request to the Bank specifying the basis upon which
the $3,500,000 payment is due to Warner-Lambert Company under the
terms of Section 2.1(a)(ii) of the Purchase Agreement referred to in
section 5(i) above;
If the reason for funding is that Borrower is purchasing
Cognex, then said funds shall be available only upon receipt by the
Bank of the following:
23) evidence satisfactory to Bank that the Federal Trade
Commission has approved the sale of Cognex to Borrower;
24) an Intellectual Property Security Agreement for Cognex;
25) a UCC-1 financing statement relating to the Intellectual
Property Security Agreement for "Cognex"; and
26) a copy of the Bill of Sale from Warner Lambert;
27) a copy of the Warner Lambert Assignment letters to the Food
and Drug Administration;
28) such other documents that the Bank may reasonably require.
GENERAL.
Law. This Amendment shall be construed in
accordance with and governed by the laws of the State of Illinois.
Successors. This Amendment shall be binding upon
the Borrower and the Bank and their respective successors and assigns,
and shall inure to the benefit of the Borrower and the Bank and its
successors and assigns.
Confirmation of Agreement. Except as amended
hereby, the Agreement shall remain in full force and effect and is
hereby ratified and confirmed in all respects.
(REMAINDER OF PAGE LEFT INTENTIONALLY BLANK)
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the date first above written.
First Horizon Pharmaceutical
Corporation
By:
--------------------------------
Print Name:
------------------------
Title:
-----------------------------
LaSalle Bank National Association
By:
--------------------------------
Print Name:
------------------------
Title:
-----------------------------
<PAGE> 1
EXHIBIT 4.6
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT, dated as of April 14, 2000 (this "Agreement"),
is by and between First Horizon Pharmaceutical Corporation, a Delaware
corporation (the "Company"), and the Kapoor Children's 1992 Trust (the "Trust").
WITNESSETH:
WHEREAS, the Company has entered into an Amended and Restated Loan and
Security Agreement (as amended and existing on the date hereof, the "Existing
Loan Agreement") with LaSalle Bank, N.A. (the "Lender"); and
WHEREAS, the Company and the Lender shall enter into a third amendment
to the Existing Loan Agreement (the "Amendment") pursuant to which the Lender
shall loan to the Company $13 million (the "Bridge Loan") for the purposes set
forth in the Amendment, which loan shall be evidenced by a term note in favor of
Lender (the "Bridge Note"); and
WHEREAS, as security for the indebtedness of the Company evidenced by
the Bridge Note, and as a condition to the Lender's entering into the Amendment,
the Trust shall on the date hereof execute a Security Agreement Re: Investment
Account (the "Pledge Agreement") in favor of Lender pursuant to which the Trust
shall, subject to the terms and conditions set forth in the Pledge Agreement,
pledge certain Collateral (as defined in the Pledge Agreement) to the Lender for
the benefit of the Company; and
WHEREAS, the Trust has agreed to enter into the Pledge Agreement on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the Company and the
Trust hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 Certain Defined Terms. In addition to terms elsewhere
defined herein, the following terms shall have the following respective
meanings:
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which the Lender is not open to the public for carrying on substantially
all of its banking functions in Chicago, Illinois.
"Capital Lease" of any person shall mean any lease which, in accordance
with Generally Accepted Accounting Principles, is or should be capitalized on
the books of such person.
<PAGE> 2
"Closing Date" shall mean the date of this Agreement which shall be the
same date as the Amendment and the Pledge Agreement are dated.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations thereunder.
"Contingent Liabilities" of any person shall mean, as of any date, all
obligations of such person or of others for which such person is contingently
liable, as obliger, guarantor, surety, accommodation party, partner or in any
other capacity, or in respect of which obligations such person assures a
creditor against loss or agrees to take any action to prevent any such loss
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all reimbursement
obligations of such person in respect of any letters of credit, surety bonds or
similar obligations (including, without limitation, bankers acceptances) and all
obligations of such person to advance funds to, or to purchase assets, property
or services from, any other person in order to maintain the financial condition
of such other person.
"Default" shall mean any event or condition which might become an Event
of Default with notice or lapse of time or both.
"Dollars" and "$" shall mean the lawful money of the United States of
America.
"Environmental Laws" as of any date shall mean all provisions of law,
statute, ordinances, rules, regulations, judgments, writs, injunctions, decrees,
orders, awards and standards promulgated by the government of the United States
of America or any foreign government or by any state, province, municipality or
other political subdivision thereof or therein or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning the protection of, or regulating the discharge of substances into,
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"ERISA Affiliate" shall mean, with respect to any person, any trade or
business (whether or not incorporated) which, together with such person or any
Subsidiary of such person, would be treated as a single employer under Section
414 of the Code.
"Event of Default" shall mean any of the events or conditions described
in Section 6.01.
<PAGE> 3
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles applied on a basis consistent with that reflected
in the financial statements referred to in Section 4.01(g) hereof.
"Hazardous Materials" includes, without limitation, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.), and in the
regulations adopted and publications promulgated pursuant thereto, or any other
federal, state or local government law, ordinance, rule or regulation.
"Indebtedness" of any person shall mean, as of any date, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person as lessee under any Capital Lease, (c) all obligations which are secured
by any Lien existing on any asset or property of such person whether or not the
obligation secured thereby shall have been assumed by such person (to the extent
of such Lien if such obligation is not assumed), (d) all obligations of such
person for the unpaid purchase price for goods, property or services acquired by
such person, except for trade accounts payable arising in the ordinary course of
business that are not past due, (e) all obligations of such person to purchase
goods, property or services where payment therefor is required regardless of
whether delivery of such goods or property or the performance of such services
is ever made or tendered (generally referred to as "take or pay contracts"), (f)
all liabilities of such person in respect of Unfunded Benefit Liabilities under
any Plan of such person or of any ERISA Affiliate, (g) all obligations of such
person in respect of any interest rate or currency swap, rate cap or other
similar transaction (valued in an amount equal to the highest termination
payment, if any, that would be payable by such person upon termination for any
reason on the date of determination), and (h) all obligations of others similar
in character to those described in clauses (a) through (g) of this definition
for which such person is contingently liable, as obliger, guarantor, surety,
accommodation party, partner or in any other capacity, or in respect of which
obligations such person assures a creditor against loss or agrees to take any
action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including
without limitation all reimbursement obligations of such person in respect of
letters of credit, surety bonds or similar obligations and all obligations of
such person to advance funds to, or to purchase assets, property or services
from, any other person in order to maintain the financial condition of such
other person.
"Loan Agreement" shall mean the Existing Loan Agreement as amended by
the Amendment.
"Multiemployer Plan" shall mean any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
<PAGE> 4
"Operative Documents" shall mean the Existing Loan Agreement, the
Amendment, the Pledge Agreement and any other agreement or instrument relating
thereto.
"Overdue Rate" shall mean a rate per annum equal to the sum of 300
basis points (3%) per annum plus the then effective interest rate charged by the
Lender with respect to indebtedness under the Bridge Loan.
"Person" or "person" shall include an individual, a corporation, an
association, a partnership, a trust or estate, a joint stock company, an
unincorporated organization, a joint venture, a limited liability company, a
trade or business (whether or not incorporated), a government (foreign or
domestic) and any agency or political subdivision thereof, or any other entity.
"Plan" shall mean, with respect to any person, any pension plan
(including a Multiemployer Plan) subject to Title IV of ERISA or to the minimum
funding standards of Section 412 of the Code which has been established or
maintained by such person, any subsidiary of such person or any ERISA Affiliate,
or by any other person if such person or any ERISA Affiliate could have
liability with respect to such pension plan.
"Subordinated Debt" shall mean Indebtedness of the Company which is
expressly subordinated in right of payment to the Indebtedness of the Company to
the Trust hereunder in a manner satisfactory to the Trust in its sole
discretion.
"Subsidiary" of any person shall mean any other person (whether now
existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law) at least a majority of the securities or
other ownership interests of each class having ordinary voting power or
analogous right (other than securities or other ownership interests which have
such power or right only by reason of the happening of a contingency), at the
time as of which any determination is being made, are owned, beneficially and of
record, by such person or by one or more of the other Subsidiaries of such
person or by any combination thereof. Unless otherwise specified, reference to
"Subsidiary" shall mean a Subsidiary of the Company.
"Unfunded Benefit Liabilities" shall mean, with respect to any Plan as
of any date, the amount of the unfunded benefit liabilities determined in
accordance with Section 4001(a)(18) of ERISA.
SECTION 1.02 Other Definitions: Rules of Construction. As used herein,
the terms "Company", "Trust", and "Agreement" shall have the respective meanings
ascribed thereto in the introductory paragraph of this Agreement. All financial
terms used herein shall be made or construed in accordance with Generally
Accepted Accounting Principles existing on the date hereof unless such
principles are inconsistent with the express requirements of this Agreement.
<PAGE> 5
Use of the terms "herein", "hereof", and "hereunder" shall be deemed references
to this Agreement in its entirety and not to the Section or clause in which such
term appears. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
ARTICLE II.
AMOUNT AND TERMS OF THE LIMITED GUARANTY
SECTION 2.01 Pledge Agreement. The Trust agrees, on the terms and
subject to the conditions hereinafter set forth, to execute and perform its
obligations under the Pledge Agreement for the benefit of the Lender. Execution
and delivery of the Pledge Agreement will be conditioned upon satisfaction of
the conditions precedent set forth in Section 3.01 hereof.
SECTION 2.02 Pledge Fees. In consideration for the Trust's execution
and delivery of the Pledge Agreement, the Company agrees to make the following
payments to the Trust:
(a) The Company shall pay to the Trust a fee of $100,000 per year,
payable quarterly in arrears on the fifteenth day of each of July, October,
January and April beginning on July 15, 2000, pro rated based on the period of
time that the Lender had a security interest or other claim with respect to
Trust assets under the Pledge Agreement during the period to which such payment
relates, provided that, until the Lender provides a written release of the
Collateral, the Lender shall be considered to have a security interest and claim
under the Pledge Agreement for purposes of this paragraph; and
(b) The Company shall pay to the Trust any and all expenses incurred in
connection with the negotiation, documentation and execution of the Pledge
Agreement (including the Trust's legal fees) on or prior to the execution and
delivery by the Trust to the Lender of the Pledge Agreement.
SECTION 2.03 Reimbursement. The Company shall pay to the Trust (i) on
any date on which the Trust shall be required to make a payment under the Pledge
Agreement, a sum equal to the amount so paid by the Trust, (ii) within 30 days
of demand by the Trust, any and all expenses incurred by the Trust in enforcing
or protecting any rights under this Agreement or any of the other Operative
Documents, including without limitation reasonable attorneys' fees relating to
such enforcement or protection, provided that such expenses are attributable to
the Trust's entering into or performing its obligations under the Operative
Documents to which it is a party, and (iii) forthwith upon demand by the Trust,
interest on any and all amounts remaining unpaid by the Company under this
Agreement at any time from the date any such amount becomes payable until
payment in full, at the Overdue Rate.
SECTION 2.04 Additional Costs. In the event the Trust makes any payment
under or is otherwise required to perform any obligation under the Pledge
Agreement, the Company shall
<PAGE> 6
pay to the Trust all costs, expenses, fees and commissions incurred by the Trust
in connection with making such payment or performing such obligations to the
extent such costs, expenses, fees or commissions would not have otherwise been
incurred by the Trust but for its execution or performance of its obligations
under the Operative Documents to which it is a party.
SECTION 2.05 Taxes; Make Whole Requirement. In the event that the Trust
incurs any federal, state or local tax liability (including any tax liability
that would otherwise have been deferred in whole or in part to some future date)
in connection with executing or performing its obligations under the Pledge
Agreement, then the Company shall pay to the Trust an amount, determined by the
Trust in its reasonable judgement, which shall put the Trust in the same
economic position as it would have been had such tax liability not been incurred
or had been deferred. The Company's liability under this Section 2.05 shall not
include capital gains taxes incurred by the Trust in connection with sales made
by the Trust not related to the performance of its obligations under the Pledge
Agreement.
SECTION 2.06 Payments and Computations. The Company shall make each
payment hereunder in lawful money of the United States of America to the Trust
at its address referred to in Section 7.02 hereof in immediately available
funds. All computations of interest, commissions and fees hereunder shall be
made by the Trust on the basis of a year of 365 or 366 days, as the case may be,
for the actual number of days elapsed.
SECTION 2.07 Payment on Non-Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of such payment.
SECTION 2.08 Obligations Absolute. The obligations of the Company under
this Agreement shall be absolute, unconditional and irrevocable and such
obligations of the Company shall not be affected, modified or impaired upon the
happening of any event, including, without limitation, any of the following,
whether or not with notice to, or the consent of, the Company:
(a) Any lack of validity or enforceability of any of the Operative
Documents;
(b) Any amendment, modification, waiver, consent, or any substitution,
exchange or release of or failure to perfect any interest in collateral or
security, with respect to any of the Operative Documents;
(c) The existence of any claim, setoff, defense or other right which
the Company may have at any time against the Lender (or any persons or entities
for whom the Lender may be acting), the Trust or any other person or entity,
whether in connection with this Agreement, any of the Operative Documents, the
transactions contemplated herein or therein or any unrelated transactions;
<PAGE> 7
(d) Payment by the Trust under the Pledge Agreement which does not
comply with the terms of the Pledge Agreement; provided, however, that in any
such event, upon payment in full by the Trust, the Company shall be subrogated
to the Trust's rights against the person to whom such payment was made;
(e) Any failure, omission, delay or lack on the part of the Trust or
any party to any of the Operative Documents in enforcing, asserting or
exercising any right, power or remedy conferred upon the Trust or any such party
under this Agreement or any of the Operative Documents, or any other acts or
omissions on the part of the Trust or any such party;
(f) The voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets of the Company, the
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or readjustment or other
similar proceedings affecting the Company or any of the assets of either of
them, or any allegation or contest of the validity of this Agreement or any of
the Operative Documents, in any such proceeding;
(g) Any other event or action that would, in the absence of this
clause, result in the release or discharge by operation of law of the Company
from the performance or observance of any obligation, covenant or agreement
contained in this Agreement;
(h) Any action by the Trust relating to the management of the Trust's
assets which may have the effect of increasing the Company's liability to the
Trust hereunder, including the allocation of Trust assets and the liquidation of
securities in connection with any payment required under the Pledge Agreement;
or
(i) No setoff, counterclaim, reduction or diminution of any obligation,
or any defense of any kind or nature which the Company has or may have against
the Lenders shall be available hereunder to the Company against the Trust.
ARTICLE III.
CONDITIONS OF DELIVERY; CLOSING DOCUMENTS
SECTION 3.01 Conditions Precedent to Execution and Delivery of the
Pledge Agreement. The obligation of the Trust to execute and deliver the Pledge
Agreement is subject to the satisfaction of the following conditions precedent:
(a) Documents. On or before the date of execution and delivery of the
Pledge Agreement, the Trust shall have received the following documents, each in
form and substance satisfactory to the Trust:
<PAGE> 8
(i) Organizational Documents. A copy of the articles of
organization of the Company and a good standing certificate, certified to a
current date by the Secretary of State of Delaware.
(ii) By-laws and Corporate Authorizations. Copies of the
By-laws of the Company and corporate resolutions of the Company approving this
Agreement and the Operative Documents to which the Company is a party and the
consummation by the Company of the transactions contemplated hereby and thereby,
and copies of all other documents evidencing necessary action of the Company
with respect to this Agreement, all certified as true and correct on the Closing
Date by the Company's secretary.
(iii) Incumbency Certificate. A certificate of incumbency of
the Company containing, and attesting to the genuineness of, the signatures of
those officers of the Company authorized to act on behalf of the Company in
connection with the Operative Documents to which it is a party and the
consummation by the Company of the transactions contemplated thereby, certified
as true and correct as of the Closing Date by a duly authorized officer of the
Company.
(iv) Consents, Approvals, Etc. Copies of all consents and
approvals necessary for the Company to enter into this Agreement, the Loan
Agreement, the Convertible Note, the Operative Documents to which the Company is
a party and the transactions contemplated herein and therein, together with a
certificate of an authorized officer of the Company dated such date of issuance
stating that such approvals are true and correct copies thereof and are in full
force and effect at such date, or if none are required a certificate to that
effect executed by an authorized officer of the Company.
(v) Operative Documents. A copy of the Existing Loan
Agreement and an executed copy of the Amendment and each of the other Operative
Documents.
(vi) Company Closing Certificate. A certificate of an
authorized officer of the Company as to the matters set forth in Sections
3.01(b) and (c) below.
(vii) Other Documents. Such other documents, instruments,
approvals or opinions (and, if requested by the Trustee, certified duplicates of
executed copies thereof) as the Trust may reasonably request.
(b) No Misrepresentation. The representations and warranties of
the Company contained in Article IV of this Agreement are true and correct on
and as of the Closing Date as though made on and as of such date.
(c) No Default. No event has occurred and is continuing, or would
result from such issuance, which constitutes a Default or an Event of Default.
<PAGE> 9
(d) Pledge Agreement. The Lender shall have executed and delivered the
Pledge Agreement to the Trust containing terms and conditions satisfactory to
the Trust.
(e) Counsel Approval. All of the Operative Documents shall be in form
and substance reasonably satisfactory to Burke, Warren, MacKay & Serritella,
P.C., counsel for the Trust.
SECTION 3.02 Deliveries by the Trust. The Trust agrees to provide to
the Company copies of any documents required by the Lender in connection with
the execution and delivery of the Pledge Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Company. The Company
represents and warrants to the Trust as follows:
(a) Company Existence and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business, and is in good standing, in all
additional jurisdictions where such qualification is necessary under applicable
law. The Company has all requisite power to own or lease the properties used in
its business and to carry on its business as now being conducted and as proposed
to be conducted, and to execute and deliver this Agreement and the Operative
Documents to which it is party and to engage in the transactions contemplated by
this Agreement.
(b) Company Authority. The execution, delivery and performance by the
Company of this Agreement and the Operative Documents to which it is a party do
not contravene any law or any contractual restriction binding on or affecting
it, and do not result in or require the creation of any lien, security interest
or other charge or encumbrance (except as provided in or contemplated by this
Agreement or the Loan Agreement) upon or with respect to any of its properties;
the execution, delivery and performance by the Company of this Agreement and the
Operative Documents to which it is a party have been duly authorized by all
necessary action and do not contravene the Company's articles of organization or
agreement or any contract or undertaking to which the Company is a party or by
which the Company or its property may be bound or affected.
(c) Consents. Etc. All necessary consents, authorizations or approvals
of, or other action by, or notice to or filing with, any governmental or
regulatory authority or any
<PAGE> 10
nongovernmental person or entity required to be obtained or made by the Company
in connection with (i) the execution, delivery and performance by the Company of
this Agreement, (ii) the execution and delivery of the Loan Agreement or the
other Operative Documents, or (iii) any of the other transactions contemplated
by this Agreement or the Operative Documents.
(d) Binding Effect. This Agreement and the Operative Documents to which
the Company is a party are legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy and insolvency law and general principles of
equity.
(d) Loan Agreement. The representations and warranties of the Company
contained in the Loan Agreement are incorporated herein by reference and the
Company represents that such representations and warranties and true and correct
on the date hereof in all material respects, without consideration to any waiver
granted by the Lender.
SECTION 4.01 Representations and Warranties of the Trust. The Trust represents
that it is authorized to enter into this Agreement and the Pledge Agreement.
ARTICLE V.
COVENANTS OF THE COMPANY
SECTION 5.01 Affirmative Covenants. So long as the Trust has
obligations under the Pledge Agreement or the Lender has a security interest in
Trust assets pursuant to the Pledge Agreement, the Company will, unless the
Trust shall otherwise consent in writing:
(a) Preservation of Company Existence. Etc. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and its qualification in good standing in each jurisdiction in which
such qualification is necessary under applicable law, and the rights, licenses,
permits (including those required under Environmental Laws), franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
businesses; and defend all of the foregoing against all claims, actions,
demands, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority.
(b) Compliance with Laws. Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority,
whether federal, state, local or foreign (including without limitation, ERISA,
the Code and Environmental Laws) in effect from time to time, non-compliance
with which could materially and adversely affect the financial condition or
operations of the Company (such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed
<PAGE> 11
upon the Company or upon its property the non-payment of which could materially
and adversely affect the financial condition or operations of the Company)
except to the extent that compliance with any of the foregoing is then contested
in good faith and by appropriate legal proceedings and with respect to which
adequate reserves have been established on the books and records of the Company.
(c) Maintenance of Properties: Insurance. Maintain, preserve and
protect all property that is material to the conduct of the business of the
Company and keep such property in good repair, working order and condition and
from time to time make, or cause to be made all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times in accordance with customary and prudent business practices for
similar businesses; and, in addition to that insurance required under the
Operative Documents, maintain in full force and effect insurance with
responsible and reputable insurance companies or associations in such amounts,
on such terms and covering such risks, including fire and other risks insured
against by extended coverage, as is usually carried by companies engaged in
similar businesses and owning similar properties similarly situated and maintain
in full force and effect public liability insurance, insurance against claims
for personal injury or death or property damage occurring in connection with any
of its activities or any properties owned, occupied or controlled by in such
amount as it shall reasonably deem necessary, and maintain such other insurance
as may be required by law.
(d) Compliance with Loan Agreement. The Borrower shall comply in all
material respects with the agreements, covenants and terms of the Loan Agreement
and shall give the Trust prompt notice of any failure on the part of the Company
to comply with the agreements, covenants and terms of the Loan Agreement
regardless of any waiver on the part of the Lender.
(e) Notices and Reports under Loan Agreement. To the extent the Loan
Agreement requires the Company to provide any notices, financial statements,
operating information, notices of default or other information to the Lender,
the Company shall also provide copies of such information to the Trust.
(f) Payments. Except with respect to payments required under the Loan
Agreement, the Company agrees that any payments made to the Bank relating to the
Loan Agreement shall be applied to the Bridge Loan until it is paid in full. The
amount outstanding under the Bridge Note may not at any time be increased
without the written consent of the Trust.
SECTION 5.02 Negative Covenants. So long as the Trust has any
obligation under the Pledge Agreement or the Lender has a security interest in
Trust assets under the Pledge Agreement, the Company will not, without the prior
written consent of the Trust:
<PAGE> 12
(a) Indebtedness. Create, incur, assume or in any manner become liable
in respect of, or suffer to exist, any Indebtedness or enter into any lease as
lessee (whether or not a Capital Lease) other than:
(i) The Indebtedness under the Operative Documents and hereunder,
and other Indebtedness to the Lender;
(ii) Indebtedness existing on the date hereof and permitted under
the Loan Agreement; and
(iii) Subordinated Debt which is unsecured.
(b) Liens. Create, permit to be created or permit to exist any lien,
mortgage, encumbrance or other security interest (collectively, "Liens") with
respect to any of the Company's property other than:
(i) Liens in favor of the Lender; and
(ii) Liens existing on the date hereof and relating to
Indebtedness permitted under Section 5.02(b)(i)and (ii).
(b) Inconsistent Agreements. Enter into any agreement containing any
provision which would be violated or breached by this Agreement or any of the
transactions contemplated hereby or by performance by the Company of its
obligations in connection therewith.
(c) Subordinated Debt. Make any payment in violation of the terms
applicable to any Subordinated Debt.
(d) Amendment to Loan Agreement. Agree to any modification, amendment
or other modifying agreement or understanding with respect to the Loan
Agreement.
ARTICLE VI.
EVENTS OF DEFAULT
SECTION 6.01 Events of Default. The occurrence of any of the following
events shall be an Event of Default hereunder unless waived by the Trust
pursuant to Section 7.01 hereof:
(a) Nonpayment. The Company shall fail to pay when due any amount
payable pursuant to Section 2.03, 2.04 or 2.05 hereof; or
<PAGE> 13
(b) Misrepresentation. Any representation or warranty made by the
Company in connection with this Agreement or any of the Operative Documents
shall prove to have been incorrect in any material respect when made; or
(c) Certain Covenants. The Company shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(a), 5.01(d) or 5.02
hereof; or
(d) Other Defaults. The Company shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement, and such failure
shall remain unremedied for 30 calendar days after written notice thereof shall
have been given to the Company by the Trust; or
(e) Cross Default. The Company shall fail to pay any part of the
principal of, the premium, if any, or the interest on, or any other payment of
money due under the Loan Agreement or any of its other Indebtedness having a
principal balance, individually or in the aggregate, in excess of $100,000
(other than Indebtedness hereunder) beyond any period of grace provided with
respect thereto, or if the Company fails to perform or observe any other
agreement, term or condition contained in any document evidencing or securing
such Indebtedness or in any agreement or instrument under which any such
Indebtedness was issued or created, beyond any period of grace, if any, if the
effect of such default is either to cause the holder or holders thereof (or a
trustee on its or their behalf) to cause the Indebtedness to become due prior to
its stated maturity unless such default has been waived pursuant to the terms of
such other agreement; or
(f) Operative Documents. A default (not caused by the failure of the
Trust to perform its payment obligations under the Pledge Agreement) under any
of the Operative Documents shall have occurred and be continuing without being
cured or waived pursuant thereto; or
(g) Judgments. One or more judgments or orders for the payment of money
in an aggregate amount in excess of $100,000 shall be rendered against the
Company, or any other judgment or order (whether or not for the payment of
money) shall be rendered against the Company which causes a material adverse
change in the business, properties, operations or condition, financial or
otherwise, of the Company or which has a material adverse effect on the
legality, validity or enforceability of this Agreement or the Security
Documents, and either (i) such judgment or order shall have remained unsatisfied
and the Company shall not have taken action necessary to stay enforcement
thereof by reason of pending appeal or otherwise, prior to the expiration of the
applicable period of limitations for taking such action or, if such action shall
have been taken, a final order denying such stay shall have been rendered, or
(ii) enforcement proceedings shall have been commenced by any creditor upon any
such judgment or order; or
(h) Insolvency. Etc. The Company shall be dissolved or liquidated (or
any judgment, order or decree therefor shall be entered), or shall generally not
pay its debts as they become due,
<PAGE> 14
or shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors, or shall institute, or
there shall be instituted against the Company any proceeding or case seeking to
adjudicate it a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief or protection of debtors or seeking the entry of an order for relief,
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its assets, rights, revenues or property,
and, if such proceeding is instituted against the Company and is being contested
by the Company in good faith by appropriate proceedings, such proceeding shall
remain undismissed unstayed for a period of 60 days; or the Company shall take
any action (corporate or other) to authorize or further any of the actions
described above in this subsection.
SECTION 6.02 Remedies upon an Event of Default. If any Event of Default
shall have occurred and be continuing, the Trust may (i) if the Pledge Agreement
shall not have been executed and delivered, terminate its commitment to provide
the Pledge Agreement or (ii) in any event, exercise such other rights and
remedies as are available to the Trust under this Agreement, any of the
Operative Documents or applicable law.
SECTION 6.03 Failure to make Payment by the Trust. If the Trust shall
fail to observe any payment obligation required by the Bank under the Pledge
Agreement, the Company's obligation to pay the fee provided for under Section
2.02(a) shall be temporarily suspended during the period of such failure,
provided that such fee shall continue to accrue and all other payment and
reimbursement obligations shall remain in full force and effect during such
period, and, provided further that any waiver or suspension by the bank of any
such payment obligation shall constitute a waiver of the Company hereunder. The
Company shall not be obligated to pay to the Trust any expenses of the Trust
hereunder to the extent such expenses are due solely to the Trust's failure to
observe any payment obligation required by the bank under the Pledge Agreement.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.01 Amendments. Etc. This Agreement may be amended from time
to time by the written agreement of all parties hereto. No amendment or waiver
of any provision of this Agreement nor consent to any departure by the Company
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Trust, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
<PAGE> 15
SECTION 7.02 Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and mailed by first
class mail, return receipt requested, by overnight delivery with a nationally
recognized carrier or personally delivered as follows:
If to the Company:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn.: Bala Venkataramin
Tel:
Fax: 770-442-9594
If to the Trust:
Kapoor Children's 1992 Trust
c/o EJ Financial Enterprises
225 E. Deerpath, Suite 250
Lake Forest, IL 60045
Attn: Kevin Harris
Tel: (847) 295-8665
Fax: (847) 295-8680
or such other address as either party may provide in writing to the other.
SECTION 7.03 Costs, Expenses and Taxes. Subject to Section 2.02(b) of
this Agreement and the other terms of this Agreement, he Company agrees to pay
within 30 days of demand by the Trust all reasonable costs and expenses in
connection with the preparation, execution, delivery, filing, recording and
administration of this Agreement and any other documents which may be delivered
in connection with this Agreement, including, without limitation, the reasonable
fees and out-of-pocket expenses of Burke, Warren, MacKay & Serritella, P.C.,
counsel to the Trust, with respect thereto and with respect to advising the
Trust as to its rights and responsibilities under this Agreement and all
reasonable costs and expenses (including counsel fees and expenses) in
connection with the enforcement of this Agreement or the other Operative
Documents, and all other documents and instruments which may be delivered in
connection with this Agreement or the other Operative Documents.
SECTION 7.04 Binding Effect: Assignment. This Agreement shall become
effective when it shall have been executed and delivered by the Company and the
Trust and thereafter shall be binding upon and inure to the benefit of the
Company and the Trust and their respective successors and assigns, except that
(i) the Company shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Trust, which will not
be
<PAGE> 16
unreasonably withheld, delayed or conditioned, and (ii) the Trust shall not have
the right to assign its rights hereunder without the prior written consent of
the Company, which will not be unreasonably withheld, delayed or conditioned
provided, however, that no consent of the Company shall be required for an
assignment of all or any part of, or any interest (divided or undivided) in, the
Trust's rights and benefits under this Agreement by the Trust to an entity
controlling, controlled by or under common control with Dr. John N. Kapoor, or
to any person who is related by blood, marriage or adoption to Dr. John N.
Kapoor, it being acknowledged that to the extent of any such assignment, such
assignee shall have the same rights and benefits against the Company hereunder
as it would have had if such assignee were the Trust hereunder.
SECTION 7.07 Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 7.08 Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Illinois without giving
effect to choice of law principles of such State.
SECTION 7.09 Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION 7.10 Counterparts. This Agreement may be executed in any number
of counterparts, each of which, when so executed and delivered, shall be deemed
to be an original, but all such counterparts taken together shall constitute but
one and the same Agreement.
SECTION 7.11 WAIVER OF JURY TRIAL. THE TRUST AND THE COMPANY, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL
BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF EITHER OF THEM. NEITHER THE TRUST NOR THE COMPANY SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE
OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY
<PAGE> 17
RESPECT OR RELINQUISHED BY EITHER THE TRUST OR THE COMPANY EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
FIRST HORIZON PHARMACEUTICAL CORPORATION
By:
-----------------------------------------
Its:
---------------------------------------
KAPOOR CHILDREN'S 1992 TRUST
By:
-----------------------------------------
Editha Kapoor, Trustee
<PAGE> 1
EXHIBIT 10.17
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[****]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
---------------------------------------------------------------------
PONSTEL(R)
ASSET PURCHASE AGREEMENT
between
WARNER-LAMBERT COMPANY
and
FIRST HORIZON PHARMACEUTICAL CORPORATION
Dated as of April 10, 2000
---------------------------------------------------------------------
<PAGE> 2
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
April 10, 2000, by and among WARNER-LAMBERT COMPANY, a Delaware corporation with
offices at 201 Tabor Road, Morris Plains, New Jersey 07950 ("Warner-Lambert")
and FIRST HORIZON PHARMACEUTICAL CORPORATION, a Delaware corporation with
offices at 660 Hembree Parkway, Suite 106, Roswell, Georgia 30076 ("Horizon").
RECITALS
WHEREAS, Warner-Lambert is engaged in the business of manufacturing
and selling pharmaceutical products and owns certain rights related to the
product listed on Exhibit A hereto (the "Product"); and
WHEREAS, the parties hereto intend that Warner-Lambert shall sell to
Horizon, and Horizon shall purchase from Warner-Lambert, certain assets related
to the Product upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties, covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties do hereby
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 SALE OF ASSETS. Pursuant to the terms and conditions set forth
in this Agreement, Warner-Lambert agrees to sell, convey, assign, grant,
transfer and deliver to Horizon, and Horizon agrees to purchase, acquire and
receive from Warner-Lambert on April 14, 2000 or such other date as the parties
agree upon in writing (the "Closing Date"), Warner-Lambert's entire interest in
all of the following assets related to the Product (collectively, the "Assets")
in the United States and Puerto Rico (the "Territory"):
1.1.1 Inventory. The inventories of finished Product
(including samples) owned by Warner-Lambert on the Closing Date and held for use
in the Territory as specified on Exhibit 1.1.1 hereto (the "Inventory");
provided, that the expiration date for such Inventory of finished Product is at
least twelve (12) months after the Closing Date. Inventory purchased by Horizon
hereunder shall be delivered to Horizon as soon as practicable after Closing but
in any event no later than fifteen (15) days thereafter;
1.1.2 Trademarks. All the rights in the Territory to the
trademarks listed on Exhibit 1.1.2 hereto (the "Trademarks");
1.1.3 Registrations. All regulatory approvals and
applications for regulatory approval for the Product in the Territory (including
the NDA for the Product) held by Warner-Lambert or its Affiliates (defined
below) (collectively, the "Registrations") set forth on Exhibit 1.1.3; provided,
however, that Warner-Lambert retains such rights under the Registrations, if
any, as may be required for Warner-Lambert to manufacture, have manufactured,
sell, market, distribute or use the Product outside the Territory.
Warner-Lambert shall deliver such Registrations to Horizon as soon as
practicable after Closing but in any event no later than forty-
2
<PAGE> 3
five (45) days thereafter. As used herein: the term "Affiliate" shall mean (i)
any company or entity, more than fifty percent (50%) of whose voting stock or
participating profit interest is owned or controlled, directly or indirectly, by
a party; (ii) any company, entity or person which owns or controls, directly or
indirectly, more than fifty percent (50%) of the voting stock or participating
profit interest of a party and (iii) any company, entity or person which is
under common control with a party hereto and the term "common control" means a
third party has direct or indirect ownership of fifty percent (50%) or more of
the voting stock or participating profit interest of both the other company or
entity and the party to this Agreement; and "NDA" means the new drug application
for the Product set forth in Exhibit 1.1.3;
1.1.4 Information and Know-How. All technical information
(including the master batch record, analytical methods including validation
protocol, and the drug master file), know-how, market research results, and the
like specifically relating to the manufacture, packaging, testing, development,
distribution, marketing, use or sale of the Product (including the raw materials
used in the manufacture thereof) in the Territory owned or possessed by
Warner-Lambert on the Closing Date (collectively, the "Information"). The
Information, to the extent such Information has not previously been provided to
Horizon, shall be transferred as soon as practicable after the Closing Date, but
in any event no later than sixty (60) days thereafter;
1.1.5 Managed Care Agreements. To the extent their
assignment in part is permitted under the terms thereof or by the other party
thereto, all Managed Care Agreements (as hereinafter defined), to which
Warner-Lambert is a party and which are utilized in connection with the sale of
the Product by Warner-Lambert in the Territory; and
1.1.6 Goodwill. All goodwill associated with the Product in
the Territory other than goodwill associated with any trademark. trade name,
service mark, service name, slogan or logo used by Warner-Lambert prior to the
date hereof and not transferred to Horizon pursuant to this Agreement or any of
the other operative agreements which are necessary to completely sell, convey,
assign, grant, transfer and deliver the Assets to Horizon.
1.2 EXCLUDED ASSETS. Notwithstanding anything in this Agreement to
the contrary, the following assets of Warner-Lambert (the "Excluded Assets")
shall be excluded from and shall not constitute Assets:
1.2.1 Accounts Receivable. All trade accounts receivable
and all notes, bonds and other evidences of indebtedness and rights to receive
payments arising out of sales of the Product prior to the Closing Date,
including any rights of Warner-Lambert with respect to any third party
collection procedures or any contract or any other actions which have accrued
prior to the Closing Date in connection with the manufacture, sale or use of any
Product;
1.2.2 Litigation Claims. Any rights (including
indemnification), claims and recoveries under litigation of Warner-Lambert or
its Affiliates against third parties arising out of or relating to events
occurring prior to the Closing Date;
1.2.3 Excluded Contract Rights. The rights of
Warner-Lambert or any of its Affiliates in, to and under all contracts of any
nature, the obligations of Warner-Lambert or any of its Affiliates under which
are not expressly assumed by Horizon herein; and
3
<PAGE> 4
1.2.4 Excluded Intellectual Property. Warner-Lambert shall
retain the right and title to any Intellectual Property (as defined herein) and
Information utilized in connection with the manufacture, packaging, testing,
development, distribution, marketing, use or sale of the Product outside of the
Territory and of any of Warner-Lambert's or its Affiliates' products, other than
the Product, including, but not limited to, those that are also used by
Warner-Lambert on the Product, such as the Parke-Davis trademark, logo and
designs. As used herein "Intellectual Property" means, with respect to the
Product, all of the following without limitation and whether registered, issued,
pending or in a draft form: all patents, trademarks and trademark rights,
service marks and service mark rights, service names and service name rights,
brand names, logos, slogans, trade secrets, trade dress, processes, designs,
methodologies, technical information and know-how, in each case relating to the
manufacture, packaging, development, testing, distribution, marketing, use or
sale of such Product.
1.3 ASSUMED LIABILITIES. Horizon shall assume and agrees to pay,
perform and discharge when due the following liabilities and obligations of
Warner-Lambert arising in connection with the Product (the "Assumed
Liabilities"):
1.3.1 Returns. All liabilities and obligations with respect
to (i) the returned units of the Product, from and after the date that is six
(6) months after the Closing Date and (ii) the returned units of the Product
during the first six (6) months following the Closing Date to the extent such
returns exceed 4.6% of the gross sales of the Product in the Territory in the
first six (6) months immediately preceding the Closing Date;
1.3.2 Rebates and Chargebacks. All liabilities and
obligations arising from (i) all rebates to state Medicaid and other state and
local governmental programs and to pharmacy benefit management companies, health
plans, insurance companies, mail service pharmacies and other health care
providers based upon the utilization of the Product (collectively, "Rebates")
and (ii) all credits, chargebacks, reimbursements, administrative fees and other
payments to wholesalers and other distributors, group purchasing organizations,
insurers and other institutions (collectively, "Chargebacks") , occurring in the
third calendar quarter of 2000 and thereafter, subject to the Rebate and
Chargeback Reimbursement (defined below) to be paid to Horizon by
Warner-Lambert, provided, however, that Horizon shall not be liable for any
Chargebacks or Rebates occurring in the first and second calendar quarters of
2000. For purposes of this Section 1.3.2, Rebates shall be deemed to have
occurred in the calendar quarter in which the pharmacy or other applicable
entity is reimbursed by Medicaid or other applicable entity and Chargebacks
shall be deemed to have occurred in the calendar quarter in which the wholesaler
or other applicable entity ships the Product that results in the chargeback. As
used herein, "Rebate and Chargeback Reimbursement" shall mean an amount equal to
the product of (i) the Rebates and Chargebacks occurring in the third calendar
quarter of 2000 and (ii) a fraction, the denominator of which is 92 and the
numerator of which is the number of days elapsed in the second quarter through
the Closing Date. To the extent that Warner-Lambert is unable to assign any
agreement of Warner-Lambert for the payment of Rebates and Chargebacks ("Managed
Care Agreements")to Horizon with respect to the Product, Horizon agrees to
reimburse Warner-Lambert for the amount of such Rebates and Chargebacks under
the Managed Care Agreements paid by Warner-Lambert within thirty (30) days after
receipt by Horizon of a written invoice from Warner-Lambert for same;
1.3.3 Registrations. All liabilities and obligations with
respect to the Registrations arising or incurred from and after the Closing
Date, provided, however, with
4
<PAGE> 5
respect to the NDA establishment fee, Horizon shall only be responsible for such
fees which are incurred in connection with the period beginning with the first
full calendar year following the expiration or earlier termination of the Supply
Agreement (as defined herein);
1.3.4 Recalls. From and after the Closing Date, all
liabilities, obligations and responsibilities relating to voluntary and
involuntary recalls of Product sold by Horizon after the Closing Date, except to
the extent that such recall is for a failure of the Inventory to meet the
product specifications set forth in the NDA as such specifications exist on the
date hereof (the "Specifications"), where such failure is due solely to the
actions or omissions of Warner-Lambert;
1.3.5 Product Liability. From and after the Closing Date,
all liabilities, obligations and responsibilities relating to product liability
claims or threatened claims relating to Product sold by Horizon after the
Closing Date, other than product liability that results from a failure of the
Inventory to meet the Specifications, where such failure is due solely to the
actions or omissions of Warner-Lambert;
1.3.6 Research and Development. All liabilities,
obligations and responsibilities for any research and development conducted by
Horizon and relating to the Product after the Closing Date; and
1.3.7 Product Regulatory Obligations. All liabilities,
obligations and responsibilities undertaken by Horizon pursuant to Section 5.4.
1.4 RETAINED LIABILITIES. Except for the Assumed Liabilities,
Horizon shall not assume by virtue of this Agreement or the transactions
contemplated hereby, and shall have no liability for, any liabilities, debts or
obligations of Warner-Lambert of any kind, character or description whatsoever
(the "Retained Liabilities").
ARTICLE 2
CONSIDERATION FOR TRANSFER OF ASSETS
2.1 PURCHASE PRICE. (a) Subject to the terms and conditions of
this Agreement, in consideration for the sale and transfer of the Assets,
Horizon shall pay to Warner-Lambert (i) a non-refundable payment of Nine Million
Five Hundred Thousand Dollars ($9,500,000) payable to Warner-Lambert on the
Closing Date, (ii) Three Million Five Hundred Thousand Dollars ($3,500,000)
payable to Warner-Lambert on the earliest of (A) three (3) Business Days
following signing of a definitive asset purchase agreement by Warner-Lambert and
a party other than Horizon regarding Warner-Lambert's Cognex business, (B) three
(3) Business Days following the date on which Horizon notifies Warner-Lambert
that it does not intend to purchase Warner-Lambert's Cognex business, (C) June
1, 2000, in the event that Horizon has not purchased Warner-Lambert's Cognex
business by such date, other than due to a delay in receiving clearance from the
Federal Trade Commission to proceed with the purchase of the Cognex business,
(D) three (3) Business Days following the date on which a definitive agreement
between Horizon and Warner-Lambert for the Cognex Business is terminated, (E)
three (3) Business Days following the date of the initial public offering of
Horizon or (F) November 30, 2000, as evidenced by an interest-free promissory
note in the form of Exhibit 2.4.2 and (iii) an
5
<PAGE> 6
amount equal to the value of the Inventory transferred to Horizon pursuant to
the terms of this Agreement based on the Closing Inventory Value (as defined
below) payable to Warner-Lambert within thirty (30) days after the Closing Date.
The amounts set forth in Section 2.1 (a)(i), (ii) and (iii) are hereinafter
referred to collectively as the "Purchase Price". As used herein, "Business Day"
means a day during which banks are generally open for business in New York and
"Closing Inventory Value" means the value of the Inventory (including samples)
as of the Closing Date based on Warner-Lambert's calculation of the standard
cost of the Product.
(b) All payments under this Section shall be made by wire transfer
or other immediately available funds to an account indicated by Warner-Lambert.
2.2 ALLOCATION. The parties agree to allocate the portion of the
Purchase Price paid pursuant to Sections 2.1(a)(i) and 2.1(a)(ii) among the
Assets (other than Inventory) purchased hereunder. The allocation of the
Purchase Price to Inventory shall be the amount calculated as Closing Inventory
Value in accordance with Section 2.1(a)(iii).
2.3 CLOSING. The Closing shall take place at 11:00 a.m. EDT at 201
Tabor Road, Morris Plains, New Jersey on the Closing Date or at such time and
place as the parties hereto may otherwise mutually agree.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 LEGAL AUTHORITY. Each party represents and warrants that it
has the legal power, authority and right to enter into this Agreement and to
perform its respective obligations set forth herein.
3.2 NO CONFLICTS. Each party represents and warrants that it is
not a party to any agreement or arrangement with any third party or under any
obligation or restriction, including pursuant to its Articles of Incorporation,
By-Laws or other organizational documents, which in any way limits or conflicts
with its ability to fulfill any of its obligations set forth herein.
3.3 TITLE TO ASSETS. Warner-Lambert hereby represents and warrants
that to its knowledge: (i) it or its Affiliates has good and marketable title to
the Assets, free and clear of all liens; (ii) no sublicenses have been granted
to any third party with respect to the Assets; and (iii) there are no adverse
claims of ownership to the Assets.
3.4 INTELLECTUAL PROPERTY RIGHTS. Warner-Lambert hereby represents
and warrants that, to its knowledge without any inquiry of third parties, there
are no patents, trademarks, trade names or copyrights or any other proprietary
rights of any third person which would be infringed by the manufacture, use or
sale of the Product in the Territory.
3.5 INVENTORY. The Inventory will be of salable quality, will meet
the Specifications, have been manufactured in accordance with current good
manufacturing practices and other applicable law.
6
<PAGE> 7
3.6 LITIGATION. (a) Warner-Lambert hereby represents and warrants
that, to its knowledge, there is no litigation, action, suit, inquiry,
investigation, arbitration or other proceeding pending or threatened against
Warner-Lambert or its Affiliates specifically with respect to the Product, the
Assets or Warner-Lambert's right and ability to consummate the transaction
contemplated by this Agreement, nor does Warner-Lambert know of any basis for
any such proceedings, investigations or inquiries.
(b) Horizon hereby represents and warrants that, to its knowledge,
there is no litigation, action, suit, inquiry, investigation, arbitration or
other proceeding pending or threatened against Horizon with respect to its right
and ability to consummate the transactions contemplated by this Agreement.
3.7 CONSENTS AND APPROVALS. Warner-Lambert and Horizon each hereby
represents and warrants that it has obtained all third party consents and
government approvals, if any, required in connection with the assignment and
assumption of the Assets to and by Horizon. Notwithstanding the foregoing, the
parties acknowledge that transfer of the NDAs will not be completed until
receipt and acceptance by the United States Food and Drug Administration ("FDA")
of the Warner-Lambert Assignment Letters and the Horizon Assumption Letters.
3.8 HORIZON'S REPRESENTATION AND WARRANTY REGARDING THE PRODUCT.
Horizon represents and warrants that it and its Affiliates have not
manufactured, used or sold the Product anywhere worldwide or used the Trademarks
anywhere worldwide prior to the Closing Date. Horizon hereby acknowledges that
it has been afforded the opportunity to conduct due diligence with respect to
the Product and to secure such information from Warner-Lambert with respect to
the Product as it deems necessary to evaluate the merits of entering into the
transactions contemplated in this Agreement.
3.9 NO BROKERAGE FEE. Each party represents and warrants that no
broker, financial advisor or other person or entity is entitled to any brokerage
fee or commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
3.10 MANAGED CARE AGREEMENTS. Warner-Lambert represents and
warrants that the agreements of Warner-Lambert with the customers listed on
Exhibit 3.10 hereto are all the Managed Care Agreements as of April 10, 2000.
Also set forth on Exhibit 3.10 are the rebate and/or discount terms with respect
to each such Managed Care Agreement as of April 10, 2000. Warner-Lambert shall
deliver a revised Exhibit 3.10 at the Closing listing all the Managed Care
Agreements as of the Closing Date. Each party will use its best efforts to
notify the customers set forth on Exhibit 3.10 that the Product has been
transferred to Horizon within three (3) Business Days after the Closing Date.
Promptly after the Closing Date, but in no event later than ten (10) Business
Days following the Closing Date, Warner-Lambert shall, subject to the required
consent of the applicable customer, assign all Managed Care Agreements existing
on the Closing Date and shall notify Horizon on a regular basis regarding each
such consent and assignment; provided, however, that with respect to those
Managed Care Agreements that Warner-Lambert is unable to assign, Warner-Lambert
shall fulfill all its obligations under each such Managed Care Agreement until
its expiration (it being understood and agreed that Horizon has an obligation to
reimburse Warner-Lambert for Rebates and Chargebacks with respect to the Managed
Care Agreements pursuant to Section 1.3.2 hereof).
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3.11 REGISTRATIONS. Warner-Lambert hereby represents and warrants
that, to its knowledge, (i) the Registrations are in good standing and (ii)
there is no pending or threatened action by the FDA which will have a material
adverse effect on the Registrations. Warner-Lambert has paid the NDA maintenance
fee for the Product for the year 2000. It is understood and agreed by the
parties that if USP publishes a monograph covering the Product, the Product may
not meet the new USP specifications. Under those circumstances, the Product must
be labeled accordingly.
3.12 CERTAIN FINANCIAL INFORMATION. Warner-Lambert represents and
warrants that certain 1999 financial information provided to Horizon as of
December 31, 1999, specifically, the gross sales, net sales, standard cost of
goods and gross profit of the Product in the Territory were based upon the
information contained in the books and records of Warner-Lambert and, as such,
are accurate in all material respects. As used herein, "net sales" shall mean
the aggregate sales of Warner-Lambert and its Affiliates of Product to
unaffiliated third parties in the Territory (but not including sales between
Warner-Lambert and its Affiliates) less (i) bad debts related to the Product,
and (ii) sales returns and allowances, including, without limitation, trade,
quantity and cash discounts and any other adjustments, including, but not
limited to, those granted on account of price adjustments, billing errors,
rejected goods, damaged goods, recalls, returns, rebates, chargeback rebates,
fees, reimbursements or similar payments granted or given to wholesalers or
other distributors, buying groups, health care insurance carriers or other
institutions, freight and insurance charges billed to the customers, customs or
excise duties, sales tax and other taxes (except income taxes) or duties
relating to sales, and any payment in respect of sales to any governmental or
regulatory authority in respect of any Federal or state Medicaid, Medicare or
similar program, all as determined in a manner consistent with the books and
records of Warner-Lambert.
3.13 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED HEREIN,
WARNER-LAMBERT DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD
TO THE PRODUCTS, INCLUDING THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE FOREGOING, HORIZON
ACKNOWLEDGES THAT WARNER-LAMBERT HAS MADE NO REPRESENTATION OR WARRANTY AS TO
THE ABILITY TO MANUFACTURE OR SELL ANY OF THE PRODUCTS IN ACCORDANCE WITH
APPLICABLE LAW.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION BY WARNER-LAMBERT. Warner-Lambert shall
indemnify, defend and hold harmless Horizon against any loss, expense, liability
or other damages, including reasonable costs of investigation, interest,
penalties and attorneys' fees (collectively, "Losses") incurred by Horizon, its
Affiliates or any of their respective officers, directors, agents or employees
(collectively, the "Horizon Group") to the extent relating to or resulting from
(a) any inaccuracy of a representation or breach of a warranty made by
Warner-Lambert in this Agreement or (b) the Retained Liabilities; provided,
however, that Warner-Lambert will have no obligations under this Section for
Losses to the extent that they are caused by (i) any inaccuracy of a
representation or breach of a warranty made by Horizon in this Agreement or (ii)
the gross
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negligence or willful misconduct of any member of the Horizon Group. Horizon
hereby agrees that Warner-Lambert's liability under this Agreement from whatever
cause, whether pursuant to this Section or any other cause arising under this
Agreement, is limited to the amounts paid by Horizon to Warner-Lambert pursuant
to Section 2.1 as of the date of determination of such liability, provided,
however, that the limitation on liability contained in this sentence shall not
apply to a failure of the Inventory to meet the Specifications, where such
failure was due solely to the actions or omissions of Warner-Lambert.
Furthermore, the parties agree that in no event will Warner-Lambert be liable to
Horizon hereunder for special, consequential, indirect, punitive or similar
damages.
4.2 INDEMNIFICATION BY HORIZON. Horizon shall indemnify, defend
and hold harmless Warner-Lambert against any Losses incurred by Warner-Lambert,
its Affiliates or any of their respective officers, directors, agents or
employees (collectively, the "Warner Group") relating to or resulting from (a)
any inaccuracy of a representation or breach of a warranty made by Horizon in
this Agreement; (b) any liabilities, obligations, commitments of, or claims
against any member of the Warner Group based on the manufacture, use or sale of
the Product in the Territory or use of the Trademarks or the Registrations in
the Territory, on and after the Closing Date; and (c) the Assumed Liabilities;
provided, however, that Horizon will have no obligations under this Section for
Losses to the extent that they are caused by (a) any inaccuracy of a
representation or breach of a warranty made by Warner-Lambert in this Agreement
or (b) the gross negligence or willful misconduct of any member of the Warner
Group. Furthermore, the parties agree that in no event will Horizon be liable to
Warner-Lambert hereunder for special, consequential, indirect, punitive or
similar damages.
4.3 INDEMNIFICATION PROCEDURES. In any case under this Agreement
where one party has indemnified the other against any claim or legal action,
indemnification will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way of
settlement and release) at its own cost and expense. The indemnified party may,
but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated to,
defend, contest or otherwise protect against the same, and make any compromise
or settlement thereof and recover the entire costs thereof from the indemnifying
party, including reasonable attorneys fees, disbursements and all amounts paid
as a result of such claim or suit or the compromise or settlement thereof;
provided, however, that if the indemnifying party undertakes the timely defense
of such matter, the indemnified party will not be entitled to recover from the
indemnifying party its costs incurred in the defense thereof. The indemnified
party will cooperate and provide such assistance as the indemnifying party may
reasonably request in connection with the defense of the matter subject to
indemnification.
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ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 TERRITORIAL RESTRICTION. Horizon shall not directly or
indirectly sell the Product outside the Territory at any time. Horizon will use
its commercially reasonable efforts to prevent the Product from being resold for
use or sale outside the Territory. Warner-Lambert shall not directly or
indirectly sell the Product in the Territory at any time after the Closing Date.
Warner-Lambert will use its commercially reasonable efforts to prevent the
Product from being resold for use or sale in the Territory. The restrictions set
forth in this Section 5.1 shall survive indefinitely.
5.2 USE OF WARNER-LAMBERT NAME. (a) Horizon shall not use the name
of Warner-Lambert, Parke-Davis or any of Warner-Lambert's Affiliates
(collectively, the "Warner-Lambert Name") in any manner whatsoever in connection
with the manufacture, use, sale, promotion, advertising or distribution of the
Product after the Closing Date, provided, however, Horizon may use the Inventory
purchased from Warner-Lambert by Horizon hereunder bearing the Warner-Lambert
Name (including inventory purchased under the Supply Agreement) for ten (10)
months following the Closing Date or until such Inventory is depleted, whichever
occurs first ("Final Inventory Sell Off Date"). Except as otherwise set forth in
this Section 5.2 or in Section 5.3 hereof, Horizon shall have no right to use
the Warner-Lambert Name without the prior written consent of Warner-Lambert.
(b) Horizon hereby agrees that any Inventory purchased from
Warner-Lambert hereunder and bearing the Warner-Lambert Name will be held,
maintained and distributed in accordance with applicable pharmaceutical current
good manufacturing practices, the Registrations, and all applicable laws.
Warner-Lambert shall have no responsibility for costs and expenses associated
with any recall of the Inventory on or after the Closing Date attributable to a
determination by a governmental or regulatory authority that the use of the
Warner-Lambert Name on such Inventory would constitute misbranding within the
meaning of the Federal Food, Drug, and Cosmetic Act.
5.3 USE OF PROMOTIONAL MATERIALS. From the Closing Date until the
Final Inventory Sell Off Date, Horizon shall have the right, subject to
Warner-Lambert's prior written consent, to apply the Warner-Lambert Name on any
new promotional materials (including, but not limited to, journal ads,
convention materials, sales aids, and medical education materials) for the
Product. Horizon shall submit such promotional materials in final form, together
will all data and documentation required to support any claims made therein, to
Warner-Lambert's regulatory group which shall determine, within ten (10)
Business Days after receipt, whether to grant written consent to use such
promotional materials. Horizon shall have no other right to use the
Warner-Lambert Name other than as set forth herein and in Section 5.2 above.
Horizon agrees that after the Final Inventory Sell Off Date all promotional
materials containing the Warner-Lambert Name shall be destroyed at Horizon's
sole cost and expense. Use of the Warner-Lambert Name on promotional materials
by Horizon shall be at Horizon's risk.
5.4 PRODUCT REGULATORY OBLIGATIONS.
5.4.1. FDA Contacts. On and after the Closing Date, Horizon
shall be responsible for all contacts with the FDA and other regulatory
authorities in the Territory with
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respect to the Product, and all other responsibilities under the Registrations;
provided that either party shall notify the other party immediately, and in no
event later than (A) forty-eight (48) hours after receipt of any contact or
communication from the FDA or any other governmental or regulatory authority in
the Territory and (B) five (5) Business Days after receipt of any contact or
communication with any other third party in the Territory, that in either case,
in any way requests or suggests the need for a recall or withdrawal of a lot of
Product manufactured by or on behalf of Warner-Lambert or otherwise calls into
question the quality or safety of such a Product lot. Horizon shall be
responsible for investigating any such request or suggestion and for any
communications with any governmental or regulatory authority in the Territory
relating thereto; provided that Horizon shall comply with all reasonable
requests by Warner-Lambert.
5.4.2. Customer Complaints. Horizon shall be solely
responsible for responding to any Product complaint received on or after the
Closing Date concerning Product lots sold in the Territory. Each party shall
notify the other in the event that such a party receives a report of a Product
complaint relating to a Product lot manufactured by or on behalf of
Warner-Lambert. The complaint recipient shall use all reasonable efforts to
provide such notice to the other party within forty-eight (48) hours if the
complaint involves allegations of suspected or actual product tampering,
contamination or mislabeling, and shall provide such notice to the other party
within five (5) Business Days in the case of all other complaints. Horizon shall
be responsible for investigating all such Product complaints and responding to
the complainant, provided each party shall comply with all reasonable requests
from the other in connection therewith.
5.4.3. Adverse Event Reporting. On and after the Closing
Date, each party shall have a continuing obligation to notify the other party of
any adverse drug experience reported to such party arising from or in connection
with the use of the Product. This notification shall occur within seventy-two
(72) hours for an unexpected fatal or life-threatening serious adverse drug
experience (as defined in 21 CFR 312.32) associated with the Product and arising
during clinical trials. For post-marketing adverse drug experience reports, the
parties agree as follows:
(i) Warner-Lambert shall report to Horizon all adverse drug
experiences arising in the Territory and all serious adverse
drug experience reports arising outside the Territory within
five (5) Business Days after the time such report becomes
known to any employee, agent or Affiliate of Warner-Lambert.
All other post-marketing adverse drug experience reports for
the Product shall be reported to Horizon by Warner-Lambert on
a rolling fifteen (15)-day basis.
(ii) Horizon shall report to Warner-Lambert all serious adverse
drug experience reports for the Product within five (5)
Business Days after the time such report becomes known to any
employee, agent or Affiliate of Horizon and all other adverse
drug experience reports for the Product on a rolling fifteen
(15)-day basis.
All notifications pursuant to this paragraph shall be by fax or e-mail at such
numbers (or e-mail addresses) agreed upon by the parties' respective drug safety
organizations. Horizon shall have sole responsibility to investigate such
adverse experience reports arising in the Territory and for reporting such
reports to governmental and regulatory authorities in the Territory.
Warner-Lambert shall have sole responsibility for investigating such adverse
experience reports arising outside the Territory and for reporting such reports
to applicable governmental and regulatory authorities outside the Territory.
Except as otherwise stated above, the terms
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"adverse drug experience" and "serious adverse drug experience" used in this
paragraph shall have the meanings set forth in 21 CFR 314.80.
The parties shall use reasonable efforts to enter into a separate drug safety
sharing agreement describing the procedures and other logistics to implement the
provisions in this Section 5.4 within ninety (90) days after execution of this
Agreement.
5.4.4 Assistance with Regulatory Obligations Transfer. For
a period of up to sixty (60) days following the Closing Date, Warner-Lambert
agrees to provide assistance and cooperation reasonably requested by Horizon in
connection with the transfer of the Registrations to Horizon.
5.5 PAYMENT OF TRANSACTION EXPENSES. All sales taxes, use taxes,
transfer taxes, filing fees (including trademark assignment fees) and similar
taxes, fees, charges and expenses (excluding any taxes arising from income or
gains earned by Warner-Lambert) required to be paid in connection with the sale
of the Assets to Horizon will be borne and paid by Horizon. All legal fees and
other expenses incurred on behalf of Warner-Lambert in connection with the
negotiation of this Agreement will be borne by Warner-Lambert; and all legal
fees and other expenses incurred on behalf of Horizon in connection with the
negotiation of this Agreement will be borne by Horizon.
5.6 ACCESS TO WARNER-LAMBERT RECORDS. To the extent required by
the Securities and Exchange Commission in connection with an initial public
offering of or other financing for Horizon and upon five (5) Business Days'
prior written notice from Horizon, Warner-Lambert agrees to provide Horizon and
up to two (2) employees of an independent accounting firm designated by Horizon
with reasonable access to financial records pertaining to the Product covering a
period ending not more than three (3) years prior to the date of such request.
Prior to granting any access to such records, the designated accounting firm
shall first agree not to disclose any confidential information contained in such
financial records. Horizon shall pay all costs and expenses in connection with
the review of such financial records.
5.7 LIMITATION ON TRANSFER. Horizon hereby agrees that until such
time as Horizon has discharged all its payment obligations hereunder, it shall
not convey, sell, assign, transfer, license or otherwise dispose of any of the
Assets (other than Inventory in the ordinary course of business) without the
prior written consent of Warner-Lambert, which consent shall not be unreasonably
withheld, provided, that Horizon shall have the right to assign its rights and
obligations under this Agreement to any third party successor to all or
substantially all of its entire business. Warner-Lambert will respond to such
written request for transfer of the Assets within forty-five (45) days after
receipt of such written request from Horizon.
5.8 CONFIDENTIALITY. For a period of five (5) years from the
Closing Date, each party shall hold in confidence and use its best efforts to
have all of their respective Affiliates and representatives hold in confidence
all confidential information of the other party, and, except as contemplated by
this Agreement, shall not disclose, publish, use or permit others to use the
same; provided, however, that the foregoing restriction shall not apply to any
portion of the foregoing which was or becomes available on a non-confidential
basis to the other party or when such disclosure is required by a governmental
or regulatory authority or is otherwise required by law or is necessary in order
to establish rights under this Agreement or any other agreements referred to
herein. In the event the transaction contemplated hereby is not
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consummated, upon the request of the other party, each party hereto will, and
will cause its Affiliates, any Person who has provided, or who is providing,
financing to such party and their respective Representatives to, promptly (and
in no event later than five (5) Business Days after such request) redeliver or
cause to be redelivered all copies of confidential documents and information
furnished by the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such documents and information
or its representatives, provided, however, that each party shall be entitled to
keep one archival copy of such confidential documents and information and
related materials solely as evidence of what was redelivered and destroyed
hereunder, and for no other purpose.
5.9 TECHNICAL TRANSFER. Subsequent to the Closing Date,
Warner-Lambert agrees to provide the technical support, to the extent possible,
set forth on Exhibit 5.9 attached hereto. Horizon shall pay to Warner-Lambert
the amounts set forth on Exhibit 5.9 for all technical support provided by
Warner-Lambert. In addition, the parties agree to use their best efforts to
agree upon a systems transfer plan within thirty (30) days after the Closing
Date.
5.10 FURTHER ASSURANCES. Warner-Lambert, at any time after the
Closing Date, at the request of Horizon and at Horizon's sole expense, shall
execute, acknowledge and deliver any further assignments, and other assurances,
documents and instruments of transfer that may be reasonably necessary for the
purpose of assigning and granting to Horizon all Assets to be conveyed pursuant
to this Agreement.
5.11 THIRD PARTY CONSENTS. To the extent that any Managed Care
Contract is not assignable without the consent of another party, this Agreement
shall not constitute an assignment or an attempted assignment thereof if such
assignment or attempted assignment would constitute a breach thereof.
Warner-Lambert and Horizon shall use their commercially reasonable efforts to
obtain the consent of such other party to the assignment of any such Managed
Care Contract to Horizon in all cases in which such consent is or may be
required for such assignment. If any such consent shall not be obtained,
Warner-Lambert shall cooperate with Horizon in any reasonable arrangement
designed to provide for Horizon the benefits intended to be assigned to Horizon
under the relevant Managed Care Contract, including enforcement at the cost and
for the account of Horizon of any and all right of Warner-Lambert or any of its
Affiliates against the other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise. If and to the extent that
such arrangement cannot be made, Horizon shall have no obligation pursuant to
Section 1.3 or otherwise with respect to any such Managed Care Contract. The
provisions of this Section 5.11 shall not affect the right of Horizon not to
consummate the transactions contemplated by this Agreement if the condition to
its obligations hereunder contained in Section 3.7 has not been fulfilled.
5.12 NOTIFICATION TO THE TRADE. The parties shall each use their
best efforts to notify Warner-Lambert's customers of the sale of the Product to
Horizon within three (3) Business Days after the Closing Date.
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ARTICLE 6
COVENANTS OF THE PARTIES
6.1 COVENANTS OF WARNER-LAMBERT. Warner-Lambert covenants and
agrees with Horizon that, at all times from and after the date hereof until the
Closing, Warner-Lambert will comply with all covenants and provisions of this
Section 6.1, except to the extent Horizon may otherwise consent in writing.
6.1.1 Investigation by Horizon. Warner-Lambert will provide
Horizon and its Representatives with full access, upon reasonable prior notice
and during normal business hours, to the officers, employees and agents of
Warner-Lambert who have any responsibility for the conduct of the Business, to
Warner-Lambert's accountants and to the Assets.
6.1.2 Conduct of Business. Warner-Lambert will operate the
Business only in the ordinary course, consistent with past practice.
6.1.3 Fulfillment of Conditions. Warner-Lambert will
execute and deliver at the Closing each operative agreement that Warner-Lambert
is required hereby to execute and deliver as a condition to the Closing, will
take all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each other condition to the obligations
of Horizon contained in this Agreement and will not take or fail to take any
action that could reasonably be expected to result in the nonfulfillment of any
such condition.
6.2 COVENANTS OF HORIZON. Horizon covenants and agrees with
Warner-Lambert that, at all times from and after the date hereof until the
Closing, Horizon will comply with all covenants and provisions of this Section
6.2, except to the extent Warner-Lambert may otherwise consent in writing.
6.2.1 Fulfillment of Conditions. Horizon will execute and
deliver at the Closing each operative agreement that Horizon is hereby required
to execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Warner-Lambert contained
in this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PARTIES
7.1 CONDITIONS TO OBLIGATIONS OF HORIZON. The obligations of
Horizon hereunder to purchase the Assets and to assume and pay, perform and
discharge the Assumed Liabilities are subject to the fulfillment, at or before
the Closing, of each of the following conditions (all or any of which may be
waived in whole or in part by Horizon in its sole discretion):
7.1.1 Representations and Warranties. The representations
and warranties made by Warner-Lambert in this Agreement, taken as a whole, shall
be true and correct, in all material respects, on and as of the Closing Date as
though made on and as of the Closing Date
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or, in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date.
7.1.2 Performance. Warner-Lambert shall have performed and
complied with, in all material respects, the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
Warner-Lambert at or before the Closing.
7.1.3 Orders and Laws. There shall not be in effect on the
Closing Date any order or law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the operative agreements.
7.1.4 Deliveries. Warner-Lambert shall have delivered to
Horizon an Assignment, Assumption and Bill of Sale in the form of Exhibit
7.1.4(a) (the "Assignment, Assumption and Bill of Sale"), a Trademark assignment
in the form of Exhibit 7.1.4(b) and except as otherwise provided herein, such
other documents and instruments as may be necessary to completely sell, convey,
assign, grant, transfer and deliver the Assets to Horizon.
7.1.5 Supply Agreement. Warner-Lambert shall have delivered
to Horizon a manufacturing and supply agreement between Warner-Lambert or its
Affiliate and Horizon in the form of Exhibit 7.1.5 (the "Supply Agreement").
7.1.6. Warner-Lambert Assignment Letters. Warner-Lambert
shall have delivered to Horizon letters from Warner-Lambert to the FDA,
transferring all rights and responsibilities under the Registrations to Horizon,
in form reasonably satisfactory to counsel for Horizon (the "Warner-Lambert
Assignment Letters").
7.2 CONDITIONS TO OBLIGATIONS OF WARNER-LAMBERT. The obligations
of Warner-Lambert hereunder to sell or cause the Selling Affiliates to sell the
Assets are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Warner-Lambert in its sole discretion):
7.2.1 Representations and Warranties. The representations
and warranties made by Horizon in this Agreement, taken as a whole, shall be
true and correct in all material respects on and as of the Closing Date as
though made on and as of the Closing Date.
7.2.2 Performance. Horizon shall have performed and
complied with, in all material respects, the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
Horizon at or before the Closing.
7.2.3 Orders and Laws. There shall not be in effect on the
Closing Date any order or law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the operative agreements.
7.2.4 Deliveries. Horizon shall have delivered to
Warner-Lambert the Assignment, Assumption and Bill of Sale and except as
otherwise provided herein, such other documents and instruments as may be
necessary to completely sell, convey, assign, grant, transfer and deliver the
Assets to Horizon.
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7.2.5 Supply Agreement. Horizon shall have delivered to
Warner-Lambert the Supply Agreement.
7.2.6. Horizon Assumption Letters. Horizon shall have
delivered to Warner-Lambert letters from Horizon to the FDA assuming all rights
and responsibilities under the Registrations, in form reasonably satisfactory to
counsel for Warner-Lambert (the "Horizon Assumption Letters").
ARTICLE 8
GENERAL
8.1 ASSIGNMENT. Until such time as Horizon has discharged all its
payment obligations hereunder, this Agreement may not be assigned by Horizon
without the prior written consent of Warner-Lambert; provided, that Horizon
shall have the right to assign its rights and obligations under this Agreement
to any third party successor to all or substantially all of its entire business.
Warner-Lambert will respond to Horizon's written request for assignment within
forty-five (45) days after receipt of such written request from Horizon. This
Agreement will be binding upon and will inure to the benefit of permitted
assigns and successors. Notwithstanding anything to the contrary in this Section
8.1, Horizon may sublicense the Assets to a third party manufacturer to the
extent and only to the extent necessary to manufacture the Product for Horizon.
8.2 NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received on the date when
delivered by hand delivery with receipt acknowledged, or upon the next Business
Day following receipt of telex or telecopy transmission, or upon the third day
after deposit in the United States mail, registered or certified with postage
prepaid, return receipt requested, addressed as set forth below:
(a) If to Warner-Lambert:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attn: President, Pharmaceutical Sector
Fax: 973-385-4009
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attn: Senior Vice President and General Counsel
Fax: 973-385-3927
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(b) If to Horizon:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Vice President, Corporate Development
Fax: (770) 442-9594
with a copy to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Legal Counsel
Fax: (770) 442-9594
Any party may alter the addresses to which communications or copies are to be
sent by giving, notice of such change of address in conformity with the
provisions of this Section for giving notice.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by Warner-Lambert in this Agreement shall
survive from the Closing Date for a period of two (2) years and terminate
thereafter. All indemnification provisions made by the parties hereto under this
Agreement shall survive indefinitely.
8.4 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, the remaining provisions will continue
in full force without being impaired or invalidated in any way, and the parties
agree to replace any invalid provision with a valid provision which most closely
approximates the intent and economic effect of the invalid provision.
8.5 HEADINGS. Headings used in this Agreement are for reference
purposes only and in no way define, limit, construe or describe the scope or
extent of such paragraph, or in any way affect this Agreement.
8.6 NO WAIVER. No term or provisions hereof shall be deemed
waived, and no breach excused, unless such waiver or consent is in writing and
signed by the party claimed to have waived or consented. The waiver by any party
of a breach of any provision of this Agreement will not operate or be
interpreted as a waiver of any other or subsequent breach.
8.7 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement should
be construed to create a partnership, agency, joint venture or employer-employee
relationship. None of the parties has the authority to assume or create any
obligation, express or implied, on behalf of any other party.
8.8 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of New York. Each party hereby consents
to the personal jurisdiction of the state and federal courts located in New
York.
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8.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including all
Exhibits and Schedules hereto (which Exhibits and Schedules are hereby
incorporated into and made a part of this Agreement), and the additional
documents required to be delivered on the Closing Date, constitute the final,
complete and exclusive agreement among the parties with respect to the subject
matter hereof and supersede any previous proposals, negotiations, agreements,
arrangements or warranties, whether verbal or written, made among the parties
with respect to such subject matter. This Agreement may be amended or modified
only by mutual agreement in writing of the authorized representatives of the
parties.
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof shall bear the signatures of all
parties indicated as signatories hereto.
8.11 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person or
entity.
8.12 PUBLIC ANNOUNCEMENTS. Warner-Lambert and Horizon will not
issue or make any reports, statements or releases to the public or generally to
the employees, customers, suppliers or other persons or entities with respect to
this Agreement or the transactions contemplated hereby without the consent of
the other parties, which consent shall not be unreasonably withheld. If any
party is unable to obtain the approval of its public report, statement or
release from the other party and such report, statement or release is, in the
opinion of legal counsel to such parties, required by law in order to discharge
such party's disclosure obligations, then such party may make or issue the
legally required report, statement or release and promptly furnish the other
parties with a copy thereof. Warner-Lambert and Horizon will also obtain the
other parties' prior approval of any press release to be issued immediately
following the Closing Date announcing the consummation of the transactions
contemplated by this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WARNER-LAMBERT COMPANY
By:
----------------------------------------
Name:
Title:
FIRST HORIZON PHARMACEUTICAL CORPORATION
By:
----------------------------------------
Name:
Title:
19
<PAGE> 20
EXHIBIT A
PRODUCT
Ponstel
<PAGE> 21
EXHIBIT 1.1.1
FINISHED PRODUCT INVENTORY
Item Quantity
- -------------------------------------------------------------------------------
71-540-24 Ponstel 250mg 100's 16,339 Bottles of 100's
<PAGE> 22
EXHIBIT 1.1.2
TRADEMARKS
<TABLE>
<CAPTION>
Registration Renewal
Trademarks Number Country Date Owner
- ---------- ------ ------- ---- -----
<S> <C> <C> <C> <C>
Ponstel 838249 USA 11/07/2007 Warner-Lambert Company
Ponstel 25773 Puerto 9/06/2004 Warner-Lambert Company
Rico
</TABLE>
<PAGE> 23
EXHIBIT 1.1.3
REGULATORY APPROVALS
The following NDA relating to the Product:
NDA # 15-034 Ponstel
<PAGE> 24
EXHIBIT 2.4.2
PROMISSORY NOTE
US$3,500,000.00
April 14, 2000
Morris Plains, New Jersey
FOR VALUE RECEIVED, the undersigned, First Horizon
Pharmaceutical Corporation, a Delaware corporation (the "Borrower"), hereby
promises to pay to the order of Warner-Lambert Company, a Delaware corporation
(the "Lender"), in accordance with the terms hereof, in lawful money of the
United States, the principal sum of Three Million Five Hundred Thousand Dollars
(US$3,500,000.00). The unpaid principal amount of this Note shall be payable by
the Borrower in full, on the earliest of (i) three (3) Business Days following
signing of a definitive asset purchase agreement by Lender and a party other
than Borrower regarding Lender's Cognex business, (ii) three (3) Business Days
following the date on which Borrower notifies Lender that it does not intend to
purchase Lender's Cognex business, (iii) June 1, 2000, in the event that
Borrower has not purchased Lender's Cognex business by such date, other than due
to a delay in receiving clearance from the Federal Trade Commission to proceed
with the purchase of the Cognex business, (iv) three (3) Business Days following
the date on which a definitive agreement between Borrower and Lender for the
Cognex Business is terminated, (v) three (3) Business Days following the date of
the initial public offering of the Borrower and (vi) November 30, 2000. As used
herein, "Business Day" means a day during which banks are generally open for
business in New York.
The outstanding principal of this Note, shall be payable by
wire transfer of funds, to the account of the holder of this Note at such
financial institution as such holder designates in writing or, if requested by
such holder, by check payable to the holder of this Note mailed to the address
of such holder as set forth on the records of the Borrower or such other address
as shall be designated in writing by the holder of this Note to the Borrower.
Notwithstanding the foregoing, in the event that (i) the
Borrower shall fail to pay any amount of principal when due hereunder, or (ii)
the Borrower shall become insolvent, or admit in writing its inability to pay
its debts as they mature, or make an assignment for the benefit of creditors, or
apply for or consent to the appointment of a trustee, examiner, liquidator or
receiver for the Borrower or for a substantial part of the Borrower's property
or business, or fail to obtain the discharge within thirty (30) days of a
trustee, examiner, liquidator or receiver appointed for the Borrower or for a
substantial part of Borrower's property or business, the Lender at its option
may declare the unpaid principal amount of this Note and any other amount due
hereunder, immediately due and payable.
Whenever any payment under this Note shall be due on a day
which is not a Business Day, such payment shall be due on the first Business Day
thereafter.
This Note may be paid or prepaid at any time in whole or in
part without premium or penalty.
No delay by the Lender in exercising any power or right in
connection herewith shall operate as a waiver of any power or right, nor shall
any single or partial exercise of any power
20
<PAGE> 25
or right preclude other or further exercise thereof, or the exercise of any
other power or right in connection herewith or otherwise; and no waiver whatever
or modification of the terms hereof shall be valid unless set forth in writing
by the Lender and then only to the extent set forth therein.
The Borrower may not assign or otherwise transfer any of its
rights or obligations under this Note without the consent of the Lender, and
this Note shall be binding upon the Borrower and its successors and permitted
assigns. The Lender may assign or otherwise transfer all or any part of its
rights under this Note without the consent of the Borrower, and this Note shall
inure to the benefit of the Lender and its successors and assigns.
This Note shall be construed in accordance with and governed
by the laws of the State of New York.
IN WITNESS THEREOF, the undersigned has caused this Note to be
executed and delivered by a duly authorized officer as of the date first above
written.
FIRST HORIZON PHARMACEUTICAL
CORPORATION
By:
------------------------------
<PAGE> 26
EXHIBIT 3.10
[****]-CONFIDENTIAL TREATMENT REQUESTED
MANAGED CARE CUSTOMERS
PARKE-DAVIS
PONSTEL CONTRACTS
- --------------------
ALPHA LISTING
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Renewal/ Current Rights to
Term. Rights Rebate/ Contract Change Assign. Primary Admin.
Name Contact Person Type Phone Number Term Both Parties Discount Price Price/Rebate Rights Wholesaler Fee Amend.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[****]
**[****]
</TABLE>
<PAGE> 27
EXHIBIT 5.9
[****]-CONFIDENTIAL TREATMENT REQUESTED
TECHNICAL TRANSFER
MEFENAMIC ACID--API PROCESS
PARKE-DAVIS, HOLLAND, MI PLANT
The follow list details the level of support that Parke-Davis, Holland staff
would provide for the technical transfer of the process used to manufacture this
active pharmaceutical ingredient.
1. A secrecy agreement would have to be in effect for all parties (including
Horizon and any third party manufacturer of Horizon) prior to the visit to
the Holland Plant site.
2. All technical transfer meetings and process observation would take place at
the Holland, Michigan plant site during the full scale production batch. It
will not be possible to provide any support at the customer's facility.
3. Since equipment availability is quite limited, the production batch would
be run around the clock in a manner which most efficiently utilizes plant
resources. The entire effort is expected to take between 1 1/2, and 3 weeks
to complete.
4. A production Area Manager and a Chemical Services Chemist will be assigned
to the customer's team during the technical transfer batch.
5. One eight hour day will be devoted to a process review with the
Manufacturing Area Manager and the Chemical Services Chemist the day before
the Q1 2000 batch is started.
6. No Parke-Davis documents may be copied/scanned for this transfer, but batch
records, analytical workcards and raw material specifications will be
available to the customer team for reading. The customer will of course be
allowed to take as many notes as needed while on site.
7. An analyst experienced in this product testing will be made available for a
separate eight-hour meeting to review testing procedures and experience for
this product.
8. Actual in-process and final testing of this product may be observed by the
customer in Parke-Davis' laboratory. This testing will take place at
varying times of the day or night to accommodate other production schedules
at the plant.
9. The technology transfer would not include any validation work in
Manufacturing, Quality Assurance or Quality Control, just one production
batch from start to finish.
10. The standard yield of a Mefenamic Acid USP lot is [****]. Customer agrees
to purchase all of the approved Mefenamic Acid in Parke-Davis, Holland's
inventory after the demonstration lot is complete, at a price of $[****].
11. The cost for technical support from Manufacturing, Chemical Services and
Analytical would come to $[****] for on-site support during the
demonstration batch.
SOLID DOSAGE PROCESS
PARKE-DAVIS, LITITZ, PA PLANT
The follow list details the level of support that Parke-Davis, Lititz staff
would provide for the technical transfer of the process used to manufacture this
solid dosage of Ponstel.
1. Horizon, Warner-Lambert and any third party manufacturer of Horizon
shall execute a Nondisclosure Agreement prior to visiting the Lititz
Plant.
<PAGE> 28
2. All technical transfer meetings will take place in Lititz at the
Parke-Davis production facility. No support shall be provided at the
purchaser's facility or any other facility designated by Purchaser.
3. Lititz Materials Management will provide dates when production can be
observed.
4. One man week of Pharm Tech transfer service will be provided at the
Lititz manufacturing site.
5. Validation reports for process, packaging and cleaning will be made
available when the production process is observed.
6. Analytical Procedures will be provided for all raw materials and the
finished product.
7. Material specifications will be provided for all raw materials and
packaging supplies.
8. Provision of the technical transfer service outlined above will be
subject to a schedule prepared by Warner-Lambert.
9. The cost for technical support provided by Lititz as outlined above
will be $12,000.
<PAGE> 29
EXHIBIT 7.1.4(A)
ASSIGNMENT, ASSUMPTION AND BILL OF SALE
THIS GENERAL ASSIGNMENT, ASSUMPTION AND BILL OF SALE is
entered into this 14th day of April, 2000, by and among FIRST HORIZON
PHARMACEUTICAL CORPORATION, a Delaware corporation ("Horizon"), and
WARNER-LAMBERT COMPANY, a Delaware corporation ("Warner-Lambert").
WHEREAS, Horizon and Warner-Lambert have entered into a Asset
Purchase Agreement, dated as of April 10, 2000 (the "Asset Purchase Agreement";
capitalized terms not defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement), pursuant to which Warner-Lambert has agreed to
sell to Horizon and Horizon has agreed to purchase from Warner-Lambert certain
of the assets of Warner-Lambert relating to the Product and Horizon has agreed,
in consideration therefor, to assume certain obligations in connection
therewith;
NOW, THEREFORE, the parties hereto agree as follows:
1. Conveyance and Acceptance. (a) Warner-Lambert hereby
irrevocably sell, assign, and transfer to Horizon, free and clear of all liens,
all of Warner-Lambert's right, title and interest in the Assets and Assumed
Liabilities, other than the Retained Liabilities, as the same shall exist on the
date hereof (collectively, the "Assigned Assets").
(b) Horizon hereby accepts the sale, assignment and transfer of
the Assigned Assets.
2. Further Assurances. (a) At any time or from time to time after
the date hereof, at Horizon's request and without further consideration,
Warner-Lambert shall execute and deliver to Horizon such other instruments of
sale, transfer, conveyance, assignment and confirmation, provide such materials
and information and take such other actions as Horizon may reasonably deem
necessary or desirable in order more effectively to sell, assign and transfer to
Horizon and to confirm Horizon's title to, all of the Assigned Assets, and, to
the fullest extent permitted by law, to put Horizon in actual possession and
operating control of the Assigned Assets and to assist Horizon in exercising all
rights with respect thereto.
(b) Warner-Lambert hereby constitutes and appoints Horizon the
true and lawful attorney of Warner-Lambert, with full power of substitution, in
the name of Warner-Lambert or Horizon, but on behalf of and for the benefit of
Horizon: (i) to demand and receive from time to time any and all of the Assigned
Assets and to make endorsements and give receipts and releases for and in
respect to the same and any part thereof; (ii) to institute, prosecute,
compromise and settle any and all Actions that Horizon may deem proper in order
to collect, assert or enforce any claim, right or title of any kind in or to the
Assigned Assets; (iii) to defend or compromise any and all Actions in respect of
any of the Assigned Assets; and (iv) to do all such acts and things in relation
to the matters set forth in the preceding clauses (i) through (iii) as Horizon
shall deem desirable. Warner-Lambert hereby acknowledges that the appointment
hereby made and the powers hereby granted are coupled with an interest and are
not and shall not be revocable by it in any manner or for any reason. Horizon
shall indemnify and hold harmless Warner-Lambert
<PAGE> 30
and its officers, directors, employees, agents and Affiliates from any and all
Losses caused by or arising out of any breach of law by Horizon in its exercise
of the aforesaid powers.
3. Assumption of Liabilities. (a) Horizon hereby undertakes and
agrees from and after the date hereof, subject to the limitations contained
herein, to assume and to pay, perform and discharge when due the Assumed
Liabilities.
(b) Nothing contained herein shall require Horizon to pay
or discharge any debts or obligations expressly assumed hereby so long; as
Horizon shall in good faith contest or cause to be contested the amount or
validity thereof.
(c) Other than as specifically stated above or in the
Asset Purchase Agreement, Horizon assumes no debt, liability or obligation of
Warner-Lambert, including without limitation the Retained Liabilities, by this
General Assignment, Assumption and Bill of Sale, and it is expressly understood
and agreed that all debts, liabilities and obligations not assumed hereby by
Horizon shall remain the sole obligation of Warner-Lambert, its successors and
assigns.
(d) No person other than the Warner-Lambert and its
respective successors and assigns shall have any rights under the provisions of
this Section 3.
4. Miscellaneous. (a) This General Assignment, Assumption and
Bill of Sale may be executed in any number of counterparts, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument.
(b) This General Assignment, Assumption and Bill of Sale
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York applicable to a contract executed in that State.
(c) This General Assignment, Assumption and Bill of Sale
shall be binding upon and shall inure to the benefit of permitted assigns and
successors.
IN WITNESS WHEREOF, this General Assignment, Assumption and
Bill of Sale has been duly executed and delivered by a duly authorized officer
of each party on the day and year first above written.
FIRST HORIZON PHARMACEUTICALS CORPORATION
By:
-----------------------------------------
Name:
Title:
WARNER-LAMBERT COMPANY
By:
-----------------------------------------
Name:
Title:
<PAGE> 31
EXHIBIT 7.1.4(B)
TRADEMARK ASSIGNMENT
WHEREAS, WARNER-LAMBERT COMPANY, a corporation organized and existing under the
laws of the state of Delaware, with an office and place of business at 201 Tabor
Road, Morris Plains, New Jersey 07950, is the owner of the trademark Ponstel
with Registration Numbers _______ (the "Trademark"), and
WHEREAS, FIRST HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and
existing under the laws of Delaware, with an office and place of business at 660
Hembree Parkway, Suite 106, Roswell, Georgia 30076, pursuant to an Asset
Purchase Agreement dated April __, 2000 among said parties, is desirous of
acquiring all rights, title and interest in and to the Trademark, including the
goodwill associated therewith;
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, said WARNER-LAMBERT COMPANY hereby assigns to said FIRST
HORIZON PHARMACEUTICAL CORPORATION all rights, title and interest in the
Trademark and the goodwill associated therewith.
WARNER-LAMBERT COMPANY
----------------------------------
Name:
Title:
Date:
<PAGE> 1
Exhibit 10.18
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[****]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (the "Agreement") is made and entered into as of
April 14, 2000 (the "Effective Date"), by and between WARNER-LAMBERT COMPANY, a
corporation organized and existing under the laws of Delaware ("SUPPLIER"), and
FIRST HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and existing
under the laws of Delaware ("PURCHASER"). Capitalized terms not otherwise
defined herein shall have the meanings set forth in Article 1.
WITNESSETH:
WHEREAS, on the date hereof, PURCHASER has purchased the Product from
SUPPLIER pursuant to an asset purchase agreement between SUPPLIER and PURCHASER
dated as of April 10, 2000 (the "Asset Purchase Agreement");
WHEREAS, PURCHASER does not have immediate capacity for manufacturing
or causing to be manufactured the Products, Active Ingredient or Samples;
WHEREAS, pursuant to the terms of the Asset Purchase Agreement,
SUPPLIER has undertaken to supply Product, Active Ingredient and Samples to
PURCHASER;
WHEREAS, SUPPLIER is a manufacturer with adequate capacity for
manufacturing PURCHASER's Product and Samples and has access to sources of
Active Ingredient;
WHEREAS, the parties desire to enter into a Supply Agreement pursuant
to which SUPPLIER shall supply the Products, Active Ingredient and Samples to
PURCHASER; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have the meanings
set forth below:
"Active Ingredient" means mefenamic acid.
"Affiliate" means (i) any company or entity, more than fifty percent
(50%) of whose voting stock or participating profit interest is owned or
controlled, directly or indirectly, by a party; (ii) any company, entity or
person which owns or controls, directly or indirectly, more than fifty percent
(50%) of the voting stock or participating profit interest of a party and (iii)
any company, entity or person which is under common control with a party
hereto. The term "common control" means a third party has direct or indirect
ownership of fifty percent (50%) or more of the voting
<PAGE> 2
stock or participating profit interest of both the other company or entity and
the party to this Agreement.
"Asset Purchase Agreement" has the meaning set forth in the Recitals.
"Business Day" means a day during which banks are generally open for
business in New York.
"FDA" means the Food and Drug Administration of the United States.
"GMPs" means current Good Manufacturing Practices.
"New Drug Application" means the new drug application relating to the
Product.
"Product" means the finished pharmaceutical product containing the
Active Ingredient supplied pursuant to this Agreement and set forth in Schedule
A.
"Production Fee" means the fees payable pursuant to Sections 2.2, 2.3
and 2.4.
"Proprietary Information" has the meaning set forth in Section 6.1.
"Raw Materials" means all raw materials and packaging materials
(including labeling), other than the Active Ingredient, needed to produce the
Product.
"Reimbursement Amount" has the meaning set forth in Section 5.3.
"Samples" has the meaning set forth in Section 2.4.
"Specifications" means the specifications and procedures currently
utilized by SUPPLIER in testing Raw Materials and the Active Ingredient and in
manufacturing and testing the Product which are according to the New Drug
Application for the Product in effect on the date hereof or such other
manufacturing specifications as are mutually agreed upon in writing by the
parties hereto, including all stability requirements set forth therein.
"Territory" means the United States of America and Puerto Rico.
2. PRODUCTION ARRANGEMENT.
2.1 Appointment. PURCHASER hereby appoints SUPPLIER and SUPPLIER
hereby agrees to be a supplier of the Product, Active Ingredient and Samples to
PURCHASER pursuant to and for the term of this Agreement.
2.2 Agreement to Supply and Purchase the Product. (a) During the
term of this Agreement, SUPPLIER shall use its commercially reasonable efforts
to supply to PURCHASER the Product in such quantities and on such dates as set
forth in Schedule A hereto, subject to SUPPLIER's ability to complete any
required packaging and labeling changes. In the event SUPPLIER is unable to
supply the Product to PURCHASER on a delivery date set forth on Schedule A, for
a reason other than SUPPLIER's inability to complete packaging and labeling
changes in time, SUPPLIER shall use its commercially reasonable efforts to
deliver such Product as soon as practicable thereafter, but in any event, no
later than thirty (30) days after the applicable delivery date.
<PAGE> 3
(b) PURCHASER shall purchase from SUPPLIER Product in the
quantities and on the delivery dates set forth in Schedule A. In the event
PURCHASER fails at any time to purchase all Product manufactured and made
available for delivery by SUPPLIER as specified in this Section 2.2(b),
PURCHASER shall pay to SUPPLIER an amount equal to the total Production Fee
which would have otherwise been paid to SUPPLIER had PURCHASER purchased the
quantity specified on Schedule A on the applicable date.
2.3 Active Ingredient and Raw Materials. (a) SUPPLIER will at all
times acquire, at its own cost and expense, the Active Ingredient and Raw
Materials, in such quantities as are necessary to enable SUPPLIER to
manufacture and supply the desired quantities of the Product during the term of
this Agreement. SUPPLIER will perform all quality control procedures with
respect to the Active Ingredient and Raw Materials in accordance with the
Specifications.
(b) SUPPLIER will use its commercially reasonable efforts to
provide PURCHASER with the Active Ingredient in the quantity, on the delivery
date and at the price set forth on Schedule B hereto. In the event SUPPLIER is
unable to supply the Active Ingredient to PURCHASER on the delivery date set
forth on Schedule B, SUPPLIER shall use its commercially reasonable efforts to
deliver such Active Ingredient as soon as practicable thereafter, but in any
event, no later than thirty (30) days after the original delivery date.
2.4 Product Samples. SUPPLIER shall use its commercially
reasonable efforts to provide PURCHASER with samples of the Product ("Samples")
in such quantity, on the delivery dates and at the prices set forth on Schedule
C hereto, provided, PURCHASER delivers to SUPPLIER a purchase order for the
desired quantity of Samples at least ten (10) Business Days before the
beginning of the applicable delivery date option selected by PURCHASER. In the
event SUPPLIER is unable to supply the Samples to PURCHASER on the applicable
delivery date set forth on Schedule C, SUPPLIER shall use its commercially
reasonable efforts to deliver such Samples as soon as practicable thereafter,
but in any event, no later than thirty (30) days after the applicable delivery
date.
3. DELIVERY AND ACCEPTANCE.
3.1 Delivery. The Products shall be delivered to a carrier
designated by PURCHASER at SUPPLIER's plant in Lititz, Pennsylvania, or
SUPPLIER's distribution center in Elk Grove Village, Illinois, as PURCHASER
shall direct. Title to and risk of loss for the Product shall transfer to
PURCHASER upon delivery to PURCHASER at the designated location.
3.2 Acceptance of Shipments. After receipt of a shipment of
Products, Active Ingredient or Samples, PURCHASER shall within ten (10)
Business Days after delivery thereof, visually inspect the Product shipment and
communicate acceptance or rejection to Seller in writing. The parties agree
that PURCHASER's visual inspection consists of (i) comparing the applicable
order against the documentation accompanying the shipment to verify that the
delivery date, identity, quantity and exterior shipment labeling comply with
the order and (ii) visually inspecting the exterior of the shipment to verify
that the shipment appears to be in good condition.
3.3 Failure to meet Specifications. In addition, after the date of
acceptance by PURCHASER pursuant to Section 3.2, PURCHASER shall be entitled to
return any shipment of Product, Active Ingredient or Samples, in whole or in
part, to the extent that such Product,
<PAGE> 4
Active Ingredient or Samples fail to meet Specifications (as such
Specifications existed on the date of delivery), where such failure is due
solely to the actions or omissions of SUPPLIER.
4. PRODUCTION FEE AND PAYMENT.
4.1 Production Fees. Subject to Section 2.2(b), PURCHASER will pay
SUPPLIER the applicable Production Fees for Product (including costs of Active
Ingredient, Raw Materials, manufacturing, filling, inspecting, quality control,
stability testing and packaging), Active Ingredient and Samples delivered to
PURCHASER hereunder.
4.2 Invoices. SUPPLIER will issue an invoice PURCHASER for the
full Production Fee with each shipment of the Product, Active Ingredient or
Samples delivered in accordance with Section 3.1. SUPPLIER will invoice
PURCHASER for all other amounts due hereunder on or after performance or
occurrence of the event that entitles SUPPLIER to be paid such amount by
PURCHASER. All invoices hereunder will be due and payable within thirty (30)
days after receipt of the invoice by PURCHASER.
4.3 Taxes. In addition to payment of the Production Fee, PURCHASER
will be responsible for the payment of any sales and use taxes on the Product,
Active Ingredient or Samples delivered by SUPPLIER to PURCHASER.
5. QUALITY CONTROL.
5.1 Manufacturing Process and Quality Assurance. The Product will
be manufactured by SUPPLIER in compliance with applicable laws and the
Specifications and in accordance with the manufacturing, quality assurance and
validation procedures currently employed by SUPPLIER in manufacturing the
Product or such other procedures as may be mutually agreed upon, or as may be
required under the New Drug Application.
5.2 Modifications. Any request for modification of the
Specifications (including a change of the Raw Materials or Active Ingredient)
will be made by the requesting party to the other party in writing. SUPPLIER
will inform PURCHASER of the amount of any additional costs (including capital
expenditures) that any such modification would reasonably entail, if any, and,
if PURCHASER elects to adopt the modification, the Production Fee will be
increased by the amount of such additional costs, and the relevant documents
and related schedules will be revised accordingly. If SUPPLIER is technically
unable to comply with a modification proposed by PURCHASER or if PURCHASER is
unwilling to pay the additional costs associated with any modification, the
requesting party will have the option to withdraw the proposed modification or,
if the requesting party can demonstrate that it reasonably requires such
modification for business or regulatory reasons, to terminate this Agreement.
Each party will notify the other party as soon as reasonably possible of any
proposed changes to the Specifications, procedures or other areas that have an
impact on the other party's performance of this Agreement. In no event will
SUPPLIER be required to make (or not to make) a modification that it deems
prohibited (or required) by applicable regulations or regulatory authorities.
Notwithstanding the foregoing, SUPPLIER shall not have the right to terminate
this Agreement pursuant to this Section 5.2 if PURCHASER is unwilling to pay
the additional costs associated with any modification proposed by SUPPLIER,
other than modifications that are required for regulatory reasons.
5.3 Testing. SUPPLIER will perform such quality assurance testing
as required under the New Drug Application, and will provide evidence of such
testing to PURCHASER in a
<PAGE> 5
certificate of analysis for each product lot which confirms that the product
lot has been manufactured and analyzed by SUPPLIER according with the
Specifications. SUPPLIER shall provide a copy of the applicable certificate of
analysis to PURCHASER with each product lot that is delivered to PURCHASER or
by facsimile on the date of delivery.
5.4 Reimbursement for Non-Conforming Product. If the Product fails
to meet the Specifications, where such failure is due solely to the actions or
omissions of SUPPLIER, SUPPLIER will credit PURCHASER with the Reimbursement
Amount. The "Reimbursement Amount" will be deemed equal to the sum of any costs
reasonably expended by PURCHASER in order to identify the defect (i.e.,
testing), plus all Production Fees paid on account of the subject Product. The
Reimbursement Amount will be payable sixty (60) days after rejection of the
subject Product in accordance with this Section. At PURCHASER's option, (i)
SUPPLIER will be relieved of any obligation to deliver any Product with respect
to the non-conforming batch, or (ii) SUPPLIER will replace the non-conforming
batch with substitute Product that conforms with the Specifications and any
other requirements of this Agreement, within sixty (60) calendar days from the
date PURCHASER notifies SUPPLIER of its election of option (ii) of this Section
5.4, in which case PURCHASER will pay to SUPPLIER amounts in accordance with
Article 4 based on the substitute Product. SUPPLIER will dispose of the
non-conforming Product at its own expense This Section 5.4 sets forth
PURCHASER's sole remedy for non-conforming Product that is identified before
sale thereof by PURCHASER to PURCHASER's customer, and under no circumstances
will SUPPLIER be liable to PURCHASER for any damages, including, without
limitation, direct, special, incidental or consequential damages (including,
without limitation, loss of business, profits, or goodwill), arising therefrom
(whether in contract, tort, negligence or otherwise) or in connection with its
performance under this Agreement.
5.5 Access for Quality Control. Subject to SUPPLIER's reasonable
ability to assure the confidentiality of its other projects, SUPPLIER will
permit PURCHASER's representatives to enter SUPPLIER's plant upon reasonable
advance written notice and at reasonable intervals during regular business
hours solely for the purpose of making quality control inspections of the
facilities used in production of the Product for PURCHASER, including
manufacturing, receiving, sampling, analyzing, storing, handling, packaging,
shipping and disposing of the Active Ingredient and the Product. In addition,
the parties agree that a member of SUPPLIER's pharmaceutical quality assurance
team shall be present at all such inspections.
6. CONFIDENTIAL INFORMATION.
6.1 Confidentiality. PURCHASER and SUPPLIER will at all times
maintain as confidential any information, technology, formulation, process,
packaging, analytical methods, stability data, registration data or know-how of
a proprietary or confidential nature relating to the Product disclosed by the
other party pursuant to or in connection with this Agreement (the "Proprietary
Information"); provided, however, that the term "Proprietary Information" does
not include information which becomes available to the receiving party
following the date of this Agreement on a non-confidential basis from a source
other than the disclosing party, its representatives or Affiliates, if such
source is not under an obligation, (whether contractual, legal or fiduciary) to
the disclosing party, its representatives or its Affiliates to keep such
information confidential.
6.2 Survival of Confidentiality. PURCHASER and SUPPLIER hereby
agree that the provisions of this Article 6 and the obligations of
confidentiality herein will endure for a period of five (5) years after the
expiration or termination of this Agreement; provided, however, that with
<PAGE> 6
respect to Proprietary Information regarding, arising out of, relating to,
reflecting, incorporating or based upon scientific, technological (including,
without limitation, analytical, manufacturing or formulation technology),
regulatory or compliance matters, the obligations of confidentiality herein
will not terminate.
7. INDEMNIFICATION.
7.1 Indemnification of SUPPLIER. PURCHASER will defend, indemnify,
and hold harmless SUPPLIER, its officers, agents, employees and Affiliates from
any loss, claim, action, damage, penalty, fine, expense or liability (including
reasonable defense costs and attorneys fees) ("Claim") to the extent the same
arises out of or is related to (a) the breach of any representation, warranty
or guarantee made by PURCHASER herein, (b) the handling, possession or use of
the Product following delivery to PURCHASER in accordance with Section 3.1
including, without limitation, express and implied warranties of
merchantability, fitness for a particular purpose and strict liability, unless
the claim results from the applicable Product failing to conform to the
Specifications, where such non-compliance is due solely to the actions or
omissions of SUPPLIER or (c) any other negligent act or omission of PURCHASER.
7.2 Indemnification of PURCHASER. SUPPLIER will defend, indemnify,
and hold harmless PURCHASER, its officers, agents, employees and Affiliates
from any Claim to the extent the same arises out of or is related to (a) the
breach of any representation, warranty or guarantee made by SUPPLIER herein or
(b) any other negligent act or omission of SUPPLIER.
7.3 Indemnification Procedures. In any case under this Agreement
where one party has indemnified the other against any claim or legal action,
indemnification will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way
of settlement and release) at its own cost and expense. The indemnified party
may, but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated
to, defend, contest or otherwise protect against the same, and make any
compromise or settlement thereof and recover the entire costs thereof from the
indemnifying party, including reasonable attorneys fees, disbursements and all
amounts paid as a result of such claim or suit or the compromise or settlement
thereof; provided, however, that if the indemnifying party undertakes the
timely defense of such matter, the indemnified party will not be entitled to
recover from the indemnifying party its costs incurred in the defense thereof.
The indemnified party will cooperate and provide such assistance as the
indemnifying party may reasonably request in connection with the defense of the
matter subject to indemnification.
8. RECALLS.
8.1 Recalls. If any Product must be recalled by reason of failure
to meet the Specifications, any requirements of the FDA or any other
requirements of law, PURCHASER will pay all costs and expenses in order to
effect the recall unless such recall is caused by a failure of the Product to
meet the Specifications, where such failure is due solely to the actions or
omissions of SUPPLIER. However, SUPPLIER will, in any event, comply with any
regulatory
<PAGE> 7
obligations arising from its status as manufacturer of the recalled Product,
and otherwise cooperate as reasonably required in PURCHASER's efforts.
8.2 Reimbursement by PURCHASER. PURCHASER will reimburse SUPPLIER
for any costs reasonably expended by SUPPLIER to effect the recall, including
any cost associated with the Product that cannot be shipped due to the
condition requiring the recall, unless the recall is required due to the
failure of the Product to meet the Specifications, where such failure is due
solely to the actions or omissions of SUPPLIER.
8.3 Reimbursement by SUPPLIER. If PURCHASER can demonstrate that
the failure to meet applicable legal requirements is caused by failure of the
Product to meet the Specifications, where such failure is due solely to the
actions or omissions of SUPPLIER, SUPPLIER will reimburse PURCHASER for (a) any
cost reasonably expended by PURCHASER to effect the recall and (b) the
Reimbursement Amount in accordance with Section 5.4.
9. RECORDS AND AUDITS.
9.1 Hold Period. For one (1) year after the expiration date of any
particular Product batch(es), or longer if required by law (the "Hold Period"),
each party will maintain, as applicable, records and samples relating to such
batch(es) sufficient to substantiate and verify its duties and obligations
hereunder, including but not limited to, records of orders sent and received,
Product manufactured, work in progress, Product analyses and quality control
tests, distribution of the Product and the like. During the Hold Period,
neither party will destroy any records relating to regulatory compliance or
quality assurance without giving the other party advance written notice and an
opportunity to take possession of or copy such records.
9.2 Notice of FDA Actions. Each party agrees to advise the other
party in a timely manner of any actions by the FDA with respect to the Product.
Such notice remains subject, in all respects, to the provisions of Article 6.
10. TERM AND TERMINATION.
10.1 Term. Subject to the termination provisions of Section 10.2,
this Agreement will expire on December 31, 2000. This Agreement may be extended
by mutual agreement of the parties hereto for an additional three (3) months.
10.2 Termination. Each party will have the right to terminate this
Agreement (i) by giving the other party written notice thereof if the other
party fails to perform or violates any material provision of this Agreement in
any material respect, and such failure continues unremedied for a period of
thirty (30) days after the date the notifying party gives written notice to the
defaulting party with respect thereto; or (ii) immediately if the other party
is declared insolvent or bankrupt by a court of competent jurisdiction, or a
voluntary petition of bankruptcy is filed in any court of competent
jurisdiction by the other party, or the other party makes or executes any
assignment for the benefit of creditors.
10.3 Effect of Termination. Unless otherwise agreed to between the
parties, all stock on hand as of the effective date of expiration or
termination of this Agreement will be treated as follows as soon as
practicable:
<PAGE> 8
(a) Product manufactured and packaged pursuant to Schedule A will
be delivered by SUPPLIER to PURCHASER, whereupon PURCHASER will pay SUPPLIER
therefor in accordance with the terms hereof; and
(b) Work in progress commenced by SUPPLIER in accordance with the
manufacturing schedule set forth on Schedule D attached hereto will, at the
option of PURCHASER (but at the option of SUPPLIER in the case of termination
hereof by SUPPLIER under Section 10.2), (i) cease, and such work in progress
will remain with SUPPLIER (in which case PURCHASER will pay SUPPLIER an amount
equal to SUPPLIER's actual costs incurred in connection with the performance
and cessation of such work less the cost to SUPPLIER of materials that can be
returned by SUPPLIER or used by SUPPLIER in later batches of other products
manufactured by SUPPLIER as reasonably determined by SUPPLIER) or (ii) be
completed by SUPPLIER and delivered to PURCHASER, whereupon PURCHASER will pay
SUPPLIER therefor in accordance with the terms hereof; provided, however, that
in the case of expiration under Section 10.1, PURCHASER will not have such
option and will proceed under clause (ii) of this provision.
10.4 No Release. The expiration or termination of this Agreement
will not operate to release any party from any liability incurred prior to or
upon termination hereof or which subsequently arises under the operation of
Article 22.
11. REGULATORY MATTERS.
11.1 Compliance. Each party will provide reasonable assistance to
the other if necessary to respond to FDA audits, inspections, inquiries or
requests concerning the Product or otherwise necessary to comply with GMPs.
PURCHASER's employees present at the facility will at all times adhere to
safety regulations, GMPs and work schedules generally applicable to SUPPLIER's
own employees.
11.2 USP Monograph. It is understood and agreed by the parties that
if the USP establishes a monograph for the Product that conflicts with the
Specifications, the Product labeling shall be modified to reflect this fact in
accordance with the Federal Food, Drug, and Cosmetic Act ("FFDCA").
11.3 Compliance Audits. Each party will notify the other party
within twenty four (24) hours after it receives notice of an FDA or other
domestic regulatory authority audit involving the Product or any component
thereof and will provide to such party copies of any resulting document of
action (FDA Form 483 inspectional observation report, regulatory letters, etc.)
or of relevant sections thereof, resulting from these audits within five (5)
Business Days after receipt (solely to the extent such documents directly
relate to the Product).
12. TRADEMARKS AND LABELING.
12.1 Trademarks and Labeling. (a) PURCHASER shall provide SUPPLIER
with labeling instructions prior to or on the Effective Date. SUPPLIER will
affix labeling to the Product as instructed by PURCHASER. PURCHASER shall pay
all costs incurred by SUPPLIER in connection with the implementation of labels
bearing PURCHASER's name and trademark. Nothing contained herein will give
PURCHASER any right to use any SUPPLIER trademark and PURCHASER will not obtain
any right, title or interest in any SUPPLIER trademark by virtue of this
Agreement or the performance by SUPPLIER of services hereunder; provided,
however, that SUPPLIER will permit PURCHASER to use SUPPLIER's trademark in
connection with the
<PAGE> 9
Product to the extent permitted under the Asset Purchase Agreement or required
by applicable law or regulation.
(b) SUPPLIER and PURCHASER shall use their best efforts to
complete the conversion of labels to PURCHASER's name and trademark for Product
having a delivery date on or after July 31, 2000.
(c) As between PURCHASER and SUPPLIER, PURCHASER shall be solely
responsible for ensuring that approved Product labels, Product inserts and
other printed materials, if any, comply with all applicable laws, provided,
however, that SUPPLIER warrants that Product supplied hereunder prior to the
conversion of labels to PURCHASER's name and trademark in accordance herewith
shall comply with the NDA as it exists on the date hereof.
(d) No change to Product labels or Product inserts may be made
without the prior written approval of PURCHASER.
13. RELATIONSHIP OF PARTIES.
13.1 Independent Contractors. It is not the intent of the parties
hereto to form any partnership or joint venture. Each party will, in relation
to its obligations hereunder, act as an independent contractor, and nothing in
this Agreement will be construed to give either party the power or authority to
act for, bind or commit the other party in any way whatsoever.
13.2 Public Statements. SUPPLIER and PURCHASER each agree not to
disclose the terms or status of this Agreement in any public statements,
whether oral or written, including but not limited to shareholder reports,
communications with stock market analysts, statements to other customers or
prospective customers, press releases or other communications with the media,
or prospectuses, without the other party's prior written consent, which will
not be unreasonably withheld, or as required by applicable law. If possible,
each party will give the other at least five (5) Business Days advance written
notice of a disclosure required by applicable law and will cooperate with the
other party to minimize the scope and content of such disclosure.
14. WARRANTIES.
14.1 SUPPLIER's Warranty. SUPPLIER hereby represents and warrants
as follows:
(a) The Product will conform with the Specifications.
(b) Subject to Section 5.2(b) of the Asset Purchase Agreement,
SUPPLIER will comply in all material respects with any law, regulation,
ordinance, order, injunction, decree or requirement applicable to the
manufacture of the Product (including GMPs); provided that PURCHASER will
reimburse SUPPLIER for any increased costs that SUPPLIER reasonably incurs;
(and cannot reasonably defer) in manufacturing the Product, or operating the
facility in which the Product is manufactured, as a result of any change in
such laws or regulations.
(c) SUPPLIER will maintain in effect all material governmental
permits, licenses, orders, applications and approvals required of it and make
all filings and notifications required of it regarding the manufacturing of the
Product; and SUPPLIER will manufacture Products in material compliance with all
such permits, licenses, orders, applications and approvals.
<PAGE> 10
(d) SUPPLIER and SUPPLIER's employees and Affiliates have never
been (i) debarred or (ii) convicted of a crime for which a person can be
debarred, under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of
1992. SUPPLIER agrees that it will promptly notify PURCHASER in the event of
any such debarment or conviction. The terms of the preceding sentence shall
survive the termination or expiration of this Agreement.
(e) The Product shall, at the time it is delivered under Section
3.1, not be adulterated or misbranded within the meaning of the FFDCA.
Warner-Lambert shall have no responsibility for costs and expenses associated
with any recall of Product on or after the date hereof attributable to a
determination by a governmental or regulatory authority that the use of the
Warner-Lambert Name on such Product would constitute misbranding within the
meaning of the FFDCA.
(f) SUPPLIER has full authority to enter into this Agreement.
14.2 PURCHASER's Warranty. PURCHASER hereby represents and warrants
as follows:
(a) PURCHASER owns all rights to the Product trademarks and trade
names, if any, and the Product labeling bearing PURCHASER's name and trademarks
meets regulatory requirements.
(b) The use and sale of the Product (in the country where sold and
for its indicated purpose) bearing PURCHASER's name and trademarks by or on
behalf of PURCHASER or its customers will not infringe any trademark or trade
name of any third person.
(c) PURCHASER will comply in all material respects with any law,
regulation, ordinance, order, injunction, decree or requirement applicable to
the marketing of the Product.
(d) PURCHASER will maintain in effect all material required
governmental permits, licenses, orders, applications and approvals regarding
the marketing of the Product, including the New Drug Application, and PURCHASER
will market the Product in accordance with all such permits, licenses, orders,
applications and approvals. PURCHASER shall not make any changes to the New
Drug Application affecting the Specifications without the prior written consent
of SUPPLIER, which will not be unreasonably withheld. SUPPLIER shall respond to
PURCHASER'S written request for any such change within thirty (30) days after
receipt of such written request from PURCHASER.
(e) PURCHASER warrants and represents that it has full authority
to enter into this Agreement, that it has been granted full rights and license
to sell the Product and that nothing contained in any other agreement prohibits
or restricts PURCHASER from entering into any part of this Agreement.
14.3 NO IMPLIED WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
IN THIS AGREEMENT, SUPPLIER AND PURCHASER MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OF ANY KIND REGARDING THE SUPPLY OF THE PRODUCT, EITHER EXPRESS OR
IMPLIED, INCLUDING, IN THE CASE OF SUPPLIER, ANY EXPRESS OR IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
<PAGE> 11
15. ASSIGNMENT.
15.1 This Agreement will be assignable or transferable by SUPPLIER
only with the consent in writing of PURCHASER, which consent shall not be
unreasonably withheld. PURCHASER agrees that until such time as PURCHASER has
discharged all its payment obligations under the Asset Purchase Agreement, it
shall not assign or transfer this Agreement without the prior written consent
of SUPPLIER, which consent shall not be unreasonably withheld. Either party
will respond to the other party's written request for assignment within
forty-five (45) days after receipt of such written request from such other
party. Notwithstanding the foregoing, this Agreement will be assignable or
transferable by either party to any third party successor to all or
substantially all of its entire business. Any assignment or transfer in
violation of the terms of this Agreement will be void and of no effect and will
constitute a material breach hereof. This Agreement will be binding upon and
inure to the benefit of SUPPLIER and PURCHASER and their respective permitted
successors and assigns.
16. GOVERNING LAW.
16.1 This Agreement will be governed by the laws of the State of
New York. Each party hereby consents to the personal jurisdiction of the state
and federal courts located in New York.
17. FORCE MAJEURE.
17.1 Except in the case of monetary obligations of one party to the
other hereunder, neither party hereto will be liable to the other in damages
for, nor will this Agreement be terminable by reason of, any delay or default
in such party's performance hereunder if such delay or default is caused by
conditions beyond such party's control including, but not limited to, acts of
nature, regulation or law or other action of any government or any agency
thereof, war, insurrection, civil commotion, destruction of production
facilities or materials by earthquake, fire, flood or storm, strikes, epidemic,
or unforeseen failure of suppliers, public utilities or common carriers. Each
party hereto agrees promptly to notify the other party of any event of force
majeure above and to employ all reasonable efforts towards prompt resumption of
its performance hereunder when possible if such performance is delayed or
interrupted by reason of such event.
18. NOTICES.
18.1 All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received on the date when delivered by
hand delivery with receipt acknowledged, or upon the next Business Day following
receipt of telex or telecopy transmission, or upon the third day after deposit
in the United States mail, registered or certified with postage prepaid, return
receipt requested, addressed as set forth below:
If to PURCHASER:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Vice President, Corporate Development
Fax: (770) 442-9594
<PAGE> 12
with a copy to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Legal Counsel
Fax: (770) 442-9594
If to SUPPLIER:
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Attention: Vice President, Pharmaceutical
Manufacturing
Fax: (973) 385-7269
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: Senior Vice President and General Counsel
Fax: (973) 385-3927
Any party may alter the addresses to which communications or copies are to be
sent by giving, notice of such change of address in conformity with the
provisions of this section for giving notice.
19. HEADINGS.
19.1 Headings used in this Agreement are for reference purposes
only and in no way define, limit, construe or describe the scope or extent of
such paragraph, or in any way affect this Agreement.
20. SEVERABILITY.
20.1 If any provision of this Agreement is held to be invalid or
unenforceable for any reason, the remaining provisions will continue in full
force without being impaired or invalidated in any way, and the parties agree
to replace any invalid provision with a valid provision which most closely
approximates the intent and economic effect of the invalid provision.
21. WAIVER.
21.1 No term or provisions hereof shall be deemed waived, and no
breach excused, unless such waiver or consent is in writing and signed by the
party claimed to have waived or consented. The waiver by any party of a breach
of any provision of this Agreement will not operate or be interpreted as a
waiver of any other or subsequent breach.
<PAGE> 13
22. SURVIVAL.
22.1 The provisions of Sections 2.3(b), 5.4, 5.5, 10.3, 10.4 and
13.2 and Articles 6-9 and 11 will survive the termination or expiration of this
Agreement.
22.2 The provisions of this Agreement which do not survive
termination or expiration hereof (as the case may be) will, nonetheless, be
controlling on, and will be used in construing and interpreting, the rights and
obligations of the parties hereto with regard to any dispute, controversy or
claim that may arise under, out of, in connection with, or relating to this
Agreement.
23. ENTIRE AGREEMENT.
23.1 This Agreement, together with the Schedules hereto and the
Asset Purchase Agreement, constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior agreements, negotiations, understandings, representations,
statements and writings relating thereto. To the extent there is any conflict
between this Agreement, any purchase order and any of the Schedules attached
hereto, this Agreement will take precedence. This Agreement may not be amended
or modified unless such amendment or modification is made in writing and
executed by a duly authorized officer or agent of each party hereto.
24. COUNTERPARTS.
24.1 This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof shall bear the signatures of all parties
indicated as signatories hereto.
25. NO THIRD PARTY BENEFICIARY.
25.1 The terms and provisions of this Agreement are intended solely
for the benefit of each party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other person or entity.
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be entered into
by their duly authorized representatives, to be effective as of the date first
above written.
WARNER-LAMBERT COMPANY FIRST HORIZON PHARMACEUTICAL
CORPORATION
By: By:
------------------------------ ---------------------------------
Name: Name:
------------------------- ----------------------------
Title: Title:
------------------------ ---------------------------
<PAGE> 15
SCHEDULE A
[****]-CONFIDENTIAL TREATMENT REQUESTED
PONSTEL SUPPLY SCHEDULE
<TABLE>
<CAPTION>
SUPPLY
- ------
Item Delivery Date Quantity___________
- ---------------------------------------------------------------------------------------
Finished Product
- ----------------
<S> <C> <C>
250 mg. [****] [****]
250 mg. [****] [****]
250 mg. [****] [****]
250 mg. [****] [****]
250 mg. [****] [****]
250 mg. [****] [****]
</TABLE>
PRODUCTION FEE
Fifteen (15) days prior to each scheduled delivery date, SUPPLIER shall set the
Production Fee based on SUPPLIER's calculation of the standard cost which shall
include the costs of Active Ingredient, Raw Materials, manufacturing, filling,
inspecting, quality control, stability testing and packaging. The Production
Fee for the Product to be delivered on April 30, 2000 will be $ [****] per
bottle of 100's. The Production Fee is subject to adjustment as provided in the
Agreement.
<PAGE> 16
[****]-CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE B
MEFENAMIC SUPPLY SCHEDULE
<TABLE>
<CAPTION>
Item Delivery Date Quantity Price/unit
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mefenamic Acid March 31, 2001 [****] $ [****]
</TABLE>
<PAGE> 17
SCHEDULE C
[****]-CONFIDENTIAL TREATMENT REQUESTED
SAMPLE SUPPLY SCHEDULE
FINISHED PRODUCT SAMPLE SUPPLY
PURCHASER shall choose between one of the two delivery and quantities options
below with respect to the supply of Samples:
<TABLE>
<CAPTION>
Maximum
Item/Unit Delivery Date Quantity_______
- ---------------------------------------------------------------------------------
SAMPLE SUPPLY OPTION #1
- -----------------------
<S> <C> <C>
[****] [****] [****]
[****] [****] [****]
OR
<CAPTION>
SAMPLE SUPPLY OPTION #2
- -----------------------
[****] [****] [****]
PRICE
- -----
The price per bottle for Samples under either option above is as follows:
[****]
</TABLE>
<PAGE> 18
SCHEDULE D
[****]-CONFIDENTIAL TREATMENT REQUESTED
MANUFACTURING SCHEDULE
<TABLE>
<CAPTION>
Ponstel
- -------
JAN `00 FEB `00 MAR `00 APR `00 MAY `00 JUN `00 JUL `00 AUG `00 SEP `00 OCT `00 NOV `00 DEC `00
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beg. Invt. [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****]
Forecast [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****]
Production [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****]
End Invt. [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****] [****]
</TABLE>
[****] to be produced using Parke-Davis labeling, will be delivered [****].
<PAGE> 1
EXHIBIT 10.19
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[****]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
- -------------------------------------------------------------------------------
COGNEX(R)
ASSET PURCHASE AGREEMENT
between
WARNER-LAMBERT COMPANY
and
FIRST HORIZON PHARMACEUTICAL CORPORATION
Dated as of April 14, 2000
- -------------------------------------------------------------------------------
<PAGE> 2
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
April 14, 2000, by and among WARNER-LAMBERT COMPANY, a Delaware corporation with
offices at 201 Tabor Road, Morris Plains, New Jersey 07950 ("Warner-Lambert")
and FIRST HORIZON PHARMACEUTICAL CORPORATION, a Delaware corporation with
offices at 660 Hembree Parkway, Suite 106, Roswell, Georgia 30076 ("Horizon").
RECITALS
WHEREAS, Warner-Lambert and its Affiliates (as hereinafter defined)
are engaged in the business of manufacturing and selling pharmaceutical products
and own certain rights related to products containing tacrine hydrochloride
(1,2,3,4-tetrahydro-9-acridinamine monohydrochloride monohydrate) as its sole
active ingredient in the Territory and listed on Exhibit A hereto (the "Product"
or "Cognex");
WHEREAS, in addition to the Product, Warner-Lambert and its Affiliates
also own certain rights related to a once a day control release version of the
Product ("Cognex CR"); and
WHEREAS, the parties hereto intend that Warner-Lambert and each of the
Affiliates of Warner-Lambert that will be caused by Warner-Lambert to transfer
Assets (as hereinafter defined) pursuant to this Agreement (collectively the
"Selling Affiliates") shall sell to Horizon, and Horizon shall purchase from
Warner-Lambert and the Selling Affiliates, certain assets related to the Product
and Cognex CR upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties, covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties do hereby
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 SALE OF ASSETS. Pursuant to the terms and conditions set forth in
this Agreement, Warner-Lambert agrees to sell and to cause the Selling
Affiliates to sell, convey, assign, grant, transfer and deliver to Horizon, and
Horizon agrees to purchase, acquire and receive from Warner-Lambert and the
Selling Affiliates on the date that is three (3) Business Days after the date of
receipt of clearance from the Federal Trade Commission for the transactions
contemplated by this Agreement or such other date as the parties agree upon in
writing (the "Closing Date"), Warner-Lambert's entire interest in all of the
following assets related to the Product and Cognex CR (collectively, the
"Assets"):
1.1.1 Inventory. The inventories of finished Product owned by
Warner-Lambert on the Closing Date and held for use in the Territory as
specified on Exhibit 1.1.1 hereto (the "Inventory"); provided, that the
expiration date for such Inventory of finished Product is at least fifteen (15)
months after the Closing Date. Inventory purchased by Horizon hereunder shall be
<PAGE> 3
delivered to Horizon as soon as practicable after Closing but in any event no
later than fifteen (15) days thereafter;
1.1.2 Intellectual Property. The Intellectual Property (as
hereinafter defined) and all valid and binding rights under contract to use such
Intellectual Property, including without limitation the Intellectual Property
listed on Exhibit 1.1.2. As used herein, "Intellectual Property" means, with
respect to the Product and Cognex CR, all of the following without limitation
and whether registered, issued, pending or in a draft form: all patents,
trademarks and trademark rights (the "Trademarks"), service marks and service
mark rights, service names and service name rights, brand names, logos, slogans,
trade secrets, trade dress, processes, designs, methodologies, technical
information and know-how, in each case relating to the manufacture, packaging,
development, testing, distribution, marketing, use or sale of such Product;
1.1.3 Registrations. All regulatory approvals and applications
for regulatory approval for the Product and Cognex CR (including the Marketing
Authorizations for the Product) held by Warner-Lambert or its Affiliates
(defined below) (collectively, the "Registrations") set forth on Exhibit 1.1.3.
Warner-Lambert shall deliver such Registrations to Horizon as soon as
practicable after Closing but in any event no later than forty-five (45) days
thereafter. As used herein: the term "Affiliate" means (i) any company or
entity, more than fifty percent (50%) of whose voting stock or participating
profit interest is owned or controlled, directly or indirectly, by a party; (ii)
any Person which owns or controls, directly or indirectly, more than fifty
percent (50%) of the voting stock or participating profit interest of a party
and (iii) any Person which is under common control with a party hereto and the
term "common control" means a third party has direct or indirect ownership of
fifty percent (50%) or more of the voting stock or participating profit interest
of both the other company or entity and the party to this Agreement; "Marketing
Authorization" means the authorization to sell the Product as granted by the
relevant Governmental or Regulatory Authority (as hereinafter defined); and
"Person" means any natural person, corporation, general partnership, limited
partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority. Notwithstanding the
foregoing, Warner-Lambert shall be permitted to retain one archive copy of the
Registrations;
1.1.4 Information and Know-How. All technical information
(including the master batch record, analytical methods including validation
protocol, and the drug master file), know-how, market research results, and the
like specifically relating to the manufacture, packaging, testing, development,
distribution, marketing, use or sale of the Product and Cognex CR (including the
raw materials used in the manufacture thereof) owned or possessed by
Warner-Lambert or the Selling Affiliates on the Closing Date (collectively, the
"Information"). The Information, to the extent such Information has not
previously been provided to Horizon, shall be transferred as soon as practicable
after the Closing Date, but in any event no later than (a) thirty (30) days
thereafter with respect to Germany, Greece, France, Spain and Austria (the
"Primary Countries"); (b) sixty (60) days thereafter with respect to Australia,
Belgium, French Export Countries (Guadaloupe, Martinique, La Reunion, New
Caledonia and Tunisia), Hong Kong, Korea, Luxembourg, Portugal, Switzerland, the
United States and Puerto Rico (and, together with the Primary Countries, the
"Territory"); and (c) ninety (90) days thereafter with respect to countries
outside of the Territory. Notwithstanding the foregoing, Warner-Lambert shall
retain one archive copy of the Information pursuant to Section 5.14;
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1.1.5 Managed Care Agreements. To the extent their assignment
in part is permitted under the terms thereof or by the other party thereto, all
Managed Care Agreements (as hereinafter defined), to which Warner-Lambert is a
party and which are utilized in connection with the sale of the Product by
Warner-Lambert in the United States;
1.1.6 Goodwill. All goodwill associated with the Product other
than goodwill associated with any trademark, trade name, service mark, service
name, slogan or logo used by Warner-Lambert or any of its Affiliates prior to
the date hereof and not transferred to Horizon pursuant to this Agreement or any
of the other operative agreements which are necessary to completely sell,
convey, assign, grant, transfer and deliver the Assets to Horizon (the
"Operative Agreements");
1.1.7 Prepaid Royalties. All prepaid royalties relating to
the Assets and listed in Exhibit 1.1.7; and
1.1.8 Promotional Materials. The advertising and promotional
materials and sales training materials owned by Warner-Lambert related to the
Product (collectively, the "Promotional Materials").
1.2 EXCLUDED ASSETS. Notwithstanding anything in this Agreement to
the contrary, the following assets of Warner-Lambert and the Selling Affiliates
(the "Excluded Assets") shall be excluded from and shall not constitute Assets:
1.2.1 Accounts Receivable. All trade accounts receivable and
all notes, bonds and other evidences of indebtedness and rights to receive
payments arising out of sales of the Product prior to the Closing Date,
including any rights of Warner-Lambert or its Affiliates with respect to any
third party collection procedures or any contract or any other actions which
have accrued prior to the Closing Date in connection with the manufacture, sale
or use of any Product;
1.2.2 Litigation Claims. Any rights (including
indemnification), claims and recoveries under litigation of Warner-Lambert or
its Affiliates against third parties arising out of or relating to events
occurring prior to the Closing Date;
1.2.3 Excluded Contract Rights. The rights of Warner-Lambert
or any of its Affiliates in, to and under all contracts of any nature, the
obligations of Warner-Lambert or any of its Affiliates under which are not
expressly assumed by Horizon herein; and
1.2.4 Excluded Intellectual Property. Warner-Lambert shall
retain the right and title to any Intellectual Property and Information
utilized in connection with the manufacture, packaging, testing, development,
distribution, marketing, use or sale of any of Warner-Lambert's or its
Affiliates' products, other than the Product and Cognex CR, including, but not
limited to, those that are also used by Warner-Lambert and its Affiliates on
the Product, such as the Parke-Davis trademark, logo and designs.
1.3 ASSUMED LIABILITIES. Horizon shall assume and agrees to pay,
perform and discharge when due the following liabilities and obligations of
Warner-Lambert or its Affiliates arising in connection with the Product (the
"Assumed Liabilities"):
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1.3.1 Returns. All liabilities and obligations with respect
to (i) the returned units of the Product, from and after the date that is
twelve (12) months after the Closing Date and (ii) the returned units of the
Product during the first twelve (12) months following the Closing Date to the
extent such returns exceed $1.8 million;
1.3.2 Rebates and Chargebacks. All liabilities and
obligations arising from (i) all rebates to state Medicaid and other state and
local governmental programs and to pharmacy benefit management companies,
health plans, insurance companies, mail service pharmacies and other health
care providers based upon the utilization of the Product (collectively,
"Rebates") and (ii) all credits, chargebacks, reimbursements, administrative
fees and other payments to wholesalers and other distributors, group purchasing
organizations, insurers and other institutions (collectively, "Chargebacks"),
occurring in the third calendar quarter of 2000 and thereafter, subject to the
Rebate and Chargeback Reimbursement (defined below) to be paid to Horizon by
Warner-Lambert, provided, however, that Horizon shall not be liable for any
Chargebacks or Rebates occurring in the first and second calendar quarters of
2000. For purposes of this Section 1.3.2, Rebates shall be deemed to have
occurred in the calendar quarter in which the pharmacy or other applicable
entity is reimbursed by Medicaid or other applicable entity and Chargebacks
shall be deemed to have occurred in the calendar quarter in which the
wholesaler or other applicable entity ships the Product that results in the
chargeback. As used herein, "Rebate and Chargeback Reimbursement" shall mean an
amount equal to the product of (i) the Rebates and Chargebacks occurring in the
third calendar quarter of 2000 and (ii) a fraction, the denominator of which is
92 and the numerator of which is the number of days elapsed in the second
quarter through the Closing Date. To the extent that Warner-Lambert is unable
to assign any agreement of Warner-Lambert for the payment of Rebates and
Chargebacks ("Managed Care Agreements") to Horizon with respect to the Product,
Horizon agrees to reimburse Warner-Lambert for the amount of such Rebates and
Chargebacks under the Managed Care Agreements paid by Warner-Lambert within
thirty (30) days after receipt by Horizon of a written invoice from
Warner-Lambert for same;
1.3.3 Registrations. All liabilities and obligations with
respect to the Registrations arising or incurred from and after the Closing
Date, provided, however, with respect to the NDA establishment fee, Horizon
shall only be responsible for such fees which are incurred in connection with
the period beginning with the first full calendar year following the expiration
or earlier termination of the Supply Agreement (as defined herein);
1.3.4 Recalls. From and after the Closing Date, all
liabilities, obligations and responsibilities relating to voluntary and
involuntary recalls of Product sold by Horizon after the Closing Date, except to
the extent that such recall is for a failure of the Inventory to meet the
product specifications set forth in the Marketing Authorizations as such
specifications exist on the date hereof (the "Specifications"), where such
failure is due solely to the actions or omissions of Warner-Lambert;
1.3.5 Product Liability. From and after the Closing Date, all
liabilities, obligations and responsibilities relating to product liability
claims or threatened claims relating to Product sold by Horizon after the
Closing Date, other than product liability that results from a failure of the
Inventory to meet the Specifications, where such failure is due solely to the
actions or omissions of Warner-Lambert;
1.3.6 Research and Development. All liabilities, obligations
and responsibilities
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for any research and development conducted by Horizon and relating to the
Product after the Closing Date; and
1.3.7 Product Regulatory Obligations. All liabilities,
obligations and responsibilities undertaken by Horizon pursuant to Section 5.4.
1.4 RETAINED LIABILITIES. Except for the Assumed Liabilities,
Horizon shall not assume by virtue of this Agreement or any of the Operative
Agreements or the transactions contemplated hereby, and shall have no liability
for, any liabilities, debts or obligations of Warner-Lambert of any kind,
character or description whatsoever (the "Retained Liabilities").
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ARTICLE 2
CONSIDERATION FOR TRANSFER OF ASSETS
2.1 PURCHASE PRICE. (a) Subject to the terms and conditions of this
Agreement, in consideration for the sale and transfer of the Assets, Horizon
shall pay to Warner-Lambert (i) a non-refundable payment of Three Million Five
Hundred Thousand Dollars ($3,500,000) payable to Warner-Lambert on the Closing
Date, (ii) One Million Five Hundred Thousand Dollars ($1,500,000) payable to
Warner-Lambert upon the approval by the United States Food and Drug
Administration (the "FDA") of a new drug application ("NDA") for Cognex CR in
the United States which includes an approved package insert with the attributes
provided in Exhibit 2.1, as adjusted by the Price Adjustment described in
Section 2.1(b) below, if any; provided, however, that Horizon shall not be
required to seek approval of the NDA for Cognex CR from the FDA, and (iii) an
amount equal to the value of the Inventory transferred to Horizon pursuant to
the terms of this Agreement based on the Closing Inventory Value (as defined
below) payable to Warner-Lambert within thirty (30) days after the Closing Date.
The amounts set forth in Section 2.1 (a)(i), (ii) and (iii) are hereinafter
referred to collectively as the "Purchase Price". As used herein, "Business Day"
means a day during which banks are generally open for business in New York and
"Closing Inventory Value" means the value of the Inventory (including samples)
as of the Closing Date based on Warner-Lambert's calculation of the standard
cost of the Product.
(b) The amount payable pursuant to Section 2.1(a)(ii) above will be
reduced by an amount which is equal to the product of (i) total third-party
out-of-pocket expenses, reasonably incurred by Horizon relating to (A) the
performance by or on behalf of Horizon of additional studies in connection with
the approval of the NDA for Cognex CR to the extent required by the FDA
(including, but not limited to, manufacturing costs in connection with the
manufacture of trial batches of the Product and costs of literature searches and
analysis required for such studies) plus (B) returns incurred during the twelve
(12) month period following the Closing Date for Product sold prior to the
Closing Date by Warner-Lambert in an aggregate amount greater than $1.8 million
but less than $2.8 million ("Total Expense") and (ii) the applicable Factor (as
hereinafter defined) (the "Price Adjustment"). "Factor" shall be determined as
follows: if Total Expense is (i) less than or equal to $200,000 then the factor
will be 1.35, and (ii) greater than $200,000 and less than or equal to $500,000
then the factor will be 1.50. If Total Expenses is greater than $500,000 then
Horizon will not have any obligation to pay the amount set forth in Section
2.1(a)(ii). Under no circumstances shall Warner-Lambert incur any obligation to
pay Horizon as a result of the calculation of the Price Adjustment.
Warner-Lambert makes no representation or warranty that the NDA for Cognex CR
will be accepted for filing or approved by the FDA.
(c) Within thirty (30) days of the approval of the NDA for Cognex CR,
Horizon shall prepare and deliver to Warner-Lambert a written report showing the
components of Total Expenses (including returns) and the amount payable pursuant
to Section 2.1(a)(ii), if any (the "Report"). Concurrently with the submission
of such written report, Horizon shall pay Warner-Lambert the amount shown to be
due thereon; provided, however, if the NDA for Cognex CR is approved by the FDA
during the twelve month period following the Closing Date, Horizon shall prepare
the Report within thirty (30) days following the end of such twelve (12) month
period.
(d) Horizon shall keep accurate records in sufficient detail to
determine the amount payable under Section 2.1(a)(ii). Warner-Lambert may
designate an independent public accountant mutually acceptable to Warner-Lambert
and Horizon to review such records to verify
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the accuracy of information provided to Warner-Lambert. Warner-Lambert shall
pay the cost of any review of records conducted at the request of
Warner-Lambert under this Section; provided, however, that if the independent
public accountant conducting the review concludes that the amount payable under
Section 2.1(a)(ii) was understated by 5% or more, Horizon shall pay the cost of
such review.
(e) All payments under this Section shall be made by wire transfer or
other immediately available funds to an account indicated by Warner-Lambert.
2.2 ALLOCATION. The parties agree to allocate the Purchase Price among
the Assets in accordance with Exhibit 2.2.
2.3 CLOSING. The Closing shall take place at 11:00 a.m. EDT at 201
Tabor Road, Morris Plains, New Jersey on the Closing Date or at such time and
place as the parties hereto may otherwise mutually agree.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 LEGAL AUTHORITY. Each party represents and warrants that it has
the legal power, authority and right to enter into this Agreement and to
perform its respective obligations set forth herein.
3.2 NO CONFLICTS. Each party represents and warrants that it is not a
party to any agreement or arrangement with any third party or under any
obligation or restriction, including pursuant to its Articles of Incorporation,
By-Laws or other organizational documents, which in any way limits or conflicts
with its ability to fulfill any of its obligations set forth herein.
3.3 TITLE TO ASSETS. Warner-Lambert hereby represents and warrants
that: (i) it or the applicable Selling Affiliate has good and marketable title
to the Assets, free and clear of all liens; (ii) to its knowledge, except as
set forth in Exhibit 1.1.2, no sublicenses have been granted to any third party
with respect to the Assets; and (iii) to its knowledge, there are no adverse
claims of ownership to the Assets.
3.4 INTELLECTUAL PROPERTY RIGHTS. (a) Except as disclosed in Licenses
Out listed on Exhibit 1.1.2, (i) Warner-Lambert and its Affiliates has the
exclusive right to use the Trademarks and (ii) all registrations with and
applications to Governmental or Regulatory Authorities in respect of such
Trademarks are valid and in full force and effect.
(b) Warner-Lambert hereby represents and warrants that, to its
knowledge without any inquiry of third parties, there are no patents,
trademarks, trade names or copyrights or any other proprietary rights of any
third person which would be infringed by the manufacture, use or sale of the
Product in the Territory.
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3.5 INVENTORY. The Inventory will be of salable quality, will meet the
Specifications, have been manufactured in accordance with current good
manufacturing practices and other applicable law.
3.6 LITIGATION. (a) Warner-Lambert hereby represents and warrants
that, to its knowledge, there is no litigation, action, suit, inquiry,
investigation, arbitration or other proceeding pending or threatened against
Warner-Lambert or its Affiliates specifically with respect to the Product, the
Assets or Warner-Lambert's right and ability to consummate the transaction
contemplated by this Agreement, nor does Warner-Lambert know of any basis for
any such proceedings, investigations or inquiries.
(b) Horizon hereby represents and warrants that, to its knowledge,
there is no litigation, action, suit, inquiry, investigation, arbitration or
other proceeding pending or threatened against Horizon with respect to its
right and ability to consummate the transactions contemplated by this
Agreement.
3.7 CONSENTS AND APPROVALS. (a) Except as disclosed in Exhibit 3.7(a),
no consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority (as hereinafter defined) or any third party on the part of
Warner-Lambert or any Selling Affiliate is required in connection with the
execution, delivery and performance of this Agreement or any of the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby, except (i) where the failure to obtain any such
consent, approval or action, to make any such filing or to give any such notice
will not adversely affect the ability of Warner-Lambert to consummate the
transactions contemplated by this Agreement or the ability of Warner-Lambert or
any Selling Affiliate to consummate the transactions contemplated by any
Operative Agreement or to perform its obligations hereunder or thereunder, or
have a material adverse effect on the condition of the Business or impair the
ability of Horizon to operate the Business in the ordinary course, and (ii)
those as would be required solely as a result of the identity or the legal or
regulatory status of Horizon or any of its Affiliates. As used herein,
"Governmental or Regulatory Authority" means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of the United
States or any relevant country, state, province, county, city or other
political subdivision.
(b) Except as disclosed in Exhibit 3.7(b), no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority
(as hereinafter defined) or any third party on the part of Horizon is required
in connection with the execution, delivery and performance of this Agreement or
any of the Operative Agreements to which it is a party or the consummation of
the transactions contemplated hereby or thereby, except where the failure to
obtain any such consent, approval or action, to make any such filing or to give
any such notice will not adversely affect the ability of Horizon to consummate
the transactions contemplated by this Agreement or the ability of Horizon to
consummate the transactions contemplated by any Operative Agreement or to
perform its obligations hereunder or thereunder.
(c) The parties acknowledge that transfer of the NDA for the Product
will not be completed until receipt and acceptance by the FDA of the
Warner-Lambert Assignment Letters and the Horizon Assumption Letters.
3.8 HORIZON'S REPRESENTATION AND WARRANTY REGARDING THE PRODUCT.
Horizon represents and warrants that it and its Affiliates have not
manufactured, used or sold the
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Product anywhere worldwide or used the Trademarks anywhere worldwide prior to
the Closing Date. Horizon hereby acknowledges that it has been afforded the
opportunity to conduct due diligence with respect to the Product and to secure
such information from Warner-Lambert with respect to the Product as it deems
necessary to evaluate the merits of entering into the transactions contemplated
in this Agreement.
3.9 NO BROKERAGE FEE. Each party represents and warrants that no
broker, financial advisor or other Person is entitled to any brokerage fee or
commission in respect of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
3.10 MANAGED CARE AGREEMENTS. Warner-Lambert represents and warrants
that the agreements of Warner-Lambert with the customers listed on Exhibit 3.10
hereto are all the Managed Care Agreements as of April 14, 2000. Also set forth
on Exhibit 3.10 are the rebate and/or discount terms with respect to each such
Managed Care Agreement as of April 14, 2000. Warner-Lambert shall deliver a
revised Exhibit 3.10 at the Closing listing all the Managed Care Agreements as
of the Closing Date. Each party will use its best efforts to notify the
customers set forth on Exhibit 3.10 that the Product has been transferred to
Horizon within three (3) Business Days after the Closing Date. Promptly after
the Closing Date, but in no event later than ten (10) Business Days following
the Closing Date, Warner-Lambert shall, subject to the required consent of the
applicable customer, assign all Managed Care Agreements existing on the Closing
Date and shall notify Horizon on a regular basis regarding each such consent
and assignment; provided, however, that with respect to those Managed Care
Agreements that Warner-Lambert is unable to assign, Warner-Lambert shall
fulfill all its obligations under each such Managed Care Agreement until its
expiration (it being understood and agreed that Horizon has an obligation to
reimburse Warner-Lambert for Rebates and Chargebacks with respect to the
Managed Care Agreements pursuant to Section 1.3.2 hereof).
3.11 REGISTRATIONS. Warner-Lambert hereby represents and warrants that
in the Territory, to its knowledge, (i) the Registrations are in good standing
and (ii) there is no pending or threatened action by the FDA or any relevant
Governmental or Regulatory Authority which will have a material adverse effect
on the Registrations. Warner-Lambert has paid the NDA maintenance fee for the
Product for the year 2000. Warner-Lambert makes no representation or warranty
that the NDA for Cognex CR will be accepted for filing or approved by the FDA.
3.12 CERTAIN FINANCIAL INFORMATION. Warner-Lambert represents and
warrants that the 1999 financial information provided to Horizon as of December
31, 1999, specifically, the gross sales, net sales, standard cost of goods and
gross profit of the Product as set forth in Section X of the Offering
Memorandum relating to the Product provided to Horizon, was based upon the
information contained in the books and records of Warner-Lambert and, as such,
are accurate in all material respects. As used herein, "net sales" shall mean
the aggregate sales of Warner-Lambert and its Affiliates of Product to
unaffiliated third parties (but not including sales between Warner-Lambert and
its Affiliates) less (i) bad debts related to the Product, and (ii) sales
returns and allowances, including, without limitation, trade, quantity and cash
discounts and any other adjustments, including, but not limited to, those
granted on account of price adjustments, billing errors, rejected goods,
damaged goods, recalls, returns, rebates, chargeback rebates, fees,
reimbursements or similar payments granted or given to wholesalers or other
distributors, buying groups, health care insurance carriers or other
institutions, freight and insurance charges billed to the customers, customs or
excise duties, sales tax and other taxes (except income taxes) or duties
relating to sales, and any payment in respect of sales to
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any Governmental or Regulatory Authority in respect of any Federal or state
Medicaid, Medicare or similar program, all as determined in a manner consistent
with the books and records of Warner-Lambert.
3.13 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED HEREIN,
WARNER-LAMBERT DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD
TO THE PRODUCTS, INCLUDING THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE FOREGOING, HORIZON
ACKNOWLEDGES THAT WARNER-LAMBERT HAS MADE NO REPRESENTATION OR WARRANTY AS TO
THE ABILITY TO MANUFACTURE OR SELL ANY OF THE PRODUCTS IN ACCORDANCE WITH
APPLICABLE LAW.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION BY WARNER-LAMBERT. Warner-Lambert shall indemnify,
defend and hold harmless Horizon against any loss, expense, liability or other
damages, including reasonable costs of investigation, interest, penalties and
attorneys' fees (collectively, "Losses") incurred by Horizon, its Affiliates or
any of their respective officers, directors, agents or employees (collectively,
the "Horizon Group") to the extent relating to or resulting from (a) any
inaccuracy of a representation or breach of a warranty made by Warner-Lambert
in this Agreement or (b) the Retained Liabilities; provided, however, that
Warner-Lambert will have no obligations under this Section for Losses to the
extent that they are caused by (i) any inaccuracy of a representation or breach
of a warranty made by Horizon in this Agreement or (ii) the gross negligence or
willful misconduct of any member of the Horizon Group. Horizon hereby agrees
that Warner-Lambert's liability under this Agreement from whatever cause,
whether pursuant to this Section or any other cause arising under this
Agreement, is limited to the amounts paid by Horizon to Warner-Lambert pursuant
to Section 2.1 as of the date of determination of such liability, provided,
however, that the limitation on liability contained in this sentence shall not
apply to a failure of the Inventory to meet the Specifications, where such
failure was due solely to the actions or omissions of Warner-Lambert.
Furthermore, the parties agree that in no event will Warner-Lambert be liable
to Horizon hereunder for special, consequential, indirect, punitive or similar
damages.
4.2 INDEMNIFICATION BY HORIZON. Horizon shall indemnify, defend and
hold harmless Warner-Lambert against any Losses incurred by Warner-Lambert, its
Affiliates or any of their respective officers, directors, agents or employees
(collectively, the "Warner Group") relating to or resulting from (a) any
inaccuracy of a representation or breach of a warranty made by Horizon in this
Agreement; (b) any liabilities, obligations, commitments of, or claims against
any member of the Warner Group based on the manufacture, use or sale of the
Product in the Territory or use of the Trademarks or the Registrations in the
Territory, on and after the Closing Date; and (c) the Assumed Liabilities;
provided, however, that Horizon will have no obligations under this Section for
Losses to the extent that they are caused by (a) any inaccuracy of a
representation or breach of a warranty made by Warner-Lambert in this Agreement
or (b) the gross negligence or willful misconduct of any member of the Warner
Group. Furthermore, the
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parties agree that in no event will Horizon be liable to Warner-Lambert
hereunder for special, consequential, indirect, punitive or similar damages.
4.3 INDEMNIFICATION PROCEDURES. In any case under this Agreement where
one party has indemnified the other against any claim or legal action,
indemnification will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way
of settlement and release) at its own cost and expense. The indemnified party
may, but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated
to, defend, contest or otherwise protect against the same, and make any
compromise or settlement thereof and recover the entire costs thereof from the
indemnifying party, including reasonable attorneys fees, disbursements and all
amounts paid as a result of such claim or suit or the compromise or settlement
thereof; provided, however, that if the indemnifying party undertakes the
timely defense of such matter, the indemnified party will not be entitled to
recover from the indemnifying party its costs incurred in the defense thereof.
The indemnified party will cooperate and provide such assistance as the
indemnifying party may reasonably request in connection with the defense of the
matter subject to indemnification.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 MONTHLY REPORTS; RETURNS. (a) During the twelve month period
following the Closing Date, Horizon shall prepare and deliver to Warner-Lambert
a written monthly report showing all returns received by Horizon of Product sold
prior to the Closing Date by Warner-Lambert (the "Returns"). Within thirty (30)
days of the receipt of such monthly report, Warner-Lambert shall reimburse
Horizon for payments made by Horizon with respect to such Returns up to $1.8
million in the aggregate.
(b) Horizon shall keep accurate records in sufficient detail to
determine the amount of the reimbursement payable by Warner-Lambert under this
Section 5.1. Warner-Lambert may designate an independent public accountant
mutually acceptable to Warner-Lambert and Horizon to review such records to
verify the accuracy of information provided to Warner-Lambert. Warner-Lambert
shall pay the cost of any review of records conducted at the request of
Warner-Lambert under this Section; provided, however, that if the independent
public accountant conducting the review concludes that the amount payable under
this Section 5.1 were overstated by 5% or more, Horizon shall pay the cost of
such review.
5.2 USE OF WARNER-LAMBERT NAME. (a) Horizon shall not use the name of
Warner-Lambert, Parke-Davis or any of Warner-Lambert's Affiliates (collectively,
the "Warner-Lambert Name") in any manner whatsoever in connection with the
manufacture, use, sale, promotion, advertising or distribution of the Product
after the Closing Date, provided, however, Horizon may use the inventory and
Promotional Materials purchased from Warner-Lambert by Horizon
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hereunder bearing the Warner-Lambert Name (including inventory purchased under
the Supply Agreement) until such inventory expires or is depleted, whichever
occurs first ("Final Inventory Sell Off Date"). Except as otherwise set forth
in this Section 5.2 or in Section 5.3 hereof, Horizon shall have no right to
use the Warner-Lambert Name without the prior written consent of
Warner-Lambert.
(b) Horizon hereby agrees that any Inventory purchased from
Warner-Lambert hereunder and bearing the Warner-Lambert Name will be held,
maintained and distributed in accordance with applicable pharmaceutical current
good manufacturing practices, the Registrations, and all applicable laws.
Warner-Lambert shall have no responsibility for costs and expenses associated
with any recall of the Inventory on or after the Closing Date attributable to a
determination by a Governmental or Regulatory Authority that the use of the
Warner-Lambert Name on such Inventory would constitute misbranding within the
meaning of the Federal Food, Drug, and Cosmetic Act or similar laws in the
Territory.
5.3 USE OF PROMOTIONAL MATERIALS. Horizon hereby agrees that any
Promotional Materials purchased from Warner-Lambert hereunder and bearing the
Warner-Lambert Name (i) will not be used after the Final Inventory Sell Off
Date; and (ii) will be held, maintained and distributed in accordance with the
Registrations and all applicable laws. From the Closing Date until the Final
Inventory Sell Off Date, Horizon shall have the right, subject to
Warner-Lambert's prior written consent, to apply the Warner-Lambert Name on any
new promotional materials (including, but not limited to, journal ads,
convention materials, sales aids, and medical education materials) for the
Product. Horizon shall submit such promotional materials in final form, together
will all data and documentation required to support any claims made therein, to
Warner-Lambert's regulatory group which shall determine, within ten (10)
Business Days after receipt, whether to grant written consent to use such
promotional materials. Horizon shall have no other right to use the
Warner-Lambert Name other than as set forth herein and in Section 5.2 above.
Horizon agrees that after the Final Inventory Sell Off Date all promotional
materials and Promotional Materials containing the Warner-Lambert Name shall be
destroyed at Horizon's sole cost and expense. Use of the Warner-Lambert Name on
promotional materials and the use of the Promotional Materials by Horizon shall
be at Horizon's risk.
5.4 PRODUCT REGULATORY OBLIGATIONS.
5.4.1. FDA Contacts. On and after the Closing Date, Horizon
shall be responsible for all contacts with the FDA and other regulatory
authorities with respect to the Product, and all other responsibilities under
the Registrations; provided that either party shall notify the other party
immediately, and in no event later than (A) forty-eight (48) hours after receipt
of any contact or communication from the FDA or any other Governmental or
Regulatory Authority in the Territory and (B) five (5) Business Days after
receipt of any contact or communication with any other third party, that in
either case, in any way requests or suggests the need for a recall or withdrawal
of a lot of Product manufactured by or on behalf of Warner-Lambert or otherwise
calls into question the quality or safety of such a Product lot. Horizon shall
be responsible for investigating any such request or suggestion and for any
communications with any Governmental or Regulatory Authority relating thereto;
provided that Horizon shall comply with all reasonable requests by
Warner-Lambert.
5.4.2. Customer Complaints. Horizon shall be solely
responsible for responding to any Product complaint received on or after the
Closing Date. Each party shall notify the other
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in the event that such a party receives a report of a Product complaint
relating to a Product lot manufactured by or on behalf of Warner-Lambert. The
complaint recipient shall use all reasonable efforts to provide such notice to
the other party within forty eight (48) hours if the complaint involves
allegations of suspected or actual product tampering, contamination or
mislabeling, and shall provide such notice to the other party within five (5)
Business Days in the case of all other complaints. Horizon shall be responsible
for investigating all such Product complaints and responding to the
complainant, provided each party shall comply with all reasonable requests from
the other in connection therewith.
5.4.3. Adverse Event Reporting. (a) On and after the Closing
Date until such date that each of the Registrations are transferred to Horizon
(the "Transfer Date"), each party shall have a continuing obligation to notify
the other party of any adverse drug experience reported to such party arising
from or in connection with the use of the Product. This notification shall occur
within seventy-two (72) hours for an unexpected fatal or life-threatening
serious adverse drug experience (as defined in 21 CFR 312.32) associated with
the Product and arising during clinical trials. For post-marketing adverse drug
experience reports, the parties agree as follows:
(i) Warner-Lambert shall report to Horizon all adverse drug
experiences within five (5) Business Days after the time such
report becomes known to any employee, agent or Affiliate of
Warner-Lambert. All other post-marketing adverse drug
experience reports for the Product shall be reported to
Horizon by Warner-Lambert on a rolling fifteen (15)-day
basis.
(ii) Horizon shall report to Warner-Lambert all serious adverse
drug experience reports for the Product within five (5)
Business Days after the time such report becomes known to any
employee, agent or Affiliate of Horizon and all other adverse
drug experience reports for the Product on a rolling fifteen
(15)-day basis.
All notifications pursuant to this paragraph shall be by fax or e-mail at such
numbers (or e-mail addresses) agreed upon by the parties' respective drug safety
organizations. Horizon shall have sole responsibility to investigate such
adverse experience reports and for reporting such reports to Governmental and
Regulatory Authorities. Except as otherwise stated above, the terms "adverse
drug experience" and "serious adverse drug experience" used in this paragraph
shall have the meanings set forth in 21 CFR 314.80.
(b) On and after the Transfer Date, Warner-Lambert shall have
a continuing obligation to notify Horizon of any postmarketing adverse drug
experience reported to Warner-Lambert arising from or in connection with the use
of a Product in post-marketed use. This notification shall occur within five (5)
days for all post-marketing adverse drug experience reports. This notification
shall be by fax. Horizon shall have sole responsibility to investigate such
adverse experience reports and for reporting such reports to applicable
Governmental or Regulatory Authorities. Following the Closing Date, Horizon
shall provide Warner-Lambert with reasonable access to the post-marketing and
clinical safety database for the Product as necessary in connection with any
ongoing legal and/or regulatory requirements of Warner-Lambert.
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(c) The parties shall use reasonable efforts to enter into a
separate drug safety sharing agreement describing the procedures and other
logistics to implement the provisions in this Section 5.4 within ninety (90)
days after execution of this Agreement.
5.4.4 Assistance with Regulatory Obligations Transfer. For a
period of up to sixty (60) days following the Closing Date, Warner-Lambert
agrees to provide assistance and cooperation reasonably requested by Horizon in
connection with the transfer of the Registrations to Horizon in the United
States and all other countries except the European countries in the Territory.
During the term of the Transition Services Agreement and for a period of up to
sixty (60) days following the termination of the Transition Services Agreement,
Warner-Lambert agrees to provide assistance and cooperation reasonably requested
by Horizon in connection with the transfer of the Registrations to Horizon in
the European countries in the Territory.
5.4.5 Transfer of Registration. The parties shall use all
reasonable efforts to transfer the Registrations from Warner-Lambert and the
Selling Affiliates to Horizon or its designee six (6) months after the Closing
Date.
5.5 PAYMENT OF TRANSACTION EXPENSES. All sales taxes, use taxes, value
added taxes, transfer taxes, filing fees (including trademark assignment fees)
and similar taxes, fees, charges and expenses (excluding any taxes arising from
income or gains earned by Warner-Lambert) required to be paid in connection with
the sale of the Assets to Horizon will be borne and paid by Horizon. All legal
fees and other expenses incurred on behalf of Warner-Lambert in connection with
the negotiation of this Agreement will be borne by Warner-Lambert; and all legal
fees and other expenses incurred on behalf of Horizon in connection with the
negotiation of this Agreement will be borne by Horizon.
5.6 ACCESS TO WARNER-LAMBERT RECORDS. To the extent required by the
Securities and Exchange Commission in connection with an initial public offering
of or other financing for Horizon and upon five Business Days' prior written
notice from Horizon, Warner-Lambert agrees to provide Horizon and up to two (2)
employees of an independent accounting firm designated by Horizon with
reasonable access to financial records pertaining to the Product covering a
period ending not more than three (3) years prior to the date of such request.
Prior to granting any access to such records, the designated accounting firm
shall first agree not to disclose any confidential information contained in such
financial records. Horizon shall pay all costs and expenses in connection with
the review of such financial records.
5.7 LIMITATION ON TRANSFER. Horizon hereby agrees that until such time
as Horizon has discharged all its payment obligations hereunder (other than the
payment obligation set forth in Section 2.1(a)(ii)), it shall not convey, sell,
assign, transfer, license or otherwise dispose of any of the Assets (other than
Inventory in the ordinary course of business) without the prior written consent
of Warner-Lambert, which consent shall not be unreasonably withheld, provided,
that Horizon shall have the right to assign its rights and obligations under
this Agreement to any third party successor to all or substantially all of its
entire business. Warner-Lambert will respond to such written request for
transfer of the Assets within forty-five (45) days after receipt of such written
request from Horizon.
5.8 CONFIDENTIALITY. For a period of five (5) years from the Closing
Date, each party shall hold in confidence and use its best efforts to have all
of their respective Affiliates and representatives hold in confidence all
confidential information of the other party, and, except as
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contemplated by this Agreement, shall not disclose, publish, use or permit
others to use the same; provided, however, that the foregoing restriction shall
not apply to any portion of the foregoing which was or becomes available on a
non-confidential basis to the other party or when such disclosure is required
by a Governmental or Regulatory Authority or is otherwise required by law or is
necessary in order to establish rights under this Agreement or any other
agreements referred to herein. In the event the transaction contemplated hereby
is not consummated, upon the request of the other party, each party hereto
will, and will cause its Affiliates, any Person who has provided, or who is
providing, financing to such party and their respective Representatives to,
promptly (and in no event later than five (5) Business Days after such request)
redeliver or cause to be redelivered all copies of confidential documents and
information furnished by the other party in connection with this Agreement or
the transactions contemplated hereby and destroy or cause to be destroyed all
notes, memoranda, summaries, analyses, compilations and other writings related
thereto or based thereon prepared by the party furnished such documents and
information or its representatives, provided, however, that each party shall be
entitled to keep one archival copy of such confidential documents and
information and related materials solely as evidence of what was redelivered
and destroyed hereunder, and for no other purpose.
5.9 TRANSITION SERVICES. Subsequent to the Closing Date, Warner-Lambert
agrees to provide certain transition services to Horizon pursuant to the
Transition Services Agreement (as hereinafter defined).
5.10 FURTHER ASSURANCES. Warner-Lambert, at any time after the Closing
Date, at the request of Horizon and at Horizon's sole expense, shall execute,
acknowledge and deliver any further assignments, and other assurances, documents
and instruments of transfer that may be reasonably necessary for the purpose of
assigning and granting to Horizon all Assets to be conveyed pursuant to this
Agreement.
5.11 THIRD PARTY CONSENTS. To the extent that any Managed Care Contract
is not assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof. Warner-Lambert and
Horizon shall use their commercially reasonable efforts to obtain the consent of
such other party to the assignment of any such Managed Care Contract to Horizon
in all cases in which such consent is or may be required for such assignment. If
any such consent shall not be obtained, Warner-Lambert shall cooperate with
Horizon in any reasonable arrangement designed to provide for Horizon the
benefits intended to be assigned to Horizon under the relevant Managed Care
Contract, including enforcement at the cost and for the account of Horizon of
any and all right of Warner-Lambert or any of its Affiliates against the other
party thereto arising out of the breach or cancellation thereof by such other
party or otherwise. If and to the extent that such arrangement cannot be made,
Horizon shall have no obligation pursuant to Section 1.3 or otherwise with
respect to any such Managed Care Contract. The provisions of this Section 5.11
shall not affect the right of Horizon not to consummate the transactions
contemplated by this Agreement if the condition to its obligations hereunder
contained in Section 3.7 has not been fulfilled.
5.12 NOTIFICATION TO THE TRADE. The parties shall each use their best
efforts to notify Warner-Lambert's customers in the United States of the sale of
the Product to Horizon within three (3) Business Days after the Closing Date.
The parties will agree to notify Warner-
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Lambert's customers outside the United States upon the transfer of the
Registration of the Product.
5.13 POST CLOSING OPERATION OF BUSINESS. For twelve (12) months
following the Closing Date, Horizon will operate the Business only in the
ordinary course.
5.14 DOCUMENT RETENTION. Each party agrees for a period which is the
longer of three (3) years after the Closing Date and the applicable period
required by law or any Governmental or Regulatory Authority not to destroy or
otherwise dispose of any Registrations or Information unless such party shall
first offer in writing to surrender such documentation to the other party and
such other party shall not agree in writing to take possession thereof during
the ten (10) day period after such offer is made.
5.15 CERTAIN FTC UNDERTAKINGS. (a) Horizon shall, within ten (10) days
after the Closing Date, submit to the United States Federal Trade Commission
(the "Commission") a certification attesting to its good faith intention to
obtain expeditiously all of the necessary FDA approvals to sell and manufacture
or have manufactured Cognex, together with a business plan setting forth the
forecasted dates for completion of necessary preparations and final FDA
approvals.
(b) Horizon shall, submit to the Commission and Interim Trustee
periodic reports setting forth, in detail, the efforts of Horizon to market the
Product and to obtain FDA approvals to sell and manufacture or have manufactured
the Product. Horizon shall submit the first such report sixty (60) days after
the date of the Consent Order relating to the merger of Warner-Lambert and
Pfizer Inc., and every sixty days thereafter, until all necessary FDA approvals
are obtained by or on behalf of Horizon.
(c) In the event that Horizon (i) ceases to sell the Product in the
United States for a period exceeding sixty (60) days, or (ii) abandons its
efforts to obtain all necessary FDA approvals to sell and manufacture or have
manufactured Cognex, Horizon shall notify the Commission and the Interim Trustee
within ten (10) days thereafter. Horizon shall provide the Commission and the
Interim Trustee with access to all records and facilities that relate to its
efforts to manufacture and sell the Product.
(d) In the event that Horizon, other than for reasons that are outside
of its control, (i) voluntarily ceases for sixty (60) days or more the sale of,
or otherwise fails to pursue good efforts to sell the Product in the United
States prior to obtaining all necessary FDA approvals; (ii) fails to pursue sale
and manufacture (or third party manufacture) of the Product within one (1) year
from the date the Commission approves this Agreement, provided, however, that
the one (1) year period may be extended by the Commission in three (3) month
increments for a period not to exceed one (1) year if it appears that such FDA
approvals are likely to obtain with such extended period, the Commission may
order that the Product revert to Warner-Lambert and the Product will be divested
by the divestiture trustee appointed by the Commission to a new purchaser.
Horizon shall be entitled to receive the proceeds from the sale of the Product
by the divestiture trustee, up to a maximum of $3.5 million, within thirty (30)
days after Warner-Lambert receives such proceeds. Warner-Lambert shall have no
further obligation or liability to Horizon in connection with the reversion of
Product to Warner-Lambert hereunder.
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ARTICLE 6
COVENANTS OF THE PARTIES
6.1 COVENANTS OF WARNER-LAMBERT. Warner-Lambert covenants and agrees
with Horizon that, at all times from and after the date hereof until the
Closing, Warner-Lambert will comply with all covenants and provisions of this
Section 6.1, except to the extent Horizon may otherwise consent in writing.
6.1.1 Investigation by Horizon. Warner-Lambert will provide
Horizon and its Representatives with full access, upon reasonable prior notice
and during normal business hours, to the officers, employees and agents of
Warner-Lambert who have any responsibility for the conduct of the Business, to
Warner-Lambert's accountants and to the Assets.
6.1.2 Conduct of Business. Warner-Lambert will operate the
Business only in the ordinary course, consistent with past practice.
6.1.3 Fulfillment of Conditions. Warner-Lambert will execute
and deliver at the Closing each Operative Agreement that Warner-Lambert is
required hereby to execute and deliver as a condition to the Closing, will take
all commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each other condition to the obligations of Horizon
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
6.1.4 Regulatory and Other Approvals. Warner-Lambert will take
all commercially reasonable steps necessary or desirable to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Warner-Lambert to consummate the transactions
contemplated hereby and by the Operative Agreements, including without
limitation those described in Exhibits 3.7(a) and 3.7(b).
6.2 COVENANTS OF HORIZON. Horizon covenants and agrees with
Warner-Lambert that, at all times from and after the date hereof until the
Closing, Horizon will comply with all covenants and provisions of this Section
6.2, except to the extent Warner-Lambert may otherwise consent in writing.
6.2.1 Fulfillment of Conditions. Horizon will execute and
deliver at the Closing each Operative Agreement that Horizon is hereby required
to execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Warner-Lambert contained
in this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
6.2.2 Regulatory and Other Approvals. Horizon will take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Horizon to consummate the transactions
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contemplated hereby and by the Operative Agreements, including without
limitation those described in Exhibits 3.7(a) and 3.7(b).
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PARTIES
7.1 CONDITIONS TO OBLIGATIONS OF HORIZON. The obligations of Horizon
hereunder to purchase the Assets and to assume and pay, perform and discharge
the Assumed Liabilities are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of which may be waived
in whole or in part by Horizon in its sole discretion):
7.1.1 Representations and Warranties. The representations and
warranties made by Warner-Lambert in this Agreement, taken as a whole, shall be
true and correct, in all material respects, on and as of the Closing Date as
though made on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on and as
of such earlier date.
7.1.2 Performance. Warner-Lambert shall have performed and
complied with, in all material respects, the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
Warner-Lambert at or before the Closing.
7.1.3 Orders and Laws. There shall not be in effect on the
Closing Date any order or law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
7.1.4 Deliveries. Warner-Lambert shall have delivered to
Horizon an Assignment, Assumption and Bill of Sale in the form of Exhibit
7.1.4(a) (the "Assignment, Assumption and Bill of Sale"), a Trademark assignment
in the form of Exhibit 7.1.4(b) and except as otherwise provided herein, such
other documents and instruments as may be necessary to completely sell, convey,
assign, grant, transfer and deliver the Assets to Horizon.
7.1.5 Supply Agreement. Warner-Lambert shall have delivered to
Horizon a manufacturing and supply agreement between Warner-Lambert or its
Affiliate and Horizon in the form of Exhibit 7.1.5 (the "Supply Agreement").
7.1.6 Warner-Lambert Assignment Letters. Warner-Lambert shall
have delivered to Horizon letters from Warner-Lambert to the FDA, transferring
all rights and responsibilities under the Registrations to Horizon, in form
reasonably satisfactory to counsel for Horizon (the "Warner-Lambert Assignment
Letters").
7.1.7 Third Party Consents. The consents (or in lieu thereof
waivers) listed on Exhibit 3.7(a) shall have been obtained and shall be in full
force and effect.
7.1.8 Sublicense. Warner-Lambert shall have delivered to
Horizon a sublicense of the License Agreement between William K. Summers, M.D.
and Warner-Lambert dated September 27, 1990 substantially in the form of Exhibit
7.1.8 (the "Sublicense").
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7.1.9 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to the relevant Governmental
or Regulatory Authority set forth in Exhibits 3.7(a) and 3.7(b), necessary to
permit Horizon and Warner-Lambert to perform their obligations under this
Agreement, to permit Horizon, Warner-Lambert and the Selling Affiliates to
perform their respective obligations under the Operative Agreements and to
consummate the transactions contemplated hereby and thereby shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any such Governmental
or Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
7.1.10 Transition Services Agreement. Warner-Lambert shall
have delivered to Horizon a transition services agreement between Warner-Lambert
or its Affiliate and Horizon substantially in the form of Exhibit 7.1.10 (the
"Transition Services Agreement").
7.1.11 Assignment of Licenses. Warner-Lambert shall have
delivered to Horizon an assignment and assumption agreement in the form of
Exhibit 7.1.11 (the "License Agreement").
7.2 CONDITIONS TO OBLIGATIONS OF WARNER-LAMBERT. The obligations of
Warner-Lambert hereunder to sell or cause the Selling Affiliates to sell the
Assets are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Warner-Lambert in its sole discretion):
7.2.1 Representations and Warranties. The representations and
warranties made by Horizon in this Agreement, taken as a whole, shall be true
and correct in all material respects on and as of the Closing Date as though
made on and as of the Closing Date.
7.2.2 Performance. Horizon shall have performed and complied
with, in all material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Horizon at or
before the Closing.
7.2.3 Orders and Laws. There shall not be in effect on the
Closing Date any order or law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
7.2.4 Deliveries. Horizon shall have delivered to
Warner-Lambert the Assignment, Assumption and Bill of Sale and except as
otherwise provided herein, such other documents and instruments as may be
necessary to completely sell, convey, assign, grant, transfer and deliver the
Assets to Horizon.
7.2.5 Supply Agreement. Horizon shall have delivered to
Warner-Lambert the Supply Agreement.
7.2.6. Horizon Assumption Letters. Horizon shall have
delivered to Warner-Lambert letters from Horizon to the FDA assuming all rights
and responsibilities under the Registrations, in form reasonably satisfactory to
counsel for Warner-Lambert (the "Horizon Assumption Letters").
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7.2.7 Third Party Consents. The consents (or in lieu thereof
waivers) listed on Exhibit 3.7(b) shall have been obtained and shall be in full
force and effect.
7.2.8 Sublicense. Horizon shall have delivered to
Warner-Lambert the Sublicense.
7.2.9 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to the relevant Governmental
or Regulatory Authority set forth in Exhibits 3.7(a) and 3.7(b), necessary to
permit Horizon and Warner-Lambert to perform their obligations under this
Agreement, to permit Horizon, Warner-Lambert and the Selling Affiliates to
perform their respective obligations under the Operative Agreements and to
consummate the transactions contemplated hereby and thereby shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any such Governmental
or Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
7.2.10 Transition Services Agreement. Horizon shall have
delivered to Warner-Lambert the Transition Services Agreement.
7.2.11 Assignment of Licenses. Horizon shall have delivered
to Warner-Lambert the License Agreement.
ARTICLE 8
GENERAL
8.1 ASSIGNMENT. Until such time as Horizon has discharged all its
payment obligations hereunder (other than the payment obligation set forth in
Section 2.1(a)(ii)), this Agreement may not be assigned by Horizon without the
prior written consent of Warner-Lambert; provided, that Horizon shall have the
right to assign its rights and obligations under this Agreement to any third
party successor to all or substantially all of its entire business.
Warner-Lambert will respond to Horizon's written request for assignment within
forty-five (45) days after receipt of such written request from Horizon. This
Agreement will be binding upon and will inure to the benefit of permitted
assigns and successors. Notwithstanding anything to the contrary in this herein,
Horizon may sublicense the Assets to a third party manufacturer to the extent
and only to the extent necessary to manufacture the Product for Horizon.
8.2 NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received on the date when
delivered by hand delivery with receipt acknowledged, or upon the next business
day following receipt of telex or telecopy transmission, or upon the third day
after deposit in the United States mail, registered or certified with postage
prepaid, return receipt requested, addressed as set forth below:
(a) If to Warner-Lambert:
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Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attn: President, Pharmaceutical Sector
Fax: 973-385-4009
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attn: Senior Vice President and General Counsel
Fax: (973) 385-3927
(b) If to Horizon:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Vice President, Corporate Development
Fax: (770) 442-9594
with a copy to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Legal Counsel
Fax: (770) 442-9594
Any party may alter the addresses to which communications or copies are to be
sent by giving, notice of such change of address in conformity with the
provisions of this Section for giving notice.
8.3 TERMINATION. (a) Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior to
the Closing Date: (i) by the mutual consent of the parties; (ii) by
Warner-Lambert if the Closing shall not have occurred on or before June 30,
2000, other than due to a delay in receiving clearance from the Federal Trade
Commission to proceed with the transactions contemplated herein; (iii) by either
party in the event of a material breach by the other party of any of its
agreements, representations or warranties contained herein, as the case may be,
and the failure of such breaching party to cure such breach within fourteen (14)
days after receipt of notice from the non-breaching party requesting such breach
to be cured, or (iv) by either party if consummation of the transactions
contemplated hereby shall violate a decree, injunction or similar order of any
Governmental or Regulatory Authority.
(b) Any party desiring to terminate this Agreement pursuant to Section
8.3(a) shall provide five (5) days' prior written notice of such termination to
the other party to this Agreement.
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(c) If this Agreement is validly terminated pursuant to Section
8.3(a), this Agreement will forthwith become null and void, and there will be
no liability or obligation on the part of Warner-Lambert or Horizon (or any of
their representatives or Affiliates), except that the provisions with respect
to expenses in Section 5.5 and confidentiality in Section 5.8 will continue to
apply following any such termination.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Warner-Lambert in this Agreement shall survive from the
Closing Date for a period of two (2) years and terminate thereafter. All
indemnification provisions made by the parties hereto under this Agreement
shall survive indefinitely.
8.5 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, the remaining provisions will continue
in full force without being impaired or invalidated in any way, and the parties
agree to replace any invalid provision with a valid provision which most
closely approximates the intent and economic effect of the invalid provision.
8.6 HEADINGS. Headings used in this Agreement are for reference
purposes only and in no way define, limit, construe or describe the scope or
extent of such paragraph, or in any way affect this Agreement.
8.7 NO WAIVER. No term or provisions hereof shall be deemed waived,
and no breach excused, unless such waiver or consent is in writing and signed
by the party claimed to have waived or consented. The waiver by any party of a
breach of any provision of this Agreement will not operate or be interpreted as
a waiver of any other or subsequent breach.
8.8 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement should be
construed to create a partnership, agency, joint venture or employer-employee
relationship. None of the parties has the authority to assume or create any
obligation, express or implied, on behalf of any other party.
8.9 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York. Each party hereby consents
to the personal jurisdiction of the state and federal courts located in New
York.
8.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including all
Exhibits and Schedules hereto (which Exhibits and Schedules are hereby
incorporated into and made a part of this Agreement), and the additional
documents required to be delivered on the Closing Date, constitute the final,
complete and exclusive agreement among the parties with respect to the subject
matter hereof and supersede any previous proposals, negotiations, agreements,
arrangements or warranties, whether verbal or written, made among the parties
with respect to such subject matter. This Agreement may be amended or modified
only by mutual agreement in writing of the authorized representatives of the
parties.
8.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof shall bear the signatures of all
parties indicated as signatories hereto.
22
<PAGE> 24
8.12 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
8.13 PUBLIC ANNOUNCEMENTS. Warner-Lambert and Horizon will not issue or
make any reports, statements or releases to the public or generally to the
employees, customers, suppliers or other Persons with respect to this Agreement
or the transactions contemplated hereby without the consent of the other
parties, which consent shall not be unreasonably withheld. If any party is
unable to obtain the approval of its public report, statement or release from
the other party and such report, statement or release is, in the opinion of
legal counsel to such parties, required by law in order to discharge such
party's disclosure obligations, then such party may make or issue the legally
required report, statement or release and promptly furnish the other parties
with a copy thereof. Warner-Lambert and Horizon will also obtain the other
parties' prior approval of any press release to be issued immediately following
the Closing Date announcing the consummation of the transactions contemplated by
this Agreement.
23
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WARNER-LAMBERT COMPANY
By:
--------------------------------------
Name:
Title:
FIRST HORIZON PHARMACEUTICAL CORPORATION
By:
--------------------------------------
Name:
Title:
24
<PAGE> 26
EXHIBIT A
PRODUCT
Cognex
<PAGE> 27
EXHIBIT 1.1.1
[****]-CONFIDENTIAL TREATMENT REQUESTED
FINISHED PRODUCT INVENTORY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINISHED PRODUCT INVENTORY (PACKAGED)
- ---------------------------------------------------------------------------------------------------------------------
COUNTRY DOSAGE STRENGTH QUANTITY EXPIRATION DATE COST (US$)
------- --------------- -------- --------------- ----------
<S> <C> <C> <C> <C>
US
10 mg 2,100* 07/31/2001 $[*****]
20 mg 31,900* 03/30/2002 $[*****]
40 mg 7,200* 05/30/2001 $[*****]
* - 120 ct bottles
FRANCE
40 mg 103*** 10/01/2001 $[*****]
*** - 112 ct packages
GREECE
10 mg 1,000* 08/01/2001 $[*****]
30 mg 520* 10/01/2001 $[*****]
40 mg 1,223* 10/01/2001 $[*****]
* - 56 ct packages
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINISHED PRODUCT IN GERMANY (PACKAGED BUT NOT SHIPPED)
- ---------------------------------------------------------------------------------------------------------------------
COUNTRY DOSAGE STRENGTH QUANTITY EXPIRATION DATE COST
------- --------------- -------- --------------- ----
<S> <C> <C> <C> <C>
GREECE 40 mg 1,520 (56 ct) 10/01/2001 $[*****]
GRAND TOTAL $[*****]
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
EXHIBIT 1.1.2
INTELLECTUAL PROPERTY
TRADEMARKS
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
USA COGNEX 73/762382 07NO1988 1543222
13JE1989 13JE2009 WLP G
ANDO COGNEX 12903 04DE1998 12467
04DE1998 04DE2008 WLP G
AOIP COGNEX 82989 16NO1993 33312
15SE1994 16NO2003 WLP G
ARGE COGNEX 1668032 19OC1988 1419731
26FE1993 26FE2003 WLP G
ARME COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ASTL COGNEX 497479 01MY1995 A497479
01MY1995 17OC2009 WLP G
ATRA COGNEX AM4962/89 11OC1989 129313
09MR1990 31JA2000 WLP G
ATRA COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
AZER COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BELA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BENE COGNEX 65023 14SE1998 457086
02FE1999 26OC2008 WLP G
BENE COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
BRAZ COGNEX 68344 29DE1999 814501605
28AU1990 28AU2000 WLP G
BRAZ COGNEX CR 819637173 04NO1996 819637173
13JL1999 13JL2009 WLP G
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BULG COGNEX 21382 08SE1992 21730
30SE1993 08SE2002 WLP G
BULG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
CAMB COGNEX 1803 08OC1992 1801
21AP1993 08OC2002 WLP G
CHIL COGNEX 443093 12MR1999 539520
01JL1999 27AP2009 WLP G
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CHIL COGNEX CR 357493 10OC1996 489543
14JL1997 14JL2007 WLP G
CHIN COGNEX 93125913 02DE1993 765722
14SE1995 13SE2005 WLP G
COLO COGNEX 309872 11SE1989 147849
10NO1993 10NO2003 WLP G
COLO COGNEX CR 96056701 25OC1996 197101
15MY1997 15MY2007 WLP G
COST COGNEX NONE 07DE1994 95326
27MR1996 27MR2006 WLP G
CTM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
CUBA COGNEX 1033/96 11JE1996 125203
28FE1997 11JE2006 WLP G
CZEC COGNEX 71543-92 04SE1992 179288
31AU1994 04SE2002 WLP G
DENM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
DENM COGNEX 6580/1989 07SE1989 7273/1992
07AU1992 07AU2002 WLP G
DREP COGNEX NONE 03NO1993 70025
15JA1994 15JA2014 WLP G
ECUA COGNEX 42184/93 08OC1993 3834-94
14NO1994 14NO2004 WLP G
EGYP COGNEX 88550 11OC1993 88550
22JE1998 11OC2003 WLP G
ESTO COGNEX 9303722 14AP1993 16105
30JE1995 30JE2005 WLP G
FINL AXONYL 4039/91 27AU1991 122292
21SE1992 21SE2002 WLP G
FINL COGNATEX 4040/91 27AU1991 122293
21SE1992 21SE2002 WLP G
FINL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
FINL COGNEX 5965/89 21NO1989 119949
06JL1992 06JL2002 WLP G
FRAN AXONYL 102120 30NO1998 1513315
08JA1999 10JA2009 WLP G
FRAN COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
FRAN COGNEX 963139 01JE1998 1495729
10JL1998 25OC2008 WLP G
GBRI COGNEX 1361554 21SE1995 1361554
21SE1995 25OC2005 WLP G
GBRI COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
GBRI COGNEX CR 2111743 03OC1996 2111743
04AP1997 03OC2006 WLP G
GEOR COGNEX TM1998013151 24FE1998 11272
11DE1998 11DE2008 WLP G
GERM COGNEX W38616/5WZ 16FE1999 1158143
16FE1999 31OC2008 WLP G
GERM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
GERM COGNEX IN CYRILLIC 39629332.8 04JL1996 39629332
21NO1996 31JL2006 PDGB G
GREC COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
GREC COGNEX 95564 30MR1999 95564
30MR1999 12SE2009 WLP G
GUAT COGNEX 7368-93 05NO1993 80261
24JE1996 23JE2006 WLP G
HAIT COGNEX 539/0 25OC1993 73/100
12JL1994 12JL2004 WLP G
HOND COGNEX 10427/93 20OC1993 59959
25MY1994 25MY2004 WLP G
HONG COGNEX 6695/88 21AU1995 686/1990
06OC1995 21OC2009 WLP G
HONG COGNEX IN CHINESE CHARACTERS 95/04659 21AP1995 4917/1997
01MY1997 21AP2004 WLP G
HONG COGNEX IN CHINESE CHARACTERS 9703229 11MR1997 B6434/1998
25JE1998 11MR2004 PDA G
HONG COGNEX IN CHINESE CHARACTERS 9703228 11MR1997 B7477/1998
27JL1998 11MR2004 PDA G
HUNG COGNEX M9204478 15SE1992 137076
17AU1993 15SE2002 WLP G
ICEL COGNEX NONE 09AU1999 1038/1989
14OC1999 08DE2009 WLP G
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INDI COGNEX WLP F 609118 11OC1993
INDO COGNEX NONE 11SE1989 271725
13FE1992 13AU2001 WLP G
INTL COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
IREL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
IREL COGNEX 6377/89 27NO1996 135633
27NO1996 26NO2006 WLP G
ISRA COGNEX 89254 14OC1993 89254
13SE1995 13OC2000 WLP G
ITAL COGNEX WLP F RM005925 03DE1997
ITAL COGNEX RM98C005339 28OC1998 557807
13JA1992 03NO1998 WLP G
ITAL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
JAMA COGNEX 5/4953 19OC1993 27282
14NO1996 19OC2000 WLP G
JAPA COGNEX 119497/1988 20OC1988 2313556
28JE1991 28JE2001 WLP G
JORD COGNEX NONE 15NO1999 33170
23OC1993 23OC2000 WLP G
KAZA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
KENY COGNEX 40928 23NO1993 40928
30MR1995 23NO2000 WLP G
KORS COGNEX 93-35581 07OC1993 307643
08FE1995 08FE2005 WLP G
KORS COGNEX IN KOREAN CHARACTERS 94-49286 09DE1994 331529
16JA1996 16JA2006 PDA G
KYRG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
LAOS COGNEX 1342 11SE1992 1437
20JL1993 11SE2002 WLP G
LATV COGNEX M-93-2209 08MR1993 M33894
20OC1996 08MR2003 WLP G
LEBA COGNEX WLP F 61860 18AU1994
LITH COGNEX 12922 05OC1993 23927
16DE1996 05OC2003 WLP G
MACE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
MAYS COGNEX NONE 03JL1996 MA/5572/89
22JL1996 12SE2010 WLP G
MEXI COGNEX 160501 11FE1993 452998
24FE1994 11FE2003 WLP G
MOLD COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 B G
MONG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
NEWZ COGNEX NONE 14DE1994 188209
14DE1994 19OC2009 WLP G
NICA COGNEX 93-02730 29NO1993 26207
12JL1994 11JL2004 WLP G
NIGE COGNEX WLP F NONE 26OC1993
NORW AXONYL 91/4361 28AU1991 175093
14MR1996 14MR2006 WLP G
NORW COGNATEX 91/4360 28AU1991 154564
14JA1993 14JA2003 WLP G
NORW COGNEX 89/4387 11SE1989 144521
21MR1991 21MR2001 WLP G
PAKI COGNEX WLP F 104073 27SE1989
PANA COGNEX 77106 04SE1995 77106
28OC1996 28OC2006 WLP G
PARA COGNEX 18125 18DE1991 154686
24JE1992 24JE2002 WLP G
PERU COGNEX 240536 20AP1994 79857
19AU1994 10MY2004 WLP G
PHIL COGNEX 76718 08JL1991 55601
02JL1993 02JL2013 WLP G
POLA COGNEX Z-113342 09SE1992 79098
28OC1994 09SE2002 WLP G
PORT COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
PORT COGNEX 259054 12OC1989 259054
06MY1993 06MY2003 WLP G
PUER COGNEX NONE 20JL1993 33734
04NO1994 04NO2004 WLP G
ROMA COGNEX 27765 16SE1992 19848
26MR1996 16SE2002 WLP G
RUSS COGNEX 165803 09NO1992 120087
09NO1992 09NO2002 WLP G
RUSS COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
SAFR COGNEX NONE 26MR1999 89/9005
29MR1999 26SE2009 WLP G
SALV COGNEX 3743 14OC1993 156
08MY1995 08MY2005 WLP G
SAUD COGNEX 22612 16OC1993 314/37
25JL1994 26JE2003 WLP G
SING COGNEX 5960/89 02JL1996 S/5960/89
19FE1997 08SE2006 WLP G
SLOV COGNEX Z-9870111 27JA1998 9870111
05OC1998 26JA2008 WLP G
SLVK COGNEX 0-71543-92 04SE1992 174926
14JE1995 04SE2002 WLP G
SPAI COGNEX 1521725 05MY1999 1521725
01JA2000 28SE2009 WLP G
SPAI COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SPAI COGNEX CR 2050172 02OC1996 2050172
05MR1997 02OC2006 WLP G
SWED COGNEX 89-08491 23AU1989 244648
30DE1992 30DE2002 WLP G
SWED COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SWED COGNEX CR 96-09133 08OC1996 326021
16JA1998 16JA2008 WLP G
SWIT COGNEX 7341 02OC1989 376663
12JL1990 02OC2009 WLP G
SYRI COGNEX WLP D
TADJ COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
TAIW COGNEX (78)01408 28JA1989 477796
16MR1990 15MR2000 WLP G
TAIW COGNEX IN CHINESE CHARACTERS 82059910 06DE1993 654939
16SE1994 15SE2004 WLP G
THAI COGNEX 371708 09NO1998 KOR83130
08DE1998 09NO2008 WLP G
TUNI COGNEX WLP F
EE991593 24SE1999
TURK COGNEX 11383/93 20OC1993 147828
20OC1993 19OC2003 WLP G
UKRA COGNEX 93084114 03AU1993 8843
31OC1997 03AU2003 WLP G
UKRA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
URUG COGNEX 265939 15OC1993 265939
11AU1994 11AU2004 WLP G
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
URUG COGNEX CR 290345 09OC1996 290345
01SE1997 01SE2007 WLP G
UZBE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
VENE COGNEX WLP F 19772-88 24OC1988
VENE COGNEX CR WLP F 86384 05NO1996
VIET COGNEX 8630 06AU1992 7554
22FE1993 06AU2002 WLP G
YUGO COGNEX Z-1124/92 16SE1992 40303
19SE1997 16SE2002 WLP G
YUGO COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ZIMB COGNEX 874/93 12OC1993 974/93
14FE1994 12OC2003 WLP G
</TABLE>
PATENTS
MASTER FILE REPORT PCMASTER REPORTER
13MR2000 9 05 PAGE: 1
TACRINE PATENT PORTFOLIO
<TABLE>
<CAPTION>
Docket Number Ctry CsTp RlTp FlTp FlNo St
- ------ ------ ---- ---- ---- ---- ---- --
<S> <C> <C> <C> <C> <C> <C> <C>
3626 USA P 01 G
APP#: 391808
DATE:09AU1989
PAT#: 5019395
DATE:28MY1991
EXP.DT:28MY2008
ABSTRACT:
PD-3626 US *** THE PENETRATION OF VARIOUS
DRUGS THROUGH LIVING MEMBRANES IS IMPROVED BY
THEIR USE IN TRANSDERMAL COMPOSITIONS
CONTAINING CERTAIN PENETRATION-ENHANCING
SYSTEMS. THIS APPLICATION IS A C-I-P OF USSN
165,322 FILED 3/8/88.
3626 ASTL G
APP#: 30258/89
DATE:23FE1989
PAT#: 611771
DATE:03DE1991
EXP.DT:23FE2009
3626 ASTL 02 G
APP#: 70061/91
DATE:29JA1991
PAT#: 634015
DATE:18JE1993
EXP.DT:29JA2011
3626 ATRA E G
APP#: E90571
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C>
3626 ATRA E 02 G
APP#: E114481
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 BELG E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 BELG E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 DENM F
APP#: 1096/89
DATE:07MR1989
PAT#:
DATE:
EXP.DT:
3626 DENM E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 EPC E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 EPC E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 FRAN E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 FRAN E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 GBRI E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C>
3626 GBRI E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 GERM E 02 G
APP#: EP0499662
DATE:19FE1991
PAT#: P69105480.0
DATE:30NO1994
EXP.DT:19FE2011
3626 GERW E G
APP#: EP0332147
DATE:07MR1989
PAT#: P68907081.0
DATE:16JE1993
EXP.DT:07MR2009
3626 GREC E G
APP#: EP0332147
DATE:07MR1989
PAT#: 3008708
DATE:16JE1993
EXP.DT:07MR2009
3626 GREC E 02 G
APP#: EP0499662
DATE:19FE1991
PAT#: 3014988
DATE:30NO1994
EXP.DT:19FE2011
3626 IREL G
APP#: 390/89
DATE:07FE1989
PAT#: 62871
DATE:15FE1995
EXP.DT:07FE2009
3626 IREL 02 G
APP#: 305/91
DATE:29JA1991
PAT#: 64308
DATE:10JL1995
EXP.DT:29JA2011
3626 ITAL E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 ITAL E 02 G
APP#: 20674BE/95
DATE:19FE1991
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C>
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 JAPA G
APP#: 53069/89
DATE:07MR1989
PAT#: 2939264
DATE:11JE1999
EXP.DT:07MR2009
3626 KORS 02 G
APP#: 1750/91
DATE:01FE1991
PAT#: 191456
DATE:25JA1999
EXP.DT:01FE2011
3626 LUXE E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 LUXE E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 NETH E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 NETH E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 NEWZ G
APP#: 228094
DATE:22FE1989
PAT#: 228094
DATE:20FE1992
EXP.DT:22FE2009
3626 NEWZ 02 G
APP#: 236921
DATE:28JA1991
PAT#: 236921
DATE:09FE1994
EXP.DT:28JA2011
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C>
3626 PHIL G
APP#: 38267
DATE:01MR1989
PAT#: 26548
DATE:19AU1992
EXP.DT:19AU2009
3626 PHIL 02 G
APP#: 41919
DATE:31JA1991
PAT#: 31671
DATE:18JA1999
EXP.DT:18JA2016
3626 PORT 02 G
APP#: 96779
DATE:15FE1991
PAT#: 96779
DATE:26JE1998
EXP.DT:26JE2013
3626 SAFR G
APP#: 89/1031
DATE:09FE1989
PAT#: 89/1031
DATE:31OC1990
EXP.DT:09FE2009
3626 SAFR 02 G
APP#: 91/0624
DATE:28JA1991
PAT#: 91/0624
DATE:28OC1992
EXP.DT:28JA2011
3626 SPAI E G
APP#: EP0332147
DATE:07MR1989
PAT#: 2056981
DATE:16JE1993
EXP.DT:07MR2009
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C>
3626 SPAI E 02 G
APP#: EP0499662
DATE:19FE1991
PAT#: 2064780
DATE:30NO1994
EXP.DT:19FE2011
3626 SWED E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 SWED E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 SWIT E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 SWIT E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3884 USA G
APP#: 387722
DATE:31JL1989
PAT#: 4999430
DATE:12MR1991
EXP.DT:31JL2009
</TABLE>
ABSTRACT:
NOVEL PRODRUGS OR DEPOT DERIVATIVES OF
1,2,3,4-TETRAHYDRO-9-ACRIDINAMINE ARE
DESCRIBED, AS WELL AS, METHODS FOR THE
PREPARATION AND PHARMACEUTICAL COMPOSITIONS
OF SAME, WHICH ARE USEFUL AS ANALGESIC AGENTS
FOR THE TREATMENT OF PAIN, AS SLEEP AIDS AND
AS AGENTS FOR TREATING THE SYMPTOMS OF SENILE
DEMENTIA, ALZHEIMER'S DISEASE, HUNTINGTON'S
CHOREA, TARDIVE DYSKINESIA, HYPERKINESIA,
MANIA, OR SIMILAR CONDITIONS OF CEREBRAL
INSUFFICIENCY CHARACTERIZED BY DECREASED
CEREBRAL A CETYLCHOLINE PRODUCTION OR
RELEASE.
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C>
3884 ATRA E G
APP#: E119885
DATE:03JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:03JL2010
3884 ATRA D E 01 G
APP#: E186908
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 BELG E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 BELG D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 CANA F
APP#: 2022297
DATE:30JL1990
PAT#:
DATE:
EXP.DT:
3884 DENM E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 DENM D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 EPC E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 EPC D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
</TABLE>
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C>
DATE:24NO1999
EXP.DT:31JL2009
3884 FRAN E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 FRAN D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 GBRI E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 GBRI D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 GERM D E 01 G
APP#: EP0628548
DATE:30JL1990
PAT#: 69033369.2
DATE:24NO1999
EXP.DT:31JL2009
3884 GERW E G
APP#: EP0411534
DATE:30JL1990
PAT#: P69017789.5
DATE:15MR1995
EXP.DT:30JL2010
3884 GREC E G
APP#: EP0411534
DATE:30JL1990
PAT#: 3016106
DATE:15MR1995
EXP.DT:30JL2010
3884 GREC D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
</TABLE>
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C>
3884 IREL G
APP#: 2751/90
DATE:30JL1990
PAT#: 66823
DATE:16JA1996
EXP.DT:30JL2010
3884 IREL D 01 F
APP#: 950609
DATE:11AU1995
PAT#:
DATE:
EXP.DT:
3884 ITAL E G
APP#: 24477BE/95
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 ITAL D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 JAPA G
APP#: 199361/90
DATE:30JL1990
PAT#: 2930245
DATE:21MY1999
EXP.DT:30JL2010
3884 LUXE E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 LUXE D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 NETH E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 NETH D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C>
EXP.DT:31JL2009
3884 SPAI E G
APP#: EP0411534
DATE:30JL1990
PAT#: 2068955
DATE:15MR1995
EXP.DT:30JL2010
3884 SPAI D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 SWED E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 SWED D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 SWIT E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 SWIT D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
4370 USA P 01 G
APP#: 098871
DATE:24SE1987
PAT#: 4816456
DATE:28MR1989
EXP.DT:09SE2007
</TABLE>
ALL PATENTS WITH THE DOCKET NUMBER
4370 ARE SUBJECT TO THE LICENSE WITH
WILLIAM SUMMERS (SEE OTHER LEGAL
MATTERS SECTION)
ABSTRACT:
A METHOD FOR TREATING CENTRAL NERVOUS SYSTEM
OR PERIPHERAL NERVOUS SYSTEM CHOLOINERGIC
DEFICIT STATES SUCH AS ALZHEIMER'S DISEASE
IN A MAMMAL, SAID METHOD COMPRISING
ADMINISTERING TO SAID MAMMAL AN AMOUNT OF A
MONOAMINE ACRIDINE DERIVATIVE EFFECTIVE IN
THE TREATMENT OF A CHOLINERGIC DEFICIT STATE
AN
<PAGE> 44
<TABLE>
D FOR A TIME SUFFICIENT TO ACHIEVE A SUITABLE BLOOD LEVEL TO
TREAT SAID CHOLINERGIC DEFICIT STATE. THE PREFERRED MONOAMINE
ACRIDINE DERIVATIVE IS 1,2,3,4-TETRAHYDRO-5-AMINO
ACRIDINE A UNIT DOSAGE PHARMACEUTICAL COMPOSITION OF MATTER
COMPRISING AN EFFECTIVE AMOUNT OF SAID MONOAMINE ACRIDINE
DERIVATIVE SUFFICIENT TO TREAT SAID CHOLINERGIC DEFICIT
STATE AND A PHARMACEUTICALLY ACCEPTABLE INERT CARRIER
THEREFOR IS ALSO DISCLOSED. CIP OF U.S. SERIAL NO. 914,076
FILED 01OC1986. NO PRIORITY
<S> <C> <C> <C>
4370 ASTL G
APP#: 80707/87
DATE:28SE1987
PAT#: 621035
DATE:03MR1993
EXP.DT:28SE2007
4370 ASTL D 02 F
APP#: 78886/94
DATE:17NO1994
PAT#:
DATE:
EXP.DT:
4370 ATRA E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:26OC2014
4370 ATRA X G
APP#: E106245
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 ATRA J X G
APP#: SZ9/96
DATE:23MY1996
PAT#: SZ9/96
DATE:23FE1998
EXP.DT:05MY2009
4370 BELG E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 BELG X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 BELG J X F
APP#: 96C0021
DATE:05JE1996
PAT#:
</TABLE>
<PAGE> 45
<TABLE>
<S> <C> <C>
DATE:
EXP.DT:
4370 DENM P F
APP#: 2958/88
DATE:28SE1987
PAT#:
DATE:
EXP.DT:
4370 EPC E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 EPC X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 FRAN E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 FRAN X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 GBRI X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 GERM E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 GERM X G
APP#: EP0328535
DATE:28SE1987
PAT#: P3789967.2
DATE:01JE1995
EXP.DT:28SE2007
</TABLE>
<PAGE> 46
<TABLE>
<S> <C> <C>
4370 ITAL E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 ITAL X G
APP#: 4919/BE94
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 LUXE E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 LUXE X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 MEXI F
APP#: 923762
DATE:29JE1992
PAT#:
DATE:
EXP.DT:
4370 NETH E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
</TABLE>
<PAGE> 47
<TABLE>
<S> <C> <C>
4370 SWIT X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT J G
APP#: 52934
DATE:16JE1995
PAT#: C0328535/01
DATE:30AP1996
EXP.DT:16JE2010
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C> <C>
4627 USA C 01 G
APP#: 08/422019
DATE:12AP1995
PAT#: 5576022
DATE:19NO1996
EXP.DT:19NO2013
ABSTRACT:
RELEASE COMPOSITION COMPRISING;(A) A
WATER-INSOLUBLE POLYMER IN AN AMOUNT FROM
ABOUT 40% TO ABOUT 90%; (B) A WATER-SOLUBLE
POLYMER IN AN AMOUNT UP TO ABOUT 10%; AND (C)A
SECOND PLASTICIZING AGENT IN AN AMOUNT UP TO
ABOUT 10%; WHEREIN THE SUSTAINING LAYER AND
THE IMMEDIATE RELEASE COMPOSITION ARE PRESENT
IN THE SUSTAINED RELEASE COMPOSITION IN A
RATIO BY WEIGHT FROM ABOUT 1:9 TO ABOUT 4:6,
RESPECTIVELY, AND THE IMMEDIATE RELEASE
COMPOSITION AND THE SUSTAINED RELEASE
COMPOSITION ARE PRESENT IN THE DRUG DELIVERY
SYSTEM IN A RATIO BY WEIGHT FROM ABOUT 0.0 1:1
TO ABOUT 1:1, RESPECTIVELY. CONTINUATION OF
USSN 08/096140 FILED 7/22/93.
5180 USA G
APP#: 07/999999
DATE:22DE1986
PAT#: 4631286
DATE:23DE1986
EXP.DT:22DE2006
ABSTRACT: PATENTS WITH THE DOCKET NUMBER
5180 ARE SUBJECT TO THE LICENSE
AGREEMENT WITH HOECHST-ROUSSEL
(SEE OTHER LEGAL MATTERS SECTION)
5180 USA C 01 G
APP#: 07/999999
DATE:27JE1988
PAT#: 4754050
DATE:28JE1988
EXP.DT:22DE2006
5180 USA C 02 G
APP#: 07/999999
DATE:29MY1989
PAT#: 4835275
DATE:30JE1989
EXP.DT:22DE2006
5180 USA C 03 G
APP#: 07/999999
DATE:12JE1989
PAT#: 4839364
DATE:13JE1989
EXP.DT:22DE2006
5180 USA P 01 G
APP#: 07/999999
DATE:22DE1986
PAT#: 4695573
DATE:23DE1986
EXP.DT:22DE2006
5180 ASTL G
APP#: 99999
DATE:23OC1981
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C> <C>
PAT#: 589141
DATE:24OC1981
EXP.DT:23OC2001
5180 ASTL 01 G
APP#: 99999
DATE:18JL1985
PAT#: 615768
DATE:19JL1985
EXP.DT:18JL2005
5180 ATRA E G
APP#: E63903
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 BELG E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 CANA G
APP#: 99999
DATE:02DE1988
PAT#: 1292744
DATE:03DE1988
EXP.DT:03DE2005
5180 CZEC D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 DENM G
APP#: 99999
DATE:23OC1985
PAT#: 167250
DATE:24OC1985
EXP.DT:23OC2005
5180 DENM 01 G
APP#: 99999
DATE:25NO1992
PAT#: 168704
DATE:26NO1992
EXP.DT:25NO2012
</TABLE>
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
5180 EPC E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 FINL G
APP#: 99999
DATE:22OC1985
PAT#: 86421
DATE:23OC1985
EXP.DT:22OC2005
5180 FRAN E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 GBRI E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 GERM E G
APP#: EP0179383
DATE:14OC1985
PAT#: P3582995.0
DATE:15OC1985
EXP.DT:14OC2005
5180 HUNG G
APP#: 99999
DATE:17OC1985
PAT#: 196183
DATE:18OC1985
EXP.DT:17OC2005
5180 ISRA D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 ISRA 01 D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 ITAL E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
</TABLE>
<PAGE> 51
<TABLE>
<S> <C> <C> <C>
5180 JAPA D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 JAPA 01 D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 KORS D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 LUXE E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 NETH E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 NEWZ G
APP#: 213932
DATE:22OC1981
PAT#: 213932
DATE:23OC1981
EXP.DT:22OC2001
5180 NEWZ 01 G
APP#: 229248
DATE:22OC1981
PAT#: 229248
DATE:23OC1981
EXP.DT:22OC2001
5180 NORW G
APP#: 99999
DATE:23OC1985
PAT#: 169121
DATE:24OC1985
EXP.DT:23OC2005
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
5180 NORW 01 G
APP#: 99999
DATE:29OC1990
PAT#: 172847
DATE:30OC1990
EXP.DT:29OC2010
5180 PHIL G
APP#: 99999
DATE:16OC1985
PAT#: 22614
DATE:17OC1985
EXP.DT:17OC2002
5180 PORT G
APP#: 81362
DATE:29NO1982
PAT#: 81362
DATE:30NO1982
EXP.DT:29NO2002
5180 SAFR G
APP#: 85/08136
DATE:23OC1985
PAT#: 85/08136
DATE:24OC1985
EXP.DT:23OC2005
5180 SPAI G
APP#: 99999
DATE:22OC1985
PAT#: 548137
DATE:23OC1985
EXP.DT:23OC2005
5180 SPAI 01 G
APP#: 99999
DATE:29AP1986
PAT#: 554568
DATE:30AP1986
EXP.DT:30AP2006
5180 SPAI 02 G
APP#: 99999
DATE:29AP1986
PAT#: 554569
DATE:30AP1986
EXP.DT:30AP2006
5180 SWED E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 SWIT E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
</TABLE>
<PAGE> 53
LICENSES
Licenses In:
1. Royalty Agreement between Mount Sinai School of Medicine and
Warner-Lambert Company dated as of September 8, 1987.
2. Agreement between Shire Holdings Limited and Warner-Lambert Company
dated as of April 20, 1990.
3. License Agreement between William K. Summers, M.D. and Warner-Lambert
Company dated as of September 27, 1990.
4. Settlement and License Agreement between Hoechst-Roussel
Pharmaceuticals Inc. and Warner-Lambert Company dated as of September
28, 1994.
Licenses Out:
1. Technology License Agreement between Je Il Pharmaceutical Co., Ltd. and
Warner-Lambert Company dated as of November 1, 1995. (Korea)
2. Trademark License Agreement between Je Il Pharmaceutical Co., Ltd. and
Warner-Lambert Company dated as of November 1, 1995. (Korea)
3. Amendment Agreement among Warner-Lambert Company, Parke-Davis & Company
and G&M S.A. dated as of August 1, 1994 to the Pharmaceutical License
Agreement dated March 17, 1989 between the parties. (Argentina)
<PAGE> 54
EXHIBIT 1.1.3
REGULATORY APPROVALS
The following Marketing Authorizations relating to the Product:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
REGISTRATION REGISTRATION REGISTRATION
COUNTRY FILED APPROVED NUMBER
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EUROPEAN
UNION
-------------------------------------------------------------------------------------------------------------------
Austria 17-Jan-94 18-Dec-95
-------------------------------------------------------------------------------------------------------------------
Belgium 2-May-94 11-Dec-95
-------------------------------------------------------------------------------------------------------------------
France Jun-90 5-May-94
-------------------------------------------------------------------------------------------------------------------
French Export
Countries
-------------------------------------------------------------------------------------------------------------------
Germany 3-May-94 22-Jun-95
-------------------------------------------------------------------------------------------------------------------
Greece 3-May-94 31-July-95
-------------------------------------------------------------------------------------------------------------------
Luxembourg 3-May-94 29-Nov-95
-------------------------------------------------------------------------------------------------------------------
Norway
-------------------------------------------------------------------------------------------------------------------
Portugal 5-May-94 1-July-97
Nacional
-------------------------------------------------------------------------------------------------------------------
Spain 27-Apr-94 15-Dec-95
-------------------------------------------------------------------------------------------------------------------
Switzerland 7-Feb-94 16-Jun-95
-------------------------------------------------------------------------------------------------------------------
U.K. 29-Apr-94 22-May-97
-------------------------------------------------------------------------------------------------------------------
Australia 7-Nov-93 30-Nov-94
-------------------------------------------------------------------------------------------------------------------
U.S. 1-Jun-90 9-Sep-93
-------------------------------------------------------------------------------------------------------------------
LATIN AMERICA
-------------------------------------------------------------------------------------------------------------------
Argentina 15-Jun-94
-------------------------------------------------------------------------------------------------------------------
Brazil 15-Sep-94
-------------------------------------------------------------------------------------------------------------------
Chile 17-Dec-94
-------------------------------------------------------------------------------------------------------------------
Colombia 29-Jun-95
-------------------------------------------------------------------------------------------------------------------
Ecuador 30-Oct-95 (10+40 mg)
13-Nov-95 (30 mg)
-------------------------------------------------------------------------------------------------------------------
El Salvador 30-Aug-95
-------------------------------------------------------------------------------------------------------------------
Guatemala 17-May-94
-------------------------------------------------------------------------------------------------------------------
Peru 21-Aug-95
-------------------------------------------------------------------------------------------------------------------
Puerto Rico
-------------------------------------------------------------------------------------------------------------------
Uruguay 15-Oct-94
-------------------------------------------------------------------------------------------------------------------
VENEZUELA 9-Dec-94
-------------------------------------------------------------------------------------------------------------------
ASIA
-------------------------------------------------------------------------------------------------------------------
Hong Kong 1-Aug-95
-------------------------------------------------------------------------------------------------------------------
Israel Oct-96
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
REGISTRATION REGISTRATION REGISTRATION
COUNTRY FILED APPROVED NUMBER
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Korea 9-Feb-96
-------------------------------------------------------------------------------------------------------------------
Philippines 14-May-96
-------------------------------------------------------------------------------------------------------------------
Singapore 24-Aug-95
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 56
EXHIBIT 1.1.7
[****]-CONFIDENTIAL TREATMENT REQUESTED
PREPAID ROYALTIES
An amount equal to $[****] less the actual royalty payable by Warner-Lambert to
Licensor under the License Agreement dated as of September 27, 1990 between
William K. Summers, M.D. and Warner-Lambert Company for the period beginning
April 1, 2000 and ending on May 31, 2000.
<PAGE> 57
EXHIBIT 2.1
[****]-CONFIDENTIAL TREATMENT REQUESTED
PACKAGE INSERT PROVISIONS FOR COGNEX CR
INDICATIONS
COGNEX CR is indicated for the treatment of mild to moderate dementia of the
Alzheimer type.
CLINICAL ADVERSE EXPERIENCES, WARNINGS, PRECAUTIONS
COGNEX CR labeling will include liver monitoring recommendations that are no
worse than that of COGNEX IR.
DOSAGE AND ADMINISTRATION
The dosage range of COGNEX CR is [*****].
<PAGE> 58
EXHIBIT 2.2
ALLOCATION
The Purchase Price is allocated as follows:
$500,000 of the Purchase Price should be allocated to Intellectual Property and
any licenses. Any remaining portion of the Purchase Price should be allocated
to goodwill.
<PAGE> 59
EXHIBIT 3.7(A)
GOVERNMENTAL AND THIRD PARTY CONSENTS
Issuance of a Decision and Order by the Federal Trade Commission in the matter
of Pfizer Inc., a corporation; and Warner-Lambert Company, a corporation,
approving Horizon as the purchaser of the Cognex Divestiture Assets, as defined
therein.
Consent of Mount Sinai School of Medicine ("Mt. Sinai") to the assignment of the
Agreement dated September 8, 1987 between Warner-Lambert and Mt. Sinai.
<PAGE> 60
EXHIBIT 3.7(B)
GOVERNMENTAL AND THIRD PARTY CONSENTS
Issuance of a Decision and Order by the Federal Trade Commission in the matter
of Pfizer Inc., a corporation; and Warner-Lambert Company, a corporation,
approving Horizon as the purchaser of the Cognex Divestiture Assets, as defined
therein.
<PAGE> 61
EXHIBIT 3.10
MANAGED CARE CUSTOMERS
<PAGE> 62
[*****]-CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
COGNEX CONTRACTS
ALPHA LISTING
Renewal/ Current Rights to
Term. Rights Rebate/ Contract Change Assign. Primary Admin.
Name Type Contact Phone Term Both Parties Discount Price Price/ Rights Whole- Fee Amend.
Person Number Rebate saler
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*****]
- -----------------------------------------------------------------------------------------------------------------------------------
PENDING
-----------------------------------------------------------------------------------------------------------------
[*****]
- -----------------------------------------------------------------------------------------------------------------------------------
*[*****]
</TABLE>
<PAGE> 63
EXHIBIT 7.1.4(A)
ASSIGNMENT, ASSUMPTION AND BILL OF SALE
THIS GENERAL ASSIGNMENT, ASSUMPTION AND BILL OF SALE is
entered into this __ day of May, 2000, by and among FIRST HORIZON
PHARMACEUTICAL CORPORATION, a Delaware corporation ("Horizon"), and
WARNER-LAMBERT COMPANY, a Delaware corporation ("Warner-Lambert").
WHEREAS, Horizon and Warner-Lambert have entered into a
Asset Purchase Agreement, dated as of April 14, 2000 (the "Asset Purchase
Agreement"; capitalized terms not defined herein shall have the meanings
ascribed to them in the Asset Purchase Agreement), pursuant to which
Warner-Lambert has agreed to sell to Horizon and Horizon has agreed to purchase
from Warner-Lambert certain of the assets of Warner-Lambert relating to the
Product and Horizon has agreed, in consideration therefor, to assume certain
obligations in connection therewith;
NOW, THEREFORE, the parties hereto agree as follows:
1. Conveyance and Acceptance. (a) Warner-Lambert hereby irrevocably sell,
assign, and transfer to Horizon, free and clear of all liens, all of
Warner-Lambert's right, title and interest in the Assets and Assumed
Liabilities, other than the Retained Liabilities, as the same shall exist on the
date hereof (collectively, the "Assigned Assets").
(b) Horizon hereby accepts the sale, assignment and transfer of
the Assigned Assets.
2. Further Assurances. (a) At any time or from time to time after the date
hereof, at Horizon's request and without further consideration, Warner-Lambert
shall execute and deliver to Horizon such other instruments of sale, transfer,
conveyance, assignment and confirmation, provide such materials and information
and take such other actions as Horizon may reasonably deem necessary or
desirable in order more effectively to sell, assign and transfer to Horizon and
to confirm Horizon's title to, all of the Assigned Assets, and, to the fullest
extent permitted by law, to put Horizon in actual possession and operating
control of the Assigned Assets and to assist Horizon in exercising all rights
with respect thereto.
(b) Warner-Lambert hereby constitutes and appoints Horizon the
true and lawful attorney of Warner-Lambert, with full power of substitution, in
the name of Warner-Lambert or Horizon, but on behalf of and for the benefit of
Horizon: (i) to demand and receive from time to time any and all of the
Assigned Assets and to make endorsements and give receipts and releases for and
in respect to the same and any part thereof; (ii) to institute, prosecute,
compromise and settle any and all Actions that Horizon may deem proper in order
to collect, assert or enforce any claim, right or title of any kind in or to
the Assigned Assets; (iii) to defend or compromise any and all Actions in
respect of any of the Assigned Assets; and (iv) to do all such acts and things
in relation to the matters set forth in the preceding clauses (i) through (iii)
as Horizon shall deem desirable. Warner-Lambert hereby acknowledges that the
appointment hereby made and the powers hereby granted are coupled with an
interest and are not and shall not be revocable by it in any manner or for any
reason. Horizon shall indemnify and hold harmless Warner-Lambert
<PAGE> 64
and its officers, directors, employees, agents and Affiliates from any and all
Losses caused by or arising out of any breach of law by Horizon in its exercise
of the aforesaid powers.
3. Assumption of Liabilities. (a) Horizon hereby undertakes and agrees from
and after the date hereof, subject to the limitations contained herein, to
assume and to pay, perform and discharge when due the Assumed Liabilities.
(b) Nothing contained herein shall require Horizon to pay or discharge
any debts or obligations expressly assumed hereby so long as Horizon shall in
good faith contest or cause to be contested the amount or validity thereof.
(c) Other than as specifically stated above or in the Asset Purchase
Agreement, Horizon assumes no debt, liability or obligation of Warner-Lambert,
including without limitation the Retained Liabilities, by this General
Assignment, Assumption and Bill of Sale, and it is expressly understood and
agreed that all debts, liabilities and obligations not assumed hereby by
Horizon shall remain the sole obligation of Warner-Lambert, its successors and
assigns.
(d) No person other than the Warner-Lambert and its respective
successors and assigns shall have any rights under the provisions of this
Section 3.
4. Miscellaneous. (a) This General Assignment, Assumption and Bill of
Sale may be executed in any number of counterparts, each of which will be deemed
an original, but all of which together will constitute one and the same
instrument.
(b) This General Assignment, Assumption and Bill of Sale shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York applicable to a contract executed in that State.
(c) This General Assignment, Assumption and Bill of Sale shall be
binding upon and shall inure to the benefit of permitted assigns and
successors.
IN WITNESS WHEREOF, this General Assignment, Assumption and
Bill of Sale has been duly executed and delivered by a duly authorized officer
of each party on the day and year first above written.
FIRST HORIZON PHARMACEUTICALS CORPORATION
By:
--------------------------------------
Name:
Title:
WARNER-LAMBERT COMPANY
By:
--------------------------------------
Name:
Title:
<PAGE> 65
EXHIBIT 7.1.4(B)
TRADEMARK ASSIGNMENT
WHEREAS, [WARNER-LAMBERT COMPANY] [NAME OF AFFILIATE], a corporation organized
and existing under the laws of the state of [Delaware][State of Incorporation],
with an office and place of business at 201 Tabor Road, Morris Plains, New
Jersey 07950, is the owner of the trademarks listed on the attached schedule
(the "Trademarks"), and
WHEREAS, FIRST HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and
existing under the laws of Delaware, with an office and place of business at
660 Hembree Parkway, Suite 106, Roswell, Georgia 30076, pursuant to an Asset
Purchase Agreement dated April 14, 2000 among said parties, is desirous of
acquiring all rights, title and interest in and to the Trademark, including the
goodwill associated therewith;
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, said WARNER-LAMBERT COMPANY hereby assigns to said FIRST
HORIZON PHARMACEUTICAL CORPORATION all rights, title and interest in the
Trademark and the goodwill associated therewith.
[WARNER-LAMBERT COMPANY]
[NAME OF AFFILIATE]
---------------------------
Name:
Title:
Date:
<PAGE> 66
TRADEMARK ASSIGNMENT
SCHEDULE OF TRADEMARKS
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
USA COGNEX 73/762382 07NO1988 1543222
13JE1989 13JE2009 WLP G
ANDO COGNEX 12903 04DE1998 12467
04DE1998 04DE2008 WLP G
AOIP COGNEX 82989 16NO1993 33312
15SE1994 16NO2003 WLP G
ARGE COGNEX 1668032 19OC1988 419731
26FE1993 26FE2003 WLP G
ARME COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ASTL COGNEX 497479 01MY1995 A497479
01MY1995 17OC2009 WLP G
ATRA COGNEX AM4962/89 11OC1989 129313
09MR1990 31JA2000 WLP G
ATRA COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
AZER COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BELA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BENE COGNEX 65023 14SE1998 457086
02FE1999 26OC2008 WLP G
BENE COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
BRAZ COGNEX 68344 29DE1999 814501605
28AU1990 28AU2000 WLP G
BRAZ COGNEX CR 819637173 04NO1996 819637173
13JL1999 13JL2009 WLP G
</TABLE>
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BULG COGNEX 21382 08SE1992 21730
30SE1993 08SE2002 WLP G
BULG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
CAMB COGNEX 1803 08OC1992 1801
21AP1993 08OC2002 WLP G
CHIL COGNEX 443093 12MR1999 539520
01JL1999 27AP2009 WLP G
CHIL COGNEX CR 357493 10OC1996 489543
14JL1997 14JL2007 WLP G
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INDI COGNEX WLP F 609118 11OC1993
INDO COGNEX NONE 11SE1989 271725
13FE1992 13AU2001 WLP G
INTL COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
IREL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
IREL COGNEX 6377/89 27NO1996 135633
27NO1996 26NO2006 WLP G
ISRA COGNEX 89254 14OC1993 89254
13SE1995 13OC2000 WLP G
ITAL COGNEX WLP F RM005925 03DE1997
ITAL COGNEX RM98C005339 28OC1998 557807
13JA1992 03NO1998 WLP G
ITAL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
JAMA COGNEX 5/4953 19OC1993 27282
14NO1996 19OC2000 WLP G
JAPA COGNEX 119497/1988 20OC1988 2313556
28JE1991 28JE2001 WLP G
JORD COGNEX NONE 15NO1999 33170
23OC1993 23OC2000 WLP G
KAZA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
KENY COGNEX 40928 23NO1993 40928
30MR1995 23NO2000 WLP G
KORS COGNEX 93-35581 07OC1993 307643
08FE1995 08FE2005 WLP G
KORS COGNEX IN KOREAN CHARACTERS 94-49286 09DE1994 331529
16JA1996 16JA2006 PDA G
KYRG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
LAOS COGNEX 1342 11SE1992 1437
20JL1993 11SE2002 WLP G
LATV COGNEX M-93-2209 08MR1993 M33894
20OC1996 08MR2003 WLP G
LEBA COGNEX WLP F 61860 18AU1994
LITH COGNEX 12922 05OC1993 23927
16DE1996 05OC2003 WLP G
MACE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
CHIN COGNEX 93125913 02DE1993 765722
14SE1995 13SE2005 WLP G
COLO COGNEX 309872 11SE1989 147849
10NO1993 10NO2003 WLP G
COLO COGNEX CR 96056701 25OC1996 197101
15MY1997 15MY2007 WLP G
COST COGNEX NONE 07DE1994 95326
27MR1996 27MR2006 WLP G
CTM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
CUBA COGNEX 1033/96 11JE1996 125203
28FE1997 11JE2006 WLP G
CZEC COGNEX 71543-92 04SE1992 179288
31AU1994 04SE2002 WLP G
DENM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
DENM COGNEX 6580/1989 07SE1989 7273/1992
07AU1992 07AU2002 WLP G
DREP COGNEX NONE 03NO1993 70025
15JA1994 15JA2014 WLP G
ECUA COGNEX 42184/93 08OC1993 3834-94
14NO1994 14NO2004 WLP G
EGYP COGNEX 88550 11OC1993 88550
22JE1998 11OC2003 WLP G
ESTO COGNEX 9303722 14AP1993 16105
30JE1995 30JE2005 WLP G
FINL AXONYL 4039/91 27AU1991 122292
21SE1992 21SE2002 WLP G
FINL COGNATEX 4040/91 27AU1991 122293
21SE1992 21SE2002 WLP G
FINL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------------------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
MAYS COGNEX NONE 03JL1996 MA/5572/89
22JL1996 12SE2010 WLP G
MEXI COGNEX 160501 11FE1993 452998
24FE1994 11FE2003 WLP G
MOLD COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
MONG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
NEWZ COGNEX NONE 14DE1994 188209
14DE1994 19OC2009 WLP G
NICA COGNEX 93-02730 29NO1993 26207
12JL1994 11JL2004 WLP G
NIGE COGNEX WLP F NONE 26OC1993
NORW AXONYL 91/4361 28AU1991 175093
14MR1996 14MR2006 WLP G
NORW COGNATEX 91/4360 28AU1991 154564
14JA1993 14JA2003 WLP G
NORW COGNEX 89/4387 11SE1989 144521
21MR1991 21MR2001 WLP G
PAKI COGNEX WLP F 104073 27SE1989
PANA COGNEX 77106 04SE1995 77106
28OC1996 28OC2006 WLP G
PARA COGNEX 18125 18DE1991 154686
24JE1992 24JE2002 WLP G
PERU COGNEX 240536 20AP1994 79857
19AU1994 10MY2004 WLP G
PHIL COGNEX 76718 08JL1991 55601
02JL1993 02JL2013 WLP G
POLA COGNEX Z-113342 09SE1992 79098
28OC1994 09SE2002 WLP G
PORT COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
PORT COGNEX 259054 12OC1989 259054
06MY1993 06MY2003 WLP G
PUER COGNEX NONE 20JL1993 33734
04NO1994 04NO2004 WLP G
ROMA COGNEX 27765 16SE1992 19848
26MR1996 16SE2002 WLP G
RUSS COGNEX 165803 09NO1992 120087
09NO1992 09NO2002 WLP G
RUSS COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
SAFR COGNEX NONE 26MR1999 89/9005
29MR1999 26SE2009 WLP G
SALV COGNEX 3743 14OC1993 156
08MY1995 08MY2005 WLP G
SAUD COGNEX 22612 16OC1993 314/37
25JL1994 26JE2003 WLP G
SING COGNEX 5960/89 02JL1996 S/5960/89
19FE1997 08SE2006 WLP G
SLOV COGNEX Z-9870111 27JA1998 9870111
05OC1998 26JA2008 WLP G
SLVK COGNEX 0-71543-92 04SE1992 174926
14JE1995 04SE2002 WLP G
SPAI COGNEX 1521725 05MY1999 1521725
01JA2000 28SE2009 WLP G
SPAI COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SPAI COGNEX CR 2050172 02OC1996 2050172
05MR1997 02OC2006 WLP G
SWED COGNEX 89-08491 23AU1989 244648
30DE1992 30DE2002 WLP G
SWED COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SWED COGNEX CR 96-09133 08OC1996 326021
16JA1998 16JA2008 WLP G
SWIT COGNEX 7341 02OC1989 376663
12JL1990 02OC2009 WLP G
SYRI COGNEX WLP D
TADJ COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
TAIW COGNEX (78)01408 28JA1989 477796
16MR1990 15MR2000 WLP G
TAIW COGNEX IN CHINESE CHARACTERS 82059910 06DE1993 654939
16SE1994 15SE2004 WLP G
THAI COGNEX 371708 09NO1998 KOR83130
08DE1998 09NO2008 WLP G
TUNI COGNEX WLP F
EE991593 24SE1999
TURK COGNEX 11383/93 20OC1993 147828
20OC1993 19OC2003 WLP G
UKRA COGNEX 93084114 03AU1993 8843
31OC1997 03AU2003 WLP G
UKRA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
URUG COGNEX 265939 15OC1993 265939
11AU1994 11AU2004 WLP G
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
URUG COGNEX CR 290345 09OC1996 290345
01SE1997 01SE2007 WLP G
UZBE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
VENE COGNEX WLP F 19772-88 24OC1988
VENE COGNEX CR WLP F 86384 05NO1996
VIET COGNEX 8630 06AU1992 7554
22FE1993 06AU2002 WLP G
YUGO COGNEX Z-1124/92 16SE1992 40303
19SE1997 16SE2002 WLP G
YUGO COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ZIMB COGNEX 874/93 12OC1993 974/93
14FE1994 12OC2003 WLP G
</TABLE>
<PAGE> 72
EXHIBIT 7.1.5
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (the "Agreement") is made and entered
into as of [____], 2000 (the "Effective Date"), by and between PARKE-DAVIS
PHARMACEUTICALS LIMITED, a company organized and existing under the laws of the
Cayman Islands ("SUPPLIER"), and FIRST HORIZON PHARMACEUTICAL CORPORATION, a
corporation organized and existing under the laws of Delaware ("PURCHASER").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in Article 1.
WITNESSETH:
WHEREAS, PURCHASER has purchased the Product from SUPPLIER pursuant to
an asset purchase agreement between Warner-Lambert Company and PURCHASER dated
as of April 14, 2000 (the "Asset Purchase Agreement");
WHEREAS, PURCHASER does not have immediate capacity for manufacturing
or causing to be manufactured the Products or the Active Ingredient;
WHEREAS, pursuant to the terms of the Asset Purchase Agreement,
SUPPLIER has undertaken to supply Product and the Active Ingredient to
PURCHASER;
WHEREAS, SUPPLIER is a manufacturer with adequate capacity for
manufacturing PURCHASER's Product and Active Ingredient;
WHEREAS, the parties desire to enter into a Supply Agreement pursuant
to which SUPPLIER shall supply the Products and the Active Ingredient to
PURCHASER; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have the meanings
set forth below:
"Active Ingredient" means tacrine hydrochloride.
"Affiliate" means (i) any company or entity, more than fifty percent
(50%) of whose voting stock or participating profit interest is owned or
controlled, directly or indirectly, by a party; (ii) any company, entity or
person which owns or controls, directly or indirectly, more than fifty percent
(50%) of the voting stock or participating profit interest of a party and (iii)
any company, entity or person which is under common control with a party hereto.
The term "common control" means a third party has direct or indirect ownership
of fifty percent (50%) or more of the voting stock or participating profit
interest of both the other company or entity and the party to this Agreement.
"Asset Purchase Agreement" has the meaning set forth in the Recitals.
<PAGE> 73
"Business Day" means a day during which banks are generally open for
business in New York.
"GMPs" means the regulatory standards and the principles and
guidelines of good manufacturing practice, as in effect from time to time,
relating to the manufacture of medicinal products including, but not limited to,
standards for equipment, facilities, production and quality control established
by the applicable Governmental or Regulatory Authority.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, agency, commission, official or other instrumentality of the
European Community or any relevant country, state, province, county, city or
other political subdivision.
"Marketing Authorization" means the authorization to sell the Product,
as granted by the relevant Governmental or Regulatory Authorities.
"Manufacturing Authorization" means any authorization necessary to
manufacture the Product, as granted by the relevant Governmental or Regulatory
Authorities.
"Product" means the filled capsule shells and the fully-finished and
packaged pharmaceutical product, in each case containing the Active Ingredient
supplied pursuant to this Agreement and set forth in Schedule A or otherwise
pursuant to Article 2 of this Agreement.
"Production Fee" means the appropriate fees set forth on Exhibit I to
this Agreement.
"Proprietary Information" has the meaning set forth in Section 6.1.
"Raw Materials" means all raw materials and packaging materials
(including labeling), other than the Active Ingredient, needed to produce the
Product.
"Reimbursement Amount" has the meaning set forth in Section 5.4.
"Specifications" means the specifications and procedures currently
utilized by SUPPLIER in testing Raw Materials and the Active Ingredient and in
manufacturing and testing the Product which are according to the Marketing
Authorizations for the Product in effect on the date hereof or such other
manufacturing specifications as are mutually agreed upon in writing by the
parties hereto, including all stability requirements set forth therein.
2. PRODUCTION ARRANGEMENT.
2.1 Appointment. PURCHASER hereby appoints SUPPLIER and SUPPLIER
hereby agrees to be a supplier of the Product and the Active Ingredient to
PURCHASER pursuant to and for the term of this Agreement.
2.2 Agreement to Supply and Purchase the Product. (a) Schedule A
hereto sets forth the total number of filled capsule shells of Product that
SUPPLIER will supply to PURCHASER during the year 2000. Schedule A shall
indicate the allocation of such filled capsule shells as between the U.S. and
the "rest of world."
<PAGE> 74
(b) On or prior to April 21, 2000, PURCHASER shall provide to
SUPPLIER a schedule (the "Production Schedule") indicating the manner in which
such filled capsule shells shall be packaged and labeled. The Production
Schedule shall include the information set forth on Schedule B to this
Agreement. SUPPLIER shall promptly confirm its ability to manufacture and
package the product in accordance with the Production Schedule. Thereafter,
SUPPLIER shall use its commercially reasonable efforts to supply to PURCHASER
the Product in such quantities and on such dates as set forth in the agreed-upon
Production Schedule, subject to SUPPLIER's ability to complete any required
packaging and labeling changes. In the event SUPPLIER is unable to supply the
Product to PURCHASER on a delivery date set forth on the Production Schedule,
for a reason other than SUPPLIER's inability to complete packaging and labeling
changes in time, SUPPLIER shall use its commercially reasonable efforts to
deliver such Product as soon as practicable thereafter, but in any event, no
later than thirty (30) days after the applicable delivery date.
(c) PURCHASER shall purchase from SUPPLIER Product in the
quantities and on the delivery dates set forth in the Production Schedule. In
the event PURCHASER fails at any time to purchase all Product manufactured and
made available for delivery by SUPPLIER as specified in this Section 2.2(b),
PURCHASER shall pay to SUPPLIER an amount equal to the total Production Fee
which would have otherwise been paid to SUPPLIER had PURCHASER purchased the
quantity specified on the Production Schedule on the applicable date.
2.3 Active Ingredient and Raw Materials. (a) SUPPLIER will at all
times acquire, at its own cost and expense, the Active Ingredient and Raw
Materials, in such quantities as are necessary to enable SUPPLIER to manufacture
and supply the desired quantities of the Product during the term of this
Agreement. SUPPLIER will perform all quality control procedures with respect to
the Active Ingredient and Raw Materials in accordance with the Specifications.
(b) SUPPLIER will, or will cause its Affiliates to, use its
commercially reasonable efforts to provide PURCHASER with the Active Ingredient
in the quantity, on the delivery date and at the price set forth on Schedule C
hereto. In the event SUPPLIER or its Affiliate is unable to supply the Active
Ingredient to PURCHASER on the delivery date set forth on Schedule C, SUPPLIER
shall, or shall cause its Affiliate to, use its commercially reasonable efforts
to deliver such Active Ingredient as soon as practicable thereafter, but in any
event, no later than thirty (30) days after the original delivery date.
(c) PURCHASER shall purchase from SUPPLIER the Active Ingredient
in the quantities and on the delivery dates set forth in Schedule C. Subject to
Section 10.3 hereof, in the event PURCHASER fails at any time to purchase all of
the Active Ingredient manufactured and made available for delivery by SUPPLIER
as specified in this Section 2.3(c), PURCHASER shall pay to SUPPLIER an amount
equal to the total Production Fee which would otherwise have been paid to
SUPPLIER had PURCHASER purchased the quantity specified on Schedule C on the
applicable date.
2.4 Changes to Production Schedule. Purchaser may request changes
to the Production Schedule relating to the allocation of Product among
countries, quantity and dosage strength and SUPPLIER shall use commercially
reasonable efforts to effectuate such changes; provided, however, that such
changes shall not in any way decrease the obligation of
<PAGE> 75
PURCHASER to purchase the aggregate equivalent amount of Product as set forth on
the Production Schedule as originally agreed upon by the parties.
2.5 Controlling Provisions. In ordering and delivering, PURCHASER
and SUPPLIER may employ their standard forms, but nothing in those forms shall
be construed to modify or amend the terms of this Agreement and in case of
conflict herewith, this Agreement shall control.
3. DELIVERY AND ACCEPTANCE.
3.1 Delivery. The Products and Active Ingredient shall be
delivered to a carrier designated by PURCHASER at SUPPLIER's or its Affiliates
plants in Holland, Michigan, Vega Baja, Puerto Rico or Frieburg, Germany, as
PURCHASER shall direct. Title to and risk of loss for the Product or Active
Ingredient shall transfer to PURCHASER upon delivery to PURCHASER or its
designee at the designated location(s) set forth above.
3.2 Acceptance of Shipments. After receipt of a shipment of
Products or Active Ingredient, PURCHASER shall within ten (10) Business Days
after delivery thereof, visually inspect the Product or Active Ingredient
shipment and communicate acceptance or rejection to SUPPLIER in writing. The
parties agree that PURCHASER's visual inspection consists of (i) comparing the
applicable order against the documentation accompanying the shipment to verify
that the delivery date, identity, quantity and exterior shipment labeling comply
with the order and (ii) visually inspecting the exterior of the shipment to
verify that the shipment appears to be in good condition.
3.3 Failure to meet Specifications. In addition, after the date of
acceptance by PURCHASER pursuant to Section 3.2, PURCHASER shall be entitled to
return any shipment of Product or Active Ingredient, in whole or in part, to the
extent that such Product or Active Ingredient fails to meet Specifications (as
such Specifications existed on the date of delivery), where such failure is due
solely to the actions or omissions of SUPPLIER.
4. PRODUCTION FEE AND PAYMENT.
4.1 Production Fees. Subject to Sections 2.2(c) and 2.3(c),
PURCHASER will pay SUPPLIER the applicable Production Fees for Product
(including costs of Active Ingredient, Raw Materials, manufacturing, filling,
inspecting, quality control, stability testing and packaging) or Active
Ingredient delivered to PURCHASER hereunder.
4.2 Invoices. SUPPLIER will issue an invoice to PURCHASER for the
full Production Fee with each shipment of the Product and Active Ingredient
delivered in accordance with Section 3.1. SUPPLIER will invoice PURCHASER in
U.S. dollars for all other amounts due hereunder on or after performance or
occurrence of the event that entitles SUPPLIER to be paid such amount by
PURCHASER. All invoices hereunder will be due and payable by PURCHASER in U.S.
dollars within thirty (30) days after receipt of the invoice by PURCHASER.
4.3 Taxes. In addition to payment of the Production Fee, PURCHASER
will be responsible for the payment of any sales and use taxes on the Product or
Active Ingredient delivered by SUPPLIER to PURCHASER.
<PAGE> 76
5. QUALITY CONTROL.
5.1 Manufacturing Process and Quality Assurance. The Product will
be manufactured by SUPPLIER in compliance with applicable laws and the
Specifications and in accordance with the manufacturing, quality assurance and
validation procedures currently employed by SUPPLIER in manufacturing the
Product or such other procedures as may be mutually agreed upon, or as may be
required under the applicable Marketing Authorizations.
5.2 Modifications. Any request for modification of the
Specifications (including a change of the Raw Materials or Active Ingredient)
will be made by the requesting party to the other party in writing. SUPPLIER
will inform PURCHASER of the amount of any additional costs (including capital
expenditures) that any such modification would reasonably entail, if any, and,
if PURCHASER elects to adopt the modification, the Production Fee will be
increased by the amount of such additional costs, and the relevant documents and
related schedules will be revised accordingly. If SUPPLIER is technically unable
to comply with a modification proposed by PURCHASER or if PURCHASER is unwilling
to pay the additional costs associated with any modification, the requesting
party will have the option to withdraw the proposed modification or, if the
requesting party can demonstrate that it reasonably requires such modification
for business or regulatory reasons, to terminate this Agreement. Each party will
notify the other party as soon as reasonably possible of any proposed changes to
the Specifications, procedures or other areas that have an impact on the other
party's performance of this Agreement. In no event will SUPPLIER be required to
make (or not to make) a modification that it deems prohibited (or required) by
applicable regulations or regulatory authorities. Notwithstanding the foregoing,
SUPPLIER shall not have the right to terminate this Agreement pursuant to this
Section 5.2 if PURCHASER is unwilling to pay the additional costs associated
with any modification proposed by SUPPLIER, other than modifications that are
required for regulatory reasons.
5.3 Testing. SUPPLIER will perform such quality assurance testing
as required under the applicable Specifications, and will provide evidence of
such testing to PURCHASER or its designee in a certificate of analysis for each
Product lot which confirms that the Product lot has been manufactured and
analyzed by SUPPLIER according with the applicable Specifications. SUPPLIER
shall provide a copy of the applicable certificate of analysis to PURCHASER with
each Product lot that is delivered to PURCHASER or by facsimile on the date of
delivery.
5.4 Reimbursement for Non-Conforming Product. If the Product fails
to meet the Specifications, where such failure is due solely to the actions or
omissions of SUPPLIER, SUPPLIER will credit PURCHASER with the Reimbursement
Amount. The "Reimbursement Amount" will be deemed equal to the sum of any costs
reasonably expended by PURCHASER in order to identify the defect (i.e.,
testing), plus all Production Fees paid on account of the subject Product. The
Reimbursement Amount will be payable sixty (60) days after rejection of the
subject Product in accordance with this Section. At PURCHASER's option, (i)
SUPPLIER will be relieved of any obligation to deliver any Product with respect
to the non-conforming batch, or (ii) SUPPLIER will replace the non-conforming
batch with substitute Product that conforms with the Specifications and any
other requirements of this Agreement, within sixty (60) calendar days from the
date PURCHASER notifies SUPPLIER of its election of option (ii) of this Section
5.4, in which case PURCHASER will pay to SUPPLIER amounts in accordance with
Article 4 based on the substitute Product. SUPPLIER will dispose of the
non-conforming Product at its own expense This Section 5.4 sets forth
PURCHASER's sole remedy for non-conforming
<PAGE> 77
Product that is identified before sale thereof by PURCHASER to PURCHASER's
customer, and under no circumstances will SUPPLIER be liable to PURCHASER for
any damages, including, without limitation, direct, special, incidental or
consequential damages (including, without limitation, loss of business, profits,
or goodwill), arising therefrom (whether in contract, tort, negligence or
otherwise) or in connection with its performance under this Agreement.
5.5 Access for Quality Control. Subject to SUPPLIER's reasonable
ability to assure the confidentiality of its other projects, SUPPLIER will
permit PURCHASER's representatives and representatives of applicable
Governmental or Regulatory Authorities to enter SUPPLIER's plants located in
Holland, Michigan, Vega Baja, Puerto Rico or Freiburg, Germany upon reasonable
advance written notice and at reasonable intervals during regular business hours
solely for the purpose of making quality control inspections of the facilities
used in production of the Product or Active Ingredient for PURCHASER, including
manufacturing, receiving, sampling, analyzing, storing, handling, packaging,
shipping and disposing of the Active Ingredient and the Product. In addition,
the parties agree that a member of SUPPLIER's pharmaceutical quality assurance
team shall be present at all such inspections.
6. CONFIDENTIAL INFORMATION.
6.1 Confidentiality. PURCHASER and SUPPLIER will at all times
maintain as confidential any information, technology, formulation, process,
packaging, analytical methods, stability data, registration data or know-how of
a proprietary or confidential nature relating to the Product or Active
Ingredient disclosed by the other party pursuant to or in connection with this
Agreement (the "Proprietary Information"); provided, however, that the term
"Proprietary Information" does not include information which becomes available
to the receiving party following the date of this Agreement on a
non-confidential basis from a source other than the disclosing party, its
representatives or Affiliates, if such source is not under an obligation,
(whether contractual, legal or fiduciary) to the disclosing party, its
representatives or its Affiliates to keep such information confidential.
6.2 Survival of Confidentiality. PURCHASER and SUPPLIER hereby
agree that the provisions of this Article 6 and the obligations of
confidentiality herein will endure for a period of five (5) years after the
expiration or termination of this Agreement; provided, however, that with
respect to Proprietary Information regarding, arising out of, relating to,
reflecting, incorporating or based upon scientific, technological (including,
without limitation, analytical, manufacturing or formulation technology),
regulatory or compliance matters, the obligations of confidentiality herein will
not terminate.
7. INDEMNIFICATION.
7.1 Indemnification of SUPPLIER. PURCHASER will defend, indemnify,
and hold harmless SUPPLIER, its officers, agents, employees and Affiliates from
any loss, claim, action, damage, penalty, fine, expense or liability (including
reasonable defense costs and attorneys fees) ("Claim") to the extent the same
arises out of or is related to (a) the breach of any representation, warranty or
guarantee made by PURCHASER herein, (b) the handling, possession or use of the
Product following delivery to PURCHASER in accordance with Section 3.1
including, without limitation, express and implied warranties of
merchantability, fitness for a particular purpose and strict liability, unless
the claim results from the applicable Product failing
<PAGE> 78
to conform to the Specifications, where such non-compliance is due solely to the
actions or omissions of SUPPLIER or (c) any other negligent act or omission of
PURCHASER.
7.2 Indemnification of PURCHASER. SUPPLIER will defend, indemnify,
and hold harmless PURCHASER, its officers, agents, employees and Affiliates from
any Claim to the extent the same arises out of or is related to (a) the breach
of any representation, warranty or guarantee made by SUPPLIER herein or (b) any
other negligent act or omission of SUPPLIER.
7.3 Indemnification Procedures. In any case under this Agreement
where one party has indemnified the other against any claim or legal action,
indemnification will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way of
settlement and release) at its own cost and expense. The indemnified party may,
but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated to,
defend, contest or otherwise protect against the same, and make any compromise
or settlement thereof and recover the entire costs thereof from the indemnifying
party, including reasonable attorneys fees, disbursements and all amounts paid
as a result of such claim or suit or the compromise or settlement thereof;
provided, however, that if the indemnifying party undertakes the timely defense
of such matter, the indemnified party will not be entitled to recover from the
indemnifying party its costs incurred in the defense thereof. The indemnified
party will cooperate and provide such assistance as the indemnifying party may
reasonably request in connection with the defense of the matter subject to
indemnification.
8. RECALLS.
8.1 Recalls. If any Product must be recalled by reason of failure
to meet the Specifications, any requirements of any applicable Governmental or
Regulatory Authority or any other requirements of law, PURCHASER will pay all
costs and expenses in order to effect the recall unless such recall is caused by
a failure of the Product to meet the Specifications, where such failure is due
solely to the actions or omissions of SUPPLIER. However, SUPPLIER will, in any
event, comply with any regulatory obligations arising from its status as
manufacturer of the recalled Product, and otherwise cooperate as reasonably
required in PURCHASER's efforts.
8.2 Reimbursement by PURCHASER. PURCHASER will reimburse SUPPLIER
for any costs reasonably expended by SUPPLIER to effect the recall, including
any cost associated with the Product that cannot be shipped due to the condition
requiring the recall, unless the recall is required due to the failure of the
Product to meet the Specifications, where such failure is due solely to the
actions or omissions of SUPPLIER.
8.3 Reimbursement by SUPPLIER. If PURCHASER can demonstrate that
the failure to meet applicable legal requirements is caused by failure of the
Product to meet the Specifications, where such failure is due solely to the
actions or omissions of SUPPLIER, SUPPLIER will reimburse PURCHASER for (a) any
cost reasonably expended by PURCHASER to effect the recall and (b) the
Reimbursement Amount in accordance with Section 5.4.
<PAGE> 79
9. RECORDS AND AUDITS.
9.1 Hold Period. For one (1) year after the expiration date of any
particular Product batch(es), or longer if required by applicable law or
Governmental or Regulatory Authority (the "Hold Period"), each party will
maintain, as applicable, records and samples relating to such batch(es)
sufficient to substantiate and verify its duties and obligations hereunder,
including but not limited to, records of orders sent and received, Product
manufactured, work in progress, Product analyses and quality control tests,
distribution of the Product and the like. During the Hold Period, neither party
will destroy any records relating to regulatory compliance or quality assurance
without giving the other party advance written notice and an opportunity to take
possession of or copy such records.
9.2 Notice of Governmental or Regulatory Authority Actions. Each
party agrees to advise the other party in a timely manner of any actions by any
Governmental or Regulatory Authority with respect to the Product. Such notice
remains subject, in all respects, to the provisions of Article 6.
10. TERM AND TERMINATION.
10.1 Term. Subject to the termination provisions of Section 10.2,
this Agreement will expire on the date (the "Termination Date") which is two
years from the Effective Date. PURCHASER shall have the option, by providing
SUPPLIER with at least 90 days' prior written notice of the Termination Date, to
extend the term of this Agreement for an additional one year period, provided
PURCHASER has used good faith efforts to arrange for an alternative source of
supply of the Product and Active Ingredient. In the event PURCHASER elects to
extend this Agreement for an additional one year period, the parties shall
commence good faith negotiations regarding terms and conditions for the
continued supply of Active Ingredient or Product by SUPPLIER.
10.2 Termination. PURCHASER shall have the right to terminate this
Agreement upon 60 days' prior written notice to SUPPLIER. In addition, each
party will have the right to terminate this Agreement (i) by giving the other
party written notice thereof if the other party fails to perform or violates any
material provision of this Agreement in any material respect, and such failure
continues unremedied for a period of thirty (30) days after the date the
notifying party gives written notice to the defaulting party with respect
thereto; or (ii) immediately if the other party is declared insolvent or
bankrupt by a court of competent jurisdiction, or a voluntary petition of
bankruptcy is filed in any court of competent jurisdiction by the other party,
or the other party makes or executes any assignment for the benefit of
creditors.
10.3 Effect of Termination. Unless otherwise agreed to between the
parties, all Raw Materials, Active Ingredient, work in progress or Product on
hand as of the effective date of expiration or termination of this Agreement
will be treated as follows as soon as practicable following such expiration or
termination:
(a) Raw Materials presently owned by SUPPLIER, as set forth on
Schedule D hereto, or otherwise purchased by SUPPLIER
reasonably based on any purchase orders for Product or Active
Ingredient submitted by PURCHASER, and not utilized by
SUPPLIER for the manufacture of the Product up to and
including
<PAGE> 80
the date of such expiration or termination, shall be delivered
by SUPPLIER to PURCHASER, whereupon PURCHASER will pay
SUPPLIER therefor in accordance with the costs set forth on
Schedule D or in an amount equalling SUPPLIER's actual cost
for such materials as documented by SUPPLIER to PURCHASER;
(b) Work in progress commenced by SUPPLIER in accordance with this
Agreement will, at the option of PURCHASER (but at the option
of either party in the case of termination hereof by it under
Section 10.2), (i) cease, and such work in progress will
remain with SUPPLIER (in which case PURCHASER will pay
SUPPLIER an amount equal to SUPPLIER's actual costs incurred
in connection with the performance and cessation of such work
less the cost to SUPPLIER of materials that can be returned by
SUPPLIER or used by SUPPLIER in later batches of other
products manufactured by SUPPLIER as reasonably determined by
SUPPLIER) or (ii) be completed by SUPPLIER and delivered to
PURCHASER, whereupon PURCHASER will pay SUPPLIER therefor in
accordance with the terms hereof; provided, however, that in
the case of expiration under Section 10.1, PURCHASER will not
have such option and will proceed under clause (ii) of this
provision; and
(c) Active Ingredient and Product manufactured pursuant to
Schedule C and the Production Schedule, respectively, will be delivered by
SUPPLIER to PURCHASER, whereupon PURCHASER will pay SUPPLIER therefor in
accordance with the terms hereof.
10.4 No Release. The expiration or termination of this Agreement
will not operate to release any party from any liability incurred prior to or
upon termination hereof or which subsequently arises under the operation of
Article 22.
11. REGULATORY MATTERS.
11.1 Compliance. Each party will provide reasonable assistance to
the other if necessary to respond to any Governmental or Regulatory Authority
audits, inspections, inquiries or requests concerning the Product or otherwise
necessary to comply with GMPs. PURCHASER's employees present at the facility
will at all times adhere to safety regulations, GMPs and work schedules
generally applicable to SUPPLIER's own employees.
11.2 Compliance Audits. Each party will notify the other party
within forty-eight (48) hours after it receives notice of a Governmental or
Regulatory Authority audit involving the Product or any component thereof and
will provide to such party copies of any resulting document of action (FDA Form
483 inspectional observation report (or other equivalent report), regulatory
letters, etc.) or of relevant sections thereof, resulting from these audits
within five (5) Business Days after receipt (solely to the extent such documents
directly relate to the Product).
12. TRADEMARKS AND LABELING.
12.1 Trademarks and Labeling for U.S. Product. (a) PURCHASER shall
provide SUPPLIER with labeling instructions for Product to be sold in the U.S.
prior to or on the Effective Date. SUPPLIER will affix labeling to the Product
to be sold in the U.S. as instructed by PURCHASER. PURCHASER shall pay all costs
incurred by SUPPLIER in connection with the
<PAGE> 81
implementation of such labels bearing PURCHASER's name and trademark. Nothing
contained herein will give PURCHASER any right to use any SUPPLIER trademark and
PURCHASER will not obtain any right, title or interest in any SUPPLIER trademark
by virtue of this Agreement or the performance by SUPPLIER of services
hereunder; provided, however, that SUPPLIER will permit PURCHASER to use
SUPPLIER's trademark in connection with the Product to the extent permitted
under the Asset Purchase Agreement or required by applicable law or regulation.
(b) SUPPLIER and PURCHASER shall use their best efforts to
complete the conversion of labels to PURCHASER's name and trademark for Product
to be sold in the U.S.
(c) As between PURCHASER and SUPPLIER and with respect to Product
to be sold in the U.S., PURCHASER shall be solely responsible for ensuring that
approved Product labels, Product inserts and other printed materials, if any,
comply with all applicable laws, provided, however, that SUPPLIER warrants that
Product supplied hereunder prior to the conversion of labels to PURCHASER's name
and trademark in accordance herewith shall comply with the applicable Marketing
Authorization as it exists on the date hereof.
(d) No change to Product labels or Product inserts for Product to
be sold in the U.S. may be made without the prior written approval of PURCHASER.
12.2 Trademarks and Labeling for Non-U.S. Product. (a) PURCHASER
will, for a period of approximately one year, or such other period as is
appropriate or required under applicable local law or as directed by any
Governmental or Regulatory Authority (the "Transition Period"), sell Product
outside of the U.S. that bears the labeling and tradedress of an Affiliate of
SUPPLIER. PURCHASER and SUPPLIER shall use good faith efforts to mutually agree
on a schedule for the transition to PURCHASER's labeling and tradedress which
shall allow such transition to occur prior to the end of the Transition Period.
SUPPLIER will, or will cause its Affiliates to, affix labeling to the Product to
be sold outside of the U.S. as instructed by PURCHASER. PURCHASER shall pay all
costs incurred by SUPPLIER in connection with the implementation of such labels
bearing PURCHASER's name and trademark for Product to be sold outside of the
U.S. From and after the change of such labels and tradedress, nothing contained
herein will give PURCHASER any right to use any SUPPLIER trademark and PURCHASER
will not obtain any right, title or interest in any SUPPLIER trademark by virtue
of this Agreement or the performance by SUPPLIER of services hereunder;
provided, however, that SUPPLIER will permit PURCHASER to use SUPPLIER's
trademark in connection with the Product to the extent permitted under the Asset
Purchase Agreement or required by applicable law or regulation.
(b) As between PURCHASER and SUPPLIER and with respect to Product
to be sold outside of the U.S., PURCHASER shall be solely responsible for
ensuring that approved Product labels, Product inserts and other printed
materials, if any, comply with all applicable laws, provided, however, that
SUPPLIER warrants that Product supplied hereunder prior to the conversion of
labels to PURCHASER's name and trademark in accordance herewith shall comply
with the applicable Marketing Authorizations as they exist on the date hereof.
(c) Subject to this Section 12.2, No change to Product labels or
Product inserts may be made without the prior written approval of PURCHASER for
Product to be sold outside of the U.S.
<PAGE> 82
13. RELATIONSHIP OF PARTIES.
13.1 Independent Contractors. It is not the intent of the parties
hereto to form any partnership or joint venture. Each party will, in relation to
its obligations hereunder, act as an independent contractor, and nothing in this
Agreement will be construed to give either party the power or authority to act
for, bind or commit the other party in any way whatsoever.
13.2 Public Statements. SUPPLIER and PURCHASER each agree not to
disclose the terms or status of this Agreement in any public statements, whether
oral or written, including but not limited to shareholder reports,
communications with stock market analysts, statements to other customers or
prospective customers, press releases or other communications with the media, or
prospectuses, without the other party's prior written consent, which will not be
unreasonably withheld, or as required by applicable law. If possible, each party
will give the other at least five (5) Business Days advance written notice of a
disclosure required by applicable law and will cooperate with the other party to
minimize the scope and content of such disclosure.
14. WARRANTIES.
14.1 SUPPLIER's Warranty. SUPPLIER hereby represents and warrants
as follows:
(a) The Product will conform with the Specifications.
(b) Subject to Section 5.2(b) of the Asset Purchase Agreement,
SUPPLIER will comply in all material respects with any law, regulation,
ordinance, order, injunction, decree or requirement applicable to the
manufacture of the Product or Active Ingredient (including GMPs); provided that
PURCHASER will reimburse SUPPLIER for any increased costs that SUPPLIER
reasonably incurs (and cannot reasonably defer) in manufacturing the Product or
Active Ingredient, or operating the respective facilities in which the Product
or Active Ingredient is manufactured, as a result of any change in such laws or
regulations.
(c) SUPPLIER will maintain in effect all material governmental
permits, licenses, orders, applications and approvals required of it and make
all filings and notifications required of it regarding the manufacturing of the
Product and Active Ingredient; and SUPPLIER will manufacture the Product and
Active Ingredient in material compliance with all such permits, licenses,
orders, applications and approvals.
(d) SUPPLIER and SUPPLIER's employees and Affiliates have never
been (i) debarred or (ii) convicted of a crime for which a person can be
debarred, under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of
1992. SUPPLIER agrees that it will promptly notify PURCHASER in the event of any
such debarment or conviction. The terms of the preceding sentence shall survive
the termination or expiration of this Agreement.
(e) The Product shall, at the time it is delivered under Section
3.1, not be adulterated or misbranded within the meaning of the FFDCA or any
equivalent local legislation. SUPPLIER shall have no responsibility for costs
and expenses associated with any recall of Product on or after the date hereof
attributable to a determination by a governmental or regulatory authority that
the use of the Warner-Lambert Name on such Product would constitute misbranding
within the meaning of the FFDCA.
<PAGE> 83
(f) SUPPLIER has full authority to enter into this Agreement.
14.2 PURCHASER's Warranty. PURCHASER hereby represents and warrants
as follows:
(a) PURCHASER owns all rights to the Product trademarks and trade
names, if any, and the Product labeling bearing PURCHASER's name and trademarks
meets regulatory requirements.
(b) The use and sale of the Product (in the country where sold and
for its indicated purpose) bearing PURCHASER's name and trademarks by or on
behalf of PURCHASER or its customers will not infringe any trademark or trade
name of any third person.
(c) PURCHASER will comply in all material respects with any law,
regulation, ordinance, order, injunction, decree or requirement applicable to
the marketing of the Product.
(d) PURCHASER will maintain in effect all material required
governmental permits, licenses, orders, applications and approvals regarding the
marketing of the Product, including the respective Marketing Authorizations, and
PURCHASER will market the Product in accordance with all such permits, licenses,
orders, applications and approvals. PURCHASER shall not make any changes to the
respective Marketing Authorizations affecting the Specifications without the
prior written consent of SUPPLIER, which will not be unreasonably withheld.
SUPPLIER shall respond to PURCHASER'S written request for any such change within
thirty (30) days after receipt of such written request from PURCHASER.
(e) PURCHASER warrants and represents that it has full authority
to enter into this Agreement, that it has been granted full rights and license
to sell the Product and that nothing contained in any other agreement prohibits
or restricts PURCHASER from entering into any part of this Agreement.
14.3 NO IMPLIED WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
THIS AGREEMENT, SUPPLIER AND PURCHASER MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OF ANY KIND REGARDING THE SUPPLY OF THE PRODUCT, EITHER EXPRESS OR
IMPLIED, INCLUDING, IN THE CASE OF SUPPLIER, ANY EXPRESS OR IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
15. ASSIGNMENT.
15.1 Until such time as PURCHASER has discharged all its payment
obligations under the Asset Purchase Agreement (other than the payment
obligation set forth in Section 2.1(a)(ii) thereof), this Agreement may not be
assigned by PURCHASER without the prior written consent of SUPPLIER; provided,
that PURCHASER shall have the right to assign its rights and obligations under
this Agreement to any third party successor to all or substantially all of its
entire business. SUPPLIER will respond to PURCHASER's written request for
assignment within forty-five (45) days after receipt of such written request
from PURCHASER. This Agreement will be binding upon and will inure to the
benefit of permitted assigns and successors.
<PAGE> 84
16. GOVERNING LAW.
16.1 This Agreement will be governed by the laws of the State of
New York. Each party hereby consents to the personal jurisdiction of the state
and federal courts located in New York.
17. FORCE MAJEURE.
17.1 Except in the case of monetary obligations of one party to the
other hereunder, neither party hereto will be liable to the other in damages
for, nor will this Agreement be terminable by reason of, any delay or default in
such party's performance hereunder if such delay or default is caused by
conditions beyond such party's control including, but not limited to, acts of
nature, regulation or law or other action of any government or any agency
thereof, war, insurrection, civil commotion, destruction of production
facilities or materials by earthquake, fire, flood or storm, strikes, epidemic,
or unforeseen failure of suppliers, public utilities or common carriers. Each
party hereto agrees promptly to notify the other party of any event of force
majeure above and to employ all reasonable efforts towards prompt resumption of
its performance hereunder when possible if such performance is delayed or
interrupted by reason of such event.
18. NOTICES.
18.1 All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received on the date when delivered by
hand delivery with receipt acknowledged, or upon the next Business Day following
receipt of telex or telecopy transmission, or upon the third day after deposit
in the United States mail, registered or certified with postage prepaid, return
receipt requested, addressed as set forth below:
If to PURCHASER:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Vice President, Corporate Development
Fax: (770) 442-9594
with a copy to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Legal Counsel
Fax: (770) 442-9594
<PAGE> 85
If to SUPPLIER:
Parke-Davis Pharmaceuticals Limited
Km. 1.9 Road 689
Vega Baja, Puerto Rico 00693
Attn: General Manager
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Attention: Vice President, Pharmaceutical
Manufacturing
Fax: (973) 385-7269
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: Senior Vice President and General Counsel
Fax: (973) 385-3927
Any party may alter the addresses to which communications or copies are to be
sent by giving, notice of such change of address in conformity with the
provisions of this section for giving notice.
19. HEADINGS.
19.1 Headings used in this Agreement are for reference purposes only
and in no way define, limit, construe or describe the scope or extent of such
paragraph, or in any way affect this Agreement.
20. SEVERABILITY.
20.1 If any provision of this Agreement is held to be invalid or
unenforceable for any reason, the remaining provisions will continue in full
force without being impaired or invalidated in any way, and the parties agree to
replace any invalid provision with a valid provision which most closely
approximates the intent and economic effect of the invalid provision.
21. WAIVER.
21.1 No term or provisions hereof shall be deemed waived, and no breach
excused, unless such waiver or consent is in writing and signed by the party
claimed to have waived or consented. The waiver by any party of a breach of any
provision of this Agreement will not operate or be interpreted as a waiver of
any other or subsequent breach.
22. SURVIVAL.
22.1 The provisions of Sections 2.3(b), 5.4, 5.5, 10.3, 10.4 and
13.2 and Articles 6-9 and 11 will survive the termination or expiration of this
Agreement.
<PAGE> 86
22.2 The provisions of this Agreement which do not survive termination
or expiration hereof (as the case may be) will, nonetheless, be controlling on,
and will be used in construing and interpreting, the rights and obligations of
the parties hereto with regard to any dispute, controversy or claim that may
arise under, out of, in connection with, or relating to this Agreement.
23. ENTIRE AGREEMENT.
23.1 This Agreement, together with the Schedules hereto and the Asset
Purchase Agreement, constitutes the entire agreement and understanding between
the parties hereto and Warner-Lambert Company with respect to the subject matter
hereof and supersedes any prior agreements, negotiations, understandings,
representations, statements and writings relating thereto. To the extent there
is any conflict between this Agreement, any purchase order and any of the
Schedules attached hereto, this Agreement will take precedence. This Agreement
may not be amended or modified unless such amendment or modification is made in
writing and executed by a duly authorized officer or agent of each party hereto.
24. COUNTERPARTS.
24.1 This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which shall together constitute
one and the same instrument. This Agreement shall become binding when one or
more counterparts hereof shall bear the signatures of all parties indicated as
signatories hereto.
25. NO THIRD PARTY BENEFICIARY.
25.1 The terms and provisions of this Agreement are intended solely for
the benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person or entity.
IN WITNESS WHEREOF, the parties have caused this Agreement to be entered into by
their duly authorized representatives, to be effective as of the date first
above written.
PARKE-DAVIS FIRST HORIZON PHARMACEUTICAL
PHARMACEUTICALS LIMITED CORPORATION
By: By:
--------------------------- -------------------------
Name: Name:
Title: Title:
<PAGE> 87
[****]-CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT I - PRODUCTION FEES*
<TABLE>
<CAPTION>
PRODUCT: TACRINE
AFFILIATE PRESENTATION WITH UNIT OF MEASURE CONSOLIDATED COST
--------- --------------------------------- -----------------
<S> <C> <C>
Austria 10 mg x 56 [*****]
20 mg x 56 [*****]
30 mg x 112 [*****]
40 mg x 112 [*****]
France 10 mg x 56 HOSP [*****]
10 mg x 56 [*****]
10 mg x 28 [*****]
10 mg x 28 MS [*****]
20 mg x 56 [*****]
20 mg x 28 [*****]
30 mg x 112 [*****]
30 mg x 28 [*****]
40 mg x 112 HOSP [*****]
40 mg x 112 [*****]
40 mg x 28 [*****]
Germany 10 mg x 56 [*****]
10 mg x 112 [*****]
10 mg x 112 TAP5 [*****]
20 mg x 56 [*****]
20 mg x 112 [*****]
20 mg x 112 TAP5 [*****]
30 mg x 56 [*****]
30 mg x 112 [*****]
30 mg x 112 TAP5 [*****]
40 mg x 56 [*****]
40 mg x 112 [*****]
40 mg x 112 TAP5 [*****]
10 mg x 56 - samples [*****]
Greece 10 mg x 56 [*****]
20 mg x 56 [*****]
30 mg x 56 [*****]
40 mg x 56 [*****]
Puerto Rico 10 mg x 120 [*****]
20 mg x 120 [*****]
30 mg x 120 [*****]
40 mg x 120 [*****]
Spain 10 mg x 56 (Zaimer) [*****]
20 mg x 56 (Zaimer) [*****]
30 mg x 112 (Zaimer) [*****]
40 mg x 112 (Zaimer) [*****]
United States 10 mg x 120 [*****]
</TABLE>
<PAGE> 88
<TABLE>
<S> <C> <C>
20 mg x 120
30 mg x 120 [*****]
40 mg x 120 [*****]
Active Ingredient $[*****] per kilo
Filled Capsule Shells $
</TABLE>
* Fifteen Days prior to each scheduled delivery date, SUPPLIER shall set the
Production Fee based on Suppliers calculation of the standard cost which shall
include the costs of Active Ingredient, Raw Materials, manufacturing, filling,
inspecting, quality control, stability testing and packaging. The Production Fee
for the Product to be delivered in the year 2000 is set forth herein. The
Production Fee is subject to adjustment as provided in the Agreement.
<PAGE> 89
SCHEDULE A
<TABLE>
<CAPTION>
DOSAGE STRENGTH NUMBER OF CAPSULES FOR U.S. NUMBER OF CAPSULES FOR "REST OF WORLD"
- --------------- --------------------------- --------------------------------------
<S> <C> <C>
10 mg 3,828,000* none
20 mg None 3,828,000
30 mg 3,828,000 none
40 mg 3,828,000 3,828,000
</TABLE>
* 600,000 of these capsules will be provided to PURCHASER in containers for use
by PURCHASER in packaging samples.
<PAGE> 90
SCHEDULE B
FORM OF PRODUCTION SCHEDULE*
<TABLE>
<CAPTION>
Country Dosage Strength Quantity Delivery Date
------- --------------- -------- -------------
<S> <C> <C> <C>
</TABLE>
* The Production Schedule submitted by PURCHASER to SUPPLIER pursuant to Section
2.2(b) of this Agreement will provide the above information for the Product
manufactured by SUPPLIER in 2000 plus an allocation of the following filled
capsule shells currently located in SUPPLIER's Affiliate in Freiburg, Germany
(for non-U.S.
Product):
BULK CAPSULES IN GERMANY (UNPACKAGED)
<TABLE>
<CAPTION>
COUNTRY DOSAGE STRENGTH QUANTITY EXPIRATION DATE
(CAPSULES)
<S> <C> <C> <C>
GERMANY
10 mg 3,600,000 09/01/2001
30 mg 2,290,000 11/01/2001
40 mg 1,720,000 11/01/2001
</TABLE>
<PAGE> 91
SCHEDULE C
[****]-CONFIDENTIAL TREATMENT REQUESTED
TACRINE HYDROCHLORIDE SUPPLY SCHEDULE
ITEM DELIVERY DATE
QUANTITY PRICE/UNIT
Tacrine Hydrochloride [*****]* [*****] [*****]
Tacrine Hydrochloride [*****]** [*****] [*****]
* PURCHASER shall provide SUPPLIER with at least 90 days' notice prior to the
date on which it desires to receive the Active Ingredient. PURCHASER's desired
date of delivery shall fall within the range set forth above. SUPPLIER shall use
commercially reasonable efforts to deliver the Active Ingredient on such date.
In the event PURCHASER desires to receive from SUPPLIER Product manufactured
using this batch of Active Ingredient, PURCHASER shall provide to SUPPLIER a
purchase order which shall specify the quantities, dosage strengths, country of
destination and any other information necessary for SUPPLIER to fill such order;
provided that any Product shall be manufactured in full batch sizes for any
particular dosage strength. Such purchase order shall be delivered to SUPPLIER
no earlier than the date on which such Active Ingredient would otherwise be
delivered as provided above and, in any event, at least 90 days prior to the
date on which such Product is to be delivered by SUPPLIER to PURCHASER. SUPPLIER
shall use commercially reasonable efforts to supply to PURCHASER the Product in
such quantities and on such dates as provided in such purchase order.
** PURCHASER shall provide SUPPLIER, prior to the date which is 180 days prior
to the Termination Date, written notice of its desire to receive this batch of
Active Ingredient. SUPPLIER shall use commercially reasonable efforts to deliver
the Active Ingredient on or prior to the Termination Date. In the event
PURCHASER desires to receive from SUPPLIER Product manufactured using this batch
of Active Ingredient PURCHASER shall provide to SUPPLIER with notice of its
desire at least 9 months prior to the Termination Date. Thereafter, PURCHASER
shall provide to SUPPLIER a purchase order which shall specify the quantities,
dosage strengths, country of destination and any other information necessary for
SUPPLIER to fill such order; provided that any Product shall be manufactured in
full batch sizes for any particular dosage strength. Such purchase order shall
be delivered to SUPPLIER on the date which is 90 days prior to the Termination
Date. SUPPLIER shall use commercially reasonable efforts to supply to PURCHASER
the Product on or prior to the Termination Date.
<PAGE> 92
SCHEDULE D
[****]-CONFIDENTIAL TREATMENT REQUESTED
RAW MATERIALS SCHEDULE
PRIMARY TACRINE HYDROCHLORIDE RAW MATERIALS
<TABLE>
<CAPTION>
CURRENT AFTER 1 LOT AFTER 2 LOTS AFTER 3 LOTS
KG/LOT COST/KG INV. VALUE INV. VALUE INV. VALUE INV. VALUE
------ ------- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2-Aminobenzonitrile 273 [*****] 1,114 [*****] 841 [*****] 568 [*****] 295 [*****]
Sodium Carbonate 500 [*****] 545 [*****] 45 [*****] 0 [*****] 0 [*****]
Zinc Chloride 390 [*****] 800 [*****] 410 [*****] 20 [*****] 0 [*****]
TOTAL [*****] [*****] [*****] [*****]
</TABLE>
<PAGE> 93
EXHIBIT 7.1.8
SUBLICENSE
THIS AGREEMENT is made as of the ___ day of May 2000 by and between
WARNER-LAMBERT COMPANY, corporation organized and existing under the laws of
the state of Delaware and having its principal place of business at 201 Tabor
Road, Morris Plains, New Jersey 07950 (hereinafter referred to as "LICENSOR")
and FIRST HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and
existing under the laws of the state of Delaware and having its principal place
of business at 660 Hembree Parkway, Roswell, Georgia 30036 (hereinafter
referred to as "LICENSEE"). This Sublicense is a sublicense pursuant to Section
2.01 of the License Agreement dated the 27th day of September, 1990 by and
between WILLIAM K. SUMMERS, M.D., an individual having his principal place of
business at 2400 Louisiana NE, Suite 530, Albuquerque, New Mexico 87110
(hereinafter referred to as "SUMMERS") and LICENSOR (the "License Agreement").
Unless otherwise defined herein, all capitalized terms shall have the meanings
set forth in Article I.
W I T N E S S E T H:
WHEREAS, SUMMERS is the owner of the Licensed Patents (as hereinafter
defined) and has developed and is the owner of the Agreement Compound Studies
(as hereinafter defined);
WHEREAS, pursuant to the License Agreement, SUMMERS granted LICENSOR
an exclusive license under the Licensed Patents throughout the world (except
Canada where SUMMERS may wish to grant a license to LICENSOR and to
PharmaScience Inc., a Canadian corporation ("PharmaScience"));
WHEREAS, on the date hereof, LICENSEE has purchased from LICENSOR,
pursuant to the Asset Purchase Agreement dated April 14, 2000, certain assets
relating to the Cognex(R) business and LICENSOR has agreed to sublicense the
Licensed Patents to LICENSEE pursuant to Section 2.1 thereof;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, LICENSOR and LICENSEE agree as follows:
I. DEFINITIONS
The following terms as used in this Agreement shall have the meanings set forth
in this Article:
1.01 "Affiliate", with respect to any Person, means any other Person
controlling, controlled by or under direct or indirect common control with such
Person in question. A Person shall be deemed to control a corporation (or other
entity) if such Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of such corporation (or
other entity), whether through the ownership of voting securities, by contract,
or otherwise.
1.02 "Agreement Compound" means the pharmaceutical compound
1,2,3,4-tetrahydro-9-aminoacridine (known by the generic names "Tacrine" and
"THA"), including all salts and hydrates.
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<PAGE> 94
1.03 "Agreement Compound Studies" means all Data together with all of
SUMMER's protocols, write-ups, analyses, compilations and other writings
relating to the Data in whatever stage of completion and whether in preparation
for submission to regulatory authorities or otherwise.
1.04 "Data" means, whether generated by SUMMERS or any of SUMMER's
researchers or investigators, all preclinical (including, but not limited to,
chemistry, formulation stability and analytical development methodology),
clinical, toxicology and other data (including, but not limited to, raw and
underlying data such as patient records, computer software, adverse events
data, etc.) resulting from, referring, or relating to, all studies performed or
to be performed or completed by or on behalf of SUMMERS in connection with
Agreement Compound.
1.05 "Exclusivity Period" means, with respect to a given country, the
period of time during which no third party can obtain governmental approval to
sell Agreement Compound based, in whole or in part, on data submitted by
LICENSOR to obtain its approval to sell Agreement Compound in said country.
1.06 "Licensed Compound" means Agreement Compound which (or the use or
sale of which) is covered by a Valid Claim.
1.07 "Licensed Patents" means all, patents and patent applications
covering the manufacture, use or sale of Product, Agreement Compound or
compounds used in the production thereof, owned or controlled by SUMMERS at any
time during the term of this Agreement, or under which SUMMERS is or shall
become empowered to grant licenses, including, but not limited to, the United
States Patent and all patents issuing from corresponding applications in
countries outside the United States, and any and all reissues, reexaminations,
extensions, substitutions, confirmations, registrations, revalidations,
additions, continuations, continuations-in-part or divisions of or to any of
the aforesaid patents. If a particular patent or patent application is directed
toward an invention of general applicability to all pharmaceuticals or
pharmaceuticals across a broad range of therapeutic areas, it would not be
deemed to be covered within the definition of "Licensed Patents" because such
patent or patent application may have incidental applicability to Agreement
Compound.
1.08 "Losses" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, reasonable fees of attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any claim, default or
assessment).
1.09 "NDA" means the United States New Drug Application filed by the
LICENSOR on June 1, 1990 (NDA #20-070) in connection with the use of Agreement
Compound for the treatment of Alzheimer's disease.
1.10 "Net Sales" means the actual gross sales of Licensed Compound and
Products by LICENSEE and its Affiliates to nonaffiliated customers less trade,
cash and quantity discounts and broker's or agent's commissions, if any,
actually allowed or paid; returns, allowances and adjustments actually granted
customers; prime vendor and institutional rebates; freight insurance and other
transportation costs and all taxes (except income taxes), tariffs, duties and
other similar governmental charges paid by LICENSEE, its Affiliates or
sublicensees. In the event of sale of Products containing Licensed Compound in
combination with other active ingredients, the Net Sales for such products
shall be determined by multiplying what would otherwise be the Net Sales of
such products by a fraction, the numerator of which shall be the production
cost of Licensed Compound contained therein
2
<PAGE> 95
and the denominator of which shall be the total production cost of all active
ingredients contained therein, the production cost of each to be determined
using the standard production cost formula of LICENSEE, provided, however, that
in no event shall the Net Sales for combination products be reduced by more
than sixty-five percent (65%).
1.11 "Payable Royalties" means the amount of royalties calculated to
be paid by LICENSEE, its Affiliates or sublicensees pursuant to this Agreement
reduced by (a) any amounts paid to third parties pursuant to Section 3.08 and
(b) the provisions of Section 3.09.
1.12 "Person" means any corporation, company, partnership, joint
development, other entity or natural person.
1.13 "Product" means any finished pharmaceutical product which
contains Agreement compound as an active ingredient, whether alone or in
combination form which (or the use or sale of which) is covered by a Valid
Claim.
1.14 "United States Patent" means United States Patent No. 4,816,456
and any reexaminations or reissues thereof.
1.15 "Valid Claim" means a claim which but for the license granted
hereunder, would be infringed by LICENSOR's, its Affiliate's or sublicensee's
manufacture, use or sale of Product and/or Licensed Compound, and which is in
an unexpired issued patent owned by SUMMERS included within the Licensed
Patents which has not been held invalid or unenforceable by a decision of a
court of competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, and which has not been held by an applicable governmental
agency, or expressly admitted in writing by the owner, to be invalid through
reissue, reexamination, disclaimer or otherwise, and, in the case of a holding,
is unappealable or unappealed within the time allowed for appeal.
II. GRANT
2.01 Grant of License. LICENSOR hereby grants to LICENSEE an exclusive
sublicense (and the right to sublicense) under the Licensed Patents to make,
use, and sell Licensed Compound and Products in all countries of the world;
provided, however, that SUMMERS may, in addition to the license granted to
LICENSOR in Canada, grant a nonexclusive license (without the right to
sublicense) under the Canadian Licensed Patents to PharmaScience for the sole
purpose of making, using, and selling Licensed Compound and Product in Canada
without the right to send Agreement Compound and/or Product outside of Canada.
To the extent Net Sales are made by any sublicensee of LICENSEE, they will be
treated for royalty purposes as if made by LICENSEE.
2.02 Sublicense Subject To License. LICENSEE acknowledges that, as a
licensee under the License Agreement, LICENSOR can not sublicense to LICENSEE
rights other than those it has been granted under the License Agreement.
III. PAYMENTS
3.01 Payments to LICENSOR. In consideration of the aforesaid grant of
license to LICENSEE and the further covenants contained in this Agreement,
including the covenant contained in Section [****]-CONFIDENTIAL TREATMENT
REQUESTED
3
<PAGE> 96
6.03(a), LICENSEE shall pay to LICENSOR's Designee the amounts set forth below
pursuant to the terms set forth herein.
3.02 In the event that SUMMERS, without LICENSOR's prior written
consent and unless compelled by applicable court or agency order, takes an
affirmative action that permits a third party (other than PharmaScience in
Canada) to make, use or sell Product or Agreement Compound in any country such
that LICENSEE does not have an exclusive market in such country for Product or
Agreement Compound (i.e. SUMMERS disclaims a Licensed Patent, or grants a
license to, covenants not to sue, or otherwise agrees not to enforce a Licensed
Patent or indemnifies a third party), LICENSOR shall pay to LICENSEE an amount
equal to all amounts recovered by LICENSOR pursuant to Section 3.02 of the
License Agreement, less reasonable costs and expenses of LICENSOR in effecting
such recovery. LICENSOR shall use its commercially reasonably efforts to
recover what it is entitled to under Section 3.02 of the License Agreement.
LICENSOR agrees that any request by SUMMERS pursuant to Section 3.02 of the
License Agreement will be communicated to LICENSEE in writing promptly and that
LICENSOR shall not consent or object without direction to so do from LICENSEE.
3.03 Royalty. (a) In further consideration of the rights granted
hereunder, LICENSEE shall pay to LICENSOR's Designee from June 1, 2000, and for
the remaining term of this Agreement, except as hereinafter provided, the
following royalties:
(1) [INTENTIONALLY OMITTED]
(2) [*****] of Net Sales in the United States, until the date
of expiration of the United States Patent;
(3) In each country outside the United States where there is
a Licensed Patent, [*****] of Net Sales in said country; such
royalties shall continue thereafter until the end of the Exclusivity
Period in said country; and
(4) Beginning with the end of the Exclusivity Period in each
country outside the United States where there is a Licensed Patent,
[*****] of Net Sales in said country; such royalties shall continue
thereafter until the date of expiration of the applicable Licensed
Patent.
(b) Notwithstanding the foregoing, the amount of Payable Royalties in
any quarter shall be reduced by any and all Prepaid Royalties until such time
that all Prepaid Royalties have been credited against Payable Royalties. As
used herein, "Prepaid Royalties" means royalties in the amount of $[*****] that
were prepaid by LICENSOR to SUMMERS, less an amount equal to the amount of
royalties payable by LICENSOR to SUMMERS under the License Agreement for the
period beginning April 1, 2000 and ending May 31, 2000.
(c) For purposes of this Agreement, and in response to the advice of
the United States Federal Trade Commission in connection with the approval of
the merger of LICENSOR and Pfizer Inc., LICENSOR irrevocably appoints Dr.
William K. Summers as its Designee (where indicated) for purposes of Articles
III and IV of this Agreement.
[****]-CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 97
3.04 Payment. (a) All payments to be made by LICENSEE to LICENSOR's
Designee hereunder shall be made as follows:
(i) Seventy-five percent (75%) to William K. Summers, M.D. or a bank
account designated in writing by William K. Summers.
(ii) Twenty-five percent (25%) to Burns, Doane, Swecker & Mathis.
Current wiring instructions are:
Crestar Bank
[*****]
Burns, Doane, Swecker & Mathis LLP
[*****]
The payment pursuant to clause (a)(ii) is mandated by a Stipulation and Order
Re Enforcement of Judgment and, by order of the Superior Court of the State of
California for the County of Los Angeles, may not be revoked by SUMMERS for any
reason.
(b) All payments to be made by LICENSEE as provided in Section 3.04(a)
above shall be made in United States dollars in the United States. For
converting into United States dollars a royalty accrued in another currency,
the conversion rate shall be the closing commercial buying rate of exchange for
United States dollars and such other currency quoted by Citibank, N.A. (or its
successors in interest) in New York for the last business date of the quarterly
period for which payment is being made.
3.05 Taxes Withheld. Any income or other tax that LICENSEE or its
Affiliates is required to withhold and pay on behalf of LICENSOR's Designee
with respect to the royalties payable to LICENSOR's Designee under this
Agreement shall (without regard to the provisions of Section 3.03(b)) be
deducted from such royalties prior to remittance to LICENSOR's Designee.
LICENSEE shall provide LICENSOR's Designee with documentary evidence of said
payments.
3.06 Computation of Royalties. All sales of Product and Licensed
Compound between LICENSEE and any of its Affiliates and/or sublicensees shall
be disregarded for purposes of computing royalties under this Article III.
Nothing herein contained shall obligate LICENSEE to pay LICENSOR's Designee
more than one royalty on any unit of a Product.
3.07 Licenses to Affiliates. (a) LICENSOR shall, at the request of
LICENSEE, sign sublicense agreements directly with LICENSEE's Affiliates in
those countries where the sale of Licensed Compound or Product by LICENSEE or
its Affiliates would infringe a Valid Claim. Such license agreements shall
contain substantially the same language as contained herein with appropriate
changes in parties and territory. It shall be LICENSEE's responsibility to
register such agreements with the appropriate authorities.
(b) Royalties received by LICENSOR's Designee directly from LICENSEE's
Affiliates pursuant to such agreements shall be credited towards LICENSEE's
royalty obligation under Section 3.03 hereof.
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<PAGE> 98
(c) Notwithstanding any other term or provision of this Agreement, the
failure of LICENSOR to comply with the provisions of Section 3.07(a) within
sixty (60) days of a request by LICENSEE or such Affiliate to comply with such
provision, shall immediately release LICENSEE of any and all obligations of
LICENSEE to make payments of any kind, including, but not limited to, payments
pursuant to Sections 3.03 and 6.04, until LICENSOR has complied with such
provisions.
3.08 Offset of Royalties. LICENSEE shall be entitled to offset against
the royalties otherwise due hereunder any amounts payable to third parties in
respect of other patent rights covering the manufacture, use or sale of
Agreement Compound that would preclude LICENSEE from practicing a Licensed
Patent without obtaining a license thereunder, except royalties due under the
Settlement and License Agreement dated as of September 28, 1994 between
Hoechst-Roussel Pharmaceuticals Inc. and LICENSOR.
3.09 Reduction of Royalties. (a) In the event that any third party
begins the sale of Product in any country where there is a Licensed Patent and
the sale of Product by all such third parties in the aggregate in such country
reaches or exceeds the percentages set forth below of the sales of Product in
such country made by LICENSEE, its Affiliates and any sublicensees in any
fiscal quarter, then payment of royalties (and the obligation to pay royalties)
shall be reduced with respect to Net Sales in such country pursuant to the
schedule set forth below for so long as such third party sales shall continue.
The amount of aggregate third party sales for a fiscal quarter shall be
determined by LICENSEE (a) in the United States, by data obtained from
Information Management Systems ("IMS") and (b) in any other country in which
there is a Licensed Patent, by data obtained from IMS drugstore audits
supplemented by LICENSEE's sampling of hospital and other institutional
purchasers.
6
<PAGE> 99
<TABLE>
<CAPTION>
Aggregate Third Party
Sales as Percentage Percentage of
of LICENSEE's Sales Royalties Suspended
in Any Fiscal Quarter for Such Fiscal Quarter
<S> <C>
10% and greater but 25%
less than 15%
15% and greater but 50%
less than 20%
20% and greater but 75%
less than 25%
25% and greater but 90%
less than 35%
35% and greater 100%
</TABLE>
(b) Upon the resumption of full royalty payment following any
reduction of payment under any Section of this Agreement, no payment shall be
made with respect to any royalties not received during the period of reduction.
(c) Notwithstanding any other term or provision of this Agreement, the
payment of royalties (and the obligation to pay royalties) shall terminate in
its entirety in a particular country in the event that SUMMERS, without
LICENSOR's prior written consent and unless compelled by applicable court or
agency order, takes an affirmative action that permits a third party (other
than PharmaScience in Canada) to make, use or sell Product or Agreement
compound in such country such that LICENSEE does not have an exclusive market
in such country for Product or Agreement Compound (e.g. SUMMERS grants a
license to, covenants not to sue, or otherwise agrees not to enforce a Licensed
Patent or indemnifies such third party). LICENSOR agrees that any request by
SUMMERS pursuant to Section 3.09(c) of the License Agreement will be
communicated to LICENSEE in writing promptly and that LICENSOR shall not
consent or object without direction to so do from LICENSEE.
IV. RECORDS AND PAYMENTS
4.01 Quarterly Reports and Payments. Beginning one hundred and twenty
(120) days after the second fiscal quarter of 2000 and one hundred and twenty
(120) days after the end of any subsequent fiscal quarter during the term of
this Agreement, LICENSEE shall deliver or cause to be delivered to LICENSOR's
Designee and to Burns, Doane, Swecker & Mathis LLP, a written report showing
all sales of Product by LICENSEE and its Affiliates during the preceding
quarterly period and showing the calculation of Net Sales and the amount
payable as royalties as calculated in accordance with Article III hereof,
provided, however, that the first such report shall cover only the month of
June 2000. Concurrently with the submission of each such written report,
LICENSEE shall pay LICENSOR's Designee or cause to be paid the amount of
royalties shown to be due thereon, subject to the other provisions of this
Agreement.
7
<PAGE> 100
4.02 Records. LICENSEE shall keep or cause to be kept accurate records
in sufficient detail to enable the royalties payable hereunder to be
determined. Upon the request of LICENSOR's Designee (but not more frequently
than once in each fiscal year), LICENSOR's Designee may designate an
independent public accountant mutually acceptable to LICENSOR's Designee and
LICENSEE to review such records to verify the accuracy of the royalty payments
made or payable hereunder during the preceding fiscal year, but only as to any
period ending not more than two (2) years prior to the date of such request.
Said accountant shall not disclose to LICENSOR or any other party any
information except that which should properly be contained in a royalty report
required under this Agreement. LICENSOR's Designee shall pay the cost for any
review of records conducted at the request of LICENSOR's Designee under this
Section 4.02; provided, however, that in the event that such review shall
reveal a discrepancy of greater than twenty percent (20%) in the royalty
payment due to LICENSOR's Designee hereunder, LICENSEE shall pay the cost of
such review. In addition, in the event that LICENSEE seeks indemnification
under Section 9.03 of this Agreement or if LICENSOR reasonably needs access to
such records in connection with any action or proceeding against LICENSOR by
SUMMERS, LICENSOR shall have the right to review LICENSEE's records to verify
the accuracy of the royalty payments made or payable hereunder, upon reasonable
notice and during regular business hours.
V. PATENT PROSECUTION AND INFRINGEMENT
5.01 Prosecution. LICENSOR shall use all reasonable measures to cause
SUMMERS to prosecute all applications for Licensed Patents and maintain all
such applications and issued Licensed Patents at his own expense and LICENSOR
shall keep LICENSEE currently advised of all steps taken or to be taken in the
prosecution of such applications (including reissues and reexaminations) and
improvements therein and shall furnish LICENSEE with copies of all such patent
applications and papers received from and filed with each patent office
promptly after filing or receipt. SUMMER's has undertaken in the License
Agreement to take all reasonable and necessary actions to obtain and maintain
Licensed Patents. In the event that SUMMERS elects or has elected not to file
applications in any country or countries or not to continue to prosecute any
application, including an application involved in an appeal or opposition
proceeding, or not to maintain any Licensed Patent or application for Licensed
Patent by failure to pay any required annuity, renewal or working fee, LICENSOR
shall so advise LICENSEE in time to enable LICENSEE to take appropriate action
and LICENSEE shall be entitled to file such applications or take such other
action at its expense and to own such resultant patents without the obligation
to pay any royalties under such patents pursuant to this Agreement or
otherwise. In such event, LICENSOR shall and shall use all reasonable measures
to cause SUMMERS, at LICENSEE's request, but at no additional cost to LICENSEE,
execute whatever documents are necessary to transfer to LICENSEE full ownership
of such application or Licensed Patent. Notwithstanding any other term or
provision of this Agreement, the payment of royalties (and the obligation to
pay royalties) shall terminate in its entirety in a particular country in the
event that SUMMERS fails to comply with the provisions of Section 5.1 of the
License Agreement with respect to such country.
5.02 Infringement Actions. LICENSOR and LICENSEE shall promptly notify
each other of any infringement of the Licensed Patents which may come to their
attention. SUMMERS, at his sole discretion, may undertake to obtain a
discontinuance of the aforesaid infringement and/or SUMMERS may bring suit
against such infringer.
8
<PAGE> 101
It is understood and agreed that SUMMERS shall bear solely all costs and
expenses associated with any suit or action pursuant to Section 5.02 of the
License Agreement and shall be entitled to retain and keep any and all sums
received, obtained, collected or recovered whether by judgment, settlement or
otherwise, as a result of such suit. SUMMERS shall have the right to prosecute
by counsel of his choice, and in connection therewith shall have the full right
to conduct the prosecution thereof.
VI. CONFIDENTIALITY AND OTHER OBLIGATIONS
6.01 Confidentiality. (a) Each party agrees that, without the prior
written consent of the other party or unless required by law, it shall not
disclose to any third party the terms of this Agreement or any confidential
information regarding the other party or the business of such party which has
been made available to it pursuant to Article III or Article IV hereof. It is
understood that LICENSEE and LICENSOR, without the consent of the other party,
may disclose in press releases or to third parties the existence and general
nature of this Agreement without disclosing the specific terms hereof.
(b) It is further understood that LICENSOR shall not be entitled to
disclose to any third party or to publish for any purpose (scholarly,
educational or otherwise) any Agreement Compound Study or any portion, extract
or analysis (partial or full) thereof without the prior written consent of
LICENSEE. It is understood that such restriction is a worldwide restriction.
If any third party has an obligation to present a document relating to
Agreement Compound to LICENSOR prior to its publication for LICENSOR's comment
and approval, LICENSOR shall give LICENSEE access to such document and assist,
in all respects requested, LICENSEE in communicating to such third party its
comments or concerns relating to the publication of any such document. LICENSEE
may instruct LICENSOR to withhold its approval in the event that, in LICENSEE's
reasonable opinion, its commercial position regarding Product may be prejudiced
by such publication.
(c) LICENSOR shall take all reasonable measures to restrain SUMMERS,
his employees, agents and advisors and former employees, agents and advisors
from publishing or disclosing to any third party the Agreement Compound Studies
or any portion, extract or analysis (partial or full) thereof.
(d) LICENSOR shall refrain from making untrue statements regarding
Agreement Compound or Licensed Patents.
(e) Notwithstanding any other provision of this Section 6.01, LICENSEE
or LICENSOR shall be permitted to respond to any lawful court or other tribunal
demand (including subpoenas, interrogatories, or document requests) seeking
information or documents relating to the validity of the Licensed Patents.
6.02 Agreement Compound Studies. In addition to the provisions of
Section 6.01(b), LICENSOR shall take all reasonable measures to prevent SUMMERS
from selling or conveying the Agreement Compound Studies to any third party or
allowing the Agreement Compound Studies to be used by any third party for
purposes of gaining approval for any Person other than LICENSEE from any
governmental body to market Agreement Compound or Product. LICENSEE shall not
sell or convey its equivalent of the Agreement Compound Studies (the "Licensee
Studies") to any third party nor allow the Licensee Studies to be used by any
third party for purposes of gaining approval for any
9
<PAGE> 102
such third party from any governmental body to market Licensed Compound or
Product unless the sales by such third party are included in the calculation of
Net Sales.
6.03 Non-Competition. (a) During the term of this Agreement, LICENSOR
shall not assist and shall use all reasonable measure to prevent SUMMERS from
assisting (other than PharmaScience with respect to Canada only) any third
party to develop, register, promote or market Agreement Compound or Product.
(b) During the term of this Agreement, LICENSEE shall not assist any
third party to develop, register, promote or market Licensed Compound or
Product where the sale or use of Product or Licensed Compound is covered by a
Licensed Patent; provided, however, that LICENSEE is permitted to assist a
third party if the sales of such third party, if any, are included in the
calculation of Net Sales.
(c) Notwithstanding any other term or provision of this Agreement, the
payment of royalties shall terminate in its entirety in the event that LICENSOR
breaches the obligations of Section 6.03(a) or SUMMERS breaches the obligations
of Section 6.03(a) of the License Agreement.
6.04 Activities of LICENSEE. It is understood that LICENSEE regularly
has discussions with other Persons with respect to licensing and related
activities with respect to pharmaceutical products, including those in the
field of cognition, as a result of which LICENSEE may, during the term of this
Agreement, market products (not containing Licensed Compound) that will compete
with Product. In the event that during the term of this Agreement LICENSEE
commences the sale or promotion in the United States of a product (other than
Product) for the treatment of Alzheimer's Disease and at the time of such
commencement the payment of royalties due under this Agreement for Net Sales in
the United States has not been reduced by more than twenty-five percent (25%)
or terminated pursuant to Section 3.09 hereof or otherwise, LICENSEE will pay
to LICENSOR's Designee a one-time payment of one million dollars
($1,000,000.00). This payment is in full and complete compensation for any loss
of royalties to LICENSOR's Designee that might be caused by LICENSEE's sale of
competing product(s) inside or outside the United States. Payment of the amount
due under this Section 6.04 shall not relieve LICENSEE of the obligations to
pay royalties on this sale of Product pursuant to the terms of this Agreement.
Notwithstanding the foregoing, if LICENSOR incurs the obligation under the
terms of Section 6.04 of the License Agreement to make payment to SUMMERS,
LICENSEE shall not be obligated to make any payment pursuant to this Section
6.04, as it is a one-time payment.
VII. REPRESENTATIONS AND WARRANTIES
7.01 Representations and Warranties of LICENSOR. LICENSOR hereby
represents and warrants the following:
(a) LICENSOR is the valid licensee of the Licensed Patents pursuant to
the terms of the License Agreement.
(b) LICENSOR has the right to enter into this Agreement and grant the
sublicense under the Licensed Patents pursuant to this Agreement. LICENSOR is
not a party to any other agreement or under any obligation to any third party
that would prevent LICENSOR from entering into this Agreement.
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<PAGE> 103
(c) To LICENSOR's knowledge, as of the date hereof, the Licensed
Patents are composed of the patents listed on Exhibit A.
(d) To LICENSOR's knowledge, except as set forth in Exhibit B hereof,
there are no patents owned by others and there are no trade secret or
proprietary rights of others which would be infringed or violated by the
making, using or selling of Agreement Compound or Products by LICENSEE anywhere
in the world.
(e) As of the date of this Agreement, there are no adverse
actions, suits or claims pending against LICENSOR, or to LICENSOR's knowledge,
against SUMMERS in any court or by or before any governmental body or agency
with respect to Licensed Patents or Agreement Compound and to the best of
LICENSOR's knowledge, no such actions, suits or claims have been threatened
against LICENSOR.
(f) No other Person or organization presently has any effective option
or license with respect to the manufacture, use or sale of Agreement Compound
or Products anywhere in the world, or is presently authorized to use the
Agreement Compound Studies anywhere in the world.
(g) LICENSOR makes no warranties other than as expressly stated
herein.
VIII. TERM OF AGREEMENT
8.01 Term. Unless sooner terminated as provided herein, this Agreement
shall commence as of the date first above written and shall continue until the
expiration of the last-to-expire Licensed Patent.
8.02 Termination. This Agreement may be terminated by either party
upon breach of this Agreement by the other party on sixty (60) days' prior
written notice to the breaching party, the notice to become effective at the
end of the-sixty (60) day period unless the breach is sooner cured by the
breaching party. The parties hereto agree that neither the reduction in
royalties pursuant to Section 3.09 nor the sales by a third party in a country
where there is a Licensed Patent shall constitute a breach of this Agreement by
which either party may terminate this Agreement.
8.03 Continuing Rights. Termination of this Agreement for any reason
shall be without prejudice to:
(a) LICENSOR's right to receive all royalties accrued and unpaid and
then due to be paid to LICENSOR's Designee by LICENSEE pursuant to the terms of
this Agreement on the effective date of such termination;
(b) the rights and obligations provided in Section 4.02 and Section
8.02 hereof; and
(c) any other remedies which either party may then or thereafter have
hereunder or otherwise.
[****]-CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 104
8.04 Waiver. Failure to terminate this Agreement following breach or
failure to comply with this Agreement shall not be deemed a waiver of the
non-breaching party's defenses, rights or causes of action arising from such or
any future breach or noncompliance.
IX. MISCELLANEOUS
9.01 Force Majeure. If for reasons of Force Majeure, as hereinafter
defined, either party fails to comply with its obligations hereunder, such
failure shall not constitute breach of contract. For the purpose of this
Article, Force Majeure shall mean acts of God; acts, regulations or laws of any
government; wars; civil commotion; destruction of production facilities or
materials; fire; earthquake or storm; labor disturbances; failure of public
utilities or common carriers and any other causes (not resulting from an action
of or failure to act by either party) beyond the reasonable control of either
party.
9.02 Assignment. LICENSEE may assign this Agreement in whole or in
part to any Affiliate or Affiliates who shall be substituted directly in whole
or in part for it hereunder, provided, however, that LICENSEE shall guarantee
the performance of its Affiliate assignee hereunder. This Agreement shall not
otherwise be assignable by either party without the prior written consent of
the other party, except to the successor or assignee of all or substantially
all of its business related to Licensed Products and provided that LICENSOR's
Designee shall be permitted to assign his right to receive monies under this
Agreement.
9.03 Indemnification.
(a) Indemnification by LICENSOR. LICENSOR shall indemnify and hold
LICENSEE and its agents, directors, officers and employees and representatives
harmless from and against any and all Losses which they may at any time incur
by reason of any action or proceeding brought by any third party against
LICENSEE arising out of or resulting from any misrepresentation, breach of
warranty or non-fulfillment of or failure to perform any agreement or covenant
made by LICENSOR in this Agreement, where the Loss is not one for which LICENSOR
is indemnified by LICENSEE pursuant to Section 9.03(b).
(b) Indemnification by LICENSOR. LICENSEE shall indemnify and hold
LICENSOR and its agents, directors, officers and employees and representatives
harmless from and against any and all Losses which they may at any time incur
by reason of any action or proceeding brought by any third party including, but
not limited to, LICENSOR's Designee, against LICENSOR arising out of or
resulting from any misrepresentation, breach of warranty or non-fulfillment of
or failure to perform any agreement or covenant made by LICENSEE in this
Agreement.
(c) Survival. The obligation of the parties in this Section 9.03 shall
survive the expiration or earlier termination of this Agreement to the extent
permitted by applicable Law.
9.04 Expenses. Whether or not the transactions contemplated hereby are
consummated, all costs, expenses and disbursements incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party hereto incurring such costs and expenses.
9.05 Notices. Any notice or report required or permitted to be given
or made under this Agreement by one of the parties hereto to the other shall be
in writing and sent to the other party at its
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<PAGE> 105
address indicated below or to such other address as the addressee shall have
theretofore furnished in writing to the addressor:
If to LICENSEE:
First Horizon Pharmaceutical Corporation
600 Hembree Parkway
Roswell, Georgia 30036
Attention: Chief Financial Officer
With a copy to: Legal Counsel
If to LICENSOR:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: President, Pharmaceutical Sector
with a copy to: Vice President and General Counsel
If to Designee:
William K. Summers, M.D.
2400 Louisiana NE, Suite 530
Albuquerque, New Mexico 87110
If to Burns, Doane, Swecker & Mathis LLP:
Burns, Doane, Swecker & Mathis LLP
Suite 500
1737 King Street
Alexandria, Virginia 22314
9.07 Governing Law. This Agreement shall be construed and the
respective rights of the parties hereto determined according to the substantive
law of New Jersey, United States of America other than those provisions
governing conflict of laws. Each party hereto hereby irrevocably submits to the
jurisdiction of any court in the State of New Jersey.
9.08 Entire Agreement. The terms and provisions contained in this
Agreement constitute the entire Agreement between the parties and shall
supersede all previous communications, representations, agreements or
understandings, either oral or written, between the parties hereto with respect
to the subject matter hereof, and no agreement or understanding varying or
extending this Agreement shall be binding upon either party hereto, unless in
writing which specifically refers to this Agreement, signed by duly authorized
officers or representatives of the respective parties and the provisions of
this Agreement not specifically amended thereby shall remain in full force and
effect.
13
<PAGE> 106
9.09 Non-Waiver. Any waiver must be explicitly in writing. The waiver
by either of the parties to this Agreement of any breach of any provision
hereof by the other party shall not be construed to be a waiver of any
succeeding breach of such provision or a waiver of the provision itself.
9.10 Severability. If and to the extent that any court or tribunal of
competent Jurisdiction holds any of the terms, provisions or conditions or
parts thereof of this Agreement, or the application hereof to any
circumstances, to be invalid or to be unenforceable in a final nonappealable
order, the remainder of this Agreement and the application of such term,
provision or condition or party thereof to circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby, and
each of the other terms, provisions and conditions of this Agreement shall be
valid and enforceable to the fullest extent of the law.
9.11 Agency. The relationship of the parties under this Agreement is
that of independent contractors. Neither party shall be deemed to be the agent
of the other, and neither is authorized to take any action binding upon the
other.
9.12 Counterparts and Headings. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both together
shall be deemed to be one and the same Agreement. All headings in this
Agreement are inserted for convenience of reference only and shall not affect
its meaning or interpretation.
IN WITNESS WHEREOF, LICENSOR and LICENSEE have executed this Agreement in
duplicate as of the day and year first above written.
WARNER-LAMBERT COMPANY
----------------------------
Name:
Title:
FIRST HORIZON PHARMACEUTICAL CORPORATION
-----------------------------
Name:
Title:
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<PAGE> 107
EXHIBIT A
<TABLE>
<S> <C> <C>
4370 USA P 01 G
APP#: 098871
DATE:24SE1987
PAT#: 4816456
DATE:28MR1989
EXP.DT:09SE2007
ABSTRACT:
A METHOD FOR TREATING CENTRAL NERVOUS SYSTEM OR PERIPHERAL
NERVOUS SYSTEM CHOLOINERGIC DEFICIT STATES SUCH AS ALZHEIMER'S
DISEASE IN A MAMMAL, SAID METHOD COMPRISING ADMINISTERING
TO SAID MAMMAL AN AMOUNT OF A MONOAMINE ACRIDINE DERIVATIVE
EFFECTIVE IN THE TREATMENT OF A CHOLINERGIC DEFICIT STATE AND
FOR A TIME SUFFICIENT TO ACHIEVE A SUITABLE BLOOD LEVEL TO TREAT
SAID CHOLINERGIC DEFICIT STATE. THE PREFERRED MONOAMINE ACRIDINE
DERIVATIVE IS 1,2,3,4-TETRAHYDRO-5-AMINO ACRIDINE A UNIT DOSAGE
PHARMACEUTICAL COMPOSITION OF MATTER COMPRISING AN EFFECTIVE
AMOUNT OF SAID MONOAMINE ACRIDINE DERIVATIVE SUFFICIENT TO TREAT
SAID CHOLINERGIC DEFICIT STATE AND A PHARMACEUTICALLY ACCEPTABLE
INERT CARRIER THEREFOR IS ALSO DISCLOSED. CIP OF U.S. SERIAL NO.
914,076 FILED 01OC1986. NO PRIORITY
4370 ASTL G
APP#: 80707/87
DATE:28SE1987
PAT#: 621035
DATE:03MR1993
EXP.DT:28SE2007
4370 ASTL D 02 F
APP#: 78886/94
DATE:17NO1994
PAT#:
DATE:
EXP.DT:
4370 ATRA E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:26OC2014
4370 ATRA X G
APP#: E106245
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
</TABLE>
15
<PAGE> 108
<TABLE>
<S> <C> <C>
4370 ATRA J X G
APP#: SZ9/96
DATE:23MY1996
PAT#: SZ9/96
DATE:23FE1998
EXP.DT:05MY2009
4370 BELG E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 BELG X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 BELG J X F
APP#: 96C0021
DATE:05JE1996
PAT#:
DATE:
EXP.DT:
4370 DENM P F
APP#: 2958/88
DATE:28SE1987
PAT#:
DATE:
EXP.DT:
4370 EPC E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 EPC X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 FRAN E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 FRAN X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
</TABLE>
16
<PAGE> 109
<TABLE>
<S> <C> <C>
4370 GBRI X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 GERM E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 GERM X G
APP#: EP0328535
DATE:28SE1987
PAT#: P3789967.2
DATE:01JE1995
EXP.DT:28SE2007
4370 ITAL E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 ITAL X G
APP#: 4919/BE94
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 LUXE E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 LUXE X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 MEXI F
APP#: 923762
DATE:29JE1992
PAT#:
DATE:
EXP.DT:
</TABLE>
17
<PAGE> 110
<TABLE>
<S> <C> <C>
4370 NETH E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWIT X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT J G
APP#: 52934
DATE:16JE1995
PAT#: C0328535/01
DATE:30AP1996
EXP.DT:16JE2010
</TABLE>
In addition, there are corresponding patents in Canada, Japan and Brazil which
are in the process of being abandoned. It may be possible to revive these
patents if Horizon so desires.
18
<PAGE> 111
EXHIBIT B
Settlement and License Agreement dated as of September 28, 1994 between
Hoechst-Roussel Pharmaceuticals Inc. and Warner-Lambert Company (Shutske patent)
Agreement dated September 8, 1987 between Warner-Lambert Company and Mount Sinai
School of Medicine
19
<PAGE> 112
EXHIBIT 7.1.10
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT, dated May ___, 2000, between FIRST
HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and existing under
the laws of Delaware, whose principal office is located at 660 Hembree Parkway,
Suite 106, Roswell, Georgia 30076 ("Horizon"), and WARNER-LAMBERT COMPANY, a
corporation organized and existing under the laws of Delaware, whose principal
office is located at 201 Tabor Road, Morris Plains, New Jersey 07950
("Warner-Lambert"). All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Asset Purchase Agreement, dated as of
April 14, 2000 (the "Purchase Agreement"), by and between Warner-Lambert and
Horizon.
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement, Warner-Lambert has agreed
to sell and Horizon has agreed to purchase the Assets;
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Purchase Agreement that Warner-Lambert and Horizon enter
into this Agreement;
WHEREAS, the parties wish to facilitate an orderly transfer of the
Cognex business to Horizon; and
WHEREAS, Warner-Lambert and certain of its Affiliates (the "Service
Providers") are willing to provide certain transitional administrative services
to Horizon upon the terms and conditions set forth below;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the parties hereto agree as follows:
Article 1. Definitions. As used in this Agreement, the following terms will
have the meanings set forth below:
"Business" means the Cognex business in the European countries in the
Territory.
"Business Data" means all files, documents, books and records relating
to the Business in the possession or under the control of Warner-Lambert or
certain of its Affiliates in connection with the Services.
"Incremental Services" will have the meaning set forth in Section 5.2.
"Invoice" will have the meaning set forth in Section 5.3.
"Service Providers" will have the meaning set forth in the forepart of
this Agreement.
"Services" will have the meaning set forth in Section 2.1.
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<PAGE> 113
Article 2. Services.
2.1 Services to be Made Available. In accordance with the terms
and provisions of this Agreement, Warner-Lambert agrees to provide or cause to
be provided to Horizon the transitional services relating to the Business that
are described on Schedule A hereto (collectively, the "Services") for the term
of this Agreement. Except as may be agreed by Warner-Lambert, provision of each
such Service will be limited to substantially the same number and quality of
employees as are currently involved in the conduct of the Business.
2.2 Controlling Provisions. In ordering and delivering Services
and Incremental Services hereunder, Warner-Lambert, the Service Providers and
Horizon may employ their standard forms, but nothing in those forms will be
construed to modify or amend the terms of this Agreement and in case of conflict
herewith, this Agreement will control.
2.3 Cash Management. In the event that provision of any of the
Services requires Warner-Lambert or any Service Provider to receive cash or
other moneys on behalf of Horizon, Warner-Lambert will utilize or cause to be
utilized commercially reasonable efforts to assure that such cash or other
moneys are promptly credited to one or more accounts designated by Horizon.
Horizon agrees that payments to Horizon may be made in local currency and that
if Horizon elects to receive payment in any currency other than the currency of
payment, Horizon bears all currency exchange costs and risk related thereto.
Article 3. Title to Equipment and Media.
3.1 Property of Warner-Lambert. Unless furnished to Warner-Lambert
or any Service Provider by Horizon, all equipment used in connection with
providing the Services and all media upon which information of Horizon is stored
in connection with the Services is and will remain the property of
Warner-Lambert or the relevant Service Provider.
Article 4. Intentionally Omitted.
Article 5. Billing.
5.1 Fees. Services relating to the maintenance of the Business in
the ordinary course will be provided to Horizon for the term of this Agreement,
free of charge.
5.2 Incremental Services and Out-of-Pocket Expenses. (a) Horizon
will be charged, per hour, the amount shown in Schedule A for the Incremental
Services referred to therein, plus applicable value added taxes; provided,
however, Horizon will not be charged for Incremental Services to the extent such
Incremental Services are required solely as a result of a breach of this
Agreement by Warner-Lambert or the Service Providers. As used herein,
"Incremental Services" means Services that would not, in the ordinary course of
business, be required to operate the Business, including, but not limited to
responding to investigations by Governmental or Regulatory Authorities regarding
the Product. Horizon will have the option of terminating an Incremental Service
and its corresponding fees, as set forth in Schedule A hereto, upon seven (7)
days' written notice to Warner-Lambert.
(b) Horizon will be charged for all of Warner-Lambert's
and the Service Providers' unrelated third-party out-of-pocket expenses,
reasonably incurred in connection with providing the Services and Incremental
Services; provided, however, Horizon will not be charged for any such unrelated
third-party out-of-pocket
2
<PAGE> 114
expenses to the extent such unrelated third-party out-of-pocket expenses
resulted solely from a breach of this Agreement by Warner-Lambert or the Service
Providers. Before incurring any single such expense in excess of the local
equivalent of U.S.$5,000, Warner-Lambert will notify Horizon or cause Horizon to
be notified. Horizon promptly will approve or reject such expense. If Horizon
rejects such expense, Warner-Lambert will be released from all obligations to
provide any Services or Incremental Services reasonably dependent upon the
activities related to such expense.
5.3 Payment. Unless otherwise agreed, Warner-Lambert will
issue or cause to be issued a monthly invoice (the "Invoice(s)") for the fees
relating to Incremental Services rendered pursuant to this Agreement and for
reimbursement of any third party, out-of-pocket expense incurred in connection
with providing the Services or Incremental Services (which invoice will include
copies of all third party invoices that exceed the local equivalent of
U.S.$5,000) and Horizon will pay or cause to be paid such Invoice to an account
designated by Warner-Lambert in immediately available funds within thirty (30)
days from the date of invoice. Unless Horizon specifically objects in writing,
Warner-Lambert will be entitled to cause any Invoice that is unpaid within such
thirty (30) day period to be paid from funds of any Horizon account that
Warner-Lambert may manage on Horizon's behalf hereunder. Horizon acknowledges
that the out-of-pocket expenses will be incurred in local currency, and the
terms of reimbursement thereof in any alternative currency shall be subject to
the agreement of Warner-Lambert.
Article 6. Indemnification.
6.1 Indemnification by Horizon. Horizon will indemnify and hold
Warner-Lambert and its respective Affiliates, agents, directors, officers,
employees and representatives harmless from and against any and all Losses which
they may at any time incur by reason of any Action brought by any Governmental
Authority or other third party arising out of or resulting from (a) any
misrepresentation, breach of warranty or non-fulfillment of or failure to
perform any agreement or covenant made by Horizon in this Agreement, (b) any
negligent act or omission of Horizon or any of its Affiliates and (c) provision
of the Services or Incremental Services, provided that in providing the Services
or Incremental Services Warner-Lambert employs at least the same level of care
as it currently employs in providing similar services for its own businesses.
6.2 Indemnification by Warner-Lambert. Warner-Lambert will
indemnify and hold Horizon and its respective Affiliates, agents, directors,
officers, employees and representatives harmless from and against any and all
Losses which they may at any time incur by reason of any Action brought by any
Governmental Authority or other third party arising out of or resulting from any
misrepresentation, breach of warranty or non-fulfillment of or failure to
perform any agreement or covenant made by Warner-Lambert in this Agreement;
provided, however, that with respect to the provision of Services or Incremental
Services, Warner-Lambert will be liable only to the extent of its failure to
employ at least the same level of care as it employs in providing similar
services for its own businesses or the gross negligence or willful misconduct of
Warner-Lambert.
6.3 Indemnification Procedures. Indemnification under Section 6.1
or Section 6.2 will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way of
settlement and release) at its own cost and expense. The indemnified party may,
but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
3
<PAGE> 115
indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated to,
defend, contest or otherwise protect against the same, and make any compromise
or settlement thereof and recover the entire costs thereof from the indemnifying
party, including reasonable attorneys fees, disbursements and all amounts paid
as a result of such claim or suit or the compromise or settlement thereof;
provided, however, that if the indemnifying party undertakes the timely defense
of such matter, the indemnified party will not be entitled to recover from the
indemnifying party its costs incurred in the defense thereof. The indemnified
party will cooperate and provide such assistance as the indemnifying party may
reasonably request in connection with the defense of the matter subject to
indemnification.
6.4 Disclaimer. Except as expressly provided herein, the Services
and Incremental Services are provided "as is" and without any express or implied
warranties, including the warranties of merchantability and fitness for a
particular purpose.
6.5 Certain Losses. Under no conditions will Warner-Lambert be
liable for any special, incidental or consequential damages (including, without
limitation, loss of business, profits or good will) in connection with its
performance under this Agreement.
6.6 Survival. The provisions of this Article 6 will survive the
expiration or earlier termination of this Agreement for so long as an
indemnified party hereunder may have liability under applicable Law.
Article 7. Term; Termination.
7.1 Term. This Agreement will expire on November 30, 2000, or
earlier upon termination of all Services and Incremental Services pursuant to
Section 7.2.
7.2 Termination. (a) In the event that either party materially
fails to perform any of its duties or obligations pursuant to this Agreement and
such failure is not cured within thirty (30) days after notice to such party
specifying the nature of such material failure, the other party may terminate
this Agreement upon further notice to the defaulting party.
(b) Horizon may terminate this Agreement upon thirty (30)
days' prior written notice to Warner-Lambert. Horizon will be relieved of any
obligation to pay for terminated Services and Incremental Services from and
after the effective date of such termination; provided, however, that Horizon
will continue to pay for any noncancellable commitments reasonably made by
Warner-Lambert in anticipation of providing the Services as required herein.
Warner-Lambert agrees to use its commercially reasonable efforts to provide
Horizon with a list of any such noncancellable commitments at least seven (7)
days prior to the termination of the Agreement by Horizon.
(c) Either party may, in its discretion and without
prejudice to its other rights and remedies at law, terminate this Agreement
immediately in the event that the other party becomes insolvent, has a receiver,
examiner or liquidator appointed over the whole or any part of its assets, has
an order made or resolution passed for it to be wound up or enters into any
arrangement or composition with its creditors.
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<PAGE> 116
(d) Warner-Lambert may terminate this Agreement if any
entity or person (other than Horizon or any of its Affiliates) acquires
ownership or control of 50% or more of Horizon's voting capital stock or
substantially all of its assets.
7.3 Effect of Termination. (a) Expiration or termination of this
Agreement for any reason, will not release either party from any liability which
at said time it has already incurred to the other party, nor affect in any way
the survival of any rights, duties or obligations of either party that are
expressly stated elsewhere in this Agreement to survive said expiration or prior
termination. Nothing in the immediately preceding sentence will affect the right
of the party aggrieved by any breach of this Agreement to be compensated for any
injury or damage resulting therefrom that is incurred before or after such
expiration or termination.
(b) Upon expiration or termination of this Agreement, all
fees owed by Horizon to Warner-Lambert for Services and Incremental Services
provided through the date of such expiration or termination will be paid within
thirty (30) days of the date of such expiration or termination.
(c) Promptly after the expiration or earlier termination
of this Agreement, Warner-Lambert will deliver or make available to Horizon all
of the Business Data, and if at any time after the termination of this Agreement
Warner-Lambert discovers in its possession or under its control any other
Business Data, it will forthwith deliver such Business Data to Horizon.
Notwithstanding the foregoing, to the extent any of the Business Data are items
susceptible to duplication and are either (x) used in connection with any of
Warner-Lambert's businesses other than the Business or (y) are required by Law
to be retained by Warner-Lambert, Warner-Lambert may deliver photostatic copies
or other reproductions from which, in the case of Business Data referred to in
clause (x).
Article 8. Miscellaneous.
8.1 Further Assurances. Subject to the provisions hereof, each of
Warner-Lambert and Horizon will execute and deliver such other agreements,
documents or instruments and take or cause to be taken such other actions as may
be reasonably required in order to effect the purposes of this Agreement and to
consummate the transactions contemplated hereby. Subject to the provisions
hereof, each of Warner-Lambert and Horizon will, in connection with entering
into this Agreement, performing its obligations hereunder and taking any and all
actions relating hereto, comply with all applicable Laws, obtain all required
consents and approvals and make all required filings with any Governmental
Authority and promptly provide the other with all such information as the other
party may reasonably request in order to be able to comply with the provisions
of this sentence.
8.2 Notices. All demands, notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally or by facsimile transmission or by mail
(first class, postage prepaid) to the parties at the following addresses or
facsimile numbers:
5
<PAGE> 117
if to Warner-Lambert, addressed to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: President, Pharmaceutical Sector
Fax No: (973) 385-4009
if to HORIZON, addressed to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30036
Attention: Chief Financial Officer
Fax No: (770) 442-9594
a copy of all notices and communications hereunder having the effect of
amending, supplementing, modifying or assigning this Agreement shall be
provided to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: Senior Vice President and General Counsel
Facsimile No. (973) 385-3927
or to such other address as a party hereto shall specify to the other party
hereto in writing.
8.3 Confidentiality. All confidential information of
Warner-Lambert disclosed to Horizon or any of its Affiliates in connection
herewith and all confidential information of Horizon and its Affiliates
disclosed to Warner-Lambert or its Service Providers in connection herewith will
be held in confidence and will not be disclosed by the other party to any third
party or used outside the scope of this Agreement, except that Horizon or
Warner-Lambert, as the case may be, may disclose such information to its
Affiliates or its employees who are under a similar obligation of secrecy in
furtherance of the purposes of this Agreement; provided, however, that the
aforesaid obligation of confidentiality assumed by Horizon and its Affiliates
and Warner-Lambert and its Service Providers hereunder will not apply to any
confidential information (collectively referred to as "Information" for purposes
of this Section 8.3) which (i) was or becomes available to Horizon or
Warner-Lambert, as the case may be, on a non-confidential basis from a source
that is not under an obligation (whether contractual, legal or fiduciary) to the
other party to keep such information or data confidential, (ii) was previously
known to the Receiving Party (defined below), as established by competent
evidence or (iii) was or becomes a part of the public domain through no fault of
the Disclosing Party (defined below). If the party receiving Information of the
other party (the "Receiving Party") is requested in any judicial or
administrative proceeding or by any Governmental Authority to disclose any
Information of the other party (the "Disclosing Party"), the Receiving Party
will give the Disclosing Party prompt notice of such request so that the
Disclosing Party may seek an appropriate protective order. The Receiving Party
will cooperate fully with the Disclosing Party in obtaining such an order. If in
the absence of a protective order the Receiving Party is nonetheless compelled
to disclose Information of the Disclosing Party, the Receiving Party may make
such disclosure without liability hereunder, provided that the Receiving Party
gives the Disclosing Party written notice of the Information to be disclosed as
6
<PAGE> 118
far in advance of its disclosure as is practical and, upon the Disclosing
Party's request and at its expense, the Receiving Party will use reasonable
efforts to obtain reasonable assurances that confidential treatment will be
accorded to such Information. The obligations of confidentiality in this Section
8.3 will survive the expiration or earlier termination of this Agreement until
the confidential information disclosed hereunder is no longer "Information" as
defined herein.
8.4 Third Party Beneficiaries. Each party intends that this
Agreement will not benefit or create any right or cause of action in or on
behalf of any Person other than Warner-Lambert, the Service Providers and
Horizon.
8.5 Entire Agreement. This Agreement, including all Schedules
hereto (which Schedules are hereby incorporated into and made a part of this
Agreement), constitutes the entire agreement between the parties and supersedes
all previous communications, representations, agreements or understandings,
either oral or written, between the parties with respect to the subject matter
hereof and this Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of each party hereto.
8.6 Authority. Horizon hereby authorizes Warner-Lambert and its
Affiliates and subcontractors to do all such things in the name or for the
account of Horizon as may be necessary or desirable for, or incidental to, the
performance of any of the Services in the ordinary course of business, including
the execution and delivery of any document.
8.7 Contractual Relationship. Nothing contained in this Agreement
will be deemed to create any joint venture, partnership or principal-agent
relationship between Warner-Lambert and Horizon or any of their respective
Affiliates and neither of the parties will hold itself out in any manner which
would indicate any such relationship with the other.
8.8 Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party. This Agreement will be
binding upon and, subject to the terms of the foregoing sentence, inure to the
benefit of the parties hereto, their respective successors, legal
representatives and assigns.
8.9 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver will be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
will be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
8.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
8.11 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any applicable present or future
law, and if the rights or obligations of any party hereto under this Agreement
will not be affected materially and adversely thereby, (a) such provision will
be fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or
7
<PAGE> 119
unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added as a part of this Agreement by mutual agreement
of the parties, a legal, valid and enforceable provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible.
8.12 Force Majeure. Except in the case of monetary obligations
hereunder, the occurrence of an event which materially interferes with the
ability of a party to perform its obligations or duties hereunder that is not
within the reasonable control of the party affected, not due to malfeasance and
that could not with the exercise of due diligence have been avoided ("Force
Majeure"), including, but not limited to, fire, accident, labor difficulty,
strike, riot, civil commotion, act of nature, delay or errors by shipping
companies or change in Law will not excuse such party from the performance of
its obligations or duties under this Agreement, but will merely suspend such
performance during the continuation of Force Majeure. The party prevented from
performing its obligations or duties because of Force Majeure will promptly
notify the other party hereto (the "Other Party") of the occurrence and
particulars of such Force Majeure and will provide the Other Party, from time to
time, with its best estimate of the duration of such Force Majeure and with
notice of the termination thereof. The party so affected will use its best
efforts to avoid or remove such causes of nonperformance. Upon termination of
Force Majeure, the performance of any suspended obligation or duty will promptly
recommence. Except as otherwise specifically provided herein, neither party will
be liable to the other party for any direct, indirect, consequential,
incidental, special, punitive or exemplary damages arising out of or relating to
the suspension or termination of any of its obligations or duties under this
Agreement by reason of the occurrence of Force Majeure. In the event that Force
Majeure has occurred and is continuing for a period of at least 2 months, the
Other Party will have the right to terminate this Agreement upon 30 days notice.
8.13 Governing Law. This Agreement and the rights and obligations
of the parties hereunder will be governed by, and construed and interpreted in
accordance with, the laws of New York applicable to a contract executed and
performed in such state.
8.14 Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original, but both of which together will
constitute one and the same instrument.
8
<PAGE> 120
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party, as of the date first above
written.
WARNER-LAMBERT COMPANY
By:
---------------------------------------
Name:
-------------------------------
Title:
-------------------------------
FIRST HORIZON PHARMACEUTICAL CORPORATION
By:
---------------------------------------
Name:
-------------------------------
Title:
-------------------------------
9
<PAGE> 121
Schedule A
[****]-CONFIDENTIAL TREATMENT REQUESTED
SERVICES
1. Services :
Services
Regulatory Services :
Maintenance of Registrations, including processing of payments for renewal and
annual fees
Contact with Governmental and Regulatory Authorities with respect to the
Product, including reporting of adverse events
Responding to customer complaints or physician inquiries
Providing a Qualified Person for the release of the Product in the European
countries in the Territory
Preparation and filing of Product Periodic Safety Update Report
Sales administration: Sales orders, shipping management, billing, processing of
returns (including providing Horizon with monthly reports of returns in the
Primary Countries) and collection services
Storage of Product (to the extent ordinarily stored in facilities of
Warner-Lambert or its Affiliates)
Assistance with transferring the foregoing functions to Horizon or its designee
2. Incremental Services
<TABLE>
<CAPTION>
Services Hourly Fee*
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Regulatory Services: $ [*****]
</TABLE>
Investigation of
- - any request or suggestions that the Product needs to be recalled or
withdrawn**
- - any request or suggestion that calls into question the quality** or safety of
the Product
<PAGE> 122
- -adverse events
Quality investigations of customer complaints including but not limited to
complaints alleging suspected or actual product tampering, contamination** or
mislabeling***
Any communications with physicians in relation to the Product.
Any periodic testing of Product as requested by Governmental or Regulatory
Authorities
Responding to an investigation or inquiry of any Governmental or Regulatory
Authority concerning the Product, including but not limited to further
investigation or inquiry regarding the mouse carcinogenicity study.
Management of Product recalls**
*Plus applicable value added taxes
** Horizon shall not bear the cost of such service where the recall is for a
failure of Products manufactured by Warner-Lambert to meet Specifications, where
such failure is due solely to the actions or omissions of Warner-Lambert.
***Horizon shall not bear the cost of such service where the investigation is
for a failure of Products manufactured by Warner-Lambert to meet Specifications,
where such failure is due solely to the actions or omissions of Warner-Lambert
<PAGE> 123
EXHIBIT 7.1.10
LICENSE AGREEMENT (ASSIGNMENT AND ASSUMPTION)
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated May __, 2000, by and between
First Horizon Pharmaceutical Corporation, a company incorporated under the laws
of Delaware and having its principal place of business at 660 Hembree Parkway,
Suite 106, Roswell, Georgia 30036 ("Horizon") and Warner-Lambert Company, a
company incorporated under the laws of Delaware and having its principal place
of business at 201 Tabor Road, Morris Plains, New Jersey 07950, U.S.A.
("Warner"). Capitalized terms not otherwise defined herein shall have the
meanings set forth in Article 1.
WHEREAS, Warner entered into the contracts listed in Appendix A hereof (the
"Contracts"), in connection with the development, manufacturing, marketing,
promotion and sale of the Cognex products; and
WHEREAS, on the date hereof, Warner has sold its Cognex business to Horizon
pursuant to the terms of an Asset Purchase Agreement dated April 14, 2000 (the
"Asset Purchase Agreement");
WHEREAS, Warner wishes, pursuant to the terms of the Asset Purchase Agreement,
to assign the Contracts to Horizon and Horizon is willing to accept the rights
and assume the obligations relating thereto;
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, the Parties hereto agree as follows:
ARTICLE 1
ASSIGNMENT AND ASSUMPTION
1.1 Assignment. Warner hereby transfers and assigns to Horizon, its
successors and permitted assigns, all right, title and interest of Warner in, to
and under the Contracts.
1.2 Assumption. Horizon hereby assumes as its own liability until
discharged in full, and agrees to perform, each and every obligation on the part
of Warner arising and to be performed under the Contracts on and after the date
hereof, with the same force and effect as if Horizon had been originally a party
to the Contracts.
ARTICLE 2
MISCELLANEOUS
2.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York.
1
<PAGE> 124
2.2 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any applicable present or future law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement, a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
2.3 Assignment. This Agreement and any rights and obligations hereunder
shall not be assignable by a party hereto, without the prior written consent of
the other party; provided that Horizon may assign this Agreement to one or more
of its affiliates.
2.4 Further Assurances. Each party hereto shall execute such other
documents and instruments and take such other actions as may be necessary to
effect the transactions contemplated hereby and further to comply with all
applicable Laws in connection with this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives, on the day and year set forth above.
FIRST HORIZON PHARMACEUTICAL CORPORATION
----------------------------------------
Name:
Title:
WARNER-LAMBERT COMPANY
----------------------------------------
Name:
Title:
2
<PAGE> 125
APPENDIX A
CONTRACTS
1. Settlement and License Agreement dated as of September 28, 1994 between
Warner-Lambert Company and Hoechst-Roussel Pharmaceuticals Inc.
2. Agreement dated September 8, 1987 between Warner-Lambert Company and
Mount Sinai School of Medicine.
3. Agreement dated April 20, 1990 between Warner-Lambert Company and Shire
Holdings Limited.
3
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NO. 1 TO PRODUCT DEVELOPMENT AND SUPPLY AGREEMENT
THIS AMENDMENT NO. 1, is entered into as of May 3, 2000 by and between
PENWEST PHARMACEUTICALS CO., a Washington corporation, with a principal place
of business at 2981 Route 22, Patterson, New York 12563 ("Penwest") and FIRST
HORIZON PHARMACEUTICAL CORPORATION, a Delaware corporation, with a principal
place of business at 660 Hembree Parkway, Suite 106, Roswell, GA 30076
("Horizon").
W I T N E S S E T H:
WHEREAS, Penwest and Horizon have heretofore entered into a Product
Development and Supply Agreement dated as of March 25, 1999 (the "Agreement");
and
WHEREAS, Penwest and Horizon desire to amend certain provisions of the
Agreement as hereinafter set forth; and
WHEREAS, Section 12.5 of the Agreement provides that modifications may
be made to the Agreement provided that they are reduced to writing and signed
by duly authorized representative by each of the parties;
NOW, THEREFORE, it is agreed by the parties as follows:
1. In Section 12.3 of the Agreement entitled "Assignment"
Subsection (b) is hereby deleted and the following is substituted in its place:
"...(b) nine (9) months following such assignment or
delegation, (i) such right shall become ineffective
and (ii) Horizon shall terminate any such assignment
or delegation, unless Inpharmakon has (A) within six
(6) months identified in writing to Penwest one or
more qualified third parties that have a sales
force, whether their own or contracted, in the
Territory of at least 133 sales personnel or a
substantially equivalent sales and distribution
capability, and (B) within nine (9) months obtained
a binding contract to market and sell the Designated
Product in the Territory which binding contract
shall be with a third party that does not
manufacture, market or promote any oral, controlled
release delivery product, except that Inpharmakon
may contract with a contract manufacturer that
manufactures such a delivery product if such
manufacturer agrees to be bound by the
confidentiality conditions that bind Horizon under
Section 8.1 of this Agreement and provided further
that if Penwest reasonably objects to such
manufacturer, Penwest shall have the right to
provide Inpharmakon with an acceptable substitute
contract manufacturer on terms substantially
equivalent to the terms
1
<PAGE> 2
Inpharmakon has negotiated with the manufacturer to whom
Penwest has objected.
2. In the sentence following Subsection (b) in Section 12.3 of
the Agreement, the reference to "six (6) month period" is hereby deleted and
the phrase "nine (9) month period" is substituted in its place.
3. In all other respects the Agreement is hereby ratified and
confirmed.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as
of the day and date first above written.
PENWEST PHARMACEUTICALS CO. FIRST HORIZON PHARMACEUTICAL
CORPORATION
By: By:
----------------------------- ---------------------------------
Its: Its:
---------------------------- --------------------------------
2
<PAGE> 1
EXHIBIT 10.21
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked With
Brackets ("[****]"). The Omitted Material Has Been Filed Separately With
The Securities And Exchange Commission.
Amendment to Collaboration Agreement
May 3, 2000
Donald L. Barbeau
President
Inpharmakon Corporation
191 Waukegan Avenue
Suite 206
Northfield, Illinois 60099
Dear Donald,
This letter records the terms on which First Horizon Pharmaceutical Corporation
(formerly Horizon Pharmaceutical Corporation) ("First Horizon") and Inpharmakon
Corporation ("Inpharmakon") have agreed to settle their differences with regard
to certain issues arising out of their Collaboration Agreement made as of
October 31, 1998 ("Collaboration Agreement").
1. First Horizon shall pay to Inpharmakon a total of $200,000 (the "IPO
Payment") within 30 days of the closing of First Horizon's initial public
offering of its shares of Common Stock ("IPO"); provided, however, that in
the event that the IPO has not closed by October 20, 2000, First Horizon
shall pay to Inpharmakon one half of the IPO Payment ($100,000) on October
20, 2000 and provided further, that in the event that the IPO has not
closed by April 20, 2001, First Horizon shall pay to Inpharmakon the
remaining balance of the IPO Payment ($100,000) on April 20, 2001. For the
purposes of this paragraph "closing" of the IPO refers to the date on which
First Horizon's underwriters fund the purchase of IPO shares from First
Horizon. The IPO is a firm commitment underwriting.
2. Secondly the Collaboration Agreement is amended to provide for the
following additional compensation:
a. First Horizon shall pay to Inpharmakon a total of $[****], in place of
the $[****] payment required by Section 4.01(ii) of the Collaboration
Agreement, such payment to be made on the earlier to occur of (i)
within 30 days after the filing of the NDA for the Product for the
Indication by First Horizon, and (ii) December 31, 2001.
b. First Horizon shall pay to Inpharmakon a total of $[****], in place of
the payment of $[****] required by Section 4.01(iii) of the
Collaboration Agreement, within 30 days after the approval of such
NDA.
3. Subsections 8.04(iii) and (iv) of the Collaboration Agreement are deleted.
4. In order to avoid future misunderstandings and to foster a closer spirit of
collaboration, First Horizon will designate Mr. Ralph Jordan, or such other
individual as First Horizon may designate
<PAGE> 2
from time to time as Project Liaison between Inpharmakon and First Horizon
as the individual to whom Inpharmakon may direct all questions and
inquiries regarding the development of, and FDA registration activities
concerning, the Product. In addition First Horizon agrees to provide
Inpharmakon with detailed written quarterly reports to be delivered to
Inpharmakon within 30 days after the end of each quarter during the term of
the Collaboration Agreement, such reports to include but not be limited to
a reasonable explanation of the progress of and any changes in Horizon's
regulatory strategies for the Product. In addition to the foregoing and as
part of its undertaking hereunder, First Horizon will provide Inpharmakon
with (a) at the same time as the FDA, the summary sections of any IND, New
Drug Application (whether full, partial or abbreviated) and amendments
thereto, excluding attachments, filed for the Product with the FDA until
such time as the FDA has approved the NDA, and (b) copies of all other
written communications to or from the FDA concerning the Product, including
but not limited to correspondence, filings, minutes of meetings, briefing
documents, responses to and from the FDA, and supporting documentation
whether in printed or electronic form. First Horizon agrees to make
available to Inpharmakon knowledgeable personnel with the knowledge and
authority to discuss all such activities and to give Inpharmakon access in
Horizon's offices, at no cost to First Horizon, to the attachments to
Horizon's filings for the Product with the FDA on not less than 48 hours
notice to Horizon.
5. Provided that First Horizon makes the payments in accordance with the
provisions of the above Paragraphs 1 and 2, each of Inpharmakon and First
Horizon shall and does hereby remise, release and forever discharge and, by
these presents, does, for itself, its directors, officers, agents,
successors, assigns, employees and representatives and each of them,
release and forever discharge the other party and its directors, officers,
agents, successors, assigns employees and representatives, and each of
them, from and against all manner of actions, complaints, causes of action,
claims, suits, debts, breaches, sums of money, accounts, reckonings,
contracts, torts, controversies, agreements, promises, damages, judgments,
executions, claims and demands whatsoever in law or in equity arising out
of, directly or indirectly, any matter, transaction, representation, event
or thing from the first day in time to and including the date of this
letter, including, but without limitation, any and all previously
unreleased and/or unfulfilled obligations of either party arising under or
pursuant to the Collaboration Agreement.
6. As a material inducement to Inpharmakon agreeing to the terms and
conditions of this letter, First Horizon hereby represents and warrants to
Inpharmakon that (a) the only formulation for the Product that it is now
being developed is for the Indication; (b) it will promptly inform Horizon
in the event it abandons such formulation or does or causes others to do
any work on any other formulation for communications through the date of
this letter to or from the FDA concerning the Product, (c) it has provided
Inpharmakon with true copies of all written communications through the date
of this letter to or from the FDA concerning the Product, including but not
limited to correspondence, filings, minutes of meetings, briefing
documents, responses to and from the FDA, and supporting documentation
whether in printed or electronic form; (d) the attached amendment to the
Product Development and Supply Agreement entered into as of March 25, 1999
by and between Penwest Pharmaceuticals Co. ("Penwest") and First Horizon
(the "Penwest Agreement") is a true and correct copy of an amendment to the
Penwest Agreement executed by the parties thereto on May 3, 2000, which
amendment is in full force and effect, and (e) it will not further amend
the assignment provisions of the Penwest Agreement without Inpharmakon's
prior written consent which consent will not be unreasonably withheld.
7. In the event of a material breach or material default by First Horizon
under the representations and warranties contained in Paragraph 6 above,
Inpharmakon may give notice of termination to First Horizon specifying the
breach or default, in which event the Collaboration Agreement shall
terminate immediately if the breach or default is not capable of cure, or,
if the breach or default is capable of cure, after 30 days unless First
Horizon cures the breach or default within the 30 day period. In the event
that the Collaboration Agreement is terminated pursuant to Inpharmakon's
notice hereunder, Inpharmakon shall have the exclusive right to proceed
with a NDA for the Product for the Indication using the Formulation and the
data from the Clinical Trials as has been
<PAGE> 3
acquired or developed by Horizon at the date of termination, and shall
have the right to assume Horizon's rights to the same and the NDA, if
applicable, without cost to Inpharmakon or Inpharmakon Affiliates. In
that event Horizon shall release to Inpharmakon its rights to the
Opportunity Package, the Formulation, the related not publicly
available information provided by Inpharmakon or developed by or for
Horizon, and registration data related to the NDA for the Product for
the Indication.
8. In the event that First Horizon grants Penwest a sublicense
under the provisions of Section 11.4 of the Penwest Agreement or
otherwise to the Horizon Test and Regulatory Data (as defined in the
Penwest Agreement), Horizon agrees to pay to Inpharmakon the royalties
provided under the provisions of Section 4.02 of the Collaboration
Agreement whether or not the Collaboration Agreement is still in force
provided that the Collaboration Agreement is not terminated by First
Horizon under Section 8.02 of the Collaboration Agreement in which
case the right to such royalties would terminate with the Collaboration
Agreement.
9. Defined Terms used in this letter have the same meaning as
they have in the Collaboration Agreement.
10. All other provisions of the Collaboration Agreement will
continue in full force and effect except to the extent changed by the
provisions of this letter.
11. The parties agree to execute a formal amendment to the
Collaboration Agreement within 30 days of the date of this letter
incorporating the above provisions into the Collaboration Agreement. At
such time as that amendment has been executed and exchanged by the
parties, the amendment will replace the agreement contained in this
letter.
12. This letter agreement may be executed in one or more counterparts, each
of which shall be an original, but all of which taken together shall
constitute one and the same agreement.
If the above terms and conditions accurately record our agreement, please sign
and return the acknowledgement at the foot of this letter.
Sincerely,
AGREED & ACCEPTED
/s/ William G. Campbell Inpharmakon Corporation
William G. Campbell
Controller
/s/ Donald L. Barbeau
Donald L. Barbeau
President
cc. Christopher R. Manning (Burke, Warren, MacKay & Serritella)
Michael J. Hogg (Business Counsel)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the use of our reports
(and to all references to our Firm) included in or made part of this
registration statement.
Arthur Andersen LLP
Atlanta, Georgia
May 4, 2000
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<EPS-BASIC> 0.10 .00
<EPS-DILUTED> 0.09 .00
</TABLE>
