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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-10432
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ROBERTS PHARMACEUTICAL CORPORATION
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(Exact name of registrant as specified in its charter)
New Jersey 22-2429994
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Meridian Center II
4 Industrial Way West
Eatontown, New Jersey 07724
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number,
including area code: (732) 676-1200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock $.01 par value per share American Stock Exchange
Rights American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
None
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(Title of class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the common stock, $.01 par value per share
(the "Common Stock"), of the Registrant held by non-affiliates of the
Registrant, as determined by reference to the last sale price of the Common
Stock as reported by the American Stock Exchange as of March 9, 1999 was
$822,611,808.
As of March 9, 1999, the number of outstanding shares of Common Stock was
31,563,043.
Documents incorporated by Part of Form 10-K into which
reference into this report document is incorporated
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Proxy Statement for the Part III
Annual Meeting of Shareholders
to be held in May 1999.
Forward Looking Statements
Certain statements included in (i) Item 1(c) Description of Business
with respect to the Registrant's development of its proprietary pipeline
products and with respect to the Registrant's newly acquired manufacturing and
distribution facilities and with respect to certain discontinued operations of
the Registrant; (ii) Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations; and (iii) the notes to the Registrant's
consolidated financial statements herein, are intended to be, and are hereby
identified as, forward looking statements for purposes of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. The Registrant cautions
readers that forward looking statements, including, without limitation, those
relating to the Registrant's future business prospects, revenues, cost of sales,
intangible dispositions and write-offs, continuing operations and discontinued
operations, and liquidity and capital resources, are subject to certain risks
and uncertainties, including, without limitation, the ability of the Registrant
to secure regulatory approval in the United States and in foreign jurisdictions
for the Registrant's developmental pipeline drugs, the efforts of the
Registrant's competitors and the introduction of rival pharmaceutical products
which may prove to be more effective than the Registrant's products, general
market conditions, the availability of capital, and the uncertainty over the
future direction of the healthcare industry, that could cause actual results to
differ materially from those indicated in the forward looking statements.
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PART I
Item 1. Business
(a) General Development of Business
Roberts Pharmaceutical Corporation (the "Company") is an international
pharmaceutical company which licenses, acquires, develops and commercializes
post-discovery drugs in selected therapeutic categories. The Company was
incorporated under the laws of the State of New Jersey in 1982 and commenced
operations in 1983. In 1988, its name was changed to Roberts Pharmaceutical
Corporation from VRG International, Inc. The Company's executive offices are
located at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey
07724, and its telephone number is (732) 676-1200. As used herein, the term the
"Company" refers to Roberts Pharmaceutical Corporation and its subsidiaries
unless the context indicates otherwise.
(b) Financial Information about Industry Segments
Substantially all revenues, operating profits or losses and assets of the
Company are attributable to one line of business, the acquisition, development
and sale of pharmaceutical products, primarily prescription pharmaceutical
products, in three segments, the United States, Canada and the United Kingdom.
(c) Description of Business
The Company was founded to take advantage of the large and growing
opportunity to license, acquire, develop and commercialize post-discovery drugs
in selected therapeutic categories. The Company has organized its drug
development, acquisition and marketing activities to focus on late-stage
development drugs in Phase II or Phase III clinical trials and currently
marketed prescription pharmaceutical products which (i) do not meet the
strategic objectives or profit thresholds of larger pharmaceutical companies or
(ii) are made available by government agencies and research institutions. The
therapeutic categories targeted by the Company are Cardiovascular,
Gynecology/Endocrinology, Urology, Oncology, Hematology and Gastroenterology.
The Company has a broad product portfolio including PROAMATINE(R) and
AGRYLIN, which are the Company's first proprietary drugs approved by the U.S.
Food and Drug Administration (the "FDA") and PENTASA(R), a drug for the
treatment of ulcerative colitis. See "Approved Pipeline Products." In
addition, the Company has a number of other proprietary late-stage development
products in the Company's pipeline. See "Late-Stage Development Products."
With a view toward focusing on its core business of licensing, acquiring,
developing, marketing and selling prescription pharmaceuticals, the Company
completed in 1998 the divestiture of the last of its non-core businesses
including VRG International, Inc. and its homecare and medical products
divisions. See Notes to Consolidated Financial Statements - Note 15.
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Approved Pipeline Products
PROAMATINE(R). In 1985, the Company acquired from the predecessor in
interest of Nycomed Pharma AG ("Nycomed Pharma") exclusive marketing rights in
the United States, Canada, the United Kingdom and Ireland to PROAMATINE
(midodrine), formerly AMATINE(R), a drug used for the treatment of orthostatic
hypotension and other blood pressure disorders. Orthostatic hypotension is a
condition involving the sudden drop in blood pressure upon assuming an upright
posture, resulting in dizziness, weakness or unconsciousness.
In September 1996, the FDA approved the Company's New Drug Application
("NDA") for PROAMATINE and cleared PROAMATINE for marketing in the United States
for the treatment of symptomatic orthostatic hypotension. The Company commenced
marketing and sales activities in the U.S. with respect to PROAMATINE in the
fourth quarter of 1996.
The FDA approved PROAMATINE pursuant to its accelerated approval process
for new drugs for serious or life threatening illnesses. There are no other FDA
approved treatments available for orthostatic hypotension. Other current
therapies used to treat the condition are associated with significant adverse
side effects such as potassium reduction, fluid retention and cardiac and
central nervous system disorders. The Company is conducting post-approval and
post-launch (Phase IV) studies of PROAMATINE required as part of the FDA
approval. PROAMATINE is in Phase II trials for stress urinary incontinence.
See "Late Stage Development Products - Therapeutic Category - Urology."
PROAMATINE for orthostatic hypotension has been designated by the FDA as an
"Orphan Drug" under the Orphan Drug Act of 1983 (the "Orphan Drug Act"), which
provides the Company with a seven year period of market exclusivity in the
United States from the date of the FDA approval. See "Government Regulation."
In 1990, the Company was granted approval by the Irish National Drugs
Advisory Board to market PROAMATINE for use in the treatment of orthostatic
hypotension in Ireland, where the drug is sold under the name MIDON(R). In
1991, the Company obtained regulatory approval for the sale in Canada of
PROAMATINE for use in the treatment of orthostatic hypotension, where the drug
is sold under the name AMATINE(R). AMATINE is sold in Canada by the Company's
licensee, Knoll Pharma Inc. ("Knoll") (formerly Boots Pharmaceuticals Ltd.). In
December, 1997 the Company filed an application in the United Kingdom for the
approval to market PROAMATINE under the name MIDON(R) for the treatment of
orthostatic hypotension.
AGRYLIN. In 1991, the Company obtained an exclusive worldwide license from
Bristol-Myers Squibb to develop, market and sell AGRYLIN (anagrelide), which has
been developed as an oral treatment for thrombocytosis, a blood disorder
characterized by
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high blood platelet counts which could result in an abnormally high incidence of
adverse blood clotting events, including heart attack and stroke. There is
evidence that some patients with increased platelet counts have thrombosis or
hemorrhage which can be treated successfully by lowering the platelet count.
AGRYLIN is intended to inhibit excessive platelet production and reduce the
morbidity and mortality of heart attack and stroke in thrombocytosis patients.
In March 1997, the Company received notification from the FDA that the
Company's NDA for AGRYLIN was approved. The Company commenced active marketing
and sales activities with respect to AGRYLIN in the second quarter of 1997.
There is no other FDA approved treatment available for thrombocytosis. Other
current therapies used to reduce excessive platelet production have distinct
disadvantages, such as leukemogenesis, leukopenia and anemia. Further, AGRYLIN
has been designated by the FDA as an Orphan Drug, a status which entitles the
Company to seven years of market exclusivity. In December 1997, the Company
filed an application with the FDA a status which entitles the Company to seven
years of market exclusivity to expand the indications of AGRYLIN to include
polycythemia vera. In December 1998, the Company received approval for the
expanded indication for AGRYLIN for thrombocytosis secondary to
myeloproliferative diseases, including Polycythemia Vera and Chronic Myelogenous
Leukemia.
In June 1998, the U.S. Department of Commerce, Patent and Trademark Office
issued to the Company a patent covering a new and highly improved process for
manufacturing anagrelide Hcl, the active ingredient in AGRYLIN. Currently,
anagrelide is commercially prepared utilizing a time consuming and difficult
synthesis involving a starting material possessing environmentally unfriendly
properties. The new process, which eliminates this precursor material and
greatly simplifies the synthesis, represents both an environmentally sound and a
significantly more economical method of manufacture. The patent for this new
process expires in 2017.
The Company has received approval of its New Drug Submission ("NDS") from
the Health Protection Branch, Canada ("HPB") for the sale of AGRYLIN in the
Canadian market, and has begun marketing the drug in Canada.
The Company has concluded distribution arrangements for AGRYLIN in
Scandinavia, Australia, Korea and Israel and intends to pursue such arrangements
in other geographic locations such as Japan, other Asian countries and Latin
America.
Prescription Pharmaceutical Products
In addition to developing its proprietary pipeline products, the Company's
principal objective is to concentrate its operations primarily on licensing,
acquiring, developing, marketing and selling prescription pharmaceutical
products. To enhance the Company's presence in its targeted therapeutic
categories, the
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Company has acquired marketed prescription pharmaceutical products from various
pharmaceutical companies. These product lines generate cash flow, which
contributes partial financial support to the Company's drug development
activities, and provides enhanced product sales opportunities for the Company's
sales force. Further, the sale of prescription pharmaceutical products has
enabled the Company to establish marketing channels in its targeted therapeutic
categories which the Company uses to market PENTASA, PROAMATINE and AGRYLIN and
expects to use to market its other late-stage development products if such
products are approved for sale.
Over the last five years, the Company has acquired the United States and/or
foreign product rights for many prescription pharmaceutical products from
various pharmaceutical manufacturers such as Hoechst Marion Roussel ("HMR"),
Procter & Gamble Pharmaceuticals, Inc. ("Procter & Gamble"), Bristol-Myers
Squibb Company ("Bristol-Myers Squibb"), Glaxo Canada, Inc. ("Glaxo Canada"), Du
Pont Merck Pharmaceutical Company ("Du Pont Merck"), Merck and Co., Inc.
("Merck"), G.D. Searle & Co. ("G.D. Searle"), SmithKline Beecham plc
("SmithKline Beecham") and Wyeth Laboratories, U.K. Certain of these products
are: NOROXIN(R), an antibiotic used for the treatment of urinary tract
infections; TIGAN(R), a drug used to control nausea and vomiting; EMINASE(R), a
thrombolytic agent used in the treatment of acute myocardial infarction to
dissolve blood clots obstructing coronary arteries; NORPACE(R) and TRANDATE(R)
in Canada, SALUTENSIN(R), SALURON(R), ETHMOZINE(R), NITRODISC, cardiovascular
products; FLORINEF(R), for adrenocortical insufficiency; MAXOLON(R), a gastro-
intestinal agent used for treatment of nausea and vomiting associated with
cancer chemotherapy; MINTEC(R), a gastro-intestinal drug used for symptomatic
relief of irritable bowel and spastic colon syndromes in adults; ESTRACE(R), a
line of estrogen replacement therapy products used for symptomatic relief of
menopausal symptoms and for the prevention of osteoporosis sold in Canada; and
MEPTID(R) and LODINE(R), analgesic agents. In April 1998, the Company acquired
exclusive U.S. marketing rights to PENTASA(R), a patented gastrointestinal drug
for the treatment of ulcerative colitis from HMR, which has become the Company's
largest selling drug.
As part of the Company's divestiture activities, in 1998 the Company
completed the sale of its ENTUSS(R), COMHIST(R) and CHERACOL(R) lines of
cough/cold products.
Nonprescription Pharmaceutical Products
In order to facilitate the growth of the Company's business, the Company
had always focused a part of its operations on the acquisition, marketing and
sale of nonprescription pharmaceutical products. Some of the nonprescription
pharmaceutical products acquired from various pharmaceutical companies and which
are marketed by the Company are: COLACE(R), PERI-COLACE(R), SQUIBB(R) mineral
oil, SQUIBB(R) Glycerin Suppositories and SQUIBB(R) Cod Liver Oil, used in the
treatment of gastrointestinal disorders and SLOW-MAG(R), a magnesium supplement.
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In August 1995, the Company identified the sale of nonprescription
pharmaceuticals as a non-core business activity and made the decision to divest
most of the products it had acquired. The Company divested a substantial
portion of its nonprescription products during 1996. The Company has retained
and will continue to sell, and under the right circumstances may acquire, only
certain well known, high volume nonprescription pharmaceutical products, such as
COLACE, PERI-COLACE, and SLOW-MAG that do not require significant promotional
outlays to establish and maintain consumer brand recognition and the demand for
which is not susceptible to uncontrollable seasonal factors.
In October 1998, the Company completed the divestiture of its CHERACOL(R)
line of cough/cold products.
Late-Stage Development Products
The Company has a portfolio of several late-stage development products
discussed below. Rights to these late-stage development products were acquired
by the Company after substantial value had been added to the products through
research activities conducted by others. The Company's objective is to continue
the development of these late-stage products and bring them to market as has
been accomplished with PROAMATINE and AGRYLIN. There can be no assurance that
regulatory approval of the late-stage developmental products will be obtained in
the United States or abroad. The Company intends to contract-out the
development of several of its late stage development products, utilizing
contract clinical research organizations. Sales of products acquired from other
pharmaceutical companies, and sales of the Company's prescription and
nonprescription pharmaceutical products, have enabled the Company to develop a
marketing and sales infrastructure to facilitate sales of these late-stage
products, if approved.
Therapeutic Category - Gastroenterology
In July 1998, the Company entered into an arrangement with Ribogene, Inc.
whereby the Company has been granted an exclusive license to market, distribute
and sell the product EMITASOL(R) for the treatment of emesis. EMITASOL(R) is an
intranasal form of metoclopramide and is currently in Phase III clinical trials.
The Company has been contracted by Ribogene, Inc. to develop this product and
Ribogene, Inc. will provide up to $7 million in funding for the development of
this product.
In a separate transaction, the Company purchased $10 million of Ribogene
Convertible Preferred Stock in a private placement. See Notes to Consolidated
Financial Statements - Note 5.
In the latter part of 1996, the Company and Eli Lilly and Company ("Lilly")
entered into a series of License Agreements pursuant to which the Company
acquired from Lilly certain rights to four developmental compounds designated
LY246736, LY353433, LY213829 (also known as "Tazofelone") and LY315535
(collectively,
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the "Compounds"), which could potentially address some of the unmet medical
needs with respect to certain gastrointestinal disorders such as inflammatory
bowel disease and irritable bowel syndrome. Each of the License Agreements
grants the Company an exclusive license to develop, manufacture, market and sell
the Compounds anywhere in the world, except with respect to LY315535, for which
the Company is licensed only in the United States and its territories, Canada
and Mexico. For a description of certain other terms of the Lilly License
Agreements, see "License Agreements."
Tazofelone is being developed for the treatment of Inflammatory Bowel
Diseases ("IBD"), including ulcerative colitis and Crohn's disease. A Phase II
efficacy trial has been completed for Tazofelone, and Tazofelone could offer
consumers an alternative to existing treatments for IBD which include
corticosteroids, 5ASA and azsulfidine.
The other three Compounds are being developed to treat Functional Bowel
Disorders ("FBD"), including irritable bowel syndrome and non-ulcerative
dyspepsia. These Compounds could provide an alternative to current FBD
therapies which include dietary changes, over-the-counter laxatives,
antidiarrheals, prescription antispasmodics, gastroprokinetics, proton pump
inhibitors, 5HT\3\ compounds and antacids.
The Company has completed a Phase 1a study of LY315535. The compound is
being developed for the treatment of irritable bowel syndrome and non-ulcerative
dyspepsia. The Phase 1a single rising dose study was conducted in human
volunteers. The objectives of the placebo-controlled study were to 1) show
safety across a range of doses and 2) establish a maximum tolerated dose. The
study demonstrated a favorable safety profile, with LY315535 being well-
tolerated across a broad range of doses. Given the positive outcome of this
study, the next stage of Phase I testing in humans is scheduled to commence in
the near term.
Therapeutic Category - Cardiovascular
In March, 1997, the Company and Pfizer Inc. ("Pfizer") entered into a
License Agreement pursuant to which the Company acquired from Pfizer worldwide
rights to a compound in development called Sampatrilat. Sampatrilat, currently
in phase II clinical trials, is intended to treat essential hypertension and
congestive heart failure. The License Agreement grants the Company exclusive
worldwide rights to develop, manufacture, market and sell Sampatrilat anywhere
in the world.
Sampatrilat incorporates, in a single substance, two different but
complimentary modes of activity. It is a potent inhibitor of angiotensin
converting enzyme ("ACE") and also inhibits neutral endopeptidase which, in
turn, results in an elevation of atrial natriuretic factor ("ANF"), the body's
own natural diuretic. This
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dual mode of activity may offer patients and managed care providers the
potential advantages of a treatment regime involving fewer drugs, reduced risks,
and lower costs in comparison to currently existing therapies.
Today, treatment of uncomplicated essential hypertension follows a step
therapy paradigm with the initial treatment often being an ACE inhibitor.
However, normalization of blood pressure may require the addition of a second
drug, generally a diuretic, in combination with the ACE inhibitor. This type of
step therapy, involving two and sometimes three drugs, may produce side effects
comprising the additive adverse reactions of the different products employed.
Diuretics commonly employed with ACE inhibitors can produce side effects
that include potassium depletion, gout, elevated blood lipids, and abnormalities
in sugar metabolism. Because ANF is a natural diuretic that does not possess
these properties, the use of Sampatrilat in hypertension or congestive heart
failure patients may confer, through the administration of a single drug, all
the advantages of a pure ACE inhibitor with the addition of greater natruresis
thus obviating the need for separate diuretics.
Therapeutic Category - Gynecology/Endocrinology
SOMAGARD(R). In 1988, the Company acquired rights from the Salk Institute
to manufacture and market SOMAGARD (deslorelin) in the United States and in
certain foreign countries, including the United Kingdom and Canada. SOMAGARD is
being developed for the treatment of central precocious puberty in children, an
endocrine disorder that results in premature release of hormones; and for
endometriosis in women. Published reports of long-term studies conducted by the
National Institutes of Health have indicated that the administration of SOMAGARD
inhibits the release of hormones which cause the abnormal maturation process and
causes a return to normal growth rates. The Company has completed Phase III
trials for SOMAGARD for use in the treatment of central precocious puberty and
is studying various alternatives for the commercialization of this product and
may elect to complete its development through a licensing arrangement with a
third party.
The Company currently markets the product SUPPRELIN(R) (histrelin), an
Orphan Drug, for central precocious puberty. See "Government Regulation." The
Company believes that SOMAGARD will complement SUPPRELIN. SOMAGARD, if approved
by the FDA, would be marketed to endocrinologists and managed healthcare
organizations.
SOMAGARD also is being developed as a treatment for endometriosis. A
number of Phase II clinical trials for this indication have been conducted.
Endometriosis is a gynecologic abnormality which may result in pain, infertility
and sexual and bowel dysfunction. Published reports of studies conducted by the
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National Institutes of Health indicate that SOMAGARD relieves pain and restores
normal sexual and bowel function in women with this condition.
Therapeutic Category - Hematology
STANATE. In 1994, the Company acquired the exclusive worldwide rights from
The Rockefeller University to develop, manufacture, market and sell STANATE
(stannsoporfin), which is being developed for the treatment of
hyperbilirubinemia in neonates, a condition caused by an accumulation of
excessive levels of bilirubin produced by the liver. Unless treated,
hyperbilirubinemia can result in jaundice, brain damage and death.
Bilirubin is excreted by the liver pursuant to a metabolic step requiring
the presence of an enzyme which, studies have shown, is not fully functional in
many early term and full term neonates. STANATE is intended to inhibit the
accumulation of excessive levels of bilirubin in neonates and to provide neonate
enzyme systems with an opportunity to mature and take over the normal
elimination of bilirubin.
The most common treatment for hyperbilirubinemia in neonates involves
phototherapy which requires exposure to a light source in order to stimulate the
temporary excretion of bilirubin. Phototherapy is often not fully effective
and requires many hours and sometimes several days of exposure to light with
resulting maternal separation, extensive nursing supervision and related time-
sensitive costs. In contrast, STANATE is administered by injection and clinical
studies have shown that one dose is generally all that is necessary for
treatment purposes. STANATE is currently in Phase II/III clinical trials and
the Company is reviewing various alternatives for the completion of the clinical
trials and commercialization of this product including outlicensing.
Therapeutic Category - Urology
PROAMATINE. In addition to its use in the treatment of blood pressure
disorders, PROAMATINE is currently sold in several countries by unaffiliated
third parties to treat stress urinary incontinence, the involuntary loss of
urine from the bladder. There is no approved therapy for stress urinary
incontinence in the United States. PROAMATINE is an alpha agonist which
increases the tension of the urinary sphincter, thereby preventing the
involuntary loss of urine from the bladder. The Company is conducting a Phase
II clinical program in the United States for the use of PROAMATINE in the
treatment of stress urinary incontinence.
Therapeutic Category - Oncology
DIRAME(R). In 1992, the Company obtained exclusive worldwide rights from
Bayer AG ("Bayer") to develop and market DIRAME (propiram), a potent, centrally
acting analgesic with low addiction
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potential intended for use in the control of moderate to severe acute or chronic
pain. See "Government Regulation."
DIRAME is in Phase III clinical trials which indicate that the compound
appears to be safe and effective in patients with various kinds of acute and
chronic pain.
A joint venture from which Bayer obtained the rights to DIRAME had
initially filed an NDA for DIRAME. Subsequent to such filing, the FDA required
additional studies regarding the drug. The Company is now addressing the issues
raised by the FDA and, in 1993, commenced long-term carcinogenicity studies on
two species of laboratory animals and other clinical studies. The in-life phase
of these studies has been completed and the results are currently under
analysis. In order to complete its NDA filing, the Company believes it must
complete an additional Phase III clinical trial. The Company has commenced such
clinical trial during 1998.
SOMAGARD. In addition to the treatment of central precocious puberty and
endometriosis, SOMAGARD has been studied as adjunctive treatment for prostate
cancer. Other treatments for prostate cancer such as surgery and/or
radiotherapy are often precluded because the cancer has spread to the bones. As
a result, castration, hormonal therapy or chemotherapy are often the only
available treatments. SOMAGARD is being evaluated by the Company as an
alternative to these procedures. The Company has filed a Product License
Application (NDA equivalent) for SOMAGARD for treatment of prostate cancer in
the United Kingdom and has obtained approval from the Irish regulatory
authorities to market the product for this indication. Use of SOMAGARD for the
treatment of prostate cancer in the United States is in Phase III clinical
trials.
RL0903. The Company is developing a compound to treat prostate cancer
designated RL0903. This compound, in a patented delivery system has been
licensed exclusively to the Company for North America and Europe and is
currently in Phase III clinical trials. Roberts acquired rights from Hydro Med
Sciences to a patented hydrogel implant delivery technology for use in the Phase
III development of RL0903 for the hormonal treatment of prostate cancer. In
consideration of milestone payments and royalties on future sales, the Company
received exclusive rights to develop and market this Hydrogel Implant in the US,
Canada, and Europe. RL0903 is a synthetic gonadotropic hormone releasing factor
agonist that, due to its long-term inhibition of pituitary release of
gonadotropins, can block both ovarian and testicular function. The hydrogel
implant employs a proprietary technology that delivers therapeutic agents at a
controlled, constant release rate for up to a year. It is a retrievable
subcutaneous implant that can be inserted in a physician's office using a local
anesthetic.
The Hydrogel Implant offers potentially significant benefits over standard
drug therapies for prostate cancer that employ gonadotropin hormone releasing
agonists and involve administration
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regimens ranging from low-dosage daily injections to high-dosage implants or
depot injections of three to four months duration. The Hydrogel Implant should
have distinct advantages by providing a more potent, reliable administration of
smaller amounts of therapeutic agent over a longer time.
License Agreements
The Company has obtained rights to the late-stage drugs currently being
developed by it through license agreements and has sublicensed certain of these
rights to pharmaceutical companies through license and/or marketing agreements.
A discussion of these agreements is provided below.
PROAMATINE Agreements. In 1985, the Company entered into a license
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agreement with the predecessor in interest of Nycomed Pharma pursuant to which
the Company obtained exclusive rights to develop and market the product
PROAMATINE in the United States, Canada, the United Kingdom, Ireland and certain
other countries. The agreement was amended in January 1994 to, among other
things, provide for a reduction in the delivery price of the product to the
Company in any territory covered by the agreement for a five year period
commencing upon the Company's launch of the product in any such territory and
the addition of minimum sales requirements which must be achieved by the Company
in the territories covered by the agreement in order to maintain exclusivity.
The Company's agreement with Nycomed Pharma, as amended, obligates it to develop
PROAMATINE and obtain governmental approval to market the product in the
licensed territories. The Company is obliged to pay a royalty to Nycomed Pharma
on sales of PROAMATINE by the Company and its distributors and must purchase its
requirements of PROAMATINE from Nycomed Pharma.
In 1991, the Company entered into a marketing agreement with Knoll which
granted Knoll the exclusive right to market and sell PROAMATINE in Canada (under
the name AMATINE) for use in the treatment of orthostatic hypotension.
AGRYLIN Agreements. In 1991, the Company entered into a license agreement
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with Bristol-Myers Squibb pursuant to which the Company obtained exclusive
worldwide rights to develop and market AGRYLIN. The Company is obliged to fund
the continued development and registration of AGRYLIN; made a payment upon FDA
approval and has paid and is obligated to continue to pay royalties on sales of
the drug.
The Company entered into various distribution agreements with third parties
for the distribution and sale of AGRYLIN in Norway, Sweden, Finland, Denmark,
Iceland, Israel, Korea, Australia and New Zealand. AGRYLIN is not yet approved
in all of these countries and, as part of the distribution agreement, the
distributors are responsible for obtaining regulatory approval. If regulatory
approval is obtained, the Company will supply finished goods to the distributors
which will provide physical distribution along with marketing and sales support.
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SOMAGARD License Agreement. In 1988, the Company and the Salk Institute
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entered into a license agreement pursuant to which the Company obtained certain
rights to develop and market the product SOMAGARD in the United States and
certain foreign markets, including the United Kingdom and Canada. Under the
terms of the license agreement, the Company is required to pay royalties on
sales of SOMAGARD in countries in which the Salk Institute has obtained patents.
HYDROGEL License Agreement. In 1998, the Company entered into a license
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agreement with Hydro Med Sciences pursuant to which the Company was granted an
exclusive license to market the hydrogel implant containing its RL0903 compound
in North America and Europe. The Company is obligated to make milestone
payments, to purchase its requirements of the hydrogel implant from Hydro Med
Sciences and to pay royalties on sales of the product.
DIRAME License Agreement. In 1992, the Company entered into a license
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agreement with Bayer with respect to the product DIRAME. Pursuant to this
agreement, the Company acquired exclusive worldwide rights from Bayer to
develop, manufacture and market the product DIRAME. The Company paid an up-
front royalty to Bayer for rights to develop and market DIRAME. The Company
must also pay Bayer licensing fees and royalties on sales.
STANATE License Agreement. In 1994, the Company and The Rockefeller
--------------------------
University entered into a license agreement pursuant to which the Company
acquired the exclusive worldwide rights to develop, manufacture, market and sell
STANATE. The Company paid an up-front license fee to Rockefeller University for
the rights to develop, manufacture, market and sell STANATE. The Company must
also pay Rockefeller University annual licensing fees and royalties on sales.
License Agreements for Tazofelone and other Lilly Compounds. In 1996, the
------------------------------------------------------------
Company entered into four License Agreements with Lilly pursuant to which the
Company acquired the exclusive rights to develop, manufacture, market and sell
Tazofelone and the Compounds LY246736 and LY353433 anywhere in the world and the
Compound LY315535 in the United States and its territories, Canada and Mexico.
The term of each of the License Agreements shall be the later of either (i) the
life of the last to expire of the patents covering a Compound or (ii) fifteen
years. Under the terms of each of the License Agreements, the Company paid
Lilly a signing fee and is obligated to make certain milestone payments to Lilly
as well as pay Lilly certain royalties based on the sales of any products
resulting from the Compounds.
In June 1998, the Company granted to Adolor Corporation an option to license the
compound LY246736, previously acquired from Lilly. The granting of this option
for LY246736 is consistent with the Company's strategy to maximize, within the
shortest time possible, returns on its research and development investments by
focusing these resources on the internal development of compounds that are
-12-
<PAGE>
further advanced in its pipeline. The Company received an up front
nonrefundable, cash payment for granting Adolor a thirteen (13) month exclusive
worldwide option on this compound. During this option period, Adolor will
complete Phase I studies of LY246736. If Adolor then exercises its option to
license the compound, the Company would receive a second cash payment, followed
by milestone fees, and a royalty on future sales.
SAMPATRILAT License Agreement. In March, 1997, the Company entered into a
------------------------------
License Agreement with Pfizer pursuant to which the Company acquired the
exclusive rights to develop, manufacture, market and sell Sampatrilat anywhere
in the world. The term of the License Agreement shall be the earlier of the
expiration of the last to expire of the patents covering Sampatrilat or fifteen
years from the date of first commercial sale of a product containing
Sampatrilat. Under the terms of the License Agreement, the Company paid Pfizer
a signing fee and is obligated to make certain milestone payments as well as pay
Pfizer certain royalties based on the sale of products containing Sampatrilat.
Pfizer has retained the right under certain circumstances should the Company's
sales of Sampatrilat dosage forms equal or exceed a certain percentage of the
worldwide sales of pharmaceuticals sold for the treatment of hypertension in
humans, to convert the Company's license to a non-exclusive license upon the
making of certain payments to the Company.
Marketing
In the United States the Company markets and sells its products primarily
through its own nationwide sales force and through a network of brokers and
distributors. The Company has focused its sales operation to impact selected
physician specialties and major buying and decision making entities, such as
managed care organizations and large retail and mass merchandise operations.
With the growing trend in the United States of providing health care through
some form of managed care program, the Company has stepped-up its selling
efforts of prescription products to such managed healthcare organizations. In
an effort to increase its sales to managed healthcare organizations, the Company
has employed national account managers to focus efforts on this growing market.
Various marketing, promotion, sales and training programs have been initiated to
improve the Company's penetration of the managed healthcare market and increase
product sales to managed healthcare organizations.
Manufacturing
From its inception, the Company's initial strategy was to outsource its
manufacturing and packaging functions in order to enable the Company to grow
without requiring large capital outlays to produce and package its products. In
that regard, the Company has engaged contractors, primarily large pharmaceutical
companies, to convert active ingredients into finished drug products. In most
instances where the Company has acquired the rights to approved
-13-
<PAGE>
products from other pharmaceutical companies, the seller or licensor has agreed
to manufacture the Company's requirements of the products for a specified period
of time. The manufacturing activities conducted by third parties for the
Company have consisted of the receipt and storage of materials, purification,
production, packaging and labeling. The Company maintains a manufacturing
department which is responsible for (i) monitoring the manufacturing operations
of its contractors, (ii) inventory control, and (iii) quality control. The
Company's manufacturing department maintains a quality control and quality
assurance program, including a set of standard operating procedures, designed to
assure that the Company's products are manufactured in accordance with Good
Manufacturing Practices standards ("GMP") and other applicable domestic and
foreign regulations.
The Company has determined that it will take control of a major portion of
its manufacturing activities and seek to achieve certain cost efficiencies. In
July, 1997, the Company concluded the purchase from Monsanto Canada, Inc. of a
100,000 square foot pharmaceutical manufacturing facility previously operated by
Monsanto's Searle Division ("Searle") located in Oakville, Ontario, Canada. The
facility is approved by both the FDA and HPB. In addition to manufacturing and
processing capabilities, the facility includes laboratory, warehouse and
administrative space. The Company has begun transferring certain product
packaging from third parties to this facility, and should realize certain
benefits, including, without limitation, lower production costs and more
flexibility in determining appropriate inventory levels for the Company's
products when it begins to transfer the manufacturing of certain products to
this facility upon appropriate regulatory approval. In addition, the Company
utilized the available office space in Oakville by relocating the operations of
its subsidiary, Roberts Pharmaceutical Canada, Inc., to the Oakville facility.
The Company's ability to transfer the production of certain of its products to
the Oakville facility will be, in certain cases, dependent on the duration of
its current agreements with suppliers, and the ability to obtain regulatory
approvals to transfer the manufacture of these products to Oakville.
The Company is currently in the process of refitting the Oakville plant in
order to accommodate the manufacture of as many of the Company's products as
possible. In addition, the Company will explore the possibility of using the
Oakville facility to engage in contract manufacturing for other pharmaceutical
companies.
Distribution
In October, 1997, the Company completed the acquisition of an approximately
70,000 square foot distribution facility located in a suburb of Chicago. The
Company began distributing its products from this facility in the second
quarter, 1998. The Company anticipates that its distribution costs will
decrease as a result of operating its own distribution facility.
-14-
<PAGE>
Patents and Proprietary Rights
The Company considers the protection of discoveries in connection with its
development activities important to its business. To date, the Company has
acquired certain patents in connection with the acquisition of certain products
and has filed applications for patents covering new processes for manufacturing
anagrelide, the active ingredient in AGRYLIN. Additionally, rights to patented
technology have been licensed to the Company. The late-stage products being
developed by the Company which are afforded patent protection are: AGRYLIN -
patents issued 1982 and applications filed in 1996; STANATE - patents issued
1987, 1988, 1992 and 1993. Also, regarding the Compounds acquired from Lilly,
certain patents have been issued in the United States and several other
countries with respect to Tazofelone and the other compounds. In addition,
there are other domestic or foreign patent applications pending for the
Compounds. Patents have been issued with respect to the compound Sampatrilat,
licensed from Pfizer. Certain of the Company's products may be afforded
protection under laws which provide market exclusivity for Orphan Drugs and
drugs which include a new active ingredient. See "Government Regulation."
Competition
Many companies, including large pharmaceutical, chemical and biotechnology
firms with financial and marketing resources and research and development staffs
and facilities substantially greater than those of the Company, are engaged in
researching, developing, marketing and selling products intended to treat the
same conditions and diseases as the products currently sold and under
development by the Company. Further, other products now in use or under
development by others may be intended to treat the same conditions as the
Company's products. The pharmaceutical industry is characterized by rapid
technological advances, and competitors may develop products more rapidly than
the Company. In addition, competitors may be able to complete the regulatory
approval process sooner than the Company, and therefore market their products
earlier than the Company can market certain of its products.
Government Regulation
The marketing of pharmaceutical products requires the approval of the FDA
and comparable agencies in foreign countries. The FDA has established
guidelines and safety standards which apply to the preclinical evaluation,
clinical testing, manufacture and marketing of pharmaceutical products. The
process of obtaining FDA approval for a new drug can take many years and
involves the expenditure of substantial resources. The steps required before
such a product
-15-
<PAGE>
can be produced and marketed for human use include preclinical studies, the
filing of an IND, human clinical trials and the approval of an NDA.
Drug marketing exclusivity protection is granted through the Orphan Drug
Act of 1983 (the "Orphan Drug Act") and the Drug Price Competition and Patent
Term Restoration Act of 1984 (commonly referred to as the "Waxman Hatch Act").
The Orphan Drug Act entitles a company to market exclusivity in the United
States for a period of seven years from the date of FDA approval for drugs
which, among other criteria, are intended to treat a patient population of less
than 200,000. PROAMATINE for orthostatic hypotension and AGRYLIN for
thrombocytosis have been granted Orphan Drug status by the FDA. Certain
provisions of the Waxman-Hatch Act grant market exclusivity in the United States
for a period of five years from the date of FDA approval for drugs containing a
new active ingredient. Based upon its review of industry and government data,
the Company believes that DIRAME may qualify for this protection.
The manufacturing processes of the Company and its contractors and
licensors are subject to regulation, including the need to comply with Good
Manufacturing Practices. These same regulations will apply to the Company with
respect to the Oakville, Ontario manufacturing facility which it has purchased
from Searle. See "Manufacturing." The Company's business is also subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Drug Enforcement Act, the
Resource Conservation and Recovery Act, the Pharmaceutical Marketing Act of 1988
and other current and potential future federal, state or local regulations.
The Company markets various products containing controlled substances that
are subject to the Department of Justice, Drug Enforcement Administration
regulations. Distribution of prescription drugs classified as controlled
substances or, in some cases, other pharmaceutical products, is subject to
licensing or regulation in certain states. Generally, the entity engaged in the
actual distribution is subject to such regulation. In addition, state licensing
is generally required in the state in which such entity's principal place of
business is located.
United States Federal and state governments continue to seek means to
reduce costs of Medicare and Medicaid programs, including placement of
restrictions on reimbursement for, or access to, certain drug products. Major
changes were made in the Medicaid program under the Omnibus Budget
Reconciliation Act of 1990 (the "Act"). As a result, the Company entered into a
Medicaid Rebate Agreement ("Rebate Agreement") with the United States
Government, under Section 4401 of the Act. Pursuant to the Rebate Agreement, in
order for federal reimbursement to be available for prescription
-16-
<PAGE>
drugs under state Medicaid plans, the Company must pay certain statutorily
prescribed rebates on Medicaid purchases. Effective July 1, 1991, the law also
denies federal Medicaid reimbursement for drug products of the original NDA-
holder if a less expensive generic version of such drug is available from
another manufacturer, unless the prescriber indicates on the prescription that
the branded product is medically necessary.
In most other markets, governments exert controls over pharmaceutical
prices either directly or by controlling admission to, or levels for,
reimbursement by government health programs. The nature of such controls and
their effect on the pharmaceutical industry vary greatly from country to
country.
Employees
As of March 12, 1999, the Company had 440 employees, including 4 officers,
62 persons engaged in research and development activities and 228 persons
engaged in marketing and sales activities. In addition to its full-time staff,
the Company engages medical doctors and other professional personnel on a
consultancy basis and, from time to time, consultants and others on a per diem
or hourly basis. The Company believes its relations with its employees are
satisfactory.
Financial Information about Foreign and Domestic Operations
Financial Information about Foreign and Domestic Operations is presented in
Note 14 to the Company's financial statements. See "Notes to Consolidated
Financial Statements - Note 14."
-17-
<PAGE>
Item 2. Properties
The Company's worldwide headquarters are located at Meridian Center II, 4
Industrial Way West, Eatontown, New Jersey. The building housing the Company's
worldwide headquarters, which was purchased by the Company in 1992 and occupied
in 1993, consists of an aggregate of 80,000 square feet.
The Company owns an office and warehouse building consisting of 30,300
square feet, which is located across the street from the Company's worldwide
headquarters. The Company uses this building for the warehousing of Company
records, archives, certain offices and facilities. A portion of this building
has been leased to the purchasers of VRG and the Company receives rental
payments from the purchasers.
The Company also owns a manufacturing facility and a distribution facility.
The 100,000 square foot manufacturing facility is located in Oakville, Ontario,
Canada and also houses the office operations of Roberts Canada. The 70,000
square foot distribution facility is located in Buffalo Grove, Illinois, a
suburb of Chicago.
The Company's United Kingdom subsidiary, Monmouth Pharmaceuticals, Ltd.,
occupies 3,800 square feet of leased office space in the Surrey Research Park in
Guildford, Surrey, England, approximately 30 miles south of London. The monthly
rental for these offices is approximately 6,500 British pounds.
-18-
<PAGE>
Item 3. Legal Proceedings
There are no material legal, governmental, administrative or other
proceedings pending against the Company, any of its subsidiaries or any of their
properties, or to which the Company or any such subsidiary is a party, and to
the knowledge of management, no such material proceedings are threatened or
contemplated.
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<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter ended December 31, 1998, no matters were
submitted to a vote of the Company's security holders through the solicitation
of proxies or otherwise.
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<PAGE>
Item 4A. Executive Officers of the Registrant
The executive officers of the Company as of March 12, 1999 are listed
below, and brief summaries of their business experience and certain other
information with respect to each of them is set forth in the following table and
in the information which follows the table.
The executive officers of the Company are as follows:
NAME AGE POSITION
- -------------------------------------------------------------------------------
JOHN T. SPITZNAGEL 57 President and
Chief Executive Officer
ROBERT W. LOY 61 Executive Vice President
PETER M. ROGALIN 56 Vice President, Treasurer
and Chief Financial
Officer
ANTHONY A. RASCIO, ESQ. 56 Vice President, Secretary
and General Counsel
John T. Spitznagel has served as President and Chief Executive Officer
since September, 1997. Mr. Spitznagel has been an officer of the Company since
July 1996, including Executive Vice President -Worldwide Sales and Marketing
from March 1996 to September 1997, and he has also been a Director of the
Company since July 1996. Mr. Spitznagel served as President of Reed and
Carnrick Pharmaceuticals from September 1990 through July 1995. In 1989 and
1990, Mr. Spitznagel served as Chief Executive Officer of BioCryst
Pharmaceuticals, Inc. From 1979 through 1989, Mr. Spitznagel held various
positions with Wyeth-Ayerst Laboratories, advancing from Marketing Director to
Senior Vice President of Marketing and Sales. Mr. Spitznagel was employed by
Roche Laboratories from 1971 through 1979 and by Warner-Chilcott Laboratories
from 1966 through 1971 in various sales, marketing and management positions.
Mr. Spitznagel received his undergraduate degree from Rider University and an
M.B.A. from Fairleigh Dickinson University.
Robert W. Loy has served as Executive Vice President -Operations and New
Business Development since March 4, 1996. Mr. Loy served as Chief Operating
Officer of the Company from August 1992 to March 1996 and as Vice President of
the Company from December 1992 to March 1996. Mr. Loy has served as a Director
of the Company since October 1993. From 1963 to 1990, he held various positions
at Squibb Corporation, including that of Vice President, Worldwide Operations
for the Squibb Derm Division. From 1990 to 1992, Mr. Loy served as Vice
President, International Sales and Marketing, with Hollister, Inc. Mr. Loy
received his undergraduate degree from Old Dominion University and attended
Villanova University Graduate School.
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<PAGE>
Peter M. Rogalin has served as Vice President, Treasurer, Chief Financial
Officer and a Director of the Company since February 5, 1996. From 1978 to
1992, Mr. Rogalin was employed in various executive capacities by Sterling
Winthrop, Inc. (formerly Sterling Drug, Inc.), including Assistant Treasurer
from 1987 through 1992. From 1993 through July 1994, Mr. Rogalin was a
Principal in RK Associates, a consulting firm with specific expertise in
financial and business operations and systems for small and medium sized
companies. From July 1994 through January 1996, Mr. Rogalin served as Vice
President - Finance and Chief Financial Officer of ImClone Systems, Inc., a
biopharmaceutical company engaged in research and development of therapeutic
products for the treatment of cancer and cancer related disorders. Mr. Rogalin,
a Certified Public Accountant, received his undergraduate degree from St.
Lawrence University and an M.B.A. from the Graduate School of Business, New York
University.
Anthony A. Rascio, Esq., has served as Vice President and General
Counsel and Secretary of the Company since June 1987. In addition, he served as
a Director of the Company from 1987 to 1998. From January 1987 to June 1987,
Mr. Rascio was Director, Legal Affairs for the Company. During 1986, Mr. Rascio
was engaged in the private practice of law. From 1984 through 1985, Mr. Rascio
was employed as Director, International Operations by Jeffrey Martin, Inc., a
marketer of cosmetics and proprietary medicines. Mr. Rascio served as Legal
Director, International Pharmaceutical Products Division for Schering-Plough
Corporation from 1980 through 1984 and held various legal positions with that
company from 1971 to 1980. Mr. Rascio received undergraduate and law degrees
from Fordham University.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Common Stock
The Company's Common Stock is traded on the American Stock Exchange and was
held by approximately 960 shareholders of record as of March 15, 1999.
The following table sets forth, for the periods indicated, the high and low
last sale prices for the Company's Common Stock, as reported on the NASDAQ
National Market System from January 1, 1997 through May 21, 1997 and as reported
by the American Stock Exchange from May 22, 1997 through December 31, 1998.
High Low
-------- --------
Year Ended December 31, 1997
First Quarter $15 $11
Second Quarter $13 $10 7/8
Third Quarter $13 $ 9 7/16
Fourth Quarter $11 7/8 $ 9
Year Ended December 31, 1998
First Quarter $14 3/8 $ 9 9/16
Second Quarter $23 $13 1/8
Third Quarter $24 5/16 $16 1/4
Fourth Quarter $25 1/8 $16 1/2
The Company has not paid any cash dividends on its Common Stock in the
past, and it is unlikely that the Company will pay any dividends on its Common
Stock in the foreseeable future.
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<PAGE>
Item 6. Selected Financial Data
The selected consolidated financial data for the Company should be read in
conjunction with "Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the Company's consolidated
financial statements and related notes appearing elsewhere in this report.
Operating Statement Data:
Years Ended December 31,
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(in thousands, except per share data)
Total Revenue $89,020 $113,427 $98,111 $122,508 $175,445
Operating Income (Loss)
from Continuing
Operations 25,802 6,873 (50,195)/(1)/ (762) 27,378
Net Income (Loss) from
Continuing Operations 20,618 2,703 (34,275) 2,517 16,787
Net (Loss) Income from
Discontinued Operations (1,206) (27,045) 556 --- ---
Net Income (Loss) 19,412 (24,342) (33,719) 2,517 16,787
Earnings (Loss) Per
Share of Common Stock
from Continuing
Operations - Basic 1.12 .15 (2.47)/(2)/ .06 .54
(Loss) Earnings Per Share
of Common Stock from
Discontinued Operations
- Basic (.06) (1.46) .03 --- ---
Earnings (Loss) Per Share
of Common Stock - Basic 1.06 (1.31) (2.44) .06 .54
Average Number of
Common Shares - Basic
Outstanding 18,400 18,536 19,133 29,414 31,049
Earnings (Loss) Per
Share of Common Stock
from Continuing
Operations - Diluted 1.10 .15 (2.47)/(2)/ .06 .53
(Loss) Earnings Per Share
of Common Stock from
Discontinued Operations
- - Diluted (.06) (1.45) .03 --- ---
Earnings (Loss) Per Share
of Common Stock - Diluted 1.04 (1.30) (2.44) .06 .53
Average Number of
Common Shares - Diluted
Outstanding 18,708 18,623 19,133 29,497 31,460
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<PAGE>
(1) Intangible Dispositions and Write-Offs. During the fourth quarter of 1996,
---------------------------------------
the Company completed the sale of the majority of its non-core
nonprescription products along with the NUCOFED and QUIBRON brands in two
independent sales transactions. These sales, net of proceeds, resulted in
a one time, non-cash write off of $11.9 million, which amounted to $7.6
million net of taxes. Also, during the fourth quarter of 1996, the Company
expensed certain purchased development products and recorded an impairment
loss of long-lived intangible assets totalling $25.4 million, which
amounted to $17.8 million net of taxes.
Operating income and net loss were negatively affected by the purchase of
development products and the sale and write down of the intangible assets
in the amounts of $37.3 million for operating income and $25.4 million for
net loss. In the event that these transactions had not occurred, the
operating loss would have been $12.9 million and net loss would have been
$8.3 million.
(2) Pursuant to a position taken by the SEC staff (the "Staff"), effective
March 13, 1997, on accounting for preferred stock which is convertible at a
discount to market, the Company recorded a charge for Earnings Per Share
purposes of $.61 per share. This charge to Earnings Per Share is
consistent with the Staff's position that the 10% discount available to
holders of the Company's 5% Convertible Preferred Stock ("5% Preferred
Stock") should be amortized between the issuance date and the first date
that conversion could occur.
To clarify the adjustments indicated above, a reconciliation of
dilutive Earnings Per Share for the twelve months ended December 31, 1996
is composed of the following elements:
Net (loss) from continuing operations before the
consideration of purchased research and development,
write-off and the sale of intangible assets, the
recognition of the discount upon the
issuance of 5% Preferred Stock or preferred dividends $ (.47)
Purchased research and development and the write-off
and sale of intangible assets (1.33)
5% Preferred Stock dividends (.06)
Issuance of 5% Preferred Stock at a 10% discount to
market (.61) (.67)
------- -------
Net (loss) from continuing operations (2.47)
Income from discontinued operations .03
-------
(Loss) attributable to common stock $(2.44)
=======
Balance Sheet Data:
As of December 31
- -----------------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(in thousands)
Total Assets $336,192 $340,290 $372,225 $367,855 $526,236
Long-Term Debt and
Redeemable Preferred
Stock (excluding
current portion) 22,411 16,183 10,639 10,327 126,739
Shareholders' Equity 259,129 235,467 309,759 317,303 341,810
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Years Ended December 31, 1997 and 1998
Corporate Revenues. For the year ended December 31, 1998, total revenue
-------------------
increased $52.9 million from $122.5 to $175.4 million. This increase was
primarily the result of an increase in product sales.
Product Sales. For the year ended December 31, 1998, U.S. product sales
--------------
increased $47.7 million from $91.6 to $139.3 million. The most significant
contributor to the increase was PENTASA with sales of $33.3 million, acquired by
the Company in the second quarter 1998. Also, increasing sales of AGRYLIN and
PROAMATINE contributed $9.2 million and $9.0 million, respectively, of the
increase over 1997 sales levels.
For the year ended December 31, 1998, sales of the Company's United Kingdom
subsidiary, Monmouth Pharmaceuticals, Ltd., increased $3.6 million from $17.5
million to $21.1 million. The increased sales of MEPTID of $1.5 million were
the primary reason for the increase. Product sales of the Company's Canadian
subsidiary, Roberts Pharmaceutical Canada, Inc., increased $0.8 million from
$12.5 million to $13.3 million.
Cost of Sales. For the year ended December 31, 1998, cost of sales
--------------
amounted to 38% of product sales as compared to 42% in 1997. This decrease in
cost of sales percentage and corresponding increase in gross profit percentage
is primarily the result of the addition of PENTASA and its higher gross margin
to the product mix.
Research and Development. Research and development expenses decreased $1.3
-------------------------
million from $13.1 million in 1997 to $11.8 million in 1998. Approximately $1.6
million of the 1997 expense was due to the purchase of development-stage
products. The cost of acquisition of development-stage products is charged
immediately to research and development expense. The decrease is primarily due
to increased new program spending in 1998 of $3.8 million offset by a decrease
in license fees of $4.7 million as 1997 expenses included the cost of the
purchase of development stage products.
Marketing and Administrative Expenses. Marketing and administrative
--------------------------------------
expenses increased $11.3 million from $58.7 million in 1997 to $70.0 million in
1998. Marketing expenses increased $0.1 million. Administrative expenses
increased $11.2 million from $22.5 million in 1997 to $33.7 million in 1998.
The primary components of the change were a $3.3 million increase in product
intangible amortization expense due to the addition of PENTASA and a $6.8
million increase related to salaries and benefits, particularly the stock
appreciation rights (SARs) and
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<PAGE>
the Supplemental Executive Retirement Plan (SERP) which was established in the
second quarter 1998. The 1998 SERP expense was $2.1 million.
In order to mitigate the potential future compensation expense to the Company
related to SARs, during 1998 the Company accelerated the vesting of all SARs not
yet vested, and the executive officers holding such SARs agreed to voluntarily
exercise the outstanding SARs, thereby terminating any potential benefit from
the SARs which such officers may have realized in the future. The exercise of
all outstanding SARs during the current period resulted in a one time charge of
$3.3 million, of which $0.7 million relates to accelerated vesting. In
connection with the acceleration of vesting and the exercise of all outstanding
SARs, the executive officers who exercised the SARs received options to purchase
one share of the Company's Common Stock for each two SARs exercised.
Interest Income and Expense. For the year ended December 31, 1998,
----------------------------
interest income decreased $1.1 million from $5.2 million to $4.1 million as the
result of a decreased cash balance due to the use of funds for capital
improvement projects and the cash portion of the purchase of PENTASA. Interest
expense increased from $0.8 million in 1997 to $6.2 million in 1998 as a result
of interest costs from the financing of the PENTASA acquisition.
Income Taxes. For the year ended December 31, 1998, income taxes from
-------------
continuing operations increased $9.3 million from a benefit of $1.1 million to a
provision of $8.2 million, primarily as a result of improved 1998 operations
versus 1997. The Company's effective tax rate was 32.9% for the year ended
December 31, 1998.
The Company has recorded net deferred tax assets of approximately $8.6
million. Realization is dependent upon generating sufficient taxable income to
utilize such assets. Although realization on these tax assets is not assured, a
valuation allowance has not been provided because management believes it is more
likely than not that the deferred tax assets will be realized.
Years Ended December 31, 1996 and 1997
Corporate Revenues. For the year ended December 31, 1997, total revenue
-------------------
increased $24.4 million from $98.1 to $122.5 million. This increase was the
result of an increase in product sales.
Product Sales. For the year ended December 31, 1997, product sales
--------------
increased $23.5 million from $98.1 to $121.6 million. This increase is
primarily the result of sales in the United States of AGRYLIN and PROAMATINE.
AGRYLIN was launched in the first quarter of 1997 and PROAMATINE was launched in
the
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<PAGE>
fourth quarter of 1996. The COLACE line also contributed significant increases.
For the year ended December 31, 1997, sales of the Company's United Kingdom
subsidiary, Monmouth Pharmaceuticals, Ltd., increased $5.5 million from $12.0
million to $17.5 million. Increased sales of LODINE, launched in the fourth
quarter of 1996, are the primary reason for this increase. Product sales of the
Company's Canadian subsidiary, Roberts Pharmaceutical Canada, Inc., increased
$0.8 million from $11.7 million to $12.5 million.
Cost of Sales. For the year ended December 31, 1997, cost of sales
--------------
amounted to 42% of product sales as compared to 51% in 1996. This decrease in
cost of sales percentage and corresponding increase in gross profit percentage
is primarily the result of the addition of AGRYLIN to the product mix. AGRYLIN
has a higher gross profit percentage as it is a product the development of which
was completed internally.
Research and Development. Research and development expenses increased $5.7
-------------------------
million from $7.4 million in 1996 to $13.1 million in 1997. The increase is due
to a post-launch study for PROAMATINE, the continued development of DIRAME,
STANATE and the purchased compounds, and increases in registration, and user and
license fees.
Marketing and Administrative Expenses. Marketing and administrative
--------------------------------------
expenses increased $1.5 million from $57.2 million in 1996 to $58.7 million in
1997. Marketing expenses increased $0.5 million primarily as a result of
increased sampling, market research, the introduction of AGRYLIN, and fleet
expenses offset by decreases in outside services and travel and meetings.
Administrative expenses increased $1.0 million during 1997 as compared to 1996
in large part due to increases in salaries and benefits offset by decreases in
audit and legal fees. Legal fees in 1997 were substantially lower than in 1996
due to the proposed settlement of the shareholders' class action lawsuit reached
in third quarter 1997 and subsequently finalized in January 1998.
Interest Income and Expense. For the year ended December 31, 1997,
----------------------------
interest income increased $2.3 million from $2.9 million to $5.2 million as the
result of an increased cash balance due to the private placements that were
completed during 1996. Interest expense decreased from $1.8 million in 1996 to
$0.8 million in 1997 as a result of a decrease in long-term debt related to
product acquisitions.
Income Taxes. For the year ended December 31, 1997, income taxes from
-------------
continuing operations increased $13.5 million from a benefit of $14.6 million to
a benefit of $1.1 million, primarily as a result of improved 1997 operations
versus 1996 and a 1996 write off and disposition of certain intangible assets.
The
-28-
<PAGE>
Company's effective tax benefit of 77% was higher than the normal statutory rate
primarily as a result of the elimination of certain reserves for taxes due to
the closure of years 1991 through 1993 after an IRS audit.
The Company has recorded net deferred tax assets of approximately $17.3
million. Realization is dependent upon generating sufficient taxable income to
utilize such assets. Although realization is not assured, management believes
it is more likely than not that the deferred tax assets for which a valuation
allowance has not been provided will be realized.
Discontinued Operations. See "Notes to Consolidated Financial Statements -
------------------------
Note 15" for a discussion of discontinued operations.
Liquidity and Capital Resources
- -------------------------------
For the year ended December 31, 1998, operating cash inflows amounted to
$32.4 million as a result of the Company's net income adjusted by an increase in
accounts payable, a decrease in accounts receivable, and an increase in non-cash
charges, primarily depreciation and amortization. As of December 31, 1998, the
Company had cash, cash equivalents and marketable securities of $75.3 million.
The Company's funding requirements depend on a number of factors, including
the Company's product development programs, product acquisitions, the level of
resources required for the expansion of marketing capabilities as the product
base expands, increased investment in accounts receivable and inventory which
may arise from increased sales levels, competitive and technological
developments, the timing and cost of obtaining required regulatory approvals for
new products, relationships with parties to collaborative agreements, the
success of acquisition activities and the continuing revenues generated from
sales of PROAMATINE, AGRYLIN and PENTASA.
The Company financed the majority of its purchase of PENTASA with a note
for $125 million. The remainder of the purchase price was paid in cash. In
connection with the $125 million note, the Company is subject to certain
affirmative and negative covenants. See Note 7 to the consolidated financial
statements.
Existing cash and securities balances and cash generated from operations
are expected to be sufficient to fund operating activities for the foreseeable
future, as well as support near and long term debt obligations, completion of
the capital improvements to the manufacturing facility, development of the
existing pipeline compounds and to fund future acquisitions of products. Cash
equivalents and marketable securities currently consist of immediately available
money market fund balances and investment grade securities.
-29-
<PAGE>
Capital Expenditures. Capital Expenditures in 1998 of approximately $11
---------------------
million relate primarily to the upgrades to the manufacturing facility in Canada
and significant investments in new computer hardware and software. As these
projects are nearing completion, the Company expects a lower level of cash
expenditures for capital improvements in 1999.
Foreign Currency Fluctuations. The Company has subsidiary operations
------------------------------
outside the United States. As a result, the Company is subject to fluctuations
in subsidiary revenues and costs reported in United States dollars as a
consequence of currency exchange rate fluctuations, especially rates for the
British pound and Canadian dollar. Fluctuations were not material for the
British pound. Due to the weakening of the Canadian dollar in 1998, the
cumulative foreign currency translation balance increased by $1.4 million in
1998. These amounts are accumulated and reported separately in shareholder's
equity.
Concentration of Credit Risk. Financial instruments that potentially
-----------------------------
expose the Company to concentrations of credit risk consist primarily of short
term cash investments and trade accounts receivable. The Company places its
temporary excess cash investments in short term money market instruments. At
times, such investments may be in excess of the FDIC insurance limit. The
Company markets its products primarily to wholesale drug distributors, retail
pharmacies and physicians in the United States and abroad. The Company performs
certain credit evaluation procedures and does not require collateral. Reserves
are maintained for estimated credit losses.
Inflation. Although at reduced levels in recent years, inflation continues
----------
to apply upward pressure on the cost of goods and services used by the Company.
However, the Company believes that the net effect of inflation on its operations
has been minimal during the past three years.
New Accounting Pronouncements
- -----------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at its fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. This statement is effective for fiscal years beginning after June 15,
1999. The provisions of this statement shall not be applied retroactively to
financial statements of prior periods. The Company is in the process of
evaluating this statement and has not yet determined the future impact on its
consolidated financial statements.
-30-
<PAGE>
Euro Conversion
---------------
On January 1, 1999, a majority of the European Union member countries
converted to a common currency, the "Euro". The existing national currencies of
the participating countries will continue to be acceptable until January 1, 2002
after which the Euro will be the sole legal tender for the participating
countries. The Company is currently evaluating the economic and operational
impact, including competition, pricing, contracts, taxation and foreign currency
exchange rate risk, of the Euro conversion but does not expect it to have a
material effect on its financial condition or results of operations.
Year 2000 Conversion
- --------------------
The year 2000 conversion problem arises from the inability of some
information systems and other date-sensitive equipment with embedded chips or
processors to properly recognize and process information after January 1, 2000.
The Company's project to identify and remediate year 2000 issues is proceeding
on schedule. The four main areas that have been or are being addressed are
financial systems, non-financial systems, customers and suppliers readiness and
other date-sensitive equipment.
Over the past year, the Company has replaced or upgraded much of its
software and systems in the normal course of business. The financial system was
replaced with an Enterprise Reporting System which the developer states is 2000
compliant. The Company intends to obtain and review the developer's
certification documentation. The system was implemented in the U.S. in April,
1998, due to the need for an integrated, more advanced system to link the
Finance and Sales departments located at headquarters with the new distribution
facility. The Canadian and U.K. subsidiary implementations were completed as of
January 4, 1999. These upgrades are also due to the new integrated reporting
system and not year 2000 compliance. Due to the completion of the
implementation, the three financial locations are electronically linked,
enabling more timely completion of financial requirements. Non-financial
software and hardware were also replaced in the normal course of business as the
previous systems were outdated.
The manufacturing plant, located in Canada, which was purchased by the
Company in 1997, required various upgrades to its operating systems. New
hardware and upgraded software was installed. The hardware was installed to
replace outdated processing equipment. The software was installed to ensure
year 2000 compliance. The Company's investment in this software was
approximately $225,000 U.S. dollars.
-31-
<PAGE>
One of the Company's customers requires the Company to meet certain
electronic data interface (EDI) requirements related to year 2000 compliance in
order for the customer to continue its relationship with the Company. The
Company completed the testing and implementation of the compliant version in
1998 and is now listed on a national database of Y2K compliant trading partners
in the healthcare pharmaceutical industry. The cost of meeting these EDI
requirements was approximately $1,000. Approximately 50 to 60 percent of the
Company's sales are currently made through EDI, through primarily one
clearinghouse. This clearinghouse is year 2000 compliant and upgrades non-year
2000 compliant incoming transmissions to compliant transmissions. In the event
that a non-compliant customer could not interface electronically, orders can be
transmitted via phone, fax or mail, and therefore no disruption of sales would
be expected.
The Company is attempting to ascertain the compliance of other customers
and suppliers, including the Company's toll manufacturers, through the means of
a survey. This program is ongoing and assessments regarding additional work
necessary will be made as responses are received. To assist in the effort, the
Company is developing a tracking database to help monitor which business
partners have taken part in the Company's survey, surveyed the Company or
received a compliance letter from the Company. In the event that any of the
Company's significant customers or suppliers do not achieve compliance on a
timely basis, the Company's business or operations could be adversely impacted
if new customers or alternate suppliers can not be found.
Other date-sensitive equipment includes primarily telephones and building
systems such as heating and lighting systems. The telephone system at the U.S.
headquarters was replaced in 1998 in the normal course of business as the lease
on the former system expired. The new system is year 2000 compliant. The phone
systems at the Canadian and U.K. locations have been replaced in order to be
year 2000 compliant. The phone system at the distribution facility will be
replaced by the second quarter of 1999 as it is not currently year 2000
compliant. The total cost of these new systems is approximately $70,000 U.S.
dollars. The Company has received assurances that the building systems are
compliant and will be obtaining documentation to that effect over the next
several months.
In accordance with the Company's fixed asset capitalization policy, the
hardware, software and phone systems purchased are added to fixed assets and
amortized over the appropriate useful life. The Company has not retained any
consultants nor hired additional employees to assist in achieving compliance.
Other IT projects have not been delayed by the Company's year 2000 readiness
project.
-32-
<PAGE>
Based on the Company's progress to date and timeline to complete the work
on the Year 2000 compliance issue, the Company does not foresee significant
financial or operational risks associated with its compliance at this time.
However, these expectations are subject to uncertainties. These include, but
are not limited to the ability to assess suppliers and customers readiness,
failure to identify all susceptible systems and the availability and cost of
personnel necessary to remediate any unforeseen problems.
-33-
<PAGE>
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
The Company is subject to market risk exposure in the following areas:
Interest Rate Market Risk. The Company has cash and cash equivalents on which
interest income is earned at variable rates. The Company also has a syndicated
loan for $125 million. The interest rate on this borrowing is variable and
therefore interest expense is affected by the general level of U.S. and foreign
interest rates. Increases in interest expense resulting from an increase in
interest rates would be offset to some extent by a corresponding increase in
interest income from cash and cash equivalents.
Foreign Exchange Market Risk. The Company has two foreign subsidiaries whose
financial statements are translated using the accounting policies described in
Note 1 of the Notes to the Consolidated Financial Statements. The Company is
subject to exposure from the risk of currency fluctuations as the value of the
foreign currency fluctuates against the dollar. The Company does not believe
that it is exposed to material foreign exchange market risk.
-34-
<PAGE>
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data of the Company
called for by this item are submitted as a separate section of this report.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
On December 2, 1998, the Company received notice that
PricewaterhouseCoopers LLP resigned as the independent accountants of Roberts
Pharmaceutical Corporation. The reports of PricewaterhouseCoopers LLP on the
financial statements for the past two fiscal years contained no adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle.
In connection with its audits for the two most recent fiscal years and
through November 25, 1998, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of PricewaterhouseCoopers LLP
would have caused them to make reference thereto in their report on the
financial statements for such years.
The Company engaged Ernst & Young LLP as its new independent accountants as
of December 9, 1998. During the two most recent fiscal years and through
December 9, 1998, the Company has not consulted with Ernst & Young LLP regarding
either (i) the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on the Company's financial statements, and either a written report was
provided to the Company or oral advice was provided that Ernst & Young LLP
concluded was an important factor considered by the Company in reaching a
decision as to the accounting, auditing or financial reporting issue; or (ii)
any matter that was either the subject of a disagreement, as that term is
defined in Item 304(a)(I)(iv) or Regulation S-K and the related instructions to
item 304 of Regulation S-K, or a reportable event, as that term is defined in
Item 304(a)(I)(v) of Regulation S-K.
-35-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information relating to directors of the Company required to be
furnished pursuant to this item is incorporated herein by reference to the
sections entitled "Election of Directors" and "Compliance with Section 16(a) of
the Securities Exchange Act" from the Company's definitive Proxy Statement for
its Annual Meeting of Shareholders to be held in May 1999. Certain information
relating to executive officers of the Company is set forth in Item 4A of Part I
of this Form 10-K under the caption "Executive Officers of the Registrant."
Item 11. Executive Compensation
Information pertaining to executive compensation is incorporated herein by
reference to the section entitled "Election of Directors - Executive
Compensation" from the Company's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held in May 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information pertaining to security ownership of certain beneficial owners
and management is incorporated herein by reference to the sections entitled
"Principal Shareholders" and "Security Ownership of Management" from the
Company's definitive Proxy Statement for its Annual Meeting of Shareholders to
be held in May 1999.
Item 13. Certain Relationships and Related Transactions
Any information relating to this item is incorporated herein by reference
from the Company's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held in May 1999.
-36-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
(a) 1. and 2. Financial Statements and Financial Statement
Schedules.
Reference is made to the Index of Financial
Statements and Financial Statement Schedules
hereinafter contained........................................ F-1
3. Exhibits
Reference is made to the Index of Exhibits
hereinafter contained........................................ E-1
(b) Reports on Form 8-K
During the fourth quarter ended December 31, 1998, the following reports on
Form 8-K were filed by the Company with the Securities and Exchange
Commission:
Form 8-K (Item 5. Other Events), date of earliest event reported November
2, 1998 with respect to changes and improvements to the Company's internet
website.
Form 8-K (Item 5. Other Events), date of earliest event reported December
9, 1998 with respect to the resignation of PricewaterhouseCoopers LLP as
independent accountants and the retention of Ernst & Young LLP as new audit
firm.
Form 8-K (Item 5. Other Events), date of earliest event reported December
22, 1998 with respect to amended labeling for AGRYLIN, clearing the drug
for treatment of other disorders.
-37-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ROBERTS PHARMACEUTICAL CORPORATION
----------------------------------
(Registrant)
Date: March 26, 1999 By:/s/ John T. Spitznagel
----------------------------------
John T. Spitznagel, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Robert A. Vukovich Chairman March 26, 1999
- -------------------------
/s/ John T. Spitznagel President Chief Executive March 26, 1999
- ------------------------- Officer and Director
JOHN T. SPITZNAGEL
/s/ Peter M. Rogalin Vice President, Treasurer March 26, 1999
- ------------------------- & Director (Principal
PETER M. ROGALIN Financial and Accounting
Officer)
/s/ Robert W. Loy Director March 26, 1999
- -------------------------
ROBERT W. LOY
/s/ Joseph Smith Director March 26, 1999
- -------------------------
JOSEPH SMITH
/s/ Digby W. Barrios Director March 26, 1999
- -------------------------
DIGBY W. BARRIOS
/s/ Zola P. Horovitz Director March 26, 1999
- -------------------------
ZOLA P. HOROVITZ
/s/ Joseph Noonburg Director March 26, 1999
- -------------------------
JOSEPH NOONBURG
/s/ Marilyn Lloyd Director March 26, 1999
- -------------------------
MARILYN LLOYD
-38-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ROBERTS PHARMACEUTICAL CORPORATION
Page
----
Report of Ernst & Young LLP F-2
Report of PricewaterhouseCoopers LLP F-3
Consolidated Balance Sheets as of F-4
December 31, 1997 and 1998
Consolidated Statements of Operations for F-5
the years ended December 31, 1996, 1997 and 1998
Consolidated Statements of Comprehensive F-6
Income for the years ended December 31, 1996,
1997, and 1998
Consolidated Statements of Cash Flows for F-7
the years ended December 31, 1996, 1997 and 1998
Consolidated Statements of Changes in Shareholders' F-8
Equity for the years ended December 31, 1996,
1997 and 1998
Notes to Consolidated Financial Statements F-9
Schedules*
Schedule II, Valuation and Qualifying Accounts F-27
________________
* All other schedules under Article 12 of Regulation S-X have been omitted
because of the absence of the conditions under which certain information is
required and because certain information required is presented in the
financial statements and the notes thereto.
F-1
<PAGE>
Report of Independent Auditors
To the Board of Directors
Roberts Pharmaceutical Corporation
We have audited the accompanying consolidated balance sheet of Roberts
Pharmaceutical Corporation (the "Company") as of December 31, 1998, and the
related consolidated statement of operations, stockholders' equity and cash flow
for the year ended December 31, 1998. Our audit also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at December 31, 1998 and the consolidated results of their operations
and their cash flow for the year ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole present fairly in all material respects, the
information set forth therein for 1998.
ERNST & YOUNG LLP
MetroPark, New Jersey
February 16, 1999
F-2
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
Roberts Pharmaceutical Corporation:
We have audited the accompanying consolidated balance sheets of Roberts
Pharmaceutical Corporation and Subsidiaries as of December 31, 1997, and the
related consolidated statements of operations, cash flows and changes in
shareholders' equity for each of the two years in the periods ended December 31,
1997 and 1996 and the financial statement schedules on pages F-27 and F-28 of
this Form 10-K. These financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Roberts
Pharmaceutical Corporation and Subsidiaries as of December 31, 1997, and the
consolidated results of their operations and their cash flows for each of the
two years in the periods ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
Princeton, New Jersey PricewaterhouseCoopers LLP
February 5, 1998, except for the restated segment information in note 14, as to
which the date is March 23, 1999
F-3
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1997 1998
- -------- ------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 42,950 $ 39,280
Marketable securities 39,887 36,062
Accounts and Notes Receivable:
Trade, net 24,730 40,412
Other 225 9,426
Inventory 19,826 23,573
Deferred tax assets 4,962 5,222
Net assets held for sale 3,760 -
Other current assets 1,647 3,259
------------ -------------
Total current assets 137,987 157,234
Fixed assets, net 25,913 34,911
Intangible assets, net 190,724 315,865
Notes receivable 729 2,369
Deferred tax asset 12,332 3,392
Other assets 170 12,465
------------ -------------
Total assets $ 367,855 $ 526,236
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current installments of long-term debt $ 8,037 $ 11,178
Accounts payable 13,188 21,897
Other current liabilities 18,756 24,612
------------ -------------
Total current liabilities 39,981 57,687
Long-term debt, excluding current installments 10,327 126,739
Other liabilities 244 -
Commitments and contingent liabilities - - - - - -
Shareholders' equity:
Class B 5% Convertible Preferred stock, $.10
par value 10,000,000 shares authorized,
4,440,225 issued, 475,654 outstanding 48 -
Common stock, $.01 par value,
100,000,000 shares authorized,
29,414,440 and 31,507,442 outstanding 299 320
Additional paid-in capital 372,384 381,631
Cumulative translation adjustments (1,250) (2,716)
Deficit (53,941) (37,188)
Treasury Stock, 387,594 shares of
common stock, at cost (237) (237)
------------ -------------
Total shareholders' equity 317,303 341,810
------------ -------------
Total liabilities and
shareholders' equity $ 367,855 $ 526,236
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Years Ended December 31, December 31, December 31,
1996 1997 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
Sales and revenue:
Sales $ 98,075 $ 121,612 $ 173,764
Other revenue 36 896 1,681
---------------- ---------------- ----------------
Total sales and revenue 98,111 122,508 175,445
Operating costs and expenses:
Cost of sales 49,753 51,386 66,530
Research & development 7,408 (2) 13,146 11,751
Marketing & administration 57,239 58,738 70,006
Intangible write-offs and loss
(gain) on dispositions 33,906 (2) - (220)
---------------- ---------------- ----------------
Total operating costs & expenses 148,306 123,270 148,067
---------------- ---------------- ----------------
Operating (loss) income (50,195) (762) 27,378
---------------- ---------------- ----------------
Other income (expense):
Interest income 2,907 5,212 4,108
Interest expense (1,750) (755) (6,157)
Other, net 188 (2,279) (318)
---------------- ---------------- ----------------
Total other income (expense) 1,345 2,178 (2,367)
---------------- ---------------- ----------------
(Loss) income from continuing operations
before income taxes (48,850) 1,416 25,011
Benefit (provision) for income taxes 14,575 1,101 (8,224)
---------------- ---------------- ----------------
(Loss) income from continuing operations (34,275) 2,517 16,787
---------------- ---------------- ----------------
Income from discontinued
operations, net of tax 556 - - - - - -
---------------- ---------------- ----------------
Net (loss) income $ (33,719) $ 2,517 $ 16,787
================ ================ ================
Per share of common stock, basic:
Net (loss) income from continuing operations $ (2.47) (1) $ 0.06 $ 0.54
Net income from discontinued operations 0.03 - -
---------------- ---------------- ----------------
Net (loss) income $ (2.44) (1) $ 0.06 $ 0.54
================ ================ ================
Per share of common stock, fully diluted:
Net (loss) income from continuing operations $ (2.47) (1) $ 0.06 $ 0.53
Net income from discontinued operations 0.03 - -
---------------- ---------------- ----------------
Net (loss) income $ (2.44) (1) $ 0.06 $ 0.53
================ ================ ================
Weighted average number of common shares outstanding:
Basic 19,132,863 29,414,440 31,048,808
Fully Diluted 19,132,863 29,496,767 31,460,129
</TABLE>
- --------------------------
(1) Includes a $.61 per share charge pursuant to a new position taken by the
SEC staff, effective March 13, 1997, on accounting for preferred stock
which is convertible at a discount to market. See Note 1.
(2) Includes a $1.33 per share charge for the sale and write-off of certain
intangible assets. See Note 4.
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31, December 31, December 31,
1996 1997 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net (loss) income $ (33,719) $ 2,517 $ 16,787
---------------- ---------------- ----------------
Foreign currency translation adjustment (4) (949) (1,466)
---------------- ---------------- ----------------
Comprehensive (loss) income $ (33,723) $ 1,568 $ 15,321
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31, December 31, December 31,
1996 1997 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (33,719) $ 2,517 $ 16,787
Adjustments to reconcile net (loss) income
to net cash flows from operating activities:
Depreciation and amortization 7,531 6,940 11,080
Provision for losses on receivables - - - 120 432
Provision for product sales returns 6,041 5,994 6,191
Deferred tax provision (benefit) 8,680 (14,575) 2,954
Write down of intangible assets 14,364 - - - - - -
Loss on sale of intangible assets 7,621 - - - - - -
Loss on abandonment of leasehold improvements 71 - - - - - -
Income from discontinued operations (556) - - - - - -
Foreign currency gains 387 - - - - - -
Change in accounts receivable, unbilled
revenue and advance billings (2,544) 6,595 (16,359)
Change in other assets (483) (60) 5,902
Change in inventory 3,984 (3,495) (4,256)
Change in accounts payable and
other liabilities (12,017) 145 9,695
Impact of discontinued operations (2,582) (629) - - -
---------------- ---------------- ----------------
Total adjustments 30,497 1,035 15,639
---------------- ---------------- ----------------
Net cash (used in) provided by
operating activities (3,222) 3,552 32,426
---------------- ---------------- ----------------
Cash flows from investing activities:
Redemption of (investment in) marketable securities 5,856 (32,094) 3,825
Purchase of long-term investment - - - - - - (10,000)
Purchases of intangible assets (4,762) (9,058) (141,156)
Proceeds from sale of intangible assets 1,600 - - - 600
Purchases of fixed assets (168) (11,986) (11,080)
Collection on notes receivable - - - 6,738 1,751
---------------- ---------------- ----------------
Net cash provided by (used in) investing activities 2,526 (46,400) (156,060)
---------------- ---------------- ----------------
Cash flows from financing activities:
Long-term debt issued in connection with
product acquisition - - - - - - 125,000
Payments on notes payable and long-
term debt (36,773) (6,588) (11,586)
Payment of debt issuance costs - - - - - - (2,528)
Net proceeds from issuance of common stock 9,923 1,075 4,725
Net proceeds from issuance of preferred stock 99,247 6,000 4,494
Cash dividends paid (476) (1,629) (150)
Impact of discontinued operations (397) - - - - - -
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities 71,524 (1,142) 119,955
---------------- ---------------- ----------------
Effect of exchange rate changes on cash
and cash equivalents (60) (185) 9
---------------- ---------------- ----------------
Change in cash and cash equivalents 70,768 (44,175) (3,670)
Beginning cash and cash equivalents 16,357 87,125 42,950
---------------- ---------------- ----------------
Ending cash and cash equivalents $ 87,125 $ 42,950 $ 39,280
================ ================ ================
Supplemental cash flow information:
Interest paid $ 2,396 $ 823 $ 3,712
Income taxes paid 233 29 11
Non cash activities:
Notes issued in connection with
product acquisitions - - - $ 7,250 - - -
Notes received for sale of Pronetics
subsidiaries and product rights $ 8,193 - - - $ 218
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
5% Preferred Stock Common Stock Additional
------------------ ------------ Paid-In
Shares Amount Shares Amount Capital
-------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 18,801,977 $ 189 $ 256,296
Issuance of preferred shares 4,200,000 $ 420 - - - - - - 98,827
Issuance of common stock - - - - - - 651,058 7 9,916
Cumulative translation
adjustment - - - - - - - - - - - - - - -
Year ended December 31, 1996
net loss - - - - - - - - - - - - - - -
5% Preferred dividends - - - - - - - - - - - - - - -
5% Preferred stock converted
to common stock (1,478,970) (148) 3,774,059 37 111
--------------- ------------ -------------- ------------ --------------
Balance,
December 31, 1996 2,721,030 272 23,227,094 233 365,150
Issuance of preferred shares 240,225 25 - - - 5,976
Issuance of common stock - - - - - - 97,245 1 1,074
Cumulative translation
adjustment - - - - - - - - - - - - - - -
Year ended December 31, 1997
net income - - - - - - - - - - - - - - -
5% Preferred dividends - - - - - - - - - - - - - - -
5% Preferred stock converted
to common stock (2,485,601) (249) 6,477,695 65 184
--------------- ------------ -------------- ------------ --------------
Balance,
December 31, 1997 475,654 48 29,802,034 299 372,384
Issuance of preferred shares 179,775 18 - - - - - - 4,476
Issuance of common stock - - - - - - 419,630 4 4,722
Cumulative translation
adjustment - - - - - - - - - - - - - - -
Year ended December 31, 1998
net income - - - - - - - - - - - - - - -
5% Preferred dividends - - - - - - - - - - - - - - -
5% Preferred stock converted
to common stock (655,429) (66) 1,673,372 17 49
--------------- ------------ -------------- ------------ --------------
Balance,
December 31, 1998 - - - $ - - - 31,895,036 $ 320 $ 381,632
=============== ============ ============== ============ ==============
<CAPTION>
Retained Cumulative Total
Earnings Translation Treasury Shareholders'
(Deficit) Adjustment Stock Equity
----------- -------------- ---------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1995 $ (20,484) $ (297) $ (237) $ 235,467
Issuance of preferred shares - - - - - - - - - 99,247
Issuance of common stock - - - - - - - - - 9,923
Cumulative translation
adjustment - - - (4) - - - (4)
Year ended December 31, 1996
net loss (33,719) - - - - - - (33,719)
5% Preferred dividends (1,155) - - - - - - (1,155)
5% Preferred stock converted
to common stock - - - - - - - - - -
------------ -------------- ---------- ----------------
Balance,
December 31, 1996 (55,358) (301) (237) 309,759
Issuance of preferred shares - - - - - - - - - 6,001
Issuance of common stock - - - - - - - - - 1,075
Cumulative translation
adjustment - - - (949) - - - (949)
Year ended December 31, 1997
net income 2,517 - - - - - - 2,517
5% Preferred dividends (1,100) - - - - - - (1,100)
5% Preferred stock converted
to common stock - - - - - - - - - - - -
------------ -------------- ---------- ----------------
Balance,
December 31, 1997 (53,941) (1,250) (237) 317,303
Issuance of preferred shares - - - - - - - - - 4,494
Issuance of common stock - - - - - - - - - 4,726
Cumulative translation
adjustment - - - (1,466) - - - (1,466)
Year ended December 31, 1998
net income 16,787 - - - - - - 16,787
5% Preferred dividends (34) - - - - - - (34)
5% Preferred stock converted
to common stock - - - - - - - - - -
------------ -------------- ---------- ----------------
Balance,
December 31, 1998 $ (37,188) $ (2,716) $ (237) $ 341,810
============ ============== ========== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Presentation
- ---------------------
Roberts Pharmaceutical Corporation is an international pharmaceutical
company which licenses, acquires, develops and commercializes post-discovery
drugs in selected therapeutic categories. The Company currently markets
approved pharmaceutical products in the United States, Canada, the United
Kingdom and several other European countries. The consolidated financial
statements include the accounts of Roberts Pharmaceutical Corporation and its
wholly owned subsidiaries. All significant intercompany transactions are
eliminated. All dollar amounts are presented in thousands, except for earnings
per share.
Revenue Recognition
- -------------------
Product sales, net of estimated future returns, are recorded as the
products are shipped against customer orders.
Licensing revenues are recorded as earned under the terms of each
underlying agreement and are included in other revenue.
Cash Equivalents and Marketable Securities
- ------------------------------------------
Cash equivalents include all money market investments with original
maturities of three months or less.
Marketable securities classified as available for sale consist primarily of
debt instruments with maturities of more than three months and are stated at
amortized cost plus accrued interest, which approximates fair value.
Inventories
- -----------
Inventories, consisting primarily of finished goods, are stated at the
lower of first-in, first-out cost or market.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the period reported. Actual results
could differ from those estimates. Estimates include accounting for
F-9
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allowance for doubtful accounts, inventory obsolescence, future product returns,
depreciation and amortization, value of intangibles, employee benefit plans,
income taxes and contingencies.
Fixed Assets and Depreciation
- -----------------------------
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is determined using the straight-line method over the estimated
useful lives of the related assets ranging from five to fifty years. Gains and
losses on disposals are recognized in the year of the disposal. Expenditures
for maintenance and repairs are expensed as incurred; significant renewals and
betterments are capitalized.
Intangible Assets
- -----------------
Intangible assets are stated at cost less accumulated amortization.
Amortization is determined using the straight-line method over the estimated
useful lives of the related assets which are estimated to range from five to
forty years. It is the Company's policy to review periodically and evaluate
whether there has been an impairment in the value of intangibles.
In the fourth quarter of 1996, the Company recorded a charge to earnings
for an impairment of intangible assets and to expense certain purchased
development products totaling $25.4 million.
Long-Lived Assets
- -----------------
Long-lived assets are recorded at the lower of amortized cost or fair
value. As part of an ongoing review of the valuation of long-lived assets,
management assesses the carrying value of such assets if facts and circumstances
suggest they may be impaired. If this review indicates that the carrying value
of these assets may not be recoverable, as determined by a nondiscounted cash
flow analysis over the remaining useful life, the carrying value would be
reduced to its estimated fair value.
Foreign Currency Translation
- ----------------------------
Effective January 1, 1997, the functional currency of the United Kingdom
subsidiary, Monmouth Pharmaceutical, Ltd., was changed from the U.S. dollar to
the British pound as a result of a change in circumstance. Monmouth's
translation gains and losses are accumulated as a separate component of
Shareholders' Equity and are included in the determination of comprehensive
income. Prior to 1997, Monmouth's accounts were remeasured in dollars and
translation gains and losses were included in income.
F-10
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The functional currency of the Company's Canadian subsidiary is the
Canadian dollar. Translation gains and losses of the Company's Canadian
subsidiary are accumulated as a separate component of Shareholders' Equity and
are included in the determination of comprehensive income.
Advertising Expense
- -------------------
The Company expenses the cost of advertising as incurred. Advertising
costs amounted to $8,806, $4,640 and $5,135 for the years ended December 31,
1996, 1997 and 1998, respectively.
Concentration of Credit Risk
- ----------------------------
The Company markets prescription and nonprescription pharmaceuticals
primarily to wholesale drug distributors, retail pharmacies and physicians in
the United States and abroad. The Company performs certain credit evaluation
procedures and does not require collateral. The Company maintains reserves for
estimated credit losses; at December 31, 1997 and 1998, the reserve for
uncollectible accounts amounted to $440 and $538, respectively.
At December 31, 1998, cash equivalents and marketable securities consisted
of immediately available money market fund balances and investment grade debt
and preferred stock securities with maturities of less than one year.
The fair value of investment securities classified as available for sale,
totaled $58,517 at December 31, 1998. These investment securities mature within
one year.
At December 31, 1998, the Company had an investment in the non-voting
convertible preferred stock of Ribogene Inc. (see Note 5.) carried under the
cost method at $10 million. The Company routinely assesses the financial
strength of Ribogene, and does not expect that Ribogene will fail to meet its
obligations to the Company. As such, the Company considers the risks associated
with this investment to be mitigated. In the event of non-performance by
Ribogene under its obligations to Roberts, the Company would realize a material
loss.
Earnings (loss) Per Share
- -------------------------
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly held common stock or potential common
stock. For all periods, per-share data has been restated to conform to the SFAS
No. 128 requirements.
F-11
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net (loss) income from operations used in the calculation of
earnings per share was calculated as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net (loss) income from
operations $ (34,275) $ 2,517 $ 16,787
Preferred dividends (1,155) (859) (34)
Discount on 5%
Preferred Stock (11,670) --- ---
----------- ----------- -----------
Net (loss) income for
computation of earnings
per share $ (47,100) $ 1,658 $ 16,753
=========== =========== ===========
</TABLE>
Total common stock and potentially dilutive common stock for the
calculation of diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average common
shares outstanding 19,132,863 29,414,440 31,048,808
Dilutive effect of:
Preferred Stock Warrants --- 82,246 ---
Common Stock Warrants --- --- 11
Stock Options --- 81 411,310
----------- ----------- -----------
Total shares for computation
of EPS 19,132,863 29,496,767 31,460,129
=========== =========== ===========
</TABLE>
The effect of conversion of the original shares of Preferred Stock for the
year ended December 31, 1996 is not included in the calculation of earnings per
share because inclusion would be antidilutive. The remaining original 5%
Preferred Stock shares were convertible into 1,332,322 shares of Common Stock at
December 31, 1997. All 5% Preferred Stock was converted to Common in 1998. See
Note 8., Shareholders' Equity, for further discussion of these securities.
Pursuant to a position taken by the SEC staff (the "Staff"), effective
March 13, 1997, on accounting for preferred stock which is convertible at a
discount to market, the Company adjusted its calculation of 1996 Earnings Per
Share by $.61 per share. This reflected the Staff's position that the 10%
discount available to holders of the Company's 5% Preferred Stock should be
incorporated in the calculation of Earnings Per Share.
F-12
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
To clarify the adjustments indicated above, a reconciliation of Earnings
Per Share for the twelve months ended December 31, 1996 is composed of the
following elements:
Net (Loss) from continuing operations before
the consideration of purchased research and
development and write-off and the sale of
intangible assets, the recognition of the
discount upon the issuance of 5% Preferred
Stock or preferred dividends $ (.47)
Purchased research and development and
write-off and sale of intangible assets (1.33)
5% Preferred Stock dividends (.06)
Issuance of 5% Preferred Stock
at a 10% discount to market (.61) (.67)
----- --------
Net (Loss) from Continuing Operations (2.47)
Income from Discontinued Operations .03
--------
(Loss) attributable to Common Stock $ (2.44)
========
New Accounting Pronouncements
- -----------------------------
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS No. 130), establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general-purpose financial statements. This
Statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This Statement requires that a company (a) classify items
of other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The Company has
adopted the provisions of SFAS No. 130, effective January 1, 1998.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise Related Information" (SFAS No. 131), establishes
standards for the way that public business companies report information about
operating segments in annual financial statements and requires that those
companies report selected information about operating segments in annual
financial statements and requires that those companies report selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. This Statement
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," but retains the requirement to report
F-13
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
information about major customers. In the initial year of application,
comparative information for earlier years is to be restated. The Company has
adopted the provisions of SFAS No. 131, effective January 1, 1998. There was
no impact on the Company's consolidated results of operation, financial position
or cash flow as a result of the adoption of these statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at its fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. This statement is effective for fiscal years beginning after June 15,
1999. The provisions of this statement shall not be applied retroactively to
financial statements of prior periods. The Company is in the process of
evaluating this statement and has not yet determined the future impact on its
consolidated financial statements.
2. INVENTORY
---------
Inventory consists of:
December 31,
----------------
1997 1998
---- ----
Raw materials $ 2,487 $ 6,249
Work-in-process 451 1,456
Finished goods 16,888 15,868
------- -------
$19,826 $23,573
======= =======
3. FIXED ASSETS, NET
-----------------
Fixed assets consist of:
December 31,
----------------
1997 1998
---- ----
Land and buildings $23,440 $28,997
Office furniture and
equipment 4,305 5,682
Machinery and equipment 1,161 3,659
------- -------
28,906 38,338
Less: Accumulated
depreciation 2,993 3,427
------- -------
$25,913 $34,911
======= =======
Depreciation expense for the years ended December 31, 1996, 1997 and
1998 was $449, $781, and $1,265, respectively.
F-14
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INTANGIBLE ASSETS
-----------------
Intangible assets consist of:
December 31,
----------------------
1997 1998
---- ----
Product rights acquired $217,919 $349,282
Less: Accumulated
amortization 27,195 33,417
------- -------
$190,724 $315,865
======= =======
Amortization expense for the years ended December 31, 1996, 1997 and 1998
was $6,692, $6,159, and $9,815, respectively.
Intangible Dispositions and Write-Offs.
- -----------------------------------------
During the fourth quarter of 1996, the Company completed the sale of the
majority of its non-core nonprescription brands along with the NUCOFED and
QUIBRON brands in two independent sales agreements. These sales, net of
proceeds, resulted in a one time, non-cash write off of $11.9 million, which
amounted to $7.6 million net of taxes. Also, during the fourth quarter of 1996,
the Company expensed certain purchased development products and recorded an
impairment loss of long-lived intangible assets totalling $25.4 million, ($17.8
million net of taxes).
Operating income and net loss for 1996 were negatively affected by the
purchase of development products, and the sale and write down of the intangible
assets in the amounts of $37.3 million for operating income and $25.4 million
for net loss. The operating loss would have amounted to $12.9 million and net
loss would have been $8.3 million if such transactions had not occurred.
5. OTHER ASSETS
------------
Other assets consist primarily of the Company's $10 million investment in
the convertible preferred stock of RiboGene, Inc., a drug discovery company
targeting infectious diseases. The shares have no voting rights. The
investment is carried under the cost method, and the operating results of
RiboGene are not and will not be included in Roberts' operating results. One-
third of the preferred stock is convertible at the option of the Company to
common stock of RiboGene at each of the first three anniversary dates of the
investment. The investment is classified as held-to-maturity.
F-15
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also entered into an arrangement whereby the Company will
develop a new delivery formulation for RiboGenes' product, EMITASOL. Under the
terms of the agreement, RiboGene will provide up to $7 million in funding from
the development of EMITASOL through completion of Phase III trials and the
submission of a New Drug Application ("NDA") with the balance, if any, provided
by Roberts. Upon approval of the NDA, Roberts can exercise its option to market
EMITASOL in the United States, Canada and Mexico under the RiboGene patents by
making a milestone payment at that time plus subsequent royalties on product
sales.
6. OTHER CURRENT LIABILITIES
-------------------------
Other current liabilities consist of:
December 31,
----------------
1997 1998
------- -------
Accrued estimated future
product returns $ 9,364 $ 8,509
Accrued estimated Medicaid
rebates 1,150 2,489
Income taxes payable 3,022 3,025
Other accrued liabilities 5,220 10,589
------- -------
$18,756 $24,612
======= =======
Product return reserves of $401 and $401 have been offset against accounts
receivable for 1997 and 1998, respectively.
7. LONG-TERM DEBT
--------------
Long-term debt consists of:
December 31,
--------------------
1997 1998
---- ----
Notes payable on product
acquisitions at an imputed
weighted average interest
rate of 6.0% and 8.0% $18,364 $137,917
Less: Current installments 8,037 11,178
------- --------
$10,327 $126,739
======= ========
On June 24, 1998, the Company entered into a syndicated loan in the amount
of $125 million to finance the purchase of PENTASA. The loan bears interest at
a variable, tiered margin rate. Principal payments in the amount of 1% of the
balance are due annually for the first four years, with a balloon payment due
for the balance in year five.
F-16
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principal payments in each of the next five years on long-term debt
outstanding at December 31, 1998 amount to:
1999........................................... 11,178
2000........................................... 4,552
2001........................................... 1,250
2002........................................... 1,250
2003........................................... 119,687
-------
$137,917
=======
Notes payable are collateralized by acquired product rights.
8. SHAREHOLDERS' EQUITY
--------------------
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
If the Company had elected to recognize compensation cost based on the fair
value at the grant dates for awards in 1996, 1997 and 1998, consistent with the
provisions of SFAS No. 123, the Company's net (loss) income and per share data
would have been changed to the pro forma amounts indicated below:
Years Ended December 31,
--------------------------
1996 1997 1998
---- ---- ----
Net (Loss) Income As reported $(33,719) $ 2,517 $16,787
Pro forma (36,925) (4,620) 11,367
---------
(Loss) Income per share As reported-Basic $ (2.44) $ 0.06 $ 0.54
As reported-Diluted (2.44) 0.06 0.53
Pro forma - Basic (2.61) (0.19) 0.37
---------
Pro forma - Diluted (2.61) (0.19) 0.36
---------
The fair value of stock options used to compute pro forma net (loss) income
and per share disclosures is the estimated present value at grant date using the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 0%; expected volatility of 54%; a risk free
interest rate of 6%; and a general expectation that employees will exercise
options when they become vested.
The weighted average fair value of stock options, calculated using the
Black-Scholes option-pricing model, granted during the years ended December 31,
1996, 1997 and 1998 was $7.17, $8.48 and $10.32, respectively.
On July 17, 1996, the Company issued and sold in a private placement to
certain investment funds 600,000 shares of the Company's Common Stock at an
issue price of $16.65 per share resulting in gross proceeds to the Company of
$9.9 million. In addition to receiving cash consideration equal to 5% of the
gross proceeds and the reimbursement of certain expenses, the Placement Agent
received Common Stock Warrants to acquire an aggregate of 15,000 shares of
Common Stock for a purchase price of $16.65 per share. Substantially all of
these warrants were exercised in 1998. The remaining 150 warrants expire in
July of 1999.
F-17
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On August 29, 1996, the Company issued and sold in a private placement to
approximately eighty accredited investors for $25 per share an aggregate of
4,200,000 shares of cumulative 5% Preferred Stock resulting in gross proceeds of
$105 million. In addition to receiving cash consideration equal to 5% of the
gross proceeds and the reimbursement of certain expenses the Placement Agent
received Preferred Stock Warrants to acquire 420,000 shares of 5% Preferred
Stock for a purchase price of $25 per share. In 1997, 240,225 of these warrants
were exercised, resulting in gross proceeds of $6 million. The remaining
179,775 warrants were exercised in 1998, providing additional proceeds of $4.5
million. A total of 4,620,000 shares of the 5% Preferred Stock were issued.
The 655,429 shares outstanding at December 31, 1997, or issued during 1998 were
converted in 1998. No 5% Preferred Stock remained outstanding at December 31,
1998.
Stock Compensation Plans
- ------------------------
During 1996 and in prior years, executives and key employees of the Company
were granted stock option awards under the Incentive Stock Option Plan. At
December 31, 1998, 481,488 shares remain exercisable under the Incentive Plan.
In May of 1996, the Company's shareholders approved the Equity Incentive Plan
which became effective May 22, 1996. The Company's Incentive Stock Option Plan
was discontinued on the same date. The Equity Incentive Plan provides for the
grant of incentive and nonqualified stock options, stock appreciation rights,
deferred stock awards, restricted stock grants and other stock based awards to
executives and key employees. The total number of shares of Common Stock
authorized for grant under the Equity Incentive Plan is 3,000,000.
Options to purchase Common Stock may be granted either alone or in addition
to other awards. The term of each option will be fixed by the Compensation
Committee (the "Committee") of the Company's Board of Directors, provided that
no incentive stock option, as defined in the Internal Revenue Code, will be
exercisable after the expiration of ten years from the date the option is
granted. Options will be exercisable at such time or times as determined by the
Committee at or subsequent to grant. Stock Appreciation Rights ("SARS") may be
granted to participants either alone or in addition to stock options and may,
but need not be, related to a specific option. The provisions of SARs need not
be the same with respect to each recipient.
The following table summarizes the status of the Company's stock options,
outstanding and exercisable at December 31, 1998.
<TABLE>
<CAPTION>
Stock Options
Stock Options Outstanding Exercisable
------------------------- -----------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life Price Shares Price
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.06 to $11.375 990,036 3 yrs, 2 mos $10.59 495,511 $11.17
$11.50 to $13.69 944,690 4 yrs, 1 mos $11.85 683,500 $11.83
$14.13 to $24.063 1,293,350 5 yrs, 6 mos $17.39 373,250 $17.13
</TABLE>
F-18
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Presented below is a summary of the status of the Company's stock options
held by employees, and the related transactions for the years ended December 31,
1996, 1997 and December 31, 1998.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1997 December 31, 1998
------------------- -------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Stock Options Price Shares Price Shares Price Shares
- ------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
January 1 $19.060 1,175,710 $11.803 2,108,415 $11.45 2,287,313
Granted $11.480 1,113,250 $10.78 549,848 $16.77 1,479,450
Exercised $11.910 (51,058) $11.375 (76,825) $11.35 (421,072)
Forfeited/ $18,553 (129,487) $11.42 (294,125) $11.90 (117,615)
Expired
Outstanding
December 31 $11,803 2,108,415 $11.45 2,287,313 $13.77 3,228,076
Options available for grant
- Equity Incentive Plan 127,802
</TABLE>
9. INCOME TAXES
------------
The Company utilizes the asset and liability method for taxes, which
requires that deferred income taxes be provided for the cumulative temporary
differences between the financial and tax bases of the Company's assets and
liabilities, using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.
The (provision) benefit for income taxes consists of:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Current
Federal $ --- $ 4,055 $ 338
State and foreign --- --- 118
------- ------- -------
Total current $ --- $ 4,055 $ 456
======= =======
Deferred
Federal 14,487 (3,148) (9,138)
State and foreign 88 194 458
------- ------- -------
Total deferred $14,575 $(2,954) $(8,680)
======= ======= =======
</TABLE>
F-19
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A comparison of the provision for income taxes as reported, to a provision
based on federal statutory rates and consolidated income before income taxes is
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
--------- -------- ---------
<S> <C> <C> <C>
(Provision) benefit at
federal statutory rates $16,609 $ (478) $(9,115)
Non-deductible expense (530) (262) (611)
State taxes net of federal effect --- --- ---
Research and development credits (266) --- ---
Foreign items (809) (523) 962
Other (429) (337) 540
Adjustment to prior year
liabilities --- 2,701 ---
------- ------ -------
(Provision) benefit for
income taxes $14,575 $1,101 $(8,224)
======= ====== =======
</TABLE>
The adjustment to prior year liabilities was a result of the elimination of
certain reserves for taxes due to the closure of years 1991 through 1993 from an
IRS audit.
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 and
December 31, 1998 are presented below:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998
Federal Debits Credits Debits Credits
- ------- -------- ------- --------- -------
<S> <C> <C> <C> <C>
Inventory $ 340 $ --- $ 531 $ ---
Allowance for bad debts 181 --- 258 ---
Accrued liabilities 5,144 --- 4,966 ---
Depreciation --- 412 --- 590
Foreign items 3,159 --- 3,637 ---
Amortizable intangibles --- 1,657 --- 6,499
Loss on Discontinuance --- 558 --- ---
AMT credit 449 --- 770 ---
Other 138 --- 505 ---
Net Operating Losses 12,054 --- 6,600 ---
State taxes 3,994 --- 4,096 ---
------- ------ ------- -------
Total 25,459 2,627 21,363 7,089
Valuation allowance -
state and foreign (5,538) --- (5,660) ---
------- ------ ------- -------
$19,921 $2,627 $15,703 $7,089
======= ====== ======= =======
</TABLE>
At December 31, 1998, the Company has federal net operating loss
carryforwards of approximately $19.4 million which expire in the year 2011 and
2012, foreign net operating loss carryforwards of approximately $11.1 million
and net operating loss carryforwards for state tax purposes of approximately
$78.2 million which expire at various dates through 2005.
F-20
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A valuation allowance was provided for certain foreign net operating losses
and certain state deferred tax assets due to the uncertainty of realization of
these assets.
The Company has recorded net deferred tax assets of approximately $8.6
million. Realization is dependent upon generating sufficient taxable income to
utilize such items. Although realization is not assured, management believes it
is more likely than not that the deferred tax assets for which a valuation
allowance has not been provided, will be realized. The amount of the deferred
tax assets considered realizable, however, could be reduced at any time if
estimates of future taxable income are reduced.
10. LEASES AND OTHER COMMITMENTS
----------------------------
The Company leases office space and certain office equipment under
operating leases. Minimum rental payments in each of the next five fiscal years
required under leases which have initial or remaining lease terms in excess of
one year are as follows:
December 31, 1998
-----------------
1999 ........................................ 1,691
2000 ........................................ 1,445
2001 ........................................ 1,025
2002 ........................................ 70
2003 ........................................ 16
Facility rent expense for the years ended December 31, 1996, 1997, and 1998
was $177, $257, and $195 respectively.
In accordance with several product acquisitions and licensing agreements
and subject to certain cancellation rights reserved by the Company, the Company
may be required to make minimum payments related to NOROXIN, SAMPATRILAT and the
Lilly Compounds totaling $39.3 million and purchase PROAMATINE inventory in the
amount of $75.1 million through 2003. The NOROXIN payments may be triggered if
minimum sales levels are not met and the PROAMATINE payments may be triggered if
minimum sales purchases are not made. The SAMPATRILAT and Lilly payments are
milestone payments due upon reaching certain stages in the development of the
compounds.
11. EMPLOYEE BENEFITS
-----------------
The Company has employment agreements with certain of its employees which
provide them with continued salary for a period of three to four years in the
event of their termination by the Company and provide additional payments on
termination by the Company equal to three to four times their average incentive
compensation.
F-21
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Through December 31, 1997 the Company maintained an employee savings plan
available to all employees who met certain age and service requirements and made
discretionary contributions to the plan based on employee compensation or
employee contributions. The Company contributions for 1996 and 1997 were $258
and $255, respectively.
Also through December 31, 1997, the Company had a money purchase pension
plan available to all employees who met certain age and service requirements.
The Company made discretionary contributions to the plan based on employee
compensation. The Company contributions for 1996 and 1997 were $248 and $199,
respectively.
As of January 1, 1998, the two plans were merged into one employee savings
plan. This plan is available to all employees who meet certain age and service
requirements. The plan requires mandatory contributions based on employee
contributions and makes discretionary contributions based on employee
compensation. The mandatory contributions made to the plan in 1998 totalled
$285. Estimated discretionary contributions of $226 were accrued in 1998 and
will be disbursed in 1999.
Employee Stock Purchase Plan
- ----------------------------
The Company's Board of Directors approved the Employee Stock Purchase Plan
(the "Plan"), which gives employees of the Company the opportunity to purchase
shares of the Company's common stock through payroll deductions beginning on
April 1, 1997. Employees can elect to participate in the Plan by designating
from 1% to 10% of eligible compensation to be deducted from pay. On the date of
exercise, which is the Friday before the 15th of the month following each
quarter end, the per share purchase price will be 85% of the average high and
low per-share trading price of Roberts common stock on the American Stock
Exchange on that date. 500,000 shares of the Company's Common Stock have been
reserved for issuance under the Employee Stock Purchase Plan. The total number
of shares purchased under the plan in the years ended December 31, 1997 and 1998
was 4,045 and 10,444 with a total value of $39 and $141 respectively.
Supplemental Executive Retirement Plan
- --------------------------------------
The Company established a Supplemental Executive Retirement Plan (SERP) in
1998, which is a funded defined benefit plan for key employees of the Company.
The projected benefit obligation was $5,315 and the 1998 expense for the plan
was $2,146. Of this total, $65 was disbursed in 1998 and the remainder of the
year's contribution will be funded in 1999. The service cost component was
$1,470 and the interest cost component was $676. The discount rate utilized was
7.0%.
F-22
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. CONTINGENCY
-----------
A shareholder class action suit was instituted in March, 1995, in the
United States District Court for the District of New Jersey against the Company
and certain of its officers and a former officer for alleged violations of
certain federal securities laws. This suit was settled. The net expenses of
this settlement to the Company amounted to $2.3 million and were included in
other expense for the quarter ended September 30, 1997.
13. ACQUISITIONS
------------
In 1996, 1997, and 1998, the Company acquired trademarks and other rights
to several products from various pharmaceutical companies. The aggregate price
of these acquisitions was $5.1 million, $15.3 million, and $135.1 million,
respectively, consisting of cash and notes payable.
14. SEGMENT REPORTING
-----------------
The Company adopted SFAS No. 131, Disclosures About Segments of and
Enterprise and Related Information in 1998, which changes the way the Company
reports information about its operating segments. Previous year's information
has been restated.
The Company has three segments, determined geographically and are made up
of the operations of the U.S., Canada, and the U.K. Each of the divisions sell
pharmaceutical products; the Canadian operations also includes a manufacturing
plant. Manufacturing revenues were not material to the Canadian operations or
to the consolidated operations. Each division has its own management team,
markets to different countries and the results of each division are evaluated
independently.
The Company evaluates performance based on profit or loss from operations
before income taxes, with intercompany sales eliminated. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies except that the results of the
foreign operations are translated at the budgeted foreign exchange rate rather
than the actual rate with the differences accumulated and shown separately as an
adjustment to operating income. The accounting for the assets of each segment
is the same as in consolidation with intercompany balances eliminated.
Amortization of product intangibles is allocated from the U.S. segment to the
foreign subsidiaries, however, the intangibles are maintained on the U.S. books.
F-23
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1998 U.S. Canada U.K. Total
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues 139,583 15,969 20,274 175,826
Segment profit 17,728 2,019 5,264 25,011
Amortization expense 7,453 624 1,738 9,815
Interest revenue 3,876 100 132 4,108
Interest expense 6,156 --- 1 6,157
Total assets 491,150 23,449 11,636 526,235
Long-lived assets 336,379 14,265 132 350,776
Reconciliation of segment revenue to consolidated revenue
Segment revenues 139,583 15,969 20,274 175,826
Effect of actual vs.
budget rates --- (1,254) 873 (381)
------- ------ ------ -------
Consolidated revenues 139,583 14,715 21,147 175,445
======= ====== ====== =======
1997 U.S. Canada U.K. Total
------- ------- ------- --------
Revenues 91,613 13,601 17,084 122,298
Segment profit (3,834) 2,401 2,849 1,416
Amortization expense 3,797 624 1,738 6,159
Interest revenue 5,104 61 48 5,213
Interest expense (755) --- --- (755)
Total assets 336,783 24,465 6,607 367,855
Long-lived assets 209,805 6,758 74 216,637
Reconciliation of segment revenue to consolidated revenue
Segment revenues 91,613 13,601 17,084 122,298
Effect of actual vs.
budget rates --- (204) 414 210
------- ------ ------ -------
Consolidated revenues 91,613 13,397 17,498 122,508
======= ====== ====== =======
1996 U.S. Canada U.K. Total
------- ------- ------- --------
Revenues 74,422 11,665 12,086 98,173
Segment profit (51,176) 1,021 1,305 (48,850)
Amortization expense 4,223 624 1,738 6,585
Interest revenue 2,878 1 30 2,909
Interest expense (1,750) --- --- (1,750)
Total assets 357,646 8,821 5,758 372,225
Long-lived assets 198,385 62 72 198,519
Reconciliation of segment revenue to consolidated revenue
Segment revenues 74,422 11,665 12,086 98,173
Effect of actual vs.
budget rates --- 292 (354) (62)
------- ------ ------ -------
Consolidated revenues 74,422 11,957 11,732 98,111
======= ====== ====== =======
</TABLE>
F-24
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The management reporting format used for this disclosure was not in effect
prior to 1998. In order to present three years of data in the format prescribed
by FAS 131, some estimates were made in calculating the 1996 and 1997 results as
the data was not available. These estimates related to intercompany allocations
and eliminations and did not effect the consolidated results. The 1996 U.S.
segment results include the effects of the intangible asset dispositions and
write-offs. See Note 4.
15. DISCONTINUED OPERATIONS
-----------------------
In August 1995, the Company decided to seek a buyer for the assets of its
Pronetics (Homecare) subsidiaries which were located in New York, New Jersey,
North Carolina, and South Carolina. The sale of the Homecare division was
expected to result in a loss at closing. Accordingly, the Company charged 1995
operations with the estimated loss on discontinuing the division.
Sales of the Homecare subsidiaries were essentially completed in December
1996. The total realized from the sales was $2.7 million. The additional loss
on sale was offset by a decrease in the assets held for sale and lower than
expected losses from operations in 1996. There was no income statement effect
from the final disposition of the Homecare division.
In March 1996, the Company announced its plan to discontinue and divest
VRG, a contract clinical research organization. The Company expected the sale
of VRG to result in a loss at closing. Accordingly, the Company charged 1995
operations with the estimated loss on discontinuation of the subsidiary.
In May 1998, the Company concluded a definitive acquisition agreement to
sell VRG. The Company has received a promissory note from the purchaser calling
for periodic payments to be made to the Company. With this sale, the Company
completed its plans to divest non-strategic, non-pharmaceutical businesses. No
gain or loss was recognized with respect to this transaction.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amount of cash and cash equivalents approximates fair value
due to the short-term maturities of these instruments. The fair value of
marketable securities was estimated based on quotes obtained from brokers. The
fair value of long-term debt is estimated based on the discounted future cash
flows using currently available interest rates.
F-25
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
----------------------------
Carrying Amount Fair Value
--------------- -----------
Cash and cash equivalents $ 39,280 $ 39,503
Marketable securities 36,062 36,158
Long-term debt 137,917 137,784
Held-to-maturity security 10,000,000 10,000,000
The carrying amounts in the table are included in the consolidated balance sheet
under the indicated captions with the exception of the held-to-maturity security
which is included in other assets.
17. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
-------------------------------------------
The following table presents summarized quarterly results for 1998 (in
thousands, except per share data).
First Second Third Fourth
----- ------ ----- ------
Revenues $32,588 $43,796 $42,336 $55,044
Gross profit 20,244 28,706 27,615 32,350
Net income 2,145 3,386/(1)/ 4,677 6,579
Basic and diluted
net income per
share $ 0.07 $ 0.11 $ 0.15 $ 0.21
F-26
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents summarized quarterly results for 1997 (in
thousands, except per share data).
First Second Third Fourth
--------- ------- ------------- -----------
Revenues $ 26,330 $30,286 $28,357 $36,639
Gross profit 14,678 17,305 14,310 23,933
Net earnings 910/(2)/ 1,288 (2,995)/(3)/ 3,315/(4)/
Basic net earnings
per share $ 0.03 $ 0.04 $(0.11) $ 0.11
Diluted net earnings
per share $ 0.02 $ 0.04 $(0.11) $ 0.11
(1) Subsequent to the filing of the Company's quarterly report on Form 10-Q for
the three months ended June 30, 1998, the Company reversed the gain
recorded from the sale of the discontinued VRG division. The net of tax
charge to earnings was $1,314, or $0.04 per share.
(2) Subsequent to the filing of the Company's quarterly report on Form 10-Q for
the three months ended March 31, 1997, the Company reclassified costs that
had been capitalized as an intangible asset to research and development
expense. The net of tax charge to earnings was $660,000, or $0.02 per
share.
(3) Includes a $2.3 million charge for the settlement of a lawsuit instituted
against the Company for alleged violations of certain federal securities
laws.
(4) In fourth quarter 1997, management made several changes in the estimates of
income tax reserves and allowances for returned goods. The reduction in
income tax reserves resulted from the elimination of certain reserves due
to the closure of years 1991 through 1993 after an IRS audit. The
allowance for returned goods was revalued based upon a change in estimate
of the economic benefit from the product returns. The impact of these
revaluations was $2.7 million and $1.0 million respectively.
F-27
<PAGE>
SCHEDULE II
ROBERTS PHARMACEUTICAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Balance Additions Balance
----------------------------------
Beginning of Charged to Charged to End of
Period Costs and Expenses Other Accounts Deductions Period
------------ ------------------ -------------- ---------- ------
<S> <C> <C> <C> <C> <C>
Allowance for uncollectibles $ 440 432 --- (334)/(1)/ $ 538
Allowance for return goods $9,765 6,191 (345) (6,701)/(2)/ $8,910
</TABLE>
ROBERTS PHARMACEUTICAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Balance Additions Balance
----------------------------------
Beginning of Charged to Charged to End of
Period Costs and Expenses Other Accounts Deductions Period
------------ ------------------ -------------- ---------- ------
<S> <C> <C> <C> <C> <C>
Allowance for uncollectibles $ 1,440 $ 120 $ --- $(1,120)/(1)/ $ 440
Allowance for return goods $16,298 $5,667 $(3,000)/(3)/ $(9,200)/(2)/ $9,765
</TABLE>
(1) Actual bad debts charged to the allowance.
(2) Actual returns of goods charged to the allowance.
(3) Reversal of allowance established in connection with product acquisition.
F-28
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
o 3.1.1 Amended and Restated Certificate of Incorporation of Registrant
filed with the Secretary of State of the State of New Jersey on
February 1, 1988 and Certificates of Amendment thereto dated
February 2, 1988 and October 31, 1989, respectively.
zz 3.1.2 Certificate of Amendment, dated August 26, 1996, to the Amended
and Restated Certificate of Incorporation of Roberts
Pharmaceutical Corporation.
ee 3.1.3 Certificate of Amendment, dated August 29, 1996, to the Amended
and Restated Certificate of Incorporation of Roberts
Pharmaceutical Corporation.
zz 3.1.4 Certificate of Amendment, dated November 25, 1996, to the Amended
and Restated Certificate of Incorporation of Roberts
Pharmaceutical Corporation.
y 3.2 By-laws of the Registrant, as amended.
+ 4.1 Form of Specimen Certificate, Roberts Pharmaceutical Corporation
Common Stock.
dd 4.2 Form of Specimen Certificate, Roberts Pharmaceutical Corporation
5% Convertible Preferred Stock.
dd 4.4 Form of Stock Purchase Agreement, dated July 17, 1996, executed by
and between Roberts and the purchasers of the Common Stock in the
Common Stock Private Placement.
dd 4.5 Form of Preferred Stock Investment Agreement, dated August 29,
1996, executed by and between Roberts and the purchasers of the 5%
Convertible Preferred Stock in the Preferred Stock Private
Placement.
dd 4.6 Form of Stock Purchase Warrant used in connection with the Common
Stock Private Placement.
dd 4.7 Form of Stock Purchase Warrant used in connection with the
Preferred Stock Private Placement.
ff 4.8 Rights Agreement, dated as of December 16, 1996, between Roberts
and Continental Stock Transfer & Trust Company and the Summary of
Rights to purchase Roberts Preferred Stock.
ff 4.9 Form of Specimen Rights Certificate to be used upon the occurrence
of a "Distribution Date" as defined in the Rights Agreement.
+ 10.1 License Agreement (United States), dated November 6, 1989, between
Roberts and Instituto Biologico Chemioterapico (ABC) S.p.A.
</TABLE>
E - 1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
+ 10.2 License Agreement (United Kingdom), dated November 6, 1989,
between Roberts and Instituto Biologico Chemioterapico (ABC)
S.p.A.
o 10.3 License Agreement, dated January 1, 1985, between the National
Technical Information service and Roberts.
o 10.4 Agreement, dated October 1, 1985, between Hafslund Nycomed Pharma
AG (formerly CL Pharma AG) and Roberts Laboratories, Inc., a
wholly owned subsidiary of Roberts.
aa 10.4.1 Amendment, dated January 19, 1994, to Agreement, dated October 1,
1985, between Hafslund Nycomed Pharma AG and Roberts Laboratories,
Inc., a wholly owned subsidiary of Roberts.
o 10.16 Agreements and other documents of Roberts, Hafslund Nycomed AG and
Linz-Roberts, Inc. including the following exhibits thereto:
(a) Subscription and Shareholders Agreement, dated December 1,
1985, between Roberts, Hafslund Nycomed Pharma AG and Linz-
Roberts, Inc., including the following exhibits thereto:
(i) Certificate of Incorporation of Linz-Roberts, Inc.
(ii) By-Laws of Linz-Roberts, Inc.
(iii) License Agreement, dated January 1, 1985, between the
National Technical Information Service and Roberts (See
Exhibit 10.3)
(iv) Agreement of Assignment, dated December 1, 1985,
between Roberts and Linz-Roberts, Inc.
(v) Research and Development Agreement, dated as of
December 1, 1985, between Vukovich Research Group, Inc.
and Roberts Pharmaceutical Corporation
(b) License and Distribution Agreement, dated December 1, 1985,
between Roberts and Hafslund Nycomed Pharma AG.
o 10.17 License Agreement, dated October 31, 1988, between the Salk
Institute for Biological Studies and Roberts.
(*) 10.20.1 Employment Agreement, dated as of August 24, 1998, between Roberts
and John T. Spitznagel.
(*) 10.20.2 Employment Agreement, dated as of August 24, 1998, between Roberts
and Peter M. Rogalin.
</TABLE>
E - 2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
(*) 10.23 Employment Agreement, dated as of August 24, 1998, between Roberts
and Robert W. Loy.
(*) 10.24 Employment Agreement, dated as of August 24, 1998, between Roberts
and Anthony A. Rascio.
o 10.26 Rental Deposit Deed, dated September 28, 1988, between the
University of Surrey and Roberts relating to the leased office
space in Guildford, England.
o 10.27 Underlease, dated September 28, 1988, between the University of
Surrey and Roberts relating to the leased office space in
Guildford, England.
xx 10.42 Distribution Agreement, dated February 15, 1991, between Roberts
and Flint Laboratories (Canada) Ltd.
++ 10.43 Agreement for Products and Sale of Assets, dated March 6, 1991,
between Norwich Eaton Pharmaceuticals, Inc. and Roberts
Laboratories Inc., a wholly owned subsidiary of Roberts.
y 10.48 License Agreement, dated as of August 1, 1991, between Bristol-
Myers Squibb Co. and Roberts Laboratories Inc., a wholly owned
subsidiary of Roberts.
y 10.51 Agreements of Roberts Laboratories Inc., a wholly owned subsidiary
of Roberts, Boehringer Ingelheim Limited, Windsor Healthcare
Limited and Altam Pharmaceuticals Limited:
(a) Agreement, dated December 5, 1991, by and among Roberts
Laboratories Inc., a wholly owned subsidiary of Roberts,
Boehringer Ingelheim Limited and Windsor Healthcare Limited.
(b) Supplemental Agreement, dated December 5, 1991, by and among
Roberts Laboratories Inc., a wholly owned subsidiary of
Roberts, Boehringer Ingelheim Limited and Windsor Healthcare
Limited.
y 10.52 Dopar Agreement for Purchase and Sale of Assets, dated December 6,
1991, between Norwich Eaton Pharmaceuticals, Inc. and Roberts
Laboratories Inc., a wholly owned subsidiary of Roberts.
k 10.53 Agreements of Roberts, Roberts Laboratories Inc. and Monmouth
Pharmaceuticals Ltd., wholly owned subsidiaries of Roberts,
American Home Products Corporation, John Wyeth & Brother limited
and Ayerst, McKenna & Harrison Inc.
(a) Agreement, dated December 20, 1991, by and among Roberts,
Roberts Laboratories Inc., a wholly owned subsidiary of
Roberts, American Home Products Corporation, John Wyeth &
Brother Limited and Ayerst,
</TABLE>
E - 3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
McKenna & Harrison, Inc.
(b) Manufacturing Agreement, dated December 24, 1991, between
John Wyeth & Brother Limited and Monmouth Pharmaceuticals
Ltd., a wholly owned subsidiary of Roberts.
(c) AHPC License Agreement, dated December 24, 1991, between
American Home Products Corporation and Roberts Laboratories
Inc., a wholly owned subsidiary of Roberts.
(d) The Ayerst License Agreement, dated December 24, 1991,
between Ayerst, McKenna & Harrison Inc. and Roberts
Laboratories Inc., a wholly owned subsidiary of Roberts.
(e) The Wyeth License Agreement, dated December 24, 1991, between
John Wyeth & Brother Limited and Roberts Laboratories Inc., a
wholly owned subsidiary of Roberts.
(f) Distribution Agreement, dated December 24, 1991, between John
Wyeth & Brother Limited and Monmouth Pharmaceuticals Ltd., a
wholly owned subsidiary of Roberts.
(g) Assignments, each dated December 24, 1991, between American
Home Products Corporation and Roberts Laboratories In., a
wholly owned subsidiary of Roberts.
(h) Assignment, dated December 24, 1991, between John Wyeth &
Brother Limited and Roberts Laboratories In., a wholly owned
subsidiary of Roberts.
k 10.55 Stock Purchase Agreement, dated as of January 22, 1992, between
Roberts and Yamanouchi Pharmaceutical Co., Ltd., including
Shareholder Agreement dated as of January 22, 1992 between Dr.
Robert A. Vukovich and Yamanouchi Pharmaceutical Co., Ltd. which
comprises Annex A to such agreement.
j 10.56 Distribution Agreement, dated March 31, 1992, between Research
Industries Corporation and Roberts Pharmaceutical of Canada Inc.,
a wholly owned subsidiary of Roberts.
j 10.57 License Agreement, dated April 2, 1992, between Bayer AG and
Roberts Laboratories Inc., a wholly owned subsidiary of Roberts.
j 10.58 License Agreement, dated April 10, 1992, between Ortho
Pharmaceutical Corporation and Roberts Laboratories Inc., a wholly
owned subsidiary of Roberts.
</TABLE>
E - 4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
j 10.59 Purchase Agreement, dated July 6, 1992, between Galen Limited and
Roberts Laboratories Inc., a wholly owned subsidiary of Roberts.
kk 10.60 Asset Purchase Agreement, dated September 29, 1992, between Smith-
Kline Beecham Pharmaceuticals, an unincorporated division of
Smith-Kline Beecham Corporation, and Roberts Laboratories Inc, a
wholly owned subsidiary of Roberts.
j 10.61 Agreement for Purchase and Sale of COMHIST Assets, dated November
24, 1992, between Procter & Gamble Pharmaceuticals, Inc. and
Roberts Laboratories Inc, a wholly owned subsidiary of Roberts.
Upon the request of the Securities and Exchange Commission,
Roberts agrees to furnish a copy of Schedules 1.1(a) through 6.11
and Exhibits A through C to the Agreement for Purchase and Sale of
COMHIST Assets as follows: 1.1(a) Schedule of Trademarks; 1.1(b)
Schedule of Know-How; 1.1(d) Tooling Schedule; 1.4 Allocation of
Purchase Price Schedule; 6.6(4) Intellectual Property Claims
Schedule; 6.10 Schedule of Customers; 6.11 Financial Information
Schedule; A Form of Trademark Assignment; B Form of Bill of Sale;
C Contract Manufacturing Agreement.
j 10.63 Purchase and Sale Agreement, dated December 21, 1992, between the
Du Pont Merck Pharmaceutical Company and Roberts Laboratories
Inc., a wholly owned subsidiary of Roberts.
j 10.64 Asset Purchase Agreement, dated December 28, 1992, between G.D.
Searle & Co. and Roberts Laboratories Inc., a wholly owned
subsidiary of Roberts. Upon the request of the Securities and
Exchange Commission, Roberts agrees to furnish a copy of Exhibits
A and B, Schedules 1.12 through 4.2(d), and various miscellaneous
assignments of copyrights and trademarks to the Asset Purchase
Agreement as follows: A Security Agreement; B Supply Agreement;
1.12 Product Registrations, 2.3 Purchase Price Allocations; 4.1(c)
Contracts Requiring Consents; 4.1(f) Pending Suits and Claims;
4.1(g) Compliance; 4.1(h) Material Contracts; 4.1(i) Exceptions to
Ownership of Intellectual Property; 4.1(j) Financial Information;
4.1(l) Customer List; 4.1(m) Material Adverse Changes; 4.2(d)
Buyer's Financial Statements; assignments of copyrights;
assignments of trademarks.
j 10.65 Asset Purchase Agreement, dated March 23, 1993, by and between
Searle Canada, Inc. and Roberts Laboratories Inc., a wholly owned
subsidiary of Roberts. Upon the request of the Securities and
Exchange Commission, Roberts agrees to furnish a copy of Exhibit A
and Schedules 1.5(a) through 5.19 to the Asset Purchase Agreement
as follows: A Supply Agreement; 1.5(a) Sales Retained by Seller;
1.5(b) Pricing Prior to Closing; 1.10 Product Registrations;
4.1(g) Compliance; 4.1(h) Material Contracts; 4.1(i) Exceptions to
Ownership of Intellectual Property; 4.1(j) Financial Information;
4.1(l) Customer List; 4.1(m) Material Adverse Changes; 5.19
Packaging Charges.
</TABLE>
E - 5
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
# 10.67 Copy of form of Option Agreement used in connection with options
granted under the Roberts Pharmaceutical Corporation Restricted
Stock Option Plan.
# 10.68 Copy of form of Option Agreement used in connection with options
granted under the Roberts Pharmaceutical Corporation Incentive
Stock Option Plan.
j 10.69 Rebate Agreement, dated November 11, 1992, between the Secretary
of Health and Human Services and Roberts Laboratories Inc., a
wholly owned subsidiary of Roberts.
a 10.70 License Agreement, dated as of March 27, 1993, by and among
Roberts Laboratories Inc, a wholly owned subsidiary of Roberts,
Sawai Pharmaceutical Co., Ltd., and Grelan Pharmaceutical Co.,
Ltd.
a 10.71 Agreements, dated as of May 5, 1993, between Roberts Laboratories
Inc., a wholly owned subsidiary of Roberts, and Glaxo Canada Inc.,
dated as of May 5, 1993.
(a) First Asset Purchase Agreement.
(b) Promotion Agreement.
(c) Supply Agreement.
(d) Distribution Agreement.
(e) License Agreement.
(f) Registered User Agreement.
(g) Assignment of Trademarks.
(h) Second Asset Purchase Agreement.
a 10.72 Stock Purchase Agreement, dated August 30, 1993, by and among
Roberts, Yamanouchi Pharmaceutical Co., Ltd. and Yamanouchi U.S.A.
Inc.
aa 10.73 Amendment to Stock Purchase Agreement, dated August 30, 1993, by
and among Roberts, Yamanouchi Pharmaceutical Co., Ltd. and
Yamanouchi U.S.A. Inc.
aa 10.74 Agreements, dated as of September 14, 1993, among Bristol-Myers
Squibb Company, Bristol-Myers Squibb Company Canada Inc. and
Roberts Laboratories Inc., a wholly owned subsidiary of Roberts.
(a) COLACE Et Al. Sale Agreement.
(b) COLACE Et Al. Supply Agreement.
(c) Security Agreement.
(d) Notice of Security Interest in Trademark.
(e) Assignment of Collateral.
(f) Guaranty.
bb 10.75 License Agreement, dated as of July 6, 1994, between the
Rockefeller University
</TABLE>
E - 6
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
and Roberts Laboratories Inc., a wholly owned subsidiary of
Roberts.
bb 10.76 Agreements between Roberts Laboratories Inc., a wholly owned
subsidiary of Roberts, and SmithKline Beecham Pharmaceuticals, an
unincorporated division of SmithKline Beecham Corporation:
(a) TIGAN Asset Purchase Agreement dated as of March 27, 1995.
Upon the request of the Securities and Exchange Commission,
Roberts agrees to furnish a copy of Exhibits A through D and
Schedules 5.4 through 5.11 and Appendix I as follows: A List
of Products; B- Assignment and Assumption Agreement; C
Promissory Note; D Transitional Services Agreement; 5.4
Financial Information; 5.5 Litigation; 5.6 Inventory; 5.7
Product Formulas; 5.8 Regulatory Issues; 5.9 FDA and Other
Administrative Approvals, Registrations and Permits; 5.11
Intellectual Property Rights; I Purchase Price Adjustments.
(b) EMINASE Asset Purchase Agreement dated as of March 27, 1995.
Upon the request of the Securities and Exchange Commission,
Roberts agrees to furnish a copy of Exhibits A through D,
Schedules 2.1(a)(1) through 5.11 and Appendices I and II as
follows: A List of Products; B Manufacturing Agreement; C
Promissory Note; D Transitional Services Agreement; 2.1(a)(1)
Transferable Product Rights; 2.1(a)(2) Non-Transferable
Product Rights; 2.1(b) Transferred Contracts; 5.4 Financial
Information; 5.5 Litigation; 5.6 Inventory; 5.7 Product
Formulas; 5.8 Regulatory Issues; 5.9 FDA and Other
Administrative Approvals, Registrations and Permits; 5.11
Intellectual Property Rights; I Territories; II Purchase
Price Adjustments.
gg 10.77 Distribution Agreement, dated February 23, 1995, between Roberts
Laboratories Inc., a wholly owned subsidiary of the Company, and
Merck and Co., Inc. with respect to NOROXIN.
zz 10.78 License Agreements between Roberts Laboratories Inc., a wholly
owned subsidiary of Roberts, and Eli Lilly and Company.
(a) Tazofelone License Agreement dated November 5, 1996.
(b) Compound LY246736 License Agreement dated November 5, 1996.
(c) Compound LY353433 License Agreement dated November 5, 1996.
(d) Compound LY315535 License Agreement dated December 4, 1996.
zz 10.79 License Agreement between Roberts Laboratories Inc., a wholly
owned subsidiary of the Company, and Pfizer Inc. with respect to
Sampatrilat. Upon request of the Securities and Exchange
Commission, Roberts agrees to furnish a copy of Exhibits 1.7(a)
and 3.1(b).
</TABLE>
E - 7
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
zz 10.80 Agreement, dated December 3, 1996, by and between Roberts and
Monsanto Canada, Inc. with respect to Oakville manufacturing
facility.
zz 10.81 Divestiture Agreement, dated December 1, 1996, by and among
Roberts, Pronetics Health Care Group, Inc. (New Jersey), Pronetics
Health Care Group, Inc. (New York), PHCG, Inc. and MJGC Corp.
pertaining to the divestiture of certain Homecare operations.
zz 10.82 Stock Purchase Agreement, dated January 31, 1997, by and among
Roberts, Pronetics Health Care Group, Inc. (North Carolina) and
American Homepatient, Inc. pertaining to the divestiture of
certain Homecare operations.
ll 10.83 Agreement of sale, August 1997, by and between Roberts
Pharmaceutical Corporation and Novartis Pharmaceutical Corporation
pertaining to the acquisition of the distribution facility.
ll 10.84 Asset Purchase Agreement, December 1997, by and between Roberts
Laboratories Inc., a wholly owned subsidiary of Roberts, and G.D.
Searle & Co. pertaining to the divestiture of NORETHIN. Upon
request of the Securities and Exchange Commission, Roberts agrees
to furnish copies of Schedules 1.13, 2.3, 4.1(c), (f), (g), (h),
(i), (j), (l) and (m).
ll 10.85 Distribution Agreement, December 1997, by and between Roberts
Laboratories Inc., a wholly owned subsidiary of Roberts, and G.D.
Searle & Co. pertaining to the distribution rights for SLOW-MAG.
10.86 Supplemental Executive Retirement Plan of Roberts Pharmaceutical
Corporation, effective January 1, 1998.
10.87 Agreements between Hydro Med Sciences, a division of GP Strategies
Corp., and Roberts Laboratories Inc.:
(a) License Agreement, dated March 24, 1998.
(b) Manufacturing Supply Agreement, dated March 24, 1998 and
First Amendment to Manufacturing Supply Agreement, dated
September 25, 1998.
10.88 Agreements for the right to market Pentasa(R):
(a) Sublicense and Assignment Agreement, dated June 24, 1998,
between Hoechst Marion Roussel, Inc. and Roberts Laboratories
Inc.
(b) Amendment to Sublicense and Assignment Agreement, dated June
24, 1998, between Hoechst Marion Roussel, Inc., and Roberts
Laboratories Inc.
</TABLE>
E - 8
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
(c) Supply Agreement, dated April 1, 1998, between Hoechst Marion
Roussel, Inc. and Roberts Laboratories Inc.
(d) Stand-Still Agreement, dated June 17, 1998, between Ferring
A/S, Hoechst Marion Roussel, Inc., Roberts Pharmaceutical
Corporation and Roberts Laboratories Inc.
(e) Agreement, dated June 22, 1998, among Ferring A/S, Hoechst
Marion Roussel, Inc., Roberts Laboratories Inc. and Roberts
Pharmaceutical Corporation.
nn 10.89 Credit Agreement, dated as of June 24, 1998, among Roberts
Pharmaceutical Corporation, First Union National Bank, Summit
Bank, DLJ Capital Funding, Inc., and various other financial
institutions.
10.90 Agreements between RiboGene, Inc. and Roberts Pharmaceutical
Corporation:
(a) Option and License Agreement, dated July 6, 1998.
(b) First Amendment to the Option and License Agreement, dated
July 6, 1998.
(c) Registration Rights Agreement, dated July 16, 1998.
(d) Stock Purchase Agreement, dated July 6, 1998.
10.91 Consultant Agreement, made as of October 1, 1998, by and between
Roberts Pharmaceutical Corporation and Robert A. Vukovich, Ph.D.
mm 16.01 Letter, dated December 9, 1998, from PricewaterhouseCoopers L.L.P.
regarding their resignation as Roberts Pharmaceutical
Corporation's principal accountant.
21. Subsidiaries of the Registrant.
23.01 Consent of Ernst & Young L.L.P.
23.02 Consent of PricewaterhouseCoopers L.L.P.
cc 27. Financial Data Schedules.
(*) Constitutes a management contract required to be filed as an
exhibit pursuant to Item 14(c) of Form 10-K.
y Incorporated by reference to the identically numbered exhibit to
the Registrant's Registration Statement on Form S-4 (Registration
No. 33-44441).
o Incorporated by reference to the identically numbered exhibit to
Registrant's Registration Statement on Form S-1 (Registration No.
33-31876).
</TABLE>
E - 9
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
+ Incorporated by reference to the identically numbered exhibit to
Amendment No. 1 to Registrant's Registration Statement on Form S-1
(Registration No. 33-31876).
x Incorporated by reference to the identically numbered exhibit to
Amendment No. 2 to Registrant's Registration Statement on Form S-1
(Registration No. 33-31876).
z Incorporated by reference to the identically numbered exhibit to
Amendment No. 1 to Registrant's Registration Statement on Form S-1
(Registration No. 33-40636).
k Incorporated by reference to the identically numbered exhibit to
Registrant's Registration Statement on Form S-1 (Registration No.
33-45069).
# Incorporated by reference to the identically numbered exhibit to
Registrant's Registration Statement on form S-8 (Registration No.
33-34767).
a Incorporated by reference to the identically numbered exhibit to
Registrant's Registration Statement on Form S-3 (Registration No.
33-68080).
b Incorporated by reference to Registrant's Registration Statement
on Form S-8 (Registration No. 33-51198)
nn Incorporated by reference to Registrant's Report on Form 10-Q/A
for the quarter ended June 30, 1998.
@ Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990.
j Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.
aa Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
bb Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
gg Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
zz Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
ll Incorporated by reference to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
cc Financial Data Schedules are submitted in electronic format only.
</TABLE>
E - 10
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
dd Incorporated by reference to the identically numbered exhibit
to Registrant's Registration Statement on Form S-3
(Registration No.333-13729).
ee Incorporated by reference to Exhibit No. 4.3 to Registrant's
Registration Statement on Form S-3 (Registration No. 333-13729).
ff Incorporated by reference to Exhibit No. 1 to Registrant's
Registration Statement ton Form 8-A.
xx Incorporated by reference to Registrant's Current Report on
Form 8-K, dated February 15, 1991.
++ Incorporated by reference to Registrant's Current Report on
Form 8-K, dated March 6, 1991.
vv Incorporated by reference to Registrant's Current Report on
Form 8-K, dated November 5, 1991.
kk Incorporated by reference to Registrant's Current Report on
Form 8-K, dated September 29, 1992.
mm Incorporated by reference to Registrant's Current Report on
Form 8-K, dated December 9, 1998.
</TABLE>
E - 11
<PAGE>
EXHIBIT 10.20.1
EMPLOYMENT AGREEMENT
This Employment Agreement made as of the 24th day of August 1998
BY AND BETWEEN:
ROBERTS PHARMACEUTICAL CORPORATION, a New Jersey Corporation with offices
located at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey
(hereinafter referred to as "Employer")
AND
JOHN T. SPITZNAGEL, residing at 25 Bedford Road, Summit, New Jersey 07901
(hereinafter referred to as "Employee"):
W I T N E S S E T H:
WHEREAS, Employee has been employed as President and Chief Executive Officer
by Employer and has made and is expected to continue to make material
contributions to the growth and development of Employer; and
WHEREAS, Employer deems it to be in Employer's best interest to assure
Employee continuous employment by Employer; and
<PAGE>
- 2 -
WHEREAS, it is in the best interest of the Employer that Employee remain
focused on the business of the Company in the event of a change of control of
Employer; and
WHEREAS, Employer deems it to be in Employer's best interests to encourage
Employee to remain employed by Employer during a period of uncertainty
concerning ownership of Employer; and
WHEREAS, Employee is willing to continue, and is desirous of continuing, in
the employment of Employer;
NOW THEREFORE, in consideration of the mutual agreements contained herein and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1. CAPACITY AND DUTIES
- ---------- -------------------
1.01 Employment, Acceptance of Employment.
-------------------------------------
Employer hereby employs Employee and Employee hereby accepts employment by
Employer subject to all the terms and conditions hereafter set forth.
1.02 Capacity.
---------
Employee shall serve as President and Chief Executive Officer.
1.03 Duties.
-------
During the term of this Agreement, Employee shall devote his full attention
and his best efforts to the performance of the customary duties of President and
Chief Executive Officer.
<PAGE>
- 3 -
ARTICLE 2. TERM OF EMPLOYMENT; TERMINATION
- ---------- -------------------------------
2.01 Term.
-----
Unless earlier terminated as hereafter provided, the term of this Agreement
shall commence on the date first above written (the "Effective Date") and shall
continue through August 31, 2002, and thereafter shall automatically renew and
extend for successive one (1) year periods on each anniversary of the Effective
Date.
2.02 Termination.
------------
From and after the date hereof, Employer may terminate this Agreement and
Employee's employment hereunder by giving written notice to Employee
("Termination Notice") specifying the intention to terminate this Agreement, and
the effective date for such termination ("Termination Date").
2.03 Compensation on Termination.
----------------------------
In the event of any termination of this Agreement by Employer pursuant to
section 2.02 for any reason other than Employee's willful misconduct, Employee
shall be entitled to receive, and Employer shall be obligated to pay, all Base
Compensation (as defined in Section 3.01(a) at the annual rate which Employee is
receiving on the date Termination notice is given, which would otherwise be paid
to Employee hereunder, for a period of four (4) years following the Termination
Date together with an amount equal to four (4) times the average annual bonus
and incentive compensation received by Employee for the period beginning March
4, 1996 and ending upon the termination of this Agreement together with an
amount equal to four (4) times any payment Employer
<PAGE>
- 4 -
may have made for the previous year to Employee's 401-K Plan and Pension Plan on
behalf of the Employee (the "Severance Compensation"). For purposes of
calculation hereunder, the bonus and incentive compensation shall be the actual
annual bonus and incentive compensation actually paid to Employee or the annual
sum of $50,000 whichever is greater. Employer shall pay to Employee the
Severance Compensation, at the sole discretion of the Employee, either in a lump
sum or in the same manner and on the same dates as Employee would have received
the Base Compensation had the termination of this Agreement not occurred. In the
event of Employee's death after termination, but before he has received the
entire Severance Compensation hereunder, Employer shall pay to Employee's estate
or designated beneficiary in one lump sum the balance of the Severance
Compensation which would have been due Employee had his death not occurred.
From and after the Termination Date, Employee shall be entitled to receive
medical and insurance benefits previously received by him at the same level and
cost to the Employee as of the Termination Date for a period of four (4) years
after the Termination Date in addition to the Severance Compensation. Employer
shall pay the premiums for Employee and his dependents' health coverage for the
aforesaid four (4) years from the Termination Date under Employer's health plans
which cover the Employer's senior executives or similar plans in the same
proportion of Employer contributions to Employee contributions to said premiums
as in existence on the Termination Date. Payments may, at the discretion of the
Employer, be made by
<PAGE>
- 5 -
continuing the Employee's participation in the Employer's plans as a retiree or
by covering the Employee and his dependents under substitute arrangements.
2.04 Termination After Change of Control.
------------------------------------
In the event of a Change in Control (as hereinafter defined) of Employer,
Employer shall have the right to terminate this Agreement by giving written
notice to Employee specifying the intention to terminate this Agreement and the
effective date for such termination. Any termination pursuant to this Section
2.04 by the Employer shall be governed and controlled by Sections 2.02 and 2.03
hereof. Employee shall have the right to terminate his employment with Company
or Successor following a Change of Control provided that he shall have remained
in the employ of Company or Successor for a period of one (1) year following
such Change of Control. Such right shall be exercisable by Employee only during
the period of thirty (30) days immediately following the end of the one (1) year
period immediately subsequent to a Change of Control. Notwithstanding anything
herein to the contrary, Employee shall have the right to terminate this
Agreement at any time in the event of a Change of Control if: (1) after such
Change of Control, Employee's duties are diminished; or (2) any amounts due to
Employee pursuant to Sections 3.01(a) and 3.02 or the rights granted to Employee
pursuant to Sections 3.01(b) and 3.03 are diminished; or (3) the place of
Employee's employment is relocated more than twenty (20) miles from its location
as of the date of this Agreement or (4) the failure of any Successor (as
hereinafter defined) or of any person, entity or group of persons or entities
acting in concert acquiring thirty percent (30%) or more of the
<PAGE>
- 6 -
outstanding common stock of Employer to assume in a writing delivered to
Employee the obligations of Employer under this Agreement (each of the events
described in subparagraphs 1, 2, 3 and 4 of this Section 2.04 shall hereinafter
be referred to as Good Reason). For purposes of this Article 2, "Change of
Control" shall mean either (i) a merger or consolidation of Employer into
another corporation or a merger of another corporation with or into the
Employer; or (ii) a sale by Employer of substantially all of its assets, which,
in the case of either (i) or (ii) above, results in the shareholders of Employer
(as they existed immediately prior to the effectiveness of the merger,
consolidation or sale) owning less than seventy percent (70%) of the surviving
entity or new corporation or entity that has acquired substantially all of the
Employer's assets after the effectiveness thereof; or (iii) a reorganization of
Employer which results in either Employer becoming a subsidiary of another
corporation or Employer not being the surviving entity (other than a merger or
consolidation (a) with a wholly-owned subsidiary of the Employer; (b) to effect
a change in domicile; or (c) of the Employer into another corporation that does
not result in the shareholders of Employer, as they existed immediately prior to
the effectiveness of such merger or consolidation, owning less than seventy
percent (70%) of the surviving corporation); (iv) the acquisition by any person,
entity or group of persons or entities acting in concert, of thirty percent
(30%) or more of Employer's then issued and outstanding voting securities,
whether acquired in one transaction or a series of transactions; or (v) the
individuals who (x) as of the effective date of this Agreement constitute the
Board of Directors (the "Original Directors"), (y)
<PAGE>
- 7 -
thereafter are elected to the Board of Directors and whose election or
nomination for election to the Board of Directors was approved by a vote of at
least 2/3 of the Original Directors then still in office (such Directors being
called "Additional Original Directors"), or (z) are elected to the Board of
Directors and whose election or nomination for election to the Board of
Directors was approved by a vote of at least 2/3 of the Original Directors and
Additional Original Directors then still in office, cease for any reason to
constitute a majority of the members of the Board of Directors.
2.05 Compensation on Termination After Change of Control.
----------------------------------------------------
In the event of any termination of this Agreement by Employee pursuant to
Section 2.04 hereof, Employee shall be entitled to receive, and Employer shall
be obligated to pay Employee's Severance Compensation (as defined in Section
2.03) payable in accordance with said Section 2.03.
ARTICLE 3. COMPENSATION
- ---------- ------------
3.01(a) Compensation.
-------------
During the term of this Agreement or any extension thereof, and after
termination of this Agreement as provided in Section 2.03, as compensation for
services to the Employer pursuant to this Agreement, the Employer shall pay to
Employee a minimum base salary of Three Hundred Fifty Thousand Dollars
($350,000) per year and the Board of Directors of Employer may, in its sole
discretion from time to time, increase said base salary to be paid to Employee
as provided in this Article 3 (the "Base Compensation"), or
<PAGE>
- 8 -
provide additional compensation to Employee, including but not limited to
incentive compensation based upon the earnings or performance of Employer or
otherwise, in order to recognize and fairly compensate Employee for the value of
his services to Employer.
In addition, Employee shall be entitled to receive all vacation and other
fringe benefits provided by Employer to its employees and officers, including
insurance benefits, which may be established by the Board of Directors of
Employer from time to time. In addition, Employer may provide such other
additional or incentive compensation, benefits or perquisites as its Board of
Directors may from time to time authorize.
3.01(b) Incentive Compensation.
-----------------------
Employer may adopt and maintain a "Management Incentive Compensation Plan."
Should such a plan be adopted by Employer, at all times during the term of this
Agreement, Employee shall be designated by Employer as a participant in such
plan. In the event that, at any time during the term of this Agreement,
Employer shall rescind, discontinue, amend or revise such plan, then Employer
shall include Employee in any revised or amended Incentive Plan or substituted
plan and Employee shall be entitled to receive incentive compensation comparable
to that offered to other members of Employer's senior level management
thereunder.
3.02 Disability Payments.
--------------------
Employer shall pay to Employee all Severance Compensation as prescribed in
Section 2.03 of this Agreement in the event that the Employee shall become
disabled due to injury or sickness. The term "disability" as used in this
Section 3.02 means the
<PAGE>
- 9 -
inability, because of injury or sickness, to perform the substantial and
material duties of the Employee's regular occupation, while under the regular
care of a licensed physician, and while not gainfully employed in any occupation
reasonably consistent with the Employee's education, training and experience.
3.03 Stock Option Plans.
-------------------
If during the term of this Agreement, Employee's employment is terminated and
such election by Employee is permitted under any stock option plan(s) or
pursuant to any determination made prior or subsequent to the execution of this
Agreement by the Employer's Board of Directors or the committee thereof
administering any such plan applicable to Employee, Employee, or his personal
representatives or heirs, shall have the right during a period of one (1) year
following the Termination Date to exercise all options previously granted to
Employee under all Stock Option Plans adopted and maintained by Employer as to
all or any part of the shares covered thereby, including shares as to which such
options would not otherwise then be exercisable.
ARTICLE 4 CERTAIN COVENANTS
- --------- -----------------
4.01 Non-Competition.
----------------
During the term of employment hereunder and, in the event of termination of
this Agreement for any reason other than (a) by Employer for Employee's willful
misconduct or (b) by Employee for other than Good Reason, for two years
thereafter, Employee shall not accept employment with any employer in direct
competition with, nor engage in any
<PAGE>
- 10 -
activities in direct competition with, the business of the Employer. In
addition, this Section 4.01 shall not prevent Employee from acquiring, as a
passive investor, up to 5% of the equity of a competing enterprise or from
serving as a non-executive director of any company.
ARTICLE 5. MISCELLANEOUS
- ---------- -------------
5.01 Assignment.
-----------
This Agreement shall not be assignable by Employee and shall be assignable and
required to be assigned, by Employer, only to a person, firm or corporation
which may become a successor in interest (whether direct or indirect, by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of Employer) to Employer ("Successor") and this Agreement
shall be fully binding upon, and the assumed obligation of, such Successor.
5.02 Employee's Attorney Fees.
-------------------------
In the event that Employee is required to institute legal proceedings against
Employer to enforce this Agreement or any term or provision thereof ("Employee's
Suit") and the Employee's suit results in a judgment in whole or in part in
favor of Employee against Employer, then Employer hereby agrees that Employer
shall pay, either directly or by reimbursement to Employee, all legal fees and
costs incurred by Employee in the prosecution of Employee's suit.
<PAGE>
- 11 -
5.03 Entire Agreement.
-----------------
This writing represents the entire understanding of the parties and supersedes
any and all other understandings between the parties regarding the subject
matter hereof whether oral or written. This Agreement may not be altered nor
amended in any way except by an agreement in writing signed by both Employer and
Employee.
5.04 Binding Effect.
---------------
Subject to Section 5.01, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs,
executors and administrators. Any paragraph, sentence, phrase or other
provision of this Agreement which is or becomes in conflict with any applicable
statute, rule or other law shall be deemed, if possible, to be modified or
altered to conform thereto or, if not possible, to be omitted herefrom. If any
provision of this Agreement shall be or become illegal or unenforceable in whole
or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and subsisting.
5.05 Governing Law.
--------------
This Agreement has been negotiated and executed within the State of New
Jersey, and the validity, interpretation and enforcement of this Agreement shall
be governed by the laws of the State of New Jersey.
5.06 Headings.
---------
The headings of Sections in this Agreement are for convenience only and form
no part of this Agreement and shall not affect its interpretation.
<PAGE>
- 12 -
5.07 Notice.
-------
Notices authorized or required to be sent pursuant to this Agreement shall be
in writing and sent postage prepaid, by United States Certified or Registered
Mail, return receipt requested, directed to the other party at its address as
may be designated by notice from time to time. Notice shall be deemed given on
the date the envelope in which such notice is enclosed, as provided above, is
deposited for mailing in a United Sates mailbox or post office.
5.08 Payment of Taxes.
-----------------
(a) Special Reimbursement. In the event that Employee becomes entitled to
the Severance Compensation Payments; if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Employee in connection
with a Change in Control or the termination of Employee's employment, whether
any such payments or benefits are pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any of its subsidiaries,
any Person, or otherwise (the "Total Payments"), will or would be subject to the
excise tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Employee an additional amount (the "Gross-Up Payment")
which amount shall be equal to the sum of (a) the amount of such Excise Tax
imposed (determined without regard to the Gross-Up Payment), and (b) the product
of (i) such Excise Tax (determined without regard to the Gross-Up Payment), and
(ii) the rate of Excise Tax imposed on "golden parachute" payments under Section
4999 of the Code.
<PAGE>
- 13 -
(b) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) the Total
Payments shall be treated as "parachute payments" within the meaning of section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel (delivered to Employee) selected by the
Company and reasonably acceptable to Employee, such Total Payments (in whole or
in part) (a) do not constitute parachute payments, including (without
limitation) by reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, or (c) are otherwise not subject to the Excise Tax, and (ii) the value of
any non-cash benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
Employee's employment, Employee shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Employee's employment (including
by reason of any payment, the
<PAGE>
- 14 -
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by Employee with
respect to such excess) at the time that the amount of such excess is finally
determined. The Employee and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of any such subsequent liability for Excise
Tax with respect to the Severance Compensation.
5.09 Waiver of Breach.
-----------------
The waiver of either party of a breach of any provision of this Agreement
shall not operate nor be construed as a waiver of any subsequent breach thereof
or of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ROBERTS PHARMACEUTICAL CORPORATION
By: /s/ Anthony A. Rascio
--------------------------------
Anthony A. Rascio
Vice President
By: /s/ John T. Spitznagel
---------------------------------
John T. Spitznagel
Employee
<PAGE>
EXHIBIT 10.20.2
EMPLOYMENT AGREEMENT
This Employment Agreement made as of the 24th day of August 1998
BY AND BETWEEN:
ROBERTS PHARMACEUTICAL CORPORATION, a New Jersey Corporation with offices
located at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey
(hereinafter referred to as "Employer")
AND
PETER M. ROGALIN, residing at 75 Belmont Road, Glen Rock, New Jersey 07452
(hereinafter referred to as "Employee"):
W I T N E S S E T H:
WHEREAS, Employee has been employed as Vice President and Treasurer, by
Employer and has made and is expected to continue to make material contributions
to the growth and development of Employer; and
WHEREAS, Employer deems it to be in Employer's best interest to assure
Employee continuous employment by Employer; and
<PAGE>
- 2 -
WHEREAS, it is in the best interest of the Employer that Employee remain
focused on the business of the Company in the event of a change of control of
Employer; and
WHEREAS, Employer deems it to be in Employer's best interests to encourage
Employee to remain employed by Employer during a period of uncertainty
concerning ownership of Employer; and
WHEREAS, Employee is willing to continue, and is desirous of continuing, in
the employment of Employer;
NOW THEREFORE, in consideration of the mutual agreements contained herein and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1. CAPACITY AND DUTIES
- ---------- -------------------
1.01 Employment, Acceptance of Employment.
-------------------------------------
Employer hereby employs Employee and Employee hereby accepts employment by
Employer subject to all the terms and conditions hereafter set forth.
1.02 Capacity.
---------
Employee shall serve as Vice President and Treasurer.
<PAGE>
- 3 -
1.03 Duties.
-------
During the term of this Agreement, Employee shall devote his full attention
and his best efforts to the performance of the customary duties of Vice
President and Treasurer.
ARTICLE 2. TERM OF EMPLOYMENT; TERMINATION
- ---------- -------------------------------
2.01 Term.
-----
Unless earlier terminated as hereafter provided, the term of this Agreement
shall commence on the date first above written (the "Effective Date") and shall
continue through August 31, 2001, and thereafter may be automatically renewed
for successive one (1) year periods on each anniversary of the Effective Date
only upon the mutual Agreement of Employer and Employee.
2.02 Termination After Change of Control.
------------------------------------
In the event of a Change in Control (as hereinafter defined) of Employer,
Employer shall have the right to terminate this Agreement by giving written
notice to Employee specifying the intention to terminate this Agreement and the
effective date for such termination. For purposes of this Article 2, "Change of
Control" shall mean either (i) a merger or consolidation of Employer into
another corporation or a merger of another corporation with or into the
Employer; or (ii) a sale by Employer of substantially all of its assets, which,
in the case of either (i) or (ii) above, results in the shareholders of Employer
(as they existed immediately prior to the effectiveness of the merger,
consolidation or sale) owning less than seventy percent (70%) of the surviving
entity or
<PAGE>
- 4 -
new corporation or entity that has acquired substantially all of the Employer's
assets after the effectiveness thereof; or (iii) a reorganization of Employer
which results in either Employer becoming a subsidiary of another corporation or
Employer not being the surviving entity (other than a merger or consolidation
(a) with a wholly-owned subsidiary of the Employer; (b) to effect a change in
domicile; or (c) of the Employer into another corporation that does not result
in the shareholders of Employer, as they existed immediately prior to the
effectiveness of such merger or consolidation, owning less than seventy percent
(70%) of the surviving corporation); or (iv) the acquisition by any person,
entity or group of persons or entities acting in concert, of thirty percent
(30%) or more of Employer's then issued and outstanding voting securities,
whether acquired in one transaction or a series of transactions; or (v) the
individuals who (x) as of the effective date of this Agreement constitute the
Board of Directors (the "Original Directors"), (y) thereafter are elected to the
Board of Directors and whose election or nomination for election to the Board of
Directors was approved by a vote of at least 2/3 of the Original Directors then
still in office (such Directors being called "Additional Original Directors"),
or (z) are elected to the Board of Directors and whose election or nomination
for election to the Board of Directors was approved by a vote of at least 2/3 of
the Original Directors and Additional Original Directors then still in office,
cease for any reason to constitute a majority of the members of the Board of
Directors.
2.03 Compensation on Termination After Change of Control.
----------------------------------------------------
In the event of any termination of this Agreement by Employer pursuant to
Section 2.02 hereof, Employee shall be entitled to receive, and Employer shall
be
<PAGE>
- 5 -
obligated to pay, the compensation set forth in Section 3.01 (a) at the annual
rate which Employee is receiving on the date of termination of this Agreement
for a period of three (3) years following the termination date (the Severance
Compensation).
ARTICLE 3. COMPENSATION
- ---------- ------------
3.01(a) Compensation.
-------------
During the term of this Agreement or any extension thereof, and after
termination of this Agreement as provided in Section 2.02, as compensation for
services to the Employer pursuant to this Agreement, the Employer shall pay to
Employee a minimum base salary of One Hundred Ninety Three Thousand Dollars
($193,000) per year and the Board of Directors of Employer may, in its sole
discretion from time to time, increase said base salary to be paid to Employee
as provided in this Article 3 or provide additional compensation to Employee,
including but not limited to incentive compensation based upon the earnings or
performance of Employer or otherwise, in order to recognize and fairly
compensate Employee for the value of his services to Employer.
In addition, Employee shall be entitled to receive all vacation and other
fringe benefits provided by Employer to its employees and officers, including
insurance benefits, which may be established by the Board of Directors of
Employer from time to time. In addition, Employer may provide such other
additional or incentive compensation, benefits or perquisites as its Board of
Directors may from time to time authorize.
3.01(b) Incentive Compensation.
-----------------------
Employer may adopt and maintain a "Management Incentive Compensation
<PAGE>
- 6 -
Plan." Should such a plan be adopted by Employer, at all times during the term
of this Agreement, Employee shall be designated by Employer as a participant in
such plan. In the event that, at any time during the term of this Agreement,
Employer shall rescind, discontinue, amend or revise such plan, then Employer
shall include Employee in any revised or amended Incentive Plan or substituted
plan and Employee shall be entitled to receive incentive compensation comparable
to that offered to other members of Employer's senior level management
thereunder.
3.02 Stock Option Plans.
-------------------
If during the term of this Agreement, Employee's employment is terminated and
such election by Employee is permitted under any stock option plan or pursuant
to any determination made prior to subsequent to the execution of this Agreement
by the Employer's Board of Directors or the committee thereof administering any
such plan applicable to Employee, Employee, or his personal representatives or
heirs, shall have the right during a period of one (1) year following the
Termination Date to exercise all options previously granted to Employee under
all Stock Option Plans adopted and maintained by Employer as to all or any part
of the shares covered thereby, including shares as to which such options would
not otherwise then be exercisable.
ARTICLE 4 CERTAIN COVENANTS
- --------- -----------------
4.01 Non-Competition.
----------------
During the term of employment hereunder and, in the event of termination of
this Agreement, for two (2) years thereafter, Employee shall not accept
employment with any
<PAGE>
- 7 -
employer in direct competition with, nor engage in any activities in direct
competition with, the business of Employer. This Section 4.01 shall not be
applicable to any period after a termination of employment if such termination
was effected by Employer. In addition, this Section 4.01 shall not prevent
Employee from acquiring, as a passive investor, up to 5% of the equity of a
competing enterprise.
ARTICLE 5. MISCELLANEOUS
- ---------- -------------
5.01 Assignment.
-----------
This Agreement shall not be assignable by Employee and shall be assignable and
required to be assigned, by Employer, only to a person, firm or corporation
which may become a successor in interest (by purchase of all or substantially
all of the assets of Employer, merger or otherwise) to Employer ("Successor")
and this Agreement shall be fully binding upon, and the assumed obligation of,
such Successor.
5.02 Employee's Attorney Fees.
-------------------------
In the event that Employee is required to institute legal proceedings against
Employer to enforce this Agreement or any term or provision thereof ("Employee's
Suit") and the Employee's suit results in a judgment in whole or in part in
favor of Employee against Employer, then Employer hereby agrees that Employer
shall pay, either directly or by reimbursement to Employee, all legal fees and
costs incurred by Employee in the prosecution of Employee's suit.
5.03 Entire Agreement.
-----------------
This writing represents the entire understanding of the parties and supersedes
any
<PAGE>
- 8 -
and all other understandings between the parties regarding the subject matter
hereof whether oral or written. This Agreement may not be altered nor amended in
any way except by an agreement in writing signed by both Employer and Employee.
5.04 Binding Effect.
---------------
Subject to Section 5.01, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs,
executors and administrators. Any paragraph, sentence, phrase or other
provision of this Agreement which is or becomes in conflict with any applicable
statute, rule or other law shall be deemed, if possible, to be modified or
altered to conform thereto or, if not possible, to be omitted herefrom. If any
provision of this Agreement shall be or become illegal or unenforceable in whole
or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and subsisting.
5.05 Governing Law.
--------------
This Agreement has been negotiated and executed within the State of New
Jersey, and the validity, interpretation and enforcement of this Agreement shall
be governed by the laws of the State of New Jersey.
5.06 Headings.
---------
The headings of Sections in this Agreement are for convenience only and form
no part of this Agreement and shall not affect its interpretation.
5.07 Notice.
-------
Notices authorized or required to be sent pursuant to this Agreement shall be
in writing and sent postage prepaid, by United States Certified or Registered
Mail, return
<PAGE>
- 9 -
receipt requested, directed to the other party at its address as may be
designated by notice from time to time. Notice shall be deemed given on the date
the envelope in which such notice is enclosed, as provided above, is deposited
for mailing in a United Sates mailbox or post office.
5.08 Payment of Taxes.
-----------------
(a) Special Reimbursement. In the event that Employee becomes entitled to
the Severance Compensation, if any payment or benefit paid or payable, or
received or to be received, by or on behalf of the Employee in connection with a
Change in Control whether any such payments or benefits are pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Company, any of its subsidiaries, any Person, or otherwise (the "Total
Payments"), will or would be subject to the excise tax imposed under section
4999 of the Code (the "Excise Tax"), the Company shall pay to the Employee an
additional amount (the "Gross-Up Payment") which amount shall be equal to the
sum of (a) the amount of such Excise Tax imposed (determined without regard to
the Gross-Up Payment), and (b) the product of (i) such Excise Tax (determined
without regard to the Gross-Up Payment), and (ii) the rate of Excise Tax imposed
on "golden parachute" payments under Section 4999 of the code.
(b) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) the Total
Payments shall be treated as "parachute payments" within the meaning of section
280G(b) (2) of the Code, and all "excess parachute payments" within the meaning
of section 280(b) (1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel
<PAGE>
- 10 -
(delivered to Employee) selected by the Company and reasonably acceptable to
Employee, such Total Payments (in whole or in part) (a) do not constitute
parachute payments, including (without limitation) by reason of section 280G (b)
(4) (A) of the Code, (b) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered, within the
meaning of section 280G (b) (4) (B) of the Code, or (c) are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G (d) (3) and (4) of
the Code.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
Employee's employment, Employee shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided in section 1274(b) (2) (B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Employee's employment
(including by reason of any payment, the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by Employee with respect to such excess) at the
time that the amount of such excess is finally determined. The Employee and the
Company shall each reasonably cooperate with the other in connection with any
<PAGE>
- 11 -
administrative or judicial proceedings concerning the existence or amount of any
such subsequent liability for Excise Tax with respect to the Severance
Compensation.
5.09 Waiver of Breach.
-----------------
The waiver of either party of a breach of any provision of this Agreement
shall not operate nor be construed as a waiver of any subsequent breach thereof
or of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ROBERTS PHARMACEUTICAL CORPORATION
By: /s/ John T. Spitznagel
---------------------------------
John T. Spitznagel
President and CEO
By: /s/ Peter M. Rogalin
-------------------------------
Peter M. Rogalin
Employee
<PAGE>
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
This Employment Agreement made as of the 24th day of August 1998
BY AND BETWEEN:
ROBERTS PHARMACEUTICAL CORPORATION, a New Jersey Corporation with offices
located at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey
(hereinafter referred to as "Employer")
AND
ROBERT W. LOY, residing at 6117 Hidden Valley Drive, Doylestown, Pennsylvania
18901 (hereinafter referred to as "Employee"):
W I T N E S S E T H:
WHEREAS, Employee has been employed as Executive Vice President, Operations by
Employer and has made and is expected to continue to make material contributions
to the growth and development of Employer; and
WHEREAS, Employer deems it to be in Employer's best interest to assure
Employee continuous employment by Employer; and
<PAGE>
- 2 -
WHEREAS, it is in the best interest of the Employer that Employee remain
focused on the business of the Company in the event of a change of control of
Employer; and
WHEREAS, Employer deems it to be in Employer's best interests to encourage
Employee to remain employed by Employer during a period of uncertainty
concerning ownership of Employer; and
WHEREAS, Employee is willing to continue, and is desirous of continuing, in
the employment of Employer;
NOW THEREFORE, in consideration of the mutual agreements contained herein and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1. CAPACITY AND DUTIES
- ---------- -------------------
1.01 Employment, Acceptance of Employment.
-------------------------------------
Employer hereby employs Employee and Employee hereby accepts employment by
Employer subject to all the terms and conditions hereafter set forth.
1.02 Capacity.
---------
Employee shall serve as Executive Vice President, Operations.
1.03 Duties.
-------
During the term of this Agreement, Employee shall devote his full attention
and his best efforts to the performance of the customary duties of Executive
Vice President, Operations.
<PAGE>
- 3 -
ARTICLE 2. TERM OF EMPLOYMENT; TERMINATION
- ---------- -------------------------------
2.01 Term.
-----
Unless earlier terminated as hereafter provided, the term of this Agreement
shall commence on the date first above written (the "Effective Date") and shall
continue through August 31, 2001, and thereafter shall automatically renew and
extend for successive one (1) year periods on each anniversary of the Effective
Date.
2.02 Termination.
------------
From and after the date hereof, Employer may terminate this Agreement and
Employee's employment hereunder by giving written notice to Employee
("Termination Notice") specifying the intention to terminate this Agreement, and
the effective date for such termination ("Termination Date").
2.03 Compensation on Termination.
----------------------------
In the event of any termination of this Agreement by Employer pursuant to
section 2.02 for any reason other than Employee's willful misconduct, Employee
shall be entitled to receive, and Employer shall be obligated to pay, all Base
Compensation (as defined in Section 3.01(a) at the annual rate which Employee is
receiving on the date Termination notice is given, which would otherwise be paid
to Employee hereunder, for a period of three (3) years following the Termination
Date together with an amount equal to three (3) times the average annual bonus
and incentive compensation received by Employee for the period beginning August
31, 1992 and ending upon the termination of this Agreement together with an
amount equal to three (3) times any payment Employer
<PAGE>
- 4 -
may have made for the previous year to Employee's 401-K Plan and Pension Plan on
behalf of the Employee (the "Severance Compensation"). For purposes of
calculation hereunder, the bonus and incentive compensation shall be the actual
annual bonus and incentive compensation actually paid to Employee or the annual
sum of $50,000 whichever is greater. Employer shall pay to Employee the
Severance Compensation, at the sole discretion of the Employee, either in a lump
sum or in the same manner and on the same dates as Employee would have received
the Base Compensation had the termination of this Agreement not occurred. In the
event of Employee's death after termination, but before he has received the
entire Severance Compensation hereunder, Employer shall pay to Employee's estate
or designated beneficiary in one lump sum the balance of the Severance
Compensation which would have been due Employee had his death not occurred.
From and after the Termination Date, Employee shall be entitled to receive
medical and insurance benefits previously received by him at the same level and
cost to the Employee as of the Termination Date for a period of three (3) years
after the Termination Date in addition to the Severance Compensation. Employer
shall pay the premiums for Employee and his dependents' health coverage for the
aforesaid three (3) years from the Termination Date under Employer's health
plans which cover the Employer's senior executives or similar plans in the same
proportion of Employer contributions to Employee contributions to said premiums
as in existence on the Termination Date. Payments may, at the discretion of the
Employer, be made by
<PAGE>
- 5 -
continuing the Employee's participation in the Employer's plans as a retiree or
by covering the Employee and his dependents under substitute arrangements.
2.04 Termination After Change of Control.
------------------------------------
In the event of a Change in Control (as hereinafter defined) of Employer,
Employer shall have the right to terminate this Agreement by giving written
notice to Employee specifying the intention to terminate this Agreement and the
effective date for such termination. Any termination pursuant to this Section
2.04 by the Employer shall be governed and controlled by Sections 2.02 and 2.03
hereof. Employee shall have the right to terminate his employment with Company
or Successor following a Change of Control provided that he shall have remained
in the employ of Company or Successor for a period of one (1) year following
such Change of Control. Such right shall be exercisable by Employee only during
the period of thirty (30) days immediately following the end of the one (1) year
period immediately subsequent to a Change of Control. Notwithstanding anything
herein to the contrary, Employee shall have the right to terminate this
Agreement at any time in the event of a Change of Control if: (1) after such
Change of Control, Employee's duties are diminished; or (2) any amounts due to
Employee pursuant to Sections 3.01(a) and 3.02 or the rights granted to Employee
pursuant to Sections 3.01(b) and 3.03 are diminished; or (3) the place of
Employee's employment is relocated more than twenty (20) miles from its location
as of the date of this Agreement or (4) the failure of any Successor (as
hereinafter defined) or of any person, entity or group of persons or entities
acting in concert acquiring thirty percent (30%) or more of the
<PAGE>
- 6 -
outstanding common stock of Employer to assume in a writing delivered to
Employee the obligations of Employer under this Agreement (each of the events
described in subparagraphs 1, 2, 3 and 4 of this Section 2.04 shall hereinafter
be referred to as Good Reason). For purposes of this Article 2, "Change of
Control" shall mean either (i) a merger or consolidation of Employer into
another corporation or a merger of another corporation with or into the
Employer; or (ii) a sale by Employer of substantially all of its assets, which,
in the case of either (i) or (ii) above, results in the shareholders of Employer
(as they existed immediately prior to the effectiveness of the merger,
consolidation or sale) owning less than seventy percent (70%) of the surviving
entity or new corporation or entity that has acquired substantially all of the
Employer's assets after the effectiveness thereof; or (iii) a reorganization of
Employer which results in either Employer becoming a subsidiary of another
corporation or Employer not being the surviving entity (other than a merger or
consolidation (a) with a wholly-owned subsidiary of the Employer; (b) to effect
a change in domicile; or (c) of the Employer into another corporation that does
not result in the shareholders of Employer, as they existed immediately prior to
the effectiveness of such merger or consolidation, owning less than seventy
percent (70%) of the surviving corporation); (iv) the acquisition by any person,
entity or group of persons or entities acting in concert, of thirty percent
(30%) or more of Employer's then issued and outstanding voting securities,
whether acquired in one transaction or a series of transactions; or (v) the
individuals who (x) as of the effective date of this Agreement constitute the
Board of Directors (the "Original Directors"), (y)
<PAGE>
- 7 -
thereafter are elected to the Board of Directors and whose election or
nomination for election to the Board of Directors was approved by a vote of at
least 2/3 of the Original Directors then still in office (such Directors being
called "Additional Original Directors"), or (z) are elected to the Board of
Directors and whose election or nomination for election to the Board of
Directors was approved by a vote of at least 2/3 of the Original Directors and
Additional Original Directors then still in office, cease for any reason to
constitute a majority of the members of the Board of Directors.
2.05 Compensation on Termination After Change of Control.
----------------------------------------------------
In the event of any termination of this Agreement by Employee pursuant to
Section 2.04 hereof, Employee shall be entitled to receive, and Employer shall
be obligated to pay Employee's Severance Compensation (as defined in Section
2.03) payable in accordance with said Section 2.03.
ARTICLE 3. COMPENSATION
- ---------- ------------
3.01(a) Compensation.
-------------
During the term of this Agreement or any extension thereof, and after
termination of this Agreement as provided in Section 2.03, as compensation for
services to the Employer pursuant to this Agreement, the Employer shall pay to
Employee a minimum base salary of Two Hundred Forty Thousand Dollars ($240,000)
per year and the Board of Directors of Employer may, in its sole discretion from
time to time, increase said base salary to be paid to Employee as provided in
this Article 3 (the "Base Compensation"), or
<PAGE>
- 8 -
provide additional compensation to Employee, including but not limited to
incentive compensation based upon the earnings or performance of Employer or
otherwise, in order to recognize and fairly compensate Employee for the value of
his services to Employer.
In addition, Employee shall be entitled to receive all vacation and other
fringe benefits provided by Employer to its employees and officers, including
insurance benefits, which may be established by the Board of Directors of
Employer from time to time. In addition, Employer may provide such other
additional or incentive compensation, benefits or perquisites as its Board of
Directors may from time to time authorize.
3.01(b) Incentive Compensation.
-----------------------
Employer may adopt and maintain a "Management Incentive Compensation Plan."
Should such a plan be adopted by Employer, at all times during the term of this
Agreement, Employee shall be designated by Employer as a participant in such
plan. In the event that, at any time during the term of this Agreement,
Employer shall rescind, discontinue, amend or revise such plan, then Employer
shall include Employee in any revised or amended Incentive Plan or substituted
plan and Employee shall be entitled to receive incentive compensation comparable
to that offered to other members of Employer's senior level management
thereunder.
3.02 Disability Payments.
--------------------
Employer shall pay to Employee all Severance Compensation as prescribed in
Section 2.03 of this Agreement in the event that the Employee shall become
disabled due to injury or sickness. The term "disability" as used in this
Section 3.02 means the
<PAGE>
- 9 -
inability, because of injury or sickness, to perform the substantial and
material duties of the Employee's regular occupation, while under the regular
care of a licensed physician, and while not gainfully employed in any occupation
reasonably consistent with the Employee's education, training and experience.
3.03 Stock Option Plans.
-------------------
If during the term of this Agreement, Employee's employment is terminated and
such election by Employee is permitted under any stock option plan(s) or
pursuant to any determination made prior or subsequent to the execution of this
Agreement by the Employer's Board of Directors or the committee thereof
administering any such plan applicable to Employee, Employee, or his personal
representatives or heirs, shall have the right during a period of one (1) year
following the Termination Date to exercise all options previously granted to
Employee under all Stock Option Plans adopted and maintained by Employer as to
all or any part of the shares covered thereby, including shares as to which such
options would not otherwise then be exercisable.
ARTICLE 4 CERTAIN COVENANTS
- --------- -----------------
4.01 Non-Competition.
----------------
During the term of employment hereunder and, in the event of termination of
this Agreement for any reason other than (a) by Employer for Employee's willful
misconduct or (b) by Employee for other than Good Reason, for two years
thereafter, Employee shall not accept employment with any employer in direct
competition with, nor engage in any
<PAGE>
- 10 -
activities in direct competition with, the business of the Employer. In
addition, this Section 4.01 shall not prevent Employee from acquiring, as a
passive investor, up to 5% of the equity of a competing enterprise or from
serving as a non-executive director of any company.
ARTICLE 5. MISCELLANEOUS
- ---------- -------------
5.01 Assignment.
-----------
This Agreement shall not be assignable by Employee and shall be assignable and
required to be assigned, by Employer, only to a person, firm or corporation
which may become a successor in interest (whether direct or indirect, by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of Employer) to Employer ("Successor") and this Agreement
shall be fully binding upon, and the assumed obligation of, such Successor.
5.02 Employee's Attorney Fees.
-------------------------
In the event that Employee is required to institute legal proceedings against
Employer to enforce this Agreement or any term or provision thereof ("Employee's
Suit") and the Employee's suit results in a judgment in whole or in part in
favor of Employee against Employer, then Employer hereby agrees that Employer
shall pay, either directly or by reimbursement to Employee, all legal fees and
costs incurred by Employee in the prosecution of Employee's suit.
<PAGE>
- 11 -
5.03 Entire Agreement.
-----------------
This writing represents the entire understanding of the parties and supersedes
any and all other understandings between the parties regarding the subject
matter hereof whether oral or written. This Agreement may not be altered nor
amended in any way except by an agreement in writing signed by both Employer and
Employee.
5.04 Binding Effect.
---------------
Subject to Section 5.01, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs,
executors and administrators. Any paragraph, sentence, phrase or other
provision of this Agreement which is or becomes in conflict with any applicable
statute, rule or other law shall be deemed, if possible, to be modified or
altered to conform thereto or, if not possible, to be omitted herefrom. If any
provision of this Agreement shall be or become illegal or unenforceable in whole
or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and subsisting.
5.05 Governing Law.
--------------
This Agreement has been negotiated and executed within the State of New
Jersey, and the validity, interpretation and enforcement of this Agreement shall
be governed by the laws of the State of New Jersey.
5.06 Headings.
---------
The headings of Sections in this Agreement are for convenience only and form
no part of this Agreement and shall not affect its interpretation.
<PAGE>
- 12 -
5.07 Notice.
-------
Notices authorized or required to be sent pursuant to this Agreement shall be
in writing and sent postage prepaid, by United States Certified or Registered
Mail, return receipt requested, directed to the other party at its address as
may be designated by notice from time to time. Notice shall be deemed given on
the date the envelope in which such notice is enclosed, as provided above, is
deposited for mailing in a United Sates mailbox or post office.
5.08 Payment of Taxes.
-----------------
(a) Special Reimbursement. In the event that Employee becomes entitled to
the Severance Compensation Payments; if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Employee in connection
with a Change in Control or the termination of Employee's employment, whether
any such payments or benefits are pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any of its subsidiaries,
any Person, or otherwise (the "Total Payments"), will or would be subject to the
excise tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Employee an additional amount (the "Gross-Up Payment")
which amount shall be equal to the sum of (a) the amount of such Excise Tax
imposed (determined without regard to the Gross-Up Payment), and (b) the product
of (i) such Excise Tax (determined without regard to the Gross-Up Payment), and
(ii) the rate of Excise Tax imposed on "golden parachute" payments under Section
4999 of the Code.
<PAGE>
- 13 -
(b) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) the Total
Payments shall be treated as "parachute payments" within the meaning of section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel (delivered to Employee) selected by the
Company and reasonably acceptable to Employee, such Total Payments (in whole or
in part) (a) do not constitute parachute payments, including (without
limitation) by reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, or (c) are otherwise not subject to the Excise Tax, and (ii) the value of
any non-cash benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
Employee's employment, Employee shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Employee's employment (including
by reason of any payment, the
<PAGE>
- 14 -
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by Employee with
respect to such excess) at the time that the amount of such excess is finally
determined. The Employee and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of any such subsequent liability for Excise
Tax with respect to the Severance Compensation.
5.09 Waiver of Breach.
-----------------
The waiver of either party of a breach of any provision of this Agreement
shall not operate nor be construed as a waiver of any subsequent breach thereof
or of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ROBERTS PHARMACEUTICAL CORPORATION
By: /s/ John T. Spitznagel
---------------------------------
John T. Spitznagel
President and CEO
By: /s/ Robert W. Loy
---------------------------
Robert W. Loy
Employee
<PAGE>
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This Employment Agreement made as of the 24th day of August 1998
BY AND BETWEEN:
ROBERTS PHARMACEUTICAL CORPORATION, a New Jersey Corporation with offices
located at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey
(hereinafter referred to as "Employer")
AND
ANTHONY A. RASCIO, residing at 372 Daniele Drive, Ocean, New Jersey
(hereinafter referred to as "Employee"):
W I T N E S S E T H:
WHEREAS, Employee has been employed as Vice President, Secretary and General
Counsel by Employer and has made and is expected to continue to make material
contributions to the growth and development of Employer; and
WHEREAS, Employer deems it to be in Employer's best interest to assure
Employee continuous employment by Employer; and
<PAGE>
- 2 -
WHEREAS, it is in the best interest of the Employer that Employee remain
focused on the business of the Company in the event of a change of control of
Employer; and
WHEREAS, Employer deems it to be in Employer's best interests to encourage
Employee to remain employed by Employer during a period of uncertainty
concerning ownership of Employer; and
WHEREAS, Employee is willing to continue, and is desirous of continuing, in
the employment of Employer;
NOW THEREFORE, in consideration of the mutual agreements contained herein and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1. CAPACITY AND DUTIES
- ---------- -------------------
1.01 Employment, Acceptance of Employment.
-------------------------------------
Employer hereby employs Employee and Employee hereby accepts employment by
Employer subject to all the terms and conditions hereafter set forth.
1.02 Capacity.
---------
Employee shall serve as Vice President, Secretary and General Counsel.
1.03 Duties.
-------
During the term of this Agreement, Employee shall devote his full attention
and his best efforts to the performance of the customary duties of Vice
President, Secretary and General Counsel.
<PAGE>
- 3 -
ARTICLE 2. TERM OF EMPLOYMENT; TERMINATION
- ---------- -------------------------------
2.01 Term.
-----
Unless earlier terminated as hereafter provided, the term of this Agreement
shall commence on the date first above written (the "Effective Date") and shall
continue through August 31, 2001, and thereafter shall automatically renew and
extend for successive one (1) year periods on each anniversary of the Effective
Date.
2.02 Termination.
------------
From and after the date hereof, Employer may terminate this Agreement and
Employee's employment hereunder by giving written notice to Employee
("Termination Notice") specifying the intention to terminate this Agreement, and
the effective date for such termination ("Termination Date").
2.03 Compensation on Termination.
----------------------------
In the event of any termination of this Agreement by Employer pursuant to
section 2.02 for any reason other than Employee's willful misconduct, Employee
shall be entitled to receive, and Employer shall be obligated to pay, all Base
Compensation (as defined in Section 3.01(a) at the annual rate which Employee is
receiving on the date Termination notice is given, which would otherwise be paid
to Employee hereunder, for a period of three (3) years following the Termination
Date together with an amount equal to three (3) times the average annual bonus
and incentive compensation received by Employee for the period beginning July 1,
1988 and ending upon the termination of this Agreement together with an amount
equal to three (3) times any payment Employer may
<PAGE>
- 4 -
have made for the previous year to Employee's 401-K Plan and Pension Plan on
behalf of the Employee (the "Severance Compensation"). For purposes of
calculation hereunder, the bonus and incentive compensation shall be the actual
annual bonus and incentive compensation actually paid to Employee or the annual
sum of $50,000 whichever is greater. Employer shall pay to Employee the
Severance Compensation, at the sole discretion of the Employee, either in a lump
sum or in the same manner and on the same dates as Employee would have received
the Base Compensation had the termination of this Agreement not occurred. In the
event of Employee's death after termination, but before he has received the
entire Severance Compensation hereunder, Employer shall pay to Employee's estate
or designated beneficiary in one lump sum the balance of the Severance
Compensation which would have been due Employee had his death not occurred.
From and after the Termination Date, Employee shall be entitled to receive
medical and insurance benefits previously received by him at the same level and
cost to the Employee as of the Termination Date for a period of three (3) years
after the Termination Date in addition to the Severance Compensation. Employer
shall pay the premiums for Employee and his dependents' health coverage for the
aforesaid three (3) years from the Termination Date under Employer's health
plans which cover the Employer's senior executives or similar plans in the same
proportion of Employer contributions to Employee contributions to said premiums
as in existence on the Termination Date. Payments may, at the discretion of the
Employer, be made by
<PAGE>
- 5 -
continuing the Employee's participation in the Employer's plans as a retiree or
by covering the Employee and his dependents under substitute arrangements.
2.04 Termination After Change of Control.
------------------------------------
In the event of a Change in Control (as hereinafter defined) of Employer,
Employer shall have the right to terminate this Agreement by giving written
notice to Employee specifying the intention to terminate this Agreement and the
effective date for such termination. Any termination pursuant to this Section
2.04 by the Employer shall be governed and controlled by Sections 2.02 and 2.03
hereof. Employee shall have the right to terminate his employment with Company
or Successor following a Change of Control provided that he shall have remained
in the employ of Company or Successor for a period of one (1) year following
such Change of Control. Such right shall be exercisable by Employee only during
the period of thirty (30) days immediately following the end of the one (1) year
period immediately subsequent to a Change of Control. Notwithstanding anything
herein to the contrary, Employee shall have the right to terminate this
Agreement at any time in the event of a Change of Control if: (1) after such
Change of Control, Employee's duties are diminished; or (2) any amounts due to
Employee pursuant to Sections 3.01(a) and 3.02 or the rights granted to Employee
pursuant to Sections 3.01(b) and 3.03 are diminished; or (3) the place of
Employee's employment is relocated more than twenty (20) miles from its location
as of the date of this Agreement or (4) the failure of any Successor (as
hereinafter defined) or of any person, entity or group of persons or entities
acting in concert acquiring thirty percent (30%) or more of the
<PAGE>
- 6 -
outstanding common stock of Employer to assume in a writing delivered to
Employee the obligations of Employer under this Agreement (each of the events
described in subparagraphs 1, 2, 3 and 4 of this Section 2.04 shall hereinafter
be referred to as Good Reason). For purposes of this Article 2, "Change of
Control" shall mean either (i) a merger or consolidation of Employer into
another corporation or a merger of another corporation with or into the
Employer; or (ii) a sale by Employer of substantially all of its assets, which,
in the case of either (i) or (ii) above, results in the shareholders of Employer
(as they existed immediately prior to the effectiveness of the merger,
consolidation or sale) owning less than seventy percent (70%) of the surviving
entity or new corporation or entity that has acquired substantially all of the
Employer's assets after the effectiveness thereof; or (iii) a reorganization of
Employer which results in either Employer becoming a subsidiary of another
corporation or Employer not being the surviving entity (other than a merger or
consolidation (a) with a wholly-owned subsidiary of the Employer; (b) to effect
a change in domicile; or (c) of the Employer into another corporation that does
not result in the shareholders of Employer, as they existed immediately prior to
the effectiveness of such merger or consolidation, owning less than seventy
percent (70%) of the surviving corporation); (iv) the acquisition by any person,
entity or group of persons or entities acting in concert, of thirty percent
(30%) or more of Employer's then issued and outstanding voting securities,
whether acquired in one transaction or a series of transactions; or (v) the
individuals who (x) as of the effective date of this Agreement constitute the
Board of Directors (the "Original Directors"), (y)
<PAGE>
- 7 -
thereafter are elected to the Board of Directors and whose election or
nomination for election to the Board of Directors was approved by a vote of at
least 2/3 of the Original Directors then still in office (such Directors being
called "Additional Original Directors"), or (z) are elected to the Board of
Directors and whose election or nomination for election to the Board of
Directors was approved by a vote of at least 2/3 of the Original Directors and
Additional Original Directors then still in office, cease for any reason to
constitute a majority of the members of the Board of Directors.
2.05 Compensation on Termination After Change of Control.
----------------------------------------------------
In the event of any termination of this Agreement by Employee pursuant to
Section 2.04 hereof, Employee shall be entitled to receive, and Employer shall
be obligated to pay Employee's Severance Compensation (as defined in Section
2.03) payable in accordance with said Section 2.03.
ARTICLE 3. COMPENSATION
- ---------- ------------
3.01(a) Compensation.
-------------
During the term of this Agreement or any extension thereof, and after
termination of this Agreement as provided in Section 2.03, as compensation for
services to the Employer pursuant to this Agreement, the Employer shall pay to
Employee a minimum base salary of One Hundred Sixty Thousand Dollars ($160,000)
per year and the Board of Directors of Employer may, in its sole discretion from
time to time, increase said base salary to be paid to Employee as provided in
this Article 3 (the "Base Compensation"), or
<PAGE>
- 8 -
provide additional compensation to Employee, including but not limited to
incentive compensation based upon the earnings or performance of Employer or
otherwise, in order to recognize and fairly compensate Employee for the value of
his services to Employer.
In addition, Employee shall be entitled to receive all vacation and other
fringe benefits provided by Employer to its employees and officers, including
insurance benefits, which may be established by the Board of Directors of
Employer from time to time. In addition, Employer may provide such other
additional or incentive compensation, benefits or perquisites as its Board of
Directors may from time to time authorize.
3.01(b) Incentive Compensation.
-----------------------
Employer may adopt and maintain a "Management Incentive Compensation Plan."
Should such a plan be adopted by Employer, at all times during the term of this
Agreement, Employee shall be designated by Employer as a participant in such
plan. In the event that, at any time during the term of this Agreement,
Employer shall rescind, discontinue, amend or revise such plan, then Employer
shall include Employee in any revised or amended Incentive Plan or substituted
plan and Employee shall be entitled to receive incentive compensation comparable
to that offered to other members of Employer's senior level management
thereunder.
3.02 Disability Payments.
--------------------
Employer shall pay to Employee all Severance Compensation as prescribed in
Section 2.03 of this Agreement in the event that the Employee shall become
disabled due to injury or sickness. The term "disability" as used in this
Section 3.02 means the
<PAGE>
- 9 -
inability, because of injury or sickness, to perform the substantial and
material duties of the Employee's regular occupation, while under the regular
care of a licensed physician, and while not gainfully employed in any occupation
reasonably consistent with the Employee's education, training and experience.
3.03 Stock Option Plans.
-------------------
If during the term of this Agreement, Employee's employment is terminated and
such election by Employee is permitted under any stock option plan(s) or
pursuant to any determination made prior or subsequent to the execution of this
Agreement by the Employer's Board of Directors or the committee thereof
administering any such plan applicable to Employee, Employee, or his personal
representatives or heirs, shall have the right during a period of one (1) year
following the Termination Date to exercise all options previously granted to
Employee under all Stock Option Plans adopted and maintained by Employer as to
all or any part of the shares covered thereby, including shares as to which such
options would not otherwise then be exercisable.
ARTICLE 4 CERTAIN COVENANTS
- --------- -----------------
4.01 Non-Competition.
----------------
During the term of employment hereunder and, in the event of termination of
this Agreement for any reason other than (a) by Employer for Employee's willful
misconduct or (b) by Employee for other than Good Reason, for two years
thereafter, Employee shall not accept employment with any employer in direct
competition with, nor engage in any
<PAGE>
- 10 -
activities in direct competition with, the business of the Employer. In
addition, this Section 4.01 shall not prevent Employee from acquiring, as a
passive investor, up to 5% of the equity of a competing enterprise or from
serving as a non-executive director of any company.
ARTICLE 5. MISCELLANEOUS
- ---------- -------------
5.01 Assignment.
-----------
This Agreement shall not be assignable by Employee and shall be assignable and
required to be assigned, by Employer, only to a person, firm or corporation
which may become a successor in interest (whether direct or indirect, by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of Employer) to Employer ("Successor") and this Agreement
shall be fully binding upon, and the assumed obligation of, such Successor.
5.02 Employee's Attorney Fees.
-------------------------
In the event that Employee is required to institute legal proceedings against
Employer to enforce this Agreement or any term or provision thereof ("Employee's
Suit") and the Employee's suit results in a judgment in whole or in part in
favor of Employee against Employer, then Employer hereby agrees that Employer
shall pay, either directly or by reimbursement to Employee, all legal fees and
costs incurred by Employee in the prosecution of Employee's suit.
<PAGE>
- 11 -
5.03 Entire Agreement.
-----------------
This writing represents the entire understanding of the parties and supersedes
any and all other understandings between the parties regarding the subject
matter hereof whether oral or written. This Agreement may not be altered nor
amended in any way except by an agreement in writing signed by both Employer and
Employee.
5.04 Binding Effect.
---------------
Subject to Section 5.01, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs,
executors and administrators. Any paragraph, sentence, phrase or other
provision of this Agreement which is or becomes in conflict with any applicable
statute, rule or other law shall be deemed, if possible, to be modified or
altered to conform thereto or, if not possible, to be omitted herefrom. If any
provision of this Agreement shall be or become illegal or unenforceable in whole
or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and subsisting.
5.05 Governing Law.
--------------
This Agreement has been negotiated and executed within the State of New
Jersey, and the validity, interpretation and enforcement of this Agreement shall
be governed by the laws of the State of New Jersey.
5.06 Headings.
---------
The headings of Sections in this Agreement are for convenience only and form
no part of this Agreement and shall not affect its interpretation.
<PAGE>
- 12 -
5.07 Notice.
-------
Notices authorized or required to be sent pursuant to this Agreement shall be
in writing and sent postage prepaid, by United States Certified or Registered
Mail, return receipt requested, directed to the other party at its address as
may be designated by notice from time to time. Notice shall be deemed given on
the date the envelope in which such notice is enclosed, as provided above, is
deposited for mailing in a United Sates mailbox or post office.
5.08 Payment of Taxes.
-----------------
(a) Special Reimbursement. In the event that Employee becomes entitled to
the Severance Compensation Payments; if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Employee in connection
with a Change in Control or the termination of Employee's employment, whether
any such payments or benefits are pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any of its subsidiaries,
any Person, or otherwise (the "Total Payments"), will or would be subject to the
excise tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Employee an additional amount (the "Gross-Up Payment")
which amount shall be equal to the sum of (a) the amount of such Excise Tax
imposed (determined without regard to the Gross-Up Payment), and (b) the product
of (i) such Excise Tax (determined without regard to the Gross-Up Payment), and
(ii) the rate of Excise Tax imposed on "golden parachute" payments under Section
4999 of the Code.
<PAGE>
- 13 -
(b) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) the Total
Payments shall be treated as "parachute payments" within the meaning of section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel (delivered to Employee) selected by the
Company and reasonably acceptable to Employee, such Total Payments (in whole or
in part) (a) do not constitute parachute payments, including (without
limitation) by reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, or (c) are otherwise not subject to the Excise Tax, and (ii) the value of
any non-cash benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
Employee's employment, Employee shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Employee's employment (including
by reason of any payment, the
<PAGE>
- 14 -
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by Employee with
respect to such excess) at the time that the amount of such excess is finally
determined. The Employee and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of any such subsequent liability for Excise
Tax with respect to the Severance Compensation.
5.09 Waiver of Breach.
-----------------
The waiver of either party of a breach of any provision of this Agreement
shall not operate nor be construed as a waiver of any subsequent breach thereof
or of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ROBERTS PHARMACEUTICAL CORPORATION
By: /s/ John T. Spitznagel
----------------------------------
John T. Spitznagel
President and CEO
By: /s/ Anthony A. Rascio
--------------------------------
Anthony A. Rascio
Employee
<PAGE>
EXHIBIT 10.86
ROBERTS PHARMACEUTICAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE JANUARY 1, 1998
<PAGE>
Roberts Pharmaceutical Corporation
Supplemental Executive Retirement Plan
Preamble
- --------
This is the Roberts Pharmaceutical Corporation Supplemental Executive Retirement
Plan (the "Plan"), which Roberts Pharmaceutical Corporation (the "Employer") has
adopted effective January 1, 1998, for the benefit of its executives. The Plan
has three purposes: (1) to provide the designated executives with a target
level of retirement benefits to supplement retirement benefits available to them
from other sources, including the qualified retirement plan(s) that are now or
may in the future be maintained by the Employer; (2) to provide an incentive to
the designated executives to perform at high levels; and (3) to encourage the
designated executives to remain in the employ of the Employer.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.....................................................4
ARTICLE II. PARTICIPATION..................................................7
ARTICLE III. RETIREMENT BENEFITS...........................................9
ARTICLE IV. VESTING.......................................................11
ARTICLE V. PAYMENT OF BENEFITS............................................12
ARTICLE VI. ADMINISTRATION................................................14
ARTICLE VII. MISCELLANEOUS................................................16
APPENDIX A. PLAN PARTICIPANTS.............................................18
<PAGE>
ARTICLE I. DEFINITIONS
When used herein, the following shall have the meanings below unless the
context clearly indicates otherwise:
1.1 "Accrued Benefit" means the accrued benefit of a Participant at the
---------------
first of any month expressed in terms of an annual single life annuity payable
at or after his Normal Retirement Date, determined under Section 3.1 based upon
the Participant's Years of Credited Service. This definition describes the
benefit that a Participant has earned under this plan at any point in time.
1.2 "Actuarial Equivalent" means the equivalent actuarial value of an
--------------------
annual single life annuity, determined by the Administrator based upon the
advice of the Plan's actuary. This definition allows a Participant's benefit to
be converted from one form of payment to another or from one commencement date
to another without changing the total value of the benefit.
1.3 "Administrator" means the committee appointed by Roberts
-------------
Pharmaceutical Corporation to administer this Plan.
1.4 "Annual Incentive" means the annual cash award(s) that may be paid
----------------
to the executive from the Management Incentive Compensation Plan or any
successor or replacement plan plus any other bonus or incentive arrangement, but
excluding any long term incentive arrangements or programs. For purposes of
calculation hereunder, Annual Incentive shall be the amount of the annual cash
award as aforesaid actually paid or the sum of $50,000 whichever is greater. For
purposes of Plan Compensation, the Annual Incentive will be counted as
Compensation for the last month of the calendar year for which it is earned.
1.5 "Annuity Starting Date" means the first day of the first month for
---------------------
which an amount is payable as an annuity or any other form of benefit payment.
1.6 "Base Salary" means a Participant's annual salary.
-----------
1.7 "Beneficiary" means the Participant's spouse or other person
-----------
designated by the Participant. If the Participant has no spouse and makes no
effective Beneficiary designation, then the Participant's Beneficiary shall be
the Participant's estate.
1.8 "Board of Directors" or "Board" means the Board of Directors of the
-----------------------------
Employer.
1.9 "Cause" means that Participant has engaged in an act of willful
-----
misconduct during the course of his employment with the Employer in the
reasonable determination of the Board, including, but not limited to, having:
a) committed an intentional act of fraud, embezzlement, or theft in
connection with Participant's duties or in the course of his
employment with Employer;
4
<PAGE>
b) caused intentional wrongful damage to property of Employer in the
course of his employment with Employer; or
c) engaged in any gross misconduct in the course of his employment
with Employer;
provided, that with respect to any of the acts described in the preceding
subparagraphs (a) through (c), such act shall have been materially harmful to
Employer. For purposes of this Plan, an act or omission on the part of the
Participant shall be deemed "intentional" if it was not due primarily to an
error in judgment or negligence and was done by Participant not in good faith
and without reasonable belief that the act or omission was in the best interests
of Employer.
1.10 "Change of Control" means any of the following events:
-----------------
a) Any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended), is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, as amended,
except that a person shall be deemed to have `beneficial
ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of 30% or
more of the total voting power of the Employer's outstanding
capital stock;
b) The individuals who (i) as of the effective date of this Plan
constitute the Board of Directors (the "Original Directors"),
(ii) thereafter are elected to the Board of Directors and whose
election or nomination for election to the Board of Directors was
approved by a vote of at least 2/3 of the Original Directors then
still in office (such Directors being called "Additional Original
Directors"), or (iii) are elected to the Board of Directors and
whose election or nomination for election to the Board of
Directors was approved by a vote of at least 2/3 of the Original
Directors and Additional Original Directors then still in office,
cease for any reason to constitute a majority of the members of
the Board of Directors;
c) The Employer shall consummate a merger, consolidation,
recapitalization, or reorganization of the Employer, other than
any such transaction which results in holders of outstanding
voting securities of the Employer immediately prior to the
transaction having beneficial ownership of at least 70% of the
total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction,
with the voting power of each such continuing holder relative to
such other continuing holders being not altered substantially in
the transaction; or
d) The Employer shall consummate a plan of complete liquidation of
the Employer or an agreement for the sale, assignment,
conveyance, transfer, lease or other disposition by the Employer
of all or substantially all of its assets to
5
<PAGE>
any person, or group of related persons, in one or a series of
related transactions.
1.11 "Code" means the Internal Revenue Code of 1986, as amended.
----
1.12 "Compensation" means a Participant's Base Salary and Annual Incentive
------------
for services rendered to the Employer for the applicable period. Compensation
shall include amounts that would be paid to the Participant during the Plan Year
but for the Participant's election under a cash or deferred arrangement such as
described in Section 401(k) of the Code or a cafeteria plan described in Section
125 of the Code. Except as expressly provided in the preceding sentence,
Compensation shall not include Employer contributions to this or any other plan
for the benefit of its employees.
1.13 "Effective Date" means January 1, 1998.
--------------
1.14 "Employer" means Roberts Pharmaceutical Corporation, any subsidiary
--------
and any successor organization.
1.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
1.16 "Final Average Compensation" means the greater of (i) the
--------------------------
Participant's highest average annual Compensation during any 36 consecutive
months during the Participant's final 120 months of employment or (ii) the
Participant's highest average annual Compensation for any three calendar years
during the Participant's final 120 months of employment.
1.17 "Good Reason" means the occurrence of one or more of the following
-----------
events following a Change of Control:
(a) Any reduction, without Participant's consent, in the authorities,
powers, functions, responsibilities, titles or duties attached to
Participant's position with the Employer;
(b) Any reduction in Participant's Base Salary from the level of Base
Salary in effect prior to the occurrence of the Change of Control;
(c) Any change in the location of Participant's place of employment of
more than twenty (20) miles from its location as of the date hereof.
1.18 "Normal Retirement Date" means the first day of the month coincident
----------------------
with or next following the date a Participant reaches age 60 and completes three
Years of Credited Service.
1.19 "Participant" means an individual employed by the Employer who
-----------
becomes a Participant as described in Article II.
6
<PAGE>
1.20 "Plan" means the Roberts Pharmaceutical Corporation Supplemental
----
Executive Retirement Plan set forth herein.
1.21 "Plan Year" means the calendar year.
---------
1.22 "Savings Plan" means the Roberts Pharmaceutical Employees Savings
------------
and Protection Plan.
1.23 "Supplemental Retirement Benefit" means the benefits payable to the
-------------------------------
Participant in accordance with the provision of this Plan.
1.24 "Total and Permanent Disability" means the inability of the
------------------------------
Participant, because of injury or sickness, to perform the substantial and
material duties of the Participant's regular occupation, while under the regular
care of a licensed physician, and while not gainfully employed in any occupation
reasonably consistent with the Participant's education, training and experience,
and where such inability is expected to continue indefinitely or for a period of
not less than six months.
1.25 "Year of Credited Service" means each 12 consecutive month period
------------------------
beginning on the Participant's employment commencement date and each anniversary
thereof during which the Participant is employed by the Employer. However, for
the Plan Year during which the Participant retires, the Participant will receive
credit for 1/12th of a Year of Credited Service for each month of employment.
For purposes of the occurrence of a Change in Control, a Participant's Years of
Credited Service shall be deemed to be equal to the greater of (i), ten (10) and
(ii), the Participant's Years of Credited Service prior to the Change of
Control. In the event of termination by the Participant with Good Reason, a
Participant's Years of Credited Service shall be deemed to be equal to the
greater of (i) ten (10) and (ii) the Participant's actual Years of Credited
Service.
7
<PAGE>
ARTICLE II. PARTICIPATION
2.1 Participation Eligibility. An executive who is employed by the
--------------------------
Employer shall become a Participant only upon designation by the Board.
Participants as of the Effective Date are listed in Appendix A. A Participant
shall remain a Participant until the Participant's employment with the Employer
terminates and thereafter until the Participant has received all benefits to
which he is entitled under the Plan.
8
<PAGE>
ARTICLE III. RETIREMENT BENEFITS
3.1 Normal Retirement Benefit. Upon retirement after reaching his Normal
-------------------------
Retirement Date, a Participant shall be entitled to an Accrued Benefit payable
beginning on the first of the month coincident with or next following such date
equal to:
3.1.1 65% of his Final Average Compensation, adjusted for less than 10
Years of Service as described below, and reduced by the sum of "A" plus "B",
where:
"A" equals the Actuarial Equivalent of the Participant's account
balance in the Savings Plan accumulated from Employer contributions,
expressed in terms of an annual single life annuity; and
"B" equals 50% the Participant's annual Social Security or foreign
equivalent benefit payable at the Participant's actual retirement date
or, if the Participant's actual retirement date precedes the earliest
retirement date for commencement of Social Security or foreign
equivalent benefits, the annual Social Security or foreign equivalent
benefit payable at the earliest retirement date for commencement of
Social Security or foreign equivalent benefits.
If the Participant has been credited with less than 10 Years of Credited Service
when he retires, the amount calculated under this Section 3.1.1 shall be
multiplied by a fraction, the numerator of which is the Participant's Years of
Credited Service, and the denominator of which is 10.
Upon the occurrence of a Change of Control, the Participant shall be credited
with 10 Years of Credited Service when he retires or his employment terminates
for any reason.
3.2 Late Retirement Benefit. The late retirement benefit payable to a
-----------------------
Participant who retires after his Normal Retirement Date shall equal his Accrued
Benefit determined under Section 3.1, based upon his Final Average Compensation
and Years of Credited Service determined at his actual retirement date.
3.3 Disability or Death Benefit. The benefit payable either to a Participant
---------------------------
who incurs a Total and Permanent Disability or a Beneficiary of a Participant
who dies shall be the Actuarial Equivalent of his Accrued Benefit based on his
Years of Credited Service up to the date he terminates employment due to such
disability or death, without regard to age at such termination of employment.
3.4 Deferred Vested Benefit. Except as specified in paragraph 4.2, "Vesting
-----------------------
Based on Total and Permanent Disability or Death", paragraph 4.4, "Vesting Based
on Occurrence of Certain Events" and paragraph 4.5, "Vesting Based on
Involuntary Termination Without Cause", if a Participant terminates employment
after completing three Years of Credited Service, but prior to his Normal
Retirement Date, he shall not be entitled to any benefit without specific
9
<PAGE>
Board approval. Upon the occurrence of a Change of Control, upon Plan
Termination, or upon Board approval, each affected Participant shall be vested
in and entitled to his Accrued Benefit, determined at the earlier of his
termination of employment or Plan Termination, without regard to his age at
termination of employment, upon reaching age 50. Further, upon involuntary
termination of a Participant without Cause, where such Participant has at least
three Years of Credited Service, he shall be vested in and entitled to his
Accrued Benefit, determined at his termination of employment, without regard to
his age at termination of employment, upon reaching his Normal Retirement Date.
Finally, upon termination by a Participant with Good Reason, he shall be vested
in and entitled to his Accrued Benefit, determined at his termination of
employment, without regard to his age at termination of employment, upon
reaching his Normal Retirement Date.
10
<PAGE>
ARTICLE IV. VESTING
4.1 Vesting Based on Age and Years of Credited Service. A Participant's
--------------------------------------------------
interest in his Accrued Benefit shall become 100% vested upon the Participant's
completion of three Years of Credited Service and attainment of age 60.
4.2 Vesting Based on Total and Permanent Disability or Death. A
--------------------------------------------------------
Participant's interest in his Accrued Benefit shall become 100% vested if, while
employed by the Employer, he sustains a Total and Permanent Disability,
regardless of his age at such Total and Permanent Disability. A Participant's
interest in his Accrued Benefit shall become 100% vested if, while employed by
the Employer, he dies, regardless of his age at death.
4.3 Forfeiture. Except as specified in paragraph 4.4, "Vesting Based on
----------
Occurrence of Certain Events" and paragraph 4.5, "Vesting Based on Involuntary
Termination Without Cause", if a Participant's employment is terminated before
the Participant (i) completes three Years of Credited Service and attains age
60, (ii) dies, or (iii) sustains a Total and Permanent Disability, the
Participant shall forfeit his Accrued Benefit.
4.4 Vesting Based on Occurrence of Certain Events. Upon the occurrence of a
---------------------------------------------
Change of Control, termination by a Participant with Good Reason or a Plan
Termination, each affected Plan Participant will become immediately vested in
his Accrued Benefit, regardless of his age or Years of Credited Service.
4.5 Vesting Based on Involuntary Termination Without Cause. Upon the
------------------------------------------------------
occurrence of an involuntary termination of a Participant without Cause, such
Plan Participant, if he has completed at least three Years of Credited Service,
will become immediately vested in his Accrued Benefit, regardless of his age.
For purposes of this Plan, involuntary termination of a Participant without
Cause shall include, but shall not be limited to, (i) any reduction, without
Participant's consent, in the authorities, powers, functions, responsibilities,
titles or duties attached to Participant's position with the Employer; (ii) any
reduction in Participant's Base Salary from the level of Base Salary in effect
prior to such reduction; (iii) any change in the location of Participant's
place of employment of more than twenty (20) miles from its location as of the
date hereof; and (iv) the failure of any successor in interest (whether direct
or indirect by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Employer) to Employer or any
person acquiring thirty percent (30%) or more of the outstanding common stock of
Employer to assume in a writing delivered to Participant the obligations of
Employer pursuant to this Plan.
11
<PAGE>
ARTICLE V. PAYMENT OF BENEFITS
5.1 Payment of Benefits upon Normal Retirement. Upon retirement on or after
------------------------------------------
the Participant reaches his Normal Retirement Date, a Participant shall be
entitled to receive a Supplemental Retirement Benefit equal to the Actuarial
Equivalent of his Accrued Benefit, determined as of his retirement date. Such
benefit shall be paid or shall begin to be paid as soon as administratively
practicable following the Participant's termination of employment.
5.2 Election of Benefit Form. Before the end of the Participant's taxable
------------------------
year prior to the Participant's anticipated Annuity Starting Date, but not later
than six months before the anticipated Annuity Starting Date, a Participant
shall select a form of payment for his Supplemental Retirement Benefit. He
shall be entitled to have the Actuarial Equivalent of his Supplemental
Retirement Benefit payable in any annuity form of benefit or a cash lump sum.
The payment of this lump sum may also be deferred for payment at a later date.
Any election shall be in writing and made on the form prescribed by the
Administrator. Payment shall be made in accordance with the Participant's
election.
5.3 Death Benefits. As soon as administratively practicable following a
--------------
Participant's death before his Annuity Starting Date, the Participant's
Beneficiary shall be paid at such Beneficiary's option, a monthly benefit for
life or a cash lump sum, equal to the Actuarial Equivalent of the Participant's
Accrued Benefit. If the Participant dies after his Annuity Starting Date, a
death benefit shall be payable to his Beneficiary in accordance with the form of
benefit elected by the Participant effective as of his Annuity Starting Date.
Alternatively, at the sole discretion of the Beneficiary, the Participant's
Beneficiary may be paid in a single lump sum.
5.4 Disability Benefit. As soon as administratively practicable following
------------------
the Administrator's determination that a Participant has suffered a Total and
Permanent Disability, the Participant shall be paid at Participant's option a
monthly benefit for life or a cash lump sum in an amount equal to the Actuarial
Equivalent of his Accrued Benefit.
5.5 Vested Terminated Participants. With the exceptions of Board approval,
------------------------------
the occurrence of a Change of Control, Plan Termination, termination by a
Participant with Good Reason or involuntary termination without Cause, a
Participant who terminates employment with the Employer before his Normal
Retirement Date shall forfeit his Accrued Benefit. In the case of (i) a Change
of Control, (ii) a Plan Termination or (iii) termination by a Participant with
Good Reason, each affected Participant shall be entitled to receive a
Supplemental Retirement Benefit equal to the Actuarial Equivalent of his Accrued
Benefit, determined as of the earlier of his termination of employment or Plan
Termination, as applicable. In the case of a Participant who has at least 3
Years of Credited Service at his termination of employment and one of the
following events has occurred: (i) Board Approval, or (ii) involuntary
termination without Cause, each affected Participant shall be entitled to
receive a Supplemental Retirement Benefit equal to the Actuarial Equivalent of
his Accrued Benefit, determined as of his termination of
12
<PAGE>
employment. Such benefit shall be paid or shall begin to be paid beginning on
the date the Participant reaches age 60.
13
<PAGE>
ARTICLE VI. ADMINISTRATION
6.1 Administration. The Administrator shall have the authority to interpret
--------------
the Plan and to determine the amount and time of payment of benefits and other
issues arising in the administration of the Plan consistent with the terms of
the Plan. Any construction or interpretation of the Plan and any determination
of fact in administering the Plan made in good faith by the Administrator shall
be final and conclusive for all Plan purposes.
6.2 Claims Procedure.
----------------
6.2.1 Initial Determination. Upon presentation to the Administrator
---------------------
of a claim for benefits under the Plan, the Administrator shall make a
determination of the validity thereof. If the determination is adverse to the
claimant, the Administrator shall furnish to the claimant within 90 days after
the receipt of the claim a written notice setting forth the following:
a) the specific reason or reasons for the denial;
b) specific references to pertinent provisions of the Plan
on which the denial is based;
c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
d) appropriate information as to the steps to be taken if
the claimant wishes to submit his or her claim for
review.
6.2.2 Appeal Procedure. In the event of a denial of a claim, the
----------------
claimant or his or her duly authorized representative may appeal such denial to
the Administrator for a full and fair review of the adverse determination. The
claimant's request for review must be in writing and made to the Administrator
within 60 days after receipt by claimant of the written notification described
in Section 6.2.1; provided, however, that such 60-day period shall be extended
if circumstances so warrant. The claimant or his or her duly authorized
representative may submit issues and comments in writing which shall be given
full consideration by the Administrator in its review. The Administrator may, in
its sole discretion, conduct a hearing. A request for a hearing made by the
claimant will be given full consideration. At such hearing, the claimant shall
be entitled to appear and present evidence and be represented by counsel.
6.2.3 Decision on Appeal. A decision on a request for review shall
------------------
be made by the Administrator not later than 60 days after receipt of the
request; provided, however, in the event of a hearing or other special
circumstances, such decision shall be made not later than 120 days after receipt
of such request. If it is necessary to extend the period of time for making a
decision beyond 60 days after the receipt of the request, the claimant shall be
notified in writing of the extension of time prior to the beginning of such
extension. The Administrator's decision
14
<PAGE>
on review shall state in writing the specific reasons and references to the Plan
provisions on which it is based. Such decision shall be promptly provided to the
claimant.
6.3 Legal Fees. In the event that a Participant's denial of a claim
----------
for benefits leads to the Participant seeking legal remedies, and such legal
remedies result in a reward of the denied claim in whole or in part, the
Employer shall promptly reimburse the Participant for all reasonable legal fees
and related expenses.
15
<PAGE>
ARTICLE VII. MISCELLANEOUS
7.1 No Effect on Employment Rights. Nothing contained herein will confer
------------------------------
upon any Participant the right to be retained in the service of the Employer nor
limit the right of the Employer to discharge or otherwise deal with any
Participant without regard to the existence of the Plan.
7.2 Funding. The Employer shall establish a grantor trust for the purpose of
-------
funding Supplemental Retirement Benefits. The Employer may make contributions
to the trust from time to time. At a minimum, the Employer shall make annual
contributions to the trust equal to the amount expensed by the Employer for
accounting purposes for the Plan, adjusted for earnings in the trust, as
determined by the Plan's actuarial consultants. Upon the occurrence of a Change
of Control or Plan Termination, the Employer will immediately accelerate the
funding such that the trust assets will be sufficient to pay all Accrued
Benefits as of the Change of Control or Plan Termination. The trust shall
conform to the terms of the model trust provided by the Internal Revenue Service
as described in Revenue Procedure 92-64. Notwithstanding the establishment of
such trust, it is the intention of the Employer and the Participants that the
Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.
The Plan constitutes a promise by the Employer to pay benefits in the future.
To the extent that any Participant or any other person acquires a right to
receive benefits under this Plan, such right shall be no greater than the right
of any unsecured general creditor of the Employer.
7.3 Spendthrift Provisions. No benefit payable under the Plan shall be
----------------------
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge prior to actual receipt thereof by the payee; and
any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge prior to such receipt shall be void; and the Employer shall not be
liable in any manner for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to any benefit under the Plan.
7.4 Governing Law. The Plan is established under and will be construed
-------------
according to the laws of the State of New Jersey, to the extent that such laws
are not preempted by ERISA and valid regulations promulgated thereunder.
7.5 Incapacity of Recipient. In the event a Participant is declared
------------------------
incompetent and a conservator or other person legally charged with the care of
the person or the estate of such Participant is appointed, any benefits under
the Plan to which such Participant is entitled shall be paid to the conservator
or other person legally charged with the care of such Participant. Except as
provided in the preceding sentence, should the Administrator, in its discretion,
determine that a Participant is unable to manage his or her personal affairs,
the Administrator may make distributions to any person for the benefit of such
Participant, provided the Administrator makes a reasonable good faith judgment
that such person shall expend the funds so distributed for the benefit of such
Participant.
16
<PAGE>
7.6 Amendment or Termination. The Employer reserves the right to amend or
------------------------
terminate the Plan by or pursuant to action of the Board of Directors when, in
the sole opinion of the Employer, an amendment or termination is advisable. Any
amendment or termination shall be made pursuant to a resolution of the Board of
Directors and shall be effective as of the date of the resolution or as
specified therein. No amendment or termination of the Plan shall adversely
affect the rights of any Participant under the Plan.
7.7 Withholding. The Employer reserves the right, notwithstanding any other
-----------
provision of the Plan, to withhold applicable federal, state and local taxes
from payments under the Plan.
7.8 Construction. The masculine gender includes the feminine and the
------------
singular includes the plural, unless the context clearly indicates otherwise.
To record its adoption of the Plan, Roberts Pharmaceutical Corporation has
caused its authorized officers to affix its corporate name and seal this 3rd day
of June, 1998.
[CORPORATE SEAL] Roberts Pharmaceutical Corporation
- --------------------------- ----------------------------------
17
<PAGE>
APPENDIX A. PLAN PARTICIPANTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Participant Date of Hire Date of Participation
- ---------------------------------------------------------------------------------
<S> <C> <C>
Louis Berardi 11/3/97 1/1/98
- ---------------------------------------------------------------------------------
Robert Loy 8/31/92 1/1/98
- ---------------------------------------------------------------------------------
John Morris 3/13/89 1/1/98
- ---------------------------------------------------------------------------------
Anthony Rascio 1/19/87 1/1/98
- ---------------------------------------------------------------------------------
Peter Rogalin 2/5/96 1/1/98
- ---------------------------------------------------------------------------------
John Spitznagel 3/4/96 1/1/98
- ---------------------------------------------------------------------------------
David Tierney 4/8/97 1/1/98
- ---------------------------------------------------------------------------------
Robert Vukovich 1/1/83 1/1/98
- ---------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
EXHIBIT 10.87
MANUFACTURING SUPPLY AGREEMENT
This MANUFACTURING SUPPLY AGREEMENT (the "Agreement") is entered into as of
March 24, 1998, by and between Hydro Med Sciences ("Hydro Med"), a division of
GP Strategies Corp., a Delaware corporation, and Roberts Laboratories Inc., a
New Jersey corporation ("Roberts").
RECITALS
WHEREAS, Hydro Med has developed a sealed, hollow cartridge containing the
luteinizing hormone releasing hormone (LHRH), histrelin, for the subcutaneous
release of said hormone, which may be useful in the treatment of human prostatic
carcinoma and other indications (the "Product") and Roberts has agreed to
license from Hydro Med certain rights of Hydro Med to the Product and to pursue
development and commercialization of the Product pursuant to the terms of a
License Agreement, dated as of the date hereof (the "License Agreement"),
between Hydro Med and Roberts; and
WHEREAS, subject to the terms and conditions set forth in this Agreement,
Roberts wishes to have Hydro Med manufacture the Product at its manufacturing
facility in Cranbury, New Jersey and Hydro Med has agreed to manufacture such
Product for Roberts at such facility.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
"AFFILIATES" shall mean, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with, such other
Person. For purposes hereof, the term "controlled" (including the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the direct or indirect ability or power to direct or cause
the direction of management policies of such Person, whether through the
ownership of voting securities or otherwise.
"AGREEMENT" shall mean this Manufacturing Supply Agreement, as the same may
hereafter be amended, modified or restated, including all of the exhibits
annexed hereto.
"ANNUAL FORECAST" shall have the meaning ascribed to such term in Section
2.2 hereof.
<PAGE>
"APPLICABLE LAWS" shall mean all applicable United States federal, state
and local laws, ordinances, rules and regulations of any kind whatsoever,
including, without limitation, the United States Federal Food, Drug and Cosmetic
Act.
"BUSINESS DAY" shall mean a day on which banks are open for the transaction
of business required for this Agreement in the State of New Jersey.
"CAPITAL IMPROVEMENTS" shall mean items of any nature incorporated into the
Plant which are not expensed but rather are capitalized in accordance with Hydro
Med's policies.
"DEFECT" shall mean one or more defects or characteristics in any Product
which causes the Product to fail to conform to the Specifications.
"DEFECTIVE PRODUCT" shall mean a Product containing one or more Defects
which causes the Product to fail to conform to the labeled indications for its
use which have been established by the FDA.
"DISPUTED PRODUCT" shall have the meaning ascribed to such term in Section
4.3(b) hereof.
"DISPUTED ROBERTS MATERIALS" shall have the meaning ascribed to such term
in Section 5.4 hereof.
"FDA" shall mean the United States Food and Drug Administration.
"FORCE MAJEURE CONDITIONS" shall have the meaning ascribed to such term in
Section 9.13 hereof.
"HYDRO MED GROUP" shall have the meaning ascribed to such term in Section
5.5 hereof.
"HYDRO MED PRODUCT DEFECT" shall mean any Defect in any Product which is
attributable to Hydro Med, rather than to Roberts, including, without
limitation, in the design, workmanship, in the manufacture of, in the Materials
(other than in the Roberts Materials) comprising, or in the packaging of, any
Product, and which causes the Product to be a Defective Product.
"LICENSING AGREEMENT" shall have the meaning ascribed to such term in the
Recitals set forth above.
- 2 -
<PAGE>
"MATERIALS" shall mean all materials, goods and ingredients ( including,
without limitation, the Roberts Materials) necessary for the manufacture,
production, labeling, packaging and storage of the Product.
"MINIMUM ANNUAL UNIT AMOUNTS" shall have the meaning ascribed to such term
in Section 2.3 hereof.
"PERSON" shall mean a natural person, a corporation, a partnership, a
trust, a joint venture, a limited liability company, any governmental authority
or any other entity or organization.
"PLANT" shall mean Hydro Med's manufacturing facility at 8 Cedar Brook
Drive, Cranbury, New Jersey 08512 or any other manufacturing premises where
Hydro Med moves its operations in accordance with the terms of this Agreement.
"PRODUCT" shall have the meaning ascribed to such term in the Recitals set
forth above.
"PURCHASE ORDER" shall mean a purchase order from Roberts to Hydro Med for
the Products which is issued in accordance with the provisions of Section 2.2 of
this Agreement.
"ROBERTS GROUP" shall have the meaning ascribed to such term in Section 5.6
hereof.
"ROBERTS MATERIALS" shall mean the luteinizing hormone releasing hormone
(LHRH) histrelin and all other materials, goods and ingredients supplied by
Roberts to Hydro Med in connection with the manufacturing, production and
processing of the Product at the Plant pursuant to the terms hereof.
"ROBERTS PRODUCT DEFECT" shall mean any Defect in any Product which is
attributable to Roberts, rather than to Hydro Med, including, without
limitation, in the design, workmanship, in the manufacture of, in the Roberts
Materials comprising, or in the labeling or packaging of, any Product, and which
causes the Product to be a Defective Product.
"SPECIFICATIONS" shall mean the specifications for the Product which are
established by Hydro Med and are approved by the FDA.
"TECHNICAL AGREEMENT" shall mean the Technical Agreement, substantially in
the form attached hereto as Exhibit A, to be entered into between Roberts and
Hydro Med on the date hereof, as the same may hereafter be amended, modified or
restated.
"TOTAL COST PER UNIT" shall mean the aggregate amount of all direct and
indirect costs, fees and expenses incurred by Hydro Med in order to manufacture
and produce each unit of the Product at the Plant.
- 3 -
<PAGE>
SECTION 2
MANUFACTURING, PRICING, AND PAYMENT
2.1. MANUFACTURING. (a) During the term of this Agreement, Hydro Med
will manufacture, package, produce and provide to Roberts, Roberts' total
requirements of Product on an exclusive basis. Subject to the provisions of
Section 2.2(e) hereof, Roberts shall not permit any party other than Hydro Med
to manufacture and produce the Product. Such manufacturing shall be performed
to the best of Hydro Med's ability in accordance with the terms hereof and in
accordance in all material respects with the terms and conditions described in
the Technical Agreement attached hereto as Exhibit A.
(b) All Roberts Materials required in connection with the production
and manufacture of the Product shall be supplied to Hydro Med by Roberts at
Roberts' sole cost and expense and shall comply with the Specifications. Once
the parties hereto have obtained all necessary approvals from the FDA to market
and sell the Product in the United States, Roberts shall, during the term
hereof, deliver to Hydro Med, on a semi-annual basis, a sufficient volume of
Roberts Materials to enable Hydro Med following each such delivery to produce
the Product at the Plant in an amount necessary to satisfy Roberts' then current
volume requirements for the Product for at least a six (6) month period in
accordance with the most recent Purchase Order furnished by Roberts to Hydro
Med pursuant to Section 2.2 (c) hereof . Title to all Roberts Materials
furnished by Roberts to Hydro Med shall remain in Roberts and the materials
shall be segregated in Hydro Med's Plant and clearly and conspicuously labeled
as Roberts' property until such time as such Roberts Materials are used in the
production of the Product.
(c) Product produced hereunder shall be manufactured by Hydro Med in
accordance with Applicable Laws (including current Good Manufacturing Practices
(cGMP)) and Hydro Med's current production standards and practices at the Plant.
Either party hereto may, from time to time, during the term of this Agreement,
request the approval of the other party to a change in such standards or
practices, which approval shall not be unreasonably withheld; provided that if
any such requested change is not agreed to, the standards and practices in
effect immediately prior to the time of such request shall remain valid and in
effect. Any and all changes to such practices and standards shall be made only
pursuant to the written agreement of the parties hereto, or, if required in
order for Hydro Med to remain in compliance with Applicable Laws following the
date hereof, upon written notice from Hydro Med to Roberts, such notice to
specify in reasonable detail the basis for such changes; provided that Hydro Med
shall be entitled to increase its standards costs of production to the extent of
any increase in production costs resulting from any change in production
standards or practices pursuant to this Section 2.1(c) from those in effect on
the date hereof. In the event that the production standards or practices of
Hydro Med are changed pursuant
- 4 -
<PAGE>
to the provisions of this Section 2.1(c), Hydro Med shall thereafter manufacture
the Product hereunder in compliance with such changed production practices and
standards.
(d) Nothing contained herein shall limit, restrict or prohibit Hydro
Med during the term of this Agreement from soliciting for manufacture or
manufacturing other products, goods and items in addition to the Products so
long as Hydro Med is able to satisfy all of its manufacturing obligations to
Roberts hereunder. In such case, Hydro Med agrees not to favor such other
products, goods or items by manufacturing such products, goods or items at the
Plant in a manner which has a material adverse effect on Hydro Med's ability to
manufacture the Product at the Plant.
2.2. PRODUCTION REQUIREMENTS; PURCHASE ORDERS. (a) Once the parties
hereto have obtained all necessary approvals from the FDA to market and sell the
Product in the United States, Roberts shall, by September 1 of each year during
the term hereof, provide Hydro Med with an annual written forecast (the "Annual
Forecast") for the following calendar year describing in specific detail and on
a quarterly basis its volume requirements for the Product during such year,
which Annual Forecast shall be updated quarterly and shall include written
notice of any significant changes in Roberts' volume requirements. It is
understood and agreed, however, that within thirty (30) days of the date on
which the parties hereto have obtained all necessary approvals from the FDA to
market and sell the Product in the United States, Roberts shall provide Hydro
Med with an Annual Forecast for the relevant calendar year in which all such
approvals have been obtained, such Annual Forecast to describe in specific
detail Roberts' volume requirements for the Product for the remainder of such
calendar year. Any such Annual Forecast (and any quarterly update thereto)
shall constitute the best estimate of Roberts as of the date of such Annual
Forecast (or as of the date of any such quarterly update) of Roberts' then
current volume requirements for the Products, but nothing contained in any such
Annual Forecast (or in any quarterly update thereto) shall constitute a Purchase
Order or an undertaking or obligation on the part of Roberts to purchase the
quantities of Products set forth therein during the periods specified therein.
(b) On a regular and frequent basis, which may be quarterly, Hydro Med
and Roberts (i) shall review the inventory of Product and anticipated sales of
the Product; and (ii) agree upon a production schedule which will provide
Roberts with sufficient amounts of Product to maintain appropriate customer
service levels.
(c) During the term of this Agreement, Roberts shall on a quarterly
basis provide Hydro Med with Purchase Orders for the Product with each such
Purchase Order to specify Roberts' volume requirements for the Product for at
least a six (6) month period and to be provided to Hydro Med at least one
hundred eighty (180) days in advance of the date that any such Products must
first be delivered by Hydro Med to Roberts. Each Purchase Order shall be
governed by the terms of this Agreement and none of the terms or conditions of
Roberts's Purchase Orders, Hydro Med's acknowledgment forms or any other forms
shall be applicable, except those specifying quantity ordered, delivery
locations and delivery schedule and invoice information. Each Purchase Order
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<PAGE>
shall constitute a valid, binding and irrevocable obligation upon Roberts to
accept the quantities of Products ordered therein if, and to the extent that,
such Products do not contain any Hydro Med Product Defects. Roberts shall make
reasonable efforts to order reasonable quantities of the Products per Purchase
Order and to spread out the deliveries of the Products over the course of the
year to the extent practicable. Hydro Med hereby covenants that it shall use
reasonable efforts to ensure that all of the shipments of Products ordered by
Roberts pursuant to a Purchase Order are shipped timely in accordance with the
directions contained in such Purchase Order; provided, however, that nothing
contained herein shall require Hydro Med, during any six (6) month period, to
supply to Roberts more than 150% of the quantity of Products which Roberts
anticipated ordering from Hydro Med during such six (6) month period pursuant to
the most recent Annual Forecast which Roberts previously furnished to Hydro Med.
(d) In the event Hydro Med, within ninety (90) Business Days after
its receipt of a Purchase Order, notifies Roberts of its inability to meet the
requirements of such Purchase Order, including the specified delivery dates, the
parties shall attempt to arrange a substitute delivery schedule by mutual
agreement. Such notice shall include a statement of the reasons for Hydro Med's
inability to produce such volume of the Product and the amount of Product
affected.
(e) Except in the case of a force majeure condition (in which case the
provisions of Section 9.13 hereof shall apply), in the event the parties are
unable to agree on a substitute delivery schedule, Roberts shall have the right
to have the Product manufactured by parties other than Hydro Med or to undertake
such manufacture itself, but only if Product can be obtained more expeditiously
from an alternative source and only in such amounts and for such periods
necessary to make up the difference between the amounts required by Roberts
hereunder and the amounts Hydro Med is capable of manufacturing at the Plant
during such periods and only for such periods in which Hydro Med is unable to
supply the Product to Roberts on a timely basis. In that event, Hydro Med
agrees to provide Roberts or its designee with all technical assistance
reasonably necessary for the manufacture of Product, so long as any such
designee signs a confidentiality agreement in form and substance reasonably
satisfactory to Hydro Med, whereby such designee agrees to be bound by all of
the confidentiality obligations to which Roberts is subject in accordance with
the provisions of Section 8.1 hereof.
2.3. MINIMUM UNITS. (a) Roberts and Hydro Med hereby agree that once the
parties hereto have obtained all necessary approvals from the FDA to market and
sell the Product in the United States, Roberts will be required to make minimum
annual purchases of the Product in the following amounts (such amounts are the
"Minimum Annual Unit Amounts"):
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<PAGE>
<TABLE>
<CAPTION>
Period of Time Minimum Annual Unit
Amount During
Applicable Period
<S> <C>
The first one-year period following the date of receipt by
the parties hereto of all necessary FDA approvals 10,000
The second one-year period following the date of receipt by
the parties hereto of all necessary FDA approvals 20,000
The third one-year period following the receipt by the
parties hereto of all necessary FDA approvals 40,000
The fourth one-year period following the receipt by the
parties hereto of all necessary FDA approvals and each 60,000
one-year period thereafter during the term of this Agreement
</TABLE>
(b) In the event of the failure of Roberts, other than for causes
solely attributable to a Force Majeure Condition (as defined pursuant to Section
9.13 hereof), during any applicable one-year period described above, to order
the applicable Minimum Annual Unit Amounts of the Products set forth above,
Roberts and Hydro Med agree that Hydro Med will have the option, in its sole
discretion, to either (i) immediately terminate this Agreement and the License
Agreement or (ii) demand and receive liquidated damages from Roberts in an
amount equal to the product of the Total Cost Per Unit times the aggregate
number of units of the Product which Roberts failed to order from Hydro Med in
accordance with the applicable Minimum Annual Unit Amount requirements set forth
above.
2.4. REIMBURSEMENT OF EXPENSES.
(a) The parties hereto hereby agree that Hydro Med shall not receive
any fees or other compensation or consideration from Roberts for the performance
of the manufacturing services it is providing for Roberts pursuant to the terms
of this Agreement. The parties hereto hereby acknowledge and agree, however,
that Hydro Med will incur substantial ongoing operating costs, fees and expenses
in order to manufacture the Product at the Plant. In order to reimburse Hydro
Med for such costs, fees and expenses which have previously been or will be
incurred by Hydro Med in connection with the commercial operation of the Plant
and the manufacture of the Product at the Plant (including, without limitation,
any costs and expenses related to product development, production scale-up,
Capital Improvements, labor, overhead and regulatory compliance), Roberts
hereby agrees to provide the following reimbursement payments to Hydro Med in
the following manner:
(i) On the date of the signing of this Agreement [] $250,000
(ii) On the date which is six (6) months from the
date of the signing of this Agreement [] $250,000
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(iii) On the date which is twelve (12) months from the
date of the signing of this Agreement [] $250,000
(iv) On the date which is eighteen (18) months from
the date of the signing of this Agreement [] $250,000
(b) Roberts has also agreed during the term of this Agreement to,
subject to the terms and conditions of this Section 2, reimburse Hydro Med for
all direct and indirect costs, fees and expenses incurred by Hydro Med in
connection with the production and manufacture of the Product at the Plant
pursuant to the terms hereof. In connection therewith, the parties hereto hereby
agree that for the purposes of this Agreement the Total Cost Per Unit shall be
fixed at thirty-five dollars ($35.00) during the entire term of this Agreement .
2.5. INVOICES. Within thirty (30) days after the shipment of Product to
Roberts pursuant to a Purchase Order, Hydro Med shall provide Roberts with an
invoice for the total number of units of the Product manufactured at the Plant
and shipped to Roberts in accordance with such Purchase Order. Each such invoice
shall include a computation of the Total Cost Per Unit multiplied by the total
number of units of the Product covered by such invoice. All payments due and
payable to Hydro Med by Roberts in accordance with any such invoice shall be
provided by Roberts to Hydro Med within thirty (30) days of Roberts' receipt of
such invoice.
2.6. TERMS OF PAYMENT. All payments to be made to Hydro Med in accordance
with Sections 2.4 and 2.5 hereof shall be made by check or bank draft to the
following address and shall indicate to which invoice(s) payment applies:
Hydro Med Sciences
8 Cedar Brook Drive
Cranbury, New Jersey 08512
Attention: Mr. Robert Feinberg
President and Chief Executive Officer
SECTION 3
OBLIGATIONS OF HYDRO MED
3.1. MANUFACTURING REQUIREMENTS (a) Hydro Med shall manufacture,
package, label, test, prepare for shipment and ship Products to Roberts, or to
locations designated in writing by Roberts, at and from Hydro Med's Plant at the
times and in the quantities set forth by Roberts in the Purchase Orders.
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<PAGE>
3.2. QUALITY CONTROL AND ASSURANCE. (a) Hydro Med shall manufacture the
Products in accordance with all Applicable Laws (including, without limitation,
current Good Manufacturing Practices (cGMP)), its customary standards and
practices at the Plant and in accordance with the Specifications for the
Product.
(b) Personnel from Roberts shall, upon reasonable advance written
notice to Hydro Med, have access to the Plant no more than once a month (except
in the event that any Force Majeure Condition has occurred at the Plant, in
which case Roberts and its representatives shall be entitled to have access to
the Plant upon reasonable advance notice to Hydro Med) during normal business
hours in order to observe and inspect the manufacturing, quality control and
testing processes for, and the records of all production and quality assurance
data related to, the Products.
3.3. RECORDS AND ACCOUNTING. Hydro Med shall, with respect to each lot of
the Products produced by it hereunder, keep accurate records during the term of
this Agreement of the manufacture and testing of the Products produced by it
hereunder, including, without limitation, all such records which are required
under Applicable Laws. Access to such records shall be made available by Hydro
Med to representatives of Roberts up to four (4) times during any calendar year
during normal business hours at the Plant upon Roberts's prior written request.
3.4. TECHNICAL AGREEMENT. The parties hereto shall on the date hereof
enter into a Technical Agreement, substantially in the form attached hereto as
Exhibit A and made a part hereof.
SECTION 4
LABELING AND TESTING PRODUCTS
4.1. LABELING AND PACKING. The Products shall be labeled, prepared and
packed for shipment in full compliance with all Applicable Laws, the
Specifications and Hydro Med's customary practice.
4.2. LOT NUMBERING. Lot numbers shall be affixed on the containers for
the Products and on each shipping carton in accordance with Applicable Laws, the
Specifications and Hydro Med's customary practice.
4.3. TESTING AND REJECTION OF DELIVERED PRODUCTS. (a) Roberts shall be
entitled, at its sole cost and expense, to test any and all Products delivered
to it hereunder to determine whether any such Products are Defective Products.
Such testing of the Products shall be conducted in accordance with procedures
and requirements to be mutually agreed upon by Roberts and Hydro Med. Roberts
shall notify Hydro Med in writing promptly, and in any event not later than
thirty (30) days after its receipt thereof, if it rejects any Products delivered
to it because Roberts believes that such Products are Defective Products.
Products not rejected within such thirty (30) day period by Roberts shall be
deemed accepted by Roberts. Hydro Med shall use reasonable efforts to
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<PAGE>
replace any Defective Products with Products which are not Defective Products
within the shortest possible time and shall deliver such replacement Products to
Roberts. In addition, Hydro Med shall arrange for all such Defective Products to
be picked up promptly in accordance with all Applicable Laws.
(b) Notwithstanding subsection 4.3(a) above, if Roberts and Hydro Med
disagree on whether any Products are Defective Products or on the methods for or
results of testing of any of the Products, an independent laboratory which is
acceptable to both parties shall be asked to test the Products in dispute
("Disputed Products"). To the extent such laboratory finds that the Disputed
Products are not Defective Products or that the Disputed Products are
Defective Products due to any Roberts Product Defects, Roberts shall promptly
pay all of the fees, costs and expenses of such laboratory related to such
testing and shall promptly pay for all of the Disputed Products. To the extent
that such laboratory finds that the Disputed Products are Defective Products due
to any Hydro Med Product Defects, Hydro Med shall promptly pay all of the costs,
expenses and fees of such laboratory related to such testing and shall replace
the Disputed Products in accordance with the preceding subsection 4.3(a). Both
parties hereby agree to accept and be bound by the findings of such independent
laboratory.
SECTION 5
DEFECTIVE PRODUCTS; INDEMNIFICATION
5.1. Roberts shall be solely responsible for the quality of all Roberts
Materials provided to Hydro Med hereunder. Hydro Med shall be responsible for
any loss or damage to the Roberts Materials which is solely attributable to the
gross negligence or willful misconduct of Hydro Med.
5.2. In the event that any Roberts Materials provided by Roberts to Hydro
Med pursuant hereto are deemed by Hydro Med to contain a Roberts Product Defect
within forty-five (45) days of the date of delivery of such Roberts Materials to
Hydro Med's Plant, after routine testing of such Roberts Materials by Hydro
Med, Roberts shall, at its sole cost and expense, replace such Roberts Materials
as soon as possible.
5.3. Any nondefective Roberts Materials used by Hydro Med in the
manufacture, packaging and production of a Product which is deemed to be a
Defective Product in accordance with Section 4.3 hereof due to a Hydro Med
Product Defect shall be replaced by Roberts as soon as possible at the sole cost
and expense of Hydro Med.
5.4. Notwithstanding anything herein to the contrary, if Roberts and Hydro
Med disagree on whether any Roberts Materials contain any Roberts Product
Defects or on the methods for or results of testing of any of the Roberts
Materials, an independent laboratory which is acceptable to both parties shall
be asked to test the Roberts Materials in dispute ("Disputed Roberts
Materials"). To the extent such laboratory finds that the Disputed Roberts
Materials do not contain any Roberts Products Defects, Hydro Med shall promptly
pay all of the fees, costs and expenses of such
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<PAGE>
laboratory related to such testing. To the extent such laboratory finds that the
Disputed Roberts Materials contain any Roberts Product Defects, Roberts shall
promptly pay all of the fees, costs and expenses of such laboratory related to
such testing and shall, at its sole cost and expense, promptly replace the
Disputed Roberts Materials in accordance with this Agreement. Both parties
hereby agree to accept and be bound by the findings of such independent
laboratory.
5.5. Roberts agrees to indemnify and hold harmless Hydro Med and its
employees, officers, directors, shareholders, representatives, agents and
Affiliates (collectively, the "Hydro Med Group") from and against and in respect
of any liabilities, fees, costs, obligations, damages, judgments, penalties,
losses or expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred by any or all of the Hydro Med Group as a result of any
demand, suit, action, proceeding or claim asserted or brought against the
Roberts Group or the Hydro Med Group by any Person for any death, actual bodily
injury or physical property damage arising out of or attributable to (i) any
Roberts Product Defect (including, without limitation, any misleading or
inaccurate label or instruction form or information affixed to or included with
any Product), or (ii) any inaccurate, misleading, or false claim or
representation relating to the Product made by Roberts or any of its employees,
officers, directors, representatives or agents.
5.6. Hydro Med agrees to indemnify and hold harmless Roberts and its
employees, officers, directors, shareholders, representatives, agents and
Affiliates (collectively, the "Roberts Group") harmless from and against and in
respect of any liabilities, fees, costs, losses, expenses (including, without
limitation, reasonable attorneys' fees and expenses), obligations, damages,
judgments and penalties incurred by any or all of the Roberts Group as a result
of any demand, suit, action, proceeding or claim asserted or brought against
the Hydro Med Group or the Roberts Group by any Person for any death, actual
bodily injury or physical property damage arising out of or attributable to (i)
any Hydro Med Product Defect or (ii) any inaccurate, misleading, or false claim
or representation relating to the Product made by Hydro Med or any of its
employees, officers, directors, representatives or agents.
5.7. The Hydro Med Group on the one hand, and the Roberts Group, on the
other, shall each give prompt written notice to the other of any claim against
the party giving notice which might give rise to a claim by it against the other
party based upon any indemnity contained herein. The notice shall set forth in
reasonable detail the nature and basis of the claim and the actual or estimated
amount thereof. In the event any action, suit or proceeding is brought against
the Hydro Med Group or the Roberts Group, or the Hydro Med Group or the Roberts
Group is a party thereto, with respect to which the other party hereto may have
liability under any indemnity contained herein, the indemnifying party shall
have the right, at its sole cost and expense, to defend such action in the name
and on behalf of the indemnified party and in connection with any such action,
suit or proceeding the parties hereto agree to render to each other such
assistance as may reasonably be required in order to ensure the proper and
adequate defense of any such action, suit or proceeding. The indemnified party
shall have the right to participate, at its own expense and with counsel of its
choosing, in the defense of any claim against which it is indemnified hereunder
and it shall be kept fully informed with respect thereto. The party seeking
indemnification hereunder shall not make any
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<PAGE>
settlement of any claim which might give rise to liability of the other party
under any indemnity contained herein without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
SECTION 6
TERM OF AGREEMENT; TERMINATION
6.1 TERM OF AGREEMENT. Unless sooner terminated in accordance with this
Section 6, this Agreement shall take effect and commence on the date hereof and
shall continue in full force and effect until the date of termination of the
License Agreement, at which time this Agreement shall terminate in accordance
with the provisions of this Section 6.
6.2 TERMINATION FOR INSOLVENCY. If either Roberts or Hydro Med (or any
Affiliate of Hydro Med to which this Agreement has been assigned in accordance
with Section 9.1 hereof) (i) makes a general assignment for the benefit of its
creditors or becomes insolvent; (ii) files an insolvency petition in bankruptcy;
(iii) petitions for or acquiesces in the appointment of any receiver, trustee or
similar official to liquidate or conserve its business or any substantial part
of its assets; (iv) commences under the laws of any jurisdiction any proceeding
involving its insolvency, bankruptcy, reorganization, adjustment of debt,
dissolution, liquidation or any other similar proceeding for the release of
financially distressed debtors; or (v) becomes a party to any proceeding or
action of the type described in clauses (iii) or (iv) of this Section 6.2 and
such proceeding or action remains undismissed or unstayed for a period of more
than sixty (60) consecutive days, then the other party hereto may by written
notice terminate this Agreement in its entirety with immediate effect.
6.3 TERMINATION FOR DEFAULT. Roberts and Hydro Med shall each have the
right to terminate this Agreement if the other party hereto fails to comply in
any material respect with any of the material terms and conditions of this
Agreement. At least thirty (30) days prior to any such termination for default,
the party seeking to so terminate shall give the other party hereto written
notice of its intention to terminate this Agreement in accordance with the
provisions of this Section 6.3, which notice shall set forth the default(s)
which forms the basis for such termination in reasonable detail. If the
defaulting party fails to correct such default(s) within thirty (30) days after
the receipt of such notification, or if the same reasonably cannot be corrected
or remedied within thirty (30) days, then the other party hereto may terminate
this Agreement upon the expiration of any such thirty (30) day period. In
addition, any default by a party under the Licensing Agreement shall be deemed
to be a default by such party hereunder. Notwithstanding any provision to the
contrary contained herein, in the event of a default by Roberts of its
obligations set forth in Section 2.3 hereof, Hydro Med shall be entitled to
immediately terminate this Agreement without providing thirty (30) days prior
notice of such termination to Roberts.
6.4 CONTINUING OBLIGATIONS. Termination of this Agreement for any reason
shall not relieve the parties of any obligation accruing prior thereto with
respect to the Product and shall
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<PAGE>
be without prejudice to the rights and remedies of either party with respect to
any antecedent breach of the provisions of this Agreement. Without limiting the
generality of the foregoing, no termination of this Agreement, whether by lapse
of time or otherwise, shall serve to terminate the obligations of the parties
hereto under Sections 2.3, 2.4, 2.5, 5, 8, 9.14, 9.15 or 9.17 hereof, and such
obligations shall survive any such termination.
SECTION 7
COMPLIANCE WITH APPLICABLE LAWS
7.1 COMPLIANCE WITH APPLICABLE LAWS. (a) Hydro Med shall manufacture,
store and load for shipment Product, maintain the Plant and dispose of waste and
other by-products of manufacture at the Plant, and package the Product in
conformity in all material respects with all Applicable Laws and the
Specifications; provided, however, that Roberts shall be solely responsible for
designing and maintaining labels that comply with all Applicable Laws.
(b) Hydro Med shall, within seventy-two (72) hours, notify Roberts of
any inspection of the Plant by the FDA or any other federal, state or local
governmental agency or authority and shall furnish Roberts with copies of all
reports and analyses relating to such inspections where the inspections involve
Product, its ingredients or the Plant used to manufacture Product; provided that
any failure to so notify or furnish shall not constitute a breach or default of
this Agreement. If such inspections are scheduled or conducted with advance
notice, Hydro Med shall advise Roberts and Roberts shall have the option to be
present at the Plant at the time of such inspection. Duplicate samples of
Product given to government agents will be provided to Roberts, as will
duplicates of photographs, if any, taken during the inspection.
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<PAGE>
SECTION 8
CONFIDENTIALITY
8.1 CONFIDENTIALITY. The parties hereto hereby acknowledge and agree that
each party hereto possesses certain confidential and proprietary information,
patent rights and trade secrets relating to, among other things, the Roberts
Materials and the Product, in the case of Roberts, and the Product and Hydro
Med's manufacturing processes, systems and techniques, in the case of Hydro Med,
which the other party hereto will have access to by virtue of this Agreement.
The parties hereto hereby agree to maintain said confidential and proprietary
information, patent rights and trade secrets in the strictest confidence and not
to disclose any such information to anyone, except to their respective
consultants, representatives, directors, officers and employees on a "need to
know" basis, and only after they have made them aware of all of the restrictions
contained herein regarding the limitations imposed by this Section 8.1 and not
to use any such confidential or proprietary information, patent rights or trade
secrets for any purposes other than the discharge of their respective duties and
obligations under this Agreement. This prohibition includes, but is not limited
to, press releases, educational and scientific conferences, promotional
materials, governmental filings, and discussions with lenders, investment
bankers, potential investors, shareholders, public officials, and the media.
The parties hereto also agree to cause their respective consultants,
representatives, directors, officers and employees to execute, from time to
time, such confidentiality agreements that the other party hereto shall
reasonably require in respect of such confidential or proprietary information,
patent rights and trade secrets. Notwithstanding any provision to the contrary
contained herein, Hydro Med may provide a copy of this Agreement, and any
information and records concerning any payments provided to it by Roberts
pursuant to Section 2 hereof, to The Population Council, Inc. as may be required
by Hydro Med's agreement with The Population Council, Inc.
SECTION 9
MISCELLANEOUS PROVISIONS
9.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that Roberts may not assign any of its rights,
duties or obligations hereunder to any party other than any Affiliate thereof,
without the prior written consent of Hydro Med, which consent shall not be
unreasonably withheld. In the event of any such assignment by Roberts to an
Affiliate thereof, Roberts agrees to guarantee the due payment and performance
of all of such Affiliate's obligations hereunder. Hydro Med may freely assign
its rights, duties and obligations hereunder to any other Person; provided,
however, that if Hydro Med assigns its rights, duties and obligations hereunder
to an Affiliate thereof, it will guarantee the due payment and performance of
all of such Affiliate's obligations hereunder.
9.2 NOTICES. All notices, claims or other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered by
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<PAGE>
hand, sent by facsimile transmission or mailed postage prepaid, by registered or
certified mail, return receipt requested, or by reputable overnight delivery
service as follows:
If to Hydro Med:
Hydro Med Sciences, a Division of GP Strategies Corp.
8 Cedar Brook Drive
Cranbury, NJ 08512
Telecopier No.: (609) 409-1650
Attention: Mr. Robert Feinberg
President and Chief Executive Officer
With a copy to:
GP Strategies Corp.
9 West 57th Street, 41st Floor
New York, NY 10019
Telecopier No.: (212) 230-9545
Attention: General Counsel
If to Roberts:
Roberts Pharmaceutical Corporation
4 Industrial Way West
Eatontown, New Jersey 07724
Telecopier No.: (732) 389-1014
Attention: Anthony A. Rascio
Vice President and General Counsel
Any party named in this Section 9.2 may change its address or telecopier number
for the receipt of notices by sending a notice provided in accordance with this
Section 9.2 to the other parties named in this Section 9.2. All notices and
other communications hereunder shall be deemed to have been duly given when
transmitted by telecopier, in each case addressed as aforesaid or personally
delivered or, in the case of a mailed notice, when actually received by the
intended recipient.
9.3 WAIVER; REMEDIES. No delay on the part of Hydro Med or Roberts in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either Hydro Med or Roberts of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
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<PAGE>
9.4 ENTIRE AGREEMENT. This Agreement, together with the Licensing
Agreement, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements or
understandings between the parties relating thereto.
9.5 AMENDMENT. This Agreement may be modified or amended only by written
agreement of the parties hereto.
9.6 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute a single instrument.
9.7 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
governed and construed in accordance with the laws of the State of New York
excluding any choice of law rules which may direct the application of the law of
another state. The parties hereto hereby agree that any action, suit or
proceeding initiated by either party hereto arising directly or indirectly out
of the transactions contemplated hereby shall be heard or litigated in the
Supreme Court of the State of New York, New York County or in the United States
District Court for the Southern District of New York. The parties hereto hereby
agree that final judgment in such suit, action or proceeding shall be conclusive
and may be enforced in any other jurisdiction by suit on the judgment or in any
other manner provided by Applicable Laws.
9.8 CAPTIONS. All section titles or captions contained in this Agreement
are for convenience only, shall not be deemed a part of this Agreement and shall
not affect the meaning or interpretation of this Agreement.
9.9 NO THIRD PARTY RIGHTS. No provision of this Agreement shall be deemed
or construed in any way to result in the creation of any rights or obligation in
any Person not a party to this Agreement.
9.10 CONSTRUCTION. This Agreement shall be deemed to have been drafted by
both Hydro Med and Roberts and shall not be construed against either party as
the draftsperson hereof.
9.11 NO JOINT VENTURE. Nothing contained herein shall be deemed to create
any joint venture or partnership between the parties hereto, and, except as is
expressly set forth herein, neither party shall have any right by virtue of this
Agreement to bind the other party in any manner whatsoever.
9.12 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective while
this Agreement remains in effect, the legality, validity and enforceability of
the remaining provisions shall not be affected thereby.
9.13 FORCE MAJEURE. If either party is prevented from complying, either
totally or in part, with any of the terms or provisions set forth herein with
respect to the Product by reason of a
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force majeure condition, including, by way of example and not of limitation,
fire, flood, explosion, storm, strike, lockout or other labor dispute, riot,
war, rebellion, accidents, acts of God, acts of governmental agencies or
instrumentalities, failure of suppliers or any other cause or externally induced
casualty beyond its reasonable control (any such event is a "Force Majeure
Condition"), whether similar to the foregoing contingencies or not, said party
shall provide written notice of same to the other party. Said notice shall
describe any such Force Majeure Condition in reasonable detail and shall be
provided within five (5) days of the occurrence of such event and shall identify
the requirements of this Agreement or such of its obligations hereunder as may
be adversely affected by such Force Majeure Condition, and to the extent so
affected, said obligations shall be suspended during the period of such
disability. The party prevented from performing hereunder as a result of any
such Force Majeure Condition, shall use reasonable efforts to remove such
condition, and shall continue performance whenever such Force Majeure Conditions
are removed. The party so affected shall give to the other party a good faith
estimate of the continuing effect of the Force Majeure Condition and
nonperformance. If the period of any previous actual nonperformance by Hydro Med
because of Hydro Med Force Majeure Conditions plus the anticipated future period
of Hydro Med nonperformance because of any Force Majeure Conditions will exceed
an aggregate of one hundred fifty (150) days within any twenty-four (24) month
period, Roberts may terminate this Agreement by written notice to Hydro Med. If
the period of any previous actual nonperformance of Roberts because of Roberts
Force Majeure Conditions plus the anticipated future period of Roberts
nonperformance because of any Force Majeure Conditions will exceed an aggregate
of one hundred fifty (150) days within any twenty-four (24) month period, Hydro
Med may terminate this Agreement by written notice to Roberts. When such
circumstances as those contemplated herein arise, the parties shall discuss in
good faith, what, if any, modification of the terms set forth herein may be
required in order to arrive at an equitable solution.
9.14 REPRESENTATIONS. Each of the parties hereto hereby represents and
warrants that it has the full corporate power and authority to execute, deliver
and perform all of its obligations under this Agreement and that it is not a
party to any other agreement, understanding or arrangement which conflicts with,
violates or constitutes a breach of any of its duties and obligations under this
Agreement. Roberts hereby represents and warrants that it is the sole owner of
or is duly licensed to provide all of the Roberts Materials to Hydro Med in
accordance with the terms hereof for use in the production and manufacture of
the Product. Nothing contained in this Agreement is intended to limit,
restrict, modify or otherwise affect any representation, warranty, obligation or
covenant of Hydro Med or Roberts which is set forth in the Licensing Agreement
and all of such representations, warranties, obligations and covenants are
hereby incorporated herein by reference as if such representations, warranties,
obligations and covenants had been expressly stated herein.
9.15 INSURANCE. Hydro Med shall, at its sole cost and expense, procure
and maintain insurance coverage in the amount of at least $1,000,000 for fire,
theft, fidelity and such other insurance which is reasonably necessary so as to
protect the Product and perform its obligations hereunder. At its sole cost and
expense, Hydro Med shall also obtain and maintain in full force and effect
during the term of this Agreement insurance to cover its property and
operations, and worker's compensation insurance in the amount required by law.
Roberts shall, at its sole cost and expense, procure and maintain product
liability insurance coverage in the amount of $5,000,000 in relation to the
Product and shall name Hydro Med as an additional loss payee on any such
insurance policies.
- 17 -
<PAGE>
9.16 CHANGE OF PLANT. Hydro Med hereby agrees that it must provide at
least forty-five (45) days prior written notice to Roberts of any relocation of
its Plant but in no event, however, shall Hydro Med relocate its Plant without
the prior consent of any and all necessary governmental authorities.
9.17 GUARANTY. By its execution of this Agreement in the space provided
for its signature below, Roberts Pharmaceutical Corporation, a New Jersey
corporation, which owns all of the issued and outstanding shares of capital
stock of Roberts, hereby guarantees Roberts' full and prompt payment and the
performance of all of Roberts' obligations and liabilities under this Agreement
and all of the agreements, instruments and documents executed by Roberts in
connection herewith and hereby agrees to pay or perform all of such liabilities
and obligations to the extent that Roberts fails to do so.
IN WITNESS WHEREOF, the parties hereto have executed this Manufacturing
Supply Agreement as of the date first above written.
GP STRATEGIES CORP.
By: __________________________________
Name:
Title:
ROBERTS LABORATORIES INC.
By: __________________________________
Name:
Title:
ACCEPTED AND AGREED WITH
RESPECT TO SECTION 9.17 HEREOF ONLY:
ROBERTS PHARMACEUTICAL CORPORATION
By:____________________________________________
Name:
Title:
<PAGE>
FIRST AMENDMENT TO MANUFACTURING SUPPLY AGREEMENT
-------------------------------------------------
FIRST AMENDMENT (the "Amendment"), dated as of September 25, 1998, to the
Manufacturing Supply Agreement (the "Agreement"), dated as of March 24, 1998, by
and among HYDRO MED SCIENCES ("Hydro Med"), a division of GP STRATEGIES CORP., a
Delaware corporation, and ROBERTS LABORATORIES INC., a New Jersey corporation
("Roberts").
W I T N E S S E T H:
-------------------
WHEREAS, Hydro Med has developed a sealed, hollow cartridge containing the
luteinizing hormone releasing hormone (LHRH), histrelin, for the subcutaneous
release of said hormone, which may be useful in the treatment of human prostatic
carcinoma and other indications (the "Product") and Roberts has agreed to
license from Hydro Med certain rights of Hydro Med to the Product and to pursue
development and commercialization of the Product pursuant to the terms of a
License Agreement, dated as of March 24, 1998 (the "License Agreement"), between
Hydro Med and Roberts;
WHEREAS, pursuant to the terms and conditions of the Agreement, Roberts and
Hydro Med have agreed that Hydro Med shall manufacture the Product at its
manufacturing facility in Cranbury, New Jersey (the "Plant") and that Roberts
shall reimburse Hydro Med for all of the costs, fees and expenses incurred by
Hydro Med in connection with the commercial operation of the Plant and the
production of the Product at the Plant;
WHEREAS, in order to reimburse Hydro Med for such costs, fees and expenses,
Roberts provided Hydro Med with a $250,000 payment following the execution and
delivery of the Agreement and agreed to provide Hydro Med with three additional
$250,000 payments to reimburse Hydro Med for all of the costs, fees and expenses
it may incur during the eighteen (18) month period following the date of
execution of the License Agreement in connection with the performance of its
obligations under the License Agreement; and
WHEREAS, Hydro Med and Roberts have mutually agreed to extend by four (4)
months the date on which these three separate $250,000 payments shall be
provided by Roberts to Hydro Med.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used herein, unless otherwise
-----------
defined herein, shall have the meanings ascribed to such terms in the Agreement.
2. Amendment to Agreement. The Agreement is hereby amended as follows as
----------------------
of the date hereof:
<PAGE>
Clauses (ii), (iii) and (iv) of Section 2.4(a) of the Agreement are
hereby deleted in their entirety and the following provisions are hereby
inserted in place thereof:
<TABLE>
<S> <C> <C>
"(ii) In order to reimburse Hydro Med for the $250,000 to be provided
costs, fees and expenses it incurs during by Roberts to Hydro Med
the period commencing March 24, 1998 and no later than January
ending September 30, 1998 24, 1999
(iii) In order to reimburse Hydro Med for the $250,000 to be provided
costs, fees and expenses it incurs during by Roberts to Hydro Med
the period commencing October 1, 1998 and no later than July 24,
ending March 31, 1999 1999
(iv) In order to reimburse Hydro Med for the $250,000 to be provided
costs, fees and expenses it incurs during by Roberts to Hydro Med
the period commencing April 1, 1999 and no later than January
ending September 30, 1999 24, 2000"
</TABLE>
3. Miscellaneous.
-------------
(a) Each of Roberts and Hydro Med hereby acknowledges and agrees that
it continues to be bound by and subject to all of its covenants, undertakings,
agreements, liabilities and obligations under the Agreement and the License
Agreement and hereby repeats and reaffirms all of its covenants, undertakings,
agreements, liabilities and obligations under the Agreement and the License
Agreement.
(b) Except as expressly amended hereby, the Agreement shall remain in
full force and effect following the execution and delivery of this Amendment by
the parties hereto.
(c) This Amendment may be executed in any number of separate
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Amendment by signing
any such counterpart.
(d) This Amendment shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed in and
to be wholly performed therein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
the Manufacturing Supply Agreement to be duly executed as of the day and year
first above written.
GP STRATEGIES CORP.
By:
------------------------------------
Name:
Title:
ROBERTS LABORATORIES INC.
By:
------------------------------------
Name:
Title:
ACCEPTED AND AGREED TO IN ALL RESPECTS:
ROBERTS PHARMACEUTICAL CORPORATION
By:
------------------------------------
Name:
Title:
LICENSE AGREEMENT
This License Agreement ("Agreement") is made as of the 24th day of March,
1998, by and between Hydro Med Sciences, a division of GP Strategies Corp., a
Delaware corporation ("Hydro Med") and Roberts Laboratories Inc., a New Jersey
corporation ("Roberts").
RECITALS
--------
1. Hydro Med is in the business of discovering, developing and marketing
drug delivery technologies. Roberts is in the business of developing and
marketing pharmaceutical products.
- 21 -
<PAGE>
2. Hydro Med has developed a sealed, hollow cartridge containing the
luteinizing hormone releasing hormone (LHRH), histrelin, for the subcutaneous
release of said hormone, which may be useful in the treatment of human prostatic
carcinoma and other indications (as defined in Section 1.02, the "Licensed
Product"). Hydro Med has previously engaged in certain research and development
efforts, including limited clinical trials, with respect to the Licensed
Product, but has concluded that future development efforts could best be
conducted in conjunction with Roberts.
3. Roberts desires to license from Hydro Med certain rights of Hydro Med
to the Licensed Product and to pursue development and commercialization of the
Licensed Product within the Territory (as defined below), and Hydro Med is
willing to grant such license, all upon the terms and conditions set forth in
this Agreement.
AGREEMENT
---------
In consideration of the Recitals and the mutual covenants and agreements
set forth below, the parties agree as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
When used in this Agreement, each of the following terms shall have the
meanings set forth below.
Section 1.01. "Affiliate" of a party hereto means, with respect to any
------------
Person, any Person directly or indirectly controlling, controlled by, or under
common control with, such other
- 22 -
<PAGE>
Person. For purposes hereof, the term, "controlled" (including the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the direct or indirect ability or power to direct or cause
the direction or management policies of such Person, whether through the
ownership of voting securities or otherwise.
Section 1.02. "Licensed Product" means a sealed, hollow cartridge
------------
containing the luteinizing hormone releasing hormone (LHRH), histrelin, a
synthetic nonapeptide agonist of naturally occurring luteinizing hormone
releasing hormone, which cartridge is constructed from biocompatible hydrogel
copolymers, consisting of hydrophilic monomers such as 2-
hydroxyethylmethacrylate (HEMA) and hydroxypropylmethacrylate (HPMA). Any
product for use as a therapeutic or diagnostic product that incorporates a
Licensed Product (as defined above) shall also be deemed a Licensed Product.
Section 1.03. "End User" means a wholesaler, distributor, pharmacy,
------------
hospital, health care organization, physician or patient.
Section 1.04. "Know-How" means the items described in the attached
------------
Appendix A (i) which are now owned by or licensed to Hydro Med or (ii) which may
subsequently be owned by or licensed to Hydro Med with a right to sublicense to
Roberts.
Section 1.05. "Hydro Med Intellectual Property Rights" means all patent
------------
rights, trade secret rights, and Know-How rights which are now owned by or
licensed to Hydro Med or which may subsequently be owned by or licensed to Hydro
Med with a right to sublicense to Roberts and which encompass the Licensed
Product and are effective in the Territory, including all patent divisions,
continuations, continuations-in-part, reissuances, reexaminations, extensions,
Supplementary Protection Certificates, and any similar intellectual property
rights, and all
- 23 -
<PAGE>
counterparts thereof in the Territory. A list of all such patent rights owned or
licensed to Hydro Med as of the date hereof and which are licensed hereunder is
attached as Appendix B.
Section 1.06. "Net Sales" means with respect to a Licensed Product, the
------------
gross amounts invoiced by Roberts, any Affiliate of Roberts and/or any
sublicensee hereunder, less only the following deductions:
(a) Customary trade, quantity and cash discounts actually given or
allowed;
(b) Amounts repaid or credited for returned goods or rejections of
Licensed Product which is unsalable;
(c) Reasonable chargebacks, allowances and rebates, Medicaid and Medicare
reimbursements, and similar deductions; and
(d) Any taxes, customs duties, and the like levied on the on the sale,
delivery, importation or use of the Licensed Product (other than taxes
on income or similar taxes) and paid by or on behalf of Roberts.
Section 1.07. "Territory" means the United States of America, its
------------
territories and possessions, Canada and the following countries: Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden, United Kingdom, Switzerland, Norway,
Andorra, Cyprus, Malta, San Marino, Liechtenstein, Australia, South Africa, New
Zealand, Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic,
Estonia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Poland, Romania,
Serbia, Slovakia, Slovenia, Turkey, Russia, Armenia, Azerbaijan, Belarus,
Georgia, Kazakstan, Kyrgystan, Mongolia, Tajikistan, Turkmenistan, Ukraine,
Uzbekistan, Bahrain, Egypt, Iran, Iraq, Israel,
- 24 -
<PAGE>
Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, Turkey,
United Arab Emirates, and Yemen.
Section 1.08. "Person" means a natural person, a corporation, a
-------------
partnership, a trust, a joint venture, a limited liability company, any
governmental authority or any other entity or organization.
ARTICLE II
----------
LICENSE
-------
Section 2.01. License Grant. Hydro Med grants to Roberts an exclusive
----------------------------
license to use and sell the Licensed Product to End Users within the Territory
under the Hydro Med Intellectual Property Rights solely and only for the
treatment of human prostatic carcinoma (the "Field of Use"). With respect to
any patent rights licensed hereunder, such license shall be limited solely to
those patent claims necessary to provide Roberts with the ability to use and
sell the Licensed Product to End Users for the Field of Use within the Territory
and shall, further, be limited solely to the right to use and sell the Licensed
Product to End Users for the Field of Use within the Territory. Such license
shall include the right of Roberts to sublicense consistent with the terms of
this Agreement; provided, however, that Roberts shall not grant any such
sublicense without first obtaining the written approval of Hydro Med therefor,
which approval shall not be unreasonably withheld. All terms and provisions of
this Agreement shall apply to each sublicense to the same extent as they apply
to Roberts, and Roberts shall, and hereby does, guarantee the performance by any
sublicensee of any and all obligations imposed by the terms and provisions of
this Agreement, including, without limitation, the payment of royalties. The
foregoing license shall be subject to the Supply Agreement between the parties
being entered into
- 25 -
<PAGE>
by Hydro Med and Roberts contemporaneously with the signing of this Agreement
(the "Supply Agreement").
Section 2.02. Exclusivity. Except as is necessary for Hydro Med to
--------------------------
fulfill its obligations under the Supply Agreement, during the Term of this
Agreement (as defined below), Hydro Med will not sell the Licensed Product for
the Field of Use within the Territory nor will it license any Person other than
Roberts to do so.
Section 2.03. Reserved Rights. Notwithstanding the foregoing, Hydro Med
------------------------------
retains and reserves all rights respecting the Licensed Product and/or under the
Hydro Med Intellectual Property Rights for all human and veterinary indications
other than the treatment of human prostatic carcinoma; provided, however, that
Hydro Med hereby grants to Roberts an exclusive option a period of two (2) years
after the date first written (the "Option Period") to negotiate a license
agreement to use and sell the Licensed Product in the Territory for the
treatment, in humans, of endometriosis, benign prostatic hyperplasia and central
precocious puberty (the "Additional Indications"). The parties shall negotiate
in good faith during the Option Period with a view towards entering into such a
license agreement. During the Option Period, Roberts may provide a written
offer to Hydro Med (the "Offer Notice") to enter into such a license agreement,
such Offer Notice to specify in reasonable detail all of the material terms and
conditions (including, without limitation, the royalty payments to be paid by
Roberts to Hydro Med in connection therewith and the territory to be covered by
such license agreement), upon which Roberts desires to enter into such a license
agreement. Such Offer Notice shall constitute an irrevocable, binding offer on
the part of Roberts to enter into such a license agreement with
- 26 -
<PAGE>
Hydro Med on the terms and conditions contained in such Offer Notice. Hydro Med
may elect, in its sole discretion, to accept or reject the offer provided by
Roberts to Hydro Med pursuant to such Offer Notice. If, during the Option
Period, Hydro Med does not accept an offer provided to it by Roberts pursuant to
an Offer Notice to enter into such a license agreement, it may not accept an
offer from any other Person to enter into such a license agreement for a period
of three (3) months following the expiration of such Option Period, unless in
the reasonable estimation of Hydro Med, the terms of any such offer are more
favorable to Hydro Med than the terms contained in the Offer Notice furnished to
Hydro Med by Roberts, in which case Hydro Med may accept any such offer upon the
expiration of the Option Period. In the event that the parties are unable to
reach final agreement on such a license agreement, Hydro Med shall be free to
use and sell the Licensed Product for the Additional Indications and to
negotiate and enter into a license agreement therefor with any other Person.
Hydro Med further reserves and retains a non-exclusive right respecting the
Licensed Products and/or under the Hydro Med Intellectual Property Rights to
make, have made, use and sell the Licensed Products for the Field of Use and for
the Additional Indications for research purposes only. Nothing in this Agreement
shall be deemed to license or grant to or otherwise confer upon Roberts any
rights, under the Hydro-Med Intellectual Property Rights or otherwise, to make,
use or sell any cartridge described in Section 1.02 containing any hormone,
enzyme, drug, medicine, medication, compound, mixture or solution other than
histrelin, all of which rights are hereby expressly reserved and retained by
Hydro-Med.
Section 2.04. Transfer of IND. Promptly after the signing of this
------------------------------
Agreement, Hydro Med shall transfer to Roberts, and Roberts shall assume, all of
the responsibilities and expenses of the
- 27 -
<PAGE>
sponsor of the Investigational New Drug application ("IND") respecting the
Licensed Product; provided, however, that Hydro Med shall retain the right to
review, comment and approve (such approval not to be unreasonably withheld)
those actions of Roberts respecting such IND that directly or indirectly affect
Hydro Med or its rights or this Agreement. All of the data generated from
clinical trials of the Licensed Product in connection with such IND which are
sponsored and paid for solely by Roberts shall be the sole and exclusive
property of Roberts, and Hydro Med may not use or authorize any Person to use
such data without Roberts' prior consent, which consent may not be unreasonably
withheld, except that Hydro Med may use such data for or in connection with
internal research purposes and/or academic papers, presentations, conferences
and seminars. Furthermore, after the signing of this Agreement, Roberts shall be
responsible for all adverse event reporting, annual reporting and any other
reporting responsibilities to regulatory agencies in the Territory relating to
the Licensed Product.
2.05. Improvements. In the event that Hydro Med shall make any
-------------------
improvements in the Licensed Products that have application in the Field of Use,
said improvements and any patent applications and patents therefor shall come
under this Agreement and be subject to all of the terms and provisions hereof.
ARTICLE III
-----------
DEVELOPMENT PAYMENTS
--------------------
- 28 -
<PAGE>
Section 3.01. Costs of Clinical Development. From and after the date
--------------------------------------------
first written, Roberts shall assume the responsibility for obtaining, and shall
use its best efforts to obtain, approval to market and sell the Licensed Product
under the United States Federal Food, Drug and Cosmetic Act and under other
similar laws in Canada and elsewhere in the Territory as defined by the
Medicinal Product Directives of the European Economic Community (Council
Directive 93/39 EEC dated January 14, 1993), and Roberts shall also assume the
responsibility for all of the costs of obtaining such approvals and the
clinical development of the Licensed Product, including, without limitation, all
of the costs of any clinical supplies of the Licensed Product necessary to
obtain such approvals. Without limiting the foregoing, Roberts shall also
assume responsibility for, and the costs associated with, the New Drug
Application ("NDA") for the Licensed Product according to the provisions of 21
CFR (S)314. The parties agree that such approval process and development shall
be undertaken under the joint supervision and control of Hydro Med and Roberts.
The parties further agree that Hydro Med has engaged Precision Research, Inc. to
compile and review the data generated to date from the multi-center dose range
study for the Licensed Product that has heretofore been conducted by or for
Hydro Med and to assist in the preparation of a protocol as required by 21 CFR
(S)312.21. The parties further agree that Hydro Med or Roberts will engage one
or more contract research organizations to satisfy the protocol as required by
21 CFR (S)312.21. Accordingly, in addition to being responsible for the costs of
obtaining regulatory approvals and all clinical development of the Licensed
Product, Roberts shall pay Hydro Med by wire transfer to an account designated
by Hydro Med the following amounts at the following times:
(i) Upon submission of a New Drug $250,000 (U.S.)
- 29 -
<PAGE>
Application to the United States
Food and Drug Administration (the
"FDA") to market and sell the
Licensed Product for the Field of
Use in the United States
(ii) Upon approval by the FDA of a $500,000 (U.S.)
NDA to market and sell the Licensed
Product for the Field of Use in the
United States
(iii) Upon approval by any authorized $250,000 (U.S.)
or competent regulatory authority
equivalent to the FDA of the equivalent
of a NDA to market and sell the Licensed
Product for the Field of Use in (a)
the European Union market or (b) any
of the following countries: (1) France,
(2) the United Kingdom, (3) Germany or
(4) Italy
Section 3.02 Late Payment. All payments described above shall be made
--------------------------
within ten (10) days of the stated event, except for the payment described in
Section 3.01(i), which shall be made upon the signing of this Agreement.
Without limiting any of Hydro Med's rights or remedies hereunder or otherwise,
any payment not made when due as above shall bear interest at the United States
prime rate on the due date as published in the Wall Street Journal.
- 30 -
<PAGE>
ARTICLE IV
----------
ROYALTIES
---------
Section 4.01. Royalty. As consideration for the licenses granted
----------------------
hereunder, Roberts shall pay to Hydro Med a royalty equal to twenty seven
percent (27%) of all Net Sales. On sales for resale between Roberts and an
Affiliate of Roberts or a sublicensee hereunder, the royalty shall be calculated
on the resale price.
Section 4.02. Timing of Payments. The payments due under Section 4.01
---------------------------------
shall be paid and reported as set forth in Article VIII below.
Section 4.03. Certain Minimum Payments. In the event that within three
---------------------------------------
(3) years after the date first above written Roberts fails to submit to the FDA
a completed NDA for the Licensed Product, Roberts shall be obligated to pay to
Hydro Med, as non-refundable advances against the percentage royalties, the sum
of $41,666.66 (the AAdvance Amount@) on the first day of each calendar month
beginning after the expiration of such three (3) year period (such three (3)
year period as the same may be extended pursuant to this Section 4.03 is the
ANDA Submission Period@) and continuing until such NDA is submitted to the FDA,
after which submission this obligation shall cease. All amounts paid to Hydro
Med under this Section 4.03 shall be credited against the amounts due under
Section 4.01 above. If the FDA requires two or more phase III clinical studies,
or two or more treatment cycles of one or more phase III studies, with respect
to the Licensed Product the NDA Submission Period shall be extended from three
(3) years to four (4) years and Roberts shall not be obligated to pay any
Advance Amount to Hydro Med until the first day of each calendar month beginning
after the expiration of such four (4) year period. Any payment to be made by
Roberts to Hydro Med pursuant to this Section 4.03 shall be conditioned
- 31 -
<PAGE>
upon Hydro Med having supplied Roberts with a completed Chemistry, Pharmacy and
Controls Section of the NDA which can be submitted to the FDA as part of the
aforesaid completed NDA. Notwithstanding any provision to the contrary contained
herein, if the FDA requires substantial additional studies to be conducted with
respect to the Licensed Product prior to authorizing the commencement of a phase
III clinical study for the Licensed Product, the NDA Submission Period shall not
be deemed to commence for the purposes of this Section 4.03 until the date on
which the FDA authorizes the commencement of such phase III clinical study.
ARTICLE V
---------
PROSECUTION AND INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
------------------------------------------------------------
Section 5.01. Patent Term Extensions and Supplementary Protection
------------------------------------------------------------------
Certificates. Hydro Med, upon request of Roberts, shall apply for and grant
- ------------
Roberts a license under any patent term extensions, Supplementary Protection
Certificates or functional equivalents thereof, in any jurisdiction within the
Territory where such items are permissible, for and to the extent of any Hydro
Med Intellectual Property Rights licensed to Roberts hereunder. Roberts will
provide Hydro Med with all material and information as may be necessary to
obtain any of the aforesaid rights.
Section 5.02. Prosecution and Maintenance of Licensed Patents.
---------------------------------------------------------------
(a) Appendix B attached hereto identifies all pending patent applications
and patents in the Territory which are encompassed in the Hydro Med Intellectual
Property Rights. In the event that Hydro Med applies for or maintains
additional patents relating to the Hydro Med Intellectual Property Rights
anywhere in the Territory or elsewhere, any costs, fees and expenses
- 32 -
<PAGE>
incurred by Hydro Med in connection therewith shall be shared equally by Hydro
Med and Roberts.
(b) Hydro Med shall use reasonable efforts to prosecute any pending patent
applications of which it is the owner that are encompassed in the Hydro Med
Intellectual Property Rights in the Territory and maintain any patents that have
issued or will issue thereon in full force and effect for the term of such
patent. Should, during the course of prosecution of any pending claims, an
official action rejecting the claims require that an amendment be made or action
be taken which would limit or substantially change the scope of any license
hereunder, Hydro Med will timely inform Roberts in writing. Hydro Med shall
consult Roberts before responding to any such official action, and allow Roberts
to assist in the prosecution of such claims or, at Hydro Med's option, allow
Roberts the opportunity at its time and expense to prosecute such claims to
Roberts' satisfaction.
Section 5.03. Costs of Prosecution and Maintenance of Patents. Hydro Med
--------------------------------------------------------------
shall bear all costs incurred in filing, prosecuting and maintaining all patents
and patent applications encompassed within the Hydro Med Intellectual Property
Rights.
Section 5.04. Infringement. Each party shall give prompt notice to the
---------------------------
other of any infringement, potential infringement or suspected infringement in
the Territory of the rights to Hydro Med Intellectual Property Rights
exclusively licensed to Roberts hereunder that may come to such party's
attention. Promptly thereafter, the parties shall consult and cooperate fully
to determine a course of action, including, but not limited to, the commencement
of legal action by one or both parties, to cause such infringement, potential
infringement, or suspected infringement to be terminated. Each party, at its
option, may elect to participate in or commence such a legal
- 33 -
<PAGE>
action. In the event of a joint action in which both parties agree to
participate, the parties will share in the costs and the recovery thereof and
therefrom in a manner to be agreed upon. Failing agreement on a course of action
to abate such infringement, potential infringement or suspected infringement
within sixty (60) days of the time such infringement, potential infringement or
suspected infringement becomes known to both parties, either party shall have
the right, at its own expense, to initiate and prosecute an action against the
infringer and shall retain whatever damages are recovered. Neither party will
enter into any settlement of any action referred to in this Section 5.04 without
the other party's prior consent, which consent shall not be unreasonably
withheld. In the event that a declaratory judgment action is commenced or a
defense is raised alleging the invalidity of any of the Hydro Med Intellectual
Property Rights licensed hereunder, Hydro Med, at its sole option, shall have
the right to take over and control the defense of such action and/or the
response to such defense.
Section 5.05. Reexamination and Reissue. Hydro Med shall defend in a
----------------------------------------
reasonable manner any patent encompassed within the Hydro Med Intellectual
Property Rights in any reexamination or reissue proceeding in the United States
Patent and Trademark Office and the applicable foreign equivalent. Before Hydro
Med initiates a reissue proceeding, or before either party initiates a
reexamination proceeding, the parties shall consult as to the desirability or
necessity of such a proceeding. Such proceedings will not be abandoned prior to
a final decision of the Patent Office Board of Appeals or Patent Office Board of
Interferences and the applicable foreign equivalent without the consent of
Roberts, which consent will not be unreasonably withheld taking into
consideration, inter alia, the merits of the action of the Patent and Trademark
Office and the applicable foreign equivalent, priority dates provable by any
- 34 -
<PAGE>
interference party (should an interference be involved), and the technological
and commercial importance of the subject matter of the claims of the application
or patent involved. All expenses of any proceedings set described in this
Section 5.05 shall be shared equally by Roberts and Hydro Med.
ARTICLE VI
----------
DISCLOSURE OF AGREEMENT
-----------------------
Section 6.01. Disclosure of Agreement. Except as provided below, neither
--------------------------------------
Roberts nor Hydro Med shall release any information to any third party with
respect to the existence and terms of this Agreement or with respect to any
confidential information or trade secrets concerning the parties, the Licensed
Product or the Hydro Med Intellectual Property Rights, without the prior written
consent of the other party to this Agreement, which consent shall not be
unreasonably withheld, except that Hydro Med may provide a copy of this
Agreement and information and records concerning the royalties and other
payments received by Hydro Med hereunder and the Net Sales of the Licensed
Product hereunder to the Population Council ("PC") as may be required by Hydro
Med's agreement with PC. This prohibition includes, but is not limited to,
press releases, educational and scientific conferences, promotional materials,
governmental filings, and discussions with lenders, investment bankers, public
officials, and the media.
Section 6.02. Releases Required by Law. If either party determines a
---------------------------------------
release of information is required by law or governmental regulation, it shall
notify the other in writing at least ten (10) days (or such shorter period where
legally required) before the time of the proposed release. The notice shall
include the exact text of the proposed release, the time and manner of
- 35 -
<PAGE>
the release, and the basis for such party's belief that disclosure is required.
At the other party's request and before the release, the party desiring to
release information shall consult with the other party on the necessity for the
disclosure and the text of the proposed release. In no event shall a release
include information regarding the existence or terms of this Agreement that is
not required by law or governmental regulation without the consent of the other
party. Notwithstanding any other terms of this Agreement, either party shall be
permitted and allowed to provide a copy of this Agreement or any terms hereof or
otherwise provide any information with respect to the existence and terms of
this Agreement to appropriate governmental taxing or regulatory authorities,
without advance written notice or approval of the other party.
ARTICLE VII
-----------
CERTAIN UNDERTAKINGS
--------------------
Section 7.01. Hydro Med Warranties. Hydro Med hereby warrants that, to
-----------------------------------
the best of its knowledge, the patents listed in Appendix B hereto are valid and
that Hydro Med is the sole owner of or is duly licensed under the Hydro Med
Intellectual Property Rights licensed to Roberts hereunder and has the authority
to grant licenses under such Rights.
Section 7.02. Roberts Efforts. Roberts hereby agrees to use its best
------------------------------
efforts to develop and commercialize the Licensed Product for the Field of Use
and to make a determination as to the Additional Indications throughout the
Territory.
Section 7.03. Sublicensing. All sublicenses granted by Roberts hereunder
---------------------------
shall be in writing and shall include a requirement that the sublicensee use its
best efforts to commercialize the Licensed Product as quickly as is reasonably
possible and shall bind the sublicensee to meet all of Roberts= obligations to
Hydro Med under this Agreement, and a copy of this Agreement
- 36 -
<PAGE>
shall be attached to such sublicense agreement. In the event that Roberts is
unable or unreasonably refuses to consent to the granting of sublicenses, either
as suggested by Hydro Med or a potential sublicensee or otherwise, Hydro Med may
directly license such potential sublicensee unless Roberts reasonably satisfies
Hydro Med that such sublicense would not materially increase the Net Sales of
the Licensed Products.
Section 7.04. Hydro Med Name. Roberts shall not use Hydro Med's name or
-----------------------------
any adaptation of it in any packaging, advertising, promotional, sales
literature or other material without the prior written consent of Hydro Med.
Section 7.05. Comply With Law. Roberts agrees to comply with all
------------------------------
applicable laws and regulations relating to the Licensed Product. In
particular, it is understood and acknowledged that the transfer of certain
commodities and technical data is subject to United States laws and regulations
controlling the export of such commodities and technical data, including all
Export Administration Regulations of the United States Department of Commerce.
These laws and regulations among other things prohibit or require a license for
the export of certain types of technical data to certain specified countries.
Roberts hereby agrees and gives written assurance that it will comply with all
United States laws and regulations controlling the export of commodities and
technical data, that it will be solely responsible for any violation of such by
Roberts or its Affiliates or any sublicensees hereunder, and that it will defend
and hold Hydro Med harmless in the event of any legal action of any nature
occasioned by such violation.
ARTICLE VIII
------------
ACCOUNTING
----------
- 37 -
<PAGE>
Section 8.01. Sales and Royalty Reports. Roberts shall deliver to Hydro
---------------------------------------
Med within forty-five (45) days after the end of each calendar quarter a written
report setting forth an accounting of Roberts= Net Sales and the royalty payment
due to Hydro Med for such quarter. Such quarterly reports shall be in English
and shall set forth for such calendar quarter (a) the number of Licensed
Products sold by Roberts, any Affiliates of Roberts and/or any sublicensees
hereunder, separately by each country in the Territory, (b) the total billings
or invoice prices for such Licensed Products, separately by each country in the
Territory, (c) a detailed specification of the deductions from such amounts to
determine Net Sales, (d) the amount of royalties due pursuant to Section 4.01,
and (e) such other information as Hydro Med may from time to time reasonably
request. Such reports shall be certified as correct by an officer of Roberts.
If no royalties are due Hydro Med for such quarter, the report shall so state.
Annually, by October 1, Roberts shall deliver to Hydro Med a sales forecast, by
quarter, for the subsequent calendar year. All sales and royalty reports shall
be directed to Robert Feinberg, President and CEO of Hydro Med Sciences, c/o GP
Strategies Corp., 9 West 57th Street, 41st Floor, New York, New York 10019. In
the event Roberts makes sales of the Licensed Product to Persons other than End
Users, Roberts shall require such Persons to provide Roberts with such
information as Hydro Med may reasonably request to permit Hydro Med to calculate
and verify Net Sales and Royalties due.
Section 8.02. Delivery of Royalty. When Roberts delivers the written
----------------------------------
reports to Hydro Med under Section 8.01 or forty-five (45) days after the end of
each calendar quarter, whichever is earlier, Roberts shall pay by wire transfer
or other method acceptable to Hydro Med, the payments due to Hydro Med for the
preceding calendar quarter under Section 4.01 hereof. Without limiting any of
Hydro Med's rights or remedies hereunder or otherwise, any payment
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<PAGE>
not made when due shall bear interest at the United States prime rate on the due
date as published in the Wall Street Journal.
Section 8.03. Audits. Roberts shall keep, and shall require its
---------------------
Affiliates to keep, accurate records in sufficient form and detail to enable the
amounts due to Hydro Med hereunder to be determined. During the term of this
Agreement and for two (2) years after its termination, Hydro Med shall, not more
than once each year and upon written notice, have the right, at its expense, to
audit (or have audited) the books and records of Roberts and its Affiliates only
for the purpose of determining the accuracy of payments made to Hydro Med
hereunder. If Roberts has underpaid the amounts due Hydro Med under this
Agreement by more than five percent (5%) for any twelve (12) month period,
Roberts shall, in addition to paying any royalties due plus interest, also
reimburse Hydro Med for the cost of such audit.
Section 8.04. Exchange Rates and Currency Translation. All payments to be
------------------------------------------------------
made by Roberts to Hydro Med under this Agreement shall be made and reported in
United States dollars. Conversion of foreign currency to U.S. dollars shall be
made at the conversion rate existing in the United States (as reported in the
Wall Street Journal) on the last business day of the calendar quarter for which
the payments are due. Such payments shall be made to Hydro Med in accordance
with this Agreement.
Section 8.05. Withholding Taxes. Roberts shall have no liability for any
--------------------------------
income taxes levied against Hydro Med on account of royalties paid hereunder.
If any law regulations require that any such taxes be withheld by Roberts,
Roberts shall deduct such taxes from the payment due Hydro Med, pay the taxes so
withheld to the proper taxing authority, and send proof of payment to Hydro Med
annually within sixty (60) days after the first day of the year following
- 39 -
<PAGE>
such payment. If Hydro Med desires to obtain a refund of any taxes so withheld
and paid from a taxing authority, Roberts shall cooperate reasonably in the
pursuit of such refund.
ARTICLE IX
----------
TERM AND TERMINATION
--------------------
Section 9.01. Term. This Agreement shall become effective on the date
-------------------
hereof, and shall remain in effect until the later of either: (i) the life of
the last to expire of the patents encompassed in the Hydro Med Intellectual
Property, or (ii) fifteen (15) years from the date hereof. Upon termination of
this Agreement as set forth in this Section 9.01, the licenses granted to
Roberts hereunder shall be deemed to be paid up in full.
Section 9.02. Termination by Default. If either party is in default of
-------------------------------------
any of its material obligations under this Agreement, or fails to remedy such
default within sixty (60) days (thirty (30) days in the case of a default in
making a payment hereunder) after the other party sends written notice
detailing the substance of the default to the defaulting party, the injured
party may terminate this Agreement by written notice. In the event of the
termination of this Agreement, the licenses granted hereunder shall terminate.
Without limiting the meaning of the term default hereunder, it is agreed that
Roberts' failure to pay to Hydro Med the amounts due under Articles III and IV
as and when due as set forth in this Agreement shall constitute a default of a
material obligation under this Agreement. In the event that this Agreement is
terminated by reason of a default by Roberts or Roberts' failure to make the
minimum purchases as set forth in Section 9.03 below, Roberts shall forthwith
transfer to Hydro Med all rights to the NDA for the Licensed Product and shall
execute and deliver to Hydro Med any and all documents reasonably necessary to
effectuate or confirm such transfer.
- 40 -
<PAGE>
Section 9.03. Minimum Purchases. In the event that in any year after the
--------------------------------
NDA for the Licensed Product is approved by the FDA, Roberts fails to make the
minimum purchases of the Licensed Product required under Section 2.3 of the
Supply Agreement, Hydro Med shall have the right to immediately terminate this
Agreement upon written notice to Roberts.
Section 9.04. Sublicenses. All sublicenses granted hereunder shall
--------------------------
provide that, upon termination of this Agreement, such sublicenses shall
immediately terminate or, at Hydro Med's option, Roberts' interest therein shall
immediately be assigned to Hydro Med.
Section 9.05. Insolvency. In the event that any party (or an Affiliate of
-------------------------
such party to which this Agreement or any material rights or obligations
hereunder has been assigned) (a) shall become insolvent, (b) shall make an
assignment for the benefit of creditors or shall file a petition in bankruptcy,
or (c) shall have a petition in bankruptcy filed against it, the other party
shall have the right to terminate this Agreement, immediately upon giving
written notice of such termination.
Section 9.06. Residual Obligation Upon Termination. Termination of this
---------------------------------------------------
Agreement for any reason whatsoever will not release or discharge Hydro Med or
Roberts from the performance of any obligation or the payment of any amount or
debt which may have previously accrued and remains to be performed, paid or
discharged, as of the date of such termination.
Section 9.07. Survive Termination. Sections 6.01, 7.01, 7.04, 7.05, 8.03,
----------------------------------
9.02, 9.05, 9.06 and 10.12 of this Agreement shall survive the termination of
this Agreement.
ARTICLE X
---------
MISCELLANEOUS PROVISIONS
------------------------
- 41 -
<PAGE>
Section 10.01. Amendment. This Agreement may not be amended, supplemented
-------------------------
or otherwise modified except by an instrument in writing signed by an authorized
representative of both parties.
Section 10.02. Entire Agreement. This Agreement and the Supply Agreement
--------------------------------
constitute the complete and definitive agreement of the parties on the subject
matter hereof and supersede, cancel and annul all prior or subsequent
agreements, understandings and undertakings relating to the subject matter
hereof including, but, without limiting the generality of the foregoing, any
documents used by the parties in making or accepting any offer. There are no
verbal agreements, warranties, representations or understandings affecting this
Agreement, and all previous or other negotiations, representations and
understandings between Hydro Med and Roberts are merged herein.
Section 10.03. Severability. Each party agrees that, should any provision
----------------------------
of this Agreement be determined by a court of competent jurisdiction to violate
or contravene any applicable law or policy, such provision will be severed or
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect. The parties specifically agree
that nothing in this Agreement is intended to require either party to take, or
not take, any action which would constitute a violation of any applicable law or
regulation.
Section 10.04. Notices. Any notice required or permitted to be given
-----------------------
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes if mailed by first class certified or
registered mail, postage prepaid, or sent by national
- 42 -
<PAGE>
overnight delivery service, or by acknowledged facsimile. Unless otherwise
specified in writing, the mailing addresses of the parties shall be as follows:
For Roberts:
Roberts Laboratories Inc.
4 Industrial Way West
Eatontown, New Jersey 07724
Attention: Anthony A. Rascio, Vice President and General Counsel
For Hydro Med:
GP Strategies Corp.
9 West 57th St., 41st Floor
New York, New York 10019
Attention: Robert Feinberg, President and CEO of Hydro Med Sciences
Section 10.05. Governing Law. This Agreement shall be governed by, and
-----------------------------
construed in accordance with, the Laws of the State of New York, excluding any
choice of law rules which may direct the application of the law of any other
jurisdiction.
Section 10.06. Assignment. Except as expressly provided herein, neither
--------------------------
party may assign or sublicense this Agreement or its rights or obligations under
this Agreement (other than to an Affiliate) without the prior written consent of
the other party, except that either party may make such an assignment without
the consent of the other in connection with any merger or sale of all or
substantially all of such party=s assets. In the event of any such assignment
to an Affiliate, the assignor shall guarantee the due payment and performance of
all the Affiliate=s obligations under this Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
permitted successors and permitted assignees.
Section 10.7. Consents Not To Be Unreasonably Withheld. Whenever
-------------------------------------------------------
provision is made in this Agreement for either party to secure the consent or
approval of the other, that consent or
- 43 -
<PAGE>
approval shall not unreasonably be withheld, and whenever in this Agreement
provisions are made for one party to object to or disapprove a matter, such
objection or disapproval shall not unreasonably be exercised.
Section 10.8. No Strict Construction. This Agreement has been prepared
-------------------------------------
jointly and shall not be strictly construed against either party.
Section 10.9. Captions. The captions or headings of the Sections or other
-----------------------
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.
Section 10.10. Force Majeure. Any delay or failure in the performance of
-----------------------------
any of the duties or obligations of any party hereto caused by an event outside
the affected party's reasonable control shall not be considered a breach of this
Agreement, and the time required for such party's performance shall be extended
for a period equal to the period of such delay. Such events shall include,
without limitation, any labor strike or lockout, act of God, war, fire, flood,
embargo, act of any governmental authority, riot, or any other unforeseeable
cause or causes beyond the reasonable control and without the fault or
negligence of the party so affected. The party so affected shall give prompt
notice to the other party of such cause, and shall take whatever reasonable
steps are appropriate in the party's discretion to relieve the effect of such
cause as rapidly as possible.
Section 10.11. Currency. All references to "$" or "dollars" in this
------------------------
Agreement shall refer to United States dollars.
Section 10.12. Guaranty. By its execution of this Agreement in the space
-----------------------
provided for its signature below, Roberts Pharmaceutical Corporation, a New
Jersey corporation, which owns all
- 44 -
<PAGE>
of the issued and outstanding shares of capital stock of Roberts, hereby
guarantees Roberts' full and prompt payment and the performance of all of
Roberts' obligations and liabilities under this Agreement and all of the
agreements, instruments and documents executed by Roberts in connection herewith
and hereby agrees to pay or perform all of such liabilities and obligations to
the extent that Roberts fails to do so.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their respective officers thereunto duly authorized.
ROBERTS LABORATORIES, INC. GP STRATEGIES CORP.
By: ______________________________ By: ______________________________
Name:______________________________ Name:______________________________
Title: ___________________________ Title: ___________________________
ACCEPTED AND AGREED WITH
RESPECT TO SECTION 10.12 HEREOF ONLY:
ROBERTS PHARMACEUTICAL CORPORATION
By:
___________________________________
Name:
Title:
- 45 -
<PAGE>
Appendix A
----------
Hydro Med Know-How
------------------
Know-How shall mean all written information in the possession of Hydro Med
regarding the Licensed Product reasonably useful to Roberts in exploiting the
rights granted to Roberts hereunder. Hydro Med shall use its reasonable efforts
to locate and furnish to Roberts all material documents representing Know-How.
Provided that Hydro Med has used its reasonable efforts to locate such
documents, Hydro Med shall have no further obligation to Roberts with respect to
such documents.
Appendix B
----------
Hydro Med Patents and Patent Applications in the Territory
----------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Country Patent No. Issue Date Title
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. 5,266,325 11/30/93 Preparation of Homogeneous
Hydrogel Copolymers
("Preparation")
- --------------------------------------------------------------------------------------------------
U.S. 5,292,515 03/08/94 Manufacture of Water Soluble
Hydrophilic Articles and Drug
Delivery Devices ("Manufacture")
- --------------------------------------------------------------------------------------------------
Canada 2,059,377 08/27/96 Manufacture
==================================================================================================
</TABLE>
- 46 -
<PAGE>
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Canada 2,059,406 05/28/96 Preparation
- --------------------------------------------------------------------------------------------------
Europe (France, Germany,
Italy, Switzerland, UK) 0,551,699 07/10/96 Preparation
- --------------------------------------------------------------------------------------------------
Europe (Austria, Belgium, 0,551,698 03/05/97 Manufacture
Denmark, France, Germany,
Italy, Netherlands, Sweden,
Switzerland, UK)
- --------------------------------------------------------------------------------------------------
</TABLE>
- 47 -
<PAGE>
Exhibit 10.88(A)
SUBLICENSE AND ASSIGNMENT AGREEMENT
THIS AGREEMENT ENTERED INTO AS OF THE 1st DAY OF APRIL, 1998
BETWEEN: HOECHST MARION ROUSSEL, INC., a Delaware corporation having its
principal place of business at 10236 Marion Park Drive, P.O. Box
9627, Kansas City, Missouri 64134 ("HMRI")
AND: ROBERTS LABORATORIES INC., a New Jersey corporation having its
principal place of business at 4 Industrial Way West, Eatontown,
New Jersey 07724 (ROBERTS)
WHEREAS, by a License Agreement dated April 25, 1983, Ferring A/S granted to
Marion Laboratories, Inc. (now Hoechst Marion Roussel, Inc.) the right and
license to make, have made, use and sell products containing Licensed Compound
(as defined therein) in the United States and its territories and possessions
and in Canada, with the right to sublicense its rights as provided therein (the
"1983 Agreement"); and
WHEREAS, HMRI currently markets Pentasa(R) (mesalamine) in the United States and
Canada pursuant to the 1983 Agreement; and
WHEREAS, Ferring A/S and HMRI entered into a Development, Supply and
Distribution Agreement on November 7, 1997 which provides for the development
and commercialization of additional dosage forms of Pentasa (the "1997
Agreement"); and
WHEREAS, ROBERTS desires to obtain from HMRI the rights to market Pentasa in the
United States and its territories and possessions and certain rights granted
HMRI in the 1997 Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
herein made and the mutual benefits to be derived from this Agreement, the
parties covenant and agree as follows:
ARTICLE I - DEFINITIONS
1.01 FDA means the Food and Drug Administration
1.02 NDA means New Drug Application for the PRODUCT
1.03 PATENTS means any and all patents maturing or issuing out of United States
Patent Service No. 270,517 filed May 29, 1981 and any valid divisions,
continuations, continuations-in-part, additions or reissues thereof, including
United States Patent Service No. 4,496,553, United States Patent Service No.
4,880,794, and United States Patent Service No. 4,980,173.
1.04 PRODUCT means, Pentasa, a pharmaceutical product for oral administration,
containing in a controlled-release form of 5-aminosalicylic acid (5-ASA) useful
and for use in the treatment of ulcerative colitis and Crohn's disease in
humans, all as more fully described in the PATENTS and in specifications agreed
to in writing by the parties.
<PAGE>
1.05 SACHETS means a granular formulation packaged in unit dose sachets of 5-
aminosalicylic acid useful and for use in the treatment of ulcerative colitis
and Crohn's disease in humans, all as more fully described in the PATENTS and in
accordance with the formulation currently manufactured by Ferring and sold in
territories other than the United States.
1.06 TABLETS means a 500 milligram tablet dosage form of 5-aminosalicylic acid,
in a dosing regimen of two (2) grams to be taken twice daily, useful and for use
in the treatment of ulcerative colitis and Crohn's disease in humans, all as
more fully described in the PATENTS and in accordance with the formulation
currently manufactured by Ferring and sold in territories other than the United
States.
1.07 TERRITORY means the United States and its territories and possessions.
1.08 TRADEMARK means Ferring's mark Pentasa, conferred by United States
Registration Serial No. 365,906 dated May 21, 1982.
ARTICLE II - SUBLICENSE
2.01 Subject to the terms and conditions of this Agreement, HMRI hereby grants
to ROBERTS an exclusive sublicense under the 1983 Agreement to make, have made,
use and sell the PRODUCT throughout the United States its territories and
possessions and to exclusively use and apply the TRADEMARKS in connection
therewith.
ARTICLE III - ASSIGNMENT
3.01 Subject to the terms and conditions of the Agreement, HMRI hereby assigns
to ROBERTS its rights and obligations under the 1997 Agreement, except the
payment obligations set forth in Article III of the 1997 Agreement.
3.02 Under the 1997 Agreement, Ferring will perform all development work
required for TABLETS. HMRI hereby assigns to ROBERTS its rights to ownership of
the TABLETS NDA, whether filed as a supplement to the Pentasa NDA or as a new
NDA.
3.03 Under the 1997 Agreement, Ferring will perform all development work
required for SACHETS. HMRI hereby assigns to ROBERTS its obligation to grant
Ferring a right of reference to the Pentasa NDA for the purpose of gaining
approval of SACHETS.
3.04 HMRI hereby assigns to ROBERTS its obligations to commercialize and sell
TABLETS, as more fully set forth in Article VI of the 1997 Agreement.
3.05 HMRI hereby assigns to ROBERTS its obligation to distribute SACHETS, as
more fully set forth in Article VIII of the 1997 Agreement.
ARTICLE IV - ASSET TRANSFER
4.01 HMRI hereby transfers the NDA to Roberts and will undertake all regulatory
filings necessary to effect the transfer of the NDA to ROBERTS.
2
<PAGE>
4.02 HMRI will transfer to ROBERTS its existing supply of PRODUCT samples,
available sales training and promotional materials related to PRODUCT, and
PRODUCT customer lists.
ARTICLE V - PAYMENT
5.01 As consideration for the rights sublicensed and assigned and the assets
transferred herein ROBERTS shall pay to HMRI the sum of one hundred and thirty
six million dollars ($136,000,000) no later than July 1, 1998.
ARTICLE VI - TERMS AND TERMINATION
6.01 This Agreement shall be coextensive with the 1983 Agreement.
6.02 HMRI may terminate this Agreement in the event that ROBERTS fails to make
payments that are due, or if bankruptcy or insolvency proceedings are instituted
against ROBERTS, provided that HMRI has given ROBERTS written notice of such
default or disability and provided further that the default is not corrected
within 60 days.
6.03 In the event that any of the terms or provisions of this Agreement are
incurably breached, the non-breaching party may terminate the Agreement by
written notice. In the event of any other breach, the non-breaching party may
terminate this Agreement by the giving of written notice to the breaching party
that the Agreement will terminate on the 60th day from notice unless cure is
sooner effected.
ARTICLE VII - REPRESENTATIONS AND WARRANTIES
HMRI hereby represents and warrants:
7.01 To the best of HMRI's knowledge, the TRADEMARK is valid and in full force
and effect;
7.02 To the best of HMRI's knowledge, the PATENTS are valid and in full force
and effect;
7.03 HMRI is manufacturing and selling the PRODUCT without any notice or
knowledge that the PRODUCT is infringing or alleged to be infringing the patent
or trademark rights of any third party;
7.04 HMRI is in full compliance with all its obligations under the 1983
Agreement and the 1997 Agreement and has no notice or knowledge that it is in
default under any of its obligations under either or both of the aforesaid
agreements;
7.05 HMRI is not in material violation of any law, regulation, order, decree or
ruling of or restriction imposed by an judicial, governmental or regulatory body
or agency, whether local, state or federal relating to the Product. HMRI is not
aware of any significant pending or threatened regulatory activity specifically
with respect to the Product and HMRI has received no notices from the FDA or any
other government agency claiming that the Product or related advertising are in
any way not currently in full compliance with the requirements of the FDA;
3
<PAGE>
7.06 There are non (i) outstanding orders, judgments, injunctions, awards or
decrees or any court or arbitrator or (to Seller's knowledge) other governmental
regulatory body, or (ii) actions, suits, personal injury or product liability
claims, legal, administrative or arbitral proceedings or (to Seller's knowledge)
investigations, whether or not the defense thereof or liabilities in respect
thereto are either pending, in effect or to HMRI's knowledge threatened against
or relating to the product;
7.07 To HMRI's knowledge, there are no official decisions by any U.S.
governmental or regulatory body stating that the Product is defective, unsafe
for normal use or fails to meet applicable standards promulgated by said
governmental or regulatory body. There have been no recalls ordered by any such
governmental or regulatory body with respect to the Product within the five (5)
years prior to the date hereof.
7.08 The parties hereto recognize that, pursuant to the 1983 Agreement and the
1997 Agreement, HMRI is required to obtain approval from Ferring A/S of the
sublicense and assignment referred to herein. It is further understood that
HMRI anticipates that approval from Ferring is forthcoming. In the event that
said approval is not obtained and Ferring institutes legal action to enforce
provisions of the 1983 Agreement and/or the 1997 Agreement, ROBERTS will
undertake the cost of its defense against such action. In the event Ferring is
successful in contesting the validity of this Agreement, the rights,
obligations, and assets transferred to ROBERTS pursuant to this Agreement will
revert back to HMRI.
ARTICLE VIII - RETURNS, CHARGEBACK AND REBATES
8.01 Returns of Product
(a) Returns will be the financial responsibility of the party that
originally sold the returned Product. Returns shall be tracked by lot number.
Returned Product with lot numbers sold exclusively by HMRI will be the financial
responsibility of HMRI, returned Product with lots numbers sold exclusively by
Roberts will be the responsibility of Roberts; financial responsibility for
returned Product from lots where each party sold a portion of the lot will be
prorated based on the portion of the shared lot that each party sold.
(b) Both parties agree to enforce preauthorized return or scan and destroy
procedures in an attempt to have customer return the Product and obtain credit
from the party who originally sold the Product to them. Both parties agree to
accept returns from the prorated lot. However, either party may accept Product
returns for which it is not financially responsible in order to maintain its
reputation and good will in the marketplace and the financially responsible
party will reimburse the party processing the return. In these cases,
reimbursement will be at the current Net Wholesale Price.
8.02 Chargebacks and Rebates
(a) HMRI will be financially responsible for all chargeback claims related
to Product sold by a wholesaler to a chargeback contract customer received by
HMRI prior to, on and after the date hereof and for a period of six (6) months
thereafter.
4
<PAGE>
(b) HMRI will be financially responsible for all managed care rebates
related to Product dispensed by a pharmacist received by HMRI prior to, on and
after the date hereof and for a period of six (6) months hereafter;
(c) In general, ROBERTS will forward to HMRI for payment any claims
received related to Section 8.02(a) and (b) above for which HMRI is financially
responsible. However, for the purpose of administrative convenience or at the
specific request of a customer, ROBERTS may elect to pay the claim for which
HMRI is financially responsible and HMRI will reimburse ROBERTS with respect to
such claim;
(d) HMRI will assign ROBERTS, effective July 1, 1998, any then effective
rebate or chargeback contracts covering PRODUCT. It is understood that ROBERTS
is accepting contractual obligations only as they relate to PRODUCT. ROBERTS
will continue to provide PRODUCT and services as required by those contracts
until such time as ROBERTS negotiates new PRODUCT pricing. During the period
between the effective date of this Agreement and July 1, 1998, all PRODUCT sales
under contract will be credited to ROBERTS. Payment to ROBERTS for sales during
this period will be made by August 15, 1998. After the expiration of the period
described in paragraph 8.02(a) and (b), HMRI will forward to ROBERTS for payment
any claims for chargebacks or rebates for which ROBERTS is financially
responsible or HMRI may elect to pay the claim for which ROBERTS is responsible
and ROBERTS will reimburse HMRI with respect to such claim;
(e) HMRI will be financially responsible for all Medicaid rebates related
to Product dispensed by a pharmacist received by HMRI prior to, on and after the
date hereof and for a period of six (6) months thereafter. For administrative
convenience, HMRI will continue to pay all future Medicaid rebate claims it
receives. Roberts will reimburse HMRI for any rebate claims paid by HMRI but
which relate to Product dispensed by a pharmacist after the aforesaid six month
period.
ARTICLE IX - SPECIAL SERVICES
9.01 From and after the date hereof and until July 1, 1998, HMRI shall,
(a) in written form and substance satisfactory to Roberts, notify all
customers and formularies under contracts existing as of the date of this
Agreement that as of July 1, 1998 Roberts shall be the seller of the Product
(providing Roberts with a duplicate set of mailing labels for its use);
(b) invoice, book sale and ship Product on behalf of Roberts and use all
reasonable efforts (short of instituting third party collection or legal
proceedings) to collect amounts due for Product so shipped and remit such
amounts due to ROBERTS.
(c) handle and report adverse events and product quality complaints. HMRI
will promptly notify ROBERTS of any action taken pursuant to this paragraph.
9.02 For the first two quarters of 1998, HMRI shall calculate the appropriate
Federal Ceiling price and shall be responsible for Federal Supply Schedule
contract compliance and reporting. Beginning July 1, 1998, ROBERTS will assume
full responsibility for the calculation of Federal Ceiling Price and Federal
Supply Schedule contract compliance and reporting. By July 31, 1998,
5
<PAGE>
HMRI will provide ROBERTS with information concerning its 1997 and January 1 to
June 30, 1998 pricing and sale of PRODUCT.
ARTICLE X - COMPETITION
10.01 For a period of two (2) years from the date hereof, neither HMRI nor its
subsidiaries will Engage (as defined herein) in the Restricted Business (as
defined herein).
(a) Engage. As used herein, the term "Engage" (together with any and all
variations thereof) means taking part in or participating in, whether such
taking part or participating is direct or indirect or alone or in combination
with others.
(b) The Restricted Business. As used herein, the term "Restricted
Business" means manufacturing, distributing or selling any prescription human
pharmaceutical product, anywhere in the Territory containing mesalamine or any
ester or salt thereof as an active ingredient, either alone or in combination
with other active ingredients.
10.02 Acquisition and Mergers. If, at any time during the aforesaid two (2)
year period, HMRI acquires a product, product range, business or entity, or
merges with an entity, which causes HMRI to Engage in the Restricted Business,
HMRI will give Roberts the right to acquire that product which would be
considered Restricted Business hereunder at fair market value.
ARTICLE XI - SUCCESSION AND ASSIGNMENT
11.01 Neither party hereto may assign, cede or transfer its rights arising from
this Agreement except to a person controlling, controlled by or under common
control with the assignor without the written consent of the other party, which
consent may not be unreasonably withheld; provided that without such consent
either party may assign the Agreement in connection with the transfer or sale of
all or substantially all of its business or its merger of consolidation with
another company.
11.02 This Agreement shall inure to the benefit of and be binding upon each
party signatory hereto, its successors and permitted assigns. No assignment
shall relieve either party of the performance of any accrued obligation which
such party may then have under this Agreement.
ARTICLE XII - EXECUTION OF ADDITIONAL DOCUMENTS
12.01 Each party signatory hereto agrees to execute such further papers or
documents or agreements as may be reasonably necessary to effect the purposes of
the Agreement and carry out its provisions.
ARTICLE XIII - NOTICE
13.01 Any notice required or permitted to be given under this Agreement shall
be in writing and shall deemed to have been fully given if sent by registered or
certified mail or by facsimile confirmed by registered or certified mail,
addressed as follows:
6
<PAGE>
If to HMRI: Hoechst Marion Roussel, Inc.
10236 Marion Park Drive
Kansas City, Missouri 4137-1405
Attention: General Counsel
If to ROBERTS: Roberts Laboratories Inc.
4 Industrial Way West
Eatontown, New Jersey 07724
Attention: General Counsel
ARTICLE XIV - ENTIRE AGREEMENT
14.01 This Agreement constitutes the whole agreement between the parties and
supersedes all written or oral understandings or agreements in variation of its
terms. No amendment, verification, or modification of this Agreement shall be
valid unless in writing and signed by both parties hereto.
ARTICLE XV - GOVERNING LAW
15.01 This Agreement shall be governed and construed in accordance with the
laws of the state of Missouri.
ARTICLE XVI - FORCE MAJEURE
16.01 Neither party shall be responsible or liable, in any way, for any default
in performance of this Agreement arising, directly or indirectly, from any cause
beyond such Party's control, including, without limiting the generalities of
this provision, fire, flood, tornado, cyclone, war, enemy action, embargo,
strike, lockout, labor trouble, transportation difficulties, governmental order,
proclamation or regulation.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
this 1st day of April, 1998.
HOECHST MARION ROUSSEL, INC. ROBERTS LABORATORIES INC.
BY: /s/ Gerald P. Belle BY: /s/ John T. Spitznagel
--------------------- ------------------------
NAME: Gerald P. Belle NAME: John T. Spitznagel
------------------------
TITLE: President, Hoechst Marion Roussel TITLE: President & CEO
---------------
North America
7
<PAGE>
Exhibit 10.88(B)
AMENDMENT TO SUBLICENSE AND ASSIGNMENT AGREEMENT
THIS AGREEMENT ENTERED INTO AS OF THE 24th DAY OF JUNE, 1998
BETWEEN: HOECHST MARION ROUSSEL, INC., a Delaware corporation having its
principal place of business at 10236 Marion Park Drive, P.O. Box
9627, Kansas City, Missouri 64134 ("HMRI")
AND ROBERTS LABORATORIES INC., a New Jersey corporation having its
principal place of business at 4 Industrial Way West, Eatontown, New
Jersey 07724 (ROBERTS)
WHEREAS, HMRI and ROBERTS entered into a Sublicense and Assignment Agreement on
April 1, 1998; and
WHEREAS, the parties now desire to amend that agreement;
NOW, THEREFORE, it is hereby agreed that the Sublicense and Assignment Agreement
is amended to read as follows:
ARTICLE V PAYMENT
5.01 As consideration for the rights sublicensed and assigned and the assets
transferred herein ROBERTS shall pay to HMRI the sum of one hundred and forty
one million dollars ($141,000,000) no later than July 1, 1998.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed on
this 24th day of June, 1998.
HOECHST MARION ROUSSEL, INC. ROBERTS LABORATORIES INC.
By: /s/ Gerald P. Belle By: /s/ John T. Spitznagel
-------------------- ------------------------
NAME: Gerald P. Belle NAME: John T. Spitznagel
TITLE: President, Hoechst Marion Roussel TITLE: President and CEO
North America
1
<PAGE>
June 24, 1998
Hoechst Marion Roussel, Inc.
10236 Marion Park Drive
Kansas City, MO 64134
Re: PENTASA
Gentlemen:
This letter will confirm our understanding regarding the payment for our
acquisition of PENTASA from you. It is understood and agreed as follows:
1. We shall pay you the sum of $141,000,000 no later than July 1,
1998, pursuant to the terms of a Sublicense and Assignment
Agreement executed by our respective firms:
2. You shall pay us interest on the aforesaid sum at the rate of
4.92% per annum according to the attached schedule.
If you are in accord with the foregoing, please so indicate by signing and
returning to us the enclosed copy of this letter.
Sincerely,
/s/ Peter M. Rogalin
- ---------------------
Peter M. Rogalin
VP Finance, Treasurer
and Chief Financial Officer
PMR/mer
Attachments
cc: A. Rascio
W. Shusko
Agreed to and accepted:
HOECHST MARION ROUSSEL, INC.
By: /s/ Gerald P. Belle
---------------------
2
<PAGE>
AMORTIZATION OF INTEREST
------------------------
Date of Principal Payment: June 25, 1998
Rate of Interest: 4.92% per annum
<TABLE>
<CAPTION>
Principal
Interest Payment Date Amount Remaining Balance
--------------------- ------ -----------------
<S> <C> <C>
July 1, 1998 $ 114,036 $123,375,000
October 1, 1998 1,529,985 105,750,000
January 1, 1999 1,311,416 88,125,000
April 1, 1999 1,069,089 70,500,000
July 1, 1999 864,774 52,875,000
October 1, 1999 655,708 35,250,000
January 1, 2000 437,139 17,625,000
April 1, 2000 216,194 0
----------
$6,198,341
</TABLE>
3
<PAGE>
Exhibit 10.88(C)
SUPPLY AGREEMENT
----------------
This agreement entered into AS OF the 1st day of APRIL, 1998
between: HOECHST MARION ROUSSEL INC., a Delaware corporation ,
having its principal place of business at 10236 Marion
Park Drive, P.O. Box 9627, Kansas City, Missouri 64134,
(hereinafter referred to as "HMRI")
and: ROBERTS LABORATORIES INC., a New Jersey corporation,
having its principal place of business at 4 Industrial
Way West, Eatontown, New Jersey 07724,
(hereinafter referred to as "ROBERTS")
WHEREAS FERRING A/S and Marion Laboratories, Inc. (now Hoechst Marion Roussel,
Inc.) (hereinafter referred to as "Marion") have entered into a License
Agreement on April 25, 1983 pursuant to which FERRING has licensed to HMRI
commercial rights related to PRODUCT (as hereinafter defined) in the United
States and its territories and possessions and Canada (hereinafter referred to
as the "Marion Agreement");
WHEREAS HMRI and ROBERTS have entered into an agreement on April 1, 1998
pursuant to which HMRI has transferred to ROBERTS its rights related to the
PRODUCT in the United States and its territories and possessions (hereinafter
referred to as the "Roberts Agreement");
WHEREAS pursuant to the Roberts Agreement, HMRI agreed to provide ROBERTS its
requirements of the PRODUCT under a separate Supply Agreement; and
WHEREAS HMRI and ROBERTS wish to enter into this Supply Agreement in order to
set out in writing the terms and conditions of the supply of the PRODUCT,
effective as of the date of this Agreement.
Now, therefore, in consideration of the mutual benefits in furthering the
interests of the parties, it is hereby agreed as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 Definitions
-----------
In this Agreement, the following words shall have the meanings set out
hereunder:
1.1.1 DEFECTS means any defect as determined according to quality
assurance standards recognized by the pharmaceutical industry.
1.1.2 FDA means the Food and Drug Administration.
1.1.3 NET WHOLESALE PRICE means the invoice amount charged to wholesalers
by HMRI for sales pursuant to the Marion agreement.
1.1.4 Patents means any and all patents maturing or issuing out of United
States Patent Service No. 270,517 filed May 29, 1981 and any valid
divisions, continuations, continuations-in-part, additions or
reissues thereof, including United States Patent Service No.
4,496,553, United States Patent Service No. 4,880,794, and United
States Patent Service No. 4,980,173.
1.1.5 PRODUCT means the pharmaceutical product, in a packaged finished
form, for oral administration, containing a controlled-release form,
and method of use, of 5-aminosalicylic acid (5-ASA) useful and for
use in the treatment of ulcerative colitis and Crohn's disease in
humans, all as more fully described in the Patents and in
specifications agreed to in writing by the parties.
1.1.6 QUARTER means a three-month period starting on the first date of
January, April, July or September of any year of the TERM.
1.1.7 STANDARD COST means the projected actual cost incurred by HMRI in
the manufacture of PRODUCT.
1.1.8 TERM means the term of this Agreement as set out in Section 4.1
shortened by any early termination pursuant to Section 4.2.
1.1.9 Territory means the United States and its territories and
possessions.
1.2 Interpretation
--------------
This Agreement shall be governed by the following provisions:
<PAGE>
1.2.1 This Agreement shall be governed and construed in accordance with
the laws of the State of Missouri.
1.2.2 Should any provision of this Agreement be null or without effect or
deemed unwritten under any applicable law, it or they shall not
render the other provisions, terms and conditions hereof invalid as
this Agreement is not an indivisible whole.
1.2.3 The division of this Agreement into Articles, Sections, Subsections
and subdivisions and the insertions of headings are for convenience
of reference only and shall not affect or be utilized in the
construction or the interpretation hereof.
1.2.4 Where required herein, the singular shall comprise the plural and
vice versa, the masculine shall include the feminine and vice versa
while the neuter shall comprise both the masculine and the feminine.
ARTICLE II
SUPPLY OF PRODUCT
-----------------
2.1 HMRI shall supply exclusively to ROBERTS and ROBERTS shall purchase
exclusively from HMRI, subject to all of the terms and conditions of this
Agreement, all of ROBERTS' requirements of PRODUCT for sale in the
TERRITORY.
2.2 All quantities of the PRODUCT required under this Agreement shall be
manufactured by HMRI according to the specifications and quality control
requirements agreed upon by the parties hereto and fit for its approved
use; provided, however, that such specifications and requirements meet with
the approval of appropriate governmental regulatory bodies in the
TERRITORY. PRODUCT will be available in 240 count 250 mg capsule packages,
80 count 250mg capsule packages, and 25 count 250 mg sample packs, each
such pack referred to hereafter as SKU. All quantities of the PRODUCT
received by ROBERTS shall be accompanied by a certificate of analysis and
certification of manufacturing.
2.3 Forecasts
---------
(a) Long-Range Forecasts. Within ninety (90) days from the execution
--------------------
of this Agreement, and at least one hundred and twenty (120) days
prior to the beginning of each Calendar Year for the term of this
Agreement, ROBERTS shall furnish HMRI with a rolling quarterly
forecast of the
<PAGE>
quantities of PRODUCT that ROBERTS intends to order during the
remaining term of the Agreement. Such forecasts shall represent the
most current estimates for planning purposes, but not be purchase
commitments. Such forecasts shall not exceed HMRI's maximum annual
capacity as set forth in Section 2.7(a), unless a forecast in
excess of HMRI's capacity is agreed to by the parties.
(b) Short-Term Forecasts. Within thirty (30) days from the execution
--------------------
of the Agreement and, at least ninety (90) days prior to the first
day of each succeeding calendar quarter, ROBERTS shall furnish HMRI
with a rolling forecast of the quantities of PRODUCT by SKU that
ROBERTS intends to order by month, during the eighteen (18) month
period commencing with that calendar quarter. Such forecasts shall
constitute binding commitments of ROBERTS to purchase the
percentages of PRODUCT set forth below pursuant to firm orders
issued in accordance with Section 2.4. Such forecasts shall not
exceed HMRI's maximum annual capacity as set forth in Section
2.7(a). However, HMRI will use its best efforts to fill orders by
ROBERTS in excess of such forecasts. ROBERTS shall be required to
purchase that percentage of the quantity of PRODUCT specified in
the forecast for successive quarters as follows:
Period of the Forecast Percentage of PRODUCT by SKU
that ROBERTS is Required to Purchase
Immediate Three Month Period 100%
Second Three Month Period 75%
Third Three Month Period 25%
Fourth Three Month Period 0%
2.4 Firm Orders. ROBERTS shall place each purchase order with HMRI for PRODUCT
-----------
to be delivered hereunder at least ninety (90) days prior to the delivery
date specified in each respective order. Such orders shall be in Units,
full lots and minimum order quantities and shall specify for each three
month period an aggregate quantity of PRODUCT (by Unit) required to be
purchased by ROBERTS pursuant to Section 2.3. In addition, the number of
such purchase orders shall not exceed one (1) per month, unless a greater
monthly number is agreed to by HMRI, and, to the extent possible, be
delivered to HMRI on or about the fifteenth (15) of such month. HMRI shall
confirm in writing each such purchase order within ten (10) business days
of receipt thereof. HMRI shall deliver against each such order in
accordance with Section 2.5. ROBERTS shall be obligated to purchase all
such PRODUCT ordered and delivered by the delivery date specified in
ROBERTS' purchase order, provided that such PRODUCT meets the
Specifications.
<PAGE>
2.5 Delivery. Delivery terms shall be F.O.B. the Kansas City manufacturing
--------
facility or such other facility mutually agreed to by the parties. HMRI
shall ship PRODUCT on a carrier or carriers specified by ROBERTS in
accordance with HMRI's purchase order form or as otherwise directed by
ROBERTS in writing. Title to and risk of loss as to any PRODUCT purchased
by ROBERTS shall pass to ROBERTS upon the earlier of (i) a common carrier
accepting possession or control of such PRODUCT, or (ii) the passage of
such PRODUCT from the loading dock of HMRI's facility to or any employee,
agent or contractor of ROBERTS or such common carrier.
2.6 Rejected Goods/Shortages
------------------------
(a) Notice; Replacement. ROBERTS shall notify HMRI in writing of any
-------------------
claim relating to PRODUCT that fails to meet the Specifications,
arising from defective manufacture, storage or handling of such
PRODUCT by HMRI prior to shipment or any shortage in quantity of any
shipment of PRODUCT within thirty (30) days of receipt of such
PRODUCT.
Provided the parties agree that the PRODUCT is defective or that there
is a shortage, HMRI shall replace the defective PRODUCT or make up the
shortage as soon as reasonably possible after receiving such notice,
at no additional cost to ROBERTS. ROBERTS shall make arrangements with
HMRI for the return or disposal of any rejected PRODUCT; the costs of
such return or disposal shall be paid by HMRI. In the event that only
a limited supply of PRODUCT is available at the time of such rejection
or shortage, then HMRI shall ship to ROBERTS such quantities of
PRODUCT as are available and ROBERTS will be promptly reimbursed or
credited against future orders, at ROBERTS' option, for amounts paid
for the remaining quantity of rejected PRODUCT.
(b) Disputes. If HMRI disagrees with ROBERTS' claim that the PRODUCT
--------
fails to meet the Specifications, HMRI and ROBERTS representatives
shall attempt to resolve such dispute. If the representatives cannot
resolve such dispute, a sample of such PRODUCT shall be submitted by
HMRI to a mutually agreed-to qualified laboratory for testing against
the Specifications and the test results obtained by such laboratory
shall be final and controlling. The fees and expenses of such
laboratory testing shall be borne entirely by the party whose PRODUCT
analysis was in error. In the event the test results indicate that the
PRODUCT in question does not conform to the Specifications, HMRI shall
replace such PRODUCT at no additional cost to ROBERTS as soon as
reasonably possible after receipt of such results. In the event the
test results indicate that the PRODUCT in question
<PAGE>
does conform to the Specifications, ROBERTS shall pay all additional
costs incurred as a result of the disagreement.
2.7 Failure to Supply; Capacity Allocation
--------------------------------------
(a) Capacity. HMRI's current maximum annual capacity to manufacturer
--------
PRODUCT is 165 bulk capsule batches. HMRI anticipates that annual
capacity will increase to 200 bulk capsule batches beginning in July
of 1999.
(b) HMRI Notice. In the event that HMRI, upon receiving a forecast under
-----------
Section 2.3 or a firm order under Section 2.4, is, or anticipates that
it will be, unable to meet such forecast or firm order, either in
whole or in part, due to any reason, HMRI shall give written notice of
such inability to ROBERTS within ten (10) days of receipt of such
forecast or firm order or upon HMRI's reasonable belief that it cannot
fulfill the forecast or firm order, if such date is after such ten
(10) day period. If such inability is partial, HMRI shall fulfill firm
orders with such quantities of PRODUCT as are available.
(c) Supply Alternatives. HMRI and ROBERTS shall meet within thirty (30)
-------------------
days of such written notice to consider and, if appropriate, pursue
alternative arrangements for meeting ROBERTS' requirements for
PRODUCT. Any such alternative pursued shall be subject to all required
regulatory approvals and HMRI's approval. Any alternative arrangements
entered into pursuant to this Section 2.7 shall act in no way as a
waiver of any other rights or remedies which ROBERTS or HMRI may have
under this Agreement or otherwise.
(d) Capacity Allocation. In the event that HMRI's inability to meet firm
-------------------
orders or forecasts is due to a shortage of production capacity at
HMRI's facility, in addition to the requirements of Section 2.7(a) and
Section 2.7(b) above, HMRI shall promptly notify ROBERTS of such
shortage of production capacity, and, if possible, the date such
shortage of production capacity is expected to end. In such event,
HMRI shall allocate its available production capacity to the
production of PRODUCT in such proportion as the production capacity
actually utilized to meet orders for the PRODUCT over the previous
twelve (12) month period bears to total production capacity in such
HMRI facility(ies) over the same period.
(e) Supply Resumption. HMRI shall notify ROBERTS as soon as possible of
-----------------
the date upon which such shortage of production capacity will cease.
Upon
<PAGE>
resumption of production of PRODUCT ROBERTS shall resume obtaining its
requirements for PRODUCT from HMRI to the extent such resumption is
consistent with any contractual arrangements entered into with third
parties pursuant to Section 2.7(b).
2.9 Manufacturing Changes.
---------------------
(a) Required Manufacturing Changes. For changes to the Specifications or
------------------------------
manufacturing process that are required by applicable law, rule or
regulation or by action (or inaction) by any legally competent
government or other regulatory body of authority or by medical or
scientific concerns as to the toxicity, safety and/or efficiency of
the PRODUCT (collectively "Required Manufacturing Changes"), the
Parties shall cooperate in making such changes promptly.
(b) Discretionary Manufacturing Changes. For changes to the
-----------------------------------
Specifications or Manufacturing process that are not Required
Manufacturing changes (collectively "Discretionary Manufacturing
Changes") the Parties must both agree to such Discretionary
Manufacturing Changes and shall, to the extent commercially reasonable
under the circumstances, cooperate in making such changes.
Notwithstanding the foregoing, HMRI's standard change control
procedures shall be utilized in reviewing such changes.
(c) Manufacturing Changes. Notwithstanding the foregoing, all costs
---------------------
associated with Required Manufacturing Changes, (including, without
limitation obsolete raw materials, work-in-process and finished
product inventories) shall be shared equally. Discretionary
Manufacturing Changes shall be borne by the party initiating such
change, except that should such changes that result in cost savings,
such savings shall be shared equally.
ARTICLE III
PRICE
-----
3.1 HMRI's 1998 standard costs for the manufacturer of PRODUCT are $18.214 for
the 240 count 250mg pack; $6.868 for the 80 count blister pack; and $2.916
for the 25 count sample pack. HMRI's 1998 Net Wholesale Price for PRODUCT
is $75.70 for the 240 count 250mg pack and $25.15 for the 80 count blister
pack.
3.2 During the term of this Acquisition, the cost of goods paid by ROBERTS to
HMRI for its requirements of 240 count 250mg. capsules packages shall be
22% of net wholesale price, an amount equal to $16.654 per 240 count 250mg
package.
<PAGE>
3.4 HMRI's existing product inventory as of the date of this Agreement will be
sold to ROBERTS at 22% of net wholesale price. HMRI's existing inventory of
25 count sample packs will be sold to ROBERTS at HMRI's standard cost.
3.5 In the event that ROBERTS takes over packaging responsibilities, the
parties will negotiate a revised cost of goods to appropriately reflect
HMRI's reduced costs, but in no event shall the reduction be less than
$1.0126 per 240 count 250 mg capsules.
3.6 Payments shall be made not later than thirty (30) days after date of
invoice, which invoice shall be issued when PRODUCT is delivered pursuant
to Section 2.5 hereof.
ARTICLE IV
TERM AND TERMINATION
--------------------
4.1 This Agreement shall be for a two year term commencing on April 1, 1998 or
such later date upon which the Roberts Agreement shall be executed. Upon
termination of this agreement, HMRI will use its best efforts in
cooperation with ROBERTS to transfer the PRODUCT manufacturing
responsibilities to ROBERTS. In the event that this transfer cannot be
accomplished, the parties will negotiate in good faith for an agreement to
continue the supply of PRODUCT.
4.2 Either party hereto may terminate this Agreement upon the substantial or
material breach of any of the terms hereof by the other party on sixty (60)
days' prior written notice; provided, however, that if, during the said
sixty (60) days, the party notified of its breach cures said breach, then
the Agreement shall continue in full force and effect; and, provided
further, should either party hereto be dissolved or liquidated or become
insolvent or if any proceeding is filed or commenced by or against either
party under bankruptcy, insolvency or debtor relief law, the other party
may terminate this Agreement immediately by giving written notice of such
termination to the other party. The termination upon the breach shall be
without prejudice to any remedy which either party may have against the
other for such breach.
ARTICLE V
PRODUCT LIABILITY
-----------------
ROBERTS agrees to save, defend, indemnify and hold harmless HMRI from and
against any and all demands, claims, actions, suits, costs, expenses, awards,
damages, liabilities, and/or loss resulting or arising out of the, marketing,
sale or distribution of the PRODUCT by ROBERTS in the TERRITORY; except,
however, HMRI shall be solely liable for, and shall save, defend, indemnify and
hold harmless ROBERTS from and against any and all
<PAGE>
demands, claims, actions, suits, costs, expenses, awards, damages, liabilities,
and/or loss resulting or arising out of the manufacturing, handling or shipment
of the PRODUCT by HMRI or any other willful or negligent act of HMRI, its
officers, agents and employees.
ARTICLE VI
FINAL PROVISIONS
----------------
6.1 This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and permitted assigns.
6.2 This Agreement constitutes the entire agreement of the parties with respect
to the subject matter of this Agreement and supersedes all prior and
contemporaneous agreements and understandings in connection therewith.
6.3 This Agreement may be amended or waived only by a formal written amendment
accepted by both parties. In no event will the use of any form of purchase
order, shipping document, confirmation, or waybills be effective to vary,
alter or modify the terms and provisions of this Agreement. Nor will such
use have the effect of substituting the provisions set forth on such form
for the provisions contained in an authorized purchase order.
6.4 All notices, requests, orders, consents or approvals required or permitted
by this Agreement shall be in writing and sent to the parties at the first
above-mentioned addresses. A party may change such address by notice to the
other party from time to time. Notices shall be delivered personally or
sent by registered or certified mail with postage prepaid or by facsimile.
Notices given by mail shall be deemed to have been received five (5)
business days after transmission.
6.5 Each of the parties upon the request of the other shall do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, documents, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably
necessary or desirable to effect complete consummation of the transactions
contemplated by this Agreement.
6.6 Nothing herein contained shall constitute or create a partnership among, or
a joint venture by, all or any of the parties.
6.7 Neither failure nor delay by either party to exercise any right or remedy
provided in this Agreement or by statute, or law shall operate as a waiver
of such right or remedy, nor shall any single or partial exercise of any
such right or remedy preclude any other or further exercise of any other
right or remedy. The rights and remedies set forth in this Agreement are
cumulative and enforcement of one right
<PAGE>
or remedy shall not preclude subsequent enforcement of the same or other
rights and remedies provided in this Agreement or at law.
6.8 This Agreement and all rights and obligations hereunder shall not be
assigned in whole or in part by either party to any third party without the
prior written consent of the other.
6.9 Neither party shall be responsible or liable, in any way, for default in
performance of this Agreement arising, directly or indirectly, from any
cause beyond such Party's control, including without limiting the
generalities of this provision, fire, flood, tornado, cyclone, war, enemy
action, embargo, strike, lockout, labor trouble, transportation
difficulties, governmental order, proclamation or regulation.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in two
counterparts by their duly authorized representatives as of the day and year
first set forth above.
HOECHST MARION ROUSSEL, INC.
By: /s/ Gerald P. Belle
--------------------------------------------------
Name: Gerald P. Belle
Title: President, Hoechst Marion Roussel North America
Signed on April 1, 1998
ROBERTS LABORATOTIES INC.
By: /s/ John T. Spitznagel
--------------------------------------------------
Name: John T. Spitznagel
----------------------------------------------
Title: President & CEO
----------------------------------------------
Signed on April 1, 1998
<PAGE>
Exhibit 10.88(D)
June 17, 1998
Writer's Direct Dial Number
(914) 631-4489
Edward H. Stratemeier, Esq.
Vice President and General Counsel
Hoechst Marion Roussel, Inc.
9300 Ward Parkway
Kansas City, MO 64114
Re: Stand-Still Agreement
---------------------
Dear Ed:
This letter agreement is between Ferring A/S ("Ferring"), Hoechst Marion
Roussel, Inc. ("HMR"), Roberts Pharmaceutical Corporation and Roberts
Laboratories, Inc. (collectively "Roberts"). It sets forth the agreement of the
parties by their counsel, who, by signing below, confirm their authority to bind
their respective clients to the terms hereof.
This agreement arises out of the parties' mutual desire to provide an
opportunity to attempt amicably to resolve without litigation a dispute that has
arisen between Ferring, on the one hand, and HMR and Roberts, on the other,
concerning HMR's purported sublicense and assignment to Roberts, without
Ferring's consent, of rights flowing to HMR from Ferring under a License
Agreement, dated April 25, 1983, between Ferring and Marion Laboratories, Inc.
and a Development, Supply and Distribution Agreement, dated November 7, 1997,
between Ferring and HMR (the "Dispute").
The parties hereby agree as follows:
1. This agreement and any discussions or communications the parties
have pursuant thereto represent settlement negotiations and may not be admitted
into evidence or otherwise used in any litigation or other proceeding or used in
any other way or for any other purpose other than to attempt to settle the
Dispute, except that this agreement may be used to enforce its terms by a party
not in breach in an action or proceeding commenced in violation of its terms.
Moreover, neither the agreement nor any discussions or communications had
pursuant to this agreement may be disclosed to any person or entity not a party
to the agreement except as required by law, judicial order or applicable
regulation.
<PAGE>
2. This agreement has been entered into in reliance upon the provisions
of Rule 408 of the Federal Rules of Evidence and any similar state provision.
3. Ferring may not commence any action or assert in court or other
proceeding any claim or cause of action against HMR or Roberts concerning the
Dispute or seek any declaration or other relief with respect thereto until
Monday, June 22, 1998.
4. Neither HMR nor Roberts may commence any action or assert in court
or other proceeding any claim or cause of action against Ferring concerning the
Dispute or seek any declaration or other relief with respect thereto until
Tuesday, June 23, 1998, except in an action or other proceeding commenced by
Ferring.
5. The terms of this agreement may not be amended or waived except in a
writing signed by the party against which the amendment or waiver is being
assessed.
6. If any action or other proceeding is ultimately commenced between or
among any of the parties hereto concerning the Dispute, the passage of time from
the date and time of this letter until the commencement of such action or other
proceeding shall not be used by any other party against any other party in any
way.
7. The construction and effect of this agreement shall be governed by
the laws of the State of New York, and no party shall be entitled to have the
agreement construed against any other party by reason of its authorship.
8. This agreement may be executed in counterparts and, when so executed
by all of the parties, shall have the same effect as if one original of the
agreement had been signed by all of the parties.
Yours truly,
Ferring A/S
By: /s/ Arnold Chase
-----------------------
Arnold Chase
Counsel
Above agreement accepted:
<PAGE>
Hoechst Marion Roussel, Inc. Roberts Pharmaceutical Corporation
Roberts Laboratories, Inc.
By: /s/ Edward H. Stratemeier By: /s/ Anthony Rascio
------------------------- -----------------------------
Edward H. Stratemeier Anthony Rascio
Vice President and General Counsel General Counsel
<PAGE>
Exhibit 10.88(E)
Agreement dated June 22, 1998 among Ferring A/S, a Danish corporation
with principal offices at Indertoften 10, DK 2720 Vanlose, Denmark ("Ferring"),
Hoechst Marion Roussel, Inc. a Delaware corporation with principal offices at
10236 Marion Park Drive, Kansas City, Missouri 64134 ("HMRI"), and Roberts
Laboratories, Inc. and Roberts Pharmaceutical Corporation, New Jersey
corporations with principal offices at Meridian Center II, Four Industrial Way
West, Eatontown, New Jersey 07724 (collectively "Roberts").
The parties agree as follows:
1. Ferring agrees not to file any complaint, cause of action, or other
proceeding arising out of or related to the matters described in the draft
Complaint dated June 17, 1998 and titled Ferring A/S v. Roberts Laboratories
-----------------------------------
Inc., Roberts Pharmaceutical Corporation and Hoechst Marion Roussel, Inc.
- -------------------------------------------------------------------------
2. HMRI agrees to pay to Ferring the sum of $8,500,000 which amount
shall be paid in two equal payments on December 1, 1998 and January 4, 1999.
3. The parties agree that the Development, Supply and Distribution
Agreement dated November 7, 1997 between Ferring and HMRI (the "1997 Agreement")
is amended as follows:
(a) Section 8.01(c) is amended by (i) changing the word "approval"
in the second line to "review and comment" and (ii) deleting the
words "such approval not to be unreasonably withheld."
(b) Section 8.02 is amended by adding at the beginning of such
Section the words "At the option of Ferring."
(c) Section 8.03 is amended by adding at the beginning of such
Section the words "Subject to Section 8.02."
(d) In all other respects the 1997 Agreement shall remain in full
force and effect.
4. Notwithstanding anything to the contrary in the 1997 Agreement or the
License Agreement dated April 25, 1983 between Ferring and Marion Laboratories,
Inc. (the "1983 Agreement"), Ferring shall have the right to use and apply the
trademark Pentasa(R) to products containing 5-aminosalicylic acid ("5-ASA")
other than oral formulations. The parties agree to execute such further
documents or agreements as may be necessary to carry out this provision.
<PAGE>
5. Ferring agrees that it will not grant license rights for the United
States to any third party with respect to products containing 5-ASA other than
oral formulations without affording to Roberts the first opportunity to
negotiate for such rights on such terms as Ferring and Roberts may in good faith
negotiations agree. If Ferring and Roberts are unable to agree within 120 days
after notice from Ferring, Ferring will be free to grant such rights to a third
party.
6. Each party waives any claim which it may have against the others
arising under the 1983 Agreement of the 1997 Agreement prior to the date hereof;
provided, however, Ferring does not waive any claim for royalties due on sales
made prior to the date hereof.
7. This Agreement may not be changed or modified except in writing and
shall be governed by and construed in accordance with the laws of the State of
New York.
8. Each of the parties agrees to execute such further papers or
agreements as may be necessary or desirable to effect the purposes of this
Agreement and carry out its provisions.
In witness whereof, the parties have caused this Agreement to be executed
on the date stated above.
Ferring A/S Roberts Laboratories, Inc.
/s/ Anthony A. Rascio
- ---------------------------------- ----------------------------
Hoechst Marion Roussel, Inc. Roberts Pharmaceutical Corp.
/s/ Gerald P. Belle /s/ Anthony A. Rascio
- ---------------------------------- ----------------------------
<PAGE>
EXHIBIT 10.90
Option and License Agreement
This Agreement ("Agreement") is entered into as of the 6th day of July,
1998, by and between RiboGene, Inc., a corporation organized under the laws of
Delaware ("RiboGene"), and Roberts Pharmaceutical Corporation ("Roberts"), a
corporation organized under the laws of New Jersey.
Recitals
Whereas, RiboGene has conducted research and development with an
intranasally administered pharmaceutical product containing metoclopramide as an
active ingredient for the treatment of delayed onset emesis and other
indications, and owns certain patents relating thereto; and
Whereas, Roberts is interested in completing the development of RiboGene's
product as a contract research organization for RiboGene, and desires to obtain
an exclusive option for obtaining a license to market said product after
regulatory approvals have been obtained;
Whereas, RiboGene and Roberts have entered into that certain Series A
Preferred Stock Purchase Agreement, dated as of the date hereof, (the "Purchase
Agreement"), pursuant to which Roberts will purchase 1,428,572 shares of Series
A Convertible Non-voting Preferred Stock of RiboGene (the "Stock Purchase");
Now, Therefore, in consideration of the foregoing and the covenants and
promises contained herein, and subject to the Closing of the Stock Purchase, the
parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" shall mean (i) any corporation or other entity ("Parent")
which directly or indirectly owns or controls at least fifty percent (50%) of
the outstanding voting securities of a party, (ii) any corporation or other
entity in which a party owns or controls at least fifty percent (50%) equity
interest, and (iii) any corporation or other entity in which a Parent of a party
owns or controls at least a fifty percent (50%) equity interest.
1.2 "Allowable Expenses" shall mean the pre-existing third party
commitments and any patent and trademark costs in the Territory incurred by
RiboGene relating to the Product, an estimate of which is contained in Exhibit
A.
1.3 "Closing" shall have the meaning specified in the Purchase Agreement.
1.4 "Collaboration Know-How" shall mean all inventions, discoveries,
materials and information developed by either party relating to the Product
during the term of this Agreement. Collaboration Know-How shall not include
Collaboration Patents.
1.5 "Collaboration Patents" shall mean any and all patents, including,
without limitation, any substitutions, extensions, reissues, renewals,
supplementary protection certificates
1.
<PAGE>
and inventors' certificates, which have not been held invalid or unenforceable
by a non-appealable or non-appealed decision of a court of competent
jurisdiction, issuing from patent applications filed in any jurisdiction,
including, without limitation, any provisionals, divisionals, continuations, and
continuations-in-part, which cover inventions or discoveries made by either
party alone or both parties jointly relating to the Product during the term of
this Agreement.
1.6 "Collaboration Technology" shall mean all Collaboration Patents and
Collaboration Know-How.
1.7 "Confidential Information" shall mean a party's confidential
information, including, without limitation, Roberts Know-How, RiboGene Know-How,
Collaboration Know-How, Development Programs, engineering designs and drawings,
research data, manufacturing processes and techniques, scientific,
manufacturing, marketing, and business plans, financial or personnel matters
relating to the party, its present or future products, sales, suppliers,
customers, employees, investors or business.
1.8 "Development Program" shall mean the program of preclinical and
clinical development activities relating to the Product undertaken by Roberts
pursuant to this Agreement.
1.9 "Effective Date" shall mean the date on which the Closing occurs, as
defined in the Purchase Agreement.
1.10 "FDA" shall mean the United States Food and Drug Administration.
1.11 "Field" shall mean therapeutic treatment of delayed onset emesis and
any other conditions or diseases in humans.
1.12 "NDA" shall mean the approval required by the FDA or an equivalent
non-U.S. authority required for the marketing and sale of the Product in the
Territory.
1.13 "Net Sales" shall mean the gross invoice price of the Product sold in
the Territory by Roberts, its Affiliates or sublicensees to an independent third
party after deducting, if not already deducted in the amount invoiced (a) trade,
quantity and cash discounts actually taken, (b) returns, rebates, chargebacks
and allowances made or granted, and (c) transportation and insurance charges
separately billed. With respect to sales of combination products consisting of
metoclopramide combined with one or more additional active ingredients, the
parties will agree on a method of allocation in the event the situation arises.
Sales among Roberts and its Affiliates or sublicensees shall not be deemed Net
Sales. The Product shall be considered sold when invoiced by Roberts.
1.14 "Product" shall mean a pharmaceutical product containing
metoclopramide as an active ingredient formulated for intranasal delivery.
1.15 "RiboGene Know-How" shall mean all inventions, discoveries, materials
and information (i) which RiboGene owns, controls or has a license (with a right
to sublicense) as of the Effective Date or which arise outside the Development
Program during the term of this Agreement, and (ii) which are necessary or
useful for the conduct of the Development Program,
2.
<PAGE>
or the manufacture, use or sale of the Product. RiboGene Know-How shall not
include RiboGene Patents.
1.16 "RiboGene Patents" shall mean the patents listed in Exhibit B and any
and all patents other than Collaboration Patents, including, without limitation,
any substitutions, extensions, reissues, renewals, supplementary protection
certificates and inventors' certificates, which have not been held invalid or
unenforceable by a non-appealable or non-appealed decision of a court of
competent jurisdiction, issuing from patent applications filed in any
jurisdiction, including, without limitation, any provisionals, divisionals,
continuations, continuations-in-part, which (i) RiboGene owns, controls or has a
license to (with the right to sublicense) as of the Effective Date, and (ii)
would be infringed by the conduct of the Development Program, or the
manufacture, use or sale of the Product.
1.17 "RiboGene Technology" shall mean the RiboGene Patents and the RiboGene
Know-How.
1.18 "Regulatory Approval(s)" shall mean shall mean all new drug approvals,
marketing approvals, applications, licenses, permits, and other authorizations,
which are required for manufacturing and selling the Product in compliance with
applicable laws in the Territory;
1.19 "Regulatory Authority" shall mean the competent government regulatory
authority responsible for granting the Regulatory Approvals in a country of the
Territory.
1.20 "Roberts Know-How" shall mean all inventions, discoveries, materials
and information (i) which Roberts owns, controls or has a license to (with a
right to sublicense) as of the Effective Date or which arise outside of the
Development Program from time to time during the term of this Agreement, and
(ii) which are necessary or useful for the conduct of the Development Program,
or the manufacture, use or sale of the Product. Roberts Know-How shall not
include Roberts Patents.
1.21 "Roberts Patents" shall mean any and all patents other than
Collaboration Patents, including, without limitation, any substitutions,
extensions, reissues, renewals, supplementary protection certificates and
inventors' certificates, which have not been held invalid or unenforceable by a
non-appealable or non-appealed decision of a court of competent jurisdiction,
issuing from patent applications filed in any jurisdiction, including, without
limitation, any provisionals, divisionals, continuations, continuations-in-part,
which (i) Roberts owns, controls or has a license to (with the right to
sublicense) as of the Effective Date, and (ii) would be infringed by the conduct
of the Development Program, or the manufacture, use or sale of the Product.
1.22 "Roberts Technology" shall mean the Roberts Patents and the Roberts
Know-How.
3.
<PAGE>
1.23 "Steering Committee" shall mean the committee established by the
parties pursuant to Section 2.1.
1.24 "Territory" shall mean in the United States, its commonwealth and
possessions, Canada and Mexico.
1.25 "Trademark" shall mean Emitasol(R).
ARTICLE 2
PRODUCT DEVELOPMENT
2.1 Steering Committee.
(a) Formation of Steering Committee. Promptly after the Effective
Date, the parties shall establish the Steering Committee. The Steering Committee
shall consist of an equal number of members from Roberts and RiboGene, appointed
and substituted by each party as necessary from time to time. Each member shall
have appropriate technical credentials and knowledge and ongoing familiarity
with the Development Program. All decisions of the Steering Committee shall be
unanimous.
(b) Meetings of Steering Committee. The Steering Committee shall meet
quarterly or at such other intervals as shall be agreed between the parties, and
at such times as shall be mutually agreed upon by the parties and at a site
alternating between RiboGene's and Roberts's place of business, or as otherwise
mutually agreed.
(c) Responsibilities of the Steering Committee. The Steering
Committee shall establish the Development Program for the Product aimed at
developing and commercializing the Product in all possible indications in all
countries of the Territory. The Steering Committee shall monitor the progress of
the Development Program and may revise it as necessary to achieve the overall
goal of developing the Product as quickly as commercially feasible, and
maximizing the commercial potential of the Product.
2.2 Conduct of the Development Program.
(a) Roberts will conduct the Development Program under the direction
of the Steering Committee. Roberts shall keep the Steering Committee fully
informed on a reasonable basis of the development of the Product, including but
not limited to periodic written updates on the progress of each filing with a
Regulatory Authority.
(b) In performing the Development Program, Roberts shall devote the
same degree of attention, resources and diligence to the preclinical and
clinical development of the Product as it devotes to its own high priority
compounds and products. In particular, Roberts undertakes to diligently conduct
clinical trials and to apply for Regulatory Approval of the Product in each
country of the Territory within [ * ] from the Effective Date. If
Roberts has not filed an NDA or its foreign equivalent in a country of the
Territory within [ * ] from the Effective Date, Roberts' option
granted under Section 4.1 shall be deemed to
4.
<PAGE>
have expired in such country, and such country shall be excluded from the
Territory. Should an action of a Regulatory Authority outside of Roberts'
control give rise to a reasonable basis to extend the aforesaid [ * ]
period, meaning that it is reasonable to expect that Roberts acting with
commercially reasonable diligence shall not have applied for Regulatory Approval
as aforesaid, an extension of time will be provided to enable Roberts to
complete the Development Plan and the parties shall negotiate in good faith and
arrive at a reasonable period of extension.
(c) All regulatory filings shall be made in the name of RiboGene, and
any Regulatory Approvals granted thereon shall be transferred to Roberts upon
exercise of the option as set forth in Section 4.2.
2.3 Manufacture for Development. Roberts shall be responsible for
obtaining supplies of the Product in quantities necessary for performing the
preclinical and clinical development activities under the Development Program.
2.4 Access and Use of Information. RiboGene shall have the right to use
all data obtained in the studies, all filings made, and all Regulatory Approvals
obtained by Roberts in the Territory, and shall have the right to reference any
such data, any regulatory filings and Regulatory Approvals for inclusion in
regulatory submissions such as filings for Regulatory Approvals for the Product
outside of the Territory.
2.5 Development Funding. RiboGene shall fund the preclinical and clinical
studies conducted by Roberts under the Development Program, and pay the
Allowable Expenses up to an amount of seven million dollars ($7,000,000)
("Development Funds"). Any costs of activities to be performed under the
Development Program and any Allowable Expenses in excess of the Development
Funds shall be funded by Roberts. Payments by RiboGene shall be made on a
contract research basis in accordance with a development budget and schedule
established by the Steering Committee in the Development Program.
2.6 [ * ] If at any time during the term of this Agreement and
prior to the exercise of the option by Roberts pursuant to Section 4.2 below [
*
] The [
*
] RiboGene at the time when [ *
] or upon the first Regulatory Approval of the Product. If necessary
to pay for the preclinical and clinical studies under the Development Program or
the Allowable Expenses, [ *
] the budget and payment schedule contained in the Development Program or the
due date of the payments for Allowable Expenses.
5.
<PAGE>
ARTICLE 3
OWNERSHIP OF INTELLECTUAL PROPERTY AND LICENSES
3.1 Roberts Technology. RiboGene acknowledges and agrees that Roberts is
and shall remain the sole owner of the Roberts Technology and that RiboGene has
no rights in or to any of it other than the license and rights specifically
granted herein and the licenses granted pursuant to this Agreement.
3.2 RiboGene Technology. Roberts acknowledges and agrees that RiboGene is
and shall remain the sole owner of the RiboGene Technology and that Roberts has
no rights in or to any of them other than the rights specifically granted herein
and the license to be granted pursuant to this Agreement.
3.3 Collaboration Technology. Collaboration Technology shall be owned by
either party alone or jointly with the other party depending on whether such
Collaboration Technology was developed by a party alone or jointly with the
other party. Inventorship shall be determined in accordance with the rules of
inventorship under U.S. patent laws. Neither party shall have rights to such
Collaboration Technology owned solely or jointly except as expressly granted
under this Agreement.
3.4 License Grants.
(a) License Grant to Roberts. As of the Effective Date, RiboGene
hereby grants to Roberts a non-royalty bearing, exclusive license under RiboGene
Technology and Collaboration Technology in the Field for the sole purpose of
conducting the Development Program. Roberts may not grant sublicenses under the
license granted in this subsection (a) except in the context of contract
research or contract development by a third party as part of the Development
Program, and then only after the prior written approval of RiboGene, which
approval shall not be unreasonably withheld. The terms of any sublicense shall
conform to the terms of this Agreement in all respects.
(b) License Grant to RiboGene. As of the Effective Date, Roberts
hereby grants to RiboGene a non-royalty bearing, non-exclusive license, with the
right to sublicense, under Roberts Technology, and a non-royalty bearing,
exclusive license, with the right to sublicense, under Collaboration Technology
to research, develop, make, have made, use, import, offer for sale and sell the
Product outside of the Territory.
3.5 Trademark License. As of the Effective Date, RiboGene hereby grants to
Roberts a non-royalty bearing, exclusive license, with the right to sublicense
subject to RiboGene's prior written approval, under RiboGene's rights in and to
the Trademark for the sole purpose of developing, marketing, and selling the
Product in the Territory during the term of this Agreement. Roberts shall use
the Trademark in connection with the development, marketing, promotion and
selling of the Product. RiboGene shall file and maintain the Trademark in all
countries of the Territory. The costs of such filings and maintenance shall be
part of Allowable
6.
<PAGE>
Expenses until Roberts has exercised its option pursuant to Section 4.2,
whereafter such costs shall be borne by Roberts.
ARTICLE 4
OPTION GRANT
4.1 Option for Commercialization License. Roberts shall have the option
to obtain an exclusive license, with the right to sublicense subject to
RiboGene's prior written approval, under RiboGene Technology and Collaboration
Technology in the Field to make, have made, use, import, offer for sale and sell
the Product in the Territory. The option shall be in effect in any particular
country of the Territory for a period beginning on the Effective Date and ending
sixty (60) days after first Regulatory Approval of the Product in that
particular country of the Territory ("Option Period").
4.2 Option Exercise. Roberts shall exercise the option by giving RiboGene
written notice prior to the expiration of the Option Period.
4.3 Expiry of Option. If the option granted under Section 4.1 expires
under the terms of this Agreement, Roberts shall transfer to RiboGene all
information, including, without limitation, data, reports and documentation
generated by Roberts in the course of the performance of the Development Program
and all rights of Roberts in and to such information.
ARTICLE 5
COMMERCIAL TERMS
5.1 License Fee. Within [ * ] after exercising the option
pursuant to Section 4.2 above, Roberts shall pay to RiboGene a license fee of
ten million dollars ($10,000,000) ("License Fee") as follows:
(a) [ * ] of the License Fee, i.e. [
*
] if the option is exercised following FDA Regulatory Approval of the
Product for delayed onset emesis or for an indication which permits the
promotion of the Product for treatment of the symptoms of delayed onset emesis;
(b) [ * ] of the License Fee, i.e. [
*
] if the option is exercised following FDA Regulatory Approval of the
Product for an indication which does not permit the promotion of the Product for
the treatment of the symptoms of delayed onset emesis;
(c) [ * ] of the License Fee, i.e. [
*
] if the option is exercised following Regulatory Approval of the
Product in Canada or Mexico;
(d) In the event of a partial payment of the License Fee pursuant to
subsections (b) through (c) above, Roberts shall make additional payments upon
the occurrence of any subsequent Regulatory Approvals for an indication which
permits the promotion of the
7.
<PAGE>
Product for the treatment of the symptoms of delayed onset emesis described in
subsections (a) through (c), up to and until such time as the full amount of the
License Fee has been paid;
(e) Notwithstanding the payment events described in subsections (b)
through (d) above and license fee payments made by Roberts thereunder, the
balance of the License Fee shall be due and payable (i) if gross sales generated
with the Product in the first year from the date of first commercial sale reach
or exceed [ * ]; or (ii) if the
aggregate gross sales generated with the Product reach or exceed [
* ]
5.2 Royalties.
(a) Royalty Rate. Roberts shall pay to RiboGene royalties at a
rate of [ * ] of Net Sales of the Product.
(b) Royalty Term.
(i) In any country where the manufacture, use or sale of the
Product is covered by a Collaboration Patent or RiboGene Patent, royalties shall
be payable in such country until the later of (i) [ * ] from the
first commercial sale of the Product in such country and (ii) the expiration of
the last to expire of such Collaboration Patent or RiboGene Patent.
(ii) In any country where the manufacture, use or sale of the
Product is not covered by a Collaboration Patent or RiboGene Patent, royalties
shall be payable in such country until the expiration of [ * ]
from the date of first commercial sale of the Product in such country.
(c) If, due to restrictions or prohibitions imposed by national or
international authority, including but not limited to restrictions on payments
of royalties from the Territory, Roberts is unable to make the payments of
royalties as aforesaid, the parties shall consult with a view to finding a
prompt and acceptable solution and Roberts shall not be relieved of the
obligation to make such payments and will from time to time deal with such
monies as RiboGene may lawfully direct.
(d) Any and all taxes payable in connection with the payments to be
made pursuant to this Section 5.2 shall be for the account of RiboGene. In the
event that Roberts shall be required to withhold or pay any taxes in the
Territory applicable to RiboGene with respect to any such payments, Roberts
shall promptly furnish RiboGene with the respective tax receipts, or other
evidence of payment.
(e) Upon request by RiboGene, Roberts shall file on behalf of
RiboGene any tax returns which the law of the Territory may require. Such tax
returns shall be filed in accordance with RiboGene's instructions and Roberts
shall pay such taxes on RiboGene's behalf, deducting the amounts of such tax
payments from the royalty payments due pursuant to this Section 5.2.
8.
<PAGE>
(f) Roberts shall reasonably assist RiboGene in obtaining a tax
credit under the applicable taxation treaties and laws, including by providing
appropriate evidence of RiboGene's payment of the withholding tax.
5.3 Due Diligence.
(a) Roberts undertakes to launch and sell the Product in each
country of the Territory within [ * ] from the date of
Regulatory Approval, including pricing approval, where applicable, in such
country. Roberts shall market and promote the Product as it markets and promotes
its own products with similar sales potential.
(b) If Roberts has not launched the Product within the time period
required under subsection (a) above, Roberts' license obtained pursuant to the
exercise of the option under Section 4.2 shall be deemed to have expired in such
country, and such country shall be excluded from the Territory. Upon expiry of
the license, Roberts shall transfer to RiboGene all Regulatory Approvals in such
country, and information, including, without limitation, data, reports and
documentation generated by Roberts in the course of the performance of the
development of the Product for such country and all rights of Roberts in and to
such information.
5.4 Territorial Limitation. Roberts hereby undertakes to practice the
RiboGene Technology and Collaboration Technology licensed hereunder only within
the Territory. Roberts shall not sell or distribute the Product outside of the
Territory, and shall not sell or supply the Product to any third party of whom
it knows or has reason to believe that such third party sells or supplies the
Product to customers outside of the Territory.
ARTICLE 6
PAYMENTS; RECORDS; AUDIT
6.1 Royalty Payment and Reports.
(a) Royalty amounts payable to RiboGene under Section 5.2 shall be
paid in U.S. Dollars within [ * ] of the end of each calendar
quarter. Each payment of royalties shall be accompanied by a statement of the
amount of Net Sales during such period, the amount of aggregate Net Sales to
date as of the end of such period, and the amount of royalties due on such Net
Sales.
(b) For the purpose of calculating royalties on Net Sales generated
in currencies other than U.S. dollars, such Net Sales shall be converted into
U.S. dollars at the rate of exchange as quoted in the Wall Street Journal on the
last business day of the relevant calendar quarter. All royalty payments owed
under this Agreement shall be made by means of wire transfer to RiboGene's
account in a bank in the United States to be designated by RiboGene.
6.2 Records and Audit.
(a) During the term of this Agreement and for a period of
[ * ] thereafter, Roberts shall keep complete and accurate
records pertaining to the sale or other
9.
<PAGE>
disposition of the Product commercialized by it, in sufficient detail to permit
RiboGene to confirm the accuracy of all payments due hereunder.
(b) RiboGene shall have the right to cause an independent, certified
public accountant to audit such records to confirm Roberts's Net Sales and
royalty payments; provided, however, that such auditor shall not disclose
Roberts's confidential information to RiboGene, except to the extent such
disclosure is necessary to verify the amount of royalties due under this
Agreement.
(c) Such audits may be exercised once a year, within [ * ]
after the royalty period to which such records relate, upon notice to Roberts
and during normal business hours.
(d) RiboGene shall bear the full cost of such audit unless such
audit discloses a variance of more than [ * ] from the
amount of the Net Sales or royalties previously paid. In such case, Roberts
shall bear the full cost of such audit. The terms of this Section 6.2 shall
survive any termination or expiration of this Agreement for a period of
[ * ]
(e) Overdue Payments. If RiboGene does not receive payment of any
sum payable under this Agreement on the date it is due, simple interest shall
thereafter accrue on the sum due to RiboGene until the date of payment at the
per annum rate of [ * ]
ARTICLE 7
PATENT PROSECUTION AND DEFENSE
7.1 Patent Prosecution and Maintenance.
(a) RiboGene shall maintain the RiboGene Patents during the term of
this Agreement. The costs of such maintenance shall be part of Allowable
Expenses until Roberts has exercised its option pursuant to Section 4.2,
whereafter such costs shall be borne by Roberts.
(b) Roberts shall be responsible for filing and prosecuting
applications for Collaboration Patents and for maintaining Collaboration Patents
owned solely by either party or jointly by the parties in the Territory. Roberts
shall consult with RiboGene as to the selection of countries in which to file
applications for such Collaboration Patents. Roberts shall be responsible for
bearing the cost of filing and prosecuting applications for Collaboration
Patents and of maintaining Collaboration Patents in the Territory. In the event
that Roberts decides not to proceed with prosecuting an application for a
Collaboration Patent, it shall give RiboGene [ * ] notice
before any relevant deadline, and RiboGene shall have the right to pursue, at
its own expense, prosecution of such patent application or maintenance of such
patent, and such patent shall be excluded from the licenses granted herein or
in the License Agreement.
(c) Each party agrees to cooperate with the other and take all
reasonable additional actions and execute such agreements, instruments, and
documents as may be
10.
<PAGE>
reasonably required to prosecute patent applications as provided in this
section, and to perfect the other's ownership interest in Collaboration Patents
as allocated in Article 3, including, without limitation, the execution of
necessary and appropriate instruments of assignment.
7.2 Infringement of Patents by Third Parties.
(a) Notice. Each party shall promptly notify the other in writing of
any alleged or threatened infringement of RiboGene Patents, Roberts Patents, or
Collaboration Patents which may adversely impact the rights of the parties
hereunder.
(b) Roberts Patents and RiboGene Patents.
(i) The party which is the holder of Roberts Patents or
RiboGene Patents, respectively, shall have the right, but not the obligation, to
bring an appropriate action against any person or entity directly or
contributorily infringing its patents. If the patent holder brings an action
against an alleged infringer, the other party shall cooperate reasonably with
the patent holder in any such efforts.
(ii) Any recovery obtained by the patent holder as a result of
such action, whether obtained by settlement or otherwise, shall be disbursed as
follows: first, each party shall be reimbursed for any reasonable expenses
incurred in bringing or assisting in such action (including counsel fees). If
the infringement was made by a third party product which competed with the
Product in the Territory, the remaining proceeds shall be added to Net Sales. In
the event of any other kind of infringement, the remaining proceeds shall
retained by the patent holder.
(iii) No settlement, compromise or other disposition of any
such action which compromises a party's rights under this Agreement shall be
entered into without such party's prior consent, which shall not be unreasonably
withheld.
(c) Collaboration Patents.
(i) If a Collaboration Patent is infringed in the Territory,
Roberts shall have the right to bring, at its own expense, an appropriate action
against any person or entity directly or contributorily infringing such
Collaboration Patent. In such event, RiboGene shall cooperate reasonably with
Roberts in any such action, including if required to bring such action, the
furnishing of a power of attorney.
(ii) In the event Roberts fails to institute an infringement
suit or take other reasonable action to protect the relevant Collaboration
Patent, RiboGene shall have the right, upon [ * ] of notification of
Roberts, to institute such suit or take other appropriate action at its own
expense in its own name, the joint owners' name, or both. In such event, Roberts
hereby agrees to cooperate reasonably with RiboGene in any such effort,
including if required to bring such action, the furnishing of a power of
attorney.
(iii) Regardless of which party brings the action, any recovery
obtained by settlement or otherwise shall be disbursed as follows: the party
bringing such action shall first ensure that any reasonable expenses incurred in
assisting in such action (including counsel fees)
11.
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by both parties are reimbursed. Thereafter, the party bringing such action shall
ensure that the net recovery shall be added to Net Sales.
7.3 Infringement of Third Party Rights.
(i) Joint Strategy. In the event that the Product developed,
manufactured or sold hereunder becomes the subject of a claim for patent,
copyright or other proprietary right infringement in the Territory ("Product
Infringement Claim"), and irrespective of whether Roberts or RiboGene is charged
with said infringement, and the venue of such claim, the parties shall promptly
confer to discuss the claim. The parties shall agree on how to best defend the
Product Infringement Claim and shall designate the party who shall have primary
responsibility to conduct the defense of any Product Infringement Claim in the
Territory.
(ii) Defense. The party with primary responsibility for the
defense of a Product Infringement Claim shall keep the other party informed on
the progress and shall provide it with copies of all filings made or received in
connection with such claim. The other party shall have the right to participate
in any proceedings and to be represented by counsel of its own choice. The costs
of such defense shall be shared between the parties. Each party shall reasonably
cooperate with the party conducting the defense of the Product Infringement
Claim, including if required to conduct such defense, furnishing a power of
attorney. Neither party shall enter into any settlement that affects the other
party's rights or interests without such other party's written consent, which
consent shall not be unreasonably withheld.
7.4 Patent Marking. Roberts shall mark, if necessary, all the Product
manufactured, used or sold under the terms of this Agreement, or its containers,
in accordance with the applicable patent marking laws, as required.
ARTICLE 8
PUBLICATION; PUBLICITY
8.1 Publication.
(a) Review and Approval. Each party to this Agreement recognizes that
the publication of papers, including oral presentations and abstracts, regarding
the Collaboration Know-How and the Collaboration Patents, subject to reasonable
controls to protect Confidential Information, will be beneficial to both
parties. However, each party shall have the right to review and approve any
paper proposed for publication by the other party, including oral presentations
and abstracts, which utilizes data generated from the Development Program and/or
includes Collaboration Know-How or Confidential Information of the reviewing
party.
(b) Review and Approval Process. At least [ * ] before any
such paper is presented or submitted for publication, the party proposing
publication shall deliver a complete copy to the other party. The receiving
party shall review any such paper and give its comments to the publishing party
within [ * ] of the delivery of such paper to the receiving party.
With respect to oral presentation materials and abstracts, the parties shall
make reasonable efforts to expedite review of such materials and abstracts, and
shall return such items
12.
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as soon as practicable to the publishing party with appropriate comments, if
any, but in no event later than [ * ] from the delivery date thereof
to the receiving party. The publishing party shall comply with the other party's
request to delete references to such other party's Confidential Information in
any such paper and agrees to withhold publication of same in order to permit the
parties to obtain patent protection, if either of the parties deem it necessary,
in accordance with the terms of this Agreement.
8.2 Publicity. Except as otherwise provided herein or required by law, no
party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, or stockholders'
reports, or otherwise, relating to the existence of or the performance under
this Agreement, without the prior written approval of the other party, which
approval shall not be unreasonably withheld, [ *
]
8.3 Press Release. Notwithstanding any provision of this Agreement to the
contrary, promptly after the date hereof, each party may issue a press release
substantially in the form as agreed to by the parties.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES
9.1 Corporate Power, Due Authorization, Binding Agreement. Each party
hereby represents and warrants:
(a) That it is duly organized and validly existing under the laws of
the state or country of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;
(b) That it is duly authorized to execute and deliver this Agreement
and to perform its obligations hereunder;
(c) That this Agreement is a legal and valid obligation binding upon
it and is enforceable in accordance with its terms, and that the execution,
delivery and performance of this Agreement by such party does not conflict with
any agreement, instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or regulation of any
court, governmental body or administrative or other agency having authority over
it.
9.2 Intellectual Property. Each party has the full right to grant the
licenses granted by it under this Agreement and is not aware, to the best of its
knowledge, of any claims by third parties to a conflicting ownership interest in
its solely-owned Patents.
9.3 RiboGene Disclaimer. THE RIBOGENE TECHNOLOGY AND COLLABORATION
TECHNOLOGY LICENSED HEREUNDER IS PROVIDED "AS IS" AND RIBOGENE EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
13.
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THIRD PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN
ALL CASES WITH RESPECT THERETO.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification by RiboGene. RiboGene shall indemnify Roberts, its
Affiliates, and all their officers, directors, employees and agents, for any
reasonable out-of-pocket costs and expenses (including court and arbitration
costs, witness fees and reasonable attorneys' fees), non-appealed or non-
appealable judicial or arbitration damage awards, and settlement payments,
payable or owed by Roberts in connection with any demands, law suits and other
legal actions of third parties arising from (i) the performance or breach of
this Agreement by RiboGene, and (ii) any negligent actions or willful misconduct
by RiboGene, its Affiliates, agents or sublicensees.
10.2 Indemnification Undertaking by Roberts. Roberts shall indemnify
RiboGene, its Affiliates and sublicensees, and all their officers, directors,
employees and agents, for any reasonable out-of-pocket costs and expenses
(including court and arbitration costs and reasonable attorneys' fees), non-
appealed or non-appealable judicial or arbitration damage awards, and settlement
payments agreed with the third party claimants payable or owed by RiboGene in
connection with any demands, law suits and other legal actions of third parties
arising from (i) the performance or breach of this Agreement by Roberts, (ii)
any negligent actions or willful misconduct by Roberts, its Affiliates, or
agents, and (iii) the possession, manufacture, use, marketing, promotion,
distribution, sale or administration of the Product.
10.3 Conditions and Limitations of Indemnification Obligation.
(a) In order to maintain the right to be indemnified by the other
party ("Indemnitor") for any demands, law suits and other legal actions of third
parties ("Third Party Claims") described in Sections 10.1 and 10.2 above, the
party claiming indemnification ("Indemnitee") must:
(i) notify the Indemnitor promptly after learning of a Third
Party Claim;
(ii) allow the Indemnitor to manage and control (by way of
intervention or otherwise) the defense and/or settlement of the Third Party
Claim against the Indemnitee;
(iii) cooperate with the Indemnitor in the defense or the
settlement negotiations of any Third Party Claims for which indemnification is
sought, as reasonable required by the Indemnitor;
(iv) abstain from making any statements or taking any actions
which damage the defense against a Third Party Claim (including, without
limitation, any statements against the interest of the Indemnitee or admissions
of causation or guilt);
14.
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(b) The Indemnitor shall not agree to any settlement that adversely
affects the Indemnitee's rights or interest without the Indemnitee's prior
written approval (which approval shall not be unreasonably withheld).
(c) The Indemnitor shall have no obligation to indemnify the
Indemnitee to the extent that a Third Party Claim results from the negligence or
willful misconduct of the Indemnitee.
ARTICLE 11
CONFIDENTIALITY
11.1 Disclosure of Confidential Information. Confidential Information
disclosed by one party to the other pursuant to and during the term of this
Agreement shall be subject to the confidentiality obligations set forth below:
(a) if disclosed in writing and marked "confidential" or
"proprietary" by the disclosing party prior to or at the time of the disclosure
thereof, or if it would be apparent to a reasonable person, familiar with the
disclosing party's business and the industry, that such information is of a
confidential or proprietary nature; and
(b) if [ * ] after disclosure of Confidential
Information, the disclosing party informs the receiving party in writing of the
confidential nature of the disclosed information, describing such information
and referencing the place and date of the oral, visual or written disclosure and
the names of the employees or officers of the receiving party to whom such
disclosure was made.
11.2 Confidentiality and Non-Use. Except to the extent expressly
authorized by this Agreement or unless otherwise agreed in writing by the
parties, each party agrees that, for the combined term of this Agreement and the
Development Agreement, and for [ * ] thereafter, it shall keep
confidential and shall not publish or otherwise disclose and shall not use for
any purpose other than as provided for in this Agreement any Confidential
Information, unless the receiving party can demonstrate by competent proof that
such Confidential Information:
(a) was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the other party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise part of
the public domain after it disclosure and other than through any act or omission
of the receiving party in breach of such Agreements;
(d) was disclosed to the receiving party, other than under an
obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing party not to disclose such information to others;
or
15.
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(e) was independently discovered or developed by the receiving party
without the use of Confidential Information belonging to the disclosing party.
11.3 Authorized Disclosure.
(a) Each party may disclose Confidential Information belonging to
the other party to Affiliates and sublicensees who agree to be bound by similar
terms of confidentiality. In addition, each party may disclose Confidential
Information of the other party to the extent such disclosure is reasonably
necessary to: (i) comply with applicable securities laws and regulations and
other applicable governmental regulations, (ii) file or prosecute patents
relating to Collaboration Technology, (iii) prosecute or defend litigation, (iv)
file applications for Regulatory Approvals for the Product, and (vi) conduct
pre-clinical or clinical trials with the Product.
(b) Notwithstanding the foregoing, in the event a party is required
to make a disclosure of the other party's Confidential Information pursuant to
subsection (a) above, it will, except where impracticable, give reasonable
advance notice to the other party of such disclosure and use best efforts to
secure confidential treatment of such information. In any event, the parties
agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder.
ARTICLE 12
IMPORT AND EXPORT CONTROLS
12.1 United States Laws. The parties understand and acknowledge that each
of them is subject to regulation by agencies of the U.S. government, including
the U.S. Department of Commerce, which prohibit export, re-export or diversion
of the Product and technology to certain countries. Any and all obligations of
Roberts or RiboGene to provide access to or license any technology pursuant to
this Agreement, as well as any technical assistance shall be subject in all
respects to such United States laws and regulations as shall from time to time
govern the license and delivery of technology and the Product abroad by persons
subject to the jurisdiction of the United States, including the Export
Administration Act of 1979, as amended, any successor or interim controlling
legislation, and the Export Administration Regulations issued by the Department
of Commerce, International Trade Administration, Bureau of Export
16.
<PAGE>
Administration. Both parties also agree to comply with the requirements of the
U.S. Foreign Corrupt Practices Act (the "Act") and shall refrain from making any
payments to third parties which would cause Roberts or RiboGene to violate the
Act.
12.2 Non-United States Laws. Roberts and RiboGene shall each provide the
other party with such reasonable assistance as may be required for the party
requesting such assistance to comply with all non-United States laws,
ordinances, rules, regulations and the like of all governmental units or
agencies having jurisdiction pertaining to this Agreement, including without
limitation, obtaining all import, export and other permits, certificates,
licenses or the like required by such non-United States laws, ordinances, rules,
regulations and the like, necessary to permit the parties to perform hereunder
and to exercise their respective rights hereunder.
ARTICLE 13
TERM AND TERMINATION
13.1 Term. Except as provided under Section 13.2 below, the term of this
Agreement shall commence upon the Effective Date and shall expire on the
expiration date of the last to expire royalty obligation.
13.2 Termination on Material Breach. If either party materially breaches
the Agreement, including without limitation its due diligence obligations under
Section 2.2(b) and 5.3, and the breaching party has not cured the breach or
initiated good faith efforts to cure such breach to the reasonable satisfaction
of the non-breaching party within sixty (60) days of notice of breach from the
non-breaching party, the non-breaching party may terminate this Agreement upon
expiration of such sixty (60)-day period.
13.3 Licenses upon Expiration or Termination.
(a) Upon expiration or termination of this Agreement, Roberts shall
have a fully paid, nonexclusive license under RiboGene Technology and
Collaboration Technology in the Field to make, have made, use, import, offer for
sale and sell the Product in the Territory.
(b) Notwithstanding subsection (a) above, if this Agreement is
terminated by RiboGene based on a material breach by Roberts, then Roberts'
license rights shall terminate and RiboGene shall have a perpetual, paid-up,
worldwide license under Roberts Technology and Roberts-owned or jointly owned
Collaboration Technology to make, have made, use, import, offer for sale and
sell the Product.
(c) If this Agreement is terminated by Roberts due to a failure by
RiboGene to pay for the performance of the Development Program conducted under
this Agreement, Roberts shall have an exclusive license under RiboGene
Technology and Collaboration Technology in the Field to make, have made, use,
import, offer for sale and sell the Product in the Territory, subject only to
the obligation to pay the License Fee (less any amounts of the Development Funds
owed but not paid by RiboGene to Roberts hereunder) and royalties as provided in
Section 5.2.
17.
<PAGE>
13.4 Surviving Rights and Obligations. Termination of this Agreement, for
whatever reason, shall not affect any rights or obligations of either party
which are intended by the parties to survive termination.
13.5 Accrued Rights. The termination, relinquishment or expiration of the
Agreement for any reason shall be without prejudice to any rights which shall
have accrued to the benefit of either party prior to such termination,
relinquishment or expiration, including any damages arising from any breach
hereunder.
ARTICLE 14
MISCELLANEOUS
14.1 Waiver. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent or similar breach or default.
14.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns;
provided, however, that neither party shall assign any of its rights and
obligations hereunder without the prior written consent of the other; except
that RiboGene may assign this Agreement incident to the merger, consolidations,
reorganization, or acquisition of stock or assets affecting substantially all of
the assets or actual voting control of RiboGene.
14.3 Notices. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or five (5) days after mailing by registered or certified
mail, postage paid, to the other party at the following address:
In the case of RiboGene: RiboGene, Inc.
26118 Research Road
Hayward, CA 94545
Fax: (510) 293-2596
Attention: President
with a copy to: Cooley Godward LLP
Five Palo Alto Square
Palo Alto, CA 94306
Fax: (650) 857-0663
Attention: Brian C. Cunningham, Esq.
In the case of Roberts: Roberts Pharmaceutical Corporation
Meridian Center II
4 Industrial Way West
Eatontown, New Jersey 07724
Fax: (732) 398-1014
Attention: A. A. Rascio, VP and General Counsel
18.
<PAGE>
Either party may change its address for communications by a notice to the other
party in accordance with this section.
14.4 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
14.5 Amendment. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
14.6 Choice of Law, Jurisdiction and Venue.
(a) This Agreement and its terms and conditions shall be governed
exclusively by and construed according to the laws of California, excluding its
choice of law provisions and also excluding the United Nations Convention on
Contracts for the International Sale of Goods.
(b) All disputes which may arise between the parties hereto in
relation to the interpretation or administration of this Agreement shall be
first referred to the Steering Committee for resolution. Any disputes which the
Steering Committee is unable to resolve with a reasonable period of time shall
be resolved by the agreement of the Chief Executive Officers of the respective
parties or their delegates. Any disputes which cannot be resolved in this manner
shall be finally resolved in the courts with jurisdiction and venue at the
domicile of the defendant.
14.7 Force Majeure. Any delays in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The party
suffering such occurrence shall immediately notify the other party as soon as
practicable and any time for performance hereunder shall be extended by the
actual time of delay caused by the occurrence.
14.8 Independent Contractors. In making and performing this Agreement,
Roberts and RiboGene act and shall act at all times as independent contractors
and nothing contained in this Agreement shall be construed or implied to create
an agency, partnership or employer and employee relationship between RiboGene
and Roberts. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party.
14.9 Severability. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
14.10 Cumulative Rights. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
19.
<PAGE>
14.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
14.12 Entire Agreement. This Agreement and any and all Schedules and
Appendices referred to herein embodies the entire understanding of the parties
with respect to the subject matter hereof and shall supersede all previous
communications, representations or understandings, either oral or written,
between the parties relating to the subject matter hereof.
20.
<PAGE>
In Witness Whereof, both Roberts and RiboGene have executed this Agreement,
in duplicate originals, by their respective officers hereunto duly authorized,
as of the day and year hereinabove written.
RiboGene, Inc. Roberts Pharmaceutical Corporation
By: /s/ Timothy E. Morris By: /s/ Anthony A. Rascio
------------------------ -----------------------------
Name: TIMOTHY E. MORRIS Name: ANTHONY A. RASCIO
Title: Vice President Finance & Title: Vice President
Administration and
Chief Financial Officer
21.
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Exhibit A
Allowable Expenses
[
*
]
[ ] Estimated costs for patent and trademark prosecution, consisting of
approximately [
* ] including the estimated
cost of
[ * ]
[ ] Estimated patent and trademark maintenance costs (subject to increases due
to litigation or other unforeseen circumstances).
[ ] These expenses shall [ * ] once the Product, [
* ]
1.
<PAGE>
Exhibit B
RiboGene Patents
[
*
]
2.
<PAGE>
Exhibit 10.91
CONSULTANT AGREEMENT
AGREEMENT made as of this First day of October, 1998, by and between
ROBERTS PHARMACEUTICAL CORPORATION, a corporation organized and existing under
and by virtue of the laws of the State of New Jersey (hereinafter referred to as
Company) and Robert A. Vukovich, Ph.D., residing at 7 Taylor Run, Holmdel, New
Jersey (hereinafter referred to as Consultant).
WHEREAS, Consultant has, for many years, been engaged in the research and
development of pharmaceutical products and in the identification, evaluation,
licensing and acquisition of such products and related businesses; and
WHEREAS, Company desires to retain Consultant with the aforesaid
achievements and Consultant desires to be retained as such Consultant under the
terms and conditions set forth in this Agreement:
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
1. Company hereby retains Consultant in the field of research and
development of pharmaceutical products and in the identification and evaluation
of such products and businesses which could be candidates for licensing or
acquisition by Company.
2. Consultant agrees to render the following services to Company:
a) to consult with Company and to render advice and assistance
in matters in which such advice is sought concerning the research and
development of pharmaceutical products;
<PAGE>
b) to render advice concerning and to assist in the design and
implementation of clinical trials;
c) to render advice concerning and to assist in the preparation
of INDs, NDAs, ANDAs and their foreign equivalents;
d) to render advice and assist Company in the identification of
suitable product acquisition and licensing candidates;
e) to render advice and assist in the evaluation of
pharmaceutical products which may be candidates for licensing or acquisition by
Company;
f) to render advice and assist in the identification and
evaluation of suitable businesses for acquisition by Company;
g) to consult with and render advice to Company concerning the
Company's strategic focus;
h) to render such other advice and assistance relating to the
research and development of pharmaceutical products and the identification,
evaluation, licensing and acquisition of pharmaceutical products and related
businesses, as Company may from time to time require;
i) at the request of Company, to render such written reports as
may be necessary or useful, in the opinion of Company in order to enable Company
to benefit properly from and evaluate the advice and recommendations of
Consultant.
2
<PAGE>
3. a) In consideration of all services to be performed by
Consultant hereunder, Company shall pay to Consultant an amount equal to Two
Hundred Thousand Dollars ($200,000) per annum payable in quarterly installments
beginning on the first day of the month immediately succeeding the date of the
signing of this Agreement;
b) It is understood and agreed by and between the parties
hereto that the compensation set forth in this Agreement constitutes the entire
compensation due from Company to Consultant for the services performed by
Consultant hereunder and Consultant does not now have nor will in the future
have any right to any further compensation whether by way of contingencies or
otherwise arising out of the rendering to Company of the services set forth in
this Agreement;
c) Any compensation paid to Consultant hereunder shall be
payable without deduction for federal or state income taxes or for social
security payments.
4. a) This Agreement shall be effective as of the date hereof and
shall remain in full force and effect for a period of five (5) years unless
sooner terminated as provided herein;
b) Either party shall have the right to terminate this
Agreement at any time upon written notice in the event the other party shall
commit a breach of any of the terms of this Agreement;
c) Consultant shall have the right to terminate this Agreement
at any time upon thirty (30) days written notice to Company.
5. This Agreement may not be assigned by Consultant nor may
Consultant's duties hereunder be delegated, the services to be rendered
hereunder being of a personal nature.
3
<PAGE>
6. Nothing contained in this Agreement shall be construed as appointing
Consultant as an agent or employee of Company or any of its subsidiary or
affiliated companies, it being expressly agreed and understood that in rendering
the services hereunder, Consultant shall at all times act as an independent
contractor. Company shall carry no Workers' Compensation insurance to cover
Consultant. The Company shall not pay any contribution to Social Security,
unemployment insurance, federal or state withholding taxes, nor provide any
other contributions or benefits which might be expected in an employer-employee
relationship. Consultant agrees to report and pay any contributions for taxes,
unemployment insurance, Social Security and other benefits for himself.
Consultant shall not hold himself out as an agent or employee of the Company or
have authority to incur any financial obligations or make other commitments on
behalf of the Company.
7. a) It is anticipated that Company will disclose to Consultant
certain information, data and/or materials pertaining to Company's strategic
focus, products, processes, customers, supplies and services including
information relating to research and development, inventions and manufacturing
and purchasing. These materials and data are hereinafter collectively referred
to as "Data."
b) Consultant hereby agrees to keep, hold and maintain in
confidence all such Data and not to disclose, directly or indirectly, to any
third party or otherwise make use of the Data without Company's prior written
consent, during the term of this Agreement and for a period of five (5) years
following the date of termination of this Agreement;
c) The obligation of confidence assumed by Consultant hereunder
shall not apply to:
4
<PAGE>
i) Data which at the time of disclosure is in the public
domain; or
ii) Data which thereafter lawfully becomes a part of the public
domain other than through disclosure by Consultant or
through Consultant; or
iii) Data which is lawfully disclosed to Consultant by a third
party not under an obligation of confidence to Company with
respect to said Data.
8. Consultant shall disclose promptly to Company or its nominee, any
and all product and technology opportunities, acquisition opportunities,
inventions, discoveries and improvements brought to the attention of or
conceived or made by Consultant during the term of this Agreement and related to
the business or activities of Company and hereby assigns and agrees to assign
all his interest therein to Company or its nominee. Whenever requested to do so
by Company, Consultant shall execute any and all applications, assignments or
other instruments which Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to protect
otherwise Company's interest therein. The obligations in this Section 8 shall be
binding upon Consultant's assigns, executors, administrators and other legal
representatives.
9. Except as pursuant to the advance written consent of the Company,
the Consultant covenants and agrees with the Company that during any period in
which the Consultant is engaged by the Company to provide consulting services
under this Consulting Agreement, neither the Consultant nor any Controlled
Affiliate shall, whether on his or its own behalf or on behalf of any other
person, firm, partnership, corporation or other business venture (hereinafter, a
"person"), own, manage, control, participate in, consult with, be employed by,
rendered services for or otherwise assist in any manner any person that is
engaged in, any Competitive Business
5
<PAGE>
Activity (as hereinafter defined). Nothing herein shall prohibit the Consultant
or any Controlled Affiliate from being an owner of the equity or debt securities
of any public company, so long as said Company does not directly engage in any
Competitive Business Activity. As used herein: "Competitive Business Activity,"
with respect to any person, means the development, marketing or sale of any
product which is directly competitive with the products of the Company (both
those existing during Consultant's engagement by the Company and those which are
planned for the future and of which the Consultant learns during such consulting
engagement). Notwithstanding anything herein contained to the contrary, the
Consultant shall not be prohibited from serving as a member of the board of
directors of any corporation, firm or other business venture.
Consultant and the Company agree that the covenants set forth herein are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Company and its subsidiaries. Consultant
acknowledges that the Company has a legitimate interest in protecting its
business and that the restrictive covenants set forth above are not oppressive
to Consultant, are reasonable in the limitations as to time, and do not harm in
any manner whatsoever the public interest. Consultant acknowledges that he has
received substantial consideration for agreeing to such restrictive covenants.
10. As used in this Agreement, the term "Company" means ROBERTS
PHARMACEUTICAL CORPORATION, its predecessor and successor companies,
subsidiaries, and all affiliated companies.
11. As used in this Agreement, the term "Controlled Affiliate" of the
Consultant means any member of the Consultant's immediate family and any other
person or entity which, directly
6
<PAGE>
or indirectly, is at any time controlled by the Consultant. For purposes of this
definition, "control" of a person or entity means the power, direct or indirect,
to direct or cause the direction of the management and policies of such person,
whether by contract or otherwise.
12. This Agreement shall inure to the benefit of Company and its
successors and assigns and be binding upon Consultant and/or Consultant's heirs,
executors, administrators or other legal representatives;
13. This Agreement constitutes the entire Agreement between the parties
and hereby supercedes any and all other arrangements, agreements and
understandings between the parties, whether oral or written concerning the
subject matter hereof.
14. The validity of this Agreement and the interpretation and
performance of all of its terms shall be governed by the substantive laws of the
State of New Jersey.
15. Consultant shall be reimbursed for all reasonable business expenses
incurred by Consultant during the term of the Agreement on behalf of Company in
the performance of services under, upon compliance with the then policies of
Company relating to reimbursement of such expenses. Consultant is required to
submit itemized requests for reimbursement of such expenditures supported by
sufficient documentation of the expenditures and explanation of their purpose.
16. Failure of either party hereto to insist upon strict compliance
with any of the terms, covenants and conditions hereof shall not be deemed a
waiver or relinquishment of any similar right or power hereunder at any
subsequent time or of any other provision hereof.
7
<PAGE>
17. If any term, condition, provision of this Agreement is held to be
unenforceable for any reason, it shall, if possible, be interpreted rather than
voided, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other terms, conditions, and provisions of
this Agreement shall be deemed valid and enforceable to the full extent.
18. Any notice required or permitted to be given hereunder shall be
given either by personal delivery or by registered mail, by air if to a
different country, return receipt requested, to the appropriate party at the
following address or to such other address as the parties may hereafter
communicate to each other in writing; it being understood that such notice shall
be deemed given as of the date so delivered or mailed:
To Company: Roberts Pharmaceutical Corporation
4 Industrial Way West
Eatontown, New Jersey 07724
To Consultant: Robert A. Vukovich
7 Taylor Run
Holmdel, New Jersey
IN WITNESS WHEREOF, the parties have hereunto set their hands as of this
day and year first above written.
ROBERTS PHARMACEUTICAL CORPORATION
By: /s/ Anthony A. Rascio, VP
By: /s/ Robert A. Vukovich
8
<PAGE>
Exhibit 21
Roberts Pharmaceutical Corporation
State or Other Jurisdiction
Subsidiaries of Incorporation
- ------------ ----------------
Roberts Laboratories Inc. New Jersey
Monmouth Pharmaceuticals, Ltd. United Kingdom
Roberts Pharmaceutical of Canada, Inc. Canada
Roberts Investments, Inc. Delaware
Shore Pharmaceuticals, Inc. New Jersey
<PAGE>
EXHIBIT 23.01
We consent to the incorporation by reference in the Registration Statements Form
S-8 No. 33-34767 pertaining to the Incentive Stock Option Plan; Form S-8 No. 33-
61543 pertaining to the Incentive Stock Option Plan; Form S-8 No. 333-09847
pertaining to the 1996 Equity Incentive Plan; and Form S-8 No. 333-66705
pertaining to the Employees' Savings and Protection Plan of Roberts
Pharmaceutical Corporation and in the Registration Statement S-3 No. 333-13729
of Roberts Pharmaceutical Corporation and in the related Prospectus of our
report dated February 16, 1999, with respect to the consolidated financial
statement and schedule of Roberts Pharmaceutical Corporation included in the
Annual Report (From 10-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
MetroPark, New Jersey
March 26, 1999
<PAGE>
EXHIBIT 23.02
We consent to the incorporation by reference in the registration statement of
Roberts Pharmaceutical Corporation on (1) Form S-3 (File No. 333-13729) and (2)
Forms S-8 (File Nos. 33-34767, 33-61543, 333-09847 and 333-66705) of our report
dated February 5, 1998, on our audits of the consolidated financial statements
of Roberts Pharmaceutical Corporation and Subsidiaries as of December 31, 1997
and for each of the two years in the periods ended December 31, 1997 and 1996,
which report is included in the Corporation's 1998 Annual Report on From 10-K.
PRICEWATERHOUSECOOPERS LLP
Princeton, New Jersey
March 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 39,280
<SECURITIES> 36,062
<RECEIVABLES> 40,412
<ALLOWANCES> 0
<INVENTORY> 23,573<F1>
<CURRENT-ASSETS> 157,234
<PP&E> 34,911
<DEPRECIATION> 0
<TOTAL-ASSETS> 526,236
<CURRENT-LIABILITIES> 57,687
<BONDS> 126,739<F2>
0
0
<COMMON> 320
<OTHER-SE> 341,490
<TOTAL-LIABILITY-AND-EQUITY> 526,326
<SALES> 173,764
<TOTAL-REVENUES> 175,445
<CGS> 66,530
<TOTAL-COSTS> 66,530
<OTHER-EXPENSES> 11,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,157
<INCOME-PRETAX> 25,011
<INCOME-TAX> 8,224
<INCOME-CONTINUING> 16,787
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,787
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.53
<FN>
<F1>Includes raw material and work in process inventory of $7,705.
<F2>Non-current portion of long term debt.
</FN>
</TABLE>
