SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 205497
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 25, 1998
PHARMACEUTICAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY File Number 1-10827 22-3122182
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(State or other jurisdiction of Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
One Ram Ridge Road, Spring Valley, New York 10977
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (914)425-7100
TOTAL NUMBER OF PAGES -- 14
EXHIBIT INDEX IS LOCATED ON PAGE 4
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Item 5. Other Events.
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Stock Purchase Agreement.
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On March 25, 1998, the Registrant entered into a Stock Purchase Agreement
(the "Agreement") with Lipha Americas, Inc., a Delaware corporation and an
affiliate of Merck KGaA, Darmstadt, Germany ("Lipha"), as more fully described
in a press release dated March 26, 1998, issued by the Registrant describing
such transaction and certain related matters, which is attached as Exhibit 10.1
hereto.
Rights Agreement.
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In connection with the execution and delivery of the Agreement, the
Registrant amended the Rights Agreement, dated August 6, 1991, as amended,
between the Registrant and First City Transfer Company, as successor rights
agent (the "Rights Agent"), (the "Rights Agreement"). The Amendment to the
Rights Agreement, dated March 25, 1998, between the Registrant and the Rights
Agent amended certain definitions in the Rights Agreement to exempt from
operation of the Rights Agreement acquisitions of common stock and options to
purchase common stock by Lipha and its affiliates and associates pursuant to the
Agreement and other agreements contemplated thereby and to remove the exemptions
previously granted to Clal Pharmaceutical Industries, Ltd. ("Clal"), which
Amendment is attached as Exhibit 4.1 hereto. The Registrant and the Rights Agent
also amended the Rights Agreement on September 30, 1997, to exempt from
operation of the Rights Agreement certain permitted transferees of Clal, which
amendment is attached as Exhibit 4.2 hereto.
Item 7. Financial statements and Exhibits.
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(c) Exhibits.
4.1 Amendment to Rights Agreement, dated March 25, 1998, between the
Registrant and First City Transfer Company.
4.2 Amendment to Rights Agreement, dated September 30, 1997, between
the Registrant and First City Transfer Company.
10.1 Press Release of the Registrant, dated March 26, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange of Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMACEUTICAL RESOURCES, INC.
(Registrant)
March 31, 1998 ------------------------------
Dennis J. O'Connor
Vice President and
Chief Financial Officer
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Exhibit Index
Exhibit No. Description Seq. Page No.
4.1 Amendment to Rights Agreement, 5
dated March 25, 1998,
between the Registrant and
First City Transfer Company
4.2 Amendment to Rights Agreement, 9
dated September 30, 1997,
between the Registrant and First
City Transfer Company
10.1 Press Release of the 12
Registrant, dated March 26, 1998
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Exhibit 4.1
AMENDMENT TO RIGHTS AGREEMENT dated March
25, 1998, to the Rights Agreement dated August 6,
1991, as amended (the "Rights Agreement"), by and
between Pharmaceutical Resources, Inc., a New Jersey
corporation ("the "Company"), and First City Transfer
Company (the "Rights Agent").
WHEREAS, the Board of Directors of the Company, on August 6, 1991,
authorized and adopted a share purchase rights plan (the "Plan") to protect the
Company's shareholders against unsolicited and hostile attempts to acquire
control of the Company and, in connection therewith, executed and delivered the
Rights Agreement to effectuate the terms of the Plan;
WHEREAS, the Board of Directors of the Company, on March 25, 1998, approved
and adopted an amendment to the Plan as described herein in contemplation of a
certain negotiated transaction;
WHEREAS, the Board of Directors of the Company authorized and directed the
proper officers of the Company as well as the Rights Agent to execute and
deliver this Amendment to the Rights Agreement in order to effectuate the
foregoing amendments to the Plan; and
WHEREAS, all capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Rights Agreement.
NOW, THEREFORE, in consideration of the mutual premises, the Rights
Agreement is hereby amended as follows:
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Section 1. Effective Dates. (a) The amendment set forth in Section 2(a)
hereof shall be effective upon the execution and delivery of the Stock Purchase
Agreement, dated March 25, 1998, between the Company and Lipha Americas, Inc.
(the "Stock Purchase Agreement").
(b) The amendments set forth in Sections 2(b), (c), (e) and (f) hereof
shall be effective upon the consummation of the Stock Purchase Agreement.
Section 2. Certain Definitions. (a) The definition of "Acquiring Person" as
set forth in the first sentence in Section 1(a) shall be amended by deleting
"or" before "(v)" and inserting in its stead "," and by inserting the following
at the end of the first sentence thereof before the ".":
"and (vi) Lipha Americas, Inc. ("Lipha"), Merck KGaA ("Merck") and
Genpharm, Inc. ("Genpharm") under a stock purchase agreement and options
approved by the Board of Directors of the Company, as amended from time to
time, between the Company and Lipha, Merck and Genpharm, as the case may
be, so long as any acquisition or tender or exchange offer is permitted
under such stock purchase agreement or options"
(b) The definition of "Acquiring Person" as set forth in the first sentence
of Section 1(a) shall be amended by amending clause (v) in its entirety as
follows:
"(v) [intentionally omitted],"
(c) The definition of "Permitted Offer" in Section 1(n) shall be amended in
its entirety as follows:
"(n) "Permitted Offer" shall mean the following tender offers made in the
manner prescribed by Section 14(d) of the Exchange Act and the rules and
regulations promulgated thereunder: (i) a tender offer for all outstanding
Common Shares; provided, however, that such tender offer occurs at a time
when Continuing Directors are in office and a majority of the Continuing
Directors has determined that the offer is fair to, and otherwise in the
best interests of, the Company and
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its stockholders, and (ii) a tender offer for Common Shares as
permitted by a stock purchase agreement approved by the Board of
Directors of the Company, as amended from time to time, between the
Company and Lipha."
(d) The proviso in the definition of "Person" in Section 1(o) shall be
amended in its entirety with the following:
"; provided, however, that "Person" shall exclude Lipha and its associates
and affiliates until such time as any acquisition of or tender offer for
Common Shares by Lipha or any of its affiliates or associates shall not be
permitted under a stock purchase agreement approved by the Board of
Directors of the Company, as amended from time to time, between the Company
and Lipha"
(e) The proviso in the definition of "Section 11(a)(ii)(A) Event" in
Section 1(v) shall be amended in its entirety as follows:
"; provided, however, in no event shall any of the actions described
in Section 11(a)(11)(A) by Lipha or any of its affiliates or
associates constitute a Section 11(a)(ii)(A) Event to the extent that
any such actions shall not be prohibited under a stock purchase
agreement approved by the Board of Directors of the Company, as
amended from time to time, between the Company and Lipha"
(f) The proviso in the definition of "Section 13 Event" in Section 1(w)
shall be amended in its entirety as follows:
"; provided, however, in no event shall any of the actions described
in Section 13(a) by Lipha or any of its affiliates or associates
constitute a Section 13 Event to the extent that any such actions
shall not be prohibited under a stock purchase agreement approved by
the Board of Directors of the Company, as amended from time to time,
between the Company and Lipha"
Section 3. Authority for Amendment. This Amendment is being executed and
delivered as of the date hereof by the Company and the Rights Agent pursuant to
and in accordance with Section 27 of the Rights Agreement. By executing this
Amendment, the Company hereby certifies to the Rights Agent that this Amendment
is in compliance with Section 27 of the Rights Agreement. Except as
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otherwise amended hereby, all the provisions of the Rights Agreement shall
remain in full force and effect. This Amendment shall be deemed to be a part of,
and shall be construed as part of, the Rights Agreement.
IN WITNESS HEREOF, the parties hereby have caused this Amendment to be duly
executed as of the date first above written.
PHARMACEUTICAL RESOURCES, INC.
By /s/ Kenneth I. Sawyer
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Title: President
FIRST CITY TRANSFER COMPANY
By /s/ Kathleen M. Zaleske
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Title: Kathleen M. Zaleske
Assistant Vice President
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Exhibit 4.2
AMENDMENT TO RIGHTS AGREEMENT dated September 30, 1997, to the Rights
Agreement dated August 6, 1991, as amended (the "Rights Agreement"), by and
between Pharmaceutical Resources, Inc., a New Jersey corporation (the
"Company"), and First City Transfer Company (the "Rights Agreement"), as
successor to Midlantic Bank.
WHEREAS, the Board of Directors of the Company, on August 6, 1991,
authorized and adopted a share purchase rights plan (the "Plan") to protect the
Company's shareholders against unsolicited and hostile attempts to acquire
control of the Company and, in connection therewith, executed and delivered the
Rights Agreement to effectuate the terms of the Plan;
WHEREAS, the Plan was amended, on March 23, 1995, in contemplation of a
certain negotiated transaction with Clal Pharmaceutical Industries Ltd.;
WHEREAS, the Board of Directors of the Company, on July 28, 1997, approved
an amendment to the Plan as described herein in contemplation of modifications
to such negotiated transaction;
WHEREAS, the Board of Directors of the Company authorized and directed the
proper officers of the Company as well as the Rights Agent to execute and
deliver this Amendment to the Rights Agreement in order to effectuate the
foregoing amendments to the Plan; and
WHEREAS, all capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Rights Agreement.
NOW, THEREFORE, in consideration of the premises, the Rights Agreement is
hereby amended as follows:
Section (C) Certain Definitions. Section 1(a)(v) of the Rights Agreement
shall be amended in its entirety as follows:
"(v) Clal Pharmaceutical Industries Ltd. and its permitted assigns
under Section 16 of the Stock Purchase Agreement, dated March 25, 1995,
between the Company and Clal Pharmaceutical Industries Ltd., as amended
(the "Stock Purchase Agreement") (Clal Pharmaceutical Industries Ltd.
and its permitted assigns under such Section 16 shall be collectively
referred to herein as "Clal"), so long as any acquisition or tender
offer by Clal is permitted under the Stock Purchase Agreement"
(A) The definition of "Permitted Offer" in Section 1(n) of the Rights
Agreement shall be amended in its entirety as follows:
"(n) "Permitted Offer" shall mean the following tender
offers made in the manner prescribed by Section 14(d) of
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the Exchange Act and the rules and regulations promulgated thereunder:
(i) a tender offer for all outstanding Common Shares; provided,
however, that such tender offer occurs at a time when Continuing
Directors are in office and a majority of the Continuing Directors has
determined that the offer is fair to, and otherwise in the best
interests of, the Company and its stockholders, and (ii) a tender offer
for Common Shares as permitted by the Stock Purchase Agreement."
(B) The proviso in the definition of "Section 11(a)(ii)(A) Event" in
Section 1(v) of the Rights Agreement shall be amended in its entirety as
follows:
"; provided, however, in no event shall an acquisition of or tender
offer for Common Shares by Clal constitute a Section 11(a)(ii)(A) Event
until such time as any such acquisition or tender offer by Clal shall
no longer be permitted under the Stock Purchase Agreement"
(C) The proviso in the definition of "Section 13 Event" in Section 1(w) of
the Rights Agreement shall be amended in its entirety as follows:
"; provided, however, in no event shall an acquisition of or tender
offer for Common shares by Clal constitute a Section 13 Event until
such time as any such acquisition or tender offer by Clal shall no
longer be permitted under the Stock Purchase Agreement"
Section (D) Authority for Amendment. This Amendment is being executed and
delivered as of the date hereof by the Company and the Rights Agent pursuant to
and in accordance with Section 27 of the Rights Agreement. By executing this
Amendment, the Company hereby certifies to the Rights Agent that this Amendment
is in compliance with Section 27 of the Rights Agreement. Except as otherwise
amended hereby, all the provisions of the Rights Agreement shall remain in full
force and effect. This Amendment shall be deemed to be a part of, and shall be
construed as part of, the Rights Agreement.
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IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
duly executed as of the date first above written.
PHARMACEUTICAL RESOURCES, INC.
By: /s/ Kenneth I. Sawyer
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Title: President
FIRST CITY TRANSFER COMPANY
By: /s/ Kathleen M. Zaleske
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Title: Assistant Vice President
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Exhibit 10.1
Contact:
Kenneth I. Sawyer
President
Pharmaceutical Resources, Inc.
(914) 573-0390
FOR IMMEDIATE RELEASE
PHARMACEUTICAL RESOURCES, INC.,
ANNOUNCES STRATEGIC ALLIANCE WITH
MERCK KGaA
Spring Valley, New York, March 26, 1998 -- Pharmaceutical Resources, Inc.
(NYSE/PSE:PRX) announced today that it has formed a strategic alliance with
Merck KGaA, Darmstadt, Germany, a German pharmaceutical, laboratory and chemical
company. Under the agreement, Merck KGaA, through its subsidiary Lipha Americas,
Inc. ("Lipha"), will pay Resources cash for 10,400,000 newly-issued shares as
well as give Resources the sole rights to market an important portfolio of
products for the U.S. through Merck's Canadian subsidiary, Genpharm, Inc.
("Genpharm"). The cash purchase price of $2 per share will provide Resources
$20.8 million for investment in its continuing business, and will give Merck
KGaA a 36% stake in Resources. The Company intends to use a significant portion
of the net proceeds of the stock sale to repay advances made to it under its
existing line of credit and the remainder will be used for working capital,
including business expansion.
In addition, Merck KGaA agreed to purchase 1,813,272 shares of the
Company's common stock from Clal Pharmaceutical Industries Ltd. ("Clal"), the
Company's largest stockholder, and Merck KGaA and the Company acquired rights to
purchase an additional 500,000 shares from Clal in three years. In connection
with the transactions, Merck KGaA and Genpharm also agreed to provide certain
consulting services to the Company in exchange for 5-year options to purchase an
aggregate of 1,171,040 additional shares of the Company's common stock at $2 per
share.
The sole rights to the portfolio of products are covered by a
distribution agreement with Genpharm, granting the Company exclusive U.S.
distribution rights for up to 40 generic pharmaceuticals currently being
developed, some of which have obtained U.S. FDA approval and others which have
been or will be submitted to the FDA for approval.
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Genpharm will pay all of the research and development costs associated with
the 40 products. In return, Resources will pay a certain percentage of gross
margin to Genpharm on the sales of the products. Additionally, Merck KGaA will
work with Resources on future opportunities with specific products to further
enhance its North American generic business.
Under the stock purchase agreement signed today, Lipha will have the right,
subject to the closing of the sale transaction, to designate a majority of the
Company's Board of Directors. The Company's current Board of Directors will
designate three persons to continue as Directors of the Company, one of whom
will be Kenneth I. Sawyer (the current Chairman, President and Chief Executive
Officer of the Company). Lipha will designate Dr. Rudi D. Neirinckx as President
and Chief Operating Officer of the Company. Dr. Neirinckx has been the Head of
Business Development at Merck KGaA. Mr. Sawyer will remain the Chairman and
Chief Executive Officer of the Company. Lipha and its affiliates have agreed to
not engage in certain business combinations including the Company for a period
of three years, unless a majority of the three directors designated by the
Company's current board consent. Lipha will have certain rights of first refusal
to acquire equity stock of the Company in the event of future equity offerings.
Merck KGaA and its affiliates have, as a result of and subject to the
closing of the transactions announced today, the right to purchase approximately
46% of the Company's common stock. The completion of the transactions with
Lipha, Merck KGaA and Genpharm are subject to certain conditions in the stock
purchase agreement, including the obtaining of all necessary government
consents, approval by the Company's stockholders of the issuance of the common
stock and the election of the designated directors. The distribution agreement
is effective immediately, but is terminable by Genpharm if the stock transaction
does not close by July 15, 1998 and is not subject to such conditions.
Kenneth I. Sawyer, Chairman, Chief Executive Officer and President of
Resources, commented, "The strategic alliance with Merck KGaA provides the
Company with the opportunity to achieve our objective of building a profitable
generic pharmaceutical business with the prospect of future growth. The alliance
will immediately add a significant number of products to our product development
pipeline, give the Company additional expertise in generic pharmaceutical
marketing and manufacturing, and significantly reduce the Company's debt while
providing capital to explore additional options to improve the Company's growth
prospects. We believe in order to compete in today's intensely competitive
generic drug market it is important to form strategic alliances and we feel
extremely fortunate to form an alliance with a company of Merck's heritage,
expertise and performance in the industry."
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"This is a further step to implement our North-American strategy by
increasing our presence in the world's largest pharmaceutical market" said Prof.
Dr. Bernhard Scheuble, designated Head of Merck's Pharmaceutical Business and
Deputy Member of the Executive Board. "In the US we have seen a very successful
introduction of our betablocker Concor (bisoprolol) and the antidiabetic
Glucophage (metformin) through licensees. This agreement now marks the start of
becoming a major player in the US generics industry."
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Merck KGaA is a German specialty pharmaceuticals, laboratory and chemicals
company with sales of $4.4 billion, and 29,000 employees in 47 countries
worldwide. Its pharmaceutical sales of $2.5 billion consists mainly of ethicals,
generics, contrastmedia and OTC products. Within the Ethicals Division Merck
spends more than 20% of its sales on R&D and has core research expertise in CV,
CNS, oncology and metabolic disease. Merck KGaA owns Merck-Lipha S.A., a French
ethical and generic pharmaceutical company, which owns Dey Laboratories, L.P., a
U.S. generic pharmaceutical company located in Napa Valley, California.
Pharmaceutical Resources, Inc. is a holding company with subsidiaries that
develop manufacture and distribute generic pharmaceuticals products. PRI's
principal subsidiary, Par Pharmaceutical, located in Spring Valley, New York,
manufactures and distributes various dosage strengths of approximately 100
products.
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