<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11397,
ICN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0628076
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3300 Hyland Avenue
Costa Mesa, California 92626
(Address of principal executive offices)
(Zip Code)
(714) 545-0100
(Registrant's telephone number, including area code)
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
The number of outstanding shares of the registrant's Common Stock,
$.01 par value, as of November 6, 1997 was 40,320,725.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Page ii
ICN PHARMACEUTICALS, INC.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION (Unaudited):
Consolidated Condensed Balance Sheets -
September 30, 1997 and December 31, 1996 ............................... 3
Consolidated Condensed Statements of Income -
Three and nine months ended September 30, 1997 and 1996 ............... 4
Consolidated Condensed Statements of Cash Flows -
Nine months ended September 30, 1997 and 1996 .......................... 5
Management's Statement Regarding Unaudited Financial
Statements ............................................................ 6
Notes to Consolidated Condensed Financial Statements .................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................... 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................................ 22
Item 6. Exhibits and Reports on Form 8-K ................................. 22
SIGNATURES ................................................................ 23
ii
<PAGE>
Page 3
ICN PHARMACEUTICALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited - 000's omitted, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 269,861 $ 39,366
Restricted cash 552 552
Marketable securities 4,327 --
Receivables, net 202,694 258,531
Notes receivable 130,000 --
Inventories, net 123,471 120,973
Prepaid expenses and other current assets 21,238 24,979
------------- ------------
Total current assets 752,143 444,401
Property, plant and equipment, net 300,902 234,209
Deferred taxes, net 60,188 34,334
Other assets 56,565 32,230
Goodwill and intangibles, net 122,954 33,477
------------- ------------
Total assets $ 1,292,752 $ 778,651
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $ 52,552 $ 62,049
Accrued liabilities 55,136 55,383
Notes payable 9,745 13,231
Current portion of long-term debt 176,674 5,961
Income taxes payable 3,926 1,013
------------- ------------
Total current liabilities 298,033 137,637
Long-term debt, less current portion:
Convertible into common stock 5,381 130,941
Other long-term debt 320,321 45,548
Deferred license and royalty income 12,885 13,850
Other liabilities 22,174 15,622
Minority interest 119,742 96,583
Common stock subject to Put Agreement,
1,065 shares at December 31, 1996 -- 23,120
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $.01 par value; 10,000
shares authorized; 4 and 50 shares of Series B
issued and outstanding at September 30, 1997
and December 31, 1996, respectively ($4,000
liquidation preference) 1 1
Common stock, $.01 par value; 100,000 shares
authorized; 38,734 and 33,422 shares outstanding
at September 30, 1997 and December 31, 1996,
respectively (including shares
subject to put agreement) 387 324
Additional capital 514,745 368,187
Retained earnings (deficit) 38,277 (25,915)
Foreign currency translation adjustments (39,194) (27,247)
------------- -----------
Total stockholders' equity 514,216 315,350
------------- -----------
Total liabilities and stockholders' equity $ 1,292,752 $ 778,651
============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE>
Page 4
ICN PHARMACEUTICALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
For the three and nine months ended September 30, 1997 and 1996
(Unaudited - 000's omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 177,397 $ 157,917 $ 496,594 $ 439,825
Cost of sales 77,309 70,515 228,070 210,850
---------- ---------- ---------- ----------
Gross profit 100,088 87,402 268,524 228,975
Selling, general and administrative expenses 54,187 51,366 165,369 136,532
Research and development costs 4,290 4,130 13,210 11,040
---------- ---------- ---------- ----------
Income from operations 41,611 31,906 89,945 81,403
Translation and exchange (gains) losses, net 1,494 (903) 7,204 (215)
Interest income (6,392) (187) (9,855) (1,706)
Interest expense 5,950 3,653 13,332 9,245
---------- ---------- ---------- ----------
Income before provision (benefit) for income taxes
and minority interest 40,559 29,343 79,264 74,079
Provision (benefit) for income taxes (521) 2,345 (12,311) 3,385
Minority interest 6,523 6,163 13,438 12,963
---------- ---------- ---------- ----------
Net income $ 34,557 $ 20,835 $ 78,137 $ 57,731
========== ========== ========== ==========
Per Share Information:
Primary:
Earnings per share $ .79 $ .60 $1.79 $ 1.67
========= ========== ========== ==========
Shares used in per share computation 43,088 35,353 40,403 34,322
========= ========== ========== ==========
Fully diluted:
Earnings per share $ .73 $ .59 $1.66 $ 1.65
========= ========== ========== ==========
Shares used in per share computation 48,944 40,565 46,864 39,546
========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
Page 5
ICN PHARMACEUTICALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1997 and 1996
(Unaudited - 000's omitted)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1997 1996
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 78,137 $ 57,731
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 18,370 10,123
Increase in allowance for losses
on accounts receivable 2,235 389
Translation and exchange (gains) losses, net 7,204 (215)
Minority interest 13,438 12,963
Decrease (increase) in deferred taxes (25,854) 2,679
Changes in:
Accounts and notes receivable (74,327) (131,510)
Inventories (2,223) 38,847
Prepaid expenses and other current assets 4,069 13,037
Other operating assets and liabilities, net (5,675) (15,838)
----------- ----------
Net cash provided by (used in) operating activities 15,374 (11,794)
----------- ----------
Cash flows from investing activities:
Capital expenditures (27,634) (12,286)
Proceeds from sale of property, plant and equipment 1,527 --
Sale of marketable securities -- 27,667
Acquisitions and other (24,137) (24,472)
----------- ----------
Net cash used in investing activities (50,244) (9,091)
----------- ----------
Cash flows from financing activities:
Net (payments) borrowings of notes payable (8,958) 20,688
Proceeds from issuance of long term debt (net of fees of $8,000) 267,000 --
Net payments of long-term debt (256) (6,934)
Proceeds from exercise of stock options 16,534 10,279
Proceeds from issuance of stock -- 12,101
Dividends paid (8,414) (4,741)
----------- ----------
Net cash provided by financing activities 265,906 31,393
----------- ----------
Effect of exchange rate changes on cash and cash equivalents (541) (378)
----------- ----------
Net increase in cash and cash equivalents 230,495 10,130
Cash and cash equivalents at beginning of period 39,366 24,094
----------- ----------
Cash and cash equivalents at end of period $ 269,861 $ 34,224
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
<PAGE>
Page 6
MANAGEMENT'S STATEMENT REGARDING UNAUDITED FINANCIAL STATEMENTS
The consolidated condensed financial statements included herein have been
prepared by ICN Pharmaceuticals, Inc. ("the Company" or "ICN"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
results of operations presented herein are not necessarily indicative of the
results to be expected for a full year. Although the Company believes that all
adjustments (consisting only of normal, recurring adjustments) necessary for a
fair presentation of the interim period presented are included and that the
disclosures are adequate to make the information presented not misleading, these
consolidated condensed financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
Form 10-K/A filed on July 24, 1997.
<PAGE>
Page 7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
Principles of Consolidation
The accompanying consolidated condensed financial statements include the
accounts of the Company and all of its subsidiaries. Investments in 20%
through 50% owned affiliated companies are included under the equity method
where the Company exercises significant influence over operating and
financial affairs. Investments in less than 20% owned companies are
recorded at cost. All significant intercompany account balances and
transactions have been eliminated in consolidation.
Per Share Information
Earnings per share is based on net income after preferred stock dividend
requirements, the weighted average number of common shares outstanding,
including shares issued subject to put option, and the dilutive effect of
common share equivalents. Common share equivalents represent shares
issuable for outstanding options, on the assumption that the proceeds would
be used to repurchase shares in the open market, and the shares issuable
related to certain of the Company's convertible preferred stock and to
certain of the Company's convertible debentures. Such convertible preferred
stock and convertible debentures are considered common stock equivalents if
they met certain criteria at the time of issuance and have a dilutive
effect, if converted.
On March 25, 1997, the Company's Board of Directors declared a first
quarter cash dividend ("distribution") of $.08 per share, payable on April
23, 1997, to stockholders of record on April 9, 1997.
On June 26, 1997, the Company's Board of Directors declared a second
quarter cash dividend of $.08 per share, payable July 23, 1997, to
stockholders of record on July 9, 1997.
On September 24, 1997, the Company's Board of Directors declared a third
quarter cash dividend of $.08 per share, payable on October 22, 1997, to
stockholders of record on October 8, 1997.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," on the computation and presentation of earnings per share ("EPS").
SFAS No. 128 simplifies the computation for and replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement.
The statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods, and requires
restatement of all prior period earnings per share data presented. Earlier
application is not permitted. The Company will implement the accounting
standard beginning with its annual financial statements for the year ended
December 31, 1997. The Company expects that basic EPS will be greater than
the currently reported primary EPS.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes requirements for disclosure of
comprehensive income and becomes effective for the Company for the year
ending December 31, 1998. Comprehensive income includes such items as
foreign currency translation adjustments and unrealized holding gains and
losses on available for sale securities that are currently being presented
by the Company as a component of stockholders' equity (deficit). The impact
of adopting SFAS No. 130 has not been determined by the Company.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards
for disclosure about operating segments in annual financial statements and
selected information in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. This statement supersedes
<PAGE>
Page 8
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
September 30, 1997
(Unaudited)
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise."
The new standard becomes effective for the Company for the year ending
December 31, 1998, and requires that comparative information from earlier
years be restated to conform to the requirements of this standard. The
Company does not expect this pronouncement to materially change the
Company's current reporting and disclosures.
2. RELATED PARTY TRANSACTIONS -
During the second quarter of 1997, the Company made a short-term advance to
the Chairman and CEO of approximately $327,000. The advance along with
accrued interest was repaid in August 1997.
3. SUPPLEMENTAL CASH FLOW INFORMATION -
Cash paid for income taxes for the nine months ended September 30, 1997 and
1996 was $2,629,000 and $4,084,000, respectively.
Cash paid for interest for the nine months ended September 30, 1997 and
1996 was $7,759,000 and $8,723,000, respectively.
In January 1997, the Company issued approximately 541,000 shares of common
stock as payment of its $10,000,000 obligation under the 1987 class action
settlement.
During the third quarter of 1997, the Company accrued a common stock
dividend of $3,085,000.
During the nine months ended September 30, 1997, the Company issued
approximately 87,000 shares of common stock as payment of a fourth quarter
1996, first quarter 1997 and second quarter 1997 preferred stock dividend
of $1,875,000.
<PAGE>
Page 9
Notes To Consolidated Condensed Financial Statements (Continued)
September 30, 1997
(Unaudited)
4. GEOGRAPHIC DATA -
The following table sets forth the amount of net sales and operating income
(loss) of the Company by geographical areas (includes pharmaceuticals and
biomedical operations) for the three and nine months ended September 30,
1997 and 1996 and the identifiable assets of the Company by geographical
areas as of September 30, 1997 and December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------- ----------------------
September 30, September 30,
--------------------- ----------------------
1997 1996 1997 1996
-------- --------- -------- ---------
Net Sales:
<S> <C> <C> <C> <C>
United States .................... $ 41,693 $ 37,106 $ 100,932 $ 95,080
Canada ........................... 4,840 4,514 14,970 14,060
-------- --------- -------- ---------
North America ............... 46,533 41,620 115,902 109,140
Latin America (principally Mexico) 14,912 12,546 42,753 35,128
Western Europe ................... 11,959 12,511 40,769 44,707
Yugoslavia ....................... 58,660 69,242 156,768 199,234
Russia ........................... 28,806 19,593 83,014 44,473
Hungary .......................... 11,498 -- 41,147 --
-------- --------- --------- ---------
Eastern Europe .............. 98,964 88,835 280,929 243,707
Asia, Africa, and Australia ...... 5,029 2,405 16,241 7,143
--------- --------- --------- ---------
Total ............................ $ 177,397 $ 157,917 $ 496,594 $ 439,825
========= ========= ========= =========
Operating Income (Loss):
United States .................... $ 15,008 $ 16,401 $ 34,894 $ 41,176
Canada ........................... 1,740 1,457 5,153 687(2)
-------- --------- --------- ---------
North America ............... 16,748 17,858 40,047 41,863
Latin America (principally Mexico) 4,220 2,416 10,309 7,613
Western Europe ................... 612 (1,166) 2,807 1,890
Yugoslavia ....................... 21,273 19,179 53,855 46,271
Russia ........................... 6,536 5,266 18,906 13,404
Hungary .......................... 1,485 -- 6,271 --
Eastern European Headquarters .... (1,439) -- (3,117) --
-------- --------- --------- ---------
Eastern Europe .............. 27,855 24,445 75,915 59,675
Asia, Africa, and Australia ...... 24 59 139 166
Corporate ........................ (7,848) (11,706) (39,272)(1) (29,804)
-------- --------- --------- ---------
Total ............................ $ 41,611 $ 31,906 $ 89,945 $ 81,403
========= ========= ========= =========
<FN>
(1) Includes $12,000,000 of expenses related to a charge in connection with the
settlement of the Company's class action lawsuit. (See Note 6.)
(2) Includes $3,500,000 of expenses related to one-time charge in connection
with a resolution of a commercial dispute and a penalty from the Canadian Patent
Price Review Board.
</FN>
</TABLE>
<PAGE>
Page 10
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
September 30, 1997
(Unaudited)
Identifiable assets:
September 30, December 31,
1997 1996
------------ ------------
United States .................... $ 250,232 $ 105,670
Canada ........................... 10,468 7,433
---------- ----------
North America .................... 260,700 113,103
Latin America (principally Mexico) 32,491 30,691
Western Europe ................... 50,202 56,578
Yugoslavia ....................... 395,921 342,983
Russia ........................... 80,520 54,990
Hungary .......................... 75,693 77,245
Eastern European Headquarters .... 6,809 --
---------- ----------
Eastern Europe ................... 558,943 475,218
Asia, Africa, and Australia ...... 26,228 2,524
Corporate ........................ 364,188 100,537
----------- ----------
Total ............................ $ 1,292,752 $ 778,651
=========== ==========
5. ICN YUGOSLAVIA -
ICN Yugoslavia, a 75% owned subsidiary, operates in a business environment
that is subject to significant economic volatility and political
instability. The economic conditions in Yugoslavia include continuing
liquidity problems, a history of high inflation, unemployment, a weakened
banking system and a high trade deficit. The future of the economic and
political environment of Yugoslavia is uncertain and could deteriorate to
the point that a material adverse impact on the Company's financial
position and results of operations could occur.
ICN Yugoslavia began the year with a net monetary asset exposure of
$134,000,000 which was subject to foreign exchange loss if a devaluation of
the dinar were to occur. During the first nine months of 1997, the Company
reduced its monetary exposure by converting dinar denominated accounts
receivable into notes receivable payable in dinars, but fixed in dollar
amounts. The first conversion was made early in the first quarter with
$50,000,000 accounts receivable converted into a one year note bearing
interest at LIBOR plus one percent. A second conversion was arranged at the
end of the first quarter through an agreement with the Yugoslavian
government to purchase $50,000,000 of drugs. The sales under this agreement
were converted into a note receivable bearing interest at LIBOR plus one
percent on the outstanding balance and has special payment guarantees with
the payment fixed in dollar amounts. The second agreement also allows the
Company to offset certain payroll tax obligations against outstanding
accounts receivable balances. Subsequent to these two agreements, the
Company negotiated an arrangement with the government of Yugoslavia under
which ICN Yugoslavia would commit to continue to provide products, in
dollar denominated sales, in an amount up to $50,000,000 per calendar
quarter for one year, and the government would pay a minimum of $9,500,000
per month towards outstanding receivables. However, at no point in time can
the amount due to ICN Yugoslavia from the government exceed $200,000,000,
including both accounts and notes receivable. Receivables that arise from
this agreement are interest bearing with interest at the LIBOR rate plus
one percent. As of September 30, 1997, ICN Yugoslavia had a net monetary
asset position of $48,000,000 which would be subject to foreign exchange
loss if a devaluation of the dinar were to occur.
The Company reduced its overall accounts receivable balance from the
beginning of the year through collections and the conversion of
$130,000,000 of accounts receivable into notes receivable discussed above.
As of September 30, 1997, the accounts receivable balance was $74,471,000.
The willingness of the Yugoslavian government to provide the Company
<PAGE>
Page 11
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
September 30, 1997
(Unaudited)
protection against devaluation on its receivables in exchange for longer
payment terms is a reflection of the strict adherence to government policy
on controlling inflation by limiting the amount of hard currency in
circulation. This policy was initially established with the start of the
stabilization program in 1994.
6. COMMITMENTS AND CONTINGENCIES -
Litigation: In a Consolidated Amended Class Action Complaint for Violations
of Federal Securities Laws (the "Securities Complaint") (the "1995
Actions"), plaintiffs allege that Defendants made various deceptive and
untrue statements of material fact and omitted material facts regarding its
hepatitis C NDA in connection with: (i) the Merger of the Company, SPI,
Viratek and Biomedicals in November 1994 and the issuance of convertible
debentures in connection therewith; and (ii) information provided to the
public. Plaintiffs also allege that the Chairman of the Company traded on
inside information relating to the hepatitis C NDA. The Securities
Complaint asserts claims for alleged violations of Sections 11 and 15 of
the Securities Act of 1933, Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Plaintiffs
motion seeking the certification of (i) a class of persons who purchased
ICN securities from November 10, 1994 through February 17, 1995; and (ii) a
subclass consisting of persons who owned SPI and/or Biomedicals common
stock prior to the Merger was granted. Defendants filed their answer to the
Securities Complaint. On July 23, 1997, plaintiffs and defendants entered
into a Memorandum of Agreement to Settle Action (the "Agreement"), whereby
the parties agreed to settle the 1995 Actions for $15,000,000. This
settlement, funded in part by the Company's insurance policy, resulted in a
$12,000,000 charge to the Company which is included in the consolidated
condensed statements of income for the nine months ended September 30,
1997. The full settlement documentation has been filed with the Court and a
preliminary hearing is scheduled for November 17, 1997. The settlement is
subject to final approval of the Court. The Company intends to urge the
Court to approve the settlement. If the settlement is not approved and the
matter proceeds to trial, the ultimate outcome of any such trial cannot be
predicted with certainty and an unfavorable outcome could have a material
adverse effect on the Company.
Four lawsuits have been filed with respect to the Merger in the Court of
Chancery in the State of Delaware (the "1994 Actions"). Three of these
lawsuits were filed by stockholders of SPI and, in one lawsuit, of Viratek
against ICN, SPI, Viratek (in the one lawsuit) and certain directors and
officers of ICN, SPI and/or Viratek (including the Chairman) and purport to
be class actions on behalf of all persons who held shares of SPI and
Viratek common stock. The fourth lawsuit was filed by a stockholder of
Viratek against ICN, Viratek and certain directors and officers of ICN, SPI
and Viratek (including the Chairman) and purports to be a class action on
behalf of all persons who held shares of Viratek common stock. These suits
allege that the consideration provided to the public stockholders of SPI
and/or Viratek in the Merger was unfair and inadequate, and that the
defendants breached their fiduciary duties in approving the Merger and
otherwise. The 1994 Actions have been inactive. The Company believes that
these suits are without merit and intends to defend them vigorously.
Management believes that, having extensively reviewed the issues in the
above referenced matters, there are strong defenses and, if the matters are
not settled, the Company will continue to defend the litigations
vigorously. While the ultimate outcome of the 1995 Actions, should the
Court not approve the settlement, and 1994 Actions cannot be predicted with
certainty, and an unfavorable outcome could have a material adverse effect
on the Company, at this time management does not expect these matters will
have a material adverse effect on the financial position and results of
operations of the Company.
<PAGE>
Page 12
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
September 30, 1997
(Unaudited)
Investigations: Pursuant to an Order Directing Private Investigation and
Designating Officers to Take Testimony, entitled In the Matter of ICN
Pharmaceuticals, Inc., (P-177) (the "Order"), a private investigation is
being conducted by the SEC with respect to certain matters pertaining to
the status and disposition of the hepatitis C NDA. As set forth in the
Order, the investigation concerns whether, during the period June 1994
through February 1995, the Company, persons or entities associated with it
and others, in the offer and sale or in connection with the purchase and
sale of ICN common stock, engaged in possible violations of Section 17(a)
of the Securities Act of 1933 and Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 thereunder, by having possibly: (i) made false
or misleading statements or omitted material facts with respect to the
status and disposition of the hepatitis C NDA; or (ii) purchased or sold
ICN common stock while in possession of material, non-public information
concerning the status and disposition of the hepatitis C NDA; or (iii)
conveyed material, non-public information concerning the status and
disposition of the hepatitis C NDA, to other persons who may have purchased
or sold ICN stock. The Company is cooperating with the SEC in its
investigation. The Company has and continues to produce documents to the
SEC pursuant to its request and the SEC has taken the depositions of
certain current and former officers, directors, and employees of the
Company.
In addition, the Company has received Subpoenas from a Grand Jury of the
United States District Court, Central District of California, requesting
the production of documents covering a broad range of matters over various
time periods. The Company and Milan Panic are subjects of the
investigation. The Company has and continues to cooperate in the production
of documents pursuant to the Subpoenas. A number of current and former
employees of the Company have been interviewed by the government in
connection with the investigation.
The Company is a party to a number of other pending or threatened lawsuits.
In the opinion of management, the ultimate resolution of these other
matters will not have a material effect on the Company's consolidated
financial position or results of operations.
Commitments: In January 1997, ICN Yugoslavia entered into a forward
exchange contract with a Yugoslavian bank to purchase $16,935,000 in hard
currency at a fixed exchange rate of 5.25 dinars to one U.S. dollar. The
dinars shall be paid to the bank two days after the receipt of the hard
currency. Should the bank fail to provide the hard currency, ICN Yugoslavia
is under no obligation to pay the dinars. Additionally, this contract is
automatically canceled should there be an official devaluation of the
dinar.
<PAGE>
Page 13
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
September 30, 1997
(Unaudited)
7. DETAIL OF CERTAIN ACCOUNTS - (000's omitted)
Receivables, Net:
September 30, December 31,
1997 1996
------------ ------------
Trade accounts receivable ...................... $ 198,076 $ 257,619
Other .......................................... 12,201 9,782
------------ ------------
210,277 267,401
Allowance for doubtful accounts ............... (7,583) (8,870)
------------ ------------
$ 202,694 $ 258,531
============ ============
Inventories, Net:
September 30, December 31,
1997 1996
------------ ------------
Raw materials and supplies .................... $ 57,898 $ 48,656
Work-in-process ............................... 12,875 14,625
Finished goods ................................ 63,454 67,845
------------ ------------
134,227 131,126
Allowance for inventory obsolescence .......... (10,756) (10,153)
------------ ------------
$ 123,471 $ 120,973
============ ============
Property, Plant and Equipment, Net:
September 30, December 31,
1997 1996
------------ ------------
Property, plant and equipment, at cost ........ $ 369,167 $ 280,629
Accumulated depreciation ...................... (68,265) (46,420)
------------ ------------
$ 300,902 $ 234,209
============ ============
8. DEBT -
In August 1997, the Company completed its offering of $275,000,000
principal amount of 9.25% Senior Notes due 2005 (the "Notes") for net
proceeds of approximately $267,000,000. Interest on the Notes is payable
semi-annually on February 15 and August 15 of each year, commencing
February 15, 1998. The Notes mature on August 15, 2005, unless previously
redeemed. The Notes are redeemable in cash at the option of the Company, in
whole or in part, on or after August 15, 2001. The Notes are general
unsecured obligations of the Company. The Notes rank pari passu in right of
payment with all unsecured senior indebtedness and senior to all
subordinated indebtedness of the Company, including the Company's 8.5%
Convertible Subordinated Notes due 1999. The indenture governing the Notes
permits the Company and its subsidiaries to incur additional indebtedness,
subject to certain limitations, and contains certain covenants with respect
to payment of dividends, creation of liens, and sales of assets.
<PAGE>
Page 14
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
September 30, 1997
(Unaudited)
9. ACQUISITIONS -
In August 1997, the Company completed its purchase of the worldwide rights
to seven products, the non-U.S. rights to two other products, with an
option to purchase the U.S. rights to these products, and the purchase of a
GMP-standard manufacturing plant in Humacao, Puerto Rico (the "Plant") from
F. Hoffmann-La Roche, Ltd. ("Roche"). The purchase price of the Plant was
$55,000,000 payable in cash. Additionally, the purchase of the Plant is
under a sale/leaseback arrangement whereby Roche will lease the Plant from
the Company under a two year lease with lease payments totaling $8,000,000
annually.
Under the agreement, effective July 1, 1997, the Company received the
product rights in exchange for $90,000,000 payable in a combination of
1,600,000 shares of the Company's common stock valued at $40,000,000 and
2,000 shares of the Company's convertible preferred stock valued at
$50,000,000. Each share of the Company's convertible preferred stock is
convertible into 1,000 shares of the Company's common stock at a conversion
price equivalent to $25 per share. In conjunction with the issuance of the
common and preferred stock, the Company guaranteed a price initially at
$25.75 per common share increasing at a rate of 6% per year for three
years. Should Roche sell the shares issued at any time during the guarantee
period, the Company is entitled to any of the proceeds realized by Roche in
excess of the guaranteed price.
Effective October 1, 1997, as a result of the rise in the per share market
price of the Company's common stock since the initial acquisition from
Roche, the Company exercised its option to acquire the U.S. rights to the
two products noted above plus two other U.S. product rights in exchange for
an obligation of $82,073,000. Five days prior to the Closing date of
December 1, 1997, the parties will determine the form of consideration used
to settle the obligation. Consideration is likely to be in the form of cash
owed to the Company from the sale of common stock by Roche in excess of the
guarantee price and further stock price guarantees or a combination
thereof.
This acquisition will be accounted for using the purchase method of
accounting. The purchase price allocation is preliminary pending
appraisals, evaluations and other studies of fair value of the assets
acquired. At this time it is impractical to provide the required financial
statements related to the acquisition and the pro forma financial
information that are required to be furnished under cover of Form 8-K. The
Company anticipates filing this information under cover of Form 8-K as soon
as practicable within 75 days from the closing date.
10. SUBSEQUENT EVENTS -
On October 1, 1997, the Company acquired a 72% interest in Marbiopharm, a
pharmaceutical company located in Yoshkar-Ola, Russia, for approximately
$3,000,000 in cash. Marbiopharm manufactures, sells and distributes
pharmaceutical products in Russia.
On October 13, 1997, the Company acquired an 80% interest in Polfa Rzeszow,
S.A., ("Polfa") a pharmaceutical company located in Rzeszow, Poland, for
approximately $33,700,000 in cash and approximately 32,000 shares of common
stock of the Company valued at $1,709,000. Polfa makes and distributes a
wide range of pharmaceuticals, including anti-depressants, anti-fungals,
anti-infectives, pain relievers, anti-allergy, cardiovasculars and
nutritionals. Under the terms of the agreement, the Company will invest
approximately $20,000,000 over the next two years, primarily for the
construction of a new pharmaceutical production plant, at which time the
Company will own approximately 90% of Polfa.
On October 21, 1997, the Company acquired a 75% interest in AO Tomsk
Chemical Pharmaceutical Plant ("Tomsk"), a pharmaceutical company located
in Tomsk, Russia, for approximately $3,000,000 in cash. Tomsk makes and
distributes a wide range of pharmaceuticals, including antiseptics,
analgesics, antibiotics and herbal liquids and extracts. Under the terms of
the agreement, the Company will invest approximately $8,000,000 over the
next two years. The terms and conditions of the acquisition are subject to
the approval of the Anti-monopoly Committee of the Russian Federation and
are expected to be finalized in the fourth quarter of 1997.
<PAGE>
Page 15
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
September 30, 1997
(Unaudited)
On October 27, 1997, the Company acquired a 42.6% interest in Velefarm, a
distributor located in Belgrade, Yugoslavia, for 54,000,000 dinars
(approximately $9,000,000). Under the terms of the agreement, the Company
exchanged accounts receivable due from Velefarm for the 42.6% interest. ICN
Yugoslavia recorded sales to Velefarm of $61,057,000 and $86,383,000 for
the year ended December 31, 1996 and the nine months ended September 30,
1997, respectively. Accounts receivable due from Velefarm as of December
31, 1996 were $32,224,000. The Company's investment in Velefarm will be
recorded under the equity method of accounting.
Each of the above acquisitions will be accounted for using the purchase
method of accounting. The purchase price allocations are preliminary
pending appraisals, evaluations and other studies of the fair value of the
assets and liabilities acquired. Each of the acquisitions individually or
in the aggregate is not material to the financial position or results of
operations of the Company.
On October 14, 1997, the Company announced that it elected to redeem its 8-
1/2% Convertible Subordinated Notes due 1999 on November 16, 1997, and the
5-5/8% Xr Capital Holding Exchangeable Certificates due 2001, issued by a
trust established by ICN in 1986, on November 7, 1997. As of October 10,
1997, there was outstanding principal amount of $114,900,000 of the 8-1/2%
Convertible Subordinated Notes. These bonds were issued in November 1994
and are convertible into shares of ICN common stock at a conversion price
of $22.117, or 45.21 shares per $1,000 principal amount. Bondholders will
have the right to convert the bonds into ICN common stock on or before
November 14, 1997. Holders of record at the close of business on November
1, 1997 and who convert after that date will be entitled to receive the
semi-annual interest payment payable on November 15, 1997. If not
converted, bondholders will receive 102.125% of the principal amount plus
accrued interest. As of November 13, 1997, approximately $64,597,000 of the
Convertible Subordinated Notes have been converted into 2,920,694 shares of
common stock.
As of October 10, 1997, there was outstanding principal amount of
approximately Sfr 59,000,000 of the 5-5/8% Xr Capital Holding Exchangeable
Certificates. These certificates were issued in 1986 in the international
market and are convertible into ICN common stock at U.S. $26.695 (using a
fixed exchange rate of Sfr 1.66 per U.S. $1.00). Holders of the
certificates will have the right to convert the bonds into ICN common stock
on or before October 24, 1997, ten business days before the redemption
date, November 7, 1997. The redemption price is 100% of the principal
amount plus accrued interest. At the redemption date, all Xr Capital
Holding Exchangeable certificates converted into 1,342,000 shares of the
common stock except Sfr 180,000 principal amount which was redeemed for
cash.
<PAGE>
Page 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For financial reporting purposes the Company's operations are divided into two
industry segments, the Pharmaceutical segment and the Biomedical segment.
Certain financial information for these two segments is set forth below (in
thousands).
Net Sales
Three Months Ended Nine Months Ended
----------------------- -----------------------
September 30, September 30,
----------------------- -----------------------
1997 1996 1997 1996
Pharmaceutical $ 158,918 $ 142,123 $ 441,062 $ 391,653
Biomedical 18,479 15,794 55,532 48,172
--------- ---------- --------- ----------
Total Company $ 177,397 $ 157,917 $ 496,594 $ 439,825
========= ========== ========= ==========
Pharmaceutical sales for the three and nine months ended September 30, 1997
increased $16,795,000 or 12% and $49,409,000 or 13%, respectively, compared to
the same periods in 1996. The major increases occurred in the Eastern European
region reflecting internal growth in Russian and additional sales from
acquisitions. This region experienced growth despite declining sales in
Yugoslavia resulting from government controls on healthcare spending.
Pharmaceutical net sales in Eastern Europe were $98,964,000 and $280,929,000 for
the three and nine months ended September 30, 1997, respectively, compared to
$88,835,000 and $243,707,000 for the same periods in 1996. Sales in Russia were
$28,806,000 and $83,014,000 for the three and nine months ended September 30,
1997, respectively, compared to $19,593,000 and $44,473,000 for the same periods
in 1996. The increase in sales in Russia is due to the inclusion of a full nine
months of operations of Polypharm and Leksredstva in 1997 and price increases
and higher unit sales. The Company's acquisition of Alkaloida in Hungary in
October 1996 contributed $11,498,000 and $41,147,000 for the three and nine
months ended September 30, 1997, respectively. Sales in Yugoslavia were
$58,660,000 and $156,768,000 for the three and nine months ended September 30,
1997, respectively, compared to $69,242,000 and $199,234,000 for the same
periods in 1996. Sales in Yugoslavia were lower due to decreased unit sales and
unfavorable exchange rates and have been adversely affected by liquidity
problems in that country and by government actions to reduce health care
spending.
Pharmaceutical net sales in North America were $35,268,000 and $83,355,000 for
the three and nine months ended September 30, 1997, respectively, compared to
$33,030,000 and $84,769,000 for the same periods in 1996. Net sales in the third
quarter of 1997 for the North American region increased $2,238,000 or 7%
compared to the previous year primarily due to the additional sales contributed
by the acquisition of the F. Hoffmann-La Roche Ltd. ("Roche") products,
described below, partially offset by a decrease in unit sales of Virazole(R) of
$12,508,000. Net sales for the nine months ended September 30, 1997 decreased
$1,414,000 or 2% primarily due to a decrease in unit sales of Virazole(R) in the
amount of $20,076,000 partially offset by the additional $15,420,000 in sales
contributed by the acquisition of the Roche products and unit sales increases in
the myasthenia gravis product lines. Virazole(R) is used in the United States to
treat respiratory syncytial virus ("RSV"), a seasonal illness which occurs
primarily in late fall through early spring. Sales of Virazole(R) during the
first nine months of 1997 have been adversely impacted by increased wholesale
inventory levels that developed early in the 1995/1996 season along with
continuing trends in the industry toward cost containment.
On July 1, 1997, the Company completed its purchase from Roche of worldwide
rights to seven products and non-U.S. rights to two other products having
<PAGE>
Page 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
aggregate annual sales in 1996 of $53,800,000. The sales from these products are
included in the North American sales from the effective date of the acquisition,
July 1, 1997, and annualized sales may be slightly lower than the annualized
1996 sales levels.
Pharmaceutical net sales in Latin America were $14,298,000 and $40,753,000 for
the three and nine months ended September 30, 1997, respectively, compared to
$12,071,000 and $33,544,000 for the same periods in 1996. Net sales in the third
quarter and nine months ended September 30, 1997 increased $2,227,000 or 18% and
$7,209,000 or 21%, respectively, compared to the same periods in 1996. Such
increases in net sales were primarily due to price increases, and, to a lesser
extent, volume increases.
Pharmaceutical net sales in Western Europe were $7,285,000 and $25,090,000 for
the three and nine months ended September 30, 1997, respectively, compared to
$6,934,000 and $25,985,000 for the same periods in 1996. Net sales in the third
quarter of 1997 increased $351,000 or 5%, primarily due to an increase in
Virazole(R) sales. Net sales for the nine months ended September 30, 1997
decreased $895,000 or 3% primarily due to a decrease in Calcitonina(R) and
antibiotic unit sales in Spain and changes in translation rates partially offset
by an increase in Virazole(R) sales of $1,615,000. Since the beginning of the
year the exchange rate of the Spanish peseta has declined in value against the
dollar by 15%.
Pharmaceutical net sales in Asia, Africa and Australia were $3,103,000 and
$10,935,000 for the three and nine months ended September 30, 1997,
respectively, compared to $1,253,000 and $3,648,000 for the same periods in
1996. These increases of $1,850,000 and $7,287,000 for the three and nine months
ended September 30, 1997, respectively, compared to the same periods in 1996 are
primarily due to the additional sales contributed by the Company's acquisition
of Wuxi Pharmaceutical Corporation ("Wuxi") in China, which the Company acquired
in the first quarter of 1997.
Biomedicals segment net sales for the three and nine months ended September 30,
1997 were $18,479,000 and $55,532,000, respectively, compared to $15,794,000 and
$48,172,000 for the same periods of 1996. Net sales in the third quarter and
nine months ended September 30, 1997 increased $2,685,000 or 17% and $7,360,000
or 15%, respectively. The increase in net sales for the three months ended
September 30, 1997 is primarily due to the effect of the additional Dosimetry
sales resulting from the acquisition of the former Siemens Dosimetry Service in
July of 1996. The increase in net sales for the nine months ended September 30,
1997 is primarily due to the additional Dosimetry sales of $8,612,000 resulting
from the acquisition mentioned above, partially offset by a decrease in
instrument sales of $1,260,000 resulting from the sale of the Company's
instrument business in March 1996.
Gross Profit
Gross profit as a percentage of sales was 55% and 53% for the three and nine
months ended September 30, 1997, respectively, compared to 55% and 52% for the
same periods in 1996, respectively. Gross profit margins improved primarily at
ICN Yugoslavia, where gross profit margins increased to 50% and 49% for the
three and nine months ended September 30, 1997, respectively, from 43% and 37%
during the same periods in 1996. ICN Yugoslavia margins were lower in the prior
year due to the impact of the devaluation of the dinar in November 1995 which
carried over into 1996 as the higher priced inventory was sold. The improvement
at ICN Yugoslavia was partially offset by the gross profit margins resulting
from the acquisitions in Eastern Europe of Alkaloida in Hungary and Leksredstva
and Polypharm in Russia where sales carry gross profit margins of approximately
35%, and by lower gross profit margins in the North America region. Lower
Virazole(R) sales, which carry gross profit margins close to 90% and the effect
of additional sales from the acquisitions of the Roche products, which carry
gross profit margins of 66% affected gross profits in the North America region,
where gross profits were 74% and 78% for the three and nine months ended
September 30, 1997, respectively, compared to 88% and 86% for the same periods
in 1996.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $54,187,000 or 31% of sales
and $165,369,000 or 33% of sales for the three and nine months ended September
30, 1997, respectively, compared to $51,366,000 or 33% of sales and $136,532,000
or 31% of sales for the three and nine months ended September 30, 1996,
<PAGE>
Page 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
respectively. The increase compared to the same periods in 1996 is primarily due
to additional expenses as a result of the acquisitions of Alkaloida in Hungary,
Leksredstva and Polypharm in Russia, and the former Siemens Dosimetry Service in
the United States. In the nine month period ended September 30, 1997, the
Company recorded a non-recurring $12,000,000 charge for the settlement of the
1995 class action suit related to the Company's filing of its hepatitis C new
drug application with the Food and Drug Administration.
Research and Development
Research and development expenditures increased $160,000 or 4% and $2,170,000 or
20% for the three and nine months ended September 30, 1997, respectively,
compared to the same periods in 1996. Such increases were primarily due to the
acquisition of personnel and modern research facilities at Alkaloida in Hungary
and increased expenditures at ICN Yugoslavia.
Translation and Exchange (Gains) Losses, Net
Translation and exchange (gains) losses, net, were $1,494,000 and $7,204,000 for
the three and nine months ended September 30, 1997, respectively, compared to
($903,000) and ($215,000) for the same periods in 1996. In the third quarter of
1997, translation (gains), losses, net include $2,849,000 of translation losses,
primarily related to ICN Yugoslavia's net monetary asset position, partially
offset by $1,363,000 of translation gains related to the Company's foreign
denominated debt. For the nine months ended September 30, 1997, translation
(gains), losses, net include $10,403,000 of translation losses, primarily
related to ICN Yugoslavia's net monetary asset position, partially offset by
$3,095,000 of translation gains related to the Company's foreign denominated
debt.
Interest Income
Interest income during the three and nine months ended September 30, 1997
increased $6,205,000 and $8,149,000, respectively. This increase is primarily
due to interest income on notes receivable from the Yugoslavian government, and
the interest income from the investment of the proceeds resulting from the
Company's issuance of $275,000,000 of senior notes.
Interest Expense
Interest expense during the three months and nine months ended September 30,
1997 increased $2,297,000 and $4,087,000, respectively, compared to the same
periods in 1996. This increase resulted primarily from the increase in short and
long term debt of the Company, primarily due to the effect of the debt assumed
with the acquisition of Alkaloida in Hungary and the issuance in August of 1997
of $275,000,000 of senior notes.
Taxes
Provision (benefit) for income taxes was ($521,000) and ($12,311,000) for the
three and nine months ended September 30, 1997, respectively, compared to
$2,345,000 and $3,385,000 for the same periods in 1996. As a result of the
acquisition of product rights from Roche, the Company reassessed the carrying
value of its deferred tax assets resulting in an increase in its deferred tax
asset and a corresponding deferred tax benefit of $25,854,000. Offsetting this
benefit were increases in taxes at ICN Yugoslavia of $10,163,000 resulting from
the expiration of tax benefits which originated when ICN Yugoslavia was acquired
in 1991. However, future taxes may be partially offset by tax credits allowed in
Yugoslavia for plant construction. The current statutory tax rate in Yugoslavia
is 25%.
<PAGE>
Page 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Computation of Per Share Earnings
In the Company's calculation of per share earnings, certain adjustments are made
to reported net income to arrive at an adjusted net income that is divided by
the number of shares for the period. Last year these adjustments related to the
impact of the Company's convertible debt, while in the three and nine months
ended September 30, 1997 there are additional adjustments related to preferred
dividends. In October of 1996, the Company issued $50,000,000 of preferred stock
having a 6% annual dividend and a convertibility feature that allows conversion
into common stock at a discount from the current market price at the time of the
exercise. This discount represents an embedded dividend and is treated similar
to the 6% stated preferred dividend in the calculation of earnings per share.
In the three and nine months ended September 30, 1997, the preferred stock is
not assumed to be converted because to do so would be anti-dilutive.
Accordingly, the earnings per share calculation includes an adjustment to net
income for the three and nine months ended September 30, 1997 of $659,000 and
$5,085,000, respectively, related to the stated preferred and embedded dividends
compared to no preferred dividend deduction last year. The embedded dividend is
deducted from earnings in the per share calculation based on when the
convertible feature of the preferred becomes exercisable, which occurs over a
year with most of the discount amortized in the first two quarters subsequent to
the issuance. Since March 31, 1997, approximately 48,000 shares of the initial
50,000 share preferred stock offering have been converted into common stock.
ICN YUGOSLAVIA
ICN Yugoslavia, a 75% owned subsidiary, operates in a business environment that
is subject to significant economic volatility and political instability. The
economic conditions in Yugoslavia include continuing liquidity problems, a
history of high inflation, unemployment, a weakened banking system and a high
trade deficit. The future of the economic and political environment of
Yugoslavia is uncertain and could deteriorate to the point that a material
adverse impact on the Company's financial position and results of operations
could occur.
ICN Yugoslavia began the year with a net monetary asset exposure of $134,000,000
which was subject to foreign exchange loss if a devaluation of the dinar were to
occur. During the first nine months of 1997, the Company reduced its monetary
exposure by converting dinar denominated accounts receivable into notes
receivable payable in dinars, but fixed in dollar amounts. The first conversion
was made early in the first quarter with $50,000,000 accounts receivable
converted into a one year note bearing interest at LIBOR plus one percent. A
second conversion was arranged at the end of the first quarter through an
agreement with the Yugoslavian government to purchase $50,000,000 of drugs. The
sales under this agreement were converted into a note receivable bearing
interest at LIBOR plus one percent on the outstanding balance and has special
payment guarantees with the payment fixed in dollar amounts. The second
agreement also allows the Company to offset certain payroll tax obligations
against outstanding accounts receivable balances. Subsequent to these two
agreements, the Company negotiated an arrangement with the government of
Yugoslavia under which ICN Yugoslavia would commit to continue to provide
products, in dollar denominated sales, in an amount up to $50,000,000 per
calendar quarter for one year, and the government would pay a minimum of
$9,500,000 per month towards outstanding receivables. However, at no point in
time can the amount due to ICN Yugoslavia from the government exceed
$200,000,000, including both accounts and notes receivable. Receivables that
arise from this agreement are interest bearing with interest at the LIBOR rate
plus one percent. As of September 30, 1997, ICN Yugoslavia had a net monetary
asset position of $48,000,000 which would be subject to foreign exchange loss if
a devaluation of the dinar were to occur.
The Company reduced its overall accounts receivable balance from the beginning
of the year through collections and the conversion of $130,000,000 of accounts
receivable into notes receivable discussed above. As of September 30, 1997, the
accounts receivable balance was $74,471,000. The willingness of the Yugoslavian
government to provide the Company protection against devaluation on its
receivables in exchange for longer payment terms is a reflection of the strict
adherence to government policy on controlling inflation by limiting the amount
of hard currency in circulation. This policy was initially established with the
start of the stabilization program in 1994.
<PAGE>
Page 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
In spite of a decrease in sales for the nine months ended September 30, 1997 of
$42,466,000 compared to the same period last year, the operating income of ICN
Yugoslavia increased to $53,855,000 for the nine months ended September 30, 1997
from $46,271,000 the same period of last year, an increase of 16%. The increase
is primarily due to improved gross margins of 49% in the nine months ended
September 30, 1997 compared to 37% last year. Last year's quarterly margins
reflected the impact of the devaluation of the dinar in November of 1995. This
improvement over last year should not be viewed as an indication of improvement
to be expected in future quarters. The Yugoslavian economy is weak and liquidity
continues to be a problem. The improvement in operating income over last year is
offset by increased levels of tax expense due to the expiration of tax benefits
in Yugoslavia. Net income from ICN Yugoslavia for the nine months ended
September 30, 1997, was $31,553,000 compared to $34,687,000 last year.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997, cash provided by operating
activities totaled $15,374,000. The level of accounts and notes receivable
increased $74,327,000, primarily at ICN Yugoslavia resulting from the
lengthening of the collection period of receivables, the conversion of accounts
receivables into one-year notes receivables and general liquidity problems in
Yugoslavia. Cash from operating activities includes an adjustment to reverse the
non-cash impact of a $25,854,000 tax benefit from the revaluation of the
Company's deferred tax asset.
Cash used in investing activities of $50,244,000 for the nine months ended
September 30, 1997 include $24,137,000 of cash paid for acquisitions that were
initially acquired in 1996 and $27,634,000 of capital expenditures primarily in
the North America and Eastern European regions, related to production facility
improvements.
Cash provided by financing activities of $265,906,000 for the nine months ended
September 30, 1997 primarily includes $16,534,000 of proceeds from the exercise
of stock options and $267,000,000 of net proceeds from the issuance of senior
notes partially offset by net payments of notes payable of $8,958,000 and
$8,414,000 of dividends paid. The increase in 1997 dividend payments is
primarily due to the timing of quarterly cash payments in 1997 compared to 1996.
On March 25, 1997, the Company's Board of Directors declared a first quarter
cash dividend ("distribution") of $.08 per share payable on April 23, 1997 to
stockholders of record on April 9, 1997.
On June 26, 1997, the Company's Board of Directors declared a second quarter
cash dividend of $.08 per share, payable July 23, 1997 to stockholders of record
on July 9, 1997.
On September 24, 1997, the Company's Board of Directors declared a third quarter
cash dividend of $.08 per share, payable on October 22, 1997 to stockholders of
record on October 8, 1997.
The Company is subject to foreign currency risk on its foreign denominated debt
of approximately $25,615,000 at September 30, 1997, which is primarily
denominated in Swiss francs.
In April 1997, the Company obtained a $15,000,000 revolving credit facility.
Funds borrowed under this facility will be used for general operating
requirements at a rate of LIBOR plus one percent. This credit facility contains
covenants that include restrictions on redemption or repurchase of stock,
limitation on dividend payments and on acquiring new debt and the maintenance of
certain financial ratios.
The Company and certain subsidiaries do not maintain product liability
insurance. While the Company has never experienced a material adverse claim for
personal injury resulting from allegedly defective products, a successful claim
could have a material adverse effect on the Company's liquidity and financial
performance.
<PAGE>
Page 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
DEMANDS ON LIQUIDITY
Management believes that funds generated from operations will be sufficient to
meet its normal operating requirements during the coming year. If the historic
rate of growth in Eastern Europe continues, these operations will require
increasing levels of working capital and funds for additional facilities or
upgrading of existing facilities. Additionally, the Company has several
preliminary acquisition prospects that may require significant funds in 1997. In
August 1997, the Company completed its offering of $275,000,000 principle amount
of 9.25% Senior Notes due 2005 (the "Notes"). Interest on the Notes will be
payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1998. The Notes will mature on August 15, 2005, unless previously
redeemed. The Notes will be redeemable in cash at the option of the Company, in
whole or in part, on or after August 15, 2001. The Company intends to use the
proceeds from this offering for expansion in Eastern Europe, product
acquisitions in the North America, and for general purposes.
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
This Form 10-Q contains statements that constitute forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Those statements appear in a number of places in this Form 10-Q and include
statements regarding, among other matters, the factors affecting the Company's
financial condition or results of operations, liquidity in Yugoslavia,
management of monetary exposure, economic conditions in Yugoslavia, credit
policies in Yugoslavia, and trends in financial results. Stockholders are
cautioned that any such forward looking statements are not guarantees of future
performance and involve risks, uncertainties and other factors which may cause
actual results, performance or achievements to differ materially from the future
results, performance or achievements, expressed or implied in such forward
looking statements. Such factors are discussed in this Form 10-Q and also
include, without limitation, the Company's dependence on foreign operations
(which are subject to certain risks inherent in conducting business abroad,
including possible nationalization or expropriation, price and exchange control,
limitations on foreign participation in local enterprises, health-care
regulations and other restrictive governmental conditions); the risk of
operations in Yugoslavia; Eastern Europe, Russia and China in light of the
unstable economies, political and regulatory conditions in such countries; the
Company's ability to successfully develop and commercialize future products; the
limited protection afforded by the patents relating to Virazole(R), and possibly
on future drugs, techniques, processes or products the Company may develop or
acquire; the Company's ability to continue its expansion plan and to integrate
successfully any acquired companies; the results of lawsuits pending against the
Company; the Company's dependence on its management, including Milan Panic, its
Chairman and Chief Executive Officer; the Company's potential product liability
exposure and lack of any insurance coverage thereof; government regulation of
the pharmaceutical industry (including review and approval for new
pharmaceutical products by the FDA in the United States and comparable agencies
in other countries) and competition.
<PAGE>
Page 22
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
See Note 6 of Notes to Consolidated Condensed Financial Statements.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 10.1: Form of Asset Purchase Agreement by and between
Hoffmann-La Roche Inc., a New Jersey corporation, and ICN
Pharmaceuticals, Inc., a Delaware corporation, dated as of October 30,
1997.
Exhibit 10.2: Form of Asset Purchase Agreement by and between Roche
Products Inc., a Panamanian corporation, and ICN Pharmaceuticals,
Inc., a Delaware corporation, dated as of October 30, 1997.
Exhibit 10.3: Form of Asset Purchase Agreement by and between Syntex
(F.P.) Inc., a Delaware corporation, Syntex (U.S.A.) Inc., a Delaware
corporation, ICN Puerto Rico, Inc., a Puerto Rico corporation, and ICN
Pharmaceuticals, Inc., a Delaware corporation, dated as of June 13,
1997.
Exhibit 11: Computation of Per Share Earnings
Exhibit 15.1: Review Report of Independent Accountants
Exhibit 15.2: Awareness Letter of Independent Accountants
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended September 30, 1997.
<PAGE>
Page 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ICN PHARMACEUTICALS, INC.
Registrant
Date: November 12, 1997 /s/ Milan Panic
------------------------------------
Milan Panic
Chairman of the Board and Chief Executive Officer
Date: November 12, 1997 /s/ John E. Giordani
------------------------------------
John E. Giordani
Executive Vice President and Chief Financial Officer
Exhibit 10.1 ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into on October 30, 1997 by and between Hoffmann-La Roche Inc., a New Jersey
corporation, with offices at 340 Kingsland Street, Nutley, New Jersey 07110
("Seller") on the one hand and ICN Pharmaceuticals, Inc., a Delaware corporation
with offices at ICN Plaza, 3300 Hyland Avenue, Costa Mesa, California 92626
("Buyer").
This Agreement sets forth the terms and conditions upon which Buyer is
purchasing from Seller and Seller is selling to Buyer the Assets (as hereinafter
defined).
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "Active Ingredient" means the pharmaceutical compounds known by
the chemical names fluorouracil, edrophonium chloride and levorphanol tartrate.
1.2 "Affiliate" of a party means any corporation or other business
entity controlled by, controlling or under common control with, such party. For
this purpose "control" shall mean direct or indirect beneficial ownership of
more than fifty percent (50%) of the voting securities of or income interest in
such corporation or other business entity; provided, however, that Genentech,
Inc., with offices located at 460 Point San Bruno Boulevard, South San
Francisco, California, 94080, shall not be considered an Affiliate of Seller.
1.3 "Assets" has the meaning ascribed to such term in Article 2.
1.4 "Assigned Agreements" has the meaning ascribed to such term in
Section 2.5.
1.5 "Buyer Indemnifiable Claims" has the meaning ascribed to such term
in Section 12.1.
1.6 "Buyer Labeling" means the printed labels, labeling and packaging
materials, including printed carton, container label and package inserts, used
by Buyer and bearing Buyer's name for each Product.
1.7 "cGMP's" means the then-current Good Manufacturing Practices
applicable to the manufacture of pharmaceutical products for human use in the
United States in accordance with FDA regulations.
1.8 "Closing" has the meaning ascribed to such term in Section 10.1.
1.9 "Closing Date" has the meaning ascribed to such term in Section
10.1.
1.10 "Closing Time" means 12:01 a.m. on the date of Closing.
1.11 "Confidentiality Agreement" has the meaning ascribed to such term
in Section 11.2.
1.12 "Copyrights" has the meaning ascribed to such term in Section
2.1.
1.13 "Damages" has the meaning ascribed to such term in Section
12.1.1.
1.14 "Data Bank Documents" has the meaning ascribed to such term in
Section 2.7.
1.15 "Disclosure Schedule" means the disclosure schedule delivered
prior to the Effective Date to Buyer by Seller or to Seller by Buyer in
connection with this Agreement. The sections of the Disclosure Schedule
correspond to the sections of this Agreement, but information disclosed in any
section of the Disclosure Schedule shall be deemed to be disclosed as to all
relevant sections of this Agreement, except as otherwise specifically provided
herein.
1.16 "DOJ" means the United States Department of Justice.
1.17 "Effective Date" means the execution date of this Agreement.
1.18 "FDA" means the United States Food and Drug Administration.
1.19 "FTC" means the United States Federal Trade Commission.
1.20 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder.
1.21 "Indemnified Party" has the meaning ascribed to such term in
Section 12.3.
1.22 "Indemnifying Party" has the meaning ascribed to such term in
Section 12.3.
1.23 "Intellectual Property" means the patents, the Know-How, the
Trademarks, and the Copyrights.
1.24 "Inventory" has the meaning ascribed to such term in Section 2.4.
1.25 "Inventory Statement" has the meaning ascribed to such term in
Section 9.3.1.
1.26 "Know-How" has the meaning ascribed to such term in Section 2.4.
1.27 "Law" means any federal, state, foreign, local or other law,
ordinance, rule, regulation, or governmental requirement or restriction of any
kind, and any rules, regulations, and orders promulgated thereunder.
1.28 "Material Adverse Effect" means a material adverse effect on the
Assets, taken as a whole.
1.29 "NDA" means a New Drug Application, as such term is defined by
the FDA.
1.30 "Patent Rights" means any patents or patent applications and any
and all divisions, continuations, continuations-in-part, reexaminations,
reissues, extensions, pending or granted supplementary protection, certificates,
substitutions, confirmations, registrations, revalidations, revisions, additions
and the like, of or to said patents and patent applications.
1.31 "Products" means the finished pharmaceutical products set forth
in the Registrations, including all dosage size and forms thereof.
1.32 "Product Transfer Date" shall mean October 1, 1997.
1.33 "Registrations" has the meaning ascribed to such term in Section
2.2
1.34 "Schedule" means a schedule included as part of the Disclosure
Schedule.
1.35 "Seller Indemnifiable Claims" has the meaning ascribed to such
term in Section 12.2.
1.36 "Seller Labeling" means the printed labels, labeling and
packaging materials, including printed carton, container label and package
inserts, currently used by Seller or its Affiliates for the Product.
1.37 "Seller Process" means, for each Product, the manufacturing
process approved in the NDA for such Product.
1.38 "Seller Supply Agreement" means the Supply Agreement entered into
on the Effective Date between Seller and Buyer concerning the supply of the
Product.
1.39 "Territory" means the United States of America, and its
possessions, including the Commonwealth of Puerto Rico and the United States
Virgin Islands.
1.40 "Trademarks" has the meaning ascribed to such term in Section
2.1.
<PAGE>
2. ASSETS BEING SOLD
Subject to the terms and conditions of this Agreement, at Closing,
Seller shall sell, transfer, assign, convey and deliver to Buyer, its successors
and assigns forever, all of the right, title, and interest of Seller in and to
the assets listed below in the Territory (collectively, the "Assets") and Buyer
shall assume all of the right, title, and interest of Seller in and to the
Assets and, all of the liabilities, obligations and responsibilities associated
therewith. Except as expressly stated herein, Seller does not intend to convey
and Buyer does not intend to purchase the right, title and interest of Seller in
and to any assets not listed in this Article 2 or which may be outside of the
Territory, or the obligations and responsibilities associated therewith.
2.1 Trademarks. The trademark/service mark registrations and
applications that are set forth on Schedule 2.1 and the goodwill symbolized by
such trademarks/service marks (the "Trademarks") , and any copyrights and any
unregistered trade dress that are owned by Seller which are associated solely
with the Products and used by Seller solely on or in association with such
Products (the "Copyrights"). "Trademarks" shall not include any
trademark/service marks outside of the Territory that are the same as or similar
to the Trademarks or the right to register any such trademarks-service marks.
Neither "Trademarks" nor "Copyrights" shall include copyrights, service marks
and trade dress used outside the Territory or that are primarily associated with
the divisions, companies or corporate entities of either Roche Products, Inc. or
Hoffmann-La Roche Inc., or their distributors or Affiliates.
2.2 Registrations. The NDAs that are set forth on Schedule 2.2 and the
regulatory files relating thereto (the "Registrations");
2.3 Manufacturing Technology and Know-How.
2.3.1. The manufacturing technology and know-how that is exclusively
used in the pharmaceutical manufacturing of the Products, including but not
limited to the Seller Processes, specifications and test methods for Products,
raw material, packaging, stability and other applicable specifications,
manufacturing and packaging instructions, master formula, validation reports
(process, analytical methods and cleaning) to the extent available, stability
data, analytical methods, records of complaints, annual product reviews to the
extent available, and other master documents necessary for the manufacture,
control, and release of the Product as conducted by, or on behalf of Seller (the
"Know-How");
2.3.2 A non-exclusive, perpetual, paid-up, irrevocable and
royalty-free license, with the right to sublicense, to use any pharmaceutical
manufacturing technology and know-how that are necessary or used in
manufacturing any Product (but not exclusively used therein) with such license
being restricted to use for purposes of manufacturing, using or selling Products
only in the Territory. In no event shall "Know-How" include any pharmaceutical
manufacturing technology and know-how relating to the manufacture, use or sale
of products other than as specified herein.
2.4 Inventory.
2.4.1 The inventory consisting of the Products that are owned by
Seller and that have been approved by the Parties as meeting specifications and
otherwise saleable in the ordinary and normal course of business as of October
1, 1997, the quantity and the location of which shall be agreed upon by the
parties prior to Closing. "Inventory" shall be as described in Schedule 2.4.1
and shall not include Products that have been shipped from the plant or a
warehouse directly to distributors, wholesalers, or customers prior to October
1, 1997. Subject to Article 3, Inventory shall be shipped FOB Seller's location
to a destination designated by Buyer in writing on or before Closing By the
closing date a physical inventory will be provided by Seller of finished goods.
The October 1 inventory shall be calculated based on this closing date inventory
plus units sold in October and November, less units produced in October and
November and adjusted for any units destroyed or samples distributed in October
and November.
2.5 Assigned Agreements .
2.5.1 Trademark Agreements. All of the Seller's rights, and all
liabilities, obligations and responsibilities associated with those agreements
set forth on Schedule 2.5.1 but only to the extent such agreements relate to the
Trademarks.
2.6 Manufacturing Information. Accurate and complete copies of
Seller's Manufacturing Worksheets and copies of Seller's Manufacturing Quality
Assurance Notebooks to the extent available, as well as relevant packaging
information.
2.7 Data Bank Documents. The right to obtain copies of and reference
the animal toxicology, animal mutagenicity, human clinical study and final
reports, and drug monograph/investigator brochures, listed on Schedule 2.7 (the
"Data Bank Documents").
2.8 Worldwide Safety Reports. A hard copy of Seller's Worldwide Safety
Reports with respect to Products, but Buyer shall have all responsibility and
shall pay all costs associated with converting such Worldwide Safety Reports
into the format from which Buyer can access that information.
2.9 Marketing Information. Copies of current and past advertising and
promotional materials, to the extent that they relate exclusively to the
Products, with the understanding that Buyer will reformat same to substitute its
name for that of HLR or RPI as the case may be.
2.10 Patent Rights All patent rights to those patents that are set
forth on Schedule 2.10, and the relevant files related thereto.
<PAGE>
3. PURCHASE PRICE
3.1 Purchase Price. Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties, covenants and
agreements of the Seller contained herein, and in consideration of the sale,
conveyance, assignment, transfer and delivery of the Assets provided for in
Article 2 hereof, Buyer will deliver at Closing the Purchase Price, consisting
of United States forty-five million eight hundred seventy-three thousand dollars
(US $45,873,000). On request of Seller, the Parties shall consult not later than
five (5) days prior to Closing to define the mode of payment.
3.2 Inventory. In addition to the Purchase Price, any finished goods
Inventory in the Inventory Statement shall be purchased by Buyer from Seller at
the price per unit as set forth in Schedule 3.2. Payment shall be made within
sixty (60) days of Closing.
4. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the Disclosure Schedule attached hereto as
Schedule 4, Seller hereby represents and warrants to the Buyer as follows:
4.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the New Jersey, with full
corporate power and authority to consummate the transactions contemplated
hereby.
4.2 Authority. The execution and delivery of this Agreement, and the
Supply Agreement, (collectively, the "Transaction Agreements") by Seller and the
consummation and performance of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate and
other proceedings, and each of the Transaction Agreements has been duly
authorized, executed, and delivered by Seller and, assuming the enforceability
against Buyer, constitutes the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, except as enforcement thereof may be
limited by general principles of equity and the effect of applicable bankruptcy,
insolvency, moratorium and other similar laws of general application relating to
or affecting creditors' rights generally, including, without limitation, the
effect of statutory or other laws regarding fraudulent conveyances and
preferential transfers.
4.3 Title to Assets. Except as set forth in Schedule 4.3, Seller has
good and marketable title to all the Assets it is obligated to convey hereunder,
and will convey good and marketable title at Closing, free and clear of any and
all liens, encumbrances, charges, claims, restrictions, pledges, security
interests, or impositions of any kind (including those of secured parties). None
of the Assets is leased, rented, licensed, or otherwise not owned by Seller.
4.4 No Violation or Conflict . The execution and delivery of the
Transaction Agreements by Seller and the performance of the Transaction
Agreements (and the transactions contemplated herein) by Seller or its
Affiliates (a) will not conflict with, violate or constitute or result in a
default under any Law, judgment, order, decree, the certificate of incorporation
or bylaws of Seller, or any material contract or agreement to which Seller is a
party or by which Seller is bound, except for any conflicts, violations or
defaults that are not, singly or in the aggregate, material to Seller's ability
to consummate the transactions contemplated hereby, and (b) will not result in
the creation or imposition of any lien, charge, mortgage, claim, pledge,
security interest, restriction or encumbrance of any kind on, or liability with
respect to, the Assets except as otherwise provided herein or otherwise
disclosed on the Disclosure Schedule.
4.5 Registrations. The Registrations are the only registrations
currently required by the FDA to sell and market the Products in the Territory.
All registrations listed on Schedule 2.2 are valid and held by Seller.
4.6 Inventory. As of Closing, the Inventory shall meet the
specifications therefor as set forth in the manufacturing documentation and
Registrations. The Inventory will be in good condition, properly stored and
usable and saleble in the ordinary course of business. The Inventory to be
purchased by Buyer shall in each case be sufficient to maintain a running
business for ninety (90) days. Since January 1, 1997, Seller has not made or
instituted any unusual or novel method of sale concerning the Products
inconsistent with past practices.
4.7 Taxes. As of Closing, there will be no liens for taxes upon the
Assets except for liens for current taxes not yet due and payable.
4.8 Absence of Certain Changes. As of the date hereof and as of the
Closing Date and except as otherwise disclosed on the Disclosure Schedule, there
has not been any material adverse change in the Assets and Seller is not aware
of any facts, circumstances, or proposed or contemplated events that would have
a Material Adverse Effect after Closing.
4.9 Violations of Law. The use of the Assets (i) does not violate or
conflict with any Law, any decree, judgment, order, or similar restriction in
the Territory in any material respect, and (ii) to the best of Seller's
knowledge, has not been the subject of an investigation or inquiry by any
governmental agency or authority regarding violations or alleged violations, or
found by any such agency or authority to be in violation, of any Law, other than
investigations, inquiries or findings that have not had, or are not reasonably
likely to have, a Material Adverse Effect.
4.10 Restrictions . Except as listed or described on the Disclosure
Schedule, and except for consents the failure of which to obtain would not have
a Material Adverse Effect, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency is required to
be obtained or made by or with respect to Seller in connection with the
execution and delivery of this Agreement by Seller or the consummation by it of
the transactions contemplated hereby to be consummated by it, except for the
filing of a pre-merger notification report under the HSR Act.
4.11 Litigation. Except as set forth in the Disclosure Schedule, the
Assets are not the subject of (i) any outstanding judgment, order, writ,
injunction or decree of, or settlement agreement with, any person, corporation,
business entity, court, arbitrator or administrative or governmental authority
or agency, limiting, restricting or affecting the Assets in a way that would
have a Material Adverse Effect, or (ii) to the best of Seller's knowledge, any
pending or threatened claim, suit, proceeding, charge, inquiry, investigation or
action of any kind, and (iii) any court suits filed with respect to the Product
since January 1, 1991. To the best of Seller's knowledge, there are no claims,
actions, suits, proceedings or investigations pending or threatened by or
against Seller with respect to the transactions contemplated hereby, at law or
in equity or before or by any federal, state, municipal or other governmental
department, commission, board, agency, instrumentality or authority.
4.12 Limitation of Warranty and Disclaimers. Seller will not and does
not warrant that owners of products that are substantially similar to or
identical with the Products will not attempt to register and sell such products
in the Territory. Seller makes no representation or warranty as to the
prospects, financial or otherwise, of marketing the Products in the Territory.
EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT OR ANY OTHER TRANSACTION
AGREEMENT: (A) SELLER MAKES NO WARRANTY OF MERCHANTABILITY OF ANY OF THE ASSETS
OR OF THE FITNESS OF ANY OF THE ASSETS FOR ANY PURPOSE, AND (B) THE ASSETS ARE
TO BE SOLD PURSUANT TO THIS AGREEMENT IN AN "AS IS" CONDITION.
4.13 Sales. Net sales of Efudex in the territory for the twelve (12)
month period ending September 30, 1997 shall be no less than US $13,227,000.
4.14 Trademarks. Seller owns the Trademarks set forth in Schedule 2.1
which are formally registered. All Trademarks registrations set forth in Section
2.1 have been duly issued and have not been canceled, abandoned or otherwise
terminated to the best knowledge of Seller. Seller shall not be obligated to
maintain any Trademark after the Closing.
4.15 No Infringement of Third Party Rights. Except as set forth herein
or in the Disclosure Schedule, the use of the Products by Seller in the
Territory does not infringe any third party rights.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth on the Disclosure Schedule attached hereto as
Schedule 5, Buyer hereby represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to consummate the transactions contemplated
hereby.
5.2 Authority. The execution and delivery of this Agreement by Buyer,
and the consummation and performance of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate and other
proceedings, and this Agreement has been duly authorized, executed, and
delivered by Buyer and, assuming the enforceability against Seller, constitutes
the legal, valid and binding obligation of Buyer, enforceable in accordance with
its terms, except as enforcement thereof may be limited by general principles of
equity and the effect of applicable bankruptcy, insolvency, moratorium and other
similar laws of general application relating to or affecting creditors' rights
generally, including, without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers.
5.3 Binding Effect. Each of the Transaction Agreements will, when
delivered at the Closing, have been duly authorized, executed and delivered by
Buyer and, assuming the enforceability against Seller, constitute the legal,
valid and binding obligation of Buyer, enforceable in accordance with their
respective terms, except as enforcement thereof may be limited by general
principles of equity and the effect of applicable bankruptcy, insolvency,
moratorium and other similar laws of general application relating to or
affecting creditors' rights generally, including, without limitation, the effect
of statutory or other laws regarding fraudulent conveyances and preferential
transfers.
5.4 No Violation or Conflict. The execution and delivery of the
Transaction Agreements by Buyer and the performance of the Transaction
Agreements (and the transactions contemplated herein) by Buyer do not and will
not conflict with, violate or constitute or result in a default under any Law,
judgment, order, decree, the articles of incorporation or bylaws of Buyer, or
any material contract or agreement to which Buyer is a party or by which Buyer
is bound.
5.5 No Government Restrictions. Except for consents the failure of
which to obtain would not have a Material Adverse Effect, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental agency is required to be obtained or made by or with respect to
Buyer in connection with the execution and delivery of this Agreement by Buyer
or the consummation by it of the transactions contemplated hereby to be
consummated by it, except for the filing of a pre-merger notification report
under the HSR Act.
5.6 Litigation. There are no claims, actions, suits, proceedings or
investigations pending or threatened by or against Buyer with respect to the
transactions contemplated hereby, at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board,
agency, instrumentality or authority.
<PAGE>
6. SELLER'S COVENANTS
6.1 Use of Assets . Seller agrees that from the Effective Date until
the Closing Date that, except as specifically disclosed in Schedule 6.1 as of
the Effective Date or unless otherwise consented to by Buyer in writing, Seller
shall:
6.1.1 maintain the Assets in good status and condition normal wear and
tear excepted and not sell or dispose of any Assets except sales of Product in
the ordinary course of business;
6.1.2 not make or institute any unusual or novel methods of purchase,
sale, management, operation, or other business practice with regard to the
Assets;
6.1.3 not enter into any material contract or commitment, engage in
any transaction, extend credit or incur any obligation with respect to the
Assets, outside of the ordinary course of business;
6.1.4 not engage in any special pricing, rebate, allowance,
promotional or marketing programs inconsistent with past practices or for the
purpose of maintaining customer inventory levels of Product in excess of those
levels maintained in the past; and
6.1.5 promptly inform Buyer of any change in the Assets that could
have a Material Adverse Effect.
6.1.6 not act or omit to take any act which will cause a material
breach of any agreement impacting the Assets which would have a Material Adverse
Effect.
6.1.7 maintain insurance covering the Assets in such amounts and of
such kinds as are comparable to that in effect on the date of this Agreement, if
any;
6.1.8 shall not incur any indebtedness or liability which will or
likely would create a lien or other encumbrance against any of the Assets;
6.2 Compliance with Laws. Except as otherwise disclosed on the
Disclosure Schedule, Seller shall comply or begin to remedy such non-compliance
upon notification thereof in all material respects with all Laws and orders of
any court or federal, state, local or other governmental entity applicable to
the Assets except where such non-compliance will not have a Material Adverse
Effect.
6.3 Disclosure Supplements. From time to time prior to the Closing
Date, Seller will promptly inform Buyer, in writing, with respect to any matter
that may arise hereafter and that, if existing or occurring prior to the Closing
Date, would have been required to be set forth or described herein or in the
Disclosure Schedule.
6.4 Access. From and after the date hereof and up to Closing (except
as otherwise provided herein), Buyer and its authorized agents, officers, and
representatives shall have access to the Assets during normal business hours
upon reasonable prior notice and at a time and manner mutually agreed upon
between Buyer and Seller in order to conduct such examination and investigation
of the Assets as is reasonably necessary, provided that such examinations shall
not unreasonably interfere with Seller's operations and activities.
6.5 Further Assurances. Seller shall use all reasonable efforts to
implement the provisions of this Agreement, and for such purpose Seller, at the
request of Buyer, at or after Closing, will, without further consideration,
execute and deliver, or cause to be executed and delivered, to Buyer such
contract assignments, bills of sale, consents and other instruments in addition
to those required by this Agreement, in form and substance reasonably
satisfactory to Buyer, as Buyer may reasonably deem necessary or desirable to
implement any provision of this Agreement.
6.6 Non-Compete: Except for products currently marketed by Seller or
its affiliates, Seller covenants and agrees that for a period of five years
following the Closing Date, neither Seller nor any of its Affiliates will
directly or indirectly engage in the Territory in the manufacture, marketing and
distribution of products having both the same chemical substance and being
promoted for the same indication as the Products (hereinafter "Competing
Products"). Should, during the aforesaid five year period, either Seller or an
Affiliate of Seller as a consequence of an acquisition of a company or a
business acquire any Competing Products, Buyer shall have the right of first
refusal to acquire such Competing Products from Seller or its Affiliate at
conditions to be negotiated in good faith. Should Buyer not exercise its right
of first refusal or should subsequently held negotiations between Seller and
Buyer fail, Seller shall make good faith-efforts to divest the Competing
Products to a third party.
6.7 Audit: Seller shall engage reputable auditors to conduct an audit
of the Products and the Assets transferred under this Agreement, which is
required under Regulation S-X of the U.S. Securities and Exchange Commission,
which audit will be completed and delivered to Buyer within seventy (70) days of
the Closing Date. The cost of the audit shall be the obligation of Seller.
7. BUYER'S COVENANTS
7.1 Buyer Labeling. Following Closing, Buyer shall at its own expense
and as expeditiously as possible use all reasonable efforts to notify FDA of the
transfer and to obtain such FDA approvals necessary for Buyer Labeling for each
Product.
7.2 Further Assurances. Buyer shall use all reasonable efforts to
implement the provisions of this Agreement, and for such purpose Buyer, at the
request of Seller, at or after Closing, will, without further consideration,
execute and deliver, or cause to be executed and delivered, to Seller such
consents and other instruments in addition to those required by this Agreement,
in form and substance reasonably satisfactory to Seller, as Seller may
reasonably deem necessary or desirable to implement any provision of this
Agreement.
7.3 Taxes. Buyer covenants and agrees to pay on a timely basis all
federal, state and local sales, transfer and use taxes and customs duties with
respect to the sale and purchase of the Assets, and Buyer covenants to reimburse
Seller for any such taxes and duties for which Seller is liable for payment
within twenty (20) business days of receiving notice from Seller of such
payment.
7.4 Operational Changes. Buyer shall not engage in any special
pricing, rebate allowance, promotional or marketing program or activities,
special returns policy or special restocking program that would impact the
normal course or level of expected returns with respect to Products sold prior
to Closing.
8. COVENANTS BY BUYER AND SELLER
8.1 Technology Transfer. Buyer and Seller shall work together to
commence transfer of the Know-How to Buyer promptly after Closing. Seller shall
use all reasonable efforts to assist Buyer in assuming manufacture of the
Products, provided, however, that Seller cannot ensure Buyer's ability to
successfully manufacture the Products. Seller shall have no obligation to
provide manufacturing support for any Product and Seller shall not be
responsible for any delay and other consequences, if Buyer elects to use a
process that is materially different from a Roche Process. If Buyer elects to
transfer a Roche Process, Seller shall provide reasonable access to Seller's
manufacturing facilities and for a period of up to two years up to 25
(twenty-five) total man-days of technical support free-of-charge. Thereafter,
Buyer shall reimburse Seller for providing such technical assistance at Seller's
then-standard hourly charge for rendering technical assistance, which as of the
date of this Agreement is US$ 150.00 (one hundred and fifty United States
Dollars) per hour, plus all reasonable out-of-pocket expenses incurred by Seller
in rendering such assistance. Seller's obligation to provide hands-on
manufacturing support for a transferred Product shall cease following successful
manufacture of the registration batch for such Product.
8.2 Supply Agreement . Buyer and Seller, or their respective
affiliates shall on or before Closing enter into the Supply Agreement attached
hereto as Exhibit A.
8.3 Stability Studies. As soon as possible following execution of this
Agreement, Buyer shall qualify appropriate testing sites for future stability
studies. Seller shall continue through completion all on-going stability studies
for the Products and provide Buyer with copies of the resulting data as
available.
8.4 Labeling. In accordance with Section 7.1, Buyer is responsible for
having Buyer Labeling submitted to the FDA as soon as possible following
Closing. Buyer may use the Seller Labeling on the Inventory until such Inventory
is exhausted. In addition, Buyer may use the Seller Labeling on each Product
manufactured by Seller or its Affiliates for Buyer until the earlier of the date
(i) the FDA approves the Buyer Labeling for use on such Product and Buyer, using
all reasonable efforts, has obtained sufficient supplies of materials with such
Labeling for use on such Product, or (ii) six (6) months following Closing,
provided, however, if at the end of such six (6) month period the FDA has not
yet approved the Buyer Labeling, then such six (6) month period shall be
extended for a period of time to be mutually agreed by the parties reasonably
required to obtain such approval, but in no event greater than an additional six
(6) months.
8.5 Use of Seller Trademarks. Other than the use of the Seller
Labeling as set forth in Section 8.4, or with respect to the Trademarks, Buyer
shall not have the right to use any trademarks, tradenames, or logos of Seller
without Seller's consent, and any such use must be approved by Seller in
advance.
8.6 Customers. All contracts governing the Products with customers of
Seller or Seller's Affiliates shall be terminated as to the Products upon
expiration of the applicable notice period, and customers shall be notified of
that termination upon Closing. Seller shall provide updated information to
assist Buyer in quantifying the impact of these terminations, provided, however,
no pricing information will be exchanged. Seller shall provide all necessary
information (except pricing information) regarding customers and contracts to
Buyer to assist in Buyer's determination of whether to enter into new contracts.
8.7 Assignment of Trademarks. At or prior to Closing, Buyer shall
prepare and Seller shall execute such assignment documents as Buyer may
reasonably request in order to record the assignment of the Trademarks. The
responsibility and expense of filing such documents and any actions required
ancillary thereto, shall be borne solely by Buyer. Notwithstanding anything
contained elsewhere herein, Buyer shall hold Seller and its Affiliates harmless
from and against any loss or damage, including but not limited to fees,
penalties, fines or third party claims, due to Buyer's failure to record any
assignment of any such Trademarks pursuant to this subsection, except if such
loss or damage is due to the conduct of the Seller.
8.8 Transfer of Registrations. At Closing, Buyer and Seller shall
execute such documents as Buyer may reasonably request in order to transfer the
Registrations. Buyer shall pay any user fees associated with any Product that
accrue after Closing, including user fees that accrue prior to transfer of such
Registrations. Notwithstanding anything contained elsewhere herein, Buyer shall
hold Seller and its Affiliates harmless from and against any loss or damage,
including but not limited to fees, penalties, fines or third party claims, due
to Buyer's failure to file any Registration pursuant to this subsection, except
if such loss or damage is due to the conduct of the Seller.
8.9 Access to Information. Buyer and Seller will, upon reasonable
prior notice, make available to the other party such information or records
relating to the Assets which is in its possession after Closing, to the extent
reasonably required for the purpose of assisting the other party in the
preparation of tax returns relating to the Assets, and prosecuting or defending
or preparing for the prosecution or defense of any action, suit, claim,
complaint, proceeding or investigation at any time brought by or pending against
Seller or Buyer relating to the Assets , other than in the case of litigation
between the parties hereto, such information or records (or copies thereof) in
their possession after Closing (except if such information or records are
protected by the attorney-client privilege and the provision thereof would
destroy such privilege). Buyer and Seller shall also provide each other with
periodic drug safety updates and other information related to the Products, as
more specifically set forth in Schedule 8.9 for so long as each party continues
to manufacture and sell products containing the Active Ingredient.
8.10 Customer Information. Buyer and Seller shall agree on the text of
a joint announcement informing the customers in the Territory of the transfer of
the Products to Buyer or its relevant Affiliate. Should it be appropriate for
any party to make an announcement on its own, it will have to be approved by the
other party, which approval will not be unreasonably withheld or delayed.
8.11 Press Releases. Neither the Seller nor the Buyer, nor any
Affiliate thereof, will issue or cause publication of any press release or other
announcement or public communication with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party, which consent will not be unreasonably withheld or delayed. Unless
otherwise required by applicable law, the Purchase Price shall not be disclosed.
8.12 Government Filings.
8.12.1 Within three (3) business days after the Effective Date, Buyer
will, and Seller will, or will cause the ultimate parent entity of Seller to,
make such filings, together with a request for early termination, as may be
required by the HSR Act with respect to the consummation of the transactions
contemplated by this Agreement. Thereafter, Buyer will, and Seller will, or will
cause the ultimate parent entity of Seller to, each file or cause to be filed as
promptly as practicable with the FTC and the DOJ any supplemental information
that may be requested pursuant to the HSR Act. All such filings will comply in
all material respects with the requirements of the HSR Act.
8.12.2 Within three (3) business days following the Closing Date,
Seller shall notify the Health Care Financing Administration of the transfer of
the ownership of the products to Buyer.
8.13 Rebates. Seller or its Affiliates shall be responsible for any
rebate payments to non-Affiliates with respect to the Products, whether by
agreements, government mandate or otherwise, for all Products dispensed prior to
the Product Transfer Date and for a period of thirty (30) days thereafter, and
Buyer shall be responsible for any rebate payments with respect to the Products,
whether by agreements, government mandate or otherwise, for all Products
dispensed on or after thirty (30) days following the Product Transfer Date. With
respect to Products dispensed during the calendar quarter in which Closing
occurs, Seller shall be responsible for making such rebate payments, but the
amount of such payments shall be prorated between Buyer and Seller based on the
number of days remaining in said quarter as of thirty (30) days following the
Product Transfer Date, or the end of that calendar quarter, whichever is
earlier. If Seller or an Affiliate makes payment of rebates in its own name
(after the thirty day period above) due to governmental requirements pertaining
to Products for which Buyer is responsible, Buyer will reimburse Seller or its
Affiliate such amount within thirty (30) days following the date Seller or its
Affiliate notifies Buyer that Seller or its Affiliate has made such payments.
Buyer reserves the right to request Seller to audit at Buyer's expense
($150/hour) any particular rebate charge to determine whether the rebate should
be charged to Buyer or Seller under the terms hereof.
8.14 Contract Chargebacks. As of the Closing Date, Seller or its
Affiliates shall notify all parties with purchase contracts covering the
Products that said contract will terminate as to the Product in accordance with
its terms which in no case shall exceed sixty (60) days. Seller shall be
responsible for all costs and expenses with respect to claims under contract
chargebacks for the Product for chargeback requests for Product with an invoice
date prior to Closing or during a period of sixty (60) days following Closing.
8.15 Returns. Following the Closing Date, Seller shall be responsible
for the cost and proper handling of all returns in connection with Products sold
under Seller NDC code, with the exception of the Products specified in the
Inventory Statement, and Buyer shall be responsible for the cost and proper
handling of all returns in connection with Products sold under Buyer's NDC code,
as well as those lots of Product specified in Inventory Statement.
8.16 Cooperation. Prior to the Closing Date, the parties agree to each
designate a key contact person or persons to work out further details and
procedures as the need may arise for each subsection in Article 8. These contact
persons shall be guided by the principles in Article 8, and the parties agree to
good faith cooperation to share relevant information in order to facilitate the
respective Covenants set forth in Article 8. In the event the Closing Date
occurs in the middle of a calendar quarter, the parties agree to cooperate with
each other to facilitate the timely filing of any necessary government filings.
As part of this duty to cooperate, Buyer agrees to devote sufficient corporate
resources to this specialized field of rebates and chargebacks so that Seller is
not penalized in any way.
9. CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions to Obligation of Buyer. The obligations of Buyer under
this Agreement to complete the transactions contemplated hereby are subject to
the satisfaction on or prior to the Closing Date of the following conditions
(all or any of which may be waived in whole or in part by Buyer):
9.1.1 Representations and Warranties. The representations and
warranties made by Seller in this Agreement shall have been true and correct in
all material respects as of the Closing Date with the same force and effect as
though said representations and warranties had been made on the Closing Date,
except for representations and warranties made as of a specified date, which
will be true and correct in all respects as of the specified date.
9.1.2 Performance. Seller shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it prior to or at Closing.
9.1.3 Third Party Approvals . All governmental approvals and any other
consents or approvals of third parties necessary for Seller to execute and
deliver this Agreement and perform its obligations hereunder shall have been
obtained and, in the case of any regulatory approval (including under the HSR
Act), all notice and waiting periods with respect thereto shall have expired or
terminated and all conditions contained in any such approval required to be
satisfied prior to consummation of the transactions contemplated hereby shall
have been satisfied, and Seller shall have delivered to Buyer copies or other
evidence of such approvals.
9.1.4 No Adverse Change. During the period from the Effective Date to
the Closing Date there shall not have occurred or been discovered, and there
shall not exist on the Closing Date except for that which has been otherwise
disclosed elsewhere in this Agreement or in the Disclosure Schedule, any
condition or fact that would have a Material Adverse Effect.
9.1.5 Officer's Certificate. Seller shall have delivered to Buyer a
certificate, dated the Closing Date and executed by an officer of Seller,
certifying to the fulfillment of all conditions set forth in this Section 9.1.
9.1.6 Certificate of Good Standing. Seller shall have delivered to
Buyer a certificate of good standing for Seller issued by the State of New
Jersey and the Republic of Panama dated within thirty (30) business days prior
to the Closing Date ("Seller Certificate of Good Standing").
9.1.7 Litigation. No investigation, suit, action, or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks the restraint, prohibition, damages, or other relief in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement unless such action would not have a Material Adverse Effect.
9.1.8 Delivery of Other Documents. Buyer shall have received (a) if
authorization and approval of the Board of Directors of Seller is required, a
certified copy of the resolutions of the Board of Directors of Seller, in effect
as of the Closing Date, authorizing and approving the execution, delivery and
performance by Seller of this Agreement and (b) such additional documents
evidencing or certifying satisfaction of the conditions specified in this
Section 9.1 as reasonably may be requested by Buyer.
9.1.9 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Buyer and Buyer's counsel, and Seller
shall have made available to Buyer for examination the originals or true and
correct copies of all documents which Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
9.2 Conditions to Obligations of Seller. The obligations of Seller
under this Agreement to complete the transactions contemplated hereby at Closing
are subject to the satisfaction on or prior to the Closing Date of the following
conditions (all or any of which may be waived in whole or in part by Seller):
9.2.1 Representations and Warranties. The representations and
warranties made by Buyer in this Agreement shall have been true and correct in
all material respects as of the Closing Date with the same force and effect as
though said representations and warranties had been made on the Closing Date,
except for representations and warranties made as of a specified date, which
will be true and correct in all respects as of the specified date.
9.2.2 Performance. Buyer shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it prior to or at Closing.
9.2.3 Third Party Approvals . All governmental approvals and any other
consents or approvals of third parties necessary for Buyer to execute and
deliver this Agreement and perform its obligations hereunder shall have been
obtained and, in the case of any regulatory approval (including under the HSR
Act), all notice and waiting periods with respect thereto shall have expired or
terminated and all conditions contained in any such approval required to be
satisfied prior to consummation of the transactions contemplated hereby shall
have been satisfied, and Buyer shall have delivered to Seller copies or other
evidence of such approvals.
9.2.4 Officer's Certificate. Buyer shall have delivered to Seller a
certificate, dated the date of Closing and executed by an officer of Buyer,
certifying to the fulfillment of all conditions specified in this Section 9.2.
9.2.5 Certificate of Good Standing. Buyer shall have delivered to
Seller a certificate of good standing for Buyer issued by the State of Delaware
dated within thirty (30) business days prior to the Closing Date ("Buyer
Certificate of Good Standing").
9.2.6 Litigation. No investigation, suit, action, or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks the restraint, prohibition, damages, or other relief in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement unless such action would not have a Material Adverse Effect.
9.2.7 Delivery of Other Documents. Seller shall have received (a) a
certified copy of the resolutions of the Board of Directors of Buyer, in effect
as of the Closing Date, authorizing and approving the execution, delivery and
performance by Buyer of this Agreement and (b) such additional documents
evidencing or certifying satisfaction of the conditions specified in this
Section 9.2 as reasonably may be requested by Seller.
9.2.8 Proceedings and Instruments Satisfactory. Proceedings and
Instruments Satisfactory. All proceedings, corporate or other, to be taken in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Seller and Seller's counsel, and Buyer shall have made available to
Seller for examination the originals or true and correct copies of all documents
which Seller may reasonably request in connection with the transactions
contemplated by this Agreement.
9.3 Other Conditions. In addition to the conditions set forth in
Sections 9.1 and 9.2 above, the obligations of the parties to be performed at
the Closing are subject to the satisfaction on or prior to the Closing Date of
the following conditions:
9.3.1 Inventory Statement. Seller and Buyer shall have agreed upon and
delivered the Inventory Statement described in Section 2.4 and Article 3 above,
which shall detail the Closing Inventory and any additional Inventory.
9.3.2 Supply Agreement. Seller and Buyer, or their Affiliates, shall
have executed the Supply Agreement.
10. THE CLOSING
10.1 The Closing . Subject to the satisfaction of all of the
conditions to each party's obligations set forth in Article 9 hereof (or, with
respect to any condition not satisfied, the waiver in writing thereof by the
party or parties for whose benefit the condition exists), the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
9:00 a.m. (local time) as soon as possible following the expiration or
termination of all required waiting periods under the HSR Act or December 1,
1997, whichever is later (the "Closing Date") at the offices of Buyer or its
Affiliate or at such other time, date and place as the parties hereto may agree
in writing. The transfer of the Assets shall be deemed to have occurred as of
the Closing Time.
10.2 Deliveries by Seller. At Closing, Seller shall deliver to Buyer
in form reasonably satisfactory to Buyer, each properly executed and dated as of
the Closing Date, where appropriate:
10.2.1 A general conveyance of the Assets;
10.2.2 Seller Certificate of Good Standing;
10.2.3 Secretary's Certificate certifying that the Board of Directors
of Seller has authorized this Agreement;
10.2.4 Officer's Certificate described in Section 9.1.5;
10.2.5 the statement of the quantity and location of inventory
described in Section 2.4;
10.2.6 completed disclosure schedules required hereunder;
10.2.7 the Supply Agreement
10.2.8 a receipt for the Purchase Price;
10.2.9 the NDA's including all correspondence with FDA related to the
Products; and
10.2.10 transfer of ownership letters to FDA;
10.3 Deliveries by Buyer. At Closing, Buyer shall deliver or cause to
be delivered to Seller:
10.3.1 The Initial Purchase Price payable in accordance with Article
3;
10.3.2 Buyer Certificate of Good Standing;
10.3.3 Secretary's Certificate certifying that the Board of Directors
of Buyer has authorized this Agreement.
10.3.4 Officer's Certificate described in Section 9.2.4; and
10.3.5 the Supply Agreement with Seller,
10.4 Effects of Closing. Upon Closing the ownership of the Assets as
well as the full responsibility for the use of the Assets and the full
responsibility for the conduct of the business comprising the use of the Assets
shall pass from Seller to Buyer. Seller shall remain exclusively responsible for
the conduct of the Business prior to Closing (including any consequences
therefrom which may appear after the Closing). Buyer shall be exclusively
responsible for the conduct of the Business from Closing. Buyer acknowledges
that as per the Closing the product liability insurance of Seller and its
Affiliates will terminate and Buyer shall be responsible for proper insurance of
the product liability and other risks relating to the Products.
Within sixty (60) days of Closing, Seller shall remit to Buyer a sum
representing the net proceeds of sales to customers of the Products between
October 1, 1997 and Closing. This sum shall account for historical rates of
product returns, contract chargebacks, rebates and any other offsets on these
sales, as well as allow Seller a 5% fee for distribution, general and
administrative and collection costs.
At the Closing the License Agreement and the Manufacturing Agreement
between Hoffmann-La Roche Inc. ("HLR Inc.") and ICN., both dated July 1, 1988,
as well as the related Transfer Agreement between HLR Inc. and ICN dated
November 1, 1996 pertaining to the transfer of the manufacturing of Tensilon
shall terminate with respect to Tensilon effective October 1, 1997 [subject to
business review] to the extent superseded by this Agreement, in particular the
license and the royalty provisions, it being understood that the provisions
pertaining to the transfer of the manufacturing from HLR Inc. to ICN shall
continue to apply and that HLR Inc. shall continue to supply Tensilon to ICN
until completion of the transfer of manufacturing pursuant to the Transfer
Agreement. In the event that a third party toll manufacturer manufactures these
Products for Hoffmann-La Roche Inc., the pertaining toll manufacturing
agreement(s) shall be assigned to and assumed by Buyer at Closing effective as
per the Effective Date on the same terms now existing, provided such terms are
commercially reasonable, subject to any necessary consent of the toll
manufacturer.
Similarly, at the Closing the License Agreement and the Supply
Agreement between Hoffmann-La Roche Limited ("Roche Canada.") and ICN Canada
Limited ("ICN Canada"), both dated July 1, 1988 shall terminate with respect to
Tensilon effective October 1, 1997 [subject to business review] to the extent
superseded by this Agreement, in particular the license and the royalty
provisions, it being understood that Roche Canada or an Affiliate of Roche
Canada shall continue to supply Tensilon for the period provided by this
Agreement.
The Closing shall further have the other effects provided for in this
Agreement.
11. TERMINATION
11.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date:
11.1.1 By the mutual written consent of Seller and Buyer;
11.1.2 By either Seller or Buyer, if Closing shall not have occurred
on or before March 1, 1998, unless such date has been extended by mutual
agreement in writing;
11.1.3 By either Seller or Buyer, if consummation of the transactions
contemplated hereby shall violate any non-appealable final order, decree or
judgment of any court or governmental agency having competent jurisdiction.
11.1.4 By either Seller or Buyer if there has been a material
violation or breach by the other party of any of the agreements, representations
or warranties contained in this Agreement that has not been waived in writing,
or there has been a material failure of satisfaction of a condition to the
obligations of the other party that has not been waived in writing, and such
violation, breach, or failure has not been cured within sixty (60) days of
written notice to the other party, except that in no event shall either party be
required to Close if any of the conditions in Article 9 have not be satisfied;
11.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 11.1, all further obligations of Seller and Buyer under this
Agreement shall terminate without further liability of Seller or Buyer except
for (a) the obligations of the parties under the Confidentiality Agreement and
(b) the obligations of Buyer and Seller under Sections 8.13, 14 and 15.2.
Termination shall not constitute a waiver by any party of any claim it may have
for damages caused by reason of a breach by the other party of a representation,
warranty, covenant or agreement hereunder.
12. INDEMNIFICATION
12.1 Remedy for Breach.
12.1.1 General Principle: After the Closing, the sole and exclusive
remedy of Buyer and Seller for any breach or inaccuracy of any representation or
warranty or any breach of any covenant under this Agreement by the other party
hereto shall be the indemnities contained in this Article 12.
12.1.2 Notice: Any claims that a party may have arising out of the
other party's breach of its representations and warranties or breach of a
covenant hereunder shall be notified to the other party promptly, but in no
event later than 90 (ninety) days after having reasonably sufficient knowledge
of the existence of a potential claim, by written notice describing the claim in
reasonable detail then known. Failure to give such notice on time shall not
affect the other party's indemnification obligations hereunder except to the
extent it is prejudiced thereby.
12.1.3 Survival of representations and warranties: The
representations, warranties, covenants of Seller and Buyer contained in this
Agreement shall survive the Closing Date, but any claim for breach of
representations and warranties or of a covenant shall be entitled to
indemnification hereunder only if written notice of such claim is given to the
other party hereto no later than 18 (eighteen) months following Closing Date
except that Buyer's right to notify claims with respect to the following matters
shall only terminate as follows:
a) Claims for breach of warranties and representations concerning
Litigation (Art. 4.11) insofar as such Litigation relates to product liability
matters shall be notified to Seller no later than 5 (five) years following the
Closing Date;
b) Claims for breach of warranties and representations concerning
Trademarks (Art. 4.13) shall be notified to Seller no later than 2 (two) years
following the Closing Date;
c) Claims for breach of warranties and representations concerning
taxes (Art. 4.7) may be notified to the Seller until the expiration of the
applicable statutes of limitations for taxes relevant to such claims.
It is understood that if and when either party has done the
notification for the pertaining matter within the applicable notification time,
it may start court proceedings pursuant to Art. 14 at any time within one year
of the date such claim was duly notified. Seller and Buyer shall agree to use
all reasonable efforts to mitigate any loss or damage for which they may seek
indemnification under this Article 12.
12.2 Indemnification by Seller:
12.2.1 Claims: Subject to the limitations set forth in Article 12.2.2
to the fullest extent permitted under applicable law, Seller shall indemnify
Buyer and its Affiliates against and agrees to hold Buyer and its Affiliates
harmless from any and all damage, loss, liability, third party claims, and
expense (collectively, "Damages") (including, without limitation, reasonable
expenses of investigation and attorneys' fees and expenses in connection with
any action, suit or proceeding brought against Buyer or its Affiliates) incurred
or suffered by Buyer or its Affiliates arising out of (a) any misrepresentation
or breach of a warranty or covenant made by Seller herein, (b) the maintenance
of the Assets by Seller prior to Closing or (c) the conduct of the Business by
Seller or its Affiliates prior to Closing (collectively, "Indemnifiable
Claims").
12.2.2 Limitations: Notwithstanding anything to the contrary set forth
elsewhere herein, Buyer and its Affiliates shall not be entitled to
indemnification hereunder with respect to any Indemnifiable Claim brought under
Article 12.2.1 unless the amount of Damages with respect to such Indemnifiable
Claim exceeds US$ 30,000. However, Seller shall in no event be required to pay
Buyer and its Affiliates more than half of the Purchase Price (Art. 3.1) in
respect of aggregate damages asserted pursuant to Article 12.2.1 (a) and (b)
except that the aforesaid limitation in respect of aggregate damages shall not
apply to any Indemnifiable Claim based on breach of Seller's warranties and
representations concerning Litigation in the field of product liability.
12.2.3 Form of Indemnification: Indemnification by Seller to Buyer
shall, at Seller's option, be effected in ICN Shares, valued at the Guaranteed
Price as of the Guaranty Date next preceding such indemnification plus pro rata
6% p.a., and/or cash. To effect any such payment, Seller shall surrender to ICN
one or more certificates representing such number of shares of Common Stock
and/or, at Seller's option, Preferred Stock as shall represent the aggregate
value of the amount of any such indemnification payment and ICN shall promptly
thereupon issue to Seller new certificates representing such number of shares of
Common Stock and/or Preferred Stock retained by Seller.
12.3 Indemnification of Buyer. Buyers shall indemnify Seller and it
Affiliates against and agrees to hold Seller and its Affiliates harmless from
any and all Damages (including without limitation, reasonable expenses of
investigation and attorneys' fees and expenses in connection with any action,
suit or proceeding brought against Seller or its Affiliates) incurred or
suffered by Seller or its Affiliates arising out of (a) any misrepresentation or
breach of warranty or covenant made by Buyer herein; or (b) the conduct of the
Business by Buyer and its Affiliates after Closing (collectively, "Indemnifiable
Claims"). Notwithstanding the foregoing, Buyer shall in no event be required to
pay Seller and its Affiliates more than half of the Purchase Price (Art 3.1) in
respect of aggregate damages asserted pursuant to Article 12.3 (a) and (b),
except that the aforesaid limitation shall no apply to Buyer's obligation to pay
the Purchase Price under Art. 3.1 above and the Inventory under Art. 3.5 above
and all provisions related to these payments, including but not limited to all
obligations of Buyer relating to the shares of common Stock and Preferred Stock
set forth in this Agreement and its Exhibits.
12.4 Notice: A party seeking indemnification pursuant to Article 12.2
or 12.3 (an "Indemnified Party") shall give prompt notice to the party from whom
such indemnification is sought (the "Indemnifying Party) of the assertion of any
claim, or the commencement of any action, suit or proceeding, in respect of
which indemnity is or may be sought hereunder (whether or not the limits set
forth in Article 12.2.2 have been exceeded) and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder (except to the extent the Indemnifying Party has
suffered actual prejudice thereby).
12.5 Participation in Defense: The Indemnifying Party may, at its
expense, participate in or assume the defense of any such actions, suit or
proceeding involving a third party. In such case the Indemnified Party shall
have the right (but not the duty) to participate in the defense thereof, and to
employ counsel, at its own expense, separate from counsel employed by the
Indemnifying Party in any such action and to participate in the defense thereof.
The Indemnifying Party shall be liable for the fees and expenses of one firm as
counsel (and appropriate local counsel) employed by the Indemnified Party if the
Indemnifying Party has not assumed the defense thereof. Whether or not the
Indemnifying Party chooses to defend or prosecution thereof and shall furnish
such records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested in
connection therewith.
12.6 Settlements: The Indemnifying Party shall not be liable under
this Article for any settlement effected without its consent of any claim,
litigation or proceedings in respect of which indemnity may be sought hereunder,
unless the Indemnifying Party refuses to acknowledge liability for
indemnification under this Article 12 and/or declines to defend the Indemnified
Party in such claim, litigation or proceeding.
<PAGE>
13. NOTICES
Any notice required or permitted to be given hereunder shall be deemed
sufficient if sent by United States mail or overnight courier, or delivered by
hand to Seller or Buyer at the respective addresses set forth below or at such
other address as either party hereto may designate. If delivered by overnight
courier, notice shall be deemed given when it has been signed for. If delivered
by hand, notice shall be deemed given when received. If delivered by U.S. Mail,
notice shall be deemed given five (5) business days following the postmark date.
if to Buyer, to:
ICN Pharmaceuticals, Inc.
1330 Hyland Avenue
Costa Mesa, California 92626
Attn: President
With a copy to General Counsel
if to Seller, to:
Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attn: General Counsel
14. ARBITRATION AND GOVERNING LAW
14.1 Except for the right of either party to apply to a court of
competent jurisdiction for a temporary restraining order to preserve the status
quo or prevent irreparable harm pending the selection and confirmation of a
panel of arbitrators, any dispute, controversy, or claims arising under, out of
or relating to this Agreement (and subsequent amendments thereof), its valid
conclusion, binding effect, interpretation, performance, breach or termination,
including tort claims, shall be referred to and finally determined by
arbitration, to the exclusion of any courts of law, in accordance with the Rules
of Arbitration of the International Chamber of Commerce as in force at the time
when initiating the arbitration. The arbitral tribunal shall consist of three
arbitrators. The place of arbitration shall be Paris, France. The language to be
used in the arbitral proceedings shall be English. The arbitration decision
shall be final and binding upon the parties and the parties agree that any award
granted pursuant to such decision may be entered forthwith in any court of
competent jurisdiction. This arbitration clause and any award rendered pursuant
to it shall be governed by the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitration Awards signed in New York on 10 June, 1958.
The party to whom a favorable ruling is awarded shall be entitled to
reimbursement of all its reasonable costs and expenses in arbitration by the
other party.
14.2 The present Agreement shall be subject to the substantive law of
Switzerland (regardless of its or any other jurisdiction's choice of law
principles).
15. ADDITIONAL TERMS
15.1 Brokers. Buyer represents to Seller that it has not employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission from Seller upon consummation of the transactions contemplated
hereby. Seller represents to Buyer that it has not employed any such Person in
such connection who might be entitled to a fee or any commission from Buyer upon
consummation of the transactions contemplated hereby.
15.2 Expenses. Except as otherwise expressly provided in this
Agreement, all legal, accounting and other costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
15.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns; provided that this Agreement may not be assigned by any party except to
an Affiliate of such party without the prior written consent of the other party
other than in connection with the reincorporation of such party in another
jurisdiction.
15.4 Exhibits and Schedules. The Exhibits and Schedules attached to
this Agreement and the principles and conditions incorporated in such Exhibits
and Schedules shall be deemed integral parts of this Agreement and all
references in this Agreement to this Agreement shall encompass such Exhibits and
Schedules and the principles and conditions incorporated in such Exhibits and
Schedules.
15.5 Entire Agreement. This Agreement, the exhibits hereto, and the
Disclosure Schedule (including Disclosure Supplements, if any) embody the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersede and replace all previous negotiations, understandings,
representations, writings, and contract provisions and rights relating to the
subject matter hereof.
15.6 Amendments; No Waiver. No provision of this Agreement may be
amended, revoked or waived except by a writing signed and delivered by an
authorized officer of each party. No failure or delay on the part of either
party in exercising any right hereunder will operate as a waiver of, or impair,
any such right. No single or partial exercise of any such right will preclude
any other or further exercise thereof or the exercise of any other right. No
waiver of any such right will be deemed a waiver of any other right hereunder.
15.7 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall together constitute one and the same instrument
and shall become effective when a counterpart has been signed by Buyer and
delivered to Seller and a counterpart has been signed by Seller and delivered to
Buyer.
15.8 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable and (b) in the event that any of the provisions
hereof are held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, (i) such invalid, void or otherwise unenforceable
provisions shall be automatically replaced by other provisions that are as
similar as possible in terms to such invalid, void or otherwise unenforceable
provisions but are valid and enforceable and (ii) the remaining provisions shall
remain enforceable to the fullest extent permitted by law, provided that the
rights and interests of the parties hereto shall not be materially affected.
15.9 Captions. Captions herein are inserted for convenience of
reference only and shall be ignored in the construction or interpretation of
this Agreement. Unless the context requires otherwise, all references herein to
Articles and Sections are to the articles and sections of this Agreement.
IN WITNESS WHEREOF, this Agreement has been signed by duly authorized
representatives of each of the parties hereto as of the date first above
written.
HOFFMANN-LA ROCHE INC. ICN PHARMACEUTICLS, INC.
By: /s/ Ed Thiele By: /s/ Bill A. MacDonald
----------------------------- ---------------------------
Name: Ed Thiel Name: Bill A. MacDonald
----------------------------- ---------------------------
Title: Vice President Title: Executive Vice President
----------------------------- ---------------------------
Date: October 30, 1997 Date: October 30, 1997
----------------------------- ---------------------------
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into on
October 30, 1997 by and between Roche Products Inc. a Panamanian corporation
with offices at Calle Aquilino de la Guardia, No. 8, Edificio Igra, Panama,
Republica de Panama ("Seller") on the one hand and ICN Pharmaceuticals, Inc., a
Delaware corporation with offices at ICN Plaza, 3300 Hyland Avenue, Costa Mesa,
California 92626 ("Buyer").
This Agreement sets forth the terms and conditions upon which Buyer is
purchasing from Seller and Seller is selling to Buyer the Assets (as hereinafter
defined).
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "Active Ingredient" means the pharmaceutical compound known by the
chemical names chlordiazepoxide hydrochloride
1.2 "Affiliate" of a party means any corporation or other business
entity controlled by, controlling or under common control with, such party. For
this purpose "control" shall mean direct or indirect beneficial ownership of
more than fifty percent (50%) of the voting securities of or income interest in
such corporation or other business entity; provided, however, that Genentech,
Inc., with offices located at 460 Point San Bruno Boulevard, South San
Francisco, California, 94080, shall not be considered an Affiliate of Seller.
1.3 "Assets" has the meaning ascribed to such term in Article 2.
1.4 "Assigned Agreements" has the meaning ascribed to such term in
Section 2.5.
1.5 "Buyer Indemnifiable Claims" has the meaning ascribed to such term
in Section 12.1.
1.6 "Buyer Labeling" means the printed labels, labeling and packaging
materials, including printed carton, container label and package inserts, used
by Buyer and bearing Buyer's name for each Product.
1.7 "cGMP's" means the then-current Good Manufacturing Practices
applicable to the manufacture of pharmaceutical products for human use in the
United States in accordance with FDA regulations.
1.8 "Closing" has the meaning ascribed to such term in Section 10.1.
1.9 "Closing Date" has the meaning ascribed to such term in Section
10.1.
1.10 "Closing Time" means 12:01 a.m. on the date of Closing.
1.11 "Confidentiality Agreement" has the meaning ascribed to such term
in Section 11.2.
1.12 "Copyrights" has the meaning ascribed to such term in Section
2.1.
1.13 "Damages" has the meaning ascribed to such term in Section
12.1.1.
1.14 "Data Bank Documents" has the meaning ascribed to such term in
Section 2.7.
1.15 "Disclosure Schedule" means the disclosure schedule delivered
prior to the Effective Date to Buyer by Seller or to Seller by Buyer in
connection with this Agreement. The sections of the Disclosure Schedule
correspond to the sections of this Agreement, but information disclosed in any
section of the Disclosure Schedule shall be deemed to be disclosed as to all
relevant sections of this Agreement, except as otherwise specifically provided
herein.
1.16 "DOJ" means the United States Department of Justice.
1.17 "Effective Date" means the execution date of this Agreement.
1.18 "FDA" means the United States Food and Drug Administration.
1.19 "FTC" means the United States Federal Trade Commission.
1.20 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder.
1.21 "Indemnified Party" has the meaning ascribed to such term in
Section 12.3.
1.22 "Indemnifying Party" has the meaning ascribed to such term in
Section 12.3.
1.23 "Intellectual Property" means the patents, the Know-How, the
Trademarks, and the Copyrights.
1.24 "Inventory" has the meaning ascribed to such term in Section 2.4.
1.25 "Inventory Statement" has the meaning ascribed to such term in
Section 9.3.1.
1.26 "Know-How" has the meaning ascribed to such term in Section 2.4.
1.27 "Law" means any federal, state, foreign, local or other law,
ordinance, rule, regulation, or governmental requirement or restriction of any
kind, and any rules, regulations, and orders promulgated thereunder.
1.28 "Material Adverse Effect" means a material adverse effect on the
Assets, taken as a whole.
1.29 "NDA" means a New Drug Application, as such term is defined by
the FDA.
1.30 "Patent Rights" means any patents or patent applications and any
and all divisions, continuations, continuations-in-part, reexaminations,
reissues, extensions, pending or granted supplementary protection, certificates,
substitutions, confirmations, registrations, revalidations, revisions, additions
and the like, of or to said patents and patent applications.
1.31 "Products" means the finished pharmaceutical products set forth
in the Registrations, including all dosage size and forms thereof.
1.32 "Product Transfer Date" shall mean October 1, 1997.
1.33 "Registrations" has the meaning ascribed to such term in Section
2.2
1.34 "Schedule" means a schedule included as part of the Disclosure
Schedule.
1.35 "Seller Indemnifiable Claims" has the meaning ascribed to such
term in Section 12.2.
1.36 "Seller Labeling" means the printed labels, labeling and
packaging materials, including printed carton, container label and package
inserts, currently used by Seller or its Affiliates for the Product.
1.37 "Seller Process" means, for each Product, the manufacturing
process approved in the NDA for such Product.
1.38 "Seller Supply Agreement" means the Supply Agreement entered into
on the Effective Date between Seller and Buyer concerning the supply of the
Product.
1.39 "Territory" means the United States of America, and its
possessions, including the Commonwealth of Puerto Rico and the United States
Virgin Islands.
1.40 "Trademarks" has the meaning ascribed to such term in Section
2.1.
<PAGE>
2. ASSETS BEING SOLD
Subject to the terms and conditions of this Agreement, at Closing,
Seller shall sell, transfer, assign, convey and deliver to Buyer, its successors
and assigns forever, all of the right, title, and interest of Seller in and to
the assets listed below in the Territory (collectively, the "Assets") and Buyer
shall assume all of the right, title, and interest of Seller in and to the
Assets and, all of the liabilities, obligations and responsibilities associated
therewith. Except as expressly stated herein, Seller does not intend to convey
and Buyer does not intend to purchase the right, title and interest of Seller in
and to any assets not listed in this Article 2 or which may be outside of the
Territory, or the obligations and responsibilities associated therewith.
2.1 Trademarks. The trademark/service mark registrations and
applications that are set forth on Schedule 2.1 and the goodwill symbolized by
such trademarks/service marks (the "Trademarks") , and any copyrights and any
unregistered trade dress that are owned by Seller which are associated solely
with the Products and used by Seller solely on or in association with such
Products (the "Copyrights"). "Trademarks" shall not include any
trademark/service marks outside of the Territory that are the same as or similar
to the Trademarks or the right to register any such trademarks-service marks.
Neither "Trademarks" nor "Copyrights" shall include copyrights, service marks
and trade dress used outside the Territory or that are primarily associated with
the divisions, companies or corporate entities of either Roche Products, Inc. or
Hoffmann-La Roche Inc., or their distributors or Affiliates.
2.2 Registrations. The NDAs that are set forth on Schedule 2.2 and the
regulatory files relating thereto (the "Registrations");
2.3 Manufacturing Technology and Know-How.
2.3.1. The manufacturing technology and know-how that is exclusively
used in the pharmaceutical manufacturing of the Products, including but not
limited to the Seller Processes, specifications and test methods for Products,
raw material, packaging, stability and other applicable specifications,
manufacturing and packaging instructions, master formula, validation reports
(process, analytical methods and cleaning) to the extent available, stability
data, analytical methods, records of complaints, annual product reviews to the
extent available, and other master documents necessary for the manufacture,
control, and release of the Product as conducted by, or on behalf of Seller (the
"Know-How");
2.3.2 A non-exclusive, perpetual, paid-up, irrevocable and
royalty-free license, with the right to sublicense, to use any pharmaceutical
manufacturing technology and know-how that are necessary or used in
manufacturing any Product (but not exclusively used therein) with such license
being restricted to use for purposes of manufacturing, using or selling Products
only in the Territory. In no event shall "Know-How" include any pharmaceutical
manufacturing technology and know-how relating to the manufacture, use or sale
of products other than as specified herein.
2.4 Inventory.
2.4.1 The inventory consisting of the Products that are owned by
Seller and that have been approved by the Parties as meeting specifications and
otherwise saleable in the ordinary and normal course of business as of October
1, 1997, the quantity and the location of which shall be agreed upon by the
parties prior to Closing. "Inventory" shall be as described in Schedule 2.4.1
and shall not include Products that have been shipped from the plant or a
warehouse directly to distributors, wholesalers, or customers prior to October
1, 1997. Subject to Article 3, Inventory shall be shipped FOB Seller's location
to a destination designated by Buyer in writing on or before Closing By the
closing date a physical inventory will be provided by Seller of finished goods.
The October 1 inventory shall be calculated based on this closing date inventory
plus units sold in October and November less units produced in October and
November and adjusted for any units destroyed or samples distributed in October
and November.
2.5 Assigned Agreements .
2.5.1 Trademark Agreements. All of the Seller's rights, and all
liabilities, obligations and responsibilities associated with those agreements
set forth on Schedule 2.5.1 but only to the extent such agreements relate to the
Trademarks.
2.6 Manufacturing Information. Accurate and complete copies of
Seller's Manufacturing Worksheets and copies of Seller's Manufacturing Quality
Assurance Notebooks to the extent available, as well as relevant packaging
information.
2.7 Data Bank Documents. The right to obtain copies of and reference
the animal toxicology, animal mutagenicity, human clinical study and final
reports, and drug monograph/investigator brochures, listed on Schedule 2.7 (the
"Data Bank Documents").
2.8 Worldwide Safety Reports. A hard copy of Seller's Worldwide Safety
Reports with respect to Products, but Buyer shall have all responsibility and
shall pay all costs associated with converting such Worldwide Safety Reports
into the format from which Buyer can access that information.
2.9 Marketing Information. Copies of current and past advertising and
promotional materials, to the extent that they relate exclusively to the
Products, with the understanding that Buyer will reformat same to substitute its
name for that of HLR or RPI as the case may be.
2.10 Patent Rights All patent rights to those patents that are set
forth on Schedule 2.10, and the relevant files related thereto.
<PAGE>
3. PURCHASE PRICE
3.1 Purchase Price. Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties, covenants and
agreements of the Seller contained herein, and in consideration of the sale,
conveyance, assignment, transfer and delivery of the Assets provided for in
Article 2 hereof, Buyer will deliver at Closing the Purchase Price, consisting
of United States thirty six million two hundred thousand dollars (US
$36,200,000). On request of Seller, the Parties shall consult not later than
five (5) days prior to Closing to define the mode of payment.
3.2 Inventory. In addition to the Purchase Price, any finished goods
Inventory in the Inventory Statement shall be purchased by Buyer from Seller at
the price per unit as set forth in Schedule 3.2. Payment shall be made within
sixty (60) days of Closing.
4. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the Disclosure Schedule attached hereto as
Schedule 4, Seller hereby represents and warrants to the Buyer as follows:
4.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the Republic of Panama, with
full corporate power and authority to consummate the transactions contemplated
hereby.
4.2 Authority. The execution and delivery of this Agreement, and the
Supply Agreement, (collectively, the "Transaction Agreements") by Seller and the
consummation and performance of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate and
other proceedings, and each of the Transaction Agreements has been duly
authorized, executed, and delivered by Seller and, assuming the enforceability
against Buyer, constitutes the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, except as enforcement thereof may be
limited by general principles of equity and the effect of applicable bankruptcy,
insolvency, moratorium and other similar laws of general application relating to
or affecting creditors' rights generally, including, without limitation, the
effect of statutory or other laws regarding fraudulent conveyances and
preferential transfers.
4.3 Title to Assets. Except as set forth in Schedule 4.3, Seller has
good and marketable title to all the Assets it is obligated to convey hereunder,
and will convey good and marketable title at Closing, free and clear of any and
all liens, encumbrances, charges, claims, restrictions, pledges, security
interests, or impositions of any kind (including those of secured parties). None
of the Assets is leased, rented, licensed, or otherwise not owned by Seller.
4.4 No Violation or Conflict . The execution and delivery of the
Transaction Agreements by Seller and the performance of the Transaction
Agreements (and the transactions contemplated herein) by Seller or its
Affiliates (a) will not conflict with, violate or constitute or result in a
default under any Law, judgment, order, decree, the certificate of incorporation
or bylaws of Seller, or any material contract or agreement to which Seller is a
party or by which Seller is bound, except for any conflicts, violations or
defaults that are not, singly or in the aggregate, material to Seller's ability
to consummate the transactions contemplated hereby, and (b) will not result in
the creation or imposition of any lien, charge, mortgage, claim, pledge,
security interest, restriction or encumbrance of any kind on, or liability with
respect to, the Assets except as otherwise provided herein or otherwise
disclosed on the Disclosure Schedule.
4.5 Registrations. The Registrations are the only registrations
currently required by the FDA to sell and market the Products in the Territory.
All registrations listed on Schedule 2.2 are valid and held by Seller.
4.6 Inventory. As of Closing, the Inventory shall meet the
specifications therefor as set forth in the manufacturing documentation and
Registrations. The Inventory will be in good condition, properly stored and
usable and salable in the ordinary course of business. The Inventory to be
purchased by Buyer shall in each case be sufficient to maintain a running
business for ninety (90) days. Since January 1, 1997, Seller has not made or
instituted any unusual or novel method of sale concerning the Products
inconsistent with past practices.
4.7 Taxes. As of Closing, there will be no liens for taxes upon the
Assets except for liens for current taxes not yet due and payable.
4.8 Absence of Certain Changes. As of the date hereof and as of the
Closing Date and except as otherwise disclosed on the Disclosure Schedule, there
has not been any material adverse change in the Assets and Seller is not aware
of any facts, circumstances, or proposed or contemplated events that would have
a Material Adverse Effect after Closing.
4.9 Violations of Law. The use of the Assets (i) does not violate or
conflict with any Law, any decree, judgment, order, or similar restriction in
the Territory in any material respect, and (ii) to the best of Seller's
knowledge, has not been the subject of an investigation or inquiry by any
governmental agency or authority regarding violations or alleged violations, or
found by any such agency or authority to be in violation, of any Law, other than
investigations, inquiries or findings that have not had, or are not reasonably
likely to have, a Material Adverse Effect.
4.10 Restrictions . Except as listed or described on the Disclosure
Schedule, and except for consents the failure of which to obtain would not have
a Material Adverse Effect, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency is required to
be obtained or made by or with respect to Seller in connection with the
execution and delivery of this Agreement by Seller or the consummation by it of
the transactions contemplated hereby to be consummated by it, except for the
filing of a pre-merger notification report under the HSR Act.
4.11 Litigation. Except as set forth in the Disclosure Schedule, the
Assets are not the subject of (i) any outstanding judgment, order, writ,
injunction or decree of, or settlement agreement with, any person, corporation,
business entity, court, arbitrator or administrative or governmental authority
or agency, limiting, restricting or affecting the Assets in a way that would
have a Material Adverse Effect, or (ii) to the best of Seller's knowledge, any
pending or threatened claim, suit, proceeding, charge, inquiry, investigation or
action of any kind, and (iii) any court suits filed with respect to the Product
since January 1, 1991 . To the best of Seller's knowledge, there are no claims,
actions, suits, proceedings or investigations pending or threatened by or
against Seller with respect to the transactions contemplated hereby, at law or
in equity or before or by any federal, state, municipal or other governmental
department, commission, board, agency, instrumentality or authority.
4.12 Limitation of Warranty and Disclaimers. Seller will not and does
not warrant that owners of products that are substantially similar to or
identical with the Products will not attempt to register and sell such products
in the Territory. Seller makes no representation or warranty as to the
prospects, financial or otherwise, of marketing the Products in the Territory.
EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT OR ANY OTHER TRANSACTION
AGREEMENT: (A) SELLER MAKES NO WARRANTY OF MERCHANTABILITY OF ANY OF THE ASSETS
OR OF THE FITNESS OF ANY OF THE ASSETS FOR ANY PURPOSE, AND (B) THE ASSETS ARE
TO BE SOLD PURSUANT TO THIS AGREEMENT IN AN "AS IS" CONDITION.
4.13 Sales. Net sales of Librium in the territory for the twelve (12)
month period ending September 30, 1997 shall be no less than US$ 5,838,000.
4.14 Trademarks. Seller owns the Trademarks set forth in Schedule 2.1
which are formally registered. All Trademarks registrations set forth in Section
2.1 have been duly issued and have not been canceled, abandoned or otherwise
terminated to the best knowledge of Seller. Seller shall not be obligated to
maintain any Trademark after the Closing.
4.15 No Infringement of Third Party Rights. Except as set forth herein
or in the Disclosure Schedule, the use of the Products by Seller in the
Territory does not infringe any third party rights.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth on the Disclosure Schedule attached hereto as
Schedule 5, Buyer hereby represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to consummate the transactions contemplated
hereby.
5.2 Authority. The execution and delivery of this Agreement by Buyer,
and the consummation and performance of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate and other
proceedings, and this Agreement has been duly authorized, executed, and
delivered by Buyer and, assuming the enforceability against Seller, constitutes
the legal, valid and binding obligation of Buyer, enforceable in accordance with
its terms, except as enforcement thereof may be limited by general principles of
equity and the effect of applicable bankruptcy, insolvency, moratorium and other
similar laws of general application relating to or affecting creditors' rights
generally, including, without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers.
5.3 Binding Effect. Each of the Transaction Agreements will, when
delivered at the Closing, have been duly authorized, executed and delivered by
Buyer and, assuming the enforceability against Seller, constitute the legal,
valid and binding obligation of Buyer, enforceable in accordance with their
respective terms, except as enforcement thereof may be limited by general
principles of equity and the effect of applicable bankruptcy, insolvency,
moratorium and other similar laws of general application relating to or
affecting creditors' rights generally, including, without limitation, the effect
of statutory or other laws regarding fraudulent conveyances and preferential
transfers.
5.4 No Violation or Conflict. The execution and delivery of the
Transaction Agreements by Buyer and the performance of the Transaction
Agreements (and the transactions contemplated herein) by Buyer do not and will
not conflict with, violate or constitute or result in a default under any Law,
judgment, order, decree, the articles of incorporation or bylaws of Buyer, or
any material contract or agreement to which Buyer is a party or by which Buyer
is bound.
5.5 No Government Restrictions. Except for consents the failure of
which to obtain would not have a Material Adverse Effect, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental agency is required to be obtained or made by or with respect to
Buyer in connection with the execution and delivery of this Agreement by Buyer
or the consummation by it of the transactions contemplated hereby to be
consummated by it, except for the filing of a pre-merger notification report
under the HSR Act.
5.6 Litigation. There are no claims, actions, suits, proceedings or
investigations pending or threatened by or against Buyer with respect to the
transactions contemplated hereby, at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board,
agency, instrumentality or authority.
6. SELLER'S COVENANTS
6.1 Use of Assets . Seller agrees that from the Effective Date until
the Closing Date that, except as specifically disclosed in Schedule 6.1 as of
the Effective Date or unless otherwise consented to by Buyer in writing, Seller
shall:
6.1.1 maintain the Assets in good status and condition normal wear and
tear excepted and not sell or dispose of any Assets except sales of Product in
the ordinary course of business;
6.1.2 not make or institute any unusual or novel methods of purchase,
sale, management, operation, or other business practice with regard to the
Assets;
6.1.3 not enter into any material contract or commitment, engage in
any transaction, extend credit or incur any obligation with respect to the
Assets, outside of the ordinary course of business;
6.1.4 not engage in any special pricing, rebate, allowance,
promotional or marketing programs inconsistent with past practices or for the
purpose of maintaining customer inventory levels of Product in excess of those
levels maintained in the past; and
6.1.5 promptly inform Buyer of any change in the Assets that could
have a Material Adverse Effect.
6.1.6 not act or omit to take any act which will cause a material
breach of any agreement impacting the Assets which would have a Material Adverse
Effect.
6.1.7 maintain insurance covering the Assets in such amounts and of
such kinds as are comparable to that in effect on the date of this Agreement, if
any;
6.1.8 shall not incur any indebtedness or liability which will or
likely would create a lien or other encumbrance against any of the Assets;
6.2 Compliance with Laws. Except as otherwise disclosed on the
Disclosure Schedule, Seller shall comply or begin to remedy such non-compliance
upon notification thereof in all material respects with all Laws and orders of
any court or federal, state, local or other governmental entity applicable to
the Assets except where such non-compliance will not have a Material Adverse
Effect.
6.3 Disclosure Supplements. From time to time prior to the Closing
Date, Seller will promptly inform Buyer, in writing, with respect to any matter
that may arise hereafter and that, if existing or occurring prior to the Closing
Date, would have been required to be set forth or described herein or in the
Disclosure Schedule.
6.4 Access. From and after the date hereof and up to Closing (except
as otherwise provided herein), Buyer and its authorized agents, officers, and
representatives shall have access to the Assets during normal business hours
upon reasonable prior notice and at a time and manner mutually agreed upon
between Buyer and Seller in order to conduct such examination and investigation
of the Assets as is reasonably necessary, provided that such examinations shall
not unreasonably interfere with Seller's operations and activities.
6.5 Further Assurances. Seller shall use all reasonable efforts to
implement the provisions of this Agreement, and for such purpose Seller, at the
request of Buyer, at or after Closing, will, without further consideration,
execute and deliver, or cause to be executed and delivered, to Buyer such
contract assignments, bills of sale, consents and other instruments in addition
to those required by this Agreement, in form and substance reasonably
satisfactory to Buyer, as Buyer may reasonably deem necessary or desirable to
implement any provision of this Agreement.
6.6 Non-Compete: Except for products currently marketed by Seller or
its affiliates, , Seller covenants and agrees that for a period of five years
following the Closing Date, neither Seller nor any of its Affiliates will
directly or indirectly engage in the Territory in the manufacture, marketing and
distribution of products having both the same chemical substance and being
promoted for the same indication as the Products (hereinafter "Competing
Products"). Should, during the aforesaid five year period, either Seller or an
Affiliate of Seller as a consequence of an acquisition of a company or a
business acquire any Competing Products, Buyer shall have the right of first
refusal to acquire such Competing Products from Seller or its Affiliate at
conditions to be negotiated in good faith. Should Buyer not exercise its right
of first refusal or should subsequently held negotiations between Seller and
Buyer fail, Seller shall make good faith-efforts to divest the Competing
Products to a third party.
6.7 Audit: Seller shall engage reputable auditors to conduct an audit
of the Products and the Assets transferred under this Agreement, which is
required under Regulation S-X of the U.S. Securities and Exchange Commission,
which audit will be completed and delivered to Buyer within seventy (70) days of
the Closing Date. The cost of the audit shall be the obligation of Seller.
7. BUYER'S COVENANTS
7.1 Buyer Labeling. Following Closing, Buyer shall at its own expense
and as expeditiously as possible use all reasonable efforts to notify FDA of the
transfer and to obtain such FDA approvals necessary for Buyer Labeling for each
Product.
7.2 Further Assurances. Buyer shall use all reasonable efforts to
implement the provisions of this Agreement, and for such purpose Buyer, at the
request of Seller, at or after Closing, will, without further consideration,
execute and deliver, or cause to be executed and delivered, to Seller such
consents and other instruments in addition to those required by this Agreement,
in form and substance reasonably satisfactory to Seller, as Seller may
reasonably deem necessary or desirable to implement any provision of this
Agreement.
7.3 Taxes. Buyer covenants and agrees to pay on a timely basis all
federal, state and local sales, transfer and use taxes and customs duties with
respect to the sale and purchase of the Assets, and Buyer covenants to reimburse
Seller for any such taxes and duties for which Seller is liable for payment
within twenty (20) business days of receiving notice from Seller of such
payment.
7.4 Operational Changes. Buyer shall not engage in any special
pricing, rebate allowance, promotional or marketing program or activities,
special returns policy or special restocking program that would impact the
normal course or level of expected returns with respect to Products sold prior
to Closing.
8. COVENANTS BY BUYER AND SELLER
8.1 Technology Transfer. Buyer and Seller shall work together to
commence transfer of the Know-How to Buyer promptly after Closing. Seller shall
use all reasonable efforts to assist Buyer in assuming manufacture of the
Products, provided, however, that Seller cannot ensure Buyer's ability to
successfully manufacture the Products. Seller shall have no obligation to
provide manufacturing support for any Product and Seller shall not be
responsible for any delay and other consequences, if Buyer elects to use a
process that is materially different from a Roche Process. If Buyer elects to
transfer a Roche Process, Seller shall provide reasonable access to Seller's
manufacturing facilities and for a period of up to two years up to 25
(twenty-five) total man-days of technical support free-of-charge. Thereafter,
Buyer shall reimburse Seller for providing such technical assistance at Seller's
then-standard hourly charge for rendering technical assistance, which as of the
date of this Agreement is US$ 150.00 (one hundred and fifty United States
Dollars) per hour, plus all reasonable out-of-pocket expenses incurred by Seller
in rendering such assistance. Seller's obligation to provide hands-on
manufacturing support for a transferred Product shall cease following successful
manufacture of the registration batch for such Product.
8.2 Supply Agreement . Buyer and Seller, or their respective
affiliates shall on or before Closing enter into the Supply Agreement attached
hereto as Exhibit A.
8.3 Stability Studies. As soon as possible following execution of this
Agreement, Buyer shall qualify appropriate testing sites for future stability
studies. Seller shall continue through completion all on-going stability studies
for the Products and provide Buyer with copies of the resulting data as
available.
8.4 Labeling. In accordance with Section 7.1, Buyer is responsible for
having Buyer Labeling submitted to the FDA as soon as possible following
Closing. Buyer may use the Seller Labeling on the Inventory until such Inventory
is exhausted. In addition, Buyer may use the Seller Labeling on each Product
manufactured by Seller or its Affiliates for Buyer until the earlier of the date
(i) the FDA approves the Buyer Labeling for use on such Product and Buyer, using
all reasonable efforts, has obtained sufficient supplies of materials with such
Labeling for use on such Product, or (ii) six (6) months following Closing,
provided, however, if at the end of such six (6) month period the FDA has not
yet approved the Buyer Labeling, then such six (6) month period shall be
extended for a period of time to be mutually agreed by the parties reasonably
required to obtain such approval, but in no event greater than an additional six
(6) months.
8.5 Use of Seller Trademarks. Other than the use of the Seller
Labeling as set forth in Section 8.4, or with respect to the Trademarks, Buyer
shall not have the right to use any trademarks, tradenames, or logos of Seller
without Seller's consent, and any such use must be approved by Seller in
advance.
8.6 Customers. All contracts governing the Products with customers of
Seller or Seller's Affiliates shall be terminated as to the Products upon
expiration of the applicable notice period, and customers shall be notified of
that termination upon Closing. Seller shall provide updated information to
assist Buyer in quantifying the impact of these terminations, provided, however,
no pricing information will be exchanged. Seller shall provide all necessary
information (except pricing information) regarding customers and contracts to
Buyer to assist in Buyer's determination of whether to enter into new contracts.
8.7 Assignment of Trademarks. At or prior to Closing, Buyer shall
prepare and Seller shall execute such assignment documents as Buyer may
reasonably request in order to record the assignment of the Trademarks. The
responsibility and expense of filing such documents and any actions required
ancillary thereto, shall be borne solely by Buyer. Notwithstanding anything
contained elsewhere herein, Buyer shall hold Seller and its Affiliates harmless
from and against any loss or damage, including but not limited to fees,
penalties, fines or third party claims, due to Buyer's failure to record any
assignment of any such Trademarks pursuant to this subsection, except if such
loss or damage is due to the conduct of the Seller.
8.8 Transfer of Registrations. At Closing, Buyer and Seller shall
execute such documents as Buyer may reasonably request in order to transfer the
Registrations. Buyer shall pay any user fees associated with any Product that
accrue after Closing, including user fees that accrue prior to transfer of such
Registrations. Notwithstanding anything contained elsewhere herein, Buyer shall
hold Seller and its Affiliates harmless from and against any loss or damage,
including but not limited to fees, penalties, fines or third party claims, due
to Buyer's failure to file any Registration pursuant to this subsection, except
if such loss or damage is due to the conduct of the Seller.
8.9 Access to Information. Buyer and Seller will, upon reasonable
prior notice, make available to the other party such information or records
relating to the Assets which is in its possession after Closing, to the extent
reasonably required for the purpose of assisting the other party in the
preparation of tax returns relating to the Assets, and prosecuting or defending
or preparing for the prosecution or defense of any action, suit, claim,
complaint, proceeding or investigation at any time brought by or pending against
Seller or Buyer relating to the Assets , other than in the case of litigation
between the parties hereto, such information or records (or copies thereof) in
their possession after Closing (except if such information or records are
protected by the attorney-client privilege and the provision thereof would
destroy such privilege). Buyer and Seller shall also provide each other with
periodic drug safety updates and other information related to the Products, as
more specifically set forth in Schedule 8.9 for so long as each party continues
to manufacture and sell products containing the Active Ingredient.
8.10 Customer Information. Buyer and Seller shall agree on the text of
a joint announcement informing the customers in the Territory of the transfer of
the Products to Buyer or its relevant Affiliate. Should it be appropriate for
any party to make an announcement on its own, it will have to be approved by the
other party, which approval will not be unreasonably withheld or delayed.
8.11 Press Releases. Neither the Seller nor the Buyer, nor any
Affiliate thereof, will issue or cause publication of any press release or other
announcement or public communication with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party, which consent will not be unreasonably withheld or delayed. Unless
otherwise required by applicable law, the Purchase Price shall not be disclosed.
8.12 Government Filings.
8.12.1 Within three (3) business days after the Effective Date, Buyer
will, and Seller will, or will cause the ultimate parent entity of Seller to,
make such filings, together with a request for early termination, as may be
required by the HSR Act with respect to the consummation of the transactions
contemplated by this Agreement. Thereafter, Buyer will, and Seller will, or will
cause the ultimate parent entity of Seller to, each file or cause to be filed as
promptly as practicable with the FTC and the DOJ any supplemental information
that may be requested pursuant to the HSR Act. All such filings will comply in
all material respects with the requirements of the HSR Act.
8.12.2 Within three (3) business days following the Closing Date,
Seller shall notify the Health Care Financing Administration of the transfer of
the ownership of the products to Buyer.
8.13 Rebates. Seller or its Affiliates shall be responsible for any
rebate payments to non-Affiliates with respect to the Products, whether by
agreements, government mandate or otherwise, for all Products dispensed prior to
the Product Transfer Date and for a period of thirty (30) days thereafter, and
Buyer shall be responsible for any rebate payments with respect to the Products,
whether by agreements, government mandate or otherwise, for all Products
dispensed on or after thirty (30) days following the Product Transfer Date. With
respect to Products dispensed during the calendar quarter in which Closing
occurs, Seller shall be responsible for making such rebate payments, but the
amount of such payments shall be prorated between Buyer and Seller based on the
number of days remaining in said quarter as of thirty (30) days following the
Product Transfer Date, or the end of that calendar quarter, whichever is
earlier. If Seller or an Affiliate makes payment of rebates in its own name
(after the thirty day period above) due to governmental requirements pertaining
to Products for which Buyer is responsible, Buyer will reimburse Seller or its
Affiliate such amount within thirty (30) days following the date Seller or its
Affiliate notifies Buyer that Seller or its Affiliate has made such payments.
Buyer reserves the right to request Seller to audit at Buyer's expense
($150/hour), any particular rebate charge to determine whether the rebate should
be charged to Buyer or Seller under the terms hereof.
8.14 Contract Chargebacks. As of the Closing Date, Seller or its
Affiliates shall notify all parties with purchase contracts covering the
Products that said contract will terminate as to the Product in accordance with
its terms which in no case shall exceed sixty (60) days. Seller shall be
responsible for all costs and expenses with respect to claims under contract
chargebacks for the Product for chargeback requests for Product with an invoice
date prior to Closing or during a period of sixty (60) days following Closing.
8.15 Returns. Following the Closing Date, Seller shall be responsible
for the cost and proper handling of all returns in connection with Products sold
under Seller NDC code, with the exception of the Products specified in the
Inventory Statement, and Buyer shall be responsible for the cost and proper
handling of all returns in connection with Products sold under Buyer's NDC code,
as well as those lots of Product specified in Inventory Statement.
8.16 Cooperation. Prior to the Closing Date, the parties agree to each
designate a key contact person or persons to work out further details and
procedures as the need may arise for each subsection in Article 8. These contact
persons shall be guided by the principles in Article 8, and the parties agree to
good faith cooperation to share relevant information in order to facilitate the
respective Covenants set forth in Article 8. In the event the Closing Date
occurs in the middle of a calendar quarter, the parties agree to cooperate with
each other to facilitate the timely filing of any necessary government filings.
As part of this duty to cooperate, Buyer agrees to devote sufficient corporate
resources to this specialized field of rebates and chargebacks so that Seller is
not penalized in any way.
9. CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions to Obligation of Buyer. The obligations of Buyer under
this Agreement to complete the transactions contemplated hereby are subject to
the satisfaction on or prior to the Closing Date of the following conditions
(all or any of which may be waived in whole or in part by Buyer):
9.1.1 Representations and Warranties. The representations and
warranties made by Seller in this Agreement shall have been true and correct in
all material respects as of the Closing Date with the same force and effect as
though said representations and warranties had been made on the Closing Date,
except for representations and warranties made as of a specified date, which
will be true and correct in all respects as of the specified date.
9.1.2 Performance. Seller shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it prior to or at Closing.
9.1.3 Third Party Approvals . All governmental approvals and any other
consents or approvals of third parties necessary for Seller to execute and
deliver this Agreement and perform its obligations hereunder shall have been
obtained and, in the case of any regulatory approval (including under the HSR
Act), all notice and waiting periods with respect thereto shall have expired or
terminated and all conditions contained in any such approval required to be
satisfied prior to consummation of the transactions contemplated hereby shall
have been satisfied, and Seller shall have delivered to Buyer copies or other
evidence of such approvals.
9.1.4 No Adverse Change. During the period from the Effective Date to
the Closing Date there shall not have occurred or been discovered, and there
shall not exist on the Closing Date except for that which has been otherwise
disclosed elsewhere in this Agreement or in the Disclosure Schedule, any
condition or fact that would have a Material Adverse Effect.
9.1.5 Officer's Certificate. Seller shall have delivered to Buyer a
certificate, dated the Closing Date and executed by an officer of Seller,
certifying to the fulfillment of all conditions set forth in this Section 9.1.
9.1.6 Certificate of Good Standing. Seller shall have delivered to
Buyer a certificate of good standing for Seller issued by the State of New
Jersey and the Republic of Panama dated within thirty (30) business days prior
to the Closing Date ("Seller Certificate of Good Standing").
9.1.7 Litigation. No investigation, suit, action, or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks the restraint, prohibition, damages, or other relief in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement unless such action would not have a Material Adverse Effect.
9.1.8 Delivery of Other Documents. Buyer shall have received (a) if
authorization and approval of the Board of Directors of Seller is required, a
certified copy of the resolutions of the Board of Directors of Seller, in effect
as of the Closing Date, authorizing and approving the execution, delivery and
performance by Seller of this Agreement and (b) such additional documents
evidencing or certifying satisfaction of the conditions specified in this
Section 9.1 as reasonably may be requested by Buyer.
9.1.9 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Buyer and Buyer's counsel, and Seller
shall have made available to Buyer for examination the originals or true and
correct copies of all documents which Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
9.2 Conditions to Obligations of Seller. The obligations of Seller
under this Agreement to complete the transactions contemplated hereby at Closing
are subject to the satisfaction on or prior to the Closing Date of the following
conditions (all or any of which may be waived in whole or in part by Seller):
9.2.1 Representations and Warranties. The representations and
warranties made by Buyer in this Agreement shall have been true and correct in
all material respects as of the Closing Date with the same force and effect as
though said representations and warranties had been made on the Closing Date,
except for representations and warranties made as of a specified date, which
will be true and correct in all respects as of the specified date.
9.2.2 Performance. Buyer shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it prior to or at Closing.
9.2.3 Third Party Approvals . All governmental approvals and any other
consents or approvals of third parties necessary for Buyer to execute and
deliver this Agreement and perform its obligations hereunder shall have been
obtained and, in the case of any regulatory approval (including under the HSR
Act), all notice and waiting periods with respect thereto shall have expired or
terminated and all conditions contained in any such approval required to be
satisfied prior to consummation of the transactions contemplated hereby shall
have been satisfied, and Buyer shall have delivered to Seller copies or other
evidence of such approvals.
9.2.4 Officer's Certificate. Buyer shall have delivered to Seller a
certificate, dated the date of Closing and executed by an officer of Buyer,
certifying to the fulfillment of all conditions specified in this Section 9.2.
9.2.5 Certificate of Good Standing. Buyer shall have delivered to
Seller a certificate of good standing for Buyer issued by the State of Delaware
dated within thirty (30) business days prior to the Closing Date ("Buyer
Certificate of Good Standing").
9.2.6 Litigation. No investigation, suit, action, or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks the restraint, prohibition, damages, or other relief in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement unless such action would not have a Material Adverse Effect.
9.2.7 Delivery of Other Documents. Seller shall have received (a) a
certified copy of the resolutions of the Board of Directors of Buyer, in effect
as of the Closing Date, authorizing and approving the execution, delivery and
performance by Buyer of this Agreement and (b) such additional documents
evidencing or certifying satisfaction of the conditions specified in this
Section 9.2 as reasonably may be requested by Seller.
9.2.8 Proceedings and Instruments Satisfactory. Proceedings and
Instruments Satisfactory. All proceedings, corporate or other, to be taken in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Seller and Seller's counsel, and Buyer shall have made available to
Seller for examination the originals or true and correct copies of all documents
which Seller may reasonably request in connection with the transactions
contemplated by this Agreement.
9.3 Other Conditions. In addition to the conditions set forth in
Sections 9.1 and 9.2 above, the obligations of the parties to be performed at
the Closing are subject to the satisfaction on or prior to the Closing Date of
the following conditions:
9.3.1 Inventory Statement. Seller and Buyer shall have agreed upon and
delivered the Inventory Statement described in Section 2.4 and Article 3 above,
which shall detail the Closing Inventory and any additional Inventory.
9.3.2 Supply Agreement. Seller and Buyer, or their Affiliates, shall
have executed the Supply Agreement.
10. THE CLOSING
10.1 The Closing . Subject to the satisfaction of all of the
conditions to each party's obligations set forth in Article 9 hereof (or, with
respect to any condition not satisfied, the waiver in writing thereof by the
party or parties for whose benefit the condition exists), the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
9:00 a.m. (local time) as soon as possible following the expiration or
termination of all required waiting periods under the HSR Act or December 1,
1997, whichever is later (the "Closing Date") at the offices of Buyer or its
Affiliate or at such other time, date and place as the parties hereto may agree
in writing. The transfer of the Assets shall be deemed to have occurred as of
the Closing Time.
10.2 Deliveries by Seller. At Closing, Seller shall deliver to Buyer
in form reasonably satisfactory to Buyer, each properly executed and dated as of
the Closing Date, where appropriate:
10.2.1 A general conveyance of the Assets;
10.2.2 Seller Certificate of Good Standing;
10.2.3 Secretary's Certificate certifying that the Board of Directors
of Seller has authorized this Agreement;
10.2.4 Officer's Certificate described in Section 9.1.5;
10.2.5 the statement of the quantity and location of inventory
described in Section 2.4;
10.2.6 completed disclosure schedules required hereunder;
10.2.7 the Supply Agreement
10.2.8 a receipt for the Purchase Price;
10.2.9 the NDA's including all correspondence with FDA related to the
Products; and
10.2.10 transfer of ownership letters to FDA;
10.3 Deliveries by Buyer. At Closing, Buyer shall deliver or cause to
be delivered to Seller:
10.3.1 The Initial Purchase Price payable in accordance with Article
3;
10.3.2 Buyer Certificate of Good Standing;
10.3.3 Secretary's Certificate certifying that the Board of Directors
of Buyer has authorized this Agreement.
10.3.4 Officer's Certificate described in Section 9.2.4; and
10.3.5 the Supply Agreement with Seller,
10.4 Effects of Closing. Upon Closing the ownership of the Assets as
well as the full responsibility for the use of the Assets and the full
responsibility for the conduct of the business comprising the use of the Assets
shall pass from Seller to Buyer. Seller shall remain exclusively responsible for
the conduct of the Business prior to Closing (including any consequences
therefrom which may appear after the Closing). Buyer shall be exclusively
responsible for the conduct of the Business from Closing. Buyer acknowledges
that as per the Closing the product liability insurance of Seller and its
Affiliates will terminate and Buyer shall be responsible for proper insurance of
the product liability and other risks relating to the Products.
Within sixty (60) days of Closing, Seller shall remit to Buyer a sum
representing the net proceeds of sales to customers of the Products between
October 1, 1997 and Closing. This sum shall account for historical rates of
product returns, contract chargebacks, rebates and any other offsets on these
sales, as well as allow Seller a 5% fee for distribution, general and
administrative and collection costs.
The Closing shall further have the other effects provided for in this Agreement.
<PAGE>
11. TERMINATION
11.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date:
11.1.1 By the mutual written consent of Seller and Buyer;
11.1.2 By either Seller or Buyer, if Closing shall not have occurred
on or before March 1, 1998, unless such date has been extended by mutual
agreement in writing;
11.1.3 By either Seller or Buyer, if consummation of the transactions
contemplated hereby shall violate any non-appealable final order, decree or
judgment of any court or governmental agency having competent jurisdiction.
11.1.4 By either Seller or Buyer if there has been a material
violation or breach by the other party of any of the agreements, representations
or warranties contained in this Agreement that has not been waived in writing,
or there has been a material failure of satisfaction of a condition to the
obligations of the other party that has not been waived in writing, and such
violation, breach, or failure has not been cured within sixty (60) days of
written notice to the other party, except that in no event shall either party be
required to Close if any of the conditions in Article 9 have not be satisfied;
11.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 11.1, all further obligations of Seller and Buyer under this
Agreement shall terminate without further liability of Seller or Buyer except
for (a) the obligations of the parties under the Confidentiality Agreement and
(b) the obligations of Buyer and Seller under Sections 8.13, 14 and 15.2.
Termination shall not constitute a waiver by any party of any claim it may have
for damages caused by reason of a breach by the other party of a representation,
warranty, covenant or agreement hereunder.
12. INDEMNIFICATION
12.1 Remedy for Breach.
12.1.1 General Principle: After the Closing, the sole and exclusive
remedy of Buyer and Seller for any breach or inaccuracy of any representation or
warranty or any breach of any covenant under this Agreement by the other party
hereto shall be the indemnities contained in this Article 12.
12.1.2 Notice: Any claims that a party may have arising out of the
other party's breach of its representations and warranties or breach of a
covenant hereunder shall be notified to the other party promptly, but in no
event later than 90 (ninety) days after having reasonably sufficient knowledge
of the existence of a potential claim, by written notice describing the claim in
reasonable detail then known. Failure to give such notice on time shall not
affect the other party's indemnification obligations hereunder except to the
extent it is prejudiced thereby.
12.1.3 Survival of representations and warranties: The
representations, warranties, covenants of Seller and Buyer contained in this
Agreement shall survive the Closing Date, but any claim for breach of
representations and warranties or of a covenant shall be entitled to
indemnification hereunder only if written notice of such claim is given to the
other party hereto no later than 18 (eighteen) months following Closing Date
except that Buyer's right to notify claims with respect to the following matters
shall only terminate as follows:
a) Claims for breach of warranties and representations concerning
Litigation (Art. 4.11) insofar as such Litigation relates to product liability
matters shall be notified to Seller no later than 5 (five) years following the
Closing Date;
b) Claims for breach of warranties and representations concerning
Trademarks (Art. 4.13) shall be notified to Seller no later than 2 (two) years
following the Closing Date;
c) Claims for breach of warranties and representations concerning
taxes (Art. 4.7) may be notified to the Seller until the expiration of the
applicable statutes of limitations for taxes relevant to such claims.
It is understood that if and when either party has done the
notification for the pertaining matter within the applicable notification time,
it may start court proceedings pursuant to Art. 14 at any time within one year
of the date such claim was duly notified. Seller and Buyer shall agree to use
all reasonable efforts to mitigate any loss or damage for which they may seek
indemnification under this Article 12.
12.2 Indemnification by Seller:
12.2.1 Claims: Subject to the limitations set forth in Article 12.2.2
to the fullest extent permitted under applicable law, Seller shall indemnify
Buyer and its Affiliates against and agrees to hold Buyer and its Affiliates
harmless from any and all damage, loss, liability, third party claims, and
expense (collectively, "Damages") (including, without limitation, reasonable
expenses of investigation and attorneys' fees and expenses in connection with
any action, suit or proceeding brought against Buyer or its Affiliates) incurred
or suffered by Buyer or its Affiliates arising out of (a) any misrepresentation
or breach of a warranty or covenant made by Seller herein, (b) the maintenance
of the Assets by Seller prior to Closing or (c) the conduct of the Business by
Seller or its Affiliates prior to Closing (collectively, "Indemnifiable
Claims").
12.2.2 Limitations: Notwithstanding anything to the contrary set forth
elsewhere herein, Buyer and its Affiliates shall not be entitled to
indemnification hereunder with respect to any Indemnifiable Claim brought under
Article 12.2.1 unless the amount of Damages with respect to such Indemnifiable
Claim exceeds US$ 30,000. However, Seller shall in no event be required to pay
Buyer and its Affiliates more than half of the Purchase Price (Art. 3.1) in
respect of aggregate damages asserted pursuant to Article 12.2.1 (a) and (b)
except that the aforesaid limitation in respect of aggregate damages shall not
apply to any Indemnifiable Claim based on breach of Seller's warranties and
representations concerning Litigation in the field of product liability.
12.2.3 Form of Indemnification: Indemnification by Seller to Buyer
shall, at Seller's option, be effected in ICN Shares, valued at the Guaranteed
Price as of the Guaranty Date next preceding such indemnification plus pro rata
6% p.a., and/or cash. To effect any such payment, Seller shall surrender to ICN
one or more certificates representing such number of shares of Common Stock
and/or, at Seller's option, Preferred Stock as shall represent the aggregate
value of the amount of any such indemnification payment and ICN shall promptly
thereupon issue to Seller new certificates representing such number of shares of
Common Stock and/or Preferred Stock retained by Seller.
12.3 Indemnification of Buyer. Buyers shall indemnify Seller and it
Affiliates against and agrees to hold Seller and its Affiliates harmless from
any and all Damages (including without limitation, reasonable expenses of
investigation and attorneys' fees and expenses in connection with any action,
suit or proceeding brought against Seller or its Affiliates) incurred or
suffered by Seller or its Affiliates arising out of (a) any misrepresentation or
breach of warranty or covenant made by Buyer herein; or (b) the conduct of the
Business by Buyer and its Affiliates after Closing (collectively, "Indemnifiable
Claims"). Notwithstanding the foregoing, Buyer shall in no event be required to
pay Seller and its Affiliates more than half of the Purchase Price (Art 3.1) in
respect of aggregate damages asserted pursuant to Article 12.3 (a) and (b),
except that the aforesaid limitation shall no apply to Buyer's obligation to pay
the Purchase Price under Art. 3.1 above and the Inventory under Art. 3.5 above
and all provisions related to these payments, including but not limited to all
obligations of Buyer relating to the shares of common Stock and Preferred Stock
set forth in this Agreement and its Exhibits.
12.4 Notice: A party seeking indemnification pursuant to Article 12.2
or 12.3 (an "Indemnified Party") shall give prompt notice to the party from whom
such indemnification is sought (the "Indemnifying Party) of the assertion of any
claim, or the commencement of any action, suit or proceeding, in respect of
which indemnity is or may be sought hereunder (whether or not the limits set
forth in Article 12.2.2 have been exceeded) and will give the Indemnifying Party
such information with respect thereto as the Indemnifying Party may reasonably
request, but no failure to give such notice shall relieve the Indemnifying Party
of any liability hereunder (except to the extent the Indemnifying Party has
suffered actual prejudice thereby).
12.5 Participation in Defense: The Indemnifying Party may, at its
expense, participate in or assume the defense of any such actions, suit or
proceeding involving a third party. In such case the Indemnified Party shall
have the right (but not the duty) to participate in the defense thereof, and to
employ counsel, at its own expense, separate from counsel employed by the
Indemnifying Party in any such action and to participate in the defense thereof.
The Indemnifying Party shall be liable for the fees and expenses of one firm as
counsel (and appropriate local counsel) employed by the Indemnified Party if the
Indemnifying Party has not assumed the defense thereof. Whether or not the
Indemnifying Party chooses to defend or prosecution thereof and shall furnish
such records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested in
connection therewith.
12.6 Settlements: The Indemnifying Party shall not be liable under
this Article for any settlement effected without its consent of any claim,
litigation or proceedings in respect of which indemnity may be sought hereunder,
unless the Indemnifying Party refuses to acknowledge liability for
indemnification under this Article 12 and/or declines to defend the Indemnified
Party in such claim, litigation or proceeding.
13. NOTICES
Any notice required or permitted to be given hereunder shall be deemed
sufficient if sent by United States mail or overnight courier, or delivered by
hand to Seller or Buyer at the respective addresses set forth below or at such
other address as either party hereto may designate. If delivered by overnight
courier, notice shall be deemed given when it has been signed for. If delivered
by hand, notice shall be deemed given when received. If delivered by U.S. Mail,
notice shall be deemed given five (5) business days following the postmark date.
if to Buyer, to:
ICN Pharmaceuticals, Inc.
1330 Hyland Avenue
Costa Mesa, California 92626
Attn: President
With a copy to General Counsel
if to Seller, to:
Roche Products Inc.
Calle Aquilino de la Guardia, No. 8
Edificio Igra
Panama, Republica de Panama
Attn: Manager
with a copy to:
Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attn: General Counsel
14. ARBITRATION AND GOVERNING LAW
14.1 Except for the right of either party to apply to a court of
competent jurisdiction for a temporary restraining order to preserve the status
quo or prevent irreparable harm pending the selection and confirmation of a
panel of arbitrators, any dispute, controversy, or claims arising under, out of
or relating to this Agreement (and subsequent amendments thereof), its valid
conclusion, binding effect, interpretation, performance, breach or termination,
including tort claims, shall be referred to and finally determined by
arbitration, to the exclusion of any courts of law, in accordance with the Rules
of Arbitration of the International Chamber of Commerce as in force at the time
when initiating the arbitration. The arbitral tribunal shall consist of three
arbitrators. The place of arbitration shall be Paris, France. The language to be
used in the arbitral proceedings shall be English. The arbitration decision
shall be final and binding upon the parties and the parties agree that any award
granted pursuant to such decision may be entered forthwith in any court of
competent jurisdiction. This arbitration clause and any award rendered pursuant
to it shall be governed by the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitration Awards signed in New York on 10 June, 1958.
The party to whom a favorable ruling is awarded shall be entitled to
reimbursement of all its reasonable costs and expenses in arbitration by the
other party.
14.2 The present Agreement shall be subject to the substantive law of
Switzerland (regardless of its or any other jurisdiction's choice of law
principles).
15. ADDITIONAL TERMS
15.1 Brokers. Buyer represents to Seller that it has not employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission from Seller upon consummation of the transactions contemplated
hereby. Seller represents to Buyer that it has not employed any such Person in
such connection who might be entitled to a fee or any commission from Buyer upon
consummation of the transactions contemplated hereby.
15.2 Expenses. Except as otherwise expressly provided in this
Agreement, all legal, accounting and other costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
15.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns; provided that this Agreement may not be assigned by any party except to
an Affiliate of such party without the prior written consent of the other party
other than in connection with the reincorporation of such party in another
jurisdiction.
15.4 Exhibits and Schedules. The Exhibits and Schedules attached to
this Agreement and the principles and conditions incorporated in such Exhibits
and Schedules shall be deemed integral parts of this Agreement and all
references in this Agreement to this Agreement shall encompass such Exhibits and
Schedules and the principles and conditions incorporated in such Exhibits and
Schedules.
15.5 Entire Agreement. This Agreement, the exhibits hereto, and the
Disclosure Schedule (including Disclosure Supplements, if any) embody the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersede and replace all previous negotiations, understandings,
representations, writings, and contract provisions and rights relating to the
subject matter hereof.
15.6 Amendments; No Waiver. No provision of this Agreement may be
amended, revoked or waived except by a writing signed and delivered by an
authorized officer of each party. No failure or delay on the part of either
party in exercising any right hereunder will operate as a waiver of, or impair,
any such right. No single or partial exercise of any such right will preclude
any other or further exercise thereof or the exercise of any other right. No
waiver of any such right will be deemed a waiver of any other right hereunder.
15.7 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall together constitute one and the same instrument
and shall become effective when a counterpart has been signed by Buyer and
delivered to Seller and a counterpart has been signed by Seller and delivered to
Buyer.
15.8 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable and (b) in the event that any of the provisions
hereof are held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, (i) such invalid, void or otherwise unenforceable
provisions shall be automatically replaced by other provisions that are as
similar as possible in terms to such invalid, void or otherwise unenforceable
provisions but are valid and enforceable and (ii) the remaining provisions shall
remain enforceable to the fullest extent permitted by law, provided that the
rights and interests of the parties hereto shall not be materially affected.
15.9 Captions. Captions herein are inserted for convenience of
reference only and shall be ignored in the construction or interpretation of
this Agreement. Unless the context requires otherwise, all references herein to
Articles and Sections are to the articles and sections of this Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by duly authorized
representatives of each of the parties hereto as of the date first above
written.
ROCHE PRODUCTS INC. ICN PHARMACEUTICALS, INC.
By: /s/ Robert Aleman By: /s/ Bill A. MacDonald
--------------------------- ---------------------------
Name: Robert Aleman Name: Bill A. MacDonald
------------------------ -------------------------
Title: Assistant Secretary Title: Executive Vice President
------------------------ -------------------------
Date: October 30, 1997 Date: October 30, 1997
-------------------------- -------------------------
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated as of June 13, 1997, by and
between Syntex (F.P.) Inc., a Delaware corporation ("Seller"), Syntex (U.S.A.)
Inc., a Delaware corporation ("Syntex"), ICN Puerto Rico, Inc., a Puerto Rico
corporation ("Buyer"), and ICN Pharmaceuticals, Inc., a Delaware corporation
("ICN").
WITNESSETH:
WHEREAS, Seller owns the plant site located at. Mariana Ward, Road 909 Km 1.1,
Humacao, Puerto Rico, including the real property on which the plant is located
and the buildings, site improvements, furniture, fixtures, equipment and other
assets (except for certain leased equipment) located at the plant site (the
"Plant Site") ; and
WHEREAS, subject to the terms and conditions hereinafter set forth, Seller
desires to sell and Buyer desires to purchase, the Real Property (as hereinafter
defined) and the Equipment and Other Assets (as hereinafter defined); and
WHEREAS, Buyer agrees that Buyer is not purchasing any interest in the Excluded
Property (as hereinafter defined) at the Plant Site, any product of Seller or
its affiliates, and all know how and other confidential information of Seller
and its affiliates; and
WHEREAS, Buyer desires to manufacture and supply for Seller and/or certain of
its affiliates, certain of Seller's or its affiliates' products at the Plant
Site and provide certain other services to Seller and/or its affiliates at the
Plant Site after the Closing Date; and
WHEREAS, simultaneously on the Closing Date, Seller will lease back the Assets,
including but not limited to the Real Property, Equipment and Other Assets (as
hereinafter defined) pursuant to the Lease attached hereto as Exhibit ____; and
enter into the Toll Manufacturing Agreement attached as Exhibit ____; and
WHEREAS, Seller may lease certain of Buyer's employees and portions of the Plant
Site after the expiration of the Lease (as hereinafter defined) with respect to
the production of certain of Seller or its affiliates' products and for other
purposes after the Closing Date; and
WHEREAS, ICN agrees to guarantee, jointly and severally, with the Buyer, the
payment and performance of all of the obligations of the Buyer under this
Agreement and any other related agreement; and
WHEREAS, Syntex agrees to guarantee, jointly and severally with the Seller, the
payment and performance of all of the obligations of the Seller upon this
Agreement and any other related agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I - SALE AND PURCHASE OF ASSETS
Section 1.1 Sale and Purchase of Assets
Subject to the terms and conditions set forth in this Agreement, Seller agrees
to convey, assign, transfer and deliver, or cause to be conveyed, assigned,
transferred and delivered, to Buyer at the Closing Date (as hereinafter
defined), and Buyer agrees to acquire and accept from Seller, good and
marketable title to all of Seller's right, title and interest in the following
(collectively, the "Assets"):
a) Real Property. All real property described on Schedule 1.1(a)
hereto, together with all land, buildings, improvements and fixtures thereof and
all rights, privileges and easements appurtenant thereto (the "Real Property"),
subject to any and all exceptions of record;
b) Equipment. All machinery, equipment, parts, supplies, fixtures,
computers, trade fixtures and furnishings, whether leased, licensed or owned,
that are located on the Real Property as of the date hereof (except for Excluded
Assets as hereinafter defined) (the "Equipment"), subject to the terms of any
lease or agreement;
c) Other Assets. Except for the Excluded Assets(as hereinafter
defined) and Inventory (as hereinafter defined),
i) All materials and supplies that are currently used or useful in the
maintenance and operation of the Plant Site, the Real Property and the
Equipment;
ii) All assignable service agreements related to the Plant Site, the
Real Property, and the Equipment;
iii) All information, drawings, files, records, data and plans
relating to the Assets, including equipment manuals, maintenance records,
and engineering drawings, excluding any confidential information of Seller
and its affiliates and other records which Seller determines must be
retained by Seller in order to comply with any governmental or legal
requirements.
<PAGE>
Section 1.2 Excluded Assets
The Assets shall not include any , company vehicles assigned to an employee,
pension assets, 401-K assets, and financial systems records and programs,
proprietary or leased computer software,confidential machinery and equipment and
other items listed on Schedule 1.2 hereto, consumable manufacturing supplies,
raw materials, packaging, finished goods, and work-in-process relating to
Seller's or its affiliates' products, records which Seller determines must be
retained by Seller in order to comply with any governmental or legal
requirements, permits, and any confidential information, , proprietary
information, intellectual property, know how, patents, trademarks, and
copyrights of Seller or its affiliates, including but not limited to any of the
foregoing pertaining to any of Seller or its affiliates products (the "Excluded
Assets"). Buyer acknowledges and agrees that Buyer is not acquiring any rights
to any product of Seller or any of its affiliates. Buyer agrees that Seller may
remove any of the Excluded Assets either before or after the Closing Date (or
after the expiration of the Lease) as it may be necessary for Buyer to use some
of the Excluded Assets after the Closing Date or after the expiration of the
Lease, but Buyer shall not obtain any rights to such Excluded Assets and Seller
may remove the same at any time.
On the expiration of the Lease, Buyer shall purchase, at Seller's cost, any and
all of Seller's inventory (excluding finished products), work-in-process,
packaging, raw materials, manufacturing supplies and other related products
concerning any of Seller's products which Buyer will continue to produce after
the expiration of the Lease (the "Inventory"). Buyer and Seller shall consult on
appropriate levels of Inventory prior to expiration of the lease.
Section 1.3 The Closing Date
Subject to satisfaction of Closing Conditions set forth below, Buyer agrees that
Buyer shall be unconditionally obligated to purchase the Assets as of the date
of this Agreement; provided however, that Seller shall retain title to the
Assets and will not transfer title to the Assets to Buyer until August -1, l997,
11:00 a.m. (the "Closing Date") at the offices of McConnell Valdes, San Juan,
Puerto Rico, or at such other time, date and place as mutually agreed between
the parties; . Notwithstanding anything herein to the contrary, Seller shall
retain the ownership, benefit and possession of, and bear all risk of loss of,
or damage to, the Assets until the Closing Date.
Section 1.4 AS IS, WHERE IS
EXCEPT AS SPECIFICALLY PROVIDED FOR IN THIS AGREEMENT, BUYER AGREES THAT THE
ASSETS AND INVENTORY ARE SOLD ON AN AS IS, WHERE IS BASIS WITHOUT ANY
REPRESENTATION OR WARRANTY, AND THAT SELLER SHALL HAVE NO LIABILITY OR
OBLIGATION WITH RESPECT TO THE ASSETS OR INVENTORY EITHER BEFORE OR AFTER THE
CLOSING DATE.,
From the date of execution of this Agreement to the Closing Date, Seller agrees
to maintain the Assets, reasonable wear and tear excepted.
Upon shutdown of the oral contraceptives operations, Seller agrees to use
reasonable efforts to sanitize, in accordance with reasonable industry 's
standards, the oral contraceptive process area such that Buyer may utilize the
area for the production of other dissimilar products, but Buyer agrees that
Seller may be unable to complete this task prior to the Closing Date and Buyer
agrees that Seller may complete this task during the term of the Lease. Seller
agrees to maintain any and all governmental permits between the date of the
execution of this Agreement and the Closing Date except as may be mutually
agreed between the parties. Prior to the expiration of the Lease, , Buyer agrees
to secure any and all approvals which Buyer must obtain in order to produce
Seller's products at the Plant Site.
Section 1.5 Joint Inspection and Walk-Through
Seller and Buyer shall provide personnel to conduct a joint inspection and
walk-through of the Assets on a mutually agreed upon date prior to the Closing
Date. Based on the joint inspection, Seller and Buyer shall jointly identify in
writing any items requiring action, if any, to be taken by either party or both
parties prior to or after the Closing Date; provided however, that Seller shall
have no obligation to repair or replace any of the Assets, that Seller's
obligations shall be limited as provided in this Agreement and that Buyer's
remedies shall be limited as provided in this Agreement. Buyer agrees that
notwithstanding any such inspection, Buyer shall be obligated to purchase the
Assets on the Closing Date on the terms set forth in this Agreement.
ARTICLE II - NO ASSUMPTION OF LIABILITIES
Except as otherwise expressly provided herein, each party shall not assume or
incur any liability or obligation of the other party arising out of or relating
to events that occur prior to the Closing Date, including but not limited to the
following:
a) any federal, state or local income or other tax (i) payable with
respect to the Assets for any period prior to the Closing Date or (ii) incident
to or arising as a consequence of the negotiation or consummation by such party
of this Agreement and the transaction contemplated hereby;
b) any liability or obligation of Seller arising or incurred in
connection with the Excluded Assets; or
c) any liability or obligation of such party arising or incurred in
connection with the negotiation, preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including but not limited to
all fees and expenses of such party's counsel, accountants, surveyors and other
experts.
ARTICLE III - CONSIDERATION FOR TRANSFER
Section 3.1 Consideration to be Paid by Buyer
On the Closing Date, as consideration for the sale of the Assets, Buyer shall
pay to Seller the sum of Fifty-Five Million ($55,000,000.00) Dollars (the
"Purchase Price") payable as follows: (i) Eleven Million ($11,000,000.00)
Dollars in cash or a Promissory Note in favor of Seller for the amount of
$11,000,000 secured by a purchase money first mortgage and other financial
security for this sum in a form acceptable to Seller, but in no event shall
payment of the full amount of the Promissory Note extend beyond Ninety(90 ) days
after the Closing Date, and it is understood that Buyer will pay all expenses of
recording any documents necessary to perfect the purchase money first
mortgage;(ii) Forty Million ($40,000,000.00) by the Buyer assuming all
obligations, and having Seller and any of its affiliates released from any and
all obligations or guarantees, regarding the Puerto Rico Industrial, Medical,
Educational and Environmental Pollution Control Facilities Financing Authority
Industrial Revenue Bonds 1990 Series A Bonds Due May 1, 2015 (the "Industrial
Revenue Bonds"); (iii) Four Million ($4,000,000.00) Dollars in credit against
the First Year Rent Payment under the Lease; (iv) paying Seller for any
difference between the principal amount of the Bonds outstanding as of the
Closing Date and any interest or other charges due thereon, together with any
prepaid amounts paid by Seller, and $40,000,000 provided that if the total
exceeds $40,000,000, such excess shall be credited to Buyer; and (v) any
prorations or other amounts to be paid pursuant to the terms of this Agreement.
The Purchase Price shall be allocated as set forth on Schedule 3.1.
Simultaneously with the closing of title, Buyer and Seller shall execute the
Lease attached hereto as Schedule 3.1 (a) which shall be of a term which shall
expire no sooner than July 31, 1999 (the "Lease"). Buyer agrees to take such
action and/or execute such documents as may be reasonably necessary to assure
Seller that a mortgage lender shall have no right to disturb Seller's possession
of the leased Premises, provided Seller is at all relevant times in compliance
with the terms of the Lease. The parties agree that the Lease will be recorded
(at Seller's expense) simultaneous with the recording of the Deed. The Lease
shall be superior in right to any mortgage on the Property during the two (2)
year term, provided, however, that if Seller receives, in its opinion,
satisfactory assurances and protections from any mortgage lender to Buyer of
Seller's right to remain in possession during the Lease, and Buyer can document
savings in its borrowing costs thereby, Seller will subordinate its Lease to
such mortgage.
In the event that prior to ninety (90) days after the the Closing Date, after
using due diligence, Buyer is unable to assume the Industrial Revenue Bonds and
release Seller and its affiliates from any and all obligations under the
Industrial Revenue Bonds and related agreements or guarantees, then in such
event Buyer shall pay Seller Fifty-Five Million ($55,000,000.00) Dollars, plus
interest to be accumulated on the Industrial Revenue Bonds from the Closing Date
through the date of prepayment, and the Seller will pay off the Industrial
Revenue Bonds; provided however that the provisions of the Industrial Revenue
Bonds permit Seller to prepay the same and the prepayment is made on or before
to November 1, 1998.
<PAGE>
In the event that Seller cannot prepay the Industrial Revenue Bonds and Seller
cannot be released from liability on the Industrial Revenue Bonds, then Buyer
shall (1) pay Seller $ 40,000,000 in cash or (2) assume the Industrial Revenue
Bonds and provide Seller with a purchase money first mortgage lien on the Assets
as security for Buyer's performance or a letter of credit or some other form of
financial security acceptable to the Seller and the guarantor of the Industrial
Revenue Bonds, and an indemnification agreement, all in form and substance which
is acceptable to Seller and its counsel. Buyer shall be responsible for any
costs or expenses associated with providing Seller with acceptable security,
including, without limitation, any fees associated with the letter of credit,
recording fees and other related costs of the mortgage, letter of credit and
other security documents.
Section 3.2 Method of Payment
The Purchase Price and all other moneys owed by Buyer to Seller shall be paid by
wire transfer of immediately available funds in US dollars to Seller. Seller
shall designate an account to receive such funds in writing at least five
business days prior to Closing.
Section 3.3 Remedies
Notwithstanding anything to the contrary as may be set forth herein, in the
event the Asset Purchase Agreement of even date herewith between Buyer and
F.Hoffmann-La Roche Ltd concerning acquisition of certain pharmaceutical
products closes (the Product Agreement), thereafter Buyer shall not have the
right of rescission, which might otherwise be available. Except as so limited,
each of the parties hereto may pursue all remedies available to it in the event
of a breach of this Agreement by the other.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
<PAGE>
Section 4.1 Corporate Existence
Seller and Syntex are corporations duly organized under the laws of Delaware and
Seller is qualified to do business in Puerto Rico.
Section 4.2 Corporate Power; Authorization; Enforceable Obligations
Seller and Syntex each has all requisite corporate power and authority to
execute, deliver and perform this Agreement and all other instruments and
agreements required to be executed, delivered or performed by them pursuant
hereto ("Seller's Documents"). As of the execution of this Agreement or on the
Closing Date, the execution, delivery and performance of this Agreement, and all
other Seller's Documents, will have been duly authorized by all necessary
corporate action on the part of Seller and Syntex. This Agreement has been, and
on the Closing Date, all other Seller's Documents will have been duly authorized
by all necessary corporate action on the part of Seller. This Agreement has
been, and as of the execution of this Agreement or on the Closing Date, all
other Seller's Documents will have been, duly executed and delivered by
authorized officers of Seller and Syntex and constituteor will constitute the
legal, valid and binding obligations of Seller and Syntex enforceable against
them in accordance with their respective terms.
Section 4.3 Validity of Contemplated Transactions
The execution, delivery and performance of this Agreement by Seller and Syntex
does not and will not violate, conflict with or result in the breach of any
term, condition or provision of, or require the consent of any other person
under the charter documents of Seller or any securities issued by Seller and/or
Syntex, or any material mortgage, indenture, agreement, contract, commitment,
lease, plan, document or understanding, oral or written, to which Seller or
Syntex is a party by which Seller or Syntex or any of the Assets may be bound or
affected, or give any party with material rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of Seller thereunder, except under the Industrial Revenue Bonds and
any lease or service agreement pertaining to the Plant Site or Assets.
Section 4.4 No Third Party Options
There are no existing agreements, options, commitments or rights with, or to any
person to acquire any of the Assets or any interest therein.
Section 4.5 Taxes
All property taxes, general or special assessments and any other taxes relating
to the Assets applicable to periods prior to the Closing Date have been or shall
be paid by Seller in a timely manner.
Section 4.6 Existing Condition
Seller has not as of the date of the execution of this Agreement:
a) failed to pay or discharge when due any liabilities of which the
failure to pay or discharge has caused or could reasonably be expected to cause
any material damage or risk of material loss to any of the Assets;
b) sold, encumbered, assigned or transferred any Assets, except for
the Industrial Revenue Bonds and any lease or service agreement;
c) subjected any of the Assets to any mortgage, lien, pledge, security
interest, conditional sales contract or other encumbrance of any nature
whatsoever, except for the Industrial Revenue Bonds and any leased equipment or
service agreement;
d) to the best of Seller's knowledge, after due inquiry, suffered any
material damage, destruction or loss, whether or not covered by insurance,
adversely affecting the Assets;
e) to the best of Seller's knowledge, after due inquiry, suffered any
material adverse change in or relating to the Assets; or
f) to the best of Seller's knowledge, after due inquiry, received
notice or had knowledge of any actual or threatened material labor trouble,
strike or other occurrence, event or condition of any similar character which
has had or could reasonably be expected to have a material adverse effect on the
operation of the Plant Site.
Section 4.7 Compliance with Law
Except as provided in this Agreement, to the best of Seller's knowledge, Seller
has complied in all material respects with any law, ordinance, or governmental
or regulatory rule or regulation, order, judgment or decree whether federal,
state, commonwealth, local or foreign, to which the Assets or Seller's
operations at the Plant Site are subject.
Section 4.8 Litigation
Except as provided in Schedule 4.8, no action, suit, litigation, arbitration,
arbitrator or governmental or regulatory official , body or authority, including
without limitation the United States Food and Drug Administration, relating to
the Assets, the Plant Site or the transactions contemplated by this Agreement is
pending or, to the best knowledge of Seller, threatened against Seller, nor does
Seller know or have reason to know of any basis for any such action, suit,
litigation, arbitration, investigation or proceeding; Seller is not aware of any
claim, event or occurrence that would require Seller to give notice to any
insurer under any of Seller's insurance policies; and Seller is not a party to
or subject to the provisions of any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory official, body or
authority that relates in any material way to the Assets, the Plant Site or the
transactions contemplated by this Agreement.
Section 4.9 Insurance
The Assets are adequately insured under various policies of general liability
and other forms of insurance or self insurance.
Section 4.10 Labor Matters
Seller represents that it is not a party to any contract of employment, employee
lease contract, collective bargaining agreement or other labor agreement that
relates to or covers any Transferred Employee (as defined in Section 10.1) as of
the Closing Date.
Section 4.11 Real Property
a) Title to Real Property. Title to the Real Property is, and at
Closing Date shall be, good and marketable, fee simple absolute, free and clear
of all liens, adverse claims and other matters affecting Seller's title to or
possession of the Real Property, including, but not limited to, all
encroachments, boundary disputes, covenants, restrictions, reservations,
easements, rights of way, mortgages, security interests, leases, and
encumbrances, except as set forth in any title binder or policy procured by or
given to either party, except for the Industrial Revenue Bonds.
b) Eminent Domain. Seller has received no notices, oral or written, and
has no reason to believe, that any governmental body having the power of eminent
domain over the Real Property has commenced or intends to exercise the power of
eminent domain or a similar power with respect to all or any part of the Real
Property.
c) Public Improvements. Except for a portion of the Plant Site
dedicated for public use and for exceptions of record, no work for municipal
improvements has been commenced on or in connection with the Real Property or
any street adjacent thereto. No assessment for public improvements has been made
against the Real Property which remains unpaid. No notice from any governmental
body has been served upon the Real Property or received by Seller requiring or
calling attention to the need for any work, repair, construction, alteration or
installation on or in connection with the Real Property which has not been
complied with.
Section 4.12 Environmental Matters
a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Environmental Claims" means any and all administrative,
regulatory, or judicial actions, suits, demand letters, claims, liens,
notices of noncompliance or violations, investigations or proceedings
relating to any Environmental Law or Environmental Permit (as those
terms are hereinafter defined) (collectively "Claims"), including,
without limitation, (A) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable
Environmental Law, and (B) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Substances
(as hereinafter defined) or arising from alleged injury or threat of
injury to the environment.
(ii) "Environmental Laws" means any federal, state, commonwealth
or local statute, law, rule, regulation, ordinance, code, policy or
rule of common law in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating
to human health and the environment or Hazardous Substances,
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.
9601 et seq.; the Emergency Planning and Community Right-to- Know Act,
42 U.S.C ss. 11001 et. seq., the Resource Conservation and Recovery
Act, 42 U.S.C. ss. 6901 et. seq.; the Federal Water Pollution Control
Act, 33 U.S.C. ss. 1251 et. seq.; the Clean Air Act, as amended, 42
U.S.C. S 7401 et. seq. ; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. ss. 136 et. seq.; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f et. seq., the Toxic Substances Control Act, 15
U.S.C. ss. 2601 et. seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.
1001 et. seq.; the Hazardous Materials Transportation Act, as amended,
49 U.S.C. ss. 1801 et. seq.; the Occupational Safety and Health Act,
as amended, 29 U.S.C. ss. 651 et. seq.; or the Federal Food, Drug and
Cosmetic Act, as amended, 21 U.S.C. ss. 301 et. seq., the Puerto Rico
Environmental Policy Act, 12 L.P.R.A. ss. 1121 et. seq., the Puerto
Rico Environmental Emergencies Fund Act 12 L.P.R.A. ss. 1271 et. seq.;
the Puerto Rico Sold Waste Authority Act, 12 L.P.R.A. ss. 1301 et.
seq.; the Puerto Rico Harmful Spills Law, 12 L.P..R.A. ss. 1141 et.
seq., the Puerto Rico Organic Act of the Department of The Environment
And Natural Resources, 3 L.P.R.A.ss. 151 et. seq.; or any
environmental transfer laws which regulate the transfer of property
and the corresponding state or commonwealth laws, regulations and
local ordinances which may be applicable, as any such acts have been
or may be amended.
(iii) "Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations required
under any applicable Environmental Law.
(iv) "Hazardous Substances" means any chemicals, materials or
substances defined as or included in the definition of "hazardous
substances," "hazardous wastes, " "hazardous materials," "hazardous
solid waste," "toxic waste," "toxic or hazardous waste," "industrial
waste," "harmful substances," "extremely hazardous wastes," "regulated
substances, ""restricted hazardous wastes," "toxic substances," "toxic
pollutants," "hazardous air pollutants," "pollutants," "contaminants,"
"toxic chemicals," "petroleum or petroleum products," "toxins,"
"hazardous chemicals," "extremely hazardous substances," "pesticides"
or related materials, as now, in the past, or hereafter defined in any
applicable Environmental Law.
b) Buyer acknowledges that Buyer has inspected the Assets and will
receive Seller's report and a third party's report concerning the environmental
status of the Assets prior to Closing. Seller representsthat: (i) Seller has
complied in all material respects with any applicable Environmental Law; (ii)
Seller has obtained all necessary Environmental Permits and is in compliance in
all material respects with their requirements as of the date hereof; (iii) the
Assets (including, without limitation, soils and surface, ground waters and
buildings) are not contaminated with any Hazardous Substances; (iv) there are no
past, pending or , to the best knowledge of Seller, threatened Environmental
Claims or circumstances that could reasonably be anticipated to form the basis
thereof against Seller; and (v) the Real Property is not listed on the National
Priorities List or any similar state, commonwealth or local listing nor is it
included in an area included in such a list, and Seller is not aware that such a
listing is pending or contemplated (except for listing on CERCLIS and equivalent
local listing) as of the date hereof.
c) Seller agrees to indemnify and hold harmless Buyer for any and all
losses, claims, damages, penalties, liabilities, fines, injuries, costs and
expenses (including attorney's fees, administrative expenses, prejudgment
interest and court costs), or response costs, including the cost of any required
or reasonable investigation, testing, monitoring, repair, cleanup or
detoxification, decontamination, preparation of any closure or other required
plans, removal, response or remedial action) (collectively, "Environmental
Liabilities") in connection with the Assets or any Environmental Claims but only
to the extent arising from or out of activities occurring, or undertaken by
Seller, prior to Closing Date with respect to, as a direct or indirect result
of, or arising out of the presence of Hazardous Substances at, on, beside, above
or under the Real Property, or any breach of subsection (b) above; provided,
however, that Seller shall not be required to indemnify Buyer for any
Environmental Liabilities or Environmental Claims that result from Buyer's or
its representatives activities at the Plant Site, whether arising before or
after Closing Date. Notwithstanding anything contained herein to the contrary,
in no event shall Seller be required to indemnify Buyer as provided herein for
any Environmental Liabilities if Seller has not been notified in writing of the
matter within five (5) years of the Closing Date.
d) Buyer agrees to indemnify and hold harmless Seller for any and all
Environmental Liabilities in connection with the Assets or any Environmental
Claims but only to the extent arising from or out of activities occurring, or
undertaken by Buyer, after the Closing Date with respect to, as a direct or
indirect result of, or arising out of the presence of Hazardous Substances at,
on, beside, above or under the Real Property, or any breach of subsection (b)
above, or Buyer's manufacture of Seller's products after the Closing Date.
e) Except as provided for in Section 8.5, in the event of potential
joint or shared responsibility for Environmental Liabilities or Environmental
Claims, Seller and Buyer agree (i) to mutually cooperate with each other on all
matters in which cooperation is necessary and (ii) to share in responsibility
according to the final decision of the applicable governmental, regulatory, or
judicial authority, or as otherwise mutually agreed.
f) Except as may be mutually agreed, Seller hereby agrees to maintain
all Environmental Permits currently in effect and assign them to Buyer to the
extent they may be lawfully transferred. Seller and Buyer agree to notify the
other party in the event either is contacted by a third party regarding
Environmental Laws, Claims, or Liabilities pertaining to the other party's
operations at the Plant Site.
SECTION 4.13 Availability of Documents
Prior to Closing, Seller will make available to Buyer copies of all material
and relevant documents, including without limitation all agreements, contracts,
commitments, insurance policies, leases, plans, instruments, undertakings,
authorizations, permits and licenses referred to herein, except documents
subject to confidentiality obligations.
SECTION 4.14 Assets
The Assets include all rights and property located or situated at the Plant
Site, other than the Excluded Assets or any lease or service agreement, and the
Real Property constitutes all of the real estate that comprises the Plant Site.
SECTION 4.15 Contracts and Commitments
Schedule 4.15 sets forth a list of all material agreements, contracts and leases
necessary to the operations of the Plant Site and the use and maintenance of the
Assets (collectively, "Contracts"). Each Contract is valid and enforceable in
all material respects in accordance with its terms. Seller is, and to Seller's
knowledge all other parties thereto are, in compliance with the material
provisions thereof. Seller is not, and to Seller's knowledge no other party
thereto is, in material default in the performance, observance or fulfillment of
any material obligation, covenant or condition contained therein, and no event
has occurred which with or without the giving of notice or lapse of time, or
both, would constitute a default thereunder. No Contract requires the consent of
any party to effect its assignment in connection with the transactions
contemplated hereby except for such consents as set forth on Schedule 4.15, the
Industrial Revenue Bonds, and as have been obtained or will be obtained by the
Closing Date. Notwithstanding the foregoing, Buyer agrees that the failure to
obtain any consent or failure to observe any obligation, covenant, or condition
of any Contract, shall not constitute a breach of this Agreement and Buyer shall
be obligated to close on the Closing Date.
Section 4.16 No Finder's or Broker's Fee
Seller and Seller's Affiliates have not incurred or caused to be incurred any
liability for any fee or commission in the nature of a finder's, originator's or
broker's fee in connection with the transactions contemplated hereby.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and ICN hereby represent and warrant to Seller as follows:
Section 5.1 Organization
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of Puerto Rico. ICN is a corporation duly organized, validly
existing and in good standing under the laws of Delaware.
Section 5.2 Corporate Power; Authorization; Enforceable Obligations
Buyer and ICN each has all requisite corporate power and authority to execute,
deliver and perform this Agreement and all other instruments and agreements
required to be executed, delivered or performed by Buyer or ICN pursuant hereto
("Buyer's Documents"). As of the date of the execution of this Agreement and on
the Closing Date, the execution, delivery and performance of this Agreement, and
all other Buyer's Documents, will have been duly authorized by all necessary
corporate action on the part of Buyer and ICN. This Agreement has been, and on
the Closing Date all other Buyer's Documents will have been, duly executed and
delivered by authorized officers of Buyer and ICN, and constitutes or will
constitute the legal, valid and binding obligations of Buyer and ICN enforceable
against Buyer and ICN in accordance with their respective terms.
Section 5.3 Validity of Contemplated Transactions
The execution, delivery and performance of this Agreement by Buyer and ICN does
not and will not violate, conflict with or result in the breach of any term,
condition or provisions of, or require the consent of any other person under the
charter documents of Buyer or any securities issued by Buyer and/or ICN, or any
material mortgage, indenture, agreement, contract, commitment, lease, plan,
document or understanding, oral or written, to which Buyer or ICN was a party
immediately prior to the Closing.
Section 5.4 No Finder's or Broker's Fee
Buyer and ICN have not incurred or caused to be incurred any liability for any
fee or commission in the nature of a finder's, originator's or broker's fee in
connection with the transactions contemplated hereby.
ARTICLE VI - COVENANTS
Section 6.1 Further Assurances; Cooperation
Seller hereby covenants and agrees that, from and after the Closing Date,
Seller shall, at its expense, execute and deliver to Buyer or its designee all
such deeds, conveyances, bills of sale, assurances, transfers, assignments and
consents, approvals, agreements and contracts and any other documents, and shall
cooperate fully with Buyer and do all such other things, as may be necessary to
effectively transfer the Assets to, and to perfect and confirm the ownership of
the Assets by Buyer. Buyer and Seller each agree to fully and diligently
cooperate with and assist the other party to obtain any necessary or appropriate
governmental or other approvals, including but not limited to all tax grants,
the Industrial Revenue Bonds and any other applicable tax exemptions; provided
however, that Buyer and ICN agree that Seller shall have no obligation to secure
any consent or other approval from any third party or governmental agency,
relatedto the Industrial Revenue Bonds.
Section 6.2 Transfer Tax
The parties agree that all sales, use and transfer taxes resulting from the sale
of the Assets shall be paid as customary under Puerto Rico practice. Buyer shall
pay the recording fees and stamps for the first certified copy of the deed and
Seller for the stamps of the original deed. Buyer pays for all recording fees
and stamps of the original and first copy of the purchase money first mortgage,
chattel mortgage and any other security to be placed on the Assets. The Lease
shall be recorded and Seller shall pay any fees and expense to record the Lease.
Section 6.3 Title Insurance
Buyer shall obtain, at its sole cost and expense, an ALTA owners title insurance
policy, or other title insurance policy in a form and amount satisfactory to
Buyer, issued and underwritten by the title company of its choosing, insuring a
merchantable fee simple title to the Real Property in Buyer as of the date of
recording the deed to the Real Property.
<PAGE>
Section 6.4 Prorations
Seller and Buyer each agree that all real estate taxes and all personal property
taxes payable with respect to the Assets for the year in which the Closing Date
occurs shall be prorated between Seller and Buyer as of the Closing Date. If the
amount of any such tax cannot be ascertained on the Closing Date, proration
shall be computed based upon the amount thereof for the immediately preceding
year and shall be later adjusted, if the taxes actually paid are higher or
lower, based upon the number of calendar days during the year each party owned
the Assets.
As provided by law or local custom, Seller shall pay the notarial tariff and
internal revenue stamps for the deed of purchase and sale or other original
public instrument of conveyance and Buyer shall pay the internal revenue stamps
for the certified copy and the fee for recording it in the Registry of Property.
Seller and Buyer agree that any other tax stamps, or similar governmental
assessment shall be paid pursuant to law or local custom. The party bearing any
Notarial fee obligation hereunder shall be entitled to designate the Notary to
be used.
ARTICLE VII - CONDITIONS TO OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to consummate the transactions contemplated hereby
shall be subject to the fulfillment, to the reasonable satisfaction of Seller,
prior to or on the Closing Date, of each of the following conditions precedent;
provided however, that any of such conditions may be waived by Seller at or
prior to the Closing Date.
Section 7.1 Representations and Warranties True and Correct
The representations and warranties of Buyer set forth in Article V hereof shall
be true and correct when made and as of the Closing Date with the same effect as
though made on and as of such date.
Section 7.2 Payment of Purchase Price; Execution on the Payment Date and
Delivery Documents
Buyer shall have paid the Purchase Price and executed and delivered or otherwise
have caused to have delivered all documents required to be delivered by Buyer
pursuant to Section 9.3 hereof.
Section 7.3 Performance
Buyer shall have performed and complied with all material agreements, covenants
and conditions contained herein required to be performed or complied with by it
on or prior to the Closing Date.
Section 7.4 Tax Exemption
Seller and its affiliates shall have received in form and substance satisfactory
to them amendments to their existing Puerto Rico tax exemption grants or a
comfort letter acceptable to Seller and its affiliates. Buyer shall provide
Seller and its affiliates with such assistance as may be reasonably requested in
obtaining such amendments.
Section 7.5 Approvals
Seller shall have received notice of early termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or
shall be aware that the waiting period shall have expired without receipt of a
second Request for Information.
Sectin 7.6 Product Agreement Closing
There shall have been or will simultaneously be a Closing of the Product
Agreement.
ARTICLE VIII - BUYER'S OBLIGATION TO CLOSE
The obligation of Buyer to consummate the transactions contemplated hereby shall
be subject to the fulfillment to the reasonable satisfaction of Buyer, prior to
or on the Closing Date, of each of the following conditions precedent; provided,
however, that any of such conditions may be waived by Buyer at or prior to the
Closing Date.
Section 8.1 Representations and Warranties True and Correct
The representations and warranties of Seller set forth in Article IV hereof
shall be true and correct in all material respects when made and as of the
Closing Date with the same effect as though made on and as of such date.
Section 8.2 Delivery of Documents
Seller shall have delivered all documents required to be delivered by Seller
pursuant to Section 9.1 hereof.
Section 8.3 Performance
Seller shall have performed and complied with all material agreements, covenants
and conditions contained herein required to be performed or complied with by it
on or prior to the Closing Date.
<PAGE>
Section 8.4 Tax Exemption
Buyer or its affiliates shall have received in form and substance satisfactory
to them Puerto Rico tax exemption grants, or a comfort letter acceptable to
Buyer. Seller shall provide Buyer with such assistance as may be reasonably
requested in obtaining such grants.
Section 8.5 Approvals
Buyer shall have received notice of early termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or
shall be aware that the waiting period shall have expired without receipt of a
second Request for Information.
Section 8.6 Cooperation
Seller shall have supplied information to Buyer necessary to comply with the
requirements of Regulation S-X of the Securities & Exchange Commission, if
applicable, which shall be at Buyer's expense.
Section 8.7 Product Agreement Closing
There shall have been or will simultaneously be a Closing of the Product
Agreement.
ARTICLE IX - DOCUMENTS TO BE DELIVERED AT CLOSING
Section 9.1 Documents to be Delivered by Seller
Seller shall deliver or cause to be delivered the following documents to Buyer
on the Closing Date:
a) a certificate of good standing of Seller and Syntex, issued by the
State of Delaware as of a date not more than 20 days prior to the Closing Date;
b) a duly executed, acknowledged, and recordable deed of purchase and
sale with covenants (i) against grantor's acts, and (ii) regarding Buyer's and
Buyer's affiliates non-use and non-disclosure of the Assets or any know-how
inherent in them to manufacture products of Seller or Seller's affiliates, or
other deed by which Seller received the Real Property, conveying to Buyer the
Real Property or equivalent deed of purchase and sale under Commonwealth law;
c) a duly executed bill of sale, conveying the Equipment;
d) a duly executed officer's certificate stating that the
representations and warranties of Seller set forth herein are true and correct
as of the Closing Date;
e) a notarized certificate of the secretary or assistant secretary of
Seller in respect of (i) each of its officers who is authorized to execute and
deliver this Agreement and all other Seller's Documents, (ii) certified copies
of the Certificate of Incorporation and Bylaws of Seller, and (iii) resolutions
of the Board of Directors of Seller authorizing the making and performance by
Seller of this Agreement and each of the other Seller's Documents and the
consummation of the transactions contemplated hereby and thereby;
f) an executed counterpart of the Toll Manufacturing Agreement, the
Lease, leased employee agreement, and any other agreement as contemplated by
Buyer and Seller in form and substance acceptable to the Seller;
g) guarantees by Syntex in form and substance satisfactory to Buyer;
h) such other documents as Buyer may reasonably require for the
consummation of the transactions contemplated by this Agreement.
Section 9.2 Documents to be Delivered by Buyer
Buyer and ICN shall deliver the following documents to Seller on the Closing
Date:
a) certificates of good standing of Buyer issued by Puerto Rico and
ICN issued by the State of Delaware as of a date not more than 20 days prior to
the Closing Date;
b) a notarized secretary's certificate of the secretary or assistant
secretary of Buyer and ICN in respect of (i) each of its officers who is
authorized to execute and deliver this Agreement and all other Documents to be
executed by Buyer and ICN in connection with the Agreement, (ii) certified
copies of the Certificate of Incorporation and Bylaws of Buyer and ICN, and
(iii) resolutions of the Board of Directors of Buyer and ICN authorizing the
making and performance by Buyer and ICN of this Agreement and each of the
Buyer's and ICN's Documents and the consummation of the transactions
contemplated hereby and thereby;
c) an executed counterpart of the Toll Manufacturing Agreement, the
Lease, leased employee agreement and any other agreement as contemplated by
Buyer and Seller in form and substance acceptable to the Buyer, as well as a
purchase money first mortgage lien on the property to secure Buyer's production
of Seller and its affiliates products after the Closing;
d) an assumption of leases of certain items of Equipment;
e) guarantees by ICN in form and substance satisfactory to Seller;
f) an agreement in form acceptable to counsel for Seller and Buyer,
regarding Buyer's and Buyer's affiliates non-use and non-disclosure of any
know-how or confidential information or equipment inherent in the products and
the manufacture of such products of Seller or its affiliates; and
g) such other documents as Seller may reasonably require for the
consummation of the transactions contemplated by this Agreement.
ARTICLE X - EMPLOYEES
Section 10.1 Transferred Employees
Buyer will offer employment to all of the employees of Seller or of its
affiliate companies assigned to the Plant Site (collectively referred to as
"Employees"), who are employees on the expiration of the Lease, at a base salary
equal to or higher than the base salary Employees were receiving from Seller
prior to the expiration date of the Lease. However, Seller shall have no
obligation to employ any specific employee up to the expiration date of the
Leasee. "Employees" shall mean any person who, on the expiration date of the
Lease, is employed by Seller, or its affiliate companies, and assigned to the
Plant Site, excluding those on long term disability leave, but including those
who are inactive on the expiration date of the Lease, such as those on
short-term disability leave, authorized leave of absence or military service.
Buyer shall provide written offers of employment to Employees, setting forth job
titles, responsibilities and salary, no later than 90 days prior to the
expiration date of the Lease. Those Employees who accept such offers of
employment effective as of the expiration date of the Lease shall be hired by
Buyer and shall be referred to herein as "Transferred Employees". Based upon the
estimated guaranteed volume of production in Schedule 2.1 of the Toll
Manufacturing Agreement, the number of Transferred Employees shall not exceed
190 people. If the guaranteed production volume increases, the parties will
negotiate the additional number of Employees required to be hired hereunder.
Buyer agrees not to lay-off or otherwise terminate any Transferred Employees for
a period of one year, provided, however, Buyer may terminate Transferred
Employees for cause. "Cause" shall not include a reorganization or reduction in
force or sale or divestiture of all or a portion of Buyer's business.
Section 10.2 Benefits
Except as set forth in Section 10.10 hereof, Transferred Employees will be
eligible to participate, from and after the expiration date of the Lease, in all
employee benefit plans offered by Buyer to similarly situated employees of
Buyer, on the same terms and conditions applicable to Buyer's similarly situated
employees, as they may be amended from time to time, which are listed at
Schedule 10.2.
Section 10.3 Accrued Wages and Salaries
Buyer shall not be obligated to make any payments of wages, salary or other
compensation accrued prior to the expiration date of the Lease, whether or not
earned or payable by the expiration of the Lease.
Section 10.4 Employment Liabilities
Except as specifically described herein, Seller shall retain and be responsible
for all liabilities in connection with claims incurred on or prior to the
expiration of the Lease by Transferred Employees under Seller's employee benefit
plans. Buyer shall assume and be responsible for all liabilities in connection
with claims incurred after the expiration date of the Lease by Transferred
Employees under any of Buyer's employee benefit plans. Claims under an employee
benefit welfare plan (as defined in Section 3 (1) of ERISA) shall be considered
incurred on the date treatment is rendered or a service performed. Worker's
Compensation claims of any Transferred Employees shall be the responsibility and
liability of Seller if the claim is based on events that occurred on or prior to
the expiration date of the Lease and shall be the responsibility and liability
of Buyer if the claim is based on events that occurred after the expiration date
of the Lease.
Section 10.5 Service Credit
Buyer shall grant service credit under Buyer's employee benefit plans and/or
other benefit or other employee programs which are calculated on the basis of
service and/or for purposes of Puerto Rico's Law 80 of May 30, 1976, as amended,
equal to the Seller's credited service time for Transferred Employees for all
applicable purposes under such plans and programs. Service Credit under any
defined benefit pension plan shall be given for purposes of eligibility for
participation, and vesting.
Section 10.6 Savings Plans
a) Effective as of the expiration date of the Lease, Buyer shall extend
coverage under Buyer's Savings Plan which is a defined contribution plan and
shall be qualified under applicable Puerto Rico Laws to Transferred Employees
who were eligible to participate in the Savings Plans of Seller, or its
affiliate companies ("Seller's Savings Plan"), as of the day prior to the
expiration date of the Lease and to other Transferred Employees in accordance
with the Buyer's Savings Plan (giving Service Credit as required pursuant to
Section 10.5).
b) To the extent permitted by the Code and subject to the terms of this
Section 10.6(b), the Buyer's Savings Plan will accept a direct rollover within
the meaning of Section 401 (a) (31) of the Code of the Transferred Employee's
entire account balance (and accumulated reserves related thereto, if any) in the
Seller's Saving Plan. Direct rollovers shall be in cash.
Section 10.7 Welfare Plans
On the expiration date of the Lease, the Transferred Employees shall be eligible
to enroll themselves and their dependents in Buyer's welfare benefit plans. If a
Transferred Employee enrolls for coverage under the medical or dental plans of
Buyer within thirty (30) days of first becoming eligible, the Buyer's medical or
dental plan shall waive any waiting period and limitations for pre-existing
medical or dental conditions.
Section 10.8 Post Retirement Welfare Benefits
The post retirement welfare benefits for Transferred Employees who retire under
the Seller's Pension Plan and who are eligible for post welfare benefits shall
be the responsibility of the Seller, provided that Buyer shall provide primary
medical and dental coverage to such Transferred Employees while they are
actively employed by the Buyer. Other Transferred Employees shall be eligible
for post-retirement welfare benefits, if any, from Buyer in accordance with
Buyer's plan terms as they may be amended from time to time. Nothing in this
Section 10.8 shall prevent Seller from amending or terminating its
post-retirement welfare benefits.
Section 10.9 Vacation
Buyer shall provide vacation entitlement to Transferred Employees in accordance
with Buyer's vacation policies applicable to its employees (giving Service
Credit as required pursuant to Section 10.5). Transferred Employees will receive
a cash out by Seller of the unused portion of their accrued vacation entitlement
as of the expiration date of the Lease.
Section 10.10 Severance Pay
Subject to Section 10.1, in the event Buyer terminates the employment of any
Transferred Employee, Buyer shall pay severance to such Transferred Employee
only in accordance with Buyer's severance plan in effect at the time of such
termination or as required by law.
Section 10.11 Continuation Coverage
If, on or before the expiration date of the Lease, Seller determines, in its
discretion, with respect to all group health plans (as defined in Code Section
5000(b)(1)) maintained by Seller that the continuation health care coverage
requirements of Code Section 4980B and ERISA Sections 601 through 608 (the
"continuation coverage requirements") apply to this transaction, Seller shall be
solely responsible for compliance with the continuation health care coverage
requirements for all "qualifying events," within the meaning of Code Section
4980B(f)(3) and ERISA Section 603, affecting any current or former employee of
Seller and any qualified beneficiary related to such employee or former employee
(as defined in Code Section 4980B(g)(1)) which occurred at any time on or prior
to the expiration date of the Lease. With respect to all qualifying events
occurring after the expiration date of the Lease and affecting Transferred
Employees or their dependents, Buyer agrees to provide continuation health care
coverage to affected qualified beneficiaries, in accordance with Sections 601
through 608 of ERISA ("COBRA"). Seller shall be solely responsible for
compliance with the continuation health care coverage requirements for
Employees, who are not Transferred Employees, and/or their qualified
beneficiaries.
Section 10.12 Third Party Beneficiary; Termination At Will
Nothing in this Article 10 shall create any third party beneficiary rights in
any employee or former employee of Seller. Seller and Buyer agree and
acknowledge that the transactions contemplated by this Agreement will not affect
the "at will" employment status of the Transferred Employees.
Section 10.13 Notification of Hire
In order to assist Seller in the proper administration of its severance pay
program, Buyer agrees to inform Seller whenever it hires, either as an employee
or as an independent contractor or consultant, any former Employee of Seller
receiving severance pay from Seller at any time within three years after the
expiration date of the Lease, and Seller shall periodically provide Buyer with a
list ofpersons receiving severance payments.
ARTICLE XI - INDEMNIFICATION
Section 11.1 Survival
The representations and warranties made herein shall survive the Closing Date
but only for the enforcement of the indemnification provisions of this Agreement
and for damages; provided however, that under no circumstances shall the
transactions contemplated herein be voided following Closing of the Asset
Purchase Agreement referenced in Section 3.3. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of any party hereto pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by such party hereunder as of the Closing Date. Sections 1.2 and 1.4
shall survive the termination of this Agreement.
Section 11.2 Indemnification of Buyer by Seller
Subject to the limitations set forth in Section 11.5 of this Agreement, Seller
agrees to hold harmless, indemnify and defend Buyer and ICN and their respective
directors, officers and employees thereof, from and against, and will reimburse
such indemnified parties with respect to, any and all claims, demands, causes of
action, proceedings, losses, damages, debts, expenses, liabilities, fines,
penalties, deficiencies, judgments or costs, including, without limitation,
reasonable accountants' and attorneys' fees, court costs, amounts paid in
settlement and costs and expenses of investigations (collectively, "Claims") at
any time and from time to time asserted against or incurred by any such
indemnified party insofar as such Claims are based upon:
a) any breach or nonfulfillment of, or any inaccuracy in, any
covenant, representation or warranty contained herein on behalf of Seller in
connection with the transactions contemplated hereby;
b) any injury to any person, or damage to any property, occurring
before or after the Closing Date related in any way to the Plant Site that is
attributable to Seller's negligence or willful misconduct, excluding injuries
that relate to the supervision by Buyer (or an affiliate of Buyer) of an
employee of Seller or Buyer;
c) any Claim against Buyer relating to the Plant Site or the Assets
that arises from or is based upon any action, event or condition existing on or
occurring before the Closing Date, excluding Claims attributable to Buyer's
negligence or willful misconduct;
d) any Claim by an Employee for severance or termination pay as a
result of the transactions contemplated by this Agreement (except as otherwise
provided in this Agreement), excluding Claims attributable to Buyer as provided
in this Agreement;
e) the failure of Seller to comply with the "bulk transfer" laws of
any jurisdiction in connection with the transactions contemplated hereby;
f) the failure of Seller to pay any taxes, applicable to periods prior
to Closing including, without limitation, any sales tax resulting from the
transfer of the Assets to Buyer, or to make any unemployment compensation
insurance contribution that was due prior to the Closing Date;
g) any Claim based upon or relating to the manufacture, usage,
distribution or sale by Seller of its or its affiliates' products manufactured
at the Plant Site prior to the Closing Date; or
h) any Claim that arises out of a Claim of infringement or
unauthorized use of any patent, copyright, trade secret, know how or other
intellectual property right resulting from Seller's activities at the Plant Site
or Buyer's production of Seller or its affiliates' products at the Plant Site
after the Closing Date.
Section 11.3 Indemnification of Seller by Buyer
Buyer agrees to hold harmless, indemnify and defend Seller and its affiliates,
and the directors, officers and employees thereof, from and against, and will
reimburse such indemnified parties with respect to Claims at any time and from
time to time asserted against or incurred by any such indemnified party insofar
as such Claims are based upon:
a) any breach or nonfulfillment of, or any inaccuracy in, any
covenant, representation or warranty contained herein or otherwise made in
writing by or on behalf of Buyer in connection with the transactions
contemplated hereby;
b) any injury to any person, or damage to any property, occurring
before or after the Closing Date related in any way to the Plant Site that is
attributable to Buyer's negligence or willful misconduct or, with respect to a
Claim or suit relating to an employee of Seller, is attributable to Buyer's sole
negligence or willful misconduct;
c) any Claim against Seller or involving any of the Assets that arises
from or is based upon any action, event or condition existing or occurring after
the Closing Date, excluding Claims attributable to Seller's negligence or
willful misconduct; or
d) any Claim based upon or relating to the validation, manufacture,
usage, distribution or sale of Buyer's products manufactured at the Plant Site
whether prior or after the Closing Date;
e) any Claim arising out of or relating to the employment or
termination of employees of Buyer;
f) the failure of Buyer to comply with the "bulk transfer" laws of any
jurisdiction in connection with the transactions contemplated hereby;
g) the failure of Buyer to pay any taxes, including, without
limitation, any sales tax resulting from the transfer of the Assets to Buyer, or
to make any unemployment compensation insurance contribution that was due after
the Closing Date;
h) the failure of Buyer to comply with any of the obligations provided
for in Sections 10.1 and 10.10 if such failure results in Seller being obligated
to pay any severance or termination pay or provide benefits to any Employee or
Transferred Employee.
Section 11.4 Indemnification Procedure
The indemnification obligations under this Article XI shall survive until the
fifth anniversary of the Closing Date, and shall survive any termination of this
Agreement until the third anniversary of the termination. The indemnification
obligations in section 11.2 (F) shall survive until the statute of limitation
has expired for such tax obligation. In the event of any Claim for which
indemnification is sought under this Article XI by a person or entity specified
in Section 11.2 or 11.3 hereof (an "Indemnified Party"):
a) The Indemnified Party will give the indemnifying party prompt
written notice of the Claim asserted against or imposed upon or incurred by the
Indemnified Party (which notice shall set forth the basis of the Claim).
b) The Indemnified Party shall not compromise or settle such claim
without the approval of the indemnifying party, which approval shall not be
unreasonably withheld or delayed.
Section 11.5 Limitation of Liability
a) Notwithstanding anything contained in this Agreement to the
contrary, Buyer agree that the total liability of Seller and Synrex to Buyer and
ICN for any damages or other injury which Buyer or ICN may sustain or incur as a
result of a breach of any provision or covenant of this Agreement by Seller and
Syntex, any indemnification provisions of Article XI, Section 4.12, or any other
provision of this Agreement shall not exceed Twenty Five Million
($25,000,000.00) Dollars in the aggregate for any and all claims, whether past,
present and future, and in the event that Seller and/or Syntex shall pay such
amount, Seller and Syntex shall be discharged of any liability to Buyer and ICN.
b) Notwithstanding anything contained in this Agreement to the
contrary, Seller and Syntex agree that the total liability of Buyer and ICN to
Seller and Syntex for any damages or other injury which Seller or Syntex may
sustain or incur as a result of a breach of any provision or covenant of this
Agreement by Buyer or ICN, any indemnification provisions of Article XI, Section
4.12, or any other provision of this Agreement shall not exceed Twenty Five
Million ($25,000,000.00) Dollars in the aggregate for any and all claims,
whether past, present and future, and in the event that Buyer and/or ICN shall
pay such amount, Buyer and ICN shall be discharged of any liability to Seller
and Syntex.
ARTICLE XII - TERMINATION
Section 12.1 Termination by Seller
Without prejudice to other rights and remedies which it may have,
Seller may, at its option, terminate this Agreement at any time prior to the
Closing by giving notice thereof to the other party if:
a) A bona fide legal action or proceeding is pending or threatened
against the other party as of the date of such notice of termination, an
unfavorable judgment, decree or order in such action or proceeding would prevent
or make unlawful the consummation of the transaction contemplated by this
Agreement and an unfavorable judgment, order or decree is likely;
b) Any representation, warranty or covenant in this Agreement shall
prove to have been incorrect, incomplete or misleading at the time it was made
in any material respect; or
c) Any of the conditions precedent do not occur.
Section 12.2 Eminent Domain; Damage or Destruction
If prior to the Closing Date all or any material part of the Real Property is
(i) taken or threatened by eminent domain or (ii) damaged or destroyed, in
Seller's opinion, Seller may, by written notice to Buyer, elect to cancel this
Agreement. If a material part of the Real Property is taken by eminent domain,
damaged or destroyed but this Agreement is not so canceled with respect thereto,
or if an immaterial part of the Real Property is so taken, damaged or destroyed,
then in either of said events, Buyer shall be obligated to close the
transactions contemplated by this Agreement and Buyer shall be entitled to
receive any and all condemnation or insurance proceeds as the case may be.
Section 12.3 Effect of Termination
In the event of termination of this Agreement as expressly permitted under this
Article XII, this Agreement shall forthwith become void and there shall be no
liability on the part of either party, or their respective officers, directors,
or affiliated companies, to the other, except that the provisions of Article XI
and Section 13.2 hereof shall survive any such termination.
ARTICLE XIII - CONFIDENTIALITY
Section 13.1 Confidentiality
a) The commitments set forth in this Section 13.2 shall be effective
as of the date hereof and shall survive the termination of this Agreement.
b) Seller , ICN and Buyer each acknowledge and agree that each party
may have access to certain proprietary information of the other party by virtue
of their activities at the Plant Site ("Confidential Information").
c) Seller, ICN and Buyer, as the case may be, hereby agree as follows
with respect to the Confidential Information received by or to which access is
provided to the other party:
(i) that the disclosure of or access to Confidential Information
will be held in strict confidence by Seller, ICN and Buyer;
(ii) that Seller, ICN and Buyer will take all steps as are
necessary to prevent the disclosure of Confidential Information to
others; and
(iii) the Seller, ICN and Buyer will not commercially utilize
Confidential Information for purposes out the scope of this Agreement.
d) In the event that any party is legally required by a court or
governmental agency of competent jurisdiction to disclose Confidential
Information, prompt notice shall be given by the party required to make such
disclosure to the other party to enable the other party to seek a protective
order or other appropriate remedy or to waive compliance with the provisions of
this Section 13.2 as to such required disclosure. If no protective order has
been obtained by not later than the date upon which the party of whom disclosure
is required must disclose or suffer penalty of contempt or other censure, the
other party shall be deemed to have waived compliance with the provisions of
this Section 13.2 as to such disclosure.
e) The commitments set forth in this Section 13.2 shall not extend to
any portion of Confidential Information:
(i) that was in the public domain prior to disclosure;
(ii) that was not acquired, directly or indirectly, in any
manner from Seller, ICN or Buyer and that Seller, ICN or Buyer, as the
case may be, lawfully had in its possession prior to the Closing Date
or that Seller, ICN or Buyer, as the case may be, lawfully acquires
from a source not under an obligation of secrecy to Seller, ICN or
Buyer, as the case may be; or
(iii) that, after the Closing Date, through no act on the part
of Seller, ICN or Buyer, becomes information generally available to the
public.
(iv) developed independently by ICN or Buyer without any
use of the Confidential Information;
f) Seller, ICN and Buyer agree that the terms of the confidentiality
agreement between affiliate of Seller and ICN dated as of March 21, l997 are in
full force and effect and are not affected by this Agreement.
g) Seller and Buyer agree to cooperate regarding joint communication of
this transaction to their respective employees and will not make any
communication without the prior consent of the other party.
ARTICLE XIV - MISCELLANEOUS
Section 14.1 Notices
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed duly given if and when delivered personally or sent
by certified mail (return receipt requested, postage prepaid) or telecopy:
TO BUYER OR ICN: ICN Puerto Rico, Inc.
American Industrial Plaza
250 Munoz Riviera Avenue
San Juan, Puerto Rico 00918
Attn: Walter Chow
Fax: 787-753-8944
WITH A COPY TO: ICN Pharmaceuticals, Inc.
ICN Plaza
3300 Hyland Avenue
Costa Mesa, California 92626
Attn: General Counsel
Fax: 714-641-7274
TO SELLER: Syntex (F.P.) Inc.
B.O.Mariana
Road 909 Km 1.1
Humacao, Puerto Rico 00791-9731
Attn: Plant Manager
Fax: 787-850-6160
Syntex (U.S.A.) Inc.
c/o Roche Bioscience
3401 Hillview Avenue
Palo Alto, CA 94304
Attn: Law Department
Fax: 415-852-1338
WITH A COPY TO: Frederick C. Kentz III
340 Kingsland Street
Building 85, 8th floor
Nutley, NJ 07110-1199
Fax: 201-235-3500
or to such other address as either party may notify the other party in writing.
All notices and copies shall be sent simultaneously.
Section 14.2 Expenses
Except as specifically set forth in this Agreement, each party hereto shall bear
all of its own costs, fees and expenses in connection with the transactions
contemplated hereby.
Section 14.3 Assignment
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. No party
hereby may assign any of its rights hereunder without the prior written consent
of the other party hereto, except that Buyer or Seller may assign its rights
hereunder to any of their respective affiliates; provided, however, that neither
Buyer nor Seller shall be relieved of its obligations hereunder.
Section 14.4 Governing Law
This Agreement shall be governed and construed in accordance with the laws of
the Commonwealth of Puerto Rico.
Section 14.5 Waiver and Amendment
Except as otherwise expressly provided herein, no provision hereof may be
waived, amended or otherwise modified except by a written agreement signed by
each party hereto.
Section 14.6 Entire Agreement
This Agreement, together with the exhibits and schedules hereto, and the
Confidentiality Agreement between an affiliate of Seller and ICN dated as of
March 21, l997, embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating thereto.
Section 14.7 Binding Agreement
The Agreement constitutes, and all other agreements and instruments entered into
or delivered in connection with the transactions contemplated hereby will
constitute, the valid and binding obligations of the parties and are enforceable
against the parties in accordance with their terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditor's rights, or rules of law governing
specific performance, injunctive relief or other equitable remedies.
<PAGE>
Section 14.8 Headings
The headings of this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
Section 14.9 Severability
If all or any portion or provision of this Agreement shall to any extent be held
invalid or unenforceable in whole or in part by a court or agency having valid
jurisdiction pursuant to a valid decision or decree, then the parties hereto
expressly agree to be bound by any lesser covenant imposing the maximum legal
duty permitted by law that is subsumed within the terms of such covenant, as if
the resulting covenants were separately stated in and made a part of this
Agreement, and the remainder of this Agreement shall remain in full force and
effect.
Section 14.10 Counterparts
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which taken together shall constitute one and
the same instrument.
Section 14.11 Hart-Scott-Rodino
Following execution, the parties shall cooperate to facilitate a timely filing
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Section 14.12 Puerto Rico Bulk Sales Act
Buyer agrees to comply with the provisions of the Puerto Rico Sales Transfer Act
10 L.P.R.A. ss. 61 et. seq. Seller agrees to furnish information to Buyer
necessary to comply.
Section 14.13 ICN Guarantee
ICN hereby agrees to guarantee, jointly and severally with the Buyer, the
payment and performance of all of the obligations of the Buyer under this
Agreement and any of the related agreements. This guaranty is an absolute and
unconditional guaranty of the full and punctual payment and performance of the
Buyer's obligations under this Agreement and any related agreement and in no way
conditioned upon any requirement that the Seller first attempt to collect or
make performance of any such obligations from the Buyer or resort to any
security or other means of obtaining payment or performance of Buyer.
<PAGE>
Section 14.14 Syntex (U.S.A.) Inc. Guarantee
Syntex (U.S.A.) Inc. hereby agrees to guarantee, jointly and severally with the
Seller, the payment and performance of all of the obligations of the Seller
under this Agreement and any of the related agreements. This guaranty is an
absolute and unconditional guaranty of the full and punctual payment and
performance of the Seller's obligations under this Agreement and any related
agreement and in no way conditioned upon any requirement that the Buyer first
attempt to collect or make performance of any such obligations from the Seller
or resort to any security or other means of obtaining payment or performance of
Seller.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first set forth above.
SELLER BUYER
SYNTEX (F.P.) INC. ICN PUERTO RICO, INC.
By: /s/ Edward C. Thiele By: /s/ Bill A. MacDonald
Name: Edward C. Thiele Name: Bill A. MacDonald
Title: Vice President Title: President
SYNTEX (U.S.A.) INC. ICN PHARMACEUTICALS, INC.
By: /s/ David R. Austin By: /s/ Bill A. MacDonald
Name: David R. Austin Name: Bill A. MacDonald
Title: Vice President Title: Executive Vice President
EXHIBIT 11. COMPUTATION OF PER SHARE EARNINGS
The computation of earnings per share for the three and nine months ended
September 30, 1997 and 1996 is as follows: (000's omitted except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(unaudited) (unaudited)
1997 1996 1997 1996
---------------------- ----------------------
Primary
<S> <C> <C> <C> <C>
Net income $ 34,557 $ 20,835 $ 78,137 $ 57,731
Add: Adjustments to net income
net of tax, related to convertible debentures 137 303 (684) (466)
Adjustments to net income related
to the stated and embedded dividends
on the series B preferred stock (659) -- (5,085) --
--------- --------- --------- ---------
Adjusted net income $ 34,035 $ 21,138 $ 72,368 $ 57,265
========= ========= ========= =========
Average common shares outstanding 36,973 32,860 34,992 31,681
Dilutive common equivalent shares
issuable upon the exercise of
options currently outstanding to
purchase common shares 2,215 1,021 1,511 1,169
Preferred stock 2,000 -- 2,000 --
Conversion of debentures 1,900 1,472 1,900 1,472
--------- --------- --------- ---------
43,088 35,353 40,403 34,322
========= ========= ========= =========
Earnings per share $ .79 $ .60 $ 1.79 $ 1.67
========= ========= ========= =========
Fully Diluted
Net income $ 34,557 $ 20,835 $ 78,137 $ 57,731
Add: Adjustments to net income
net of tax, related to
convertible debentures 2,017 3,126 4,972 7,415
Adjustments to net income related
to the stated and embedded dividends
on the series B preferred stock (659) -- (5,085) --
--------- --------- --------- ---------
Adjusted net income $ 35,915 $ 23,961 $ 78,024 $ 65,146
========= ========= ========= =========
Average common shares outstanding 36,973 32,860 34,992 31,681
Dilutive common equivalent shares
issuable upon the exercise of options
currently outstanding to purchase
common shares 2,871 1,021 2,772 1,181
Preferred stock 2,000 -- 2,000 --
Conversion of debentures 7,100 6,684 7,100 6,684
--------- --------- --------- ---------
48,944 40,565 46,864 39,546
========= ========= ========= =========
Earnings per share $ .73 $ .59 $ 1.66 $ 1.65
========= ========= ========= =========
</TABLE>
EXHIBIT 15.1
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of
ICN Pharmaceuticals, Inc.
We have reviewed the accompanying consolidated condensed balance sheet of ICN
Pharmaceuticals, Inc. and subsidiaries as of September 30, 1997 and the related
consolidated condensed statements of income for the three and nine month periods
ended September 30, 1997 and 1996 and the consolidated condensed statements of
cash flows for the nine month periods then ended. These consolidated condensed
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated March 4,
1997, which included an emphasis of matter paragraph relating to the Company's
net monetary assets at ICN Yugoslavia which would be subject to foreign exchange
loss if a devaluation of the Yugoslavian dinar were to occur, as more fully
described in Note 13 to the consolidated statements, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the consolidated condensed balance sheet as of December
31, 1996, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Newport Beach, California
November 3, 1997
Exhibit 15.2
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
November 12, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: ICN Pharmaceuticals, Inc.
Registrations on Form S-8 (File No. 33-56971) and Form S-3
(File Nos. 333-35167, 333-10661, and 333-35241, and 333-16409)
We are aware that our report dated November 3, 1997, on our review of interim
financial information of ICN Pharmaceuticals, Inc. for the three and nine month
periods ended September 30, 1997 and included in the Company's Quarterly report
on Form 10-Q for the period then ended is incorporated by reference in the
Registrations on Form S-8 (File No. 33-56971) and on Form S-3 (File Nos.
333-35167, 333-10661, 333-35241, and 333-16409). Pursuant to Rule 436(c) under
the Securities Act of 1933, this report should not be considered a part of the
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
Coopers & Lybrand L.L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> $ 270,413 $ 270,413
<SECURITIES> 0 0
<RECEIVABLES> 332,694 332,694
<ALLOWANCES> 0 0
<INVENTORY> 123,471 123,471
<CURRENT-ASSETS> 752,143 752,143
<PP&E> 369,167 369,167
<DEPRECIATION> (68,265) (68,265)
<TOTAL-ASSETS> 1,292,752 1,292,752
<CURRENT-LIABILITIES> 298,033 298,033
<BONDS> 0 0
0 0
1 1
<COMMON> 387 387
<OTHER-SE> 513,828 513,828
<TOTAL-LIABILITY-AND-EQUITY> 1,292,752 1,292,752
<SALES> 177,397 496,594
<TOTAL-REVENUES> 177,397 496,594
<CGS> 77,309 228,070
<TOTAL-COSTS> 77,309 228,070
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 649 2,235
<INTEREST-EXPENSE> 5,950 13,332
<INCOME-PRETAX> 40,559 79,264
<INCOME-TAX> (521) (12,311)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 34,557 78,137
<EPS-PRIMARY> .79 1.79
<EPS-DILUTED> .73 1.66
</TABLE>
