-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PgMp7+CxLOPUiXMVciiO5k8l4cZpDNZ+BVHOtYhL7+TxUWH64I6SgZ1yQL4x8Roy X2LRbextfn+z3vr6pgyCSA== 0000217028-95-000036.txt : 19951119 0000217028-95-000036.hdr.sgml : 19951119 ACCESSION NUMBER: 0000217028-95-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RHONE POULENC RORER INC CENTRAL INDEX KEY: 0000217028 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 231699163 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05851 FILM NUMBER: 95592779 BUSINESS ADDRESS: STREET 1: 500 ARCOLA RD STREET 2: P O BOX 1200 M/S 5B14 CITY: COLLEGEVILLE STATE: PA ZIP: 19426-0107 BUSINESS PHONE: 6104548000 FORMER COMPANY: FORMER CONFORMED NAME: RORER GROUP INC DATE OF NAME CHANGE: 19900731 FORMER COMPANY: FORMER CONFORMED NAME: RORER AMCHEM INC DATE OF NAME CHANGE: 19770604 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE - ---- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE - ---- SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to_______________ Commission file number 1-5851 Rhone-Poulenc Rorer Inc. - ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) Commonwealth of Pennsylvania 23-1699163 - ---------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 500 Arcola Road Collegeville, Pennsylvania 19426-0107 - ---------------------------------------------------------------- (Address of principal (Zip Code) executive offices) (610)454-8000 - ---------------------------------------------------------------- (Registrant's telephone number, including area code) (Former name, address and fiscal year, if changed since last report.) 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 134,278,795 shares as of October 31, 1995. The exhibit index is located on page 23. RHONE-POULENC RORER INC. TABLE OF CONTENTS -------------------------------------------------- Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial statements: Report of Independent Accountants 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7-13 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 14-23 PART II. OTHER INFORMATION Item 1. Legal Proceedings 24-28 Item 6. Exhibits and Reports on Form 8-K 29-30 2 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Rhone-Poulenc Rorer Inc.: We have reviewed the accompanying condensed consolidated balance sheet of Rhone-Poulenc Rorer Inc. and subsidiaries as of September 30, 1995, and the related condensed consolidated statements of income and cash flows for the three and nine month periods ended September 30, 1995 and 1994. These 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 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 the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Rhone-Poulenc Rorer Inc. and subsidiaries as of December 31, 1994, and the related consolidated statements of income and cash flows for the year then ended appearing in the Company's Form 8-K dated August 14, 1995. Those financial statements were prepared to give effect to the acquisitions from Rhone-Poulenc S.A. of Cooperation Pharmaceutique Francaise and a Brazilian pharmaceutical business in the second quarter of 1995. The acquisitions of these entities under common control were treated for accounting purposes in a manner similar to a pooling of interests as described in Note 2. In our report, which includes an explanatory paragraph on the Company's change in its method of accounting for income taxes in 1992, dated January 20, 1995 except for the transactions described in Note 2 for which date is August 14, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ COOPERS & LYBRAND L.L.P. -------------------------------- COOPERS & LYBRAND L.L.P. Philadelphia, Pennsylvania October 20, 1995 3 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - amounts in millions except per share data) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- Restated Restated 1995 1994 1995 1994 -------- -------- -------- -------- Net sales $1,212.7 $1,137.3 $3,552.4 $3,083.9 Cost of products sold 419.9 396.4 1,251.6 1,070.2 Selling, delivery and administrative expenses 421.6 407.6 1,283.2 1,133.5 Research and development expenses 189.7 153.3 532.7 430.1 Restructuring and other charges -- -- -- 121.2 -------- -------- -------- -------- Operating income 181.5 180.0 484.9 328.9 Interest expense - net 17.9 12.7 40.9 36.0 (Gain) loss on sale of assets -- (4.6) (49.5) (8.6) Other expense - net 5.8 8.0 65.6 34.3 -------- -------- -------- -------- Income before income taxes 157.8 163.9 427.9 267.2 Provision for income taxes 45.7 49.4 129.2 73.3 -------- -------- -------- -------- Net income 112.1 114.5 298.7 193.9 Dividends on preferred stock (4.8) (4.9) (16.2) (13.8) -------- -------- -------- -------- Net income available to common shareholders $107.3 $109.6 $282.5 $180.1 ======== ======== ======== ======== Earnings per common share $ 0.80 ======== Earnings per common share, pro forma $ 0.80 $ 2.09 $ 1.28 ======== ======== ======== Cash dividend per common share $ 0.30 $ 0.28 $ 0.90 $ 0.84 Average common shares outstanding 134.2 134.8 134.2 135.6 See accompanying Notes to Condensed Consolidated Financial Statements. 4 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - dollars in millions) Restated September 30, December 31 1995 1994 ------------- ----------- ASSETS Current: Cash and cash equivalents $ 44.3 $ 118.8 Short-term investments 11.8 -- Trade accounts and notes receivable, less reserves of $82.2 (1994: $78.6) 777.9 812.1 Inventories 713.3 612.5 Other current assets 640.5 543.3 -------------- ---------- Total current assets 2,187.8 2,086.7 Time deposits, at cost 43.6 55.8 Property, plant and equipment, net of accumulated depreciation of $1,256.9 (1994: $1,111.1) 1,282.5 1,199.8 Goodwill, net of accumulated amortization of $240.7 (1994: $210.2) 747.7 705.9 Intangibles, net of accumulated amortization of $132.1 (1994: $121.2) 199.0 170.5 Other assets 632.8 433.6 -------------- ---------- Total assets $5,093.4 $4,652.3 ============== ========== LIABILITIES Current: Short-term debt $ 162.0 $ 127.8 Accounts payable 473.0 470.5 Other current liabilities 780.4 896.7 -------------- ---------- Total current liabilities 1,415.4 1,495.0 Long-term debt 872.2 439.9 Deferred income taxes 20.8 31.6 Other liabilities, including minority interests 948.6 575.4 -------------- ---------- Total liabilities 3,257.0 2,541.9 Contingencies SHAREHOLDERS' EQUITY Market Auction Preferred Shares, without par value (liquidation preference $1,000 per share); authorized, issued and outstanding 1994-225,000 shares -- 225.0 Money market preferred stock, without par value (liquidation preference $100,000 per share); authorized, issued and outstanding 1,750 shares 175.0 175.0 Common stock, without par value; stated value $1 per share; authorized 200,000,000 shares; issued and outstanding 134,278,795 shares (1994: 134,095,649 shares) 139.3 139.1 Capital in excess of stated value 144.9 412.2 Retained earnings 1,565.5 1,403.7 Employee Benefits Trust (185.7) (185.7) Cumulative translation adjustments (2.6) (58.9) ----------- ---------- Total shareholders' equity 1,836.4 2,110.4 ----------- ---------- Total liabilities and shareholders' equity $5,093.4 $4,652.3 =========== ========== See accompanying Notes to Condensed Consolidated Financial Statements. 5 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - dollars in millions) Nine Months Ended September 30, ------------------ Restated 1995 1994 ------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by operating activities $ 275.6 $ 411.9 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (192.7) (144.4) Businesses acquired (185.0) -- Purchase of investments/product rights (124.7) (28.7) Proceeds from sale of assets 85.4 10.5 Net investment hedging, net (3.5) (33.4) ------- ------- Net cash used in investing activities (420.5) (196.0) CASH FLOWS FROM FINANCING ACTIVITIES: Debt borrowings (repayments): Long-term debt, net 29.7 35.9 Short-term debt, net 394.3 (16.2) Redemption of Market Auction Preferred Shares (225.0) -- Issuances of common stock 6.9 1.8 Shares repurchased for Employee Benefits Trust -- (109.5) Dividends paid (136.9) (127.9) ------- -------- Net cash provided by (used in) financing activities 69.0 (215.9) Effect of exchange rate changes on cash 1.4 3.9 ------- -------- Net increase (decrease) in cash and cash equivalents (74.5) 3.9 Cash and cash equivalents at beginning of year 118.8 35.4 ------- -------- Cash and cash equivalents at September 30 $ 44.3 $ 39.3 ======= ======== See accompanying Notes to Condensed Consolidated Financial Statements. 6 RHONE-POULENC RORER INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1.- RESULTS FOR INTERIM PERIODS In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of financial position, cash flows and results of operations for the periods presented. The statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures required by generally accepted accounting principles or those made in the Annual Report on Form 10-K. The Annual Report on Form 10-K for the year 1994 and the Company's restated financial statements for the year ended December 31, 1994 as filed on a Current Report on Form 8-K dated August 14, 1995 are on file with the Securities and Exchange Commission and should be read in conjunction with these condensed consolidated financial statements. NOTE 2.- ACQUISITIONS FROM RHONE-POULENC S.A. In the 1995 second quarter, Rhone-Poulenc Rorer Inc. acquired from Rhone-Poulenc S.A. ("RP") the businesses of Cooperation Pharmaceutique Francaise ("Cooper"), primarily in France, and a pharmaceutical business in Brazil for cash and preferred stock of a French subsidiary aggregating approximately $270 million. The preferred shares, accounted for as minority interest in other liabilities, have a liquidation preference approximating 645 million French francs and pay dividends of 7.5% per annum on a stated value of 145 million French francs. The acquisition agreements call for potential adjustments to the purchase price of the businesses based on several factors, including earnings performance. The acquisitions of these entities under common control were treated for accounting purposes on an "as-if pooling" basis and, accordingly, the Company has restated its first quarter 1995 and full year 1994 results to include the accounts of Cooper and the Brazilian business as of April 1, 1994 and January 1, 1994, respectively. The effect of restatements in periods prior to 1994 was not material. The assets and liabilities of the acquired businesses were recorded by the Company at the carrying values used by RP as of the restatement dates. Earnings per share for the restated periods reflect pro forma adjustments giving effect to interest on indebtedness and preferred dividends relative to the acquisition transactions. NOTE 3.- JOINT VENTURE Under terms of a September 28, 1995 Amendment to the Joint Venture Agreement (the "Amendment"), the Company's Armour Pharmaceutical Company subsidiary ("Armour") and Behringwerke AG ("Behring"), a subsidiary of Germany's Hoechst AG, completed the formation of their 50/50 global joint venture in the plasma proteins business. The joint venture's Board of Directors will be formally established on January 1, 1996, at which time joint control and profit-sharing provisions also take effect. Accordingly, the Company will continue to consolidate the results of Armour through the year 1995. 7 NOTE 4.- RESTRUCTURING AND OTHER CHARGES In June 1994, the Company recorded a $121.2 million pretax charge in connection with a global restructuring plan that is expected to be completed in 1995. Annual pretax savings associated with the plan approximated $20.0 million in 1994 and should grow to over $50.0 million in 1996. The restructuring will reduce the Company's workforce by approximately 1,300 positions, or 6%; as of September 30, 1995, the Company's workforce had been reduced by just under 1,000 employees. To- date, cash outlays related to the plan have totaled $69.9 million and are expected to exceed $90.0 million. Cash outlays for the three and nine month periods ended September 30, 1995 have approximated $8.7 million and $35.8 million, respectively. Asset writeoffs in conjunction with certain production facilities have totaled $22.7 million, including $3.3 million during the nine months ended September 30, 1995. A rollforward of the remaining 1994 restructuring provision from December 31, 1994 is as follows: December 31, Payments/ Translation 1994 asset adjustments/ September 30, (Restated) writeoffs other 1995 --------- --------- --------- ------------ (Dollars in millions) Social costs $ 52.8 $ (31.3) $ 6.9 $ 28.4 Third parties 8.4 (4.5) (0.1) 3.8 Asset writeoffs 8.2 (3.3) (3.3) 1.6 --------- --------- --------- ------------ Total $ 69.4 $ (39.1) $ 3.5 $ 33.8 ========= ========= ========= ============ In 1993, the Company recorded charges of $93.8 million for the cost of certain restructuring and manufacturing streamlining programs, principally in Europe, and increased provisions for certain litigation. The programs include a plan to divest a portion of a manufacturing facility in Monts, France by the end of 1995. Total workforce reductions associated with the plan will approximate 800 positions; as of September 30, 1995, the Company's workforce had been reduced by over 650 employees relative to these activities. A rollforward of the remaining 1993 restructuring provision from December 31, 1994 is as follows: December 31, Payments/ Translation 1994 asset adjustments/ September 30, (Restated) writeoffs other 1995 --------- --------- --------- ---------- (Dollars in millions) Social costs $ 12.2 $ (6.3) $ 0.8 $ 6.7 Asset writeoffs 9.0 (1.4) 0.7 8.3 --------- --------- --------- ---------- Total $ 21.2 $ (7.7) $ 1.5 $ 15.0 ========= ========= ========= ========== 8 NOTE 5.- GAIN ON SALE OF ASSETS AND OTHER EXPENSE - NET Pretax gains from the sale of assets totaled $49.5 million ($.25 per share) for the nine months ended September 30, 1995 and included gains on the sale of assets related to the Company's Canadian over-the-counter business to Ciba-Geigy Limited and the sale of certain European product rights during the 1995 first quarter. Other expense-net for the nine months ended September 30, 1995 included $13.0 million ($.06 per share) of acquired research and development expense related to an additional investment in Applied Immune Sciences, Inc. and pretax charges of $25.4 million ($.15 per share) related to the reassessment of the carrying value of certain assets, including those associated with the Company's prior investment in The Immune Response Corporation, recorded in the first quarter. NOTE 6.- INCOME TAXES The Company records income tax expense based on an estimated full year effective income tax rate. The year-to-date reported effective tax rate approximated 30.2% in 1995 compared with 27.4% in 1994. The current year rate was affected by reduced tax benefits from Puerto Rico operations and certain asset sales/writeoffs. The 1994 year-to-date effective tax rate was favorably impacted by restructuring charges. NOTE 7.- INVENTORIES Inventories consisted of the following: December 31, September 30, 1994 1995 (Restated) ------------- ------------ (Dollars in millions) Finished goods $ 293.0 $ 323.2 Work in process 157.6 125.0 Raw materials and supplies 262.7 164.3 ------------- ------------ $ 713.3 $ 612.5 ============= ============ 9 NOTE 8.- SHAREHOLDERS' EQUITY
Market Money Auction market Common Capital Retained Employee Cumulative Preferred preferred shares at in excess earnings Benefits translation Shares stock stated of stated Trust adjustments value value -------- --------- -------- --------- -------- -------- ----------- Balance, December 31, 1994 (Restated) $225.0 $175.0 $139.1 $412.2 $1,403.7 $ (185.7) $(58.9) Net income 298.7 Cash dividends, $.90 per common share (120.7) Dividends on preferred stock (16.2) Redemption of Market Auction Preferred Shares (225.0) Adjustment of capital contributions for acquisition liabilities (273.2) Issuance of shares under employee benefit plans 0.2 5.9 Translation adjustments, net of $5.2 million reductions due to hedging activities 56.3 ------- ------ ------- ------- -------- --------- ------- Balance, September 30, 1995 $ -- $175.0 $ 139.3 $ 144.9 $1,565.5 $ (185.7) $(2.6) ======= ====== ======= ======= ======== ========= ======= In the 1995 third quarter, the Company redeemed Series A, C and D of Market Auction Preferred Shares for $225 million plus accrued dividends. As discussed in Note 2, the Company has restated its 1994 results to include the accounts of Cooper and the Brazilian business as of April 1, 1994 and January 1, 1994, respectively. The assets and liabilities of the acquired businesses were recorded by the Company at the carrying values used by RP as of the restatement dates and the value of net assets acquired was reflected in capital in excess of stated value as a capital contribution from RP. In 1995, the Company reduced capital in excess of stated value to reflect the purchase obligation related to the acquisition transactions of approximately $270 million.
10 NOTE 9.- RELATED PARTY TRANSACTIONS Receivables from Rhone-Poulenc S.A. and affiliates at September 30, 1995 included $8.2 million in accounts receivable from sales of products to RP and $48.3 million classified as other current assets. Accounts payable related to the purchase of materials and services from RP were $14.6 million at September 30, 1995; accrued and other liabilities due to RP totaled $17.1 million. As of September 30, 1995, the Company had $51.6 million short- term and $60.1 million long-term debt outstanding with RP. Sales to RP totaled $7.5 million in the third quarter and $24.0 million for the nine-month period; services purchased from and interest paid to RP totaled $9.0 million in the third quarter and $28.2 million for the first nine months of 1995. For the comparable 1994 periods on a restated basis, sales to RP were $8.8 million and $22.8 million, respectively. Services purchased from and interest paid to RP totaled $9.0 million and $27.0 million, respectively. In the 1995 second quarter, the Company acquired Cooper and a pharmaceutical business in Brazil from RP for cash and preferred stock of an RPR subsidiary aggregating approximately $270 million. The preferred shares, accounted for as minority interest in other liabilities, have a liquidation preference approximating 645 million French francs (approximately $130 million) and pay dividends of 7.5% per annum on a stated value of 145 million French francs. See Note 2. NOTE 10.- CONTINGENCIES The Company is involved in litigation incidental to its business, including but not limited to: (1) approximately 373 pending lawsuits in the United States, Canada and Ireland against the Company and its Armour Pharmaceutical Company subsidiary ("Armour"), in which it is claimed by individuals infected with the Human Immunodeficiency Virus ("HIV") that their infection with HIV and, in some cases, resulting illnesses, including Acquired Immmune Deficiency Syndrome-related conditions or death therefrom, may have been caused by admin- istration of antihemophilic factor ("AHF") concentrates processed by Armour in the early and mid-1980s. Armour has also been named as a defendant in six proposed class action lawsuits filed on behalf of HIV-infected hemophiliacs and their families. None of the cases involves Armour's currently distributed AHF concentrates; (2) legal actions pending against one or more subsidiaries of the Company and various groupings of more than one hundred pharmaceutical companies, in which it is generally alleged that certain individuals were injured as a result of the development of various reproductive tract abnormalities because of in utero exposure to diethylstilbestrol ("DES") (typically, -- ----- two former operating subsidiaries of the Company are named as defendants, along with numerous other DES manufacturers, when the claimant is unable to identify the manufacturer); (3) antitrust actions in the U.S. alleging that the Company engaged in price discrimination practices to the detriment of certain independent community pharmacists, retail chains and consumers; (4) alleged breach of contract by a subsidiary of the Company with respect to agreements involving another company's bisphosphonate compound and the Company's licensed product Lozol(r); and (5) potential responsibility relating to past waste disposal practices, including potential involvement, for which the Company believes its share of liability, if any, to be negligible, at three sites on the U.S. National Priority List created by Superfund legislation. 11 The eventual outcomes of the above matters of pending litigation cannot be predicted with certainty. The defense of these matters and the defense of expected additional lawsuits related to these matters may require substantial legal defense expenditures. The Company follows Statement of Financial Accounting Standards No. 5 in determining whether to recognize losses and accrue liabilities relating to such matters. Accordingly, the Company recognizes a loss if available information indicates that a loss or range of losses is probable and reasonably estimable. The Company estimates such losses on the basis of current facts and circumstances, prior experience with similar matters, the number of claims and the anticipated cost of administering, defending and, in some cases, settling such claims. The Company has also recorded as an asset certain insurance recoveries which are determined to be probable of occurrence on the basis of the status of current discussions with its insurance carriers. If a contingent loss is not probable but is reasonably possible, the Company discloses this contingency in the notes to its consolidated financial statements if it is material. Based on the information available, the Company does not believe that reasonably possible uninsured losses in excess of amounts recorded for the above matters of litigation would have a material adverse impact on the Company's financial position, results of operations or cash flows. NOTE 11.- FISONS On October 20, 1995, the Company gained operational control of the U.K.-based pharmaceutical company Fisons plc via beneficial ownership of a majority of Fisons' total share capital. By mid- November 1995, RPR had completed the purchase of 93% of the outstanding shares of Fisons for approximately $2.7 billion. Of this amount, $1.75 billion was financed under the Societe General and Banque Nationale de Paris loan facility arrangements; $700 million, the majority of which represented open market share purchases, was financed under short-term loan arrangements with certain banks; a further $250 million represented drawdowns of the Company's medium-term lines of credit. The weighted average annual effective interest rate on the borrowings approximates 6.1%. The $2.7 billion drawings mature in December 1995 at which time the Company intends to establish longer-term financing arrangements. The acquisition will be accounted for using the purchase method. NOTE 12.- APPLIED IMMUNE SCIENCES, INC. In October 1995, the Company and Applied Immune Sciences, Inc. ("AIS"), a pioneer in cell and gene therapy, announced that they entered into a definitive agreement and plan of merger. The agreement provides for the acquisition by RPR of the 7.2 million AIS shares not previously owned by RPR at a cash price of $11.75 per share, or approximately $84.4 million. The acquisition is expected to be financed under available medium-term lines of credit bearing interest at an annual rate of LIBOR plus a margin. Prior to the transaction, the Company owned approximately 47% of AIS and accounted for this interest under the equity method. The acquisition of the remaining outstanding shares of AIS will be accounted for under the purchase method and, accordingly, the purchase price will be allocated to 53% of AIS' assets and liabilities based on their estimated fair values as of the acquisition date. 12 Consummation of the tender offer is subject to the valid tender of a majority of the AIS shares not held by RPR and certain other conditions. Completion of the merger is subject to the closing of the tender offer and the absence of any legal prohibitions. Subject to the foregoing, the transaction is expected to be completed by the end of 1995. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Rhone-Poulenc Rorer Inc. ("RPR" or "the Company") is one of the largest research-based pharmaceutical companies in the world. RPR was formed in 1990 by the combination of Rorer Group Inc. and substantially all of the Human Pharmaceutical Business of Rhone-Poulenc S.A. ("RP"), based in Paris, France. RP owns approximately two-thirds of RPR's common stock and controls the Company. In the 1995 second quarter, RPR acquired from RP the businesses of Cooperation Pharmaceutique Francaise ("Cooper"), with operations primarily in France, and a pharmaceutical business in Brazil. The acquisitions of entities under common control were treated for accounting purposes on an "as-if pooling" basis and, accordingly, RPR restated its first quarter 1995 results and full year 1994 results to include the accounts of Cooper and the Brazilian business as of April 1, 1994 and January 1, 1994, respectively. Earnings per share for the restated periods reflect pro forma adjustments giving effect to interest on indebtedness and preferred dividends relative to the acquisition transactions. The discussion that follows reflects the effect of such restatements. Results of Operations (Three and nine months ended September 30, 1995 versus comparable 1994 periods) At $107 million, third quarter net income available to common shareholders was essentially level with the prior year ($.80 per common share in both years). Net income for the first nine months of 1995 totaled $283 million ($2.09 per common share) as compared with $180 million ($1.28 per common share) in 1994. Results for the 1994 year-to-date period included pretax restructuring charges of $121 million ($.58 per common share). Results for the first nine months of 1995 included a $.04 per share benefit from the net effects of asset sales and certain one-time charges recorded in the first quarter. The comparable prior year-to-date period included $.04 per share of gains on sales of assets. Sales Third quarter 1995 sales ($1,213 million) increased by 7% on both an as-reported and operational basis as the favorable effects of currency fluctuations due to a weaker U.S. dollar (+4%) were offset by product divestitures, principally the Company's U.S. and Canadian over-the-counter businesses (-4%). Operational sales growth resulted from volume increases (+5%), including new product presentations, and net higher prices in Europe and in the U.S. prescription pharmaceuticals business (+2%). For the first nine months of 1995, reported sales increased by 15% including currency fluctuations (+7%) and product divestitures (-4%). On an operational basis, sales growth was 12%, including 3% from the inclusion of Cooper sales for nine months in 1995 compared with six months in 1994, 2% from new product presentations, and 2% from net price changes in Europe and in the U.S. (prescription pharmaceuticals and plasma proteins). 14 In the tables and discussion which follow, percentage comparisons of sales are presented excluding the effects of currency fluctuations unless otherwise noted. Sales by geographic area (excluding product divestitures) were as follows: Three Months ended September 30, -------------------- Restated % ($ in millions) 1995 1994 Change ------- ------- ----- U.S. $ 313 $ 318 8% ------- ------- ----- France 416 385 --% Other Europe 276 253 4% Rest of World 208 181 25% ------- ------- ----- Total Non-U.S. 900 819 6% ------- ------- ----- Total Sales $ 1,213 $ 1,137 7% ======= ======= ===== Nine Months ended September 30, -------------------- Restated % ($ in millions) 1995 1994 Change ------- ------- ----- U.S. $ 813 $ 820 11% ------- ------- ----- France 1,326 1,052 12% Other Europe 840 732 5% Rest of World 573 480 28% ------- ------- ----- Total Non-U.S. 2,739 2,264 13% ------- ------- ----- Total Sales $ 3,552 $ 3,084 12% ======= ======= ===== Three- and nine-month sales in the United States exceeded prior year levels as the Company's prescription pharmaceuticals Azmacort(r), Lovenox(r) and DDAVP(r) and plasma proteins (recombinant Factor VIII offerings and Albuminar(r)) continued to perform well. In France, increased quarterly sales of Doliprane(r) and Maalox(r) and contributions from the recently acquired Biogalenique generics business were offset by reduced sales of anti- infectives. Sales growth in France on a year-to-date basis reflected improved performance of analgesics and anti-infectives and also benefited from the inclusion of nine months of Cooper sales as compared to six months in 1994. In Other European markets, sales of prescription pharmaceuticals continued to recover over the prior year periods in Germany (+14% on a year-to-date basis) and in Italy (+8%) where Granocyte(r) was launched in the second quarter. Ethical product sales in the U.K. (-4%) included positive performance by Granocyte(r) and Imovane(r)/Amoban(r) but continued to be negatively impacted by generic competition. Sales increases in Central and Eastern Europe added to Other Europe sales growth for the three- and nine-month periods. In the Rest of World area, sales expansion continued in South American countries, particularly Argentina and Brazil, with sales gains posted by anti- infectives and bone metabolism/rheumatology products. Quarterly and year-to-date sales in Japan (Albuminar(r) and Maalox(r)) also exceeded prior year levels. 15 Sales by therapeutic area were as follows: Three Months ended Therapeutic Area/Principal September 30, Offerings --------------------- Restated % ($ in millions) 1995 1994 Change* ------------------------------------- -------- ----- Clexane(r)/Lovenox(r) $ 70 $ 51 29% Dilacor(r) XR 36 38 -3% Lozol(r)/Indapamide 20 26 -24% Selectol(r)/Selecor(r) 19 14 28% Total Cardiovascular 235 221 2% Zagam(tm) -- 6 -- Granocyte(r) 12 6 -- Total Anti-infectives/ Oncology 175 139 22% Albuminar(r) 48 39 21% Monoclate-P(r)/Factor VIII 47 38 21% Total Plasma Proteins 143 126 11% Doliprane(r) 32 26 13% Imovane(r)/Amoban(r) 33 24 30% Total CNS/Analgesics 149 122 17% Azmacort(r) 49 40 21% Nasacort(r) 21 21 -3% Total Respiratory 120 115 2% Maalox(r) 42 59 -29% Total Gastrointestinal 94 109 -15% Calcitonins 26 20 29% Orudis(r)/Profenid(r)/Oruvail(r) 59 48 22% Total Bone Metabolism/ Rheumatology 100 82 21% DDAVP(r) 27 22 22% Other Therapeutic Areas 197 223 -16% * Percentage change calculation excludes effects of currency fluctuations. Nine Months ended Therapeutic Area/Principal September 30, Offerings ------------------ Restated % ($ in millions) 1995 1994 Change* ------------------------------------- -------- ----- Clexane(r)/Lovenox(r) $211 $149 30% Dilacor(r) XR 81 76 6% Lozol(r)/Indapamide 47 56 -15% Selectol(r)/Selecor(r) 53 39 24% Total Cardiovascular 666 586 6% Zagam(tm) 17 6 -- Granocyte(r) 33 11 -- Total Anti-infectives/ Oncology 495 400 15% Albuminar(r) 146 114 24% Monoclate-P(r)/Factor VIII 153 111 32% Total Plasma Proteins 428 354 17% Doliprane(r) 98 71 23% Imovane(r)/Amoban(r) 92 65 29% Total CNS/Analgesics 420 342 13% Azmacort(r) 129 95 36% Nasacort(r) 55 59 -6% Total Respiratory 319 289 7% Maalox(r) 123 163 -27% Total Gastrointestinal 281 319 -17% Calcitonins 77 61 19% Orudis(r)/Profenid(r)/Oruvail(r) 153 142 3% Total Bone Metabolism/ Rheumatology 275 241 8% DDAVP(r) 62 54 16% Other Therapeutic Areas 669 553 12% * Percentage change calculation excludes effects of currency fluctuations. Three-month sales of cardiovascular products increased modestly as continued growth of Clexane(r)/Lovenox(r) in the U.S., France and Germany was partially offset by reduced quarterly sales of Dilacor(r) XR and indapamide products in the U.S. Lower quarter-on- quarter Dilacor(r) XR sales resulted from the introductory stocking of certain new packagings in the prior year. Although Dilacor(r) XR lost U.S. FDA exclusivity in mid-1995, management does not anticipate sales erosion in the current year from generic intrusion. In 1995, both Lovenox(r) and Dilacor(r) XR were approved by the FDA for new indications. Increased third quarter sales of anti-infectives resulted from the continued sales expansion of antibiotics in South America, particularly with respect to the antiparasitic Flagyl(r). A quarter-on-quarter reduction in anti-infective sales in France resulted from the absence of Zagam(tm) sales due to an incidence of photosensitivity. Future Zagam(tm) sales levels in France will be determined by the outcome of a review of product indications and labeling requirements by the European Union regulatory authority in November 1995. 16 The largest contributors to quarterly sales of the Company's oncological product Granocyte(r) were France, Italy and Germany; Granocyte(r) is now available in all European Union countries. Third quarter 1995 introductions of oncology products included the launch in France of Campto(r), for treatment of colorectal cancer, and the Canadian launch of Taxotere(r), for use in treatment of advanced breast and non-small cell lung cancer. In October 1995, Taxotere(r) received an approvable letter from the U.S. FDA for use in treatment of advanced breast cancer when other lines of therapy fail. Taxotere(r) has now been approved or recommended for approval in seven countries and has been launched in three countries. Third quarter and year-to-date sales growth of plasma proteins was driven by double-digit sales increases of Albuminar(r) in the U.S. and Japan and of worldwide Factor VIII offerings (Monoclate-P(r), Helixate(r) and Bioclate(r)). Sales of Monoclate-P(r) were higher in Europe but declined slightly in the U.S. due to increased sales of the competitive recombinant brands, Helixate(r) and Bioclate(r). In the first quarter of 1995, the Company initiated a voluntary withdrawal of certain of its immune globulin offerings in the U.S. in response to the FDA's industry-wide request that such products undergo a new testing technique. In the third quarter of 1995, the Company received FDA approval for Gammar(r) IV-P pasteurized immunoglobulin; Gammar(r) IV experienced third quarter sales declines in anticipation of the fourth quarter 1995 launch of the new pasteurized immunoglobulin offering. Under terms of a September 28, 1995 amendment to the Joint Venture Agreement (the "Amendment"), the Company's Armour Pharmaceutical Company subsidiary ("Armour") and Behringwerke AG ("Behring"), a subsidiary of Germany's Hoechst AG, completed the formation of a 50/50 global joint venture in the plasma proteins business. The joint venture's Board of Directors will be formally established on January 1, 1996 at which time joint control and profit- sharing provisions will also take effect. Improved sales of central nervous system products were led by higher sales of the sleeping agent Imovane(r)/Amoban(r) in Europe and Japan. The French analgesic Doliprane(r) registered three- and nine-month sales gains over comparable prior year periods which were affected by weak demand. In the third quarter, an FDA advisory committee recommended the Company's product Rilutek(tm) (riluzole) for U.S. FDA approval for the treatment of Amyotrophic Lateral Sclerosis. The recommendation will be considered by the FDA in its review of the Company's new drug application for Rilutek(tm). Higher sales of Azmacort(r) in the U.S. helped generate modest sales growth of respiratory products for the three-month period. On a year-to-date basis, Azmacort(r) sales registered improvement compared to a prior year period which was negatively affected by trade inventory reductions. The impact of a competitive entry kept current year Nasacort(r) sales below prior year levels for the quarter and nine-month periods. Early in the fourth quarter of 1995, the Company acquired the U.K.- based pharmaceutical company Fisons plc. Of Fisons' 1994 pharmaceutical sales which totaled $730 million, sales of asthma/allergy products exceeded $500 million. Management believes 17 that the acquisition of Fisons, which has established positions in the U.S., Europe and Japan, should result in a strong global respiratory franchise. Maalox(r) recorded solid quarterly and nine-month sales improvements in France and in Japan where Maalox(r) granules were launched at the end of 1994. Although higher on a year-to-date basis, three-month sales of Maalox(r) in Other European markets were slightly below the prior year period due, in part, to a quarterly decline in Germany. In January 1995, the Company completed the transfer of its Canadian Maalox(r) product rights to Ciba-Geigy Limited ("Ciba"); the Company's U.S. rights were transferred to Ciba in December 1994. Reported sales for 1994 included approximately $25 million and $69 million of U.S. and Canadian Maalox(r) sales for the three- and nine-month periods, respectively. Sales growth of the anti-inflammatory Orudis(r)/ Profenid(r)/Oruvail(r) was spurred by quarterly increases in South American countries and in Japan. Sales of Orudis(r) in European markets were essentially level quarter-on-quarter and remained below the prior year on a nine-month basis. Increased three- and nine-month sales of bone metabolism products reflected continued expansion of injectable and generic calcitonins in the United States. In European markets, calcitonin sales remained below the prior year levels. 18 Operating Income Three Months ended September 30, -------------------------------------- 1995 1994 (Restated) ---------------- ---------------- % of % of Total (in millions) $ Sales $ Sales Change ----- -------- ------ ------- ------- Gross margin $793 65.4% $741 65.1% 7% Selling, delivery and administrative 422 34.8 408 35.8 3 Research and development 190 15.6 153 13.5 24 Operating income 182 15.0 180 15.8 1 Nine Months ended September 30, ------------------------------------ 1995 1994 (Restated) -------------- ---------------- % of % of Total (in millions) $ Sales $ Sales Change ------ ------ ------ ------ ------ Gross margin $2,301 64.8% $2,014 65.3% 14% Selling, delivery and administrative 1,283 36.1 1,133 36.8 13 Research and development 533 15.0 430 13.9 24 Operating income 485 13.6 329 10.7 47 Quarter-on-quarter gross margin improvements reflected the favorable impact of price and product mix-related benefits. Commercial expenses declined as a percentage of sales as the impact of reduced advertising and promotional spending offset higher selling expenses, principally in the U.S. pharmaceuticals business and in support of the German and East/Central European markets. Quarterly operating income margin declined as an increased investment in research and development offset improved gross margin and commercial expenses as a percentage of sales. On a year-to-date basis, gross margin was negatively affected by unfavorable product mix and the lower margin Cooper business; net change in price had a favorable effect on year-to-date gross margin. Nine-month selling, delivery and administrative expense ratios benefited from the absence in 1995 of higher advertising and promotion costs associated with the Company's North American over- the-counter businesses. Excluding the effect of prior year restructuring charges, operating income margin declined by almost one percentage point due to reduced year-on-year gross margin and higher research and development expense as a percentage of sales. In June 1994, the Company recorded a $121 million charge related to a global restructuring plan. For the three- and nine-month periods ended September 30, 1995, cash outlays associated with the plan approached $9 million and $36 million, respectively; asset write- offs were not significant. As of September 30, 1995, the Company's workforce had been reduced by just under 1,000 positions as a result of the 1994 restructuring. In 1993, the Company recorded charges of $94 million for the cost of certain restructuring and manufacturing streamlining programs and increased provisions for certain litigation. Year-to-date cash outlays associated with the 1993 program exceeded $6 million. As of September 30, 1995, over 650 positions had been affected by the 1993 plan. Interest, Other Expense, and Taxes Increased net interest expense for the quarter reflected higher worldwide average debt balances in support of acquired new businesses and higher average interest rates. Increased net interest expense for the nine-month period was due principally to higher average interest rates in the United States and in certain new and/or expanding markets including South America and Eastern Europe. 19 During the third quarter, the Company redeemed its outstanding Market Auction Preferred Shares ("MAPS"), resulting in a slight quarter-on-quarter decline in preferred dividends. Increased preferred dividends for the nine months of 1995 were due to higher short-term interest rates in the United States. Gains on sales of assets totaling $50 million ($.25 per share) were recorded in the first quarter of 1995. These gains included the sale of assets related to the Company's Canadian over-the-counter business and certain European product rights. Similar gains totaled $9 million ($.04 per share) in the comparable 1994 period. Other expense-net for the nine months of 1995 included charges of $38 million ($.21 per share) recorded in the first quarter, including $13 million ($.06 per share) of acquired research and development expense related to an additional investment in Applied Immune Sciences, Inc. ("AIS") and $25 million ($.15 per share) related to the reassessment of the carrying value of certain assets, including those associated with the Company's prior investment in The Immune Response Corporation. The Company's year-to-date reported effective income tax rate approximated 30% in 1995 compared with 27% in 1994. The current year rate was affected by reduced tax benefits from Puerto Rico operations and certain asset sales/write-offs while the prior year's effective tax rate was favorably impacted by restructuring charges. Acquisitions In October 1995, the Company gained operational control of the U.K.- based pharmaceutical company Fisons plc via beneficial ownership of a majority of Fisons' total share capital. By mid-November 1995, RPR had completed the acquisition of substantially all of the outstanding share capital of Fisons. At 265 pence per share, the aggregate purchase price will approximate $2.9 billion. On October 18, 1995, the Company announced a definitive agreement and plan of merger with AIS. The agreement provides for the acquisition by RPR of the seven million AIS shares not previously owned by RPR at a cash price of $11.75 per share, or approximately $84 million. Subject to certain events and conditions, the tender offer and merger are expected to be completed by the end of 1995. Financial Condition Cash Flows Operating activities provided cash of $276 million during the nine- month period of 1995 as compared with $412 million in the prior year. Lower 1995 operating cash flows reflected increased working capital needs and higher cash outlays for restructuring activities and income taxes. Year-to-date cash outlays related to restructuring activities totaled $42 million. Income tax payments for the nine months included a $42 million first quarter tax payment related to the Ciba transaction. 20 Current year investing activities included cash outflows of $185 million related to the acquisition of new businesses, including a Brazilian pharmaceutical business formerly owned by RP and a generics company in France. Cash outflows also included $80 million associated with certain investments in technologies including $43 million in the first half of 1995 for the acquisition of two million common shares of AIS, and payments of $41 million related to the purchase of certain product rights. Proceeds from sales of assets, including the sales of the Company's Canadian over-the- counter business and certain European product rights, totaled $85 million. Nine-month capital expenditures exceeded comparable 1994 spending by $48 million. Financing activities provided cash inflows of $69 million. Increased borrowings, primarily in support of businesses acquired and to finance preferred share redemptions totaled $424 million for the nine-month period. Cash outflows associated with the third quarter redemption of MAPS Series A, C and D totaled $225 million. Cash dividends paid to common shareholders were $137 million ($.90 per share) as compared with $128 million in 1994 ($.84 per share). In October 1995, the Board of Directors declared a fourth quarter cash dividend of $.30 per share payable November 30, 1995 to holders of record on November 10, 1995. Cash outlays of $216 million in 1994 included open market common share repurchases for the Employee Benefits Trust totaling $109 million. 21 Liquidity The Company's net debt (short- and long-term debt including notes payable to RP, less cash and cash equivalents, short-term investments and time deposits) to net debt plus equity ratio increased to .34 to 1 at September 30, 1995 from .16 to 1 at December 31, 1994 principally as a result of increased borrowings. The ratio of current assets to current liabilities was 1.55 to 1 compared to 1.40 to 1 at December 31, 1994. At September 30, 1995, the Company had committed lines of credit totaling $5.2 billion with approximately $100 million of borrowings outstanding under these lines. Of the $5.2 billion, $4.3 billion represented loan facility agreements effective August 17, 1995 with Banque Nationale de Paris ("BNP"), Credit Lyonnais and Societe Generale. Drawings under these facilities, which mature in February 1996, bear interest at the London Interbank Offered Rate ("LIBOR") plus a margin. These arrangements temporarily suspended certain other line of credit agreements previously in place with the same banks totaling $680 million; the suspended amounts are reestablished upon the maturity of the August 17th facilities and will expire in the year 2000. Of the remaining $.9 billion of the total $5.2 billion committed lines of credit at September 30th, $400 million related to a long-term revolving credit facility unconditionally guaranteed by RP; this facility was terminated on October 25, 1995. The remaining $500 million consisted of new or renegotiated medium-term multicurrency line of credit agreements expiring in the next five years. At September 30, 1995, the Company had the ability and intent to renew or to refinance under its facilities approximately $635 million of short-term third party borrowings for at least one year. Accordingly, this amount was classified as long-term debt. By mid-November 1995, RPR had completed the purchase of 93% of the outstanding shares of Fisons for approximately $2.7 billion. Of this amount, $1.75 billion was financed under the Societe Generale and BNP loan facility arrangements; $700 million, the majority of which represented open market share purchases, was financed under short-term loan arrangements with certain banks; a further $250 million represented drawdowns of the Company's medium-term lines of credit. The weighted average annual effective interest rate on the $2.7 billion of new borrowings approximated 6.1%. These drawings mature in December 1995 at which time the Company intends to establish longer-term financing arrangements. The sale of Fisons' Laboratory Supplies Division to Fisher Scientific International Inc. for $310 million was completed in October 1995. Sale of Fisons' Scientific Instruments Division to Thermo Instrument Systems Inc. for $318 million is subject to regulatory approval and will not be completed in 1995. In October 1995, the Company announced a definitive agreement and plan of merger with AIS, providing for the acquisition by RPR of the remaining shares of AIS not owned by RPR at a cash price approximating $84 million. The transaction, when finalized, is expected to be financed under available medium-term lines of credit bearing interest at an annual rate of LIBOR plus a margin. Pursuant to a shelf registration, the Company has the ability to issue an additional $325 million in public debt securities and/or preferred shares. 22 In October 1995, Moody's Investor Service ("Moody's") and Standard & Poor's ("S&P") lowered the Company's senior unsecured debt and preferred share credit ratings, attributing the change to the acquisition of Fisons. The Company's senior unsecured debt is now rated Baa1 by Moody's and BBB by S&P. The Company's preferred shares are rated Baa2 by Moody's and BBB- by S&P. Management believes that cash flows from operations, supplemented by financing expected to be available from external sources, will provide sufficient liquidity to meet its needs for the foreseeable future. Long-term liquidity is dependent upon the Company's competitive position, including its ability to discover, develop and market innovative new therapies and maximize the benefits of new business alliances. The Company routinely explores new strategic business alliances as such opportunities arise. The Company is involved in litigation incidental to its business. A discussion of contingencies appears in Note 10 of the Notes to Condensed Consolidated Financial Statements and in Legal Proceedings in Part II of this Form 10-Q. 23 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Diethylstilbestrol ("DES") Litigation There are approximately two hundred and fifty legal actions pending against one or more subsidiaries of the Company and various groupings of more than one hundred pharmaceutical companies, in which it is generally alleged that "DES daughters" and/or their offspring were injured as a result of the development of various reproductive tract abnormalities in the "DES daughters" because of their in utero exposure to DES. Typically, William H. Rorer, Inc. ("WHR") and Kremers-Urban Company ("K-U"), two former operating subsidiaries of the Company, are named as defendants, along with numerous other former DES manufacturers, when the claimant is unable to identify the manufacturer of the DES to which she was exposed. While the aggregate monetary damages sought in all of these DES actions are substantial, the Company believes that both WHR and K-U have adequate defenses to DES claims. In May 1994, a proposed class action was filed on behalf of persons alleging injuries caused by DES and living in the state of Ohio (Kurczi, -------- et al. v. Eli Lilly, et al., United States District Court for - --------------------------- the Northern District of Illinois). The Company and certain of its current and former subsidiaries were named among the 192 defendants. Class certification was denied in February 1995. All pending cases are currently being defended by insurance carriers, sometimes under a reservation of rights. AHF Litigation There are approximately three hundred and eleven lawsuits in the United States, six in Canada and fifty-six in Ireland pending against the Company's Armour Pharmaceutical Company ("Armour") subsidiary, and in some instances, the Company and certain of its other subsidiaries, in which individuals with hemophilia and infected with the Human Immunodeficiency Virus ("HIV"), or their representatives, claim that such infection and, in some cases, resulting illnesses, including Acquired Immune Deficiency Syndrome-related conditions or death therefrom, may have been caused by administration of anti-hemophilic factor ("AHF") concentrates processed by Armour in the early and mid-1980s. None of these cases involves Armour's currently distributed AHF concentrates. In most of these suits, Armour is one of a number of defendants, including other fractionators who supplied AHF during that period. To date, approximately one hundred and four cases and claims have been resolved either by dismissal by the plaintiffs or the Court or through settlement. A majority of the currently pending lawsuits were filed in 1993, and management expects additional lawsuits will be filed. It is not possible, however, to predict with certainty the number of additional lawsuits that may eventually be filed alleging HIV- related claims. In January 1993, a jury in Florida held that Armour was liable to the parents of a deceased HIV-infected hemophiliac for damages of approximately $2 million. Armour believed this verdict to be inconsistent with evidence specific to the case and, accordingly, filed motions with the trial court seeking reversal or, alternatively, a new trial. The trial court denied 24 both motions and Armour appealed the judgment to the United States Court of Appeals for the Eleventh Circuit. In June 1995, the Court of Appeals issued an opinion reversing the verdict and remanding the case for a new trial because of prejudicial error in the district court's instruction concerning the learned intermediary doctrine. The court affirmed in respect to Armour's contentions regarding an absence of sufficient evidence of causation. Both parties' petitions for rehearing were denied, and the case has been returned to the district court for retrial. Regardless of the ultimate outcome of this case, and because the facts vary widely in such cases, the Company does not view a possibly adverse verdict as predictive of, or as precedent for, decisions in any other cases. Juries in other AHF cases have determined that Armour and the other plasma fractionators acted responsibly and were not negligent. In October 1993, Armour obtained a directed verdict dismissing it from a lawsuit pending in Louisiana State Court on the basis that the plaintiff had not presented evidence sufficient to maintain an action against Armour. That decision has been appealed by plaintiff to the state appellate court in Louisiana and was argued in March 1995. Additionally, in November 1993, a jury verdict in favor of Armour and the other plasma fractionators was obtained in an action pending in the United States District Court for the Northern District of Illinois. The jury concluded that the fractionators of Factor VIII concentrate in the early 1980s were not negligent as alleged and accordingly were not liable to the claimant. In March 1995, the United States Court of Appeals for the Seventh Circuit granted the plaintiffs' appeal in this action and remanded the case for a new trial because of improper closing argument by counsel for one of the defendants. Subsequent to the issuance of the court's opinion in March, Armour reached an out of court settlement with the plaintiffs. Armour reasonably expects that other cases may proceed to trial in the future. In December 1993, the Federal Multi-District Litigation Panel ("MDL") authorized the consolidation of all AHF litigation pending in U.S. Federal Courts for purposes of pre-trial discovery and the transfer of such cases to the U.S. District Court for the Northern District of Illinois for this purpose. Four proposed federal class action lawsuits (Wadleigh, et al. v. -------------------- Armour Pharmaceutical Company, et al., United States District - ------------------------------------- Court, Northern District, Illinois; Richard Roe and his mother, --------------------------- Jane Roe v. Armour Pharmaceutical Company, et al., United States - ------------------------------------------------- District Court, Idaho District; Jose Alvarez, Jr. et al. v. --------------------------- Armour Pharmaceutical Company, et al., United States District - ------------------------------------- Court for the Eastern District of Louisiana; and Timmy Dale ---------- Martin, et al. v. Armour Pharmaceutical Company, et al. United - ------------------------------------------------------- States District Court for the Northern District of Alabama), and two proposed state class actions (Jeffrey Stanger, et al. v. --------------------------- Armour Pharmaceutical Company, et al., Superior Court, Pima - ------------------------------------- County, Arizona and Jones v. Bayer Corporation et al, Florida), -------------------------------- discussed further below, have been filed against several fractionators, including Armour. The federal actions are part of the MDL proceeding in Chicago. In an August 1994 bench ruling and Memorandum Opinion, the Court in Wadleigh stated that it intended to certify the issue -------- of negligence in that action for class action treatment, but that it would deny plaintiffs' motion for certification of an all-purpose class action and plaintiffs' motion for certification of the issues of strict liability, breach of warranty, proximate cause, and punitive damages. In September 1994, the Court denied the defendants' motion for reconsideration, and also denied defendants' request that it certify the issues for immediate consideration by the Court of Appeals. In an order entered in October 1994, the Court ruled that it would not certify plaintiffs' concert of action claim for class treatment. In November 1994, the Court entered its formal class certification order, and in December 1994 entered further orders regarding notice to the class and also denied class certification in the federal actions other than Wadleigh. -------- Under the issue certification contemplated by the Court in Wadleigh, only the issue of negligence would be tried on a class- - -------- 25 wide basis. In the event of a defense verdict, all class members would be bound thereby; in the event of a plaintiffs' verdict, it would be necessary for each class member to attempt to utilize that favorable outcome in his own separate litigation. The class trial would not involve any issues of causation or damages, or a determination as to any defenses such as the statute of limitations. As the facts in each individual lawsuit varied widely, Armour did not believe that class action status was warranted in the Wadleigh action. In December 1994, Armour and the other - -------- fractionator/defendants in Wadleigh filed a petition for a writ -------- of mandamus in the Seventh Circuit Court of Appeals in Chicago seeking to have the class certification order vacated. In March 1995, the Court of Appeals granted the writ of mandamus in a two- to-one decision and directed the District Court to decertify the plaintiff class. The plaintiffs thereafter filed a petition for rehearing and suggestion for rehearing en banc with the Court of -- ---- Appeals. Plaintiffs' petition for rehearing was denied in April 1995. In June 1995, the Court of Appeals on plaintiffs' motion entered an order staying its mandate so as to permit the plaintiffs to seek a writ of certiorari from the United States Supreme Court. In July 1995, plaintiffs filed their petition for a writ of certiorari with the U.S. Supreme Court. In October 1995, the Supreme Court denied plaintiffs' petition. As a result, the negligence class previously certified by the District Court in Wadleigh will be decertified. -------- As noted above, in May 1995, an additional "nationwide" class action (Jones) was filed in the Florida state court against the ----- same defendants as in Wadleigh, together with a Florida plasma -------- provider; plaintiffs' counsel consist of a subgroup of counsel from Wadleigh. Defendants have removed the action to federal -------- court. Plaintiffs' motion to remand the action to the state court is pending. In the U.S., Armour and other plasma fractionators have participated in discussions with representatives of the hemophilia community, including the National Hemophilia Foundation, concerning the issue of assistance for U.S. hemophiliacs infected with HIV. In August 1994, Armour and Baxter Healthcare Corporation ("Baxter") reached a tentative settlement with attorneys representing claimants in the purported class-action lawsuits pending against the respective companies and submitted a Memorandum of Understanding to the Court in that regard. However, as a result of the Court's statements with respect to class certification in Wadleigh, -------- plaintiffs' counsel withdrew their recommendation concerning the settlement. Armour will continue to vigorously defend its position in all cases and claims brought against it. With respect to this litigation, the Company has contractual rights to certain insurance coverage provided by carriers that provided insurance to Revlon, Inc., the party from which it purchased the Armour business in 1986 ("Revlon carriers"). The Company also believes that it has access to "excess" liability insurance coverage from other carriers, effective in 1986, for certain of these cases if certain self-insured retention levels from relevant insurable losses are exceeded. The Company has been involved in litigation with a principal insurance carrier ("the principal carrier") and an umbrella insurance carrier ("the umbrella carrier"), as well as with certain of the Revlon carriers, relative to carrier defense and indemnity obligations associated with AHF litigation ("the insurance coverage litigation"). In late 1994, the Company settled the dispute being litigated with the principal carrier by entering into an agreement which defines the principal carrier's obligations with respect to the underlying AHF litigation. The Company has also settled its disputes with the 26 umbrella carrier and certain of the Revlon carriers. Recently, after lengthy discussions, the Company and the remaining Revlon carriers in the insurance coverage litigation reached an agreement in principle regarding the extent and other conditions of coverage of those carriers. Based upon the above, the Company believes that, although not a certainty, a substantial level of coverage (including substantial coverage for legal defense expenditures) for the Company's estimated liability determined in accordance with Statement of Financial Accounting Standards No. 5 ("SFAS 5") is probable of occurrence. Certain Contract Litigation Rhone-Poulenc Rorer Pharmaceuticals Inc. ("RPRP"), a subsidiary of the Company, has been named as a defendant in two related breach of contract lawsuits initiated by Boehringer Mannheim GmbH and its American affiliate, Boehringer Mannheim Pharmaceuticals Corporation (collectively, "BM"), seeking compensatory damages. Specifically, BM commenced arbitration proceedings in Switzerland and litigation in the state court of Maryland alleging that RPRP breached an agreement related to the development of BM's bisphosphonate compound and a copromotion agreement pertaining to the Company's licensed product Lozol(r). RPR filed a counterclaim in the Maryland litigation against BM for fraud related to representations made by BM and its agents prior to the execution of the agreements. In March 1995, the parties agreed to dismiss the Maryland litigation and to transfer all of those claims to final and binding arbitration in Switzerland. At present, two arbitration proceedings before the same panel are underway. The Company believes that the claims asserted by BM are without merit and RPRP intends to vigorously defend its position. Antitrust Litigation The Company has been named as a defendant in 121 antitrust lawsuits. It is presently a party to eight state court actions pending in California, and one each in Wisconsin, Alabama, Washington, Minnesota, Colorado and New York. Additionally, the Company has been named in 107 antitrust actions brought in several federal courts which have been coordinated before a judge in the U. S. District Court for the Northern District of Illinois (Chicago). Seven of the cases brought in California state court have similarly been coordinated before a judge in the San Francisco Superior Court; defendants have moved to coordinate the recently filed eighth case in San Francisco Superior Court with the other cases. The suits allege that certain pharmaceutical companies (including RPR) and wholesalers, in conjunction with certain pharmacy benefits managers, discriminated against independent community pharmacist plaintiffs and/or retail chains with respect to the prices charged for brand name pharmaceutical products and further conspired to maintain prices at artificially high levels to the detriment of these pharmacies. One of the California actions alleges injury to a class of California residents who are consumers of brand name prescription products. The cases in New York, Colorado and Washington allege proposed consumer class claims. On October 4, 1995, the Washington state court action was dismissed with prejudice with the court holding that Washington law did not permit a consumer action in this instance. Many of the federal actions were brought on behalf of an alleged class of retail pharmacies throughout the United States; three of the state cases similarly allege classes of pharmacists within those states. Plaintiffs in these lawsuits seek injunctive relief and a monetary award for past damages alleged. The federal class plaintiffs have filed an amended consolidated Complaint so that issues affecting the class are pleaded consistently. The coordinating federal court certified the class alleged in the amended consolidated Complaint in 27 November 1994. Notice to the class was given and the opt-out period ended March 10, 1995. The coordinating California state court certified retail and consumer classes in June 1995. Notice to the class has not yet been provided. The Company believes that these claims are without merit and it intends to vigorously defend these lawsuits. Patent and Intellectual Property Litigation In February 1993, Tanabe Seiyaku Company ("Tanabe") of Japan and their U.S. licensee, Marion Merrell Dow Inc. ("MMD") initiated an action before the International Trade Commission ("ITC"), the administrative agency responsible for handling complaints of imports which allegedly infringe U.S. intellectual property rights. The complaint names ten domestic and foreign respondents, including the Company, and alleges infringement of a Tanabe U.S. patent, claiming a process for preparing bulk diltiazem, the active ingredient in the Company's Dilacor(r) XR product. In January 1995, the ITC Administrative Judge ruled that Dilacor(r) XR does not infringe the MMD/Tanabe patent under any circumstances and that the MMD/Tanabe patent is invalid and unenforceable. An appeal was taken and the Commission effectively affirmed the ITC Judge's rulings on invalidity, unenforceability and noninfringement findings. MMD/Tanabe has appealed to the Court of Appeals for the Federal Circuit. The Company is a plaintiff in a patent infringement lawsuit with Chiron Corporation filed in the United States District Court in California involving the patent licensed exclusively to the Company by the Scripps Research Institute ("Scripps") covering the anti-hemophilic Factor VIII:C. The Court is considering pending summary judgment motions. If this case goes to trial, such trial is likely to be scheduled to commence within the six to twelve months after the Court's decision on the summary judgment motions. The eventual outcomes of the above matters of pending litigation cannot be predicted with certainty. The defense of these matters and the defense of expected additional lawsuits related to these matters may require substantial legal defense expenditures. The Company follows SFAS 5 in determining whether to recognize losses and accrue liabilities relating to such matters. Accordingly, the Company recognizes a loss if available information indicates that a loss or range of losses is probable and reasonably estimable. The Company estimates such losses on the basis of current facts and circumstances, prior experience with similar matters, the number of claims and the anticipated cost of administering, defending and, in some cases, settling such claims. The Company has also recorded as an asset, insurance recoveries which are determined to be probable of occurrence on the basis of the status of current discussions with its insurance carriers. If a contingent loss is not probable, but is reasonably possible, the Company discloses this contingency in the notes to its consolidated financial statements if it is material. Based on the information available, the Company does not believe that reasonably possible uninsured losses in excess of amounts recorded for the above matters of litigation would have a material adverse impact on the Company's financial position, results of operations or cash flows. 28 ITEM 6. Exhibits and Reports on Form 8-K a. Exhibits 10 Material contracts. (a) $200,000,000 Loan Facility Agreement with Banque Nationale de Paris dated June 15, 1993 ("BNP Agreement"). (b) First Supplemental Agreement to the BNP Agreement dated April 13, 1995. (c) Amendment No. 2 to the BNP Agreement effective August 17, 1995. (d) $1,100,000,000 Loan Facility Agreement with Societe Generale effective August 17, 1995. (e) $1,500,000,000 Loan Facility Agreement with Credit Lyonnais effective August 17, 1995. 11 Statement re computation of earnings per common share. 15 Letter re unaudited interim financial information. b. Reports on Form 8-K The Company filed the following Current Reports on Form 8-K: - - Current Report on Form 8-K dated August 14, 1995 containing the restated financial statements for the year ended December 31, 1994 resulting from the Cooper and Brazilian business acquisition transactions. - - Current Report on Form 8-K dated August 17, 1995 containing the Company's press release announcing a cash offer for Fisons plc and disclosing additional loan facility arrangements. - - Current Report on Form 8-K dated September 28, 1995 announcing the creation of the joint venture between Armour Pharmaceutical Company and Behringwerke AG. - - Current Report on Form 8-K/A (Amendment to Form 8-K dated September 28, 1995) containing Behringwerke AG historical combined financial statements and company pro forma financial information. - - Current Report on Form 8-K dated October 5, 1995 containing the Company's press releases announcing a final cash offer for Fisons plc, certain open market purchases of Fisons' ordinary shares, and the recommendation of the offer by Fisons' Board to its shareholders. - - Current Report on Form 8-K dated October 18, 1995 containing the press release announcing a definitive agreement and plan of merger between the Company and Applied Immune Sciences, Inc. 29 - - Current Report on Form 8-K dated October 20, 1995 containing the Company's press releases declaring the Company's offer for Fisons plc unconditional and announcing beneficial ownership over 90%. 30 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. RHONE-POULENC RORER INC. ------------------------- (Registrant) November 14, 1995 /s/ PATRICK LANGLOIS -------------------- ------------------------------- Patrick Langlois Senior Vice President and Chief Financial Officer 31 INDEX TO EXHIBITS Exhibit No. - ----------- 10 Material contracts. (a) $200,000,000 Loan Facility Agreement with Banque Nationale de Paris dated June 15, 1993 ("BNP Agreement"). (b) First Supplemental Agreement to the BNP Agreement dated April 13, 1995. (c) Amendment No. 2 to the BNP Agreement effective August 17, 1995. (d) $1,100,000,000 Loan Facility Agreement with Societe Generale effective August 17, 1995. (e) $1,500,000,000 Loan Facility Agreement with Credit Lyonnais effective August 17, 1995. 11 Statement re computation of earnings per common share. 15 Letter re unaudited interim financial information. 32 EX-10 2 LINES OF CREDIT AGREEMENTS Exhibit 10(a) TRANSLATION FOR INFORMATION PURPOSES ONLY BETWEEN: - - BANQUE NATIONALE DE PARIS or BNP, a "societe anonyme" with a share capital of FF 3,536,972,150, whose registered office is at 16 Boulevard des Italiens, 75009 PARIS, registered with the PARIS Registry of Commerce and Companies under number B 662 042 449, represented by: - - Mr Ervin ROSENBERG, Manager - - Mr Alain CHANTEREAU, Assistant Manager (the "Bank", if not referred to by name) OF THE ONE PART, AND: - - RHONE-POULENC RORER INC, a limited liability company with a share capital of USD 438,298,771, whose registered office is at 500 Arcola Road, COLLEGEVILLE, PENNSYLVANIA 19426, UNITED STATES OF AMERICA, represented by: - - Mr Patrick LANGLOIS Corporate Senior Vice President, Chief Financial Officer (the "Borrower", if not referred to by name) OF THE OTHER PART, IT IS AGREED AS FOLLOWS: ARTICLE I - AMOUNT AND PURPOSE OF LOAN The Bank agrees to grant the Borrower a loan facility (the "Loan") of a maximum amount of USD 200,000,000 (TWO HUNDRED MILLION US DOLLARS) or its equivalent in FRF, DEM or GBP. The Loan is entered into in order to reinforce the Borrower's financial resources. Subject to the prior written agreement of RHONE-POULENC RORER INC, the following companies, being subsidiaries owned as to more than 50% by RHONE-POULENC RORER INC: - - RHONE-POULENC RORER S.A. - - RHONE-POULENC RORER LTD - - RHONE-POULENC RORER GmbH may make drawings under the Loan subject to the guarantee by RHONE-POULENC RORER INC in the form attached as schedule I hereto. Subject to the prior written agreement of RHONE-POULENC RORER INC, RHONE-POULENC S.A. may make drawings under the Loan. RHONE-POULENC S.A., RHONE-POULENC RORER S.A., RHONE-POULENC RORER LTD and RHONE-POULENC RORER GmbH shall, prior to the first drawing that they may make, enter into an undertaking directly with the Bank on the terms of schedule II to this loan agreement. The terms and conditions agreed with RHONE-POULENC RORER INC shall apply to these companies. RHONE-POULENC RORER INC, RHONE-POULENC RORER S.A., RHONE-POULENC RORER LTD, RHONE-POULENC RORER GmbH and RHONE-POULENC S.A. shall hereafter be referred to as the "Borrowing Companies". ARTICLE II - DURATION OF THE LOAN The Loan is granted for a period of four years from 15th June, 1993 to 15th June, 1997. ARTICLE III - REPAYMENT Except in the case of prepayment under Article VIII ("PREPAYMENT FACILITY"), the Loan shall be repaid in one single instalment on 15th June, 1997. ARTICLE IV - METHODS OF DRAWING Drawings may be made under this loan on one business day's notice in respect of drawings in FRP and two business days' notice in respect of drawings in USD, GBP or DEM, by the debiting of a special account constituting a simple accounting record, which shall not have the legal consequences of a running account and which shall be opened for these purposes by each of the Borrowing Companies in the books of the BNP LA DEFENSE Branch. Drawings shall have a duration of one, two, three or six months. However, drawings in French francs may have a minimum duration of fifteen days. RHONE-POULENC RORER INC shall also be able to make drawings in USD without prior notice through BNP NEW YORK. In respect of drawings in French francs, the Borrowing Companies shall draw one or more notes in favour of the Bank payable at BANQUE NATIONALE DE PARIS, which shall include a provision that the bearer of the note is not required to protest the notes at their maturity. The amount of drawings in currencies other than US Dollars shall be calculated on the basis of the rate of exchange of the US Dollar against the relevant currency, on the PARIS Foreign Exchange Market, two business days before the drawing date (one business day in the case of drawings in French francs). "Business day" means any complete day on which the banks are open: - - in respect of drawings in French francs, in PARIS; - - in respect of drawings in euro-currencies, in LONDON and the principal national financial centre of the currency in which the drawing is made. After having drawn on the Loan and reimbursed it in one or more instalments, in whole or in part, the Borrowing Companies may request new drawings, subject to the limits relating to amount and duration set out herein. The drawings as well as subsequent renewals and prepayments, if any, shall be made in accordance with the provisions of the Exchange Control Regulations ("Reglementations des Changes") that may apply to such transactions. ARTICLE V - NON-AVAILABILITY OF CURRENCY If the Bank observes, at the time of either any drawing or a new interest period, that the currency is not available on the PARIS inter-bank market, it shall notify the Borrowing Companies thereof as soon as possible. In such a situation, the parties shall consult in order to reach an agreement on the replacement currency or on a possible reversion to French francs. Failing agreement between the parties, the drawing or the renewal shall not take place. Existing drawings in the non-available currency shall then be repaid in French francs by the drawing company or companies as regards principal, interest, costs and expenses (if any) incurred by the Bank by reason of the non-availability of the currency. The Bank agrees to supply evidence of these costs, incidental expenses and possible costs on demand by the Borrowing Companies. The amount in FRF to be repaid shall be determined according to the most recent quotation of the rate for the currency in which the loan was then denominated. ARTICLE VI - CONTROL OF THE EQUIVALENT AMOUNT IN USD OF THE OUTSTANDING AMOUNT The total amount of drawings shall not exceed the equivalent of USD 200,000,000 (TWO HUNDRED MILLION US DOLLARS) (the "Original Amount") reduced by repayments that shall already have been made. The US dollar equivalent of the drawings shall be verified at the time of each drawing or at the beginning of each interest period at the exchange rate in force on the day of the verification. If the US dollar equivalent is larger by 5% than the Original Amount reduced by repayments already made, the Bank shall only renew the outstanding amount for a sum in foreign currencies corresponding to the equivalent amount of the Original Amount expressed in USD reduced by repayments already made, and the drawing company or companies shall repay the difference thus calculated. However, if this equivalent is not larger by 5% than the Original Amount expressed in USD reduced by repayments already made, the Bank shall renew the outstanding amount in foreign currencies at its previous level. ARTICLE VII - CONDITIONS - - COMMITMENT FEE: 0.20% per annum payable half-yearly in advance on the authorised amount irrespective of any drawings. This fee shall, in any event, be borne by RHONE-POULENC RORER INC, which shall secure the division thereof between the Borrowing Companies. It shall be calculated on the basis of a 360-day year and shall be payable in US dollars. - - INTEREST: - - in respect of drawings or renewals of drawings in FRF: Interest shall be calculated according to the precise number of days in the relevant period as compared with 360 days at the PIBOR rate (PARIS INTERBANK OFFERED RATE) for the selected period of drawing or renewal or the next longest period shown at 11.00 a.m. on the Business Day preceding the date of drawing or renewal on TELERATE page 20041 or any other page substituted therefor, increased by 0.25% annum. The above interest shall be paid at the end of each interest period. - - in respect of drawings or renewals of drawings in foreign currencies: Interest shall be calculated according to the precise number of days in the relevant period as compared with 360 days for all currencies, with the exception of GBP, interest in respect of which shall be calculated as compared with 365 days. Interest shall be determined according to the LIBOR rate (LONDON INTERBANK OFFERED RATE) for the relevant currency for the selected period of drawing or renewal for sums equivalent to those advanced, calculated under the aegis of the BRITISH BANKERS ASSOCIATION and shown on TELERATE - Page 3750 or any other page substituted therefor at 11.00 a.m. (LONDON time), two business days before the drawing date or the beginning of a new interest period, increased by 0.25% per annum. In the case of drawings made by RHONE-POULENC RORER INC in USD without prior notice through BNP NEW YORK, interest shall be determined according to the cost of funds of BNP NEW YORK for the selected drawing or renewal period, increased by 0.25% per annum. The above interest shall be payable at the end of each interest period. The Bank shall notify the Borrowing Company of the rate of interest applicable to the relevant interest period. This rate shall be revised at the end of each interest period. The special account referred to above in Article IV "METHODS OF DRAWING" shall be exempt from the payment of any account fee and any fee on the largest overdraft outstanding thereon. Interest shall automatically be debited to the current account maintained on the books of the BNP LA DEFENSE Branch by each of the Borrowing Companies. If the determination of an interest rate has become impossible by reason of the occurrence of certain events, the Bank shall notify the Borrowing Companies of such fact, and the parties shall enter into negotiations. If no agreement is reached with a view to a solution within 30 days of this notification, the Borrowing Companies shall repay the Loan as to principal interest, costs, incidental expenses and costs (if any) provided that the applicable interest rate shall be the Bank's own cost of financing, increased by 0.25% per annum. Any sum not paid on its contractual or accelerated maturity date shall automatically bear interest for the period from and including such maturity date until but excluding the day of full payment, at the rate applied during the preceding drawing or renewal period, increased by 1% per annum. Interest outstanding for a whole year shall be capitalised in accordance with Article 1154 of the Civil Code. These provisions do not constitute consent to late payment. For the purposes of article 4 of the Law of 28th December, 1966 relating to notice of global effective rates, it is hereby provided that, taking account of the three-month LIBOR rate for US dollars on 9th June, 1993 and a commitment fee payable half- yearly in advance, a full drawing of this loan on 10th June, 1993 would have resulted in a rate of 3.83%. ARTICLE VIII - PREPAYMENT FACILITY Each of the Borrowing Companies may cancel the Loan or prepay it, in whole or in part, at the end of any current drawing period, provided that it gives the Bank at least 30 (thirty) days' notice by registered letter with postal acknowledgment of receipt of its irrevocable intention to terminate or to repay the loan, in whole or in part. Any termination or prepayment shall be final for the relevant Borrowing Company. The commitment fee shall cease to be due on that part of the loan in respect of which the Borrower shall have given such notice as from the end of the half-yearly commitment fee period during which the cancellation shall have taken effect. ARTICLE IX - ACCELERATION OF MATURITY A/ The Bank reserves the right to declare the acceleration of all the sums due from any of the Borrowing Companies as regards principal, interest, default interest, fees, costs and expenses and no further drawing may be made by such Company in the following circumstances: 1) if RHONE-POULENC RORER INC reduces its direct or indirect shareholding in the share capital of such Company such that it becomes a subsidiary that is less than 50% owned (this clause shall not apply to RHONE-POULENC S.A.), 2) if payment is not made by such Company of any sum due under the Loan on its due date, and such default is not made good within fifteen days of receipt of a notice from the Bank to the Company by registered letter, 3) if payments are not made by such Company on their due dates of sums due to any party under other borrowings, and such default in payment has caused the acceleration of such borrowings. Acceleration shall not be declared if the debt is validly disputed or if the sums involved are of a nominal amount of less than USD 10m (USD 30m so far as RHONE-POULENC S.A. is concerned), or its equivalent, 4) if such Company does not comply with any of its other obligations undertaken under the Loan or if a written warranty made by such Company or any undertaking, certificate or document signed by it or supplied under the Loan by any person is shown to be inaccurate, to the extent that such inaccuracy has a material impact on the position of such Company, 5) if the BANK OF FRANCE ("BANQUE DE FRANCE") ceases to recognise such Company's signature, 6) if such company is dissolved, subject to a voluntary winding-up, or ceases to trade or to make payments, 7) in the event of administration or judicial liquidation, or, generally, any collective compromise proceedings relating to the liabilities of such Company. B\ The Bank reserves the right to declare the acceleration of all the sums due from all the Borrowing Companies (except for RHONE-POULENC S.A.) as regards principal, interest, default interest, fees, costs and expenses, and no other drawing may be made by any Borrowing Company (other than RHONE-POULENC S.A.) in the following circumstances: 1) failure to make payment within fifteen days following receipt of a request for payment sent by the Bank to RHONE- POULENC RORER INC as guarantor, of the sums not settled by any one of RHONE-POULENC RORER S.A., RHONE-POULENC RORER LTD and RHONE-POULENC RORER GmbH, 2) if payment is not made by RHONE-POULENC RORER INC of any sum due under the Loan on its due date, and such default is not made good within fifteen days after receipt of a notice by the Bank to such company by registered letter, 3) if payment is not made by RHONE-POULENC RORER INC on their due dates of sums due to any party under other borrowings, and such default in payment has caused the acceleration of such borrowings. Acceleration shall not be declared if the debt is validly disputed or if the sums involved are of a nominal amount of less than USD 10m or its equivalent. 4) If RHONE-POULENC RORER INC does not comply with any of its other obligations undertaken under the Loan or if a written warranty made by such company or any undertaking, certificate or document signed by it or supplied under the Loan by any person is shown to be inaccurate, to the extent that such inaccuracy has a material impact on the position of RHONE-POULENC RORER INC, 5) if the BANK OF FRANCE ("BANQUE DE FRANCE") ceases to recognise RHONE-POULENC RORER INC's signature, 6) if RHONE-POULENC RORER INC is dissolved, subject to a voluntary winding-up, or ceases to trade or to make payments, 7) in the event of administration or judicial liquidation, or, generally, any collective compromise proceedings relating to the liabilities of RHONE-POULENC RORER INC. Any sums that shall have become payable under paragraphs A/ and B/ shall bear interest at the rate applied during the current drawing or renewal period. This rate shall be increased by 1% in the event that the repayment of the sums does not take place within eight days as from the due date; this provision shall not constitute consent to late payment. Any interest payable that is outstanding for a whole year shall be capitalised in accordance with Article 1154 of the Civil Code. ARTICLE X - UNDERTAKINGS OF THE BORROWING COMPANIES So long as any one of the Borrowing Companies shall be capable of being a debtor hereunder, it shall: - - provide to the Bank as soon as possible and at the latest within 90 days from the Ordinary General Meeting approving its accounts, two copies of its annual balance sheets, profit and loss accounts and documents attached thereto (consolidated accounts so far as RHONE-POULENC S.A. and RHONE-POULENC RORER INC are concerned), - - inform the Bank, as soon as possible, of any fact that may be capable of affecting the size or value of its assets to a material extent, - - keep the Bank informed of any changes to its bye-laws that may be capable of affecting this loan by providing the new bye-laws within one month from the resolution of shareholders approving this change, - - immediately inform the Bank of changes to the powers of the persons authorised to act on its behalf, - - undertake not to grant or allow to exist as security for any future borrowings in an amount greater than 30 million US dollars or as security for the guarantee of such a debt, any mortgage, charge, pledge or any other right whatsoever over the whole or any part of its assets or income, present or future, unless the repayment or payment of all sums that may be due under this Loan enjoys the same priority as such security, with the exception of any security granted: - - on an asset acquired after the date of signature of this Agreement for the sole purpose of financing such acquisition and to secure payment of sums not exceeding in principal the cost of such acquisition, - - to CREDIT NATIONAL, the EUROPEAN INVESTMENT BANK, the FONDS INDUSTRIEL DE MODERNISATION, the FONDS DE DEVELOPPEMENT ECONOMIQUE ET SOCIAL, or any other financial institution controlled by the French State or the European Economic Community and which, by law or its common practice, requires such security. Further, so long as any of the Borrowing Companies shall be capable of being a debtor hereunder, RHONE-POULENC RORER INC shall give prior notice to the Bank of any planned reduction in its direct or indirect shareholding in the share capital of the Borrowing Companies (other than RHONE-POULENC S.A.) which shall result in reducing its shareholding such that any such company shall become a subsidiary that is less than 50% owned. ARTICLE XI - CHANGES OF CIRCUMSTANCE The terms of this Agreement should be read as requiring full payment to the Bank of all amounts falling due thereunder. If interest or fees payable under the Loan become liable to any duty, levy or tax whatsoever to which they are not currently subject, the Borrower or any one of the Borrowing Companies undertakes to pay the amount thereof, if evidence thereof is given by the Bank, at the mere request of the latter, such that the Bank shall bear no part thereof. Accordingly, the possible lifting of or decrease in such new charges shall also be passed on to the Borrowing Companies. The occurrence of new circumstances of a monetary, financial, banking or fiscal nature resulting from legal or regulatory provisions or directives, recommendations or interpretations by an official authority or a professional organisation that results in the Bank incurring a new obligation leading to an increased cost or the loss of a gain, linked directly or indirectly to the transactions under this Agreement such as, for example, the obligatory setting aside of reserves or making deposits, a quantitative regulation of the loan, the introduction or increase of liquidity ratios, own funds or other matters relating to the whole of the assets or liabilities (including off balance sheet liabilities), shall result in a renegotiation of the terms. In the event of disagreement at the end of a thirty day negotiation period, commencing on the date of the despatch by the Bank of a registered letter informing the Borrower of the occurrence of an event bringing this clause into effect, each party shall be entitled to repudiate the facility forthwith. In such event, the Borrowing Companies shall bear the supplementary cost and/or the loss of a gain referred to in the above paragraph incurred by the Bank during such thirty day period. RHONE-POULENC RORER INC shall secure the division thereof between the Borrowing Companies. ARTICLE XII - APPLICABLE LAW The provisions of this confirmed Credit are governed by French law, and the Courts of PARIS alone shall be competent to hear and resolve any litigation, dispute or difficulty that may occur between the parties in relation to the interpretation and carrying out of the provisions of this Agreement. ARTICLE XIII - MISCELLANEOUS The Borrower shall bear all costs, levies and taxes, fees, interest or other sums payable by reference to this Agreement or resulting therefrom or consequent thereupon, and shall secure the division thereof between the Borrowing Companies. ARTICLE XIV - ELECTION OF RESIDENCE Any notice concerning the confirmed Credit shall be sent: - - to the Borrower at the Registered Office of RHONE-POULENC RORER S.A., 20 Avenue Raymond Aron, 92165 ANTONY CEDEX, where an election in respect of residence is made, - - to the Bank at its LA DEFENSE Branch, where an election in respect of residence is made. Signed in PARIS, on 15th June 1993 in two original copies BANQUE NATIONALE DE PARIS RHONE-POULENC RORER INC /s/ Ervin /s/ Alain /s/ Patrick ROSENBERG CHANTEREAU LANGLOIS Ervin Alain Patrick ROSENBERG CHANTEREAU LANGLOIS Exhibit 10(b) FIRST SUPPLEMENTAL AGREEMENT TO THE AGREEMENT OF 15TH JUNE, 1993 BETWEEN: BANQUE NATIONALE DE PARIS, a "societe anonyme" with a share capital of FRF 4,751,153,975, whose registered office is at 16 Boulevard des Italiens, 75009 Paris, registered with the Paris Registry of Commerce and Companies under number B 662 042 449, represented by: - - Mr. Jean-Daniel WURTZ, Manager of the Department - - Mr. Alain CHANTEREAU, Assistant Manager (the "Bank", if not referred to by name) OF THE FIRST PART, AND: RHONE-POULENC RORER INC, a "societe anonyme" with a share capital of USD, whose registered office is at 500 Arcola Road, COLLEGEVILLE, PENNSYLVANIA 19426, UNITED STATES OF AMERICA, represented by: Mr. Philippe MAITRE, Corporate Treasurer (the "Borrower", if not referred to by name) OF THE SECOND PART, On 15th June, 1993 RHONE-POULENC RORER INC and the Bank entered into an Agreement (the "Agreement"), making available to RHONE- POULENC RORER INC a loan (the "Loan"), in a maximum amount of USD 200,000,000, under which drawings may be made in FRF, USD, GBP and DEM. RHONE-POULENC RORER S.A., RHONE-POULENC RORER LIMITED and RHONE-POULENC RORER GmbH may also make drawings under the Loan, subject to certain conditions; RHONE-POULENC RORER INC has guaranteed the indebtedness of such companies under a guarantee signed on 15th June, 1993. RHONE-POULENC S.A. may also make drawings thereunder. At the request of RHONE-POULENC RORER INC, BNP agrees that the amount of the loan should be increased, its duration be extended, and to amend the rate of the margin contained in the interest rates and the commitment fee. At the request of RHONE-POULENC RORER INC, BNP also agrees that, subject to certain conditions, the subsidiaries of RHONE-POULENC RORER INC that are more than 50% owned by the company, other than those already referred to in the Agreement, may make drawings under the Loan. WHEREAS IT IS AGREED AS FOLLOWS: ARTICLE I 1. The maximum amount of the loan defined in article I of the Agreement is increased to a maximum amount of USD 250,000,000 (TWO HUNDRED AND FIFTY MILLION US DOLLARS) or its equivalent in any other currency in which drawings may be made under the terms of the Agreement. 2. As a consequence, the sum referred to in article VI of the Agreement is replaced by USD 250,000,000 (TWO HUNDRED AND FIFTY MILLION US DOLLARS). ARTICLE II 1. The duration of the loan as defined in article II of the Agreement is extended until 13.04.2000. 2. As a consequence, the date referred to in article III of the Agreement is replaced by the date 13.04.2000. ARTICLE III The margin of 0.25% referred in article VII - "CONDITIONS - Interest" is decreased to 0.175%, provided that this reduction shall come into effect at the end of each interest period current at the date of entry into effect of this supplemental agreement. ARTICLE IV The commitment fee of 0.20% referred to in article VII of the Agreement is reduced to 0.125% per annum as from 15th June, 1995. ARTICLE V In the event that RHONE-POULENC S.A. reduces its direct or indirect shareholding in the share capital of RHONE-POULENC RORER INC to a level less than 51%, the terms set out in articles III and IV of this supplemental agreement shall be renegotiated at the request of BANQUE NATIONALE DE PARIS within a maximum margin of 0.075%. ARTICLE VI Drawings under the Loan by RHONE-POULENC RORER S.A., RHONE- POULENC RORER LTD and RHONE-POULENC RORER GmbH shall not exceed a maximum principal amount of USD 200,000,000 (TWO HUNDRED MILLION US DOLLARS) or its equivalent in one of the permitted currencies under the Agreement, and shall be repaid by 15th June, 1997, until the Guarantee of 15th June, 1993, attached as schedule I to the Agreement, has been amended by a supplemental agreement on the terms of schedule I hereto. ARTICLE VII Drawings may be made under the Loan by the subsidiaries of RHONE- POULENC RORER INC that are more than 50% owned by that company, in addition to those already set out in Article I of the Agreement, subject to the following conditions: - - the prior written agreement of RHONE-POULENC RORER INC - - the prior written agreement of the Bank - - the prior receipt by the Bank of a letter from the relevant subsidiary under which it enters into a direct undertaking to the Bank, in the form of Schedule II to the Agreement. The terms and conditions agreed with RHONE-POULENC RORER INC shall apply to the relevant subsidiary. - - the prior grant of a guarantee by RHONE-POULENC RORER INC to BANQUE NATIONALE DE PARIS in respect of the obligations of the relevant subsidiary relating to the Loan, in the form of the draft which shall be sent by the Bank to RHONE-POULENC RORER INC at that time. This guarantee shall be duly authorised by the Board of Directors of RHONE-POULENC RORER INC. - - the prior signature of a supplement to the Agreement authorising the relevant subsidiary to make drawings under the Loan. ARTICLE VIII On the basis of a drawing made on 12.04.1995 for a period of 3 months, the complete drawing of this loan in French francs would show an effective global rate of 8.12% per annum, calculated on the proportional basis. ARTICLE IX All the provisions of the Agreement that shall not have been amended by this Supplemental Agreement shall remain in full force and effect. ARTICLE X This Supplemental Agreement shall come into force once the agreement of the subsidiaries of RHONE-POULENC RORER INC with the Bank by way of acceptance of the commitments set out in schedule II to the Agreement has been obtained. Signed in PARIS, on 13th April 1995 in two original copies BANQUE NATIONALE DE PARIS RHONE-POULENC RORER INC /s/ Jean-Daniel WURTZ /s/ Alain CHANTEREAU /s/ Philippe Maitre Jean-Daniel WURTZ Alain CHANTEREAU Philippe Maitre Exhibit 10(c) ENGLISH TRANSLATION FOR INFORMATION ONLY AMENDMENT NO. 2 TO THE AGREEMENT OF 15TH JUNE, 1993 BETWEEN THE UNDERSIGNED: BANQUE NATIONALE DE PARIS, whose registered office is at 16, boulevard des Italiens, 75009 Paris, represented by Messrs Philippe Arnold and Jean-Daniel Wurtz, duly authorised hereinafter referred to as the "Bank" OF THE ONE PART AND RHONE-POULENC RORER INC. whose registered office is at Collegeville, 500 Arcola Road, Pennsylvania (U.S.A.), represented by Mr. Philippe Maitre hereinafter referred to as the "Client" OF THE OTHER PART WHEREAS: By an agreement dated 15th June, 1993 the Bank granted to the Client and certain of its subsidiaries a credit facility (hereinafter referred to as the "Credit"). The said agreement was amended by Amendment no. 1 dated 13th April, 1995. The said agreement as so amended is hereinafter referred to as the "Agreement". At the Client's request, the Bank has agreed to amend the Agreement anew in accordance with the following provisions. Expressions defined in the Agreement have the same meaning as in this amendment (hereinafter referred to as "Amendment no. 2"). NOW IT IS HEREBY AGREED AS FOLLOWS: CLAUSE 1 SPECIAL PERIOD During the period of seven months (hereinafter referred to as the "Special Period") which will commence upon delivery by the Client to the Bank (including by fax) of a certified copy of an extract of the minutes of a meeting of the Board of Directors of the Client ratifying the Amendment no. 2, such copy extract to be delivered to the Bank in any event not later than 11th September, 1995, the following provisions shall be deemed to be contained in the Agreement, any contrary provision being inapplicable until the expiry of the Special Period. (A) BORROWER Only Rhone-Poulenc Rorer Inc. shall be entitled to use the Credit. (B) AMOUNT OF THE CREDIT The amount of the Credit referred to, in particular, in Clauses I and VI of the Agreement, is increased during the Special Period to 1,700,000,000 United States dollars or the equivalent of such amount in Deutsche Marks, French Francs or Pounds Sterling. (C) PURPOSE OF THE CREDIT The exclusive purpose of the Credit shall be the financing or refinancing in whole or in part of (i) the acquisition price of a group of companies whose dominant activity is similar or complementary to that of the Client and all or some of whose holding company's share capital is listed, (ii) the indebtedness (including the preferred shares currently issued by the Client) of the Client or any of its subsidiaries, (iii) the expenses associated with such acquisition and (iv) any procedures related to buying out minorities. (D) TERMS The financial terms of the Credit shall remain unchanged except, during the Special Period, firstly, in respect of the amount by reference to which they are to be taxed and, secondly, in the following respects:- (i)the Bank will receive from the Client a flat fee of USD 150,000 in respect of the preparation and costs incurred in respect of the Amendment no. 2, payable on the first day of the Special Period; (ii) the commitment commission provided for in the Agreement shall be payable monthly in advance. By way of illustration, by reason of the temporary increase in the amount of the credit and on the basis of a maximum drawing on 4th August, 1995 in FRF for 3 months, the global effective rate calculated on the proportional basis is 6.33% per annum. (E) DURATION OF DRAWINGS The Credit may be used subject to 2 business days, in the case of FRF, (prior to 11 a.m.) and 3 business days, in the case of USD, DEM or GBP, notice (prior to 11 a.m.) by way of drawings or renewals of drawings denominated in USD, FRF, DEM or GBP with a minimum duration of 7 days and a maximum duration equal to the remainder of the Special Period. The drawing date means the date on which funds are made available. (F) INTEREST As regards any drawing period which is not an integral multiple of 1 month, other than 7 day USD drawings or renewals, the applicable rate shall be the sum of (i) the Bank's offered rate in Paris for the relevant duration and currency, on the preceding business day, in the case of FRF, and two business days prior thereto, in the case of foreign currencies and (ii) a margin of 0.175% per annum. In the case of 7 day USD drawings or renewals, the reference rate shall be determined on the basis of the average of the rates published by NatWest, Bank of Tokyo and Barclays for 1 week on Reuter LIBOR page at 11 A.M. (London time) 2 business days prior to the drawing date, plus a margin of 0.175% per annum. (G) EVENTS OF DEFAULT AND UNDERTAKINGS Clause IX of the Agreement shall not apply during the Special Period. In addition, failure by the Client to comply with its obligations under Clause X of the Agreement shall not be the subject of any sanction, claim or procedure whatsoever by the Bank. (H) CHANGE OF CIRCUMSTANCES In the event of any of the circumstances described in the third paragraph of Clause XI of the Agreement arising during the Special Period, the Client shall be entitled to require the Credit to be maintained and the Bank shall not be entitled to repudiate it, provided that all costs and expenses suffered by the Bank as a result thereof shall be borne by the Client. CLAUSE 2 OTHER PROVISIONS OF THE AGREEMENT The provisions of the Agreement which are not modified by the above provisions shall remain in full force and effect. CLAUSE 3 EXPIRY OF THE SPECIAL PERIOD With effect from the expiry of the Special Period, the initial provisions of the Agreement shall again become applicable as they subsisted prior to modification by Amendment no. 2. CLAUSE 4 APPLICABLE LAW Clause XII of the Agreement also applies to the Amendment no. 2. Made in Paris (France) on 7th August, 1995 /s/ P. Arnold /s/ J.D. Wurtz /s/ P. Maitre _______________________________ _________________________ P. Arnold J.D. Wurtz P. Maitre Banque Nationale de Paris Rhone-Poulenc Rorer Inc. Exhibit 10(d) RHONE-POULENC RORER INC. LOAN FACILITY AGREEMENT dated 7th August, 1995 SOCIETE GENERALE SLAUGHTER AND MAY 112, AVENUE KLEBER 75116 PARIS THIS AGREEMENT IS MADE THE 7TH DAY OF AUGUST 1995 BETWEEN SOCIETE GENERALE, a societe anonyme with a share capital of FRF 2,498,779,170, whose registered office is at 29, boulevard Haussmann, 75009 Paris, represented by Mr. Gerard GICQUEL (hereinafter referred to as the "Bank") OF THE ONE PART AND RHONE-POULENC RORER INC., a company with a share capital of USD 429 million whose registered office is at Collegeville, 500 Arcola Road, Pennsylvania, United States of America, represented by Mr. Philippe Maitre, Corporate Treasurer, (hereinafter referred to as the "Client") OF THE OTHER PART NOW IT IS HEREBY AGREED AS FOLLOWS: CLAUSE 1 - DEFINITIONS The following definitions shall have the following respective meanings, unless the context other requires:- "Available Amount" means, on any date, the amount of the Facility less the aggregate amount of the Drawings outstanding. "Business Day" means a whole day not being a Saturday on which the interbank market is open or banks are open (i) in Paris, in the case of French Franc Drawings and (ii) in London, Paris and the principal financial centre of the currency of the Drawing, in the case of any other Drawing. "DEM" means Deutsche Marks. "Drawing" means a Drawing made under the Facility or, as the case may be, the amount thereof for the time being outstanding. "Facility" means the unconditional, irrevocable, confirmed revolving facility made available by the Bank to the Client the maximum amount whereof is stated in Clause 3. "FRF" means French Francs. "GBP" means Pounds Sterling. "Reference Banks" means (i) in the case of DEM, Bayerische Landesbank, Commerzbank, Deutsche Bank and Dresdner Bank, (ii) in the case of FRF, Caisse Centrale des Banques Populaires, Caisse des Depots et Consignations, Caisse Nationale du Credit Agricole and Credit Commercial de France, (iii) in the case of GBP, Barclays Bank, Lloyds Bank, Midland Bank and National Westminster Bank and (iv) in the case of USD, Chase Manhattan Bank, Chemical Bank, Citibank and J.P. Morgan. "TMP" means the average rate recorded in day to day transactions between banks on the French inter-bank market and weighted by volume, as published by the Banque de France and currently available on Telerate page 3205. "USD" means United States Dollars. CLAUSE 2 - PURPOSE The object of the Facility shall be the financing or refinancing in whole or in part of (i) the acquisition price of a group of companies whose dominant activity is similar or complementary to that of the Client and all or some of whose holding company's share capital is listed, (ii) the indebtedness (including share capital which may be repurchased or redeemed) of the Client or any of its subsidiaries, (iii) the expenses associated with such acquisition and (iv) any procedures related to buying out minorities. CLAUSE 3 - AMOUNT AND DURATION OF THE FACILITY The Bank hereby grants to the Client an unconditional, irrevocable, confirmed revolving loan facility in the maximum amount of 1,100,000,000 United States Dollars or its equivalent in Deutsche Marks, French Francs and Pounds Sterling. Drawings under the Facility may be made during the period of seven months (hereinafter referred to as the "Availability Period") commencing on the day following the date of delivery (which shall not be made later than 60 days after the date of this Agreement) to the Bank of a certified copy of an extract of the minutes of the Board of Directors deciding on the principle of the acquisition referred to in Clause 2 and ratifying the signature of this Agreement by Mr. Philippe Maitre. CLAUSE 4 - DRAWINGS 4.1 - NOTICE OF DRAWING Each Drawing shall be made on a Business Day. Any request for a Drawing must be notified to the Bank not later than 10 a.m. (Paris time) on the Business Day prior to the proposed Drawing Date, in the case of FRF Drawings, and 2 Business Days in the case of any other Drawings. Any request for renewals shall be subject to the same notice. In the case of large Drawings, the Client shall, to the extent possible, inform the Bank as early as possible prior thereto. Notification of a request for a Drawing shall be given by telephone and shall be confirmed by fax by the Client in the form set out in the Schedule and any such fax shall be as effective between the parties as if it were an original. Subject to Clauses 5.3.1 and 5.3.4, the notice of Drawing duly signed by authorised persons shall irrevocably bind the Client which shall make the Drawing on the date stipulated in the notice of Drawing. 4.2 - DURATION AND AMOUNT OF EACH DRAWING Drawings shall not exceed the Available Amount at any given time and may only be made for a period of seven days, one month, three months or six months, and all amounts due in respect thereof shall be paid or repaid not later than the last day of the Availability Period. The amount of each Drawing shall not be less than USD TEN MILLION, or the equivalent thereof for Drawings in DEM, FRF or GBP. The Client shall, to the extent reasonably possible, use its best endeavours to keep the number of Drawings outstanding at any time to a minimum. Each Drawing shall be repaid on the last day of the relevant Drawing period or, if such day is not a Business Day, on the following Business Day. 4.3 - ACCOUNTING AND AVAILABILITY OF FUNDS In order to keep accounting records of the implementation of this Facility the Bank shall open in the name of the Client a special account which shall be a non-running, simple accounting mechanism which shall not have the legal effects of a running account ("compte courant"). The amount of each Drawing shall be entered by the Bank as a credit in the current account of the Client. The transactions resulting from the Drawings and repayments of the credit shall be excluded from all running accounts which the Client has or may have with the Bank. The Client acknowledges that the making and repayment of borrowings hereunder shall be adequately evidenced in the accounts of the Bank. CLAUSE 5 - FEES - INTEREST 5.1 - MANAGEMENT FEE The Client shall pay to the Bank, on the date of signature of this Agreement, a management fee in an amount (excluding tax) of 150,000 US Dollars. 5.2 - FACILITY FEE A Facility fee calculated on the total amount of the Facility, being U.S.D. 1,100,000,000 subject to Clause 8.2 (whether or not any Drawing is made) on a 360-day year basis shall be paid to the Bank quarterly in advance, and the first payment shall be made on the date of signature of this Agreement. The Facility fee shall be at a rate of 1/8 of 1% per annum until the expiry of this Agreement. 5.3 - INTEREST 5.3.1 - Calculation of interest on Drawings in French Francs Subject to the provisions of Clause 5.3.7, the reference rate applicable to Drawings of 1, 3 or 6 months is the corresponding PIBOR as defined in Clause 5.3.2. As regards seven day Drawings, the reference rate shall be determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which deposits are offered in the Paris inter-bank market by the relevant Reference Banks on the Business Day preceding the proposed Drawing Date at about 11.00 a.m. (Paris time) for a duration and in an amount equal to those of the relevant Drawing. The Bank shall forthwith inform the Client of such determination by telephone, whereupon the Client shall be entitled, if the rate so determined is not acceptable to it, to cancel the Drawing or select a duration of 1, 3 or 6 months therefor. Interest in respect of any FRF Drawing shall be calculated at the aggregate of the reference rate and a margin of 0.175% per annum on the basis of the exact number of days in the Drawing period divided by 360. Interest shall be payable without deduction for impost, taxes and/or withholding at source. Interest shall be payable on the last day of the relevant Drawing period or, if such day is not a Business Day, on the following Business Day. 5.3.2 - Definition of PIBOR PIBOR, in respect of any French Franc denominated Drawing means the annual rate published by TELERATE (currently page 20041) under the aegis of the Association Francaise des Banques ("AFB") at about 11.30 a.m. (Paris time) on the Business Day preceding the proposed Drawing date or the date of renewal thereof, as being the rate at which French Franc deposits are offered on the Paris Interbank Market for the period of such Drawing or renewal, as the case may be. 5.3.3 - Non-publication of PIBOR If PIBOR, as calculated and published by the AFB, ceases to be published for any reason whatsoever the Bank shall forthwith notify the Client by any method and the following provisions shall apply:- - if a reference rate replacing PIBOR is published under the aegis of the AFB, such rate shall be immediately applicable to any new Drawings and renewals thereof; - otherwise, the Bank and the Client shall negotiate in order to agree a new reference rate for 1, 3 or 6 months Drawings. In the event of failure to agree and for so long as no mechanism for the determination of a reference rate for 1, 3 or 6 month Drawings shall not have been officially established, Drawings may only be made for periods of seven days and interest shall accrue thereon in accordance with the second paragraph of Clause 5.3.1. 5.3.4. - Calculation of interest on Drawings in USD, DEM or GBP Drawings in USD, DEM or GBP shall have a duration of seven days, 1, 3 or 6 months. The Client may request two Business Days prior to the end of each Drawing period the conversion in whole or in part of one or more Drawings into a currency of its choice (being USD, DEM, FRF or GBP) without exceeding the Available Amount, subject to such conversion not resulting in the Facility amount being exceeded (by virtue of a change of parity between the currencies used and United States Dollars) by 5% or more of the total Facility amount Provided that the Client shall eliminate such excess by adjusting the amount of subsequent Drawings to the extent necessary. Subject to the preceding paragraph, repayment of each Drawing shall be made in the currency in which such Drawing is denominated. Subject to Clause 5.3.8, the reference rate applicable to Drawings in USD, DEM or GBP for a duration of 1, 3 or 6 months shall be LIBOR as defined in Clause 5.3.5. As regards seven day Drawings, the relevant reference rate shall be determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which deposits are offered in the London inter-bank market by the relevant Reference Banks two Business Days preceding the proposed Drawing date at about 11.00 a.m. (London time) for a duration and in an amount equal to those of the relevant Drawing. The Bank shall forthwith inform the Client of such determination by telephone, whereupon the Client shall be entitled, if the rate so determined is not acceptable to it, to cancel the Drawing or select a duration of 1, 3 or 6 months therefor. Interest in respect of any USD, DEM or GBP Drawings shall be calculated at the aggregate of the relevant reference rate and a margin of 0.175% per annum in accordance with euromarket practice on a 365/360 basis not later than the first day of each period selected, except that it will be calculated on a 365/365 basis for GBP. Interest shall be payable without deduction for impost, taxes and/or withholding at source. Interest shall be payable on the last day of the relevant Drawing period or, if such day is not a Business Day, on the following Business Day. In the event that, at the date for repayment of a Drawing in USD, DEM or GBP, the relevant currency shall not be available on the London interbank market, the Bank and the Client shall consult with a view to reaching agreement on a replacement currency for the payment of principal and interest in respect of such Drawing and, failing such agreement within two Business Days, FRF shall be the replacement currency. 5.3.5 - Definition of LIBOR LIBOR (London Interbank Offered Rate), in respect of any USD, DEM or GBP denominated Drawing, means the annual rate published by TELERATE (currently page 3750) under the aegis of the British Bankers Association at about 11.00 a.m. (London time) two Business Days prior to the proposed Drawing date or date of renewal thereof, as being the rate at which deposits in the relevant currency are offered on the London Interbank Market for the period of such Drawing or renewal, as the case may be. 5.3.6 - Unavailability of LIBOR In the event that the Bank shall be unable to determine LIBOR, the Bank shall promptly notify the Client, whereupon the Client and the Bank shall commence negotiations with a view to finding a mutually acceptable solution. The Bank shall be under no obligation to pursue such negotiation after the expiry of a period of 30 days after the date of such notice. In the absence of agreement, the applicable reference rate shall be determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which deposits are offered in the London inter-bank market by the Reference Banks two Business Days preceding the proposed Drawing Date at about 11.00 a.m. (London time) for a duration and in an amount equal to those of the relevant Drawing. 5.3.7 - 1, 3 and 6 month French Franc Drawings substitute rate In the event that, on the Business Day prior to a proposed Drawing date or date of renewal thereof, the Bank shall determine, as a result of consulting the relevant Reference Banks in Paris, that the arithmetic mean of the rates at which FRF deposits are offered by them in the Paris inter-bank market for a duration and in an amount equivalent to those of the relevant Drawing is higher than the PIBOR which would otherwise apply to such Drawing by more than 1/16% per annum, the applicable reference rate shall be that determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which FRF deposits are offered in the Paris inter-bank market by such Reference Banks on such Business Day at about 11.30 a.m. (Paris time) for such duration and amount. 5.3.8 - 1, 3 or 6 month DEM or GBP Drawings substitute rate In the event that, on the second Business Day prior to the date on which funds are to be made available in respect of a Drawing or a renewal thereof, the Bank shall determine, as a result of consulting the relevant Reference Banks in London, that the arithmetic mean of the rates at which deposits in the relevant currency are offered by them in the London inter-bank market for a duration and in an amount equivalent to those of the relevant Drawing is higher than the LIBOR which would otherwise apply to such Drawing by more than 1/16% per annum, the applicable reference rate shall be that determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which deposits in the relevant currency are offered in the London inter-bank market by such reference banks on such Business Day at about 11.30 a.m. (London time) for such duration and amount. 5.3.9 - Reference Banks Whenever a reference rate shall be set on the basis of Reference Banks' quotations, the Bank shall notify such quotations to the Client. The Bank's determination of reference rates on such basis, shall, in the absence of manifest error, be conclusive. In the event that no or only one Reference Bank provides any quotation prior to the making or renewal of any Drawing, the reference rate for such Drawing shall be the annual rate which the Bank shall certify to the Client as representing the cost of funding such Drawings from external sources, such certificate to be accompanied by relevant evidence of such cost. 5.4 - PLACE OF PAYMENT All payments to be made under this Agreement shall be made by transfer to the account of the Bank:- (i) in the case of DEM, with Societe Generale Frankfurt - SOGE DE FF, Mainzer Landstrasse 36 Postfach 101935, D6000 Frankfurt Am Main 1 (Germany) under reference Rhone-Poulenc Rorer/Franklin, Mme Francoise Graviche-Loiseau - Eurocredits; (ii) in the case of FRF, with Societe Generale Paris - SOGE FR PP, under reference Rhone-Poulenc Rorer/Franklin (Code Guichet 699-3), Mme Francoise Graviche-Loiseau - Eurocredits; (iii) in the case of GBP, with Societe Generale London - SGE GB 2L, Exchange House Primrose Street, London EC2A 2HT (United Kingdom), under reference Rhone-Poulenc Rorer/Franklin, Mme Francoise Graviche-Loiseau - Eurocredits; (iv) in the case of USD, with Societe Generale New York - SOGE US 33, currently at 1221 avenue of the Americas, New York N.Y. 10020 (United States), no. 0152595 under reference Rhone-Poulenc Rorer/Franklin, Mme Francoise Graviche-Loiseau - Eurocredits. The Client irrevocably authorises the Bank to deduct the amount required for payment of all sums due under this Agreement from its current account at SOCIETE GENERALE OPERA, 6, rue Auber, 75009 Paris. CLAUSE 6 - EFFECTIVE GLOBAL RATE For the purposes of sections L. 313-3 et seq. of the French Consumers Code ("Code de la Consommation") and the order ("decret") 85-944 of 4th September, 1985 and assuming a maximum borrowing denominated in USD for the term of the Facility and otherwise on the financial terms set out in this Agreement, the Bank hereby notifies the Client, by way of example, that LIBOR for one month being 5.875%, the effective global rate is therefore 6.29% per annum. The effective global rate applicable for each Drawing will depend on the manner in which Drawings are made under this Agreement. CLAUSE 7 - CHANGES IN CIRCUMSTANCES The terms for remunerating the Bank in respect of the Facility have been fixed on the basis of the regulations applicable on the date of signature of this Agreement and the Client's membership of the RHONE-POULENC Group. If RHONE-POULENC S.A.'s direct or indirect participation in the capital of RHONE-POULENC RORER INC. falls below 50%, the Bank and the Client shall agree either on a prepayment of the Facility together with interest and all other amounts relating thereto or on increased terms, which in any event shall be a maximum of PIBOR (for French Franc Drawings) or LIBOR (for USD, DEM or GBP Drawings) plus 0.25% and a Facility fee of 0.25% per annum. If, following a new legislative or regulatory provision or interpretation by a competent authority, such provision or authority being French, European, United States or foreign, whereby the Bank is subject to any tax, monetary, financial or banking measure resulting in an additional cost relating to this Agreement (arising, for example, from reserves or obligatory deposits, share capital, liquidity or other ratios or any tax, or other taxation, except corporation tax) resulting in a reduction of payment to the Bank or if such reduction of payment results from a judicial decision, the following provisions shall apply:- - - the Bank shall notify the Client in writing, indicating the estimated increase in costs under this Agreement or of the reduction of its payment in respect of this Agreement and the required indemnity, enclosing documents providing evidence thereof, - - the Client and the Bank, on the initiative of the Bank shall consult as soon as practicable and negotiate during a maximum period of 30 days from the date of the said notice in order to reach a solution which permits the resolution of any difficulties arising, in the same spirit of cooperation as presided over this Agreement. In the event of disagreement at the end of the period of consultation, the Client shall have the option within a maximum period of seven business days following the last day of the period of 30 days either:- - - to request the Bank to continue the Facility, undertaking nevertheless to be wholly liable for the additional cost incurred by the Bank from the day such cost is incurred by the Bank; or - - to terminate the Facility by prepayment of all sums due in principal, interest and fees, increased as necessary by all fees and all costs incurred by the Bank relating to such prepayment (including and upon presentation of evidence, the estimated cost of replacing the funds on the date of prepayment). CLAUSE 8 - CANCELLATION 8.1 AUTOMATIC CANCELLATION The Facility shall expire 60 days after the date of signature of this Agreement in the event of the Client failing to deliver the certified copy extract referred to in Clause 3 prior to the expiry of such 60 days. 8.2 VOLUNTARY CANCELLATION The Client may at any time cancel the Facility in whole or in part, subject to prior written notice to the Bank. However, such cancellation shall only have effect seven calendar days after receipt of such letter by the Bank. Such cancellation shall be definitive so that the amount of the Facility shall be reduced accordingly. Consequently, the Facility fee shall cease to be due on the cancelled portion of the Facility with effect from the expiry of the quarterly period for the Facility fee during which the cancellation has taken effect. CLAUSE 9 - PREPAYMENT The Client may not prepay one or more outstanding Drawings without the prior express consent of the Bank. In the event of such consent, such prepayment may be made upon the following conditions:- - - each prepayment shall be in respect of a whole Drawing. It may only be effected on a Business Day; - - the request for prepayment by the Client shall relate to a minimum of USD 50,000,000 and shall reach the Bank with seven calendar days' prior notice; - - the Client shall indemnify the Bank for all potential losses to the Bank resulting from the difference between the interest rate applied to the relevant Drawing and the rate obtained by the Bank in replacing the funds on the market during the remaining period until the date of repayment of the Drawing. CLAUSE 10 - DEFAULT INTEREST All sums due under this Agreement shall without prior notice bear interest at TMP, in the case of French Franc amounts, or at the relevant overnight London inter-bank offered rate in the case of USD, DEM or GBP amounts plus, in each case, 1% per annum from their due date for payment until actual payment. Such provision shall not constitute a waiver of the obligation to pay on the relevant due date. Interest shall be capitalised if it is due for one year in accordance with the provisions of 1154 of the Civil Code. CLAUSE 11 - TAXES AND EXPENSES Payment of any sum due by the Client under this Agreement shall be effected net of any tax retained at source or any present or future withholding of whatever nature. The Client shall be liable for all duly evidenced expenses incurred in good faith by the Bank in the preparation, signing and performance of this Agreement up to USD 30,000. In addition, the Client shall be liable for all expenses and fees incurred by the Bank in recovering sums due by the Client. CLAUSE 12 - WAIVERS The non-exercise or late exercise by the Bank of any right arising out of this Agreement shall not constitute a waiver of that right. Any partial exercise of a right shall not preclude any further exercise of rights which have not been fully exercised. The rights provided in this Clause shall be cumulative with any right provided by law. CLAUSE 13 - DOMICILE For the performance of this Agreement, the Bank elects as its domicile the place indicated in Clause 14 and, the Client elects its registered office. CLAUSE 14 - NOTICES Any notice to be given under this Agreement shall be addressed as follows:- (i) if to the Bank, to FOR CREDIT MATTERS: Societe Generale MARC/FIN/Acq Tour Societe Generale 17 cours Valmy 92987 Paris La Defense Cedex France For the attention of Mr. Dominique LEROY/Mlle Isabelle LE BOULC'H Fax no.: (33.1) 42 13 79 13 Tel no.: (33.1) 42 13 75 98 FOR OPERATIONAL AND ADMINISTRATIVE MATTERS: Societe Generale MARC/GEF/tit/eur Tour Societe Generale 17 cours Valmy 92987 Paris La Defense Cedex France For the attention of Mlle Laurence Gaertner Fax no.: (33.1) 42 13 69 67 Tel no.: (33.1) 42 13 77 71 (ii) if to the Client, to Rhone-Poulenc Rorer Inc. 500 Arcola Road Collegeville Pennsylvania United States of America For the attention of the Corporate Treasurer or in his absence the Deputy Corporate Treasurer Fax no.: 610 454 8605 Tel no.: 610 454 3510 or, in either case, to such other address as may be notified from time to time for that purpose by the relevant party. CLAUSE 15 - GOVERNING LAW This Agreement shall be governed by French law and all disputes not resolved by common agreement shall be submitted to the non-exclusive jurisdiction of the Tribunal de Commerce of Paris. SIGNED IN PARIS, IN TWO ORIGINALS /s/ Gerard Gicquel /s/ Philippe Maitre SOCIETE GENERALE RHONE-POULENC RORER INC. Exhibit 10(e) RHONE-POULENC RORER INC. LOAN FACILITY AGREEMENT dated 7th August 1995 CREDIT LYONNAIS SLAUGHTER AND MAY 112, AVENUE KLEBER 75116 PARIS THIS AGREEMENT IS MADE THE 7TH DAY OF AUGUST 1995 BETWEEN CREDIT LYONNAIS, a French corporation with a stated capital of FRF 9,389,925,000, whose registered office is at Lyon (Rhone) 18, avenue de la Republique and whose principal office is at 19, boulevard des Italiens, 75002 Paris, registered under No. B 954 509 741, Lyon Commercial Register represented by Jean-Louis JOUBERT (hereinafter referred to as the "Bank") OF THE ONE PART AND RHONE-POULENC RORER INC., a company with a share capital of USD 429 million whose registered office is at Collegeville, 500 Arcola Road, Pennsylvania, United States of America, represented by Mr. Philippe Maitre, Corporate Treasurer, (hereinafter referred to as the "Client") OF THE OTHER PART NOW IT IS HEREBY AGREED AS FOLLOWS: CLAUSE 1 - DEFINITIONS The following definitions shall have the following respective meanings, unless the context other requires:- "Available Amount" means, on any date, the amount of the Facility less the aggregate amount of the Drawings outstanding. "Business Day" means a whole day not being a Saturday on which the interbank market is open or banks are open (i) in Paris, in the case of French Franc Drawings and (ii) in London and Paris, in the case of any other Drawing. "Drawing" means a Drawing made under the Facility or, as the case may be, the amount thereof for the time being outstanding. "Facility" means the unconditional, irrevocable, confirmed facility made available by the Bank to the Client the maximum amount whereof is stated in Clause 2. "Reference Banks" means (i) in the case of DEM, Bayerische Landesbank, Caisse des Depots et Consignations and Commerzbank, (ii) in the case of FRF, Caisse des Depots et Consignations, Caisse Nationale du Credit Agricole and Credit Commercial de France, (iii) in the case of GBP, Barclays Bank, Caisse des Depots et Consignations and Lloyds Bank and (iv) Caisse des Depots et Consignations, Chemical Bank and J.P. Morgan. CLAUSE 2 - PURPOSE The object of the Facility shall be the financing or refinancing in whole or in part of (i) the acquisition price of a group of companies whose dominant activity is similar or complementary to that of the Client and all or some of whose holding company's share capital is listed, (ii) the indebtedness (including share capital which may be repurchased or redeemed) of the Client or any of its subsidiaries, (iii) the expenses associated with such acquisition and (iv) any procedures related to buying out minorities. CLAUSE 3 - AMOUNT AND DURATION OF THE FACILITY The Bank hereby grants to the Client an unconditional, irrevocable, confirmed loan facility in the maximum amount of 1,500,000,000 United States Dollars or its equivalent in Deutsche Marks, French Francs and Pounds Sterling. Drawings under the Facility may be made during the period of seven months (hereinafter referred to as the "Availability Period") commencing on the date of delivery (which shall not be made later than 60 days after the date of this Agreement) to the Bank of a certified copy of an extract of the minutes of the Board of Directors ratifying the signature of this Agreement. CLAUSE 4 - DRAWINGS 4.1 - NOTICE OF DRAWING Each Drawing shall be made on a Business Day. Any request for a Drawing must be notified to the Bank not later than 10 a.m. (Paris time) on the Business Day prior to the proposed Drawing Date, in the case of FRF Drawings, and 2 Business Days in the case of any other Drawings. Any request for renewals shall be subject to the same notice. Notification of a request for a Drawing shall be given by the Client in the form set out in the Schedule and may be sent by fax which shall be as effective between the parties as if it were an original and the Client hereby relieves the Bank of any liability which might result from any faulty, improper or fraudulent use of such means of transmission other than by the Bank. Subject to Clauses 5.3.1 and 5.3.4, the notice of Drawing duly signed by authorised persons shall irrevocably bind the Client which shall make the Drawing on the date stipulated in the notice of Drawing. 4.2 - DURATION AND AMOUNT OF EACH DRAWING Drawings not exceeding the Available Amount may be made for a period of eight days, one month, three months or six months, and all amounts due in respect thereof shall be paid or repaid not later than the last day of the Availability Period. The amount of each Drawing shall not be less than USD FIFTY MILLION, or the equivalent thereof for Drawings in DEM, FRF or GBP. Each Drawing shall be repaid on the last day of the relevant Drawing period or, if such day is not a Business Day, on the following Business Day except that if the following Business Day falls in a new calendar month, then on the preceding Business Day. 4.3 - ACCOUNTING AND AVAILABILITY OF FUNDS In order to keep accounting records of the implementation of this Facility the Bank shall open in the name of the Client a special account which shall be a non-running, simple accounting mechanism which shall not have the legal effects of a running account. The amount of each Drawing shall be entered by the Bank as a credit in the current account of the Client. The transactions resulting from the Drawings and repayments of the credit shall be excluded from all running accounts which the Client has or may have with the Bank. The Client acknowledges that the making and repayment of borrowings hereunder shall be adequately evidenced in the accounts of the Bank. CLAUSE 5 - FEES - INTEREST 5.1 - MANAGEMENT FEE The Client shall pay to the Bank, on the date of signature of this Agreement, a management fee in an amount excluding tax of 150,000 US Dollars. 5.2 - COMMITMENT FEE A commitment fee shall be paid to the Bank in arrear every 90 days after the date of this Agreement or, if applicable, at the termination of the Availability Period, and calculated at a rate of 0.15% per annum on the daily Available Amount during the relevant 90 day period (or other such period, if applicable) on a 360-day year basis. 5.3 - INTEREST 5.3.1 - Calculation of interest on Drawings in French Francs The interest reference rate applicable to Drawings of 1, 3 or 6 months is the corresponding PIBOR as defined in Clause 5.3.2. As regards eight day Drawings, the relevant reference rate shall be determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which deposits are offered in the Paris inter-bank market by prime banks to the relevant Reference Banks on the Business Day preceding the proposed Drawing Date at about 11.00 a.m. (Paris time) for a duration and in an amount equal to those of the relevant Drawing. The Bank shall forthwith inform the Client of such determination by telephone, whereupon the Client shall be entitled, if the rate so determined is not acceptable to it, to cancel the Drawing or select a different duration therefor. Interest in respect of any FRF Drawing shall be calculated at the aggregate of the relevant reference rate and a margin of 0.325% per annum, on the basis of the exact number of days in the Drawing period divided by 360. Interest shall be paid on the last day of the relevant Drawing period or, if such day is not a Business Day, on the following Business Day, except that if the following Business Day falls in a new calendar month, then on the preceding Business Day. 5.3.2 - Definition of PIBOR PIBOR, in respect of any French Franc denominated Drawing means the annual rate published by TELERATE (currently page 20041) under the aegis of the Association Francaise des Banques ("AFB") at about 11.30 a.m. (Paris time) on the Business Day preceding the proposed Drawing or renewal date, as being the rate at which French Franc deposits are offered on the Paris Interbank Market for the period of such Drawing or renewal, as the case may be. 5.3.3 - Non-publication of PIBOR If PIBOR, as calculated and published by the AFB, ceases to be published for any reason whatsoever the Bank shall forthwith notify the Client by any method and the following provisions shall apply:- - if a reference rate replacing PIBOR is published under the aegis of the AFB, such rate shall be immediately applicable to any new Drawings and renewals thereof; - otherwise, the Bank and the Client shall negotiate in order to agree a new reference rate for 1, 3 or 6 months Drawings. In the event of failure to agree and for so long as no mechanism for the determination of a reference rate for 1, 3 or 6 month Drawings shall not have been officially established, Drawings may only be made for periods of 8 days and interest shall acrrue thereon in accordance with the second paragraph of Clause 5.3.1. 5.3.4. - Calculation of interest on Drawings in USD, DEM or GBP Drawings in USD, DEM or GBP shall have a duration of 8 days, 1, 3 or 6 months. The Client may request two Business Days prior to the end of each Drawing period the conversion of one or more Drawings, in whole or, if in part, then in minimum amounts of USD 50 million or approximate equivalents thereof in another authorised currency, into a currency of its choice without exceeding the Available Amount, subject to such conversion not resulting in the Facility amount being exceeded by virtue of a change of parity between the currencies used and United States Dollars. Subject to the preceding paragraph, repayment of each Drawing shall be made in the currency in which such Drawing is denominated. The reference rate applicable to Drawings in USD, DEM or GBP for a duration of 1, 3 or 6 months shall be LIBOR as defined in Clause 5.3.5. Provided that the Client shall pay to the Bank, in the case of any GBP Drawing, additional interest equal to the difference between the LIBOR applied to such Drawing and the actual rate at which and the LIBOR which would have applied if it had been determined on the Drawing date. As regards eight day Drawings, the relevant reference rate shall be determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which deposits are offered in the London inter-bank market by prime banks to the relevant Reference Banks two Business Days preceding the proposed Drawing date at about 11.00 a.m. (London time) for a duration and in an amount equal to those of the relevant Drawing. The Bank shall forthwith inform the Client of such determination by telephone, whereupon the Client shall be entitled, if the rate so determined is not acceptable to it, to cancel the Drawing or select a different duration therefor. Interest in respect of any USD, DEM or GBP Drawing shall be calculated at the aggregate of the relevant reference rate and a margin of 0.325% per annum, in accordance with euromarket practice on a 365/360 basis at the commencement of each period selected, except that it will be calculated on a 365/365 basis for GBP. Interest shall be payable without any deduction whatsoever, including for impost, taxes and/or withholding at source. Interest shall be paid on the last day of the relevant Drawing period or, if such day is not a Business Day, on the following Business Day except that if the following Business Day falls in a new calendar month, then on the preceding Business Day. In the event that, at the date for repayment of a Drawing in USD, DEM or GBP, the relevant currency shall not be available on the interbank market, the Bank and the Client shall consult with a view to reaching agreement on a replacement currency for the payment of principal and interest in respect of such Drawing and, failing such agreement, FRF shall be the replacement currency. 5.3.5 - Definition of LIBOR LIBOR (London Interbank Offered Rate), in respect of any USD, DEM or GBP denominated Drawing, means the annual rate published by TELERATE (currently page 3750) under the aegis of the British Bankers Association at about 11.00 a.m. (London time) two Business Days prior to the proposed Drawing or renewal date, as being the rate at which deposits in the relevant currency are offered on the London Interbank Market for the period of such Drawing or renewal, as the case may be. 5.3.6 - Unavailability of LIBOR In the event that the Bank shall be unable to determine LIBOR, the Bank shall promptly notify the Client, whereupon the Client and the Bank shall commence negotiations with a view to finding a mutually acceptable solution. The Bank shall be under no obligation to pursue such negotiation after the expiry of a period of 30 days after the date of such notice. In the absence of agreement, the applicable reference rate shall be determined by the Bank as being the average (rounded up, if necessary, to the nearest 1/16 of 1% per annum) of the rates at which deposits are offered in the London inter-bank market by prime banks to the relevant Reference Banks two Business Days preceding the proposed Drawing Date at about 11.00 a.m. (London time) for a duration and in an amount equal to those of the relevant Drawing. 5.3.7 - Evidence Whenever a reference rate shall be determined on the basis of reference banks' quotations, notice of such quotations shall, upon request by the Client, forthwith be provided by the Bank to the Client. 5.4 - PLACE OF PAYMENT All payments to be made under this Agreement shall be made by transfer to the account of Credit Lyonnais - DME, La Defense 6, Tour Credit Lyonnais Cedex 10, 92081 Paris La Defense. CLAUSE 6 - EFFECTIVE GLOBAL RATE For the purposes of sections L. 313-3 et seq. of the French Consumers Code ("Code de la Consommation") and the order ("decret") 85.944 of 4th September, 1985 and assuming a maximum borrowing for the term of the Facility by renewable Drawings of one month and the financial terms set out in this Agreement, the Bank hereby notifies the Client, by way of example, that:- - - PIBOR for one month on 3rd August, 1995, being 6.1250% per annum, the contractual interest rate is 6.45% per annum, - - the rate for a period of one month is accordingly 0.53750%, - - the effective global rate is therefore 6.45017% per annum. The effective global rate applicable for each Drawing will depend on the manner in which Drawings are made under this Agreement. CLAUSE 7 - CHANGES IN CIRCUMSTANCES The terms for remunerating the Bank in respect of the Facility have been fixed on the basis of the regulations applicable on the date of signature of this Agreement. If, following a new legislative or regulatory provision or interpretation by a competent authority, such provision or authority being French, European or foreign, whereby the Bank is subject to any tax, monetary, financial or banking measure resulting in an additional cost relating to this Agreement (arising, for example, from reserves or obligatory deposits, share capital, liquidity or other ratios or any tax, or other taxation, except corporation tax) resulting in a reduction of any amounts received or to be received by the Bank or if such reduction of any amounts received or to be received by the Bank results from a judicial decision, the following provisions shall apply:- - - the Bank shall notify the Client in writing, indicating the estimated increase in costs under this Agreement or of the reduction of its payment in respect of this Agreement and the required indemnity, enclosing documents providing evidence thereof, - - the Client and the Bank, on the initiative of the Bank shall consult as soon as practicable and negotiate during a maximum period of 30 days from the date of the said notice in order to reach a solution which permits the resolution of any difficulties arising, in the same spirit of cooperation as presided over this Agreement. In the event of disagreement at the end of the period of consultation, the Client shall have the option within a maximum period of 7 business days following the last day of the period of 30 days either:- - - to request the Bank to continue the Facility, undertaking nevertheless to be wholly liable for the additional cost incurred by the Bank from the day such cost is incurred by the Bank; or - - to terminate the Facility by prepayment of all sums due in principal, interest and fees, increased as necessary by all fees and all costs incurred by the Bank relating to such prepayment (including and upon presentation of evidence, the estimated cost of replacing the funds on the date of prepayment). CLAUSE 8 - CANCELLATION 8.1 AUTOMATIC CANCELLATION The Facility shall expire 60 days after the date of signature of this Agreement in the event of the Client failing to deliver the certified copy extract referred to in Clause 3 prior to the expiry of such 60 days, whereupon the Client shall pay the commitment fee to the Bank as if the Facility had been in force for 90 days. 8.2 VOLUNTARY CANCELLATION The Client may at any time cancel the Facility in whole or in part, subject to 15 days' prior written notice to the Bank. Such cancellation shall be definitive so that the amount of the Facility shall be reduced accordingly and the commitment fee shall cease to be due on the cancelled portion of the Facility with effect from the expiry of such notice period Provided Always that in respect of the first 90 days of this Agreement, the fee shall be due as if the Facility had remained fully in force for such 90 days. CLAUSE 9 - PREPAYMENT The Client may not prepay one or more outstanding Drawings without the prior express consent of the Bank. In the event of such consent, such prepayment may be made upon the following conditions:- - - each prepayment shall be in respect of a whole Drawing. It may only be effected on a Business Day; - - the request for prepayment by the Client shall reach the Bank with 7 calendar days' notice; - - the Client shall indemnify the Bank for all potential losses to the Bank resulting from the difference between the interest rate applied to the relevant Drawing and the rate obtained by the Bank in replacing the funds on the market during the remaining period until the date of repayment of the Drawing. CLAUSE 10 - DEFAULT INTEREST All sums due under this Agreement shall without prior notice bear interest at TMP or at the overnight rate for the relevant currency plus 1% per annum from their due date for payment until actual payment. Such provision shall not constitute a waiver of the obligation to pay on the relevant due date. Interest shall be capitalised if it is due for one year in accordance with the provisions of 1154 of the Civil Code. CLAUSE 11 - TAXES AND EXPENSES Payment of any sum due by the Client under this Agreement shall be effected net of any tax retained at source or any present or future withholding of whatever nature. The Client shall be liable for all expenses and fees incurred by the Bank in recovering sums due by the Client under this Agreement. CLAUSE 12 - WAIVERS The non-exercise or late exercise by the Bank of any right arising out of this Agreement shall not constitute a waiver of that right. Any partial exercise of a right shall not preclude any further exercise of rights which have not been fully exercised. The rights provided in this Clause shall be cumulative with any right provided by law. CLAUSE 13 - DOMICILE For the performance of this Agreement and subsequent agreements, the Bank elects as its domicile the place indicated above for payments and, the Client elects its registered office. CLAUSE 14 - GOVERNING LAW This Agreement shall be governed by French law and all disputes not resolved by common agreement shall be submitted to the non-exclusive jurisdiction of the Tribunal de Commerce of Paris. SIGNED IN PARIS, IN TWO ORIGINALS /s/ Jean-Louis Joubert /s/ Philippe Maitre Jean-Louis Joubert Phillipe Maitre CREDIT LYONNAIS RHONE-POULENC RORER INC. EX-11 3 EPS EXHIBIT 11 RHONE-POULENC RORER INC. AND SUBSIDIARIES Computation of Earnings Per Common Share (Unaudited-dollars and shares in millions except per share data) Three Months Ended September 30, ------------------- Restated 1995 1994 -------- -------- Net income per common share as reported: Net income before preferred dividend $ 112.1 $ 114.5 Less: Dividend on preferred stock (4.8) (4.9) -------- -------- Net income available to common shareholders $ 107.3 109.6 ======== Pro forma adjustments for interest and preferred dividends, net of tax effects (2.4) -------- Net income available to common shareholders, pro forma $ 107.2 ======== Average shares outstanding 134.2 134.8 ======== ======== Net income available to common shareholders per share $ .80 ======== Net income available to common shareholders per share, pro forma $ 0.80 ======== Net income per common share assuming full dilution: Net income before preferred dividend $ 112.1 $ 114.5 Less: Dividend on preferred stock (4.8) (4.9) -------- -------- Net income available to common shareholders $ 107.3 109.6 ======== Pro forma adjustments for interest and preferred dividends, net of tax effects (2.4) -------- Net income available to common shareholders, pro forma $ 107.2 ======== Average shares outstanding 134.2 134.8 Shares contingently issuable for stock plan 0.7 0.4 --------- -------- Average shares outstanding, assuming full dilution 134.9 135.2 ========= ======== Net income available to common shareholders per share, assuming full dilution $ 0.80 ========= Net income available to common shareholders per share, pro forma, assuming full dilution $ 0.79 ======== This calculation is submitted in accordance with the regulations of the Securities and Exchange Commission although not required by APB Opinion No. 15 because it results in dilution of less than 3%. EXHIBIT 11 RHONE-POULENC RORER INC. AND SUBSIDIARIES Computation of Earnings Per Common Share (Unaudited-dollars and shares in millions except per share data) Nine Months Ended September 30, -------------------- Restated 1995 1994 -------- -------- Net income per common share as reported: Net income before preferred dividend $ 298.7 $ 193.9 Less: Dividend on preferred stock (16.2) (13.8) -------- -------- Net income available to common shareholders 282.5 180.1 Pro forma adjustments for interest and preferred dividends, net of tax effects (1.6) (6.6) -------- -------- Net income available to common shareholders, pro forma $ 280.9 $ 173.5 ======== ======== Average shares outstanding 134.2 135.6 ======== ======== Net income available to common shareholders per share, pro forma $ 2.09 $ 1.28 ======== ======== Net income per common share assuming full dilution: Net income before preferred dividend $ 298.7 $ 193.9 Less: Dividend on preferred stock (16.2) (13.8) -------- -------- Net income available to common shareholders 282.5 180.1 Pro forma adjustments for interest and preferred dividends, net of tax effects (1.6) (6.6) -------- -------- Net income available to common shareholders, pro forma $ 280.9 $ 173.5 ======== ======== Average shares outstanding 134.2 135.6 Shares contingently issuable for stock plan 0.7 0.5 -------- -------- Average shares outstanding, assuming full dilution 134.9 136.1 ======== ======== Net income available to common shareholders per share, pro forma, assuming full dilution $ 2.08 $ 1.27 ======== ======== This calculation is submitted in accordance with the regulations of the Securities and Exchange Commission although not required by APB Opinion No. 15 because it results in dilution of less than 3%. EX-15 4 CONSENT EXHIBIT 15 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 RE: Rhone-Poulenc Rorer Inc. Quarterly Report on Form 10-Q We are aware that our report dated October 20, 1995, on our review of interim financial information of Rhone-Poulenc Rorer Inc. ("the Company"), for the period ended September 30, 1995, and included in the Company's quarterly report on Form 10-Q for the quarter then ended is incorporated by reference in the registration statements of the Company on Form S-3 (Registration No. 33-58229, Registration No. 33-62052, Registration No. 33- 36558, Registration No. 33-30795, Registration No. 33-23754, Registration No. 33-15671, Registration No. 33-43941, Registration No. 33-53378 and Registration No. 33-55694) and on Form S-8 (Registration No. 33-58998, Registration No. 33-24537, Registration No. 2-61635, Registration No. 2-78374 and Registration No. 33-21902). Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ COOPERS & LYBRAND L.L.P. ---------------------------------- COOPERS & LYBRAND L.L.P. Philadelphia, Pennsylvania November 14, 1995 EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED BALANCE SHEET AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE-MONTH PERIOD ENDING SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1995 SEP-30-1995 44 12 860 82 713 2188 2539 1257 5093 1415 0 139 0 175 1522 5093 3552 3552 1252 3067 16 0 41 428 129 299 0 0 0 299 2.09 2.08
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