-----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, K13fnK5ZCo07I+iLKXj16wjDkjqyyB7DLLlWr1fj6txLWVhih36807CceNbdM+y9 DukEqlfPPiPa9LIgSRE7BA== 0000217028-96-000024.txt : 19960814 0000217028-96-000024.hdr.sgml : 19960814 ACCESSION NUMBER: 0000217028-96-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 96609927 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 PARTS I AND II (MAIN TEXT) - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 ------------- 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) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of common stock outstanding as of the close of business July 31, 1996 was 136,104,892. - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- The Exhibit Index is located on page 25. RHONE-POULENC RORER INC. QUARTERLY REPORT ON FORM 10-Q For the Quarter Ended June 30, 1996 TABLE OF CONTENTS -------------------------------------------------- PART I. FINANCIAL INFORMATION Page ------- 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 14-20 PART II. OTHER INFORMATION Item 3. Legal Proceedings 21-24 Item 6. Exhibits 25 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 June 30, 1996, and the related condensed consolidated statements of income and cash flows for the three- and six-month periods ended June 30, 1996 and 1995. 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, 1995, and the related consolidated statements of income and cash flows for the year then ended and in our report dated January 26, 1996, 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, 1995, 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 July 22, 1996 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 Six Months Ended Ended June 30, June 30, ------------------ ------------------ 1996 1995 1996 1995 -------- -------- -------- -------- Net sales $1,346.1 $1,241.3 $2,618.5 $2,339.7 Cost of products sold 443.8 427.7 878.0 831.7 Selling, delivery and administrative expenses 532.5 474.8 1,046.7 861.6 Research and development expenses 214.4 184.3 414.3 343.0 -------- -------- -------- -------- Operating income 155.4 154.5 279.5 303.4 Interest expense, net 43.5 12.4 84.5 23.0 Gain on sale of assets -- -- -- (49.5) Other (income) expense, net (36.6) 10.8 (77.4) 59.8 -------- -------- -------- -------- Income before income taxes 148.5 131.3 272.4 270.1 Provision for income taxes 46.3 39.9 85.2 83.5 -------- -------- -------- -------- Net income 102.2 91.4 187.2 186.6 Dividends on preferred stock and remuneration on capital equity notes 10.3 5.7 21.3 11.4 -------- -------- -------- -------- Net income available to common shareholders $ 91.9 $ 85.7 $ 165.9 $ 175.2 ======== ======== ======== ======== Primary earnings per common share: Net income available to common shareholders per share $ .68 $ .64 $ 1.23 ======== ======== ======== Net income available to common shareholders per share, pro forma $ 1.29 ======== Cash dividends per common share $ .32 $ .30 $ .62 $ .60 ======== ======== ======== ======== Average common shares outstanding 135.7 134.2 135.3 134.1 ======== ======== ======== ======== See Notes to Condensed Consolidated Financial Statements. 4 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - dollars in millions) June 30, December 31, 1996 1995 -------- ------- ASSETS Current: Cash and cash equivalents $ 60.9 $ 115.4 Cash pooling arrangements with Rhone-Poulenc S.A. 10.4 16.0 Short-term investments 66.7 -- Trade accounts and notes receivable, less reserves of $95.5 (1995: $87.3) 870.6 956.8 Inventories 832.8 765.6 Assets held for sale 9.3 228.8 Other current assets 787.8 707.0 -------- -------- Total current assets 2,638.5 2,789.6 Time deposits, at cost 83.0 83.0 Property, plant and equipment, net of accumulated depreciation of $1,447.4 (1995: $1,255.5) 1,556.5 1,621.0 Goodwill, net of accumulated amortization of $274.6 (1995: $241.6) 2,836.9 2,953.5 Intangibles, net of accumulated amortization of $133.4 (1995: $106.3) 849.2 866.8 Other assets 769.1 673.2 -------- -------- Total assets $8,733.2 $8,987.1 LIABILITIES Current: Short-term debt $ 189.1 $ 384.2 Notes payable to Rhone-Poulenc S.A. & affiliates 225.5 127.6 Accounts payable 529.8 601.8 Other current liabilities 1,143.4 1,291.5 -------- -------- Total current liabilities 2,087.8 2,405.1 Long-term debt 2,415.2 2,159.0 Notes payable to Rhone-Poulenc S.A. & affiliates 249.5 525.4 Deferred income taxes 363.1 365.5 Other liabilities, including minority interests 1,201.5 1,174.9 -------- -------- Total liabilities 6,317.1 6,629.9 Contingencies SHAREHOLDERS' EQUITY Money market preferred stock, without par value (liquidation preference $100,000 per share); authorized, issued and outstanding 1,750 shares 175.0 175.0 Capital equity notes 500.0 500.0 Common stock, without par value; stated value $1 per share; authorized 200,000,000 shares; issued and outstanding 135,986,739 shares (1995: 134,528,487 shares) 141.0 139.5 Capital in excess of stated value 204.2 153.2 Retained earnings 1,662.3 1,580.3 Employee Benefits Trust (185.7) (185.7) Cumulative translation adjustments (80.7) (5.1) -------- -------- Total shareholders' equity 2,416.1 2,357.2 -------- -------- Total liabilities and shareholders' equity $8,733.2 $8,987.1 ======== ======== See Notes to Condensed Consolidated Financial Statements. 5 RHONE-POULENC RORER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - dollars in millions) Six Months Ended June 30, ------------------ 1996 1995 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by operating activities $ 46.5 $ 136.3 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (165.9) (122.9) Proceeds from sale of assets 251.3 84.0 Businesses acquired (25.3) (185.0) Purchases of investments/product rights, net (20.2) (110.6) Net investment hedging, net -- (9.2) ------- ------- Net cash provided by (used in) investing activities 39.9 (343.7) CASH FLOWS FROM FINANCING ACTIVITIES: Debt borrowings (repayments): Long-term debt, net (9.9) 64.4 Short-term debt, net (71.7) 143.8 Issuances of common stock 52.5 1.8 Dividends and remuneration paid (105.2) (91.9) ------- ------- Net cash provided by (used in) financing activities (134.3) 118.1 Effect of exchange rate changes on cash and cash equivalents (6.6) 2.6 ------- ------- Net decrease in cash and cash equivalents (54.5) (86.7) Cash and cash equivalents at January 1 115.4 118.8 ------- ------- Cash and cash equivalents at June 30 $ 60.9 $ 32.1 ======= ======= See 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 the 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. Certain prior year items have been reclassified to conform to current classifications. The Company restated its first quarter 1995 results to include the accounts of businesses acquired from Rhone-Poulenc S.A. ("RP") (see Note 9). Earnings per share (pro forma) for the first half of 1995 reflect pro forma charges totaling $1.6 million relative to the acquisition transactions. The Company's consolidated financial statements are prepared on a basis in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. See Note 10 for disclosure of contingent liabilities and related matters. 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 1995 is on file with the Securities and Exchange Commission and should be read in conjunction with these condensed consolidated financial statements. NOTE 2.- FISONS In late October 1995, the Company acquired the outstanding shares of Fisons plc ("Fisons"), a U.K.-based pharmaceutical company, for a total purchase price, including expenses, of $3.0 billion. The Company is currently finalizing fixed asset appraisals and the valuation of intangibles. To date, the preliminary purchase price allocation has resulted in goodwill of $2.2 billion and intangibles of $600.0 million that will be amortized on a straight-line basis over lives of 40 years and 15 to 30 years, respectively. In March 1996, the sale of the majority of Fisons' Scientific Instruments Division to Thermo Instruments Systems Inc. was completed; the remaining mass spectrometry and PlasmaTrace assets of the division were also sold in March. Total consideration approximated $271.8 million, representing $235.9 million in cash and the assignment of $35.9 million of external debt. The sale resulted in a decrease in goodwill of approximately $30.0 million. On July 3, 1996, the Company finalized its agreement with Medeva plc to sell certain U.S.-based ex-Fisons fixed assets and license certain intellectual property rights for total cash consideration of $370.0 million. At the end of a four-and-one- half year period, Medeva has the option to purchase the intellectual property rights. The upfront cash payment includes fixed asset sale proceeds and certain prepayments under the licensing arrangement, including licensing fees and a purchase option payment which are refundable in certain circumstances. 7 NOTE 3.- PRO FORMA FINANCIAL INFORMATION In October 1995, the Company acquired Fisons (see Note 2). In late November 1995, the Company acquired the remaining 53% that it did not already own of Applied Immune Sciences, Inc. ("AIS"), a pioneer in cell therapy. The Company's reported results for 1995 included the operations of Fisons and AIS from November and December, respectively, as well as acquisition-related costs, financing charges and goodwill amortization incurred during the respective periods. Prior to the November transaction, the Company recorded its share of AIS' results under the equity method. On January 1, 1996, the joint control and profit-sharing provisions of the global plasma proteins joint venture formed between the Company's Armour Pharmaceutical Company subsidiary and Behringwerke AG ("Centeon") became effective. As a result, the Company has discontinued consolidation of the operations contributed to the joint venture and, under the equity method, is now reporting its share of Centeon's results as income from equity affiliates. The following unaudited pro forma financial information shows the results of the Company's operations for the three and six months ended June 30, 1995 as if the acquisitions of Fisons and AIS and the formation of Centeon had occurred on January 1, 1995. Adjustments have been made for financing charges and goodwill amortization, and income taxes were provided at an estimated full year effective income tax rate of 36%. The operations of Fisons' Scientific Instruments Division and Laboratory Supplies Division, sold in 1996 and 1995, respectively, are not included in the pro forma results. Research and development expenses approximating $9.6 million and $23.9 million for the three- and six-month periods, respectively, associated with research operations sold by Fisons in mid-1995 are also excluded. In addition, the pro forma information excludes acquired research and development of $13.0 million recorded in the first quarter of 1995 associated with the Company's prior equity investment in AIS. The pro forma information does not purport to be indicative of the Company's results of operations had the transactions actually occurred on the dates presented nor is it necessarily indicative of future operating results. Three months Six months ended ended June 30, June 30, 1995 1995 --------- --------- (in millions, except per share data) Net sales $ 1,317.8 $ 2,495.7 Cost of products sold 423.3 811.3 Selling, delivery and administrative expenses 577.2 1,068.6 Research and development 205.1 381.7 --------- --------- Operating income 112.2 234.1 Interest expense, net 45.1 88.5 Gain on sales of assets -- (49.5) Other (income), net (38.1) (46.8) --------- --------- Income before income taxes 105.2 241.9 Provision for income taxes 38.7 90.3 --------- --------- Net income from continuing operations before nonrecurring charges 66.5 151.6 Dividends on preferred stock and remuneration on capital equity notes 14.3 28.5 --------- --------- Net income from continuing operations before nonrecurring charges available to common shareholders, pro forma $ 52.2 $ 123.1 ========= ========= Earnings per common share, pro forma $ .39 $ .91 ========= ========= Average common shares outstanding 134.2 134.1 ========= ========= 8 NOTE 4.- RESTRUCTURING AND OTHER CHARGES In December 1995, the Company recorded a $60.0 million pretax charge related to the restructuring of RPR operations as a direct result of the acquisition of Fisons. As part of the Fisons purchase price allocation, the Company has also recorded a $100.0 million liability for the restructuring of Fisons operations. The combined $160.0 million liability represents expected cash outlays, which will be principally severance- related, associated with eliminating positions principally in the marketing, administrative and manufacturing functions. Many of these positions are based in the U.S. and the U.K., although other locations will also be affected. For the three- and six- month periods ended June 30, 1996, cash outlays associated with the restructuring programs totaled $49.0 million and $76.8 million, respectively, with just under 1,400 positions affected. A rollforward of the 1995 restructuring liability from January 1, 1996 is as follows: Translation January 1, adjustments/ June 30, 1996 Payments other 1996 ------ ------ ----- ------ (Dollars in millions) Social costs $148.5 $(63.2) $(3.3) $ 82.0 Third parties 11.5 (13.6) 2.1 -- ------ ------ ----- ------ Total $160.0 $(76.8) $(1.2) $ 82.0 ====== ====== ===== ====== In June 1994, the Company recorded a $121.2 million pretax charge in connection with a global restructuring plan. At June 30, 1996, the remaining reserve approximated $15.3 million, the majority of which represented outstanding social costs. Cash outlays during the quarter and year-to-date period were not significant. NOTE 5.- GAIN ON SALE OF ASSETS AND OTHER (INCOME) EXPENSE, NET Other (income) expense, net for the second quarter and year-to- date periods of 1996 included pretax income totaling $40.6 million and $77.7 million, respectively, from equity affiliates, including the Centeon joint venture. Sales of Centeon, including sales to certain RPR affiliates, approached $496.7 million for the six-month period ended June 30, 1996 while gross profit and income before taxes as a percentage of sales approximated 52% and 29%, respectively. Other (income) expense, net for the second quarter of 1996 also includes increased provisions for anti-hemophilic factor litigation and gains on sales of nonstrategic investments; the impact of these items was not material. Other (income) expense, net for the first half of 1995 included $13.0 million of acquired research and development expense related to an additional investment in AIS and pretax charges of $25.4 million 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. In the first quarter of 1995, the Company also recorded pretax gains totaling $49.5 million from the sale to Ciba-Geigy Ltd. of assets related to the Company's Canadian over-the-counter business and the sale of certain European product rights. NOTE 6.- INCOME TAXES The Company records income tax expense based on an estimated full year effective income tax rate. The year-to-date June 30 reported effective income tax rate approximated 31.3% in 1996 compared with 30.9% in 1995. 9 NOTE 7.- INVENTORIES Inventories consisted of the following: June 30, December 31, 1996 1995 -------- -------- (Dollars in millions) Finished goods $ 352.2 $ 346.2 Work in process 153.2 140.6 Raw materials and supplies 327.4 278.8 -------- -------- $ 832.8 $ 765.6 ======== ======== 10 NOTE 8.- SHAREHOLDERS' EQUITY
Money Common Capital market Capital stock at in excess Employee Cumulative preferred equity stated of stated Retained Benefits translation stock notes value value earnings Trust adjustments ------ ------ ------ ------- -------- -------- ----------- (Dollars in millions) Balance, January 1, 1996 $175.0 $500.0 $139.5 $153.2 $1,580.3 $(185.7) $ (5.1) Net income 187.2 Cash dividends, $.62 per common share (83.9) Dividends on preferred stock (4.7) Remuneration on capital equity notes (16.6) Issuance of shares under employee benefit plans 1.5 51.0 Translation adjustments (75.6) ------ ------ ------ ------ -------- ------- --------- Balance, June 30, 1996 $175.0 $500.0 $141.0 $204.2 $1,662.3 $(185.7) $ (80.7) ====== ====== ====== ====== ======== ======= =========
11 NOTE 9.- RELATED PARTY TRANSACTIONS The entities comprising the Company manage their cash separately. In the largest countries such as the U.S., France, the U.K. and Germany, the local entities have access to RP cash pooling arrangements whereby they can, at their own request, lend to or borrow from RP at market terms and conditions. At June 30, 1996, cash pooling arrangements with RP totaled $10.4 million. Receivables from RP at June 30, 1996 included $10.7 million in accounts receivable from sales of products to RP and $33.4 million classified as other current assets. Receivables and investments related to Centeon classified as current assets totaled $55.4 million at June 30, 1996. Accounts payable related to the purchase of materials and services from RP were $8.2 million at June 30, 1996; accrued and other liabilities due to RP totaled $13.0 million. As of June 30, 1996, the Company had $225.5 million short-term and $249.5 million long-term debt outstanding with RP. Current liabilities due to Centeon totaled $64.4 million. Sales to RP totaled $7.9 million in the second quarter and $17.7 million for the six-month period ended June 30, 1996; services purchased from and interest paid to RP totaled $4.3 million in the second quarter and $16.0 million for the first half of 1996. For the comparable 1995 periods, sales to RP were $8.0 million and $16.5 million, respectively; services purchased from and interest paid to RP totaled $9.7 million and $19.2 million, respectively. In the 1995 second quarter, the Company acquired Cooperation Pharmaceutique Francaise and a pharmaceutical business in Brazil from RP for cash and preferred stock of an RPR subsidiary aggregating approximately $273.2 million. The preferred shares, accounted for as minority interest in other liabilities, have a liquidation preference approximating 645.0 million French francs (approximately $125.2 million) and pay dividends of 7.5% per annum on a stated value of 145.0 million French francs. The acquisition agreements call for potential earnings adjustments to the purchase price of the businesses based on several factors, including earnings performance. NOTE 10.- CONTINGENCIES The Company is involved in litigation incidental to its business, including, but not limited to: (1) approximately 493 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 Immune Deficiency Syndrome-related conditions or death therefrom, may have been caused by administration of antihemophilic factor ("AHF") concentrates processed by Armour in the early-and mid-1980's. Armour has also been named as a defendant in certain 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. In April 1996, the Company, with the three other U.S. plasma fractionators defending the U.S. AHF litigation, announced a class settlement proposal to resolve this litigation and, in May 1996, the companies made a formal settlement offer. Negotiations are continuing with plaintiffs' counsel with respect to this proposal; (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 alleging that certain pharmaceutical companies, including 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 a bisphosphonate compound and Lozol(r); and (5) potential responsibility relating to past 12 waste disposal practices, including potential involvement at three sites on the U.S. National Priority List created by Superfund legislation. 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. 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. 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. Strategic Business Developments Affecting Comparability In the second quarter of 1995, the Company acquired from RP the businesses of Cooperation Pharmaceutique Francaise ("Cooper") and a pharmaceutical business in Brazil. The acquisitions of entities under common control were treated for accounting purposes on an "as-if pooling" basis; accordingly, the Company's restated its results effective April 1, 1994 and January 1, 1994, respectively, to include the accounts of Cooper and the Brazilian business. Earnings per share for the six months ended June 30, 1995 reflect first quarter pro forma charges totaling $1.6 million relative to the acquisition transactions. In late October 1995, RPR acquired the U.K.-based pharmaceutical company, Fisons plc ("Fisons"), which significantly added to the Company's global respiratory franchise. In late November 1995, the Company acquired the remaining 53% of the shares of the cell therapy pioneer Applied Immune Sciences, Inc. ("AIS") that it did not already own. Results for 1995 included the operating results of Fisons and AIS from November and December, respectively, as well as acquisition-related costs, financing charges and goodwill amortization incurred during the respective periods. Prior to the November transaction, the Company recorded its share of AIS' operating losses in equity from investments in affiliates. On January 1, 1996, the joint control and profit-sharing provisions of the global plasma proteins joint venture formed between the Company's Armour Pharmaceutical Company subsidiary and Behringwerke AG ("Centeon") became effective. As a result, the Company has discontinued consolidation of the operations contributed to the joint venture and, under the equity method, is now reporting its share of the venture's results as income from equity affiliates. The above strategic business developments affect comparability of second quarter and six-month 1996 results with reported results for the comparable 1995 periods. A more meaningful analysis can be made by comparing 1996 results with the 1995 pro forma results appearing in Note 3, "Pro Forma Financial Information" on page 8 in the Notes to Condensed Consolidated Financial Statements. The 1995 pro forma information does not purport to be indicative of the Company's results of operations had the transactions described above actually occurred on the dates presented nor is it necessarily indicative of future operating results. The 1995 pro forma information does not include the effects of cost savings and sales synergies expected to be realized as a result of the Fisons acquisition and Centeon joint venture. The following "Results of Operations" discussion describes the comparison of the second quarter and year-to-date periods of 1996 to the comparable 1995 pro forma results, unless otherwise noted. Results of Operations (Three and six months ended June 30, 1996 versus comparable 1995 periods on a pro forma basis) Second quarter 1996 net income available to common shareholders was $92 million ($.68 per common share) as compared with $52 million on a pro forma basis in the prior year ($.39 per common share). On a year-to-date basis, net income available to common shareholders totaled $166 million ($1.23 per common share) for the first half of 1996, an increase of 35% over the comparable prior year period. Six-month 1995 pro forma results included 14 $.10 per common share of asset gains, net of the effects of the reassessment of certain asset values. Sales At $1,346 million, reported second quarter 1996 sales increased by 2% over 1995 pro forma sales. Excluding negative effects of currency fluctuations of approximately 4%, sales increased by 6% substantially due to volume increases, including 3 percentage points from new product presentations. Reported six-month sales increased 5% over 1995 pro forma sales; year-to-date sales growth excluding currency effects approximated 7%. In the tables and discussion which follow, percentage comparisons of sales are presented excluding the effects of currency fluctuations unless otherwise noted. Sales by geographic area were as follows (% change excludes the effects of product divestitures and currency fluctuations): Three Months ended June 30, Six Months ended June 30, -------------------------- -------------------------- Pro Pro Forma % Forma % ($ in millions) 1996 1995 Change 1996 1995 Change ------ ------ ----- ------ ------ ----- U.S. $ 280 $ 269 4% $ 486 $ 455 7% ------ ------ ----- ------ ------ ----- France 449 469 --% 921 922 1% Other Europe 373 360 8% 768 713 10% Rest of World 244 220 19% 444 406 15% ------ ------ ----- ------ ------ ----- Total Non-U.S. 1,066 1,049 7% 2,133 2,041 7% ------ ------ ----- ------ ------ ----- Total Sales $1,346 $1,318 6% $2,619 $2,496 7% ====== ====== ===== ====== ====== ===== Three-month sales in the United States improved modestly over prior year pro forma sales with a doubling in sales of the thrombotic Lovenox(r) and contributions from the innovative new products Taxotere(r) and Rilutek(r). Quarterly sales declines in Azmacort(r) and Lozol(r) weakened overall U.S. sales growth for the period. On a six-month basis, U.S. sales of major prescription pharmaceuticals (Azmacort(r), Lovenox(r), Dilacor(r) XR and DDAVP(r)) exceeded prior year levels. Second quarter sales in France were essentially level with the prior year as contributions from new oncology products (Taxotere(r), Campto(r) and Granocyte(r)) exceeded declines in other categories. Sales in France have been affected by a slowdown in market growth due in part to restricted physician prescribing practices in response to government health care reform proposals. The year-to-date sales comparison in France reflected oncology product sales gains and higher sales of the analgesic Doliprane(r), offset by significantly lower Zagam(tm) sales. Increased sales in many of the major Other European markets for the three- and six-month periods resulted from growth of strategic products. Sales increased on a year-to-date basis in Germany (Clexane(r)/Lovenox(r), Tilade(r), Taxotere(r)) although quarterly sales declined slightly due to a decrease in sales of self-medication products, principally Maalox(r) and certain non- core products. Three- and six-month sales outperformed prior year levels in the U.K. (Intal(r), Imovane(r)/Amoban(r) and generics). Sales for the quarter and year-to-date period improved in Italy due to contributions from Granocyte(r) and growth of self-medication products (Maalox(r)). A government- imposed price reduction on prescription pharmaceuticals will take effect in Italy later in the year. Increased sales of strategic products drove sales growth in Spain. Sales were also higher in Central and Eastern Europe for the reported periods. 15 The Rest of World area reported higher quarterly and year-to- date sales in Japan (Albuminar(r) sold through operations not contributed to Centeon and Maalox(r)), South Asian markets and Brazil. The Company is focusing on innovation and leadership in targeted key therapeutic areas including asthma/allergy, thrombosis, anti- infectives and oncology and, in 1996, it realigned its therapeutic categories accordingly. Certain reclassifications of amounts shown in prior periods have been made between therapeutic area categories to conform to classifications now used by the Company. Sales by therapeutic area for the three- and six-month periods were as follows: Three Months ended Six Months ended June 30, June 30, ----------------------- ----------------------- Therapeutic Pro Pro Area/Principal Forma % Forma % Offerings 1996 1995 Change* 1996 1995 Change* ($ in millions) ----- ----- ------- ----- ----- ------- Azmacort(r) $ 41 $ 50 -20% $ 84 $ 80 4% Intal(r)/Aarane(r) 72 78 -5% 134 142 -4% Nasacort(r)/ Nasacort(r) AQ 22 24 -7% 34 34 -1% Tilade(r) 20 1 10% 37 36 1% Total Asthma/Allergy and Other Respiratory 277 292 -3% 543 508 8% Clexane(r)/Lovenox(r) 93 77 26% 177 142 26% Dilacor(r) XR 28 25 11% 48 44 9% Lozol(r)/Indapamide 10 16 -32% 25 27 -6% Total Cardiovascular/ Thrombosis 247 241 6% 482 439 11% Flagyl(r) 31 28 17% 59 55 11% Total Anti- infectives 151 149 5% 306 300 3% Doliprane(r) 36 37 3% 73 66 12% Imovane(r)/Amoban(r) 34 32 17% 68 60 18% Total Analgesics/ Select Neurological Disorders 159 157 15% 317 289 20% Maalox(r) 38 45 -9% 82 82 4% Total Gastro- intestinal/Vitamins 113 101 5% 229 196 8% Calcitonins 19 27 -29% 38 51 -25% Orudis(r)/Profenid(r)/ Oruvail(r) 49 54 -5% 96 101 -3% Total Hormone Replacement Therapy/ Bone Metabolism 89 97 -6% 176 183 -2% Granocyte(r) 17 12 44% 32 21 55% Taxotere(r) 23 -- N/A 27 -- N/A Total Oncology 50 21 140% 81 40 106% DDAVP(r) 24 23 5% 43 35 21% Other Therapeutic Areas 260 260 6% 485 541 -8% * Percentage change calculation excludes effects of currency fluctuations. Sales of asthma/allergy products declined slightly from the comparable prior year quarter on a pro forma basis. The decrease in sales of Azmacort(r) was partially reflective of trade buying patterns during the first quarter. On a year-to- date basis, Azmacort(r) sales exceeded prior year levels with good growth in prescriptions written, although competitor products are expected to enter the market in the near future. Sales of Nasacort(r) were below the prior year for the three and six months due in part to increased competition and the expansion of the aqueous segment. In the 1996 second quarter, the Company received U.S. FDA approval to market Nasacort(r) to children six years of age and older. The Company also received FDA approval to market Nasacort(r) AQ, a once-daily, water-based, nasally inhaled corticosteroid for the treatment of allergic rhinitis, which added to total Nasacort(r) sales during the three-month period. Reduced quarterly and year-to-date sales of Intal(r) reflected declines in the U.S. and lower European sales due to a slow asthma/allergy season. Export sales of Intal(r) from the U.K. to Japan increased during the periods reported due, in part, to distributor stocking patterns. Higher quarterly Tilade(r) sales resulted from increased sales in the U.S. and certain European markets, particularly Germany. On a year-to-date basis, sales of 16 Tilade(r) lagged the prior year in the U.S. although sales gains were registered in European markets. The thrombosis product Clexane(r)/Lovenox(r) continued to experience substantial growth in the U.S. and performed well in most major European markets for the periods reported although market competition negatively impacted Lovenox(r) sales in France. Sales of Dilacor(r) XR exceeded prior year levels for the three and six months while year-to-date sales of total indapamide products were affected by generic competition. Quarterly and year-to-date sales of anti-infectives increased modestly as the effect of higher sales in Asian markets was reduced by significantly lower Zagam(tm) sales in France. Three- and six-month sales of anti-infectives in France have also been affected by restricted physician prescribing patterns. Flagyl(r) reported quarterly and year-to-date sales gains in Brazil and South Asia. Sales of Imovane(r)/Amoban(r) outperformed the prior year periods in Europe (France, U.K., Germany) and in Japan. Sales of products for select neurological disorders also benefited from sales of Rilutek(r), approved in the U.S. in late 1995 for treatment of Amyotrophic Lateral Sclerosis ("ALS"). Rilutek(r) received approval from the European Union in June 1996 for the treatment of ALS. Lower sales of Maalox(r) during the quarter resulted primarily from declines in Germany due to competitive pressures. On a year- to-date basis, increased Maalox(r) sales were reported in Japan and in certain European countries including Italy. Sales declines in the HRT/bone metabolism category reflected lower sales of Orudis(r)/Profenid(r)/Oruvail(r) in the U.K. and Japan, and reduced calcitonin product sales in the United States due to generic competition. In the second quarter of 1996, the Company entered into a global (excluding Japan) co-promotion agreement with Novo Nordisk A/G with respect to strategic HRT products of both companies including the Menorest(r) transdermal patch, launched by RPR in major European markets in early 1996. Expansion of the Company's oncological products was driven by sales of the innovative new products Taxotere(r), Granocyte(r), and Campto(r). Taxotere(r), a semi-synthetic taxoid for solid tumors, has been approved in 33 countries for treatment of advanced metastatic breast cancer. Taxotere(r) has experienced good performance in European markets, particularly in France and Germany, where it was launched in mid-first quarter 1996. In June 1996, Taxotere(r) was launched in the U.S. with good sales acceptance. Granocyte(r), launched in European markets in 1995 for chemotherapy-induced neutropenia, recorded good growth throughout the year in France and southern Europe. Sales of Campto(r), launched in France in the 1996 second quarter for treatment of colorectal cancer, also added to growth of the category. Sales in other therapeutic areas reflected higher sales of Albuminar(r), sold through operations not contributed to Centeon, and dermatologicals. Year-to-date declines were partially due to reduced sales of the Cooper subsidiary and certain bulk chemicals. Sales were also impacted by the reclassification of certain products to other categories in the current year. In July 1996, the Company licensed the rights to certain non- strategic former Fisons products in the cough and cold, diuretic and appetite suppressant areas to Medeva plc for four-and-one- half years, after which period Medeva will have the option to purchase the product rights. 17 Operating Income Three Months ended June 30, Six Months ended June 30, ---------------------------- --------------------------------- Pro Forma Pro Forma 1996 1995 1996 1995 ----------- ----------- ------------- ------------- % of % of Total % of % of Total (in millions) $ Sales $ Sales Change $ Sales $ Sales Change ---- ----- ---- ----- --- ------ ----- ------ ----- --- Gross margin $902 67.0% $895 67.9% 1% $1,741 66.5% $1,684 67.5% 3% Selling, delivery and admin- istrative 532 39.6% 577 43.8% -8% 1,047 40.0% 1,069 42.8% -2% Research and development 214 15.9% 205 15.6% 5% 414 15.8% 382 15.3% 9% Operating income 155 11.5% 112 8.5% 39% 280 10.7% 234 9.4% 19% Reductions in second quarter and six-month gross margin from the prior year reflected the effect of unfavorable product mix and the negative impact of net royalties, including lower year-to-date royalty income from Fisons' joint venture partner in Japan as a result of a weaker- than-anticipated pollen season. Year-to-date gross margin has also been affected by certain cost reclassifications from the prior year. At 67.0%, second quarter gross margin improved from 65.9% in the first quarter; the Company expects to achieve further improvements particularly with the realization of favorable margins associated with internally-developed new products. Despite increased spending in support of new products, selling, delivery and administrative expenses decreased on a reported basis largely due to benefits of cost containment programs and increased realization in the second quarter of cost savings associated with the integration of the Fisons business. The Company anticipates that Fisons-related cost savings will be in- line with expectations on a full-year basis. Higher research and development as a percentage of sales reflected increased investment in later stage development projects including Synercid(tm) and new indications for Clexane(r)/Lovenox(r), and the movement of certain Gencell projects into the clinical development stage. Operating margin improved for the three- and six-month periods as reduced selling, delivery and administrative expenses offset higher Cost of Products Sold and an increased investment in research and development. In the fourth quarter of 1995, the Company recorded a $60 million pretax charge related to the restructuring of RPR operations as a direct result of the acquisition of Fisons. In addition, as part of the Fisons purchase price allocation, the Company recorded a $100 million liability for the restructuring of Fisons operations. The combined $160 million liability represents expected cash outlays, which will be primarily severance-related, associated with eliminating positions principally in the marketing, administrative and manufacturing functions. Many of these positions are based in the U.S. and the U.K., although other locations will also be affected. For the six months ended June 30, 1996, cash outlays associated with the restructuring approached $77 million with just under 1,400 positions affected. Interest Net interest expense for the current and pro forma 1995 periods reflected the impact of acquisition debt associated with the Fisons transaction. Current year interest expense was favorably impacted by lower weighted average interest rates in the U.S. and Europe. A reduction in dividends on preferred stock and remuneration on capital equity notes compared with pro forma 1995 was due to the absence in 1996 of Market Auction Preferred Shares which were redeemed in the third quarter of last year. In December 1995, the Company issued $500 million of capital equity notes to RP, remuneration on which is based on six-month LIBOR plus a margin. 18 Other (Income) Expense, Net and Gain on Sales of Assets Other (income) expense, net for the second quarter of 1996 included $41 million of income from equity affiliates, including the Centeon joint venture; income from equity affiliates approximated $43 million on a pro forma basis in 1995. Other (income) expense, net also includes increased provisions for anti-hemophilic factor litigation and gains on sales of nonstrategic investments; the impact of these items was not material. Other (income) expense, net on a year-to-date basis included income from equity affiliates totaling $78 million and $82 million in 1996 and pro forma 1995, respectively. Six-month pro forma 1995 other (income) expense, net included $24 million related to gains on sales of assets, net of certain asset carrying value reassessments. Six-month pro forma 1995 results exclude acquired research and development of $13 million ($.06 per share) related to an additional investment in AIS. Taxes The Company's year-to-date reported effective income tax rate approximated 31% in 1996 compared with 37% on a pro forma basis in 1995 reflecting current year tax planning strategies and the unfavorable impact in 1995 of asset gains and carrying value reassessments. Financial Condition Cash Flows Cash flows from operating activities totaled $47 million compared with $136 million in 1995, reflecting increased working capital needs and greater cash outlays for restructuring activities. Net income for 1996 included approximately $78 million of non-cash earnings of equity affiliates, primarily Centeon; in the second half of 1996, the Company expects to receive a cash dividend representing a large portion of its share of Centeon's current year earnings. Investing activities provided $40 million of cash flows for the first half of 1996, reflecting cash proceeds of $236 million from the first quarter sale of Fisons' Scientific Instruments Division, partially reduced by capital expenditures in support of new products. Investing activities also included first quarter cash outlays for Fisons acquisition costs that were accrued at year-end 1995. Net investing cash outflows in 1995 included $296 million for the acquisitions of new businesses and investments in technologies/product rights; proceeds from the sales of the Company's Canadian over-the-counter business and certain European product rights totaled $84 million. Current year financing cash outflows reflected debt repayments totaling $82 million compared with $208 million of proceeds from increased borrowings in 1995 in support of businesses acquired. Financing cash flows benefited from increased issuances of common stock primarily associated with stock option exercises. Cash dividends paid to common shareholders in 1996 totaled $84 million ($.62 per share). In July 1996, the Board of Directors declared a third quarter cash dividend of $.32 per share payable on August 30, 1996 to holders of record on August 9, 1996. Third quarter 1996 cash flows will benefit from the July 3rd receipt of $370 million associated with a sale and licensing agreement with Medeva plc. In July, the Company also announced the divestiture of assets in the U.K. and Spain for cash proceeds just under $65 million. 19 Liquidity The Company's net debt (short- and long-term debt including notes payable to RP, less cash and cash equivalents, cash pooling arrangements, short-term investments and time deposits) to net debt plus equity ratio declined slightly to .54 to 1 at June 30, 1996 from .56 to 1 at December 31, 1995. After consideration of the July 1996 receipt of $435 million associated with the Medeva agreement and additional divestitures in the U.K. and Spain, the Company's net debt has declined from $2,997 million at December 31, 1995 to $2,423 million with a net debt ratio of .50 to 1. The Company expects to achieve further improvement in its net debt ratio by the end of 1996 through cash generated from operations and proceeds from additional divestitures of non-strategic assets. The ratio of current assets to current liabilities was 1.26 to 1 at June 30, 1996 compared to 1.16 to 1 at December 31, 1995, reflecting a decrease in short-term debt balances. At June 30, 1996, the Company had committed medium-term lines of credit totaling $2,325 million. Of this amount, $1,825 million represented multicurrency medium-term facilities with fourteen banks expiring in the year 2000. An additional $500 million represented two medium-term credit agreements with Rhone-Poulenc S.A. expiring in 2000 and 2002. Borrowings outstanding under the above lines totaled $1,053 million at June 30, 1996. The Company classified this amount plus an additional $1,272 million of short-term borrowings as long-term debt at June 30, 1996 as it had the ability and intent to finance these amounts on a long- term basis under the above medium-term facilities. Pursuant to a shelf registration, the Company has the ability to issue an additional $325 million in public debt securities and/or preferred shares. Management believes that cash flows from operations, supplemented by proceeds from selected divestitures and financing expected to be available from external sources, will provide sufficient liquidity to meet its needs for the foreseeable future. The Company's competitive position, including its ability to discover, develop and market innovative new therapies, build leadership positions in targeted therapeutic areas and maximize the benefits of business acquisitions and alliances, will drive its liquidity on a long- term basis. 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. 20 ITEM 3. LEGAL PROCEEDINGS Diethylstilbestrol ("DES") Litigation There are approximately 500 actions pending against one or more current and/or former 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, the Company's subsidiaries 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 it has adequate defenses to DES claims. The Company and certain of its current and former subsidiaries were named in a putative class action, Ballo et al., v. Abbott Laboratories, et al., No. 96-CV- 0774, filed in the United States District Court for the Eastern District of New York in February 1996. The case, brought on behalf of all women in the United States exposed to DES while in utero, seeks compensation for future medical expenses allegedly associated with the exposure, as well as financial support for educational and research efforts related to DES. The class does not seek compensation for existing DES-related injuries. All pending cases are currently being defended by insurance carriers, sometimes under a reservation of rights. AHF Litigation There are approximately 430 lawsuits in the United States, 7 in Canada and 56 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 120 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 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. Five proposed federal class action lawsuits (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; Timmy Dale Martin, et al. v. Armour Pharmaceutical Company, et al., United States District Court for the Northern District of Alabama; Thorne v. Alpha Therapeutic, et al., United States District Court for the Eastern District of Louisiana and Morabito v. Rhone-Poulenc Rorer, et al., United States District Court for the District of Wyoming [removed from state Colorado court]), and three proposed state court class actions (Richard Murphy, et al. v. Armour Pharmaceutical Company, et al., Superior Court, Pima County, Arizona, James David Hepworth v. Armour, et al., Marion County Superior Court, Indiana; 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 October 1995, the United States Supreme Court denied plaintiffs' petition for a writ of certiorari related to plaintiffs' proposed certification of a federal nationwide class action captioned Wadleigh, et al v. Armour Pharmaceutical Company (United States District Court, Northern District, Illinois). Wadleigh was decertified in January 1996. As noted 21 above, the Jones action is pending in a 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. The Jones action seeks certification of a nationwide class and a Florida subclass. Evidentiary hearings on plaintiffs' motion for class certification have been completed and the judge has indicated his intention to deny certification of both proposed classes. In October 1993, Armour obtained a directed verdict dismissing it from a lawsuit pending in a state court in Louisiana on the basis that the plaintiff had not presented evidence sufficient to maintain an action against Armour. That decision was appealed by plaintiff and affirmed by the appellate court on May 29, 1996. Plaintiffs have filed an application for rehearing. With respect to the above litigation, the Company has contractual rights to certain insurance coverage provided by carriers that insured Revlon, Inc., the party from whom it purchased Armour in 1986 ("Revlon carriers"). The Company also has access to "excess" liability insurance coverage from other carriers, effective in 1986, for certain of these cases if self- insured retention levels from relevant insurable losses are exceeded. From late 1988 until November 1995, the Company was involved in litigation with a principal insurance carrier ("the principal carrier"), an umbrella insurance carrier ("the umbrella carrier") and many of the Revlon carriers, relative to carrier defense and indemnity obligations associated with the AHF litigation ("the insurance coverage litigation"). In late 1994, the Company settled the dispute being litigated with the principal carriers by entering into an agreement which defines the principal carrier's obligations with respect to the underlying AHF litigation. The Company also settled its disputes with the umbrella carrier and many of the Revlon carriers. After lengthy discussions, the Company and the remaining Revlon carriers in the insurance coverage litigation agreed in November 1995 regarding the extent and other conditions of coverage of those carriers, and the litigation was concluded. Based upon the above, the Company believes that there is a substantial level of coverage (including substantial coverage for legal defense expenditures) for the Company's estimated probable liability determined in accordance with Statement of Financial Accounting Standards No. 5 ("SFAS 5"). In April 1996, the Company, with the three other U.S. plasma fractionators defending the U.S. AHF litigation, announced a settlement proposal to resolve this litigation. The April proposal contemplated a $600 million dollar fund to be divided per capita among those who made claims, with attorneys fees and settlement administration costs to be paid out of a separate fund in an amount to be determined by the settlement judge, up to a maximum of $40 million. The proposal, subject to a variety of conditions, contemplated the use of a class settlement vehicle, no more than 100 opt-outs, and required an indication from the plaintiffs that at least 95% of the currently filed plaintiffs would accept the proposal. Following a meeting with representatives of the plaintiffs, the companies made a formal settlement offer on May 29, 1996 that responded to certain demands by the plaintiffs' negotiating committee, including the removal of the opt-out limit and a guaranteed commitment to a settlement resulting in 150 or fewer opt-outs. Negotiations are continuing with plaintiffs' counsel with respect to this proposal. A preliminary approval hearing before the settlement judge has been scheduled for August 14, 1996. Commercial Litigation Rhone-Poulenc Rorer Pharmaceuticals Inc. ("RPRP"), a subsidiary of the Company, has been named as a defendant in two related arbitration proceedings in Zurich, Switzerland initiated by Boehringer Mannheim GmbH and its American affiliate, Boehringer Mannheim Pharmaceuticals Corporation (collectively, "BM"), seeking substantial compensatory damages for alleged breach of contract by RPRP. 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 22 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 is vigorously defending its position. A hearing on liability may be held in Zurich this fall. In the spring of 1995, the Company and its subsidiary, Rhone-Poulenc Rorer International (Holdings) Inc. ("RIH"), together with three former officers and/or directors of a former subsidiary, Rorer International (Overseas) Inc. ("RIO") were named as defendants in a lawsuit filed by a Mexican pharmaceutical company known as Laboratorios A.F. Aplicaciones Farmaceuticas, S.A. de C.V. ("LAF"). The suit arose out of an action brought in 1985 in Mexico by RIO against LAF for infringement of intellectual property rights. The suit alleged that RIO obtained a wrongful injunction against LAF and pursued its claims against LAF in bad faith, resulting in lost profits and damage to LAF's reputation. The parties agreed to settle this litigation in August 1996. Antitrust Litigation The Company has been named as a defendant in 134 antitrust lawsuits. It is presently a party to ten state court actions pending in California, two each in Alabama, Minnesota and Wisconsin, and one each in the District of Columbia, Washington, Colorado, Arizona, Maine, New York and Michigan. Additionally, the Company has been named in 111 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). All of the cases brought in California state court have similarly been coordinated before a judge in the San Francisco Superior Court. The suits allege that many 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. Three of the California actions allege injury to classes of California residents who are consumers of brand name prescription products. One of the cases in each of Alabama, Minnesota, Wisconsin and the cases in the District of Columbia, New York, Arizona, Colorado, Washington, Maine and Michigan allege proposed consumer class claims. An Alabama state court has conditionally certified a consumer class action on behalf of Alabama residents and consumers in seven other states and the District of Columbia. In October 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. This ruling is currently on appeal. The Colorado state court action was dismissed in January 1996 and no appeal has been filed. 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 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. These cases have been stayed in order to trail the federal litigation proceedings. Notice to the retailer class was given and the opt-out period has expired; notice to the consumer class has not yet been provided. On April 4, 1996, the court denied summary judgment motions filed by the pharmaceutical companies and summary 1judgment motions filed by the wholesaler defendants were granted. The court entered final judgment in favor of the wholesalers and certified certain issues relating for the denial of the manufacturer defendants' summary judgment motions for interlocutory appeal to the Seventh Circuit. Plaintiffs have also filed appeals on the orders granting the wholesaler defendants' summary judgment motions. Due to the pendency of the appellate proceedings, the court withdrew the May 7, 1996 trial date previously set in the federal class conspiracy case and has not set a new trial date in any federal action. In addition, several of the companies named as defendants in the federal class action, excluding RPR, entered into a settlement 23 with independent and chain pharmacies who are members of that class. That settlement was approved by the court on June 21, 1996. The Company believes that none of the claims against it have any merit and is vigorously defending these lawsuits. Environmental Litigation Fisons plc has been named along with other defendants in a U.S. Federal Court action (Olin Corporation v. Fisons plc, et al., United States District Court for the District of Massachusetts) in which Olin Corporation is seeking to recover its response costs for environmental contamination resulting from operations at a Wilmington, Massachusetts facility. The facility was operated during the late 1960s by a separate Fisons entity. Fisons plc and another subsidiary, Fisons Finance Ltd., are named in a cross-claim and third-party complaint, respectively, filed by one of the co-defendants in the Olin action, NOR-AM Chemical Company ("NOR-AM"). NOR-AM is asserting claims for indemnification and/or contribution if it is found liable in Olin. Fisons plc has filed a motion to dismiss the Complaint for lack of personal jurisdiction. The Court has not yet ruled on this motion. The Company and/or its subsidiaries, including the recently- acquired Fisons companies, have been named as potentially responsible parties at three sites on the U.S. National Priority List created by Superfund legislation. 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 XR product. In January 1995, the ITC Administrative Judge ruled that2 Dilacor 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. 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 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 outcomes of the referenced litigation cannot be predicted with certainty. The defense of these cases and the defense of expected additional lawsuits 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 that are probable of occurrence as a result of the insurance coverage litigation settlement previously described. 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 referenced litigation would have a material adverse impact on the Company's financial position, results of operations or cash flows. 24 ITEM 6. Exhibits a. Exhibits 10 Material Contracts (a) Amendment to the Company's Articles of Incorporation increasing the number of authorized common shares to 600 million. (b) Asset Purchase Agreement between Medeva plc, Medeva Rochester Inc. and Fisons Corporation, Fisons Investments Inc., Fisons plc, and Fisons B.V. dated June 6, 1996. (c) Amendment No. 1 to the Asset Purchase Agreement [referred to in (b) above] dated July 2, 1996. (d) License Agreement between Fisons Corporation, Fisons B.V., Fisons Investments Inc., Fisons plc, and Medeva Pharmaceuticals Manufacturing, Inc. dated July 2, 1996. 11 Statement re computation of earnings per common share. 15 Letter re unaudited interim financial information. 27 Financial data schedule (electronic filing only). 25 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) August 12, 1996 /s/ PATRICK LANGLOIS ------------------------------------- Patrick Langlois Senior Vice President and Chief Financial Officer 26 INDEX TO EXHIBITS Exhibit No. - ----------- 10 Material Contracts (a) Amendment to the Company's Articles of Incorporation increasing the number of authorized common shares to 600 million. (b) Asset Purchase Agreement between Medeva plc, Medeva Rochester Inc. and Fisons Corporation, Fisons Investments Inc., Fisons plc, and Fisons B.V. dated June 6, 1996. (c) Amendment No. 1 to the Asset Purchase Agreement [referred to in (b) above] dated July 2, 1996. (d) License Agreement between Fisons Corporation, Fisons B.V., Fisons Investments Inc., Fisons plc, and Medeva Pharmaceuticals Manufacturing, Inc. dated July 2, 1996. 11 Statement re computation of earnings per common share. 15 Letter re unaudited interim financial information. 27 Financial data schedule (electronic filing only). EX-10 2 EX 10(A) ARTICLES OF INC. AMENDMENT Microfilm Number 9633-1326 --------- Filed with the Department of State on MAY 09 1996 ----------- Entity Number 0309279 ------- /s/ Yvette Kane ----------------------------- Secretary of the Commonwealth ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (REV 90) In compliance with the requirements of the applicable provisions of 15 Pa.C.S. Section 1915 (relating to articles of amendment) the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: Rhone-Poulenc Rorer Inc. --------------------------- 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is: (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) 500 Arcola Road Collegeville PA 19426-0107 Montgomery ------------------------------------------------------------- Number and Street City State Zip County (b) c/o: ________________________________________________________ Name of Commercial Registered Office Provider For a corporation or a limited partnership represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation or limited partnership is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is: _____ 4. The date of incorporation is: : July 1, 1968 ------------ 5. (Check, and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of Amendment in the Department of State. The amendment shall be effective on ___________ at __________ Date Hour 6. (Check one of the following): X The amendment was adopted by the shareholders (or members) pursuant to 15 Pa.C.S. Section 1914(a) and (b). The amendment was adopted by the board of directors pursuant to 15 Pa.C.S. Section 1914(c). 7. (Check, and if appropriate complete, one of the following): The amendment adopted by the corporation, set forth in full, is as follows: DSCB:15-1915 (REV 90)-2 X The amendment adopted by the corporation as set forth in full in Exhibit A attached hereto and made a part hereof. 8. The restated Articles of Incorporation supersede the original Articles and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 7th day of May, 1996. Rhone-Poulenc Rorer Inc. ---------------------------------------- (Name of Corporation) BY: /s/ Richard B. Young ------------------------ Richard B. Young TITLE: Secretary -------------------- EXHIBIT A RESOLVED, that pursuant to Section 1914(a) of the Pennsylvania Business Corporation Law, the Articles of Incorporation of the Corporation be and they are hereby are amended by deleting the first paragraph of Article FIFTH thereof and substituting therefore the following: FIFTH: The authorized Capital Stock of the corporation shall be six hundred and three million (603,000,000) shares, to be divided into two classes consisting of (a) three million (3,000,000) Preferred Shares, without par value, and (b) six hundred million (600,000,000) Common Shares, without par value. The following shares shall be uncertificated shares: all previously issued shares of the corporation owned by it and those Common Shares that may be issued under the Rhone-Poulenc Rorer Inc. Amended and Restated Stock Plan or the Rhone-Poulenc Rorer Inc. Equity Compensation Plan and are subject to any restrictions under either of such plans. EX-10 3 EX 10(B) ASSET PURCHASE ASSET PURCHASE AGREEMENT Between MEDEVA PLC, MEDEVA ROCHESTER INC. AND FISONS CORPORATION, FISONS INVESTMENTS INC., FISONS PLC, AND FISONS B.V. June 6, 1996 TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS 1.1. Definitions 1 1.2. Additional Definitions 17 ARTICLE 2. PURCHASE AND SALE OF THE ASSETS; CLOSING CONSIDERATION 2.1. Purchase and Sale of the Assets 17 2.2. Excluded Assets 18 2.3. Assumption of Liabilities 21 2.4. Excluded Liabilities 23 2.5. Closing Consideration 26 2.6. Closing Inventory Adjustment 27 2.7. Payment of the Closing Consideration 28 2.8. Allocation of the Purchase Price 28 2.9. Revenue Adjustment 29 ARTICLE 3. THE CLOSING 3.1. Time and Place of Closing 31 3.2. Payment of Closing Consideration; Deliveries 31 3.3. Assignment of Contracts, Etc 32 3.4. Further Assurances 33 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS 4.1. Organization and Good Standing 35 4.2. Power and Authority 35 4.3. Organizational Documents. 36 4.4. No Violation 36 4.5. Financial Information; Undisclosed Liabilities 37 4.6. Absence of Certain Changes or Events 38 4.7. Material Contracts; No Default 39 4.8. Patents, Trademarks and Trade Names 43 4.9. Actions 43 4.10. Compliance with Laws 43 4.11. Taxes 44 4.12. Title to Property 44 4.13. Insurance; Product Liability Claims 45 4.14. Approvals 45 4.15. Employee Benefit Plans; ERISA 46 4.16. Suppliers and Customers 46 i 4.17. Environmental Matters 47 4.18. Labor Matters 48 4.19. Personal Property 49 4.20. Real Property 49 4.21. Broker's or Finder's Fees 52 4.22. Regulatory and Product Matters 52 4.23. Transactions with Affiliates 54 4.24. Inventory 54 4.25. Sufficiency of Assets. 54 ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 5.1. Organization and Good Standing 55 5.2. Power and Authority 55 5.3. No Violation 56 5.4. Actions 57 5.5. Approvals 57 5.6. Broker's or Finder's Fees 57 5.7. Disclosure 58 5.8. Financing 58 ARTICLE 6. CERTAIN OBLIGATIONS OF THE SELLERS PRIOR TO THE CLOSING 6.1. Conduct of Business 59 6.2. Restricted Activities and Transactions 59 6.3. Cooperation 61 6.4. No Solicitation of Transaction. 61 6.5. Access to the Sellers 62 6.6. Confidentiality 63 6.7. Premerger Notification 63 6.8. Disclosure Supplements 64 ARTICLE 7. CERTAIN OBLIGATIONS OF THE PURCHASER PRIOR TO THE CLOSING 7.1. Cooperation 65 7.2. Confidentiality 65 7.3. Premerger Notification 66 7.4. Shareholder Circular; Shareholder Approvals; Etc. 66 7.5. Financing 67 ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER 8.1. Representations and Warranties True 68 8.2. Performance 68 8.3. Title Insurance 68 ii 8.4. No Material Adverse Change 69 8.5. Approvals 69 8.6. Deliveries 69 8.7. Absence of Litigation 71 8.8. Shareholder Approval, Etc 71 ARTICLE 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS 9.1. Representations and Warranties True 72 9.2. Performance 72 9.3. Approvals 72 9.4. Deliveries 72 9.5. Absence of Litigation 74 ARTICLE 10. ADDITIONAL COVENANTS AND AGREEMENTS 10.1. Books and Records; Access 74 10.2. Confidentiality 75 10.3. Employment and Employee Benefits 76 10.4. Specific Performance; Injunctive Relief 78 10.5. Noncompetition; Nonsolicitation 78 10.6. Use of Fisons Name; NDC Licenses 80 10.7. Reconveyance of Intangible Assets 81 10.8. Expenses 81 10.9. Access 82 ARTICLE 11. SURVIVAL; INDEMNIFICATION 11.1. Survival 82 11.2. Indemnification by the Sellers 83 11.3. Indemnification by the Sellers for Product Recalls 84 11.4. Indemnification by the Purchaser 86 11.5. Notice and Payment of Claims 87 11.6. Matters Involving Third Parties 88 11.7. Limitation of Remedies 89 11.8. Minimum Warranty Claim. 90 11.9. Maximum Warranty Claim 90 11.10. Mitigation of Damages 90 11.11. Bulk Sales Law 91 ARTICLE 12. TERMINATION 12.1. Termination 91 12.2. Effect of Termination 92 iii ARTICLE 13. MISCELLANEOUS 13.1. Public Announcements 92 13.2. Amendment; Waiver 93 13.3. Fees and Expenses 93 13.4. Transfer Taxes 93 13.5. Notices 94 13.6. Assignment 95 13.7. Governing Law; Consent to Jurisdiction 96 13.8. Counterparts 97 13.9. Headings 97 13.10. Entire Agreement 97 13.11. Severability 98 13.12. No Third Party Beneficiaries 98 13.13. Singular and Plural Forms 98 13.14. References to Articles, Etc. 98 13.15. References to "Herein," Etc. 98 13.16. Effect of Schedules 99 EXHIBITS Exhibit A Guaranty Exhibit B License Agreement Exhibit C Security Agreement Exhibit D Bargain and Sale Deed with Covenants Against Grantors Acts Exhibit E Sellers' Counsel Opinions SCHEDULES Schedule 1.1(as) Headquarters Services Schedule 1.1(au) Inactive Products Schedule 1.1(bb) Knowledge of the Seller Schedule 1.1(bi) Fisons Product List (Rochester) Schedule 1.1(bx) Products Schedule 2.1(e) Certain Excluded Assets Schedule 2.2(l) Excluded Equipment Schedule 2.2(q) Other Excluded Assets Schedule 2.3(a) Excluded Contracts Schedule 3.2 License Agreement Payments Schedule 4.1 Organization and Good Standing Schedule 4.4 No Violation Schedule 4.5(a) Financial Information Schedule 4.5(b) Material Liabilities Schedule 4.6 Absence of Certain Changes or Events Schedule 4.7(a) Competition Restrictions Schedule 4.7(b) Certain Contracts iv Schedule 4.7(c) No Defaults Schedule 4.8 Patents, Trademarks and Trade Names Schedule 4.9 Actions Schedule 4.10 Compliance with Laws Schedule 4.11 Tax Liens Schedule 4.12 Title to Property Schedule 4.13 Insurance Schedule 4.14(a) Approvals - Governmental Schedule 4.14(b) Approvals - Operation of the Business Schedule 4.16(a) Suppliers and Customers Schedule 4.16(b) Suppliers and Customers Schedule 4.16(c) Suppliers and Customers Schedule 4.16(d) Suppliers and Customers - Cancellations, Terminations, etc. Schedule 4.17(a) Environmental Matters Schedule 4.17(b) Environmental Approvals Schedule 4.18(a) Labor Matters Schedule 4.18(b) Labor Claims Schedule 4.19 Personal Property Schedule 4.20(a) Real Property - Owned Real Property Schedule 4.20(b) Real Property - Leased Real Property Schedule 4.20(c) Real Property - Options and Rights of First Refusal Schedule 4.20(d) Real Property - Improvements, Utilities and Access Schedule 4.20(e) Real Property - Nonconforming Uses, Special Permits Schedule 4.20(f) Real Property - Real Estate Taxes Schedule 4.20(i) Real Property - Money Owed to Contractors Schedule 4.22 Regulatory and Product Matters Schedule 4.23 Transactions with Affiliates Schedule 5.7 Purchaser's Knowledge Schedule 8.5 Contracts/Approvals Which Require Obtaining of Consent by Closing Schedule 8.6 Astra and Commerce Avenue Estoppel Certificate Schedule 9.3 Approvals - Sellers Schedule 10.3(a) List of Plan Employees Schedule 10.3(b) List of Employees Not to be Solicited v ASSET PURCHASE AGREEMENT This Asset Purchase Agreement ("Agreement"), dated June 6, 1996, is entered into among (i) Medeva PLC, an English corporation ("Medeva") and Medeva Rochester Inc., a Delaware corporation, on the one hand ("Medeva Rochester" and collectively with Medeva, the "Purchaser"), and Fisons Corporation, a Massachusetts corporation ("Fisons"), Fisons Investments Inc., a Delaware corporation ("FII"), Fisons plc, an English corporation ("FPLC"), and Fisons B.V., a company organized under the laws of Holland ("FBV"), on the other hand (Fisons, FII, FPLC and FBV are collectively referred to as the "Sellers"). W I T N E S S E T H: WHEREAS, the Sellers desire to transfer, sell, convey, assign and deliver to the Purchaser, and the Purchaser desires to acquire from the Sellers, the Business (as defined herein), in accordance with the terms and subject to the conditions of this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows: ARTICLE 1. DEFINITIONS 1.1. Definitions. The following terms, as used in this Agreement, shall have the following meanings: (a) "Acquisition Primary Documents" shall mean, collectively, this Agreement, the License Agreement, the Manufacturing Agreement, the Bill(s) of Sale, the Assignment and Assumption Agreement, the Deed, the Transitional Services Agreement, the Supply Agreement, the Security Agreement and the Guaranty to be delivered pursuant to Section 3.2 hereof and the guaranty, if any, to be delivered pursuant to Section 9.4(f) hereof. (b) "Acquisition Documents" shall mean the Acquisition Primary Documents and all agreements, instruments, certificates and other documents executed and delivered in connection herewith or contemplated hereby. (c) "Action" shall mean any claim, dispute, action, arbitration, litigation, proceeding, suit or investigation, and any appeal therefrom. (d) "Adjustment Current Assets" shall mean all Inventory, prepaid property taxes in respect of the Real Property, fees prepaid to the FDA in respect of the Facility and the Products, prepaid expenses for travel and other activities primarily related to the Business, prepaid rent in respect of the Leased Real Property and any other current assets that the Purchaser in its sole discretion agrees to include in connection with the Audit (as defined in Section 2.6 hereof). (e) "Affiliate" shall mean, with respect to any Person, any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person; provided, however, that with respect to the Sellers, only RPR and Persons directly or indirectly controlled by RPR shall be an Affiliate of any Seller for any provision of this Agreement. (f) "Agreement" shall mean this Asset Purchase Agreement and shall include all of the Schedules and Exhibits, if any, attached hereto. (g) "Antitrust Division" shall have the meaning ascribed to such term in Section 6.7 hereof. (h) "Approval" shall mean any approval, authorization, consent, license, franchise, order or permit of or by, notice to, or filing or registration with, a Person. 2 (i) "Assumed Liabilities" shall have the meaning ascribed to such term in Section 2.3 hereof. (j) "Astra Lease" shall mean that certain Lease, dated May 24, 1995, between Fisons, as landlord, and Astra Research Corporation ("Astra"), as tenant, covering certain portions of the Facility (as hereinafter defined), as amended by the letter agreement between such parties dated June 13, 1995. (k) "Astra Cohabitation Agreement" shall mean that certain Cohabitation Agreement, dated as of May 24, 1995, between Fisons and Astra, as amended by the letter agreement between such parties dated June 13, 1995. (l) "Books and Records" shall mean originals or copies of all books, financial and other records and any information and data which has been reduced to written, electronically formatted, recorded or encoded form primarily relating to the Business, the Products in the Territory or the Inactive Products in the Territory, the Transferred Assets, the Licensed Assets, or the Assumed Liabilities (delivery of such Books and Records to be deemed to occur upon the Transfer to Purchaser of the Real Property) and that are not Licensed Assets, including without limitation, to the extent relating to the Business, customer lists and related sales histories, credit policies and credit information with respect to existing customers, existing cost and pricing data, employee records for current employees of the Business who accept the Purchaser's offer of employment, existing business plans, advertising and promotion plans, product development plans, forecasts, market research reports, competitor information, reference catalogs, and all existing product data and studies including product distribution records (such as shipping documentation and invoices), FSS product sales and price data, batch records and results of pre-clinical and clinical studies and other product evaluation studies, audit reports (including environmental reports, financial reports and audits, QA/QC reports and Good Manufacturing Practices Reports), and adverse drug experience 3 information and drug product complaints concerning the Products, and correspondence to the extent relating to the Business (including without limitation, with the Environmental Protection Agency, the FDA, the DEA and the FTC). (m) "Bought-In Products" shall mean Gastrocrom(R) (cromolyn sodium, USP) Capsules; Gastrocrom(R) (cromolyn sodium, USP) Oral Concentrate; Hylorel(R) (guanadrel sulfate tablets, USP) Tablets; K-Norm(R) (potassium chloride extended relief cap sules, USP) Capsules; Americaine(R) (benzocaine) Otic Topical Anesthetic Ear Drops; and Americaine(R) (benzocaine) Anesthetic Lubricant. (n) "Business" shall mean the business, assets, properties, rights and operations of the Sellers and their Affiliates, wherever located and whether or not reflected on the books and records of the Sellers or their Affiliates, that are primarily used in, or primarily pertain or relate to, the manufacture at the Facility and/or sale and/or distribution of the Products in the Territory, excluding any such items related to the Sellers' sales force. (o) "Business Day" shall mean each day which is not a day on which banking institutions in New York, New York or London, England are authorized or obligated by Law to close. (p) "CERCLA" shall have the meaning ascribed to such term in Section 4.17(a) hereof. (q) "Closing" shall mean the consummation of the transactions contemplated by this Agreement with effect at and as of the Effective Time. (r) "Closing Date" shall mean July 2, 1996 or such other date as the parties shall determine, if the conditions to Closing described in Articles 8 and 9 hereof have been fully satisfied or waived by the appropriate party or parties hereto on or prior to such date. 4 (s) "Closing Purchase Price" shall have the meaning ascribed to such term in Section 2.5. (t) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. (u) "Commerce Drive Lease" shall mean that certain Agreement of Lease, dated as of July 23, 1976, between Morris Rock, Julius Rock and Joelle Kheel, as lessor, and Pennwalt Corporation, as lessee, as subsequently amended on February 24, 1982, June 29, 1987, June 28, 1991 and August 15, 1991. (v) "Contract" shall mean each instrument, contract and other agreement (including without limitation, all leases, subleases and other agreements relating to real property and all unshipped purchase orders) primarily relating to the Business, the Products in the Territory, the Inactive Products in the Territory, the Transferred Assets or the Licensed Assets to which any of the Sellers is a party or by which any of them or any of their properties or assets are bound. (w) "Competitive Business" shall have the meaning ascribed to such term in Section 10.5(a) hereof. (x) "Damages" shall mean any claim, loss, liability, debt, cost or expense (including, without limitation, reasonable attorneys' and accountants' fees, costs and expenses but excluding in all cases consequential damages) or damage of any kind or nature whatsoever. (y) "DEA" shall mean the U.S. Drug Enforcement Administration. (z) "Deed" shall mean the Bargain and Sale Deed with Covenants Against Grantor's Acts in the form attached hereto as Exhibit D. 5 (aa) "DOJ" shall have the meaning ascribed to such term in Section 4.22(c). (ab) "Effective Time" shall mean 11:59 p.m. New York Time on the Closing Date. (ac) "Environmental Laws" shall have the meaning ascribed to such term in Section 4.17(a) hereof. (ad) "Equipment" shall mean each item of machinery, equipment and fixture owned by the Sellers or their Affiliates (i) which is located on the Real Property on the date hereof or (ii) which is not so located but is now, or was at any time since December 20, 1995, used by the Sellers or their Affiliates primarily in connection with the manufacturing of Products at the Facility, including without limitation, the equipment listed on Schedule 4.19 hereto. (ae) "ERISA" shall have the meaning ascribed to such term in Section 4.15(a). (af) "Establishment Registration" shall mean the registration of the Facility and the listing of the Products with the FDA, as required under the FFDCA and, if required by Law, the DEA and the State Education Department, New York State Board of Pharmacy. (ag) "Excluded Assets" shall have the meaning ascribed to such term in Section 2.2 hereof. (ah) "Excluded Liabilities" shall have the meaning ascribed to such term in Section 2.4 hereof. (ai) "Facility" shall mean the real property, plant and fixtures owned and operated by Fisons, located at 755 Jefferson Road, Rochester, New York. 6 (aj) "FDA" means the U.S. Federal Food and Drug Administration. (ak) "FFDCA" shall have the meaning ascribed to such term in Section 4.22(c). (al) "FTC" shall have the meaning ascribed to such term in Section 6.7 hereof. (am) "Former Real Property" means any real property other than the Real Property but only with respect to such periods when it was owned, leased, operated or otherwise used in respect of the Transferred Assets and the Business, whether by Sellers or by their predecessors in interest. (an) "GAAP" shall mean generally accepted accounting principles in the United States as in effect on the date hereof. (ao) "Good Manufacturing Practices" shall mean the current good manufacturing practices for the preparation of drug products for administration to humans, as set forth in the rules and regulations issued under the FFDCA and the guidelines and other similar pronouncements issued by the FDA interpreting and giving effect to the "current" status of such rules and regulations regarding good manufacturing practices, all as in effect from time to time up to the Effective Time. (ap) "Governmental Authority" shall mean any foreign, federal, state, local or other governmental, administrative or regulatory authority, body, agency, court, tribunal or similar entity. (aq) "Guaranty" shall mean the Guaranty in the form of Exhibit A hereto. (ar) "Hazardous Materials" means any substance which is or becomes defined as "hazardous waste", "hazardous material", "hazardous substance", "asbestos", "industrial waste", 7 "radioactive material", "radioactive waste", "low-level radioactive waste", "oil", "petroleum", "petroleum products", "polychlorinated biphenyls", "pollutant", or "contaminant" under any Environmental Law, including, without limitation, CERCLA and the Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.) and the regulations promulgated thereunder. (as) "Headquarters Services" shall mean the services listed on Schedule 1.1(as). (at) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. (au) "Inactive Products" shall mean the products listed on Schedule 1.1(au). (av) "Income Taxes" shall mean any foreign, federal, state or local income Tax or franchise Tax based on income, including any interest, penalties, additions, assessments or deferred liability with respect thereto, whether disputed or not. (aw) "Indemnified Party" shall mean any party entitled to indemnification pursuant to Article 11 hereof and shall include such party's Affiliates, successors and permitted assigns. (ax) "Indemnifying Party" shall mean any party liable for indemnification pursuant to Article 11 hereof and shall include such party's successors and assigns. (ay) "Intangible Assets" shall mean all intangible property owned by Sellers primarily relating to the Pennkinetic Process, and all of the following owned by or issued to Sellers or their Affiliates, primarily relating to the Business, the Products in the Territory, the Inactive Products in the Territory or the other Transferred Assets whether or not constituting or recorded in the Books and Records of the Sellers: warranties and 8 other similar guarantees of quality or performance given by third parties in respect of goods delivered or services performed, inventions, designs, know-how, patents, patent applications, trademarks, trademark registrations and applications therefor, goodwill, goodwill associated with trademarks that are not Licensed Assets, trade names, trade secrets, trade processes, labels and other trade rights, whether or not registered, copyrights (including copyrights in computer software and computer software documentation, source code and systems documentation), copyright registrations and applications therefor, Specifications, Approvals (including without limitation the Product Licenses and Establishment Registration and any similar filings made and Approvals given in respect of the Inactive Products), customer identities and related sales histories, covenants not to compete, capitalized closing costs, Proprietary Information, research and development projects, materials and data, and any other assets, identifiable or unidentifiable, normally considered an "intangible asset" under GAAP and to which the guidance under GAAP for intangible assets would apply for purposes of accounting. (az) "Inventory" shall mean all inventories owned by the Sellers or their Affiliates primarily relating to the Business, the Products in the Territory or the other Transferred Assets, wherever located, including without limitation all packaging, finished goods, raw materials, supplies, work in process, spare parts and other miscellaneous items of tangible property normally considered a part of "inventory" under GAAP. (ba) "IRS" shall mean the U.S. Internal Revenue Service. (bb) "knowledge" or "known" shall mean with reference to Sellers' knowledge, the actual knowledge after reasonable inquiry of the persons listed, or holding the offices and positions listed, on Schedule 1.1(bb) hereto. 9 (bc) "Labelling" means package inserts, labels, carton imprints and samples used in connection with the marketing and sale of the Products in the Territory. (bd) "Law" shall mean any applicable law, statute, rule, regulation, ordinance, standard, requirement, administrative ruling, order or process promulgated by any Governmental Authority as in effect from time to time (including, without limitation, any zoning or land use law or ordinance, building code, Environmental Law, securities, blue sky, civil rights or occupational health and safety law or regulation and any court or arbitrator's order or process). (be) "Leased Real Property" shall mean the leasehold interests of Sellers or their Affiliates listed on Schedule 4.20(b) hereto. (bf) "Liability" shall mean any debt, liability, commitment or obligation of any kind, character or nature whatsoever, whether known or unknown, secured or unsecured, accrued, fixed, absolute, potential, contingent or otherwise, and whether due or to become due. (bg) "License Agreement" shall mean the License Agreement in the form attached hereto as Exhibit B and "Licensed Assets" shall mean the Intellectual Property and Assumed Contracts, each as defined therein. (bh) "Lien" shall mean any lien, statutory lien, pledge, mortgage, security interest, charge, easement, right of way, covenant, claim, restriction, right, option, conditional sale or other title retention agreement, or encumbrance of any kind or nature. (bi) "Lost Operating Profit" shall mean in respect of each Primary Product that becomes subject to a Product Recall, if any, the amount equal to 60% of the difference between (i) the agreed upon forecast sales for such Primary Product as set forth 10 in Schedule 1.1(bi) hereof and (ii) any actual sales thereof during the period commencing with the Product Recall of such Primary Product and ending thirty-six (36) months thereafter. (bj) "manufacture/manufacturing/manufactured" means all processes and operations involved in the production, formulation, blending, quality assurance, testing, storage, filling and packaging of the Products. (bk) "Manufactured Products" shall mean Delsym(R) (dextramethorphan polistirex) Cough Formula, Ionamin(R) (phentermine resin) Capsules, Mykrox(R) (metolazone tablets, USP) Tablets, Pediapred(R) (prednisolone sodium phosphate, USP) Oral Liquid, Tussionex(R) (hydrocodone polistirex/chlorpheniramine polistirex) Pennkinetic Extended Release Suspension, Zaroxolyn(R) (metolazone tablets, USP) Tablets. (bl) "Marks" shall have the meaning ascribed to such term in Section 10.6(a) hereof. (bm) "Manufacturing Agreement" shall mean a Manufacturing Agreement for the supply of certain Products to the Sellers for sale in Canada in form and substance reasonably acceptable to the parties. (bn) "Other Personalty" shall mean all personal property (including parts, furniture and furnishings) other than Equipment, Intangible Assets, Inventory, Inactive Products, Products, Proprietary Information, Product Licenses and Establishment Registrations owned, held or leased by Sellers or their Affiliates and which is used by Sellers primarily in connection with the Business, the Inactive Products in the Territory or the Products in the Territory or the other Transferred Assets excluding any Licensed Assets. (bo) "Owned Real Property" shall mean the real property and fixtures owned, in whole or in part, by the Sellers or their Affiliates listed on Schedule 4.20(a) hereto. 11 (bp) "Pennkinetic Process" shall mean the prolonged release pharmaceutical preparation process described in United States Patent Nos. 4,221,778 and 4,762,709. (bq) "Permitted Liens" shall mean (a) mechanics', carriers', warehousemens', workmens' and other similar Liens aris ing in the ordinary course of the Business which are not yet due and payable or are being contested in good faith by appropriate proceedings, which will be satisfied in full by the Sellers or omitted from the Purchaser's title insurance policy by bonding or escrow, and which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, (b) Liens for Taxes, assessments and other governmental charges not yet due and payable or that may subsequently be paid without penalty or that are being contested in good faith by appropriate proceedings and will be satisfied in full by the Sellers and which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, (c) with respect to the Owned Real Property, (i) easements, covenants, rights-of-way, claims, restrictions and other encumbrances of record set forth in the title insurance commitment for the Facility prepared for the Purchaser by Chicago Title Insurance Company under its title number 9616-25011, dated April 9, 1996, (ii) any state of facts shown on the survey of the Facility pre pared for the Purchaser by RV-SH/APS Consultants Land Surveyors, PC dated May 8, 1996, and (iii) zoning, building and other similar restrictions imposed by Law, (d) with respect to the Leased Property, such Liens as shall not render any Real Property Leases unmarketable, and any state of facts that a current survey of the Leased Real Property would show, provided the same shall not render the same unmarketable, (e) such other matters shown on Schedule 4.12 and (f) Liens under title retention agreements entered into the ordinary course of the Business and either involving annual payments by Purchaser of less than $25,000 or listed on Schedule 4.7. (br) "Person" shall mean any individual, general or limited partnership, corporation, limited liability company, 12 association, business trust, joint venture, Governmental Authority, business entity or other entity of any kind or nature. (bs) "Personal Property Lease" shall mean each lease of personal property (including capital leases) primarily relating to the Business, the Transferred Assets or the Licensed Assets which provides for payments in excess of $25,000 per annum. (bt) "Placement" shall have the meaning ascribed to such term in Section 8.8 hereof. (bu) "Placing Agreement" shall have the meaning ascribed to such term in Section 8.8 hereof. (bv) "Product License" shall mean the pending and/or approved New Drug Application, Abbreviated New Drug Application, Claimed Exemption for Investigational Use (i.e., Investigational New Drug Application), Drug Master File, or other similar product license applicable in the Territory for a Product including all supplements and amendments thereto. (bw) "Product Recall" shall have the meaning ascribed to such term in Section 11.3(a) hereof. (bx) "Products" shall mean, collectively, the products listed on Schedule 1.1(bx). (by) "Proprietary Information" shall mean, all of the following owned by Sellers or their Affiliates and primarily relating to the Business, the Products in the Territory, the Inactive Products in the Territory, or the other Transferred Assets whether or not recorded in the Books and Records of the Sellers: the content of the Books and Records, confidential information, trade secrets, pricing and marketing strategies, customer information, business leads, research and results thereof, technology, know-how, discoveries, improvements, techniques, data, methods, processes, instructions, formulae, 13 recipes, drawings and specifications (whether or not such items have been reduced to written, computer-readable or other tangible form and whether patented or patentable or not), shop rights, license agreements and other agreements relating to any of the foregoing and other proprietary information and materials of every kind and character. (bz) "Purchase Price" shall have the meaning ascribed to such term in Section 2.5 hereof. (ca) "Purchaser Material Adverse Effect" shall mean any change or effect that taken alone or together with other changes or effects has had or is likely to have a material adverse effect on the Purchaser's ability to consummate the transactions contemplated by this Agreement or the other Acquisition Documents. (cb) "Real Property" shall mean all Leased Real Property and Owned Real Property. (cc) "Real Property Leases" shall mean the leases, subleases, licenses and other agreements which relate to the use of real property. (cd) "Representative" shall mean, with respect to a Person, any employee, officer, director, stockholder, partner, accountant, attorney, investment banker, broker, finder, investor, subcontractor, consultant or other authorized agent or representative of such Person. (ce) "Restricted Assets" shall have the meaning ascribed to such term in Section 3.3 hereof. (cf) "Returned Products" means any Products validly returned to Purchaser, including without limitation, any Products returned because they are out of date or as part of a general recall of such Product from its channels of distribution but exclusive, however, of Product Recalls. 14 (cg) "RPR" shall mean Rhone-Poulenc Rorer Inc. (ch) "Security Agreement" shall mean the Intellectual Property Security Agreement in the form attached hereto as Exhibit C. (ci) "Seller Material Adverse Effect" shall mean any change or effect that taken alone or together with other changes or effect has had or is likely to have a material adverse effect on the Business or the Sellers' ability to consummate the transactions contemplated by this Agreement or the other Acquisition Documents. (cj) "Special Indemnification Deductible" shall have the meaning ascribed to such term in Section 11.3(a) hereof. (ck) "Special Indemnification Limit" shall have the meaning ascribed to such term in Section 11.3(a) hereof. (cl) "Specifications" means the specifications (including manufacturing procedures, agreed upon regulatory analytical methods, quality assurance procedures and validation procedures) for manufacturing the Products set forth in the Sellers' Product Licenses, manufacturing manuals and batch records. (cm) "Supply Agreement" shall mean an agreement in form and substance reasonably acceptable to the parties providing for the supply by the Sellers of bulk cromolyn sodium, USP to Purchaser after the Closing. (cn) "Tax" shall mean any foreign, federal, state or local income, gross receipts, franchise, license, severance, occupation, premium, environmental (including taxes under Code Section 59A), customs duties, profits, disability, registration, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, 15 occupancy, franchise, real property, personal property, business and occupation, mercantile, windfall profits, capital stock, stamp, transfer, workmen's compensation or other tax, fee or imposition of any kind whatsoever, including any interest, penalties, additions, assessments or deferred liability with respect thereto, whether disputed or not, and including taxes referred to in Section 13.4. (co) "Tax Return" shall mean any return, report, declaration, claim for refund, estimate, election, or information statement or return relating to any Tax, including any schedule or attachment thereto, and any amendment thereof. (cp) "Territory" shall mean (i) with respect to all the Products and Inactive Products except Gastrocrom(R) (cromolyn sodium, USP) Capsules and Oral Concentrate and Pediapred Oral Solution (prednisolone sodium phosphate, USP), anywhere in the world (other than Canada), (ii) with respect to Gastrocrom(R) (cromolyn sodium, USP) Capsules and Oral Con centrate, the United States and its commonwealths, territories and possessions, including without limitation, Puerto Rico, and (iii) with respect to Pediapred Oral Solution (prednisolone sodium phosphate, USP), the United States and its commonwealths, territories and possessions, including without limitation, Puerto Rico, and Aruba, Bahamas, Barbados, Curacao/Netherlands Antilles, Denmark, Guatemala, Saipan, Surinam and Trinidad. (cq) "Third Party Claim" shall have the meaning ascribed to such term in Section 11.6(a) hereof. (cr) "Transfer" shall mean any sale, transfer, conveyance, assignment, delivery or other disposition, and "Transferred" and "Transferrable" shall have a correlative meaning. (cs) "Transferred Assets" shall have the meaning ascribed to such term in Section 2.1 hereof. 16 (ct) "Transitional Services Agreement" shall mean an agreement in form and substance reasonably acceptable to the parties with respect to certain post Closing services and assistance that each is to provide the other for a transitional period after Closing. (cu) "WARN" shall mean the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101, et seq., as it may be amended from time to time. 1.2. Additional Definitions. In addition to the foregoing defined terms, other capitalized terms appearing in this Agreement shall have the respective meanings ascribed to such terms where they first appear in the text of this Agreement. ARTICLE 2. PURCHASE AND SALE OF THE ASSETS; CLOSING CONSIDERATION 2.1. Purchase and Sale of the Assets. Subject to the terms and conditions of this Agreement, and on the basis of the representations, covenants and warranties set forth herein, at the Closing the Sellers shall transfer, sell, convey, assign and deliver to the Purchaser, and the Purchaser shall purchase and accept from the Sellers, all of the Sellers' respective rights, title and interests in and to the Business, free and clear of all Liens other than Permitted Liens and the Assumed Liabilities (but in no event including the Excluded Assets) including, without limitation or duplication, all of the Sellers' respective rights, titles and interests in and to the following, free and clear of all Liens other than Permitted Liens and the Assumed Liabilities, (collectively, the "Transferred Assets"): (a) all Equipment; 17 (b) to the extent legally Transferable and subject to the Sellers' rights pursuant to Section 10.7 hereof, all Intangible Assets; (c) to the extent legally Transferrable and subject to the Sellers' rights pursuant to Section 10.7 hereof, all Proprietary Information; (d) all Inventory; (e) all Real Property; (f) to the extent legally Transferrable and subject to the Sellers' rights pursuant to Section 10.7 hereof, all rights to the Products in the Territory and Inactive Products in the Territory; (g) to the extent legally Transferrable and subject to the Sellers' rights pursuant to Section 10.7 hereof, all Contracts, including without limitation, rights under supply agreements primarily relating to the Products in the Territory, and the Astra Lease, the Astra Cohabitation Agreement and the Commerce Drive Lease; (h) all Other Personalty; (i) to the extent legally Transferrable and subject to the Sellers' rights pursuant to Section 10.7 hereof, all Books and Records; (j) without limiting the foregoing, all prepaid expenses, advances and security deposits primarily relating to the Business other than those relating to Income Taxes. 2.2. Excluded Assets. Notwithstanding anything to the contrary contained herein, including Section 2.1 above, the Transferred Assets shall not include and the Sellers shall retain all of their respective rights, title and interest in and to, and 18 shall not Transfer to the Purchaser, any asset of the Sellers or their Affiliates set forth below (collectively, the "Excluded Assets"): (a) any assets of the Sellers or their Affiliates which are not Transferred Assets including rights to products other than the Products and Inactive Products; (b) the Licensed Assets; (c) any proceeds paid or payable to Sellers in connection with, and all other rights of Sellers under, this Agreement or the other Acquisition Documents, including the Purchase Price and payments under the License Agreement; (d) any Tax credits or Tax refunds paid with respect to the Business for periods ending prior to the Effective Time; (e) any refunds of fees paid to the FDA with respect to the Business for periods ending prior to the Effective Time; (f) all causes of action and choses in action in respect of the Business for periods ending prior to the Effective Time or relating to the Excluded Liabilities; (g) all Drug Master Files relating to the Products or the Inactive Products; (h) cash and cash equivalents; (i) rights to the Products outside the Territory and the Inactive Products outside the Territory; (j) the other current assets that the Purchaser elects not to include in the definition of "Adjustment Current Assets" as permitted by such provision. 19 (k) all rights of the Sellers under Contracts which according to such Contracts relate to periods prior to the Effective Time and were paid, performed, discharged or satisfied prior to the Effective Time, and the Sellers shall retain all such rights including without limitation, all of Sellers' accounts receivable as of the Effective Time; (l) the personal computers, the zebra printer and the other machinery and equipment relating to (i) blister packing, (ii) the performance of stability work with respect to products other than the Products and (iii) release testing for products other than the Products as more fully described, in the case of clauses (i), (ii) and (iii) above, on Schedule 2.2(l) (collectively, the "Excluded Equipment"); provided, that any Books and Records contained therein will be down loaded onto portable computer disks and delivered to Purchaser with the Books and Records in accordance with Section 10.1; (m) all assets of the Pension Plan for Employees of Fisons Corporation, all assets of any tax-qualified defined contribution plan in which Plant Employees (as defined in Section 10.3(a) hereof) participate (other than any assets which are transferred in accordance with Section 10.3(e) hereof) and all assets associated with any Excluded Liability described in Sections 2.4(a) and 2.4(g) hereof; (n) all insurance policies and all rights and claims thereunder; (o) rights to the name "Fisons" or any variation thereof except as provided by Section 10.6 hereof; and (p) the corporate and financial books and records (including without limitation, the general ledgers) of Sellers, other than those primarily relating to the Business, the Trans ferred Assets or the Licensed Assets; and (q) the assets set forth on Schedule 2.2(q). 20 2.3. Assumption of Liabilities. Subject to the terms and conditions of this Agreement, as of the Effective Time, the Purchaser shall assume, and shall be solely and exclusively liable with respect to, and shall pay, perform, discharge and satisfy when due, only those Liabilities of the Sellers which are specifically enumerated below (collectively, the "Assumed Liabilities"): (a) all Liabilities of the Sellers under Contracts included in the Transferred Assets which according to such Contracts relate to periods after the Effective Time and are to be paid, performed, discharged or satisfied after the Effective Time (exclusive, however, of the obligation to make any payments under the Contracts listed on Schedule 2.3(a) to the extent such payments relate to periods ending prior to the Effective Time), and the Sellers shall retain the balance of such Liabilities including without limitation, all accounts payable as of the Effective Time; (b) all Liabilities for Damages to third parties or their property arising out of the sale of the Products after the Effective Time; provided, however, that Purchaser shall not assume, and Sellers shall retain, any such Liabilities for any Damages attributable to Products manufactured prior to the Effective Time that at the Effective Time were adulterated or misbranded within the meaning of the FFDCA; and (c) all Liabilities in respect of Product warranties and Returned Products provided, however, that: (i) in respect of such Liabilities attributable to defective Products that were manufactured by the Sellers, the Sellers shall reimburse the Purchaser within thirty (30) days of being invoiced by the Purchaser for the out-of-pocket costs of replacing such Products or the rebate or credit issued in lieu of such replacement plus any other Liabilities incurred by the Purchaser under the Product warranties applicable to 21 such Products, provided, further, that where such defective Products are from a lot a portion of which was manufactured by the Sellers and a portion of which was manufactured by the Purchaser, the Sellers shall reimburse the Purchaser as specified above based on the proportion of such lot manufactured by the Sellers; and (ii) in respect of such Liabilities attributable to Returned Products that are not defective but have expiration dating of less than 12 months and were sold by the Sellers, the Sellers shall reimburse the Purchaser with thirty (30) days of being invoiced by the Purchaser for the out-of-pocket costs of replacing such Products or the rebate or credit issued in lieu of such replacement, provided, further, that where such Returned Products are from a lot a portion of which was sold by the Sellers and a portion of which was sold by the Purchaser, the Sellers shall reimburse the Purchaser as specified above based on the proportion of such lot sold by the Sellers as determined by the Audit (as defined in Section 2.6(a) hereof). (d) all Liabilities in respect of chargebacks, governmental or other rebates (including without limitation Medicaid rebates) and other similar refunding mechanisms (collectively, "chargebacks"); provided, however, that: (i) where the chargeback request is made in respect of a product that can be identified as having been sold by the Sellers, the Sellers shall reimburse the Purchaser within thirty (30) days of being invoiced by the Purchaser for the amount of the rebate or credit awarded in respect of such chargeback; and (ii) where the chargeback request is made in respect of a Product that cannot be identified as having been sold by the Sellers or the Purchaser and the chargeback request reflects an activity date (i.e. date of sale of the Product by a wholesaler to a customer for all chargebacks other than government rebates ("Non-Government Chargebacks") and the date of dispensing for government rebates ("Government Chargebacks")) (A) prior to the Effective Time, the 22 Sellers shall reimburse the Purchaser for one hundred percent (100%) of such Non-Government Chargeback or Government Chargeback or (B) after the Closing Date but prior to the sixty-first (61st) calendar day after the Effective Time, the Sellers shall reimburse the Purchaser for one-hundred percent (100%) of such Non-Government Chargeback or Government Chargeback, up to a maximum liability of Sellers under this clause (d)(ii)(B) of Six Hundred Thousand Dollars ($600,000). The Purchaser will provide the Sellers with copies of such backup documentation reasonably satisfactory to the Sellers to support Purchaser's reimbursement claims under this Section 2.3(d) and Section 2.3(c). Amounts reimbursed by Sellers to Purchaser under this Section 2.3(d) and Section 2.3(c) shall be treated as a reduction of the Purchase Price. (e) all Liability under any Environmental Law to treat, remove, remediate, dispose of or manage any Hazardous Materials that were released, as such term is defined in CERCLA, on, in, under, about or from the Real Property after the Effective Time; and all Liability for claims (whether asserted in common law or under statute and regardless of form, including strict liability and negligence) arising out of or in respect of any Hazardous Materials (i) that were present or stored on the Real Property in compliance with applicable Environmental Laws prior to the Effective Time and which were shipped, transferred, removed, released, disposed of, arranged for disposal, or otherwise transported off the Real Property after the Effective Time or (ii) that were released on, in, under, about or from the Real Property after the Effective Time; and (f) except as provided in Section 13.4 hereof, all Real Estate Taxes payable with respect to the Owned Real Property (and, with respect to the Leased Real Property, if the related Real Property Lease obligates the Sellers to pay the same) for the period commencing on the Effective Time. 2.4. Excluded Liabilities. Except for the Assumed Liabilities, the Purchaser shall not assume, and shall have no 23 liability or obligation whatsoever, at any time, for any and all Liabilities arising from the operation of, or any act or omission occurring in respect of, the Business or the ownership of the Transferred Assets prior to the Effective Time, (collectively, the "Excluded Liabilities"). Without limiting the foregoing, the following shall be Excluded Liabilities: (a) any Liability of Sellers under any collective bargaining, non-competition, consulting, employment or any similar agreement; (b) any Liability of Sellers for any Federal, state or local Taxes, including without limitation, Taxes measured upon income or profits earned or other Tax Liabilities incurred in respect of the Business, the Transferred Assets or the Licensed Assets or events or circumstances prior to the Effective Time (including but not limited to any deferred Income Tax Liability); (c) any Liability for expenses incurred by Sellers in connection with or resulting from or attributable to the transactions contemplated by this Agreement; (d) any Liability for any investment banking, brokerage or similar charge or commission payable or incurred by Sellers in connection with this Agreement or the transactions contemplated hereby; (e) any Liability arising out of activities undertaken by, or omissions of, the Sellers subsequent to the Effective Time; (f) any Liability giving rise to a Permitted Lien prior to the Effective Time of the type included in clauses (a) or (b) of the definition of Permitted Liens (it being agreed that nothing herein shall be deemed to be a waiver of the Purchaser's obligation to pay any Taxes with respect to any Real Property for periods after the Effective Time); 24 (g) any Liability arising out of or with respect to any "employee benefit plan" (as defined in Section 3(3) of ERISA) maintained, sponsored or contributed to by the Sellers other than any Liability associated with any asset transferred in accordance with Section 10.3(e) hereof which is a claim for or in respect of an amount equal to the assets that were transferred or which arises in respect of acts or omissions with respect thereto subsequent to the transfer thereof to the Purchaser; (h) any other Liability the Sellers may have to their employees, or such employees' dependents, including without limitation for wages, salaries, individual or group life or health insurance, property damage or personal injury claims including workers' compensation claims or proceedings, discrimination claims or proceedings, benefits or severance or other Liabilities relating to employment with the Sellers or in connection with any accident or incident while employed by the Sellers; (i) any intercompany Liabilities between any of the Sellers; (j) any Liabilities for Damages to third parties or their property arising out of the sale of the Products prior to the Effective Time; (k) any Liability under any Personal Property Lease or other lease of personal property listed on Schedule 4.7(b) if the property covered thereby is not located on the Real Property on the Closing Date and is not delivered to the Purchaser within ten (10) days of the Purchaser's demand therefor; and (l) all Liability under any Environmental Law to treat, remove, remediate, dispose of or manage any Hazardous Materials that were released, as such term is defined in CERCLA, on, in, under, about or from the Real Property prior to the Effective Time or on, in, under, about or from the Former Real Property during the period it was owned, leased, operated or 25 otherwise used in respect of the Business, whether or not such release was then in compliance with applicable Environmental Laws; and all Liability for claims (whether asserted in common law or under statute and regardless of form, including strict liability and negligence) arising out of or in respect of (A) any Hazardous Materials (i) that were stored at or otherwise present or disposed of on the Real Property prior to the Effective Time or on the Former Real Property during the period it was owned, leased, operated or otherwise used in respect of the Business, and which were shipped, transferred, removed, released, disposed of, arranged for disposal, or otherwise transported off the Real Property prior to the Closing or off the Former Real Property during the period it was owned, leased, operated or otherwise used in respect of the Transferred Assets and the Business, whether or not then in compliance with applicable Environmental Laws or (ii) that were released on, in, under, about or from the Real Property prior to the Effective Time and which migrate off the Real Property either on or prior to or after the Effective Time; (B) any violation by Sellers prior to the Effective Time of any Environmental Law with respect to the Transferred Assets or operations of the Business; and (C) any failure to obtain or maintain, prior to the Effective Time, any Approval required by any Environmental Law to operate the Business. 2.5. Closing Consideration. The aggregate closing consideration to be paid by the Purchaser to the Sellers at the Closing in respect of the purchase of the Transferred Assets and in full satisfaction of Purchaser's payment obligations under the License Agreement shall be Three Hundred Seventy Million Dollars ($370,000,000). The portion of the closing consideration paid in respect of the purchase of the Transferred Assets is Sixty-one Million Dollars ($61,000,000) (the "Closing Purchase Price"), which will be allocated as provided in Section 2.8, and subject to increase or decrease by the amounts reimbursed by Sellers to Purchaser under Section 2.3(c) and (d) and the amount of the Closing Adjustment and 1996 Sales Adjustment as set forth in Section 2.6 and Section 2.9 (the Closing Purchase Price so adjusted being the "Purchase Price"). 26 2.6. Closing Inventory Adjustment. (a) Promptly after Closing, the Sellers, at their expense, shall conduct a physical count of the Inventory and audit of the other Adjustment Current Assets as of the Effective Time (the "Audit"). To the extent necessary, the Purchaser shall provide the Sellers and their Representatives reasonable access to the Facility and Leased Real Property during normal business hours to conduct the Audit. The Audit may be witnessed by the Purchaser and its accountants, at Purchaser's expense. The Inventory shall be identified by lot number and valued as of the Effective Time based on its net book value determined in accordance with GAAP; provided that Inventory with expiration dating of less than twelve (12) months measured from the Closing Date shall be valued at zero. The Audit shall be completed, and the Sellers' valuation of the Adjustment Current Assets as of the Effective Time (the "Sellers' Valuation") completed and delivered to the Purchaser, no later than thirty (30) days after the Closing Date. Sellers' Valuation shall be deemed agreed by the Purchaser and become binding among the parties unless the Purchaser shall reject such valuation in a written notification specifying the Purchaser's objections in reasonable detail delivered to the Sellers within fifteen (15) business days of receipt of Sellers' Valuation. In the event that the Purchaser shall notify the Sellers in writing within such fifteen (15) business days period that the Purchaser disagrees with the Sellers' Valuation, and if the Purchaser and the Sellers are unable to resolve any such disagreement within thirty (30) days after the Purchaser gives the Sellers notice thereof, the disagreement shall be submitted for determination to an accounting firm of national reputation which is acceptable to the Purchaser and the Sellers, provided that if the Purchaser and Sellers cannot promptly agree upon such accounting firm, the disagreement shall be submitted to Ernst & Young. The determination by such accounting firm shall be conclusive, non-appealable and binding upon the Purchaser and the Sellers for all purposes, and the fees of such firm shall be borne as it shall determine after considering the positions asserted by the parties in light of its final decision. The value of the Adjustment Current Assets as of the Effective Time, 27 as finally agreed among the parties or determined under this paragraph, is referred to herein as the "Adjusted Valuation". (b) Within ten (10) business days following the final agreement on, or determination of, Adjusted Valuation, the Closing Purchase Price paid by the Purchaser to the Sellers shall be adjusted as follows (the "Closing Adjustment"): (1) by payment by the Purchaser to the Sellers of the amount by which the Adjusted Valuation exceeds Ten Million Dollars ($10,000,000); or (2) by payment by the Sellers to the Purchaser of the amount by which the Adjusted Valuation is less than Ten Million Dollars ($10,000,000). 2.7. Payment of the Closing Consideration. At the Closing, the Purchaser shall pay the Closing Purchase Price to Fisons and/or FII by wire transfer of immediately available funds to a United States bank account or accounts identified in writing by Fisons to the Purchaser at least two (2) business days prior to the Closing Date. The Closing Inventory Adjustment and amounts payable under Section 2.3, if any, and 3.2 shall be paid in immediately available funds as directed by the recipient. 2.8. Allocation of the Purchase Price. The Sellers and the Purchaser agree that the Purchase Price shall be allocated among the Transferred Assets on the basis of an allocation (the "Allocation") to be prepared by the Purchaser. Such Allocation shall, upon delivery to the Sellers, become part of this Agreement for all purposes. The Sellers and the Purchaser agree to report, pursuant to Section 1060 of the Code and the regulations promulgated thereunder, if and when required, the Allocation of the Purchase Price, as adjusted, in a manner entirely consistent with such Allocation in the preparation and filing of all Tax Returns (including IRS form 8594). Neither the Sellers nor the Purchaser will take any action that would call into question the bona fides of such Allocation; and neither 28 party shall take any position for Tax purposes which is inconsistent with such Allocation, unless required to do so under applicable law. The parties further agree that for U.S. federal and state Income Tax purposes they shall each treat the Transfer of the assets contemplated hereby as a purchase and sale of such assets in their entirety. 2.9. Revenue Adjustment (a) Promptly after the Closing, the Purchaser, at its sole expense and discretion, shall analyze the sales practices (the "Sales Analysis") of the Sellers in the United States with respect to the Tussionex, Zaroxolyn, Deslym and Pediapred (the "Adjustment Products") during each of the months of January through June 1996. The Sales Analysis shall be based on the relevant books and records of the Sellers and shall be for the sole purpose of identifying any Incentive Sales Practices during such period. "Incentive Sales Practices" shall mean any promotional tool that could reasonably be expected to provide an incentive to customers to purchase, or salesmen, distributors, wholesalers or promoters to sell or promote, greater quantities of the Adjustment Products. Incentive Sales Practices shall include without limitation, increased commissions to salesmen, distributors, wholesalers or promoters, the announcement of a price increase, special price discounts, changes in rebate or returns policies, extended dating and free goods. (b) To the extent the Sellers enjoyed increased sales of the Adjustment Products during May and June 1996 as a result of Sellers' use of Incentive Sales Practices in such months that were not used in January through April 1996, the Sellers shall pay the Purchaser an amount equal to sixty percent (60%) of the increase in sales attributable to such Incentive Sales Practices (the "1996 Sales Adjustment"). If the Sellers shall dispute the existence or amount of any proffered 1996 Sales Adjustment, the parties shall submit the dispute to arbitration in accordance with the following procedures: 29 (i) The arbitration shall take place in New York, New York, and be conducted by the American Arbitration Association in accordance with the commercial arbitration rules thereof (the "Rules") except as modified hereby. All necessary determinations, including the arbitration decision, shall be made by an independent arbitrator (the "Arbitrator"). Within ten (10) days after delivery of a notice of arbitration, the parties shall mutually agree upon the selection of the Arbitrator, provided, however, if the parties cannot agree on such independent arbitrator within ten (10) days after delivery of a notice of arbitration, such independent arbitrator shall be selected in accordance with the Rules. The Arbitrator shall establish a schedule of discovery and hearings such that the Arbitrator's final written decision shall be issued within one hundred twenty (120) days after selection of the Arbitrator. Each party must produce all relevant non-privileged documents requested by the other party within thirty (30) days after the request therefor. The Arbitrator's decision must be in writing and shall set forth the reasons therefor. Such decision shall be a conclusive determination of the matter and binding on the parties, shall have the effect of an arbitration award, and shall not (to the extent permitted by applicable law) be contested by any of them. Any litigation necessary to enforce any such arbitration award may be commenced in any State or Federal Court sitting or located in the County of New York, and the parties consent to the personal jurisdiction of the State of New York in connection with any such action. To the fullest extent permitted by law, the parties waive all rights to a jury trial in connection with any such action. The parties agree that service of process in any arbitration or litigation referred to above may be effected by mail or in any other manner permitted by the laws of the State of New York. (ii) Each party in any arbitration and/or litigation arising under this Section 2.9 shall bear its own expenses, except that the fees and expenses of the Arbitrator shall be borne equally by the parties. 30 ARTICLE 3. THE CLOSING 3.1. Time and Place of Closing. The Closing shall take place on the Closing Date at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York New York 10022, or at such other place as may be mutually agreed upon by the parties hereto. The Closing, the Transfer of the Transferred Assets, the effectiveness of the documents, agreements, opinions and certificates delivered in accordance with this Agreement, and the consummation of the transactions contemplated hereby shall be deemed to occur at the Effective Time. 3.2. Payment of Closing Consideration; Deliveries. At the Closing, (a) the Purchaser shall pay to the Sellers in accordance with Section 2.7 hereof the Closing Purchase Price and all payments required to be paid at the Closing pursuant to the License Agreement, as more specifically set forth on Schedule 3.2; (b) the Sellers shall deliver or cause to be delivered to the Purchaser such bills of sale, assignments and instruments of Transfer (including, without limitation, the Guaranty, the Deed and a bill of sale (the "Bill of Sale") and an assignment and assumption agreement (the "Assignment and Assumption Agreement"), in form and substance reasonably satisfactory to the Purchaser and its counsel, as shall be effective to vest in the Purchaser all of the Sellers' rights, title and interests in, to and under the Transferred Assets; (c) the Purchaser shall deliver to the Sellers such agreements, undertakings and other good and sufficient instruments of assumption (including, without limitation, the Assignment and Assumption Agreement), in form and substance reasonably satisfactory to the Sellers and their counsel, as shall be effective to cause the Assumed Liabilities to be binding upon the Purchaser; (d) the parties shall execute, enter into, and deliver to one another the License Agreement, the Security Agreement, the Transitional Services Agreement, the Supply Agreement and the Manufacturing Agreement, and (e) each party shall deliver to the other party such other documents, 31 instruments and certificates as may be reasonably requested by such other party or its counsel. 3.3. Assignment of Contracts, Etc. (a) Anything contained herein to the contrary notwithstanding, this Agreement shall not constitute an agreement to Transfer any Contract, Intangible Asset or any claim or right, or any benefit arising thereunder or resulting therefrom (collectively, "Restricted Assets"), if an attempted Transfer thereof, without the consent of a third party thereto, would constitute a breach thereof or materially and adversely affect the rights of the Sellers or the Purchaser, as the case may be, thereunder. If such consent is not obtained, the Sellers will cooperate with the Purchaser without further consideration in any reasonable arrangement designed to provide for the Purchaser the benefits of or under any such Restricted Asset, including without limitation enforcement for the benefit of the Purchaser of any and all rights of the Sellers against a third party thereto arising out of the breach or cancellation thereof by such third party. Any Transfer to the Purchaser of any Restricted Asset which shall require the consent or approval of any third party for such Transfer as aforesaid shall be made subject to such consent or approval being obtained. Without limiting the generality of the foregoing, to the extent any confidentiality agreement benefitting the Business may not be assigned without a third party's consent and such consent has not been obtained, Sellers shall, from time to time after the Closing, upon request of the Purchaser, take any and all actions reasonably necessary to enforce such confidentiality agreements for the benefit of the Purchaser. To the extent that the Purchaser is provided with the benefits of any Restricted Asset pursuant to this Section 3.3(a), the Purchaser shall in due course assume, perform, pay and discharge all debts, obligations and liabilities of the Sellers with respect to such Restricted Assets to the same extent it would have had the Restricted Asset been capable of being Transferred as herein contemplated. 32 (b) If (i) a Contract or (ii) any other asset used in the Business, is not Transferred to the Purchaser under Section 2.1 hereof because it does not "primarily" relate to the Business, the Products in the Territory, the Inactive Products in the Territory, the Licensed Assets or the Transferred Assets and such Contract or asset is material to the operation of the Business as presently conducted and is not primarily used in providing the Headquarters Services, the Sellers will cooperate with the Purchaser without further consideration, to the extent reasonably practicable, in any reasonable arrangement designed to provide for the Purchaser, the benefits of or under each portion of such Contract or other asset that does relate to the Business, the Products in the Territory, the Inactive Products in the Territory, the Licensed Assets or the Transferred Assets so long as the Purchaser agrees to bear the Liabilities reasonably related thereto; provided, however, nothing in this Section 3.3(b) shall Transfer to the Purchaser any right, title or interest in and to any Excluded Asset. 3.4. Further Assurances. In addition to the actions, documents and instruments specifically required to be taken or delivered by this Agreement, or from time to time after the Closing, and without further consideration, each party hereto shall take such other actions, and execute and deliver such other documents and instruments, as any other party hereto or its counsel may reasonably request in order to effectuate and perfect the transactions contemplated by this Agreement, including without limitation as may be necessary to Transfer, subject to the Sellers' rights pursuant to Section 10.7, the Sellers' rights to the Product Licenses and Establishment Registration included within the Transferred Assets to the Purchaser in the Territory. Without limiting the foregoing, as soon as practical after Closing, the Sellers shall or shall cause their Affiliates to use commercially reasonable efforts to Transfer, subject to the terms of this Agreement, to the Purchaser the Product Licenses, or applications therefor, which are capable of being Transferred. Such assistance shall include the delivery of such information which on the Closing Date is in the possession of the Sellers or 33 their Affiliates and the execution and delivery of letters of consent to the Transfer thereof insofar as the Sellers or their Affiliates are legally entitled to do so and letters of access to information held by any Governmental Authority in the Territory. To the extent reasonably practicable, the Sellers shall also promptly submit any information required by any Governmental Authority in the Territory for the maintenance therein of any Product Licenses included within the Transferred Assets, the Transfer thereof to the Purchaser, where practicable, or the grant of new Product Licenses in respect thereof to the Purchaser by such Governmental Authority provided that (A) the Purchaser supplies any such information in a form suitable for submission to the relevant Governmental Authority, (B) this obligation shall not require the Sellers to generate any new or additional data for submission to such body or authority, except information which relates specifically to the identity or business of the Sellers and (C) the costs incurred in connection with any such Transfer or application shall be for the account of the Purchaser. Following the Closing and in perpetuity or, if the Purchase Option under, and as defined in, the License Agreement is not exercised, the end of the Term (as defined in the License Agreement), to the fullest extent the Sellers have the ownership or other rights to do the same, the Sellers shall further permit the Purchaser to reference (and upon request shall so advise the FDA), and upon the Purchaser's request shall accord the Purchaser access to, and copies of, all data contained in, the Product Licenses for the Products and Inactive Products not Transferred to the Purchaser (including without limitation all Drug Master Files) to the extent necessary to permit the Purchaser to manufacture, market and distribute the Products in the Territory and the Inactive Products in the Territory and to obtain and maintain Approvals to market and distribute the Products in the Territory or the Inactive Products in the Territory. Sellers shall promptly advise Purchaser of any changes made in any such Product License if such change could reasonably be expected to have an impact on such Approvals of Purchaser in the Territory. 34 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS The Sellers hereby jointly and severally represent and warrant to the Purchaser as of the date hereof and as of the Closing Date (except to the extent any representation or warranty relates to a specific date) as follows; provided, however, the Sellers make no representation or warranty herein with respect to any of the Inactive Products or the Pennkinetic Process, except to the extent it relates to a Product: 4.1. Organization and Good Standing. Each of the Sellers is a company duly incorporated or otherwise organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has the requisite power and authority to own, operate and lease its properties and assets and to conduct its business as they are now being owned, operated, leased and conducted. Each of the Sellers is duly qualified or licensed to do business as a foreign corporation (or other business entity, where applicable) and is in good standing in every jurisdiction in which the conduct of the Business or ownership of its properties requires it to be so licensed or qualified or in good standing except where the failure to be so qualified or licensed or in good standing could not reasonably be expected to have a Seller Material Adverse Effect. Schedule 4.1 hereto sets forth a true and complete list of all such foreign jurisdictions in which each of the Sellers is so qualified or licensed and in good standing. 4.2. Power and Authority. Each of the Sellers has the full legal power and authority to execute and deliver this Agreement and each other Acquisition Document, perform its obligations hereunder and thereunder and consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each other Acquisition Document by the Sellers, the performance by them of their obligations 35 hereunder and thereunder and the consummation by them of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate actions on the part of the Sellers. This Agreement and each other Acquisition Document constitutes (or will constitute upon the execution thereof) the legal, valid and binding obligation of the Sellers, enforceable against them in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity. 4.3. Organizational Documents. The copies of the certificate of incorporation and bylaws (or equivalents thereof) of the Sellers made available by the Sellers to the Purchaser prior to the date hereof, if any, were true and complete copies of such instruments as amended and will be in full force and effect on the date thereof. 4.4. No Violation. Except as set forth on Schedule 4.4 hereto, neither the execution and delivery of this Agreement or any other Acquisition Primary Document by each Seller, the performance by it of its obligations hereunder or thereunder, nor the consummation by it of the transactions contemplated hereby or thereby, will (a) conflict with or result in a breach of any provision of the certificate of incorporation or bylaws (or equivalents thereof) of such Seller; (b) with or without the giving of notice or the lapse of time or both, violate, be in conflict with, constitute a default under, permit the termination of, cause the acceleration of the maturity of any debt or obligation of the Sellers relating to the Business under, constitute a breach of, create a Liability or loss of a material benefit under, or result in the creation or imposition of any Lien upon any of the Transferred Assets or Licensed Assets under, any Contract, other than such violations, conflicts, defaults, terminations, accelerations, breaches, Liabilities, loss of benefits or Liens which (i) could not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect or (ii) will be cured or for which waivers will be 36 obtained prior to or concurrently with the Closing; (c) violate or conflict with, any Law or any judgment, decree or order of any Governmental Authority to which any of the Sellers are subject or by which they or any of their assets or properties are bound, other than such violations, conflicts or noncompliance with such requirements which could not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect; or (d) result in the loss of any Approval necessary to or benefitting the Business other than such losses which could not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. 4.5. Financial Information; Undisclosed Liabilities. (a) The Sellers have previously delivered to the Purchaser the financial data, reports and statements listed on Schedule 4.5(a) (collectively the "Financial Data"). Except as may otherwise be indicated therein or on Schedule 4.5(a) hereto, the Financial Data were compiled from the books and records of the Sellers regularly maintained by such companies in the ordinary course of their business, on the basis set forth in the notes contained in such Financial Data. To the Sellers' knowledge, the Financial Data do not include therein any information known or believed by such Sellers to be materially false or materially misleading or omit to include therein any information known to the Sellers that would be required to be included therein to make such information not materially misleading. The Sellers make no representation that the Financial Data have been prepared in accordance with GAAP or that they represent the results which may be expected from operation of the Business by the Purchaser in the future. The Financial Data are not necessarily the same as that used by the Sellers in its operation of the Business or shown by RPR in its published financial statements. (b) Except as may be set forth in Schedule 4.5(b) or the other Schedules to this Agreement, since December 20, 1995 none of the Sellers has incurred any Liability primarily relating 37 to the Business of a nature required by GAAP to be reflected on a corporate balance sheet or disclosed in the notes thereto, except such liabilities and obligations which (i) were incurred in the ordinary course of business and (ii) which individually or when aggregated with other similar Liabilities are not material to the Business taken as a whole. 4.6. Absence of Certain Changes or Events. Except as set forth on Schedule 4.6 hereto or as otherwise contemplated by this Agreement: (a) since December 20, 1995 there has not occurred any change or event that has had or would reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect; and (b) the Sellers have not, to the extent the following relate to the Business, (i) since December 20, 1995 mortgaged, pledged or subjected to or permitted the imposition of any Lien (other than Permitted Liens) upon any of the Transferred Assets or Licensed Assets, (ii) since December 20, 1995 entered into any material commitment or transaction (including, without limitation, any capital expenditure) except such as entail remaining Liabilities of less than $50,000 or were incurred in the ordinary course of business in a manner and amount consistent with past practice, (iii) since December 20, 1995 disposed of or permitted to lapse in the United States any rights to use any patent, trademark or copyright or other Intangible Asset, other than such dispositions or lapses which would not, individually or in the aggregate, have a Seller Material Adverse Effect, (iv) since December 31, 1995 granted any increase in the compensation of any individual listed in Schedule 10.3(a) earning in excess of $50,000 per annum, including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment, or any increase in the compensation payable or to become payable to any such employee, except, in each case, for increases in accordance with the terms of any of the Contracts disclosed on Schedule 4.7(b) hereto or periodic salary increases 38 of not more than 10% made in the ordinary course of business, or made any payment or commitment to pay any severance or termination pay to, any individuals listed on Schedule 10.3(a), (v) since December 20, 1995 entered into or agreed (whether in writing or otherwise) to enter into any agreement or other arrangement to take any action referred to in this Section 4.6(b), (vi) since December 20, 1995 sold, transferred, otherwise disposed of or agreed to sell, transfer or otherwise dispose of any of the Transferred Assets or Licensed Assets (or assets that would have, but for such actions, qualified as Transferred Assets or Licensed Assets) other than in the ordinary course of business and, in the case of assets other than Inventory, involving assets with an aggregate fair market value of less than $50,000 or an aggregate book value of less than $10,000, (vii) since December 20, 1995 waived, compromised or cancelled any right, or cancelled or compromised any claim or Liability, related to the Business or any of the Transferred Assets or any of the Licensed Assets, other than in the ordinary course of business and involving assets, rights, claims or Liabilities with an aggregate fair market value of less than $50,000 or aggregate book value of less than $10,000, or (viii) since December 20, 1995, other than the provision of the Headquarters Services from locations other than the Facility and the reduction in the number of employees employed at the Facility, introduced any material change with respect to the operation of the Business, including with respect to advertising, marketing, pricing, purchasing, sales, credit, rebates, returns or discounts or (ix) except as disclosed in the Financial Data since December 20, 1995 not made any material change with respect to the accounting methods or practices prevailing during the year prior thereto. 4.7. Material Contracts; No Default. (a) Except as set forth in a Contract listed on Schedule 4.7(a) hereto or otherwise contemplated by this Agreement, none of the Sellers is a party to or bound by any Contract which will be binding on the Purchaser after the 39 Effective Time and which materially limits or restricts it from competing in any line of business included in the Business or expanding the nature or geographical scope of the Business. (b) Schedule 4.7(b) hereto sets forth a true and complete list of all Contracts (excluding completed purchase orders and purchase orders open on the date hereof involving aggregate payments of less than $50,000 and a performance period of one year or less) of the following type primarily relating to the Business, the Transferred Assets or the Licensed Assets, a true and correct copy of each of which was provided or made available to the Purchaser prior to the date hereof: 1. Personal Property Leases. 2. Service Contracts involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 3. Confidentiality, non-disclosure or secrecy Contracts under which the Purchaser will have any Liabilities after the Closing. 4. Government Contracts involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 5. Contracts relating to the acquisition or disposition of products or businesses within the last five years under which the Purchaser will have any Liabilities after the Closing. 6. Manufacturing Contracts under which the Purchaser will have any Liabilities after the Closing. 7. Distribution Contracts involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 8. License and royalty Contracts under which the Purchaser will have any Liabilities after the Closing. 40 9. Research and/or development Contracts involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 10. Commission, brokerage and agency Contracts involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 11. Oral Contracts and commitments involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 12. All Contracts or plans for mergers, consolidations or reorganizations involving the Business within the last five years under which the Purchaser will have Liabilities after the Closing. 13. All joint venture and partnership Contracts. 14. Storage Contracts and Contracts for the production or supply by Sellers of goods or services involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 15. Contracts for (i) capital expenditures or (ii) the purchase of materials, supplies, equipment or services involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 16. Advertising Contracts involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice. 17. Contracts relating to any sale lease-back transactions under which the Purchaser will have any Liabilities after the Closing. 41 18. Industrial revenue bond Contracts and related documents under which the Purchaser will have any Liabilities after the Closing. 19. Options Contracts relating to the purchase of any of the Transferred Assets or Licensed Assets. 20. Contracts in the nature of settlement agreements within the past five years involving aggregate payments of more than $50,000 and which cannot be terminated without penalty on less than thirty (30) days notice, if they might reasonably affect the manufacture or sale of the Products in the future. 21. Any other Contracts involving aggregate payments of more than $100,000 and which cannot be terminated without penalty on less than 30 days notice. (c) Except as set forth on Schedule 4.7(c) hereto and except for defaults resulting from late performance due, or payments of amounts owed to the Sellers which, in the aggregate, do not involve Liabilities in excess of $50,000, each of the Sellers and, to the knowledge of the Sellers, each other party to each Contract (including without limitation each Personal Property Lease, the Astra Lease, the Astra Cohabitation Agreement, the Commerce Drive Lease and the Ionamin Co-Promotion Agreement dated 22 December 1992 between Fisons and Lotus Biochemical Corporation) has performed in all material respects, or is now performing in all material respects, its obligations under, and is not in default (and would not by the lapse of time or the giving of notice or both be in default) under, or in breach or violation of, nor has it received notice of any asserted claim of a default by any other party thereto under, or a breach or violation by such other party of, any of such Contracts to which such person is a party, which failure of performance, default, breach or violation could, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. 42 4.8. Patents, Trademarks and Trade Names. Schedule 4.8 hereto contains a true and complete list of (i) all patents, trademarks, tradenames and copyrights, if any, included in the Intangible Assets that are either registered with the U.S. Patent and Trademark Office or are not so registered but are material to the operation of the Business as presently conducted, (ii) all pending applications therefor and (iii) all licenses and other Contracts relating thereto or to the Know-How (as defined in the License Agreement) (whether as licensor or licensee) (the "Scheduled IP"). Except as set forth on Schedule 4.8 and Schedule 4.4 hereto, no consent of any third party will be required for the use by the Purchaser of any Scheduled IP whether pursuant to the License Agreement or otherwise or the acquisition of any of the Licensed Assets pursuant to the Purchase Option (as defined in the License Agreement). Except as set forth on Schedule 4.8 to the Sellers' knowledge, no claims are currently being asserted by any Person involving or questioning the Sellers' right to use any Scheduled IP or challenging or questioning the validity or effectiveness of any Scheduled IP; and, to the Sellers' knowledge, the use of such Scheduled IP by the Sellers does not infringe the rights of any Person nor, to the knowledge of the Sellers, is any person infringing such Scheduled IP. 4.9. Actions. Except as set forth on Schedule 4.9 hereto, there is no Action pending or, to the knowledge of the Sellers, threatened, against any of the Sellers or any Transferred Asset or Licensed Asset, before any Governmental Authority which (a) questions or challenges the validity of this Agreement or the other Acquisition Documents or any action taken or proposed to be taken by the Sellers pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby or (b) would, if adversely determined, reasonably be expected to have a Seller Material Adverse Effect. 4.10. Compliance with Laws. Except as set forth on Schedule 4.10 hereto, (a) to the Sellers knowledge the Sellers have complied in all material respects with all Laws binding on 43 them relating to the Business or binding on the Transferred Assets or the Licensed Assets except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, (b) none of the Sellers has been charged with or, to the knowledge of any of the Sellers, threatened with any charge concerning, or is under any investigation with respect to, any violation of any provision of any Law relating to the Business, the Transferred Assets or the Licensed Assets, except for such violations which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect and (c) none of the Sellers is in violation of or in default under, and to the knowledge of any of the Sellers, no event has occurred which, with the lapse of time or the giving of notice or both, would result in the violation of or default under, the terms of any judgment, decree, order, injunction or writ of any Governmental Authority relating to the Transferred Assets, the Licensed Assets or the Business, except for such violations or defaults which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect; provided, however, the Sellers make no representation or warranty in clause (a) of this Section 4.10 with respect to Laws referred to in Sections 4.17, 4.20 and 4.22. 4.11. Taxes. Except as set forth on Schedule 4.11, (i) all sales, use, real estate, payroll withholding, unemployment compensation and similar Taxes have been or will be paid when due in respect of the Transferred Assets, the Licensed Assets and the Business and (ii) except for any Liens specified in clause (b) of the definition of Permitted Liens, there are no Tax Liens on any Transferred Assets or Licensed Assets. 4.12. Title to Property. Except as set forth on Schedule 4.12 hereto, the Sellers have good and marketable title to or, in the case of a Real Property Lease or Contract, a valid leasehold interest or Contract right in all of the Transferred 44 Assets, all of the Licensed Assets in the United States, and all Intangible Assets and Proprietary Information in the United States material to the Business, free and clear of all Liens other than Permitted Liens and the Assumed Liabilities. 4.13. Insurance; Product Liability Claims. To the knowledge of the Sellers, Schedule 4.13 hereto sets forth a true and complete list of all material insurance policies or binders currently insuring the property, assets or Liabilities of the Sellers with respect to the Business. To Sellers' knowledge, Schedule 4.13 contains a list and description of all material product liability claims that have been made in respect of the Products over the past five (5) years. 4.14. Approvals. (a) Except as set forth on Schedule 4.14(a) hereto, and except for any filings under the HSR Act and pursuant to Article 31-B of the New York State Tax Law, no Approval of any Governmental Authority or other Person is required to be made, obtained or given by or with respect to the Sellers in connection with the execution or delivery by the Sellers of this Agreement and the other Acquisition Primary Documents, the performance by it of its obligations hereunder or thereunder or the consummation by it of the transactions contemplated hereby or thereby including without limitation the Transfer of the Transferred Assets to the Purchaser, except where the failure to make, obtain or give such Approval would not have a Seller Material Adverse Effect. (b) The Sellers have all Approvals required for the operation of the Business and the use and ownership or leasing of the Transferred Assets and the Licensed Assets, as currently operated, used, owned or leased, except where the loss, expiration or failure to have such Approvals could not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. All of such Approvals are listed on Schedule 4.14(b) hereto and are valid, in full force 45 and effect and in good standing, except where the failure to be so could not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. Except as could not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, there is no Action pending or, to the knowledge of the Sellers, threatened, that disputes the validity of any such Approval or that is likely to result in the revocation, cancellation or suspension, or any adverse modification of, any such Approval. 4.15. Employee Benefit Plans; ERISA. (a) All plans maintained or contributed to by Sellers in which Plant Employees (as defined in Section 10.3(a)) participate and which are "defined contribution plans" within the meaning of Section 3(34) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which are intended to be qualified under Section 401(a) of the Code have received determination letters from the IRS stating that such plans are qualified with respect to all applicable provisions of Tax Law and each trust created under any such plan is exempt from Tax under Section 501(a) of the Code. Copies of all such favorable determination letters have been delivered to Purchaser. (b) Sellers have no Liability under any "multi- employer plan" within the meaning of Section 3(37) of ERISA which could become a Liability of the Purchaser. 4.16. Suppliers and Customers. (a) Schedule 4.16 sets forth the sales of the Products during the period from May 1995 through May 1996 to Fisons' top twenty (20) customers. (b) Schedule 4.16 sets forth a list of material suppliers for the Business and the Material Sourcing Plan in respect of the period from June 1996 to May 1997. (c) Except as set forth on Schedule 4.16, no supplier of the Sellers listed on Schedule 4.16 has within the last twelve (12) months cancelled or otherwise terminated, or threatened in 46 writing to cancel or otherwise terminate, its relationship with the Sellers or has within the last twelve (12) months decreased materially its services or supplies of materials to the Sellers relating to the Business, except for such cancellations, terminations, decreases or limits which could not reasonably be expected to have a Seller Material Adverse Effect. 4.17. Environmental Matters. (a) Except as set forth on Schedule 4.17(a), (i) the Transferred Assets and operations of the Business are, and have been, in compliance with all Laws relating to the protection of the environment and/or human health and safety from environmental effects or from the generation, management, removal, remediation, emission, discharge, control, processing, use, treatment, storage, disposal, transport, release, recycling, or handling of Hazardous Materials including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA") (collectively, "Environmental Laws") and with all requirements of applicable Approvals issued pursuant to Environmental Laws, except where failure to be in compliance could not individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, (ii) there has been no unauthorized release, as such term is defined in CERCLA, of Hazardous Materials on, in, under, about or from any of the Real Property, and to Sellers' knowledge no condition exists on, in, under or about the Real Property that gives rise to any Liability or potential Liability under Environmental Laws or common law, which could, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, (iii) to Sellers' knowledge, there has been no unauthorized release of Hazardous Materials on, in, under, about or from the Former Real Property that gives rise to any Liability or potential Liability under Environmental Laws or common law, that Seller has assumed either contractually or by operation of Law which could, individually or in the aggregate, reasonably be expected to have a Seller Material Effect, (iv) during the last five (5) years, the Sellers have not received any notice from any Governmental Authority or other Person claiming any violation of or potential Liability 47 under Environmental Laws in respect of the Business or the Transferred Assets, which could, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, (v) to Sellers' knowledge, Hazardous Materials that were present or stored on the Real Property have not been disposed of, or arranged to be disposed of, in a manner or at a location that would reasonably be expected to result in Liability under any Environmental Law, and which could, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect, and (vi) in connection with the Business, the Sellers have not assumed, contractually or through a merger, any Liabilities or obligations under any Environmental Law which could, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. (b) Schedule 4.17(b) sets forth a complete and accurate list of all Approvals required under Environmental Laws relating to the manufacture, processing, distribution, use, treatment, storage, disposal, discharge, emission, transport, release, recycling or handling of Hazardous Materials in connection with the operation of the Business, copies of which have been delivered to or made available to the Purchaser. Each such Approval is valid and in full force and effect. There are no pending or threatened administrative or judicial proceedings to revoke, cancel or declare such Approvals invalid in any material respect. The Sellers agree to reasonably cooperate with Purchaser to take all steps required for the Transfer and/or assignment to the Purchaser of all such Approvals. 4.18. Labor Matters. (a) Except as set forth on Schedule 4.18(a), (i) there is no unfair labor practice charge or complaint or petition for representation against the Sellers pending before the National Labor Relations Board or any other Governmental Authority and, to the best of Sellers' knowledge, none is threatened or has been threatened within the last three (3) years; (ii) there is no proposal for collective bargaining or agreement, labor strike, dispute, request for representation, slowdown or stoppage actually pending against or affecting 48 Sellers relating to the Business and, to the best of Sellers' knowledge, none is threatened or has been threatened within the last three (3) years; and (iii) no employees employed by Sellers in connection with the Business at any time during the last three (3) years have been represented by a labor union or governed by a collective bargaining agreement in respect of such employment. (b) Except as set forth on Schedule 4.18(b), there are no current written claims against the Sellers arising out of, or relating to, or alleging any violation of Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the National Labor Relations Act, the Labor Management Relations Act, the Fair Labor Standards Act, as amended, the Immigration Reform and Control Act of 1986, the Americans with Disabilities Act, the Family Medical Leave Act, and all other Laws governing illegal discrimination, equal employment opportunity, civil rights, occupational safety and health requirements, payment of minimum wages and overtime rates and the withholding and payment of Taxes from compensation of employees. 4.19. Personal Property. Schedule 4.19 hereto sets forth a true and complete list of all Equipment and Other Personalty (other than items or categories of items having a book value of less than $10,000 individually). Except as set forth on Schedule 4.19 hereto, all Equipment and Other Personalty (other than items and categories of items having a book value of less than $10,000 individually) in the aggregate is in substantially good condition and repair in all material respects, normal wear and tear excepted, and is adequate for the uses to which it is being put in the ordinary course of the Business. 4.20. Real Property. (a) Set forth in Schedule 4.20(a) is a brief description of all the Owned Real Property. 49 (b) Set forth in Schedule 4.20(b) is a brief description of all Leased Real Property and the Real Property Leases which relate thereto and all the Real Property Leases binding on Sellers which relate to any of the Owned Real Property. Except for the consents set forth on Schedule 4.20, the assignment to the Purchaser of each such Real Property Lease pursuant to the terms of this Agreement does not require the consent of the other party thereto. (c) Except as may be provided in the Real Property Leases and the documents, instruments and other items referred to in the title insurance commitment referred to in the definition of Permitted Liens in Section 1.1(bq) hereof or as set forth in Schedule 4.20(c), the Sellers do not own or hold, and are not obligated under or a party to, any option, right of first refusal or other contractual right to sell, dispose of or sublease any of the Real Property or any portion thereof or interest therein. Except as provided in the Real Property Leases and the documents, instruments and other items referred to in the title insurance commitment referred to in the definition of Permitted Liens in Section 1.1(bq) hereof or as set forth in Schedule 4.20(c), the Sellers do not own or hold, and are not obligated under or a party to, any option, right of first refusal or other contractual right to purchase or lease any other real property or any portion thereof or interest therein which would be binding on or could create a Lien upon any of the Transferred Assets or the Licensed Assets. (d) To Sellers' knowledge, all buildings, structures and other improvements (the "Improvements") included within the Owned Real Property, including but not limited to the roofs and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water, paving and parking equipment, systems and facilities included therein (other than items and categories of items having a book value of less than $10,000 individually), in the aggregate, are in substantially good condition and repair in all material respects, except for normal wear and tear, and are 50 adequate for the purposes for which they are being put in the ordinary course of the Business. All water, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Real Property are installed and operating and are sufficient to enable the Real Property to continue to be used and operated in the manner currently being used and operated, and any so-called hookup fees or other associated charges payable by Sellers have been fully paid. Except as set forth in Schedule 4.20(d), each such utility or other service is provided by a public or private utility or service company. No Improvement or portion thereof is dependent for its access, operation or utility on any land, building or improvement not included in the Real Property. (e) Schedule 4.20(e) sets forth each certificate of occupancy for all Improvements on the Owned Real Property. All Improvements which are not covered by the certificates of occupancy listed on Schedule 4.20(e) have been completed prior to the requirement of Law providing that any improvement to Real Property have a certificate of occupancy. Sellers have no knowledge that, and have not received any notices from any Governmental Authority stating or alleging that, any Improvements have not been constructed in compliance with Law. (f) Except as set forth on Schedule 4.20(f), to Sellers' knowledge, the Owned Real Property and its continued use, occupancy and operation as currently used, occupied and operated does not constitute a nonconforming use under any Law. Except as set forth on Schedule 4.20, the continued existence, and occupancy of each Improvement, and rights to repair and/or rebuild the same to the condition existing on the date hereof following damage or destruction by fire or other casualty is not dependent on the granting of any special permit, exception, approval or variance from any Governmental Authority other than customary building permits and approvals. (g) Each of the parcels included in the Owned Real Property is assessed for real estate Tax purposes as a wholly 51 independent tax lot, separate from any adjoining land or Improvements not included in the Transferred Assets. Schedule 4.20(g) sets forth all current Tax bills for each and every such parcel and sets forth with respect to each such parcel in such year whether certiorari proceedings were instituted and, if so, whether the same are pending or have been adjudicated or settled (and if adjudicated or settled, the terms of such judgment or settlement). Except as otherwise set forth herein, the assessment of each Improvement set forth in Schedule 4.20(g) reflects the current state of completion and condition of such Improvement. (h) Sellers have not received any notice and have no knowledge of any pending, threatened or contemplated condemnation proceeding affecting the Real Property or any part thereof or of any sale or other disposition of the Real Property or any part thereof in lieu of condemnation. (i) No portion of the Real Property has suffered any material damage by fire or other casualty in the three (3) years immediately preceding the date hereof which has not heretofore been completely repaired and restored to the condition necessary for Sellers properly to own and operate the Business as such portion of the Real Property is currently used. 4.21. Broker's or Finder's Fees. None of Sellers nor any of their Affiliates has authorized any Person to act as broker, finder, banker, consultant, intermediary or in any other similar capacity which would entitle such Person to any investment banking, brokerage, finder's or similar fee in connection with the transactions contemplated by this Agreement or any of the other Acquisition Documents. 4.22. Regulatory and Product Matters. Except as set forth on Schedule 4.22: (a) The Sellers have all Product Licenses and Establishment Registrations necessary to manufacture and market 52 the Manufactured Products in the United States. All such Product Licenses and Establishment Registrations are valid and in full force and effect. To Sellers' knowledge, no such Product License or Establishment Registration contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except where such untruth or omission could not reasonably be expected to have a Seller Materi al Adverse Effect. (b) The Sellers have made available to the Purchaser true, correct and complete copies of all portions of the Specifications relating to the Manufactured Products that have been requested by the Purchaser. (c) In the last five (5) years, none of the Sellers has received any notice from the FDA, the DEA or the United States Department of Justice (the "DOJ") that (i) any Product currently manufactured or marketed by the Sellers is an unapproved new drug or an adulterated or misbranded drug within the meaning of the Federal Food, Drug and Cosmetic Act 21 U.S.C. Sections 321, et seq., as amended and the rules and regulations promulgated thereunder ("FFDCA"), or any other similar Law, or (ii) that any of the Products are articles which may not, pursuant to the FFDCA, be introduced into interstate commerce at the time of delivery. Such notice includes (1) correspondence from the FDA, DEA or DOJ alleging the foregoing, (2) an order or request from the FDA, DEA, DOJ that any of the Sellers cease to market any of the Products, or (3) a lawsuit by the FDA, DEA or DOJ filed against any of the Products or against any of the Sellers or any of their respective officers, directors or employees alleging any of the foregoing. (d) True, correct and complete copies of all Forms FDA 483 received by Sellers with respect to the Transferred Assets or the Products in the last five years are attached hereto. 53 (e) Fisons is registered with the DEA as needed to manufacture and distribute controlled substances in the Territory. To Sellers' knowledge, during the last five (5) years, Fisons has filed all required annual registration forms, all required listing forms, and all annual reports or other periodic reports with the FDA and the DEA relating to the Products. To Sellers' knowledge, during the last five (5) years Fisons has filed with the FDA and, if required, the DEA, all reports required to be filed by Sellers with respect to adverse drug experiences relating to the Products or shortages or unaccounted for amounts of controlled substances in connection with the Business. (f) To Sellers' knowledge, all samples for the Products comply with the applicable Product License. (g) Schedule 4.22 lists all product recalls or similar actions by the Sellers in respect of any of the Products within the last five (5) years. 4.23. Transactions with Affiliates. Schedule 4.23 lists all Contracts and arrangements relating to the supply of Inventory to the Business between Sellers, on the one hand and any other Seller or Affiliate of such Seller on the other hand involving annual payments in excess of $25,000 or a remaining term after the Closing Date in excess of one year. 4.24. Inventory. Except for Ionamin, the Inventory Transferred at Closing will be sufficient and adequate in kind and amount to permit the Purchaser to operate the Business after the Closing in the ordinary course having regard and making allowances for delivery lead times and Contracts assumed by the Purchaser hereunder. 4.25. Sufficiency of Assets. Except for the Excluded Assets and subject to the Headquarters Services, the Transferred Assets and Licensed Assets Transferred or licensed to the Purchaser hereunder and under the License Agreement are 54 sufficient in all material respects to permit the Purchaser to manufacture the Manufactured Products and to purchase for resale in the Territory the Bought In Products in substantially the same manner as done by Sellers since December 20, 1995. No representation is made in this Section 4.25 with respect to the adequacy of any supply arrangements or with respect to any regulatory matters. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER Each Purchaser hereby jointly and severally represents and warrants to the Sellers as of the date hereof and as of the Closing Date (except to the extent any representation or warranty relates to a specific date) as follows: 5.1. Organization and Good Standing. Each Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the requisite corporate power and authority to own, operate and lease its properties and assets and to conduct its business as they are now being owned, operated, leased and conducted, except where the failure to have such power and authority would not, individually or in the aggregate, have a Purchaser Material Adverse Effect. Each Purchaser is duly qualified or licensed to do business as a foreign corporation, and is in good standing as a foreign corporation, in every jurisdiction in which the nature of the property owned, leased or operated by it or the nature of the business conducted by it requires such qualification or license, except where the failure to be so qualified or licensed or in good standing could not, individually or in the aggregate, reasonably be expected to have a Purchaser Material Adverse Effect. 5.2. Power and Authority. Each Purchaser has the requisite corporate power and authority to execute and deliver 55 this Agreement and the other Acquisition Documents, perform its obligations hereunder and thereunder and consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Acquisition Documents by each Purchaser, the performance by it of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate actions on the part of such Purchaser. This Agreement and each other Acquisition Document constitutes (or will constitute upon the execution thereof) the legal, valid and binding obligation of each Purchaser, enforceable against it in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity. 5.3. No Violation. Neither the execution and delivery of this Agreement or any of the other Acquisition Primary Documents by each Purchaser, the performance by it of its obligations hereunder or thereunder, nor the consummation by it of the transactions contemplated hereby or thereby, will (a) contravene any provision of the memorandum and articles of association or certificate of incorporation and by-laws of such Purchaser; (b) with or without the giving of notice or the lapse of time or both, violate, be in conflict with, constitute a default under, permit the termination of, cause the acceleration of the maturity of any debt or obligation of such Purchaser under, constitute a breach of, create a Liability or loss of a material benefit under, or result in the creation or imposition of any Lien upon any of the properties or assets of such Purchaser under, any contract to which it is a party or by which it or any of its assets or properties are bound, other than such violations, conflicts, defaults, terminations, accelerations, breaches, Liabilities, Liens or loss of benefits which (i) could not, individually or in the aggregate, reasonably be expected to have a Purchaser Material Adverse Effect, or (ii) will be cured or for which waivers will be obtained prior to or concurrently 56 with the Closing; (c) violate, conflict with or require any Approval under, any Law or any judgment, decree or order of any Governmental Authority to which such Purchaser is subject or by which it or any of its assets or properties are bound, other than such violations, conflicts or noncompliance with such requirements which could not, individually or in the aggregate, reasonably be expected to have a Purchaser Material Adverse Effect; or (d) result in the loss of any Approval, other than such losses which could not, individually or in the aggregate, reasonably be expected to have a Purchaser Material Adverse Effect. 5.4. Actions. There is no Action pending, or, to the knowledge of the Purchaser, threatened, against the Purchaser or any of its assets, properties or rights before any Governmental Authority which (a) questions or challenges the validity of this Agreement or any of the other Acquisition Documents or any action taken or proposed to be taken by the Purchaser pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby or (b) would, if adversely determined, reasonably be expected to have a Purchaser Material Adverse Effect. 5.5. Approvals. Except as contemplated by Section 8.8 hereof and except for any filings under the HSR Act and pursuant to Article 31-B of the New York State Tax Law, no Approval of any Governmental Authority or other Person is required to be made, obtained or given by or with respect to the Purchaser in connection with the execution or delivery by it of this Agreement and the other Acquisition Primary Documents, the performance by it of its obligations hereunder or thereunder or the consummation by it of the transactions contemplated hereby or thereby, except where the failure to make, obtain or give such Approvals could not, individually or in the aggregate, reasonably be expected to have a Purchaser Material Adverse Effect. 5.6. Broker's or Finder's Fees. Except as provided in the Placement Agreement, neither the Purchaser nor any of its 57 Affiliates has authorized any person to act as broker, finder, banker, consultant, intermediary or in any other similar capacity which would entitle such Person to any investment banking, brokerage, finder's or similar fee in connection with the transactions contemplated by this Agreement or any of the other Acquisition Documents. 5.7. Disclosure. The Purchaser represents and warrants that, after reasonable inquiry of its employees and agents listed on Schedule 5.7 hereto, it has no knowledge of any matter which may constitute a material breach of any representation, warranty, covenant or condition of the Sellers contained herein. The Purchaser shall immediately notify the Sellers in writing if it shall obtain knowledge of any matter which may constitute a breach of any representation, warranty, covenant or condition of the Sellers contained herein. 5.8. Financing. Medeva has entered into the Placement Agreement and a Pound Sterling 125 million Revolving Credit Facility arranged by NatWest Capital Markets Limited dated 28 February 1996 (the "Credit Agreement") true and correct copies of which have been provided to the Sellers. Upon consummation of the transactions contemplated by the Placement Agreement Medeva shall receive net proceeds of approximately Pound Sterling 102,000,000, which together with amounts available to be borrowed under the Credit Agreement is sufficient to enable the Purchaser to consummate the transactions contemplated by this Agreement and the License Agreement. As of the date hereof the Placement Agreement and the Credit Agreement are in full force and effect and there are no facts or circumstances that could reasonably be expected to cause any condition to the Placement or the borrowings under the Credit Agreement not to be satisfied or to otherwise adversely affect the Placement or such borrowings. As of the date hereof, the representations and warranties made by Medeva in the Placement Agreement and the Credit Agreement are true and correct in all material respects and Medeva is not in default or breach of any covenant contained in the Placement Agreement or the Credit Agreement. 58 ARTICLE 6. CERTAIN OBLIGATIONS OF THE SELLERS PRIOR TO THE CLOSING The Sellers hereby covenant that, except as otherwise consented to in writing by the Purchaser (which consent shall not be unreasonably withheld or delayed) or as otherwise contemplated by this Agreement, from and after the date hereof until the Closing: 6.1. Conduct of Business. The Sellers shall: (i) carry on the Business, except as otherwise permitted or contemplated herein, in the ordinary course and substantially in the same manner as the Business previously has been carried on since December 20, 1995; (ii) not institute any new methods of purchase, sale, lease, management, accounting or operation that will vary materially from the methods used by the Sellers as of the date of this Agreement; and (iii) maintain its books and records in accordance with its past practices. 6.2. Restricted Activities and Transactions. Except as may be required by Law, the Sellers shall not engage, or agree to engage, in any one or more of the following activities or transactions without the prior written consent of the Purchaser (which consent shall not be unreasonably withheld or delayed): (a) except for (i) the sale of Inventory in the ordinary course of the Business as conducted since December 20, 1995 and (ii) the Transfer of the Licensed Assets to a U.S. corporation which is a direct or wholly-owned subsidiary of one of the Sellers and which will become the Licensor under and as defined in the License Agreement, Transfer any of the Transferred Assets or Licensed Assets; (b) consummate any "acquisition proposal" (as defined in Section 6.4); (c) cause to arise or permit to exist any Lien upon any of the Transferred Assets or Licensed Assets other than Permitted Liens; (d) enter into or materially amend, (or, in the case of the Contract with Lotus Biochemical referred to below, engage in any discussions with any third party regarding the 59 execution or amendment of), any material Contract relating to the Transferred Assets, the Licensed Assets or the Business (for purposes of this Section 6.2, each Personal Property Lease, the Astra Lease, the Astra Cohabitation Agreement, the Commerce Drive Lease and the Ionamin Co-Promotion Agreement dated 22 December 1992 between Fisons and Lotus Biochemical Corporation shall be deemed to be material Contracts); (e) increase the compensation payable or to become payable to the individuals listed on Sellers' Schedule 10.3(a) who presently earn in excess of $50,000 per annum, except for increases granted in accordance with the terms of the Contracts disclosed on Schedule 4.7(b) hereto or periodic salary increases of not more than 10% made in the ordinary course of business, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, sever ance or other plan, agreement, trust, fund, policy or arrangement relating to the Business in any way which would increase or be for the benefit of, any individual listed on Sellers' Schedule 10.3(a), provided that amendments may be made as may be required to make it clear that no service of any such individual after the Closing will be counted for any purpose under any employee bene fit plan of the Sellers; (f) destroy or remove from the Facility any Books or Records; (g) layoff or fire any individual listed on Sellers' Schedule 10.3(a) without prior written notice to the Purchaser, provided, however, Sellers may remove such individuals from the Facility; (h) enter into any employment or severance agreement with any individual listed on Sellers' Schedule 10.3(a); (i) enter into any Real Property Lease or amend, renew, terminate or consent to the assignment of any presently effective Real Property Lease; (j) terminate prior to the Closing any material policies of title, liability, fire, workers' compensation, property and any other form of insurance covering the Transferred Assets, Licensed Assets or operations of the Business; (k) settle any lawsuit or claim if such settlement imposes any continuing liability or non-monetary obligation on the Business or any of the Transferred Assets or Licensed Assets; (l) affirmatively waive any claims or rights relating to the 60 Transferred Assets, the Licensed Assets or the Business, exceeding $50,000 in any individual situation; (m) remove any item of Equipment or Other Personalty (other than Inventory, the Excluded Assets and Other Personalty with a value not in excess of $50,000 in the aggregate) from the Real Property; (n) intentionally take any action or omit to take any action that would cause the representations and warranties of the Sellers contained in Article 4 hereof to be untrue or inaccurate in any material respect; or (o) permit any of the Sellers' Affiliates to do or agree to do any of the foregoing. 6.3. Cooperation. The Sellers shall use their reason able efforts (but without the need to incur any unreasonable or unusual fees, costs or expenses) to cause the transactions contemplated by this Agreement to be consummated, including, without limitation, (a) obtaining, making and causing to become effective all Approvals of such Governmental Authorities and other Persons as may be necessary or reasonably requested by the Purchaser in order to consummate the transactions contemplated by this Agreement, including, without limitation, under or pursuant to the HSR Act and all Contracts with respect to which the obtaining, making and causing to become effective of an Approval is necessary or advisable, and (b) giving prompt notice to the Purchaser of (i) any notice of, or other communication relating to, any default, or any event which, with the giving of notice or the lapse of time or both, would become a default, under any Contract, and (ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the execution and delivery of this Agreement or the other Acquisition Documents or the consummation of the transactions contemplated hereby or thereby. 6.4. No Solicitation of Transaction. Until July 3, 1996, the Sellers and their Affiliates shall not, and shall use their reasonable best efforts to cause their respective officers, directors, employees, agents or advisers not to, initiate, solicit or encourage (including by way of furnishing information), any inquiries or the making of any proposal which 61 constitutes, or may reasonably be expected to lead to, any acquisition proposal (as defined below), or agree to or endorse any acquisition proposal, or participate in any discussions or negotiations (other than to express Sellers' lack of interest in such discussions or negotiations), or provide third parties with any information, relating to any such inquiry or acquisition proposal. As used herein, "acquisition proposal" shall mean any proposal or offer, whether constituting an offer to sell or an offer to purchase, relating to (i) the acquisition from the Sellers in any manner of all or any material portion of the Transferred Assets (other than sales of Inventory in the ordinary course of business), the Licensed Assets or the Business, or any equity or other interest in all or any portion of the Transferred Assets, the Licensed Assets or the Business, or (ii) for an acquisition of all or any portion of the equity interests of, or debt interests in, the Sellers or their Affiliates, or any other extraordinary transaction involving the Sellers or their Affiliates to the extent such transaction could impede, hinder or delay the transactions contemplated hereunder; provided, however, that notwithstanding anything else contained in this Section 6.4, the Sellers may, without disclosing to the Purchaser, enter into discussions about transactions of the type described in clause (ii) above, so long as such transactions would exclude the Transferred Assets, the Licensed Assets and the Business. 6.5. Access to the Sellers. The Sellers shall afford Purchaser's Representatives reasonable access, upon reasonable prior notice and at such scheduled times and places during normal business hours as shall be reasonably approved by the Sellers (but without any substantial interference with the business operations of the Sellers), to all the Books and Records, and the properties, facilities and employees of the Sellers relating to the Business; provided, however, that the Sellers shall have the right to have a representative present at all such times; and provided, further, that such access shall be at the expense and risk of the Purchaser, and that the Purchaser shall indemnify and hold harmless the Sellers and their Affiliates from and against 62 any Damages arising from any such Representative's negligence or misconduct during such access. 6.6. Confidentiality. The Sellers shall, and shall cause each of their Affiliates and the Representatives of each of them (collectively, the "Seller Recipients") to, keep confidential, and not use or disclose to others, any proprietary information of or obtained from, the Purchaser, any of its Affiliates or any of the Representatives of any of them, to the extent that such proprietary information is not or does not become readily available to the public other than as a result of disclosure by Purchaser or its Affiliates or Representatives of any of them or is not required to be disclosed by applicable Law or court order. Promptly after the Closing or in the event of the termination of this Agreement without a Closing, the Sellers shall, and shall cause each of the other Seller Recipients to, promptly return to the Purchaser all, and not retain any copies of, such written, recorded, electronically formatted or encoded proprietary information acquired from the Purchaser, provided, however, that if the Purchaser does not specify and demand the return of such proprietary information within sixty (60) days of the Closing or date of termination of this Agreement, it shall be rebuttably presumed that no such information was acquired from the Purchaser. Sellers shall be responsible for any breach of this Section 6.6 by any of the Seller Recipients and agrees, at its sole expense, to take all reasonable measures (including, without limitation, court proceedings) to restrain the Seller Recipients from prohibited or unauthorized disclosure or use of such proprietary information. 6.7. Premerger Notification. The Sellers shall as promptly as reasonably practicable make all filings which are required of them under the HSR Act. The Sellers shall timely and promptly provide any additional information or documentation requested by the Federal Trade Commission (the "FTC"), the Antitrust Division of the DOJ (the "Antitrust Division") or any other Governmental Authority with similar jurisdiction in connection with a second request or otherwise. The Sellers shall 63 furnish to the Purchaser such necessary information and assistance as the Purchaser may reasonably request in connection with its preparation of necessary filings or submissions to the FTC, the Antitrust Division or any such other Governmental Authority. The Sellers shall supply the Purchaser with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between the Sellers or their counsel, and the FTC, the Antitrust Division or any such other Governmental Authority with respect to this Agreement and the transactions contemplated hereby, except that any portions thereof containing Proprietary Information of the Seller not related to the Business may be redacted by the Sellers. 6.8. Disclosure Supplements. From time to time prior to the Closing, the Sellers will promptly supplement or amend the Schedules hereto by written notice of such supplement or amendment (i) with respect to any matter hereafter arising which would make any representation or warranty set forth in Article 4 inaccurate if brought down by the Sellers to the Closing without having been supplemented or amended or (ii) as necessary to correct any information in such Schedule or in any representation or warranty of the Sellers in Article 4. For purposes of determining the fulfillment of the conditions set forth in Section 8.1 hereof the Schedules hereto shall be deemed to include only that information contained herein on the date of this Agreement and shall be deemed to exclude any information contained in any supplement or amendment thereto. However, for purposes of determining the accuracy of the representations or warranties of Seller, contained in Article 4 or the liability of the Sellers with respect thereto under Section 11.2 should the Closing occur, the Schedules hereto shall be deemed to include all information contained in any subsequent supplement or amendment thereto. 64 ARTICLE 7. CERTAIN OBLIGATIONS OF THE PURCHASER PRIOR TO THE CLOSING The Purchaser hereby covenants that, except as otherwise consented to in writing by the Sellers (which consent shall not be unreasonably withheld or delayed), from and after the date hereof until the Closing: 7.1. Cooperation. The Purchaser shall use its reasonable efforts (but without the need to incur any unreasonable or unusual fees, costs or expenses) to cause the transactions contemplated by this Agreement to be consummated, including, without limitation, (a) obtaining, making and causing to become effective all Approvals of such Governmental Authorities and other Persons as may be necessary or reasonably requested by the Sellers in order to consummate the transactions contemplated by this Agreement, including, without limitation, under or pursuant to the HSR Act and Article 31-B of the New York State Tax Law, and (b) giving prompt notice to the Sellers of any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the execution and delivery of this Agreement or the other Acquisition Documents or the consummation of the transactions contemplated hereby. 7.2. Confidentiality. The Purchaser shall, and shall cause each of its Affiliates and the Representatives of each of them (collectively, the "Purchaser Recipients") to, keep confidential, and not use or disclose to others, any Proprietary Information of or obtained from the Sellers, any of their Affiliates or any of the Representatives of any of them, to the extent that such Proprietary Information is not or does not become readily available to the public other than as a result of disclosure by Sellers or their Affiliates or the Representatives of any of them or is not required to be disclosed by applicable Law or court order; provided that the Purchaser's Representatives may include any underwriter or other financial institutions that 65 participate, or which have been solicited to participate, in the financing of the transactions contemplated by this Agreement. Except as provided by Section 10.2 below, promptly after the Closing or in the event of the termination of this Agreement without a Closing, the Purchaser shall, and shall cause each of the other Purchaser Recipients to, promptly return to the Sellers all, and not retain any copies of, such written, recorded or encoded Proprietary Information. Purchaser shall be responsible for any breach of this Section 7.2 by any of the Purchaser Recipients and agrees, at its sole expense, to take all reasonable measures (including, without limitation, court proceedings) to restrain the Purchaser Recipients from prohibited or unauthorized disclosure or use of such Proprietary Information. 7.3. Premerger Notification. The Purchaser shall as promptly as reasonably practicable make all filings which are required of it under the HSR Act. Purchaser shall timely and promptly provide any additional information or documentation requested by the FTC, the Antitrust Division or any other Governmental Authority with similar jurisdiction in connection with a second request or otherwise. The Purchaser shall furnish to the Sellers such necessary information and assistance as the Sellers may reasonably request in connection with its preparation of necessary filings or submissions to the FTC, the Antitrust Division or any such other Governmental Authority. The Purchaser shall supply the Sellers with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between the Purchaser or its counsel, and the FTC, the Antitrust Division or any such other Governmental Authority with respect to this Agreement and the transactions contemplated hereby except that any portions thereof containing Proprietary Information of the Purchaser not related to the Business may be redacted by the Purchaser. 7.4. Shareholder Circular; Shareholder Approvals; Etc. As promptly as reasonably practicable following execution of this Agreement, the Purchaser shall prepare a shareholder circular 66 (the "Shareholder Circular") for the purpose of obtaining the Approvals referred to in Section 8.8 hereof. The Purchaser, acting through its Board of Directors, shall, in accordance with Law and its memorandum and articles of association (a) promptly and duly call, give notice of, convene and hold as soon as reasonably practicable following the date hereof a meeting of its shareholders for the purpose of voting to approve the consummation of the transactions contemplated by this Agreement and the other Acquisition Documents, including the Placement, (b) recommend approval of the consummation of the transactions contemplated by this Agreement and the other Acquisition Documents, including the Placement and shall include in the Shareholder Circular such recommendation, and (c) use its commercially reasonable efforts to cause the Placing Agreement to become unconditional in accordance with its terms. 7.5. Financing. Medeva will use its reasonable best efforts to cause the transactions contemplated by the Placement Agreement and the borrowings under the Credit Agreement and the borrowings under the Credit Agreement to be consummated, including without limitation taking all such actions as are reasonably necessary to cause the provisions of the Credit Agreement, the Placement Agreement and the Placement to be carried out and given full force and effect. Medeva shall not intentionally take any action or omit to take any action that would cause any of the representations, warranties or undertakings set forth in the Credit Agreement or the Placement Agreement to become untrue, inaccurate or misleading in any material respect. Medeva will not agree to extend the Offer Closing Date (as defined in the Placement Agreement) without the prior written consent of Sellers. Medeva will promptly provide to Sellers copies of all notices sent to its lenders under the Credit Agreement or to Lazard or received from its lenders under the Credit Agreement or Lazard in connection with the borrowings under the Credit Agreement, the Placement, the Placement Agreement or the Credit Agreement. 67 ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER The obligation of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, unless waived (subject to Law) by the Purchaser at or prior to the Closing: 8.1. Representations and Warranties True. The representations and warranties of the Sellers contained in this Agreement or in any of the other Acquisition Primary Documents shall have been true and correct in all material respects when made and in addition shall be true and correct in all material respects at and as of the Closing and with the same effect as though made at and as of the Closing (except as otherwise contemplated by this Agreement). 8.2. Performance. The Sellers shall have performed and complied in all material respects with all agreements, covenants, obligations and conditions required by this Agreement or any of the other Acquisition Primary Documents to be performed or complied with by them at or prior to the Closing. 8.3. Title Insurance. The Purchaser shall have received an ALTA 1992 Owner's Title Insurance Policy (or policies) issued by Chicago Title Insurance Company (or other title insurers reasonably acceptable to the Purchaser) in the amount(s) allocated to the Owned Real Estate in Schedule 2.8 showing that the Purchaser has good and marketable title to all of such Owned Real Property, subject only to such Liens as are set forth in the title commitment issued by Chicago Title Insurance Company with respect to the Facility, dated April 9, 1996 or shown on the ALTA survey of the Facility dated May 18, 1996 prepared for the Purchaser by RU-SH GPS Consultants and Land Surveyors, together with all such endorsements to such title 68 insurance policy (or policies) as the Purchaser may reasonably request, it being agreed that the cost of such title insurance policy (or policies) and endorsements and such survey shall be borne by the Purchaser. 8.4. No Material Adverse Change. No change or event that has had or could reasonably be expected to have, individually or in the aggregate with other changes or events, a Seller Material Adverse Effect shall have occurred since the date of this Agreement. 8.5. Approvals. All Approvals set forth on Schedule 8.5 shall have been obtained or made on terms reasonably satisfactory to the Purchaser and shall be in full force and effect. 8.6. Deliveries. The Sellers shall have tendered to the Purchaser, at or prior to the Closing, and against the deliveries referred to in Section 9.4, the following: (a) the executed Acquisition Primary Documents and other documents and agreements referred to in Section 3.2 hereof; (b) resolutions, certified as of the Closing Date by the Secretary or Assistant Secretary of each Seller, adopted by its Board of Directors, and all other necessary corporate action similarly certified, authorizing the execution and delivery by such Seller of this Agreement and the other Acquisition Documents, the performance by it of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby; (c) such certificates of the President or Vice President of each Seller to evidence compliance with the conditions set forth in Sections 8.1, 8.2 and 8.7 hereof, and any other certificates to evidence compliance with the conditions set forth in this Article 8 as may be reasonably requested by the Purchaser or its counsel; 69 (d) the opinions of Richard B. Young, Vice President, Deputy General Counsel and Secretary of RPR; Skadden, Arps, Slate, Meagher & Flom, New York; Skadden, Arps, Meagher & Flom, London; and Nauta Dutilh substantially in the forms of Exhibit E hereto. (e) executed and completed transfer Tax returns with respect to all Owned Real Property; (f) a statement of No Tax Due or a Tentative Assessment and Return issued by the New York State Department of Taxation and Finance or other appropriate Governmental Authority with respect to each parcel of Owned Real Property located in the State of New York, the value of which is in excess of $500,000; (g) certifications from each of the Sellers which own Real Property that they are not foreign corporations, foreign partnerships, foreign trusts or foreign estates (as such terms are defined in the Code); (h) estoppel certificates from the lessors or the lessees, as the case may be, with respect to all of the Real Property Leases for the Leased Property in a form reasonably acceptable to the Purchaser, it being agreed that the estoppel certificate from Astra with respect to the Astra Lease and the Cohabitation Agreement and from the lessor under the Commerce Avenue Lease with respect thereto shall include, inter alia, the representations required to be given by such parties under such agreements, it being further agreed that the Sellers shall request that such parties include the representations set forth in Schedule 8.6 hereof in such estoppel certificates; provided, however, that if Astra will not make all the representations set forth on Schedule 8.6 then, in lieu of an estoppel certificate from Astra with respect to such representations, (i) the Sellers shall have delivered to the Purchaser a certificate representing and warranting that the representations not so made by Astra are true and correct in all material respects at the Effective Time 70 and (ii) the provisions of Section 11.2(b) (but not Section 11.8) shall then automatically apply thereto; (i) copies of the valid certificates of occupancy listed on Schedule 4.20(e); (j) [Intentionally omitted] (k) assignment instruments in a form reasonably satisfactory to Purchaser with respect to all Real Property Leases; and (l) a written notice to the tenant under the Astra Lease advising such tenant that the Facility has been purchased by Purchaser and that all future rents and notices shall thereafter be sent to Purchaser as set forth in such notice. 8.7. Absence of Litigation. There shall be no Action pending or threatened in writing before any court or other Governmental Authority which seeks to (a) invalidate or set aside, in whole or in part, this Agreement or any of the other Acquisition Documents, (b) restrain, prohibit, invalidate or set aside, in whole or in part, the consummation of the transactions contemplated hereby or thereby or (c) obtain substantial Damages in connection therewith or the Business. 8.8. Shareholder Approval, Etc. (a) Medeva shall have received all requisite shareholder approvals solicited with respect to the consummation of the transactions contemplated by this Agreement and the other Acquisition Documents, including without limitation the placing and open offer (the "Placement") by Medeva with respect to not more than Pound Sterling 125 million worth of Medeva's ordinary shares (the "Ordinary Shares") pursuant to a Placing and Open Offer Agreement between Medeva and Lazard Brothers & Co., Limited (the "Placing Agreement"). (b) The Placing Agreement shall have become unconditional in accordance with its terms. 71 (c) The Ordinary Shares shall be admitted to the Official List on the London Stock Exchange. ARTICLE 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS The obligation of the Sellers to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, unless waived (subject to Law) by the Sellers at or prior to the Closing: 9.1. Representations and Warranties True. The representations and warranties of the Purchaser contained in this Agreement or in any of the other Acquisition Primary Documents shall be true and correct in all material respects when made and in addition shall be true and correct in all material respects at and as of the Closing with the same effect as though made at and as of the Closing (except as otherwise contemplated by this Agreement). 9.2. Performance. The Purchaser shall have performed and complied in all material respects with all agreements, covenants, obligations and conditions required by this Agreement and the other Acquisition Primary Documents to be performed or complied with by it at or prior to the Closing. 9.3. Approvals. All consents, approvals, authorizations and filings set forth on Schedule 9.3 shall have been obtained on terms reasonably satisfactory to the Sellers and shall be in full force and effect. 9.4. Deliveries. The Purchaser shall have tendered to the Sellers, at or prior to the Closing, and against the deliveries referred to in Section 8.6, the following: 72 (a) in accordance with Sections 2.5 and 3.2 hereof, the Closing Purchase Price and the amounts payable in respect of the License Agreement as therein provided; (b) the executed Acquisition Primary Documents and other documents and agreements referred to in Section 3.2 hereof; (c) resolutions, certified as of the Closing Date by the Secretary or Assistant Secretary of each Purchaser, adopted by its Board of Directors and approved by the requisite numbers of such Purchaser's outstanding shares of capital stock (if required), authorizing the execution and delivery by such Purchaser of this Agreement and the other Acquisition Documents, the performance by it of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby; (d) such certificates of the President or Vice President of each Purchaser to evidence compliance with the conditions set forth in Sections 9.1, 9.2 and 9.5 hereof and any other certificates to evidence compliance with the conditions set forth in this Article 9 as may be reasonably requested by the Sellers or their counsel; (e) the opinions of Richards & O'Neil, LLP, counsel to the Purchaser, and Mark G. Hardy, Company Secretary of Medeva dated the Closing Date and addressed to the Sellers, substantially covering the representations set forth in Sections 5.1 - 5.3 in a manner reasonably satisfactory to the Sellers; (f) a guaranty executed by Medeva in favor of the Sellers with respect to each Acquisition Primary Document (other than the Bill of Sale and the Deed) to which Medeva is not a party, such guaranty to have substantially the same terms and provisions as the Guaranty; 73 (g) such other documents or certificates as shall be reasonably requested by the Sellers or their counsel; (h) executed and completed transfer tax returns with respect to all Owned Real Property to the extent required to be executed and completed by the Purchaser; and (i) assumption instruments reasonably satisfactory to Sellers with respect to all Real Property Leases (it being agreed, however, that the assumption instruments with respect to the Astra Lease and Cohabitation Agreement shall be delivered to the Sellers 15 days prior to the Closing Date, but will become effective only at and as of the Effective Time). 9.5. Absence of Litigation. There shall be no Action pending or threatened in writing before any court or other Governmental Authority which seeks to (a) invalidate or set aside, in whole or in part, this Agreement or any of the other Acquisition Documents, (b) restrain, prohibit, invalidate or set aside, in whole or in part, the consummation of the transactions contemplated hereby or thereby or (c) obtain substantial Damages in connection therewith. ARTICLE 10. ADDITIONAL COVENANTS AND AGREEMENTS 10.1. Books and Records; Access. (a) Promptly but in no event more than thirty (30) days after the Closing Date, Representatives of the Purchaser and the Sellers shall jointly separate all books and records in their or their Affiliates' control with the aim of delivering all Books and Records to the custody of the Purchaser and all other books and records existing on the Closing Date to the custody of the Sellers. If any books and records relate to the Business, the Inactive Products in the Territory or the Products in the Territory, the Transferred Assets, the Licensed Assets or the Assumed Liabilities are not Transferred to the Purchaser under 74 Section 2.1(i) hereof because they do not "primarily" relate the Business, the Inactive Products in the Territory or the Products in the Territory, the Transferred Assets, the Licensed Assets or the Assumed Liabilities, the Sellers will provide the Purchaser with a copy of the portions thereof that relate to the Business, the Inactive Products in the Territory or the Products in the Territory, the Transferred Assets, the Licensed Assets or the Assumed Liabilities and that are specifically identified by the Purchaser. Such copies will be provided promptly after a request for a copy thereof is made by the Purchaser to the Sellers in writing. (b) Unless otherwise consented to in writing by the Sellers, for a period of seven (7) years after the Closing Date, the Purchaser shall not destroy or otherwise dispose of any original Books and Records in its possession on the Closing Date without first offering to surrender such Books and Records to the Sellers, and shall maintain such Books and Records in good condition in a reasonably accessible location. Upon reasonable prior notice, the Purchaser shall afford the Representatives of the Sellers reasonable access during normal business hours to examine and copy such Books and Records for any commercially reasonable purpose. (c) Unless otherwise consented to in writing by the Purchaser, for a period of seven (7) years after the Closing Date, the Sellers shall not destroy or otherwise dispose of any Books and Records in their possession without first offering to surrender such Books and Records to the Purchaser, and shall maintain such Books and Records in good condition in a reasonably accessible location. Upon reasonable prior notice, the Sellers shall afford the Representatives of the Purchaser reasonable access during normal business hours to examine and copy such Books and Records for any commercially reasonable purpose. 10.2. Confidentiality. From and after the Closing, the provisions of Sections 6.6 and 7.2 shall continue in effect, 75 provided that the Purchaser shall not be restricted with respect to any Proprietary Information relating to the Transferred Assets, the Licensed Assets or the Business and the Sellers shall be restricted with respect to such Proprietary Information as if it had originally been the property of, and been acquired by the Sellers from, the Purchaser (except that the Purchaser's failure to specify and demand the return of such information after the Closing shall not be required to avoid the rebuttable presumption that would otherwise arise with respect thereto under Section 6.6); provided, further, that upon the earlier of termination or expiration of the License Agreement and in the event the Purchaser does not exercise the Purchase Option, the Purchaser shall be restricted with respect to any Proprietary Information relating to the Licensed Assets and the Sellers shall cease to be so restricted. 10.3. Employment and Employee Benefits (a) Purchaser shall offer employment in a comparable position to substantially all, but at least 187 of the individuals who are listed on Sellers' Schedule 10.3(a) and are actively employed and actually working on a full time schedule (or on accrued vacation) at the Facility for the ten (10) weeks immediately preceding the Closing Date ("Plant Employees"); provided that Purchaser shall not offer employment to the individuals listed on Sellers' Schedule 10.3(b) without Sellers' prior written consent. For purposes of this Section 10.3(a) "comparable position" shall mean a position (i) having duties which are substantially similar in the aggregate to the duties associated with the position held by the applicable person immediately prior to the Closing and (ii) which provides a base salary at least equal to that paid to the individual immediately prior to the Closing; provided, however, the Purchaser shall not be bound by clause (ii) above in respect of not more than five of the people listed on Schedule 10.3(a) if it shall determine that such individuals are being paid more than is justified for the duties performed, so long as such individuals are offered a salary commensurate with the duties performed. Further, 76 Purchaser shall provide compensation, benefits and other terms and conditions of employment to the Plant Employees who accept Purchaser's offer, which, in the aggregate, are no less favorable than the compensation, benefits and other terms and conditions of employment provided from time to time to other similarly situated employees of Medeva's U.S. subsidiaries. Subject to compliance with the foregoing, Purchaser reserves the right to establish, amend, modify or terminate any terms or conditions of employment for such employees. (b) From and after the Closing, Sellers shall be responsible for COBRA benefits for Plant Employees who are either not offered or do not accept Purchaser's offer of employment, in accordance with the terms and conditions of Sellers' health insurance plans. (c) From and after the Closing, subject to Purchaser's compliance with Section 10.3(a), Sellers shall be responsible for the payment of severance benefits, if any shall become payable, under and in accordance with the terms and conditions of the Fisons Corporation Severance Pay Plan or any other applicable plan of Sellers. (d) Purchaser shall cooperate with Sellers and provide Sellers reasonable access to the Plant Employees who accept Purchaser's offer of employment in defending any employment related claims brought against Sellers by any personnel who were employed at the Facility at any time prior to the Closing. The employment records of Plant Employees who accept Purchaser's offer of employment will also be made available to Sellers to the extent legally permissible, in defending any employment related claims brought against Sellers by such employees. (e) Sellers represent that the accounts of all Plant Employees under Sellers' defined contribution plans shall be fully vested on the Closing Date. To the extent permitted by applicable Law and the existing terms of the relevant plans, with 77 respect to each Plant Employee who accepts Purchaser's offer of employment, Sellers shall, at the option of each such Plant Employee, transfer the account(s) of such Plant Employee under Sellers' tax-qualified defined contribution plan(s) to Purchaser's tax-qualified defined contribution plan, in accordance with Section 401(a)(31) of the Code. The accounts of any such Plant Employee shall be adjusted for investment experience according to the terms of the applicable plan. 10.4. Specific Performance; Injunctive Relief. Each of the parties hereto acknowledges, understands and agrees that any breach or threatened breach by it, any of its Affiliates or any of the Representatives of any of them (as applicable) of Sec tions 6.6, 7.2, 10.1, 10.2 or 10.5 hereof will cause irreparable injury to the other party and that money damages will not provide an adequate remedy therefor. Accordingly, in the event of any such breach or threatened breach, the non-breaching party shall have the right and remedy (in addition to any other rights or remedies available at law or in equity) to have the provisions of such Sections specifically enforced by, and to seek injunctive relief and other equitable remedies in, any court having competent jurisdiction. 10.5. Noncompetition; Nonsolicitation. (a) The Purchaser agrees that for the five year period from January 1, 2001 until December 31, 2005 it will not, and will cause each Affiliate thereof, not to, directly or indirectly, (i) engage in a Competitive Business, anywhere in the world; or (ii) acquire an interest in any Person engaged in a Competitive Business, anywhere in the world directly or indi rectly, as a proprietor, partner, stockholder, officer, director, principal, agent, trustee, consultant or in any other relation ship or capacity. For purposes of this Agreement, the term "Competitive Business" shall mean the business of producing, supplying, 78 marketing, distributing or selling, directly or indirectly, any products utilizing the Pennkinetic Process. The covenant set forth in this Section 10.5(a) shall become effective if, and only if, (i) the Purchaser does not exercise the Purchase Option in accordance with Article 8 of the License Agreement or (ii) the License Agreement is earlier terminated in accordance with the terms thereof. In the event the Purchaser does exercise the Purchase Option, such covenant shall be of no force and effect and shall automatically be null and void. (b) The Sellers agree that for the period from the Effective Time until the earlier of the expiration of the Term (as defined in the License Agreement) and January 1, 2001 the Sellers will not, and will cause each of their Affiliates, not to, directly or indirectly, (i) engage in a Competitive Business, anywhere in the Territory; or (ii) acquire an interest in any Person engaged in a Competitive Business, anywhere in the Territory directly or indirectly, as a proprietor, partner, stockholder, officer, director, principal, agent, trustee, consultant or in any other relationship or capacity. (c) For a period of two (2) years from and after the date hereof, the Purchaser shall not, and shall cause each of its Affiliates not to, directly or indirectly on behalf of or through any Person solicit for employment, employ or otherwise engage any person who is as of the date hereof an employee of the Sellers and their Affiliates; provided, however, that (i) the Purchaser may nonetheless respond to unsolicited applications for employment from individuals it would be prohibited from soliciting pursuant to this Section 10.5(c) and employ or otherwise engage such persons and (ii) Purchaser may solicit for employment, employ or otherwise engage any Person who is on the date hereof an employee at the Facility other than those individuals listed on Schedule 10.3(b). 79 (d) The Purchaser and the Sellers agree that the periods of time and the scope applicable to the covenants of this Section 10.5 are reasonable. However, if such period or scope should be adjudged unreasonable in any judicial or other dispute resolution proceeding, then the parties request that the period of time or scope be reduced by the extent deemed unreasonable, so that these covenants may be enforced for the maximum period and broadest scope as are adjudged to be reasonable. 10.6. Use of Fisons Name; NDC Licenses. (a) The Sellers hereby grant to the Purchaser effective immediately after the Closing, the royalty-free nontransferable right and non- exclusive license to use for a reasonable time (not to exceed six (6) months after the Closing Date) the corporate names, service mark or logo of any of the Sellers or any Affiliate of the Sellers (the "Marks") in the same manner as they are presently used on all Labelling for the Products, in the ordinary course of the Business. The Purchaser agrees that the nature and quality of any Products sold under such Marks shall conform substantially to the Sellers' past practices, standards and specifications. If the Sellers at any time during the Purchaser's use of such materials reasonably determine that the requirements of the fore going provision have not been complied in all material respects, Seller shall have the right to terminate the right and license granted under this Section 10.6 by giving written notice of such breach to the Purchaser and the opportunity for 30 days to cure such breach. In addition, the Purchaser shall indemnify and hold the Sellers harmless for any Damages to the Sellers arising from the right and license granted hereunder. (b) Following the Closing the Purchaser will use commercially reasonable efforts to develop and have approved, if necessary, its own Labelling so as to eliminate its use of the Marks, to change the manufacturer code in the NDC numbers for the Products to a Purchaser NDC number, and to remove the Sellers' NDC numbers from all Product Labelling as promptly as possible and in any event within six (6) months. 80 10.7. Reconveyance of Intangible Assets. Following expiration or termination of the License Agreement and if the Purchaser does not exercise the Purchase Option, the Purchaser agrees to sell, convey, assign and deliver to the Sellers for no additional consideration, any Books and Records, Proprietary Information, Intangible Assets (including the physical embodiments thereof) or Contracts necessary for the manufacture and sale of the Products and Inactive Products held by the Pur chaser or any Affiliates of the Purchaser so long as the Sellers assume all the Liabilities under such Contracts from and after the Transfer date. In the event the Purchaser Transfers any of such Books and Records, Proprietary Information, Intangible Assets or Contracts after the Closing, such Transfer shall be sub ject to this Section 10.7. The Purchaser shall take such actions and execute and deliver such documents and instruments as the Sellers may reasonably request to effectuate the provisions of this Section 10.7. 10.8. Expenses. (a) In the event that at the shareholder meeting contemplated by Section 7.4 hereof the shareholders of Medeva shall fail to approve the transactions contemplated by this Agreement and the other Acquisition Documents as envisioned by Section 8.8(a), then within five (5) calendar days of the Sellers' demand therefor, the Purchaser shall pay the Sellers $3 million as provided in Section 2.7. (b) In the event the Closing Date does not occur by July 2, 1996 because of the failure of either of the conditions specified in Section 8.8(b)-(c), the Purchaser shall become obligated to pay the Sellers $100,000 for each day after July 2, 1996 through and including the earlier to occur of the Closing Date and July 22, 1996. If the Closing Date shall not occur by July 22, 1996, then in addition to the amounts payable pursuant to the preceding sentence, the Purchaser shall become obligated to pay the Sellers a further $1 million. If the Closing Date occurs after July 2, 1996 and on or prior to July 22, 1996, then the payments owing pursuant to the preceding two sentences shall be satisfied by increasing the Closing Purchase Price by such 81 amount. If the Closing does not occur by July 22, 1996, then the $3 million owing pursuant to this Section 10.8 shall be paid on July 22, 1996. If the Closing Date shall occur after July 22, 1996, said $3 million will be treated for all purposes hereof as an increase in the Purchase Price. Any monies payable pursuant to this Section 10.8 shall be paid as provided in Section 2.7. 10.9. Access. (a) Following the Closing, upon reasonable prior notice, the Purchaser shall afford the Representatives of the Sellers reasonable access to the Real Property during normal business hours to remove therefrom any Excluded Assets not theretofore removed. (b) Following the Closing and in perpetuity the Purchaser shall permit Sellers to reference (and upon request shall so advise the FDA), and upon Sellers' request shall accord Sellers access to, and copies of, all data contained in, the Product Licenses and any Inactive Product Licenses to the extent Transferred and necessary to permit Sellers to market and distribute the Products outside the Territory and Inactive Products outside the Territory and to obtain and maintain Approvals to market and distribute the Products or Inactive Products outside the Territory. Purchaser shall promptly advise Sellers of any changes made in any Product License, Product, Inactive Product License or Inactive Product that could reasonably be expected to have an impact on such Approvals of Sellers outside the Territory. ARTICLE 11. SURVIVAL; INDEMNIFICATION 11.1. Survival. The covenants, agreements, representations and warranties of the parties hereto contained in this Agreement shall survive the execution and delivery of this Agreement, any due diligence investigation made by any party in respect of the transactions contemplated hereby and the Closing 82 as follows: (a) the covenants and agreements contained herein shall survive until performed or for such shorter period as provided herein with respect thereto; and (b) the representations and warranties contained in Articles 4 amd 5 of this Agreement shall survive until the close of business on the 540th day after the Closing Date. No Action for indemnification pursuant to this Article 11 may be brought after the applicable expiration date, provided that, if prior to such date one party hereto has notified, in writing, another party hereto of a claim for indemnity hereunder (whether or not formal legal action shall have been commenced based upon such claim), such claim shall continue to be subject to indemnification in accordance herewith. 11.2. Indemnification by the Sellers. From and after the Effective Time, the Sellers and their successors and assigns shall jointly and severally indemnify and hold harmless and defend the Purchaser and its Affiliates, successors and permitted assigns, from and against any and all Damages incurred thereby or caused thereto based on, arising out of, resulting from, or relating to: (a) any Excluded Liability including the Sellers' failure to pay or satisfy any such Excluded Liability; (b) the material breach of a representation and warranty of the Sellers contained herein or in any other Acquisition Primary Document; (c) the material breach of any covenant or agreement of the Sellers contained herein or in any other Acquisition Primary Document; (d) any Liability for the Purchaser's failure to withhold from any payments made to the Sellers hereunder or under the License Agreement; (e) any Liability to pay to vendors, contractors and other providers of goods or services any amounts due after the 83 Effective Time with respect to Liabilities incurred on or before the Effective Time under Contracts assumed by the Purchaser from the Sellers which amounts payable are in the nature of the payment of a retention that had been held by the Sellers to assure adequate completion of such Contracts; (f) the Sellers' failure to pay or discharge in full any Permitted Lien of the type described in clauses (a) or (b) of the definition of Permitted Liens attaching to the Transferred Assets or Licensed Assets as a result of acts or omissions by Sellers or their Affiliates prior to the Effective Time; (g) the failure of the Sellers to have paid in full any fees payable to the FDA for periods ending prior to the Effective Time; and (h) the failure of the Sellers to comply with WARN, if required, prior to the Effective Time. 11.3. Indemnification by the Sellers for Product Recalls. (a) Notwithstanding the indemnification provisions set forth in Section 11.2 above, the Sellers and their successors and assigns shall jointly and severally indemnify and hold harmless the Purchaser and its Affiliates, successors and assigns, as follows: (i) If within 540 days from the Closing Date, the FDA enjoins the sale of, seizes or orders or otherwise requires in writing under threat of seizure or injunction, the recall or withdrawal of any one or all of Delsym, Tussionex, Ionamin, Pediapred or Zaroxolyn (collectively, the "Primary Products") so as to prevent, for more than thirty (30) days, the continuation of the sale of such Primary Product (a "Product Recall") because of non-compliance with regulations attributable to acts or omissions of Sellers prior to Closing, the Sellers shall reimburse the Purchaser on the basis set forth in Section 84 11.3(c) below for the Purchaser's Lost Operating Profit arising as a result of such Product Recall; and (ii) Notwithstanding anything herein to the contrary, Sellers shall not have any liability for the Purchaser's Lost Operating Profit until the aggregate of such Lost Operating Profit in respect of all Product Recalls exceeds $10 million (the "Special Indemnification Deductible") in which event the Sellers shall be liable pursuant to this Section 11.3 only in respect of Lost Operating Profit in excess of the Special Indemnification Deductible and in no event shall Sellers' liability to make indemnification payments under this Section 11.3 exceed an aggregate of $100 million (the "Special Indemnification Limit"). The indemnification obligations set forth in this Section 11.3 shall be satisfied through a refund from the aggregate prepaid amounts as set forth in Schedule 3.2 to the extent such amounts have not previously been refunded to the Purchaser pursuant to Sections 3.2(a) or 8.2 of the License Agreement. Any such refund to satisfy an indemnification obligation hereunder shall be applied pro rata among such prepaid amounts not previously refunded and shall be paid as provided in Section 11.5(b). Any amounts refunded to the Purchaser, pursuant to Sections 3.2(a) or 8.2 of the License Agreement, shall to the extent of such refund reduce the Sellers' liability under this Section 11.3. (b) The Purchaser shall use commercially reasonable efforts to manage and resolve all regulatory issues in respect of the Primary Products in order to mitigate any risks of regulatory actions by the FDA. In the event of a Product Recall, the Purchaser will use its commercially reasonable efforts to mitigate any Damages or Lost Operating Profit arising therefrom. (c) In the event of a Product Recall, and subject to Section 11.3(a) above, the Sellers shall reimburse the Purchaser as follows: 85 (i) Seventy percent (70%) of the Purchaser's Lost Operating Profit, if the Product Recall occurs during the first six (6) months following the Closing Date; (ii) Sixty percent (60%) of the Purchaser's Lost Operating Profit, if the Product Recall occurs during the period from six (6) to nine (9) months following the Closing Date; (iii) Fifty percent (50%) of the Purchaser's Lost Operating Profit, if the Product Recall occurs during the period from nine (9) to twelve (12) months following the Closing Date; and (iv) Forty percent (40%) of the Purchaser's Lost Operating Profit, if the Product Recall occurs during the period from twelve (12) to eighteen (18) months following the Closing Date. 11.4. Indemnification by the Purchaser. From and after the Effective Time, the Purchaser and its successors and assigns shall indemnify, hold harmless and defend the Sellers and their Affiliates, successors and assigns, and the Representatives of each of them, from and against any and all Damages incurred thereby or caused thereto based on, arising out of, resulting from, or relating to: (a) any Assumed Liability including the Purchaser's failure to pay or satisfy any such Liability; (b) the material breach of a representation and warranty of the Purchaser contained herein or in any other Acquisition Primary Document; (c) the material breach of any covenant or agreement of the Purchaser contained herein or in any other Acquisition Primary Document except, however, where the License Agreement 86 provides an exclusive remedy is to be applied in the event of a specified breach; (d) any Liability arising from the Purchaser's opera tion of, or any act or omission of the Purchaser occurring in respect of, the Business or the Transferred Assets after the Effective Time; (e) any Liability for expenses incurred by Purchaser in connection with or resulting from or attributable to the transactions contemplated by this Agreement; (f) any Liability for any investment banking, brokerage, or similar charge or commission payable or incurred by the Purchaser in connection with this Agreement or the transactions contemplated hereby; and (g) the failure of the Purchaser to comply with WARN, if required, prior to the Effective Time. 11.5. Notice and Payment of Claims. (a) The Indemnified Party shall notify the Indemnifying Party within a reasonable period of time after becoming aware of, and shall provide to the Indemnifying Party as soon as practicable thereafter all information and documentation necessary to support and verify, any Damages that the Indemnified Party shall have determined have given rise to, or could reasonably be expected to give rise to, a claim for indemnification hereunder, provided, however, that the right of the Indemnified Party to indemnification shall be reduced in the event of its failure to give timely notice only to the extent the Indemnifying Party is prejudiced thereby. The Indemnifying Party shall be given reasonable access to all books and records in the possession or under the control of the Indemnified Party which the Indemnifying Party reasonably determines to be related to such claim. 87 (b) Any Liability for indemnification under this Article 11 shall be paid by the Indemnifying Party within fifteen (15) business days of a request therefor in immediately available funds in U.S. dollars after such Liability shall have been finally determined. The Liability for Damages hereunder shall be deemed to be "finally determined" for purposes of this Article 11 when the parties to such Action have so determined by mutual agreement or, if disputed, when a final non-appealable order of a Governmental Authority having competent jurisdiction shall have been entered. 11.6. Matters Involving Third Parties. (a) If any third party shall commence an Action against any Indemnified Party with respect to any matter which may give rise to a claim for indemnification against any Indemnifying Party under Sections 11.2 and 11.4 hereof (a "Third Party Claim") , the Indemnified Party shall notify the Indemnifying Party thereof in writing as soon as practicable, but in no event more than ten (10) days after the Indemnified Party shall have been served, provided, however, that the right of the Indemnified Party to indemnification shall be reduced in the event of its failure to give timely notice only to the extent the Indemnifying Party is prejudiced thereby. (b) The Indemnifying Party shall have the right to defend the Indemnified Party against the Third Party Claim with counsel and other Representatives of its choice so long as (i) the Indemnifying Party shall notify the Indemnified Party in writing (within the fifteen (15) day period after its receipt of notice of the Third Party Claim) that it will indemnify the Indemnified Party from and against any Damages the Indemnified Party may suffer arising out of the Third Party Claim and (ii) the Indemnifying Party diligently conducts the defense of the Third Party Claim. Otherwise, the Indemnified Party may defend against the Third Party Claim preserving its rights to indemnification hereunder including without limitation for the cost of such defense. 88 (c) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 11.6(b) above, (i) the Indemnified Party may retain separate co- counsel, at its sole cost and expense, and participate in the defense of the Third Party Claim, (ii) the Indemnified Party shall not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party, (iii) the Indemnified Party shall fully cooperate with the Indemnifying Party in the investigation and defense of any such Third Party Claim including without limitation providing required information and documents and access to all employees of the Indemnified Party with knowledge of issues relevant to the claim or litigation (any such activities required to discharge this obligation to cooperate shall be incurred at the sole expense of the Indemnified Party) and (iv) the Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed, unless such settlement includes as a term thereof a general release of the Indemnified Party from such Third Party Claim. Notwithstanding any other provision of this Section 11.6, if an Indemnified Party withholds its consent to a settlement or elects to continue the defense of any claim, where but for such action the Indemnifying Party could have settled such claim solely for the payment of money by the Indemnifying Party as specified in the written request for consent to the settlement delivered to the Indemnified Party, the Indemnifying Party shall be required to indemnify the Indemnified Party only up to a maximum of the bona fide settlement offer for which the Indemnifying Party could have settled such claim. 11.7. Limitation of Remedies. (a) The exclusive remedy of the Purchaser and the Sellers for breaches of representations, warranties and covenants in this Agreement is the indemnification provided for in this Article 11. 89 (b) Notwithstanding anything to the contrary contained herein, although a party may be entitled to make a claim for indemnification pursuant to more than one section of this Article 11, a party shall not be entitled to recover indemni fication for the same claim under more than one section of this Article 11. (c) No indemnification may be claimed for any loss, liability, claim or damage which was finally reflected in an adjustment to the Purchase Price made pursuant to Section 2.6. 11.8. Minimum Warranty Claim. Neither the Sellers nor the Purchaser shall have any liability for indemnification under Section 11.2(b) or 11.4(b), respectively, for breaches of such party's representations and warranties contained in this Agreement and the other Acquisition Documents until the aggregate amount of Damages based on, arising out of, resulting from or relating to such breaches exceeds $10 million whereupon the Indemnified Party may claim indemnification only for the Damages in excess of such amount. 11.9. Maximum Warranty Claim. Each of the Sellers' and the Purchaser's aggregate liability for indemnification under Section 11.2(b) or 11.4(b) respectively, for breaches of representations and warranties contained in this Agreement and the other Acquisition Documents shall under no circumstances exceed an amount equal to $55 million. 11.10. Mitigation of Damages. If any event shall occur which would otherwise entitle a party to assert a claim for indemnification under Sections 11.2 or 11.4 hereof, no Damages shall be deemed to have been sustained by such Indemnified Party to the extent of (a) any tax savings realized by such party as a result thereof or (b) any net proceeds received by such Indemnified Party or its Affiliates from any insurance policy with respect thereto. 90 11.11. Bulk Sales Law. The Purchaser hereby waives compliance by the Sellers with the provisions of the bulk sales law of any jurisdiction. Nevertheless, in addition to any other indemnities herein provided, Sellers shall indemnify and hold Purchaser harmless against and from any and all Damages to Purchaser resulting from such noncompliance including any Liens claimed against the Transferred Assets or Licensed Assets by any creditor arising from any credit extended to Sellers on or prior to the Closing Date. ARTICLE 12. TERMINATION 12.1. Termination. This Agreement may be terminated at any time prior to the Closing: (a) by the mutual written consent of the Purchaser and the Sellers; (b) by either the Purchaser or the Sellers, upon at least five (5) days' prior written notice, if there shall have been a material breach by the other party of any of the representations, warranties, covenants or other obligations under this Agreement which shall not have been waived by the non-breaching party and which breach cannot be cured by the date set forth in Section 12.1(c) below; (c) by either the Purchaser or the Sellers, upon written notice, if the Closing Date shall not have occurred on or before August 31, 1996 for any reason other than the failure or refusal of the party seeking to terminate to perform any of its obligations hereunder; (d) by either the Purchaser or the Sellers if any Governmental Authority having competent jurisdiction shall have issued an order, decree or ruling or taken any other action 91 restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement or the other Acquisition Documents, and such order, decree, ruling or other action shall have become final and non-appealable; or (e) by the Sellers if, at the shareholder meeting contemplated by Section 7.4 hereof, Medeva's shareholders shall fail to approve the transactions contemplated by this Agreement and the other Acquisition Documents as envisioned by Section 8.8(a). 12.2. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 12.1 hereof, such termination shall be the sole remedy, and, except with respect to Sections 6.6 and 7.2 (Confidentiality), 13.1 (Public Announcements) and 13.3 (Fees and Expenses) hereof, (a) this Agreement shall forthwith become void and (b) there shall be no liability on the part of the Sellers, the Purchaser or any of their respective Affiliates or any of the Representatives of any of them; provided, however, any breaching party shall be fully liable for any and all Damages sustained or incurred by the other party hereto, as a result of or arising from such breach and such other party shall be entitled to seek any remedies available to it at law or in equity. ARTICLE 13. MISCELLANEOUS 13.1. Public Announcements. Except as required by Law or any Governmental Authority with competent jurisdiction or the applicable rules of a stock exchange, prior to the Closing, none of the parties hereto, nor any of their respective Affiliates or any of the Representatives of any of them, shall issue any press release or make any public announcement or disclosure with respect to this Agreement or the transactions contemplated hereby 92 without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld or delayed. 13.2. Amendment; Waiver. Neither this Agreement, nor any of the terms or provisions hereof, may be amended, modified, supplemented or waived, except by a written instrument signed by all of the parties hereto (or, in the case of a waiver, by the party granting such waiver). No waiver of any of the terms or provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other term or provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. No failure of a party hereto to insist upon strict compliance by another party hereto with any obligation, covenant, agreement or condition contained in this Agreement shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of a party hereto, such consent shall be given in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 13.2. 13.3. Fees and Expenses. Except as otherwise expressly provided in this Agreement, each of the parties hereto shall bear and pay all fees, costs and expenses incurred by it or any of its Affiliates in connection with the origin, preparation, negotiation, execution and delivery of this Agreement and the other Acquisition Documents and the transactions contemplated hereby or thereby (whether or not such transactions are consummated), including, without limitation, any fees, expenses or commissions of any of its Representatives. 13.4. Transfer Taxes. (a) The Purchaser shall pay the full amount of Liabilities for sales and use Taxes, if any, in connection with the sale of the Transferred Assets herein provided. (b) The Sellers shall pay the first $45,000 of Liabilities for transfer Taxes and recording and filing fees, if any, in connection with the sale of the Transferred Assets herein 93 provided and the Purchaser shall pay all such Liabilities in excess of such amount. (c) The Sellers shall pay all Liabilities for transfer gains Taxes, if any, in connection with the sale of assets herein provided; provided, however, the Purchaser shall pay all such Liabilities, if any, in respect of any amounts of the Purchase Price in excess of $20 million that Purchaser shall allocate to the Owned Real Property. (d) Sellers shall prepare and file the required Tax Returns and other required documents with respect to the Taxes described in Section 13.4(a), (b) (c) and (d) required to be paid by Purchaser, Purchaser and Sellers and Sellers, respectively. Purchaser shall reimburse Sellers for Purchaser's portion of such Taxes described in Section 13.4(a), (b) and (c) within fifteen (15) days of receipt of written notice from Sellers. 13.5. Notices. (a) All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and mailed or facsimiled or delivered by hand or courier service: (i) If to the Sellers, to: c/o Rhone-Poulenc Rorer Inc. 500 Arcola Road P.O. Box 1200 Collegeville, PA 19426-0107 Facsimile: (610) 454-8985 Attn: General Counsel With a copy to: Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue 94 New York, New York 10022 Facsimile: (212) 735-2000 Attn: Mark C. Smith, Esq. (ii) If to the Purchaser, to: Medeva PLC 10 St. James's Street London SW1A 1EF England Facsimile: (011-44) 171-930-1516 Attn: Mark G. Hardy, Esq. With a copy to: Richards & O'Neil, LLP 885 Third Avenue New York, New York 10022 Facsimile: (212) 750-9022 Attn: Brian D. Beglin, Esq. (b) All notices and other communications required or permitted under this Agreement which are addressed as provided in this Section 13.5 (i) if delivered personally against proper receipt or by confirmed facsimile transmission shall be effective upon delivery and (ii) if delivered (A) by certified or registered mail with postage prepaid shall be effective five (5) business days, or (B) by Federal Express or similar courier service with courier fees paid by the sender, shall be effective two (2) business days following the date when mailed or couriered, as the case may be. Any party hereto may from time to time change its address for the purpose of notices to such party by a similar notice specifying a new address, but no such change shall be deemed to have been given until it is actually received by the party sought to be charged with its contents. 13.6. Assignment. This Agreement and all of the terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and 95 permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder of the parties hereto may be assigned by any of the parties hereto without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed; provided, that each of Medeva and Medeva Rochester may at any time and without such prior consents assign this Agreement or any of its rights, interests or obligations hereunder to any of its Affiliates; provided, however, that in such event, the assignor shall remain fully liable for the fulfillment of all of its obligations hereunder. 13.7. Governing Law; Consent to Jurisdiction. (a) Each party to this Agreement hereby irrevocably submits to the exclusive jurisdiction of any New York State or Federal Court sitting or located in the County of New York (a "New York Court") in any action or proceeding arising out of or relating to this Agreement, and each such party hereby irrevocably agrees that all claims in respect of such action or proceeding shall be heard and determined in such New York Court. Each party, to the extent permitted by applicable laws, hereby expressly waives any defense or objection to jurisdiction or venue based on the doctrine of Forum Non Conveniens, and stipulates that any New York Court shall have In Personam jurisdiction and venue over such party for the purpose of litigating any dispute or controversy between the parties arising out of or related to this Agreement. In the event any party shall commence or maintain any action or proceeding arising out of or related to this Agreement in a forum other than a New York Court, the other party shall be entitled to request the dismissal or stay of such action or proceeding, and each such party stipulates for itself that such action or proceeding shall be dismissed or stayed. To the extent that any party to this Agreement has or hereafter may acquire any immunity from jurisdiction of any New York Court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) with respect to 96 itself or its property, each such party hereby irrevocably waives such immunity. (b) Each party irrevocably consents to the service of process of any of the New York Courts in any such action or proceeding by personal delivery of the copies thereof or by the mailing of the copies thereof by certified mail, return receipt requested, postage prepaid, to it as its address specified in accordance with Section 13.5, such service to become effective upon the earlier of (i) the date 10 calendar days after such mailing or (ii) any earlier date permitted by applicable law. 13.8. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which, when taken together, shall constitute one and the same instrument. 13.9. Headings. The headings contained in this Agreement and the Schedules hereto are for convenience of reference only and shall not constitute a part hereof or define, limit or otherwise affect the meaning of any of the terms or provisions hereof. 13.10. Entire Agreement. This Agreement and the other Acquisition Documents embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements, commitments, arrangements, negotiations or understandings, whether oral or written, between the parties hereto, their respective Affiliates or any of the Representatives of any of them with respect thereto. There are no agreements, covenants or undertakings with respect to the subject matter of this Agreement and the Acquisition Documents other than those expressly set forth or referred to herein or therein and no representations or warranties of any kind or nature whatsoever, express or implied, are made or shall be deemed to be made herein by the parties hereto except those expressly made in this Agreement and the other Acquisition Documents. 97 13.11. Severability. Each term and provision of this Agreement constitutes a separate and distinct undertaking, covenant, term and/or provision hereof. In the event that any term or provision of this Agreement shall be determined by a court of competent jurisdiction to be unenforceable, invalid or illegal in any respect, such unenforceability, invalidity or illegality shall, to the fullest extent permitted by Law, not affect any other term or provision hereof, but this Agreement shall be construed as if such unenforceable, invalid or illegal term or provision had never been contained herein. Moreover, if any term or provision of this Agreement shall for any reason be held by a court of competent jurisdiction to be excessively broad as to time, duration, activity, scope or subject, the parties request that it be construed, by limiting and reducing it, so as to be enforceable to the fullest extent permitted under applicable Law. 13.12. No Third Party Beneficiaries. Except as and to the extent provided in Article 11 hereof, nothing in this Agreement is intended, nor shall anything herein be construed, to confer any rights, legal or equitable, in any Person other than the parties hereto and their respective successors and permitted assigns. 13.13. Singular and Plural Forms. The use herein of the singular form shall also denote the plural form, and the use herein of the plural form shall also denote the singular form, as in each case the context may require, including with respect to the terms Seller and Sellers. 13.14. References to Articles, Etc. All references herein to Articles, Sections, Exhibits and Schedules shall be to Articles and Sections of and Exhibits and Schedules to this Agreement. 13.15. References to "Herein," Etc. As used in this Agreement, the words "herein", "hereof", "hereby" and "hereunder" 98 shall refer to this Agreement as a whole, and not to any particular section, provision or subdivision of this Agreement. 13.16. Effect of Schedules. The Schedules hereto relate to certain matters concerning the disclosures required and the transactions contemplated by the Agreement. The inclusion of or reference to matters in a Schedule does not constitute an admission of what is material or the materiality of such matter. Disclosure on any Schedule in respect of any representation or warranty shall constitute disclosure for purposes of all other representations and warranties, but only to the extent it is clear how the substance of the disclosure made would be relevant to such other representations and warranties. 99 IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be duly executed as of the day and year first above written. FISONS CORPORATION By: /s/ Timothy G. Rothwell ----------------------------- Name: Timothy G. Rothwell Title: President FISONS INVESTMENTS INC. By: /s/ Paul Leggieri -------------------------- Name: Paul Leggieri Title: President FISONS PLC By: /s/ Patrick Langlois ---------------------------- Name: Patrick Langlois Title: Chairman FISONS B.V. By: /s/ Anthony J. Cork ---------------------------- Name: Anthony J. Cork Title: Director MEDEVA ROCHESTER INC. By: /s/ Mark G. Hardy ----------------------- Name: Mark G. Hardy Title Vice President MEDEVA PLC By: /s/ Mark G. Hardy ----------------------- Name: Mark G. Hardy Title: Company Secretary EX-10 4 EX 10(C) AMENDMENT #1 AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT This Asset Purchase Agreement Amendment No. 1 ("Amendment No. 1"), dated July 2, 1996, is entered into among (i) Medeva PLC, an English corporation ("Medeva") and Medeva Pharmaceuticals Manufacturing, Inc. formerly known as Medeva Rochester Inc., a Delaware corporation, on the one hand ("Medeva Pharmaceuticals" and collective ly with Medeva, the "Purchaser"), and Fisons Corporation, a Massachusetts corporation ("Fisons"), Fisons Invest ments Inc., a Delaware corporation ("FII"), Fisons plc, an English corporation ("FPLC"), and Fisons B.V., a company organized under the laws of Holland ("FBV"), on the other hand (Fisons, FII, FPLC and FBV are collective ly referred to as the "Sellers"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Sellers and Purchaser have entered into an Asset Purchase Agreement, dated as of June 6, 1996, (the "Agreement") whereby Sellers have agreed to transfer, sell, convey, assign and deliver to the Pur chaser, and the Purchaser has agreed to acquire from the Sellers, the Business (as defined in the Agreement), in accordance with the terms and subject to the conditions of this Agreement. WHEREAS, the Sellers and the Purchaser now desire to amend the Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements con tained in the Agreement, and intending to be legally bound hereby, the parties hereto hereby agree as follows: I. DEFINITIONS. Words used but not defined herein shall have the meanings ascribed thereto in the Agreement. II. GOVERNING LAW. Section 13.7 of the Agreement is amended to add the following paragraph (c): (c) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to the princi ples of conflict of laws thereof, and any applicable laws of the United States of America. III. TRANSFER TAXES. Section 13.4(d) of the Agreement is amended as necessary to take account of the following: (a) Purchaser and Sellers shall joint ly file the Tax Returns required in respect of the Taxes and recording fees described in Sec tion 13.4(b). (b) If Purchaser shall fail to satisfy its obligation under Section 13.4(a) of the Agreement when due, then the Sellers may offset the amount of such default against amounts it may owe to the Purchaser pursuant to Sec tions 2.6 or 2.9 of the Agreement. IV. CLOSING PRORATIONS. (a) PROPERTY TAXES. The prorationing of property and local school taxes being contemporaneously taken into account in connection with the payment of the Closing Purchase Price, the phrase "prepaid property taxes in respect of the Real Property" appearing in the definition of "Adjustment Current Assets" set forth in Section 1.1(d) of the Agreement is deleted. (b) ASTRA RECEIPTS. Regardless of which party is paid by Astra for July 1996, Payments due by Astra under the Astra Lease and the Astra Cohabitation Agreement in respect of July 1996 will be payable 2/31 to Sellers and 29/31 to Purchaser. The party receiving such funds will pay the portion due to the other by the second business day after the date of receipt or, if later, July 5, 1996. 2 (c) COMMERCE DRIVE LEASE. Regardless of which party pays the rent due for July 1996 under the Commerce Drive Lease, the payments due to the landlord for July 1996 will be payable 2/31 by Sellers and 29/31 by Purchaser. If Sellers shall have paid such rent, then the portion equal to 29/31 of the rent shall be part of the Adjustment Current Assets and shall be reimbursed to Sellers pursuant to Section 2.6 of the Agreement. If the Purchaser shall pay such rent, then the 2/31 due from Sellers shall be paid within ten (10) days of being invoiced therefor by Purchaser. All liabilities under the Commerce Drive Lease with respect to periods prior to July 1, 1996 shall remain with Seller. (d) LEASES OF PERSONAL PROPERTY AND CONTRACTS FOR THE PROVISION OF SERVICES TO THE BUSINESS. Leases for personal property and Contracts for the provision of services to the Business which are Contracts assumed by the Purchaser pursuant to the Agreement shall be handled in the same manner as specified for the Commerce Drive Lease specified in paragraph (c) above. V. CONFIDENTIALITY. Section 10.2 of the Agreement is amended to delete the first word ("From") of such section and to add the following language in lieu thereof: Except as necessary to permit Sellers and their Affiliates to exercise their rights with re spect to the Licensed Assets, the Products outside the Territory and the Inactive Products outside the Territory, from VI. DEFINITION OF "TERRITORY". Section 1.1 (cp) of the Agreement is amended to add to the following language to subsections (i) and (iii) after the words "(prednisolone sodium phosphate, USP)": and Pediapred Forte and Ped Forte VII. LOTUS AGREEMENT. Sellers and Purchaser acknowledge that the conditional consent tendered by 3 Lotus Biochemical Corporation ("Lotus") to the assignment of the Ionamin Co-promotion Agreement effective as of January 1, 1993, between Lotus and Fisons (the "Lotus Agreement") is not reasonably acceptable. Notwithstand ing the foregoing and any provision of the Agreement to the contrary, Sellers hereby assign the Lotus Agreement to Medeva and Medeva hereby assumes the Lotus Agreement, such assignment and assumption to be on the terms and conditions of the Assignment and Assumption Agreement. Purchaser hereby waives any condition to its obligation to consummate the transactions contemplated by the Agree ment that such consent be obtained. Purchaser agrees to indemnify, hold harmless and defend the Sellers and their Affiliates, successors and permitted assigns from and against any and all Damages arising out of, resulting from or relating to claims by Lotus that the assignment of the Lotus Agreement is a breach or violation of the Lotus Agreement. As a condition of this Amendment No. 1, Sellers hereby covenant that they will maintain the confidential ity of this Section 7 of Amendment No. 1 and the terms hereof, and will not disclose the fact or substance of this Section 7 of Amendment No. 1 to any third party without the prior written consent of Purchaser. It shall not be a violation of this confidentiality provision if Sellers are compelled to make such disclosure by court order or other legal process, provided that Sellers first give Purchaser a reasonable opportunity to contest or modify such court order or legal process. Sellers warrant and represent that after the Closing they will provide Purchaser with a reasonable opportunity to interview and, at Purchaser's election, obtain sworn statements or testimony from Sellers' then current employees or representatives with respect to the negotiation and operation of the Lotus Agreement. In the event any action or proceeding is brought against Sellers for which indemnification from Purchaser is or may be sought, such action or proceeding shall be subject to the provisions of Sections 11.5 and 11.6 and 11.10 of the Agreement. 4 Finally, if after Closing Lotus gives its unqualified consent to the assignment to Medeva of the Lotus Agreement, or should Lotus give its consent upon conditions that are reasonably acceptable to Purchaser and Sellers, in either case effective as of and from the Effective Time, then Purchaser and Sellers shall agree to such consent and then this Section 7 of Amendment No. 1 will terminate. VIII. INTEGRATION WITH AGREEMENT. Except as amended hereby, the Agreement shall continue in full force and effect in accordance with the terms thereof. The provisions of Sections 13.2, 13.3, 13.5-13.9, 13.11- 13.15 are incorporated herein by reference as if set forth in full herein. 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed as of the day and year first above written. FISONS CORPORATION By: /s/ Kenneth R. Pina ----------------------------- Name: Kenneth R. Pina Title: FISONS INVESTMENTS INC. By: /s/ Paul Leggieri ----------------------------- Name: Paul Leggieri Title: President FISONS PLC By: /s/ Patrick Langlois ----------------------------- Name: Patrick Langlois Title: Chairman FISONS B.V. By: /s/ Anthony Cork ------------------------------ Name: Anthony Cork Title: Director MEDEVA PHARMACEUTICALS MANUFACTURING, INC. f/k/a MEDEVA ROCHESTER INC. By: /s/ Mark G. Hardy -------------------------------- Name: Mark G. Hardy Title: Vice President MEDEVA PLC By: /s/ Mark G. Hardy --------------------------------- Name: Mark G. Hardy Title: Company Secretary EX-10 5 EX 10(D) LICENSE AGREEMENT LICENSE AGREEMENT dated as of July 2, 1996 between FISONS CORPORATION FISONS B.V. FISONS INVESTMENTS INC. FISONS PLC and MEDEVA PHARMACEUTICALS MANUFACTURING, INC. TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS 2 ARTICLE 2. GRANT 4 ARTICLE 3. PAYMENTS OF LICENSING FEE 6 ARTICLE 4. REPRESENTATIONS, WARRANTIES AND COVENANTS 7 ARTICLE 5. TRANSFER OF ADVERSE DRUG REACTION INFORMATION 8 ARTICLE 6. TRADEMARK AND PATENT RIGHTS 9 6.1 Prosecution and Maintenance 9 6.2 Infringement or Other Actions 9 ARTICLE 7. THIRD PARTY CLAIMS 11 ARTICLE 8. PURCHASE OPTION 12 ARTICLE 9. QUALITY CONTROL 14 ARTICLE 10. TERMINATION 16 ARTICLE 11. NOTICES 17 ARTICLE 12. FORCE MAJEURE 18 ARTICLE 13. CONFIDENTIALITY 18 ARTICLE 14. PUBLICITY 19 ARTICLE 15. ASSIGNMENT; AMENDMENT; WAIVER 20 ARTICLE 16. GOVERNING LAW 20 ARTICLE 17. SEVERABILITY 20 ARTICLE 18. ENTIRE AGREEMENT 21 ARTICLE 19. CHOICE OF FORUM 21 ARTICLE 20. MISCELLANEOUS 22 LICENSE AGREEMENT LICENSE AGREEMENT, dated as of the 2nd day of July, 1996, between FISONS PLC, an English corporation, FISONS CORPORATION, a Massachusetts corporation ("Fisons"), FISONS B.V., a Dutch corporation, and FISONS INVESTMENTS INC., a Delaware corporation, (each, to the extent of its rights in the Intellectual Property, the "Licensor") on the one hand and MEDEVA PHARMACEUTICALS MANUFACTURING, INC. f/k/a Medeva Rochester Inc., a Delaware corporation ("Licensee") on the other hand. Preliminary Statement 1. Fisons plc, Fisons, Fisons B.V. and Fisons Investments Inc. and Licensee have entered into an Asset Purchase Agreement dated as of June 6, 1996 (the "Asset Purchase Agreement"). 2. The Asset Purchase Agreement contemplates that this Agreement be executed and delivered by the parties hereto on the Closing Date (as defined in the Asset Purchase Agreement). 3. Licensor owns or has the exclusive right to use and authorize the use of certain of the Intellectual Property (as defined herein) in the Territory (as defined herein) relating to the Products, the Inactive Products, and the Pennkinetic Process (as defined herein). 4. Licensee desires to acquire the exclusive right to use such Intellectual Property in the Territory as provided herein. 5. Licensor is willing to grant Licensee an exclusive right (even as against Licensor) to use and sublicense such Intellectual Property in the Territory as provided herein. In consideration of the premises and of the mutual covenants and obligations set forth herein, the parties hereto agree as set out below. ARTICLE 1. DEFINITIONS Capitalized terms used herein but not otherwise defined herein are used herein as defined in the Asset Purchase Agreement, provided that the word "Sellers", when used in the Asset Purchase Agreement, shall be deemed to be replaced with the word "Licensor." The following terms, as used in this Agreement, shall have the meanings set forth in this Article 1: "Affiliate" shall mean, with respect to any Person, any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person; provided, however, that with respect to the Sellers, only RPR and Persons directly or indirectly controlled by RPR shall be an Affiliate of any Seller for any provision of this Agreement. "Assumed Contracts" shall mean the agreements set forth on Exhibit A hereto. "Change of Control" means (i) the direct or indirect, sale, lease or other transfer of all or substantially all of the assets of a Person to any other Person or group of Persons acting in concert as a partner ship or other group (a "Group of Persons") other than an Affiliate of such Person, and (ii) a Person or Group of Persons shall, as a result of a merger or consolidation, tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, of securities of Licensee or the entity surviving the merger or consolidation representing 50% or more of the combined voting power of the then outstanding securities of the Person in question ordi narily having the right to vote in the election of direc tors. "Event of Default" shall have the meaning ascribed to such term in the Security Agreement. "Inactive Products" shall mean the products listed as such on Exhibit B(ii) hereto. "Intellectual Property" shall mean (i) the Trademarks, (ii) the Know-How, and (iii) the Patents. "Know-How" shall mean all confidential information, trade secrets, pricing and marketing 2 strategies, customer information, business leads, research and results thereof, technology, know-how, discoveries, developments, improvements, techniques, data, methods, processes, instructions, formulae, recipes, drawings and specifications, including the foregoing to the extent contained in any Product License, owned by Licensor and used by Licensor and its Affiliates primarily in connection with the Licensed Products and the Pennkinetic Process in the Territory. "Licensed Products" shall mean the Products and the Inactive Products. "Patents" shall mean the patents and patent appliations owned by Licensor and used by Licensor and its Affiliates primarily in connection with the Licensed Prod ucts in the Territory, including those set forth in Exhibit A hereto, and any continuations, continuations-in-part, reissues, divisions, or extensions thereof and, with the exception of Canada, all non-United States equivalents thereof. "Pennkinetic Process" means the prolonged release pharmaceutical preparation process described in United States Patent Nos. 4,221,778 and 4,762,709. "Products" shall mean the products listed on Exhibit B-1 attached hereto. "Security Agreement" shall mean the Intellectual Property Security Agreement dated as of the date hereof between Licensor and Licensee. "Term" shall mean the period commencing on the Closing Date and continuing until December 31, 2000, unless earlier terminated in accordance with Article 10 hereof. "Territory" shall mean, subject to the territorial restrictions in the Assumed Contracts and the Contracts listed on Schedule 4.7 to the Asset Purchase Agreement, (i) with respect to all of the Products and Inactive Products except Gastrocrom (cromolyn sodium, USP) Capsules and Oral Concentrate and Pediapred Oral Solution (prednisolone sodium 3 phosphate, USP) and Pediapred Forte and Ped Forte, anywhere in the world (other than Canada), (ii) with respect to Gastrocrom (cromolyn sodium, USP) Capsules and Oral Concentrate, the United States and its commonwealths, territories and possessions, including without limitation, Puerto Rico and (iii) with respect to Pediapred Oral Solution (prednisolone sodium phosphate, USP) and Pediapred Forte and Ped Forte, the United States and its commonwealths, territories and possessions, including without limitations Puerto Rico, Aruba, Bahamas, Barbados, Curacao/Netherlands Antilles, Denmark, Guatemala, Saipan, Surinam and Trinidad. "Trademarks" shall mean the trademarks and all goodwill associated with such trademarks owned by Licensor and used by Licensor primarily in connection with the Licensed Products in the Territory including those Trade marks listed on Exhibit A hereto and all applications and registrations therefor, and all trade names and trade dress, owned by Licensor and used by Licensor primarily in connection with the Licensed Products in the Territory, but excluding the name "FISONS" or any variation thereof. ARTICLE 2. GRANT 2.1 Licensor on behalf of itself and each of its Affiliates hereby grants to Licensee during the Term, the exclusive (even as against Licensor) right and license within the Territory to (i) use and sublicense the use of the Intellectual Property in connection with the develop ment, manufacture, distribution, marketing, promotion, advertising and sale of the Licensed Products and Improvements (as defined below) and (ii) use all intellectu al and intangible property relating to the Pennkinetic Process included in the Intellectual Property for any and all purposes including without limitation in connection with the development, manufacture, and sale of pharmaceutical products, including, but not limited to the Licensed Products, provided, however, that the rights granted herein are subject to the third party rights, restrictions, condi tions and limitations contained in the Assumed Contracts and the Contracts listed on Schedule 4.7 to the Asset Purchase Agreement. Without limiting the foregoing, Licensee shall have the exclusive right and license to use and sublicense the use of the Trademarks in the Territory, either as primary brands, subbrands, or otherwise in connection with the Licensed Products and Improvements in any and all channels of distribution. 2.2 Licensee shall not use the Intellectual Property outside the Territory, nor shall it sell Licensed Products incorporating any of the Intellectual Property to any Person (other than Licensor or an Affiliate of Licensor) which Licensee knows or has reason to know will sell such 4 Licensed Products outside the Territory, either during the Term or after the termination hereof notwithstanding Licensee's exercise of the Purchase Option as hereinafter defined pursuant to Article 8 hereof. 2.3 [Intentionally Deleted] 2.4 To the extent Licensor has the right to do so, and without representations and warranties, Licensor on behalf of itself and each of its Affiliates hereby grants to Licensee during the Term, a royalty-free, non-exclusive right and license to use and sublicense the use of all such intellectual and intangible property of Licensor that would be included in the definition of Intellectual Property herein but for the qualifying word "primarily" appearing in the phrase "primarily in connection with ... " in the applicable definitions; provided, however, that in the event Licensee exercises the Purchase Option pursuant to Section 8.1 hereof, such non-exclusive License shall be perpetual. 2.5 Licensor does hereby assign to Licensee all of Licensor's right, title and interest in and to the Assumed Contracts except to the extent that the agreement dated June 2, 1986 between K-V Pharmaceutical Company and Pennwalt Corporation grants any rights in Canada. Licensee does hereby accept for itself and its successors and permitted assigns the assignment of the Assumed Contracts. Licensee hereby assumes and agrees to pay, perform, discharge and satisfy when due, and to indemnify Licensor against and hold it harmless from and against all Liabilities of Licensor under the Assumed Contracts which according to such Assumed Contracts relate to periods after the Effective Time (as defined in the Asset Purchase Agree ment) and are to be paid, performed, discharged or satisfied after the Effective Time. Notwithstanding the foregoing, following expiration of the Term, in the event Licensee does not exercise the Purchase Option pursuant to Section 8.1, Licensee shall reassign its right, title and interest in such Assumed Contracts and Licensor shall accept such reassignment and shall assume and agree to pay, perform, discharge and satisfy when due, and to indemnify Licensee against and hold it harmless from and against all Liabilities of Licensee under the Assumed Contracts which according to such Assumed Contracts relate to periods after the date of such reassignment and are to be paid, performed, discharged or satisfied after the date of such reassignment. 5 ARTICLE 3. PAYMENTS OF LICENSING FEE 3.1 (a) In consideration of the rights granted in Article 2, Licensee shall pay Licensor annual licensing fees. Such annual fees shall be paid to Fisons Investments Inc. as follows: (i) Payment of non-refundable licensing fee for the second half of calendar year 1996 of $30 million. (ii) Pre-payment of licensing fee for calendar year 1997 of $55 million. (iii) Pre-payment of licensing fee for calendar year 1998 of $55 million. (iv) Pre-payment of licensing fee for calendar year 1999 of $50 million. (v) Pre-payment of licensing fee for calendar year 2000 of $50 million. The fee referred to in Article 3.1(a)(i) shall be due and payable and paid on the Closing Date as provided in Section 3.2 of the Asset Purchase Agreement. The net present value of the fees referred to in Sections 3.1(a)(ii), (iii), (iv) and (v) as of the Closing Date ($175 million) will be prepaid at Closing in accordance with Sections 2.7 and 3.2 of the Asset Purchase Agreement. Not withstanding anything herein to the contrary, in the event of a Change of Control of Licensee, Licensor shall have the right within 60 days of such Change of Control of Licensee to deem any and all licensing fees payable pursuant to Section 3.1 to be due and payable and nonrefundable. 3.2 (a) Provided that Licensee is not otherwise in breach of this Agreement, Licensor shall refund to Licensee the net present value as of the Closing as set forth on Schedule 3.2 to the Asset Purchase Agreement of the licensing fee under this Agreement for each of the years 1997 through 2000 (to the extent not previously refunded as described in Section 3.2(c)) in the event that, Licensee (i) does not make any use whatsoever of the Intellectual Proper ty during such year and (ii) gives notice to Licensor that no use of the Intellectual Property will be made for such year, provided that, after December 31, 1997, such notice 6 must be given between January 1 and January 15 of the year immediately preceding the year for which such refund is sought. (b) Any refund to be made pursuant to Section 3.2(a) above shall be made to Licensee within 30 days of the end of the calendar year to which the notice provided by Licensee pursuant to Section 3.2(a) relates. Such notice shall be given by Licensee in the form of a certificate executed by its President or Chief Executive Officer stating that Licensee will not make any use whatso ever of the Intellectual Property during such year. (c) Any indemnification payment due to Licensee pursuant to the provisions of Section 11.3 of the Asset Purchase Agreement shall be satisfied through a refund of the net present value as of the Closing as shown on Schedule 3.2 to the Asset Purchase Agreement of (x) the licensing fees referred to in Section 3.1(a)(ii), (iii), (iv) and (v) and (y) the Exercise Price referred to in Section 8.1(a) (to the extent not previously refunded pursuant to Section 3.2(a) or Section 8.2). Any such refund shall be (x) applied pro rata to the fees and exercise price referred to in the preceding sentence and (y) shall be paid as provided in Section 11.5(b) of the Asset Purchase Agree ment. Any refund of such licensing fees or of the Exercise Price pursuant to Section 3.2(a) or Section 8.2 shall, to the extent of such refund, reduce Seller's liability under Section 11.3 of the Asset Purchase Agreement. Any refund of the licensing fees or of the Exercise Price pursuant to this Section 3.2(c) shall, to the extent of such refund, satisfy Licensor's obligations under Section 3.2(a) or Section 8.2. ARTICLE 4. REPRESENTATIONS, WARRANTIES AND COVENANTS 4.1 Licensor covenants that it will not voluntari ly, involuntarily, or by operation of law, Transfer any portion of the Intellectual Property without the consent of Licensee except to an Affiliate subject to the terms of this Agreement or otherwise create or permit to exist any Lien upon any portion of the Intellectual Property except pursuant to the Security Agreement. 4.2 Licensor covenants, on behalf of itself and its Affiliates, not to sell Products within the Territory nor to sell Products to any other Person (other than to 7 Licensee or an Affiliate of Licensee) which Licensor knows or has reason to know will sell such Products in the Territory. 4.3 Licensor covenants, on behalf of itself and its Affiliates, not to use the Trademarks outside the Territory in any manner that will tarnish or disparage the Trademarks in the Territory or otherwise have a material adverse effect upon the Trademarks in the Territory or the goodwill associated therewith. 4.4 Nothing herein shall be construed to be a representation by Licensor that it owns or has any rights to use the Trademarks or Patents outside of those jurisdictions in which Licensor has a trademark registration or an issued patent, respectively. 4.5 Subject to rights of third parties, Licensor, on behalf of itself and its Affiliates, covenants not to abandon, let lapse or otherwise fail to maintain any issued Patent or registered Trademark related to the Licensed Products in Canada without the consent of Licensee, which consent shall not be unreasonably withheld or delayed. In the event Licensor wishes to abandon, let lapse or otherwise fail to maintain any such issued Patent or registered Trademark, it shall, subject to rights of third parties, offer such Patent or registered Trademark for sale to Licensee. ARTICLE 5. TRANSFER OF ADVERSE DRUG REACTION INFORMATION 5.1 During the Term, each of Licensor and Licensee shall report to the other as soon as practicable, and no later than three (3) days following its own notification, of any information associated with the use of any Product that pertains to hazards, contraindications, side effects, precautions, or other information which could reasonably be expected to be pertinent to the safety of such Product and that is required to be reported to the FDA or DEA pursuant to Law. All responsibility for filing any necessary reports with the FDA and DEA concerning such events (including individual Drug Experience Reports and annual review of Drug Experience Reports) during the Term shall be borne by Licensee. In all cases, Licensee shall be responsible for interfacing with customers in the Territory. 8 ARTICLE 6. TRADEMARK AND PATENT RIGHTS 6.1 Prosecution and Maintenance. (a) Licensee shall undertake and shall bear all costs of the prosecution and maintenance of the Patents and the Trademarks in the Territory; provided, however, that Licensee shall not abandon, let lapse or otherwise fail to prosecute or maintain any Patent or Trademark without the consent of Licensor which consent shall not be unreasonably withheld or delayed. In connection with Licensee's prosecution and maintenance of the Patents and Trademarks, Licensor shall cooperate with Licensee by executing any necessary documents, supplying Licensee with specimens and performing other reasonable acts. (b) Licensee shall not use any variation of any Trademark, or any new trademark in connection with the Licensed Products, without the prior written consent of Fisons Investments Inc. which consent shall not be unreasonably withheld or delayed. In the event Fisons Investments Inc. gives its prior written approval for the use of such a variation or new trademark, Licensee may apply for a registration of that variation or trademark in the United States Patent and Trademark Office or trademark of fice or other appropriate similar office in any foreign jurisdiction in the Territory ("PTO") in the name of Licensor or its designee. If such an application is filed by Licensee, upon the receipt by Licensee of a serial number for an application from the PTO, the trademark shall become a Trademark hereunder and be subject to the terms of this Agreement. All costs of filing and prosecuting any such application and maintaining any registration resulting therefrom, shall be paid by Licensee. No additional licens ing fees shall be owed Licensor for the use by Licensee of such Trademarks. 6.2 Infringement or Other Actions. (a) If either party shall become aware of any infringement or threatened infringement of the Intellectual Property in the Territory or any unfair competition, disparagement or other tortious act by any third party in relation to any of the Intellectual Property, Licensed Products or Improvements in the Territory, then the party having such knowledge shall give notice to the other within ten (10) days of becoming aware of such infringement, 9 unfair competition, disparagement or threatened infringe ment, unfair competition, disparagement or other tortious act. (b) Licensee shall have the right to take such action as it deems appropriate to protect and maintain the Intellectual Property in the Territory, including but not limited to bringing an action, suit or other appropriate proceeding to prevent or eliminate the infringement of such Intellectual Property, or the unfair competition, disparagement or other tortious act by any third party in relation to any Intellectual Property, Licensed Product or Improvement in the Territory. Licensor agrees to cooperate with Licensee in any reasonable manner in any such action, suit or proceeding, at Licensee's expense, including joining as a party to such action, suit or proceeding, if necessary to maintain standing. (c) Licensee agrees to consult with Licensor with respect to its decision whether to take any action of the nature specified in Section 6.2(b), giving due consideration to Licensor's views with respect to the necessity or desirability of taking such action. Licensee further agrees that it will take action of the nature specified in Section 6.2(b) if, in Licensee's reasonable business judgment, after considering the value of the Intellectual Property in question and the cost of such action and giving due consideration to Licensor's right of reversion under Section 10.2 hereof, such action is commer cially reasonable; provided, however, that Licensee's rights under this Section 6.2(c) shall in no way diminish or reduce Licensee's obligations under Section 9.1(a) hereof. (d) Licensee shall not enter into any agreement to settle any action, suit or proceeding specified in Section 6.2(b) without the express written consent of Licensor, which consent shall not be unreasonably withheld or delayed, if such agreement would in any way limit or reduce the nature or scope of Licensee's use, or any other Person's use, of the Intellectual Property at the time such agreement is executed or at a future time. 6.3 Licensee acknowledges that as between Licensee and Licensor the Intellectual Property belongs to Licensor. 6.4 During the Term (and after the Term in the event that Licensee does not exercise the Purchase Option), Licensee shall not challenge Licensor's ownership in or right to use the Intellectual Property or attempt to register 10 the Intellectual Property in its own name; provided however, that nothing in this Section 6.4 is intended to contradict, or prevent Licensee from exercising its rights pursuant to the Purchase Option or under the Security Agreement. ARTICLE 7. THIRD PARTY CLAIMS 7.1 If either party shall become aware of any action, suit or proceeding or threat of action, suit or proceeding, by a third party alleging that the use of any Intellectual Property in the Territory infringes a trademark or violates any other proprietary rights of any third party, the party so aware shall promptly notify the other party of the same and fully disclose the basis therefor. 7.2 Licensee agrees to use its best efforts to defend such action, suit or proceeding within the Territory if in Licensee's reasonable business judgment, after considering the value of the Intellectual Property in question and the cost of each such action, suit or proceeding, and giving due consideration to Licensor's right of reversion under Section 10.2 hereof, such action, suit or proceeding is commercially reasonable; provided, however, that nothing in this Section 7.2 shall diminish or reduce Licensee's obligations under Section 9.1(a) hereof. Licensee will keep Licensor fully informed with respect to all significant aspects of such action, suit or proceeding. Licensor agrees to assist Licensee by providing information in the possession and control of Licensor and to otherwise cooperate with Licensee as may be reasonably necessary to such defense. Licensor shall have the right at any time, and at its expense, to consult with Licensee with respect to any such action, suit or proceeding or to take control of such action, suit or proceeding should Licensee elect not to defend or settle it. Licensee shall not enter into any agreement or settle any action, suit or proceeding specified in this Article 7 without the express written consent of Licensor, which consent shall not be unreasonably withheld or delayed, if such agreement would in any way limit or reduce the nature or scope of Licensee's use or any other person's use of the Intellectual Property at the time such agreement is executed or at a future date. All amounts awarded as damages, profits or otherwise in connection with any such litigation shall be paid to and become the sole property of Licensee. 11 ARTICLE 8. PURCHASE OPTION 8.1 (a) Licensor on behalf of itself and each of its Affiliates hereby grants to Licensee the exclusive right and option, exercisable upon notice to Licensor given at any time between September 1, 2000 and December 15, 2000, to purchase in the Territory, subject to the restrictions and limitations contained in the Assumed Contracts and the rights of third parties and the restrictions and limitations under the Contracts listed on Schedule 4.7 to the Asset Purchase Agreement, all of Licensor's right, title, and interest in the Intellectual Property on January 1, 2001 (the "Purchase Option"). The exercise price of the Purchase Option described herein is $90 million (the "Exercise Price"), the net present value of which ($59 million) will be prepaid at Closing as provided in Section 3.2 of the Asset Purchase Agreement. (b) In consideration of the grant of the Purchase Option, Licensee shall pay Licensor $45 million which amount shall be nonrefundable. Such amount shall be due and payable to Licensor and shall be paid at the Closing as provided in Section 2.7 and 3.2 of the Asset Purchase Agree ment. (c) Notwithstanding anything herein to the contrary, Licensee shall be unconditionally entitled to exercise the Purchase Option as provided herein even if at such time or prior thereto there exist claims by Licensor with respect to Licensee's use or misuse of the Intellectual Property pursuant to this Agreement or otherwise or any other claims of whatsoever nature by Licensor against Licensee, including, without limitation, any breach or default by Licensee of this Agreement or the Asset Purchase Agreement, any agreement contemplated by or executed in connection herewith or therewith or any other agreement or arrangement between Licensee and Licensor or their respective Affiliates. (d) Notwithstanding anything herein to the contrary, during the occurrence and continuation of an Event of Default, Licensee shall have the right to accelerate the Purchase Option and deem it duly exercised, such right to be exercised by delivery to Licensor of a written notice declaring the Purchase Option so accelerated and exercised. 8.2 In the event Licensee does not exercise the Purchase Option by December 15, 2000 as herein provided, the net present value at the Closing of the Exercise Price as set forth in Section 8.1(a) hereof, shall be fully refunded 12 to Licensee within 30 days of the end of the Term. Notwithstanding anything herein to the contrary, in the event of a Change of Control of Licensee, Licensor shall have the right within 60 days of such Change of Control of Licensee to accelerate the Purchase Option and deem it duly exercised, such right to be exercised by delivery to Licensee of a written notice declaring the Purchase Option so accelerated and exercised. In such event any rights hereunder of Licensee to receive a refund in respect of the Purchase Option shall terminate. 8.3 In the event Licensee exercises the Purchase Option, Licensor shall deliver such documents as necessary to effectuate the Transfer of the Intellectual Property in the Territory, as set forth in Section 8.1(a) hereof, to Licensee. 8.4 (a) Licensee shall have the unconditional right during the Term to make changes to the formulation of any Licensed Product, provided, however, that with respect to those Licensed Products for which Licensor does not own all of the rights in such formulation, Licensee may make changes to such formulations only to the extent that Licensor is entitled to do so under the Assumed Contracts and the Contracts listed on Schedule 4.7 to the Asset Purchase Agreement. All improvements or modifications of the formulation of any of the Licensed Products created or developed pursuant to the terms hereof, by or on behalf of Licensee during the Term (collectively, "Improvements") shall, as between Licensor and Licensee, be the property of Licensee and shall not become a part of the Intellectual Property, provided, however, that Licensee's rights in such Improvements do not include any rights to own or use the underlying formulation separate from the rights granted hereunder. In the event that Licensee does not exercise the Purchase Option, Licensee shall, upon termination of this Agreement, grant Licensor a nonexclusive, worldwide, perpetual, royalty-free license, with the right to sublicense and assign such rights, in form and substance satisfactory to each of the parties hereto, to use the Improvements and the Research (as hereinafter defined). (b) Licensee hereby grants to Licensor, for the Term of this Agreement, a non-exclusive, royalty-free license, to use any and all Improvements and Research (as hereinafter defined) in connection with the development, manufacture, distribution, marketing, promotion, advertising and sale of the Licensed Products outside the Territory which may not be sublicensed or assigned without the prior 13 written consent of Licensee, which consent shall not be unreasonably withheld or delayed. 8.5 All marketing research and similar information developed by Licensee and its Affiliates relating to the Intellectual Property (the "Research") shall remain the property of Licensee or its Affiliates. 8.6 In the event Licensee does not exercise the Purchase Option, Licensee shall enter into a supply agreement with Licensor pursuant to which Licensee shall agree to manufacture the Products for Licensor for a term mutually agreeable to Licensor and Licensee; provided that Licensor grants to Licensee the rights to use such of the Intellectual Property as may be required to manufacture the Products in accordance with such supply agreement, subject to appropriate quality control provisions to be agreed upon between the parties. 8.7 Licensor has granted Licensee a security interest in the Intellectual Property in the Territory to secure Licensor's obligation under Section 8.3 hereof pursuant to the Security Agreement. ARTICLE 9. QUALITY CONTROL 9.1 (a) Subject to Licensor having granted approval to Licensee to abandon, let lapse or otherwise fail to prosecute any issued Patent or registered Trademark pursuant to Section 6.1, Licensee will use commercially reasonable efforts to advertise and promote the Products and to use the Trademarks in connection with the distribution, advertising, marketing and sale of the Products. (b) Licensee shall not use the Trademarks in any manner which will tarnish or disparage the Trademarks or otherwise have a material adverse effect upon the Trademarks or the goodwill associated therewith. 9.2 The Trademarks shall be used in substantially the same form as they were heretofore used in connection with the Licensed Products. In the event Licensee wishes to use any of the Trademarks in a substantially different form, Licensee shall submit such different form to Licensor for approval, which shall not be unreasonably withheld or delayed. 14 9.3 Licensee agrees that the nature and quality of all Licensed Products, and the advertising, packaging and other materials associated therewith, sold by Licensee bearing one or more of the Trademarks shall be of a quality at least as high as the Licensed Products heretofore sold under the Trademarks and the advertising, packaging and other materials heretofore associated therewith, as the case may be. Licensee shall comply with applicable federal, state and local laws and regulations in distributing, mar keting, advertising and selling any Licensed Products. 9.4 Licensor shall have the following rights to exercise quality control over Licensee's use of the Trademarks to assure itself of Licensee's adherence to the standards set forth in Sections 9.1(b), 9.2 and 9.3: (a) Licensee shall upon request by Licensor, from time to time, submit to Licensor a reasonable number of samples of any Licensed Product and any packaging, advertising and other materials which bear or are used with one or more of the Trademarks, provided however, that nothing herein shall be deemed to give Licensor the right to preapprove, prior to the initial dissemination thereof, the advertising, packaging, and other materials used by Licensee in connection with the Licensed Products; and (b) Licensor shall have the right, during regular business hours, after reasonable advance written notice to Licensee, to undertake up to two (2) inspections per annum of the facilities used by Licensee to manufacture or store such Licensed Products. 9.5 Fisons B.V., Fisons and Fisons PLC each appoint Fisons Investments Inc. its agent for the purpose of exercising the rights herein granted to control the quality of the Licensed Products and any packaging, advertising and other materials which bear or are used with one or more of the Trademarks and for otherwise exercising the rights of Licensor under Articles 9 and 10 hereunder. 9.6 In the event of a material breach of any of the quality control provisions set forth in this Article 9 by Licensee, Licensor shall provide Licensee with written notice specifying in detail the nature of the alleged breach. Licensee shall then have 60 business days, from its receipt of such notice, to cure the breach. If Licensee fails to do so by the end of such 60-business day period, 15 Licensor shall provide Licensee with additional written notice of such failure and the parties shall then endeavor to cooperate and negotiate in good faith, for a period of 20 business days, their dispute concerning Licensee's alleged breach of the Agreement. If the parties do not resolve their dispute at the expiration of the foregoing negotiation period, Licensor shall be entitled to bring suit against Licensee in accordance with Article 19 hereof seeking a declaratory judgment that Licensee has materially breached this Agreement and injunctive relief as appropriate to prevent Licensee's further breaches of the quality control provisions. Licensee agrees that a material breach of the quality control provisions set forth in this Article 9 would constitute irreparable harm to Licensor, entitling Licensor to such injunctive relief appropriate under the circumstances. 9.7 In the event that Licensee breaches the covenant set forth in Section 9.1(a), such breach shall be deemed to be an irreparable material breach hereof and Licensee shall forfeit all claims to obtain a refund of any amount pursuant to Sections 3.2 or 8.2 hereof, it being agreed that Licensor's damages in the event of such a breach might be impossible to ascertain and that the refund amount so forfeited constitutes a fair and reasonable amount of damages under the circumstances and is not a penalty; provided that such forfeiture shall in no way prejudice or diminish Licensee's right to exercise the Purchase Option pursuant to Section 8.1 hereof. 9.8 The parties agree that an award of injunctive relief as contemplated by Section 9.6 and the forfeiture of Licensee's refund rights contemplated by Section 9.7, shall be Licensor's sole and exclusive remedy for any breach by Licensee of (i) Sections 9.1(b) through 9.6 and (ii) Section 9.1(a), respectively. ARTICLE 10. TERMINATION. 10.1 This Agreement can be terminated at any time prior to the expiration of the Term by mutual agreement of the parties. 10.2 Upon the termination or expiration of this Agreement and at a time when Licensee shall not therefore have exercised the Purchase Option, all rights granted hereunder to Licensee in the Intellectual Property shall revert to Licensor. 16 10.3 Upon the termination or expiration of this Agreement and at a time when Licensee shall not therefore have exercised the Purchase Option, Licensee shall have a period of three (3) months in which to cease all use of the Intellectual Property and to return all written or other materials containing or describing such Intellectual Property to Licensor. ARTICLE 11. NOTICES 11.1 All notices or other communications given pursuant hereto by one party hereto to the other party shall be in writing and deemed given when (a) delivered by messenger, (b) sent by telecopier (with receipt confirmed), (c) received by the addressee, if sent by Express Mail, Federal Express or other express delivery service (receipt requested), or (d) mailed, seven days after being mailed in the U.S. first-class postage prepaid, registered or certified, in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate as to itself by notice to the other party): If to Licensor, to it at: Fisons Corporation c/o Rhone-Poulenc Rorer Inc. 500 Arcola Road Collegeville, Pennsylvania 19426-0107 Attention: General Counsel Telecopier No.: (610) 454-3807 Copies to: Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, New York 10022 Attention: Mark C. Smith, Esq. Telecopier No.: (212) 735-2000 17 If to Licensee, to it at: Medeva Pharmaceuticals Manufacturing, Inc. c/o Medeva PLC 10 St. James's Street London, SWIA 1EF United Kingdom Attention: Mark G. Hardy, Esq. Telecopier No.: 011-44-171-930-1516 Copies to: Richards & O'Neil 885 Third Avenue New York, New York 10022 Attention: Brian D. Beglin, Esq. Telecopier No.: (212) 750-9022 ARTICLE 12. FORCE MAJEURE 12.1 Neither party shall be responsible or liable to the other hereunder for failure or delay in performance of this Agreement due to any war, fire, accident or other casualty, or any labor disturbance or act of God or the public enemy, or any other contingency beyond such party's reasonable control. In the event of the applicability of this Article, the party affected by such force majeure shall use reasonable efforts, consistent with good business judgment, to eliminate, cure and overcome any of such causes and resume performance of its obligations. ARTICLE 13. CONFIDENTIALITY 13.1 Licensee and Licensor each agrees to: (a) not disclose any confidential and proprietary information relating to the Intellectual Property to third parties except to: (i) the FDA and any other Governmental Authority, or their foreign equivalents; or (ii) Affiliates, and consultants of Licensee or Licensor or actual or potential contract manufacturers, sublicensees, distributors, purchasers, joint venturers or others having bona fide business relations with Licensee or Licensor, and 18 clinical investigators, in each case pursuant to a non- disclosure commitment; and (b) take such precautions as it normally takes with its own confidential and proprietary information to prevent disclosure of any Intellectual Property that is confidential and proprietary to third parties (except as contemplated above). 13.2 The obligation of maintaining confidentialty under this Article shall not, in any event, apply to any information which: (a) at the time of disclosure is or thereafter becomes available to the general public through no fault of the recipient party; (b) was lawfully known to, or otherwise was lawfully in the possession of, the recipient party, prior to the receipt of such information from the disclosing party; (c) is obtained by the recipient party from a source other than the disclosing party who would not be breaching a commitment of confidentiality to the disclosing party by disclosing such information to the recipient party; or (d) is required to be disclosed pursuant to law to protect the recipient party's interest or in connection with any litigation, investigation or regulatory proceeding, or as otherwise required by law. 13.3 The confidentiality obligations set forth in this Article 13 shall survive the expiration of this Agreement. ARTICLE 14. PUBLICITY 14.1 Licensor and Licensee agree not to issue any press release or other public statement disclosing the existence of or relating to this Agreement without the prior written consent, which consent shall not be unreasonably withheld or delayed, of the other party, provided, however, that Licensor or Licensee shall not be prevented from complying with any duty of disclosure it may have pursuant to law (including regulatory requirements), subject to noti fying the other party and giving such other party reasonable time to comment on the same prior to disclosure. 19 ARTICLE 15. ASSIGNMENT; AMENDMENT; WAIVER 15.1 (a) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respec tive successors and permitted assigns. This Agreement shall not be assignable or transferable by any party hereto with out the prior written consent of the other(s) (which consent shall not be unreasonably withheld or delayed), except that Licensee may assign this Agreement and all its rights hereunder to any Affiliate without consent, provided that no such assignment shall relieve Licensee of any of its obligations hereunder, including without limitation, those of Article 9. (b) This Agreement may be amended only by written agreement of the parties hereto. (c) The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of that or any other term hereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. ARTICLE 16. GOVERNING LAW 16.1 This Agreement shall be governed by, and con strued in accordance with, the laws of the State of New York and the United States, as though made and to be fully per formed therein without regard to conflicts of laws principles thereof. ARTICLE 17. SEVERABILITY 17.1 To the extent permitted by applicable Law, any term or provision of this Agreement which is invalid or unenforceable will be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining rights of the Person intended to be benefitted by such term or provision or any other provisions of this Agreement. 20 ARTICLE 18. ENTIRE AGREEMENT 18.1 This Agreement, together with the Asset Purchase Agreement, constitutes the entire understanding between the parties relating to the subject matter hereof and supersedes all prior agreements or negotiations with respect thereto, and no amendment or modification to this Agreement shall be valid or binding upon the parties unless made in writing and signed by the representatives of such parties. ARTICLE 19. CHOICE OF FORUM 19.1 Each party to this Agreement hereby irrevocably submits to the exclusive jurisdiction of any New York State or Federal Court sitting or located in the County of New York (a "New York Court") in any action or proceeding arising out of or relating to this Agreement, and each such party hereby irrevocably agrees that all claims in respect of such action or proceeding shall be heard and determined in such New York Court. Each party, to the extent permitted by applicable laws, hereby expressly waives any defense or objection to jurisdiction or venue based on the doctrine of Forum Non Conveniens, and stipulates that any New York Court shall have In Personam jurisdiction and venue over such party for the purpose of litigating any dispute or controver sy between the parties arising out of or related to this Agreement. In the event any party shall commence or maintain any action or proceeding arising out of or related to this Agreement in a forum other than a New York Court, the other party shall be entitled to request the dismissal or stay of such action or proceeding, and each such party stipulates for itself that such action or proceeding shall be dismissed or stayed. To the extent that any party to this Agreement has or hereafter may acquire any immunity from jurisdiction of any New York Court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) with respect to itself or its property, each such party hereby irrevocably waives such immunity. 19.2 Each party irrevocably consents to the service of process of any of the New York Courts in any such action or proceeding by personal delivery of the copies thereof or by the mailing of the copies thereof by certified mail, return receipt requested, postage prepaid, to it at its address specified in accordance with Section 11.1, such 21 service to become effective upon the earlier of (i) the date 10 calendar days after such mailing or (ii) any earlier date permitted by applicable law. ARTICLE 20. MISCELLANEOUS 20.1 Consents. For all purposes of this Agreement, whenever a party requests the consent of another pursuant to this Agreement, the phrase "which consent shall not be unreasonably withheld or delayed" shall mean consent may be withheld only on the basis that the proposed action subject to such consent is not in the reasonable commercial interests of the party whose consent is being sought. 22 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the day and year first indicated above. FISONS PLC By: /s/ Patrick Langlois -------------------------------- Name: Patrick Langlois Title: Chairman FISONS CORPORATION By: /s/ Timothy G. Rothwell -------------------------------- Name: Timothy G. Rothwell Title: President FISONS B.V. By: /s/ Anthony Cork -------------------------------- Name: Anthony Cork Title: Director FISONS INVESTMENTS INC. By: /s/ Paul Leggieri --------------------------------- Name: Paul Leggieri Title: President MEDEVA PHARMACEUTICALS MANUFACTURING, INC. f/k/a MEDEVA ROCHESTER INC. By: /s/ Mark G. Hardy --------------------------------- Name: Mark G. Hardy Title: Vice President 23 EXHIBIT A PATENTS PATENT NUMBER COUNTRY OWNER 4,221,778 UNITED STATES FISONS INVESTMENTS 4,448,774 UNITED STATES FISONS INVESTMENTS 4,517,179 UNITED STATES FISONS INVESTMENTS 4,522,818 UNITED STATES FISONS INVESTMENTS 4,762,709 UNITED STATES FISONS INVESTMENTS 5,124,152 UNITED STATES FISONS INVESTMENTS PATENT/APPLICATION COUNTRY OWNER NUMBER 124027 EUROPEAN NATION FISONS INVESTMENTS 8426434 AUSTRALIA FISONS INVESTMENTS 8402110 DENMARK FISONS INVESTMENTS 78395 PORTUGAL FISONS INVESTMENTS 8401696 FINLAND FISONS INVESTMENTS 60004124 JAPAN FISONS INVESTMENTS 8403141 SOUTH AFRICA FISONS INVESTMENTS 8602418 SPAIN FISONS INVESTMENTS 71506 ISRAEL FISONS INVESTMENTS 662947 SWITZERLAND FISONS INVESTMENTS 124027 EUROPEAN NATION FISONS INVESTMENTS 3482402 GERMANY FISONS INVESTMENTS 8304926 SOUTH AFRICA FISONS INVESTMENTS 8303733 FINLAND FISONS INVESTMENTS 8316435 AUSTRALIA FISONS INVESTMENTS 59070617 JAPAN FISONS INVESTMENTS 69139 ISRAEL FISONS INVESTMENTS 8303675 AUSTRIA FISONS INVESTMENTS TRADEMARKS RELATING TO PRODUCTS TRADEMARK REGISTRATION COUNTRY OWNER NUMBER DELSYM 1931234 ARGENTINA FISONS INVESTMENTS (Application No.) DELSYM A403304 AUSTRALIA FISONS INVESTMENTS DELSYM 396548 BENELUX FISONS INVESTMENTS DELSYM 439997 CHILE FISONS INVESTMENTS DELSYM 30717 COLOMBIA FISONS INVESTMENTS (Application No.) DELSYM 64577 COSTA RICA FISONS INVESTMENTS DELSYM 34875 DOMINICAN FISONS INVESTMENTS REPUBLIC DELSYM 676 ECUADOR FISONS INVESTMENTS DELSYM 66217 EGYPT FISONS INVESTMENTS DELSYM 1264967 FRANCE FISONS INVESTMENTS DELSYM 1194040 GREAT BRITAIN FISONS INVESTMENTS DELSYM 76519 GREECE FISONS INVESTMENTS DELSYM 49157 GUATEMALA FISONS INVESTMENTS DELSYM 41135 HONDURAS FISONS INVESTMENTS DELSYM 286338 INDONESIA FISONS INVESTMENTS DELSYM 108182 IRELAND FISONS INVESTMENTS DELSYM 58080 ISRAEL FISONS INVESTMENTS DELSYM 391496 MEXICO FISONS INVESTMENTS 2 DELSYM 12942 NETHERLANDS FISONS INVESTMENTS ANTILLES DELSYM 151112 NEW ZEALAND FISONS INVESTMENTS DELSYM 14985CC NICARAGUA FISONS INVESTMENTS DELSYM 033307 PANAMA FISONS INVESTMENTS DELSYM 84/0981 SOUTH AFRICA FISONS INVESTMENTS DELSYM 86/110 SALVADOR FISONS INVESTMENTS DELSYM 530097 TAIWAN FISONS INVESTMENTS DELSYM 145771 THAILAND FISONS INVESTMENTS DELSYM 271970 URUGUAY FISONS INVESTMENTS (Application No.) DELSYM 1267664 UNITED FISONS INVESTMENTS STATES DELSYM 139986F VENEZUELA FISONS INVESTMENTS DELSYM 570236 TAIWAN FISONS INVESTMENTS (CHINESE SCRIPT) DELSYM 150871 THAILAND FISONS INVESTMENTS (THAILAND SCRIPT) DIMINEX 363015 MEXICO FISONS INVESTMENTS GASTROCROM 1173875 UNITED FISONS INVESTMENTS STATES HYLOREL 19426 CYPRUS FISONS INVESTMENTS HYLOREL 1161/79 HONG KONG FISONS INVESTMENTS HYLOREL 366845 ITALY FISONS INVESTMENTS HYLOREL M/81394 MALAYSIA FISONS INVESTMENTS HYLOREL 298496 SWITZERLAND FISONS INVESTMENTS HYLOREL 1066577 UNITED FISONS INVESTMENTS STATES HYLOREL 99797-F VENEZUELA FISONS INVESTMENTS 3 HYLOREL 26604 YUGOSLAVIA FISONS INVESTMENTS IONAMIN 1931236 ARGENTINA FISONS INVESTMENTS (Application No.) IONAMIN 91544 BENELUX FISONS INVESTMENTS IONAMIN 279130 CHILE FISONS INVESTMENTS (Application No.) IONAMIN 160580 CHINA FISONS INVESTMENTS IONAMIN 175601 COLOMBIA FISONS INVESTMENTS IONAMIN 22300 COSTA RICA FISONS INVESTMENTS IONAMIN 8876 CYPRUS FISONS INVESTMENTS IONAMIN 66219 EGYPT FISONS INVESTMENTS IONAMIN 785063 GREAT BRITAIN FISONS INVESTMENTS IONAMIN 31261 GREECE FISONS INVESTMENTS IONAMIN 17517 GUATEMALA FISONS INVESTMENTS IONAMIN 15005 HONDURAS FISONS INVESTMENTS IONAMIN 2874/91 HONG KONG FISONS INVESTMENTS IONAMIN 80696 IRELAND FISONS INVESTMENTS IONAMIN 61716 ISRAEL FISONS INVESTMENTS IONAMIN M/92653 MALAYSIA FISONS INVESTMENTS IONAMIN 26373CC NICARAGUA FISONS INVESTMENTS IONAMIN 105526 PAKISTAN FISONS INVESTMENTS (Application No.) IONAMIN 11575 PANAMA FISONS INVESTMENTS IONAMIN 012301 PERU FISONS INVESTMENTS IONAMIN 15651 PHILIPPINES FISONS INVESTMENTS IONAMIN 176460 PORTUGAL FISONS INVESTMENTS IONAMIN 21426 PUERTO RICO FISONS INVESTMENTS 4 IONAMIN 366/30 SALVADOR FISONS INVESTMENTS (Application No.) IONAMIN S/5109/81 SINGAPORE FISONS INVESTMENTS IONAMIN 310915 SWITZERLAND FISONS INVESTMENTS IONAMIN 499478 TAIWAN FISONS INVESTMENTS IONAMIN KOR28396 THAILAND FISONS INVESTMENTS IONAMIN 682108 UNITED FISONS INVESTMENTS STATES IONAMIN 12350/94 VENEZUELA FISONS INVESTMENTS (Application No.) IONAMIN 129043 MEXICO FISONS INVESTMENTS (CL1/CL3/CL5) IONAMINA 36762-A BOLIVIA FISONS INVESTMENTS IONAMINA 15934 NICARAGUA FISONS INVESTMENTS IONAMINA 14799 PUERTO RICO FISONS INVESTMENTS IONAMINA 13985/36 SALVADOR FISONS INVESTMENTS IONAMINA 46135 VENEZUELA FISONS INVESTMENTS IONAMINE 410296 SWITZERLAND FISONS INVESTMENTS K-NORM 1467950 UNITED FISONS INVESTMENTS STATES MICROX 474782 ITALY FISONS INVESTMENTS MYKROX A527165 AUSTRALIA FISONS INVESTMENTS MYKROX 131176 AUSTRIA FISONS INVESTMENTS MYKROX 460368 BENELUX FISONS INVESTMENTS MYKROX 73688 COSTA RICA FISONS INVESTMENTS MYKROX 48195 DOMINICAN FISONS INVESTMENTS REPUBLIC MYKROX 1571157 FRANCE FISONS INVESTMENTS MYKROX 63116 GUATEMALA FISONS INVESTMENTS MYKROX 52493 HONDURAS FISONS INVESTMENTS 5 MYKROX 290514 INDONESIA FISONS INVESTMENTS MYKROX 199114 NEW ZEALAND FISONS INVESTMENTS (Application No.) MYKROX 053074 PANAMA FISONS INVESTMENTS MYKROX (Application SALVADOR FISONS INVESTMENTS filed 4/6/90) MYKROX 243693 SWEDEN FISONS INVESTMENTS MYKROX 378519 SWITZERLAND FISONS INVESTMENTS MYKROX 145772 THAILAND FISONS INVESTMENTS MYKROX 1595998 UNITED FISONS INVESTMENTS STATES MYKROX 153174 THAILAND FISONS INVESTMENTS (THAILAND SCRIPT) PEDIAPRED 991/90 GUATEMALA FISONS INVESTMENTS (Application No.) PEDIAPRED 1457972 UNITED FISONS INVESTMENTS STATES PENNKINETIC 1321729 UNITED FISONS INVESTMENTS STATES PENNKINETIC 1411963 UNITED FISONS INVESTMENTS STATES TUSS-IONEX 83263 IRELAND FISONS INVESTMENTS TUSSIONEX A138064 AUSTRALIA FISONS INVESTMENTS TUSSIONEX 91546 BENELUX FISONS INVESTMENTS TUSSIONEX 36607-A BOLIVIA FISONS INVESTMENTS TUSSIONEX 34454 COSTA RICA FISONS INVESTMENTS TUSSIONEX 17748 GUATEMALA FISONS INVESTMENTS TUSSIONEX 14997 HONDURAS FISONS INVESTMENTS TUSSIONEX M/92657 MALAYSIA FISONS INVESTMENTS TUSSIONEX 15933 NICARAGUA FISONS INVESTMENTS TUSSIONEX 11576 PANAMA FISONS INVESTMENTS 6 TUSSIONEX 14802 PUERTO RICO FISONS INVESTMENTS TUSSIONEX 13982/36 SALVADOR FISONS INVESTMENTS TUSSIONEX S/5113/81 SINGAPORE FISONS INVESTMENTS TUSSIONEX 535873 TAIWAN FISONS INVESTMENTS TUSSIONEX 149296 THAILAND FISONS INVESTMENTS TUSSIONEX 205653 URUGUAY FISONS INVESTMENTS TUSSIONEX 656009 UNITED FISONS INVESTMENTS STATES TUSSIONEX 44292 VENEZUELA FISONS INVESTMENTS TUSSIONEX 150077 THAILAND FISONS INVESTMENTS (THAILAND SCRIPT) TUSSIONEX-P 65306 COSTA RICA FISONS INVESTMENTS ZAROXOLYN 67430 AUSTRIA FISONS INVESTMENTS ZAROXOLYN 10983 BANGLADESH FISONS INVESTMENTS ZAROXOLYN 91553 BENELUX FISONS INVESTMENTS ZAROXOLYN 609207504 BRAZIL FISONS INVESTMENTS ZAROXOLYN 125198 COLOMBIA FISONS INVESTMENTS ZAROXOLYN 41375 COSTA RICA FISONS INVESTMENTS ZAROXOLYN 18595 DOMINICAN FISONS INVESTMENTS REPUBLIC ZAROXOLYN 66221 EGYPT FISONS INVESTMENTS ZAROXOLYN 1574117 FRANCE FISONS INVESTMENTS ZAROXOLYN 931927 GREAT BRITAIN FISONS INVESTMENTS ZAROXOLYN 880712 GERMANY FISONS INVESTMENTS ZAROXOLYN 45066 GREECE FISONS INVESTMENTS ZAROXOLYN 25757 GUATEMALA FISONS INVESTMENTS ZAROXOLYN 17471 HONDURAS FISONS INVESTMENTS 7 ZAROXOLYN 445/71 HONG KONG FISONS INVESTMENTS ZAROXOLYN 75989 IRELAND FISONS INVESTMENTS ZAROXOLYN MI95C004246 ITALY FISONS INVESTMENTS (Application No.) ZAROXOLYN 47926 LEBANON FISONS INVESTMENTS ZAROXOLYN 60975 PAKISTAN FISONS INVESTMENTS ZAROXOLYN 16554 PANAMA FISONS INVESTMENTS ZAROXOLYN SAB/14175 SABA FISONS INVESTMENTS ZAROXOLYN 206/58 SALVADOR FISONS INVESTMENTS ZAROXOLYN SAR/9528 SARAWAK FISONS INVESTMENTS ZAROXOLYN S/49970 SINGAPORE FISONS INVESTMENTS ZAROXOLYN 384838 SWITZERLAND FISONS INVESTMENTS ZAROXOLYN 40220 THAILAND FISONS INVESTMENTS ZAROXOLYN 891484 UNITED FISONS INVESTMENTS STATES ZAROXOLYN 149878 MEXICO FISONS INVESTMENTS (CL1/2/3/ 4/5/17/29) TRADEMARKS RELATING TO INACTIVE PRODUCTS TRADEMARK REGISTRA COUNTRY OWNER TION NUMBER BIFETAMINA 13984/36 SALVADOR FISONS INVESTMENTS BIPHETAMINE 91547 BENELUX FISONS INVESTMENTS BIPHETAMINE 8874 CYPRUS FISONS INVESTMENTS BIPHETAMINE 31260 GREECE FISONS INVESTMENTS BIPHETAMINE 15007 HONDURAS FISONS INVESTMENTS BIPHETAMINE 372893 ITALY FISONS INVESTMENTS 8 BIPHETAMINE 631189 UNITED FISONS INVESTMENTS STATES CORSYM A582810 AUSTRALIA FISONS INVESTMENTS CORSYM 110156 IRELAND FISONS INVESTMENTS CORSYM 1812370 JAPAN FISONS INVESTMENTS CORSYM 105283 PAKISTAN FISONS INVESTMENTS CORSYM 597547 TAIWAN FISONS INVESTMENTS (CHINESE SCRIPT) CORSYM 357997 MEXICO FISONS INVESTMENTS (CL1/3/5) CORSYM 535934 TAIWAN FISONS INVESTMENTS (ROMAN AND CHINESE SCRIPT) 9 EXHIBIT B (i) PRODUCTS Product Dosage Product Strength(s) NDA/ Approval Form Code ANDA Date Americaine Ointment 0376- 20% None Anesthetic 16,-62 Lubricant (benzocaine) Americaine Solution 0377- 20% None Otic (benzo 51 caine) Topi cal Anesthet ic Ear Drops Delsym Suspen- 0842- 30mg/5ml 18-658 08 Oct 82 (dextrometho sion 61 rphanpolistr ex) Extended- Release Sus pension Gastrocrom Capsules 0677- 100mg 19-188 22 Dec 89 Capsules 01 (cromolyn sodium, USP) Gastrocrom Plastic 0678- 100mg/5mL 20-479 29 Feb 96 (cromolyn Ampule 70 sodium, USP) Oral Concen trate Hylorel Tab Tablet 0787- 10,25mg 18-104 29 Dec 82 lets 71 (Upjohn) (guanadrel 0788- sulfate) 71 Ionamin Cap Capsule 0903- 15,30mg 11-613 14 May 59 sules 71,-84 (phentermine 0904- resin) 71,-84 K-Norm Ex Capsule 0010- 10mg 70-980 17 Feb 87 tended-Re 71,- (KV) lease Cap 85 sules (potas sium chloride extended-re lease cap sules, USP) Mykrox Tab Tablet 0847- 0.5mg 19-532 30 Oct 87 lets 71 (metolazone tablets, USP) Pediapred Solution 2250- 5mg/5ml 19-157 28 May 86 Oral 01,-99 Solution (predniso lone sodium phosphate, USP) Tussionex Suspens- 0548- 8mg 19-111 31 Dec 87 Pennkinetic ion 67, - chlorphen- (hydrocodone 91 iramine, polistirex/ 10mg chlorpheniramine hydrocod- polistirex) one/5ml Extended-Re lease Suspension Zaroxolyn Tablet 0975- 2.5,5,10 17-386 27 Nov 73 Tablets 96, - mg (metolazone 71, - tablets, 72, - USP) 90 0850- 96, - 71, - 72, - 90 0835- 71, 72, - 90 (ii) INACTIVE PRODUCTS o Biphetamine(R) (amphetamine) NDA 10-093 o Corsym(R) (phenylpropanolamine polistirex and chlorpheniramine polistrex) Extended-Release Suspension NDA 18-050 IND 27,986 (Put on Inactive status May 20, 1993) o Metolazone i.v. o Pediapred(R) Forte o Pennkinetic methylphenidate* o Penntuss(R) NDA 18-928 (Withdrawn February 17, 1994) IND 19,964 (Withdrawn January 10, 1991) 11 o Pseudo-12 (pseudoephedrine polistirex) NDA 19-401 IND 22,161 (Put on Inactive status September 23, 1993) o PedForte o Zaroxolyn Injectable o Hydralazine Extended Release Capsules o CR Pseudoephedrine Capsules o Hydrocortisone 1% Cream * Product concept only. No actual development work has been performed. 12 EX-11 6 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 June 30, -------------------- 1996 1995 -------- -------- Net income per common share as reported: Net income before preferred dividends and remuneration $ 102.2 $ 91.4 Less: Dividends on preferred stock and remuneration on capital equity notes (10.3) (5.7) ------- -------- Net income available to common shareholders $ 91.9 $ 85.7 ======= ======== Average shares outstanding 135.7 134.2 ======= ======== Net income available to common shareholders per share $ .68 $ .64 ======= ======== Net income per common share assuming full dilution: Net income before preferred dividends and remuneration $ 102.2 $ 91.4 Less: Dividends on preferred stock and remuneration on capital equity notes (10.3) (5.7) ------- -------- Net income available to common shareholders $ 91.9 $ 85.7 Average shares outstanding 135.7 134.2 Shares contingently issuable for stock plan 2.0 .5 ------- -------- Average shares outstanding, assuming full dilution 137.7 134.7 ======= ======== Net income available to common shareholders per share, assuming full dilution $ .67 $ .64 ======= ======== 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) Six Months Ended June 30, ------------------ 1996 1995 -------- ------- Net income per common share as reported: Net income before preferred dividends and remuneration $ 187.2 $ 186.6 Less: Dividends on preferred stock and remuneration on capital equity notes (21.3) (11.4) -------- ------- Net income available to common shareholders $ 165.9 175.2 ======== Pro forma adjustments for interest and preferred dividends, net of tax effects (1.6) ------- Net income available to common shareholders, pro forma $ 173.6 ======= Average shares outstanding 135.3 134.1 ======= ======= Net income available to common shareholders per share $ 1.23 ======= Net income available to common shareholders per share, pro forma $ 1.29 ======= Net income per common share assuming full dilution: Net income before preferred dividends and remuneration $ 187.2 $ 186.6 Less: Dividends on preferred stock and remuneration on capital equity notes (21.3) (11.4) ------- ------- Net income available to common shareholders $ 165.9 175.2 Pro forma adjustments for interest and preferred dividends, net of tax effects (1.6) ------- Net income available to common shareholders, pro forma $ 173.6 ======= Average shares outstanding 135.3 134.1 Shares contingently issuable for stock plan 2.0 .6 ------- ------- Average shares outstanding, assuming full dilution 137.3 134.7 ======= ======= Net income available to common shareholders per share, assuming full dilution $ 1.21 ======= Net income available to common shareholders per share, pro forma, assuming full dilution $ 1.29 ======= 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 7 ACCOUNTANT'S 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 July 22, 1996, on our review of interim financial information of Rhone-Poulenc Rorer Inc. ("the Company"), for the period ended June 30, 1996, 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. 33-53378 and Registration No. 33-55694) and on Form S-8 (Registration No. 33-58998, Registration No. 33- 24537 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 August 12, 1996 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-1996 JUN-30-1996 71 67 966 96 833 2,639 3,004 1,447 8,733 2,088 0 0 175 141 2,100 8,733 2,619 2,619 878 2,339 0 0 85 272 85 187 0 0 0 187 1.23 1.21
-----END PRIVACY-ENHANCED MESSAGE-----