Roche Holding Ltd., et al.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 941 0085]

Roche Holding Ltd., et al.; Proposed Consent Agreement With

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

permit, among other things, Roche Holding Ltd. to acquire Syntex

Corporation and its subsidiary, Syva, and would require Roche to divest

Syva's drugs of abuse testing (DAT) business within 12 months to a

Commission-approved buyer, to operate the Syva assets separately from

its own DAT business pending the divestiture, and to obtain, for ten

years, prior Commission approval before acquiring assets or interests

of any entity involved in the market for drugs of abuse reagent

products.

DATES: Comments must be received on or before November 14, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Claudia Higgins or Ann Malester, FTC/S-2224, Washington, DC 20580.

(202) 326-2682.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission's Rules of Practice (16 CFR 2.34), notice is hereby given

that the following consent agreement containing a consent order to

cease and desist, having been filed with and accepted, subject to final

approval, by the Commission, has been placed on the public record for a

period of sixty (60) days. Public comment is invited. Such comments or

views will be considered by the Commission and will be available for

inspection and copying at its principal office in accordance with

Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR

4.9(b)(6)(ii)).

In the Matter of: Roche Holding Ltd, a corporation, and Syntex

Corporation, a corporation; Agreement Containing Consent Order.

The Federal Trade Commission (``Commission''), having initiated an

investigation of the proposed acquisition by Roche Capital Corporation,

a Panamanian corporation and an indirect wholly-owned subsidiary of

Roche Holding Ltd, a Swiss corporation (collectively referred to as

``Roche''), of Syntex Corporation (``Syntex''), and it now appearing

that Roche and Syntex, hereinafter sometimes referred to as ``Proposed

Respondents,'' are willing to enter into an agreement containing an

order to divest certain assets and cease and desist from making certain

acquisitions, and providing for certain other relief:

It is hereby agreed by and between Proposed Respondents, by their

duly authorized officers and attorneys, and counsel for the Commission

that:

1. Proposed Respondent Roche Holding Ltd is a corporation

organized, existing, and doing business under and by virtue of the laws

of Switzerland with its principal executive offices located at

Grenzacherstrasse 124, Basel, Switzerland 4002. Hoffmann-La Roche Inc.,

an indirect wholly-owned subsidiary of Roche Holding Ltd, is located at

340 Kingsland Street, Nutley, New Jersey 07110.

2. Proposed Respondent Syntex is a corporation, organized,

existing, and doing business under and by virtue of the laws of Panama

with its principal executive offices located at 3401 Hillview Avenue,

Palo Alto, California 94304. Syva Company, an indirect wholly-owned

subsidiary of Syntex, is headquartered at 3403 Yerba Buena Road, San

Jose, California 95161-9013.

3. Proposed Respondents admit all the jurisdictional facts set

forth in the draft of complaint here attached.

4. Proposed Respondents waive:

(a) any further procedural steps;

(b) the requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

(c) all rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement;

and

(d) any claims under the Equal Access to Justice Act.

5. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission, it together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the Proposed Respondents, in which

event it will take such action as it may consider appropriate, or issue

and serve its complaint (in such form as the circumstances may require)

and decision, in disposition of the proceeding.

6. This agreement is for settlement purposes only and does not

constitute an admission by Proposed Respondents that the law has been

violated as alleged in the draft of complaint here attached, or that

the facts as alleged in the draft complaint, other than jurisdictional

facts, are true.

7. This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Section 2.34 of the

Commission's Rules, the Commission may, without further notice to

Proposed Respondents, (1) issue its complaint corresponding in form and

substance with the draft of complaint here attached and its decision

containing the following order to divest and to cease and desist, in

disposition of the proceeding, and (2) make information public with

respect thereto. When so entered, the order shall have the same force

and effect and may be altered, modified, or set aside in the same

manner and within the same time provided by statute for other orders.

The order shall become final upon service. Delivery by the U.S. Postal

Service of the complaint and decision containing the agreed-to order to

Proposed Respondents' addresses as stated in this agreement shall

constitute service. Proposed Respondents waive any right they may have

to any other manner of service. The complaint may be used in construing

the terms of the order, and no agreement, understanding,

representation, or interpretation not contained in the order or the

agreement may be used to vary or contradict the terms of the order.

8. Proposed Respondents have read the proposed complaint and order

contemplated hereby. Proposed Respondents understand that once the

order has been issued, they will be required to file one or more

compliance reports showing that they have fully complied with the

order. Proposed Respondents further understand that they may be liable

for civil penalties in the amount provided by law for each violation of

the order after it becomes final.

Order

I

It is ordered that, as used in this order, the following

definitions shall apply:

A. ``Roche'' means Roche Holding Ltd, its predecessors,

subsidiaries, including without limitation Roche Capital Corporation,

divisions, and groups and affiliates controlled by Roche, their

directors, officers, employees, agents, and representatives, and their

successors and assigns.

B. ``Syntex'' means Syntex Corporation, its predecessors,

subsidiaries, divisions, and groups and affiliates controlled by

Syntex, their directors, officers, employees, agents, and

representatives, and their successors and assigns.

C. ``Syva'' or ``Syva Company'' means Syva Company, a Delaware

corporation and an indirect wholly-owned subsidiary of Syntex

Corporation, its predecessors, subsidiaries, divisions, and groups and

affiliates controlled by Syva, their directors, officers, employees,

agents, and representatives, and their successors and assigns.

D. ``Respondents'' means Roche and Syntex.

E. ``Commission'' means the Federal Trade Commission.

F. ``Acquisition'' means Roche's proposed acquisition of voting

securities of Syntex pursuant to the Acquisition Agreement and Plan of

Merger dated May 1, 1994.

G. ``Patents'' means some, all or any part of all U.S. or foreign

unexpired patents and patents issued in the future based upon patent

applications filed in any country as of August 1, 1994, and all

substitutions, continuations, continuations-in-part, divisions,

renewals, reissues and extensions based on said patents, the

applications therefor, or said patent applications.

H. ``Drugs of abuse reagent products'' means diagnostic reagent

products used for drugs of abuse testing, including without limitation,

reagent, control and calibrator products used to test for cannabinoids

or marijuana, cocaine and cocaine metabolites, opiates, amphetamines

and methamphetamines, phencyclidine, methadone, methaqualone,

propoxyphene, barbiturates, benzodiazepine, lysergic acid diethylamide,

ethyl alcohol, or other controlled substances for which drugs of abuse

testing is conducted.

I. ``Syva Business'' means all of Syntex's United States rights,

title and interest in and to:

(1) drugs of abuse reagent products, including but not limited to,

EMIT, EMIT II, and all patents, production

technology and know-how related to the manufacture and sale of drugs of

abuse reagent products in the United States; and

(2) all of the Syva Company's assets and businesses as further

delineated in Schedule A, attached hereto and made a part hereof.

II

It is further ordered that:

A. Roche shall divest, absolutely and in good faith, within twelve

(12) months of the date this order becomes final, the Syva Business,

and shall also divest such additional ancillary assets and businesses

and effect such arrangements as are necessary to assure the

marketability, viability, and competitiveness of the Syva Business;

provided that Roche is not required to divest any of the Syva assets

and businesses identified in Part 2 of Schedule A, if such assets and

businesses are not requested by the acquirer.

B. Roche shall divest the Syva Business only to an acquirer that

receives the prior approval of the Commission and that has made any

necessary notice to or obtained any necessary approval from the FDA to

manufacture and sell all of the Syva drugs of abuse reagent products,

and only in a manner that has received the prior approval of the

Commission. The purpose of the divestiture of the Syva Business is to

ensure the continuation of the Syva Business as an ongoing, viable

operation, engaged in the same business in which the Syva Business is

engaged at the time of the proposed divestitute, and to remedy the

lessening of competition resulting from the Acquisition as alleged in

the Commission's complaint.

C. Upon reasonable notice from the acquirer to Respondents,

Respondents shall provide such personnel, information, technical

assistance, advice and training to the acquirer as is necessary to

transfer technology and know-how to assist the acquirer in obtaining

any necessary FDA approval for the manufacture and sale of the Syva

drugs of abuse reagent products and any other products identified in

Schedule A that are acquired pursuant to this order. Such assistance

shall include reasonable consultation with knowledgeable employees of

Respondents and training at the acquirer's facility for a period of

time sufficient to satisfy the acquirer's management that its personnel

are appropriately trained in the manufacture of the Syva drugs of abuse

reagent products and any other products identified in Schedule A that

are acquired pursuant to this order. Respondents shall not charge the

acquirer a rate more than their own direct costs for providing such

technical assistance.

D. Pending divestiture of the Syva Business, Respondents shall take

such actions as are necessary to maintain the viability and

marketability of the Syva Business and to prevent the destruction,

removal, wasting, deterioration or impairment of any of the Syva

Business except for ordinary wear and tear.

III

It is further ordered that:

A. If Roche has not divested, absolutely and in good faith, and

with the prior approval of the Commission, the Syva Business within

twelve (12) months of the date this order becomes final, to an acquirer

that has made any necessary notice to or obtained any necessary

approval from the FDA to manufacture and sell Syva drugs of abuse

reagent products, the Commission may appoint a trustee to divest the

Syva Business.

B. In the event that the Commission or the Attorney General brings

an action pursuant to section 5(l) of the Federal Trade Commission Act,

15 U.S.C. section 45(l), or any other statute enforced by the

Commission, Roche shall consent to the appointment of a trustee in such

action. Neither the appointment of a trustee nor a decision not to

appoint a trustee under this Paragraph shall preclude the Commission or

the Attorney General from seeking civil penalties or any other relief

available to it, including a court-appointed trustee, pursuant to

section 5(l) of the Federal Trade Commission Act, or any other statute

enforced by the Commission, for any failure by Roche to comply with

this order.

C. If a trustee is appointed by the Commission or a court pursuant

to Paragraph III.A. or B. this order, Roche shall consent to the

following terms and conditions regarding the trustee's powers, duties,

authority, and responsibilities:

1. The Commission shall select the trustee, subject to the consent

of Roche, which consent shall not be unreasonably withheld. The trustee

shall be a person with experience and expertise in acquisitions and

divestitures. If Roche has not opposed, in writing, including the

reasons for opposing, the selection of any proposed trustee within ten

(10) days after notice by the staff of the Commission to Roche of the

identity of any proposed trustee, Roche shall be deemed to have

consented to the selection of the proposed trustee.

2. Subject to the prior approval of the Commission, the trustee

shall have the exclusive power and authority to divest the Syva

Business.

3. Within ten (10) days after appointment of the trustee, Roche

shall execute a trust agreement that, subject to the prior approval of

the Commission and, in the case of a court-appointed trustee, of the

court, transfers to the trustee all rights and powers necessary to

permit the trustee to effect the divestiture required by this order.

4. The trustee shall have twelve (12) months from the date the

Commission approves the trust agreement described in Paragraph III.C.3.

to accomplish the divestiture, which shall be subject to the prior

approval of the Commission. If, however, at the end of the twelve month

period, the trustee has submitted a plan of divestiture or believes

that divestiture can be achieved within a reasonable time, the

divestiture period may be extended by the Commission, or, in the case

of a court-appointed trustee, by the court; provided, however, the

Commission may extend this period only two (2) times.

5. The trustee shall have full and complete access to the

personnel, books, records and facilities related to Syva, or to any

other relevant information, as the trustee may request. Roche shall

develop such financial or other information as such trustee may request

and shall cooperate with the trustee. Roche shall take no action to

interfere with or impede the trustee's accomplishment of the

divestiture. Any delays in divestiture caused by Roche shall extend the

time for divestiture under this Paragraph in an amount equal to the

delay, as determined by the Commission or, for a court-appointed

trustee, by the court.

6. The trustee shall use his or her best efforts to negotiate the

most favorable price and terms available in each contract that is

submitted to the Commission, subject to Roche's absolute and

unconditional obligation to divest at no minimum price. The divestiture

shall be made in the manner and to the acquirer as set out in Paragraph

II of this order, as appropriate; provided, however, if the trustee

receives bona fide offers from more than one acquiring entity, and if

the Commission determines to approve more than one such acquiring

entity, the trustee shall divest to the acquiring entity or entities

selected by Roche from among those approved by the Commission. If

requested by the trustee or acquirer, Roche shall provide the

acquirer(s) with the assistance required by Paragraph II.C. of this

order.

7. The trustee shall serve, without bond or other security, at the

cost and expense of Roche, on such reasonable and customary terms and

conditions as the Commission or a court may set. The trustee shall have

the authority to employ, at the cost and expense of Roche, such

consultants, accountants, attorneys, investment bankers, business

brokers, appraisers, and other representatives and assistants as are

necessary to carry out the trustee's duties and responsibilities. The

trustee shall account for all monies derived from the divestiture and

all expenses incurred. After approval by the Commission and, in the

case of a court-appointed trustee, by the court, of the account of the

trustee, including fees for his or her services, all remaining monies

shall be paid at the direction of Roche, and the trustee's power shall

be terminated. The trustee's compensation shall be based at least in

significant part on a commission arrangement contingent on the

trustee's divesting the Syva Business.

8. Roche shall indemnify the trustee and hold the trustee harmless

against any losses, claims, damages, liabilities, or expenses arising

out of, or in connection with, the performance of the trustee's duties,

including all reasonable fees of counsel and other expenses incurred in

connection with the preparation for, or defense of any claim, whether

or not resulting in any liability, except to the extent that such

liabilities, losses, damages, claims, or expenses result from

misfeasance, gross negligence, willful or wanton acts, or bad faith by

the trustee.

9. If the trustee ceases to act or fails to act diligently, a

substitute trustee shall be appointed in the same manner as provided in

Paragraph III of this order.

10. The Commission or, in the case of a court-appointed trustee,

the court, may on its own initiative or at the request of the trustee

issue such additional orders or directions as may be necessary or

appropriate to accomplish the divestiture required by this order.

11. The trustee shall have no obligation or authority to operate or

maintain the Syva Business.

12. The trustee shall report in writing to Roche and the Commission

every sixty (60) days concerning the trustee's efforts to accomplish

divestiture.

IV

It is further ordered that Respondents shall comply with all terms

of the Agreement to Hold Separate, attached to this order and made a

part hereof as Appendix I. The Agreement to Hold Separate shall

continue in effect until Roche has divested all of the Syva Business as

required by this order.

V

It is further ordered that, for a period of ten (10) years form the

date this order becomes final, Roche shall not, without the prior

approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise:

(a) acquire more than 1% of the stock, share capital, equity or

other interest in any concern, corporate or non-corporate, engaged in

at the time of such acquisition, or within the two years preceding such

acquisition engaged in, the manufacture or production of drugs of abuse

reagent products in the United States; or

(b) acquire any assets used or previously used (and still suitable

for use) in the manufacture and production of drugs of abuse reagent

products in the United States to which sales of $3 million or more of

drugs of abuse reagent products were attributable in the year preceding

such acquisition.

Provided, however, that this Paragraph V shall not apply to the

acquisition of products or services acquired in the ordinary course of

business or to any acquisition of a non-exclusive license to any United

States patents or other form of intellectual property (excluding assets

of the Syva Business).

VI

It is further ordered that:

A. Within sixty (60) days after the date this order becomes final

and every sixty (60) days thereafter until the Respondents have fully

complied with Paragraphs II and III of this order, Roche shall submit

to the Commission a verified written report setting forth in detail the

manner and form in which it intends to comply, is complying, and has

complied with Paragraphs II, III, and IV of this order. Roche shall

include in its compliance reports, among other things that are required

from time to time, a full description of the efforts being made to

comply with Paragraphs II, III, and IV of this order, including a

description of all substantive contacts or negotiations for the

divestiture required by this order, including the identity of all

parties contacted. Roche shall include in its compliance reports copies

of all written communications to and from such parties, all internal

memoranda, and all reports and recommendations concerning the

divestiture.

B. One (1) year from the date this order becomes final, annually

for the next nine (9) years on the anniversary of the date this order

becomes final, and at such other times as the Commission may require,

Roche shall file a verified written report with the Commission setting

forth in detail the manner and form in which it has complied and is

complying with Paragraph V of this order.

VII

It is further ordered that, for the purpose of determining or

securing compliance with this order, Respondents shall permit any duly

authorized representatives of the Commission:

A. Access, during office hours and in the presence of counsel, to

inspect and copy all books, ledgers, accounts, correspondence,

memoranda and other records and documents in the possession or under

the control of Respondents, relating to any matters contained in this

order; and

B. Upon five (5) days' notice to Respondents, and without restraint

or interference from Respondents, to interview officers, directors, or

employees of Respondents. Officers and employees of Respondents whose

place of employment is outside the United States shall be made

available on reasonable notice.

VIII

It is further ordered that Roche shall notify the Commission at

least thirty (30) days prior to any proposed change in the corporate

Respondent such as dissolution, assignment, sale resulting in the

emergence of a successor corporation, or the creation or dissolution of

subsidiaries or any other change in the corporation that may affect

compliance obligations arising out of the order.

Schedule A

Roche shall divest all of the assets and businesses of the Syva

Business pursuant to the terms of this order. The associated assets

identified in Paragraph I.I. (2) of this order shall include all

assets, properties, business and goodwill, tangible and intangible, of

the Syva Company in and relating to the development, manufacture, sale,

distribution and marketing of drugs of abuse reagent products in the

United States, including without limitation, the following:

Part 1

1. All rare reagent inventory (including antibody reagent pools,

hapten conjugates, and detection labels), all inventory (finished and

work in process), all sources of the antibodies (whether animals or

cell lines), immunogens, commodities, cross-reactants, machinery,

fixtures, equipment, vehicles, transportation facilities, furniture,

tools, and other tangible personal property;

2. all customer lists, vendor lists, catalogs, sales promotion

literature, advertising materials, technical information, management

information systems, software, inventions, copyrights, trademarks,

trade names, trade secrets, intellectual property, formulations,

patents, technology know-how, specifications, designs, drawings,

processes, quality assurance and control data, research materials, and

information, relating to the manufacture and sale of the drugs of abuse

reagent products, including without limitation information relating to

FDA approvals and applications for FDA approvals, research and

development data, data required under the Good Manufacturing Practices

Guidelines, regulatory data packages, process validation, and

documentation relating to Drug Enforcement Agency (``DEA'') approvals;

3. all rights, title and interest in and results of all research

and development efforts of Syntex relating to improvements,

developments, and variants of the Syva EMIT, EMIT II, and other drugs

of abuse reagent product lines;

4. all rights, title and interest in and to the contracts entered

into in the ordinary course of business with customers (together with

associated bid and performance bonds), suppliers, sales

representatives, distributors, agents, personal property lessors,

personal property lessees, licensors, licensees, consignors, and

consignees;

5. all rights under warranties and guarantees, express of implied;

6. all books, records and files; and

7. all items of prepaid expense.

Part 2

1. All assets, properties, business and goodwill, tangible and

intangible, of the Syva Company in and relating primarily to the

development, manufacture, sale, distribution and marketing of any in

vitro diagnostic products other than drugs of abuse reagent products,

including therapeutic drug monitoring reagent products, infectious

disease reagent products, endocrine (thyroid) testing reagent products,

and reagents used on the VISTA system (e.g., hormone, cancer, anemia,

protein, and hepatitis/HIV testing);

2. inventory and storage capacity; and

3. all rigths, title and interest in and to owned or leased real

property, together with appurtenances, licenses and permits.

Appendix I

In the Matter of: Roche Holding Ltd, a corporation, and Syntex

Corporation, a corporation; agreement to hold separate.

This Agreement to Hold Separate (``Hold Separate'') is by and

between Roche Holding Ltd (``Roche''), a corporation organized,

existing, and doing business under and by virtue of the laws of

Switzerland, with its office and principal place of business at

Grenzacherstrasse 124, Basel, Switzerland 4002; Syntex Corporation

(``Syntex''), a corporation, organized, existing, and doing business

under and by virtue of the laws of Panama with its principal place of

business located at 3401 Hillview Avenue, Palo Alto, California 94304;

and the Federal Trade Commission (``the Commission''), an independent

agency of the United States Government, established under the Federal

Trade Commission Act of 1914, 15 U.S.C. section 41, et seq.

(collectively, the ``Parties'').

Premises

Whereas, on May 1, 1994, Roche entered into an Acquisition

Agreement and Plan of Merger with Syntex Corporation (``Syntex'') to

acquire all the voting stock of Syntex (hereinafter ``Acquisition'');

and

Whereas, Syntex with its principal office and place of business

located at 3401 Hillview Avenue, Palo Alto, California 94304,

manufacturers and markets through its indirect wholly-owned subsidiary,

the Syva Company, among other things, drugs of abuse reagent products;

and

Whereas, Hoffmann-La Roche Inc., an indirect wholly-owned

subsidiary of Roche, with its principal office and place of business

located at 340 Kingsland Street, Nutley, New Jersey 07110, through its

subsidiary Roche Diagnostic Systems, Inc., manufacturers and markets,

among other things, drugs of abuse reagent products; and

Whereas, the Commission is now investigating the Acquisition to

determine whether it would violate any of the statutes enforced by the

Commission; and

Whereas, if the Commission accepts the Agreement Containing Consent

Order (``Consent Order''), the Commission must place it on the public

record for a period of at least sixty (60) days and may subsequently

withdraw such acceptance pursuant to the provisions of Sec. 2.34 of the

Commission's Rules; and

Whereas, the Commission is concerned that if an understanding is

not reached, preserving the status quo ante of the Syva Business as

defined in paragraph I. of the Consent Order during the period prior to

the final acceptance of the Consent Order by the Commission (after the

60-day public comment period), divestiture resulting from any

proceeding challenging the legality of the Acquisition might not be

possible, or might be less than an effective remedy; and

Whereas, the Commission is concerned that if the Acquisition is

consummated, it will be necessary to preserve the Commission's ability

to require the divestiture of the Syva Business and the Commission's

right to have the Syva Business continue as a viable competitor; and

Whereas, the purpose of the Hold Separate and the Consent Order is:

1. to preserve the Syva Business as a viable, independent business

pending its divestiture as a viable and ongoing enterprise,

2. to remedy any anticompetitive effects of the Acquisition, and

3. to preserve the Syva Business as an ongoing and competitive

entity engaged in the same business in which it is presently employed

until divestiture is achieved; and

Whereas, Roche and Syntex's entering into this Hold Separate shall

in no way be construed as an admission by Roche and Syntex that the

Acquisition is illegal; and

Whereas, Roche and Syntex understand that no act or transaction

contemplated by this Hold Separate shall be deemed immune or exempt

from the provisions of the antitrust laws or the Federal Trade

Commission Act by reason of anything contained in this Hold Separate.

Now, therefore, the parties agree, upon the understanding that the

Commission has not yet determined whether the acquisition will be

challenged, and in consideration of the Commission's agreement that, at

the time it accepts the Consent Order for public comment it will grant

early termination of the Hart-Scott-Rodino waiting period, and unless

the Commission determines to reject the Consent Order, it will not seek

further relief from Roche with respect to the Acquisition, except that

the Commission may exercise any and all rights to enforce this Hold

Separate, the Agreement Containing Consent Order to which it is annexed

and made a part thereof and the Order, once it becomes final, and in

the event that the required divestiture is not accomplished, to appoint

a trustee to seek divestiture of the Syva Business pursuant to the

Consent Order, as follows:

1. Roche and Syntex agree to execute and be bound by the Consent

Order.

2. Roche and Syntex agree that from the date this Hold Separate is

accepted until the earliest of the time listed in subparagraphs 2.a.-

2.b., they will comply with the provisions of Paragraph 3. of this Hold

Separate:

a. three business days after the Commission withdraws its

acceptance of the Consent Order pursuant to the provisions of Sec. 2.34

of the Commission's rules;

b. the time that the divestiture obligations required by the

Consent Order are completed.

3. To ensure the complete independence and viability of the Syva

Business and to assure that no competitive information is exchanged

between the Syva Business and Roche, Roche shall hold the Syva Business

as it is presently constituted separate and apart on the following

terms and conditions:

a. the Syva Business shall be held separate and apart and shall be

operated independently of Syntex (meaning here and hereinafter, Syntex

excluding the Syva Business and excluding all personnel connected with

the Syva Business as of the date this Agreement was signed) and Roche

(meaning here and hereinafter, Roche excluding Syntex and excluding all

personnel connected with Syntex as of the date this Agreement was

signed) except to the extent that Syntex or Roche must exercise

direction and control over the Syva Business to assure compliance with

this Agreement or the Consent Order.

b. Syntex personnel connected with Syva or providing support

services to Syva as of the date of this Agreement was signed may

continue, as employees of Syntex, to provide such services as they are

currently providing to Syva. Such Syntex personnel must retain and

maintain all material confidential information relating to the Syva

Business on a confidential basis and, except as is permitted by this

Hold Separate, such persons shall be prohibited from providing,

discussing, exchanging, circulating, or otherwise furnishing any such

information to or with any other person whose employment involves any

other Roche business, including the drugs of abuse reagent products

business, therapeutic drug monitoring business and the Roche clinical

laboratories business.

c. Roche and Syntex shall elect a five-person board of directors

for the Syva Company (``New Board''). The New Board shall consist of

the Syva Company President and General Manager, Richard Bastiani, the

Syva Company Senior Vice-President of Marketing and Sales, David

Oxlade, and the Syva Company Vice-President of Finance, Wilbert Lee, as

of the date of this Hold Separate (provided they agree, or comparable,

knowledgeable persons among the managers of Syva Company independent of

Roche); the Chief Financial Officer of Roche whose responsibilities

with Roche do not involve direct management of Roche's drugs of abuse,

therapeutic drug monitoring or clinical laboratories businesses, Henri

B. Meier (provided he agrees, or a comparable, knowledgeable person

among the financial managers of Roche); and the Chairman of Syntex,

Paul Freiman (provided he agrees, or a comparable, knowledgeable person

among the managers of Syntex). The Chairman of the New Board shall be

Richard Bastiani (provided he agrees, or a comparable, knowledgeable

person among the managers of Syva), who shall remain independent of

Roche and competent to assure the continued viability and

competitiveness of the Syva Company. Except for the Roche employee

serving on the New Board, Roche shall not permit any director, officer,

employee, or agent of Roche also to be a director, officer, employee of

the Syva Company. Each New Board member shall enter into a

confidentiality agreement agreeing to be bound by the terms and

conditions set forth in Attachment A, appended to this Hold Separate.

d. Roche shall not exercise direction or control over, or influence

directly or indirectly, the Syva Business, the New Board, or any of its

operations or businesses; provided, however, that Roche may exercise

only such direction and control over the Syva Business as is necessary

to assure compliance with this Hold Separate, the order and with all

applicable laws.

e. Roche and Syntex shall maintain the marketability, viability,

and competitiveness of the Syva Business, and shall not cause or permit

the destruction, removal, wasting, deterioration, or impairment of any

assets or business they may have to divest except in the ordinary

course of business and except for ordinary wear and tear, and they

shall not sell, transfer, encumber (other than in the normal course of

business), or otherwise impair the marketability, viability or

competitiveness of the Syva Business.

f. Except as required by law, and except to the extent that

necessary information is exchanged in the course of evaluating and

consummating the Acquisition, defending investigations or litigation,

obtaining legal advice, complying with this Hold Separate or the

Consent Order or negotiating agreements to divest assets, Roche and

Syntex shall not receive or have access to, or the use of, any material

confidential information of the Syva Business or the activities of the

New Board not in the public domain, nor shall the Syva Company, or the

New Board, receive or have access to, or the use of, any material

confidential information about the Roche drugs of abuse reagent

business or the activities of Roche in managing the drugs of abuse

reagent business not in the public domain. Roche and Syntex may receive

on a regular basis from the Syva Company aggregate financial

information necessary and essential to allow Roche and Syntex to file

financial reports, tax returns, and personnel reports. Any such

information that is obtained pursuant to this subparagraph shall be

used only for the purpose set forth in this subparagraph. (``Material

confidential information,'' as used herein, means competitively

sensitive or proprietary information not independently known to Roche

from sources other than the Syva Company or the New Board and includes

but is not limited to customer lists, price lists, marketing methods,

patents, technologies, processes, or other trade secrets.)

g. Except as is permitted by this Hold Separate, the director of

the Syva Company appointed by Roche who is also a director, officer,

agent, or employee of Roche (``Roche New Board member''), shall not

receive any Syva Business material confidential information and shall

not disclose any such information obtained through his or her

involvement with the Syva Business to Roche or use it to obtain any

advantage for Roche. The Roche New Board member shall participate in

matters that come before the New Board only for the limited purposes of

considering any capital investment of over $150,000, approving any

proposed budget and operating plans, authorizing dividends and

repayment of loans consistent with the provisions hereof, reviewing

material transactions described in subparagraph 3.i, and carrying out

Roche's responsibilities under the Hold Separate and the Order. Except

as permitted by the Hold Separate, the Roche New Board member shall not

participate in any matter, or attempt to influence the votes of other

directors on the New Board with respect to matters that would involve a

conflict of interest between Roche and the Syva Business. Meetings of

the New Board during the term of the Hold Separate shall be audio

recorded and the recording retained for two (2) years after the

termination of the Hold Separate.

h. The Syva Company shall be staffed with sufficient employees to

maintain the viability and competitiveness of the Syva Business, which

employees shall be the Syva Company employees and may also be hired

from sources other than the Syva Company. Each director, officer, and

management employee of the Syva Company shall execute a confidentiality

agreement prohibiting the disclosure of any Syva Business confidential

information.

i. All material transactions, out of the ordinary course of

business and not precluded by Paragraph 3 hereof, shall be subject to a

majority vote of the New Board.

j. Roche shall not change the composition of the New Board unless

the Chairman of the New Board consents. The Chairman of the New Board

shall have the power to remove members of the New Board for cause and

to require Roche to appoint replacement members to the New Board in the

same manner as provided in Paragraph 3.c. of this Hold Separate. Roche

shall not change the composition of the management of the Syva Company

except that the New Board shall have the power to remove management

employees for cause.

k. If the Chairman ceases to act or fails to act diligently, a

substitute chairman shall be appointed in the same manner as provided

in Paragraph 3.c.

l. Roche shall circulate to its management employees of Roche drugs

of abuse, therapeutic drug monitoring and Roche clinical laboratories

businesses and appropriately display a notice of this Hold Separate and

Consent Order in the form attached hereto as Attachment A.

m. Roche and Syntex shall cause the Syva Business to continue to

expend funds for the advertising and trade promotion of the Syva

Business at levels not lower than those budgeted for 1994 and 1995, and

shall increase such spending as deemed reasonably necessary by the New

Board in light of competitive conditions. If necessary, Roche and

Syntex shall provide the Syva Business with any funds to accomplish the

foregoing. Syntex shall continue to provide to the Syva Business such

support services as it provided prior to the Acquisition to the Syva

Company.

n. All earnings and profits of the Syva Business shall be retained

separately by the Syva Business. If necessary, Roche shall provide the

Syva Business with sufficient working capital to operate at the rate of

operation in effect during the twelve (12) months preceding the date of

the Hold Separate.

o. The New Board shall serve at the cost and expense of Roche.

Roche shall indemnify the New Board against any losses or claims of any

kind that might arise out of its involvement under this Hold Separate,

except to the extent that such losses or claims result from

misfeasance, gross negligence, willful or wanton acts, or bad faith by

the New Board directors.

p. The New Board shall have access to and be informed about all

companies who inquire about, seek or propose to buy the Syva Business.

q. The New Board shall report in writing to the Commission every

thirty (30) days concerning the New Board's efforts to accomplish the

purposes of this Hold Separate.

4. Should the Federal Trade Commission seek in any proceeding to

compel Roche to divest itself of the Syva Business or any additional

assets, as provided in the proposed order, or to seek any other

equitable relief, Roche shall not raise any objection based on the

expiration of the applicable Hart-Scott-Rodino Antitrust Improvements

Act waiting period or the fact that the Commission has permitted the

Acquisition. Roche shall also waive all rights to contest the validity

of this Hold Separate.

5. For the purpose of determining or securing compliance with this

Hold Separate, subject to any legally recognized privilege, and upon

written request with reasonable notice to Roche made to its General

Counsel, Roche and Syntex shall permit any duly authorized

representative or representatives of the Commission:

a. Access during the office hours of Roche or Syntex and in the

presence of counsel to inspect and copy all books, ledgers, accounts,

correspondence, memoranda, and other records and documents in the

possession or under the control of Roche or Syntex relating to

compliance with this Hold Separate;

b. Upon five (5) days notice to Roche or Syntex, and without

restraint or interference from it, to interview officers or employees

of Roche or Syntex, who may have counsel present, regarding any such

matters.

6. [Deleted].

7. This Hold Separate shall not be binding until approved by the

Commission.

Attachment A--Notice of Divestiture and Requirement for Confidentiality

Roche Holding Ltd (``Roche'') and Syntex Corporation (``Syntex'')

have entered into a Consent Agreement and Agreement to Hold Separate

with the Federal Trade Commission (``Commission'') relating to the

divestiture of the Syva Business. Until after the Commission's Order

becomes final and the Syva Business is divested, the Syva Business must

be managed and maintained as a separate, ongoing business, independent

of all other Roche businesses and independent of the Roche drugs of

abuse business. All competitive information relating to the Syva

Business, including without limitation the drugs of abuse business,

must be retained and maintained by the persons involved in the Syva

Business on a confidential basis and such persons shall be prohibited

from providing, discussing, exchanging, circulating, or otherwise

furnishing any such information to or with any other person whose

employment involves any other Roche business, including the drugs of

abuse business, therapeutic drug monitoring business and the Roche

Biomedical Laboratories business. Similarly, all such persons involve

in the Roche therapeutic drug monitoring business, drugs of abuse

business and the Roche Biomedical Laboratories shall be prohibited from

providing, discussing, exchanging, circulating or otherwise furnishing

competitive information about such business to or with any person whose

employment involves the Syva Business.

Any violation of the Consent Agreement or the Agreement to Hold

Separate, incorporated by reference as part of the Consent Order, may

subject Roche and Syntex to civil penalties and other relief as

provided by law.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted

provisionally an agreement containing a proposed consent order from

Roche Holding Ltd (``Roche''), under which Roche would be required to

divest the assets relating to Syntex Corporation's drugs of abuse

reagent business (``Syva Business'').

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received, and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

Order.

In a proposed tender offer, Roche plans to acquire 100% of the

voting securities of Syntex Corporation and merge Syntex into Roche.

The proposed complaint alleges that the proposed acquisition, if

consummated, would constitute a violation of Section 7 of the Clayton

Act, as amended, 15 U.S.C. section 18, and Section 5 of the FTC Act, as

amended, 15 U.S.C. section 45, in the market for drugs of abuse reagent

products. The proposed Consent Order would remedy the alleged violation

by replacing the lost competition that would result from the

acquisition.

The proposed Consent Order provides that Roche shall divest the

Syva Business within twelve (12) months from when the Order becomes

final. If Roche is unable to divest the Syva Business during the

allotted time period, then a trustee may be appointed to divest the

Syva Business within a twelve (12) month period. If, at the end of the

twelve month period, the trustee has submitted a plan of divestiture or

believes that divestiture can be achieved within a reasonable time, the

time period for divestiture can be extended by the Commission, or, in

the case of a court-appointed trustee, by the court. The Commission,

however, may extend this period only two (2) times.

A Hold Separate Agreement signed by Roche provides that during any

period in which Roche possesses an ownership interest in the Syva

Business, these assets will be operated independently of Roche. Under

the provisions of the Order, Roche is also required to provide to the

Commission a report of compliance with the divestiture provisions of

the Order within sixty (60) days following the date this Order becomes

final, and every sixty (60) days thereafter until Roche has completely

divested its interest in the Syva Business.

The Order also prohibits Roche from acquiring any interest in any

other company that sells drugs of abuse reagent products without prior

approval from the Commission for a ten-year period.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 94-22434 Filed 9-9-94; 8:45 am]

BILLING CODE 6750-01-M