Exhibit 6
EXECUTION COPY
SHARE PURCHASE AGREEMENT
Dated as of September 21, 2006
relating to
the entire share capital of Bertarelli Biotech SA and
certain shares of Serono SA
TABLE OF CONTENTS
1. Sale and Purchase..........................................................3
1.1 Purchase Object......................................................3
1.2 Consideration........................................................4
1.3 Payment of the Closing Aggregate Consideration.......................9
1.4 Covenant by the Parent...............................................9
2. Conditions precedent and Closing Events...................................10
2.1 Conditions Precedent to Each Party's Obligations....................10
2.2 Additional Conditions Precedent.....................................10
2.3 Conditions Precedent - Definition; Waiver...........................12
2.4 Closing Events......................................................13
3. Representations of the Sellers relating to Holdco.........................15
3.1 Due Organization; Articles and Bylaws; Records......................15
3.2 Capacity of the Sellers; Authorization..............................16
3.3 Capitalization......................................................16
3.4 Ownership of Shares.................................................17
3.5 Non-contravention...................................................18
3.6 Required Filings and Consents.......................................18
3.7 Financial Statements................................................19
3.8 Absence of Changes..................................................19
3.9 Sale of Assets Not Related to Serono................................21
3.10 Compliance with Legal Requirements..................................21
3.11 Serono..............................................................21
3.12 Tax Matters.........................................................22
3.13 Legal Proceedings...................................................24
3.14 Related Parties.....................................................24
3.15 Brokers and Advisors................................................24
3.16 No Other Representations............................................25
4. Representations of the Parent and The Offeror.............................25
4.1 Due Organization....................................................25
4.2 Authority; Authorization; Enforceability............................26
4.3 Noncontravention....................................................26
4.4 Required Filings and Consents.......................................27
4.5 Legal Proceedings...................................................27
4.6 Investigation; Reliance.............................................28
5. Serono Descriptions Of Condition..........................................28
5.1 Due Organization; Authority; Enforceability.........................28
5.2 Capitalization......................................................29
5.3 Noncontravention....................................................30
5.4 Securities Filings..................................................30
5.5 Absence of Changes..................................................31
5.6 Intellectual Property...............................................32
5.7 Material Contracts..................................................32
5.8 Compliance With Laws; Permits; Legal Proceedings; Regulatory
Compliance..........................................................33
5.9 Environmental Matters...............................................34
5.10 Tax Matters.........................................................35
5.11 Related Party Transactions..........................................37
5.12 Employee Plans; Social Security Contributions; Pension Plans........37
5.13 No Liability........................................................38
6. Covenants of the Parties..................................................39
6.1 Conduct between the Effective Date and the Closing Date.............39
6.2 Access to Information Prior to the Closing Date and thereafter......40
6.3 No Purchase or Sale of Serono Securities; Certain Covenants.........41
6.4 Certain Tax Covenants; Indemnity provided by the Parent regarding
IP Restructuring....................................................42
6.5 Mandatory Takeover Offer of the Offeror.............................43
6.6 Discharge of the directors of Holdco and Serono.....................44
6.7 Directors' and Officers' Insurance..................................45
6.8 Tax indemnity provided by the Parent and the Offeror................46
6.9 Press Release and Public Announcement...............................48
6.10 Confidentiality.....................................................48
6.11 Further Action......................................................50
6.12 Business Records....................................................53
6.13 Change of the corporate name of Holdco; Use of Name.................54
6.14 Holdco indemnity provided by the Sellers............................55
6.15 Agreement not to Compete; Non-Solicitation of Employees.............56
7. Indemnification...........................................................57
7.1 Indemnification.....................................................57
7.2 Indemnification by the Parent.......................................61
7.3 Claim Notice........................................................61
7.4 Right of Indemnifying Party to defend Third Party Claims............63
7.5 Limitation of Recourse..............................................65
8. Termination...............................................................66
8.1 Termination.........................................................66
8.2 Effect of Termination...............................................68
9. Miscellaneous.............................................................68
9.1 Entire Agreement; Interpretation....................................68
9.2 Amendment; waiver...................................................70
9.3 Costs and expenses..................................................70
9.4 Assignment..........................................................70
9.5 Notices.............................................................71
9.6 Certain Definitions.................................................73
9.7 Severability........................................................77
9.8 Governing Law.......................................................77
Effective as of the 21st day of September 2006 (the "Effective Date")
the following
SHARE PURCHASE AGREEMENT
has been entered into by and among:
1. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, a Swiss national domiciled in Gland, canton of
Vaud, Switzerland
("EB")
2. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, a Swiss national domiciled in Gingins, canton of
Vaud, Switzerland
("MB")
3. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, a Swiss national domiciled in Cheserex, canton
of Vaud, Switzerland
("DB")
on the one side
and
4. Merck KGaA, a partnership limited by shares organized under the Laws of
Germany with registered office in Darmstadt, Germany
(the "Parent")
5. Merck Vierte Allgemeine Beteiligungsgesellschaft mbH, a limited
liability company organized under the Laws of Germany with registered
office in Darmstadt, Germany, and a direct wholly owned subsidiary of
the Parent
(the "Offeror")
The party identified in paragraph 1 will be sometimes referred to hereinafter as
the "Management Seller" and the parties identified in paragraphs 2 and 3 will be
sometimes referred to hereinafter as the "Non-Management Sellers". Such parties
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will be referred to hereinafter collectively as the "Sellers" with each such
party being referred to individually as a "Seller".
The parties identified in paragraphs 1 to 5 will be referred to hereinafter
collectively as the "Parties" with each party being referred to individually as
a "Party".
WHEREAS
A. The Parent is Merck KGaA and the Offeror is Merck Vierte Allgemeine
Beteiligungsgesellschaft;
B. The Sellers are the owners of (i) all of the issued shares of
Bertarelli Biotech SA, a Swiss corporation (societe anonyme /
Aktiengesellschaft) having its registered office at Cheserex, canton of
Vaud, Switzerland ("Holdco") and (ii) 1,823,740 registered shares with
a par value of CHF 10 each (the "Serono Shares") of Serono SA, a Swiss
corporation with its registered office at Coinsins, canton of Vaud,
Switzerland ("Serono");
C. As of the Effective Date, the registered share capital of Holdco
amounts to CHF 93,000,000 divided into 330,000 registered shares with a
par value of CHF 100 each and 60,000 registered shares with a par value
of CHF 1,000 each (the "Holdco Shares");
D. As of the Effective Date, Holdco is the owner of 9,189,300 registered
shares of Serono and 5,036,930 bearer shares of Serono (collectively
the "Shares");
E. As of the Effective Date, the registered share capital of Serono
amounts to CHF 380,943,075 divided into 11,013,040 registered shares
with a par value of CHF 10 each and 10,832,507 bearer shares with a par
value of CHF 25 each;
F. As of the Effective Date, there were issued 11,013,040 registered
shares of Serono. As of the Effective Date, the total issued bearer
shares of Serono consisted of (x) the 10,877,992 bearer shares of
Serono issued as of June 30, 2006, plus (y) the sum of (i) bearer
shares of Serono issued upon the exercise of stock options and other
equity grants under the Serono Employee Plans (as
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defined below) since June 30, 2006 and (ii) bearer shares of Serono
issued upon the exercise of the Convertible Bonds (as defined below)
since June 30, 2006;
G. The bearer shares of Serono are listed on the EU-Regulated segment of
the SWX Swiss Exchange (the "SWX") and admitted to trading on the EU
Regulated Market Segment of virt-x. In addition, American Depositary
Shares representing bearer shares of Serono are listed on the New York
Stock Exchange (the "NYSE");
H. The Parent and the Offeror have conducted a due diligence review based
on information and materials made available by Holdco ("Due Diligence
Information");
I. The Sellers intend to sell to the Offeror, who intends to acquire from
the Sellers, the Holdco Shares and the Serono Shares;
J. The Parent and the Offeror acknowledge that completion of the
acquisition of the Holdco Shares and the Serono Shares by Offeror will
oblige the Offeror, the Parent or another Parent Subsidiary to make a
public offer to acquire all outstanding bearer shares of Serono.
NOW THEREFORE, intending to be legally bound hereby, THE PARTIES have agreed as
follows:
1. SALE AND PURCHASE
1.1 Purchase Object
1.1.1 On the terms and subject to the conditions set forth in this
Agreement, each of the Sellers, acting severally and not jointly
with the other Sellers, hereby undertakes and agrees to sell and
transfer to the Offeror, with all rights and obligations pertaining
thereto, all of its Holdco Shares and Serono Shares as listed in
Schedule 1.1, and the Offeror undertakes to purchase (and the Parent
undertakes to cause the Offeror to purchase) from
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each of the Sellers all of its Holdco Shares and Serono Shares as
listed in Schedule 1.1.
1.2 Consideration
1.2.1 Subject to the satisfaction or, to the extent permissible by Law,
waiver of all of the Conditions Precedent (as such term is defined
in Section 2.3.1), the Offeror shall pay, to each Seller (i) an
amount of CHF 10,305.285 in cash for each registered share of Holdco
with a par value of CHF 100 sold to the Offeror by such Seller under
this Agreement and (ii) an amount of CHF 103,052.849 in cash for
each registered share of Holdco with a par value of CHF 1,000 sold
to the Offeror by such Seller under this Agreement.
1.2.2 The aggregate cash consideration payable to the Sellers for all of
the Holdco Shares sold to the Offeror under this Agreement shall
consequently be equal to CHF 9,583,915,000 (the "Holdco
Consideration").
1.2.3 Subject to the satisfaction or, to the extent permissible by Law,
waiver of all of the Conditions Precedent (as such term is defined
in Section 2.3.1), the Offeror shall pay to each Seller an amount of
CHF 440 in cash for each registered share of Serono with a par value
of CHF 10 each sold to the Offeror by such Seller under this
Agreement.
1.2.4 The aggregate cash consideration payable to the Sellers for all of
the Serono Shares sold to the Offeror under this Agreement shall
consequently be equal to CHF 802,445,600 (the "Serono
Consideration").
1.2.5 The Holdco Consideration and the Serono Consideration shall be
referred to hereinafter as the "Aggregate Consideration". The
Aggregate Consideration shall be adjusted in accordance with Section
1.2.6 and Section 1.2.7.
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1.2.6 Subject to the final sentence of this paragraph, the Offeror shall
be entitled to adjust the Aggregate Consideration to reflect the
effect on the value ascribed hereby to the Serono Shares and the
Serono securities held by Holdco of the occurrence of any and all
dilutive events in relation to the share capital of Serono,
including, but not limited to, any declaration or payment of any
dividend by Serono, any issue of registered shares, bearer shares or
American depositary shares of Serono ("Serono Securities") if the
price at which such new Serono Securities are issued by Serono is
lower than the relevant Offer Price (as such term is defined in
Section 6.5.1), any issue of options over Serono Securities if the
relevant strike price per option is below the Offer Price, and
repayments of capital made by Serono, to the extent that the
dilutive event occurs at any time from June 30, 2006 to the date of
Closing. Notwithstanding the foregoing, the Parent and the Offeror
acknowledge and agree that none of (i) the transactions contemplated
by this Agreement, (ii) any stock option grants and other equity
grants under, or amendments to the terms of, the current existing
Serono Employee Plans in a manner consistent with Serono's past
practice, (iii) the issuance of Serono Securities upon the exercise
of stock options and other equity grants issued prior to the date of
this Agreement or issued in accordance with clause (ii) above and
(iv) the issuance of Serono Securities upon the exercise of the
Serono 92 Limited senior unsubordinated convertible bonds, due
November 2008 (the "Convertible Bonds"), shall, either individually
or in the aggregate, be deemed to constitute a dilutive event
justifying an adjustment of the Aggregate Consideration.
1.2.7 Aggregate Consideration Adjustment.
a. Estimated Aggregate Consideration Adjustment. At least three (3) but
not more than five (5) business days prior to the Closing Date (as
defined below), the Sellers shall deliver to the Parent a statement
(together with all relevant supporting information), setting forth
in reasonable detail (including the components of such calculation)
their reasonable good faith
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estimate of Net Asset Value (as defined below) as of the close of
business on the Closing Date (and including in any event the Loan
Note and any accrued but unpaid interest thereon) (the "Estimated
Closing Net Asset Value"). The Aggregate Consideration payable by
the Offeror at Closing shall be increased by an amount equal to the
Estimated Closing Net Asset Value, if positive, and decreased by an
amount equal to the Estimated Closing Net Asset Value, if negative.
The Aggregate Consideration as adjusted pursuant to this Section
1.2.7(a) being referred to herein as the "Closing Aggregate
Consideration".
b. Closing Net Asset Value.
(i) As promptly as practicable following the Closing and in no event
later than sixty (60) calendar days following the Closing Date, the
Parent shall prepare and deliver to the Sellers a balance sheet of
Holdco (the "Holdco Closing Balance Sheet") prepared on a basis
consistent with the audited balance sheet contained in the Holdco
Financial Statements (as defined below) and the Swiss Code of
Obligations, as of the close of business on the Closing Date (and
including in any event an amount in respect of the Loan Note and any
accrued but unpaid interest thereon equal to the amount repaid by
Sellers at Closing pursuant to Section 2.4.1(b)), which shall set
forth Net Asset Value as of close of business on the Closing Date
(the "Closing Net Asset Value").
(ii) During the forty-five (45) calendar day period following the
Sellers' receipt of the Holdco Closing Balance Sheet, the Sellers
and their representatives shall be permitted to review such books
and records of Holdco, work papers of Parent's auditors relating to
the Holdco Closing Balance Sheet (subject to the execution of any
hold harmless or similar letter reasonably required by the Parent's
auditors) or other information reasonably related thereto. The
Holdco Closing Balance Sheet shall become final and binding upon the
Parties on the forty-fifth (45th) calendar day following delivery
thereof, unless the Sellers give written notice of
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their disagreement with the Holdco Closing Balance Sheet (a "Notice
of Disagreement") to the Parent prior to such date. Any Notice of
Disagreement shall specify in reasonable detail the nature of any
disagreement so asserted. If a Notice of Disagreement is received by
the Parent in a timely manner, then the Holdco Closing Balance Sheet
(as revised in accordance with this sentence) shall become final and
binding upon the Sellers, the Parent and the Offeror on the earlier
of (A) the date the Sellers and the Parent resolve in writing any
differences they have with respect to the matters specified in the
Notice of Disagreement and (B) the date any disputed matters
specified in the Notice of Disagreement are finally resolved in
writing by the Accounting Firm (as defined below). During the thirty
(30) calendar day period following the delivery of a Notice of
Disagreement, the Sellers and the Parent shall seek in good faith to
resolve in writing any differences that they may have with respect
to the matters specified in the Notice of Disagreement. At the end
of such thirty (30) calendar day period, the Sellers or the Parent
shall be permitted to submit to an independent accounting firm (the
"Accounting Firm") for determination any and all matters that remain
in dispute and that were included in the Notice of Disagreement. The
Accounting Firm shall be such internationally recognized independent
public accounting firm as shall be agreed upon by the Parties hereto
in writing, or, in default of such agreement within five (5)
calendar days, as shall be selected by the President of the Swiss
Institute of Certified Accountants and Tax Consultants (Chambre
fiduciaire / Treuhand ▇▇▇▇▇▇), with a registered office in Zurich,
Switzerland. The Accounting Firm shall act as expert not arbitrator
and shall be instructed to render its determination of all matters
submitted to it within thirty (30) calendar days following
submission. The finding of the Accounting Firm will be deemed final
and binding on the Parties except in the event of fraud or manifest
error. The fees and expenses of the Accounting Firm incurred
pursuant to this Section 1.2.7 shall be borne 50% by the Sellers and
50% by the Parent. The Closing Net
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Asset Value as finally determined pursuant to this Section
1.2.7(b)(ii) is referred to herein as the "Final Net Asset Value".
c. Adjusted Aggregate Consideration.
(i) The Aggregate Consideration that would have been calculated
pursuant to Section 1.2.7(a) above if the Final Net Asset Value had
been substituted for the Estimated Closing Net Asset Value in such
determination as of the Closing is referred to herein as the
"Adjusted Aggregate Consideration".
(ii) In the event that the Adjusted Aggregate Consideration is less
than the Closing Aggregate Consideration, the Sellers shall, within
ten (10) business days after the Holdco Closing Balance Sheet
becomes final and binding on the Parties, pay to the Parent by wire
transfer in immediately available funds to such account as shall
have been designated in writing by the Parent the amount of such
deficiency, together with, in respect to any such deficiency,
interest thereon at a rate equal to 4% per annum, calculated on the
basis of the actual number of days elapsed divided by 365, from the
Closing Date to the date of payment.
(iii) In the event that the Adjusted Aggregate Consideration is
greater than the Closing Aggregate Consideration, the Parent shall,
within ten (10) business days after the Holdco Balance Sheet becomes
final and binding on the Parties, pay to the Sellers by wire
transfer in immediately available funds to the accounts designated
pursuant to Section 1.3.2 an amount equal to such excess, together
with, in respect to any such excess, interest thereon at a rate
equal to 4% per annum, calculated on the basis of the actual number
of days elapsed divided by 365, from the Closing Date to the date of
payment.
(iv) Any payments to or from the Sellers pursuant to this Section
1.2.7(c) shall be paid to or by the Sellers in proportion to their
respective holdings of the share capital of Holdco at Closing.
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(v) For purposes of this Agreement, "Net Asset Value" shall mean
Holdco assets (excluding any bearer shares and any registered shares
of Serono held by Holdco) minus Holdco liabilities, in each case as
of any time of determination and determined in accordance with the
Swiss Code of Obligations and in a manner consistent with the Holdco
Financial Statements.
1.3 Payment of the Closing Aggregate Consideration
1.3.1 The Closing Aggregate Consideration shall be payable to the Sellers
on the Closing Date in proportion to their respective holdings of
the share capital of Holdco and/or Serono Shares. The portion of the
Closing Aggregate Consideration due to each Seller on the Closing
Date for the transfer of all of its Holdco Shares and all of its
Serono Shares to the Offeror is set forth next to each Seller's name
in Schedule 1.1, subject to adjustment in accordance with Section
1.2.6 and Section 1.2.7.
1.3.2 All cash payments to the Sellers under Section 1.3.1 shall be made
by the Parent or the Offeror by wire transfer of immediately
available funds to the account designated in writing by the Seller
entitled to receive such payment at least two (2) business days in
advance of the Closing Date.
1.4 Covenant by the Parent
1.4.1 The Parent undertakes to each Seller and the express third party
beneficiaries under this Agreement that to the extent that the
Offeror fails to comply with any of its obligations under this
Agreement, when such obligation has become due, the Parent shall,
upon request by any of the Sellers, either (i) procure that the
Offeror shall perform such obligation; or (ii) if the Offeror fails
to so perform or if the Parent so elects, itself perform such
unperformed obligations.
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2. CONDITIONS PRECEDENT AND CLOSING EVENTS
2.1 Conditions Precedent to Each Party's Obligations
2.1.1 The obligations of the Parties to consummate the transactions
contemplated by this Agreement shall be subject to the following
Conditions Precedent having been satisfied or, to the extent
permissible by Law, waived by the relevant Party or Parties (as
described in Section 2.3.2) in writing on or prior to the Closing
Date:
a. (i) The waiting period (and any extension thereof) under the HSR Act
shall have been terminated or shall have expired; and (ii) approval
of the transactions contemplated by this Agreement shall have been
obtained from the European Commission pursuant to the EC Merger
Regulation; and
b. There shall be in force no injunction, judgment or decree of any
U.S., Swiss, European Union, or European Union Member State
Authority that prohibits, enjoins or declares illegal, void or
unenforceable this Agreement or the completion of the transactions
contemplated hereby.
2.2 Additional Conditions Precedent
2.2.1 Subject to Sections 2.3.2 and 2.3.3, the obligations of the Parent
and the Offeror to consummate the transactions contemplated by this
Agreement shall be subject to the following Conditions Precedent
having been satisfied or, to the extent legally permissible, waived
by the Parent and the Offeror in writing on or prior to the Closing
Date:
a. As at the Effective Date, the statements set out in Section 5 are
not inaccurate to an extent that, in the opinion of the Expert,
amounts to a Material Adverse Effect (and no such matter is pending
determination by, or appointment of, the Expert);
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b. Between the Effective Date and the Closing, there shall not have
occurred any change or event with respect to Serono (including but
not limited to any inaccuracy in any of the statements set forth in
Section 5) that, individually or in the aggregate, in the opinion of
the Expert, amounts to a Material Adverse Effect (and no such matter
is pending determination by, or appointment of, the Expert);
c. Each Seller shall have good and valid title to the Holdco Shares and
Serono Shares set forth next to its name on Schedule 1.1, free and
clear of any Liens, except that the Holdco Shares and the registered
shares of Serono are registered shares subject to restrictions of
transfer within the meaning of Article 685a of the Swiss Code of
Obligations;
d. Holdco shall have good and valid title to the registered shares of
Serono and the bearer shares of Serono listed in Schedule 1.1, free
and clear of any Liens, except that the registered shares of Serono
are registered shares subject to restrictions of transfer within the
meaning of Article 685a of the Swiss Code of Obligations;
e. Prior to January 1, 2007, The Sellers shall have procured the
execution of an agreement between Applied Research Systems ARS
Holding N.V., Curacao ("ARS") and Laboratoires Serono SA, Aubonne
("LS") providing for the transfer of the intellectual property
rights held by ARS to LS, at a price acceptable to the Vaud Cantonal
Tax Administration and the Swiss Federal Tax Administration (the "IP
Transfer Agreement");
f. The Sellers shall have procured a reduction of the nominal share
capital of Holdco to an amount not exceeding CHF 140,000
g. Subject to applicable Law, the Sellers shall have caused the calling
of an extraordinary shareholders' meeting as provided for in Section
6.2.2 to take place immediately following the Closing, which is
expected to take place on January 5, 2007;
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h. The Sellers shall have procured completion of liquidation of ▇▇▇▇▇
Ltd, Jersey;
i. The Sellers shall have performed in all material respects all of
their obligations undertaken in this Agreement that are required to
be performed prior to Closing;
2.2.2 The obligations of the Sellers to consummate the transactions
contemplated by this Agreement shall be subject to the following
Conditions Precedent having been satisfied or, to the extent legally
permissible, waived by the Sellers in writing on or prior to the
Closing Date:
a. Each of the Parent and the Offeror shall have performed in all
material respects all of its obligations undertaken in this
Agreement that are required to be performed prior to Closing.
2.3 Conditions Precedent - Definition; Waiver
2.3.1 As used herein, the term "Conditions Precedent" means the conditions
to the obligations of the relevant Parties to consummate the
transactions contemplated by this Agreement as set forth in Section
2.1 and Section 2.2 (each such condition, a "Condition Precedent").
2.3.2 Each of the Parties shall have the right to waive, subject to
applicable Law, the satisfaction of any or all of the Conditions
Precedent that represent conditions to the obligations of such Party
to consummate the transactions contemplated by this Agreement save
that the Condition Precedent set forth in Section 2.1.1(a) shall not
be capable of waiver.
2.3.3 Each of the Parent and the Offeror hereby agrees that on the fifth
(5th) Business Day following the date when the Condition Precedent
set forth in Section 2.1.1(a) has been satisfied and the Conditions
Precedent in Sections 2.1.1(b), 2.2.1(a), 2.2.1(b), 2.2.1(c),
2.2.1(d) and 2.2.1(i) are
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capable of being satisfied then, without any further action, the
Conditions Precedent to the obligations of the Parent and the
Offeror to consummate the transactions contemplated under this
Agreement set forth in each of Sections 2.2.1(a) and 2.2.1(b) shall
no longer constitute Conditions Precedent to the obligations of the
Parent and the Offeror to consummate the transactions contemplated
under this Agreement and shall be deemed to have been conclusively
and irrevocably waived by each of the Parent and the Offeror.
2.4 Closing Events
2.4.1 On the terms and subject to the conditions of this Agreement, the
sale and purchase of the Holdco Shares and the Serono Shares shall
be consummated (the "Closing") within five (5) business days after
all Conditions Precedent have been satisfied or, subject to
applicable Law, waived (other than those Conditions Precedent which
by their terms are intended to be satisfied at the Closing), but not
earlier than on January 3, 2007, or on such other date as the Parent
and the Sellers may agree in writing (the "Closing Date"). On the
Closing Date, the following events (the "Closing Events") shall take
place at the offices of ▇▇▇▇ & Staehelin, Route de Chene 30, Ch-1211
▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇, or at such other place as the Parent and the
Sellers may agree in writing, simultaneously except as otherwise set
forth below:
a. payment by the Offeror of the Closing Aggregate Consideration to the
Sellers;
b. immediately following receipt of the payment referred to in clause
"(a)" above, repayment by the Sellers to Holdco of (i) all
outstanding indebtedness (including accrued but unpaid interest
thereon) of the Sellers owed to Holdco under the Loan Note and (ii)
all costs and expenses relating to Project Landmark paid or incurred
by Holdco, and delivery by Holdco to the Sellers and the Parent of a
certificate issued by Holdco confirming the
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due payment and discharge of such indebtedness and such costs and
expenses;
c. delivery by the Sellers to the Offeror of the certificates
representing the Holdco Shares and the Serono Shares listed in
Schedule 1.1, showing full and undisrupted chain of endorsements,
and endorsed in blank where necessary;
d. confirmation in writing by each of Holdco's shareholders that (i)
the right of first refusal granted to each of them under Holdco's
articles of association, and (ii) any rights of first refusal,
pre-emptive and similar rights under any shareholders' agreement
have been waived by it;
e. confirmation in writing by MB that any and all rights and claims
under the usus fructus relating to the Holdco Shares subject to usus
fructus in favour of MB are fully settled or waived;
f. confirmation in writing by Management Seller as to the termination
of any employment agreement between Serono and the Management Seller
effective as of the Closing without any remaining liabilities for
Serono thereunder, including liabilities for severance payments;
provided that such termination shall not affect any rights of the
Management Seller relating to stock options or equity grants with
respect to Serono Securities or any rights to indemnification or
insurance;
g. delivery by the Sellers to the Parent of the share register of
Holdco reflecting the transfer of the Holdco Shares to the Offeror;
h. delivery by the Sellers to the Parent of a certified copy of a
resolution of the board of directors of Holdco to the effect that
the share transfer has been approved and that the Offeror has been
registered in the share register of Holdco as shareholder with
respect to the Holdco Shares;
i. delivery by the Sellers to the Parent of a certified copy of a
resolution of the board of directors of Serono to the effect that
the share transfer has been
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approved and that the Offeror has been registered in the share
register of Serono as shareholder with full voting rights with
respect to the Serono Shares;
j. delivery by the Sellers to the Parent of an executed copy of the IP
Transfer Agreement;
k. delivery by the Sellers to the Parent of evidence reasonably
satisfactory to the Parent as to the completion of the liquidation
of ▇▇▇▇▇ Ltd, Jersey;
l. delivery by the Sellers to the Parent of a certified excerpt of the
Commercial Register regarding Holdco reflecting the completion of
the reduction of the nominal share capital of Holdco to an amount
not exceeding CHF 140,000; and
m. delivery by the Sellers to the Parent of written resignations of the
members of the board of directors of Holdco, as directed by the
Parent at least two (2) business days prior to the Closing Date, and
of written resignations of the Management Seller and the current
Chairman of the Serono board of directors as members of the board of
directors of Serono if requested by Parent.
3. REPRESENTATIONS OF THE SELLERS RELATING TO HOLDCO
Except as set forth in the Sellers' Disclosure Letter delivered to the Parent
concurrently with this Agreement, the Management Seller, jointly and severally,
and the Non-Management Sellers, severally but not jointly, hereby represent to
the Parent and the Offeror (i) on the Effective Date as set out in Section 3;
and (ii) on the Closing Date as set out in Sections 3.1 to 3.6, 3.8.1, 3.13 and
3.14:
3.1 Due Organization; Articles and Bylaws; Records
3.1.1 Holdco is a Swiss corporation (societe anonyme/Aktiengesellschaft)
duly organized and validly existing under the Laws of Switzerland
and has all
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necessary power and authority to (i) conduct its business in the
manner in which its business is currently being conducted and (ii)
own and use its assets in the manner in which its assets are
currently owned and used. Holdco is not in violation of its articles
of association. The books of account, share register, minutes of
board and shareholder meetings and actions and other records of
Holdco have been maintained in accordance with standard business
practices and applicable Law.
3.2 Capacity of the Sellers; Authorization
3.2.1 Each of the Sellers has the power and legal capacity to execute and
deliver this Agreement and to perform such Seller's obligations
hereunder.
3.2.2 This Agreement has been duly executed and delivered by each of the
Sellers and constitutes, assuming due authorization, execution and
delivery of this Agreement by the Parent and the Offeror, a valid
and binding legal obligation of each of the Sellers, enforceable
against each such Seller in accordance with the terms hereof.
3.3 Capitalization
3.3.1 Holdco is a Swiss corporation (societe anonyme / Aktiengesellschaft)
which is registered with the Commercial Register of the canton of
Vaud, with an aggregate registered share capital of CHF 93,000,000
divided into 330,000 registered shares with a par value of CHF 100
each and 60,000 registered shares with a par value of CHF 1,000
each. All of the issued shares of Holdco have been duly authorized
and validly issued, and are fully paid up in compliance with the
Laws of Switzerland. The Holdco Shares constitute all of the Holdco
share capital.
3.3.2 There is no (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any equity
securities or other securities of Holdco, (ii) outstanding security,
instrument or obligation that is or may become convertible into or
exchangeable for any
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equity securities or other securities of Holdco or (iii) contract
under which Holdco is or may become obligated to sell or otherwise
issue any equity securities or any other securities.
3.4 Ownership of Shares
3.4.1 Holdco owns, and has good and valid title to the registered shares
of Serono and the bearer shares of Serono listed on Schedule 1.1.
All such shares are owned by Holdco free and clear of any Liens, it
being understood that the registered shares of Serono are registered
shares subject to restrictions of transfer within the meaning of
Article 685a of the Swiss Code of Obligations. There are no options,
warrants, pre-emptive rights, purchase rights, calls, subscriptions,
convertible securities, obligations or other rights, agreements or
commitments that obligate Holdco to sell or transfer any Serono
share or any other security of Serono to any person or which would
otherwise prevent performance of this Agreement by the Sellers in
accordance with its terms.
3.4.2 Each Seller owns, and has good and valid title to the number of
Holdco Shares and Serono Shares set forth next to its name on
Schedule 1.1, free and clear of any Liens, it being understood that
the Serono Shares are registered shares subject to restrictions of
transfer within the meaning of Article 685a of the Swiss Code of
Obligations. Each Seller holds no other shares or other security of
Holdco or Serono, or any other rights over any such share or
security, directly or indirectly. Other than this Agreement, there
are no options, warrants, preemptive rights, purchase rights, calls,
subscriptions, convertible securities, obligations or other rights,
agreements or commitments that obligate such Seller to transfer or
sell any Holdco Share or Serono Share to any person or which would
otherwise prevent performance of this Agreement by such Seller in
accordance with its terms.
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3.5 Non-contravention
3.5.1 The execution and delivery of this Agreement by the Sellers does
not, and the performance by the Sellers of their obligations
hereunder will not, (i) conflict with or violate any provision of
Holdco's articles of association, or any shareholders' agreement,
(ii) assuming that all consents, approvals, authorizations and
permits described in Section 3.6 have been obtained and all filings
and notifications described in Section 3.6 have been made and any
waiting periods thereunder have terminated or expired, conflict with
or violate any Law applicable to any Seller and/or Holdco or by
which any property or asset of any Seller and/or Holdco is bound or
affected or (iii) with or without the passage of time or the giving
of notice or both, result in the breach of, or constitute a default
or require any consent under, or result in the creation of any Lien
upon any property or assets of any Seller or Holdco pursuant to, any
instrument or agreement to which any Seller or Holdco is a party or
by which Holdco or its properties may be bound or affected.
3.6 Required Filings and Consents
3.6.1 The execution and delivery of this Agreement by the Sellers does
not, and the performance of this Agreement by the Sellers will not,
require any consent, approval, authorization or permit of, or filing
with, or notification to, any Authority, except (i) under the
notification obligation pursuant to Article 20 of the Swiss Federal
Act on Stock Exchanges and Securities Trading, as amended (the
"SESTA"), the U.S. Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act") and any other applicable federal, state,
cantonal, local or foreign securities Laws, the rules and
regulations of the NYSE and the rules and regulations of the SWX,
(ii) under the HSR Act, the EC Merger Regulation and any other
applicable antitrust, competition, investment or similar Laws, (iii)
approvals required as a result of the particular identity or
regulatory status of the Parent or its Affiliates and (iv) for such
other consents, approvals,
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authorizations, permits, filings or notifications, the failure of
which to make or obtain, would not, individually or in the
aggregate, prevent or materially delay the performance by the
Sellers of their obligations hereunder.
3.7 Financial Statements
3.7.1 Holdco has delivered to the Parent in the form attached to Section
3.7.1 of the Sellers' Disclosure Letter, the audited balance sheet
of Holdco as of June 30, 2006, the related audited profit and loss
accounts of Holdco, together with the notes thereto and the
unqualified report and opinion of Ernst & ▇▇▇▇▇ ▇.▇. relating
thereto (collectively, the "Holdco Financial Statements").
3.7.2 The Holdco Financial Statements have been prepared in accordance
with the Swiss Code of Obligations, the balance sheet contained
therein presents the financial condition of Holdco as of the date
thereof and the profit and loss accounts contained therein present
the results of operations of Holdco for the periods covered thereby,
in each case, in accordance with the Swiss Code of Obligations.
3.8 Absence of Changes
3.8.1 Except as disclosed in the Sellers' Disclosure Letter or as
otherwise contemplated or permitted by this Agreement, since June
30, 2006 and through the date hereof:
a. Holdco has not declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any equity securities, and
has not repurchased, redeemed or otherwise reacquired any equity
securities or other securities;
b. Holdco has not sold, issued or authorized the issuance of (i) any
equity security or other security, (ii) any option or right to
acquire any equity
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security or any other security, or (iii) any instrument convertible
into or exchangeable for any equity security or other security;
c. except as previously provided to the Parent, there has been no
amendment to Holdco's articles of association, and Holdco has not
effected or been a party to any recapitalization, reclassification
of shares, share split, reverse share split or similar transaction;
d. Holdco has not formed any subsidiary or acquired any equity interest
or other interest in any other entity or any other asset;
e. Holdco has not written off as uncollectible, or established any
extraordinary reserve with respect to any indebtedness owed to
Holdco;
f. Holdco has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Lien, other
than Permitted Liens;
g. Holdco has not (i) lent money to any person other than amounts
evidenced by the Loan Note or (ii) incurred or guaranteed any
indebtedness for borrowed money;
h. Holdco has not changed any of its methods of accounting or
accounting practices in any material respect;
i. Holdco has not incurred any liability (whether prospective,
contingent or otherwise and whether arising on or after Closing),
including, but not limited to any liability to any advisor, agent or
other person which will not be settled prior to Closing by the
Sellers;
j. Except as disclosed in the documents made available to the Offeror
in relation to the matter described in Section 3.9.1, Holdco has not
engaged in any business, operations or activities other than the
holding of the Serono Securities owned by it and activities
incidental thereto; and
k. Holdco has not agreed or committed to take any of the actions
referred to in clauses "(a)" through "(j)" above.
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3.9 Sale of Assets Not Related to Serono
3.9.1 As of the Effective Date, the only assets of Holdco are (i) the
Serono Shares, (ii) all of the outstanding shares of Holdco's
subsidiary, (iii) cash and (iv) the Loan Note.
3.10 Compliance with Legal Requirements
3.10.1 Holdco has complied with all applicable Laws, except where the
failure to comply with any such Law has not been and would not be
material to Holdco. Holdco has not received any written notice from
any Authority regarding any violation of, or failure to comply with,
any Law which has been or would be material to Holdco.
3.11 Serono
3.11.1 As of the Effective Date, to the Knowledge of the Management Seller,
(A) Serono is not in possession of adverse material non-public
information (within the meaning of Article 72 of the Listing Rules
of the SWX ("Article 72")) concerning Serono which is required to be
publicly disclosed as of the Effective Date under Article 72, and,
except for the transactions contemplated by this Agreement and the
process conducted by the Sellers and Serono culminating in such
transactions, Serono has not deferred the disclosure of any such
information in reliance on the exceptions in paragraphs 2 and 3 of
Article 72, except, in each case, for any such information (x) which
is within the Knowledge of the Parent or the Offeror or (y) has been
fairly disclosed in written materials made available in the data
room or otherwise provided (including for this purpose materials
provided in electronic format) to the Parent or the Offeror; and (B)
the consolidated financial statements (including the related notes)
included in the Serono Securities Filings (as such term is defined
in Section 5.4.1) and the consolidated financial statements of
Serono for the six months ended June 30, 2006 (copies of which have
been
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delivered to the Parent) present fairly, in all material respects,
the consolidated financial position and consolidated results of
operations and cash flows of Serono and the consolidated Serono
Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with IFRS consistently
applied during the periods involved except as otherwise noted
therein and in compliance with Swiss Law, and subject, in the case
of the unaudited interim financial statements, to the absence of
notes and normal and recurring year-end adjustments that have not
been and are not expected to be material in amount.
3.12 Tax Matters
3.12.1 (i) All Tax returns required to be filed by or on behalf of Holdco
have been duly filed with the appropriate Taxing authorities and all
such Tax returns were at the time of filing correct and complete in
all material respects; (ii) all Taxes shown as due and payable on
such returns by or on behalf of Holdco have been timely paid in full
or fully accrued; (iii) appropriate reserves and accruals have been
provided in the books of Holdco for all actual and contingent
liabilities for Taxes based on events prior to the Closing Date,
including but not limited to Taxes to be paid on constructive
dividends paid by Holdco to the Sellers or to third parties and for
any Taxes to be paid by Holdco due to any reassessments for Tax
periods before the Closing Date; (iv) Holdco has not executed or
filed with any Taxing authority any agreement, waiver or other
document or arrangement extending or having the effect of extending
the period for assessment or collection of Taxes (including, but not
limited to, any applicable statute of limitations).
3.12.2 Holdco has complied with all applicable Laws relating to the payment
and withholding of Taxes.
3.12.3 All deficiencies asserted or assessments made as a result of any
examinations by any Taxing authority of the Tax returns of or
covering or
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including Holdco have been fully and timely paid, and there are to
the Knowledge of the Sellers no audits or investigations by any
Taxing authority in progress as of the date hereof, nor has Holdco
received written notice from any Taxing authority as of the date
hereof that it intends to conduct such an audit or investigation.
3.12.4 Holdco has not (i) agreed to, and is not required to, make any
adjustments to its Taxable income by reason of a change in
accounting method initiated by Holdco or received any written notice
that a Taxing authority has proposed any such adjustment or change
in accounting method, or filed any pending application with any
Taxing authority requesting permission for any changes in accounting
methods, (ii) executed or entered into a closing agreement with any
Taxing authority concerning the payment of Taxes or the treatment of
a particular item for Tax purposes, or (iii) requested any extension
of time within which to file any Tax return, which Tax return has
since not been filed by the extended due date.
3.12.5 Holdco is not a party to any Tax sharing, indemnity or similar
agreement or arrangement (whether or not written) pursuant to which
it will have any obligation to make any payments with respect to
Taxes of another Person after the Closing.
3.12.6 There are no Liens as a result of any unpaid Taxes upon any of the
assets of Holdco, except for Taxes not yet due and payable and for
Taxes that are being contested in good faith and for which adequate
reserves and accruals have been provided in the books of Holdco.
3.12.7 Holdco has not distributed or caused to be distributed any
constructive dividend, nor distributed or granted any other benefit
to the Sellers or any other person which would reasonably be
expected to lead to the imposition of any withholding Taxes on
dividends or constructive dividends.
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3.13 Legal Proceedings
3.13.1 There are no Actions pending or, to the Knowledge of the Sellers,
threatened against the Sellers or Holdco that, individually or in
the aggregate with all other such Actions, would or would reasonably
be expected to have an adverse effect on Holdco, and, as of the date
hereof, there is no Action pending against the Sellers or Holdco
that seeks, or would reasonably be expected, to prohibit or restrain
the ability of the Sellers to enter into this Agreement or perform
their respective obligations under this Agreement.
3.14 Related Parties
3.14.1 No Related Party is a party to any binding agreement with Holdco
under which Holdco will continue to have binding obligations or any
liability (prospective, contingent or otherwise) following the
Closing Date.
3.14.2 No Related Party, other than the Sellers, holds any shares or other
security of Holdco or Serono, directly or indirectly.
3.14.3 No Related Party is a party to any agreement with Serono or any
Serono Subsidiary under which Serono or any such Serono Subsidiary
will continue to have binding obligations or any liability
(prospective, contingent or otherwise) following the Closing Date.
3.14.4 No Related Party owes any obligation or indebtedness or has any
liability (prospective, contingent or otherwise) to Holdco, Serono
or any Serono Subsidiary that will continue following the Closing
Date.
3.15 Brokers and Advisors
3.15.1 Except for ▇▇▇▇▇▇▇ Sachs International, there is no investment
banker, broker, finder or financial advisor which has been retained
by or is authorized to act on behalf of Holdco or the Sellers who is
or will or may become entitled to any investment banking, broker,
finder or similar fee
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from Holdco in connection with the transactions contemplated by this
Agreement, it being understood that all such fees payable or paid by
the Sellers or Holdco in connection with the transactions
contemplated by this Agreement and the process culminating in such
transactions are to be paid by the Sellers, and that the reasonable
fees incurred by Serono in connection with its review of and
response to the transactions contemplated by this Agreement and the
process culminating in such transactions, and other actions of
Serono, are to be paid by Serono.
3.16 No Other Representations
3.16.1 Except for the representations contained in this Article 3: (a) the
Sellers do not make any other express or implied representations to
the Parent or the Offeror; and (b) without limiting the generality
of the foregoing, no Seller makes any representation whatsoever as
to the value of (i) the Holdco Shares or the Serono Shares, or (ii)
the registered or bearer shares of Serono owned by Holdco, in each
case, as of the Effective Date, as of the Closing Date or as of any
other time.
3.16.2 Each of the Sellers hereby acknowledges and agrees that none of the
Parent or the Offeror makes any representations or warranties to the
Sellers, express or implied, other than those representations set
forth in Article 4.
4. REPRESENTATIONS OF THE PARENT AND THE OFFEROR
Each of the Parent and the Offeror hereby jointly and severally represents to
the Sellers as follows on the Effective Date and on the Closing Date:
4.1 Due Organization
4.1.1 The Parent is a partnership limited by shares duly organized and
validly existing under the Laws of the jurisdiction of its
formation. The Offeror is
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a corporation duly organized and validly existing under the Laws of
the jurisdiction of its formation.
4.2 Authority; Authorization; Enforceability
4.2.1 Each of the Parent and the Offeror has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated by this Agreement. The execution, delivery and
performance by each of the Parent and the Offeror of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action
on the part of the Parent and the Offeror, respectively, and such
authorization has not been subsequently modified or rescinded. This
Agreement has been duly executed and delivered by the Parent and the
Offeror and constitutes, assuming due authorization, execution and
delivery of this Agreement by the Sellers, a valid and binding legal
obligation of the Parent and the Offeror.
4.3 Noncontravention
4.3.1 The execution and delivery of this Agreement by the Parent and the
Offeror do not, and the performance by the Parent and the Offeror of
their respective obligations hereunder will not, (i) conflict with
or violate any provision of the articles of incorporation or bylaws
of the Parent or the Offeror, (ii) assuming that all consents,
approvals, authorizations and permits described in Section 4.4 have
been obtained and all filings and notifications described in Section
4.4 have been made and any waiting periods thereunder have
terminated or expired, conflict with or violate any Law applicable
to the Parent or Offeror or by which any property or asset of the
Parent or the Offeror is bound or affected or (iii) except with
respect to certain existing credit agreements (which the Parent
shall use its reasonable efforts to remedy) with or without the
passage of time or the giving of notice or both, result in the
breach of, or constitute a default or
-26-
require any consent under, or result in the creation of any Lien
upon any property or assets of the Parent or the Offeror pursuant
to, any instrument or agreement to which either of the Parent or the
Offeror is a party or by which the Parent or the Offeror or their
respective properties may be bound or affected.
4.4 Required Filings and Consents
4.4.1 The execution and delivery of this Agreement by the Parent and the
Offeror do not, and the performance of this Agreement by the Parent
and the Offeror will not, require any consent, approval,
authorization or permit of, or filing with, or notification to, any
Authority, except (i) under the SESTA, any other applicable federal,
state, cantonal, local or foreign securities Laws, the rules and
regulations of the NYSE, the Frankfurt Stock Exchange, the rules and
regulations of the Deutsche Borse and the rules and regulations of
the SWX, (ii) under the HSR Act, the EC Merger Regulation and any
other applicable antitrust, competition, investment or similar Laws,
(iii) approvals required as a result of the particular identity or
regulatory status of the Sellers or their Affiliates, and (iv) for
such other consents, approvals, authorizations, permits, filings or
notifications, the failure of which to make or obtain, would not,
individually or in the aggregate prevent or materially delay the
performance by the Parent or the Offeror of their obligations
hereunder.
4.5 Legal Proceedings
4.5.1 As of the Effective Date, there is no Action pending against the
Parent or the Offeror that seeks, or would reasonably be expected,
to prohibit or restrain the ability of the Parent or the Offeror to
enter into this Agreement or perform their respective obligations
hereunder.
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4.6 Investigation; Reliance
4.6.1 Except for the representations contained in this Article 4, the
Parent and the Offeror do not make any other express or implied
representations to the Sellers.
4.6.2 Each of the Parent and the Offeror hereby acknowledges and agrees
that none of the Sellers makes any representations or warranties to
the Parent or the Offeror, express or implied, other than those
representations set forth in Article 3. Each of the Parent and the
Offeror further hereby acknowledges and agrees that it and its
Representatives have undertaken a due diligence review of the Due
Diligence Information. Each of the Parent and the Offeror hereby
expressly acknowledges and agrees that it is not relying on, and is
not entitled to rely on, any statements or communications by Holdco,
the Sellers, Serono or any of their respective Affiliates or
Representatives with respect to any matter in connection with its
investigation or evaluation of Holdco or Serono (including any of
the assets or liabilities of Holdco or Serono) except for the
representations expressly set forth in Article 3.
5. SERONO DESCRIPTIONS OF CONDITION
For the purposes of Section 2.2.1(a) and (b) of this Agreement, the Parties have
assumed that, except as set forth in the Sellers' Disclosure Letter delivered to
the Parent concurrently with the Agreement, or as set forth in the Serono
Securities Filings (as such term is defined in Section 5.4.1) filed or published
prior to the Effective Date:
5.1 Due Organization; Authority; Enforceability
5.1.1 Serono is a Swiss corporation (societe anonyme/Aktiengesellschaft)
duly organized and validly existing under the Laws of Switzerland
and has all necessary power and authority to (i) conduct its
business in the manner in which its business is currently being
conducted and (ii) own and use its
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assets in the manner in which its assets are currently owned and
used. Each Serono Subsidiary is duly organized and validly existing
under the Laws of its jurisdiction of organization.
5.2 Capitalization
5.2.1 Serono is a Swiss corporation (societe anonyme/Aktiengesellschaft)
which is registered with the Commercial Register of the canton of
Vaud, with, as of the Effective Date, an aggregate registered share
capital of CHF 380,943,075, divided into 11,013,040 fully paid up
registered shares with a par value of CHF 10 each and 10,832,507
fully paid up bearer shares with a par value of CHF 25 each. As of
the Effective Date, there were issued 11,013,040 registered shares
of Serono. As of the Effective Date, the total issued bearer shares
of Serono consisted of (x) the 10,877,992 bearer shares of Serono
issued as of June 30, 2006, plus (y) the sum of (i) bearer shares of
Serono issued upon the exercise of stock options and other equity
grants under the Serono Employee Plans since June 30, 2006 and (ii)
bearer shares of Serono issued upon the exercise of the Convertible
Bonds since June 30, 2006. As of the Effective Date, the total
number of bearer shares of Serono held in treasury by Serono and its
Affiliates was equal to (x) the 636,046 bearer shares of Serono held
in treasury as of June 30, 2006, plus (y) any bearer shares of
Serono repurchased by Serono and its Affiliates since June 30, 2006,
less (z) the sum of (i) any bearer shares of Serono retired by
Serono and its Affiliates in the Ordinary Course of Business since
June 30, 2006, (ii) any bearer shares of Serono issued out of
treasury upon the exercise of stock options and other equity grants
under the Serono Employee Plans since June 30, 2006 and (iii) any
bearer shares of Serono issued out of treasury upon the exercise of
the Convertible Bonds since June 30, 2006. All of the shares of
Serono have been duly authorized and validly issued, and are fully
paid up in compliance with the Laws of Switzerland.
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5.2.2 Except as disclosed in Section 5.2.2 of the Sellers' Disclosure
Letter, there is no (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire
any equity securities or other securities of Serono; (ii) other
outstanding security, instrument or obligation issued by Serono that
is or may become convertible into or exchangeable for any equity
securities or other securities of Serono; or (iii) contract under
which Serono is or may become obligated to sell, otherwise issue or
repurchase any of its equity securities or any other securities.
5.3 Noncontravention
5.3.1 The consummation of the transactions contemplated by this Agreement
will not, (i) conflict with or violate any provision of Serono's
articles of association or (ii) with or without the passage of time
or the giving of notice or both, result in the breach of, or
constitute a default or require any consent under, or trigger any
rights of termination or modification in favor of a party other than
Serono and its Affiliates under, any Material Contract (as defined
below).
5.4 Securities Filings
5.4.1 Serono has filed or published all reports, proxy statements,
registration statements, forms and other documents (i) required to
be prepared by it in accordance with Swiss Law and the regulations
of the SWX since January 1, 2003 and (ii) required to be filed by it
with the SEC since January 1, 2003, (collectively, including any
exhibits and schedules thereto and all documents incorporated by
reference therein, the "Serono Securities Filings"). None of the
Serono Securities Filings, as of their respective dates (or, if
amended prior to the Effective Date, as of the dates of such
amendments), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All of
such Serono Securities Filings (as amended
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prior to the Effective Date, if amended prior to the Effective Date)
complied in form, with, as appropriate, the applicable requirements
of Swiss Law, the regulations of the SWX, the U.S. Securities Act of
1933, as amended, and the Securities Exchange Act as in effect on
the date so published or filed. Each of the consolidated financial
statements (including the related notes) included in the Serono
Securities Filings presents fairly the consolidated financial
position and consolidated results of operations and cash flows of
Serono and the consolidated Serono Subsidiaries as of the respective
dates or for the respective periods set forth therein, all in
conformity with IFRS consistently applied during the periods
involved except as otherwise noted therein and in compliance with
Swiss Law, and subject, in the case of the unaudited interim
financial statements, to the absence of notes and normal and
recurring year-end adjustments that have not been and are not
expected to be material in amount.
5.4.2 There are no liabilities of the kind required to be disclosed in the
balance sheet of Serono and the consolidated Serono Subsidiaries or
the footnotes thereto in accordance with IFRS and Swiss Law, except
for (i) liabilities set forth in the consolidated financial
statements of Serono for the six months ended June 30, 2006,
including in any footnotes thereto (copies of which have been
delivered to the Parent), or in the consolidated financial
statements included in the Serono Securities Filings (or in any
footnotes thereto) and (ii) liabilities which have arisen in the
Ordinary Course of Business since the date of the most recent
balance sheet included in the consolidated financial statements of
Serono for the six months ended June 30, 2006 (copies of which have
been delivered to the Parent) (the "Latest Balance Sheet Date").
5.5 Absence of Changes
5.5.1 Since the Latest Balance Sheet Date and through the Effective Date,
(i) Serono and the Serono Subsidiaries have conducted their business
only in
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the Ordinary Course of Business and (ii) there has not been any
change, event or occurrence that has had a material adverse effect
on the Serono Group.
5.6 Intellectual Property
5.6.1 (i) Serono or the Serono Subsidiaries own, license or otherwise have
the right, to use (in each case, free and clear of any Liens (other
than Permitted Liens)), all Intellectual Property (as defined below)
necessary for or currently used in the conduct of their respective
businesses as currently conducted; and (ii) the use of Intellectual
Property by Serono and the Serono Subsidiaries does not infringe on
or otherwise violate the rights of any Person. For purposes of this
Section 5.6, "Intellectual Property" shall mean trademarks, service
marks, brand names, trade dress and other similar indications of
origin, the goodwill associated with the foregoing and registrations
in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or
renewal of any such registration or application; proprietary
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without
limitation, divisionals, continuations, continuations-in-part and
renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; trade secrets and confidential
information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; writings and other works, whether
copyrightable or not, in any jurisdiction, and registrations or
applications for registration of copyrights in any jurisdiction, and
any renewals or extensions thereof; and any similar intellectual
property or proprietary rights.
5.7 Material Contracts
5.7.1 As of the Effective Date, neither Serono nor any of the Serono
Subsidiaries is a party to or bound by (i) any "material contract"
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(as such term is defined in Item 601(b)(10) of Regulation S-K
promulgated by the SEC); or (ii) any non-competition or similar
agreements that restrict, in any respect material to their
businesses, Serono or any of the Serono Subsidiaries from engaging
or competing in any line of business or in any geographic area
(contracts in the respective categories described in clauses (i) and
(ii) above are referred to in this Agreement as "Material
Contracts").
5.8 Compliance With Laws; Permits; Legal Proceedings; Regulatory Compliance
5.8.1 Serono and the Serono Subsidiaries are in compliance with all
applicable Laws, including without limitation, such applicable Laws
relating to (i) employment and labor practices and (ii) the
manufacture or distribution of biological and drug products,
including without limitation, the United States Federal Food, Drug
and Cosmetic Act of 1938, as amended ("Food and Drug Laws"). Serono
and the Serono Subsidiaries hold all permits, consents,
registrations and approvals from Authorities (including without
limitation all authorizations under Food and Drug Laws) which are
required for the operation of the businesses of Serono and the
Serono Subsidiaries as they are being conducted as of the Effective
Date (the "Permits"). Since January 1, 2003, Serono has not received
any written notice from any Authority, which has not been resolved,
regarding (i) any material alleged violation of, or failure to
comply with, any Permit or Law or (ii) with respect to any material
alleged failure by Serono or any Serono Subsidiary to have any
Permit. The descriptions of condition set forth in this Section 5.8
do not apply to compliance with Environmental Laws (as such term is
defined in Section 5.9) (including, without limitation, holding of
or compliance with any Permits required under such Laws), which
matters are covered under Section 5.9.
5.8.2 As of the Effective Date, there are no legal proceedings or
investigations which are pending or, to the Knowledge of Serono or
any Serono Subsidiary, threatened against Serono or any Serono
Subsidiary, or which
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involve any of their respective assets or properties, by or before
any Authority.
5.8.3 All biological and drug products currently being developed,
manufactured or distributed by Serono or the Serono Subsidiaries
that are subject to the jurisdiction of the United States Food and
Drug Administration (the "FDA"), the European Medicines Evaluation
Agency and/or any other similar federal Authority (collectively,
"Pharmaceutical Authorities") are being manufactured, labeled and
distributed in compliance with all applicable requirements under
Food and Drug Laws. The biological and drug products described in
this Section 5.8.3 are sometimes referred to herein as
"Pharmaceutical Products."
5.8.4 Since January 1, 2003, no Pharmaceutical Product has been recalled,
suspended or discontinued as a result of any action by any
Pharmaceutical Authority.
5.8.5 Since January 1, 2003, none of Serono or any Serono Subsidiary has
received any written notice that any Pharmaceutical Authority has
initiated any action to withdraw approval for or enjoin the
manufacture or distribution of any Pharmaceutical Product.
5.9 Environmental Matters
a. Serono and the Serono Subsidiaries are in compliance with all
applicable Environmental Laws. Serono and the Serono Subsidiaries
hold and are in compliance with all Permits required to be held by
them under applicable Environmental Laws.
b. Since January 1, 2003, neither Serono nor any Serono Subsidiary (i)
has received written notice from any Authority requiring that
Hazardous Materials, which Serono or any Serono Subsidiary has
generated, transported or disposed of, or which were found to be
located on any site owned or operated by Serono or the Serono
Subsidiaries, be removed,
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remediated or be the subject of any other response action pursuant
to any applicable Environmental Law or (ii) has been made a named
party to any claim or legal proceeding arising out of the Release of
Hazardous Materials.
c. For purposes of this Section 5.9, (i) "Environmental Laws" shall
mean all federal, state, cantonal and local Laws and regulations
relating to pollution or protection of the environment, including,
without limitation, Laws relating to Releases or threatened Releases
of Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, transport or
handling of Hazardous Materials; (ii) "Hazardous Materials" shall
mean (A) any petroleum, petroleum products, byproducts or breakdown
products, radioactive materials, friable asbestos, toxic mold or
polychlorinated biphenyls or (B) any chemical, waste, or other
substance defined, listed or regulated as toxic or hazardous or as a
pollutant or contaminant under any applicable Environmental Law; and
(iii) "Release" shall mean and include any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, migrating, dumping or disposing into the
environment or the workplace of any Hazardous Material, and
otherwise as defined in any Environment Law.
d. This Section 5.9 contains the sole and exclusive descriptions of
condition with respect to any environmental matters with respect to
Serono and the Serono Subsidiaries, including, without limitation,
any matters arising under any applicable Environmental Laws.
5.10 Tax Matters
5.10.1 (i) All Tax returns required to be filed by or on behalf of Serono
and the Serono Subsidiaries have been properly prepared and duly and
timely filed with the appropriate Taxing authorities, and all such
Tax returns were at the time of filing correct and complete in all
material respects; (ii) all Taxes shown as due and payable on such
returns by or on behalf of Serono and the Serono Subsidiaries have
been timely paid in full; (iii) appropriate
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reserves and accruals have been provided in the books of Serono for
all liabilities for Taxes based on events prior to the Effective
Date; and (iv) neither Serono nor any Serono Subsidiary has executed
or filed with any Taxing authority, any agreement, waiver or other
document or arrangement extending or having the effect of extending
the period for assessment or collection of Taxes (including, but not
limited to, any applicable statute of limitations).
5.10.2 All deficiencies asserted or assessments made as a result of any
examinations by any Taxing authority of the Tax returns of or
covering or including Serono and the Serono Subsidiaries have been
fully and timely paid, and there are to the Knowledge of Serono and
each Serono Subsidiary no other audits or investigations by any
Taxing authority in progress as of the date hereof, nor has Serono
or any Serono Subsidiary received written notice from any Taxing
authority as of the date hereof that it intends to conduct such an
audit or investigation.
5.10.3 Neither Serono nor any Serono Subsidiary has (i) received any
written notice from any Taxing authority requiring a change in any
accounting method, (ii) executed any agreement extending the period
for assessment or collection of Taxes (including, but not limited
to, any applicable statute of limitations), or (iii) executed a
closing agreement with any Taxing authority concerning the payment
of material Taxes or the treatment of a material item for Tax
purposes.
5.10.4 Neither Serono nor any Serono Subsidiary is a party to any Tax
sharing, indemnity or similar agreement or arrangement (whether or
not written) pursuant to which it will have any obligation to make
any payments with respect to Taxes of another Person (other than the
Serono Subsidiaries) after the Closing Date.
5.10.5 There are no Liens as a result of any unpaid Taxes upon any of the
assets of Serono or any Serono Subsidiary, except for Taxes not yet
due and payable and for Taxes that are being contested in good faith
or for
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which adequate reserves and accruals have been provided in the books
of the relevant company.
5.11 Related Party Transactions
5.11.1 No Related Party is a party to any agreement with Serono or any
Serono Subsidiary under which Serono or any such Serono Subsidiary
will continue to have binding obligations or any liability following
the Closing Date.
5.11.2 Since the Latest Balance Sheet Date, all transactions between Serono
or any Serono Subsidiary, on the one hand, and any Related Party, on
the other hand, were made on an arms' length basis.
5.12 Employee Plans; Social Security Contributions; Pension Plans
5.12.1 Section 5.12.1 of the Sellers' Disclosure Letter contains a correct
and complete list of each material Serono Employee Plan. Correct and
complete copies of each such Serono Employee Plan and any amendments
thereto (or if the Serono Employee Plan is not a written plan, a
written description thereof) have been made available to the Parent.
5.12.2 Serono is in compliance with applicable requirements for making
social security contributions and required contributions to Serono
pension plans and no funding deficiency or arrearage exists with
respect to any Serono pension plan which will result in a liability
of Serono or a Serono Subsidiary.
5.12.3 The records of Serono pension plans have been properly maintained,
and there are no Actions outstanding, pending or, to the Knowledge
of the Management Seller, threatened in relation to any Serono
pension plan, other than routine claims for benefits.
5.12.4 For purposes of this Section 5.12, "Serono Employee Plan" shall mean
and include: each material employment, compensation, bonus and
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other cash-based incentive compensation, deferred compensation,
share purchase, stock option, stock appreciation right or other
equity-based incentive, severance, change-in-control, or termination
pay, supplemental unemployment benefits, profit-sharing, pension and
other retirement (including non-statutory pension or other
retirement) plan, program, agreement or arrangement maintained or
contributed to or required to be contributed to, or entered into by
Serono or any of the Serono Subsidiaries, in each case, for the
benefit of employees or former employees of Serono or any of the
Serono Subsidiaries, but excluding any such plan, program agreement
or arrangement that is mandated by applicable Law of the relevant
jurisdiction.
5.13 No Liability
5.13.1 Each of the Parent, the Offeror and the Sellers hereby acknowledges
and agrees that the statements made in this Article 5 are made only
in connection with Section 2.2.1(a) and (b), and that no Party or
other Person will have or be subject to any liability arising from,
relating to or in connection with any inaccuracy of the matters set
forth in this Article 5, under any Laws, at common Law or equity, in
contract or otherwise. Each of the Parent and the Offeror hereby
acknowledges and agrees that the matters set forth in this Article 5
are not representations or warranties and that its only recourse
with respect to any alleged inaccuracy of the matters set forth in
this Article 5 shall be the assertion of any rights such Party may
have pursuant to the Condition Precedents set forth in Section
2.2.1(a) and (b), to the exclusion of any other recourse or remedy
under any applicable Law, including but not limited to, rescission
of this Agreement pursuant to section 23 et seq. and/or 205 of the
Swiss Code of Obligations and any indemnification claim of any
nature.
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6. COVENANTS OF THE PARTIES
6.1 Conduct between the Effective Date and the Closing Date
6.1.1 Except as contemplated by this Agreement, as set forth in Section
6.1.1 of the Sellers' Disclosure Letter, as required by applicable
Law or as consented to by the Parent and the Offeror (which consent
shall not be unreasonably withheld or delayed), for the period
between the Effective Date and the Closing Date (the "Pre-Closing
Period"), the Sellers shall cause Holdco not to engage in any
business, operations or activities other than the holding of the
Serono Securities owned by it and activities incidental thereto.
6.1.2 Nothing in this Agreement, including, without limitation, this
Section 6.1, shall prevent Holdco from changing its corporate name
during the Pre-Closing Period.
6.1.3 Except as otherwise contemplated by this Agreement, or as required
by applicable Law, for the Pre-Closing Period, the Sellers shall,
and shall cause Holdco to, take such lawful action in their
capacities as Serono shareholders as may be reasonably necessary to,
and the Management Seller, in his capacity as a member of the Board
of Directors of Serono and as a Serono executive officer, shall,
subject to his fiduciary duties to Serono under Swiss Law and to the
authority of the Board of Directors of Serono, cause Serono and the
Serono Subsidiaries (i) to conduct their business as a going concern
and in the Ordinary Course of Business, (ii) not to make or
irrevocably commit to investments or other expenditures in excess of
the amounts provided for under Serono's budgets and guidelines,
(iii) solely with respect to Serono, not to amend its Articles of
Association or make any decision under Art. 29, para. 2 and 3, of
the SESTA or Art. 34 or Art. 36 of the TOO and (iv) solely with
respect to Serono, not to issue any additional Serono Securities
except for any issuances of the type described in the last sentence
of Section 1.2.6.
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6.2 Access to Information Prior to the Closing Date and thereafter
6.2.1 During the Pre-Closing Period, upon reasonable advance notice, the
Sellers shall cause Holdco to, and the Sellers shall, and shall
cause Holdco to, take such lawful action in their capacities as
Serono shareholders as may be reasonably necessary to, and the
Management Seller, in his capacity as a member of the Board of
Directors of Serono and as a Serono executive officer, shall,
subject to his fiduciary duties to Serono under Swiss Law and to the
authority of the Board of Directors of Serono, cause Serono to,
provide to the officers, directors, employees, attorneys,
accountants, advisors, representatives and agents (the
"Representatives") of the Parent and Offeror reasonable access to
the books, records, offices and sites and personnel of Holdco and
Serono and such additional financial and operating data and other
information regarding the assets and liabilities of Holdco and/or
Serono as is reasonably requested by the Parent, the Offeror or
their Representatives, provided that the activities of the Offeror
and their Representatives shall be conducted at reasonable times and
in a manner that does not unreasonably interfere with the normal
business operations of Holdco and/or Serono and any data or other
information, whether written, oral or electronic, received by the
Parent or any of its Representatives pursuant to this Section 6.2
shall be deemed Proprietary Information and subject to the
provisions of Section 6.10 relating thereto.
6.2.2 Each Seller shall take such lawful action in its capacity as a
Holdco and Serono shareholder as may be reasonably necessary to,
and, in its capacity as a member of the Boards of Directors of
Holdco and/or Serono (to the extent applicable) and as an executive
officer of Holdco and/or Serono (to the extent applicable), shall,
subject to its fiduciary duties to Holdco and/or Serono (to the
extent applicable) under Swiss Law and to the authority of the
Holdco and/or Serono Board (to the extent applicable), provide and
procure that Holdco and Serono and any other Related Party provides
in a timely manner the information reasonably required by the
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Offeror and/or the Parent in relation to the preparation of the
Offer documentation.
6.3 No Purchase or Sale of Serono Securities; Certain Covenants
6.3.1 During the Pre-Closing Period, each Seller agrees that it shall
abstain from, and shall cause each of (i) Holdco, (ii) any other
Related Party or (iii) any other Person or entity acting on behalf
of the Sellers, Holdco or any other Related Party (provided however
that, for the purpose of clause (iii), the relevant Person or entity
qualifies as a person acting in concert with the Offeror within the
meaning of Article 11 of the TOO) to abstain from entering into, or
exercising any right under or in relation to, any (i) agreement
(either on or off exchange) relating to the acquisition or sale of
registered shares or bearer shares or convertible bonds of Serono,
(ii) derivative transaction having any or all of such shares as an
underlying asset or (iii) voting arrangement, whether by granting
any proxy or power of attorney, with respect to any or all of such
shares, if, in each case, the taking of any such action would result
in the Offeror being required to increase the Offer Price.
6.3.2 Each Seller shall, and shall cause Holdco to, take such lawful
action in their capacities as Serono shareholders as may be
reasonably necessary to, and the Management Seller, in his capacity
as a member of the Board of Directors of Serono and as a Serono
executive officer, shall, subject to his fiduciary duties to Serono
under Swiss Law and to the authority of the Board of Directors of
Serono, cause Serono to give notice to Serono shareholders of an
extraordinary general meeting of Serono shareholders, to be held on
the Closing Date but immediately following the Closing, but in any
event on January 5, 2007, subject to applicable Law, for (i) an
amendment of the articles of incorporation of Serono abolishing Art.
20.2 in its entirety and amending Art. 20.1 such as the board of
directors of Serono shall be composed of three members or more; and
(ii) the restructuring of the Serono Board of Directors to the
effect that new
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members of the Serono Board of Directors designated in writing by
Parent would constitute a majority of the Serono Board of Directors;
and (iii) the designation of an independent accounting firm
designated in writing by Parent as Serono's statutory accountant.
The Management Seller shall use his reasonable best efforts during
the Pre-Closing Period to seek the resignations of members of the
Serono Board of Directors designated in writing by Parent. If
Closing occurs later than on January 5, 2007, the aforementioned
resolutions shall be taken, to the extent legally possible, subject
to completion of Closing.
6.4 Certain Tax Covenants; Indemnity provided by the Parent regarding IP
Restructuring
6.4.1 The Sellers shall cooperate and provide assistance as reasonably
requested by Parent and Offeror in connection with the Parent's and
the Offeror's efforts to receive, prior to Closing, consent from the
Swiss tax authorities regarding the utilization of Holdco's
liquidity in order to accommodate certain financial needs of the
Parent and the Offeror provided that it is understood and agreed
that nothing in this Section 6.4.1 shall be construed as to modify
or derogate from the Sellers' rights under Section 6.8.
6.4.2 In the event that the intellectual property rights held by Applied
Research Systems ARS Holding N.V., Curacao, have been transferred to
Laboratoires Serono SA, Aubonne, in accordance with the IP Transfer
Agreement and the transactions contemplated under this Agreement are
not consummated, the Parent shall indemnify and hold harmless the
Sellers, Serono and each of their respective Affiliates from any and
all Damages and Taxes incurred by any of them, resulting therefrom
or in connection therewith; provided, however, that Sellers shall,
and shall procure that Serono and its Affiliates shall, mitigate any
such Damages and/or Taxes.
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6.5 Mandatory Takeover Offer of the Offeror
6.5.1 The Offeror hereby acknowledges and agrees that according to Art. 32
of the SESTA the Closing of the transactions contemplated by this
Agreement will trigger a duty to make a public takeover offer to
acquire all listed bearer shares of Serono (the "Offer"). The
Offeror agrees to make the Offer in compliance with the SESTA and
that the price offered under the Offer shall be not less than CHF
1,100 per bearer share of Serono (the "Offer Price"). The Sellers
understand that it is the intention of the Parent and the Offeror
that unless otherwise required by applicable Law no offer shall be
submitted to the holders of ADS of Serono or to Serono shareholders
in the United States.
6.5.2 Each Seller shall take such lawful action in its capacity as a
Holdco and Serono shareholder as may be reasonably necessary to, and
the Management Seller, in his capacity as a member of the Board of
Directors of Serono and as a Serono executive officer, shall,
subject to his fiduciary duties to Serono under Swiss Law and to the
authority of the Board of Directors of Serono, cause Serono not to
(i) tender into the Offer any bearer shares of Serono held in
treasury by Serono or (ii) sell, transfer or dispose of any bearer
shares of Serono held in treasury by Serono to any third party.
6.5.3 Each Seller agrees that it shall, and shall procure that its Related
Parties shall, immediately cease and cause to be terminated all
existing discussions, negotiations and communications between Holdco
or any of them and any persons (other than the Parent and the
Offeror) with respect to any Acquisition Transaction (as defined
below). Except as otherwise contemplated by this Agreement, each
Seller agrees that it shall not, and shall procure that its Related
Parties and Holdco shall not, solicit or initiate any discussions or
negotiations with, or provide any due diligence facilities or
materials to, any corporation, partnership, person or other entity
or group (other than the Parent, the Offeror or any Affiliate or
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associate of the Parent or the Offeror) concerning any tender offer,
merger, consolidation, business combination, liquidation,
reorganisation, sale of substantial assets, sale of shares of
capital stock or similar transaction involving the Holdco Shares,
Holdco, the Serono Shares or Serono (each an "Acquisition
Transaction"), provided that nothing contained in this Section 6.4
shall restrict those of the Sellers who are directors or officers of
Serono from discussing an Acquisition Transaction with a third party
or providing any due diligence facilities or materials to a third
party, in their capacity as directors or officers of Serono, in any
case where in any such individual's good faith determination the
failure to engage in such discussion or provide such due diligence
facilities or materials could reasonably be expected to be
inconsistent with the fulfillment of such individual's fiduciary
duties or applicable Law.
6.6 Discharge of the directors of Holdco and Serono
6.6.1 The Parent undertakes to vote the Holdco Shares at each ordinary
shareholders' meeting of Holdco considering financial statements of
Holdco for any period prior to the Closing Date in favour of the
full discharge of the directors of Holdco in office on the Effective
Date and on the Closing Date from and against any and all claims
Holdco may have against such director, in their capacity as
directors of Holdco, with respect to any matters known by the Parent
at the signing of this Agreement.
6.6.2 The Parent undertakes to vote the Serono Shares and to cause Holdco
to vote the registered shares and bearer shares of Serono held by
Holdco at each ordinary shareholders' meetings of Serono considering
financial statements of Serono for any period prior to the Closing
Date in favour of the full discharge of the directors of Serono in
office on the Effective Date and on the Closing Date from and
against any and all claims Serono may have against such director, in
their capacity as directors of Serono, with respect to any matters
known by the Parent at the signing of this Agreement.
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6.7 Directors' and Officers' Insurance
6.7.1 The Offeror shall cause to be maintained in effect for eleven years
from the Closing Date (the "Insurance Continuation Date") liability
insurance with respect to acts or omissions occurring at or prior to
the Insurance Continuation Date covering each of the individuals
who, at or prior to the Insurance Continuation Date, were directors
or officers of Serono or any of its Subsidiaries and each Person who
serves or served as a director, officer, member, trustee or
fiduciary of any trust, pension or other employee benefit plan or
enterprise or partnership or joint venture of the Company or any of
its Subsidiaries (each, together with such Person's heirs,
executives, administrators and Representatives, the "Insured
Parties"), on terms with respect to coverage, amount and advancement
of expenses no less favorable than the directors' and officers'
liability insurance policies maintained by Serono in effect as of
the date hereof; provided, however, that in no event shall the
Offeror be required to expend pursuant to this Section 6.7.1 for any
annual premium more than 300% of the current annual premium paid by
Serono for its directors' and officers' liability insurance policies
in effect as of the date hereof; provided further, however, that, if
the amount of the annual premium necessary to maintain or procure
such insurance coverage exceeds such maximum amount, the Offeror
shall maintain or procure, for such eleven-year period, directors'
and officers' insurance providing the greatest coverage then
available for an annual premium equal to that maximum amount. The
provisions of the immediately preceding sentence shall be deemed to
have been satisfied if prepaid policies have been obtained prior to
the Insurance Continuation Date from an insurer or insurers which
have an insurer financial strength rating by A.M. Best Co. of at
least "A", which policies provide the Insured Parties with coverage,
from the Insurance Continuation Date to the eleventh anniversary of
the Insurance Continuation Date, with respect to claims arising from
facts or events that occurred at or before the Insurance
Continuation Date, including, without limitation, in respect of the
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transactions contemplated by this Agreement, on terms with respect
to coverage, amount and advancement of expenses no less favorable
than the directors' and officers' liability insurance policies
maintained by the Company in effect as of the date hereof. If such
prepaid policies have been obtained prior to the Insurance
Continuation Date, the Offeror shall cause such policies to be
maintained in full force and effect, and continue to honor the
obligations thereunder.
6.7.2 The Parent and Offeror shall be jointly and severally liable to pay
all reasonable expenses, including reasonable attorney's fees, that
may be incurred by any Insured Party in enforcing the obligations
provided for in this Section 6.7. The obligations of the Parent and
the Offeror under this Section 6.7 shall not be terminated or
modified in such a manner as to adversely affect any Insured Party
without the consent of such Insured Party and shall survive the
Closing indefinitely, it being expressly agreed that the Insured
Parties to whom this Section 6.7 applies shall be intended third
party beneficiaries of this Section 6.7 within the meaning of
Article 112 para. 2 of the Swiss Code of Obligations.
6.8 Tax indemnity provided by the Parent and the Offeror
6.8.1 Neither the Parent nor the Offeror shall, directly or indirectly,
cause or permit Holdco, any Holdco subsidiary, Serono and/or the
Serono Subsidiaries, during the 5 year period following the Closing,
to take any action that could cause the transactions contemplated
under this Agreement to be characterized by the Federal Tax
Administration and/or the Vaud Cantonal Tax Administration, with
respect to any of the Sellers, as an indirect partial liquidation of
Holdco and/or Serono, under Article 20a ss. 1 letter a of the
Federal Direct Tax Act , as adopted by the Federal Parliament on
June 23, 2006, and/or under the cantonal law that will be adopted by
the Parliament of Canton of Vaud to comply with the new Article 7a
ss. 1 letter a of the Federal Harmonization Tax Act.
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For the sake of clarity, it is understood that the above paragraph
shall not preclude Holdco, any Holdco subsidiary, Serono and/or the
Serono Subsidiaries to take, after the Closing and before 1 January
2008, any action that:
(a) would entirely comply with the requirements of the new federal
law, but
(b) would cause the transactions contemplated under this Agreement
to be characterized by the Vaud Cantonal Tax Administration,
with respect to any of the Sellers, as an indirect partial
liquidation of Holdco and/or Serono, under the cantonal tax
law as of signing and its application by the Vaud Cantonal Tax
Administration.
Without limiting, and in addition to, the Parent's and the Offeror's
obligations under the preceding paragraphs, the Parent and the
Offeror shall indemnify and hold harmless the Sellers from any Swiss
federal, cantonal and municipal income tax (and all interest payment
obligations and legal and tax advisory expenses arising in
connection therewith) which become payable by any of the Sellers as
a consequence of any breach by the Parent or the Offeror of any of
the covenants under this Section 6.8.1.
6.8.2 Notwithstanding any provision to the contrary in this Agreement, the
covenants set forth in this Section 6.8 and the indemnification
obligations of the Parent and the Offeror under this Section 6.8
shall survive the Closing and continue in full force and effect
without limit in time. The provisions of Sections 7.2.2 (i), 7.3 and
7.4 shall apply mutatis mutandis, and the provisions of Section 7.5
shall apply, to the indemnification in this Section 6.8, provided
that no other provisions contained in Section 7 shall apply to the
indemnification in this Section 6.8.
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6.9 Press Release and Public Announcement
6.9.1 On the day following the Effective Date, a press release
substantially in the form attached to Section 6.9.1 of the Sellers'
Disclosure Letter shall be issued.
6.9.2 Except as may be required by applicable Law or stock exchange rule,
the Parties shall consult with each other prior to making any public
announcement relating to the Offer other than the agreed press
release pursuant to Section 6.9.1.
6.10 Confidentiality
6.10.1 For all purposes of this Section 6.10, "Proprietary Information"
shall mean any content of this Agreement and any and all
information, written, oral or electronic, created, transferred,
recorded or employed as part of, or otherwise resulting from any
activities undertaken pursuant to, this Agreement, including, but
not limited to, business, organizational, technical, financial,
marketing, operational, regulatory or sales information of Serono
(and any of its Affiliates), Holdco and the Sellers; provided, that
Proprietary Information shall not include any information that (i)
is or becomes generally available to the public other than as a
result of a disclosure by the receiving Party or its Representatives
in violation of this Agreement; (ii) is already in the possession of
the receiving Party at the time such information is disclosed by the
disclosing Party to the receiving Party, provided that such
information is reasonably believed by the receiving Party not to be
subject to a confidentiality agreement or other obligation of
confidentiality to the disclosing Party or its Representatives and
that the receiving Party can demonstrate in writing its possession
of such information prior to its disclosure by the disclosing Party
or its Representatives; or (iii) becomes available to the receiving
Party on a nonconfidential basis from a person other than the
disclosing Party or its Representatives who is reasonably believed
by the receiving Party not to
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be bound by a confidentiality obligation, whether by agreement or
otherwise, to the disclosing Party or any of its Representatives.
6.10.2 Except as expressly permitted by this Agreement, the Parties
undertake to keep all Proprietary Information strictly confidential
and refrain from disclosing it to any third parties.
6.10.3 A receiving Party may disclose Proprietary Information to its
Representatives who need to know such Proprietary Information for
the purpose of advising such Party in connection with actions to be
taken in connection with this Agreement (it being understood that
such Representatives shall be advised of the confidential nature of
such information and the restrictions imposed by this Agreement and
shall agree to be bound by such restrictions) and will cause those
Persons to observe the terms of this Agreement. Each Party which has
disclosed Proprietary Information to a Representative shall be
liable for any disclosure of such Proprietary Information to any
third party by such Representative in violation of such
Representative's confidentiality obligations.
6.10.4 In the event that the receiving Party or any of its Representatives
is requested pursuant to, or required by legal process, to disclose
any Proprietary Information, the receiving Party will provide the
disclosing Party with prompt notice of such request or requirement
in order to enable it to seek, and will assist the disclosing Party
in seeking, an appropriate protective order or other remedy, or to
take steps to resist or narrow the scope of such request,
requirement or legal process. If a protective order or other remedy
is not obtained and disclosure of Proprietary Information is
required, the person required to disclose such information may so
disclose only that portion of the Proprietary Information which the
disclosing person is advised by counsel is legally required. In any
such event the disclosing person shall use its reasonable best
efforts to ensure
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that all Proprietary Information that is so disclosed will be
accorded confidential treatment.
6.10.5 In the event that any Party is required, in such Party's reasonable
judgment, to disclose the contents of this Agreement under the
Securities Exchange Act, the Federal Act on Stock Exchanges and
Securities Trading, as amended or any other applicable federal,
state, cantonal, local or foreign securities Laws, such Party may
disclose the contents of this Agreement, at any time following the
execution and delivery of this Agreement by all of the Parties
hereto, by filing this Agreement with the Authority(ies) with
jurisdiction over the enforcement of the Law(s) requiring such
disclosure.
6.10.6 The restrictions in this Section 6.10 shall cease to apply at
Closing to Parent, each Parent Subsidiary, Holdco, Serono and each
Serono Subsidiary to the extent that they relate to Proprietary
Information of Serono or Holdco.
6.11 Further Action
6.11.1 Each of the Parties shall, and shall procure that each of its
Affiliates (subject with respect to the Sellers in the case of
Serono, to the terms of clause (iii) of this paragraph), shall use
all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the
other Parties in doing, all things necessary, proper or advisable to
consummate and make effective, as promptly as practicable, the
transactions contemplated by this Agreement in accordance with the
terms of this Agreement, including, without limitation, (i)
obtaining all necessary actions, waivers, consents, clearances and
approvals from Authorities, the preparation and making of all
necessary registrations and filings with, and submissions to,
Authorities and the taking of all steps as may be necessary to
obtain an approval, waiver or clearance from, or to avoid an action
or proceeding by, any
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Authority, including under the HSR Act, the EC Merger Regulation and
any other applicable antitrust, competition, investment or similar
Laws and (ii) defending any Actions or other legal proceedings,
whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement
in accordance with the terms of this Agreement, including seeking to
have any stay or temporary restraining order entered by any
Authority vacated or reversed and (iii) with respect to Sellers,
taking such lawful action in their capacities as Holdco and Serono
shareholders as may be reasonably necessary to cause Holdco and
Serono to, and in their capacities as members of the Boards of
Directors of Holdco and/or Serono (to the extent applicable) and as
executive officers of Holdco and/or Serono (to the extent
applicable), subject to their fiduciary duties to Holdco and/or
Serono (to the extent applicable) under Swiss Law and to the
authority of the Holdco and/or Serono Board (to the extent
applicable), causing Serono to, take all action necessary and
advisable for, and abstain from taking actions that could prevent or
materially delay, the consummation of the transactions contemplated
by this Agreement. The obligations of the Parent and the Offeror
under clause (i) of this Section 6.11.1 shall include, without
limitation, committing to any and all divestitures, licenses or hold
separate or similar arrangements with respect to their respective
assets or the assets of Serono or Serono's conduct of business
arrangements as a condition to obtaining any and all approvals or
clearances from the Authorities under the HSR Act and the EC Merger
Regulation necessary to consummate the transactions contemplated
hereby, and otherwise using all reasonable efforts to ensure the
receipt of the necessary consents, approvals, clearances or
forbearances, or the termination or expiration of the necessary
waiting periods, under the HSR Act and the EC Merger Regulation. In
addition, subject to the terms and conditions herein provided, none
of the Parties shall knowingly take or cause to be taken any action
which would reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated hereby. The Parent
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undertakes and agrees to, and the Sellers undertake and agree, to
the extent applicable, to cause Holdco to, as promptly as
practicable, file a Notification and Report Form under the HSR Act
with the United States Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice (the
"Antitrust Division"), file a Form CO notification with the European
Commission and to make such other filings and apply for such other
approvals and consents as are required, and considered appropriate
by the Parent acting reasonably, under any other applicable
antitrust, competition, investment or similar Laws. Nothing in this
Section 6.11.1 shall prohibit the Parent and/or the Offeror from
running an orderly process in order to seek to optimise the terms of
any divestiture, licence or similar arrangement to which it is
obliged to commit, provided that the Parent and/or the Offeror shall
not be entitled to delay the effectuation of any such divestiture,
licence or similar arrangement such that Closing would not take
place prior to the Termination Date.
6.11.2 The Offeror shall, and the Sellers shall, and each shall cause each
of its Affiliates (subject with respect to the Sellers in the case
of Serono, to the terms of clause (iii) of Section 6.11.1) to, (i)
respond as promptly as practicable to any inquiries received from
the FTC, the Antitrust Division, the European Commission or any
other Authority for additional information or documentation and to
all inquiries and requests received from any or other Authority in
connection with antitrust, competition, investment or similar
matters, and (ii) extend any waiting period under the HSR Act, the
EC Merger Regulation or any other applicable antitrust, competition,
investment or similar Law, or enter into any agreement with the FTC,
the Antitrust Division, the European Commission or any other
Authority to delay consummation of the transaction, only after
receiving the prior written consent of the other Parties hereto.
6.11.3 In addition, each Party shall, subject to applicable Law and except
as prohibited by any representative of any Authority with powers of
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enforcement with respect to any applicable Law, (i) promptly notify
the other Parties of any substantive written communication to that
party from the FTC, the Antitrust Division, the European Commission
or any other Authority and permit the other Parties to review in
advance any proposed substantive written communication to any of the
foregoing; (ii) not agree to participate in any substantive meeting
or discussion with any Authority in respect of any filings,
investigation or inquiry concerning this Agreement or the
transactions contemplated hereby unless it consults with the other
Parties in advance and, to the extent permitted by such Authority,
gives the other Parties the opportunity to attend and participate
thereat; and (iii) furnish the other Parties with copies of all
substantive correspondence, filings, and written communications (and
memoranda setting forth the substance thereof) between it and its
Affiliates and their respective Representatives on the one hand, and
any Authority, including members or its staff, on the other hand,
with respect to this Agreement and the transactions contemplated
hereby.
6.11.4 Each Party shall promptly notify the other Party in writing of any
pending or, to the Knowledge of such Party, threatened Action by any
Authority or any other Person (i) challenging, or seeking damages in
connection with, the transactions contemplated under this Agreement
or (ii) seeking to restrain or prohibit the consummation of the
transactions contemplated by this Agreement or otherwise limit the
right of the Parent or the Offeror to own the Holdco Shares or the
Serono Shares or operate all or any portion of the businesses or
assets of Holdco or Serono.
6.12 Business Records
6.12.1 The Parent acknowledges and agrees that the business records of
Holdco relating to its operations prior to the Closing will be
acquired by the Parent in connection with the consummation of the
transactions contemplated hereby; provided, that the Parent agrees
that the Sellers shall be entitled to retain a copy of such records.
The Parent further
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acknowledges and agrees that the Sellers may from time to time
require access to or copies of the business records of Holdco
relating to its operations prior to the Closing and the Parent
agrees that upon reasonable prior notice from any Seller, it will,
during normal business hours, provide or cause to be provided to
such Seller, at such Seller's option and cost, access to or copies
of such records. Each Seller hereby agrees to hold any Proprietary
Information so provided in confidence; provided, that,
notwithstanding anything to the contrary herein, the Sellers may use
such Proprietary Information to the extent reasonably necessary for
purposes of preparing and filing tax returns, corresponding with tax
authorities, preparing accounting records and in connection with any
litigation, including, without limitation, litigation arising out
of, relating to or resulting from the transactions contemplated by
this Agreement or the subject matter of such Proprietary
Information. The Parent agrees that it will not (and will cause each
of its Affiliates, including Holdco not to), within ten years after
the Closing Date, knowingly destroy any business records of Holdco
prepared prior to the Closing Date without first notifying the
Sellers and affording the Sellers the opportunity, at their cost, to
remove or copy such records. For purposes of the preceding sentence,
any notice from the Parent delivered in accordance with this Section
6.12.1 shall be deemed to be adequate notice if not responded to in
writing by the Sellers within sixty (60) calendar days.
6.13 Change of the corporate name of Holdco; Use of Name
6.13.1 To the extent that the corporate name of Holdco still contains the
word "Bertarelli" after the Closing, the Parent shall procure that
this word and any reference to the Bertarelli family be removed from
the corporate name of Holdco, and shall file any documents necessary
to effect such change with any Authority, within thirty (30)
business days from the closing of the Offer.
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6.13.2 Each of the Parent and the Offeror acknowledges and agrees that (i)
except with respect to Holdco as expressly permitted by Section
6.13.1, neither the Parent nor any of its Affiliates (including,
without limitation, Holdco) shall have any right to use, and shall
not use, the word "Bertarelli" or any name or ▇▇▇▇ that is a
derivative thereof or confusingly similar thereto following the
Closing and (ii) each of the Sellers shall have the right to use the
word "Bertarelli" in such Seller's sole discretion following the
Closing.
6.14 Holdco indemnity provided by the Sellers
The Management Seller shall, jointly and severally with the other Sellers, and
each Non-Management Seller shall, severally as to herself only and not jointly
as to or with any other Seller and solely to the extent of such Non-Management
Seller's Allocable Portion, indemnify and hold harmless the Parent, the Offeror
and (following Closing) Holdco (each an "indemnified person") in respect of:
a. any and all liabilities, fines, penalties, costs, losses, damages or
expenses (including legal and other professional expenses) of
Holdco, whether prospective, contingent or otherwise and whether
arising before or after Closing, in each case to the extent that
they arise as a consequence of or by reference to any transaction,
arrangement, action or omission which occurred before Closing,
except for (i) matters set forth in Section 6.14 of the Sellers'
Disclosure Letter; (ii) any matter adjusted for in the Aggregate
Consideration adjustment procedures set forth in Section 1.2.7; and
(iii) liabilities of Holdco in the amount set forth in the Holdco
Financial Statements; and
b. all costs and expenses (including legal and other professional
expenses) incurred by any of them in relation to the matters within
Section 6.14(a). Notwithstanding any provision to the contrary in
this Agreement, the indemnity given by the Sellers in this Section
6.14 shall (i) survive Closing and continue in full force and effect
without
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limit in time; and (ii) continue to apply in full whether or not the
underlying facts, circumstances or events forming the basis of an
indemnified persons claim were known, or should have been known, to
that or any other indemnified person or any of their respective
employees or advisors had they made reasonable inquiry. The
provisions of Sections 7.1.3, 7.1.6, 7.3 and 7.4 shall apply mutatis
mutandis, and the provisions of Section 7.5 shall apply, to the
indemnity in this Section 6.14; provided, that no other provisions
contained in Article 7 shall apply to the indemnity in this Section
6.14.
6.15 Agreement not to Compete; Non-Solicitation of Employees
6.15.1 The Parties acknowledge that Parent shall be entitled to protect and
preserve the going concern value of the business of Serono and the
Serono Subsidiaries to the extent permitted by Law and that Parent
would not have entered into this Agreement absent the provisions of
this Section 6.15 and, therefore, for a period of three years from
the Closing, the Management Seller shall not, directly or
indirectly:
a. engage in activities or businesses, or establish any new
businesses, or actively participate in, control, manage or own
any interest in any Person engaged in activities that are
substantially in competition with the business activities
engaged in at Closing by Serono or any Serono Subsidiary
("Competitive Activities");
b. act as a consultant to, otherwise act in an executive or
supervisory capacity with respect to, any Person undertaking
activities prohibited pursuant to Section 6.15(a); and;
c. (A) solicit any key employee of Serono or any Serono
Subsidiary (except for general solicitations of employment by
any Seller or its Affiliates not specifically directed to such
Persons or solicitation of Persons whose employment by Serono
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has been previously terminated prior to such solicitation or
offer) and (B) solicit or encourage any employee of Serono or
any Serono Subsidiary to leave the employment of Serono and
the Serono Subsidiaries.
6.15.2 Section 6.15 shall be deemed not breached as a result of the
ownership by the Management Seller or any of his Affiliates of: (i)
less than 10% of any class of stock of a Person engaged, directly or
indirectly, in Competitive Activities; (ii) less than 10% in value
of any class of instrument of indebtedness of a Person engaged,
directly or indirectly, in Competitive Activities; or (iii) a Person
that is not primarily a pharmaceutical company that engages,
directly or indirectly, in Competitive Activities if such
Competitive Activities account for less than 10% of such Person's
consolidated annual revenues.
6.15.3 The Parties hereby acknowledge that Parent and its Affiliates may be
irreparably injured by a breach of the Management Seller's
agreements set forth in this Section 6.15, that monetary remedies
may be inadequate to protect Parent or its Affiliates against any
actual or threatened breach of this Section 6.15, and, without
prejudice to any other rights and remedies, including monetary
Damages, otherwise available to Parent or any of its Affiliates
against the Management Seller, the Management Seller agrees that
Parent or its Affiliates may seek equitable relief, including
injunctive relief and specific performance, in the event of any such
actual or threatened breach of this Section 6.15.
7. INDEMNIFICATION
7.1 Indemnification
7.1.1 All of the representations of the Parties contained in Article 3 and
Article 4 shall survive the Closing and continue in full force and
effect until the date falling fifteen (15) calendar months after the
Closing Date, at which
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time such representations shall terminate, except that (i) the
representations set forth in Sections 3.9 and 3.12 shall survive the
Closing and continue in full force and effect until the date that is
twelve (12) months after the later of: (y) the expiry of the
applicable statute of limitations, including extensions; and (z) the
decision or assessment of the competent tax authority, including any
tax claw back or tax penalty assessment procedure having become
final in all respects, at which time such representations shall
terminate; and (ii) the representations of the Sellers set forth in
Sections 3.1, 3.2, 3.3, 3.4 and 3.14 and the representations of the
Parent and the Offeror set forth in Sections 4.1, 4.2 and 4.6 shall
survive the Closing indefinitely (the date or anniversary set forth
above for the expiration of any such representation, if any, the
"Expiration Date"); provided, however, that if a Notice of Claim (as
defined below) relating to the breach of any representation
contained in Article 3 or Article 4 is given to any of the Sellers,
or the Parent, as the case may be, on or prior to the Expiration
Date (or, if no Expiration Date exists, at any time following the
Closing), then, notwithstanding anything to the contrary contained
in this Section 7.1, such representation shall remain in force
solely in connection with the claims set forth in reasonable detail
in such Notice of Claim to the extent necessary to permit such
claims to survive until such time as the claims set forth in such
Claim Notice based upon any breach or alleged breach of such
representation have been fully and finally resolved. The covenants
and agreements of the Parties (including, without limitation, the
covenants and agreements of the Parties contained in this Article 7)
contained in this Agreement shall survive the Closing indefinitely,
unless a particular covenant or agreement otherwise terminates
earlier pursuant to its terms (including, pursuant to the
termination of this Agreement). All claims of the Parent or the
Offeror, or any of the Sellers, as the case may be, under or in
connection with Article 7 shall be time-barred and lapse on the
Expiration Date; provided, however, that claims which have been duly
notified in accordance with Section 7.3 to the Sellers, or the
Parent, as the case may
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be, shall not be time-barred or otherwise lapse. Articles 201 and
210 of the Swiss Code of Obligations are hereby expressly and
unconditionally waived by the Parties.
7.1.2 Subject to Sections 7.1.3, 7.1.4 and 7.1.5, the Sellers shall hold
harmless and indemnify, jointly and severally with the other
Sellers, in the case of the Management Seller, and severally as to
herself only and not jointly as to or with any other Seller, in the
case of the Non-Management Sellers, the Parent and the Offeror (and,
where applicable following Closing, Holdco) from and against (i) any
and all Damages that result from, arise out of or otherwise relate
in any way to any breach by such Seller of any of such Seller's
representations set forth in Section 3.2 and Section 3.4.2, and (ii)
in the case of the Management Seller, any and all Damages, and in
the case of each Non-Management Seller, such Seller's Allocable
Portion of any and all Damages, that result from, arise out of or
otherwise relate in any way to any misrepresentation or any breach
of any other representations set forth in Article 3 or the covenants
or other agreements made by the Sellers under this Agreement.
7.1.3 Any claim of the Parent or the Offeror for indemnification under
Section 7.1.2 shall be subject to reduction or reimbursement to the
extent (i) of any amount in respect of such claim that is recovered
from any third party, (ii) that the Damages covered by such claim
shall have been caused by acts or omissions of the Parent or its
Affiliates after the Closing (unless such acts or omissions are
contemplated by this Agreement) or (iii) that the liabilities
relating to any such indemnifiable Damages are specifically recorded
in the Holdco Financial Statements. Where the Parent or the Offeror
(or, following Closing, Serono or any Serono Subsidiary) has a claim
against a third party, the bringing of which would reasonably be
expected to reduce any claim for indemnification under Section
7.1.2, they shall use their commercially reasonable efforts to
pursue such claim against the third party. Without limitation to the
foregoing and for the avoidance of doubt, in the event that a
recovery is received by the Parent
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or its Affiliates with respect to any Damages for which the Parent
and/or the Offeror has previously been indemnified by any Seller(s)
pursuant to this Agreement, then the Parent and/or the Offeror, as
the case may be, shall promptly make a refund to each such Seller of
an amount equal to the lesser of (i) the total amount of such
recovery (less the costs associated with such recovery), and (ii)
the amount previously paid by such Seller to the Parent and/or the
Offeror as indemnification for such Damages. In order to avoid
duplication of recovery, where the Parent or the Offeror shall have
been indemnified for Damages under this Article 7, no additional
recovery shall be available hereunder with respect to such Damages.
7.1.4 None of the Sellers shall be required to indemnify any of Parent or
the Offeror for any Damages with respect to any breach of any
representations of the Sellers set forth in Section 3.11: (A) unless
the aggregate of all Damages for which the Sellers together would,
but for this clause (A), be liable thereunder exceeds on a
cumulative basis an amount equal to CHF 250,000,000, but once such
aggregate exceeds such figure, the Management Seller shall be liable
for the full aggregate amount and not just the excess over such
figure, and each Non-Management Seller shall be liable for its
Allocable Portion of such full aggregate amount; or (B) with respect
to each Non-Management Seller, in excess of its Allocable Portion of
CHF 1,557,954,000 (the "Cap"), or, in the case of the Management
Seller, in excess of the Cap; provided that in no event shall the
Sellers together be required to indemnify any of the Parent or the
Offeror for any Damages in an aggregate amount in excess of the Cap
with respect to any breach of any representations of the Sellers set
for in Section 3.11.
7.1.5 Save in the case of fraud, the Parent and the Offeror shall not have
any right to make a claim for indemnification against the Sellers
under Section 7.1.2 to the extent that, at or prior to the Effective
Date, the underlying facts, circumstances or events forming the
basis of the Parent's or the Offeror's claim (i) were within the
actual knowledge of the Parent or the
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Offeror or (ii) were fairly disclosed in writing to the Parent and
the Offeror in the Sellers' Disclosure Letter.
7.1.6 Any payment made to the Parent or the Offeror (and, where applicable
following Closing, Holdco) under Section 7.1 shall be deemed, to the
fullest extent permitted by law, to be a reduction of the Aggregate
Consideration. Any indemnification payment made by the Parent or the
Offeror under this Agreement shall be deemed, to the fullest extent
permitted by law, to be an increase in the Aggregate Consideration.
7.2 Indemnification by the Parent
7.2.1 Subject to Sections 7.1.1 and 7.2.2, the Parent and the Offeror
shall hold harmless and indemnify, jointly and severally, each of
the Sellers from and against, any Damages that arise directly from
or as a direct result of, or are directly connected with (i) any
breach of any of the representations set forth in Article 4; or (ii)
the covenants or other agreements made by the Parent or the Offeror
under this Agreement.
7.2.2 Any claim of any Seller for indemnification hereunder shall be
subject to reduction to the extent that (i) any amount in respect of
such claim is recovered under an insurance policy or from any third
party, or (ii) the Damages covered by such claim shall have been
caused by acts or omissions of such Seller or its Affiliates after
the Closing.
7.3 Claim Notice
7.3.1 As used herein, the term "Claim" shall mean a claim for
indemnification of a Party under this Article 7. Subject to the
terms of this Agreement, the claiming Party shall give written
notice of a Claim (a "Notice of Claim") to the other Party or
Parties (the "Indemnifying Parties") against which the claiming
Party wishes to make a claim for indemnification under this Article
7. The claiming Party shall deliver each Notice of Claim to the
applicable Indemnifying Party within sixty (60) calendar days of
such
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claiming Party's becoming aware of the alleged breach for which the
claiming Party seeks indemnification hereunder; it being understood
that failure to timely provide a Notice of Claim shall not affect
the indemnification obligations of any Indemnifying Party hereunder
in the absence of prejudice to such Indemnifying Party resulting
from such failure and, in such case, only to the extent of such
prejudice.
7.3.2 Each Notice of Claim given pursuant to Section 7.3.1 shall contain
the following information: (i) a best estimate of the aggregate
amount of Damages sought by the claiming Party pursuant to such
Claim (which amount may be the amount of damages claimed by a third
party in an action brought against the claiming Party based on
alleged facts, which if true, would give rise to liability for
Damages indemnifiable under this Article 7); (ii) a brief
description, in reasonable detail (to the extent known by the
claiming Party at that time) of the facts, circumstances or events
giving rise to the alleged Damages; and (iii) specific references to
the particular representation(s), covenant(s), indemnity or
agreement(s) alleged to have been breached (to the extent known by
the claiming Party at that time).
7.3.3 Subject to Sections 7.3.1 and 7.4.1, the claiming Party may submit a
Notice of Claim at any time during the period commencing with the
Closing Date and ending on the applicable Expiration Date, if any.
Notwithstanding anything contained herein to the contrary, any
Claims for Damages specified in any Notice of Claim delivered prior
to the applicable Expiration Date, if any, shall remain outstanding
until such Claims for losses have been resolved or satisfied. If,
within thirty (30) calendar days after a Notice of Claim is
received, the Indemnifying Parties have not accepted such Notice of
Claim in writing, the Indemnifying Parties shall be conclusively
deemed to have objected on behalf of all Indemnifying Parties to the
recovery by the claiming Party of the full amount of Damages
specified in the Notice of Claim in accordance with this Section
7.3.
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7.3.4 If the Indemnifying Parties object, or are deemed to have objected,
to a Notice of Claim as set forth in Section 7.3.3 (such Claim being
hereinafter referred to as a "Contested Claim"), then such Contested
Claim shall be resolved by either (i) a written settlement agreement
executed by the Parent (or Offeror) and the Sellers or (ii) in the
absence of such a written settlement agreement, by an arbitral
proceeding with respect to such Contested Claim in accordance with
Section 9.8.
7.3.5 Articles 200 and 201 of the Swiss Code of Obligations are hereby
expressly and unconditionally waived by the Parties.
7.4 Right of Indemnifying Party to defend Third Party Claims
7.4.1 If, after the Closing, one or more of Holdco, Serono, the Sellers,
the Parent or the Offeror is sued or threatened to be sued by any
third party, including without limitation any Authority, or if any
such party is subjected to any claim or arbitral demand, or any
audit or examination by any tax or other authority, and such suit,
audit or examination gives rise to a Claim for which indemnification
will be sought under Section 7.1 or 7.2 (such Claim a "Third Party
Claim"), the claiming Party shall give each Indemnifying Party
prompt notice of such Third Party Claim (in no event later than
thirty (30) calendar days after the claiming Party has become aware
of such Third Party Claim). The Indemnifying Party shall have thirty
(30) calendar days after receipt of such notice to notify such
claiming Party whether the Indemnifying Party has elected to assume
the defense of such Third Party Claim. If the Indemnifying Party
fails to notify the claiming Party within thirty (30) calendar days
after receipt of notice of a Third Party Claim that the Indemnifying
Party has elected to assume the defense of such Third Party Claim,
the claiming Party shall be entitled to assume the defense of such
Third Party Claim at its own expense; provided that the claiming
Party may not consent to the entry of any judgment or settle any
Third Party Claim without the Indemnifying Party's consent, which
consent shall not be unreasonably withheld or delayed.
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7.4.2 In the event that the Indemnifying Party elects to assume the
defense of the Third Party Claim, the claiming Party shall ensure
that the Indemnifying Party is provided with all materials,
information and assistance relevant in relation to the Third Party
Claim and is given reasonable opportunity to comment or discuss with
the claiming Party and its Representatives any measures which the
Indemnifying Party proposes to take or to omit in connection with a
Third Party Claim, and in particular the Indemnifying Party shall be
given an opportunity to comment on, participate in, and review any
reports and all relevant tax and social security audits or other
measures and receive without undue delay copies of all relevant
orders of any Authority. Without limiting the foregoing, the
claiming Party shall comply, at the Indemnifying Party's cost, with
all reasonable requests for cooperation from the Indemnifying Party.
7.4.3 In the event that the Indemnifying Party elects to assume the
defense of the Third Party Claim always providing that the
Indemnifying Party shall consult with, and take into consideration
the views of, the claiming Party as to the conduct of any Third
Party Claim, the Indemnifying Party shall be entitled at its own
discretion to take such action as it shall deem necessary to avoid,
dispute, deny, defend, resist, appeal, compromise or contest such
Third Party Claim (including making counter claims or other claims
against third parties) in the name of and on behalf of itself and
the claiming Party, and the claiming Party will give and cause its
Representatives and Affiliates to give, subject to them being
reimbursed for all reasonable out-of-pocket costs and expenses, all
such reasonable information and assistance, as described above,
including reasonable access to premises and personnel during office
hours and including the right to examine and copy or photograph any
assets, accounts, documents and records for the purpose of avoiding,
disputing, denying, defending, resisting, appealing, compromising or
contesting any such Third Party Claim as the Indemnifying Party or
their professional advisors may reasonably request; provided that
the Indemnifying Party shall use all such
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information confidentially and only for such purpose. The claiming
Party(s) shall agree to any settlement, compromise or discharge of
such Third Party Claim that the Indemnifying Party may recommend
that, by its terms, discharges the claiming Party from any liability
in connection with such Third Party Claim; provided, however, that,
without the consent of the claiming Party which shall not be
unreasonably withheld, conditioned or delayed, the Indemnifying
Party shall not consent to, and the claiming Party shall not be
required to agree to, the entry of any judgment or enter into any
settlement that (i) provides for injunctive or other non-monetary
relief affecting the claiming Party or any Affiliate of the claiming
Party or (ii) does not include as an unconditional term thereof the
giving of a release from all liability with respect to such claim by
each claimant or plaintiff for the benefit of each claiming Party.
7.4.4 All costs and expenses incurred by the Indemnifying Party in
defending any Third Party Claim in accordance with this Section 7.4
shall be borne by the Indemnifying Party. All information disclosed
by any of Holdco, Serono, the Sellers, the Parent or the Offeror to
any other party in connection with any Claim shall be kept
confidential by the receiving party.
7.5 Limitation of Recourse
7.5.1 The rights of the Parties for indemnification relating to this
Agreement or the transactions contemplated hereby shall be strictly
limited to those contained in Section 6.8, Section 6.14 and this
Article 7 and, subject to the last sentence hereof, such
indemnification rights shall be the exclusive remedies of the
Parties subsequent to the Closing Date with respect of any matter in
any way relating to this Agreement or arising in connection
herewith, other than specific performance, if available. To the
maximum extent permitted by Law, each of the Parties hereby waives
and shall cause their respective Affiliates to waive all other
rights and remedies with respect to any such matter, whether under
any Laws, at common Law,
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equity or otherwise, including but not limited to, rescission of
this Agreement pursuant to section 23 et. seq. and/or Article 205 of
the Swiss Code of Obligations except for claims based on fraud or
breach of the Holdco warranty set forth in Section 3.4 of this
Agreement. Other than Claims for indemnification pursuant to Section
6.8, Section 6.14 or this Article 7 or Actions seeking specific
performance with respect to any covenants or agreement of any Party
under this Agreement, no Action shall be brought or maintained
subsequent to the Closing Date by any Party hereto or such Party's
respective Affiliates, successors or permitted assigns against any
other Party hereto, by virtue of or based upon any alleged
misstatement or omission allegedly constituting an inaccuracy in or
breach of any of the representations, or covenants of such other
Party set forth or contained in this Agreement, except to the extent
that the same shall have been the result of fraud by such other
Party (and in the event of fraud, recourse shall only extend to
those Persons committing fraud).
8. TERMINATION
8.1 Termination
8.1.1 This Agreement may be terminated at any time prior to the Closing:
a. by the mutual written consent of the Parent and the Sellers; or
b. by written notice of either the Parent or any Seller, if the Closing
shall not have occurred on or before April 2, 2007 (the "Termination
Date"); provided, that the right to terminate this Agreement
pursuant to this Section 8.1.1(b) shall not be available to any
Party, if such Party's failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date;
c. by written notice of either the Parent or the Sellers, if the
satisfaction by the Termination Date of any Condition Precedent to
the notifying Party's obligations under this Agreement shall have
become impossible; provided,
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that the right to terminate this Agreement pursuant to this Section
8.1.1(c) shall not be available to any Party, if such Party's
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the satisfaction of the relevant Condition
Precedent becoming impossible;
d. by written notice of the Parent, in the event of a breach of any
Section of this Agreement by any Seller that is material in the
context of the transactions contemplated hereby and which cannot be
cured prior to the Termination Date or, if curable by such time, is
not cured within forty-five (45) calendar days after the Parent
shall have given the Sellers written notice stating the Parent's
intention to terminate this Agreement pursuant to this Section
8.1(d) and the basis for such termination (or by the Termination
Date, if earlier than the expiry of such forty-five (45) day
period); provided, at the time of the delivery of such notice,
neither the Parent nor the Offeror shall be in material breach of
its obligations under this Agreement;
e. by written notice of the Sellers, in the event of a breach of any
Section of this Agreement by the Parent or the Offeror that is
material in the context of the transactions contemplated hereby and
which cannot be cured prior to the Termination Date or, if curable
by such time, is not cured within forty-five (45) calendar days
after the Sellers shall have given the Parent written notice stating
the Sellers' intention to terminate this Agreement pursuant to this
Section 8.1(e) and the basis for such termination (or by the
Termination Date, if earlier than the expiry of such forty-five (45)
day period); provided, at the time of the delivery of such notice,
none of the Sellers shall be in material breach of its obligations
under this Agreement; or
f. by written notice of either the Parent or the Sellers, if any U.S.,
Swiss, European Union or European Union Member State Authority of
competent jurisdiction shall have issued any injunction, judgment,
order, decree or ruling restraining, enjoining, prohibiting,
invalidating or otherwise preventing the consummation of the
transactions contemplated hereby, and such injunction, judgment,
order, decree or ruling shall have become final
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and nonappealable (which injunction, judgment, order, decree or
ruling the Parties shall have used all reasonable efforts to have
vacated or reversed in accordance with Section 6.11).
8.2 Effect of Termination
8.2.1 Termination of this Agreement pursuant to Section 8.1 shall
terminate all obligations of the Parties hereunder, without
liability of any party to any other party, except for the
obligations under Section 6.10 and Section 6.4 (which shall survive
in accordance with the terms thereof), this Section 8.2 and Article
9. Notwithstanding the foregoing, nothing in this Section 8.2 shall
(i) affect or prejudice rights accrued as at termination or (ii)
relieve any party hereto of liability for fraud or a willful or
grossly negligent breach of any of its obligations under this
Agreement, and further if it shall be finally judicially determined
that termination of this Agreement was caused by fraud or a willful
or grossly negligent breach of this Agreement, then, in addition to
other remedies at Law or equity for breach of this Agreement, the
party so found to have committed fraud or willfully or grossly
negligently breached this Agreement shall indemnify and hold
harmless the other Parties hereto for their respective out-of-pocket
costs, including the reasonable fees and expenses of their counsel,
accountants, financial advisors and other experts and advisors, as
well as reasonable fees and expenses incident to the negotiation,
preparation and execution of this Agreement and related
documentation.
9. MISCELLANEOUS
9.1 Entire Agreement; Interpretation
9.1.1 This Agreement, including the schedules and any other documents
referred to herein, constitutes the entire agreement and
understanding among the Parties with respect to the subject matter
hereof, and shall
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supersede all prior oral and written agreements, understandings or
undertakings of the Parties. This Agreement, including the schedules
and any other documents referred to herein, shall be binding on all
successors and assignees of the Parties. All references to this
Agreement shall be deemed to include the schedules.
9.1.2 Any determination as to whether any effect, change, event, fact or
condition constitutes a "Material Adverse Effect" (as defined in
Section 9.6) for the purpose of Sections 2.2.1(a) and 2.2.1(b)),
shall not take into account any adverse effect, change, event, fact
or condition relating to, resulting from, arising out of or caused
by, any of the following: (i) general business or economic
conditions (including, without limitation, fluctuations in currency
exchange rates), (ii) business conditions in the industries and
markets in which Serono and the Serono Subsidiaries operate which do
not affect the combined business of Serono and the Serono
Subsidiaries, taken as a whole, in a materially disproportionate
way, (iii) conditions in financial, banking, or securities markets
(including any disruption thereof and any decline in the price of
any security or any market index) or any decline in the trading
prices of the bearer shares of Serono or the ADSs of Serono, (iv)
changes in IFRS, (v) national or international political or social
conditions, including armed hostilities, acts of war, sabotage or
terrorism or military actions or any escalation or material
worsening of any such hostilities, acts of war, sabotage or
terrorism or military actions, (vi) changes of general application
in Law, orders, or other binding directives issued by any Authority,
(vii) (A) results of pre-clinical and clinical testing (other than
results of clinical testing on any marketed product of Serono or any
Serono Subsidiary), or (B) the results of the review of regulatory
submissions (other than where the results of any such review are in
respect of any marketed product of Serono or any Serono Subsidiary)
by the FDA and other Authorities, including, without limitation,
where such review results in the approval by the FDA or any such
other Authority of any products of any third party
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that are competitive with products of Serono or any Serono
Subsidiary, (viii) the announcement of this Agreement and the
transactions contemplated hereby, if such effect, change, event,
fact or condition would reasonably be expected to arise as a result
thereof or (ix) the taking of (A) any action contemplated or
required by this Agreement, including pursuant to Section 6.11, or
the other agreements contemplated hereby or (B) (x) any action by
the Parent or the Offeror or (y) any action to which the Parent or
the Offeror shall consent.
9.2 Amendment; waiver
9.2.1 This Agreement may not be amended, except by an instrument in
writing signed by each Party and no Party may waive compliance with
any of the agreements or terms and conditions contained in this
Agreement except by an instrument in writing.
9.3 Costs and expenses
9.3.1 All fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be borne by the Party
incurring such fees or expenses.
9.4 Assignment
9.4.1 Neither Party shall be entitled to assign any rights or claims under
this Agreement without the written consent of the other Party,
provided that the Parent shall have the right, without Sellers'
prior consent, to assign all or part of its rights and obligations
under this Agreement to one of its Affiliates, it being understood
that in any such case, Parent shall inform the Sellers of such
assignment and shall remain jointly and severally liable for the
full, due and proper discharge of all obligations incumbent upon
Parent under this Agreement.
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9.5 Notices
9.5.1 All notices and other communications hereunder shall be made in
writing and shall be delivered or sent by registered mail,
facsimile, or courier to the addresses below or to such other
addresses which may be specified by any Party to the other Party in
the future in writing. Notices given by courier or fax shall be
deemed to have been given upon receipt or confirmation of facsimile
transmission. Notices given by registered mail shall be deemed to
have been given on the day of delivery of the mail, or in the
absence of or in the case of refusal of the mail by the addressee,
on the seventh (7th) day following unsuccessful delivery of the mail
by the post office (delai de garde).
If to the Sellers:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇/▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Pidoux & Associes
Avenue de Montbenon 2
CP 5475
▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Telephone: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
Facsimile: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
with copies to:
---------------
▇▇▇▇ & Staehelin
Route de Chene 30
▇▇-▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attn: Andreas von Planta
Guy Vermeil
Telephone: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
Facsimile: ▇▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
and
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: ▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Parent and the Offeror:
MERCK KGAA
Address: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax No: ▇▇▇(▇)▇▇▇▇ ▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ Falcke
with copies to:
---------------
Homburger Rechtsanwalte
Address: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇/▇▇
▇▇-▇▇▇▇ ▇▇▇▇▇▇
Fax No: ▇▇▇ (▇)▇▇ ▇▇▇ ▇▇ ▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
9.5.2 Each of the Sellers understands and agrees that any notice that may
be, or is required to be, given to the Sellers by the Parent and/or
the Offeror under the terms of this Agreement shall be deemed to
have been validly given, subject to the terms of Section 9.5.1, to
each of the Sellers if it has been sent by the Parent and the
Offeror to the address referred to in Section 9.5.1 as being the
address of the Sellers and given in compliance with Section 9.5.1.
Each of the Parent and the Offeror understands and agrees that,
without prejudice to the right of any of the Sellers to give a
notice to the Parent and/or the Offeror in its own name under this
Agreement, any notice that may be, or is required to be, given by
the Sellers to the Parent and/or the Offeror under the terms of this
Agreement shall be deemed to have been validly given, subject to the
terms of Section 9.5.1, to each of the Parent and the Offeror, as
applicable, if it has been sent by the Management Seller acting on
behalf of the Sellers to the address set forth in Section 9.5.1 as
being the address of the Parent, and has been given in compliance
with Section 9.5.1.
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9.6 Certain Definitions
In addition to terms defined elsewhere in this Agreement, the following terms
when utilized in this Agreement, unless the context otherwise requires, shall
have the meanings indicated, which meanings shall be equally applicable to both
the singular and plural forms of such terms:
"Action" shall mean any demand, action, claim, suit, countersuit,
litigation, arbitration, prosecution, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court, grand jury or other Authority.
"Affiliate" shall mean with respect to a Person, any other Person
controlling, controlled by or under common control with such first Person. The
term "control" as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise. With respect to Sellers, Affiliates shall
include Holdco and Serono.
"Allocable Portion" means, for each Non-Management Seller, an amount
equal to a fraction (expressed as a decimal carried to the nearest
ten-thousandth), the numerator of which is the amount of the Closing Aggregate
Consideration paid to such Seller pursuant to Section 1.3.1, and the denominator
of which is the total Closing Aggregate Consideration paid to all Sellers
pursuant to Section 1.3.1.
"Authority" means any supranational, federal, state, cantonal or
local governmental entity, regulatory agency, commission, bureau, authority,
court or arbitration tribunal having jurisdiction over the Parties or any of
them.
"Damages" means any and all liabilities, damages, costs, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses) suffered by the relevant Party.
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"Expert" means an independent investment bank or accounting firm of
internationally recognized reputation to be jointly instructed by the Parent and
the Sellers, which such expert shall be jointly appointed by the Parent and the
Sellers within five (5) business days of any assertion by the Parent or the
Offeror that there shall have occurred any effect, change, event, fact or
condition that constitutes a Material Adverse Effect; provided that in the event
that the Parent and the Sellers are unable to select a mutually agreeable expert
within the five (5) business day period referenced above, each of the Parent and
the Sellers shall within two (2) business days of the end of such five (5)
business day period provide written notice to the President of the Chamber of
Commerce and Industry of Geneva of the Parties' inability to agree upon an
expert, and the President of the Chamber of Commerce and Industry of Geneva
shall select an expert within ten (10) calendar days of its receipt of any such
notice, with such selection to be binding upon the Parties for purposes of this
Agreement.
"EC Merger Regulation" means Council Regulation (EC) No. 139/2004 of
20 January 2004, of the Council of the European Union, as amended.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976.
"IFRS" means International Financial Reporting Standards as in
effect from time to time, consistently applied.
"Knowledge" (a) when applied to any Seller means the actual
knowledge of such Seller; (b) when applied to the Parent or the Offeror means
(i) the actual knowledge of any officer or director of the Parent having made
reasonable enquiry of the individuals set forth on Schedule 9.6(b); and (c) when
applied to Serono or Serono Subsidiary means the actual knowledge of the
individuals set forth on Schedule 9.6(a).
"Material Adverse Effect" means any matter, effect, change, event,
fact or condition, that in the opinion of the Expert, is or would be expected to
be materially adverse to the combined business of Serono and the Serono
Subsidiaries, taken as a whole (the "Serono Group"). A matter, effect, change,
event, fact or
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condition shall not be considered materially adverse or expected to be
materially adverse unless it can be shown (i) to amount to, represent or have
resulted in, or to be expected to amount to, represent or result in, a reduction
in consolidated equity of the Serono Group in excess of US$ 400 million from the
consolidated equity of the Serono Group reported as of December 31, 2005; or
(ii) to be expected to amount to, represent or result in a reduction (on an
annualised basis) in the anticipated consolidated revenues of the Serono Group
for each of the calendar years 2006 and 2007 in excess of US$ 300 million from
the consolidated revenues of the Serono Group reported for the fiscal year ended
December 31, 2005.
"Serono Subsidiary" means any corporation, partnership, joint
venture or other legal entity of which Serono (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 50% or more
of the shares or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
"Law" means any law, statute, rule or regulation, and any judgment
or order of any Authority.
"Lien" means any mortgage, lien, pledge, charge, encumbrance, usus
fructus or other security interest.
"Loan Note" means that certain promissory note by and between the
Sellers, as Makers, and Holdco, as Holder, evidencing indebtedness of the
Sellers to Holdco in a principal amount of CHF 902,391,692, bearing interest as
of July 1, 2005 at a rate of 2.25% per annum, pursuant to that certain Loan
Agreement, dated as of December 9, 2005, by and between the Sellers and Holdco.
"Ordinary Course of Business" means, when applied to any Person, the
ordinary course of business consistent with the past practice of such Person in
the operation of its businesses.
"Parent Subsidiary" means any corporation, partnership, joint
venture or other legal entity of which Parent (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 50% or more
of the shares or other
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equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"Permitted Liens" means Liens securing property Taxes or
assessments, which Taxes have been incurred in the Ordinary Course of Business
and are not yet due and payable or the validity of which is being contested in
good faith by appropriate proceedings.
"Person" means any natural person, corporation, limited liability
company, unincorporated organization, partnership, association, joint-stock
company, joint venture, other entity, trust or government, or any agency or
political subdivision of any government.
"Related Party": means and includes (i) each of the Sellers; (ii)
each member of the immediate family of each of the individuals referred to in
clause "(i)" above; and (iii) any trust or other entity (other than Serono or
any Serono Subsidiary) in which any one of the individuals referred to in
clauses "(i)" and "(ii)" above has or holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest. For purposes of this definition, "immediate
family" means, in relation to a person, (i) his or her spouse and (ii) his or
her direct descendants or ascendants.
"SEC" means the United States Securities and Exchange Commission.
"Sellers' Disclosure Letter" means the disclosure letter, if any,
delivered by, or on behalf of the Sellers, to the Parent.
"Taxes" means all federal, state, cantonal and local taxes
(including, without limitation, income or profits taxes, withholding taxes
premium taxes, excise taxes, sales taxes, use taxes, gross receipts taxes,
franchise taxes, ad valorem taxes, severance taxes, capital levy taxes, transfer
taxes, value added taxes, employment and payroll-related taxes, property taxes,
business license taxes, occupation taxes, import duties and other governmental
charges and assessments), of any kind whatsoever, as well as social security
payments including interest, additions to tax and penalties with respect
thereto.
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9.7 Severability
9.7.1 Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and
provisions of this Agreement in any other jurisdiction. Upon a
determination that any term or other provision is invalid or
unenforceable, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as
closely as possible to the fullest extent permitted by applicable
Law to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
9.8 Governing Law
9.8.1 This Agreement shall be governed by and construed in accordance with
the substantive Laws of Switzerland, without regard to the
principles of conflicts of Laws thereof.
9.8.2 Any dispute, controversy or claim arising out of or in connection
with this Agreement, including the validity, invalidity, breach or
termination thereof, shall be settled by arbitration in accordance
with the Swiss Rules of International Arbitration of the Swiss
▇▇▇▇▇▇▇▇ of Commerce in force on the date when the notice of
Arbitration is submitted in accordance with these rules. The number
of arbitrators shall be three, with the Sellers selecting one
arbitrator, the Parent selecting one arbitrator, and those two
arbitrators selecting the third arbitrator by mutual agreement. Each
of the arbitrators shall be impartial and independent of the
Parties. The seat of the arbitration shall be in Geneva. The
arbitral proceedings shall be conducted in English.
[The next page is the signature page.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the date first set forth above.
MERCK KGaA
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
MERCK VIERTE ALLGEMEINE
BETEILIGUNGSGESELLSCHAFT mbH
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
By: /s/ Uta Kemmerich
-----------------------------------
Name: Uta Kemmerich
Title:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, acting as
attorney-in-fact
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, acting as
attorney-in-fact
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