COPY
STOCK AND ASSET PURCHASE AGREEMENT
AMONG
SMITHKLINE ▇▇▇▇▇▇▇ PLC,
SMITHKLINE ▇▇▇▇▇▇▇ CORPORATION
(for certain limited purposes)
and
QUEST DIAGNOSTICS INCORPORATED
Dated as of February 9, 1999
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions............................................ 1
ARTICLE II
Purchase and Sale of the Shares
and the Other Assets; Closing
SECTION 2.01. Purchase and Sale of the Shares and the Other Assets........9
SECTION 2.02. Assumption and Exclusion of Liabilities for the
Non-U.S. Clinical Laboratories Business..........11
SECTION 2.03. Closing....................................................12
SECTION 2.04. Adjustment of Cash Purchase Price..........................13
SECTION 2.05. Intercompany Accounts......................................14
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01. Authority..................................................15
SECTION 3.02. No Conflicts; Consents.....................................15
SECTION 3.03. The Shares.................................................16
SECTION 3.04. Organization and Standing..................................16
SECTION 3.05. Capital Stock of the Company and the Company Subsidiary....17
SECTION 3.06. Equity Interests...........................................17
SECTION 3.07. Financial Statements; Undisclosed Liabilities..............17
SECTION 3.08. Taxes......................................................18
SECTION 3.09. Assets Other than Intellectual Property and Real
Property Interests......................................20
SECTION 3.10. Real Property..............................................21
SECTION 3.11. Contracts..................................................22
SECTION 3.12. Litigation.................................................24
SECTION 3.13. Benefit Plans..............................................25
SECTION 3.14. Absence of Changes or Events...............................27
SECTION 3.15. Compliance with Applicable Laws; Corporate
Integrity Agreement..............................27
SECTION 3.16. Environmental and Health and Safety Matters................28
SECTION 3.17. Employee and Labor Matters.................................28
SECTION 3.18. Information Supplied.......................................29
SECTION 3.19. Receivables................................................29
SECTION 3.20. Intellectual Property......................................29
SECTION 3.21. Sufficiency of Assets......................................30
ARTICLE IV
Representations and Warranties of Buyer
SECTION 4.01. Authority..................................................31
SECTION 4.02. No Conflicts; Consents.....................................31
SECTION 4.03. Organization and Standing of the Buyer Subsidiaries........32
SECTION 4.04. Capital Stock of Buyer and the Buyer Subsidiaries..........32
SECTION 4.05. SEC Documents; Undisclosed Liabilities.....................33
SECTION 4.06. Litigation.................................................34
SECTION 4.07. Absence of Changes or Events...............................35
SECTION 4.08. Compliance with Applicable Laws; Corporate
Integrity Agreement..............................35
SECTION 4.09. Securities Act.............................................35
SECTION 4.10. Availability of Funds......................................36
SECTION 4.11. Information Supplied.......................................36
SECTION 4.12. Taxes......................................................36
SECTION 4.13. Benefit Plans..............................................37
SECTION 4.14. Real Property..............................................37
SECTION 4.15. Intellectual Property......................................38
SECTION 4.16. Assets Other than Intellectual Property and Real
Property Interests...............................38
SECTION 4.17. Employee and Labor Matters.................................38
SECTION 4.18. Environmental and Health and Safety Matters................39
ARTICLE V
Covenants of Seller
SECTION 5.01. Access.....................................................39
SECTION 5.02. Ordinary Conduct...........................................40
SECTION 5.03. Confidentiality............................................42
SECTION 5.04. Insurance..................................................42
SECTION 5.05. Resignations...............................................43
SECTION 5.06. No Additional Representations..............................43
SECTION 5.07. Supplemental Disclosure....................................43
SECTION 5.08. Financial Statements.......................................43
SECTION 5.09. No Solicitation or Negotiation.............................44
SECTION 5.10. Certain Transfers - Intellectual Property and Licenses
Under the diaDexus Agreement.....................44
SECTION 5.11. Certain Licenses...........................................45
SECTION 5.12. Senior Level Employees.....................................46
ARTICLE VI
Covenants of Buyer
SECTION 6.01. Access.....................................................46
SECTION 6.02. Conduct of Business of Buyer...............................47
SECTION 6.03. Confidentiality............................................48
SECTION 6.04. No Additional Representations..............................48
SECTION 6.05. Supplemental Disclosure....................................49
SECTION 6.06. Seller Guarantees..........................................49
SECTION 6.07. Use of Certain Names.......................................49
SECTION 6.08. Buyer Rights Agreement; Consequences if Buyer
Rights Triggered.................................49
SECTION 6.09. Preparation of the Proxy Statement; Buyer
Stockholders Meeting.............................50
SECTION 6.10. Financing..................................................50
SECTION 6.11. No Solicitation or Negotiation.............................51
ARTICLE VII
Mutual Covenants
SECTION 7.01. Consents...................................................52
SECTION 7.02. Cooperation................................................52
SECTION 7.03. Publicity..................................................53
SECTION 7.04. Reasonable Best Efforts....................................53
SECTION 7.05. Antitrust Notification.....................................53
SECTION 7.06. Records....................................................54
SECTION 7.07. Support Services...........................................54
SECTION 7.08. Fees and Expenses..........................................54
SECTION 7.09. The Other Assets...........................................55
SECTION 7.10. Further Assurances.........................................56
SECTION 7.11. Year 2000..................................................56
ARTICLE VIII
Employee and Related Matters
SECTION 8.01. Employment.................................................58
SECTION 8.02. Benefit Plans; Coverage....................................58
SECTION 8.03. Past Service Credit........................................59
SECTION 8.04. Accrued Vacation, Personal and Sick Days...................59
SECTION 8.05. Seller's Pension Plan......................................60
SECTION 8.06. 401(k) Plan................................................60
SECTION 8.07. Medical and Dental.........................................60
SECTION 8.08. Long-Term Disability.......................................61
SECTION 8.09. WARN Act...................................................61
SECTION 8.10. Life Insurance.............................................61
SECTION 8.11. Employment Claims; Workers Compensation....................62
SECTION 8.12. Cooperation; Employment Records............................62
SECTION 8.13. No Right to Plan Participation or Continued Employment.....62
SECTION 8.14. Non-U.S. Employees/Transfer Provisions.....................62
SECTION 8.15. MRI Bonuses................................................63
ARTICLE IX
Tax Matters
SECTION 9.01. Tax Indemnity..............................................64
SECTION 9.02. Procedures Relating to Indemnification of Tax Claims.......66
SECTION 9.03. Preparation and Filing of Tax Returns......................68
SECTION 9.04. Tax Covenants..............................................69
SECTION 9.05. Cooperation on Tax Matters.................................69
SECTION 9.06. Tax Refunds and Credits....................................70
SECTION 9.07. Filing of Amended Tax Returns..............................70
SECTION 9.08. Transfer, Documentary, Sales, Use, Registration and
Other Similar Transfer Taxes.....................71
SECTION 9.09. Certificate Showing Exemption from Withholding.............71
SECTION 9.10. Termination of Tax Sharing Agreements......................71
SECTION 9.11. Seller Subsidiary Election.................................71
SECTION 9.12. Seller Tax Items...........................................71
SECTION 9.13. Miscellaneous..............................................75
ARTICLE X
Conditions to Closing
SECTION 10.01. Buyer's Obligation........................................76
SECTION 10.02. Seller's Obligation.......................................77
SECTION 10.03. Frustration of Closing Conditions.........................77
ARTICLE XI
Indemnification
SECTION 11.01. Survival of Representations and Warranties................78
SECTION 11.02. Indemnification by Seller.................................78
SECTION 11.03. Indemnification by Buyer..................................80
SECTION 11.04. Certain Procedures........................................82
SECTION 11.05. Adjustments; Limitations on Indemnity.....................83
SECTION 11.06. Additional Indemnification by Seller......................84
SECTION 11.07. Seller Subsidiary Liability...............................86
SECTION 11.08 Termination of Indemnification.............................86
ARTICLE XII
Termination
SECTION 12.01. Termination...............................................86
SECTION 12.02. Consequences of Termination...............................87
SECTION 12.03. Return of Confidential Information........................87
ARTICLE XIII
Miscellaneous
SECTION 13.01. Interpretation............................................88
SECTION 13.02. Amendments................................................88
SECTION 13.03. Assignment................................................88
SECTION 13.04. No Third-Party Beneficiaries..............................89
SECTION 13.05. Notices...................................................89
SECTION 13.06. Attorney Fees.............................................90
SECTION 13.07. Counterparts..............................................90
SECTION 13.08. Entire Agreement..........................................90
SECTION 13.09. Fees......................................................90
SECTION 13.10. Severability..............................................90
SECTION 13.11. Consent to Jurisdiction...................................90
SECTION 13.12. Waiver of Jury Trial......................................91
SECTION 13.13. Governing Law.............................................91
Schedule 1(a) Seller Entities
Schedule 1(b) Certain Seller Individuals
Schedule 1(c) Certain Buyer Individuals
Schedule 5.10 diaDexus Rights
Schedule 8.02 Benefit Matters
EXHIBIT A Form of Clinical Trials Agreement
EXHIBIT B Summary of Terms of Data Access Agreement
EXHIBIT C Form of Stockholders Agreement
EXHIBIT D Form of Transition Services Agreement
EXHIBIT E Form of Non-Competition Agreement
STOCK AND ASSET PURCHASE AGREEMENT
STOCK AND ASSET PURCHASE AGREEMENT dated as of February 9, 1999
(this "Agreement"), among SmithKline ▇▇▇▇▇▇▇ plc, a public limited company
organized under the laws of England ("Seller"); for purposes of Articles
IX, XI and XIII only, SmithKline ▇▇▇▇▇▇▇ Corporation, a Pennsylvania
corporation and an indirect wholly owned subsidiary of Seller ("Seller
Subsidiary"); and Quest Diagnostics Incorporated, a Delaware corporation
("Buyer").
WHEREAS, Seller Subsidiary owns all of the issued and outstanding
shares of Class A Common Stock, without par value (the "Class A Common
Stock"), and Class B Common Stock, without par value (the "Class B Common
Stock") (collectively, the "Shares"), of SBCL, Inc., a Delaware corporation
(the "Company");
WHEREAS, Seller and the Affiliates (as defined below) of Seller
set forth on Schedule 1(a) (the "Seller Entities") own certain assets used
in the Non-U.S. Clinical Laboratories Business (as defined below); and
WHEREAS, Seller wishes to cause Seller Subsidiary to sell to
Buyer, and Buyer wishes to purchase from Seller Subsidiary, the Shares and
to sell to Buyer and to cause the Seller Entities to sell to Buyer, and
Buyer wishes to purchase from Seller and the Seller Entities, certain
assets used in the Non-U.S. Clinical Laboratories Business, and Buyer is
willing to assume certain liabilities associated with the Non- U.S.
Clinical Laboratories Business, all upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, Buyer, Seller and, for the
limited purposes set forth above, Seller Subsidiary hereby agree as
follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) For purposes of this Agreement:
"Acquired Rights Directive" means the relevant local
transposition of Council Directive (77/187/EEC) as amended, namely the
Transfer of Undertakings (Protection of Employees) Regulations 1981 in
the UK, Collective Bargaining agreement ▇▇ ▇▇▇▇▇ ▇▇ ▇ ▇▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ and articles of L122- 12 of the French Labour Code in France.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Entity.
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by, or is under common
control with, the specified Person. For purposes of this definition,
the term "control" as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management of that Person, whether through ownership of voting
securities or otherwise.
"Business" means the business of the Company and the Company
Subsidiary and the Non-U.S. Clinical Laboratories Business, in each
case as currently conducted.
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be
closed in The City of New York.
"Buyer Material Adverse Effect" means any change or effect that
is or would be reasonably likely to be materially adverse to the
business, results of
operations, financial condition or assets of Buyer and the Buyer
Subsidiaries, taken as a whole.
"Buyer's Accountants" means PricewaterhouseCoopers LLP,
independent accountants of Buyer.
"Clinical Laboratory Services" means clinical laboratory,
anatomic pathology or other diagnostics testing services (including,
without limitation, routine and esoteric clinical laboratory services
(including genetics testing), clinical laboratory services involved
with clinical trials, point-of-care testing, clinical laboratory
services involving corporate healthcare and services involved with
managing hospital laboratories) or providing to any unaffiliated
Person, in any manner, directly or indirectly, data or information
products or services which substantially consists of laboratory data.
"Clinical Trials Agreement" means the Clinical Trials Agreement,
substantially in the form of Exhibit A.
"Company Material Adverse Effect" means any change or effect that
is or would be reasonably likely to be materially adverse to the
business, results of operations, financial condition or assets of the
Company, the Company Subsidiary and the Non-U.S. Clinical Laboratories
Business, taken as a whole.
"Company Subsidiary" means SmithKline ▇▇▇▇▇▇▇ Clinical
Laboratories, Inc., a Delaware corporation.
"Consolidated Tangible Net Worth" means Total Tangible Assets
minus Total Liabilities. The term "Total Tangible Assets" means the
sum of (i) the total assets of the Company and the Company Subsidiary
less the total intangible assets (including goodwill, customer lists
and noncompete agreements) of the Company and the Company Subsidiary
and (ii) the tangible assets of the Seller Entities that properly
would be included in the preparation of a statement of
Other Assets less the intangible assets that properly would be
included on such a statement (including goodwill, customer lists and
noncompete agreements), calculated in accordance with Section 2.04(a).
The term "Total Liabilities" shall mean the sum of (i) the total
liabilities of the Company and the Company Subsidiary and (ii) the
Assumed Non-U.S. Liabilities that properly would be included in the
preparation of a statement of Other Assets, calculated in accordance
with Section 2.04(a). Total Tangible Assets and Total Liabilities
shall not include any amounts relating to (A) Taxes and (B)
intercompany receivables and payables, (C) cash, cash overdrafts and
cash equivalents, (D) pension and other post-retirement liabilities,
(E) the OIG Liabilities and (F) liabilities for which Buyer is
indemnified under Section 11.02(a)(v). Notwithstanding the foregoing,
in the event Buyer does not purchase the Other Assets in accordance
with Section 7.09, clause (ii) in each of the definitions of Total
Tangible Assets and Total Liabilities shall be disregarded.
"Data Access Agreement" means the Data Access Agreement,
substantially in the form of Exhibit B.
"Employment Liabilities" means all liabilities and commitments
relating to employment with and employee benefits from Seller or any
other Person under common control with Seller.
"Employment Losses" means all losses, liabilities, costs
(including without limitation legal costs), charges, expenses, actions
proceedings, claims and demands arising out of the contract of
employment of the Non-U.S. Employees or the termination of the
employment contract or the employment relationship of the Non-U.S.
Employees, including any liabilities under any social security,
employment, taxation or local labor laws.
"Environmental Laws" means any and all applicable foreign,
federal, state or local statutes, laws, rules,
codes, ordinances, regulations or common law, relating to pollution or
protection of the environment, occupational health or safety, to the
preservation or reclamation of natural resources, to the management,
handling, storage, treatment, Release, transportation, use or disposal
of Hazardous Materials, or the management, handling, packaging,
labeling and transportation of clinical laboratory samples and
associated materials, wastes and equipment, in each case which are in
full force and effect as of the Closing Date.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Hazardous Materials" means all explosive or radioactive
substances or wastes, all hazardous or toxic substances, wastes or
pollutants, and all other substances, materials or wastes regulated
pursuant to any Environmental Law, including, without limitation,
petroleum, asbestos or asbestos-containing materials, polychlorinated
biphenyls, infectious or medical wastes and radon gas.
"Intellectual Property Agreements" means the patent assignment
agreement, the trademark assignment agreement, the patent license
agreement and the copyright license agreement pursuant to which
Intellectual Property owned or licensed by Seller or any of its
Affiliates and used in the Business will be assigned or licensed to
the Company or Buyer as contemplated by Section 3.20 of the Seller
Disclosure Schedule.
"Knowledge" means (i) with respect to Seller, the knowledge of
the individuals set forth on Schedule 1(b), and (ii) with respect to
Buyer, the knowledge of the individuals set forth on Schedule 1(c).
"License Agreement" means the License Agreement providing for the
use of the Names pursuant to Section 6.07.
"Non-Competition Agreement" means the Non-Competition Agreement
substantially in the form of Exhibit E.
"Non-U.S. Clinical Laboratories Business" means the clinical
laboratories business conducted by Seller and the Seller Entities
outside of the United States, including the clinical trials segment of
such business.
"Non-U.S. Employees" means those employees employed by the Seller
in the Non-U.S. Clinical Laboratories Business on the Transfer Date
and whose names are listed in Section 8.14 of the Seller Disclosure
Schedule.
"Non-U.S. Inventories" means all inventory, including reagents,
goods, supplies and raw materials, related to the Non-U.S. Clinical
Laboratories Business, maintained, held or stored by or for Seller or
a Seller Entity and any prepaid deposits for any of the same.
"Non-U.S. Leased Real Property" means the real property used in
the Non-U.S. Clinical Laboratories Business as set forth in Section
3.10(b) of the Seller Disclosure Schedule.
"Non-U.S. Receivables" means the receivables described in clause
(ii) of the definition of Receivables.
"OIG Liabilities" means any and all Losses related to, arising
out of, resulting from or incurred in connection with the claims,
investigations or other matters referred to in Sections 11.06(a) or
11.06(b), whether or not such Losses are to be borne by Seller
pursuant to Section 11.06 or by Buyer pursuant to Section
11.03(a)(vii).
"Permitted Liens" means (i) such as are set forth in Section
3.02(a) of the Seller Disclosure Schedule, in the case of Seller, and
such as are set forth in Section 4.02(a) of the Buyer Disclosure
Schedule, in the case of Buyer, (ii) mechanics', carriers', workmen's,
repairmen's or other like liens arising or incurred in the ordinary
course of business consistent with past practice, Liens arising under
original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of
business, (iii) Liens that secure any Liability or debt (other than
indebtedness for money borrowed) that is reflected as a Liability on
the Company Balance Sheet or the Other Assets Statement, in the case
of Seller, or on the Buyer Balance Sheet, in the case of Buyer, and
the existence of which, in each case, is indicated in the notes
thereto, (iv) Liens for Taxes and assessments not yet due and payable
or Liens for Taxes being contested in good faith and by appropriate
proceedings, and (v) other imperfections of title or encumbrances, if
any, which do not, individually or in the aggregate, materially impair
the continued use and operation of the assets to which they relate in
the Business, in the case of Seller, and in the business of Buyer and
the Buyer Subsidiaries, in the case of Buyer.
"Person" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, trust, joint venture,
Governmental Entity or other entity.
"Purchase Price Bank Account" means a bank account in the United
States to be designated by Seller Subsidiary in a written notice to
Buyer at least two Business Days before the Closing.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Receivables" means any and all accounts receivable, notes and
other amounts receivable by
(i) the Company or the Company Subsidiary from third parties, or (ii)
Seller or a Seller Entity to the extent arising from the conduct of
the Non-U.S. Clinical Laboratories Business, including, in both cases,
without limitation, amounts due from customers, arising from the
conduct of business or otherwise before the Closing Date, whether or
not in the ordinary course, together with all unpaid financing charges
accrued thereon.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, disposing, depositing, emanating or migrating of any
Hazardous Materials in, into, onto or through the environment.
"SEC" means the United States Securities Exchange Commission or
any successor body.
"Securities Act" means the United States Securities Act of 1933.
"Seller's Accountants" means PricewaterhouseCoopers LLP,
independent accountants of Seller.
"Senior Level Employee" means any Continued Employee of the
Business who during 1998 was, taking into account base pay and any
bonuses granted during such calendar year, one of the fifty highest
paid employees of the Business.
"Statement of Net Worth" means the statement setting forth the
Consolidated Tangible Net Worth of the Business as of the Closing
Date.
"Stockholders Agreement" means the Stockholders Agreement
substantially in the form of Exhibit C.
"Subsidiary" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership
interests of which is
sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50%
or more of the equity interests of which) is owned by such first
Person or by another subsidiary of such Person.
"Transaction Documents" means this Agreement, the Clinical Trials
Agreement, the Data Access Agreement, the Intellectual Property
Agreements, the Non-Competition Agreement, the Transition Services
Agreement, the License Agreement and the Stockholders Agreement.
"Transfer Date" means the Closing Date or any such date that any
court or other tribunal of competent jurisdiction shall deem to be the
"time of transfer" under the Acquired Rights Directive.
"Transition Services Agreement" means the Transition Services
Agreement substantially in the form of Exhibit D.
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied
consistently throughout the periods involved.
(b) The following terms have the meaning set forth in the
Sections set forth below:
Term Location
Action Items...................................... ss.7.11
Active Employees.................................. ss.8.01
Agreement......................................... Preamble
Allocation Statement.............................. ss.2.01(e)
Applicable Laws................................... ss.3.15
Assumed Non-U.S. Liabilities...................... ss.2.02(a)
Audit............................................. ss.7.11
Basic Benefits.................................... ss.8.02(a)
Benefit Period.................................... ss.8.02(a)
Buyer............................................. Preamble
Buyer Balance Sheet............................... ss.4.05(b)
Term Location
Buyer Board....................................... ss.4.01(b)
Buyer Capital Stock............................... ss.4.04(a)
Buyer Common Stock................................ ss.2.01(b)
Buyer Disclosure Schedule......................... ss.4.02(a)
Buyer Implementation Plan......................... ss.7.11
Buyer Indemnified Party........................... ss.11.02(a)
Buyer Indemnitees................................. ss.9.01(a)
Buyer Intellectual Property....................... ss.4.15
Buyer Internal Systems............................ ss.7.11
Buyer Leased Real Property........................ ss.4.14(b)
Buyer Owned Real Property......................... ss.4.14(a)
Buyer Preferred Stock............................. ss.4.04(a)
Buyer Rights...................................... ss.4.04(a)
Buyer Rights Agreement............................ ss.4.04(a)
Buyer SEC Documents............................... ss.4.05(a)
Buyer Stockholders Approval....................... ss.4.01(c)
Buyer Subsidiaries................................ ss.4.03
Buyer Takeover Proposal........................... ss.6.11(a)
Buyer's 401(k) Plan............................... ss.8.05
Buyer's MRI Programme............................. ss.8.15
Buyer's Plans..................................... ss.4.13
Buyer Year 2000 Methodology....................... ss.7.11
Cash Purchase Price............................... ss.2.01(a)
Class A Common Stock.............................. Recitals
Class B Common Stock.............................. Recitals
Closing........................................... ss.2.03(a)
Closing Date...................................... ss.2.03(a)
Code.............................................. ss.3.08(a)
Common Stock Consideration........................ ss.2.01(b)
Company........................................... Recitals
Company Balance Sheet............................. ss.3.07(a)
Company Benefit Plans............................. ss.3.13(a)
Company Contracts................................. ss.3.11(b)
Company Critical Systems.......................... ss.3.22(b)
Company Financial Statements...................... ss.3.07(a)
Company Implementation Plan....................... ss.3.22(b)
Company Release................................... ss.2.05
Company Takeover Proposal......................... ss.5.09(b)
Compensation Deduction............................ ss.9.12(a)
Confidentiality Agreement......................... ss.5.03(b)
Consolidated Balance Sheets....................... ss.5.08
Term Location
Consolidated Income Statements.................... ss.5.08
Consultant........................................ ss.7.11
Continued Employees............................... ss.8.01
Designated Amount................................. ss.2.04(b)
diaDexus Agreement................................ ss.5.10(a)
diaDexus Rights................................... ss.5.10(a)
DOJ............................................... ss.7.05
ERISA............................................. ss.3.13(a)
Eligible Employees................................ Schedule 8.02
Enhanced Benefits................................. Schedule 8.02
Excluded Assets................................... ss.2.01(d)
Excluded Liabilities.............................. ss.2.02(b)
Filed Buyer SEC Documents......................... ss.4.05(b)
Financing......................................... ss.4.10
Financing Agreements.............................. ss.6.10
Firm Commitments.................................. ss.4.10
Forgiven Intercompany Amounts..................... ss.2.05
Former Employee................................... ss.8.01
FTC............................................... ss.7.05
Governmental Entity............................... ss.10.01(b)
HSR Act........................................... ss.10.01(d)
Inactive Employees................................ ss.8.01
Indemnified Party................................. ss.11.04(a)
Independent Accounting Firm....................... ss.2.04(b)
Intellectual Property............................. ss.3.20
IRS............................................... ss.3.08(c)
Joint Committee................................... ss.7.11
Leased Real Property.............................. ss.3.10(b)
Liens............................................. ss.3.02(a)
Loss.............................................. ss.11.02(a)
Mexican Joint Venture............................. ss.2.01(c)
Names............................................. ss.6.07
Non-U.S. Employees................................ ss.8.14
Other Assets...................................... ss.2.01(b)
Other Assets Financial Statements................. ss.3.07(b)
Other Assets Statement............................ ss.3.07(b)
Owned Real Property............................... ss.3.10(a)
Pension Plan...................................... ss.3.13(a)
Post-Closing Tax Period........................... ss.3.08(a)
Pre-Closing Disability............................ ss.8.08
Pre-Closing Tax Period............................ ss.3.08(a)
Term Location
Proxy Statement................................... ss.6.09(a)
Prudential........................................ ss.5.02
Punch List........................................ ss.7.11
Purchase Price.................................... ss.2.01(a)
Readiness Report.................................. ss.7.11
Records........................................... ss.7.06
Registration Statement............................ ss.3.18
Seller............................................ Preamble
Seller Carryforward Deductions.................... ss.9.12(a)
Seller Carryforward Income........................ ss.9.12(a)
Seller Disclosure Schedule........................ ss.3.02(a)
Seller Entities................................... Recitals
Seller Indemnified Party.......................... ss.11.03(a)
Seller Indemnitees................................ ss.9.01(c)
Seller Internal Systems........................... ss.3.22(a)
Seller NOLs....................................... ss.9.12(a)
Seller Pending Adjustment......................... ss.9.12(a)
Seller Pre-Closing Tax Attributes................. ss.9.12(a)
Seller Release.................................... ss.2.05
Seller Subsidiary................................. Preamble
Seller's 401(k) Plan.............................. ss.8.05
Seller's FSA...................................... ss.8.07(d)
Seller's MRI Programme............................ ss.8.15
Seller Year 2000 Methodology...................... ss.7.11
Shares............................................ Recitals
Straddle Period................................... ss.3.08(a)
Substitute Year 2000 Award........................ ss.8.15
Tangible Property................................. ss.3.09(b)
Tax............................................... ss.3.08(a)
Tax Claim......................................... ss.9.02(a)
Tax Return........................................ ss.3.08(a)
Taxes............................................. ss.3.08(a)
Third Party Claims................................ ss.11.04(b)
Three MRI Annual Awards........................... ss.8.15(b)
time machine...................................... ss.7.11
U.S. Governmental Entities........................ ss.11.06(a)
USHC.............................................. ss.5.02
WARN Act.......................................... ss.8.09
Year 2000 Award................................... ss.8.15
Year 2000 Ready................................... ss.7.11
ARTICLE II
Purchase and Sale of the Shares
and the Other Assets; Closing
SECTION 2.01. Purchase and Sale of the Shares and the Other
Assets. (a) On the terms and subject to the conditions of this Agreement,
(i) Seller shall cause Seller Subsidiary to sell, transfer and deliver to
Buyer, and Buyer will purchase from Seller Subsidiary, the Shares and (ii)
Seller shall, and shall cause the Seller Entities to, sell, convey,
transfer and assign to Buyer or its designees, and Buyer or its designees
will purchase from Seller and the Seller Entities, the Other Assets for an
aggregate purchase price for the Shares and the Other Assets consisting of
(A) the Common Stock Consideration, (B) an amount equal to $1.005 billion
(the "Cash Purchase Price"), subject to adjustment in accordance with
Sections 2.04 and 7.09, payable in the case of (A) and (B), at the Closing
in accordance with Section 2.03, and (C) the assumption of the Assumed
Non-U.S. Liabilities (the Assumed Non-U.S. Liabilities, together with the
Cash Purchase Price and the Common Stock Consideration, the "Purchase
Price").
(b) The term "Common Stock Consideration" means 12,564,336 shares
of common stock of Buyer, par value $0.01 per share ("Buyer Common Stock"),
subject to adjustment in the event that, between the date hereof and the
Closing Date, there is any stock split with respect to Buyer Common Stock.
(c) The term "Other Assets" means the following assets, other
than the Excluded Assets:
(i) the goodwill relating to the Non-U.S. Clinical Laboratories
Business except to the extent relating to the Names;
(ii) Seller's and any Seller Entity's right, title and interest
in, to and under the Non-U.S. Leased Real Property;
(iii) Seller's and any Seller Entity's right, title and interest
in and to all furniture, fixtures, equipment, machinery and other
tangible personal property used or held for use by Seller or any
Seller Entity at the Non-U.S. Leased Property;
(iv) all vehicles and rolling stock owned by a Seller Entity and
used primarily in the Non-U.S. Clinical Laboratories Business;
(v) all Non-U.S. Inventories on the Closing Date;
(vi) all Non-U.S. Receivables as of the Closing Date (other than
receivables owed by Seller or any of its Affiliates);
(vii) all books of account, general, financial, tax and personnel
records, invoices, shipping records, supplier lists, correspondence
and other documents, records and files and any custom computer
software and any non- custom software (in the case of non-custom
software, to the extent transferable by the terms of its license)
owned or licensed by Seller or any Seller Entity and primarily used in
the Non-U.S. Clinical Laboratories Business at the Closing Date, other
than organization documents, minute and stock record books and the
corporate seal of Seller or any Seller Entity, and other than as
provided in Section 7.06;
(viii) all Seller's and any Seller Entity's right, title and
interest in, to and under the Intellectual Property used in the
Non-U.S. Clinical Laboratories Business set forth on Section 3.20 of
the Seller Disclosure Schedule;
(ix) claims, causes of action, choses in action, rights of
recovery and rights of setoff of any kind (including rights to
insurance proceeds and rights under and pursuant to all warranties,
representations and guarantees made by suppliers of products,
materials or equipment, or components thereof), to the extent
arising out of the Non-U.S. Clinical Laboratories Business and enuring
to the benefit of Seller or any Seller Entity, in each case to the
extent transferable;
(x) subject to the License Agreement and Section 6.07, all sales
and promotional literature, business stationery, and other
sales-related materials owned by Seller or any Seller Entity at the
Closing Date and used primarily in the Non-U.S. Clinical Laboratories
Business;
(xi) all customer lists owned by Seller or any Seller Entity and
used in the Non-U.S. Clinical Laboratories Business;
(xii) all rights of Seller and any Seller Entity under all
contracts, licenses, sublicenses, agreements, leases (other than
leases for Non-U.S. Leased Real Property), commitments, and sales and
purchase orders, and under all commitments, bids and offers (to the
extent such commitments, bids and offers are transferable) relating
primarily to the Non-U.S. Clinical Laboratories Business;
(xiii) all franchises, permits, licenses, agreements, waivers and
authorizations held or used by Seller primarily in connection with, or
required for, the Non-U.S. Clinical Laboratories Business, in each
case to the extent transferable; and
(xiv) subject to the provisions of Section 7.01 of the Seller
Disclosure Schedule, the entire shareholding of SmithKline ▇▇▇▇▇▇▇
Capital B.V. in Corporacion MSB. S.A. de C.V. (the "Mexican Joint
Venture").
(d) Other Assets shall exclude the following assets owned by
Seller or any Seller Entity in connection with the Non-U.S. Clinical
Laboratories Business (the "Excluded Assets"):
(i) any rights to use or be located in any facility of Seller or
any Seller Entity, except as permitted pursuant to the Transition
Services Agreement and except for facilities located on Non-U.S.
Leased Property;
(ii) all cash, cash equivalents and bank accounts owned by Seller
or any Seller Entity at the Closing Date;
(iii) all rights of Seller under this Agreement and any other
Transaction Document;
(iv) copyrighted proprietary materials used for Seller's or any
Seller Entity's human resource program and supporting documentation
thereto; provided that Buyer can use such copyrighted proprietary
materials for a period of eighteen months following the Closing and
shall not be required to return any such copyrighted proprietary
materials; and
(v) the Names.
(e) Prior to Closing, Seller and Buyer shall prepare an
allocation statement (the "Allocation Statement"), setting forth the
allocation of the Purchase Price among the Shares and the Other Assets in
accordance with Section 1060 of the Code. Any subsequent adjustments to the
Purchase Price shall be reflected in the Allocation Statement as revised
hereunder in a manner consistent with Treasury Regulation ss. 1.1060-1T(f).
Buyer and Seller each agree, and agree to cause their respective
Affiliates, to report the transaction contemplated in this Agreement in a
manner consistent with the terms of this Agreement, including the
Allocation Statements and no party will take any position inconsistent
therewith in any Tax Return, refund claim, litigation or otherwise. Each of
Seller and Buyer agrees to cooperate with each other in preparing Form 8594
for filing by each and to furnish the other with a copy of such form
prepared in draft within a reasonable period before its filing due date, as
well as copies of such forms as filed.
SECTION 2.02. Assumption and Exclusion of Liabilities for the
Non-U.S. Clinical Laboratories Business. (a) On the terms and subject to
the conditions of this Agreement, Buyer shall, on the Closing Date, assume
and shall pay, perform and discharge when due all the following liabilities
of Seller and the Seller Entities related to the Non-U.S. Clinical
Laboratories Business (the "Assumed Non- U.S. Liabilities"):
(i) all liabilities and commitments of Seller or the Seller
Entities under executory contracts, licenses, sublicenses, agreements,
leases, commitments, sales and purchase orders, commitments, bids and
offers (to the extent such commitments, bids and offers are
transferred) or other arrangements included in the Other Assets;
(ii) all accounts payable of Seller or the Seller Entities to the
extent arising exclusively out of or related to the Non-U.S. Clinical
Laboratories Business but only to the extent they will be included in
Consolidated Tangible Net Worth as of the Closing Date;
(iii) Employment Liabilities assumed by Buyer pursuant to Section
8.14;
(iv) all other liabilities and commitments of Seller or the
Seller Entities to the extent arising out of the Non-U.S. Clinical
Laboratories Business existing on or arising after the Closing Date
(including any Actions, and any liabilities relating to environmental
or health and safety matters);
provided that Buyer will not assume any Excluded Liabilities.
(b) Seller shall retain, and shall be responsible for paying,
performing and discharging when due, and Buyer shall not assume or have any
responsibility for, any liability of Seller or any Seller Entity relating
to the Non-U.S. Clinical Laboratories Business other than the
Assumed Non-U.S. Liabilities (the "Excluded Liabilities"), including,
without limitation:
(i) all Taxes now or hereafter owed by Seller or any Affiliate of
Seller (other than the Company or the Company Subsidiary),
attributable to the Other Assets or the Non-U.S. Clinical Laboratories
Business, relating to any period, or any portion of any period, ending
on or prior to the Closing Date (to the extent Seller and Seller
Subsidiary are required to indemnify Buyer for such Taxes under
Section 9.01(a));
(ii) all liabilities relating to or arising out of the Excluded
Assets;
(iii) all Employment Liabilities relating to the Non-U.S.
Clinical Laboratories Business not assumed by Buyer pursuant to
Section 8.14.
SECTION 2.03. Closing. (a) Subject to the terms and conditions of
this Agreement, the sale and purchase of the Shares and the Other Assets
and the assumption of the Assumed Non-U.S. Liabilities contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at the
offices of Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at
10:00 A.M. New York time on the fifth Business Day following the later to
occur of the (i) expiration or termination of all applicable waiting
periods under the HSR Act and (ii) satisfaction or waiver of all other
conditions to the obligations of the parties set forth in Article X, or at
such other place or at such other time or on such other date as Seller and
Buyer may mutually agree upon in writing (the day on which the Closing
takes place being the "Closing Date").
(b) At the Closing, (i) Buyer shall deliver to Seller Subsidiary
(acting as agent for itself, Seller and the Seller Entities) by wire
transfer to the Purchase Price Bank Account immediately available funds in
an amount equal to the Cash Purchase Price, (ii) Buyer shall issue and
cause to be delivered to Seller Subsidiary (acting as agent for itself,
Seller and the Seller Entities) the Common Stock
Consideration, (iii) Seller (acting as agent for itself and the Seller
Subsidiary) shall deliver or cause to be delivered to Buyer certificates
representing the Shares, duly endorsed in blank or accompanied by stock
powers duly endorsed in blank in proper form for transfer, with appropriate
transfer stamps, if any, affixed, (iv) Buyer and Seller each shall execute
the Transaction Documents other than this Agreement, (v) Seller (acting as
agent for itself and the Seller Entities) shall deliver or cause to be
delivered (subject to all necessary third party consents having been
obtained) to Buyer such appropriately executed instruments of sale,
assignment, transfer and conveyance in form and substance reasonably
satisfactory to Buyer and its counsel evidencing and effecting the sale,
assignment and transfer to Buyer or its designees of the Other Assets (it
being understood that such instruments shall not require the Seller or the
Seller Entities to make any representations, warranties or covenants,
expressed or implied) and (vi) Buyer and Seller shall deliver any other
certificates required by Article X.
(c) With respect to Non-U.S. Intellectual Property, Seller hereby
agrees to execute (or cause the appropriate Seller Entities to execute)
promptly after the Closing such additional documents (in form and substance
reasonably satisfactory to Seller and its counsel) in form appropriate for
recordation (with Governmental Entities responsible for Intellectual
Property) in all countries where such Non-U.S. Intellectual Property is
registered as Buyer may prepare and reasonably request from time to time
for the purpose of perfecting Buyer's rights in, maintaining the
enforceability of, or obtaining proper recordation of the assignment to
Buyer of, such Non-U.S. Intellectual Property, including executing powers
of attorney, deeds of assignment, proofs of use, registered user
agreements, original certificates of registration (to the extent available)
or letters patent, affidavits or declarations, it being understood that the
cost of preparing and recording any such documents shall be borne by Buyer.
SECTION 2.04. Adjustment of Cash Purchase Price. The Cash
Purchase Price shall be subject to adjustment after the Closing as
specified in this Section 2.04:
(a) Statement of Net Worth. As promptly as practicable, but in
any event within sixty calendar days following the Closing Date, Buyer
shall deliver to Seller the Statement of Net Worth, together with a
certificate of Buyer's Accountants that the Statement of Net Worth has been
prepared in accordance with this Section 2.04. All amounts included in
Consolidated Tangible Net Worth as of the Closing Date shall be calculated
in accordance with U.S. GAAP on a basis consistent, to the extent
applicable, with the accounting practices and policies used in the
preparation of the Company Balance Sheet and the Other Assets Statement.
(b) Disputes. (i) Seller may dispute any amounts reflected on the
Statement of Net Worth, but only on the basis of mathematical errors or
based on the Consolidated Tangible Net Worth in the amounts reflected on
the Statement of Net Worth not being calculated in accordance with Section
2.04(a); provided, however, that Seller shall have notified Buyer in
writing of each disputed item, specifying the amount thereof in dispute and
setting forth, in reasonable detail, the basis for such dispute, within
thirty days of Buyer's delivery of the Statement of Net Worth to Seller. In
the event of such a dispute, Seller and Buyer shall attempt in good faith
to resolve in writing their differences, and any resolution in writing by
them as to any disputed amounts shall be
final, binding and conclusive on the parties hereto. If Seller and Buyer
are unable to reach a resolution with such effect within thirty days after
receipt by Buyer of Seller's written notice of dispute, Seller and Buyer
shall submit the items remaining in dispute for resolution to an
independent accounting firm of international reputation mutually acceptable
to Buyer and Seller (such accounting firm being referred to herein as the
"Independent Accounting Firm") on terms that require the Independent
Accounting Firm, within thirty days after such submission, to determine and
report to Buyer and Seller upon such remaining disputed items, and such
decision shall be final, binding and conclusive on Seller and Buyer. Seller
and Buyer shall use reasonable efforts to cause the Accounting Firm to
render a written decision resolving the matters submitted to the Accounting
Firm within 30 calendar days of the receipt of such submission. Seller and
Buyer agree that judgment may be entered upon the determination of the
Independent Accounting Firm in any court having jurisdiction over the party
against which such determination is to be enforced. The fees and
disbursements of the Independent Accounting Firm shall be allocated by the
Independent Accounting Firm between Seller and Buyer in the same proportion
that the aggregate amount of such remaining disputed items so submitted to
the Independent Accounting Firm that is unsuccessfully disputed by each
such party (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items so submitted.
(ii) The scope of the disputes to be resolved by the Independent
Accounting Firm is limited to whether such calculation was done in
accordance with Section 2.04(a) and whether there were mathematical errors
in the Statement of Net Worth.
(iii) In acting under this Agreement, the Independent Accounting
Firm shall be entitled to the privileges and immunities of arbitrators.
(iv) During the period of time from and after the Closing Date
through the resolution of any adjustment to the Cash Purchase Price
contemplated by this Section 2.04, Buyer shall cause the Company to afford
to Seller, Seller's Accountants and any counsel or financial advisers
retained by Seller in connection with any adjustment to the Cash Purchase
Price contemplated by this Section 2.04 reasonable access during normal
business hours to the Company's properties, books, personnel and records
relevant to the adjustment contemplated by this Section 2.04 (including
Buyer's working papers relating to the
Statement of Net Worth) and shall use all reasonable efforts to cause
Buyer's Accountants to make any working papers relating to the Statement of
Net Worth available to Seller and Seller's Accountants.
(v) Buyer agrees that following the Closing it shall preserve the
integrity of the accounting books and records of Company and the Company
Subsidiary relating to the periods on or prior to the Closing Date on which
the Statement of Net Worth is to be based, and such accounting books and
records shall be maintained in a form that is accessible by Seller and
Seller's Accountants.
(c) Purchase Price Adjustment. The Statement of Net Worth shall
be deemed final for the purposes of this Section 2.04 upon the earliest of
(A) the failure of Seller to notify Buyer of a dispute within thirty days
after Buyer's delivery of the Statement of Net Worth to Seller, (B) the
resolution of all disputes in writing, pursuant to Section 2.04(b)(i), by
Buyer and Seller and (C) the resolution of all disputes, pursuant to
Section 2.04(b)(i), by the Independent Accounting Firm. Notwithstanding
anything to the contrary in this Section 2.04, if the Statement of Net
Worth delivered by Buyer to Seller sets forth Consolidated Tangible Net
Worth as of the Closing Date equal to or greater than $486,000,000 or, in
the event the Other Assets are not purchased in accordance with Section
7.09, $477,347,000, then there shall be no adjustment to the Cash Purchase
Price. In the event that the Consolidated Tangible Net Worth reflected on
the Statement of Net Worth is less than $486,000,000 or $477,347,000, as
applicable, then the Cash Purchase Price shall be adjusted downward in an
amount equal to such deficiency, and Seller shall, within three Business
Days after the Statement of Net Worth becomes final and binding on the
parties, pay such amount to Buyer by wire transfer to a bank account
designated by Buyer in immediately available funds.
SECTION 2.05. Intercompany Accounts. All intercompany obligations
owed by Seller and its Affiliates (other than the Company and the Company
Subsidiary) to the Company and the Company Subsidiary and all intercompany
obligations owed by the Company and the Company Subsidiary
to Seller or any of its Affiliates, in each case as of the Closing Date,
shall be deemed paid in full, forgiven and unconditionally terminated as of
the Closing Date (collectively, the "Forgiven Intercompany Amounts"). On
the Closing Date, (i) Seller shall cause the Company and the Company
Subsidiary to execute and deliver to Seller their unconditional release
(the "Company Release") terminating, as of the Closing Date, all Forgiven
Intercompany Amounts owed by Seller or any of its Affiliates to the Company
or the Company Subsidiary, and (ii) Seller shall execute and deliver to
Buyer its unconditional release (the "Seller Release") terminating, as of
the Closing Date, Forgiven Intercompany Amounts owed by the Company or the
Company Subsidiary to Seller or any of its Affiliates. Buyer shall
acknowledge as of the Closing Date its agreement to the Company Release.
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.01. Authority. Seller is a public limited company duly
organized and validly existing under the laws of England, and Seller
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Pennsylvania. Each of the Seller
Entities is a corporation duly organized and validly existing under the
laws of the jurisdiction of its organization. Each of Seller and Seller
Subsidiary has all requisite corporate power and authority to enter into
this Agreement and Seller has all requisite corporate power and authority
to enter into the other Transaction Documents, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The Seller Entities have all requisite corporate power
and authority to consummate the transactions contemplated by this
Agreement. All corporate acts and other proceedings required to be taken by
Seller and Seller Subsidiary to
authorize the execution, delivery and performance of this Agreement and by
Seller to so authorize the other Transaction Documents and the consummation
of the transactions contemplated hereby and thereby have been duly and
properly taken. All corporate acts and other proceedings required to be
taken by the Seller Entities to authorize the transactions contemplated by
this Agreement have been, or will be, prior to the Closing, duly and
properly taken. This Agreement has been duly executed and delivered by each
of Seller and Seller Subsidiary and constitutes a legal, valid and binding
obligation of each of them, enforceable against each of them in accordance
with its terms. Upon the due execution and delivery of the Transaction
Documents other than this Agreement, such Transaction Documents each will
have been duly executed and delivered by Seller and will constitute a
legal, valid and binding obligation of Seller, enforceable against it in
accordance with its terms.
SECTION 3.02. No Conflicts; Consents. (a) Except as set forth in
Section 3.02(a) of the schedule dated the date of this Agreement from
Seller to Buyer (the "Seller Disclosure Schedule"), the execution and
delivery of this Agreement by Seller and Seller Subsidiary do not, and the
execution and delivery of the other Transaction Documents by Seller will
not, and the consummation of the transactions contemplated hereby by
Seller, Seller Subsidiary and the Seller Entities and thereby by Seller and
compliance with the terms hereof by Seller, Seller Subsidiary and the
Seller Entities and thereof by Seller will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of any material benefit
under, or result in the creation of any lien, claim, encumbrance, security
interest, option, charge or restriction of any kind ("Liens") other than a
Permitted Lien upon any of the properties or assets of Seller, Seller
Subsidiary, the Company, the Company Subsidiary or any Seller Entity under
any provision of (i) the Memorandum or Articles of Association of Seller or
the comparable governing instruments of Seller Subsidiary, any Seller
Entity, the Company and the Company Subsidiary, (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which Seller, Seller Subsidiary, any Seller
Entity, the Company or the Company Subsidiary is a party or by which any of
their respective properties or assets are bound or (iii) any judgment,
order or decree, or statute, law, ordinance, rule or regulation applicable
to Seller, Seller Subsidiary, any Seller Entity, the Company or the Company
Subsidiary or their respective properties or assets, other than, in the
case of clauses (ii) and (iii) above, any such items that, individually or
in the aggregate, would not have a Company Material Adverse Effect or
materially affect or delay the ability of Seller to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents.
(b) Except as set forth in Section 3.02(b) of the Seller
Disclosure Schedule, no consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect
to Seller, Seller Subsidiary, any Seller Entity, the Company or the Company
Subsidiary in connection with the execution, delivery and performance of
this Agreement or the other Transaction Documents or the consummation of
the transactions contemplated hereby or thereby other than (i) compliance
with and filings under the HSR Act, (ii) compliance with and filings and
notifications under applicable Environmental Laws and (iii) those that may
be required solely by reason of Buyer's (as opposed to any other third
party's) participation in the transactions contemplated by this Agreement
and the other Transaction Documents.
SECTION 3.03. The Shares. Seller Subsidiary has good and valid
title to the Shares, free and clear of any Liens. Assuming Buyer has the
requisite power and authority to be the lawful owner of the Shares, upon
delivery to Buyer at the Closing of certificates representing the Shares,
duly endorsed by Seller Subsidiary for transfer to Buyer, and upon Seller
Subsidiary's receipt of the Purchase Price, good
and valid title to the Shares will pass to Buyer, free and clear of any
Liens, other than Liens arising from acts of Buyer or its Affiliates. Other
than this Agreement, the Shares are not subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend
rights or disposition of the Shares.
SECTION 3.04. Organization and Standing. Each of the Company and
the Company Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of the
Company, the Company Subsidiary and, with respect to the Other Assets, the
Seller Entities, has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and
assets and to carry on its business as currently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of
which, individually or in the aggregate, would not have a Company Material
Adverse Effect. The Company and the Company Subsidiary are duly qualified
and in good standing to do business as a foreign corporation in each
jurisdiction in which the conduct or nature of its business or the
ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified
or in good standing, individually or in the aggregate, would not have a
Company Material Adverse Effect. Seller has prior to the execution of this
Agreement made available to Buyer true and complete copies of the
Certificate of Incorporation and Bylaws, each as amended to date, of the
Company and the Company Subsidiary.
SECTION 3.05. Capital Stock of the Company and the Company
Subsidiary. (a) The authorized capital stock of the Company consists of
5,000 shares of Class A Common Stock and 5,000 shares of Class B Common
Stock, of which 275 shares of Class A Common Stock and 725 shares of Class
B Common Stock, constituting the Shares, are duly authorized
and validly issued and outstanding, fully paid and nonassessable. Seller
Subsidiary is the record owner of the Shares. Except for the Shares, there
are no shares of capital stock or other equity securities of the Company
outstanding.
(b) The authorized capital stock of the Company Subsidiary
consists of 1,000 shares of common stock, $1 par value, all of which are
duly authorized and validly issued and outstanding, fully paid and
nonassessable. The Company is the record owner of all the outstanding
capital stock of the Company Subsidiary. The Company has good and valid
title to all the outstanding shares of capital stock of the Company
Subsidiary, free and clear of any Liens. Except as set forth above, there
are no shares of capital stock or other equity securities of the Company
Subsidiary out standing.
(c) None of the Shares or any shares of capital stock of the
Company Subsidiary has been issued in violation of, and none of the Shares
or such shares of capital stock is subject to, any purchase option, call,
right of first refusal, preemptive, subscription or similar rights under
any provision of applicable law, the Certificate of Incorporation or Bylaws
of the Company or the Company Subsidiary, any contract, agreement or
instrument to which the Company or the Company Subsidiary is subject, bound
or a party or otherwise. There are no outstanding warrants, options,
rights, "phantom" stock rights, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) (i) pursuant to
which Seller, Seller Subsidiary, the Company or the Company Subsidiary is
or may become obligated to issue, sell, purchase, return or redeem any
shares of capital stock or other securities of the Company or the Company
Subsidiary or (ii) that give any Person the right to receive any benefits
or rights similar to any rights enjoyed by or accruing to the holders of
shares of capital stock of the Company or the Company Subsidiary. Except as
set forth in Section 3.05 of the Seller Disclosure Schedule, there are no
equity securities of the Company or the Company Subsidiary reserved for
issuance for any purpose. Except as set forth in
Section 3.05 of the Seller Disclosure Schedule, there are no outstanding
bonds, debentures, notes or other indebtedness having the right to vote on
any matters on which stockholders of the Company or the Company Subsidiary
may vote.
SECTION 3.06. Equity Interests. Except for the Company Subsidiary
and as set forth in Section 3.06 of the Seller Disclosure Schedule, the
Company does not own, and since February 1, 1998 has not owned, directly or
indirectly, any capital stock of or other equity interests in any
corporation, partnership or other Person and neither the Company nor the
Company Subsidiary is a member of or participant in any partnership, joint
venture or similar Person.
SECTION 3.07. Financial Statements; Undisclosed Liabilities. (a)
Section 3.07(a) of the Seller Disclosure Schedule sets forth the unaudited
consolidated balance sheets of the Company and the Company Subsidiary as of
December 31, 1998, 1997 and 1996 (the unaudited consolidated balance sheet
as of December 31, 1998, the "Company Balance Sheet"), and the unaudited
consolidated statements of income and cash flows of the Company and the
Company Subsidiary for the periods ended December 31, 1998, 1997 and 1996
(such financial statements, collectively, the "Company Financial
Statements"). Except (i) as set forth in Section 3.07(a) of the Seller
Disclosure Schedule, (ii) as set forth in the notes to the Company
Financial Statements and (iii) for the absence of footnotes complying with
U.S. GAAP, the Company Financial Statements have been prepared in
conformity with U.S. GAAP consistently applied during the periods involved
and fairly present in all material respects the consolidated financial
position of the Company and the Company Subsidiary and the consolidated
results of their operations and cash flows for the respective periods
indicated.
(b) Section 3.07(b) of the Seller Disclosure Schedule sets forth
(i) the unaudited Statements of the Other Assets as of December 31, 1998,
1997 and 1996 (the unaudited consolidated Statement of the Other Assets as
of December 31, 1998, the "Other Assets Statement"), and the unaudited
Statements of Results of Operations of the Other
Assets for the periods ended December 31, 1998, 1997 and 1996 (such
financial statements, collectively, the "Other Assets Financial
Statements"). Except (i) as set forth in Section 3.07(b) of the Seller
Disclosure Schedule, (ii) as set forth in the notes to the Other Assets
Financial Statements and (iii) for the absence of footnotes complying with
U.S. GAAP, the Other Assets Financial Statements have been prepared in
conformity with U.S. GAAP consistently applied during the periods involved
and fairly present in all material respects the assets included in the
Other Assets and the Assumed Non-U.S. Liabilities and the results of
operations of the Other Assets for the respective periods indicated.
(c) The Company and the Company Subsidiary do not have, and the
Other Assets and Assumed Non-U.S. Liabilities do not include, any debts,
liabilities and obligations, whether accrued or fixed, absolute or
contingent, matured or unmatured or determined or determinable, including,
without limitation, those arising under any Applicable Law or Action and
those arising under any contract, agreement, arrangement, commitment or
undertaking, in each case required by U.S. GAAP to be reflected on a
consolidated balance sheet of the Company and the Company Subsidiary or in
a statement of the Other Assets, as the case may be, or, in each case, in
the notes thereto, except (i) as disclosed, reflected or reserved against
in the Company Balance Sheet or the Other Assets Statement, (ii) for items
set forth in Section 3.07(c) of the Seller Disclosure Schedule, (iii) for
liabilities incurred in the ordinary course of business consistent with
past practice since December 31, 1998 and not in violation of this
Agreement, (iv) for Taxes, (v) for Excluded Liabilities, (vi) for the OIG
Liabilities, (vii) for the liabilities for which Buyer is indemnified under
Section 11.02(a)(v) and (viii) for other liabilities which, individually or
in the aggregate, would not have a Company Material Adverse Effect.
(d) This Section 3.07 will not be deemed breached by changes in
U.S. GAAP or Applicable Law after the date of this Agreement.
SECTION 3.08. Taxes. (a) For purposes of this Agreement, (i)
"Tax" or "Taxes" shall mean any federal, state, local or foreign net or
gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium (including taxes under Code ss. 59A),
customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated or other tax, governmental fee or like assessment
or charge of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not, imposed by any Governmental
Entity or other Tax authority or arising under any Tax law or agreement,
including, without limitation, any joint venture or partnership agreement;
(ii) "Pre-Closing Tax Period" shall mean all taxable periods (or portions
thereof) that end on or before the Closing Date; (iii) "Post-Closing Tax
Period" shall mean all taxable periods (or portions thereof) that begin
after the Closing Date; (iv) "Tax Return" shall mean any return,
declaration, report, claim for refund, form, or information or return or
statement relating to Taxes, including any schedule or attachment thereto,
and including any amendments thereof; (v) "Straddle Period" shall mean any
taxable period that includes (but does not end on) the Closing Date; and
(vi) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(b) Except as set forth in Section 3.08 of the Seller Disclosure
Schedule, (i) the Company, the Company Subsidiary, and any affiliated
group, within the meaning of Section 1504(a) of the Code, of which the
Company or the Company Subsidiary is or has been a member, and, with
respect to the Other Assets, each of Seller and the Seller Entities, has
filed or caused to be filed in a timely manner (within any applicable
extension periods) all material Tax Returns required to be filed by the
Code or by applicable state, local or foreign Tax laws; (ii) all Taxes
shown to be due on such Tax Returns have been timely paid in full or will
be timely paid in full by the due date thereof; (iii) all such Tax Returns
(insofar as they relate to the activities or income of the Company, the
Company Subsidiary
and the Other Assets) are true, correct and complete in
all material respects; (iv) no adjustment relating to such Tax Returns has
been proposed in writing by any Governmental Entity or Tax authority; (v)
there are no pending or, to the Knowledge of Seller, threatened actions or
proceedings for the assessment or collection of income Taxes or material
non-income Taxes against the Company or the Company Subsidiary or with
respect to the Other Assets or any corporation that was included in the
filing of a Tax Return with Seller or Seller Subsidiary on a consolidated,
unitary or other combined basis; (vi) neither the Company nor the Company
Subsidiary has been at any time a member of, or, with respect to the Other
Assets, neither Seller nor the Seller Entities has been involved in, any
partnership or joint venture reported as a partnership for federal income
Tax purposes or the holder of a beneficial interest in any trust reported
as a trust for federal income Tax purposes for any period for which the
statute of limitations for any Tax has not expired; (vii) there are no IRS
information document requests or similar items issued by a state Taxing
authority currently outstanding that involve an adjustment that would
increase by a material amount the Taxes of the Company or the Company
Subsidiary or Seller or the Seller Entities with respect to the Other
Assets; (viii) there are no proposed reassessments by Taxing authorities of
any real property owned by the Company or the Company Subsidiary or
comprising part of the Other Assets that could increase by a material
amount any Tax to which the Company or the Company Subsidiary or the Other
Assets would be subject (other than reassessments attributable to the
transactions contemplated by this Agreement); (ix) neither the Shares nor
any part of the Other Assets is a United States real property interest
within the meaning of Section 897(c) of the Code; and (x) neither the
Company nor the Company Subsidiary has made any payments, nor is obligated
under any agreement (including as a result of the sale of Shares under this
Agreement) to make any payments that will not be deductible under Code
Section 280G.
(c) Except as set forth in Section 3.08 of the Seller
Disclosure Schedule, (i) neither Seller nor any of its Affiliates has made
with respect to the Company, the
Company Subsidiary or the Other Assets or any property held by the Company
or the Company Subsidiary or included in the Other Assets, any consent
under Section 341 of the Code; (ii) no property of the Company or the
Company Subsidiary or included in the Other Assets is "tax exempt use
property" within the meaning of Section 168(h) of the Code; (iii) neither
the Company nor the Company Subsidiary is a party to, and the Other Assets
do not include, any lease made pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended; (iv) neither the Company nor the
Company Subsidiary (A) is projected to have an amount includible in its
income for the current taxable year under Section 951 of the Code, or (B)
has an unrecaptured overall foreign loss within the meaning of Section
904(f) of the Code; (v) neither the Company nor the Company Subsidiary, or,
with respect to the Other Assets, neither Seller nor the Seller Entities
has any (A) income reportable for a period ending after the Closing Date
that is attributable to an activity or a transaction (e.g., an installment
sale) occurring in, or a change in accounting method made for, a period
ending on or prior to the Closing Date that resulted in a deferred
reporting of income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction), (B) knowledge that
the Internal Revenue Service ("IRS") or other Tax authority has proposed,
in writing, any material change in accounting method, or (C) deferred gain
or loss arising out of any deferred intercompany transaction; (vi) neither
the Company nor the Company Subsidiary is obligated under, and no part of
the Other Assets is encumbered by or involved in, any agreement with
respect to industrial development bonds or other obligations with respect
to which the excludability from gross income of the holder for U.S. federal
income Tax purposes could be affected by the transactions contemplated
hereunder; and (vii) no material Tax Liens exist or have been filed on any
assets of the Company or the Company Subsidiary or with respect to the
Other Assets (other than Liens for Taxes not yet due and payable). The
federal consolidated income Tax Returns in which the Company and/or the
Company Subsidiary have joined have been examined by the Internal Revenue
Service for all taxable years through the year ended December 31, 1993.
(d) Except as set forth in Section 3.08 of the Seller Disclosure
Schedule, there are no outstanding agreements or waivers extending the
statutory period of limitation for assessment or collection of Tax
applicable to any material Tax Returns required to be filed with respect to
the Company or the Company Subsidiary, or in respect of the Other Assets,
with respect to any of the Seller Entities, and neither the Company, the
Company Subsidiary, any affiliated group, within the meaning of Section
1504(a) of the Code, of which the Company or the Company Subsidiary is or
has been a member, nor, in respect of the Other Assets, any of Seller and
the Seller Entities has requested any extension of time within which to
file any material Tax Return, which return has not yet been filed.
(e) Seller has delivered to Buyer correct and complete copies of
all material federal and state income and franchise Tax Returns of the
Company and the Company Subsidiary for 1994 and thereafter and IRS Revenue
Agent Reports and similar state reports issued for such returns, and
statements of material Tax deficiencies assessed against or agreed to by
the Company or the Company Subsidiary since January 1, 1994.
SECTION 3.09. Assets Other than Intellectual Property and Real
Property Interests. (a) Except as set forth in Section 3.09 of the Seller
Disclosure Schedule, the Company, the Company Subsidiary or a Seller Entity
has, or at the Closing Date will have, good and valid title to all material
assets reflected on the Company Balance Sheet or on the Other Assets
Statement or thereafter acquired, except those sold or otherwise disposed
of since the date of the Company Balance Sheet or the Other Assets
Statement in the ordinary course of business consistent with past practice
and not in violation of this Agreement, in each case free and clear of all
Liens other than Permitted Liens. This Section 3.09 does not relate to
Intellectual Property, which is the subject of Section 3.20, nor to real
property or interests in real property, such items being the subject of
Section 3.10.
(b) Since January 1, 1998, all the material, tangible personal
property of the Company and the Company Subsidiary and all the material,
tangible personal property included in the Other Assets has been
maintained, repaired and replaced in all material respects in accordance
with past practice.
SECTION 3.10. Real Property. (a) Section 3.10(a) of the Seller
Disclosure Schedule lists: (i) the street address of each parcel of real
property and interests in real property owned in fee by the Company and the
Company Subsidiary ("Owned Real Property"), and (ii) the current owner of
each such parcel of Owned Real Property. The Company or the Company
Subsidiary has good, valid and insurable title in fee simple to the Owned
Real Property, free and clear of all Liens, except (i) as disclosed in
Section 3.10(a) of the Seller Disclosure Schedule and (ii) Permitted Liens.
There is no real property owned in fee by Seller or any Affiliate of Seller
and used in the Non-U.S. Clinical Laboratories Business except for any such
real property that is not used primarily in the Non-U.S. Clinical
Laboratories Business or that is used in providing the services listed in
Section 7.07 of the Seller Disclosure Schedule.
(b) Section 3.10(b) of the Seller Disclosure Schedule lists: the
street address of each parcel of real property and interests in real
property: (i) leased by the Company or the Company Subsidiary at which
either the Company Subsidiary headquarters or a hub or major operating
laboratory is located, (ii) that is Non-U.S. Leased Real Property or (iii)
leased by the Company or the Company Subsidiary under a lease that provides
for aggregate rental payments in 1999 in excess of $100,000 (collectively,
"Leased Real Property"). The Company, the Company Subsidiary and, with
respect to any Non-U.S. Leased Real Property, Seller or a Seller Entity has
good and valid title to the leasehold estates in the real property leased
by the Company or the Company Subsidiary and the Non-U.S. Leased Real
Property, free and clear of all Liens, except Permitted Liens and except as
would not, individually or in the aggregate, have a Company Material
Adverse Effect. Except
as disclosed in Section 3.10(b) of the Seller Disclosure Schedule or as
would not, individually or in the aggregate, have a Company Material
Adverse Effect, each lease for the real property leased by the Company or
the Company Subsidiary and the Non-U.S. Leased Real Property is valid,
binding and in full force and effect. None of the Company, the Company
Subsidiary or the applicable Seller Entity party to any lease and, to the
Knowledge of Seller, no other party to any such lease, is in material
breach or default thereunder, except for such noncompliance, breaches and
defaults that, individually or in the aggregate, have not had and would not
have a Company Material Adverse Effect. The Non-U.S. Leased Real Property
constitutes all real property leased by Seller or any Affiliate of Seller
and used in the Non-U.S. Clinical Laboratories Business except for any such
real property that is not used primarily in the Non-U.S. Clinical
Laboratories Business or that is used in providing the services listed in
Section 7.07 of the Seller Disclosure Schedule.
SECTION 3.11. Contracts. (a) Except as set forth in Section
3.11(a) of the Seller Disclosure Schedule, neither the Company nor the
Company Subsidiary is a party to or bound by, and none of the Other Assets
include, as of the date hereof, any:
(i) employment agreement or employment contract that has an
aggregate future liability in excess of $225,000 (or local currency
equivalent) and is not terminable by the Company, the Company
Subsidiary or the applicable Seller Entity by notice of not more than
60 days (or, where appropriate, minimum notice provisions set by
Applicable Law or collective bargaining agreements) for a cost of less
than $225,000 (or local currency equivalent);
(ii) employee collective bargaining agreement or other contract
with any labor union;
(iii) covenant of the Company, the Company Subsidiary or, in
connection with the Non-U.S. Clinical Laboratories Business, Seller or
the applicable Seller
Entity not to compete in any geographical area (other than pursuant to
any restriction contained in any agreement restricting the use of
leased property) or not to solicit customers or potential accounts;
(iv) agreement, which will survive the Closing, with (A) Seller
or any Affiliate of Seller (other than the Company or the Company
Subsidiary) or (B) any officer, director or employee of the Company,
the Company Subsidiary, Seller or any Affiliate of Seller (other than
employment agreements);
(v) lease, sublease or similar agreement with any Person (other
than the Company or the Company Subsidiary) under which the Company,
the Company Subsidiary or the applicable Seller Entity is a lessor or
sublessor of, or makes available for use to any Person (other than the
Company or the Company Subsidiary), any Real Property;
(vi) agreement, contract or other instrument under which the
Company, the Company Subsidiary or, in connection with the Non-U.S.
Clinical Laboratories Business, Seller or the applicable Seller Entity
has borrowed any money from, or issued any note, bond, debenture or
other evidence of indebtedness to, any Person (other than the Company
or the Company Subsidiary) or any other note, bond, debenture or other
evidence of indebtedness issued to any Person (other than the Company
or the Company Subsidiary) in any such case which, individually, is in
excess of $750,000 (other than intercompany debt which will be repaid,
forgiven or otherwise terminated on or prior to the Closing Date) and
which, in the case of Seller or any Seller Entity is an Assumed
Liability;
(vii) agreement, contract or other instrument (including
so-called take-or-pay or keepwell agreements) under which (A) any
Person which is not an Affiliate of the Company, the Company
Subsidiary, Seller or the applicable Seller Entity, in connection with
the Non-U.S. Clinical Laboratories Business, has
directly or indirectly guaranteed indebtedness, liabilities or
obligations of the Company, the Company Subsidiary or, with respect to
any Other Asset or Assumed Liability, Seller or the applicable Seller
Entity, including letters of credit or similar arrangements, or (B)
the Company, the Company Subsidiary or Seller or the applicable Seller
Entity has directly or indirectly guaranteed indebtedness, liabilities
or obligations of any Person (in each case other than endorsements for
the purpose of collection in the ordinary course of business), other
than, in the case of Seller or any Seller Entity, any such guarantee
that does not constitute an Assumed Liability, and in any such case in
clause (A) or (B) that, individually, is in excess of $750,000, and in
the case of clause (B) in the aggregate exceeds $2,000,000 (other than
intercompany debt which will be repaid, forgiven or otherwise
terminated on or prior to the Closing Date);
(viii) agreement, contract or other instrument under which the
Company, the Company Subsidiary or, in connection with the Non-U.S.
Clinical Laboratories Business, Seller or the applicable Seller Entity
has, directly or indirectly, made or committed to make any advance,
loan, extension of credit or capital contribution to, or other
investment in, any Person (other than the Company or the Company
Subsidiary), in any such case that, individually, is in excess of
$1,000,000 (other than an intercompany receivable which will be
repaid, forgiven or otherwise terminated on or prior to the Closing
Date) and which, in the case of Seller or any Seller Entity, is an
Assumed Liability;
(ix) laboratory service agreement (including agreements with
managed care organizations or insurance companies) involving full risk
or that generated aggregate net revenues in 1998 in excess of
$10,000,000;
(x) agreement pursuant to which the Company or the Company
Subsidiary or, in the case of the Non-U.S. Clinical Laboratories
Business, Seller or a Seller Entity manages the laboratory of any
third party which generated aggregate management fees in 1998 in
excess of $500,000;
(xi) agreement with any group purchasing organizations which
generated administrative fees in 1998 in excess of $750,000;
(xii) corporate healthcare services agreement (toxicology testing
or other clinical laboratory services performed at the request of an
employer with respect to employees of such employer) which generated
aggregate net revenues in 1998 in excess of $1,000,000;
(xiii) agreement with third parties who are not employees
pursuant to which the Company or the Company Subsidiary obtains
anatomic pathology services under which aggregate payments for
services were made by the Company or the Company Subsidiary in 1998 in
excess of $500,000;
(xiv) agreement with NeoPath, Inc.; or
(xv) any other agreement, contract, lease, license, commitment or
instrument to which the Company, the Company Subsidiary or the
applicable Seller Entity is a party or by or to which it or any of its
assets or business is bound or subject which has, or could reasonably
be expected to have, an aggregate future liability to any Person in
excess of $1,000,000 and is not terminable by the Company, the Company
Subsidiary or the applicable Seller Entity by notice of not more than
180 days for a cost of less than $1,000,000 other than, in each case
(A) customer or supplier contracts entered into in the ordinary course
of business and (B) agreements, contracts, leases, licenses,
commitments or instruments of the type which are required to be
disclosed under any of the previous clauses of this Section 3.11 or
under Section 3.10, 3.12, 3.13, 3.15, 3.16 or 3.20 (or would be
required to be disclosed pursuant to such sections if the applicable
dollar value or other materiality standard was satisfied).
(b) Except as set forth in Section 3.11(b) of the Seller
Disclosure Schedule, all agreements, contracts, leases, licenses,
commitments or instruments of the Company, the Company Subsidiary or the
Seller Entities listed in Section 3.11(a) of the Seller Disclosure Schedule
(collectively, the "Company Contracts") are valid, binding and in full
force and effect, except for such failures to be valid, binding and in full
force and effect that, (i) individually or in the aggregate, have not had
and would not have a Company Material Adverse Effect or (ii) are a result
of such agreements, contracts, leases, licenses, commitments or instruments
expiring pursuant to their terms or being terminated pursuant to a
termination right (other than as a result of a breach or default by the
Company, the Company Subsidiary, Seller or the applicable Seller Entity)
which would exist in the absence of the transactions contemplated by this
Agreement or the Transaction Documents. Except as indicated in Section
3.11(b) of the Seller Disclosure Schedule, Seller has made available to
Buyer prior to the date hereof a copy of each Company Contract in effect as
of the date hereof. Except as set forth in Section 3.11(b) of the Seller
Disclosure Schedule, the Company, the Company Subsidiary and the applicable
Seller Entity have performed all obligations required to be performed by
them under the Company Contracts and they are not (with or without the
lapse of time or the giving of notice, or both) in breach or default
thereunder and, to the Knowledge of Seller, no other party to any of the
Company Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder,
except for such noncompliance, breaches and defaults that, individually or
in the aggregate, have not had and would not have a Company Material
Adverse Effect.
(c) Set forth in Section 3.11(c) of the Seller Disclosure
Schedule is a list of the customers which generated the ten highest amounts
of aggregate net revenues in the Company Subsidiary's clinical trials
business in 1998.
SECTION 3.12. Litigation. Section 3.12 of the Seller Disclosure
Schedule sets forth a list as of the date
of this Agreement of all pending or threatened lawsuits or claims, with
respect to which any of Seller, the Seller Entities, the Company or the
Company Subsidiary has been contacted in writing by the plaintiff or
claimant or its, his or her counsel, against the Company or the Company
Subsidiary or any of their respective properties, assets, operations or
businesses or with respect to the Other Assets and which (a) are reasonably
expected to result in liability of more than $250,000 (excluding lawsuits
or claims relating to losses for which Buyer is indemnified by Seller
pursuant to Section 11.02(a)(v), (b) seek any material injunctive relief or
(c) may give rise to any legal restraint on or prohibition against the
transactions contemplated by this Agreement or the other Transaction
Documents. Except as set forth in Section 3.12 of the Seller Disclosure
Schedule, none of the Company, the Company Subsidiary or, with respect to
the Other Assets, Seller or any Seller Entity is a party or subject to or
in default under any material judgment, order, injunction or decree of any
Governmental Entity or arbitration tribunal applicable to it or any of its
respective properties, assets, operations or business. Except as set forth
in Section 3.12 of the Seller Disclosure Schedule, to the Knowledge of
Seller, there is no pending or threatened investigation of the Company, the
Company Subsidiary or, with respect to the Other Assets, Seller or any
Seller Entity, by any Governmental Entity. This Section 3.12 does not
relate to Taxes, employee benefit matters, environmental and health and
safety matters, employee and labor matters and intellectual property
matters, which are the subject of Sections 3.08, 3.13, 3.16, 3.17 and 3.20,
respectively.
SECTION 3.13. Benefit Plans. The representations in Section
3.13(a)- (j) do not apply to Non-U.S. Employees or any benefit plans
therefor. (a) Section 3.13(a) of the Seller Disclosure Schedule contains a
list of all "employee pension benefit plans" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA),
bonus, stock option, stock purchase, deferred compensation plans or
arrangements and other employee fringe benefit plans (all the foregoing
being
herein called "Company Benefit Plans") maintained, or contributed to,
by Seller, Seller Subsidiary, the Company or the Company Subsidiary for the
benefit of any officers or employees of (i) Seller or any of its
Affiliates, whose names are listed in Section 8.01 of the Seller Disclosure
Schedule, (ii) the Company or (iii) the Company Subsidiary. Seller has made
available to Buyer true, complete and correct copies of (i) each Company
Benefit Plan (or, in the case of any unwritten Company Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500
filed with the Internal Revenue Service with respect to each Company
Benefit Plan (if any such report was required), (iii) the most recent
summary plan description for each Company Benefit Plan and Pension Plan for
which such a summary plan description is required and (iv) each trust
agreement and group annuity contract relating to any Company Benefit Plan.
(b) Each Company Benefit Plan has been administered in
all material respects in accordance with its terms. Seller Subsidiary, the
Company and the Company Subsidiary and all the Company Benefit Plans are in
compliance in all material respects with the applicable provisions of all
Applicable Laws, including ERISA and the Code, with respect to the Company
Benefit Plans. Except as set forth in Section 3.13(b) of the Seller
Disclosure Schedule, all material reports, returns and similar documents
with respect to the Company Benefit Plans required to be filed with any
Governmental Entity or distributed to any Company Benefit Plan participant
have been duly and timely filed or distributed. Except as set forth in
Section 3.13 of the Seller Disclosure Schedule, there are no lawsuits,
actions, termination proceedings or other proceedings pending, or, to the
Knowledge of Seller, threatened against or involving any Company Benefit
Plan and, to the Knowledge of Seller, there are no investigations by any
Governmental Entity or other claims (except claims for benefits payable in
the normal operation of the Company Benefit Plans) pending or threatened
against or involving any Company Benefit Plan or asserting any rights to
benefits under any Company Benefit Plan.
(c) Except as set forth in Section 3.13(c) of the Seller
Disclosure Schedule, (i) all contributions to, and payments from, the
Company Benefit Plans that may have been required to be made in accordance
with the Company Benefit Plans and, when applicable, Section 302 of ERISA
or Section 412 of the Code, have been timely made, (ii) there has been no
application for or waiver of the minimum funding standards imposed by
Section 412 of the Code with respect to any Company Benefit Plan which is
subject to the minimum funding standards of Section 412 of the Code or
Title IV of ERISA (each, a "Pension Plan") and (iii) no Company Benefit
Plan has an "accumulated funding deficiency" within the meaning of Section
412(a) of the Code as of the most recent plan year.
(d) Except as set forth in Section 3.13(d) of the Seller
Disclosure Schedule, all Company Benefit Plans that are "employee benefit
plans" (as defined in Section 3(2) of ERISA) which are intended to be tax
qualified have been the subject of determination letters from the Internal
Revenue Service to the effect that such plans are qualified and exempt from
Federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, and no such determination letter has been revoked nor, to the
Knowledge of Seller, has revocation been threatened, nor has any such plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its cost.
(e) No "prohibited transaction" (as defined in Section
4975 of the Code or Section 406 of ERISA) has occurred that involves the
assets of any Company Benefit Plan and that is likely to subject the
Company or the Company Subsidiary or any of their employees, or, to the
Knowledge of Seller, a trustee, administrator or other fiduciary of any
trusts created under any Company Benefit Plan or Pension Plan to the tax or
penalty on prohibited transactions imposed by Section 4975 of ERISA or the
sanctions imposed under Title I of ERISA. Except as set forth in Section
3.13(e) of the Seller Disclosure Schedule, none of the Pension Plans has
been terminated nor have there
been any "reportable events" (as defined in Section 4043 of ERISA and the
regulations thereunder) with respect thereto. None of Seller, Seller
Subsidiary, the Company or the Company Subsidiary has knowingly engaged in
any transaction or knowingly acted or failed to act in a manner that is
likely to subject the Company or the Company Subsidiary to any liability
for breach of fiduciary duty under ERISA or any other applicable law.
(f) With respect to any Pension Plan, none of Seller, Seller
Subsidiary, the Company or the Company Subsidiary has incurred any
liability to such Pension Plan or to the Pension Benefit Guaranty
Corporation or to any other Person, other than for the payment of premiums,
all of which have been paid when due. Seller has made available to Buyer
the most recent actuarial report or valuation with respect to each Pension
Plan. The information supplied to the actuary by Seller for use in
preparing such reports and valuations was complete and accurate and Seller
has no reason to believe that the conclusions expressed in such reports and
valuations are incorrect.
(g) Except as set forth in Section 3.13(g) of the Seller
Disclosure Schedule, as of the most recent valuation date for each Pension
Plan, there was not any amount of "unfunded benefit liabilities" (as
defined in Section 4001(a)(18) of ERISA) under such Pension Plan and, to
the Knowledge of Seller, there are no facts or circumstances that would
materially change the funded status of any such Pension Plan.
(h) Except as set forth in Section 3.13(h) of the Seller
Disclosure Schedule, at no time within the five years preceding the Closing
Date has Seller, Seller Subsidiary, the Company or the Company Subsidiary
or any Person who is under common control with Seller been required to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or incurred any withdrawal liability, within the meaning of Section
4201 of ERISA, with respect to any such multiemployer plan, which liability
has not been fully paid as of the date hereof, or announced an
intention to withdraw, but not yet completed such withdrawal, from any such
multiemployer plan.
(i) Except as set forth in Section 3.13(i) of the Seller
Disclosure Schedule, each Company Benefit Plan which is a group health
plan, as such term is defined in Section 5000(b)(1) of the Code, that is
sponsored by or maintained by or contributed to by Seller or any Person
under common control with Seller complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code.
(j) Except as set forth in Section 3.13(j) of the Seller
Disclosure Schedule, no employee or former employee of the Company or the
Company Subsidiary or who is employed in accordance with Section 3.13 will
become entitled to any bonus, retirement, severance, job security or
similar benefit or any enhanced benefit solely as a result of the
transactions contemplated hereby.
(k) To the Knowledge of Seller, all plans maintained or sponsored
by Seller, the Company or the Company Subsidiary for the benefit of
Non-U.S. Employees are in compliance in all material respects with
Applicable Law.
SECTION 3.14. Absence of Changes or Events. Except as set forth
in Section 3.14 of the Seller Disclosure Schedule, since December 31, 1998,
there has not been any Company Material Adverse Effect other than changes
relating to the United States economy in general or the Company's and the
Company Subsidiary's industry in general and not specifically relating to
the Company or the Company Subsidiary. Buyer acknowledges that there may be
disruption to the Company's and the Company Subsidiary's business or the
Non-U.S. Clinical Laboratories Business as a result of the execution of
this Agreement and the consummation of the transactions contemplated
hereby, and Buyer agrees that such disruptions do not and shall not
constitute a breach of this Section 3.14. Except as set forth in Section
3.14 of the Seller Disclosure Schedule, since December 31, 1998, to the
date of this Agreement, Seller has caused the Business to be conducted in
the ordinary course of business consistent with
past practice. Except as set forth in Section 3.14 of the Seller Disclosure
Schedule, since December 31, 1998, to the date of this Agreement, none of
the Company, the Company Subsidiary or, with respect to the Other Assets,
any Seller Entity has taken any action that, if taken after the date of
this Agreement, would constitute a breach of any of the covenants set forth
in Section 5.02 (other than paragraphs (p) and (q) thereof).
SECTION 3.15. Compliance with Applicable Laws; Corporate
Integrity Agreement. Except as set forth in Section 3.15 of the Seller
Disclosure Schedule, the Company, the Company Subsidiary and, with respect
to the Other Assets, the Seller Entities, are, and have been since January
1, 1996, in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity ("Applicable
Laws"), except for instances of noncompliance that, individually or in the
aggregate, would not have a Company Material Adverse Effect. Except as set
forth in Section 3.15 of the Seller Disclosure Schedule, none of the
Company, the Company Subsidiary or, with respect to the Other Assets, any
Seller Entity has received any written communication since January 1, 1997,
from a Governmental Entity that alleges that the Company, the Company
Subsidiary or the applicable Seller Entity is not in compliance in any
material respect with any Applicable Laws that are material to the conduct
of the Business. Except as set forth in Section 3.15 of the Seller
Disclosure Schedule, since February 24, 1997, the Business has been
conducted in compliance in all material respects with the terms of the
Corporate Integrity Agreement dated as of September 1, 1996, between the
Company Subsidiary and the United States Department of Health and Human
Services, other than to the extent such terms are related to compliance
with laws (which are the subject of this Section 3.15). This Section 3.15
does not relate to Taxes, employee benefit matters, environmental and
health and safety matters, employee and labor matters and intellectual
property matters, which are the subject of Sections 3.08, 3.13, 3.16, 3.17
and 3.20, respectively.
SECTION 3.16. Environmental and Health and Safety Matters. (a)
Except as set forth in Section 3.16 of the Seller Disclosure Schedule, and
except for those matters that, individually or in the aggregate, would not
have a Company Material Adverse Effect (i) each of the Company, the Company
Subsidiary and, with respect to the Other Assets, the Seller Entities, has
obtained and is in compliance with all permits, licenses, authorizations
and approvals required for the conduct of its operations under
Environmental Laws, (ii) each of the Company, the Company Subsidiary and,
with respect to the Other Assets, the Seller Entities is in compliance with
all Environmental Laws and (iii) there have been no Releases, or threatened
Releases, of Hazardous Materials at any properties currently or formerly
owned or operated by the Company, the Company Subsidiary or the Non-U.S.
Clinical Laboratories Business, or at any offsite disposal locations
currently or formerly used by the Company, the Company Subsidiary or the
Non-U.S. Clinical Laboratories Business.
(b) Except as set forth in Section 3.16 of the Seller Disclosure
Schedule, there is no action, suit, demand, notice of noncompliance, notice
of violation, investigation, proceeding or claim arising under
Environmental Laws that is pending or, to the Knowledge of Seller,
threatened, against the Company, the Company Subsidiary or, with respect to
the Other Assets, any Seller Entity, or any of their respective properties,
assets, operations or businesses, and which (i) involves potential Losses
of more than $250,000, or (ii) is reasonably likely to result in
significant business interruption.
SECTION 3.17. Employee and Labor Matters. The representations in
this Section 3.17 do not apply to Non-U.S. Employees. Except as set forth
in Section 3.17 of the Seller Disclosure Schedule (i) there is, and during
the past three years there has been, no labor strike, dispute, work
stoppage or lockout pending, or, to the Knowledge of Seller, threatened,
against the Company or the Company Subsidiary, (ii) to the Knowledge of
Seller, no union organizational campaign is in progress with respect to the
employees of the Company or the Company Subsidiary or the
employees of Seller and no question concerning representation exists
respecting such employees or has been in progress or existed during the
past three years, (iii) neither the Company nor the Company Subsidiary is
engaged in any unfair labor practice, (iv) there is no unfair labor
practice charge or complaint against the Company or the Company Subsidiary
pending, or, to the Knowledge of Seller, threatened, before the National
Labor Relations Board or any equivalent Person, (v) there are no pending,
or, to the Knowledge of Seller, threatened, union grievances against the
Company or the Company Subsidiary and (vi) neither the Company nor the
Company Subsidiary has received written notice since January 1, 1997, of
the intent of any Governmental Entity responsible for the enforcement of
labor or employment laws to conduct an investigation of the Company or the
Company Subsidiary and, to the Knowledge of Seller, no such investigation
is in progress.
(b) In connection with the Non-U.S. Clinical Laboratories
Business, the Seller is not (and has not been within the 3 year period
preceding the date of this Agreement) involved in any dispute with any
trade union or employee representatives.
SECTION 3.18. Information Supplied. None of the information
supplied or to be supplied by Seller for inclusion or incorporation by
reference in the Proxy Statement (at the date it is first mailed to the
stockholders of Buyer or at the time of the Buyer Stockholders Meeting) or
in any registration statement on the applicable SEC form pursuant to which
any indebtedness of Buyer to be issued as part of the Financing may be
registered (the "Registration Statement") (at the time the Registration
Statement is declared effective, including any post-effective amendment
thereto) will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading.
SECTION 3.19. Receivables. Except to the extent, if any, reserved
for on the Company Balance Sheet or the
Other Assets Statement or in the reserves existing on the Closing Date
reflected in the calculation of Consolidated Tangible Net Worth as of the
Closing Date, all Receivables reflected on the Company Balance Sheet or the
Other Assets Statement arose from, and the Receivables existing on the
Closing Date will have arisen from, the sale of Inventory or services to
Persons not affiliated with Seller, the Company or the Company Subsidiary
and in the ordinary course of business consistent with past practice.
SECTION 3.20. Intellectual Property. The Company, the Company
Subsidiary or, with respect to the Other Assets, Seller or a Seller Entity,
owns, or is validly licensed or otherwise has the right to use (or, as of
the Closing, will own, be validly licensed or otherwise have the right to
use), all patents, trademarks, trade names, applications for patents or
trademarks, service marks, copyrights and other intellectual property
rights (collectively, "Intellectual Property") that are material to the
conduct of the business of the Company and the Company Subsidiary and the
Non-U.S. Clinical Laboratories Business, taken as a whole. Section 3.20 of
the Seller Disclosure Schedule sets forth a list of all patents (pending
applications and issued patents), trademarks (registrations and pending
applications), software and other forms of copyrightable works (registered
and unregistered), in each case which are (or, as of Closing, will be) (A)
owned by or assigned or licensed to the Company or the Company Subsidiary,
or (B) with respect to the Other Assets, owned by Seller or a Seller Entity
and which will be licensed to the Company or the Company Subsidiary or
Buyer or a Buyer Subsidiary, and that are material to the conduct of the
Business, taken as a whole. Except as set forth in Section 3.20 of the
Seller Disclosure Schedule, there are no claims pending or, to the
Knowledge of Seller, threatened that the Company or the Company Subsidiary,
or with respect to the Other Assets, Seller or any Seller Entity, is
infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property, except as would not, individually or
in the aggregate, have a Company Material Adverse Effect. To the Knowledge
of Seller, except as set forth in Section 3.20 of the Seller
Disclosure Schedule, no Person is infringing the rights to Intellectual
Property of the Company or the Company Subsidiary or, with respect to any
Intellectual Property included in the Other Assets, any Seller Entity,
except as would not, individually or in the aggregate, have a Company
Material Adverse Effect. Except as set forth in Section 3.20 of the Seller
Disclosure Schedule, the conduct of the Business does not as of the date
hereof or as of the Closing Date infringe upon or conflict with any
Intellectual Property (existing as of the date hereof or as of the Closing
Date) of any Person, except as would not, individually or in the aggregate,
have a Company Material Adverse Effect. Except as set forth in Section 3.20
of the Seller Disclosure Schedule, Seller, the Company, the Company
Subsidiary and, with respect to the Non-U.S. Intellectual Property, the
Seller Entities, have not received since January 1, 1993, any written claim
or written notice from any third party to the contrary that has not been
resolved. Seller, the Company and the Company Subsidiary or with respect to
licensed Intellectual Property included in the Other Assets, the Seller
Entities, as of the date hereof have, and as of the Closing Date will have,
paid all royalties, fees and other amounts due as of such dates on all
licensed Intellectual Property other than amounts payable which are not
past due, amounts accrued, or disputed amounts which are being contested in
good faith.
SECTION 3.21. Sufficiency of Assets. (a) Other than the support
services set forth in Section 7.07 of the Seller Disclosure Schedule, none
of Seller or any of its Affiliates provides any material services to the
Business. Except as set forth in Section 3.21 of the Seller Disclosure
Schedule, the Company does not engage, and since its organization has not
engaged, in any activity other than holding the stock of the Company
Subsidiary.
(b) Assuming that the necessary consents have been obtained in
connection with the transactions contemplated by this Agreement, including
consents required by the transfer of the Shares and the Other Assets and
the assumption of the Assumed Liabilities, the Other Assets and the assets
of the Company and the Company Subsidiary as of
the Closing Date will constitute all the material assets used in and all
the assets necessary for the conduct of the Business other than (i) the
Excluded Assets, (ii) assets of Seller or its Affiliates relating to the
services set forth in Section 7.07 of the Seller Disclosure Schedule, (iii)
assets of Seller or its Affiliates relating to the services to be provided
under the Transition Services Agreement, (iv) cash and (v) the Names. This
Section 3.21(b) does not relate to intellectual property matters, which are
the subject of Section 3.20.
(c) Assuming that the necessary consents have been obtained in
connection with the transactions contemplated by this Agreement, including
consents required by the transfer of the Other Assets and the assumption of
the Assumed Liabilities, the Other Assets as of the Closing Date will
constitute all the material assets used in and all the assets necessary for
the conduct of the Non-U.S. Clinical Laboratories Business other than (i)
the Excluded Assets, (ii) assets of Seller or its Affiliates relating to
the services set forth in Section 7.07 of the Seller Disclosure Schedule,
(iv) assets of Seller or its Affiliates relating to the services to be
provided under the Transition Services Agreement, (iii) cash and (iv) the
Names. This Section 3.21(c) does not relate to intellectual property
matters, which are the subject of Section 3.20.
ARTICLE IV
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as follows:
SECTION 4.01. Authority. (a) Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer has all requisite corporate power and authority to
enter into this Agreement and the other Transaction Documents, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
All corporate acts and other proceedings required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement and the
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and properly taken subject,
in the case of the issuance of the shares of Buyer Common Stock
constituting the Common Stock Consideration, to receipt of the Buyer
Stockholders Approval. This Agreement has been duly executed and delivered
by Buyer and constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. Upon the due
execution and delivery of the Transaction Documents other than this
Agreement, such Transaction Documents each will constitute a legal, valid
and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms.
(b) The Board of Directors of Buyer (the "Buyer Board"), at a
meeting duly called and held duly and unanimously adopted resolutions (i)
approving this Agreement and the other Transaction Documents, and the
transactions contemplated hereby and thereby, (ii) determining that the
terms of the transactions contemplated hereby and thereby are fair to and
in the best interests of Buyer and its stockholders and (iii) recommending
that Buyer's stockholders give the Buyer Stockholders Approval.
(c) The only vote of holders of any class or series of Buyer
Capital Stock necessary in connection with this Agreement, the other
Transaction Documents or any transaction contemplated hereby or thereby is
the approval by the holders of a majority of the outstanding shares of
Buyer Common Stock (and the holders of a majority of the outstanding shares
of Voting Cumulative Preferred Stock, voting together as a single class) of
the issuance of the shares of Buyer Common Stock constituting the Common
Stock Consideration (such approval, the "Buyer Stockholders Approval").
SECTION 4.02. No Conflicts; Consents. (a) Except as set forth in
Section 4.02(a) of the schedule, dated as of the date of this Agreement,
from Buyer to Seller
(the "Buyer Disclosure Schedule") the execution and delivery of this
Agreement do not, and the execution and delivery of the other Transaction
Documents will not, and the consummation of the transactions contemplated
hereby and thereby (including the Financing) and compliance with the terms
hereof and thereof (including the Financing) will not, conflict with, or
result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancelation
or acceleration of any obligation or to loss of a material benefit under,
or result in the creation of any Lien other than a Permitted Lien, upon any
of the properties or assets of Buyer or any Buyer Subsidiary under, any
provision of (i) the Certificate of Incorporation or Bylaws of Buyer or the
comparable governing instruments of any Buyer Subsidiary, (ii) any note,
bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, agreement or arrangement to which Buyer or any Buyer Subsidiary
is a party or by which any of their respective properties or assets are
bound, or (iii) any judgment, order, or decree, or statute, law, ordinance,
rule or regulation applicable to Buyer or any Buyer Subsidiary or their
respective properties or assets, other than, in the case of clauses (ii)
and (iii) above, any such items that, individually or in the aggregate,
would not have a Buyer Material Adverse Effect or materially affect or
delay the ability of Buyer to consummate the transactions contemplated by
this Agreement or the other Transaction Documents.
(b) Except as set forth in Section 4.02(b) of the Buyer
Disclosure Schedule, no consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect
to Buyer or any Buyer Subsidiary in connection with the execution, delivery
and performance of this Agreement or the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby, other than
(i) compliance with and filings under Section 13(a) or 15(d), as the case
may be, of the Exchange Act, (ii) compliance with and filings and
notifications under applicable Environmental Laws and (iii) those that may
be required solely by reason
of Seller's (as opposed to any other third party's) participation in the
transactions contemplated hereby and thereby.
SECTION 4.03. Organization and Standing of the Buyer
Subsidiaries. Each of the Buyer Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, which jurisdiction is set forth in Section
4.03 of the Buyer Disclosure Schedule. Each Buyer Subsidiary has full
corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to
own, lease or otherwise hold its properties and assets and to carry on its
business as presently conducted, other than such franchises, licenses,
permits, authorizations and approvals the lack of which, individually or in
the aggregate, would not have a Buyer Material Adverse Effect. Each Buyer
Subsidiary is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which the conduct or nature of
its business or the ownership, leasing or holding of its properties makes
such qualification necessary, except such jurisdictions where the failure
to be so qualified or in good standing, individually or in the aggregate,
would not have a Buyer Material Adverse Effect. The term "Buyer
Subsidiaries" means each Person listed in Section 4.03 of the Buyer
Disclosure Schedule.
SECTION 4.04. Capital Stock of Buyer and the Buyer Subsidiaries.
(a) The authorized capital stock of Buyer consists of 100,000,000 shares of
Buyer Common Stock and 10,000,000 shares of series preferred stock of
Buyer, par value $1.00 per share, of which 1,000 are designated as 1996
Voting Cumulative Preferred Stock, and 600,000 are designated Series A
Junior Participating Preferred Stock ("Buyer Preferred Stock"; together
with the Buyer Common Stock, the "Buyer Capital Stock"). At the close of
business on December 31, 1998, 30,026,634 shares of Buyer Common Stock were
outstanding. At the close of business on February 1, 1999, (i) 30,255,081
shares of Buyer Common Stock, 1,000 shares of Voting Cumulative Preferred
Stock and no shares of Series A Junior Participating Preferred Stock
were issued and outstanding, (ii) 215,394 shares of Buyer Common Stock were
held by Buyer in its treasury, (iii) 2,920,655 shares of Buyer Common Stock
were subject to outstanding Buyer employee stock options, an additional
368,600 shares of Buyer Common Stock were reserved for issuance pursuant to
Buyer's employee stock option plan and an additional 1,504,311 shares of
Buyer Common Stock were reserved for issuance pursuant to Buyer's employee
stock purchase plan and additional shares are authorized to be issued in
accordance with the terms of Buyer's profit sharing 401K plan; (iv) 51,750
shares of Buyer Common Stock were subject to outstanding Buyer director
stock options and 448,250 additional shares of Buyer Common Stock were
reserved for issuance pursuant to the non-employee director stock option
plan; and (v) 600,000 shares of Series A Junior Participating Buyer
Preferred Stock were reserved for issuance in connection with the rights
(the "Buyer Rights") issued pursuant to the rights agreement dated as of
December 31, 1996 (as amended from time to time, the "Buyer Rights
Agreement"), between Buyer and ▇▇▇▇▇▇ Trust and Savings Bank, as Rights
Agent. Except as set forth above, at the close of business on December 31,
1998, no shares of capital stock or other voting securities of the Company
were issued, reserved for issuance or outstanding. The shares of Buyer
Common Stock to be issued as the Common Stock Consideration will be validly
issued, fully paid, nonassessable and free of preemptive rights.
(b) Except as set forth in Section 4.04(b) of the Buyer
Disclosure Schedule, all the Buyer Subsidiaries are, directly or
indirectly, wholly owned by Buyer. All the outstanding shares of capital
stock of each Buyer Subsidiary have been duly authorized and validly issued
and are fully paid and nonassessable. Except as set forth in Section
4.04(b) of the Buyer Disclosure Schedule, Buyer has good and valid title,
directly or through one or more wholly owned subsidiaries, to all the
outstanding shares of capital stock of each Buyer Subsidiary, free and
clear of any Liens. Except as set forth in Section 4.04(b) of the Buyer
Disclosure Schedule, there are no shares of capital stock or other equity
securities of any Buyer Subsidiary outstanding.
(c) Except as set forth in Section 4.04(c) of the Buyer
Disclosure Schedule, no shares of capital stock of Buyer or any Buyer
Subsidiary have been issued in violation of, and no such shares of capital
stock are subject to, any purchase option, call, right of first refusal,
preemptive, subscription or similar rights under any provision of
Applicable Law, the Certificate of Incorporation or Bylaws of Buyer or the
comparable governing instruments of any Buyer Subsidiary, any contract,
agreement or instrument to which Buyer, or any Buyer Subsidiary is subject,
bound or a party or otherwise. Except as set forth in Section 4.04(c) of
the Buyer Disclosure Schedule, there are no outstanding warrants, options,
rights, "phantom" stock rights, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) (i) pursuant to
which Buyer or any Buyer Subsidiary is or may become obligated to issue,
sell, purchase, return or redeem any shares of capital stock or other
securities of Buyer or any Buyer Subsidiary or (ii) that give any Person
the right to receive any benefits or rights similar to any rights enjoyed
by or accruing to the holders of shares of capital stock of Buyer or any
Buyer Subsidiary. Except as set forth in Section 4.04(c) of the Buyer
Disclosure Schedule, there are no equity securities of Buyer or any Buyer
Subsidiary reserved for issuance for any purpose. Except as set forth in
Section 4.04(c) of the Buyer Disclosure Schedule, there are no outstanding
bonds, debentures, notes or other indebtedness having the right to vote on
any matters on which stockholders of Buyer or any Buyer Subsidiary may
vote.
SECTION 4.05. SEC Documents; Undisclosed Liabilities. (a) Buyer
has filed all reports, schedules, forms, statements and other documents
required to be filed by Buyer with the SEC since January 1, 1997 (the
"Buyer SEC Documents"). As of its respective date, each Buyer SEC Document
complied in all material respects with the requirements of the Exchange Act
or the Securities Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Buyer SEC Document, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Except to the extent that information contained in any Buyer SEC Document
has been revised or superseded by a later filed Buyer SEC Document, none of
the Buyer SEC Documents contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of Buyer included in Buyer SEC Documents comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with U.S. GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) consistently applied
during the periods involved (except in each case as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of Buyer and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal recurring year-end audit adjustments).
(b) Except as set forth in the Buyer SEC Documents filed and
publicly available prior to the date hereof (the "Filed Buyer SEC
Documents"), neither Buyer nor any Buyer Subsidiary has any debts,
liabilities and obligations, whether accrued or fixed, absolute or
contingent, matured or unmatured or determined or determinable, including,
without limitation, those arising under any Applicable Law or Action and
those arising under any contract, agreement, arrangement, commitment or
undertaking, in each case required by U.S. GAAP to be reflected on a
consolidated balance sheet of the Buyer and the Buyer Subsidiaries or, in
each case, on the notes thereto except (i) as disclosed, reflected or
reserved against in the most recent balance sheet contained in the Filed
Buyer SEC Documents (the "Buyer Balance Sheet"), (ii) for items set forth
in Section 4.05 of the Buyer
Disclosure Schedule, (iii) for Taxes, (iv) for liabilities incurred in the
ordinary course of business consistent with past practice since the date of
the Buyer Balance Sheet and not in violation of this Agreement, and (v) for
other liabilities which, individually or in the aggregate, would not have a
Buyer Material Adverse Effect.
(c) This Section 4.05 will not be deemed breached by changes in
U.S. GAAP after the date of this Agreement.
SECTION 4.06. Litigation. Section 4.06 of the Buyer Disclosure Schedule
sets forth a list as of the date of this Agreement of all pending or
threatened lawsuits or claims, with respect to which Buyer or any Buyer
Subsidiary has been contacted in writing by the plaintiff or claimant, or,
its, his or her counsel, against Buyer or any Buyer Subsidiary or any of
their respective properties, assets, operations or businesses and which (a)
are reasonably expected to result in liability of more than $250,000
(excluding any liabilities covered by insurance policies or self-insurance
retention limits under such insurance policies), (b) seek any material
injunctive relief or (c) may give rise to any legal restraint on or
prohibition against the transactions contemplated by this Agreement or the
other Transaction Documents. Except as set forth in Section 4.06 of the
Buyer Disclosure Schedule, neither Buyer nor any Buyer Subsidiary is a
party or subject to or in default under any material judgment, order,
injunction or decree of any Governmental Entity or arbitration tribunal
applicable to it or any of its respective properties, assets, operations or
business. Except as set forth in Section 4.06 of the Buyer Disclosure
Schedule, to the Knowledge of Buyer, there is no pending or threatened
investigation of Buyer or a Buyer Subsidiary by any Governmental Entity and
there are no facts that could result in any lawsuit that, alone or in the
aggregate, could reasonably be expected to result in a Buyer Material
Adverse Effect. This Section 4.06 does not relate to matters with respect
to Taxes, employee benefit matters, intellectual property, employee and
labor matters and environmental and health and safety matters which are the
subject of Sections 4.12, 4.13, 4.15, 4.17 and 4.18.
SECTION 4.07. Absence of Changes or Events. Except as disclosed
in the Filed Buyer SEC Documents or as set forth in Section 4.07 of the
Buyer Disclosure Schedule, since the date of the Buyer Balance Sheet, there
has not been any Buyer Material Adverse Effect, other than changes relating
to the United States economy in general or the Buyer's and the Buyer
Subsidiaries' industry in general and not specifically relating to the
Buyer or a Buyer Subsidiary. Seller acknowledges that there may be
disruption to the Buyer's and the Buyer Subsidiaries' business as a result
of the execution of this Agreement and the consummation of the transactions
contemplated hereby, and Seller agrees that such disruptions do not and
shall not constitute a breach of this Section 4.07. Except as set forth in
Section 4.07 of the Buyer Disclosure Schedule, since December 31, 1998, to
the date of this Agreement, Buyer has caused the business of Buyer and the
Buyer Subsidiaries to be conducted in the ordinary course of business
consistent with past practice. Except as set forth in Section 4.07 of the
Buyer Disclosure Schedule, since December 31, 1998 none of Buyer or any
Buyer Subsidiary has taken any action that if taken after the date of this
Agreement would constitute a breach of any of the covenants set forth in
Section 6.02.
SECTION 4.08. Compliance with Applicable Laws; Corporate
Integrity Agreement. Except as set forth in Section 4.08 of the Buyer
Disclosure Schedule, Buyer and the Buyer Subsidiaries are, and have been
since January 1, 1996, in compliance with all Applicable Laws, except for
instances of noncompliance that, individually or in the aggregate, would
not have a Buyer Material Adverse Effect. Except as set forth in Section
4.08 of the Buyer Disclosure Schedule, none of Buyer or the Buyer
Subsidiaries has received any written communication since January 1, 1997,
from a Governmental Entity that alleges that Buyer or a Buyer Subsidiary is
not in compliance in any respect with any Applicable Laws that are material
to the conduct of Buyer's or the Buyer Subsidiaries' business. Except as
set forth in Section 4.08 of the Buyer Disclosure Schedule, Buyer has been
since October 9, 1996, in compliance in all material respects with the
terms of the Corporate Integrity Agreement
dated as of October 9, 1996 between Buyer (then known as Corning Clinical
Laboratories Inc.) and the United States Department of Health and Human
Services, other than to the extent such terms are related to compliance
with laws (which are the subject of this Section 4.08). This Section 4.08
does not relate to matters with respect to Taxes, employee benefit matters,
intellectual property, employee and labor matters and environmental and
health and safety matters which are the subject of Sections 4.12, 4.13,
4.15, 4.17 and 4.18.
SECTION 4.09. Securities Act. The Shares purchased by Buyer
pursuant to this Agreement are being acquired for investment only and not
with a view to any public distribution thereof, and Buyer shall not offer
to sell or otherwise dispose of the Shares so acquired by it in violation
of any of the registration requirements of the Securities Act.
SECTION 4.10. Availability of Funds. As of the date of this
Agreement, Buyer has cash available which, together with existing borrowing
facilities and firm commitments (the "Firm Commitments") is sufficient to
enable it to consummate the transactions contemplated by this Agreement.
True and complete copies of any such facilities and commitments have been
provided to Seller. The financing required to consummate the transactions
contemplated hereby is collectively referred to as the "Financing". As of
the date hereof, Buyer has no reason to believe that any of the conditions
to the Financing will not be satisfied or that the Financing will not be
available on a timely basis for the transactions contemplated by this
Agreement.
SECTION 4.11. Information Supplied. None of the information
supplied or to be supplied by Buyer for inclusion or incorporation by
reference in the Proxy Statement (at the date it is first mailed to the
stockholders of Buyer, at the time of the Buyer Stockholders Meeting or at
the Closing) or the Registration Statement (at the time the Registration
Statement is declared effective, including any post-effective amendments
thereto, or at the Closing) will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy
Statement and the Registration Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the
Securities Act, respectively, and the rules and regulations thereunder,
except that no representation is made by Buyer with respect to statements
made or incorporated by reference therein based on information supplied by
or on behalf of Seller for inclusion or incorporation by reference in the
Proxy Statement or the Registration Statement.
SECTION 4.12. Taxes. (a) Except for such matters as would not
have a Buyer Material Adverse Effect, (i) Buyer has timely filed or will
timely file all Tax Returns required to be filed by Buyer with any Tax
authority with respect to Taxes for any period ending on or before the
Closing Date, taking into account any extension of time to file granted to
or obtained on behalf of Buyer; (ii) all Taxes that are due prior to the
Closing Date have been paid or will be paid (other than Taxes which (1) are
not yet delinquent or (2) are being contested in good faith and have not
been finally determined or (3) are indemnified against); (iii) as of the
date hereof, no deficiency for any Tax has been asserted or assessed by a
Tax authority against Buyer or any of the Buyer Subsidiaries which
deficiency has not been paid other than any deficiency being contested in
good faith and; (iv) Buyer has provided adequate reserves (in accordance
with GAAP) in their financial statements for any Taxes that have not been
paid, whether or not shown as being due on any Tax Returns.
(b) To the best of Buyer's knowledge, there are no material
disputes pending, or claims asserted in writing for, Taxes or assessments
upon Buyer or any of the Buyer Subsidiaries, nor has Buyer or any of the
Buyer Subsidiaries been requested in writing to give any currently
effective waivers extending the statutory period of limitation applicable
to any federal or state income Tax Return for any
period which disputes, claims, assessments or waivers are reasonably likely
to have a Buyer Material Adverse Effect.
(c) There are no Tax liens upon any property or assets of Buyer
except liens for current Taxes not yet due and except for liens which have
not had and are not reasonably likely to have a Buyer Material Adverse
Effect.
(d) Buyer has not been required to include in income any
adjustment pursuant to Section 481 of the Code by reason of a voluntary
change in accounting method initiated by Buyer, and the IRS has not
initiated or proposed any such adjustment or change in accounting method,
in either case which adjustment or change has had or is reasonably likely
to have a Buyer Material Adverse Effect.
(e) Buyer has not entered into a transaction which is being
accounted for under the installment method of Section 453 of the Code,
which would be reasonably likely to have a Buyer Material Adverse Effect.
SECTION 4.13. Benefit Plans. Section 4.13 of the Buyer Disclosure
Schedule contains a list of all "employee pension benefit plans" (as
defined in Section 3(2) of ERISA), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) and all other material plans, policies
and arrangements maintained by Buyer for the benefit of Buyer's employees
(collectively, "Buyer's Plans"). Each of Buyer's Plans are maintained in
material compliance with their applicable terms and conditions and
Applicable Law. Each of Buyer's Plans which are intended to be
tax-qualified under Section 401(a) of the Code have received a favorable
determination letter regarding their tax-qualified status and, to the best
Knowledge of Buyer, no such letter has been revoked.
SECTION 4.14. Real Property. (a) Section 4.14(a) of the Buyer
Disclosure Schedule lists: (i) the street address of each parcel of real
property and interests in real property owned in fee by Buyer and the Buyer
Subsidiaries ("Buyer Owned Real Property"), and (ii) the current owner of
each such parcel of Buyer Owned
Real Property. Buyer or a Buyer Subsidiary has good, valid, marketable and
insurable title in fee simple to the Buyer Owned Real Property, free and
clear of all Liens, except (i) as disclosed in Section 4.14(a) of the Buyer
Disclosure Schedule and (ii) Permitted Liens.
(b) Section 4.14(b) of the Buyer Disclosure Schedule lists: the
street address of each parcel of real property and interests in real
property: (i) leased by Buyer or a Buyer Subsidiary at which either a Buyer
Subsidiary's headquarters or a hub or major operating laboratory is
located, or (ii) leased by Buyer or a Buyer Subsidiary under a lease that
provides for aggregate rental payments in 1999 in excess of $100,000
(collectively, "Buyer Leased Real Property"). Buyer or a Buyer Subsidiary
has good and valid title to the leasehold estates in the real property
leased by Buyer or a Buyer Subsidiary, free and clear of all Liens, except
Permitted Liens and except as would not, individually or in the aggregate,
have a Buyer Material Adverse Effect. Except as disclosed in Section
4.14(b) of the Buyer Disclosure Schedule or as would not, individually or
in the aggregate, have a Buyer Material Adverse Effect, each lease for the
real property leased by Buyer or a Buyer Subsidiary is valid, binding and
in full force and effect. None of Buyer or the applicable Buyer Subsidiary
party to any lease and, to the Knowledge of Buyer, no other party to any
such lease is in material breach or default thereunder, except for such
noncompliance, breaches and defaults that, individually or in the
aggregate, have not had and would not have a Buyer Material Adverse Effect.
SECTION 4.15. Intellectual Property. Buyer or a Buyer Subsidiary
owns, or is validly licensed or otherwise has the right to use (or, as of
the Closing, will own, be validly licensed or otherwise have the right to
use), all patents, trademarks, trade names, applications for patents or
trademarks, service marks, copyrights and other intellectual property
rights (collectively, "Buyer Intellectual Property") that are material to
the conduct of the business of Buyer and the Buyer Subsidiaries taken as a
whole. Section 4.15 of the Buyer Disclosure Schedule sets
forth a list of all patents, trademarks and software, in each case
which are (or, as of Closing, will be) owned by Buyer or a Buyer
Subsidiary, and that are material to the conduct of the business of Buyer
and the Buyer Subsidiaries, taken as a whole. Except as set forth in
Section 4.15 the Buyer Disclosure Schedule, there are no claims pending or,
to the Knowledge of Buyer, threatened that Buyer or any Buyer Subsidiary is
infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property, except as would not, individually or
in the aggregate, have a Buyer Material Adverse Effect. To the Knowledge of
Buyer, except as set forth in Section 4.15 of the Buyer Disclosure
Schedule, no Person is infringing the rights to Intellectual Property of
Buyer or any Buyer Subsidiary, except as would not, individually or in the
aggregate, have a Buyer Material Adverse Effect. Except as set forth in
Section 4.15 of the Buyer Disclosure Schedule, the conduct of the business
of the Buyer and the Buyer Subsidiaries as presently conducted, does not,
as of the date hereof or as of the Closing Date, infringe upon or conflict
with any Intellectual Property existing as of the date hereof or as of the
Closing Date of any Person, except as would not, individually or in the
aggregate, have a Buyer Material Adverse Effect and Buyer and the Buyer
Subsidiaries have not received since January 1, 1993 any written claim or
written notice from any third party to the contrary that has not been
resolved. Buyer and the Buyer Subsidiaries, as of the date hereof have, and
as of the Closing Date will have, paid all royalties, fees and other
amounts due as of such dates on all licensed Buyer Intellectual Property
other than amounts payable which are not past due, amounts accrued, or
disputed amounts which are being contested in good faith.
SECTION 4.16. Assets Other than Intellectual Property and Real
Property Interests. (a) Except as set forth in Section 4.16 of the Buyer
Disclosure Schedule, Buyer or a Buyer Subsidiary has, or at the Closing
Date will have, good and valid title to all material assets reflected on
the Buyer Balance Sheet or thereafter acquired, except those sold or
otherwise disposed of since the date of the Buyer Balance Sheet in the
ordinary course of business consistent with past practice and not in
violation of this
Agreement, in each case free and clear of all Liens other
than Permitted Liens. This Section 4.16 does not relate to Intellectual
Property, which is the subject of Section 4.15, nor to real property or
interests in real property, such items being the subject of Section 4.14.
(b) Since January 1, 1998, all the material, tangible personal
property of Buyer and the Buyer Subsidiaries has been maintained, repaired
and replaced in all material respects in accordance with past practice.
SECTION 4.17. Employee and Labor Matters. Except as set forth in
Section 4.17 of the Buyer Disclosure Schedule (i) there is, and during the
past three years there has been, no labor strike, dispute, work stoppage or
lockout pending, or, to the Knowledge of Buyer, threatened, against Buyer
or any Buyer Subsidiary, (ii) to the Knowledge of Buyer, no union
organizational campaign is in progress with respect to the employees of
Buyer or any Buyer Subsidiary and no question concerning representation
exists respecting such employees or has been in progress or existed during
the past three years, (iii) neither Buyer nor any Buyer Subsidiary is
engaged in any unfair labor practice, (iv) there is no unfair labor
practice charge or complaint against Buyer or any Buyer Subsidiary pending,
or, to the Knowledge of Buyer, threatened, before the National Labor
Relations Board or any equivalent Person, (v) there are no pending, or, to
the Knowledge of Buyer, threatened, union grievances against Buyer or any
Buyer Subsidiary and (vi) none of Buyer or any Buyer Subsidiary has
received written notice since January 1, 1997 of the intent of any
Governmental Entity responsible for the enforcement of labor or employment
laws to conduct an investigation of Buyer or any Buyer Subsidiary and, to
the Knowledge of Buyer, no such investigation is in progress.
SECTION 4.18. Environmental and Health and Safety Matters. (a)
Except as set forth in Section 4.18 of the Buyer Disclosure Schedule, and
except for those matters that, individually or in the aggregate, would not
have a Buyer Material Adverse Effect (i) each of Buyer and the Buyer
Subsidiaries has obtained and is in compliance with
all permits, licenses, authorizations and approvals required for the
conduct of its operations under Environmental Laws, (ii) each of Buyer and
the Buyer Subsidiaries is in compliance with all Environmental Laws and
(iii) there have been no Releases, or threatened Releases, of Hazardous
Materials at any properties currently or formerly owned or operated by
Buyer or any Buyer Subsidiary, or at any offsite disposal locations
currently or formerly used by Buyer or any Buyer Subsidiary.
(b) Except as set forth in Section 4.18 of the Buyer Disclosure
Schedule, there is no action, suit, demand, notice of noncompliance, notice
of violation, investigation, proceeding or claim arising under
Environmental Laws that is pending, or to the Knowledge of Buyer,
threatened, against Buyer or any Buyer Subsidiary, or any of their
respective properties, assets, operations or businesses, and which (i)
involves potential Losses of more than $250,000, or (ii) is reasonably
likely to result in significant business interruption.
ARTICLE V
Covenants of Seller
Seller covenants and agrees as follows:
SECTION 5.01. Access. (a) From the date of this Agreement until
the Closing Date, upon reasonable notice, Seller shall, and shall cause the
Seller Entities, the Company and the Company Subsidiary (including, without
limitation, for the purpose of securing the Financing, planning the
transition of the Business following the Closing Date and obtaining
insurance for incidents occurring on or after the Closing Date), to afford
the officers, employees, auditors, attorneys, financing sources and
authorized agents and representatives of Buyer reasonable access, during
normal business hours, to the offices, properties, attorneys, auditors,
consultants, advisors, books and records (including financial and operating
data and other documents and information regarding the assets,
properties, goodwill and business of the Business as exists from time to
time) and management employees, auditors, attorneys and financing sources
of the Business; provided, however, that such investigation shall not
unreasonably interfere with any of the businesses or operations of Seller
and its Affiliates.
(b) During the period after the date hereof through the Closing
Date, as promptly as practicable, Seller will deliver to Buyer true and
complete copies of its monthly financial statements and such other
regularly prepared reports and analyses as may be prepared by Seller or any
Affiliate of Seller relating solely to the Business during such period.
SECTION 5.02. Ordinary Conduct. Except as set forth in Section
5.02 of the Seller Disclosure Schedule or otherwise expressly permitted by
the terms of this Agreement, from the date hereof to the Closing, Seller
shall cause the Business to be conducted in the ordinary course in
substantially the same manner as currently conducted, including as to
capital spending, and shall make commercially reasonable efforts consistent
with past practice to preserve the relationships of the Business with
material customers, suppliers, employees and others with which or whom the
Company, the Company Subsidiary or the applicable Seller Entity deals.
Prior to the Closing, Seller shall cause the Company Subsidiary to use
commercially reasonable efforts to reduce leakage under the Aetna U.S.
HealthCare ("USHC") and Prudential Insurance Company of America
("Prudential") laboratory network management contracts which will include
using commercially reasonable efforts to enter into subcontracts for
laboratory services and using commercially reasonable efforts to require
USHC and Prudential to meet their respective contractual obligations to
reduce leakage. Seller shall not be obligated to, directly or indirectly,
provide any funds to the Company, the Company Subsidiary or the applicable
Seller Entity other than in the ordinary course of business consistent with
past practice. From the date hereof to the Closing, Seller shall not, and
shall not permit the Company, the Company Subsidiary, Seller Subsidiary or
any Seller
Entity to, take any action that would, or that could reasonably be expected
to, result in any of the conditions to the purchase and sale of the Shares
or the Other Assets set forth in Section 10.01 not being satisfied. In
addition, except as Buyer otherwise consents in writing or as set forth in
Section 5.02 of the Seller Disclosure Schedule or otherwise expressly
permitted by the terms of this Agreement, from the date hereof to the
Closing, Seller shall not permit the Company, the Company Subsidiary and,
with respect to the Other Assets, the Seller Entities to do any of the
following without the prior written consent of Buyer:
(a) in the case of the Company or the Company Subsidiary, amend
its Certificate of Incorporation or Bylaws;
(b) in the case of the Company or the Company Subsidiary, declare
or pay any dividend or make any other distribution to its stockholders
whether or not upon or in respect of any shares of its capital stock;
provided, however, that (i) Buyer acknowledges that neither the
Company nor the Company Subsidiary maintains cash balances and, from
time to time and at the time of the Closing, Seller will cause to be
withdrawn any cash balances of the Company and the Company Subsidiary,
which withdrawals may be made, among other things, as dividends or
distributions to Seller Subsidiary or its Affiliates and (ii)
dividends and distributions may continue to be made by the Company
Subsidiary to the Company;
(c) in the case of the Company or the Company Subsidiary, redeem
or otherwise acquire any shares of its capital stock or issue any
capital stock or any option, warrant or right relating thereto or any
securities convertible into or exchangeable for any shares of capital
stock;
(d) adopt or amend in any material respect any Company Benefit
Plan or collective bargaining agreement, except as required by
Applicable Law;
(e) grant to any executive officer or employee of the Company or
the Company Subsidiary or to be transferred to Buyer in accordance
with Section 8.13 any increase in compensation or benefits, except in
the ordinary course of business consistent with past practice or as
may be required under existing agreements or by Applicable Law and
except for any increases for which Seller shall be solely obligated;
(f) incur or assume any liabilities or indebtedness for borrowed
money or guarantee any such or indebtedness, other than intercompany
debt between the Company and the Company Subsidiary or intercompany
debt between the Company or the Company Subsidiary, on one hand, and
Seller or any Affiliate of Seller, on the other hand, which in each
case will be repaid, forgiven or otherwise terminated on or prior to
the Closing Date;
(g) make any change in any accounting policy of the Business
other than those required by U.S. GAAP or Applicable Law of the United
States or any political subdivision or agency thereof;
(h) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any
assets (other than Inventory in the ordinary course of business
consistent with past practice) which are material, individually or in
the aggregate, to the Business, taken as a whole;
(i) make or incur any capital expenditure that is not currently
approved in writing and consistent with the budget for the period
between the date hereof and the Closing (a copy of such budget is set
forth as Section 5.02(i) of the Seller Disclosure Schedule) and which,
individually, is in excess of $1,000,000 or, in the aggregate, are in
excess of $5,000,000;
(j) sell, lease or otherwise dispose of any of its assets which
are material, individually or in the aggregate, to the Company, the
Company Subsidiary, or the Other Assets taken as a whole, except in
the ordinary course of business consistent with past practice;
(k) enter into any lease of real property, other than in the
ordinary course of business consistent with past practice with respect
to leases under which an aggregate amount of less than $250,000 is
payable per annum, except any renewals of existing leases in the
ordinary course of business;
(l) enter into any arrangement that will outsource activities
currently performed by Continued Employees involving payments in
excess of $250,000 per annum;
(m) settle any claim or litigation if such settlement (x) would
result in material injunctive or other equitable relief or (y) relates
to the matters referenced in Section 11.06(b) unless paid before the
Closing Date;
(n) enter into any agreement or arrangement that would be a
Company Contract under paragraph (iii) of Section 3.11(a) if in
existence on the date hereof or modify, terminate or amend any such
Company Contract;
(o) make any material federal, state, local or foreign tax
election except for elections made in the ordinary course of business,
in accordance with past practice or, provided Seller notifies Buyer of
such change, are required by any change in Applicable Law;
(p) enter into any agreement, contract or other instrument
requiring the Company or the Company Subsidiary to (A) refer any
anatomic pathology specimens to any provider of anatomic pathology
services, or (B) refer any clinical laboratory specimens to any
clinical laboratory other than a
clinical laboratory owned, managed or operated by the Company or the
Company Subsidiary, in each case which is not terminable by the
Company, the Company Subsidiary, Seller or the applicable Seller
Entity by notice of not more than 90 days without penalty therefor;
(q) enter into any agreement, contract or other instrument
requiring the Company or the Company Subsidiary to provide any
clinical laboratory data to any third party (other than data that
relates to, or is derived from, the Clinical Laboratory Services
provided to such third party) or pursuant to which the Company or the
Company Subsidiary assigns ownership to any clinical laboratory data
to any third party; or
(r) agree, whether in writing or otherwise, to do any of the
foregoing.
SECTION 5.03. Confidentiality. (a) After the Closing Date, Seller
shall keep confidential, and shall cause its Affiliates (other than the
Company and the Company Subsidiary to the extent deemed Affiliates of
Seller) and instruct its and their officers, directors, employees and
advisors to keep confidential, all information relating to the Company and
the Company Subsidiary and the Business except as required by Applicable
Law or administrative process or the rules or regulations of any United
States or foreign securities exchange or the Panel on Takeovers and Mergers
in London and except for information that is available to the public on the
Closing Date, or thereafter becomes available to the public other than as a
result of a breach of this Section 5.03. The covenant set forth in this
Section 5.03 shall terminate three years after the Closing Date.
(b) Seller acknowledges that the information being provided to it
by or on behalf of Buyer in connection with its receipt of the Common Stock
Consideration and the consummation of the other transactions contemplated
hereby and by the other Transaction Documents is subject to the terms of a
confidentiality agreement between Buyer and
Seller dated October 7, 1998 (the "Confidentiality Agreement"), the terms
of which are incorporated herein by reference.
SECTION 5.04. Insurance. From the date hereof to the Closing
Date, Seller shall keep, or cause to be kept, all insurance policies
currently maintained with respect to the Company and the Company Subsidiary
and the Other Assets, or suitable replacements therefor, in full force and
effect through the close of business on the Closing Date. Any and all
insurance policies maintained with respect to the Company, the Company
Subsidiary and their respective assets and properties and the Other Assets
are owned and maintained by Seller and its Affiliates (other than the
Company and the Company Subsidiary). None of Buyer, the Company or the
Company Subsidiary will have any rights under any such insurance policies
from and after the Closing Date. A description of all material insurance
policies is set forth on Section 5.04 of the Seller Disclosure Schedule.
SECTION 5.05. Resignations. On the Closing Date, Seller shall
cause to be delivered to Buyer duly signed resignations (from the
applicable board of directors), effective immediately after the Closing, of
all directors of the Company and the Company Subsidiary and shall take such
other action as is necessary to accomplish the foregoing.
SECTION 5.06. No Additional Representations. Seller acknowledges
that it and its representatives have been permitted full and complete
access to the books and records, facilities, equipment, tax returns,
contracts, insurance policies (or summaries thereof) and other properties
and assets of Buyer and the Buyer Subsidiaries which it and its
representatives have desired or requested to see and/or review, and that it
and its representatives have had a full opportunity to meet with the
officers and employees of Buyer and the Buyer Subsidiaries to discuss the
businesses and assets of Buyer and the Buyer Subsidiaries. Seller
acknowledges that none of Buyer, any Buyer Subsidiary or any other Person
has made any representation or warranty, expressed or implied, as to the
accuracy or completeness of any information regarding Buyer and the Buyer
Subsidiaries
furnished or made available to Seller and its representatives, except as
expressly set forth in this Agreement or the other Transaction Documents,
and none of Buyer, any Buyer Subsidiary or any other Person shall have or
be subject to any liability to Seller or any other Person resulting from
the distribution to Seller, or Seller's use of, any such information,
including any information, documents or material made available to Seller
or its representatives in certain "data rooms", management presentations or
in any other form in expectation of the transactions contemplated hereby.
SECTION 5.07. Supplemental Disclosure. From the date hereof to
the Closing Date, Seller shall promptly notify Buyer of, and furnish Buyer
any information it may reasonably request with respect to, the occurrence
to the Knowledge of Seller of any event or condition or the existence to
the Knowledge of Seller of any fact that would cause any of the conditions
to Buyer's obligation to consummate the purchase and sale of the Shares and
the Other Assets not to be fulfilled.
SECTION 5.08. Financial Statements. Not later than March 15,
1999, Seller shall cause to be delivered to Buyer (a) audited consolidated
balance sheets of the Business ("Consolidated Balance Sheets") as of and
for the periods ending December 31, 1998, 1997 and 1996 and (b) audited
consolidated statements of income and cash flows of the Business
("Consolidated Income Statements") as of and for the periods ending
December 31, 1998, 1997 and 1996, such financial statements having been
audited by Seller's Accountants and satisfying the requirements of
Regulation 14A of the proxy rules of the Exchange Act for purposes of
inclusion in the Proxy Statement and the requirements of SEC Form S-3 under
the Securities Act for purposes of inclusion in the Registration Statement.
As promptly as practical and in any event, within 30 days of the end of
each fiscal quarter after the date hereof and before the Closing, Seller
shall deliver to Buyer unaudited Consolidated Balance Sheets and unaudited
Consolidated Income Statements satisfying the requirements of Regulation
13A of the Exchange Act required by Buyer to be included in the Proxy
Statement or the Registration Statement.
SECTION 5.09. No Solicitation or Negotiation. From the date
hereof to the earlier of (i) the Closing and (ii) the termination of this
Agreement, (a) Seller agrees that none of Seller, the Company, the Company
Subsidiary or any of their respective Affiliates, officers, directors,
representatives or agents will (i) solicit, initiate, consider, encourage
or accept any Company Takeover Proposal, or (ii) participate in any
discussions, negotiations or other communications regarding, or furnish to
any other Person any information with respect to, or otherwise cooperate in
any way, assist or participate in, facilitate or encourage any effort or
attempt by any other Person to seek to do any of the foregoing. Seller
immediately shall cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
Persons conducted heretofore with respect to any of the foregoing. Seller
shall notify Buyer promptly if any Company Takeover Proposal or any inquiry
or other contact with any Person with respect thereto, is made after the
date hereof and shall, in any such notice to Buyer, indicate in reasonable
detail the identity of the Person making such proposal, offer, inquiry or
contact and the terms and conditions of such proposal, offer, inquiry or
other contact. Seller agrees not to, and to cause Seller Subsidiary, the
Company and the Company Subsidiary not to, without the prior written
consent of Buyer, release any Person from, or waive any provision of, any
confidentiality agreement to which Seller, Seller Subsidiary, the Company
or the Company Subsidiary is a party to the extent such confidentiality
agreement relates to the Business.
(b) The term "Company Takeover Proposal" means any proposal for a
merger, consolidation, dissolution, liquidation, recapitalization or other
business combination involving the Company or the Company Subsidiary, any
proposal or offer for the issuance by the Company of any of its equity
securities as consideration for the assets or securities of any Person or
any proposal or offer to acquire in any manner, directly or indirectly, an
equity interest in
any voting securities of, or any assets of the Company or the Company
Subsidiary except as permitted pursuant to Section 5.02, and except for the
transactions contemplated by this Agreement. For the avoidance of doubt,
the term "Company Takeover Proposal" does not include any proposal for a
merger, consolidation, dissolution, liquidation, recapitalization or other
business combination involving Seller or any Affiliate of Seller other than
solely the Company or the Company Subsidiary, any proposal or offer for the
issuance by Seller of its equity securities as consideration for the assets
or securities of any Person or any proposal or offer to acquire in any
manner, directly or indirectly, any voting securities of, or any assets of
Seller or any Affiliate of Seller (excluding the Other Assets) other than
solely the Company or the Company Subsidiary.
SECTION 5.10. Certain Transfers - Intellectual Property and
Licenses Under the diaDexus Agreement. (a) Seller will use reasonable best
efforts to procure an assignment to Buyer (pursuant to an assignment
reasonably satisfactory to Buyer), effective as of the Closing Date, of the
beneficial rights and licenses relating to Clinical Laboratory Services,
set forth on Schedule 5.10 (the "diaDexus Rights"), which have been granted
to Seller under the Collaboration and License Agreement among Seller,
Seller Subsidiary, Incyte Pharmaceuticals, Inc. and diaDexus, LLC, dated
the 2nd day of September 1997 (the "diaDexus Agreement"). With respect to
cDx Homebrews (as defined in the diaDexus Agreement), Seller shall use
reasonable best efforts to provide Buyer with a territory defined by
reference to Buyer rather than Seller, Seller Subsidiary and their
Affiliates (for purposes of this description of territory, as defined in
the diaDexus Agreement). In the event that Seller is unable to procure
assignment of all right(s) set forth in Schedule 5.10 through such
reasonable best efforts, then Buyer and Seller shall reasonably cooperate
to delete or modify right(s) identified in Schedule 5.10 as necessary to
secure assignment of as many of such identified rights as reasonably
possible.
(b) Seller and the Seller Subsidiary shall not assign the
diaDexus Agreement to the Company, and Seller and the Seller Subsidiary
remain solely liable for all obligations under such Agreement, except for
those expressly assumed in this Section 5.10(b). Buyer shall cause the
Company to assume (pursuant to an Assumption Agreement reasonably
satisfactory to Seller) the following obligations under the diaDexus
Agreement:
(i) all liabilities and obligations arising out of or in connection
with the exercise by the Company of the diaDexus Rights,
including, without limitation, all royalties, diligence
obligations and other obligations due with respect to the sale by
the Company or any of its Affiliates of any Test or Healthcare Ix
Product licensed by the Company pursuant to the terms of the
diaDexus Agreement;
(ii) the Confidentiality and Publication provisions under Article 12
of the diaDexus Agreement; and
(iii) the indemnification provisions under Article 18 of the
Collaboration and License Agreement with respect to the sale by
the Company or any of its Affiliates of any Test or Healthcare Ix
Product licensed by the Company under the terms of the diaDexus
Agreement.
(c) Following the dissolution of diaDexus, Seller shall grant to
Buyer, for use in the field of Clinical Laboratory Services, a worldwide,
nonexclusive paid-up royalty-free license (with the right to sublicense) of
all Intellectual Property in existence as of the Closing Date that reverts
to Seller from diaDexus relating to Clinical Laboratory Services.
(d) Seller acknowledges that the responsibilities of the Research
Committee, as described in Paragraph 10.2 of the diaDexus Agreement may
influence the orderly transfer of the Intellectual Property described in
this Section 5.10. In light of the interests conveyed to the Company under
this
Section 5.10, Seller agrees to use reasonable best efforts to cause
diaDexus, LLC and Incyte Pharmaceuticals, Inc. to grant access to Buyer on
a non-voting observer basis to such Committee or other multiparty research
governance organizations that are or may be established under the diaDexus
Agreement; provided, however, that such participation shall be limited to
discussions concerning research projects, their status, and the conveyance
of rights to Buyer or the Company related thereto, all as limited to such
projects that are subject to the rights and licenses assigned to Buyer or
the Company pursuant to this Section 5.10.
SECTION 5.11. Certain Licenses. (a) For the period ending on
December 31, 1999, Seller shall use commercially reasonable efforts to
arrange for the Company and the Company Subsidiary to continue to be
licensed under the agreements set forth on Exhibit 5.11(a) on the same
terms (including, without limitation, the same level of upgrades,
enhancements and modifications as well as maintenance, support and service)
as received by Seller and its wholly owned Subsidiaries under such
agreements; provided that the foregoing shall not require Seller or any of
its Affiliates to expend money, commence or participate in any litigation
or grant any accommodation (financial or otherwise) to any third party for
the purpose of securing such continuation. Seller shall be responsible for
any license payments for the period through December 31, 1999; provided
that the Company Subsidiary shall be responsible for any maintenance,
support and service charges for services provided under such agreements
prior to January 1, 2000 to the extent that such charges are consistent
with those charged to Seller and its wholly owned Subsidiaries; and
provided further, however, that the Company Subsidiary shall be responsible
for any applicable license per unit fees to the extent that the net number
of locations or users using the Intellectual Property listed in Section
5.13(a) of the Seller Disclosure Schedule increases during the period prior
to January 1, 2000, to the extent that such license fees are charged in
substantially the same manner as charged to Seller and its wholly owned
Subsidiaries.
(b) For a period ending on the first anniversary of the Closing
Date, Seller shall use commercially reasonable efforts to permit the
Company and the Company Subsidiary to continue to purchase supplies and
services pursuant to the agreements set forth on Section 5.11(b) of the
Seller Disclosure Schedule on substantially the same terms as such supplies
and services are purchased by Seller and its wholly owned Subsidiaries;
provided that the foregoing shall not require Seller or any of its
Affiliates to expend money, commence or participate in any litigation or
grant any accommodation (financial or otherwise) to any third party for the
purpose of securing such continuation. Nothing contained in this Section
5.11(b) shall require Seller to arrange for such supplies and services to
be supplied to any laboratory facility other than the laboratory facilities
of the Company Subsidiary as of the Closing Date.
SECTION 5.12. Senior Level Employees. As soon as practical after
the date of this Agreement (and in no event later than 14 days after such
date), Seller shall deliver to Buyer a true and complete list of the Senior
Level Employees.
ARTICLE VI
Covenants of Buyer
Buyer covenants and agrees as follows:
SECTION 6.01. Access. (a) From the date hereof to the Closing
Date, Buyer shall, and shall cause the Buyer Subsidiaries to, give Seller
and its representatives, employees, counsel and accountants reasonable
access, during normal business hours and upon reasonable prior notice, to
the personnel, properties, books and records of Buyer and the Buyer
Subsidiaries; provided, however, that such access does not unreasonably
disrupt the normal operations of Buyer or any Buyer Subsidiary.
(b) During the period after the date hereof through the Closing
Date, as promptly as practicable, Buyer will deliver to Seller true and
complete copies of its monthly financial statements and such other
regularly prepared reports and analyses as may be prepared by Buyer or any
Buyer Subsidiary during such period.
SECTION 6.02. Conduct of Business of Buyer. (a) Except to the
extent that Seller otherwise consents in writing, as set forth in Section
6.02(a) of the Buyer Disclosure Schedule, or as otherwise expressly
permitted by the terms of this Agreement or in connection with the
Financing, from the date hereof to the Closing:
(i) Buyer shall cause the business of Buyer and the Buyer
Subsidiaries, taken as a whole, to be conducted in the ordinary course
in substantially the same manner as currently conducted.
(ii) Buyer shall not redeem, repurchase or otherwise acquire, or
permit any Buyer Subsidiary to redeem, repurchase or otherwise
acquire, Buyer Common Stock or any other voting securities of Buyer
(including any option, warrant or right relating to, or any securities
convertible into or exchangeable for such Buyer Common Stock or such
other voting securities of Buyer) in excess of Buyer Common Stock
representing 10% of the aggregate outstanding Buyer Common Stock as of
the date hereof, except, in each case, as required by the terms of the
securities of the Buyer outstanding on the date hereof or as
contemplated by any employee benefit plans.
(iii) Buyer shall not amend or propose or agree to amend, the
Certificate of Incorporation or Bylaws of Buyer in any manner that
would adversely affect the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents or
otherwise adversely affect the rights of Seller following its
acquisition of the Shares.
(iv) Buyer shall not, and shall not permit a material Buyer
Subsidiary to, authorize, recommend, propose or announce an intention
to adopt a plan of complete or partial liquidation or dissolution of
Buyer or such material Buyer Subsidiary.
(v) Buyer shall not declare or pay any dividend, or declare or
make any distribution on, or authorize or effect any split-up,
combination, subdivision, adjustment, reclassification or
recapitalization of, any Buyer Common Stock.
(vi) Except as contemplated by Section 4.13 of the Buyer
Disclosure Schedule, Buyer shall not authorize the creation or
issuance of, or issue, any shares of Buyer Common Stock or any other
voting securities of Buyer (including any option, warrant or right
relating thereto or any securities convertible into or exchangeable
for such Buyer Common Stock or any other voting securities of Buyer)
or permit any Buyer Subsidiary to authorize the creation or issuance
of, or to issue any options, warrants, or rights to acquire any Buyer
Common Stock or any other voting securities of Buyer or any securities
convertible into or exchangeable for such Buyer Common Stock or any
other voting securities of Buyer other than (A) pursuant to the terms
of any of its securities outstanding as of the date hereof or as
required by its existing employee benefit plans or (B) in connection
with new employee benefit plans or the acquisition of businesses
engaged in or related or ancillary to the businesses of Buyer and
Buyer Subsidiaries as currently conducted that would, in the case of
this clause (B), in the aggregate, result in the issuance of more than
2,252,000 shares of Buyer Common Stock (including under any Buyer
employee benefit plan adopted after the date hereof), as such number
may be increased by the amount of any shares of Buyer Common Stock,
redeemed, repurchased or otherwise acquired by Buyer or a Buyer
Subsidiary during the period between the date hereof and the Closing
Date.
(vii) Buyer shall not (and shall not permit any Buyer Subsidiary
to) incur additional indebtedness, make any change in its accounting
policies or take any other action which could reasonably be expected
to cause the Financing not to be available on a timely basis for the
transactions contemplated by this Agreement.
(b) From the date hereof to the Closing, Buyer shall not, and
shall not permit any Buyer Subsidiary, to take any action that would, or
that could reasonably be expected to, result in any of the conditions to
the purchase and sale of the Shares or the Other Assets set forth in
Section 10.2 not being satisfied.
SECTION 6.03. Confidentiality. Buyer acknowledges that the
information being provided to it in connection with the purchase and sale
of the Shares and the Other Assets and the consummation of the other
transactions contemplated hereby and by the other Transaction Documents is
subject to the terms of the Confidentiality Agreement, the terms of which
are incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement shall terminate with respect to
information relating solely to the Company, the Company Subsidiary, the
Other Assets and the Assumed Non-U.S. Liabilities; provided that Buyer
acknowledges that any and all other information provided to it by Seller or
Seller's representatives concerning Seller or Seller's Affiliates (other
than the Company, the Company Subsidiary, the Other Assets and the Assumed
Non-U.S. Liabilities) shall remain subject to the terms and conditions of
the Confidentiality Agreement after the Closing Date.
SECTION 6.04. No Additional Representations. (a) Buyer
acknowledges that it and its representatives have been permitted full and
complete access to the books and records, facilities, equipment, tax
returns, contracts, insurance policies (or summaries thereof) and other
properties and assets of Seller and its Affiliates with respect to the
Company, the Company Subsidiary and the Other Assets that it and its
representatives have desired or
requested to see and/or review, and that it and its representatives have
had a full opportunity to meet with the officers and employees of Seller,
Seller Subsidiary, the Company and the Company Subsidiary to discuss the
businesses and assets of the Company and the Company Subsidiary and the
Other Assets. Buyer acknowledges that none of Seller, the Company, the
Company Subsidiary or any other Person has made any representation or
warranty, expressed or implied, as to the accuracy or completeness of any
information regarding the Company and the Company Subsidiary or the Other
Assets furnished or made available to Buyer and its representatives, except
as expressly set forth in this Agreement or the other Transaction
Documents, and none of Seller, the Company, the Company Subsidiary or any
other Person shall have or be subject to any liability to Buyer or any
other Person resulting from the distribution to Buyer, or Buyer's use of,
any such information, including any information, documents or material made
available to Buyer in certain "data rooms", management presentations or in
any other form in expectation of the transactions contemplated hereby.
(b) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ARTICLE III, BUYER
ACKNOWLEDGES THAT, SHOULD THE CLOSING OCCUR, BUYER SHALL ACQUIRE THE OTHER
ASSETS WITHOUT ANY REPRESENTATION OR WARRANTY FROM SELLER OR ANY SELLER
ENTITY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, IN AN
"AS IS" CONDITION AND ON A "WHERE IS" BASIS.
SECTION 6.05. Supplemental Disclosure. Buyer shall promptly
notify Seller of, and furnish Seller any information it may reasonably
request with respect to, the occurrence to the Knowledge of Buyer of any
event or condition or the existence to the Knowledge of Buyer of any fact
that would cause any of the conditions to Seller's obligation to consummate
the purchase and sale of the Shares not to be fulfilled.
SECTION 6.06. Seller Guarantees. Section 6.06 of the Seller
Disclosure Schedule sets forth guarantees by Seller and its Affiliates
(other than the Company and the Company Subsidiary) of obligations of the
Company or the Company Subsidiary or with respect to any Other Asset or
Assumed Liability that, in any such case, individually, is in excess of
$1,000,000; provided, however, that the failure to list any such guarantees
in Section 6.06 of the Seller Disclosure Schedule shall not be deemed a
breach of any representation or warranty for purposes of Section 11.02. As
soon as practicable after the Closing Date, Buyer will use all reasonable
efforts to replace or obtain Seller's (or Seller's Affiliate's) release of
all the guarantees by Seller (or an Affiliate of Seller) of obligations of
the Company or the Company Subsidiary or with respect to any other Asset or
Assumed Liability set forth in Section 6.06 of the Seller Disclosure
Schedule; provided that Seller agrees that during the period ending two
years after the Closing Date, Buyer will not be obligated under this
Section 6.06 to seek the consent of USHC to replace or release the
obligations of Seller under the Master Agreement by and between USHC, on
behalf of itself and its applicable Affiliates, and the Company Subsidiary,
dated September 1, 1998, and that Seller will remain a guarantor with
respect thereto until no later than the second anniversary of the Closing
Date, at which time Buyer will replace Seller as guarantor under such
agreement or otherwise obtain Seller's release, including, if necessary, by
obtaining the required letter of credit.
SECTION 6.07. Use of Certain Names. Buyer shall cause the Company
and the Company Subsidiary promptly, and in any event (a) within twenty
four months after Closing, to revise all literature of the Company and the
Company Subsidiary and to delete all references to the Names and (b) within
twenty four months after Closing, to change signing, stationery, supplies
and other personal property and otherwise discontinue use of the Names;
provided, however, that during such twenty-four month period Buyer, the
Company and the Company Subsidiary may continue to use the Names in
accordance with the License Agreement. Buyer shall change the names of the
Company and the Company Subsidiary to names that do not include the Names
within thirty Business Days of the Closing Date. In no event shall Buyer,
the Company or the Company Subsidiary use any Names after the Closing in
any manner or for any purpose different from the use of such Names during
the 90-day period
preceding the Closing. "Names" means "SmithKline Corporation",
"SmithKline", "SmithKline ▇▇▇▇▇▇▇", "SB", "SBCL", "SKB", variations and
derivatives thereof and any other logos, service marks or trademarks of
Seller or its Affiliates.
SECTION 6.08. Buyer Rights Agreement; Consequences if Buyer
Rights Triggered. The Board of Directors of Buyer shall take all action
necessary in order to render the Buyer Rights inapplicable to the
acquisition by Seller of the Common Stock Consideration. If any
Distribution Date, Share Acquisition Date or Triggering Event (as these
terms are defined in the Buyer Rights Agreement) occurs under the Buyer
Rights Agreement at any time during the period from the date of this
Agreement to the Closing Date, Buyer and Seller shall make such adjustment
to the Common Stock Consideration as Buyer and Seller shall mutually agree
so as to preserve the economic benefits that Buyer and Seller each
reasonably expected on the date of this Agreement to receive as a result of
the consummation of the transactions contemplated by this Agreement.
SECTION 6.09. Preparation of the Proxy Statement; Buyer
Stockholders Meeting. (a) As soon as practicable following the date of this
Agreement, Buyer shall prepare and file with the SEC a proxy statement
relating to the Buyer Stockholders Approval (the "Proxy Statement") in
preliminary form, and Buyer shall use all reasonable efforts to respond as
promptly as practicable to any comments of the SEC with respect thereto.
Buyer shall use all reasonable efforts to cause the Proxy Statement to be
cleared by the SEC and mailed to its stockholders at the earliest
practicable date.
(b) Buyer shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders for the purpose of seeking the Buyer Stockholders
Approval; provided that Seller acknowledges that it is Buyer's current
intention to seek the Buyer Stockholders Approval at its annual
stockholders meeting currently scheduled for May 11,
1999. Buyer shall, through the Buyer Board, recommend to its stockholders
that they give the Buyer Stockholders Approval. Without limiting the
generality of the foregoing, but subject to the provisions of Section
6.11(b), Buyer agrees that its obligations pursuant to the first sentence
of this Section 6.09(b) shall not be affected by the commencement, public
proposal, public disclosure or communication to Buyer of any proposal
regarding a business combination with Buyer or the acquisition of all or a
substantial portion of the assets of Buyer.
SECTION 6.10. Financing. Buyer will use all reasonable efforts to
obtain the Financing. In the event that any portion of the Financing
becomes unavailable, regardless of the reason therefor, Buyer will use all
reasonable efforts to obtain alternative financing from other sources on
and subject to substantially the same terms and conditions as the portion
of the Financing that has become unavailable; provided that Buyer shall not
be required to use such efforts if a portion of the Financing has become
unavailable because of the occurrence of one or more events or the
existence of one or more conditions that make it impossible to satisfy the
conditions contained in Section 10.01 (other than the condition contained
in Section 10.01(f)). Buyer shall use all reasonable efforts to (i) satisfy
on or before the Closing all requirements of the definitive agreements
pursuant to which the Financing will be obtained (the "Financing
Agreements") that are conditions to closing all transactions constituting
the Financing and to drawing down the cash proceeds thereunder; (ii) defend
all lawsuits or other legal proceedings challenging the Financing
Agreements or the consummation of the transactions contemplated thereby;
and (iii) lift or rescind any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated thereby. Notwithstanding the foregoing, Buyer
shall not be required to pay costs and expenses in connection with
arranging alternative financing materially in excess of the costs and
expenses contemplated by the Financing or agree to financing terms that
differ in a manner materially adverse to Buyer or any of its Affiliates
from those contemplated by the Financing.
SECTION 6.11. No Solicitation or Negotiation. (a) None of Buyer,
any Buyer Subsidiary or any of their respective Affiliates, officers,
directors, representatives or agents will, (i) solicit, initiate, encourage
or accept any Buyer Takeover Proposal (as defined below) or (ii)
participate in any discussions, negotiations or other communications
regarding, or furnish to any other Person any information with respect to,
or otherwise cooperate in any way, assist or participate in, facilitate or
encourage, any effort or attempt by any Person to do any of the foregoing.
For purposes of this Agreement, "Buyer Takeover Proposal" means any
proposal or offer from any Person relating to any direct or indirect
acquisition of 50% or more of Buyer Common Stock, any tender offer or
exchange offer that if consummated would result in any Person beneficially
owning 50% or more of Buyer Common Stock, any merger, consolidation, or
business combination involving Buyer as a result of which the stockholders
of Buyer prior to such transaction would own 50% or less of the voting
capital of the surviving company, the sale of all or a substantial part of
the assets of Buyer, or any recapitalization, liquidation, dissolution or
similar transaction involving Buyer.
(b) Except as set forth in this Section 6.11(b), neither the
Buyer Board nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Seller, the approval
or recommendation by the Buyer Board or any such committee of this
Agreement, the other Transaction Documents or the transactions contemplated
hereby and thereby, (ii) approve or recommend, or propose to approve or
recommend, any Buyer Takeover Proposal or (iii) enter into any agreement
with respect to any Buyer Takeover Proposal. Notwithstanding the foregoing,
in the event that, prior to the Closing, the Buyer Board determines that it
is necessary to do so in accordance with its fiduciary duties to its
stockholders under Applicable Law, the Buyer Board may withdraw or modify
its approval or recommendation of the issuance of the shares of Buyer
Common Stock constituting the Common Stock Consideration.
(c) Subject to the provisions of Section 6.11(b), nothing
contained in this Section 6.11 shall prohibit Buyer from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to its
stockholders if the Buyer Board determines in good faith (based on the
advice of outside counsel) that it is necessary to do so in accordance with
Applicable Law.
(d) In the event that, (i) (A) the Buyer Board shall have
withdrawn or modified, in a manner adverse to Seller, the approval or
recommendation by the Buyer Board of the issuance of the shares of Buyer
Common Stock constituting the Common Stock Consideration, or (B) at the
time of the meeting of Buyer's stockholders for the purpose of seeking the
Buyer's Stockholders Approval, a Buyer Takeover Proposal shall have been
made directly to Buyer's Stockholders or there shall have been a public
announcement by Buyer that a Person intends, or any Person shall have
publicly announced an intention, to make a Buyer Takeover Proposal, and
(ii) the stockholders of Buyer shall not have approved the issuance of the
shares of Buyer Common Stock constituting the Common Stock Consideration to
Seller and (iii) (A) in the event of the circumstances described in clause
(i)(A) of this subsection (d), a Buyer Takeover Proposal is consummated
within one year of the termination of this Agreement or (B) in the event of
the circumstances described in clause (i)(B) of this subsection (d), a
Buyer Takeover Proposal is consummated with the Person that made or
publicly announced the Buyer Takeover Proposal or was the subject of
Buyer's announcement at the time of such meeting, then, in any such event,
Buyer shall pay Seller promptly (but in no event later than three Business
Days after the consummation of such Buyer Takeover Proposal) a fee of
$45,000,000, which amount shall be payable in immediately available funds
to a bank account designated by Seller.
ARTICLE VII
Mutual Covenants
Each of Seller and Buyer covenants and agrees as follows:
SECTION 7.01. Consents. Buyer acknowledges that certain consents
and waivers with respect to the transactions contemplated by this Agreement
and the other Transaction Documents may be required from parties to the
Company Contracts and to the other contracts or agreements set forth in
Section 7.01 of the Seller Disclosure Schedule and that such consents and
waivers have not been obtained. Buyer agrees that Seller shall not have any
liability whatsoever to Buyer arising out of or relating to the failure to
obtain any consents or waivers that may be required in connection with the
transactions contemplated by this Agreement or the other Transaction
Documents or because of the termination of any Company Contract or any
other contract or agreement set forth in Section 7.01 of the Seller
Disclosure Schedule, as a result thereof; provided, however, that in the
event any such consent or waiver is not obtained, Seller agrees to use all
reasonable efforts to enforce its rights under any such contract or
agreement for the benefit of Buyer; provided, further, that the foregoing
shall not require Seller or any of its Affiliates (including the Company
and the Company Subsidiary) to expend money, commence or participate in any
litigation or offer or grant any accommodation (financial or otherwise) to
any third party. Except as set forth in Section 7.01 of the Seller
Disclosure Schedule, prior to the Closing, Seller shall, and shall cause
the Company and the Company Subsidiary to use all reasonable efforts to
obtain, and Buyer will cooperate with Seller in connection with obtaining,
any such consents and waivers including those described in Section 7.01 of
the Seller Disclosure Schedule; provided, however, that the foregoing shall
not include any requirement of Seller or any of its Affiliates (including
the Company and the Company Subsidiary) or Buyer to expend money, commence
or participate in any litigation or offer or grant any accommodation
(financial or otherwise) to any third party.
Notwithstanding anything to the contrary in this Section 7.01, this Section
7.01 shall not limit or otherwise affect any remedy that Buyer may have
under this Agreement with respect to any breach by Seller of Section 3.02
or Section 3.11.
SECTION 7.02. Cooperation. Buyer and Seller shall cooperate with
each other, and shall cause their respective Affiliates and their
respective officers, employees, agents, auditors and representatives to
cooperate with each other after the Closing to ensure the orderly
transition of the Company, the Company Subsidiary and the Other Assets to
Buyer and to minimize any disruption to the respective businesses of
Seller, Buyer or the Business that might result from the transactions
contemplated hereby and by the other Transaction Documents. After the
Closing, upon reasonable written notice, Buyer and Seller shall furnish or
cause to be furnished to each other and their respective Affiliates,
employees, counsel, auditors and representatives access, during normal
business hours, to such information and assistance relating to the Company
and the Company Subsidiary and the Other Assets as is reasonably necessary
for financial reporting and accounting matters, the preparation and filing
of any tax returns, reports or forms or the defense of any tax claim or
assessment. Each party shall reimburse the other for reasonable
out-of-pocket costs and expenses incurred in assisting the other pursuant
to this Section 7.02. Neither party shall be required by this Section 7.02
to take any action that would unreasonably interfere with the conduct of
its business or unreasonably disrupt its normal operations (or, in the case
of Buyer, the business or operations of the Company or the Company
Subsidiary).
SECTION 7.03. Publicity. Seller and Buyer agree that, from the
date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by either
party without the prior consent of the other party (which consent shall not
be unreasonably withheld), except as such release or announcement may be
required by Applicable Law or the rules or regulations of any United States
or foreign securities
exchange or the Panel on Takeovers and Mergers in London, in which case the
party required to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance
of such issuance; provided, however, that Buyer and Seller each may make
internal announcements to its respective employees that are consistent with
the parties' prior public disclosures regarding the transactions contem
plated hereby and by the other Transaction Documents after reasonable prior
notice to and consultation with the other party.
SECTION 7.04. Reasonable Best Efforts. Subject to the
terms and conditions of this Agreement (including the provisions set forth
in Sections 7.01 and 7.05), each party shall use reasonable best efforts to
cause the Closing to occur. Without limiting the foregoing or the
provisions set forth in Section 7.05, each of Buyer and Seller shall use
reasonable best efforts to cause the Closing to occur on or prior to June
30, 1999.
SECTION 7.05. Antitrust Notification. Each of Seller and
Buyer shall as promptly as practicable, but in no event later than ten
Business Days following the execution and delivery of this Agreement, file
with the United States Federal Trade Commission (the "FTC") and the United
States Department of Justice (the "DOJ") the notification and report form,
if any, required for the transactions contemplated hereby. Any such
notification and report form shall be in substantial compliance with the
requirements of the HSR Act. Each of Buyer and Seller shall furnish to the
other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission
which is necessary under the HSR Act. Seller and Buyer shall keep each
other apprised of the status of any communications with, and any inquiries
or requests for additional information from, the FTC and the DOJ and shall
comply promptly with any such inquiry or request and shall promptly provide
any supplemental information requested in connection with the filings made
hereunder pursuant to the HSR Act. Any such supplemental information shall
be in substantial compliance with the requirements of the HSR Act. Each of
Seller and Buyer shall
use reasonable best efforts to obtain any clearance required under the HSR
Act for the purchase and sale of the Shares and the Other Assets, including
litigating any motion for a preliminary injunction until a final and
nonappealable decision has been rendered by a court of competent
jurisdiction and entering into a consent decree with the FTC or the DOJ;
provided that Buyer will not be required by this Section 7.05 to take any
action, including entering into any consent decree with the FTC or the DOJ,
that requires the divestiture of a material amount of assets of any of the
Company Subsidiary, Buyer or any Buyer Subsidiary. Seller and Buyer shall
also cooperate to make any required regulatory filings with any state or
outside the United States as promptly as practicable after the execution
and delivery of this Agreement.
SECTION 7.06. Records. To the extent not delivered on the Closing
Date, promptly thereafter, Seller shall deliver or cause to be delivered to
Buyer all material agreements, documents, books, records and files
(collectively, "Records"), if any, in the possession of Seller or any
Seller Entity relating to the business and operations of the Company and
the Company Subsidiary and the Non-U.S. Clinical Laboratories Business to
the extent not then in the possession of the Company and the Company
Subsidiary, subject to the following exceptions:
(a) Buyer recognizes that certain Records may contain incidental
information relating to the Company, the Company Subsidiary, the Other
Assets, the Assumed Liabilities and the Non-U.S. Clinical Laboratories
Business or may relate primarily to subsidiaries, divisions or businesses
of Seller other than the Company, the Company Subsidiary and the Non-U.S.
Clinical Laboratories Business, and that Seller may retain such Records and
shall provide copies of the relevant portions thereof to Buyer;
(b) Seller may retain all Records prepared in connection with the
sale of the Shares and the Other Assets and the assumption of the Assumed
Non-U.S. Liabilities, including analyses relating to the Company, the
Company
Subsidiary, the Other Assets, the Assumed Liabilities and the
Non-U.S. Clinical Laboratories Business; and
(c) Seller may retain any Tax Returns and Buyer shall be provided
with copies of such Tax Returns to the extent that they relate to the
Company's and the Company Subsidiary's separate returns or separate Tax
liability or to the Other Assets, the Assumed Liabilities or the Non-U.S.
Clinical Laboratories Business, provided, however, that Buyer shall be
provided with originals of any Tax Returns, but only to the extent they
relate to the Company's and the Company Subsidiary's separate returns or
separate tax liability or to the Other Assets, the Assumed Liabilities or
the Non-U.S. Clinical Laboratories Business, if needed, to comply with any
requirement imposed by Tax laws or to respond to any inquiry from a Tax
authority.
SECTION 7.07. Support Services. Seller and/or its Affiliates
provide the Company, the Company Subsidiary and the Non-U.S. Clinical
Laboratories Business with the support services, including cash management,
credit and accounts receivable, payroll and human resources, legal, tax and
benefit plan administration set forth in Section 7.07 of the Seller
Disclosure Schedule. Buyer acknowledges that all such support services will
be terminated as of the Closing Date except for the support services to be
provided to Buyer pursuant to the Transition Services Agreement. Seller
acknowledges that after the Closing Date, neither the Buyer, the Company
nor the Company Subsidiary will have any obligation to pay Seller or its
Affiliates for (or reimburse Seller or its Affiliates for any expenses
incurred in connection with) any support or other services provided prior
to the Closing Date.
SECTION 7.08. Fees and Expenses. Except as otherwise expressly
provided in this Agreement, whether or not the transactions contemplated
hereby are consummated, all costs and expenses incurred in connection with
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
costs or expenses.
SECTION 7.09. The Other Assets. (a) In the event that as of the
Closing Date (i) any statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunctions or other
order enacted, entered, promulgated, enforced or issued by any Governmental
Entity or other legal restraint or prohibition preventing the purchase and
sale of any of the Other Assets listed in Section 7.09 of the Seller
Disclosure Schedule is in effect, (ii) any consents, approvals and filings
under any foreign antitrust law, the absence of which would prohibit the
consummation of the sale of any of the Other Assets listed in Section 7.09
of the Seller Disclosure Schedule, shall not have been obtained or made, or
(iii) Seller is unable to obtain any required consents of third parties
required in order to transfer the Other Assets listed in Section 7.09 of
the Seller Disclosure Schedule to Buyer, Seller shall not, and shall cause
the Seller Entities not to, sell and Buyer shall not purchase, the Other
Assets and, in any such case, the Cash Purchase Price shall be reduced to
$1.0 billion and Buyer shall not assume the Assumed Liabilities; provided,
that for so long as Seller and the Seller Entities own the Other Assets,
the Company Subsidiary shall continue to provide Seller and the Seller
Entities with the services from the Company Subsidiary which are being
provided on the date hereof to the Non-U.S. Clinical Laboratories Business
on substantially the same terms as services are being provided to Buyer
under the Transition Services Agreement. Within 30 days after the date
hereof, Seller shall provide Buyer with a detailed listing of the material
Other Assets set forth in clauses (xii) and (xiii) of Section 2.01(c)
existing as of the date hereof.
(b) In the event that Seller and the Seller Entities do not
consummate the sale of the Other Assets to Buyer on the Closing Date
because of (i) the existence on the Closing Date of any legal restraint or
prohibition as provided in Section 7.09(a)(i) or the failure to obtain any
requisite consents as provided in Section 7.09(a)(ii) or (iii), each of
Seller, the Seller Entities and Buyer agree to use their reasonable best
efforts to close the sale of the Other Assets and the assumption of the
Assumed
Liabilities or to restructure the transfer of the Other Assets in a
manner that will give effect to the intent of the parties as set forth in
this Agreement. In the event that Seller, the Seller Entities and Buyer are
unable to so close or restructure the transfer of the Other Assets within
six months after the Closing Date, then Seller and the Seller Entities
agree to use their reasonable best efforts to sell the Other Assets to a
third party within the succeeding 18 months.
(c) The parties hereto agree that, in the event any consent,
approval or authorization from third parties necessary or desirable to
preserve any right or benefit under any lease, license, contract,
commitment or other agreement or arrangement related to the Other Assets is
not obtained prior to the Closing other than a consent required in
connection with the transfer of the Other Assets listed in Section 7.09 of
the Seller Disclosure Schedule, Seller and the Seller Entities will,
subsequent to the Closing (or any delayed Closing with respect to the Other
Assets as contemplated by Section 7.09(c)), cooperate with Buyer in
attempting to obtain such consent, approval or authorization as promptly
thereafter as practicable. Until and unless such consent, approval or
authorization is obtained, Seller and the Seller Entities shall use all
reasonable efforts to provide Buyer with the rights and benefits of the
affected lease, license, contract, commitment or other agreement or
arrangement to the extent relating to the Other Assets and, if Seller and
the Seller Entities provide such rights and benefits, Buyer shall assume
the obligations and burdens thereunder. Buyer will cooperate with Seller
and the Seller Entities in obtaining any of the foregoing consents,
approvals or authorizations from third parties and, if applicable, in
obtaining any of such rights and benefits.
SECTION 7.10. Further Assurances. From time to time, as and when
requested by either party hereto, the other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions (subject to the provisions of Sections 7.01, 7.04 and 7.05), as
such other party may reasonably deem
necessary or desirable to consummate the transactions contemplated by this
Agreement and the other Transaction Documents.
SECTION 7.11. Year 2000. (a) Seller represents and warrants to
Buyer that it has a comprehensive strategy, process and procedure ("Seller
Year 2000 Methodology") for assessing, detecting, eliminating, remediating,
analyzing, testing, repairing, modifying, replacing or abandoning the
computer hardware and software systems (together with any other equipment
dependent upon or incorporating such computer hardware and software) owned
or leased by Seller or any of its Subsidiaries, and used by Seller and its
Subsidiaries in the manufacture or supply of their products or services
("Seller Internal Systems"), directed at ensuring that such Seller Internal
Systems are Year 2000 Ready. Seller represents and warrants to Buyer that
the Company Subsidiary has developed, adopted and is currently pursuing an
implementation plan based on the Seller 2000 Methodology (the "Company
Implementation Plan") directed at ensuring that the Seller Internal Systems
used by the Company Subsidiary (the "Company Critical Systems") are Year
2000 Ready on or before January 1, 2000.
(b) Buyer represents and warrants to Seller that it has a
comprehensive strategy, process and procedure ("Buyer Year 2000
Methodology") for assessing, detecting, eliminating, remediating,
analyzing, testing, repairing, modifying, replacing or abandoning the
computer hardware and software systems (together with any other equipment
dependent upon or incorporating such computer hardware and software) owned
or leased by Buyer or any of its Subsidiaries, and used by Buyer and its
Subsidiaries in their respective businesses ("Buyer Internal Systems"),
directed and ensuring that such Buyer Internal Systems are Year 2000 Ready.
Buyer represents and warrants to Seller that Buyer has developed, adopted
and is currently pursuing an implementation plan based on Buyer 2000
Methodology (the "Buyer Implementation Plan") directed at ensuring that the
Buyer Internal Systems are Year 2000 Ready on or before January 1, 2000.
(c) Within 15 days after the date hereof, each of Buyer and
Seller shall designate a mutually acceptable number of individuals to serve
on a Joint Year 2000 Readiness Management Committee (the "Joint
Committee"), with equal representation from both Buyer and Seller. Within
30 days after the date hereof, the Joint Committee shall select an
independent nationally recognized management consulting firm expert in
matters concerning the year 2000 date change (the "Consultant") mutually
acceptable to Buyer and Seller to audit the Company Subsidiary and Buyer
(the "Audit") as set forth in Section 7.11(e).
(d) The Joint Committee will agree on the instructions to be
given the Consultant regarding the scope of the Consultant's engagement in
accordance with Section 7.11(e) (which shall include a requirement that the
Consultant shall complete the Audit and submit a Readiness Report to each
of Buyer and Seller by no later than sixty days from the date of this
Agreement) and will agree on a fee schedule for the Consultant. The fees
and expenses for the Consultant will be paid 50% by Buyer and 50% by
Seller.
(e) Seller and Buyer agree that (i) the scope of the Consultant's
engagement to conduct the Audit shall be to determine whether each of the
Company Subsidiary and Buyer have (A) completed all of the action items and
activities (collectively, "Action Items") for the Company Critical Systems
and the Buyer Implementation Systems, respectively, that are required to be
completed by March 1, 1999, under the Company Implementation Plan and the
Buyer Implementation Plan, respectively, (B) any such items that are
required by the Company Implementation Plan and the Buyer Implementation
Plan to be completed as of March 1, 1999 are, in fact, completed, and (C)
the Company Subsidiary and Buyer have made progress on uncompleted items
substantially in accordance with the Company Implementation Plan and the
Buyer Implementation Plan, respectively, (ii) the Consultant is not to make
any other determination, including any determination about the suitability,
desirability, effectiveness or otherwise of the Seller Methodology or the
Buyer Methodology and (iii) the Consultant shall not perform, or have
performed any "time machine" testing.
Buyer and Seller shall provide the Consultant with reasonable access to
each of their respective properties, books, personnel and records relevant
to the Audit. With respect to each of the Company Subsidiary and Buyer, the
Consultant shall deliver a written report (each, a "Readiness Report")
setting forth any Action Items that have not been substantially completed
by March 1, 1999, in accordance with the Company Implementation Plan and
the Buyer Implementation Plan, as the case may be, and shall set forth in
writing recommendations to complete such Action Items (each, a "Punch
List").
(f) Each of Buyer and Seller agrees to use reasonable best
efforts to complete, at its own cost, all Action Items noted on the Punch
List between the date the Consultant delivers its Readiness Report with
respect to such party and the Closing Date; provided, however, that neither
Seller nor Buyer shall be required to take any action that is not
consistent with the Seller Methodology or the Buyer Methodology,
respectively. To the extent that any Action Items on the Punch List are not
substantially completed by the Closing Date, Seller and Buyer agree to
negotiate in good faith to reach a financial settlement to resolve such
Action Items, based on each party's respective fully allocated rate charged
by such party's information technology personnel. In the event Seller and
Buyer cannot agree to a settlement amount, the matter will be resolved by
binding arbitration in accordance with the Rules of the American
Arbitration Association by one arbitrator appointed in accordance with such
Rules.
(g) Section 7.11 represents the sole responsibility of Buyer and
Seller to each other with regard to being Year 2000 Ready and neither
Seller nor Buyer shall be entitled to any indemnification under Sections
11.02 or 11.03 (including Sections 11.02(a)(i)(A) or 11.03(a)(i)(A)) with
respect to the subject matter of this Section 7.11.
(h) "Year 2000 Ready" means that prior to, during and after
January 1, 2000, the design and performance specifications of the
applicable computer hardware, software and/or components thereof (i)
accurately process date/time
data (including, but not limited to, calculating, comparing and
sequencing), and (ii) accurately perform leap-year calculations.
ARTICLE VIII
Employee and Related Matters
SECTION 8.01. Employment. Effective as of the Closing, Buyer
shall or shall cause the Company Subsidiary to continue to employ each
United States-based employee of the Company Subsidiary who is actively at
work on the Closing Date ("Active Employees") and Buyer shall or shall
cause the Company Subsidiary to honor any commitment of Seller, Seller
Subsidiary, the Company or the Company Subsidiary or, following the
Closing, Buyer, to reemploy any United States-based employee of the Company
Subsidiary who is not actively at work on the Closing Date due to leave of
absence, short-term disability leave (including those individuals who are
absent due to illness or injury for a period of less than five business
days), military leave or layoff with recall rights or reemployment rights
under the Family Medical Leave Act or any other applicable law
(collectively, "Inactive Employees") upon the conclusion of their leave or
layoff, so long as such individual returns to active employment within the
period during which the individual has a protected right of recall or
reemployment under applicable law. For purposes hereof, any United
States-based employee of the Company Subsidiary who is not actively at work
on the Closing Date due to a short-term absence (including due to vacation,
holiday, jury duty or bereavement leave) in accordance with applicable
policies of Seller, the Company or the Company Subsidiary shall be deemed
to be an Active Employee. For purposes of this Article VIII, Active
Employees who immediately following the Closing continue their employment
with the Company Subsidiary and Inactive Employees, to the extent that they
become reemployed by the Company or the Company Subsidiary, shall be
referred to herein collectively as "Continued Employees". For purposes
hereof, an employee of the Company or the Company Subsidiary who has
terminated employment for any reason (including retirement and long-term
disability)
prior to the Closing shall be referred to herein as a "Former Employee".
For purposes of this Article VIII, (i) the employees of Seller Subsidiary
whose names are listed in Section 8.01 of the Seller Disclosure Schedule
shall be deemed to be employees of the Company Subsidiary and (ii)
employees of the Company Subsidiary who are based in Puerto Rico shall be
deemed to be United States-based. Except as herein specifically provided,
Seller shall be liable for all employment and benefit claims and
obligations in respect of (i) Continued Employees and their respective
eligible dependents and beneficiaries that arise prior to the Closing Date
and (ii) Former Employees, regardless of when the obligation or claim
arises. Except as specifically provided herein, Buyer shall be liable for
all employment and benefit claims and obligations in respect of Continued
Employees, and their respective dependents and beneficiaries, that arise on
or after the Closing Date.
SECTION 8.02. Benefit Plans; Coverage. (a) Effective as of the
Closing Date and through December 31, 2000 (the "Benefit Period"), Buyer
shall or shall cause Company Subsidiary to maintain base salaries,
short-term incentive programs (annual bonuses) and employee benefit plans
and arrangements ("Basic Benefits") for Continued Employees which, in the
aggregate, are reasonably comparable to the Basic Benefits provided to the
Continued Employees immediately prior to the Closing Date by Seller or any
Person under common control with Seller; provided, however, (i) in
determining whether this comparability standard is met during the Benefit
Period, Buyer and Seller agree that the benefits to be provided to
Continued Employees by Seller or any Person under common control with
Seller and which are described in paragraphs one through four of Schedule
8.02 are deemed to be Basic Benefits provided by Buyer to the Continued
Employees during the Benefit Period, (ii) Buyer's covenant hereunder is
directly contingent upon Seller's covenants in paragraphs one through four
of Schedule 8.02, (iii) nothing contained herein shall prohibit Buyer or
Company Subsidiary from amending, modifying or terminating any of the Basic
Benefits (other than those referred to in paragraphs one through four of
Schedule 8.02) during or after the Benefit Period, and (iv) notwithstanding
anything
contained in this Agreement to the contrary, neither Buyer nor any Person
under common control with Buyer shall have any obligation during the
Benefit Period to maintain, sponsor or contribute to any (x) retiree
medical, dental or life insurance plans, programs or policies or (y) any
"employee benefit pension plan" (as defined in Section 3(2) of ERISA) that
is subject to Title IV of ERISA.
(b) Effective during the Benefit Period, Buyer shall or shall
cause Company Subsidiary to provide long-term incentive programs to the
Continued Employees on terms and conditions no less favorable than those
provided to Buyer's similarly situated employees.
(c) During the period commencing with the signing of this
Agreement and ending with the Closing, Seller shall not, and shall not
cause, (i) individuals employed by the Company or the Company Subsidiary to
be transferred to the employ of Seller or any Affiliate of Seller (other
than the Company or the Company Subsidiary) and (ii) individuals employed
by Seller or any Affiliate of Seller (other than the Company and the
Company Subsidiary) to be transferred to the employ of the Company or the
Company Subsidiary, except with prior written consent of Buyer's Vice
President of Human Resources.
SECTION 8.03. Past Service Credit. In administering any employee
benefit plans and any fringe benefit plans, including vacation programs and
policies, for the Continued Employees on or after the Closing Date, Buyer
will grant full credit to each Continued Employee for all service of such
Continued Employee with Seller, Seller Subsidiary, the Company or the
Company Subsidiary (or their respective Affiliates) for all purposes for
which such service was recognized by Seller under its comparable employee
benefit plans and arrangements. In furtherance of the preceding sentence,
Buyer shall have no obligation to grant credit to Continued Employees for
service prior to the Closing Date for benefit accrual purposes under any
defined benefit plan maintained or sponsored by Buyer or any Person under
common control with Buyer or where such crediting would result in a
duplication of benefits.
SECTION 8.04. Accrued Vacation, Personal and Sick Days. Buyer and
its Affiliates shall honor, or cause the Company Subsidiary to honor, all
unused vacation, personal and sick days accrued by Continued Employees as
of the Closing Date under the respective programs and policies of Seller,
Seller Subsidiary, the Company and the Company Subsidiary which were
applicable to Continued Employees immediately prior to the Closing Date;
provided, however, Buyer's covenant hereunder is directly contingent upon
(i) Seller providing Buyer with a list of all such accrued days as soon as
reasonably practicable following the Closing and (ii) Seller paying to
Buyer following Closing an amount equal to the Liability associated with
such accrued days to the extent not reflected on the Statement of Net
Worth.
SECTION 8.05. Seller's Pension Plan. (a) Seller shall, effective
as of the Closing, adopt amendments to the SmithKline ▇▇▇▇▇▇▇ Cash Balance
Pension Plan ("Seller's Pension Plan") that will fully vest the benefits of
the Continued Employees. Seller shall cause the trustee of the Seller's
Pension Plan to commence distribution to each Continued Employee of his or
her accrued vested benefit thereunder in accordance with the terms of
Seller's Pension Plan as in effect from time to time. Buyer shall promptly
notify Seller of the termination of employment of each Continued Employee
with Buyer, the Company or any of their respective Affiliates. Seller
shall, effective as of the Closing, also adopt amendments to its
non-qualified pension plans ("Seller's Non-qualified Pension Plans")
corresponding to those set forth in this paragraph.
(b) Upon the termination of a Continued Employee's employment
with Buyer and its Affiliates after the Closing, such Continued Employee
shall be entitled to a distribution of his or her vested accrued benefit
(if any), including any early retirement benefit to which he or she is then
entitled, under Seller's Pension Plan and Seller's Non-qualified Pension
Plans in accordance with the respective terms of such plans as then in
effect but giving effect to the amendments to such plans that are required
by this Agreement.
SECTION 8.06. 401(k) Plan. Seller shall, effective as of the
Closing Date, fully vest each Continued Employee in his or her account
balance (if any) under the SmithKline ▇▇▇▇▇▇▇ Retirement Savings Plan
("Seller's 401(k) Plan"). Effective as of the Closing Date, Buyer shall
have in effect a profit-sharing plan that includes a qualified cash or
deferred arrangement within the meaning of Section 401(k) of the Code
("Buyer's 401(k) Plan"). Each Continued Employee eligible to participate in
Seller's 401(k) Plan as of the Closing shall become eligible to participate
in Buyer's 401(k) Plan as of the Closing. Continued Employees shall receive
credit for all service with Seller and its Affiliates for purposes of
eligibility and vesting under Buyer's 401(k) Plan. Buyer and Seller agree
that between the signing of this Agreement and the Closing Date, Buyer and
Seller shall discuss the possibility of an asset transfer from Seller's
401(k) Plan to a 401(k) Plan established or maintained by Buyer.
SECTION 8.07. Medical and Dental. (a) Seller shall be responsible
in accordance with its applicable welfare plans for all medical and dental
claims for expenses incurred prior to the Closing Date by Continued
Employees and their dependents. Reimbursement of Continued Employees and
their dependents for such medical and dental expenses shall be determined
in accordance with the terms of Seller's medical and dental programs as
then in effect. Seller shall terminate coverage of Continued Employees and
their dependents effective for claims for medical and dental expenses
incurred on and after the Closing Date. The medical and dental plans
provided for Continued Employees will be reasonably comparable as described
in Section 8.02. Buyer shall be responsible in accordance with its
applicable welfare plans for all medical and dental claims made by
Continued Employees and their dependents for expenses incurred on and after
the Closing Date. Reimbursement of Continued Employees for such medical and
dental expenses shall be determined in accordance with the terms of Buyer's
medical and dental programs. For purposes of this Section 8.07, a medical
or dental claim otherwise covered under Seller's or Buyer's applicable
welfare benefit plan shall be deemed incurred when the services giving rise
to
the claim are rendered (regardless of when such claim is billed by the
service provider or filed by the Continued Employee). No waiting period or
exclusion from coverage of any pre-existing medical condition shall apply
to any such Continued Employee's (or eligible dependent's) participation in
Buyer's applicable welfare benefit plans on and after the Closing Date, and
all charges and expenses of such Continued Employees and their eligible
dependents which were applied to the deductible and out-of-pocket maximums
under Seller's welfare benefit plans during the plan year of Seller in
which the Closing Date falls shall be credited toward any deductible and
out-of-pocket maximum applicable in the plan year of Buyer in which the
Closing Date falls. Notwithstanding anything to the contrary in this
Section 8.07(a), all rights, obligations and duties with respect to
Seller's flexible spending arrangements following the Closing shall be
governed by Section 8.07(c).
(b) Seller shall be responsible for any continuation of group
health coverage required under Section 4980B of the Code or Sections 601
through 608 of ERISA with respect to any Former Employee (as defined in
Section 4980B of the Code) who incurs a "qualifying event" (as defined in
Section 4980B of the Code) prior to the Closing Date. Buyer shall be
responsible for any continuation of group health coverage required under
Section 4980B of the Code or Sections 601 through 608 of ERISA with respect
to any Continued Employee or any "qualified beneficiary" (as defined in
Section 4980B of the Code) of any such employee who incurs a "qualifying
event" (as defined in Section 4980B of the Code) on or after the Closing
Date.
(c) Buyer shall establish, effective as of the Closing, a
flexible spending account plan for Continued Employees which will (i) honor
all elections made by Continued Employees under Seller's flexible spending
account plan ("Seller's FSA") in respect of the year in which the Closing
Date occurs and (ii) give credit thereunder for all unused amounts credited
in respect of each Continued Employee as of the Closing Date under Seller's
FSA; provided, however, that Buyer's covenant in this paragraph
is contingent upon receipt of the unused amounts in Seller's flexible
spending account plan applicable to the Continued Employees.
SECTION 8.08. Long-Term Disability. Except as provided in the
following sentence, Seller shall continue to be responsible in accordance
with its applicable long-term disability plans, for all long-term
disability income benefits payable to (a) Inactive Employees who are not
actively employed on the Closing Date due to a short-term disability or
other illness or injury and who thereafter become eligible under Seller's
applicable long-term disability plans without an intervening return to
active employment and (b) Former Employees who, as of the Closing, are on a
long-term disability leave (a "Pre-Closing Disability") for the duration of
such Pre-Closing Disability (including for periods following the Closing).
Buyer shall be responsible under its applicable disability plans for all
long-term disability income benefits payable to Continued Employees with
respect to a disability incurred on or after the Closing Date.
SECTION 8.09. WARN Act. Buyer agrees to provide any required
notice under the Worker Adjustment and Retraining Notification Act, as
amended (the "WARN Act"), and any similar statute, and otherwise to comply
with any such statute with respect to any "plant closing" or "mass layoff"
(as defined in the WARN Act) or similar event affecting Continued Employees
or Former Employees and occurring on or after the Closing. Buyer shall
indemnify and hold harmless Seller and its Affiliates with respect to any
liability under the WARN Act or similar statute arising from the actions of
Buyer and its Affiliates on or after the Closing.
SECTION 8.10. Life Insurance. Buyer shall be responsible for all
life insurance coverage of Continued Employees and their dependents for
claims incurred by such employees or their dependents on and after the
Closing Date and in accordance with the terms of Buyer's applicable
policies, if any. Seller shall be responsible for all
claims incurred prior to the Closing Date in respect of Former Employees
and dependents of Continued Employees.
SECTION 8.11. Employment Claims; Workers Compensation. Buyer
shall be responsible for all employment-related claims (including, but not
limited to, any claims of employment discrimination and harassment) and all
workers compensation claims filed by or on behalf of a Continued Employee
that relates to events or actions on or after the Closing Date.
SECTION 8.12. Cooperation; Employment Records. The parties agree
to furnish each other with such information concerning employees and
employee benefit plans, and to take all such other action, as is necessary
and appropriate to effect the transactions contemplated by Article VIII of
this Agreement (including the furnishing by Seller of any plan
administrator's interpretations or rulings with respect to any Company
Benefit Plan to the extent that Buyer determines to establish a plan with
features similar thereto for the benefit of Continued Employees). Without
limiting the generality of the foregoing, as soon as practicable following
the Closing, Seller shall provide to Buyer the personnel and medical files
of the Continued Employees, subject, with respect to such medical files, to
any restrictions imposed under applicable law and the receipt by Seller of
any required authorizations from Continued Employees (which authorizations
Seller shall make good faith efforts to obtain).
SECTION 8.13. No Right to Plan Participation or Continued
Employment. Nothing herein express or implied shall be construed as giving
any Continued Employee the right, following the Closing, to participate in
any particular plan of Buyer, the Company or any of their respective
Affiliates or the right, following the Closing, to continued employment
with Buyer, the Company or any of their respective Affiliates.
SECTION 8.14. Non-U.S. Employees/Transfer Provisions. Sections
8.01 through 8.13 shall not apply to
Non-U.S. Employees. The following provisions of this Section 8.14 shall
apply only to Non-U.S. Employees.
(a) The Acquired Rights Directive shall apply to the sale of the
Non-U.S. Clinical Laboratories and the contract of employment and the
rights and obligations arising from the employment relationship of each of
the Non-U.S. Employees (other than in respect of occupational pension
scheme rights) shall have effect on the Transfer Date as if originally made
between the Non-U.S. Employees and Buyer.
(b) Seller shall be responsible for all wages, salaries and
emoluments payable in respect of the Non-U.S. Employees and shall discharge
all such obligations in respect of the Non-U.S. Employees which are payable
prior to the Transfer Date. Buyer shall be responsible for and will
discharge all obligations in respect of the Non-U.S. Employees on the
Transfer Date and thereafter.
(c) In accordance with its obligations under the Acquired Rights
Directive, Buyer shall provide Seller in writing with such information and
at such time as will enable Seller to carry out its obligations to consult
under the Acquired Rights Directive. Information and consultation under the
Acquired Rights Directive to the reasonable satisfaction of Seller will be
a condition to closing.
(d) Subject to Section 8.14(e), Seller will indemnify Buyer and
keep Buyer indemnified against any Employment Losses which relate to or
arise out of or are connected with any act or omission by Seller not
disclosed in Seller Disclosure Schedule except for Employment Losses
arising out of changes to terms and conditions of employment, made in the
ordinary course of business prior to the Transfer Date and which Buyer
incurs in relation to any contract of employment or collective agreement of
one or more of the Non-U.S. Employees pursuant to the Acquired Rights
Directive.
(e) Buyer will indemnify Seller and keep Seller indemnified
against:
(i) any Employment Losses in respect of the employment of the
Non-U.S. Employees on or after the Transfer Date and against any
Employment Losses which relate to, arise out of or are connected with
any act or omission by Buyer or any event, matter or any other
occurrence having its origin on or after the Transfer Date and which
Seller incurs in relation to any contract of employment or employment
relationship or collective agreement of one or more of Non-U.S.
Employees or any other person pursuant to Acquired Rights Directive
and/or in respect of this Agreement; and
(ii) any Employment Losses which relate to or arise out of any
act or omission by Buyer or any event, matter of any other occurrence
prior to the Transfer Date which Seller incurs by virtue of Article
4(2) of the Acquired Rights Directive.
(f) Buyer shall comply with all mandatory provisions of the
Acquired Rights Directive which relate to the provision of remuneration and
benefits in respect of the Non-U.S. Employees following the Closing Date.
Buyer will provide the Non-U.S. Employees with remuneration and benefits
(including retirement and severance benefits) which are no less favorable
in the aggregate than their aggregate remuneration and benefits provided by
Seller immediately prior to the Closing Date.
SECTION 8.15. MRI Bonuses. (a) With respect to Seller's
Millennium Rentention Initiative Programme ("Seller's MRI Programme"),
Buyer shall establish, effective as of the Closing, a plan replicating all
of the terms of the Seller's MRI Programme as in effect on the date hereof
(other than the share option component of Seller's MRI Programme, which
Buyer shall have no obligation to replicate) to the extent necessary to
comply with the provisions of this Section 8.15 ("Buyer's MRI Programme").
Buyer shall pay to eligible Continued Employees all annual cash awards
earned in respect of 1998 and 1999 to the extent reflected on the Closing
Date Balance Sheet and not paid by Seller prior to the Closing. The
determination of whether
the annual cash awards in respect of 1999 have been earned will be
determined by Buyer in accordance with the terms of the Buyer's MRI
Programme which replicate the applicable terms of Seller's MRI Programme as
in effect on the date hereof.
(b) With respect to the Year 2000 award payable under Seller's
MRI Programme in 2000 which is funded, in part, through share options (the
"Year 2000 Award"), eligible Continued Employees will forfeit the Year 2000
Award as of the Closing; provided, however, that Buyer shall provide a
payment to such eligible Continued Employees in respect of the cash and
share option components of their forfeited Year 2000 Awards, and Seller
will reimburse Buyer for any such payment made to eligible Continued
Employees, as provided hereinbelow. Buyer will cause the Company to
establish a cash award initiative under Buyer's MRI Programme which will
replicate the Year 2000 Award (the "Substitute Year 2000 Award"). Buyer
will make all determinations with respect to whether the applicable
performance criteria in respect of the Substitute Year 2000 Awards have
been achieved as of the end of the performance period (applying the same
performance criteria set forth in Seller's MRI Programme as in effect as of
the date hereof), subject to Buyer's consultation with the chief
information officer of Seller before finalizing such determinations. Seller
shall reimburse Buyer for a portion of the amount paid by Buyer to eligible
Continued Employees in respect of the Substitute Year 2000 Awards, as
follows:
(i) In respect of the cash component of the forfeited Year 2000
Award, Seller shall reimburse Buyer for a proportional share of the
cost of the cash component of the Substitute Year 2000 Award based
upon the portion of the aggregate annual cash awards for 1997, 1998
and 1999 under the Seller's MRI Programme (the "Three MRI Annual
Awards") and Buyer's MRI Programme that were either paid by Seller or
accrued on the Closing Date Balance Sheet as a percentage of the
aggregate Three MRI Annual Awards which are paid, respectively, by
Seller and Buyer under such Programmes.
(ii) Seller shall reimburse Buyer for an amount equal to the
product of (x) multiplied by (y), where (x) is an amount equal to the
excess, if any, by which the aggregate value of the share option
component of the Year 2000 Awards under the Seller's MRI Programme for
eligible Continued Employees on the date that the execution of this
Agreement is publicly announced by Seller, based upon the closing
price per share for Parent's American Depositary Receipts as reported
on such date on the New York Stock Exchange exceeds 67% of the
aggregate Three MRI Annual Awards, and where (y) equals 0% (if the
level 1 performance threshold is not achieved), 33 1/3% (if only the
level 1 performance threshold is achieved) or 66 2/3% (if the level 2
performance threshold is achieved), such percentage to be the
applicable percentage cash award determined by Buyer (after
consultation with Seller, as provided herein above) paid in respect of
the Substitute Year 2000 Awards.
(iii) An example of the allocation of the cost of Year 2000
Awards and Substitute Year 2000 Awards is set forth in Section 8.15 of
the Seller Disclosure Schedule.
ARTICLE IX
Tax Matters
SECTION 9.01. Tax Indemnity. (a) Each of Seller and
Seller Subsidiary agree, on a joint and several basis, to indemnify and
hold Buyer, the Company, the Company Subsidiary, and their Affiliates and
each of their respective officers, directors, employees, stockholders,
agents, and representatives (the "Buyer Indemnitees") harmless from and
against the following Taxes: (i) Taxes imposed on the Company or the
Company Subsidiary or in respect of the Other Assets with respect to
taxable periods ending on or before the Closing Date; (ii) with respect to
taxable periods beginning before the Closing Date and ending after the
Closing Date, Taxes imposed on the Company or the Company
Subsidiary or in respect of the Other Assets which are allocable,
pursuant to paragraph (b) hereof, to the portion of such period ending on
the Closing Date; (iii) Taxes imposed on any member (other than the Company
or the Company Subsidiary) of any affiliated, consolidated, unitary or
other combined group with which the Company or the Company Subsidiary files
or has filed a Tax Return in a period ending on or prior to the Closing
Date on a consolidated, unitary or other combined basis or with which the
Seller Subsidiary files a Tax Return on such basis after the Closing Date;
and (iv) Taxes imposed on Buyer, the Company or the Company Subsidiary or
in respect of the Other Assets attributable to (A) a breach of a warranty
or representation set forth in Section 3.08(c) by Seller, but only to the
extent that such breach (I) does not give rise to an offsetting Tax benefit
to Buyer or its Affiliates (including the Company or the Company
Subsidiary) in a Post-Closing Tax Period and (II) results in an increase in
the amount of Taxes payable by Buyer and its Affiliates (including the
Company and the Company Subsidiary) or (B) a breach of obligations or
covenants of Seller or Seller Subsidiary set forth in this Agreement. For
purposes of this Section 9.01(a), each of Seller and Seller Subsidiary
agrees, on a joint and several basis, to indemnify the Buyer Indemnitees
for any and all out-of-pocket costs and expenses (including reasonable fees
for attorneys and other outside consultants) incurred in connection with
any contest of any Tax liability for which Seller and Seller Subsidiary are
liable under this Article IX. Notwithstanding the foregoing, Seller shall
not indemnify and hold harmless the Buyer Indemnitees from any liability
for Taxes attributable to a breach by Buyer of its obligations under this
Agreement to the extent that Taxes of Seller and Seller Subsidiary and
their respective Affiliates have been, or the amounts otherwise payable by
Seller or Seller Subsidiary pursuant to this Section 9.01(a) would be,
increased as a result of such breach.
(b) With respect to any Tax that is payable with respect
to a taxable period that begins before the Closing Date and that ends after
the Closing Date, the portion of any such Tax allocable to the portion of
the period ending
on the Closing Date shall be deemed to equal: (i) in the case of Taxes that
are based upon or related to income or receipts or measured by capital
(including net worth, long-term debt or intangibles), the amount which
would be payable if the taxable year ended with the Closing Date, and (ii)
in the case of Taxes imposed on a periodic basis (including property Taxes)
or Taxes measured by the level of any item not described in item (i) above,
the amount of such Taxes for the entire period multiplied by a fraction the
numerator of which is the number of calendar days in the period ending with
the Closing Date and the denominator of which is the number of calendar
days in the entire period.
(c) Buyer agrees to indemnify and hold Seller, its Affiliates and
each of their respective officers, directors, employees, stockholders,
agents and representatives (the "Seller Indemnitees") harmless from and
against the following Taxes: (i) Taxes of the Company, the Company
Subsidiary and in respect of the Other Assets for any Post-Closing Tax
Period (except to the extent Seller and Seller Subsidiary are liable under
this Article IX for such Taxes), and (ii) Taxes imposed on Seller or its
Affiliates (including the Seller Subsidiary) attributable to a breach by
Buyer of its obligations under this Agreement. For purposes of this Section
9.01(c), Buyer agrees to indemnify the Seller Indemnitees for any and all
out-of-pocket expenses (including reasonable fees for attorney and other
outside consultants) incurred in connection with any contest for any Tax
liability for which Buyer is liable under this Section 9.01(c).
Notwithstanding the foregoing, Buyer shall not indemnify and hold harmless
the Seller Indemnitees from any liability for Taxes attributable to a
breach by Seller or Seller Subsidiary of its obligations under this
Agreement to the extent that Taxes of Buyer or its Affiliates (including
the Company and the Company Subsidiary) have been, or the amounts payable
by Buyer pursuant to this Section 9.01(c) would be, increased as a result
of such breach.
(d) Payment by the indemnitor of any amount due under this
Article IX shall be made within thirty (30) days following written notice
by the indemnitee that payment of
such amounts to the appropriate Tax authority or other appropriate party is
due; provided that in the case of any payment due to a Tax authority or
other appropriate party the indemnitor shall not be required to make any
payment earlier than two days before it is due to the appropriate Tax
authority. In the case of a Tax that is contested in accordance with the
provisions of Section 9.02 (other than a Tax contested in any
administrative or judicial proceeding in which the Tax contested must be
paid prior to or upon commencement of such proceeding), payment of the Tax
to the appropriate Tax authority will not be considered to be due earlier
than the date a final determination has been made as defined in Section
1313(a) of the Code or as finally determined pursuant to any similar rule
or provision of any relevant applicable Tax laws of any state, local,
foreign or other Tax jurisdiction (a "Final Determination").
(e) If an adjustment is made by a Tax authority (other than in
respect of the Seller Tax Items as defined in 9.12) in respect of a
Pre-Closing Tax Period that increases the aggregate amount of Taxes
indemnified against by Seller and Seller Subsidiary under 9.01(a) and
decreases the Tax liability of Buyer or its Affiliates (including the
Company and the Company Subsidiary) for a Post-Closing Tax Period, Buyer
shall pay to Seller the amount of such decrease at the time such decrease
is actually realized by Buyer. If an adjustment is made by a Tax authority
(other than in respect of the Seller Tax Items as defined in 9.12) in
respect of a Post-Closing Tax Period that increases the Tax liability of
the Buyer or its Affiliates (including the Company and the Company
Subsidiary) and decreases the Taxes which are indemnified by Seller or
Seller Subsidiary for a Pre-Closing Tax Period under 9.01(a), Seller or
Seller Subsidiary shall pay the amount of such decrease to Buyer at the
time such decrease is actually realized by Seller or Seller Subsidiary.
SECTION 9.02. Procedures Relating to Indemnification of Tax
Claims. (a) After the Closing Date, if a claim shall be made in writing by
any Tax authority, which, if successful, would result in an indemnity
payment by Seller and Seller Subsidiary to Buyer or its Affiliates
pursuant to Section 9.01, Buyer shall promptly notify Seller and Seller
Subsidiary in writing of such claim (a "Tax Claim"). If notice of a Tax
Claim is not given to Seller and Seller Subsidiary promptly after receipt
by Buyer, or in reasonable detail to inform Seller and Seller Subsidiary of
the nature of the Tax Claim, in each case taking into account the facts and
circumstances with respect to such Tax Claim, neither Seller nor Seller
Subsidiary shall be liable to Buyer, to the extent that their (or any of
their Affiliate's) position is actually prejudiced as a result of a failure
to so promptly notify or inform.
(b) With respect to any Tax Claim for a taxable period that ends
on or before the Closing Date, either Seller or Seller Subsidiary shall
have the right to direct, at its own expense, all proceedings in connection
with such Tax Claim (includ ing selection of counsel) and, without limiting
the foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and con ferences with any Tax
authority with respect thereto, and may, in its sole discretion, either pay
the Tax claimed and ▇▇▇ for a refund where applicable law permits such
refund suits or contest the Tax Claim in any permissible manner. It shall
be assumed that either Seller or Seller Subsidiary will direct the
proceedings for any Tax Claim unless, within ten (10) days of receipt of
the notice of such Tax Claim from Buyer, Seller notifies Buyer of its
intent and the intent of Seller Subsidiary not to direct the proceedings
for such Tax Claim. In the event both Seller and Seller Subsidiary have
elected not to direct the proceedings for any Tax Claim, Buyer shall be
permitted to settle or compromise any such Tax Claim without prejudice to
the obligations of Seller and Seller Subsidiary to indemnify Buyer under
this Article IX. Seller and Buyer shall jointly control all proceedings
taken in connection with any Tax Claim relating solely to Taxes
attributable to a Straddle Period. Buyer, the Company, the Company
Subsidiary and each of their respective Affiliates shall cooperate with
Seller and its Affiliates in
contesting any Tax Claim, which cooperation shall include, without
limitation, the retention and (upon Seller's request) the provision to
Seller or its Affiliates of records and information which are reasonably
relevant to such Tax Claim, and making employees available on a mutually
convenient basis to provide additional information or explanation of any
material provided hereunder or to testify at proceedings relating to such
Tax Claim.
(c) In the event that Seller or Seller Subsidiary chooses to
direct and contest a Tax Claim described in the first sentence of Section
9.02(b), Buyer shall not settle or otherwise compromise such Tax Claim
without Seller's prior written consent (which consent shall not be
unreasonably withheld). Before Seller settles any such Tax Claim, Seller
shall consult in good faith with Buyer. Neither Seller nor Seller
Subsidiary may without the prior written consent of Buyer (which consent
shall not be unreasonably withheld) settle or compromise any Tax Claim in a
proceeding which Seller or Seller Subsidiary directs if doing so would
increase any indemnification obligation of Buyer under this Article IX. No
party shall settle a Tax Claim relating solely to Taxes of the Company or
the Company Subsidiary for a Straddle Period without the other party's
prior written consent (which consent shall not be unreasonably withheld).
(d) In the case of any claim for Taxes pending on the Closing
Date, and involving any contested Tax for which Seller or Seller Subsidiary
would be liable under this Article IX, Seller shall notify Buyer within
thirty (30) days after the Closing Date whether Seller or Seller Subsidiary
elects not to direct the proceeding of any such claim for Taxes in the
manner described in this Section 9.02. In the absence of such notice,
Seller will be deemed to have elected to direct all claims for Taxes
pending on the Closing Date. An election by Seller or Seller Subsidiary
with respect to any proceeding of any such claim for Taxes subject to this
Section 9.02(d) shall constitute an election for purposes of Section
9.02(a), (b) and (c).
(e) In the event that a claim for Taxes is made in writing by any
Tax authority, which, if successful, would result in an indemnity payment
by Buyer to Seller or its Affiliates under Section 9.01(c), Buyer shall
have the same
contest, timely notification and other rights in respect of
such claim for Taxes that Seller has in this Section 9.02.
(f) Buyer shall have the sole right to direct any and all
proceedings (including selection of counsel) with respect to any claim,
audit or deficiency by a Tax authority in respect of Taxes of Buyer and its
Affiliates (including the Company and the Company Subsidiary) for a
Post-Closing Period, provided, however, that Buyer shall consult in good
faith with Seller and Seller Subsidiary with respect to any audit or other
proceeding by a Tax authority or before any court with respect to the
Compensation Items (collectively, "Proceedings") (including keeping Seller
and Seller Subsidiary informed of material developments with respect to
such Proceedings on a timely basis, providing Seller and Seller Subsidiary
with copies of any material correspondence, requests or filings with
respect to such Proceedings, providing Seller and Seller Subsidiary with
Buyer's material written submissions or replies with respect to such
Proceedings prior to the filing of such submissions or replies with the
relevant Tax authority or the relevant court, providing Seller and Seller
Subsidiary with copies of material documents actually filed with the
relevant Tax authority or court in respect of such Proceedings and
considering in good faith the comments and views of Seller and Seller
Subsidiary with respect to the conduct of such Proceedings); provided
further that Buyer will be required to contest any such claim, audit or
deficiency if Seller and Seller Subsidiary so request and have agreed to
indemnify Buyer for any reasonable out-of-pocket costs and expenses that
Buyer incurs in connection with such contest (including reasonable legal
and accounting fees).
SECTION 9.03. Preparation and Filing of Tax Returns. (a)
For any Straddle Period, Buyer shall timely prepare and, with the prior
written consent of Seller (which consent shall not be unreasonably
withheld), file with the appropriate Tax authorities all Tax Returns
required to be filed with respect to the Company, the Company Subsidiary
and the Other Assets, and shall pay all Taxes due with respect to such Tax
Returns; provided that Seller or Seller Subsidiary shall pay Buyer for any
amount owed by Seller or
Seller Subsidiary pursuant to Section 9.01 with respect to the taxable
periods covered by such Tax Returns not later than two (2) days prior to
the date Tax is due to the appropriate Tax authority. Within forty-five
(45) days prior to the filing of any Tax Return for a Straddle Period,
Buyer shall deliver such Tax return to Seller for Seller's review and
comment. Seller and Buyer agree to consult and resolve in good faith any
issue arising out of Seller's review of any such Straddle Period Tax
Return. In the event the parties are unable to resolve any dispute within
thirty (30) days following the delivery of such Tax Return to Seller, the
parties shall resolve their dispute by jointly requesting that a mutually
acceptable accounting firm which is not the past or then current principal
auditors of Buyer or Seller resolve any issue before the due date of such
Tax Return, in order that such Tax Return may be timely filed. The scope of
the accounting firm's review shall be limited to the disputed items. Seller
or Seller Subsidiary, as the case may be, and Buyer shall each pay one-half
of the accounting firm's fees and expenses.
(b) For any taxable period of the Company, the Company Subsidiary
or with respect to the Other Assets that ends on or before the Closing
Date, Seller shall timely prepare and file, or shall cause to be timely
prepared and filed, with the appropriate Tax authorities all Tax Returns
required to be filed with respect to the Company, the Company Subsidiary
and the Other Assets, and shall pay or shall cause Seller Subsidiary or the
Seller Entities to pay, all Taxes due with respect to such Tax Returns.
Seller shall prepare, or cause to be prepared, any such Tax Return for a
taxable period ending on or before the Closing Date in a manner consistent
with the prior practice of the Company and the Company Subsidiary and, in
the case of the Other Assets, the Seller Entities (except to the extent
independent tax counsel shall determine that there is no reasonable basis
therefor), and Seller shall deliver, or shall cause to be delivered, such
Tax Return to Buyer at least ten (10) days prior to the date such Tax
Return is due to be filed (taking into account any extensions of time to
file such Tax Return that have been properly obtained) in the case of state
Tax Returns and thirty days (30) in the
case of federal income Tax Returns for Buyer's review and comment. Before
filing such a Tax Return, Seller, Seller Subsidiary or the Seller Entities,
as the case may be, shall consult with Buyer, and consider Buyer's
comments, in good faith, but Buyer's consent shall not be required with
respect to the filing of any such Tax Return. Buyer and Seller will cause
the Company and the Company Subsidiary to file all Tax Returns for the
period including the Closing Date on the basis that the relevant taxable
period ended as of the close of business on the Closing Date, unless the
relevant Tax authority will not accept a Tax Return filed on that basis.
Buyer shall prepare and file or cause the Company or the Company Subsidiary
to prepare and file any Tax Return relating to the Company, the Company or
the Other Assets for any taxable periods that begins on or after the
Closing Date.
SECTION 9.04. Tax Covenants. (a) Buyer (i) will not, and will not
permit the Company and the Company Subsidiary to, effect any extraordinary
transactions on the Closing Date (other than any such transactions
expressly required by applicable law or by this Agreement) that could
result in Tax liability to Seller or its Affiliates (including the Company
or the Company Subsidiary) or in respect of the Other Assets in excess of
Tax liability associated with the conduct of business in the ordinary
course; (ii) will not make any election under Section 338 of the Code (or
any analogous or similar rules in any relevant Tax jurisdiction) with
respect to the transfer of the Shares under this Agreement; and (iii) will
not make or change any tax election, amend any Tax Return or take any
action or otherwise enter into any transaction that results in any material
increase in the Tax liability of Seller or its Affiliates (including the
Company and the Company Subsidiary) in respect of any Pre-Closing Tax
Period.
(b) Seller covenants that it will not cause or permit the Company
or the Company Subsidiary to make or change any tax election, amend any Tax
Return, or take any action or otherwise enter into any transaction
(including, without limitation, the acceleration of deductions) that
results in any material increase in the Tax liability of
Buyer or its Affiliates (including the Company or the Company Subsidiary),
or any material increase in payments to Seller under Section 9.12, in
respect of any Post- Closing Tax Period.
SECTION 9.05. Cooperation on Tax Matters. Seller and Buyer shall
cooperate, and shall cause their respective Affiliates, officers,
employees, agents, auditors and representatives to cooperate, in preparing
and filing all Tax Returns, including maintaining and making available to
each other all records necessary in connection with Taxes and in resolving
all disputes and audits with respect to all taxable periods relating to
Taxes. Buyer and Seller recognize that Seller, Buyer and their Affiliates
will need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by Seller, Buyer, the
Company and the Company Subsidiary to the extent such records and
information pertain to events occurring prior to the Closing Date and
relate to the Company, the Company Subsidiary or the Other Assets;
therefore, Seller agrees and Buyer agrees, and agrees to cause the Company
and the Company Subsidiary, (a) to retain and maintain such records in
accordance with its normal recordkeeping policy and procedure for the
taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such Tax Returns and other
documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions for the
respective taxable periods, or (ii) six (6) years following the due date
(without extension) for such Tax Returns, and (b) to allow Buyer, Seller
and their agents and representatives (and agents or representatives of any
of their Affiliates), at times and dates mutually acceptable to the
parties, to inspect, review and make copies of such records as Buyer or
Seller, as the case may be, may deem necessary or appropriate from time to
time, such activities to be conducted during normal business hours and at
the requesting party's expense. Any information obtained under this Section
9.05 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax
Returns or claims for refund or in conducting an audit or other proceeding.
SECTION 9.06. Tax Refunds and Credits. Any refunds or credits of
Taxes of the Company or the Company Subsidiary or with respect to the Other
Assets for any Straddle Period shall be equitably apportioned between
Seller and Buyer. Buyer and Seller shall jointly control the prosecution of
any refund claim with respect to Straddle Period Taxes and shall split the
expenses thereof on a basis that reflects the relative amount of refunds
claimed by each party. Any refunds or credits of Taxes of the Company or
the Company Subsidiary or with respect to the Other Assets for any taxable
period ending on or before the Closing Date shall be for the account of
Seller, Seller Subsidiary and of the Seller Entities. Notwithstanding the
foregoing, any refunds or credits of Taxes of the Company or the Company
Subsidiary or with respect to the Other Assets for any taxable period
ending on or before the Closing Date that are attributable to carrybacks or
losses or credits from a Post-Closing Tax Period shall be for the account
of Buyer. Any refunds or credits of Taxes of the Company or the Company
Subsidiary or with respect to the Other Assets for any taxable period
beginning after the Closing Date shall be for the account of Buyer. Buyer
shall, if Seller so requests and at Seller's expense, cause the Company or
the Company Subsidiary to file for and obtain any refunds or credits to
which Seller, Seller Subsidiary and the Seller Entities are entitled under
this Section 9.06. Buyer shall permit Seller at its expense to direct the
prosecution of any such refund claim and, where deemed appropriate by
Seller, shall cause the Company and the Company Subsidiary to authorize by
appropriate powers of attorney such Persons as Seller shall designate to
represent the Company or the Company Subsidiary with respect to such refund
claim. Buyer shall cause the Company and the Company Subsidiary to forward
to Seller (acting as agent for itself, Seller Subsidiary and the Seller
Entities) any refund described in the third sentence of this Section 9.06
within ten (10) days after the refund is received (or reimburse Seller,
Seller Subsidiary and the Seller Entities for any such credit within ten
(10) days after the credit is allowed or applied
against other Tax liability of Buyer or its Affiliates, including the
Company or the Company Subsidiary for a Post-Closing Tax Period); provided,
however, that any such amounts payable to Seller shall be reduced by any
Tax cost (net of any Tax benefit) to Buyer or any of its Affiliates,
including the Company or the Company Subsidiary, as the case may be,
attributable to the receipt of such refund (including interest) and/or the
payment of such amounts to Seller. Notwithstanding the foregoing, the
control of the prosecution of a claim for refund of Taxes paid pursuant to
a deficiency assessed subsequent to the Closing Date as a result of an
audit by a Tax authority shall be governed by the provisions of Section
9.02.
SECTION 9.07. Filing of Amended Tax Returns. Seller and its
Affiliates shall be responsible for filing any amended consolidated,
unitary or other combined Tax Returns of the Company or the Company
Subsidiary, or with respect to the Other Assets, for taxable periods ending
on or prior to the Closing Date which are required as a result of
examination adjustments made by the Internal Revenue Service or by the
applicable state, local or foreign Tax authorities for such taxable years
as finally determined. For those jurisdictions in which separate Tax
Returns are filed by the Company or the Company Subsidiary, any required
amended Tax Returns resulting from such examination adjustments, as finally
determined, shall be prepared by Seller and its Affiliates and furnished to
the Company or the Company Subsidiary, as the case may be, for signature
and filing at least ten (10) days prior to the due date for filing such Tax
Returns. Buyer shall not permit either the Company or the Company
Subsidiary to file an amended Tax Return for a Straddle Period without the
prior written consent of Seller (which consent shall not be unreasonably
withheld).
SECTION 9.08. Transfer, Documentary, Sales, Use, Registration and
Other Similar Transfer Taxes. Seller and Buyer shall each be liable for and
shall pay fifty percent (50%) of up to $20,000 ($10,000 each in the
aggregate) of all transfer, documentary, sales, use, value added,
registration and other similar transfer taxes (including all
applicable real estate transfer or gains taxes) and related fees (including
any penalties, interest and additions to such tax) incurred in connection
with this Agreement and the transactions contemplated hereby (collectively,
"Transfer Taxes"). Any amount of such Transfer Taxes in excess of $20,000
in the aggregate shall be for the account of Seller. Seller and Buyer
shall, and shall cause their Affiliates to, cooperate in timely making all
filings and Tax Returns as may be required to comply with the provisions of
such Tax laws. Seller shall pay any stock transfer taxes due as a result of
the sale of the Shares. Buyer shall reimburse Seller (net of any Tax cost
to Buyer) for any Transfer Taxes paid by Seller if, as and when such
Transfer Taxes are refunded or allowed as a credit to Buyer or its
Affiliates (including the Company and the Company Subsidiary).
SECTION 9.09. Certificate Showing Exemption from Withholding.
Seller shall deliver, or cause to be delivered, to Buyer at the Closing a
certificate in form and substance satisfactory to Buyer, duly executed and
acknowledged, certifying any facts that would exempt the transactions
contemplated hereby from withholding in accordance with Code section
1445(b) and pursuant to the provisions of the Foreign Investment in Real
Property Tax Act.
SECTION 9.10. Termination of Tax Sharing Agreements. Seller shall
cause the provisions of any Tax sharing agreement between Seller and any of
its Affiliates (other than the Company and the Company Subsidiary), on the
one hand, and the Company or the Company Subsidiary, on the other hand, to
be terminated on or before the Closing Date.
SECTION 9.11. Seller Subsidiary Election. Seller Subsidiary has
the right to elect pursuant to U.S. Treasury Regulation Section
1.1502-20(g), and any comparable provision of state, local or foreign Tax
law, to reattribute to itself all or any portion of the net operating loss
carryovers and net capital loss carryovers, if any, of the Company and the
Company Subsidiary for Pre-Closing Tax Periods (but not in excess of the
amounts allowable under such provisions). Buyer and its Affiliates shall
cooperate with Seller Subsidiary and its Affiliates in the making of any
such elections.
SECTION 9.12. Seller Tax Items. (a) For purposes of this Section
9.12, "Seller Tax Items" shall mean (i) the aggregate carryforwards of net
operating losses of the Company or the Company Subsidiary from Pre-Closing
Tax Periods to Post-Closing Tax Periods, (ii) income, gain, loss or
deductions in respect of the grant, exercise, vesting or disposition by a
Continued Employee or a Former Employee of an option on Ordinary Shares of
Seller or on American Depositary Receipts with respect thereto
(collectively, "Seller Shares") or the grant, vesting, exercise or
disposition of Seller Shares pursuant to Seller's Medium Term Incentive
Program ("Compensation Items"), and (iii) the Code Section 481 adjustments
of the Company and/or the Company Subsidiary attributable to (x) the
enactment of Code Section 475(c)(4) and Section 7003(c)(2) of the IRS
Restructuring and Reform Act of 1998 and (y) if approved, the Company
Subsidiary's applications for a change in method of accounting with respect
to accounts receivable, effective beginning with the 1998 taxable year of
the Company Subsidiary.
(b) At the Closing, at Seller's expense, Seller shall deliver to
Buyer an opinion of Cravath, Swaine & ▇▇▇▇▇ (in a form reasonably
acceptable to Buyer and Seller) to the effect that, more likely than not,
for federal income Tax purposes (i) amounts that would have been deductible
by the Company and the Company Subsidiary in respect of Compensation Items,
absent the transfer of the Shares to the Buyer pursuant to this Agreement,
will be deductible by the Company and the Company Subsidiary to the same
extent after such transfer and (ii) Buyer and its Affiliates (including the
Company and the Company Subsidiary) will not recognize any income or gain
in respect of Compensation Items for Post-Closing Tax Periods.
(c) Seller and Seller Subsidiary shall provide Buyer on a timely
basis with such information, documentation and assistance as is necessary
or otherwise reasonably requested by Buyer in order to compute the
Compensation
Items, and to satisfy any and all reporting, withholding and payroll Tax
obligations under the Code and applicable state, local and foreign law.
Without limiting the foregoing, Seller and Seller Subsidiary shall deliver
to Buyer, in sufficient time for Buyer to comply with its Tax Return
reporting and wage withholding obligations (including FICA and FUTA), the
identity of, and amount of compensation per, individual, and any
documentation and other information in support thereof reasonably requested
by Buyer or any Tax authority. Seller and Seller Subsidiary shall indemnify
and hold the Buyer Indemnitees harmless against (i) the employer's portion
of any payroll or similar Taxes relating to the Compensation Items; (ii)
Taxes imposed as a result of a failure of Seller or Seller Subsidiary to
provide information as required by this Section 9.12(c); and (iii) all
reasonable out-of-pocket costs incurred in claiming deductions in respect
of the Compensation Items and in processing or administering the
information related to the Compensation Items.
(d) Buyer shall calculate for each Post-Closing Tax Period (i)
the aggregate amount of income and franchise Taxes actually payable by
Buyer and its Affiliates, including the Company and the Company Subsidiary
(collectively, the "Buyer Group"), for such Post-Closing Tax Period
("Buyer's Actual Tax Liability") and (ii) the amount of income and
franchise Taxes that would have been payable by the Buyer Group if
determined without regard to any Seller Tax Items ("Buyer's Hypothetical
Tax Liability"). Buyer shall provide Seller Subsidiary with copies of its
calculations of Buyer's Actual Tax Liability and Buyer's Hypothetical Tax
Liability, together with any documentation or supporting information
(consistent with Buyer's internal confidentiality policies) reasonably
requested by Seller Subsidiary to enable it to verify the accuracy of such
calculations, within thirty (30) days following the filing of all income
and franchise Tax Returns of the Buyer Group with respect to such Post-
Closing Tax Period. Buyer and Seller Subsidiary shall attempt in good faith
to resolve any disputes with respect to such calculations, and any such
resolution shall be final and binding on the parties absent manifest error.
In the event that Buyer and Seller
Subsidiary are unable to reach agreement on such calculations after a
period of thirty (30) days, then any items remaining in dispute shall be
submitted for resolution to an internationally-recognized independent
accounting firm mutually acceptable to the parties, which shall issue its
determination within thirty (30) days after submission, and such
determination shall be final and binding as to the parties absent manifest
error. Buyer shall provide such accounting firm with any documentation or
supporting information as may be reasonably requested (consistent with the
internal confidentiality policies of Buyer) in order to allow such
accounting firm to make its determination. The fees and expenses of such
accounting firm shall be borne fifty percent (50%) by Buyer and fifty
percent (50%) by Seller Subsidiary.
(e) Buyer shall report each of the Seller Tax Items to the
fullest extent, and in the earliest Post-Closing Tax Period, allowable
under applicable income and franchise Tax law after taking into account the
various limitations under the Code to which those items may be subject in
Post-Closing Tax Periods, provided, however, that nothing in this section
shall require Buyer to forego or otherwise jeopardize any other available
Tax items, to take positions inconsistent with Buyer's overall Tax Return
positions, or to change its overall business plans or operations.
Notwithstanding anything herein to the contrary, Buyer shall have no
obligation to carryback any Tax attribute or item.
(f) If, for any Post-Closing Tax Period, Buyer's Actual Tax
Liability is greater than Buyer's Hypothetical Tax Liability, Seller
Subsidiary shall pay Buyer an amount equal to such difference. If, for any
Post-Closing Tax Period, Buyer's Hypothetical Tax Liability is greater than
Buyer's Actual Tax Liability, Buyer shall pay Seller Subsidiary an amount
equal to such difference. Payments under this Section 9.12(f) shall be made
by the later of (i) forty-five (45) days following the filing of all income
and franchise Tax Returns of the Buyer Group for the applicable
Post-Closing Tax Period, and (ii) ten (10) days after the date that a final
agreement is reached as to the
calculation of Buyer's Actual Tax Liability and Buyer's Hypothetical Tax
Liability for such Post-Closing Tax Period in accordance with paragraph (d)
of this Section 9.12. Notwithstanding the foregoing, as a precondition to
any payment by Buyer to Seller Subsidiary under this Section 9.12(f),
Seller Subsidiary shall be required to obtain an irrevocable letter of
credit in favor of Buyer and its Affiliates in an amount equal to such
payment (an "LC"). The LC (and any replacement thereto) shall be issued by
a U.S. or foreign bank mutually acceptable to Buyer and Seller Subsidiary
and shall have terms and conditions (consistent with this Section 9.12)
satisfactory to Buyer. The Seller Subsidiary's obligation to maintain an LC
shall terminate no earlier than thirty (30) days following the expiration
of all applicable statutes of limitations for the Post- Closing Tax Period
to which the LC relates, unless expressly permitted by paragraph (h) of
this Section 9.12.
(g) If Buyer's Actual Tax Liability or Buyer's Hypothetical Tax
Liability for any Post-Closing Tax Period changes (by reason of the filing
of amended Tax Returns, audit adjustments agreed to with a Tax authority,
final dispositions of administrative or judicial proceedings, carrybacks
from later taxable periods to earlier taxable periods or otherwise), Buyer
shall recalculate Buyer's Actual Tax Liability and Buyer's Hypothetical Tax
Liability for such Post-Closing Tax Period. Seller Subsidiary and Buyer
shall promptly notify each other of any change or event that might give
rise to such a change. Buyer shall provide Seller Subsidiary with copies of
its recalculations, together with any documentation or supporting
information (consistent with Buyer's internal confidentiality policies)
reasonably requested by Seller Subsidiary to enable it to verify the
accuracy of such recalculations, within thirty (30) days following any such
change. Buyer and Seller Subsidiary shall attempt in good faith to resolve
any disputes with respect to such recalculations and any resolution shall
be final and binding as to the parties. If Buyer and Seller Subsidiary are
unable to reach agreement on such recalculations within thirty (30) days,
the remaining disputed items shall be submitted for resolution to an
internationally-recognized independent accounting firm
mutually acceptable to the parties that shall issue its determination
within thirty (30) days after such submission, and the determination of the
accounting firm shall be final and binding as to the parties absent
manifest error. Buyer shall provide such accounting firm with such
information and documentation as may be reasonably requested (consistent
with Buyer's internal confidentiality policies) in order to allow such
accounting firm to make its determination. The fees and expenses of such
accounting firm shall be paid fifty percent (50%) by Buyer and fifty
percent (50%) by Seller Subsidiary. Within ten (10) days following a final
agreement as to the recalculations of Buyer's Actual Tax Liability and
Buyer's Hypothetical Tax Liability, appropriate adjustment payments
(including any interest and penalties actually payable to, or receivable
from, as the case may be, the relevant Taxing Authority that are
attributable to changes in Buyer's Actual Tax Liability or Buyer's
Hypothetical Tax Liability for such Post-Closing Tax Period) shall be made
by Seller Subsidiary or Buyer, as the case may be, to the other party in a
manner consistent with Section 9.12(f) (including, without limitation, the
precondition that any payment by Buyer to Seller Subsidiary must be matched
by a LC in favor of Buyer in an equal amount).
(h) Buyer shall be entitled to draw upon the LCs in the following
circumstances: (i) the Seller Subsidiary fails to make an adjustment
payment under paragraph (g) of this Section 9.12 within the time prescribed
therefor (and, in such case, Buyer shall be entitled to draw upon the LC
only in an amount equal to the adjustment payment that Seller Subsidiary
was required but failed to make); (ii) the Seller Subsidiary becomes
insolvent or files for protection under a bankruptcy or similar proceeding;
(iii) so long as Buyer has substantially complied with its obligations
under Sections 9.12(d) and 9.12(g), a payment to a Tax authority is due
with respect to Taxes attributable to a Seller Tax Item (including, without
limitation, the disallowance of a deduction, or the inclusion of income, in
respect of a Seller Tax Item); provided that, in the case of this clause
(iii), the amount drawn shall not exceed the amount of the payment due to
the applicable Tax authority;
(iv) unless Seller Subsidiary's obligation to maintain an LC has terminated
pursuant to Sections 9.12(f) and (h), the LC is scheduled to expire within
fifteen (15) days without Seller Subsidiary having obtained a replacement
LC; or (v) such other circumstances as are agreed by Seller Subsidiary and
Buyer. By written notice to Buyer, Seller Subsidiary may request a
reduction in the outstanding amount of the LCs prior to their expiration to
the extent that Seller Subsidiary has made an adjustment payment to Buyer
under paragraph (h) hereof, or a Final Determination establishes that such
an adjustment payment will not be required (for this purpose, a revenue
ruling of the Internal Revenue Service, or a private letter ruling issued
to the Company, directly addressing the Tax treatment of the Compensation
Items shall be considered a Final Determination, but shall not excuse
Seller Subsidiary of its obligations to make adjustment payments to Buyer
in the event that such revenue ruling or private letter ruling subsequently
is determined to be incorrect). In its notice to Buyer, Seller Subsidiary
shall set forth the amount of the requested reduction and shall explain in
reasonable detail the basis for its request. Within thirty (30) days
following its receipt of written notice, Buyer may consent in writing to
the request of Seller Subsidiary, or may dispute Seller Subsidiary's
calculation of the amount of the reduction. If Buyer and Seller Subsidiary
cannot resolve any such dispute within thirty (30) days, the matter shall
be referred to an internationally-recognized independent accounting firm
mutually acceptable to Buyer and Seller Subsidiary, which shall issue its
determination (which determination shall be final and binding as to the
parties absent manifest error) within thirty (30) days after submission.
(i) If, on the Closing Date, the net positive adjustments under
Code Section 481 of the Company and the Company Subsidiary referred to in
Section 9.12(a)(iii), if any, exceed the aggregate net operating losses
carried forward by the Company and the Company Subsidiary to Post-Closing
Tax Periods and available to reduce those adjustments, then Buyer and
Seller shall negotiate in good faith to agree on an arrangement pursuant to
which Seller or Seller Subsidiary shall fund the lesser of (i) the
quarterly
estimated Tax payments of the Buyer Group and (ii) the Tax attributable to
such excess for the periods in which such net positive Code Section 481
adjustments are included in income by the Company or the Company
Subsidiary.
(j) For purposes of determining Buyer's Actual Tax Liability and
Buyer's Hypothetical Tax Liability for any Post-Closing Tax Period, any
carryback of a net operating loss, capital loss or similar item to a
Pre-Closing Tax Period that results in a refund or credit in such
Pre-Closing Tax Period shall be taken into account in determining the
amount of any payment in respect of Seller Tax Items hereunder for such
Post-Closing Tax Period. In applying the provisions of this Section 9.12,
it is the intention of the parties that the Tax benefit items of the Buyer
Group (exclusive of Seller Tax Items) have priority over the Tax benefit
items comprised within the Seller Tax Items, whether in the taxable year
when generated or in another taxable year to which such items are carried
back or carried forward.
SECTION 9.13. Miscellaneous. (a) The parties agree to treat all
payments made under Section 2.04(c) and this Article IX and under any other
indemnity provision contained in this Agreement as adjustments to the
Purchase Price for Tax purposes and that such treatment shall govern for
purposes hereof except to the extent that the laws of a particular
jurisdiction provide otherwise, in which case such payments shall be made
in an amount sufficient to indemnify the relevant party on a net after-Tax
basis as provided in Section 11.05.
(b) The covenants and obligations of parties under this Article
IX, and the representations and warranties of Seller set forth in paragraph
(c) of Section 3.08 hereof, shall survive the Closing and shall remain in
full force and effect until the expiration of all statutes of limitations
on assessment or collection of Tax plus 180 days with respect to any Taxes
that would be indemnifiable by Seller under this Agreement.
(c) For purposes of this Article IX, all references to Buyer,
Seller, the Seller Entities, the Company, the Company Subsidiary and their
Affiliates include successors thereto.
(d) Buyer, with the assistance of Seller, will use its best
efforts to register for value added tax ("VAT") purposes in the UK and in
Belgium in order that the transfer of the Other Assets located in those
jurisdictions will not be subject to VAT.
(e) With respect to tax matters, nothing in this Article IX,
Section 11.05 or elsewhere in this Agreement shall require a party to
reimburse another party more than once for the same Tax benefit or to
indemnify another party more than once for the same Tax liability.
ARTICLE X
Conditions to Closing
SECTION 10.01. Buyer's Obligation. The obligation of Buyer to
purchase and pay for the Shares and the Other Assets is subject to the
satisfaction (or waiver by Buyer) as of the Closing of the following
conditions:
(a) The representations and warranties of Seller made in this
Agreement that are qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material
respects, as of the date hereof and as of the time of the Closing as though
made as of such time, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be true
and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date). Seller shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by
Seller by the time of the Closing. Seller shall have delivered to Buyer a
certificate
dated the Closing Date and signed by an authorized officer of Seller
confirming the foregoing.
(b) No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or other
order enacted, entered, promulgated, enforced or issued by any Federal,
state, local or foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") or other
legal restraint or prohibition preventing the purchase and sale of the
Shares shall be in effect.
(c) No Action shall have been commenced by any United States
Federal Governmental Entity charged with bringing or enforcing the
antitrust, competition or trade regulatory laws of the United States
seeking to restrain or prohibit the purchase and sale of the Shares or to
deprive Buyer in any material respect of the benefits contemplated by or to
be realized from the purchase and sale of the Shares.
(d) The waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") applicable to the sale of the
Shares shall have expired or been terminated.
(e) Each of the Clinical Trials Agreement, the Data Access
Agreement, the Intellectual Property Agreements, the Non-Competition
Agreement, the Transition Services Agreement, the License Agreement and the
Stockholders Agreement shall have been executed and delivered by Seller or
the appropriate Seller Entity and shall be in full force and effect.
(f) Buyer shall have obtained the Buyer Stockholders Approval.
(g) Buyer shall have arranged financing on terms substantially
consistent with the terms contemplated by the
Firm Commitments or otherwise reasonably acceptable to Buyer.
(h) Seller shall deliver, or cause to be delivered, to Buyer at
the Closing the Certificate described in Section 9.09.
(i) Seller shall have delivered to Buyer the Seller Release.
SECTION 10.02. Seller's Obligation. The obligation of Seller to
sell and deliver or cause to be sold and delivered the Shares and the Other
Assets to Buyeris subject to the satisfaction (or waiver by Seller) as of
the Closing of the following conditions:
(a) The representations and warranties of Buyer made in this
Agreement that are qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material
respects, as of the date hereof and as of the time of the Closing as though
made as of such time, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be true
and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date). Buyer shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by
Buyer by the time of the Closing. Buyer shall have delivered to Seller a
certificate dated the Closing Date and signed by an authorized officer of
Buyer confirming the foregoing.
(b) No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or other
order enacted, entered, promulgated, enforced or issued by any Governmental
Entity or other legal restraint or prohibition preventing the purchase and
sale of the Shares.
(c) The waiting period under the HSR Act applicable to the sale
of the Shares shall have expired or been terminated.
(d) Each of the Clinical Trials Agreement, the Data Access
Agreement, the Intellectual Property Agreements, the Non-Competition
Agreement, the Transition Services Agreement, the License Agreement and the
Stockholders Agreement shall have been executed and delivered by Buyer and
shall be in full force and effect.
(e) Buyer shall have obtained the Buyer Stockholders Approval.
(f) Buyer shall have acknowledged its agreement to the Company
Release.
SECTION 10.03. Frustration of Closing Conditions. Neither Buyer
nor Seller may rely on the failure of any condition set forth in Section
10.01 or 10.02, respectively, to be satisfied if such failure was caused by
such party's failure to act in good faith or to use all reasonable efforts
to cause the Closing to occur, as required by Section 7.04.
ARTICLE XI
Indemnification
SECTION 11.01. Survival of Representations and Warranties. (a)
The representations and warranties of Seller contained in this Agreement
shall survive the Closing, solely for purposes of Section 11.02, until the
close of business on March 30, 2001; provided, however, that (i) the
representations and warranties of Seller dealing with Tax matters shall
survive as provided in Article IX, (ii) the representations and warranties
of Seller contained in Section 3.16 shall survive until the third
anniversary of the Closing Date, and (iii) the representations and
warranties of Seller contained in Section 3.13 shall survive until thirty
days after the expiration of the statute of limitations related thereto.
Neither the period of survival
nor the liability of Seller with respect to Seller's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of Buyer.
(b) The representations and warranties of Buyer contained in this
Agreement shall survive the Closing, solely for purposes of Section 11.03,
until March 30, 2001. Neither the period of survival nor the liability of
Buyer with respect to Buyer's representations and warranties shall be
reduced by any investigation made at any time by or on behalf of Seller.
SECTION 11.02. Indemnification by Seller. (a) Subject to Section
11.02(b), Buyer, its Affiliates and their successors and permitted assigns,
in accordance with Section 13.03, and the officers, directors, employees
and agents of Buyer, its Affiliates and their successors and permitted
assigns, in accordance with Section 13.03 (each a "Buyer Indemnified
Party"), shall be indemnified and held harmless by Seller for any and all
liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, reasonable
attorneys' and consultants' fees and expenses) actually suffered or
incurred by any Buyer Indemnified Party (including, without limitation, any
Action brought or otherwise initiated by any of them) (hereinafter a
"Loss"), to the extent arising out of or resulting from:
(i) the breach of (A) any representation or warranty made by
Seller contained in this Agreement (other than in respect of Taxes and
other amounts indemnified against under Article IX), it being
understood that solely for purposes of this Section 11.02, such
representations and warranties shall be interpreted without giving
effect to any limitations or qualifications as to "materiality"
(including the words "material" or "Material Adverse Effect" but
excluding any dollar limitations or thresholds) set forth therein or
(B) any covenant or agreement of Seller contained in Section 5.02; or
(ii) the breach of any covenant or agreement by Seller contained
in this Agreement (other than any covenant in Article IX or this
Article XI) requiring performance after the Closing Date; or
(iii) the Excluded Liabilities; or
(iv) any liabilities under employee benefit plans and
arrangements that Seller or its Affiliates sponsor or maintain that do
not cover Continued Employees, and with respect to which the Company
Subsidiary or Buyer or its Affiliates becomes liable solely because,
prior to the Closing, the Company Subsidiary had contingent liability
therefor as a member of the same controlled group of corporations for
purposes of Section 414(b), (c), (m) or (o) of the Code as Seller and
its Affiliates; or
(v) any Action, matter or claim (including, but not limited to,
medical professional liability) arising out of or relating to the
conduct of the Business prior to the Closing Date (whether or not any
Action, matter or claim is pending as of the Closing) to the extent
the Losses from such Action, matter or claim are covered by any
insurance policy issued by a third party for the benefit of Seller or
an internal insurance arrangement (such as through SmithKline ▇▇▇▇▇▇▇
Insurance Limited), in each case in effect with respect to the
Business as of immediately prior to the Closing Date (or that would be
covered by such policy or arrangement if an Action, matter or claim
had been brought immediately prior to the Closing Date) or to the
extent the Losses from such Action, matter or claim would be covered
by any such policy or arrangement if Seller had not retained any
self-insured retention or quota share participation with respect to
such policy or arrangement (including indemnifying, defending and
holding harmless any Buyer Indemnified Party in the event that any of
them is named as a defendant in a suit or claim to the extent the
allegations against such party involve conduct of the Company or the
Company Subsidiary that is indemnifiable pursuant to
this clause (v) to the extent such Buyer Indemnified Party's Losses
arise from such conduct).
To the extent any obligation of Seller in this Section 11.02 may be
unenforceable, Seller shall contribute the maximum amount that it is
permitted to contribute under Applicable Law to the payment and
satisfaction of all Losses incurred by the Buyer Indemnified Parties for
which Seller has an indemnification obligation under this Section 11.02.
(b) No claim may be made against Seller for indemnification
pursuant to Section 11.02(a)(i) unless the aggregate of all Losses of the
Buyer Indemnified Parties with respect to Section 11.02(a)(i) shall exceed
an amount equal to $25,000,000, and Seller and Seller Subsidiary shall then
only be liable for Losses in excess of such $25,000,000 amount. No Buyer
Indemnified Party shall be indemnified pursuant to Section 11.02(a)(i) with
respect to any individual item of Loss if the aggregate of all payments
made for Losses of the Buyer Indemnified Parties for which the Buyer
Indemnified Parties have received indemnification pursuant to Section
11.02(a)(i) shall have exceeded $946,500,000 (less any amount by which the
Cash Purchase Price is reduced pursuant to Section 2.04(c)). For the
purposes of this Section 11.02(b), in computing such individual or
aggregate amounts of claims, the adjustments provided in Section 11.05
shall be taken into account.
(c) Notwithstanding the foregoing, no claim may be made against
Seller for indemnification pursuant to Section 11.02(a)(i)(A), with respect
to (i) breaches of the representations and warranties contained in Sections
3.07 and 3.14, in either such case, unless the aggregate of Losses under
such section shall exceed an amount equal to $15,000,000, (ii) breaches of
the representations and warranties contained in Sections 3.02 and 3.15, in
either such case, unless the aggregate of Losses under such section shall
exceed an amount equal to $5,000,000 and (iii) breaches of the
representations and warranties contained in Sections 3.09, 3.10, 3.11,
3.12, 3.13, 3.16, 3.20 and 3.21, in any such case, unless the aggregate of
Losses under such section shall exceed an amount equal to
$3,000,000; it being understood that, for purposes of Section 11.02(b),
Seller shall be liable for all Losses under the foregoing representations
and warranties to the extent the thresholds in this Section 11.02(c) are
satisfied (subject to the $25,000,000 amount set forth in Section
11.02(b)).
(d) Buyer acknowledges and agrees that, should the Closing occur,
its sole and exclusive remedy with respect to any and all claims relating
to this Agreement, the transactions contemplated hereby, the Company and
the Company Subsidiary and their respective assets, liabilities and
business (other than claims of, or causes of action arising from, fraud, or
claims arising from the OIG Liabilities for which Buyer's sole and
exclusive remedy is Section 11.06 or other than in connection with
covenants requiring performance after the Closing Date or claims or causes
of action arising under any of the other Transaction Documents) shall be
pursuant to the indemnification provisions set forth in Article IX and this
Section 11.02. In furtherance of the foregoing, Buyer hereby waives, from
and after the Closing, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action (other than claims of,
or causes of action arising from, fraud, or claims arising from the OIG
Liabilities for which Buyer's sole and exclusive remedy is Section 11.06 or
other than in connection with covenants requiring performance after the
Closing Date or claims or causes of action arising under any of the other
Transaction Documents) it, the Company or the Company Subsidiary may have
against Seller and its Affiliates arising under or based upon any Federal,
state, local or foreign statute, law, ordinance, rule or regulation or
otherwise (except pursuant to the indemnification provisions of Seller set
forth in Article IX and this Article XI).
SECTION 11.03. Indemnification by Buyer. (a) Subject to
Section 11.03(b), Seller, its Affiliates and their successors and permitted
assigns, in accordance with Section 13.03, and the officers, directors,
employees and agents of Seller, its Affiliates and their successors and
permitted assigns, in accordance with Section 13.03 (each a
"Seller Indemnified Party"), shall be indemnified and held harmless by
Buyer for any and all Losses to the extent arising out of or resulting
from:
(i) the breach of (A) any representation or warranty made by
Buyer contained in this Agreement, it being understood that solely for
purposes of this Section 11.03, such representations and warranties
shall be interpreted without giving effect to any limitations or
qualifications as to "materiality" (including the words "material" or
"Material Adverse Effect" but excluding any dollar limitations or
thresholds) set forth therein or (B) any covenant of Buyer contained
in Section 6.02; or
(ii) the breach of any covenant or agreement by Buyer contained
in this Agreement (other than any covenant in Article IX or this
Article XI) requiring performance after the Closing Date; or
(iii) the Assumed Liabilities; or
(iv) liabilities of the Company and the Company Subsidiary (to
the extent not retained or indemnified against by Seller pursuant to
Section 11.02 or 11.06, or Article VIII or IX) (including
indemnifying, defending and holding harmless any Seller Indemnified
Party in the event that any of them is named as a defendant in a suit
or claim where the allegations against such party involve the conduct
of Company or Company Subsidiary) to the extent such Seller
Indemnified Party's Losses arise from such conduct; or
(v) any guarantees of Seller or its Affiliates of the obligations
of Seller or the Subsidiary or with respect to the Company, the
Company Subsidiary, any Other Assets or any Assumed Liability; or
(vi) any severance pay paid to Continued Employees under Seller's
Separation Pay Plan listed on Section 3.13(a) of the Seller Disclosure
Schedule to the extent severance is paid by Seller or its Affiliates
to or in
respect of Continued Employees pursuant to a final judicial
determination or otherwise agreed to by Buyer and any costs incurred
by Seller in defending against any claims for severance; or
(vii) the OIG Liabilities (other than Losses for which indemnification
is provided to Buyer by Seller under Section 11.06).
To the extent any obligation of Buyer in this Section 11.03 may
be unenforceable, Buyer shall contribute the maximum amount that it is
permitted to contribute under applicable law to the payment and
satisfaction of all Losses incurred by the Seller Indemnified Parties for
which Buyer has an indemnification obligation under this Section 11.03.
(b) No claim may be made against Buyer for indemnification
pursuant to Section 11.03(a)(i) unless the aggregate of all Losses of the
Seller Indemnified Parties with respect to this Section 11.03(a)(i) shall
exceed an amount equal to $25,000,000, and Buyer shall then only be liable
for Losses in excess of such $25,000,000 amount. No Seller Indemnified
Party shall be indemnified pursuant to Section 11.03(a)(i) with respect to
any individual item of Loss if the aggregate of all payments made for
Losses of the Seller Indemnified Parties for which the Seller Indemnified
Parties have received indemnification pursuant to Section 11.03(a)(i) shall
have exceeded $245,000,000. For the purposes of this Section 11.03(b), in
computing such individual or aggregate amounts of claims, the adjustments
provided in Section 11.05 shall be taken into account.
(c) Notwithstanding the foregoing, no claim may be made against
Buyer for indemnification pursuant to Section 11.03(a)(i)(A), with respect
to (i) breaches of the representations and warranties contained in Sections
4.05 and 4.07, in either such case, unless the aggregate of Losses under
such section shall exceed an amount equal to $15,000,000, (ii) breaches of
the representations and warranties contained in Sections 4.02 and 4.08, in
either such case, unless the aggregate of Losses under such section shall
exceed an amount equal to $5,000,000 and
(iii) breaches of the representations and warranties contained in Sections
4.06, 4.13, 4.14, 4.15, 4.16 and 4.18, in any such case, unless the
aggregate of Losses under such section shall exceed an amount equal to
$3,000,000; it being understood that, for purposes of Section 11.03(b),
Seller shall be liable for all Losses under the foregoing representations
and warranties to the extent the thresholds in this Section 11.03(c) are
satisfied (subject to the $25,000,000 amount set forth in Section
11.03(b)).
(d) Seller acknowledges and agrees that, should the Closing
occur, its sole and exclusive remedy with respect to any and all claims
relating to this Agreement, the transactions contemplated hereby (other
than claims of, or causes of action arising from, fraud, or other than in
connection with covenants requiring performance after the Closing Date or
claims or causes of action arising under any of the other Transaction
Documents) shall be pursuant to the indemnification provisions set forth in
Article IX and this Section 11.03. In furtherance of the foregoing, Seller
hereby waives, from and after the Closing, to the fullest extent permitted
under applicable law, any and all rights, claims and causes of action
(other than claims of, or causes of action arising from, fraud, or other
than in connection with covenants requiring performance after the Closing
Date or claims or causes of action arising under any of the other
Transaction Documents) it may have against Buyer and its Affiliates arising
under or based upon any Federal, state, local or foreign statute, law,
ordinance, rule or regulation or otherwise (except pursuant to the
indemnification provisions of Buyer set forth in Article IX and this
Article XI).
SECTION 11.04. Certain Procedures. (a) A Buyer Indemnified Party
or Seller Indemnified Party (an "Indemnified Party") shall give the
indemnifying party written notice of any matter which such Indemnified
Party has determined has given or could give rise to a right of
indemnification under this Agreement (including Section 11.06), within 30
days of such determination, stating the indemnifiable amount, if known, and
method of computation thereof, and containing a reference to the provisions
of
this Agreement in respect of which such right of indemnification is claimed
or arises. The failure by any Indemnified Party so to notify the
indemnifying party shall not relieve the indemnifying party from any
liability which it may have to such Indemnified Party under Article XI,
except to the extent that the indemnifying party demonstrates that it has
been materially prejudiced by such failure (except that the indemnifying
party shall not be liable for any expense incurred during the period, if
any, from the date that is thirty days after such determination to the date
the Indemnified Party provides notice hereunder). If the indemnifying party
does not notify the Indemnified Party within 30 days following its receipt
of such notice that the indemnifying party disputes its liability to the
Indemnified Party under Article XI, such claim specified by the Indemnified
Party in such notice shall be conclusively deemed a liability of the
indemnifying party under Article XI and the indemnifying party shall pay
the amount of such liability to the Indemnified Party on demand or, in the
case of any notice in which the amount of the claim (or any portion
thereof) is estimated, on such later date when the amount of such claim (or
such portion thereof) becomes finally determined. If the indemnifying party
has timely disputed its liability with respect to such claim, as provided
above, the indemnifying party and the Indemnified Party shall proceed in
good faith to negotiate a resolution of such dispute and, if not resolved
through negotiations, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction pursuant to Section 13.11.
(b) The obligations and liabilities of the indemnifying party
under this Article XI with respect to claims of any third party that are
subject to the indemnification provided for in this Article XI ("Third
Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnified Party shall receive
notice of any Third Party Claim, such Indemnified Party shall give the
indemnifying party written notice of such Third Party Claim within 30 days
of the receipt by such Indemnified Party of such notice and shall deliver
copies of all notices and documents
(including court papers) received by the indemnified party relating to the
Third Party Claim during such 30-day time period; provided, however, that
the failure to provide such notice shall not release the indemnifying party
from any of its obligations under this Article XI, except to the extent
that the indemnifying party demonstrates that it has been materially
prejudiced by such failure (except that the indemnifying party shall not be
liable for any expenses incurred during the period, if any, from the date
that is thirty days after receipt by the Indemnified Party of such notice
to the date the Indemnified Party provides notice hereunder). If an
indemnifying party acknowledges in writing its obligation to indemnify an
Indemnified Party hereunder against any Losses or other amounts indemnified
against that may result from such Third Party Claim, then the indemnifying
party shall be entitled to assume and control the defense of such Third
Party Claim at its expense and through counsel of its choice; provided that
such counsel is not reasonably objected to by the Indemnified Party. Should
the indemnifying party so elect to assume the defense of a Third Party
Claim, the indemnifying party shall not be liable to the Indemnified Party
for legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. In the event an indemnifying party
exercises the right to undertake any such defense against any such Third
Party Claim as provided above, the Indemnified Party shall cooperate with
the indemnifying party in such defense and the prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Whether or
not the indemnifying party shall have assumed the defense of a Third Party
Claim, the Indemnified Party shall not admit any liability with respect to,
or settle, compromise or discharge, such Third Party Claim without the
indemnifying party's prior written consent (which consent shall not be
unreasonably withheld). If the indemnifying party shall have assumed the
defense of a Third Party Claim, the
Indemnified Party shall agree to any settlement, compromise or discharge of
a Third Party Claim which the indemnifying party may recommend and which by
its terms obligates the indemnifying party to pay the full amount of the
liability in connection with such Third Party Claim, which releases the
indemnifying party completely in connection with such Third Party Claim.
SECTION 11.05. Adjustments; Limitations on Indemnity. (a) Any
amount indemnified against under Article IX or this Article XI (including
Section 11.06) shall be net of any amounts recovered by the Indemnified
Party under insurance policies with respect to such indemnified amount,
shall be paid free and clear of any present or future withholding taxes or
other similar charges, and shall be (i) increased to take account of any
net Tax cost incurred by the Indemnified Party arising from the receipt of
indemnity payments hereunder (grossed up for such increase) and (ii)
reduced to take account of any net Tax benefit realized by the Indemnified
Party arising from the incurrence or payment of any such indemnified
amount; provided, however, that (i) the indemnifying party shall be
subrogated to the rights of the Indemnified Party to recover amounts under
insurance policies of the Indemnified Party with respect to such
indemnified amount and (ii) to the extent that the Indemnified Party
receives payment of amounts under such policies for Losses for which the
indemnifying party has already made payments under this Article XI, the
Indemnified Party shall pay over such amounts to the indemnifying party. In
computing the amount of any such Tax cost or Tax benefit, the Indemnified
Party shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt or
accrual of any indemnity payment hereunder or incurrence or payment of any
indemnified amount except that carrybacks of net operating losses or other
tax attributes shall be applied in making such computation after
recognizing any item arising from the receipt or accrual of any indemnity
payment or incurrence or payment of an indemnified amount. Any
indemnification payment hereunder shall initially be made without regard to
adjustment for net Tax benefit or net Tax cost under this Section 11.05 and
shall be increased or reduced to reflect any such net Tax cost (including
gross-up) or net Tax benefit within ten days after the Indemnified Party
has actually realized such cost or benefit. For purposes of this Agreement,
an Indemnified Party shall be deemed to have "actually realized" a net Tax
cost or a net Tax benefit to the extent that, and at such time as, the
amount of Taxes payable (including Taxes payable on an estimated basis) by
such Indemnified Party is increased above or reduced below, as the case may
be, the amount of Taxes that such Indemnified Party would be required to
pay but for the receipt or accrual of the indemnity payment or the
incurrence or payment of such indemnified amount as the case may be;
provided, however, that a net Tax benefit shall not be considered actually
realized to the extent such benefit is otherwise taken into account as
Seller Tax Items under Section 9.12. The parties shall make any adjusting
payment between each other as is required under this Section 11.05 within
ten (10) days of the date an Indemnified Party is deemed to have actually
realized each net Tax benefit or net Tax cost. The amount of any increase
or reduction hereunder shall be adjusted to reflect any final determination
(which shall include the execution of Form 870-AD or successor form) with
respect to the Indemnified Party's liability for Taxes and payments the
Indemnified Party and the Indemnifying Party to reflect such adjustment
shall be made if necessary within ten (10) days of such determination.
(b) Seller shall not have any liability under Section 11.02(a)
for any consequential, punitive, indirect, special or incidental damages
incurred by any Buyer Indemnified Party in connection with any breach by
Seller of its representations or covenants other than consequential,
punitive, indirect, special or incidental damages actually paid to any
third party by such Buyer Indemnified Party.
(c) Buyer shall not have any liability under Section 11.03(a) for
any consequential, punitive, indirect, special or incidental damages
incurred by any Seller Indemnified Party in connection with any breach by
Buyer of its representations or covenants other than consequential,
punitive, indirect, special or incidental damages actually paid to any
third party by such Seller Indemnified Party.
SECTION 11.06. Additional Indemnification by Seller. (a) Seller
shall indemnify the Buyer Indemnified Parties against and hold them
harmless from any and all monetary payments required to be made by or on
behalf of the Company or the Company Subsidiary (other than criminal fines
or penalties imposed upon former or current employees of the Company or the
Company Subsidiary) to the United States government or one of the States of
the United States or any of their respective departments, branches or
agencies (collectively, the "U.S. Governmental Entities") arising out of
any investigation or claim by or on behalf of a U.S. Governmental Entity,
whether criminal, civil or administrative in nature, which investigation or
claim has been settled prior to the Closing Date or is pending as of the
Closing Date pursuant to service of subpoena or other written notice of
such investigation to Seller, Seller Subsidiary, the Company or the Company
Subsidiary, as well as any qui tam proceeding on behalf of any U.S.
Governmental Entity for which a complaint was filed prior to the Closing
Date whether or not Seller, Seller Subsidiary, the Company or the Company
Subsidiary has been served with such complaint or otherwise been notified
of the pendency of such action, but only to the extent such investigations
or claims arise out of or are related to (A) alleged violations of (1) the
federal civil False Claims Act (31 USC ss. 3729, et seq.) and its criminal
counterpart (18 USC ss. 287), (2) Criminal Penalties for Acts Involving
Federal Healthcare Programs (42 USC ss. 1320a-7b, (3) the Civil Monetary
Penalties Law (42 USC ss. 1320a-7a(b)), (4) mail fraud and wire fraud
statutes (18 USC ▇▇.▇▇. 1341 and 1343), (5) false statements (18 USC ss.
1301), (6) conspiracy (18 USC ss. 371), (7) money laundering (18 USC ss.
1956, et seq.), (8) RICO (18 USC ss. 1961), (9) Title II of the Health
Insurance Portability and Accountability Act of 1996, (10) Title XVIII of
the Social Security Act (42 USC ▇▇.▇▇. 1395-1395ccc) (the Medicare
statute), (11) Title XIX of the Social Security Act (42 USC ▇▇.▇▇. 1396, et
seq.) (the Medicaid statute), (12) the Programs Fraud Civil Remedies Act
(31 USC ▇▇.▇▇. 3801, et seq.), or (13) the federal Anti-
Kickback Act (42 USC ▇▇.▇▇. 52, et seq.) and (B) such alleged violations
are based on the billing or alleged overbilling by the Company or any past
or present subsidiary of the Company (or any of their predecessors) of any
federal program or agency, or any federally supported state health care
program or agency, or any beneficiary of any of them, for services provided
to any such beneficiary thereof by the Company, the Company Subsidiary or
any past or present subsidiary of the Company (or any of their
predecessors).
(b) Seller shall indemnify the Buyer Indemnified Parties against
and hold them harmless from any and all monetary payments required to be
made by or on behalf of the Company or the Company Subsidiary to any Person
other than a U.S. Governmental Entity relating to or arising out of the
investigations or claims referred to in Section 11.06(a); provided that, to
the extent the aggregate monetary payments made after the Closing Date for
alleged overbillings for services provided prior to the Closing Date
described in this Section 11.01(b) exceed $80,000,000 but are less than
$130,000,000, Seller shall indemnify the Buyer Indemnified Parties against
and hold them harmless from fifty percent (50%) of monetary payments in
excess of $80,000,000 but less than $130,000,000. Any amounts paid in
settlement by Seller or its Affiliates between the date hereof and the
Closing Date with respect to the liabilities which are the subject of this
Section 11.06(b) shall be credited toward the Seller's indemnification
obligations under this Section 11.06(b).
(c) Seller shall indemnify the Buyer Indemnified Parties against
or hold them harmless from eighty percent (80%) of any Losses consisting of
out-of-pocket costs and expenses relating to the investigations or claims
referred to in Sections 11.06(a) and 11.06(b) (including fees and expenses
of attorneys, consultants and other agents of the Buyer Indemnified
Parties).
(d) Seller shall not indemnify any Buyer Indemnified Party or
hold them harmless from any Losses consisting of any consequential,
indirect, special or incidental damages that may be incurred by a Buyer
Indemnified Party in connection with the claims, investigations or other
matters referred to in Sections 11.06(a) or 11.06(b), including losses of
revenues or profits that may arise as a consequence of the claims or
investigations referred to in Sections 11.06(a) or 11.06(b) or the
settlements entered into or judgments rendered as a result thereof or as a
consequence of any exclusion from participation in any federal or state
health care program, or any other consequential, indirect, special or
incidental damages that may be incurred by a Buyer Indemnified Party which
relate to the billing of any person or any beneficiary of such person by
the Company, the Company Subsidiary or any past or present subsidiary of
the Company (or any of their predecessors) for services provided to any
such Person or beneficiary thereof by the Company, the Company Subsidiary
or any past or present subsidiary of the Company (or any of their
predecessors).
(e) Buyer acknowledges and agrees that, should the Closing occur,
its sole and exclusive remedy with respect to any and all claims relating
to the OIG Liabilities shall be pursuant to the indemnification provisions
set forth in this Section 11.06. In furtherance of the foregoing, Buyer
hereby waives, from and after the Closing, to the fullest extent permitted
under Applicable Law, any and all rights, claims and causes of action it,
the Company or the Company Subsidiary may have against Seller and its
Affiliates arising under or based upon any Federal, state, local or foreign
statute, law, ordinance, rule or regulation or otherwise with respect to
the OIG Liabilities (except pursuant to the indemnification provisions of
Seller set forth in Article IX and this Article XI).
(f) Notwithstanding that Buyer shall have primary responsibility
to manage claims and litigations related to the matters covered by this
Section 11.06, Seller shall have the right to approve counsel for defense
of such matters and shall have full access to such counsel with respect to
such matters. Buyer shall cooperate with the Seller in defense of such
matters. Such cooperation shall include the retention and (upon Seller's
request) the provision to Seller and counsel of records and information
which are
reasonably relevant to such matters, and making employees available, at
Seller's expense, on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Any
settlement, compromise or discharge of any matter which is the subject to
this Section 11.06 shall require the prior written consent of Seller and,
to the extent that any portion of such settlement, compromise or discharge
is not fully indemnified by Seller pursuant to Section 11.06(b), Buyer.
SECTION 11.07. Seller Subsidiary Liability. Seller Subsidiary
shall be jointly and severally liable with Seller for all of Seller's
obligations under this Article XI.
SECTION 11.08 Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto (a) pursuant to Sections
11.02(a)(i)(A) and 11.03(a)(i)(A) shall terminate when the applicable
representation or warranty terminates pursuant to Section 11.01, (b)
pursuant to Sections 11.02(a)(i)(B) and 11.03(a)(i)(B) shall terminate on
March 31, 2001, and (c) pursuant to the other clauses of Sections 11.02 and
11.03 shall not terminate; provided, however, that as to clauses (a) and
(b), Seller's and Buyer's obligation to indemnify and hold harmless shall
not terminate with respect to any item as to which the Indemnified Party
shall have, before the expiration of the applicable period, previously made
a claim by delivering a notice of such claim (stating in reasonable detail
the basis of such claim) to the indemnifying party.
ARTICLE XII
Termination
SECTION 12.01. Termination. Anything contained herein to the
contrary notwithstanding, this Agreement may
be terminated and the transactions contemplated hereby and by the other
Transaction Documents abandoned at any time prior to the Closing Date:
(a) by mutual written consent of Seller and Buyer;
(b) by Seller, if any of the conditions set forth in Section
10.02 shall have become incapable of fulfillment, and shall not have
been waived by Seller;
(c) by Buyer, if any of the conditions set forth in
Section 10.01 shall have become incapable of fulfillment, and
shall not
have been waived by Buyer;
(d) by either party hereto, if the Closing does not occur on or
prior to September 30, 1999;
(e) by either party hereto, if, upon a vote at a duly held
meeting to obtain the Buyer Stockholders Approval, the Buyer
Stockholders Approval is not obtained; or
(f) by either party hereto, if any Governmental Entity issues an
order, decree or ruling or takes any other action permanently
enjoining, restraining or otherwise prohibiting the sale of the Shares
and such order, decree, ruling or other action shall have become final
and nonappealable.
provided, however, that the party seeking termination pursuant to Sections
12.01(b), 12.01(c) or 12.01(d) is not in breach in any material respect of
any of its representations, warranties, covenants or agreements contained
in this Agreement.
SECTION 12.02. Consequences of Termination. (a) In the event of
termination by Seller or Buyer pursuant to this Article XII, written notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement and the other Transaction Documents shall be
terminated, without further action by either party.
(b) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Article XII, this
Agreement shall become void and of no further force or effect, except for
the provisions of (i) Sections 5.03(b) and 6.02 relating to the obligation
of Seller and Buyer to keep confidential certain information and data
obtained by each of them, (ii) Sections 6.11(e) and 7.08 relating to
certain fees and expenses, (iii) Section 7.03 relating to publicity, (iv)
this Article XII and (v) Article XIII. Nothing in this Article XII shall be
deemed to release either party from any liability for any breach by such
party of the terms and provisions of this Agreement or to impair the right
of either party to compel specific performance by the other party of its
obligations under this Agreement.
SECTION 12.03. Return of Confidential Information. If the
transactions contemplated by this Agreement are terminated as provided
herein:
(a) Each party to this Agreement shall return all documents and
other material received from the other party to this Agreement or any of
its Affiliates relating to the transactions contemplated hereby and by the
other Transaction Documents, whether so obtained before or after the
execution hereof, to such other party; and
(b) all confidential information received by either party to this
Agreement with respect to the business of the other party to this Agreement
or any of its Affiliates shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement.
ARTICLE XIII
Miscellaneous
SECTION 13.01. Interpretation. (a) The headings contained in this
Agreement, in any Exhibit or Schedule hereto, in the table of contents to
this Agreement and in the Seller Disclosure Schedule and the Buyer
Disclosure Schedule are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Any matter set
forth in any provision, subprovision, section or subsection of the Seller
Disclosure Schedule or the Buyer Disclosure Schedule, as the case may be,
shall be deemed set forth for all purposes of such disclosure schedule to
the extent relevant. All Exhibits and Schedules annexed heretoor referred
to herein and the Seller Disclosure Schedule and the Buyer Disclosure
Schedule are hereby incorporated in and made a part of this Agreement as if
set forth in full herein. Any capitalized terms used in any Schedule or
Exhibit or the Seller Disclosure Schedule or the Buyer Disclosure Schedule
but not otherwise defined therein, shall have the meaning as defined in
this Agreement.
(b) In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
(c) The definitions of the terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". For purposes of Section 7.05, "material amount of assets" means
assets from which revenues constituting 5% or more of the combined revenues
of Buyer, the Company, the Company
Subsidiary and the Other Assets were derived in 1998. Unless the context
requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any
reference herein to any Person shall be construed to include the Person's
successors and permitted assigns, (iii) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof,
and (iv) all references herein to Articles, Sections, Exhibits or Schedules
shall be construed to refer to Articles, Sections, Exhibits and Schedules
of this Agreement.
SECTION 13.02. Amendments. No amendment, modification or waiver
in respect of this Agreement shall be effective unless it shall be in
writing and signed by the parties hereto.
SECTION 13.03. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by Buyer,
Seller or Seller Subsidiary (other than by operation of law in connection
with a merger, or sale of substantially all the assets, of Buyer, Seller or
Seller Subsidiary) without the prior written consent of the other parties
hereto; provided, however, that Buyer may assign its right to purchase the
Shares and the Other Assets hereunder to a wholly owned subsidiary of Buyer
without the prior written consent of Seller or Seller Subsidiary; provided
further, however, that no assignment shall limit or affect the assignor's
obligations hereunder. Any attempted assignment in violation of this
Section 13.03 shall be void.
SECTION 13.04. No Third-Party Beneficiaries. This Agreement is
for the sole benefit of the parties hereto and their permitted assigns and
nothing herein expressed or implied shall give or be construed to give to
any Person (including any Continued Employee, Former Employee or Foreign
Employee or their respective dependents and
beneficiaries), other than the parties hereto and such assigns, any legal
or equitable rights hereunder.
SECTION 13.05. Notices. All notices or other communications
required or permitted to be given hereunder shall be in writing and shall
be delivered by hand or sent by prepaid telex, cable or telecopy or sent,
postage prepaid, by registered, certified or express mail or reputable
overnight courier service and shall be deemed given when so delivered by
hand, telexed, cabled or telecopied, or if mailed, three days after mailing
(one business day in the case of express mail or overnight courier
service), as follows:
(i) if to Buyer,
Quest Diagnostics Incorporated
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇'▇▇▇▇▇; and
(ii) if to Seller or Seller Subsidiary,
SmithKline ▇▇▇▇▇▇▇ plc
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Brentford England
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
with copies to:
SmithKline ▇▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: U.S. General Counsel; and
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
SECTION 13.06. Attorney Fees. Seller and Seller Subsidiary
jointly and severally, in the case of a breach under Article IX, XI or this
Article XIII, or Seller, in the case of a breach under any other Article of
this Agreement, if in breach of this Agreement, shall, on demand, indemnify
and hold harmless Buyer and Buyer, if in breach of this Agreement, shall,
on demand, indemnify and hold harmless Seller for and against all
reasonable out-of-pocket expenses, including legal fees, incurred by the
other party by reason of the enforcement and protection of its rights under
this Agreement. The payment of such expenses is in addition to any other
relief to which such other party may be entitled.
SECTION 13.07. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts
have been signed by each of the parties and delivered to the other party.
Copies of executed counterparts transmitted by telecopy, telefax or other
electronic transmission service shall be considered original executed
counterparts for purposes of this Section 13.07; provided that receipt of
copies of such counterparts is confirmed.
SECTION 13.08. Entire Agreement. This Agreement, the other
Transaction Documents and the Confidentiality Agreement contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to
any other party in any manner by any representations, warranties or
covenants relating to such subject matter except as specifically set forth
herein, in the other Transaction Documents or in the Confidentiality
Agreement.
SECTION 13.09. Fees. Buyer and Seller hereby represent and
warrant that (a) the only brokers or finders that have acted for such party
in connection with this Agreement, the other Transaction Documents or the
transactions contemplated hereby or thereby or that may be entitled to any
brokerage fee, finder's fee or commission in respect thereof are ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated with respect to Seller and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
with respect to Buyer and (b) each party shall pay all fees or commissions
which may be payable to the firm so named with respect to such party.
SECTION 13.10. Severability. If any provision of this Agreement
(or any portion thereof) or the application of any such provision (or any
portion thereof) to any Person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision hereof (or the remaining portion thereof) or the
application of such provision to any other Persons or circumstances.
SECTION 13.11. Consent to Jurisdiction. Each of Buyer, Seller and
Seller Subsidiary irrevocably submits to the exclusive jurisdiction of (a)
a Federal Court for the Southern District of New York and (b) any New York
state court located in the County of New York, for the purposes of any
suit, action or other proceeding arising out of this Agreement, any other
Transaction Document or any transaction contemplated hereby or thereby.
Each of Buyer, Seller and Seller Subsidiary agrees to commence any action,
suit or proceeding relating hereto either in a Federal Court for the
Southern District of New York or in a New York state court located in the
County of New York. Each of Buyer, Seller and Seller Subsidiary further
agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any action, suit or proceeding in New York
with respect to any matters to which it has submitted to jurisdiction in
this Section 13.11. Each of Buyer, Seller and Seller Subsidiary irrevocably
and unconditionally waives any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement, the
other Transaction Documents or the transactions contemplated hereby or
thereby in (i) any Federal court for the Southern District of New York
or (ii) any New York state court located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 13.12. Waiver of Jury Trial. Each of Buyer, Seller and
Seller Subsidiary hereby waives to the fullest extent permitted by
applicable law any right it may have to a trial by jury with respect to any
litigation directly or indirectly arising out of, under or in connection
with this Agreement, the other Transaction Documents or any transaction
contemplated hereby or thereby. Each of Buyer, Seller and Seller Subsidiary
(a) certifies that no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce that foregoing waiver and (b)
acknowledges that it and the other parties hereto have been induced to
enter into this Agreement and the other Transaction Documents, as
applicable, by, among other things, the mutual waivers and certifications
in this Section 13.12.
SECTION 13.13. Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such
State, without regard to the conflicts of law principles of such State
other than Section 5-1401 of the New York General Obligations Law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
SMITHKLINE ▇▇▇▇▇▇▇ PLC,
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice President-
Strategic Planning and
Corporate Development
QUEST DIAGNOSTICS
INCORPORATED,
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
With respect to Articles IX,
XI and XIII only,
SMITHKLINE ▇▇▇▇▇▇▇
CORPORATION,
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President-
Associate General Counsel